YUHO REPORT Annual · 3. Retailing (the Company) The retailing division procures products for...

YUHO REPORTAnnual

Fiscal Year Ended May 31, 2017

Traded TSE1

Stock Code 1377

YUHOREPORT

Fiscal Year Ended May 31, 2017

Traded TSE1

Stock Code 1377

S A K A T A S E E D

2

This report is based on the Company’s Japanese-language annual filing with the Financial Services Agency and supplemented with materials that facilitate comparison with the Company’s peers. The materials from the annual filing with the Financial Services Agency have been edited and reorganized in a format more familiar to the international investment community. All information contained in this report has been obtained from sources believed to be reliable, but the accuracy of the data and the translation and the completeness and timeliness of the information are not warranted by the Company, Pacific Associates, or PRONEXUS. None of the above parties shall be responsible for any error or omission or for results obtained from the use of this information.

Table of Contents Profile ................................................................................................................................................. 3

Financial highlights ............................................................................................................................................ 3 Peer comparisons ............................................................................................................................................. 3

Business Overview ........................................................................................................................... 4 Contents of business ......................................................................................................................................... 4 Group companies .............................................................................................................................................. 6 History ............................................................................................................................................................... 7 Business policies ............................................................................................................................................... 9 Risk factors ....................................................................................................................................................... 9 Operating environment and issues requiring action ....................................................................................... 11 Research and development ............................................................................................................................ 12 Analysis of financial condition and results of operations ................................................................................ 13 Corporate governance .................................................................................................................................... 16 Directors .......................................................................................................................................................... 31 Employees ...................................................................................................................................................... 32 Union ............................................................................................................................................................... 32 Acquisition of treasury shares ......................................................................................................................... 32

Cash Flows ...................................................................................................................................... 34 Consolidated statement of cash flows ............................................................................................................ 34 Capital expenditures ....................................................................................................................................... 35 Dividend policy ................................................................................................................................................ 36

Operations ....................................................................................................................................... 38 Consolidated statement of income .................................................................................................................. 38 Consolidated statement of comprehensive income ........................................................................................ 39 Consolidated statement of changes in equity ................................................................................................. 40 Results of operations ...................................................................................................................................... 42 Segment information ....................................................................................................................................... 47 Sales and procurement ................................................................................................................................... 50 Selling, general and administrative expenses................................................................................................. 50

Capital Structure ............................................................................................................................. 51 Consolidated balance sheet ............................................................................................................................ 51 Financial instruments ...................................................................................................................................... 54 Market value of securities ............................................................................................................................... 57 Derivatives ...................................................................................................................................................... 58 Retirement benefits ......................................................................................................................................... 59 Deferred taxes ................................................................................................................................................. 62

Accounting Policies ........................................................................................................................ 63 Share-related Information .............................................................................................................. 65 YUHOREPORT is a trademark of Pacific Associates and PRONEXUS. The translation is copyrighted by Pacific Associates.

S A K A T A S E E D

3

Profile Financial highlights

Years ended May 31; Millions of yen 2013 2014 2015 2016 2017 Changes (%)

2017/2013

Consolidated

Net sales 50,274 53,922 56,707 58,773 61,844 123.0

Ordinary profit 3,564 3,909 5,808 7,555 8,250 231.5

Profit attributable to owners of parent 3,098 2,681 3,820 5,215 6,112 197.3

Comprehensive income 7,082 4,871 7,440 2,543 6,351 89.7

Net assets 77,686 81,399 87,410 88,886 94,093 121.1

Total assets 89,787 96,414 105,313 108,859 116,169 129.4

Net assets per share (Yen) 1,723.66 1,805.74 1,939.37 1,972.00 2,087.33 121.1

Basic earnings per share (Yen) 68.86 59.58 84.90 115.90 135.83 197.3

Diluted earnings per share (Yen) - - - - -

Net cash provided by (used in) operating activities 715 3,552 4,136 4,384 7,613 1,064.8

Net cash provided by (used in) investing activities 555 (2,018) (1,844) (3,430) (2,901)

Net cash provided by (used in) financing activities (1,082) 41 (945) 335 (2,016)

Cash and cash equivalents at year-end 7,233 9,162 10,639 11,497 14,134 195.4

Employees 1,998 2,038 2,105 2,186 2,275 113.9

Peer comparisons Percentage 2013 2014 2015 2016 2017

Profit attributable to owners of parent / net sales 6.2 5.0 6.7 8.9 9.9

Peers 1.3 2.5 2.8 1.2 (0.4)

Ordinary profit / net sales 7.1 7.2 10.2 12.9 13.3

Peers 3.2 4.6 4.4 2.5 1.3

Profit attributable to owners of parent / assets 3.6 2.9 3.8 4.9 5.4

Peers 0.9 3.7 3.4 0.1 (6.3)

Ordinary profit / assets 4.1 4.2 5.8 7.1 7.3

Peers 3.6 7.1 5.4 1.8 (1.4)

Equity / assets 86.4 84.3 82.9 81.5 80.9

Peers 50.5 48.3 49.3 47.0 43.5

Profit attributable to owners of parent / equity 4.2 3.4 4.5 5.9 6.7

Peers 3.6 7.6 7.6 1.9 (7.8)

Peers include Kaneko Seeds (1376), Hokuto (1379), Akikawa Foods & Farms (1380), HOB (1382) and Berg Earth (1383).

S A K A T A S E E D

4

Business Overview Contents of business

The Corporate Group, composed of Sakata Seed Corporation (“the Company”), 32 subsidiaries and 1 affiliated company, is engaged in selling horticultural products and materials (vegetable seeds, flower seeds, bulbs, seedlings and agricultural and horticultural products).

The Group’s businesses and the relationship of the Company and its subsidiaries and affiliated company to these businesses are outlined below.

1. Domestic wholesaling (the Company and 7 subsidiaries)

This division produces or procures vegetable seeds, flower seeds, bulbs, seedlings, and agricultural and horticultural products and wholesales these products to distributors, etc., in Japan.

2. Overseas wholesaling (the Company and 24 subsidiaries)

This division produces or procures vegetable seeds, flower seeds, bulbs, seedlings, and agricultural and horticultural products and wholesales these products to distributors, etc., overseas.

3. Retailing (the Company)

The retailing division procures products for gardening hobbyists and sells them to home improvement retailers in Japan. It also operates a mail-order sales business and a garden shop.

4. Others (the Company and 2 subsidiaries)

This division provides landscaping construction services for clients in the public and private sectors, and operates a temporary staffing agency. It also grows, processes and sells agricultural products.

The following table presents an outline of the Group’s business segments and the companies participating in them.

S A K A T A S E E D

5

Principal operations Main companies involved

Domestic wholesaling

Wholesaling of seeds and agricultural and horticultural products to distributors and other producers (Products: vegetable seeds, flower seeds, bulbs and seedlings) 3 companies, including the Company

SAKATA SEED CORPORATION (Consolidated subsidiaries) Sakata Logistics Co., Ltd., Brolead Co., Ltd.

Wholesaling of agricultural and horticultural products to distributors and other producers (Products: agricultural and horticultural materials) 2 companies, including the Company

SAKATA SEED CORPORATION (Consolidated subsidiary) Jiffy Pot Products Co. of Japan, Ltd.

Production of seeds and agricultural and horticultural products for distributors and other producers (Products: vegetable seeds, flower seeds, bulbs and seedlings) 4 companies

(Consolidated subsidiaries) Yamagata Celltop Co., Ltd., Nagano Celltop Co., Ltd., Hida Celltop Co., Ltd., Fukuoka Celltop Co., Ltd.

Overseas wholesaling

Wholesaling of seeds and agricultural and horticultural products to distributors and other producers (Products: vegetable seeds, flower seeds, bulbs and seedlings) 22 companies, including the Company

SAKATA SEED CORPORATION (Consolidated subsidiaries) Sakata Seed America, Inc., Sakata Seed de Mexico, S.A., Sakata Centroamerica, S.A., Sakata Seed de Guatemala S.A., Sakata Seed Sudamerica Ltda., Sakata Korea Co., Ltd., Sakata Vegetables Europe S.A.S., Sakata Ornamentals Europe A/S, Sakata Holland B.V., Sakata Seed Iberica S.L., Sakata UK Limited, Sakata Seed Southern Africa (Pty) Ltd., Sakata Seed India Private Limited and 7 other companies (Affiliated company) Domina S.R.L.

Production of seeds for distributors and other producers (Products: vegetable seeds, flower seeds, bulbs and seedlings) 3 companies

(Consolidated subsidiaries) Sakata Seed Chile S.A., Sakata Siam Seed Co., Ltd., Sakata Seed (Suzhou) Co., Ltd.

Retailing

Selling to gardening hobbyists through home improvement retailers The Company

SAKATA SEED CORPORATION

Mail-order sales, garden shop The Company

SAKATA SEED CORPORATION

Others

Landscaping, temporary staffing agency, cultivation of agricultural products 3 companies, including the Company

SAKATA SEED CORPORATION (Consolidated subsidiaries) Sakata Techno Service Ltd. and Taneto Farm Co., Ltd.

S A K A T A S E E D

6

Group companies Millions of yen or as indicated Capital stock Percent ownership

Sakata Logistics Co., Ltd. 30 100

Brolead Co., Ltd. 50 100

Yamagata Celltop Co., Ltd. 50 100

Nagano Celltop Co., Ltd. 60 100

Hida Celltop Co., Ltd. 70 62

Fukuoka Celltop Co., Ltd. 100 100

Jiffy Pot Products Co. of Japan, Ltd. 18 100

Sakata Techno Service Ltd. 13 100

Taneto Farm Co., Ltd. 50 100

Sakata America Holding Company Inc. US$ 4,907 thousand 100

Sakata Seed America, Inc. US$ 1,500 thousand 100

Sakata Seed de Mexico, S.A. Mex$ 26,013 thousand 100

Sakata Mexico, S.A. Mex$ 50 thousand 100

Grupo Sakata Seed de Mexico, S.A. de C.V. Mex$ 23,833 thousand 100

Sakata Centroamerica, S.A. CRC 10 million 100

Sakata Seed de Guatemala S.A. GTQ 1,541 thousand 100

Alfco, LLC US$ 0 thousand 100

European Sakata Holding S.A.S. EUR 49,671 thousand 100

Sakata Holland B.V. EUR 420 thousand 100

Sakata Vegetables Europe S.A.S. EUR 5,630 thousand 100

Sakata Ornamentals Europe A/S DKK 133 million 100

Sakata Seed Iberica S.L. EUR 3 thousand 100

Sakata UK Limited GBP 100 thousand 100

Sakata Tarim Urunleri ve Tohumculuk Sanayi ve Ticaret Limited Sirketi

TRY 13,000 thousand 100

Sakata Seed Southern Africa (Pty) Ltd. ZAR 598 thousand 100

Sakata Vegenetics RSA (Pty) Ltd. ZAR 0 thousand 100

Sakata Seed Chile S.A. CLP 5,089 million 100

Sakata Seed Sudamerica Ltda. BRL 13,776 thousand 100

Sakata Siam Seed Co., Ltd. THB 162 million 100

Sakata Seed India Private Limited INR 530 million 100

Sakata Korea Co., Ltd. KRW 15,540 million 100

Sakata Seed (Suzhou) Co., Ltd. CNY 13,831 thousand 94

S A K A T A S E E D

7

History Year Month Event

1913 July Takeo Sakata (the Company's founder) established Sakata Noen in Shirosato-mura, Kanagawa (currently, Rokkakubashi, Yokohama).

1916 Company name changed to T. Sakata & Co.

1923 September Company building lost in fire following the Great Kanto Earthquake.

1930 May Chigasaki Breeding Station established.

1942 December Merger of T. Sakata & Co., Atariya Noen, Fujita Zenbei & Co., Enomoto Tokujiro & Co. and Yomoto Co. completed to form T. Sakata & Company, capitalized at 195,000 yen.

