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- Report of Foreign Issuer (6-K)

Date : 06/08/2012 @ 6:07AM
Source : Edgar (US Regulatory)
Stock : Kyocera Corp (KYO)
Quote : 48.23  -0.13 (-0.27%) @ 7:40AM
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- Report of Foreign Issuer (6-K)

Table of Contents

FORM 6-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

Report of Foreign Private Issuer

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

the Securities Exchange Act of 1934

For the month of June 2012

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):     


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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/ S HOICHI A OKI

Shoichi Aoki

Director,

Managing Executive Officer and

General Manager of

Corporate Financial and Business Systems
Administration Group

Date: June 8, 2012


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Information furnished on this form:

EXHIBITS

 

Exhibit
Number

    
1.    Notice of the 58th Ordinary General Meeting of Shareholders
2.    Report for the year ended March 31, 2012


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LOGO

  

 

Notice of the 58th Ordinary General Meeting of Shareholders

to be held in Kyoto, Japan on June 27, 2012

 

LOGO

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

Please note that this is an English translation of the Japanese original of the Notice of the 58th Ordinary General Meeting of Shareholders distributed to shareholders in Japan. The translation is prepared solely for the reference and convenience of foreign shareholders. In the event of any discrepancy between this translation and the Japanese original, the latter shall prevail.


Table of Contents

Security Code 6971

June 8, 2012

To our shareholders

Notice of the 58th Ordinary General Meeting of Shareholders

This is to inform you that Kyocera Corporation (the “Company”) will hold its 58th 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 (voting card) or electronically (through the Internet, etc.), after examining the attached reference documents for the General Meeting of Shareholders, no later than 5:30 p.m. Tuesday, June 26, 2012, Japan time.

 

1. Time and Date

   10:00 a.m. on Wednesday, June 27, 2012, 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

 

  (1) Report 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, 2012; and

 

  (2) Report of the substance of the financial statements for the year ended March 31, 2012.

Matters to be resolved

 

Agendum No. 1    Disposition of Surplus
Agendum No. 2    Partial Amendments to the Articles of Incorporation
Agendum No. 3    Election of two (2) Directors
Agendum No. 4    Election of three (3) Corporate Auditors

 

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4. Matters relating to Exercise of Voting Rights

(1) Method of exercising voting rights in written form (voting card)

Please mark “for” or “against” as to the agenda on the voting card enclosed herewith and return it by the above deadline in order to exercise voting rights.

(2) Method of exercising voting rights electronically (through the Internet, etc.)

Please access the Internet website for exercise of voting rights ( http://www.evote.jp/ ) through a personal computer, smartphone or mobile phone. Using the code and password written on the voting card enclosed herewith and following the instructions set forth on the website, please mark “for” or “against” as to the agenda by the above deadline in order to exercise voting rights.

[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 (voting card) as well as electronically (through the Internet, etc.), the electronic exercise of voting rights shall supersede and be treated as the effective exercise of the voting rights.

 

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

 

Very truly yours,
KYOCERA Corporation
Tetsuo Kuba
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 financial statements or the 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.

 

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Reference Documents for General Meeting of Shareholders

Agenda and References are as follows:

Agendum No. 1    Disposition of Surplus

The Company believes that the best way to meet shareholders’ expectations is to improve the consolidated performance of the Company on an ongoing basis.

The Company has adopted the principal guideline that dividend amounts should be within a range based on net income attributable to shareholders of the Company on a consolidated basis, and has set its consolidated dividend policy to maintain a consolidated dividend ratio at a level of approximately 20% to 25% of consolidated net income. In addition, the Company determines dividend amounts based on an overall assessment, taking into account 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 full year performance through the year ended March 31, 2012, the Company proposes a year-end dividend for the year ended March 31, 2012 in the amount of 60 yen per share, a 10 yen decrease as compared with the year ended March 31, 2011. When aggregated with the interim dividend in the amount of 60 yen per share, the total annual dividend will be 120 yen per share.

The Company also proposes that funds shall be set aside as general reserve, 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 growth of the Company.

The proposed disposition of surplus is as follows:

 

1.  

Mattersrelating to year-end dividend

 
  (1)    Type of assets distributed as dividend:             
            Cash    
  (2)    Matters relating 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 11,006,635,200 yen.  
  (3)    Effective date of distribution of surplus as dividend:    
            June 28, 2012    
2.   Matters relating to general reserve  
  (1)    Category of surplus to increase and amount thereof:           
            General reserve   28,000,000,000 yen  
  (2)    Category of surplus to decrease and amount thereof:  
            Unappropriated retained earnings   28,000,000,000 yen  

 

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Agendum No. 2    Partial Amendments to the Articles of Incorporation

 

1. Reason for Proposal

 

  (i) It is proposed to add a corporate object, in order to prepare for expansion and diversification of business in the future (Item 13 of Article 2 of the Proposed Amendment). In addition, it is proposed to renumber Items 14 and following of Article 2 of the Proposed Amendment.

 

  (ii) It is proposed to amend the maximum number of Corporate Auditors, in order to enhance the audit system (Article 28 of the Proposed Amendment).

 

2. Substance of Amendments

The contemplated amendments are as follows:

(The underlined portion shows the proposed amendments.)

 

Present Article

 

Proposed Amendment

Article 2.    Objects   Article 2.    Objects

The objects of the Company shall be to engage in the following businesses:

 

The objects of the Company shall be to engage in the following businesses:

(1)    Manufacture and sale of and research on fine ceramics and various kinds of products utilizing fine ceramics;

  (1)  

LOGO

 

  

(2)    Manufacture and sale of and research on single crystal materials and various kinds of products utilizing single crystal materials;

  (2)     

(3)    Manufacture and sale of and research on composite materials;

  (3)     

(4)    Manufacture and sale of and research on specialty plastics;

  (4)     

(5)    Manufacture and sale of and research on measurement instruments for electronics;

  (5)     

 

(Not amended)

(6)    Manufacture and sale of and research on electronic and electric instruments and parts thereof;

  (6)     

(7)    Manufacture and sale of and research on component parts of automobiles;

  (7)     

(8)    Manufacture and sale of and research on precious metals, precious stones and semiprecious stones and various kinds of products utilizing precious metals, precious stones and semiprecious stones;

  (8)     

(9)    Manufacture and sale of and research on accessories and interior and exterior decorations and ornaments;

  (9)     

(10)  Wholesales and retail sale of health foods;

  (10)     

(11)  Manufacture and sale of and research on material and equipment for medical use;

  (11)     

(12)  Manufacture and sale of and research on equipment utilizing solar energy;

  (12)     

<Newly added>

 

(13)  Construction and sale of power plants, and power generation business and management and operation thereof;

 

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Present Article

 

Proposed Amendment

(13)   Manufacture and sale of and research on optical machinery and instruments and precision machinery and instruments and parts hereof;

  (14)   LOGO   

(14)   Manufacture and sale of and research on machinery and equipment for business use and machinery and equipment for industrial use and parts thereof;

  (15)     

(15)   Manufacture and sale of and research on photosensitive materials for photographic use;

  (16)     

(16)   Design, control and contract of construction relating to public works, building, electric equipment and piping construction;

  (17)     

(17)   Sale, purchase, lease, maintenance and brokerage of real estate;

  (18)     

(Not amended. Same as Present
Articles (13) - (25))

 

(18)   Lease, maintenance and management of facilities relating to sports, recreation, medical care, hotels and restaurants, and the travel agency business;

 

 

(19)

    

(19)   Road freight handling and warehousing;

  (20)     

(20)   Business relating to non-life insurance agency and life insurance canvassing, and general leasing, factoring and finance business;

  (21)     

(21)   Sale and purchase of various kinds of plants and technology related thereto;

  (22)     

(22)   Design and sale of software relating to computers;

  (23)     

(23)   Disposition through sale and the like and acquisition through purchase and the like of patents and other industrial property rights and know-how appertaining to the preceding items and acting as intermediary in such transactions;

  (24)     

(24)   Businesses relating to import and export of any of the foregoing items; and

  (25)     

(25)   All commercial activities relating or incidental to any of the foregoing.

  (26)     

 

Article 28.    Number of Corporate Auditors

 

 

Article 28.    Number of Corporate Auditors

The Company shall have not more than five Corporate Auditors.

 

The Company shall have not more than six Corporate Auditors.

 

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Agendum No. 3    Election of two (2) Directors

Messrs. Hisao Hisaki and Rodney N. Lanthorne will resign from the office of Director at the close of this Meeting. Accordingly, the Company proposes that two (2) Directors be newly elected.

Pursuant to Paragraph 2 of Article 21 of the Articles of Incorporation of the Company, the term of the office of the Directors to be elected at this Meeting will expire when the term of the other Directors currently in office expires.

The candidates for Director are as follows:

 

No.   

Name

(Date of birth)

  

Brief Personal History, Title,

Other Significant Responsibilities

   Number of the
Company’s
shares held
 

1

*

  

Ken Ishii

(Oct. 6, 1953)

   Mar. 1977    Joined the Company      1,957   
      Jun. 2005   

Deputy General Manager of Corporate Cutting Tool Group of the Company

  
      Apr. 2009   

Executive Officer of the Company

General Manager of Corporate Cutting Tool Group of the Company [Present]

  
      Apr. 2011    Senior Executive Officer of the Company   
      Apr. 2012    Managing Executive Officer of the Company [Present]         

2

*

  

John S. Rigby

(May 13, 1955)

   Aug. 1981    Joined Kyocera International, Inc.      (713 ADR
      Apr. 1990    Transferred to Kyocera Industrial Ceramics Corporation   
      Apr. 1997   

Vice President of Kyocera Industrial Ceramics Corporation

  
      Apr. 1999   

Executive Vice President of Kyocera Industrial Ceramics Corporation (in charge of sales)

  
      Apr. 2001   

President and Director of Kyocera Industrial Ceramics Corporation

  
      Apr. 2002    Director of Kyocera International, Inc.   
      Jun. 2005    Executive Officer of the Company [Present]   
      Apr. 2010   

President and Director of Kyocera International, Inc. [Present]

        

Notes:

 

1. Mr. Ken Ishii is a Representative Director of Kyocera Precision Tools Korea Co., Ltd., with which the Company engages in transactions relating to sale and purchase of cutting tools, etc. There are no special interests between the other candidate and the Company.

 

2. Mr. John S. Rigby beneficially owns 713 shares of Common Stock of the Company by way of American Depositary Receipts (ADRs).

 

3. Asterisks (*) above denote new candidates.

 

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Agendum No. 4    Election of three (3) Corporate Auditors

The term of office of Corporate Auditors, Messrs. Osamu Nishieda and Kazuo Yoshida, will expire at the close of this Meeting. Accordingly, the Company proposes that three (3) Corporate Auditors be elected, increasing the number thereof by one (1) Corporate Auditor in order to further enhance the audit system of the Company.

Approval of Agendum No. 2 “Partial Amendments to the Articles of Incorporation” is required for three (3) Corporate Auditors to be elected. With respect to this Agendum, consent from the Board of Corporate Auditors has been obtained.

The candidates for Corporate Auditor are as follows:

 

No.   

Name

(Date of birth)

  

Brief Personal History, Title,

Other Significant Responsibilities

   Number of
the Company’s
shares held
 
1   

Osamu Nishieda

(Jan. 10, 1943)

   Apr. 1975   

Admitted to the Bar, Registered in the Osaka Bar Association [Present]

     306,146   
      Feb. 1986   

Legal counsel to the Company [Present]

  
        Jun. 1993   

Corporate Auditor of the Company [Present]

        
2

*

  

Yoshinori Yasuda

(Nov. 24, 1946)

   Apr. 1988   

Assistant Professor, International Research Center for Japanese Studies

     0   
      Apr. 1994   

Professor, International Research Center for Japanese Studies

  
        

Professor, Graduate University for Advanced Studies

  
      Apr. 1995   

Visiting Professor, Reitaku University [Present]

  
      Oct. 1996   

Visiting Professor, Humboldt University of Berlin

  
      Apr. 1997   

Professor, Graduate School of Science, Kyoto University

  
      Apr. 2004   

Deputy-Director, International Research Center for Japanese Studies

  
      Apr. 2006   

Member of the Royal Swedish Academy of Sciences [Present]

  
      Apr. 2007   

Senior Fellow, The Tokyo Foundation [Present]

  
      Mar. 2009   

Member of the Board of Governance, Japan Broadcasting Corporation

  
      Apr. 2012   

Professor Emeritus, International Research Center for Japanese Studies [Present]

  
            

Professor, Graduate School of Environmental Studies, Tohoku University [Present]

        
3

*

  

Nichimu Inada

(Nov. 24, 1940)

   Mar. 1962   

Founded Inamasa Bannou Kougeisha (current Family Co., Ltd.)

     525   
      Aug. 1966   

Established Chuou Bussan Co., Ltd. (current Family Co., Ltd.) President and Representative Director [Present]

  
      Jun. 2007   

Executive Director, The Japan Federation of Medical Devices Associations [Present]

  
        Jul. 2007   

Chairman, The Japan Home-Health Apparatus Industrial Association [Present]

        

 

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Notes:

 

1. The Company has a retainer agreement with the candidate Mr. Osamu Nishieda to retain him as the Company’s legal counsel. There are no special interests between either of the other candidates and the Company.