1951 December Retail store operations begun (currently, Garden Center Yokohama).

1959 April Misato Research Station established.

1960 April Chogo Research Station established.

1966 August Hazawa Office established.

1967 August Fukuoka Sales Branch (currently, Kyushu Branch) opened.

1971 June Kimitsu Research Station established.

July Sendai Sales Branch (currently, Sendai Sales Office) opened.

1974 August Shirakawa Sales Branch opened (closed in May 2002).

1975 October Shares of Jiffy Pot Products Co. of Japan, Ltd. acquired.

1976 January Okayama Sales Branch opened (closed in May 2004).

1977 July Sakata Seed America, Inc. established.

1979 June Kyoei Noji Co., Ltd. (currently, Sakata Logistics Co., Ltd.) established.

1980 October Sapporo Sales Branch (currently, Hokkaido Branch) opened.

1985 October Nagoya Sales Branch opened (closed in May 2006).

1986 January Corporate name changed to Sakata Seed Corporation.

1987 January Yamagata Vegetable Center, Co., Ltd. (currently, Yamagata Celltop Co., Ltd.) established.

May Shares listed on the Second Section of the Tokyo Stock Exchange.

1988 June Higashimura Seed Co., Ltd. (currently, Brolead Co., Ltd.) established.

December European Representative Office established.

1990 March European Representative Office upgraded to local subsidiary through establishment of Sakata Seed Europe B.V. (currently, Sakata Holland B.V.).

April Kakegawa Research Center established.

May Nagano Celltop Co., Ltd. established.

June Kanto-Kita Sales Branch opened (closed in May 2006).

November Hokkaido Research Station established.

Shares listed on the First Section of the Tokyo Stock Exchange.

December Hida Celltop Co., Ltd. established.

1991 July Yokohama Sales Branch (currently, East Japan Branch) opened.

August Sakata Seed Chile S.A. established.

1992 May Fukuoka Celltop Co., Ltd. established.

1993 March Sakata Seed de Mexico, S.A. established.

1994 October Sakata Seed do Brasil Ltda. (currently, Sakata Seed Sudamerica Ltda.) established.

1995 February Corporate headquarters and head office moved to present site (Tsuzuki-ku, Yokohama).

S A K A T A S E E D

8

Year Month Event

1996 February Hokkaido Sales Branch (currently, Hokkaido Branch) established (through move and change of name of Sapporo Sales Branch).

March Shares of Samuel Yates Ltd. (currently, Sakata UK Limited) acquired.

April Sakata Seed France S.A.R.L. (currently, Sakata Vegetables Europe S.A.S.) established.

June Osaka Sales Branch (currently, West Japan Branch) opened.

Sakata Siam Seed Co., Ltd. established.

Sakata Seed Iberica S.L. established.

September Shares of Flora Feliz S.A. in Costa Rica (currently, Sakata Centroamerica, S.A.) acquired.

1997 March Shares of Chung Won Seed Co., Ltd. (currently, Sakata Korea Co., Ltd.) acquired.

1998 October Garden Center Shonan opened (closed in November 2005).

1999 February Sakata Seed (Suzhou) Co., Ltd. established.

December Shares of MayFord Holdings (Pty) Ltd. (currently, Sakata Seed Southern Africa (Pty) Ltd.)

acquired.

2001 February European Sakata Holding S.A.S. established.

June Sakata Vegenetics RSA (Pty) Ltd. established.

September Sakata Techno Service Ltd. established.

2002 April Narita Office opened.

Alf Christianson Seed Co. and Alfco, Inc. incorporated into Group as subsidiaries through share buyback and retirements.

August System of regional branches (Hokkaido Branch, East Japan Branch, West Japan Branch, Kyushu Branch) established.

2003 July Sakata Ornamentals Europe A/S established following acquisition of the flower division of L. Daehnfeldt A/S.

2006 February Yaita Logistics Center opened.

2008 May Sakata Seed India Private Limited established.

2010 February Sakata America Holding Company Inc. established.

2011 September Sakata Tarim Urunleri ve Tohumculuk Sanayi ve Ticaret Limited Sirketi established.

2012 December Nagoya Sales Office established by West Japan Branch.

2013 March Taneto Farm Co., Ltd. established.

April Seaward Investments, Inc., Quincy Investments, LLC and Bayview Ridge Properties, LLC

merged into Alfco, LLC.

2014 April Alf Christianson Seed Co. merged into Sakata Seed America, Inc.

August Nishio Shokubutsu, Co., Ltd. liquidated.

October Sakata Kosan Co., Ltd. liquidated.

S A K A T A S E E D

9

Business policies Determined to remain one of the world’s leading suppliers of seeds, Sakata Seed is committed to contributing to lifestyles and culture worldwide via the provision of high-quality products and services. The Company’s mission is summarized in its company creed, “Quality, Reliability and Service.”

The Company seeks to build enterprise value based on the pursuit of profit and the development of a solid business base. In addition to developing vegetable and flower seeds to delight producers and consumers alike, the Company aims to be a leader in the global seed industry based on the stable production and supply of high-quality seeds.

Risk factors The following is a discussion of factors that could negatively impact the Company’s financial performance and financial condition. The forward-looking statements in the discussion are based on judgments made by the Company as of the last day of the fiscal year under review. In this connection, the Company is making every effort to prepare for risks to which the Great East Japan Earthquake recalled its attention, and to apply the lessons learned from that event.

1. Weather-related risks

Climate changes around the world exert a significant impact on sales of vegetable seeds, flower seeds, bulbs and seedlings; poor weather conditions could thus erode sales and adversely affect the Company’s financial performance.

The Company carries out seed production in 19 countries around the world. In each region, the Company takes steps to disperse risk by consigning seed production to multiple outside producers. Despite these precautions, it may be unable to assure sufficient quality and quantity of production in the event of sudden changes in the local weather. Such circumstances may exert a significant negative impact on its financial results.

2. Impact of geopolitical and social systems

The Company is engaged in production, R&D and sales operations in 20 countries around the world. It operates 5 breeding and research stations in Japan and another 10 overseas (in 8 countries). This extensive base of operations exposes the Company to the following kinds of risks, which could have a significant impact on the Group’s financial performance:

Sudden and unexpected enactment of laws and regulations, or amendments to existing laws and regulations

Political and economic upheaval

S A K A T A S E E D

10

Social disorder caused by terrorism or other eruptions of violence

Earthquakes or other natural disasters

Information age-related problems, including computer viruses and information leakage

3. Development risks, including those related to human resources

The long-term nature of breeding (over 10 years) exposes the Company to the following kinds of risk:

1) Investment risk—that economic payoffs may fall short of expectations

2) Development risk—that efforts may fail to produce the desired variety

3) Market risk—that market needs may change during the course of development

4) Competitive risk—that a product may receive a less favorable reception than a product developed by another company

In addition to access to genetic resources, successful development hinges to a large extent on the abilities of individual breeders. There is a risk that a breeder may leave the Company midway through a project, thus raising obstacles to its successful completion. Failure to produce an intended high-quality variety could have a significant impact on the Company’s financial performance.

4. Risks related to safety

The Company’s creed, articulated by its founder Takeo Sakata, is “Quality, Reliability and Service.” With this as a basis, the Company seeks to gain customers’ confidence in the quality and safety of its products. Accordingly, it responds quickly and effectively when complaints arise, and works diligently to prevent problems from occurring.

Because the Company’s products are examples of “living genetics,” however, appropriate levels of quality or uniformity may not always be achieved. Safety-related problems could also arise from environmental factors or manufacturing technologies, rather than from the seeds themselves. Safety-related problems could have a significant impact on the Company’s financial performance.

5. Risks related to currency fluctuations

Financial statements prepared in local currencies are translated into yen during consolidation. Fluctuations in foreign exchange markets could thus reduce earnings, even if earnings in local currencies remain unchanged.

S A K A T A S E E D

11

Currency fluctuations may also impair the Company’s ability to procure raw materials and merchandise and pose obstacles to exporting. To minimize such impacts, the Sakata Group maintains a close watch over trends in the foreign exchange markets. Sudden and unexpected market changes could, however, negatively affect the Company’s financial performance despite these efforts.

6. Changes in the value of assets held

Because the Sakata Group holds a wide variety of assets, any decline in the price of land, marketable securities or other assets could negatively impact the Group’s financial performance.

7. Risks from natural disasters and accidents

The occurrence of natural disasters or other unforeseen events could exact major impacts on the financial performance and/or business activities of the Sakata Group.

Operating environment and issues requiring action In domestic agriculture, amid relentless declines in the farming and general population due to an aging demographic as well as in cultivated acreage, the Japanese government is working to increase food exports and double farming family incomes as part of its economic growth strategy. To support these initiatives, the Company is committed to performing a social role that is increasingly global in scope by supplying high-quality seeds to enable farmers to grow high-value-added agricultural produce.

Meanwhile, the global agrochemical industry continues to consolidate, and to become increasingly dominated by large multinational enterprises.

Against this backdrop, the Company acknowledges its vital role in global society of supplying seeds that can contribute to better human health through vegetables, along with the psychologically soothing effects of flowers.

In response to today’s conditions, the Sakata Group is focused on addressing the issues outlined below. The Group aims to remain a leader in the seed industry based on sustained R&D activities and global business development, and by seeking to combine high profitability with a strong balance sheet.

1. Establishment of a profitable business model

The Company has developed research capabilities to generate an ongoing stream of original, high-quality seeds and seedlings to support the reliable and profitable cultivation of land by producers.

To promote development of market-leading strategic products and related growth in sales, the Company is focusing resources on such products and developing earnings structures to take advantage of the growth opportunities in developing countries, notably in Asia.

S A K A T A S E E D

12

2. Restructuring of loss-making operations

The Company plans to undertake further restructuring of its retail operations that cater to amateur gardening enthusiasts.

The Company also aims to improve the profitability of its landscaping services and establish a greater presence in this market.

3. Development of a global supply chain to boost supply reliability and efficiency

With the aim of reducing costs and inventories, the Company is focusing on development of an efficient global SCM system to help establish production and technical structures to support reliable supplies of high-quality seeds.

4. Internal structural development to foster global enterprise growth

The Company is developing global human resource management structures and working to upgrade related global management capabilities to support the development of the Sakata Group as a global enterprise of Japanese origin.

Research and development The R&D Division oversees breeding for vegetables and flowers, and develops new varieties for the world’s markets.

The Company has 5 research facilities in Japan, including its principal research station in Kakegawa, Shizuoka Prefecture. It also conducts research at 10 facilities in overseas locations, including sites in North America, South America, Europe and Asia.

Throughout the Group, 400 people are involved in research and development. Total R&D expenditures amounted to ¥5,440 million during the fiscal year under review.

Domestic and overseas wholesaling

Vegetables

1. The Company’s C4-044 spinach and Tobikiri edamame beans both won top prizes in the 67th annual vegetable variety contest organized by the Japan Seed Trade Association. Tobikiri simultaneously received the Award of the Minister of Agriculture, Forestry and Fisheries (MAFF), while SC3-295 daikon radish received the Award of MAFF at the 2016 annual vegetable variety contest organized by Chiba Prefecture. These awards validated the R&D efforts that have helped the Group to secure high market shares in Japan and overseas.