 

2. The number of shares of the Company held by the candidates above includes his ownership in the Stock Purchase Plan for Kyocera Group Executives.

 

3. Asterisks (*) above denote new candidates.

 

4. The Company nominated Mr. Osamu Nishieda as a candidate for Corporate Auditor because the Company believes that he continues to be capable of conducting a general audit of corporate activities as a Corporate Auditor based on his familiarity with the Company’s internal affairs and his abundant knowledge and experience as an attorney at law.

 

5. Matters with respect to outside Corporate Auditors are as follows:

 

  (1) Messrs. Yoshinori Yasuda and Nichimu Inada are candidates for outside Corporate Auditor.

 

  (2) Reason for nomination of Messrs. Yoshinori Yasuda and Nichimu Inada as candidates for outside Corporate Auditor:

 

  (i) Mr. Yoshinori Yasuda has cultivated exceptional insight through his career as professor at International Research Center for Japanese Studies and other universities. He has also served as a member of the Board of Governance at Japan Broadcasting Corporation. The Company believes that he will be capable of conducting a general audit of corporate activities as an outside Corporate Auditor from the broad perspective derived from his experience.

 

  (ii) The Company believes that Mr. Nichimu Inada will be capable of conducting a general audit of corporate activities as an outside Corporate Auditor based on his abundant management experience and exceptional insight as a corporate executive.

 

(3) The Company will enter into agreements with Messrs. Yoshinori Yasuda and Nichimu Inada upon their election as outside Corporate Auditors regarding limitation of their liability for damages due to negligence in the performance of their tasks, in accordance with Paragraph 1 of Article 427 of the Corporation Act and Article 35 of the Articles of Incorporation of the Company. The amounts of liability, as set under such agreements, shall be limited to the smallest amounts permitted under applicable laws and regulations.

 

(4) The Company will designate Messrs. Yoshinori Yasuda and Nichimu Inada as independent auditors as provided for in the rules of the Tokyo Stock Exchange and the Osaka Securities Exchange upon their election as outside Corporate Auditors.

- END -

 

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Table of Contents
LOGO    Security Code 6971

 

 

Report for the year ended March 31, 2012

(Accompanying documents for the 58th Ordinary General Meeting of Shareholders)

 

LOGO

Please note that this is an English translation of the Japanese original of the Report for the year ended March 31, 2012 of Kyocera Corporation distributed to shareholders in Japan. The translation is prepared solely for the reference and convenience of foreign shareholders. In the event of any discrepancy between this translation and the Japanese original, the latter shall prevail.


Table of Contents

Table of Contents

 

Kyocera Management Philosophy

  

Greetings

     1   

(Accompanying documents for the 58th Ordinary General Meeting of Shareholders)

  

Business Report

     2   

1. Current Conditions of Kyocera Corporation and its Consolidated Subsidiaries

     2   

2. Shares

     15   

3. Directors and Corporate Auditors

     16   

4. Accounting Auditor

     19   

5. System and Policy

     20   

Consolidated Balance Sheets

     24   

Consolidated Statements of Income

     26   

Consolidated Statement of Equity

     27   

Consolidated Cash Flows (For reference only)

     27   

Notes to Consolidated Financial Statements

     28   

Balance Sheets

     34   

Statements of Income

     36   

Statement of Changes in Net Assets

     37   

Notes to Financial Statements

     40   

Copy of Audit Report of Accounting Auditors on Consolidated Financial Statements

     45   

Copy of Audit Report of Accounting Auditors

     47   

Copy of Audit Report of Board of Corporate Auditors

     49   


Table of Contents

Kyocera Management Philosophy

Corporate Motto

 

LOGO

“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 efforts, contribute to the advancement of

society and humankind.

Management Philosophy

To coexist harmoniously with our society, our global community and nature.

Harmonious coexistence is the underlying foundation of all our business

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

Management Based on the Bonds of Human Minds

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


Table of Contents

Greetings

We are pleased to present to you our Report for the year ended March 31, 2012 (hereinafter, “fiscal 2012” refers to the fiscal year ended March 31, 2012, and other fiscal years are referred to in a corresponding manner).

Fiscal 2012 started under extreme conditions due to overall stagnation in domestic production activities resulting from the impact of the Great East Japan Earthquake. Thereafter, continued appreciation of the yen caused by the European financial crisis, coupled with floods in Thailand, produced an increased feeling of global economic decline and deterioration of the business environment. Amid these circumstances, Kyocera worked to implement measures throughout the Kyocera Group that included reducing costs, enhancing productivity, introducing new products and cultivating new markets. Demand for digital consumer equipment in particular slumped, however, leading to a decline in sales and profit for fiscal 2012 compared with fiscal 2011.

In fiscal 2013, despite lingering fears over the European economy and exchange rate trends, component demand is expected to recover in the digital consumer equipment market, a principal market for the Kyocera Group, while demand is expected to increase for environment and energy related products, such as solar cells, due to heightened environmental awareness. In order to swiftly improve results in each business and drive growth for the Kyocera Group during the recovery phase of these markets, Kyocera will strive to further reduce costs, develop new products and cultivate new markets.

We would very much appreciate your continued support of the Kyocera Group as we forge ahead.

Makoto Kawamura

Chairman of the Board and Representative Director

Tetsuo Kuba

President and Representative Director

 

1


Table of Contents

(Accompanying documents for the 58th Ordinary General Meeting of Shareholders)

Business Report (From April 1, 2011 to March 31, 2012)

1. Current Conditions of Kyocera Corporation and its Consolidated Subsidiaries

(1) Business Progress and Results

In fiscal 2012, the Japanese economy stagnated overall, due to continued appreciation of the yen against the Euro and the U.S. dollar and a decrease in exports, despite resolution of disruptions in production activities and the supply chain following the Great East Japan Earthquake. The European economy showed a downturn, due to a reduced willingness to engage in personal consumption and investment as the financial crisis worsened. In contrast, the U.S. economy continued to recover moderately, due mainly to growth in personal consumption and private capital investment. The Chinese economy continued to expand, primarily supported by strong domestic demand in spite of signs of a slowdown in export growth.

In the information and communications market, which is the principal market for Kyocera Corporation and its consolidated subsidiaries (“Kyocera Group” or “Kyocera”), demand for items such as mobile phone handsets, personal computers and flat-screen TVs was sluggish compared with projections from the beginning of fiscal 2012. In addition, component inventory adjustments at equipment manufacturers persisted due to stagnation in production activities for products, including digital cameras, resulting from the prolonged impact of floods in Thailand. As a result, component demand, mainly for digital consumer equipment, fell below the level recorded in fiscal 2011.

Average exchange rates for fiscal 2012 were ¥79 to the U.S. dollar, marking appreciation of ¥7 (approximately 8%) from ¥86 for fiscal 2011, and ¥109 to the Euro, marking appreciation of ¥4 (approximately 4%) from ¥113 for fiscal 2011. As a result, net sales and income before income taxes for fiscal 2012 were adversely affected by approximately ¥40 billion and ¥10 billion, respectively, compared with fiscal 2011.

Consolidated net sales for fiscal 2012 decreased by ¥76,054 million, or 6.0%, to ¥1,190,870 million, compared with ¥1,266,924 million for fiscal 2011, due primarily to a decline in component demand for digital consumer equipment and a decrease in sales in the Telecommunications Equipment Group, in addition to the impact of the yen’s appreciation. Profit from operations decreased by ¥58,249 million, or 37.4%, to ¥97,675 million, compared with ¥155,924 million for fiscal 2011. In addition, income before income taxes decreased by ¥57,439 million, or 33.3%, to ¥114,893 million, compared with ¥172,332 million for fiscal 2011. Net income attributable to shareholders of Kyocera Corporation for fiscal 2012 decreased by ¥43,091 million, or 35.2%, to ¥79,357 million, compared with ¥122,448 million for fiscal 2011.

 

2


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Highlights of Consolidated Results

 

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Notes:

 

1. The amounts, numbers of shares and ratios (%) in this report are rounded to the nearest unit.

 

2. Graphs in this report are presented solely for reference.

 

3


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Consolidated Results by Reporting Segment

Fine Ceramic Parts Group

 

Net sales:

   ¥80,372 million, up 5.4% year on year

Operating profit:

   ¥12,622 million, up 5.5% year on year

Both sales and operating profit in this reporting segment increased compared with fiscal 2011, due primarily to an increase in demand for components for the automotive market overseas and LED-related markets.

 

LOGO    LOGO

Semiconductor Parts Group

 

Net sales:

   ¥153,420 million, down 12.2% year on year

Operating profit:

     ¥27,754 million, down 25.7% year on year

The impact of customer inventory adjustments for components used in digital consumer equipment led to sluggish demand for packages for electronic components and image sensors. As a result, sales and operating profit in this reporting segment decreased compared with fiscal 2011.

 

LOGO    LOGO

 

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Applied Ceramic Products Group

 

Net sales:

     ¥179,784 million,   down 9.0% year on year   

Operating profit:

         ¥6,459 million,   down 77.8% year on year   

In the cutting tool business, demand grew, particularly in the automotive market. The solar energy business stagnated, however, due to a steep decline in product prices worldwide caused by deterioration in the balance of supply and demand as growth in the European market slowed. As a result, sales and operating profit in this reporting segment decreased compared with fiscal 2011.

 

LOGO    LOGO

Electronic Device Group

 

Net sales:

   ¥228,721 million,    down 5.7% year on year   

Operating profit:

     ¥16,036 million,    down 61.5% year on year   

Sales and operating profit in this reporting segment decreased compared with fiscal 2011, due to sluggish component demand affected by the Great East Japan Earthquake and the floods in Thailand, as well as an impact of the yen's appreciation. In addition, AVX Corporation, a consolidated subsidiary, recorded an environmental remediation charge in fiscal 2012.

 

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Table of Contents

Telecommunications Equipment Group

 

Net sales:

   ¥178,669 million,   down 20.7% year on year   

Operating profit:

       ¥1,469 million,   down 30.7% year on year   

Despite aggressive introduction of new products, which included the commencement of smartphone sales for the Japanese market, sales in this reporting segment decreased compared with fiscal 2011, due to sluggish growth in sales of mobile phone handsets overseas. Operating profit was ensured through efforts to reduce manufacturing costs and to undertake structural reforms in overseas operations.

 

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   LOGO

Information Equipment Group

 

Net sales:

   ¥243,457 million,   up 1.5% year on year   

Operating profit:

     ¥29,451 million,   up 14.0% year on year   

Sales in this reporting segment increased slightly compared with fiscal 2011, due to increased sales volume resulting from the aggressive launch of new products and expansion of sales network, mostly offset by the impact of the yen’s appreciation. Operating profit increased compared with fiscal 2011, due to an increase in sales of high-value-added products, such as color-capable machines and consumables.

 

LOGO

   LOGO

 

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Others

 

Net sales:

   ¥151,987 million,   up 9.0% year on year   

Operating profit:

       ¥8,054 million,   down 16.5% year on year   

Sales in this reporting segment increased compared with fiscal 2011, due to sales contributions from new products such as LED lighting and growth in sales at Kyocera Communication Systems Co., Ltd. Operating profit decreased compared with fiscal 2011, however, due mainly to an increase in R&D expenses for new businesses.

 

LOGO

   LOGO

(2) Implemented Management Measures and Significant Management Decisions made in Fiscal 2012

 

i) In July 2011, with the aim of strengthening its cutting tool business, Kyocera acquired 100% of the outstanding common stock of Unimerco Group A/S (now Kyocera Unimerco A/S (KUA)), a Danish-based industrial cutting tool manufacturing and sales company, and made it a consolidated subsidiary. By making KUA a consolidated subsidiary, Kyocera has added KUA’s high-quality, high-precision, custom-made solid-type cutting tools for automobile engine processing, as well as aviation and wind-power generation markets to its lineup, while also expanding its sales network, mainly in Europe. Going forward, Kyocera will strive to further expand its cutting tool business through the pursuit of synergies with KUA.

 

ii) In February 2012, in order to expand its liquid crystal displays (LCDs) business, Kyocera acquired 100% of the common stock of Optrex Corporation (now Kyocera Display Corporation), a specialized manufacturer of LCDs and related products, and made it a consolidated subsidiary. Going forward, Kyocera will take advantage of its strong customer base in LCDs for automotive applications both inside and outside Japan, with the aim of expanding business in the automotive market.

(3) Capital Expenditures

During fiscal 2012, due to the economic decline in Europe, Kyocera substantially slowed its capital expenditures in the solar energy business. As a result, capital expenditures for fiscal 2012 totaled ¥66,408 million, a decrease of ¥4,272 million, or 6.0%, compared with fiscal 2011.

Required funds for fiscal 2012 were mainly financed from internal resources.

(4) Management Challenges

During fiscal 2012, Kyocera pushed ahead with initiatives to reduce manufacturing costs and enhance productivity amidst a tough management environment arising from deterioration in external conditions, including the impact of the Great East Japan Earthquake and floods in Thailand, financial problems in Europe and the yen’s appreciation. Kyocera also undertook measures to drive future growth in the Kyocera Group, such as strengthening existing businesses by acquiring external management resources.

 

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Going forward, Kyocera expects the business environment to continue to be severe, due primarily to stagnant growth in the global economy, continued appreciation of the yen and intensifying price competition resulting from the rise of Asian manufacturers. Kyocera believes it is necessary to further enhance management foundations and expand sales in growth markets in order to overcome global competition and drive growth of the Kyocera Group in any business environment, regardless of its severity. Specifically, Kyocera will tackle the following challenges, aiming for acceleration of global business development to become a high growth, highly profitable company.

i) Enhance management foundations

Kyocera will promote further cost reductions, streamline existing production sites and expand their capacity in order to overcome global competition. In addition, Kyocera will take other measures, which will include establishment of new production sites, such as those in Vietnam, and will also re-examine its materials procurement methods.

Other efforts aimed at further enhancement of the Group’s management foundations will include strengthening ties among business divisions and among Group companies, in order to accelerate the development of new technologies and products. Kyocera will also continuously seek opportunities to expand its businesses by acquiring external management resources.

ii) Expand sales in growth markets

Kyocera views the information and communications market and the environment and energy market as future growth markets and will strive to expand sales in these markets in particular.

In the information and communications market, Kyocera anticipates the worldwide proliferation of smartphones and expansion of higher speed networks going forward. Kyocera will work to increase sales in the Components Business by developing smaller, more advanced components and bolstering its sales system. Efforts will also be made to expand the Equipment Business by introducing differentiated telecommunications equipment taking advantage of Kyocera’s unique component technologies and by expanding sales networks for information equipment, mainly in emerging markets.

In the environment and energy market, amidst rising awareness of environmental preservation and energy conservation, Kyocera will work to expand sales by commencing the sale of high-value-added home energy management systems combining various new devices in order to develop new markets, while continuing to pursue sales of existing solar generating systems. Kyocera is also preparing for entry into large scale solar power generation projects.

Note: Forward-Looking Statements

Certain of the statements made in this report 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 the following:

 

(1) General economic conditions in our markets, which are primarily Japan, North America, Europe and Asia;

 

(2) Economic, political and legal conditions and unexpected changes therein in countries or areas where we operate;

 

(3) Factors that may affect our exports, including a strong yen, political and economic instability, customs, and inadequate protection of our intellectual property;

 

(4) Fluctuation in exchange rates that may affect the value of our foreign assets or the prices of our products;

 

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(5) Intensified competition in product pricing, technological innovation, R&D activities, product quality and speed of delivery;

 

(6) Manufacturing delays or defects resulting from outsourcing or internal manufacturing processes;

 

(7) The possibility that expansion of production capacity and in-process R&D activities may not produce the desired results;

 

(8) The possibility that companies or assets acquired by us may not produce the returns or benefits, or bring in business opportunities, which we expect;

 

(9) Inability to secure skilled employees, particularly engineering and technical personnel;

 

(10) The possibility of divulgence of our trade secrets and infringement of our intellectual property rights;

 

(11) The possibility that we may receive notice of claims of infringement of other parties’ intellectual property rights and claims for royalty payments;

 

(12) Increases in our environmental liability and in costs and expenses required to observe obligations imposed by environmental laws and regulations in Japan and other countries;

 

(13) Newly enacted laws and regulations or stricter interpretation of existing laws and regulations that may limit our business operations;

 

(14) Events that may negatively impact our markets or supply chain, including terrorist acts, plague, war and similar events;

 

(15) Earthquakes and other related natural disasters affecting our operational facilities and our markets or supply chain, as well as social and economic infrastructure;

 

(16) Exposure to difficulties in collection of trade receivables due to customers’ worsening financial condition;

 

(17) The possibility of recognition of impairment losses on investment securities held by us due to declines in their value;

 

(18) The possibility that we may record impairment losses on long-lived assets, goodwill and intangible assets;

 

(19) The possibility that deferred tax assets may not be realized or additional liabilities for unrecognized tax benefits may be incurred; and

 

(20) Changes in accounting principles.

Such risks, uncertainties and other factors may cause our actual results, performance, achievements or financial condition to be materially different from any future results, performance, achievements or financial condition expressed or implied by these forward-looking statements. We undertake no obligation to publicly update any forward-looking statements included in this report.

 

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(5) Four-Year Financial Summary

 

     (Yen in millions except per share amounts)  
     FY2009      FY2010      FY2011      FY2012  

Net sales

     1,128,586         1,073,805         1,266,924         1,190,870   

Income before income taxes

     55,982         60,798         172,332         114,893   

Net income attributable to shareholders of Kyocera Corporation

     29,506         40,095         122,448         79,357   

Basic earnings per share attributable to shareholders of Kyocera Corporation (yen)

     157.27         218.47         667.23         432.58   

Total assets

     1,773,802         1,848,717         1,946,566         1,994,103   

Kyocera Corporation shareholders’ equity

     1,323,663         1,345,235         1,420,263         1,469,505   

Kyocera Corporation shareholders’ equity per share (yen)

     7,212.32         7,330.14         7,739.31         8,010.65   

Notes:

 

1. The consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States.

 

2. Basic earnings per share attributable to shareholders of Kyocera Corporation is calculated using the average number of shares in issue during each respective fiscal year and Kyocera Corporation shareholders’ equity per share is calculated using the number of shares in issue excluding treasury shares at the end of each respective fiscal year.

 

3. Consolidated net sales for fiscal 2009 decreased compared with fiscal 2008, due primarily to the impact of a decrease in demand under the influence of the deteriorating business environment and to appreciation of the yen. Net income attributable to shareholders of Kyocera Corporation decreased compared with fiscal 2008 due mainly to such decrease in demand and to product selling price erosion.

 

4. Consolidated net sales for fiscal 2010 decreased compared with fiscal 2009 due to continued deterioration of the business environment until the second quarter and the impact of appreciation of the yen, despite the recovery of the general business environment. Net income attributable to shareholders of Kyocera Corporation increased compared with fiscal 2009 due to cost-cutting measures and improved productivity.

 

5. Consolidated net sales for fiscal 2011 increased compared with fiscal 2010 due to an expansion of the information and communications market despite the impact of appreciation of the yen. Net income attributable to shareholders of Kyocera Corporation increased compared with fiscal 2010 due to further cost-cutting measures and improved productivity.

 

6. Performance for fiscal 2012 is as stated in “(1) Business Progress and Results” on previous pages.

 

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(6) Principal Businesses (as of March 31, 2012)

Kyocera manufactures and sells a highly diversified range of products, including components involving fine ceramic technologies and applied ceramic products, telecommunications and information equipment, etc. The principal products and businesses are as follows:

 

Reporting Segments

  

Principal Products and Businesses

Fine Ceramic Parts Group   

Components for Semiconductor Processing Equipment and LCD Manufacturing Equipment,

Information & Telecommunication Components,

General Industrial Ceramic Components,

Sapphire Substrates,

Automotive Components

Semiconductor Parts Group   

Ceramic Packages for Crystal and SAW Devices,

CMOS/CCD Image 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, Micro Drills,

Medical and Dental Implants,

Jewelry and Fine Ceramic Application Products

Electronic Device Group   

Ceramic Capacitors, Tantalum Capacitors,

SAW Devices, RF Modules, EMI Filters,

Clock Oscillators, Crystal Units, Ceramic Resonators,

Optical Low Pass Filters, Connectors,

Thermal Printheads, Inkjet Printheads,

Amorphous Silicon Photoreceptor Drums,

LCDs, Touch Panels

Telecommunications Equipment Group   

Mobile Phone Handsets,

PHS related Products such as PHS Mobile Phone Handsets and PHS Base Stations

Information Equipment Group   

Color and Black & White Office Equipment such as ECOSYS Printers and Multifunction Peripherals,

Wide Format Multifunctional Systems,

Printer and Multifunction Peripherals Supplies,

Business Solution Services such as Managed Print Service

Others   

Information Systems & Telecommunication Services,

Engineering Business, Management Consulting Business,

Epoxy Molding Compounds for Semiconductor Encapsulation,

Electrical Insulators, Flexible Printed Circuit Sheet Materials,

Synthetic Resin Molded Parts,

Realty Development,

LED Lighting Systems

 

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(7) Significant Subsidiaries (as of March 31, 2012)

 

Name of Subsidiary

  Amount of Capital
(Yen in millions
and others
in thousands)
    Ownership  by
Kyocera
Corporation
(%)
   

Principal Business

Kyocera SLC Technologies Corporation

    ¥4,000        100.00      Development, manufacture and sale of organic multilayer packages and substrates

Kyocera Solar Corporation

    ¥310        100.00      Sale of solar energy products

Japan Medical Materials Corporation*1

    ¥2,500        77.00      Development, manufacture and sale of medical material

Kyocera Elco Corporation*2

    ¥400        100.00      Development, manufacture and sale of electronic devices

Kyocera Kinseki Corporation*3

    ¥16,318        100.00      Development and manufacture of electronic devices

Optrex Corporation*4

    ¥4,075        100.00      Development, manufacture and sale of electronic devices

Kyocera Mita Corporation*5

    ¥12,000        100.00      Development and manufacture of information equipment

Kyocera Communication Systems Co., Ltd.

    ¥2,986        76.30      Provision of information systems and telecommunication services

Kyocera Chemical Corporation

    ¥10,172        100.00      Development, manufacture and sale of electrical insulation materials

Shanghai Kyocera Electronics Co., Ltd.

    ¥17,321        100.00      Manufacture and sale of fine ceramic-related products and electronic devices

Dongguan Shilong Kyocera Optics Co., Ltd.*6

    HK$472,202        90.00      Manufacture of cutting tools and thin film components

Kyocera (Tianjin) Sales & Trading Corporation

    US$10,000        90.00      Sale of fine ceramic-related products and cutting tools

Kyocera Telecom Equipment (Malaysia) Sdn. Bhd.

 

   

 

MYR28,000

 

  

 

   

 

100.00

 

  

 

  Manufacture of telecommunications equipment

Kyocera Asia Pacific Pte. Ltd.

    US$105        100.00      Sale of fine ceramic-related products, solar energy products and electronic devices

Kyocera International, Inc.

    US$34,850        100.00      Holding company and headquarters in North America

AVX Corporation

    US$1,763        69.06      Development, manufacture and sale of electronic devices

Kyocera Fineceramics GmbH

    EURO1,687        100.00      Sale of fine ceramic-related products, solar energy products and thin film components

Asterisks (*) show consolidated subsidiaries the names of which were changed as of April 1, 2012. New company names are as follows:

*1 Kyocera Medical Corporation, *2 Kyocera Connector Products Corporation, *3 Kyocera Crystal Device Corporation, *4 Kyocera Display Corporation, *5 Kyocera Document Solutions Inc., *6 Dongguan Shilong Kyocera Co., Ltd.

 

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(8) Principal Business Sites (as of March 31, 2012)

 

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

Japan:

  

Kyocera Corporation:

  

Hokkaido Kitami Plant

   Kyocera SLC Technologies Corporation (Shiga)

Fukushima Tanagura Plant

   Kyocera Solar Corporation (Kyoto)

Nagano Okaya Plant

   Japan Medical Materials Corporation (Osaka)*1

Mie Ise Plant

   Kyocera Elco Corporation (Kanagawa)*1

Shiga Gamo Plant

   Kyocera Kinseki Corporation (Tokyo)*1

Shiga Yokaichi Plant

   Optrex Corporation (Tokyo)*1

Shiga Yasu Plant

   Kyocera Mita Corporation (Osaka)*1

Kagoshima Sendai Plant

   Kyocera Mita Japan Corporation (Tokyo)*2

Kagoshima Kokubu Plant

   Kyocera Communication Systems Co., Ltd. (Kyoto)

Kagoshima Hayato Plant

   Kyocera Chemical Corporation (Saitama)

Yokohama Office

   Kyocera Optec Co., Ltd. (Tokyo)

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)

Overseas :

  
Shanghai Kyocera Electronics Co., Ltd. (China)   
Kyocera (Tianjin) Solar Energy Co., Ltd. (China)   
Dongguan Shilong Kyocera Optics Co., Ltd. (China)*1   
Kyocera (Tianjin) Sales & Trading Corporation (China)   
Kyocera Mita Office Equipment (Dongguan) Co., Ltd. (China)*3
Kyocera Precision Tools Korea Co., Ltd. (Korea)   
Kyocera Korea Co., Ltd. (Korea)   
Kyocera Telecom Equipment (Malaysia) Sdn. Bhd. (Malaysia)
Kyocera Asia Pacific Pte. Ltd. (Singapore)   
Kyocera International, Inc. (U.S.A.)   
Kyocera Industrial Ceramics Corporation (U.S.A.)   
Kyocera America, Inc. (U.S.A.)   
Kyocera Solar, Inc. (U.S.A.)   
Kyocera Tycom Corporation (U.S.A.)   
Kyocera Communications, Inc. (U.S.A.)   
AVX Corporation (U.S.A.)   
Kyocera Mita America, Inc. (U.S.A.)*4   
Kyocera Mita Europe B.V. (Netherlands)*5   
Kyocera Mita Deutschland GmbH (Germany)*6   
TA Triumph-Adler GmbH (Germany)   
Kyocera Fineceramics GmbH (Germany)   
Kyocera Solar Europe S.R.O. (Czech Republic)   

Kyocera Unimerco A/S (Denmark)

  

Asterisks (*) show consolidated subsidiaries the names of which were changed as of April 1, 2012. New company names are as follows:

*1 See “(7) Significant Subsidiaries” on previous page.