2. The Company continued R&D into original new varieties designed to delight producers and consumers alike. New introductions included:

Fuyuzuki 90: an especially hardy strain of Chinese cabbage with exceptional taste

S A K A T A S E E D

13

Reigetsu: a large tomato for summer/autumn cultivation delivering exceptionally firm fruit

Takechiyo: a high-yield summer variety of bunching onion

Power Sweep: a densely packed, well-rounded variety of lettuce

Hamatsuzuki: a variety of mustard spinach with cold and bolting tolerance

3. In overseas markets, the Group has enjoyed strong growth in sales based on the development of vegetable seed varieties tailored to local conditions, in addition to marketing varieties originally developed in Japan. It renovated a research facility in France to develop vegetable varieties for cultivation in Europe, the Middle East and Africa.

4. In other initiatives, the Company joined the Netherlands-based International Licensing Platform (ILP) Vegetable, which aims to promote sector R&D by creating vegetable variety patent pools, along with clearing house capabilities.

Flowers

1. The Company won top prizes in the 62nd flower variety contest organized by the Japan Seed Trade Association for Profusion Lemon (SM4-226, zinnia), Azumi Rose Pink (aster), Fiery Red (celosia), Mime Light Pink (stock), and K5-14 (flowering cabbage). Profusion Lemon also received the Award of MAFF. The Company’s zinnia variety Profusion Red was recognized twice, receiving a Gold Medal from Fleuroselect, the Europe-based international organization for the ornamental plants industry, as well as being named the 2017 Flower Winner in the All-America Selections.

2. New flower variety introductions included Clarina® Sapphire (gentiana), A La Carte Shushu (primula), a downy mildew-resistant variety of sunflowers with Vincent’s® (Type 2) Tangerine DMR, and the Bunny series of flowering cabbage.

3. The Company also developed the world’s first variety of lisianthus that does not produce pollen. This technical breakthrough will take lisianthus to the next stage of commercial development by expanding its potential applications.

Analysis of financial condition and results of operations 1. Significant accounting policies and estimates

The Sakata Group’s consolidated financial statements are prepared in accordance with accounting principles generally accepted in Japan.

In preparing these statements, the Company makes all necessary estimates based on rational standards.

S A K A T A S E E D

14

2. Analysis of financial performance (percentage changes are year-on-year.)

Net sales and operating profit

Net sales: reflecting growth in sales to Asia and North America, net sales increased 5.2% to ¥61,844 million.

Cost of sales

1) Increased by 2.7% to ¥28,269 million.

2) Gross profit increased by 7.5% to ¥33,574 million.

SG&A expenses

1) Increased by 8.2% to ¥25,871 million.

2) Operating profit thus increased by 5.3% to ¥7,702 million.

Non-operating income and expenses

Net non-operating income rose from ¥237 million in the preceding fiscal year to ¥547 million, reflecting a 72.8% drop in foreign exchange losses to ¥67 million.

Ordinary profit increased by 9.2% to ¥8,250 million.

Extraordinary items and profit before income taxes

Extraordinary items included gains on sales of non-current assets of ¥104 million and impairment losses of ¥36 million.

Net extraordinary income recorded a gain of ¥67 million, compared with a loss of ¥51 million in the previous year.

Profit before income taxes increased by 10.9% to ¥8,318 million.

Income taxes

Income taxes increased from ¥2,260 million in the previous year to ¥2,172 million.

Profit attributable to owners of parent

The Company recognized profit attributable to owners of parent for the year of ¥6,112 million, an increase of ¥896 million compared to the previous year.

3. Financial condition

Assets

Total assets: increased by ¥7,309 million to ¥116,169 million.

1) Increase of ¥3,804 million in cash and deposits

2) Increase of ¥597 million in notes and accounts receivable - trade

3) Increase of ¥2,044 million in inventories

S A K A T A S E E D

15

4) Increase of ¥447 million in property, plant and equipment

5) Decrease of ¥414 million in long-term deferred tax assets

Liabilities

Total liabilities: increased by ¥2,102 million to ¥22,075 million.

1) Increase of ¥2,146 million in notes and accounts payable - trade

2) Increase of ¥238 million in short-term loans payable

3) Decrease of ¥1,077 million in long-term loans payable

4) Decrease of ¥283 million in long-term deferred tax liabilities

Net assets

Total net assets: increased by ¥5,206 million to ¥94,093 million.

Increase in retained earnings of ¥4,987 million

Equity ratio

The equity ratio at year-end was consequently 80.9% compared to 81.5% at the previous year-end.

4. Analysis of sources of capital and liquidity

2013 2014 2015 2016 2017

Equity ratio (%) 86.4 84.3 82.9 81.5 80.9

Market capitalization ratio (%) 66.1 63.8 93.5 108.9 136.9

Interest-bearing debt ratio (%) 297.9 100.7 91.4 114.8 55.1

Interest coverage ratio (times) 12.7 45.0 61.5 56.4 68.7

(Notes)

Equity ratio: total equity/total assets

Market capitalization ratio: total market capitalization/total assets

Interest-bearing debt ratio: interest-bearing debt (lease obligations excluded)/cash flows

Interest coverage ratio: cash flows/interest paid 1. All indicators are calculated on a consolidated basis.

2. The total market value of the Company’s shares is calculated on the basis of the total number of shares outstanding, less treasury shares.

3. Cash flows refer to cash flows from operations from the Company’s consolidated statement of cash flows.

4. Interest-bearing debt includes all debt on the consolidated balance sheet on which the Company pays interest.

Major funding requirements

1) In addition to procurement expenses for seeds and horticultural products, the Sakata Group’s funding requirements revolve principally around production-related expenses and SG&A and other operating costs. Its major operating expenditure categories include salaries, bonuses and other personnel costs, transportation expenses, packaging expenses and advertising expenses.

S A K A T A S E E D

16

2) The Group also maintains a program of ongoing capital investment aimed at upgrading, expanding and rationalizing its production facilities and strengthening its R&D capabilities.

3) The Sakata Group’s interest payment burden from its interest-bearing debt as of the end of the fiscal year under review was sufficiently low as a percentage of expenditures. At its current level of interest-bearing debt, the impact on the Group’s operations of an increase in interest rates would be limited.

Possibilities for financing

With respect to liquidity, the Group’s approach is to deal with unforeseen future situations by ensuring that it has sufficient liquidity on hand. With respect to financing, Sakata Seed Corporation and its domestic and overseas subsidiaries all maintain good relationships with their correspondent financial institutions, enabling the respective companies to respond appropriately to situations in their locale.

5. Management’s assessment of issues and its future policies: see discussion under “Business policies” and “Operating environment and issues requiring action.”

Corporate governance Corporate governance

Basic views regarding corporate governance

Company creed: Quality, Reliability and Service

The Company’s governing ideal is to contribute to the development of agriculture, horticulture and related businesses while acting ethically in accordance with the spirit of its company creed.

In accordance with this ideal, the Company will aim to achieve the following by providing high-quality products and services:

1) Contribute to improving the lives and cultural conditions of people around the world

2) Become the world’s leading seed company

1. Structure of corporate governance

(1) Outline of the structure of corporate governance

A company with an Audit & Supervisory Board

1) Fundamentally, corporate governance is effected through monitoring of the Board of Directors by the Audit & Supervisory Board.

S A K A T A S E E D

17

2) To increase the transparency and effectiveness of the Board of Directors, the Company has elected 2 outside directors; based on their abundant experience, the directors

a. Participate in important decisions made by the Board

b. Seek to improve the quality of the Board’s decision-making

Composition of Audit & Supervisory Board

1) 3 board members, 2 of whom are appointed from outside the Company

2) The Company established an Audit & Supervisory Board Members Office to support the operations of its audit & supervisory board members and its Audit & Supervisory Board.

Internal Auditing Office, responsible for internal control

1) The Internal Auditing Office audits the Company and its domestic subsidiaries to ensure the health and soundness of their operations.

2) An “internal control evaluator,” appointed by the Board of Directors, reviews the setup and operations of the Internal Auditing Office.

(2) Rationale for adoption of this system

Based on a judgment that this system will contribute to management transparency, clarification of management responsibilities and strengthening of management oversight

In addition to the Audit & Supervisory Board’s oversight of the Board of Directors, the appointment of a fair and independent outside director strengthens the system of internal control, ensuring that operations are executed in an appropriate and highly transparent manner.

Through its introduction of a new system of corporate executive officers on June 1, 2007, moreover, the Company has devolved authority for the execution of operations, allowing it to expedite management decision-making and to tap the talents of younger personnel.

(3) System of internal controls

At its meeting held on May 19, 2006, the Board of Directors voted to create the necessary internal controls as stipulated in the Ordinance of the Ministry of Justice to ensure compliance with relevant laws and regulations and the Company’s Articles of Incorporation in the execution of duties by Board members and other internal processes. Following a number of revisions, the Board formally amended the internal controls at its meeting held on April 17, 2015. The amended basic policy is presented below;

S A K A T A S E E D

18

April 17, 2015: Resolution adopted by the Board of Directors regarding revision of the Company’s basic policy on internal control:

I. System of controls to ensure compliance with laws and regulations and the Company’s Articles of Incorporation in the execution of duties by members of the Board of Directors and employees of the Company and its subsidiaries

Governing ideal (see “Basic views regarding corporate governance” above): the Company’s major stakeholders are:

1) Persons employed in agriculture and horticulture and related enterprises

2) Shareholders and employees

Establishment and fostering of a system of compliance

The Company has instituted a compliance manual and other related internal rules prescribing the ways in which Sakata Group directors and employees should act in compliance with laws and regulations and in observance of business ethics.

Chaired by the CEO, the Compliance Committee is responsible for instituting important policies governing the implementation of compliance training and education programs across the Group. It also reports to the Board of Directors on compliance-related matters.

The Company has also established formal internal and external channels via which employees of the Company and its domestic subsidiaries can report or seek counsel regarding any internal matters related to compliance with laws, regulations or standards of business ethics. These channels are designed to protect the confidentiality of anyone seeking counsel or providing information. In accordance with internal regulations, the provisions of the Whistleblower Protection Act and other laws and regulations, employees shall not face any adverse consequences as a result of making use of such channels.

Elimination of antisocial elements

1) The Sakata Group shall stand firm against extortionists and other elements and groups that threaten the Group organization or its ability to function in a sound and healthy manner.

2) The Sakata Group shall respond to antisocial elements by abiding by the 3 principles of “making no payments,” “refusal to employ,” and “avoidance of fear.”

S A K A T A S E E D

19

3) The Sakata Group shall endeavor to gather information from related government agencies; and it shall build a system that enables it to reach these government agencies and/or legal experts on an emergency basis should problems of this nature arise, and thus to deal promptly with such problems.

Improving systems and procedures to ensure the reliability of financial reporting

1) Establishing regulations for internal control, and developing and adopting basic guidelines for internal control related to financial reporting

2) Based on the foregoing, establishing operating procedures and other regulations to ensure that internal controls for financial reporting are put in place and carried out

3) Establishing a process for review of the effectiveness of internal controls related to financial reporting to be carried out by the internal control evaluator

4) With a senior executive (representative director) assuming responsibility, preparing a report on internal control as required under the Financial Instruments and Exchange Act

II. System to preserve and manage information on the execution of duties by directors

As prescribed by the Company’s regulations concerning document management, all documents (including electronic records) related to the execution of duties by directors, along with related materials, shall be preserved and managed by the departments and sections concerned. Such documents, etc., shall be made accessible for viewing on an as-needed basis.

As regards the management of documents, the Company’s basic policy on information security, its regulations related to the management of personal information, and its regulations on the management of trade secrets shall govern the actions taken.

III. Risk management controls for the Company and its subsidiaries

The Company has compiled an internal manual to minimize potential losses and other negative impacts on the Company and its subsidiaries. The Group has established risk management systems to manage a wide range of risks, including weather events, geopolitical and social changes in regions where the Group has operations, R&D, intellectual property right infringements, safety, finance, crimes or misconduct by employees, and natural disasters or other emergency situations.