*2 Kyocera Document Solutions Japan Inc., *3 Kyocera Document Technology (Dongguan) Co., Ltd.,

*4 Kyocera Document Solutions America, Inc., * 5 Kyocera Document Solutions Europe B.V.,

*6 Kyocera Document Solutions Deutschland GmbH

 

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(9) Employees (as of March 31, 2012)

i) Consolidated

 

Reporting Segments

   Number of Employees      Change from the end of fiscal 2011  

Fine Ceramic Parts Group

     3,010         Increase of 238   

Semiconductor Parts Group

     8,780         Decrease of 1,690   

Applied Ceramic Products Group

     7,938         Increase of 332   

Electronic Device Group

     25,638         Increase of 5,735   

Telecommunications Equipment Group

     3,888         Decrease of 194   

Information Equipment Group

     15,049         Increase of 313   

Others

     5,589         Increase of 187   

Headquarters

     1,597         Decrease of 40   
  

 

 

    

 

 

 

Total

     71,489         Increase of 4,881   
  

 

 

    

 

 

 

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

ii) Non-consolidated

 

Number of employees

     14,773   

Change from the end of fiscal 2011

     Increase of 88   

Average age

     39.5   

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, 2012)

 

(1) Total Number of Shares Authorized to be Issued:

  600,000,000   

(2) Total Number of Shares Issued:

  191,309,290   

 (7,865,370 treasury shares are included in the total number of shares issued set forth above.)

 

(3) Number of Shareholders:

  65,055   

(4) Major Shareholders (Top 10)

 

Name

   Share Ownership
(in thousands)
     Shareholding  Ratio
(%)
 

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

     12,999         7.09   

Japan Trustee Services Bank, Ltd. (Trust Account)

     12,814         6.99   

The Bank of Kyoto, Ltd.

     7,218         3.93   

State Street Bank and Trust Company

     6,847         3.73   

Kazuo Inamori

     5,606         3.06   

The Inamori Foundation

     4,680         2.55   

SSBT OD05 Omnibus Account – Treaty Clients

     3,753         2.05   

KI Enterprise Co., Ltd.

     3,550         1.94   

JPMorgan Securities Japan Co., Ltd.

     3,032         1.65   

Stock Purchase Plan for Kyocera Group Employees

     2,689         1.47   

Note:    Shareholding ratios are calculated after deduction of the treasury shares.

 

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3. Directors and Corporate Auditors

(1) List of Directors and Corporate Auditors (as of March 31, 2012)

 

Title

 

Name

  

Duties and Other Significant Responsibilities

Chairman of the Board and Representative Director

  Makoto Kawamura   

President and Representative Director

  Tetsuo Kuba    President and Executive Officer

Vice President and Representative Director

  Tatsumi Maeda   

Vice President and Executive Officer

General Manager of Corporate R&D Group and Corporate Solar Energy Group

Vice President and Representative Director

  Hisao Hisaki   

Vice President and Executive Officer

General Manager of Corporate Development Group

Director

  Yasuyuki Yamamoto   

Managing Executive Officer

General Manager of Corporate Communication Equipment Group

Director

  Goro Yamaguchi   

Managing Executive Officer

General Manager of Corporate Semiconductor Components Group

Director

  Shoichi Aoki   

Managing Executive Officer

General Manager of Corporate Financial and Business Systems Administration Group

Director

  Katsumi Komaguchi   

Managing Executive Officer

President and Representative Director of

     Kyocera Mita Corporation

Director

  Tsutomu Yamori   

Managing Executive Officer

General Manager of Corporate General Affairs Human Resources Group

Director

  Yoshihito Ohta   

Managing Executive Officer

General Manager of Corporate Office of

     the Chief Executives

Director

  Rodney N. Lanthorne   

Vice Chairman of the Board 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

  Yoshihiro Kano   

Corporate Auditor

  Osamu Nishieda    Attorney at Law

Corporate Auditor

  Kazuo Yoshida   

Professor, Graduate School of Economics,

     Kyoto University

Corporate Auditor

  Yoshinari Hara   

Chief Corporate Adviser of Daiwa Securities Group Inc.

 

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Notes:

 

1. Other significant responsibilities undertaken by Directors and Corporate Auditors in fiscal 2012.

 

  (1) Messrs. Makoto Kawamura, Chairman of the Board and Representative Director, Tetsuo Kuba, President and Representative Director, Tatsumi Maeda, Vice President and Representative Director and Rodney N. Lanthorne, Director, serve as Directors of AVX Corporation.

 

  (2) Mr. Makoto Kawamura, Chairman of the Board and Representative Director, serves as an outside Director of KDDI Corporation.

 

       Mr. Yoshihiko Nishikawa, Corporate Auditor, serves as an outside Corporate Auditor of KDDI Corporation.

 

  (3) Yoshihito Ohta, Director, serves as a Senior Managing Executive Officer of Japan Airlines Co., Ltd.

 

  (4) Mr. Kazuo Yoshida, Corporate Auditor, served as an outside Corporate Auditor of West Japan Railway Company until June 23, 2011. There are no special interests between West Japan Railway Company and Kyocera Corporation.

 

  (5) Mr. Yoshinari Hara, Corporate Auditor, serves as an outside Director of NEC Corporation, with which Kyocera Corporation engages in transactions relating to sale of products and purchase of goods.

 

  (6) Mr. Yoshinari Hara, Corporate Auditor, served as an outside Director of Tokyo Stock Exchange Group, Inc. until June 21, 2011. Kyocera Corporation is listed on the First Section of Tokyo Stock Exchange, Inc., which is a subsidiary of Tokyo Stock Exchange Group, Inc.

 

2. Messrs. Osamu Nishieda, Kazuo Yoshida and Yoshinari Hara are outside Corporate Auditors.

 

3. Kyocera Corporation has designated Messrs. Kazuo Yoshida and Yoshinari Hara as independent auditors as provided for in the rules of the Tokyo Stock Exchange and the Osaka Securities Exchange.

 

4. “Title” and “Duties and Other Significant Responsibilities” of Directors and Corporate Auditors have been changed as of April 1, 2012, as follows:

 

Title

  

Name

  

Duties and Other Significant Responsibilities

Director

   Hisao Hisaki    In charge of Corporate Development Group

Corporate Auditor

   Kazuo Yoshida    Visiting Professor, Kyoto Sangyo University

(2) Directors and Corporate Auditors retired during Fiscal 2012

Directors and Corporate Auditors retired during fiscal 2012 are as follows:

 

Title as of

Retirement

  

Name

  

Duties and Other Significant
Responsibilities as of Retirement

  

Reason for
Retirement

  

Retired Date

Director

  

Yoshihiro Kano

  

Managing Executive Officer

Deputy General Manager of Corporate Development Group

  

Expiration of term of office

   Jun. 28, 2011

Full-time Corporate Auditor

  

Kokichi Ishibitsu

      Resignation    Jun. 28, 2011

 

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(3) Remuneration to Directors and Corporate Auditors for Fiscal 2012

 

     Number of  Directors
and Corporate Auditors
    Amount of
Remuneration
(Yen in millions)
 

Directors

     13      ¥ 369   

Corporate Auditors

     6      ¥ 65   

(Outside Corporate Auditors of 6 Corporate Auditors above)

     (3   ¥ (18
  

 

 

   

 

 

 

Total

     19      ¥ 434   
  

 

 

   

 

 

 

Notes:

 

1. Amount of remuneration to Directors does not include salaries for services as employees or Executive Officers for Directors who serve as such.

 

2. As of the end of fiscal 2012, there were 12 Directors and 5 Corporate Auditors, with 3 of the latter being outside Corporate Auditors. The numbers set forth in “Number of Directors and Corporate Auditors” in the table above include 1 Director and 1 Corporate Auditor who retired in fiscal 2012.

 

3. Remuneration to Directors and Corporate Auditors was determined by a resolution adopted at the 55th Ordinary General Meeting of Shareholders, which was held on June 25, 2009, as follows:

 

   [Aggregate amount of remuneration to Directors]

 

Basic remuneration:

   No more than ¥400 million per year (not including salaries for services as employees or Executive Officers for Directors who serve as such).

Bonuses to Directors:

   No more than 0.2% of the consolidated net income* of Kyocera Corporation for the relevant fiscal year, provided that such amount shall in no case exceed 300 million yen annually.

 

  * Pursuant to a change in U.S. accounting standards, this has been revised to “Net income attributable to shareholders of Kyocera Corporation.”

 

   [Aggregate amount of remuneration to Corporate Auditors]

 

Basic remuneration:

   No more than ¥100 million per year.

(4) Outside Corporate Auditors

(i) Activities of outside Corporate Auditors during fiscal 2012

 

  (a) Mr. Osamu Nishieda attended all of the 11 meetings of the Board of Directors and all of the 8 meetings of the Board of Corporate Auditors which were held during fiscal 2012 and expressed his views based on his abundant knowledge and experience as an attorney at law.

 

  (b) Mr. Kazuo Yoshida attended 10 of the 11 meetings of the Board of Directors and all of the 8 meetings of the Board of Corporate Auditors which were held during fiscal 2012 and expressed his views based on his abundant knowledge from and experience in the study of economics.

 

  (c) Mr. Yoshinari Hara attended 9 of the 11 meetings of the Board of Directors and all of the 8 meetings of the Board of Corporate Auditors which were held during fiscal 2012 and expressed his views based on his abundant knowledge from and experience in the management of a securities firm.

(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 the performance of their tasks, in accordance with paragraph 1 of Article 427 of the Corporation Act and Article 35 of the Articles of Incorporation of Kyocera Corporation. The amounts of liability to which they are subject, as set under such agreements, are limited to the smallest amounts permitted under applicable laws and regulations.

 

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4. Accounting Auditor

 

(1) Name of Accounting Auditor:             Kyoto Audit Corporation

 

(2) Remuneration and Other Amounts Payable to Accounting Auditor

 

Remuneration and other amounts payable by Kyocera Corporation to the Accounting Auditor for services for fiscal 2012

   ¥ 260 million   

Total amount of cash and other financial benefits payable by Kyocera Group to the Accounting Auditor for services for fiscal 2012

   ¥ 516 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, remuneration is determined without separately indicating amounts payable for auditing under the Corporation Act and for auditing under the Financial Instruments and Exchange Law. Accordingly, ¥260 million represents the aggregate remuneration for both of these auditing services.

 

(3) Non-Audit-related Service

Subsidiaries of Kyocera Corporation also paid consideration to Kyoto Audit Corporation for advisory services in connection with the subsidiaries’ adoption of the International Financial Reporting Standards.

 

(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 provided in 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 Meeting of Shareholders 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 the Board of Corporate Auditors, shall propose to the General Meeting of Shareholders a resolution to terminate or not to reappoint such Accounting Auditor.

 

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5. System and Policy

Kyocera Corporation has adopted through its Board of Directors Meeting 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 efforts, 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 the Company and Kyocera Group, as a whole.

I.    Corporate Governance

1.    Basic Policy for Corporate Governance

The Board of Directors of Kyocera Corporation 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 Kyocera Corporation 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.”

 

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2.    System for Corporate Governance

The Board of Directors of Kyocera Corporation determines, pursuant to the basic policy described in 1 above, the below-outlined system for corporate governance of Kyocera Corporation, which is the core company 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 Kyocera Corporation. Directors of Kyocera Corporation 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 Kyocera Corporation, 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 reporting of internal complaints to the Board of Corporate Auditors,” established by the Board of Corporate Auditors, under which employees, suppliers and customers of Kyocera Corporation may submit complaints directly to the Board of Corporate Auditors.

 

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  (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

 

  c. Meetings with Representative Directors to exchange opinions regarding management of Kyocera Corporation in general.

(2)   Kyocera Philosophy Education

Representative Directors of Kyocera Corporation 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 Kyocera Corporation 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 Kyocera Corporation to effectuate management policy.” The Board of Directors of Kyocera Corporation 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 Kyocera Corporation.

 

(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.

 

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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.

 

(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 established relating to internal control is as follows:

 

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

 

(ii) The “Risk Management Division”, which was renamed the “Global Risk Management Division” in March 2012, was established in September 2000 in order to create a thorough system to ensure compliance with laws and regulations and internal rules.

 

(iii) The “Kyocera Management Committee”, which was renamed the “Kyocera Group Management Committee” in August 2002, was established in January 2001.

 

(iv) The “Kyocera Disclosure Committee” was established in April 2003.

 

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

 

(vi) The Executive Officer System was introduced in June 2003 to improve management efficiency.

 

(vii) The “Global Audit Division”, which has been reorganized and renamed the “Corporate Global Audit Division” from April 2010, was established in May 2005 to undertake internal audits, and it conducts audits of the businesses of Kyocera Group regularly, and reports the results of such audits to the Directors and Corporate Auditors of Kyocera Corporation. It also serves as a mechanism for meeting the requirements of Article 404 of the Sarbanes-Oxley Act of the United States of America.