S A K A T A S E E D

20

In accordance with the risk management manual, the Company seeks to ensure a rapid response to any serious risk that emerges affecting the Group based on close cooperation between the divisions that are directly involved and any related divisions.

IV. Organizational structures to ensure the efficient execution of duties by directors of the Company and its subsidiaries

Board of Directors

The Company’s Board of Directors operates appropriately in accordance with internal regulations. The Board meets on a monthly basis, as a rule, to discuss and decide all important matters related to the operations of the Sakata Group as prescribed by laws and regulations, the Company’s Articles of Incorporation, and other relevant rules. The Board of Directors is also responsible for determining the division of duties assigned to directors and corporate executive officers, and to different parts of the Group’s organization.

Senior management meeting

1) In accordance with the Company’s regulations on senior management meetings, a senior management meeting comprising the president & CEO and all directors above the rank of managing director shall be established. The objective of the senior management meeting shall be to discuss matters pertaining to the management of the Company and the Sakata Group to enable the Board of Directors to discuss and act on such matters in a smooth and expeditious manner.

2) As a rule, the senior management meeting shall be held once every month, as well as at other times as needed.

Corporate executive officer system

The Company has instituted a corporate executive officer system to support faster decision-making and more efficient execution of operations across the Group, as well as to ensure a clear separation of managerial responsibilities with respect to oversight and execution.

Decision-making by “ringi” (circulation of documents for approval)

In accordance with internal regulations and procedures, the Company has instituted a management approval system based on circulation of documents (“ringi”) to enhance the efficiency of everyday operations by directors and corporate executive officers. Operational efficiency is promoted further through detailed delegation of tasks.

S A K A T A S E E D

21

Systems for subsidiaries

The Company institutes standards related to management of the Group’s organizational structures, including assignment of positions, command and control hierarchies, delegation of authority, and decision-making processes. The Company also ensures that subsidiaries establish internal systems based on these standards.

Management of policies governing Group operations

The Company’s directors, division general managers and general managers of major subsidiaries hold meetings twice a year, as a rule, to review the Group’s overall management policies and business objectives.

To ensure that operations are appropriate and efficient from a global standpoint, the Company establishes cross-divisional groups (covering domestic and international operations) to manage policies related to R&D, production and logistics, IT, quality control or sales. The relevant central corporate division acts as the secretariat for each cross-divisional group.

V. Organizational structures that ensure appropriate execution of operations by the Group

Subsidiary management and oversight

1) The Corporate Planning Office shall have jurisdiction in this area.

2) In addition, the Company shall assign directors or corporate executive officers as “directors in charge” of individual subsidiaries.

3) Based on regulations governing the management of subsidiaries and affiliated company, the Corporate Planning Office and directors in charge shall establish a system of coordination under which they shall exchange information and interact individually through subsidiaries’ board of directors’ meetings and other venues to provide proper guidance to subsidiaries, thus building a stronger internal control system for the Group.

Reporting on execution of duties by directors of subsidiaries

1) Subsidiaries are required to submit monthly reports to the Company on sales performance, financial matters, personnel matters, and other important information.

2) Full-year performance forecasts and business plans for the following fiscal year must be submitted to the Company’s Board of Directors for approval on an annual basis.

S A K A T A S E E D

22

VI. Internal controls related to assignment of employees to duties stipulated by members of the Audit & Supervisory Board, independence of such employees from directors, and ensuring the effectiveness of orders given to such employees

At the request of members of the Audit & Supervisory Board, the Company shall establish an Audit & Supervisory Board Members Office and appoint employees to assist members of the Audit & Supervisory Board in their duties.

Prior to the employees’ assignment, the Board of Directors shall hold discussions with the members of the Audit & Supervisory Board regarding the number, rank, lines of reporting and compensation of such employees, as well as related personnel transfer issues.

VII. Internal controls related to information reported to members of the Audit & Supervisory Board by directors and employees of the Company and its subsidiaries, including safeguards to prevent unfair treatment of informants

Company directors and employees shall report to the members of the Audit & Supervisory Board any illegal conduct by directors or other actions in violation of relevant laws and regulations or the Company’s Articles of Incorporation that could have a serious material impact on the Group, including instances in which there is reason for suspicion of such conduct.

The Company shall ensure that informants are not treated unfairly for having reported such information.

To ensure the ability members of the Audit & Supervisory Board to execute their duties smoothly and effectively, Company directors and employees are required to submit reports concerning important Company-related business matters, or the operational execution status of such matters, upon request to members of the Audit & Supervisory Board in a prompt and appropriate manner.

VIII. Internal controls related to procedures for payment of expenses arising in relation to the execution of duties by members of the Audit & Supervisory Board, and handling of any related financial liabilities

The Company compiles an annual budget covering any expenses that are expected to arise in relation to the execution of duties by members of the Audit & Supervisory Board.

The Company shall respond promptly to any request for the advance payment of expenses arising from the execution of duties by members of the Audit & Supervisory Board in accordance with Article 388 of the Companies Act, unless it is determined by the responsible department that the expense or

S A K A T A S E E D

23

financial liability related to said request is not necessary to the execution of duties by members of the Audit & Supervisory Board.

IX. Other organizational structures to ensure that audits by the Audit & Supervisory Board members shall be implemented effectively

The representative director(s) and Audit & Supervisory board members shall endeavor, through regularly held meetings, to enhance mutual communication.

When deemed necessary for operational reasons, the Audit & Supervisory Board members shall receive reports from and exchange information with the person(s) in charge of internal auditing offices, audit & supervisory board members at subsidiaries, or others of equivalent status on the progress of ongoing audits or the situation with respect to any operation as a means of increasing the effectiveness of their audits.

When deemed necessary, the Audit & Supervisory Board members may appoint attorneys, CPAs or other external experts to assist in their auditing.

The Audit & Supervisory Board members shall have the right to attend senior management meetings, meetings of executive officers, meetings of the Compliance Committee and any other important meetings.

The Audit & Supervisory Board members shall have unrestricted access to any documents related to management approval and financial accounting.

Status of structure of risk management

- Establishment of a risk management structure (see item III under “Corporate governance” above)

- Risk management under normal circumstances (see item III under “Corporate governance” above)

- At the operational level

1) The BCP Committee oversees the implementation of training and education programs aimed at preventing the emergence of risks, as well as organizing the appropriate response to such risks.

2) Response to specific threats (see item III under “Corporate governance” above)

(4) Content of agreements limiting liability

In accordance with Article 423-1 of the Companies Act, the Company has entered into agreements with all of its outside directors and outside Audit & Supervisory Board members limiting their liability.

S A K A T A S E E D

24

These agreements contain a maximum liability for the payment of damages by outside directors and outside Audit & Supervisory Board members, which is the minimum amount prescribed under Article 425-1 of the Companies Act.

2. Status of internal audits and audits by Audit & Supervisory Board members

(1) Audit & Supervisory Board

Monthly meetings at which

1) Each Audit & Supervisory Board member reports on important matters related to audits.

2) Necessary discussions and decision-making are conducted in response.

Special meetings held on an as-needed basis

Audits by individual Audit & Supervisory Board members: carried out in accordance with the Audit & Supervisory Board’s policies and regulations regarding division of duties

(2) Audit & Supervisory Board Members Office

Established in January 2007 to assist the Audit & Supervisory Board members in the performance of their duties

In June 2008, assignment of a full-time head of the Audit & Supervisory Board Members Office

Internal audits are carried out by the Internal Auditing Office in accordance with Company regulations.

(3) Coordination among internal audits, audits by Audit & Supervisory Board members and financial audits

Mutual exchange of information at all times between Audit & Supervisory Board members and the Internal Auditing Office to maintain effective coordination

Exchange of opinions and relevant information at all times between the financial auditors and Audit & Supervisory Board members

Regarding the selection of Audit & Supervisory Board members

1) Primary consideration given to the person’s knowledge of finance and accounting

2) For outside Audit & Supervisory Board members, primary consideration given to their independence

S A K A T A S E E D

25

3. Financial audits

Conducted by the following certified public accountants and 24 assistants (5 CPAs and 19 others)

The Company asks KPMG AZSA LLC to conduct its audits in accordance with the Financial Instruments and Exchange Act and the Companies Act.

Name Affiliation

No. of consecutive years of auditing the Company’s accounts

Designated limited liability partner/engagement partner: Kazunori Furuyama

KPMG AZSA LLC 3 years

Designated limited liability partner/engagement partner: Yoshinori Saito

KPMG AZSA LLC 1 year

4. Relationships between the Company and its outside directors and Audit & Supervisory Board members

The Company has 2 outside directors and 2 outside Audit & Supervisory Board members.

1) Selection of candidates is based on standards for independence established by the Tokyo Stock Exchange.

2) Although the Company has not established its own standards and policies regarding independence, the TSE’s standards allow it to make selections that avoid risk involving conflicts of interest with shareholders.

Based on wide-ranging knowledge and experience, outside members of the Board play the vital roles of providing objective oversight over management and enhancing management transparency.

Outside Audit & Supervisory Board member Noboru Hasegawa possesses an extensive knowledge of financial and accounting matters acquired through many years of experience in the financial services industry.

There is no personal, financial, commercial or other conflict of interest between the Company and any of outside directors Kunihiko Sugahara or Yoshitaka Ihara or outside Audit & Supervisory Board members Noboru Hasegawa or Yasunori Numata, except as concerns ownership of the Company’s shares as detailed elsewhere in this report.

The Company has registered Kunihiko Sugahara, Yoshitaka Ihara, Noboru Hasegawa and Yasunori Numata as independent directors/auditors with the Tokyo Stock Exchange.

S A K A T A S E E D

26

5. Directors’ compensation

Compensation by Board member category; breakdown by type of compensation; and number of Board members in each category

Millions of yen Amount paid

Total amounts paid out to board members by type of compensation Number of board

members in each categoryCompensation Bonuses

Retirement benefits

Directors (excluding Outside Directors)

191 133 30 28 8

Audit & Supervisory Board Members (excluding Outside Audit & Supervisory Board Members)

19 17 - 1 1

Outside Directors and Audit & Supervisory Board Members

31 29 - 1 5

(Note) In millions of yen, with fractional amounts discarded

Total compensation for each director/ Audit & Supervisory Board member of the Company: this information is omitted because no individual’s compensation exceeds ¥100 million.

Significant compensation paid to directors who are also employees: not applicable

Policy regarding amounts paid to Board members and method of calculating such amounts

1) Basic thinking regarding compensation paid to directors: the system of compensation must

a) Enable the Company to secure the services of management personnel capable of driving the growth of the Company as a global enterprise

b) Allow the Company to enhance long-term shareholder value

c) Contribute to a continuous and stable increase in financial performance

d) Be highly objective and transparent in terms of the way the amounts of compensation are determined

2) Amounts paid out as compensation take into consideration

a) Comparisons with other companies, ascertained through surveys by outside consultants

b) A comprehensive range of other factors, including the rank of the director, his/her operational responsibilities, and his/her contributions to the financial performance of the Company

3) Components of director compensation

a) Fixed monthly salary and bonus linked to financial performance

S A K A T A S E E D

27

b) Bonus evaluations take into account the following for the period under consideration: consolidated sales, consolidated operating profit and consolidated profit attributable to owners of parent; bonuses fluctuate according to the degree to which targets under each of these categories are achieved.

c) To encourage directors to understand that fostering medium-to-long-term growth in enterprise value and shareholder returns is also in their interest, each director contributes a portion of his/her fixed monthly salary to a directors’ share-purchasing plan.

4) Components for Audit & Supervisory Board members and outside directors: in view of their independent oversight function, no bonuses linked to financial performance are paid.

5) Compensation Committee

a) This committee is organized under the Board of Directors and deliberates on directors’ compensation.

b) By including the outside director as a member of the committee, the Company seeks to ensure the objectivity and transparency of decisions by the committee.