 

(viii) The “CSR Committee” was established in November 2005.

 

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Consolidated Balance Sheets

 

     (Yen in millions)  
     March 31,     Increase
(Decrease)
 
     2011     2012    

Current assets:

      

Cash and cash equivalents

   ¥ 273,471      ¥ 273,288      ¥ (183

Short-term investments in debt securities

     44,012        47,175        3,163   

Other short-term investments

     201,817        158,765        (43,052

Trade notes receivables

     19,536        19,349        (187

Trade accounts receivables

     208,404        225,578        17,174   

Less allowances for doubtful accounts and sales returns

     (4,795     (4,583     212   

Inventories

     232,899        270,336        37,437  *1 

Advance payments

     72,207        68,685        (3,522

Deferred income taxes

     43,035        45,049        2,014   

Other current assets

     38,915        40,961        2,046   
  

 

 

   

 

 

   

 

 

 

Total current assets

     1,129,501        1,144,603        15,102   
  

 

 

   

 

 

   

 

 

 

Non-current assets:

      

Investments and advances:

      

Investments in and advances to affiliates and unconsolidated subsidiaries

     1,219        1,597        378   

Long-term investments in debt and equity securities

     377,075        372,779        (4,296

Other long-term investments

     15,585        17,501        1,916   
  

 

 

   

 

 

   

 

 

 

Total investments and advances

     393,879        391,877        (2,002
  

 

 

   

 

 

   

 

 

 

Property, plant and equipment:

      

Land

     59,638        60,600        962   

Buildings

     288,992        301,911        12,919   

Machinery and equipment

     706,474        719,146        12,672   

Construction in progress

     7,227        17,035        9,808   

Less accumulated depreciation

     (814,577     (838,155     (23,578
  

 

 

   

 

 

   

 

 

 

Total property, plant and equipment

     247,754        260,537        12,783   
  

 

 

   

 

 

   

 

 

 

Goodwill

     64,701        89,039        24,338  *2 

Intangible assets

     42,160        49,653        7,493   

Other assets

     68,571        58,394        (10,177
  

 

 

   

 

 

   

 

 

 

Total non-current assets

     817,065        849,500        32,435   
  

 

 

   

 

 

   

 

 

 

Total assets

   ¥ 1,946,566      ¥ 1,994,103      ¥ 47,537   
  

 

 

   

 

 

   

 

 

 

Remarks:

 

*1 Inventories increased due to contributions by the subsidiaries newly added to the Kyocera Group during fiscal 2012, and procurement of inventories of rare metals in preparation for future business expansion.

 

*2 Goodwill increased due to the acquisitions of companies completed during fiscal 2012.

 

Note: The consolidated balance sheets and the consolidated statements of income for the previous fiscal year, indications of increase (decrease) of amounts and remarks are presented solely for reference.

 

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       (Yen in millions)  
     March 31,     Increase
(Decrease)
 
     2011     2012    

Current liabilities:

      

Short-term borrowings

   ¥ 7,852      ¥ 4,062      ¥ (3,790 )* 

Current portion of long-term debt

     10,687        10,610        (77

Trade notes and accounts payable

     101,265        102,699        1,434   

Other notes and accounts payable

     61,226        60,993        (233

Accrued payroll and bonus

     49,092        49,880        788   

Accrued income taxes

     18,069        13,496        (4,573

Other accrued liabilities

     24,337        29,940        5,603   

Other current liabilities

     28,087        29,368        1,281   
  

 

 

   

 

 

   

 

 

 

Total current liabilities

     300,615        301,048        433   
  

 

 

   

 

 

   

 

 

 

Non-current liabilities:

      

Long-term debt

     24,538        21,197        (3,341 )* 

Accrued pension and severance liabilities

     28,924        32,441        3,517   

Deferred income taxes

     90,005        90,179        174   

Other non-current liabilities

     19,125        14,997        (4,128
  

 

 

   

 

 

   

 

 

 

Total non-current liabilities

     162,592        158,814        (3,778
  

 

 

   

 

 

   

 

 

 

Total liabilities

     463,207        459,862        (3,345
  

 

 

   

 

 

   

 

 

 

Kyocera Corporation shareholders’ equity:

      

Common stock

     115,703        115,703          

Additional paid-in capital

     162,336        162,617        281   

Retained earnings

     1,268,548        1,324,052        55,504   

Accumulated other comprehensive income

     (75,633     (81,639     (6,006

Treasury stock, at cost

     (50,691     (51,228     (537
  

 

 

   

 

 

   

 

 

 

Total Kyocera Corporation shareholders’ equity

     1,420,263        1,469,505        49,242   
  

 

 

   

 

 

   

 

 

 

Noncontrolling interests

     63,096        64,736        1,640   
  

 

 

   

 

 

   

 

 

 

Total equity

     1,483,359        1,534,241        50,882   
  

 

 

   

 

 

   

 

 

 

Total liabilities and equity

   ¥ 1,946,566      ¥ 1,994,103      ¥ 47,537   
  

 

 

   

 

 

   

 

 

 

Remark:

 

* Short-term borrowings and long-term debt decreased as a result of repayments to financial institutions.

 

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Consolidated Statements of Income

 

     (Yen in millions)  
     Years ended March 31,     Increase
(Decrease)
 
     2011     2012    

Net sales

   ¥ 1,266,924      ¥ 1,190,870      ¥ (76,054

Cost of sales

     888,869        870,143        (18,726
  

 

 

   

 

 

   

 

 

 

Gross profit

     378,055        320,727        (57,328

Selling, general and administrative expenses

     222,131        223,052        921   
  

 

 

   

 

 

   

 

 

 

Profit from operations

     155,924        97,675        (58,249 )* 

Other income (expenses):

      

Interest and dividend income

     12,963        13,966        1,003   

Interest expense

     (2,259     (2,042     217   

Foreign currency transaction gains, net

     3,824        4,533        709   

Equity in losses of affiliates and unconsolidated subsidiaries

     (160     (36     124   

Other, net

     2,040        797        (1,243
  

 

 

   

 

 

   

 

 

 

Total other income (expenses)

     16,408        17,218        810   
  

 

 

   

 

 

   

 

 

 

Income before income taxes

     172,332        114,893        (57,439

Income taxes

     42,214        30,135        (12,079
  

 

 

   

 

 

   

 

 

 

Net income

     130,118        84,758        (45,360

Net income attributable to noncontrolling interests

     (7,670     (5,401     2,269   
  

 

 

   

 

 

   

 

 

 

Net income attributable to shareholders of Kyocera Corporation

   ¥ 122,448      ¥ 79,357        ¥(43,091)   
  

 

 

   

 

 

   

 

 

 

Remark:

 

* Profit from operations decreased due to a decline in component demand for digital consumer equipment and a steep decline in product prices in the solar energy business, in addition to the impact of the yen’s appreciation.

 

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Consolidated Statement of Equity (From April 1, 2011 to March 31, 2012)

 

    (Yen in millions and shares in thousands)  

(Number of shares outstanding)

  Common
stock
    Additional
paid-in
capital
    Retained
earnings
    Accumulated
other
comprehensive
income
    Treasury
stock
    Kyocera
Corporation
shareholders'
equity
    Noncontrolling
interests
    Total
equity
 

Balance, March 31, 2011 (183,513)

  ¥ 115,703      ¥ 162,336      ¥ 1,268,548      ¥ (75,633   ¥ (50,691   ¥ 1,420,263      ¥ 63,096      ¥ 1,483,359   

Comprehensive income:

               

Net income for the year

        79,357            79,357        5,401        84,758   

Change in net unrealized gains on securities

          8,502          8,502        18        8,520   

Change in net unrealized losses on derivative financial instruments

          (41       (41     (17     (58

Change in pension adjustments

          (8,750       (8,750     (191     (8,941

Change in foreign currency translation adjustments

          (5,538       (5,538     (891     (6,429
           

 

 

   

 

 

   

 

 

 

Total comprehensive income for the year

              73,530        4,320        77,850   
           

 

 

   

 

 

   

 

 

 

Cash dividends paid to Kyocera Corporation's shareholders

        (23,853         (23,853       (23,853

Cash dividends paid to noncontrolling interests

                (2,124     (2,124

Purchase of treasury stock (69)

            (540     (540       (540

Reissuance of treasury stock (0)

      0            3        3          3   

Stock option plan of subsidiaries

      103              103        41        144   

Other

      178          (179       (1     (597     (598
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance, March 31, 2012 (183,444)

  ¥ 115,703      ¥ 162,617      ¥ 1,324,052      ¥ (81,639   ¥ (51,228   ¥ 1,469,505      ¥ 64,736      ¥ 1,534,241   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Consolidated Cash Flows (For reference only)

 

     (Yen in millions)  
     Years ended March 31,  
         2011             2012      

Cash flow from operating activities

     119,687        109,065   

Cash flow from investing activities

     (121,364     (56,051

Cash flow from financing activities

     (26,820     (50,769

Effect of exchange rate changes on cash and cash equivalents

     (11,158     (2,428

Net decrease in cash and cash equivalents

     (39,655     (183

Cash and cash equivalents at beginning of year

     313,126        273,471   

Cash and cash equivalents at end of year

     273,471        273,288   

 

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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: 223

Major consolidated subsidiaries: Kyocera Mita Corporation, AVX Corporation and Kyocera International, Inc.

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

This subsidiary is excluded from the scope of consolidation because its total assets, net sales, net income attributable to shareholders of Kyocera Corporation and retained earnings, etc. are immaterial according to a reasonable judgment of the consolidated financial condition and business results of Kyocera.

 

(2) Scope of application of the equity method

Number of non-consolidated subsidiaries and affiliates accounted for by the equity method: 11

Major affiliate accounted for by the equity method: Miyaki Electric Mfg. Co., Ltd.

 

(3) Changes in scope of consolidation

Number of increase: 35, Optrex Corporation, Kyocera Unimerco A/S and others

Number of decrease: 9

 

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

Number of increase: 2

Number of decrease: 1

 

(5) Summary of significant accounting policies

 

  (i) Standards of preparation of consolidated financial statements

The consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America pursuant to the provisions of paragraph 1 of Article 120-2 of the Corporate Calculation Rules of Japan. Certain disclosure and footnotes required under principles generally accepted in the United States are omitted pursuant to the same provision.

 

  (ii) Valuation of inventories

Kyocera has adopted the Financial Accounting Standards Board (FASB)’s Accounting Standards Codification (ASC) 330, “Inventory.” Inventories are stated at the lower of cost or market. For finished goods and work in process, cost is mainly determined by the average method, and by other methods including the first-in, first-out method. For raw materials and supplies, cost is mainly determined by the first-in, first-out method, and by other methods including the average method. Kyocera recognizes estimated write-down of inventories for excess, slow-moving and obsolete inventories.

 

  (iii) Valuation of securities

Kyocera has adopted ASC 320, “Debt and Equity Securities.” Available-for-sale securities are recorded at fair value, with unrealized gains and losses excluded from income and recorded in “accumulated other comprehensive income,” net of tax. Held-to-maturity securities are recorded at amortized cost. Non-marketable equity securities are recorded using the cost method based on ASC325, “Investments-Other.”

 

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  (iv) Depreciation method for property, plant and equipment

Kyocera has adopted ASC 360, “Property, Plant and Equipment.” Depreciation is computed mainly by the declining-balance method on estimated useful lives.

 

  (v) Goodwill and other intangible assets

Kyocera has adopted ASC 350, “Intangibles – Goodwill and Other.” Goodwill and intangible assets with indefinite useful lives, rather than being amortized straight line over their respective estimated useful lives to their estimated residual values, and reviewed for impairment which are accounted for under ASC 360, “Property, Plant, and Equipment” whenever events or changes in circumstances indicate that their carrying amount may not be recoverable.

 

  (vi) Accounting for allowance and accruals

Allowance for doubtful accounts:

Kyocera maintains allowances for doubtful accounts related to trade notes receivable, trade accounts receivable and finance receivables for estimated losses resulting from customers’ inability to make timely payments. Kyocera’s estimates are based on various factors, including the length of past due payments, historical experience and current business environments. In circumstances where it is aware of a specific customer’s inability to meet its financial obligations, a specific allowance against these amounts is provided, considering the fair value of assets pledged by the customer as collateral. In addition, when Kyocera determines it is unable to collect receivables, Kyocera directly writes-off these receivables to expenses in the period incurred.

Allowances for sales returns:

Kyocera records an estimated sales return allowance at the time of sales based on historical return experience.

Accrued pension and severance liabilities:

Kyocera has adopted ASC 715, “Compensation – Retirement Benefits.” Kyocera recognizes the overfunded or underfunded status of its defined benefit postretirement plans as an asset or liability, as the case may be, in the consolidated balance sheet and recognizes changes in funded status during the year as changes in comprehensive income for such year. 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) Accounting change

On April 1, 2011, Kyocera adopted the FASB’s Accounting Standards Update (ASU) No. 2009-13, “Multiple-Deliverable Revenue Arrangements – a consensus of the FASB Emerging Issues Task Force,” which addressed accounting for multiple-deliverable arrangements to enable vendors to account for products or services separately rather than as a combined unit. This accounting standard addresses how to separate deliverables and how to measure and allocate arrangement consideration to one or more units of accounting. The adoption of this accounting standard did not have a material impact on Kyocera’s consolidated results of operations and financial condition.