6. Shareholdings in other companies

Shares held by the Company for purposes other than pure investment

Number of issues: 20

Total value on balance sheet: ¥12,195 million

Number, book value and investment purpose of shares held by the Company for purposes other than pure investment

S A K A T A S E E D

28

May 2017 term

Millions of yen Number of

shares Book value Investment purpose

Kikkoman Corporation (2801) 649,000 2,252 To strengthen business relationships

Maruichi Steel Tube Ltd. (5463) 560,000 1,817 To strengthen business relationships

Mitsubishi Pencil Co., Ltd. (7976) 187,200 1,196 To strengthen business relationships

Yokohama Reito Co., Ltd. (2874) 1,022,000 1,085 To strengthen business relationships

MAX Co., Ltd. (6454) 537,000 864 To strengthen business relationships

Amano Corp. (6436) 335,000 834 To strengthen business relationships

T&D Holdings, Inc. (8795) 411,600 644 To strengthen business relationships

Concordia Financial Group, Ltd. (7186) 866,000 441 To strengthen relationships with financial institutions

Maruzen Showa Unyu Co., Ltd. (9068) 982,000 439 To strengthen business relationships

Sotetsu Holdings, Inc. (9003) 736,000 389 To strengthen business relationships

The Gunma Bank, Ltd. (8334) 578,000 339 To strengthen relationships with financial institutions

Fuji Nihon Seito Corporation (2114) 563,000 322 To strengthen business relationships

Ono Pharmaceutical Co., Ltd. (4528) 131,500 302 To strengthen business relationships

Sumitomo Mitsui Financial Group, Inc. (8316) 68,300 271 To strengthen relationships with financial institutions

Hakuyosha Company, Ltd. (9731) 85,000 255 To strengthen business relationships

Bull-Dog Sauce Co., Ltd. (2804) 115,200 251 To strengthen business relationships

Sodick Co., Ltd. (6143) 158,600 184 To strengthen business relationships

Okamura Corp. (7994) 175,000 174 To strengthen business relationships

Mizuho Financial Group, Inc. (8411) 530,210 102 To strengthen relationships with financial institutions

Mitsubishi UFJ Financial Group, Inc. (8306) 38,900 26 To strengthen relationships with financial institutions

S A K A T A S E E D

29

May 2016 term

Millions of yen Number of

shares Book value Investment purpose

Kikkoman Corporation (2801) 649,000 2,583 To strengthen business relationships

Maruichi Steel Tube Ltd. (5463) 560,000 2,072 To strengthen business relationships

Mitsubishi Pencil Co., Ltd. (7976) 187,200 1,078 To strengthen business relationships

Yokohama Reito Co., Ltd. (2874) 1,022,000 1,078 To strengthen business relationships

MAX Co., Ltd. (6454) 537,000 689 To strengthen business relationships

Ono Pharmaceutical Co., Ltd. (4528) 131,500 647 To strengthen business relationships

Amano Corp. (6436) 335,000 626 To strengthen business relationships

Sotetsu Holdings, Inc. (9003) 736,000 485 To strengthen business relationships

T&D Holdings, Inc. (8795) 411,600 455 To strengthen business relationships

Concordia Financial Group, Ltd. (7186) 866,000 447 To strengthen relationships with financial institutions

Maruzen Showa Unyu Co., Ltd. (9068) 766,000 311 To strengthen business relationships

Fuji Nihon Seito Corporation (2114) 563,000 257 To strengthen business relationships

The Gunma Bank, Ltd. (8334) 578,000 256 To strengthen relationships with financial institutions

Sumitomo Mitsui Financial Group, Inc. (8316) 68,300 247 To strengthen relationships with financial institutions

Bull-Dog Sauce Co., Ltd. (2804) 1,152,000 236 To strengthen business relationships

Hakuyosha Company, Ltd. (9731) 850,000 216 To strengthen business relationships

Okamura Corp. (7994) 175,000 196 To strengthen business relationships

Sodick Co., Ltd. (6143) 158,600 153 To strengthen business relationships

Mizuho Financial Group, Inc. (8411) 530,210 92 To strengthen relationships with financial institutions

Mitsubishi UFJ Financial Group, Inc. (8306) 38,900 21 To strengthen relationships with financial institutions

Shares held by the Company for purely investment purposes

2016

2017

Millions of yen Total amount on

balance sheet Total amount on

balance sheet

Total amount of dividends

received

Total amount of gains or losses from

sales Total amount of valuation gains

Unlisted shares 965 1,044 17 -

Shares other than unlisted shares

175 216 3 - 66

7. Required number of directors

The Company has stipulated in its Articles of Incorporation that there shall be no more than 11 directors.

8. Resolutions for the election of directors

The Company has stipulated in its Articles of Incorporation that resolutions concerning the election of directors must be approved as follows: shareholders holding one-third or more of the voting rights of all shareholders eligible to vote must be in attendance, and a majority of these must vote in the affirmative. Cumulative voting is not permitted.

S A K A T A S E E D

30

9. Acquisition of the Company’s own shares

The Company has stipulated in its Articles of Incorporation that, in accordance with Article 165-2 of the Companies Act, it is authorized to acquire its own shares through market transactions based on a resolution adopted by the Board of Directors. The purpose of such acquisitions is to enable the Company to implement agile and efficient strategies with respect to shareholders and financing.

10. Interim dividends

The Company has stipulated in its Articles of Incorporation that, in accordance with Article 454-5 of the Companies Act, it is authorized to pay an interim dividend with a date of record of November 30 each year based on a resolution adopted by the Board of Directors. The purpose of such interim dividends is to enable the Company to execute a dividend policy that is at once stable, agile and proactive.

11. Requirements for special resolutions by the General Meeting of Shareholders

With respect to special resolutions by the General Meeting of Shareholders, as provided for under Article 309-2 of the Companies Act, the Company has stipulated in its Articles of Incorporation that approval of such resolutions shall require that shareholders holding one-third or more of the voting rights of all shareholders eligible to vote be in attendance, and that two-thirds of the shareholders present vote in the affirmative. The aim of this rule is to promote smoother transaction of business at the General Meeting of Shareholders.

Financial auditors’ compensation

1. Compensation paid to financial auditors

2016 2017

Millions of yen Financial audit

servicesNon-audit

servicesFinancial audit

services Non-audit

services

Parent Company 49 - 49 -

Subsidiaries - - - -

49 - 49 -

2. Other important compensation

In the fiscal years ended May 2016 and May 2017, the Company paid auditing compensation of ¥110 million and ¥113 million to KPMG, which audited certain of the Company’s subsidiaries and which is a member firm of the network of financial auditors that audited the Company.

S A K A T A S E E D

31

3. Compensation policy for financial audit services

Remuneration is determined via discussions with the independent auditors based on the appropriateness of the audit plan and related service charges for the year under review and with reference to the charges levied in previous years for financial auditing services provided, based on the billed hours per audit item for different members of the financial audit team based on seniority.

Directors

Name Title Date joined company Concurrent occupations Date of birth Term

Thousandshares

Hiroshi Sakata President and Representative Director

May-1981 14-Feb-1952 2 years from the General Meeting of Shareholders (GMS) held in August 2017

155.7

Risho Uchiyama Managing Director Apr-1984 29-Jan-1962 2 years from GMS held in August 2017

9.5

Tsutomu Kagami Managing Director Apr-1987 17-Jan-1962 2 years from GMS held in August 2017

6.4

Hideto Kaneko Director Apr-1990 18-Jun-1962 2 years from GMS held in August 2017

205.4

Shuitsu Honda Director Apr-1987 25-Nov-1962 2 years from GMS held in August 2017

5.1

Akifumi Ujita Director May-2009 5-Aug-1957 2 years from GMS held in August 2017

5.9

Kazuo Kuroiwa Director Apr-1985 21-Jan-1959 2 years from GMS held in August 2017

3.0

Toshihiko Furuki Director Apr-1988 15-Feb-1966 2 years from GMS held in August 2017

3.2

Kunihiko Sugahara Director Aug-2013 Certified public accountant

8-Mar-1952 2 years from GMS held in August 2017

10.0

Yoshitaka Ihara Director Aug-2016 18-Oct-1945 2 years from GMS held in August 2017

0

Mitsuo Enda Standing Audit & Supervisory Board Member

Apr-1971 27-Jan-1949 4 years from GMS held in August 2016

13.6

Noboru Hasegawa Audit & Supervisory Board Member

Aug-2012 9-Oct-1948 4 years from GMS held in August 2016

2.3

Yasunori Numata Audit & Supervisory Board Member

Aug-2016 16-Jun-1948 4 years from GMS held in August 2016

0

421.3

Current assignments and previous positions in the Company have been omitted.

Under law, the Company is required to have a certain number of Audit & Supervisory Board members. To prepare for the possibility that it might not be able to fill the required number of seats, the Company has elected an alternate Audit & Supervisory Board member in accordance with Article 329-3 of the Companies Act.

Name Title Concurrent occupations Date of birth Thousand

shares

Tamio Nagashima Alternate Audit & Supervisory Board Member

Certified public accountant Registered tax accountant

17-Feb-49 -

S A K A T A S E E D

32

Employees Consolidated 2017

Business segment Number

Domestic wholesaling 221

Overseas wholesaling 1,528

Retailing 62

Others 15

Corporate staff 449

2,275

Parent Total or average

Number 680

Average age 37.1

Average years of service 13.6

Average annual salary (thousands of yen) 6,306

Average annual salary includes bonuses and overtime pay.

Union Sakata Seed Corporation’s union is an intra-Company union independent of any outside umbrella organization. The Company enjoys amicable labor relations.

Acquisition of treasury shares Types of shares

The acquisition of common shares as stipulated under Article 155-7 of the Companies Act.

Acquisitions which are not based on resolutions adopted by the General Meeting of Shareholders or the Board of Directors Yen No. of shares Total value

Treasury shares acquired during the year under review 1,385 3,990,052

Treasury shares acquired during the period of June 1 to July 31 339 1,185,850

S A K A T A S E E D

33

Disposal and ownership of treasury shares Fiscal year under review Period of June 1 to July 31

Yen Number of

sharesTotal value of

disposed sharesNumber of

shares Total value of

disposed shares

Acquired treasury shares sold to underwriters - - - -

Acquired treasury shares subsequently cancelled - - - -

Acquired treasury shares transferred through mergers, share exchanges or corporate divisions

- - - -

Others

(Treasury shares acquired in response to shareholders’ requests to purchase shares of less than one unit)

148 194,479 - -

No. of treasury shares held 3,409,118 194,479 3,409,457 -

S A K A T A S E E D

34

Cash Flows Consolidated statement of cash flows Years ended May 31; Millions of yen 2015 2016 2017

Cash flows from operating activities

Profit before income taxes 5,504 7,503 8,318

Depreciation 1,872 1,826 1,864

Amortization of negative goodwill (0) - -

Increase (decrease) in allowance for doubtful accounts (49) (218) (29)

Interest and dividend income (349) (358) (417)

Interest expenses 66 75 109

Foreign exchange losses (gains) (160) 201 (83)

Impairment loss 692 64 36

Loss (gain) on sales of investment securities (71) (13) -

Decrease (increase) in notes and accounts receivable - trade (1,404) 669 (446)

Decrease (increase) in inventories (2,134) (2,372) (2,086)

Increase (decrease) in notes and accounts payable - trade 331 (248) 2,146

Increase (decrease) in accounts payable - other (218) 255 (197)

Others 1,040 (1,043) 201

5,117 6,342 9,416

Interest and dividend income received 353 350 425

Interest expenses paid (67) (77) (110)

Income taxes refunded 56 20 15

Income taxes paid (1,324) (2,250) (2,133)

4,136 4,384 7,613

Cash flows from investing activities

Payments into time deposits (1,940) (3,502) (2,552)

Proceeds from withdrawal of time deposits 1,546 3,194 1,820

Purchase of property, plant and equipment (1,861) (3,069) (2,093)

Proceeds from sales of property, plant and equipment 466 128 295

Purchase of intangible assets (153) (192) (342)

Proceeds from redemption of securities - 100 150

Purchase of investment securities (94) (50) (323)

Proceeds from sales of investment securities 239 21 -

Proceeds from redemption of investment securities - - 100

Others (46) (58) 44

(1,844) (3,430) (2,901)

S A K A T A S E E D

35

Years ended May 31; Millions of yen 2015 2016 2017

Cash flows from financing activities

Net increase (decrease) in short-term loans payable (850) 973 (992)

Proceeds from long-term loans payable 941 537 323

Purchase of treasury shares (3) (3) (3)

Payments from changes in ownership interests in subsidiaries that do not result in change in scope of consolidation

- (36) -

Cash dividends paid (901) (1,035) (1,126)

Others (131) (100) (217)

(945) 335 (2,016)

Effect of exchange rate change on cash and cash equivalents 129 (431) (57)

Net increase (decrease) in cash and cash equivalents 1,476 858 2,637

Cash and cash equivalents at beginning of period 9,162 10,639 11,497

Cash and cash equivalents at end of period 10,639 11,497 14,134

Relationship between the balance of cash and cash equivalents as of term-end and balance sheet items


Cash and deposits 17,212 18,321 22,126

Time deposits, etc., of 3 months or longer (6,573) (6,823) (7,991)

Cash and cash equivalents 10,639 11,497 14,134

Capital expenditures 1. Group-wide capital investment (including intangibles): ¥2,599 million

Purchase of assets to establish a farm at a site in Chiba Prefecture: ¥99 million

Trademark purchases by subsidiary Sakata UK Ltd.: ¥213 million

Acquisition of land for Sakata Seed India Pvt Ltd.: ¥99 million

2. Capital investment by business segment

Domestic wholesaling: ¥348 million

Overseas wholesaling: ¥1,911 million

Retailing: ¥21 million

Corporate assets: ¥312 million

3. No significant retirements or sales of facilities occurred during the year under review.

S A K A T A S E E D

36

Capital expenditures and disposal plans Expenditures

Millions of yen Items Budgeted

amountExpenditures to

dateDate

commenced Completion date

Chiba Farm (tentative name)

Research facilities 1,850 392 Sep-2015 Jul-2018

Sakata Seed America, Inc.

Research facilities 1,666 581 Mar-2016 Aug-2018

Sakata Seed India Private Limited

Warehousing/research facilities

987 226 Apr-2016 Dec-2018

Disposal

Millions of yen Items Book value at term end Completion date

Kyushu Branch Commercial land/buildings 544 Sep-2017

Dividend policy Basic stance on dividends

1. The Company considers returning profits to shareholders to be a significant issue for management.

2. Over the medium-to-long term, its basic policy on dividends will be determined by:

The financial results for each term

Management’s need to ensure sufficient retained earnings to enhance its operational capabilities and to strengthen the foundations of the Company’s business

The need to maintain stability and continuity of payouts

Payouts

1. Frequency of dividend payouts: twice annually

Interim dividend, as approved by the Board of Directors

Year-end dividend, as approved by the General Meeting of Shareholders

2. Dividends for fiscal year ended May 31, 2017:

Interim dividend of ¥10 per share (in accordance with the above policy)

Year-end dividend of ¥18 per share (including a special dividend of ¥3 per share to reflect record profit performance)

Allocation of retained earnings

To respond to the changes it foresees in the business environment and to enhance its ability to compete on cost, the Company shall:

S A K A T A S E E D

37

1. Strengthen its R&D and production capabilities to respond effectively to market needs

2. Invest in resources that further its global strategies

Articles of Incorporation

With regard to interim dividends, under Article 454-5 of the Companies Act, the Company has provided for the following in its Articles of Incorporation.

“The Company may pay out interim dividends with a date of record of November 30 each year, based on a resolution by its Board of Directors.”

Dividends paid for the year under review are as shown below. Date of decision Dividend payout Dividend per share

(Millions of yen) (Yen)

January 12, 2017 Resolution of Board of Directors

450 10

August 29, 2017 Resolution of General Meeting of Shareholders

810 18

S A K A T A S E E D

38

Operations Consolidated statement of income Years ended May 31; Millions of yen 2015 2016 2017

Net sales 56,707 58,773 61,844

Cost of sales 27,969 27,539 28,269

Gross profit 28,738 31,234 33,574

Selling, general and administrative expenses 23,959 23,916 25,871

Operating profit 4,779 7,317 7,702

Non-operating income

Interest income 142 141 161

Dividend income 207 217 256

Rent income 209 211 216

Amortization of negative goodwill 0 - -

Foreign exchange gains 479 - -

Others 154 161 235

1,193 731 868

Non-operating expenses

Interest expenses 66 75 109

Sales discounts 23 23 51

Foreign exchange losses - 250 67

Others 74 144 92

164 493 321

Ordinary profit 5,808 7,555 8,250

Extraordinary income

Gain on sales of non-current assets 316 - 104

Gain on sales of investment securities 71 13 -

388 13 104

S A K A T A S E E D

39


Extraordinary losses

Impairment loss 692 64 36

692 64 36

Profit before income taxes 5,504 7,503 8,318

Income taxes - current 1,993 2,283 2,314

Income taxes - deferred (315) (23) (142)

1,677 2,260 2,172

Profit 3,826 5,243 6,145

Profit attributable to non-controlling interests 5 27 33

Profit attributable to owners of parent 3,820 5,215 6,112

Consolidated statement of comprehensive income Years ended May 31; Millions of yen 2015 2016 2017

Profit 3,826 5,243 6,145

Other comprehensive income

Valuation difference on available-for-sale securities 2,624 168 68

Foreign currency translation adjustment 878 (2,365) 21

Remeasurements of defined benefit plans, net of tax 111 (501) 115

3,613 (2,699) 205

Comprehensive income 7,440 2,543 6,351

Comprehensive income attributable to

Comprehensive income attributable to owners of parent 7,430 2,534 6,315

Comprehensive income attributable to non-controlling interests 10 9 35

S A K A T A S E E D

40

Consolidated statement of changes in equity May 2017 term

Shareholders' equity

Year ended May 31, 2017; Millions of yen Capital stock Capital surplus Retained earnings Treasury shares

Total shareholders'

equity

Balance at beginning of current period

13,500 10,793 66,980 (4,477) 86,796

Changes of items during period

Dividends of surplus (1,125) (1,125)


6,112 6,112

Purchase of treasury shares

(4) (4)

Disposal of treasury shares 0 0 0

Net changes of items other than shareholders' equity

Total changes of items during period

- 0 4,987 (3) 4,983

Balance at end of current period

13,500 10,793 71,968 (4,481) 91,780

Accumulated other comprehensive income

Year ended May 31, 2017; Millions of yen

Valuation difference on available-for-

sale securities

Foreign currency

translation adjustment

Remeasurements of defined benefit

plans

Total accumulated

other comprehensive

incomeNon-controlling

interests Total net assets


5,234 (2,842) (443) 1,949 141 88,886


Dividends of surplus (1,125)


6,112


(4)

Disposal of treasury shares 0


68 18 115 203 19 222


68 18 115 203 19 5,206


5,303 (2,823) (327) 2,152 160 94,093

S A K A T A S E E D

41

May 2016 term


Year ended May 31, 2016; Millions of yen Capital stock Capital surplus Retained earnings Treasury shares

Total shareholders'

equity


13,500 10,823 62,799 (4,473) 82,649


Dividends of surplus (1,035) (1,035)


5,215 5,215


(3) (3)

Change in ownership interest of parent due to transactions with non-controlling interests

(29) (29)



- (29) 4,180 (3) 4,147


13,500 10,793 66,980 (4,477) 86,796


Year ended May 31, 2016; Millions of yen

Valuation difference on available-for-

sale securities

Foreign currency

translation adjustment

Remeasurements of defined benefit

plans

Total accumulated

other comprehensive

incomeNon-controlling

interests Total net assets


5,066 (493) 58 4,630 129 87,410


Dividends of surplus (1,035)


5,215


(3)

Change in ownership interest of parent due to transactions with non-controlling interests

(29)


168 (2,348) (501) (2,681) 11 (2,670)


168 (2,348) (501) (2,681) 11 1,476


5,234 (2,842) (443) 1,949 141 88,886

S A K A T A S E E D

42

Results of operations Fiscal year ended May 31, 2017 (year on year, percentage changes)

Consolidated net sales up 5.2% to ¥61,844 million; operating profit up 5.3% to ¥7,702 million; ordinary profit up 9.2% to ¥8,250 million; and profit attributable to owners of parent up 17.2% to ¥6,112 million (a new record for the Sakata Group).

Economic and other factors affecting operations

1. Global economy

Economic expansion continued in the United States, supported by robust investment in housing and consumer spending.

Strong economic recovery also continued in Europe, despite short-lived turmoil in the financial markets following the British vote to leave the EU.

Among developing countries, the Chinese economy recovered with the aid of stimulus measures, but the Indian economy slowed after a government move to abolish high-denomination banknotes; meanwhile, the Brazilian economy showed signs of recovery but continued to contract.

2. Domestic economy

Improvements in individual incomes and corporate earnings continued to support the ongoing overall recovery of the Japanese economy.

3. Industry trends and impact on the Sakata Group

Domestic demand for seeds remained sluggish, but demand continued to expand in overseas markets due to rising demand for vegetable seeds and flower seeds in developing countries.

Sales revenue from domestic wholesaling operations rose year-on-year due to good sales of vegetable seeds.

Sales revenue from overseas wholesaling operations rose significantly year-on-year due to substantially higher sales of vegetable seeds and growth in sales of flower seeds.

The Group’s retailing business generated significantly lower sales than in the previous year following the removal of unprofitable product lines, but segment profit improved due to efforts to hold down operating costs.

Stronger sales of high-margin seeds helped to push up gross profit.

S A K A T A S E E D

43

4. Financial factors

Lower foreign exchange losses were recorded.

Business segment review

1. Domestic wholesaling: net sales up 2.1% to ¥16,707 million; operating profit down 0.6% to ¥5,296 million

Sales of vegetable seeds increased significantly, but sales of flower seeds fell slightly amid market stagnation.

Vegetable seeds: top sellers included broccoli, bunching onion and lettuce.

Materials: sales increased slightly year-on-year as demand for agricultural pipe and materials for green houses was stimulated by rising oil prices and price hikes for steel pipe.

2. Overseas wholesaling: the segment posted a strong performance, with net sales up 10.1% to ¥35,299 million and operating profit up 1.9% to ¥10,369 million

Performance by region:

1) Asia: strong export performers included broccoli, spinach, lisianthus and sunflower.

2) North America: broccoli, tomato, carrot, spinach, cabbage, beet, melon and other vegetable seeds all posted higher sales.

3) Europe: sales growth for broccoli, spinach, melon and other vegetable seeds and for lisianthus seeds.

4) South America: broccoli, tomato, squash, pepper, melon, lettuce and other vegetable seeds all posted higher sales; the yen’s depreciation against regional currencies boosted the rate of sales growth from the previous year.

Performance by product:

1) Vegetable seeds: strong year-on-year sales growth was driven by top performers such as broccoli, tomato, squash, spinach and melon.

2) Flower seeds: lisianthus and sunflower remained the top performers, driving further positive year-on-year sales growth.

3. Retailing: net sales down 11.7% to ¥8,221 million; the segment recorded operating profit of ¥65 million following the previous year’s loss of ¥290 million.