On April 1, 2011, Kyocera adopted the FASB’s ASU No. 2010-28, “When to Perform Step 2 of the Goodwill Impairment Test for Reporting Units with Zero or Negative Carrying Amounts.” This accounting standard modifies Step 1 of the goodwill impairment test for reporting units with zero or negative carrying amounts. For those reporting units, an entity is required to perform Step 2 of the goodwill impairment test if it is more likely than not that a goodwill impairment exists. The adoption of this accounting standard did not have a material impact on Kyocera’s consolidated results of operations and financial condition.

 

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On January 1, 2012, Kyocera adopted the FASB’s ASU No. 2011-04, “Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs.” This accounting standard amends current U.S. GAAP to create more commonality with the IFRS by harmonizing definitions and disclosure requirements in U.S. GAAP for measuring fair value and for disclosing information about fair value measurements. The adoption of this accounting standard did not have a material impact on Kyocera’s consolidated results of operations and financial condition.

2. Notes to Consolidated Balance Sheets

 

     (Yen in millions)  

(1) Allowances for doubtful accounts related to assets

  

Other current assets

   ¥ 518   

Investments in and advances to affiliates and unconsolidated subsidiaries

   ¥ 1   

Other long-term investments

   ¥ 43   

Other assets

   ¥ 1,948   

(2) Accumulated other comprehensive income

  

Net unrealized gains on securities

   ¥ 40,735   

Net unrealized losses on derivative financial instruments

   ¥ (70

Pension adjustments

   ¥ (12,290

Foreign currency translation adjustments

   ¥ (110,014

(3) Assets pledged as collateral

  

Trade accounts receivable

   ¥ 56   

Property, plant and equipment

   ¥ 4,556   

Intangibleassets

   ¥ 1,650   

* Property, plant and equipment and intangible assets above are pledged against “current portion of long-term debts” and “long-term debts” in a total amount of ¥ 3,332 million.

  

(4) Guarantee obligations

  

Guarantees for debts

   ¥ 588   

3. Notes to Consolidated Statement of Equity

(1) Total number of shares issued

 

     (Shares in thousands)  

Class of shares

   March 31, 2011      Increase      Decrease      March 31, 2012  

Common stock

     191,309                         191,309   

(2) Distribution of surplus

 

   (i) Dividends paid

 

Resolution

   Class of
shares
   Aggregate
amount
   Per share
amount
   Record date    Effective date

Ordinary General Meeting of Shareholders held on June 28, 2011

  

Common
stock

  

¥12,846

million

  

¥70

 

  

March 31,
2011

  

June 29,
2011

Board of Directors Meeting held on October 27, 2011

  

Common
stock

  

¥11,007
million

  

¥60

 

  

September 30,
2011

  

December 5,
2011

 

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   (ii) Dividends of which record date falls in fiscal 2011 with an effective date in fiscal 2012

 

Resolution

   Class of
shares
   Source of
dividend
   Aggregate
amount
   Per share
amount
   Record date    Effective Date

Ordinary General Meeting of Shareholders to be held on June 27, 2012

  


Common
stock

  

Retained
earnings

  

¥11,007
million

  

¥60

 

  

March 31,
2012

  

June 28,
2012

4. Notes to Financial Instruments

(1) Notes to Financial Instruments

Kyocera refrains from making any speculative transactions and always maintains a high level of capital liquidity to ensure the utmost stability in its fund management. Operating receivables such as notes receivable and accounts receivable are exposed to customer credit risk. Kyocera seeks to reduce this risk in accordance with its credit management policies. Kyocera is exposed to market risk, including changes in foreign currency exchange rates, interest rates and equity prices. In order to hedge against these risks, Kyocera uses derivative financial instruments. Kyocera does not hold or issue derivative financial instruments for trading purposes. Kyocera enters into foreign currency forward contracts, interest rate swaps and currency swaps. Kyocera regularly assesses these market risks based on policies and procedures established to protect against the adverse effects of these risks and other potential exposures, primarily by reference to the market value of financial instruments.

Kyocera has marketable equity securities, debt securities and non-marketable equity securities. Kyocera is currently a major shareholder of KDDI Corporation. As of March 31, 2012, the unrealized gain on the shares of KDDI Corporation was ¥57,919 million.

(2) Fair Value of Financial Instruments

The fair values of financial instruments as of March 31, 2012 and methods and assumption used to estimate such fair values were as follows:

 

       (Yen in millions)  
       Carrying amount     Fair Value     Difference  

Assets (a)

      

Short-term investments in debt securities

     47,175        47,116        (59

Long-term investments in debt and equity securities

     372,779        372,846        67   

Other long-term investments

     17,501        17,526        25   
  

 

 

   

 

 

   

 

 

 

Total

     437,455        437,488        33   
  

 

 

   

 

 

   

 

 

 

Liabilities (b)

      

Long-term debt (including due within one year)

     31,807        32,028        221   
  

 

 

   

 

 

   

 

 

 

Total

     31,807        32,028        221   
  

 

 

   

 

 

   

 

 

 

Derivatives (c) (Note)

      

Derivatives designated as hedging instruments

     (149     (149       

Derivatives not designated as hedging instruments

     (4,560     (4,560       
  

 

 

   

 

 

   

 

 

 

Total

     (4,709     (4,790       
  

 

 

   

 

 

   

 

 

 

 

Note: Assets and liabilities of derivative transactions are recorded in net amount. Liabilities are presented by (    ).

 

(a) For investments with active markets, fair value is based on quoted market prices. For non-marketable equity securities, it is not practicable to estimate fair value of non-marketable equity securities because of the lack of the market price and difficulty in estimating fair value without incurring excessive cost. In addition, Kyocera did not identify any events or changes in circumstances that may have had a significant adverse effect on these investments. The aggregate carrying amount of the investments included in the above table as of March 31, 2012 was ¥15,380 million.

 

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(b) Fair value is estimated by discounting cash flows, using current interest rates for instruments with similar terms and remaining maturities at the end of the fiscal year.

 

(c) Fair value is estimated based on quotes from financial institutions at the end of the fiscal year.

Cash and cash equivalents, other short-term investments, trade notes receivable, trade accounts receivable, short-term borrowings, and trade notes and accounts payable, and other notes and accounts payable approximate fair value because of the short maturity of these instruments.

5. Notes to per Share Information

 

(1)    Kyocera Corporation shareholders’ equity per share

      ¥ 8,010.65   

(2)    Earnings per share attributable to shareholders of Kyocera Corporation

   Basic    ¥ 432.58   
   Diluted    ¥ 432.58   

6. Other Note

AVX Corporation (AVX), a consolidated subsidiary of Kyocera in the United States, has been identified by the United States Environmental Protection Agency (EPA), state governmental agencies or other private parties as a potentially responsible party (PRP) under the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA) or equivalent state or local laws for clean-up and response costs associated with certain sites at which remediation is required with respect to prior contamination. Because CERCLA has generally been construed to authorize joint and several liability, the EPA could seek to recover all clean-up costs from any one of the PRPs at a site despite the involvement of other PRPs. At certain sites, financially responsible PRPs other than AVX also are, or have been, involved in site investigation and clean-up activities. AVX believes that liability resulting from these sites will be apportioned between AVX and other PRPs.

To resolve its liability at the sites at which AVX has been named a PRP, AVX has entered into various administrative orders and consent decrees with federal and state regulatory agencies governing the timing and nature of investigation and remediation. As is customary, the orders and decrees regarding sites where the PRPs are not themselves implementing the chosen remedy contain provisions allowing the EPA to reopen the agreement and seek additional amounts from settling PRPs in the event that certain contingencies occur, such as the discovery of significant new information about site conditions.

In 1991, in connection with a consent decree, AVX paid ¥8,878 million ($66 million), plus interest, toward the environmental conditions at, and remediation of, New Bedford Harbor in the Commonwealth of Massachusetts (the harbor) in settlement with the United States and the Commonwealth of Massachusetts, subject to reopener provisions, including a reopener if certain remediation costs for the site exceed ¥10,701 million ($130.5 million). In 2007, AVX received notification from the EPA and the Department of Justice indicating that the United States was preparing to exercise the cost reopener. In March 2011, the EPA issued the Fourth Explanation of Significant Differences (ESD #4) that explains the planned changes to the existing remedial action plan for the harbor to include the use of a confined aquatic disposal (CAD) cell, along with interim off-site transportation and disposal of certain contaminated dredge spoils, and the continued use of long-term on-site storage for other contaminated dredge spoils. ESD #4 provides future cost estimates under the new remedial action plan (in addition to costs incurred to date) ranging from ¥29,684 million ($362 million) to ¥32,882 million ($401 million), net present value, based on certain criteria included in the ESD #4. The EPA has indicated that remediation costs through December 31, 2011 were approximately ¥37,392 million (approximately $456 million), not all of which are subject to the reopener provisions.

On April 18, 2012, the EPA issued to AVX a Unilateral Administrative Order (UAO) directing AVX to perform the Remedial Design, the Remedial Action and Operation and Maintenance for the harbor cleanup. The effective date set forth in the UAO is June 18, 2012, pursuant to which AVX has until June 25, 2012 to inform the EPA if it intends to comply with the UAO.

 

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AVX has not received complete documentation of past response costs from the EPA and therefore has not yet completed an investigation of the monies spent or available defenses in light of these notifications and indications. AVX has also not yet determined whether AVX can avoid responsibility for all, or some portion, of these past or future costs because the remediation method has changed over time and costs can be appropriately apportioned to parties other than AVX. AVX anticipates further discussions with the U.S. Department of Justice, the EPA, and the Commonwealth of Massachusetts in the first half of the year ending March 31, 2013.

AVX is continuing to assess the UAO as well as potential defenses and other actions with respect to the site. However, in light of the foregoing, AVX considers it to be probable and reasonably estimable that AVX will incur cost within a range of approximately ¥7,900 million (approximately $100 million) to ¥59,860 million ($730 million), with no amount within that range representing a more likely outcome until such time as AVX completes an investigation with regard to monies spent, available defenses and other matters. AVX recognizes liabilities for environmental exposures when analysis indicates that is both probable that a liability has been incurred and the amount of loss can be reasonably estimated. When a range of loss can be estimated, AVX accrues the most likely amount. In the event that no amount in the range of probable loss is considered most likely, the minimum loss in the range is accrued. Accordingly, AVX has recorded a charge for the year ended March 31, 2012 of ¥7,900 million ($100 million) with respect to this matter.

 

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Table of Contents

Balance Sheets

 

     (Yen in millions)  
     March 31,  
     2011     2012  

Current assets:

    

Cash and bank deposits

   ¥ 105,285      ¥ 116,151   

Trade notes receivable

     5,065        4,863   

Trade accounts receivable

     160,979        144,210   

Marketable securities

     185,727        142,870   

Finished goods and merchandise

     19,777        20,871   

Work in process

     26,552        31,907   

Raw materials and supplies

     23,056        31,961   

Advance payments

     69,893        66,254   

Prepaid expenses

     337        553   

Deferred income taxes

     14,771        13,483   

Short-term loans to subsidiaries

     4,525        18,343   

Other accounts receivable

     7,473        10,975   

Refundable income tax

     2,710        168   

Other

     1,323        1,378   

Allowances for doubtful accounts

     (175     (171
  

 

 

   

 

 

 

Total current assets

     627,298        603,816   
  

 

 

   

 

 

 

Non-current assets:

    

Tangible fixed assets:

    

Buildings

     35,650        34,466   

Structures

     2,046        1,836   

Machinery and equipment

     37,950        32,369   

Vehicles

     19        23   

Tools, furniture and fixtures

     13,212        16,108   

Land

     35,576        35,550   

Leased assets

     105        237   

Construction in progress

     2,846        8,685   
  

 

 

   

 

 

 

Total tangible fixed assets

     127,404        129,274   
  

 

 

   

 

 

 

Intangible assets:

    

Goodwill

     6,040        3,386   

Patent rights

     3,112        1,518   

Trademark

     563        286   

Design right

     1        1   

Software

     699        606   

Leased assets

     48        30   

Other

     3,706        1,850   
  

 

 

   

 

 

 

Total intangible assets

     14,169        7,677   
  

 

 

   

 

 

 

Investments and other assets:

    

Investments in securities

     373,977        371,356   

Investments in subsidiaries and affiliates

     250,902        267,296   

Investments in subsidiaries and affiliates other than equity securities

     31,197        52,964   

Long-term loans to employees

     4        4   

Long-term loans to subsidiaries

     10,995        20,020   

Impaired loans

     2,654        2,185   

Long-term prepaid expenses

     1,142        1,344   

Security deposits

     1,604        1,093   

Other

     251        2,166   

Allowances for doubtful accounts

     (194     (224
  

 

 

   

 

 

 

Total investments and other assets

     672,532        718,204   
  

 

 

   

 

 

 

Total non-current assets

     814,105        855,155   
  

 

 

   

 

 

 

Total assets

   ¥ 1,441,403      ¥  1,458,971   
  

 

 

   

 

 

 

 

Note: The balance sheets and statements of income for the previous fiscal year are presented solely for reference.