Home improvement retailers: sales declined significantly due to the impact of unseasonable summer and autumn weather, poor sales of materials, and continued restraints on sales of unprofitable product lines; profitability

S A K A T A S E E D

44

improved significantly, however, due to progress in limiting sales of less profitable product lines, coupled with efforts to constrain operating costs.

Mail order sale: sales of seedlings and bulbs failed to grow due to the impact of unusually heavy autumn rains; with the transition to an online subscriber system complete, costs were cut by switching to electronic publication of mail-order catalogs and other materials.

Garden shop: solid sales of seeds and plants due to more frequent sales events were offset by a significant dip in sales of novelty items, leading to a year-on-year decline in aggregate sales revenue.

4. Other businesses: net sales up 57.4% to ¥1,615 million; operating profit up by ¥53 million, or 542.9%, to ¥63 million

Sales revenue generated by landscaping and garden construction services increased significantly with the completion of large-scale projects for both government agencies and private-sector companies.

Fiscal year ended May 31, 2016 (year on year, percentage changes)

Consolidated net sales up 3.6% to ¥58,773 million; operating profit up 53.1% to ¥7,317 million; ordinary profit up 30.1% to ¥7,555 million; and profit attributable to owners of parent up 36.5% to ¥5,215 million (a new record for the Sakata Group).

Economic and other factors affecting operations

1. Global economy

Economic recovery continued in the United States, supported by robust consumer spending and investment in housing.

Stronger consumer spending supported a moderate pace of economic recovery in Europe.

Among developing countries, the Indian economy expanded strongly, but the slowdown continued in China amid slumping commodity prices, and Brazil experienced a protracted severe recession.

2. Domestic economy

Improvements in corporate earnings and employment helped to maintain the Japanese recovery in overall terms, but consumer spending remained weak. Exports to China and other Asian markets declined amid continued uncertainty over regional economic prospects.

S A K A T A S E E D

45

3. Industry trends and impact on the Sakata Group

Overall domestic demand for seeds was still sluggish but remained buoyant in overseas markets due to rising demand for vegetable seeds and flower seeds in developing countries.

In domestic wholesaling operations, sales revenue declined from the year before due to significantly lower sales of materials, which offset steady growth in sales of vegetable seeds and seedlings.

In overseas wholesaling operations, sales of vegetable seeds and flower seeds continued to increase.

After an earlier review of unprofitable operations and subsequent measures, the Group’s retailing business generated lower sales than in the previous year.

Strong sales of vegetable seeds contributed to an increase in gross profit.

4. Financial factors

Foreign exchange losses of ¥250 million were recorded, compared with foreign exchange gains of ¥479 million in the previous year.

Business segment review

1. Domestic wholesaling: net sales down 0.2% to ¥16,365 million; operating profit down 8.6% to ¥5,327 million

Sales of vegetable seeds and seedlings increased, but the gains were offset by lower sales of materials.

Vegetable seeds: top sellers included broccoli, sweet corn and tomatoes.

Flower seeds: sales of lisianthus and sunflower seeds increased, but sales of pansy varieties declined as a stagnant market led to reduced cultivation.

Materials: sales declined from the year before despite higher demand for high-grade liquid fertilizers and specialist culture soils; this mainly reflected the fact that demand in the previous year was boosted by reconstruction demand for greenhouse materials following particularly heavy snowfalls in February 2014.

Seedlings: growth in sales was generated by tomato seedlings sold in cell trays or pots.

The cost of sales increased due to higher production and input costs.

S A K A T A S E E D

46

2. Overseas wholesaling: the segment posted a good performance, with net sales up 7.6% to ¥32,074 million and operating profit up 44.7% to ¥10,174 million.

Performance by region:

1) Asia: strong export performers included carrots, broccoli, lisianthus and sunflower.

2) North America: broccoli, squash and other vegetable seeds posted higher sales.

3) Europe and South America: broccoli, tomato and other vegetable seeds posted higher sales.

Performance by product:

1) Vegetable seeds: strong year-on-year sales growth was driven by top performers such as broccoli, tomato, carrots and squash.

2) Flower seeds: lisianthus and sunflower seeds were the top performers, driving positive year-on-year sales growth.

3. Retailing: net sales declined 3.6% to ¥9,306 million; the operating loss of ¥290 million was an improvement from the previous year’s loss of ¥351 million, reflecting successful efforts to constrain operating expenses.

Home improvement retailers: sales fell due to limited sales of unprofitable product lines, but operations became more profitable due to significant reductions in administrative costs.

Mail order sale: revenues generated by the subscriber base were lackluster after the transition to a new system for mail-order subscribers.

Garden shop: sales were higher than in the previous year, in part due to favorable weather in autumn, a popular season for gardening in Japan. Online and in-store sales both showed encouraging signs of growth.

4. Other businesses: net sales up 20.6% to ¥1,026 million; operating profit of ¥9 million, an improvement of ¥79 million compared with an operating loss of ¥69 million in the previous year

Sales revenue generated by landscaping and garden construction services increased with the completion of large-scale projects.

The turnaround in profitability reflected higher gross profit combined with a reduction in operating expenses.

S A K A T A S E E D

47

Segment information 1. Segment reporting

The Company’s segment reporting is based on organizational units for which clearly separable financial information can be obtained. These units are also subject to regular reviews by the Board of Directors to determine resource allocation and evaluate financial performance.

Segments are basically determined by type of operation; the Company provides segment information for 3 operations: domestic and overseas wholesaling and retailing.

In domestic wholesaling, the Company produces or procures vegetable seeds, flower seeds, bulbs, seedlings and agricultural and horticultural products, and wholesales these items to seed companies, etc., in the Japanese market.

In overseas wholesaling, the Company and/or its overseas subsidiaries produce or procure vegetable seeds, flower seeds, bulbs, seedlings and agricultural and horticultural products, and wholesale these items to seed companies, etc., in overseas markets.

In retailing, the Company procures merchandise for gardening enthusiasts and sells this merchandise to home improvement retailers, through mail order and through its corporate-owned and managed stores.

2. Method of calculating amounts

Segment profits are reported in terms of operating profit.

Internal sales and transfers between segments are based on market prices.

S A K A T A S E E D

48

3. Information regarding segment-related sales, profits or losses; and regarding segment-related assets, liabilities and other categories

Segment reporting

Millions of yen Domestic

wholesaling Overseas

wholesaling Retailing Subtotal(Note 1)Others Total

(Note 2)Adjustments

(Note 3)Book value

2017

Net sales

External customers 16,707 35,299 8,221 60,228 1,615 61,844 - 61,844

Inter-segment 685 2,736 0 3,423 49 3,472 (3,472) -

17,393 38,035 8,221 63,651 1,665 65,316 (3,472) 61,844

Segment profits (losses) 5,296 10,369 65 15,731 63 15,794 (8,092) 7,702

Segment assets 20,635 50,392 3,027 74,055 645 74,701 41,467 116,169

Other items Depreciation Increase in property, plant and equipment and intangible assets

159

348

1,108

1,911

19

21

1,287

2,281

2

5

1,289

2,286

574

312

1,864

2,599

2016

Net sales

External customers 16,365 32,074 9,306 57,746 1,026 58,773 - 58,773

Inter-segment 813 3,212 0 4,027 37 4,064 (4,064) -

17,179 35,287 9,306 61,773 1,064 62,838 (4,064) 58,773

Segment profits (losses) 5,327 10,174 (290) 15,211 9 15,221 (7,904) 7,317

Segment assets 20,213 46,547 3,757 70,518 370 70,888 37,971 108,859

Other items Depreciation Increase in property, plant and equipment and intangible assets

175

510

1,044

2,519

30

62

1,250

3,093

2

-

1,252

3,093

573

411

1,826

3,504

(Notes)

1. The “Others” classification encompasses businesses not included in the reported segments, specifically landscaping for government agencies and private businesses and the temporary staffing agency.

2. “Adjusted amounts” break down as follows:

(1) “Segment profits/losses adjustments” of ¥(8,092) million (2017) and ¥(7,904) million (2016), which comprise:

a. Inter-segment eliminations: ¥56 million (2017) and ¥85 million (2016)

b. Inventory adjustments: ¥(411) million (2017) and ¥(524) million (2016)

c. Corporate expenses (primarily parent company R&D and headquarters administration costs) not allocated to the segments: ¥(7,737) million (2017) and ¥(7,465) million (2016)

(2) The “segment asset adjustments” of ¥41,467 million (2017) and ¥37,971 million (2016) represent assets allocated to the Company as a whole. These assets are mainly land and buildings at the Company’s Head Office site and investment securities.

(3) The “depreciation adjustments” of ¥574 million (2017) and ¥573 million (2016) represent depreciation expenses on assets allocated to the Company as a whole.

(4) The increases in the amounts of property, plant and equipment and intangible assets of ¥312 million (2017) and ¥411 million (2016) represent the amounts of such assets acquired for use by the Company as a whole.

3. Segment profits/losses adjustments are made to adjust segment profits to operating profit on the consolidated statement of income.

Related information

Information on products and services

Millions of yen Seeds and Seedlings Materials Others Total

2017

External customers 50,101 8,897 2,845 61,844

2016

External customers 47,208 9,212 2,351 58,773

S A K A T A S E E D

49

Information by region

Millions of yen Japan North and

Central AmericaEurope, Middle and Near East Asia

South America Others Total

2017

Sales 26,544 11,208 9,164 8,313 4,281 2,331 61,844

Property, plant and equipment

18,510 5,014 2,053 1,261 1,244 668 28,753

2016

Sales 26,698 10,123 8,869 7,702 3,230 2,151 58,773


18,595 5,012 2,038 1,191 934 533 28,305

Segment information on impairment losses on non-current assets

Millions of yen Domestic

wholesaling Overseas

wholesaling Retailing Others Subtotal Eliminations Total

2017

Impairment loss - 3 33 - 36 - 36

2016

Impairment loss 8 - 56 - 64 - 64

S A K A T A S E E D

50

Sales and procurement Procurement

Millions of yen 2017

Amount Year on year (%)

Domestic wholesaling 7,791 (2.2)

Overseas wholesaling 16,065 6.8

Retailing 5,284 (15.3)

Total segment reporting 29,140 (0.4)

Others 1,367 63.9

30,507 1.4

Sales by business

Millions of yen 2017

Amount Year on year (%)

Domestic wholesaling 16,707 2.1

Overseas wholesaling 35,299 10.1

Retailing 8,221 (11.7)

Total segment reporting 60,228 4.3

Others 1,615 57.4

61,844 5.2

Selling, general and administrative expenses Years ended May 31; Millions of yen 2015 2016 2017

Packing expenses 481 466 390

Haulage expenses 1,087 1,090 1,019

Advertising expenses 958 983 991

Provision of allowance for doubtful accounts (40) (69) (29)

Employees' salaries and allowances 9,419 9,518 10,252

Retirement benefit expenses 598 442 612

Provision for directors' retirement benefits 62 54 53

Depreciation 1,315 1,298 1,353

Research and development expenses 4,840 4,989 5,440

S A K A T A S E E D

51

Capital Structure Consolidated balance sheet Assets As of May 31; Millions of yen 2015 2016 2017

Current assets

Cash and deposits 17,212 18,321 22,126

Notes and accounts receivable - trade 15,653 14,488 15,085

Securities 100 150 -

Merchandise and finished goods 21,934 23,237 24,764

Work in process 2,080 2,020 2,273

Raw materials and supplies 2,173 2,142 2,297

Costs on uncompleted construction contracts 59 135 243

Deferred tax assets 2,062 2,412 2,575

Others 1,924 2,233 2,895

Allowance for doubtful accounts (476) (276) (245)

62,724 64,864 72,016

Non-current assets


Buildings and structures 28,645 28,638 29,390

Accumulated depreciation (18,390) (18,677) (19,392)