 

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Table of Contents
     (Yen in millions)  
     March 31,  
     2011     2012  

Current liabilities:

    

Trade accounts payable

   ¥ 64,699      ¥ 50,606   

Short-term borrowing from subsidiaries

     37,400        35,630   

Lease obligations

     69        94   

Other payables

     47,161        38,351   

Accrued expenses

     9,014        9,145   

Income taxes payables

     3,803        1,174   

Advance received

     400        245   

Deposits received

     2,129        3,802   

Accrued bonuses

     14,296        13,011   

Accrued bonuses for directors

     243        164   

Product warranty reserves

     2,699        2,122   

Allowances for sales returns

     136        191   

Provision for loss on disaster

     16          

Other

     1,055        1,630   
  

 

 

   

 

 

 

Total current liabilities

     183,120        156,165   
  

 

 

   

 

 

 

Non-current liabilities:

    

Long-term borrowing from subsidiaries

            2,000   

Lease obligations

     98        195   

Long-term accounts payable

     419        407   

Deferred income taxes

     75,438        74,909   

Accrued pension and severance costs

     3,833        1,131   

Product warranty reserves

     4,074        3,895   

Asset retirement obligations

     273        262   

Other

     158        110   
  

 

 

   

 

 

 

Total non-current liabilities

     84,293        82,909   
  

 

 

   

 

 

 

Total liabilities

     267,413        239,074   
  

 

 

   

 

 

 

Net assets:

    

Shareholders’ equity:

    

Common stock

     115,703        115,703   

Capital surplus:

    

Additional paid-in capital

     192,555        192,555   

Other capital surplus

     487        487   
  

 

 

   

 

 

 

Total capital surplus

     193,042        193,042   

Retained earnings:

    

Legal reserves

     17,207        17,207   

Other retained earnings:

     742,888        768,864   

Reserve for special depreciation

     988        842   

General reserve

     669,137        717,137   

Unappropriated retained earnings

     72,763        50,885   
  

 

 

   

 

 

 

Total retained earnings

     760,095        786,071   

Treasury stock, at cost

     (50,691     (51,228
  

 

 

   

 

 

 

Total shareholders’ equity

     1,018,149        1,043,588   

Difference of appreciation and conversion

    

Net unrealized gains on other securities

     155,841        176,309   
  

 

 

   

 

 

 

Total net assets

     1,173,990        1,219,897   
  

 

 

   

 

 

 

Total liabilities and net assets

   ¥ 1,441,403      ¥ 1,458,971   
  

 

 

   

 

 

 

 

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Table of Contents

Statements of Income

 

       (Yen in millions)  
     Years ended March 31,  
     2011     2012  

Net sales

   ¥ 658,297      ¥ 570,310   

Cost of sales

     542,581        485,358   
  

 

 

   

 

 

 

Gross profit

     115,716        84,952   

Selling, general and administrative expenses

     69,724        67,253   
  

 

 

   

 

 

 

Profit from operations

     45,992        17,699   

Non-operating income:

    

Interest and dividend income

     38,824        43,677   

Foreign currency transaction gains, net

     4,878        4,583   

Other non-operating income

     2,414        3,132   
  

 

 

   

 

 

 

Total non-operating income

     46,116        51,392   

Non-operating expenses:

    

Interest expense

     61        144   

Other non-operating expenses

     762        1,704   
  

 

 

   

 

 

 

Total non-operating expenses

     823        1,848   
  

 

 

   

 

 

 

Recurring profit

     91,285        67,243   

Non-recurring gain:

    

Gain on sale of tangible fixed assets

     341        809   

Repatriation of settlement with foreign tax authorities

     1,303          

Gain on sale of securities

            310   

Other

     5        85   
  

 

 

   

 

 

 

Total non-recurring gain

     1,649        1,204   

Non-recurring loss:

    

Loss on sale and disposal of tangible fixed assets

     610        474   

Losses on bad debts

     864          

Losses on impairment of securities

            1,107   

Other

     502        466   
  

 

 

   

 

 

 

Total non-recurring loss

     1,976        2,047   
  

 

 

   

 

 

 

Income before income taxes

     90,958        66,400   

Income taxes – current

     8,397        6,691   

Refund of income taxes – previous years

     (2,615       

Income taxes – deferred

     13,242        9,881   
  

 

 

   

 

 

 

Net income

   ¥ 71,934      ¥ 49,828   
  

 

 

   

 

 

 

 

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Table of Contents

Statement of Changes in Net Assets

 

     (Yen in millions)  
     Year ended
March 31, 2012
 

Shareholders’ equity

  

Common stock

  

Balance, March 31, 2011

   ¥ 115,703   

Changes in net assets

  

Total changes in net assets

       
  

 

 

 

Balance, March 31, 2012

     115,703   
  

 

 

 

Capital surplus

  

Additional paid-in capital

  

Balance, March 31, 2011

     192,555   

Changes in net assets

  

Total changes in net assets

       
  

 

 

 

Balance, March 31, 2012

     192,555   
  

 

 

 

Other capital surplus

  

Balance, March 31, 2011

     487   

Changes in net assets

  

Reissuance of treasury stock

     0   
  

 

 

 

Total changes in net assets

     0   
  

 

 

 

Balance, March 31, 2012

     487   
  

 

 

 

Total capital surplus

  

Balance, March 31, 2011

     193,042   

Changes in net assets

  

Reissuance of treasury stock

     0   
  

 

 

 

Total changes in net assets

     0   
  

 

 

 

Balance, March 31, 2012

     193,042   
  

 

 

 

Retained earnings

  

Legal reserves

  

Balance, March 31, 2011

     17,207   

Changes in net assets

  

Total changes in net assets

       
  

 

 

 

Balance, March 31, 2012

     17,207   
  

 

 

 

Other retained earnings

  

Reserve for special depreciation

  

Balance, March 31, 2011

     988   

Changes in net assets

  

Reversal of reserve for special depreciation

     (146
  

 

 

 

Total changes in net assets

     (146
  

 

 

 

Balance, March 31, 2012

     842   
  

 

 

 

 

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Table of Contents
       (Yen in millions)  
     Year ended
March 31, 2012
 

General reserve

  

Balance, March 31, 2011

     669,137   

Changes in net assets

  

Reversal of general reserve

     48,000   
  

 

 

 

Total changes in net assets

     48,000   
  

 

 

 

Balance, March 31, 2012

     717,137   
  

 

 

 

Unappropriated retained earnings

  

Balance, March 31, 2011

     72,763   

Changes in net assets

  

Reversal of reserve for special depreciation

     146   

Appropriation of general reserve

     (48,000

Dividends

     (23,853

Net income

     49,828   
  

 

 

 

Total changes in net assets

     (21,878
  

 

 

 

Balance, March 31, 2012

     50,885   
  

 

 

 

Total retained earnings

  

Balance, March 31, 2011

     760,095   

Changes in net assets

  

Dividends

     (23,853

Net income

     49,828   
  

 

 

 

Total changes in net assets

     25,976   
  

 

 

 

Balance, March 31, 2012

     786,071   
  

 

 

 

 

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Table of Contents
       (Yen in millions)  
     Year ended
March 31, 2012
 

Treasury stock

  

Balance, March 31, 2011

     (50,691

Changes in net assets

  

Purchase of treasury stock

     (540

Reissuance of treasury stock

     3   
  

 

 

 

Total changes in net assets

     (537
  

 

 

 

Balance, March 31, 2012

     (51,228
  

 

 

 

Total Shareholders’ equity

  

Balance, March 31, 2011

     1,018,149   

Changes in net assets

  

Dividends

     (23,853

Net income

     49,828   

Purchase of treasury stock

     (540

Reissuance of treasury stock

     3   
  

 

 

 

Total changes in net assets

     25,439   
  

 

 

 

Balance, March 31, 2012

     1,043,588   
  

 

 

 

Difference of appreciation and conversion

  

Net unrealized gains on other securities

  

Balance, March 31, 2011

     155,841   

Changes in net assets

  

Net change in items other than shareholders’ equity

     20,468   
  

 

 

 

Total changes in net assets

     20,468   
  

 

 

 

Balance, March 31, 2012

     176,309   
  

 

 

 

Total unrealized gains (losses) on appreciation and conversion

  

Balance, March 31, 2011

     155,841   

Changes in net assets

  

Net change in items other than shareholders’ equity

     20,468   
  

 

 

 

Total changes in net assets

     20,468   
  

 

 

 

Balance, March 31, 2012

     176,309   
  

 

 

 

Total net assets

  

Balance, March 31, 2011

     1,173,990   

Changes in net assets

  

Dividends

     (23,853

Net income

     49,828   

Purchase of treasury stock

     (540

Reissuance of treasury stock

     3   

Net change in items other than shareholders’ equity

     20,468   
  

 

 

 

Total changes in net assets

     45,907   
  

 

 

 

Balance, March 31, 2012

   ¥ 1,219,897   
  

 

 

 

 

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Table of Contents

Notes to Financial Statements

1. Summary of Significant Accounting Policies

(1) Standards and methods of 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 as of the balance sheet date (unrealized gains and losses on such securities are reported in net assets, 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

Inventories:

   Cost determined based on acquisition costs with adjustment by write-down taking into consideration decline of profitability

Finished goods, merchandise and work in process:

   Cost of finished goods and work in process is mainly determined by the average cost method. Cost of merchandise is determined mainly by the last purchase method.

Raw materials and supplies:

   Raw materials and supplies, except those for telecommunications equipment, are valued at cost, with cost being determined by the last purchase method. Raw materials for telecommunications equipment are valued at cost, with cost being determined by the first-in, first-out method.

(2) Depreciation of non-current assets:

Tangible fixed assets (except for leased 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 - 33 years

 

    Machinery and equipment, and Tools, furniture and fixtures:

        2 years - 10 years

Intangible fixed assets (except for leased assets):    Amortization is computed using the straight-line method based on, in the case of some patents, the depreciation period set by Kyocera Corporation, and, in the case of software for its own use, the useful life thereof in Kyocera Corporation (two years).
Leased assets:    Straight-line method, using lease periods as the estimated useful lives of such assets.
Long-term prepaid expenses:    Amortization is computed using the straight-line method based on the estimated useful lives of assets.

 

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Table of Contents

(3) Accounting for allowances and accruals

Allowances for doubtful accounts:

   In anticipation of uncollectible accounts receivable, Kyocera Corporation provides allowance for doubtful accounts, for general accounts receivable, based on the past actual ratio of losses on bad debts; and, for certain specific doubtful accounts receivable, based on estimates of uncollectible amounts pursuant to analysis of individual receivables.

Accrued bonuses for employees:

   In order to prepare for bonuses to employees, accrued bonuses are provided based on the amounts expected to be paid, which are determined based on actual payments made in the previous fiscal year.

Accrued bonuses for Directors:

   In order to prepare for bonuses to Directors, accrued bonuses are provided based on the amounts expected to be paid.

Warranty reserves:

   Warranty reserves are provided to prepare for the cost of after sales service for telecommunications equipment and applied ceramic products based upon the amounts expected to be paid, which are determined taking into account actual payments made in the past, etc.

Allowances for sales returns:

   Allowances for sales returns are provided to prepare for losses from write-off of products as a result of product returns based on the past actual return ratio of unaccepted products multiplied by the amount of the uninspected products at the end of the fiscal year.
Accrued pension and severance costs:    In order to prepare for provision of retirement benefits to employees, accrued pension and severance costs are recognized based on projected benefit obligations and plan assets as of the balance sheet date. Unrecognized prior year service cost is amortized over the estimated average remaining service period of employees using the straight-line method. Actuarial gains or losses are amortized over the estimated average remaining service period of employees using the straight-line method following the year in which they are incurred.

(4) Other significant policies

Consumption taxes:

   Consumption taxes withheld upon sale and consumption taxes paid for purchases of goods and services are not included in the amounts of the respective revenue and cost or expense items in the accompanying statements of income.

 

(5) Additional information      Commencing from April 1, 2012, the “Accounting Standard for Accounting Changes and Error Corrections” (Accounting Standard Board of Japan Statement (ASBJ) No. 24, December 4, 2009) and the “Guidance on Accounting Standard for Accounting Changes and Error Corrections” (ASBJ Guidance No. 24, December 4, 2009) have been applied to accounting changes and corrections of prior period errors.

 

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Table of Contents

2. Notes to Balance Sheets

(1) Accumulated depreciation of tangible fixed assets and accumulated impairment losses: ¥426,089 million

(2) Guarantees

 

Principal Debtor

   Amount guaranteed     

Subject of Guarantee

Kyoto Broadcasting System Company Limited

   ¥ 163 million       Loan from financial institutions
  

 

 

    

Total

   ¥ 163 million      
  

 

 

    

Keep-well letters and guidance for management:

 

Party requesting issuance of keep-well letter

   Amount covered     

Subject of keep-well letter

Kyocera Realty Development Co., Ltd.

   ¥ 726 million       Guidance for repayment of loans from financial institutions

Kyoto Purple Sanga Co., Ltd.

   ¥ 400 million       Guidance for repayment of loans from financial institutions
  

 

 

    

Total

   ¥ 1,126 million      
  

 

 

    

(3) Receivables from affiliates and payables to affiliates (except amounts separately presented)

 

Current receivables:

   ¥ 77,492 million   

Long-term receivables:

   ¥ 234 million   

Current payables:

   ¥ 17,636 million   

Long-term payables:

   ¥ 48 million   

3. Notes to Statements of Income

 

Transactions with affiliates:

  

Operational transactions:

  

Net sales

   ¥ 255,708 million   

Purchases

   ¥ 80,938 million   

Selling, general and administrative expenses

   ¥ 4,330 million   

Non operational transactions:

  

Interest and dividend income

   ¥ 33,029 million   

Other non-operating income

   ¥ 419 million   

Other non-operating expenses

   ¥ 432 million   

Non-recurring gain

   ¥ 415 million   

Non-recurring loss

   ¥ 385 million   

Selling amount of assets

   ¥ 704 million   

Purchased amount of assets

   ¥ 1,382 million   

 

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Table of Contents

4. Notes to Statement of Changes in Net Assets

Number and class of treasury shares

     (Shares in thousands)  
     March 31, 2011      Increase      Decrease      March 31, 2012  

Common stock

     7,796         69         0         7,865   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

     7,796         69         0         7,865   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

Increase:

 

Purchase of treasury shares:

  66 thousand shares

Shareholders’ requests for purchase of shares not constituting one unit:

    3 thousand shares

Decrease:

 

Shareholders’ requests for sale of shares not constituting one unit:

    0 thousand shares

5. Notes to Accounting for Effects of Income Taxes

 

     (Yen in millions)  

(1) Current:

  

Deferred tax assets:

  

Accrued bonuses

   ¥ 4,944   

Loss on revaluation of inventory

     4,251   

Other payables and accrued expenses

     1,779   

Warranty reserves

     806   

Net unrealized losses on other securities

     1   

Other

     1,867   
  

 

 

 

Total deferred tax assets

     13,648   

Deferred tax liabilities:

  

Reserve for special depreciation

     (137

Tax – qualified negative goodwill

     (28
  

 

 

 

Total deferred tax liabilities

     (165
  

 

 

 

Deferred tax assets, net

   ¥ 13,483   
  

 

 

 

(2) Non-current:

  

Deferred tax assets:

  

Depreciation of fixed assets

   ¥ 18,464   

Loss on revaluation of investment in securities

     7,383   

Adjustment to book value of investments in subsidiaries

     5,326   

Tax – qualified goodwill

     1,637   

Warranty reserves

     1,402   

Others

     1,408   
  

 

 

 

Sub-total of deferred tax assets

     35,620   

Valuation allowances

     (10,925
  

 

 

 

Total deferred tax assets

     24,695   

Deferred tax liabilities:

  

Reserve for special depreciation

     (368

Tax – qualified negative goodwill

     (61

Net unrealized gain on other securities

     (99,175
  

 

 

 

Total deferred tax liabilities

     (99,604
  

 

 

 

Deferred tax liabilities, net

   ¥ (74,909
  

 

 

 

 

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Table of Contents
(2) Changes to the amount of deferred tax assets and liabilities in accordance with the revision of the corporate tax rate

In accordance with the Law to Amend a Part of the Income Tax Law to Implement a Tax System Corresponding to Changes in the Economy and Social Structure (Law No. 114 of 2011) and the Special Measures Law to Secure Necessary Financial Resources to Execute Measures for Reconstruction from the Great East Japan Earthquake (Law No. 117 of 2011), which were enacted on December 2, 2011, the corporate tax rate, etc. applied to annual reporting periods commencing on and after April 1, 2012 have been revised. As a result of such amendments, the effective Japanese statutory corporate tax rate of 41% previously applied for calculation of the amount of deferred tax assets and deferred tax liabilities has been reduced to 38% with respect to temporary differences to be realized during the annual reporting period commencing as from April 1, 2012 through the annual reporting period commencing as from April 1, 2014, and reduced to 36% with respect to temporary differences to be realized during the annual reporting periods commencing on and after April 1, 2015. As a result of such amendments, the net amount of deferred tax liabilities of Kyocera Corporation as of March 31, 2012 has decreased by ¥9,933 million, while the deferred portion of income tax expenses and net unrealized gains on other securities have increased by ¥3,841 million and ¥13,774 million, respectively.

6. Notes to Fixed Assets used under Finance Leases

Some fixed assets used under finance leases, consisting principally of manufacturing equipment and computers, are off balance sheet.

7. Notes concerning Related Party Transactions

 

                      (Yen in millions)  

Relationship

 

Name of entity

  Percentage
of voting
rights held
 

Relationship with the
entity

 

Substance of
transactions

  Amount of
transactions
   

Item

  Outstanding
transaction
amounts as
of March 31,
2012
 

Subsidiary

  Optrex Corporation   100%  

Extension of loan

Interlocking officers

  Extension of loan (Note)   ¥ 18,418      Short-term loans to subsidiaries   ¥ 16,418   
            Long-term loans to subsidiaries   ¥ 2,000   

 

Note:    Conditions of the loans have been reasonably determined, taking into account market interest rates, etc.

8. Notes to per Share Information

 

(1) Net assets per share:

   ¥ 6,649.97   

(2) Earnings per share:

   ¥ 271.62   

 

44


Table of Contents

Copy of Audit Report of Accounting Auditors on Consolidated Financial Statements

Independent Auditors’ Report

(English Translation)

May 25, 2012

To the Board of Directors of

Kyocera Corporation

 

Kyoto Audit Corporation

Hirokaze Hanai, CPA

Engagement Partner

Keiichiro Kagi, CPA

Engagement Partner

Toru Tamura, CPA

Engagement Partner

We have audited, pursuant to paragraph 4 of Article 444 of the Corporation Act of Japan, the consolidated financial statements, which consist of the consolidated balance sheet, the consolidated statement of income, the consolidated statement of 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, 2011 to March 31, 2012.

Management’s Responsibility for the Consolidated Financial Statements

Management is responsible for the preparation of consolidated financial statements that give a true and fair view in accordance with accounting principles generally accepted in the United States of America except for certain disclosures and footnotes omitted pursuant to the provisions of paragraph 1 of Article 120-2 of the Corporate Calculation Rules of Japan. This responsibility includes implementing and maintaining internal controls deemed necessary by management for the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

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. These standards require that we plan and perform the audit to obtain reasonable assurance as to whether the consolidated financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor’s judgment, including assessment of the risk of material misstatement in the consolidated financial statements, whether due to fraud or error. In making such risk assessment, the auditor considers the Company’s internal controls relevant to the preparation of consolidated financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal controls. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that the audit evidence we have obtained provides a reasonable basis for our opinion.

Opinion

In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company and its subsidiaries as of March 31, 2012 and the consolidated results for the year then ended in conformity with accounting principles generally accepted in the United States of America except for certain disclosures and footnotes omitted pursuant to the provisions of paragraph 1 of Article 120-2 of the Corporate Calculation Rules of Japan.

 

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Table of Contents

Other Matters

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

 

46


Table of Contents

Copy of Audit Report of Accounting Auditors

Independent Auditors’ Report

(English Translation)

May 25, 2012

To the Board of Directors of

Kyocera Corporation

 

Kyoto Audit Corporation

Hirokaze Hanai, CPA

Engagement Partner

Keiichiro Kagi, CPA

Engagement Partner

Toru Tamura, CPA

Engagement Partner

We have audited, pursuant to paragraph 2 – 1 of Article 436 of the Corporation Act 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 thereto, of Kyocera Corporation (hereinafter referred to as the “Company”) for its 58th fiscal year from April 1, 2011 to March 31, 2012.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation of financial statements and supplementary schedules thereof that give a true and fair view in accordance with accounting principles generally accepted in Japan. This responsibility includes implementing and maintaining internal controls deemed necessary by management for the preparation and fair presentation of financial statements and supplementary schedules thereto that are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on these financial statements and supplementary schedules based on our audit. We conducted our audit in accordance with auditing standards generally accepted in Japan. These standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and supplementary schedules thereto are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements and supplementary schedules thereto. The procedures selected depend on the auditor’s judgment, including assessment of the risk of material misstatement in the financial statements and supplementary schedules thereto, whether due to fraud or error. In making such risk assessment, the auditor considers the Company’s internal controls relevant to the preparation of financial statements and supplementary schedules thereto that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal controls. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements and supplementary schedules thereof.

We believe that the audit evidence we have obtained provides a reasonable basis for our opinion.

Opinion

In our opinion, the financial statements and supplementary schedules thereto present fairly, in all material respects, the financial position of the Company as of March 31, 2012 and the results for the year then ended in conformity with accounting principles generally accepted in Japan.

 

47


Table of Contents

Other Matters

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

 

48


Table of Contents

Copy of Audit Report of Board of Corporate Auditors

Audit Report

(English Translation)

The Board of Corporate Auditors, based on audit reports prepared by each Corporate Auditor related to the execution of duties of Directors during the 58th fiscal year from April 1, 2011 to March 31, 2012, hereby reports its results of audit after deliberations, as the unanimous opinion of all Corporate Auditors, as follows:

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

The Board of Corporate Auditors established auditing policies, auditing plans and role sharing for the fiscal year and received audit reports from each Corporate Auditor on the execution of his auditing activities and the results thereof. In addition, it received reports on the execution of duties from Directors, etc. and from the Accounting Auditors, 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, the Corporate Global Audit Division of the internal audit department which includes the Global Audit Division and the Global Risk Management Division, etc., and employees of Kyocera Corporation (hereinafter referred to as the “Company”) and endeavored to gather information and create an improved environment for auditing, according to the auditing policies, auditing plans 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, the Corporate Global Audit Division 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, plants, major operational establishments and sales offices. In addition, Corporate Auditors had regular meetings with the Chairman of the Board and Representative Director and the President and Representative Director of the Company and exchanged opinions and information on issues, etc. with respect to auditing. Corporate Auditors also received reports on the status of maintenance and operations from Directors, the Corporate Global Audit Division and employees of the Company, and, when necessary, requested their explanations and expressed opinions regarding the content of the resolution of the Board of Directors with respect to the development and maintenance of a system to ensure that the execution of duties by Directors as described in the business report shall be in compliance with laws and regulations and with the Company’s Articles of Incorporation and other systems required by Paragraph 1 and 3 of Article 100 of the Execution Rules of the Corporation Act as being necessary for ensuring the appropriateness of the Company’s operations, and the systems (internal control systems) established under such resolution.

With respect to the internal control systems regarding financial reporting, Corporate Auditors received reports on the evaluation of such internal control systems and the auditing condition from Directors, etc. and from Kyoto Audit Corporation, and, when necessary, requested their explanations regarding those reports.

With respect to subsidiaries, Corporate Auditors received reports on the auditing condition of subsidiaries from their corporate auditors, etc. at regular meetings with them and also engaged in communications and exchange of information with their directors, and, when necessary, attended important meetings, received reports on business, requested explanations and expressed opinions. Based on the foregoing methods, Corporate Auditors reviewed the business report for the fiscal year and the supplementary schedules.

 

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Table of Contents

In addition, Corporate Auditors monitored and examined whether the Accounting Auditors maintained their independence and performed their audits in an appropriate manner, and received reports from the Accounting Auditors on the execution of their duties and, when necessary, requested their explanations regarding those reports. Corporate Auditors also received notification from the Accounting Auditors that they have taken steps to improve the “system for ensuring appropriate execution of their duties” (as enumerated in Article 131 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), etc. and, when necessary, requested their explanations regarding such notification. Based on the foregoing methods, Corporate Auditors reviewed the financial statements (balance sheet, statement 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 sheet, consolidated statement of income, consolidated statement of equity and notes to consolidated financial statements).

2. Results of Audit

(1) Result of the audit of the business report, etc.

 

  (i) The business report and the supplementary schedules thereto fairly present the condition of the Company in accordance with Japanese laws and regulations and the Articles of Incorporation of the Company.

 

  (ii) 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.

 

  (iii) 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 on the description in the business report and the Directors’ execution with respect to the internal control systems, including financial reporting.

(2) Result of the audit of financial statements and supplementary schedules thereto

 

   The methods and results of the audit by the Accounting Auditors, Kyoto Audit Corporation, are due and proper.

(3) Result of the audit of consolidated financial statements

 

   The methods and results of the audit by the Accounting Auditors, Kyoto Audit Corporation are due and proper.

May 29, 2012

Board of Corporate Auditors

Kyocera Corporation

Yoshihiko Nishikawa

Full-time Corporate Auditor

Yoshihiro Kano

Full-time Corporate Auditor

Osamu Nishieda

Corporate Auditor

Kazuo Yoshida

Corporate Auditor

Yoshinari Hara

Corporate Auditor

 

Note: Messrs. Osamu Nishieda, Kazuo Yoshida and Yoshinari Hara are outside Corporate Auditors as required under Item 16 of Article 2 and Paragraph 3 of Article 335 of the Corporation Act.

 

50

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