Buildings and structures, net 10,254 9,961 9,998

Machinery, equipment and vehicles 11,517 11,710 12,219


Machinery, equipment and vehicles, net 2,426 2,489 2,788

Land 13,788 14,456 14,715

Construction in progress 383 670 544

Others 3,079 3,223 3,396


Others, net 586 727 705

27,439 28,305 28,753

S A K A T A S E E D

52

As of May 31; Millions of yen 2015 2016 2017

Intangible assets 819 638 710

Investments and other assets

Investment securities 13,589 13,633 13,846

Long-term loans receivable 111 50 32

Deferred tax assets 116 614 199

Others 658 859 713

Allowance for doubtful accounts (145) (106) (102)

14,329 15,052 14,689

Total non-current assets 42,589 43,995 44,152

Total assets 105,313 108,859 116,169

S A K A T A S E E D

53

Liabilities and equity

As of May 31; Millions of yen 2015 2016 2017

Current liabilities

Notes and accounts payable - trade 3,763 3,305 5,452

Short-term loans payable 1,661 2,676 2,914

Income taxes payable 995 985 1,213

Others 3,842 4,002 4,964

10,262 10,970 14,545

Non-current liabilities

Long-term loans payable 2,117 2,356 1,278

Deferred tax liabilities 1,824 2,383 2,099

Net defined benefit liability 2,317 3,055 2,958

Provision for directors' retirement benefits 588 345 390

Others 793 862 803

7,641 9,002 7,530

Total liabilities 17,903 19,972 22,075

Net assets


Capital stock 13,500 13,500 13,500

Capital surplus 10,823 10,793 10,793

Retained earnings 62,799 66,980 71,968

Treasury shares (4,473) (4,477) (4,481)

82,649 86,796 91,780


Valuation difference on available-for-sale securities 5,066 5,234 5,303

Foreign currency translation adjustment (493) (2,842) (2,823)

Remeasurements of defined benefit plans 58 (443) (327)

4,630 1,949 2,152

Non-controlling interests 129 141 160

Total net assets 87,410 88,886 94,093

Total liabilities and net assets 105,313 108,859 116,169

S A K A T A S E E D

54

Financial instruments Policy with respect to financial instruments

Depending on the requirements of its capital investment plans, the Company may turn to outside financing (primarily bank loans) for the capital necessary to implement its plans.

Surplus cash is invested primarily in highly liquid financial assets; the Company may use bank loans for some of its short-term capital needs.

The Company uses derivatives to hedge against certain risks, which are discussed below; it does not employ derivatives for speculative purposes.

Types of financial instruments and their attendant risks; risk management policies

Trade receivables: The Company is exposed to the credit risks of its customers; in its overseas businesses, non-yen-denominated receivables expose it to currency risks, which it offsets partially through payables denominated in the same currencies and through hedging with derivatives (forward exchange contracts and currency options).

Securities and investment securities: Primarily shares in companies with which the Company has business relationships, these investments are exposed to the risk of market fluctuations.

Trade payables (promissory notes and accounts payable): In most instances, these have maturity dates of 3 months or less; payables denominated in foreign currencies expose the Company to currency risks, which are offset by receivables denominated in the same currencies.

Loans payable mainly constitute loans obtained to finance capital investment and working capital, with terms of no more than 10 years. A portion of this debt is exposed to the risk of interest rate fluctuations, which the Company hedges through derivative transactions (interest rate swaps).

Derivative transactions: These are forward exchange contracts and currency option contracts adopted to hedge against currency risks associated with foreign currency-denominated trade payables and receivables; they also include interest rate swaps employed to hedge against interest rate fluctuations on loans payable; derivative transactions are governed by internal regulations, which establish systems of control, methods of risk management and departments that execute transactions; there are personnel responsible for signing off on all transactions. Derivative transactions by subsidiaries require prior approval by corporate headquarters.

S A K A T A S E E D

55

Liquidity risks: The assumption of trade payables and loans exposes the Company to liquidity risks (risks that payments cannot be made on time), which it deals with through the timely preparation and renewal of cash flow plans and through maintenance of sufficient cash on hand.

Supplemental statement regarding the current prices of financial instruments

In addition to values for instruments with market prices, current prices include values calculated by the Company for instruments that do not have market prices; it applies reasonable methods in calculating these values. When investing excess funds, the Company purchases only highly rated securities, a practice resulting in minimal exposure to credit risks.

In these calculations, the Company incorporates variables that can cause outcomes to change depending on the assumptions it makes; this means that the values in question may change.

The reference to “contract value” in the note on derivative transactions should not be considered as an indication of market risk related to the transactions in question.

Items related to current value 2016 2017

As of May 31; Millions of yen Book value Current valueUnrealized gain (loss) Book value Current value

Unrealized gain (loss)

Cash and deposits 18,321 18,321 - 22,126 22,126 -

Notes and accounts receivable - trade 14,488 15,085

Allowance for doubtful accounts (276) (245)

14,211 14,211 - 14,839 14,839 -

Securities and investment securities

Available-for-sale securities 12,811 12,811 - 12,796 12,796 -

Long-term loans receivable (Note 1) 89 94 5 57 59 2

Total assets 45,434 45,439 5 49,820 49,822 2

Notes and accounts payable - trade 3,305 3,305 - 5,452 5,452 -

Short-term loans payable (Note 2) 2,559 2,559 - 1,738 1,738 -

Long-term loans payable (Note 2) 2,473 2,555 82 2,454 2,536 82

Total liabilities 8,338 8,420 82 9,645 9,727 82

Notes: 1) This figure includes the current portion of long-term loans receivable, which appears on the balance sheet under others in the current

assets (¥25 million for 2017 and ¥39 million for 2016). 2) The current portion of long-term loans payable (¥1,176 million for 2017 and ¥117 million for 2016), which is included under short-term

loans payable on the balance sheet, is shown here as long-term loans payable.

S A K A T A S E E D

56

Methods of calculating current value

Cash and deposits; notes and accounts receivable - trade: book value

Securities and investment securities: market value

Long-term loans receivable: discounting at the interest rate that would apply if the Company were to newly lend the same amount of principal and interest

Notes and accounts payable - trade; short-term loans payable: book value Long-term loans payable: discounting at the interest rate that would apply if the Company were to newly borrow the same amount of principal and interest

Interest rate swaps subject to special treatment are accounted for as an inseparable part of the long-term loans payable that are being hedged; hence, their market value is included as a part of the market value of said long-term loans payable.

Financial instruments whose current value is extremely difficult to determine

Millions of yen 2016 2017

Unlisted shares 972 1,049

Value of financial receivables and securities with maturity dates that will be redeemable after the balance sheet date

Millions of yen Up to 1 yearLonger than 1 and

up to 5 yearsLonger than 5 and

up to 10 years Longer than

10 years

2017

Cash and deposits 22,126 - - -

Notes and accounts receivable - trade 15,085 - - -

Investment securities

Available-for-sale securities - 100 250 -

Long-term loans receivable 25 32 - -

37,237 132 250 -

2016

Cash and deposits 18,321 - - -

Notes and accounts receivable - trade 14,488 - - -


Available-for-sale securities 150 99 200 -

Long-term loans receivable 39 50 - -

32,999 149 200 -

Amount of loans payable scheduled for repayment after the balance sheet date

Millions of yen Up to 1 year

Longer than 1 and

up to 2 years

Longer than 2and

up to 3 years

Longer than 3and

up to 4 years

Longer than 4 and

up to 5 years Longer than

5 years

2017

Short-term loans payable 1,738 - - - - -

Long-term loans payable 1,175 181 209 292 546 48

2,914 181 209 292 546 48

2016

Short-term loans payable 2,559 - - - - -

Long-term loans payable 117 1,191 152 265 544 202

2,676 1,191 152 265 544 202

S A K A T A S E E D

57

Market value of securities Available-for-sale securities 2016 2017

Millions of yen Book valueCost of

acquisitionUnrealized gain (loss) Book value

Cost of acquisition


Securities valued on the consolidated balance sheet at amounts greater than the acquisition cost

Shares 12,331 5,507 6,824 12,415 5,608 6,807

Bonds

JGB, local government bonds, etc. 100 99 0 100 100 0

Corporate bonds 200 200 0 200 200 0

Others 22 9 13 23 9 14

12,654 5,816 6,837 12,739 5,917 6,822

Securities valued on the consolidated balance sheet at amounts not greater than the acquisition cost

Shares 2 2 (0) 2 2 (0)

Bonds

JGB, local government bonds, etc. 149 150 (0) 49 50 (0)

Corporate bonds - - - - - -

Others 4 5 (0) 4 4 (0)

156 157 (1) 57 57 (0)

12,811 5,974 6,836 12,796 5,975 6,821

Available-for-sale securities sold during the years ended May 31, 2016 and May 31, 2017

2016 2017

Millions of yen Amount

soldTotal gain

on salesTotal loss

on salesAmount

sold Total gain

on sales Total loss

on sales

Shares 21 13 - - - -

Bonds

JGB, local government bonds, etc. 100 - - 150 0 -

Corporate bonds - - - 100 - -

Others - - - - - -

121 13 - 250 0 -

S A K A T A S E E D

58

Derivatives 1. Derivative transactions not subject to hedge accounting

Currency related

Millions of yen 2016 2017

Contract

value Over

1 yearMarket

valueUnrealized gain (loss)

Contract value

Over 1 year

Market value


Forward exchange contracts

Sell side

Sale of Japanese yen, purchase of US dollars

26 - (0) (0) 15 - 0 0

Sale of Japanese yen, purchase of Euro

31 - (0) (0) 23 - 0 0

Buy side

Purchase of Japanese yen, sale of US dollars

1,102 - (2) (2) 1,104 - (1) (1)

Purchase of Japanese yen, sale of Euro

247 - 0 0 309 - 0 0

Currency option contract

Put option to sell

Purchase of Japanese yen, sale of US dollars

443

- (0) (0) 221 - 0 0

(Option fee) (14) (4)

- - (4) (4) - - 0 0

2. Derivative transactions subject to hedge accounting

Interest rate-related

2017

Hedge accounting method Type of transaction Principal object of hedge

Contract value

Over 1 year

Market value

(Millions of yen)

Interest rate swap subject to special treatment

Interest rate swap: receive variable rate; pay fixed rate

Short-term loans payable

693 - （Note）

2016

Hedge accounting method Type of transaction Principal object of hedge

Contract value

Over 1 year

Market value

(Millions of yen)

Interest rate swap subject to special treatment

Interest rate swap: receive variable rate; pay fixed rate

Long-term loans payable

693 693 （Note）

(Notes)

2017: Interest rate swaps subject to special treatment are accounted for as an inseparable part of the short-term loans payable that are being hedged; hence, their market value is included as a part of the market value of said short-term loans payable.

2016: Interest rate swaps subject to special treatment are accounted for as an inseparable part of the long-term loans payable that are being hedged; hence, their market value is included as a part of the market value of said long-term loans payable.

S A K A T A S E E D

59

Retirement benefits Overview of retirement benefit system

The Company and its consolidated subsidiaries have established defined benefit retirement systems that provide employees with either a defined benefit pension plan or a lump-sum retirement payment. Some consolidated subsidiaries apply a simplified valuation method to calculate net defined benefit liability and retirement benefit expenses, and some have established a defined contribution retirement system in addition to their defined benefit plans.

Defined benefit pensions

(1) Reconciliation of retirement benefit obligations (excluding pension plans using a simplified valuation method) Millions of yen 2016 2017

Beginning balance of retirement benefit obligations 6,133 6,673

Service cost 333 388

Interest cost 75 48

Actuarial gains or losses 500 45

Retirement benefits paid (227) (192)

Others (142) (122)

Ending balance of retirement benefit obligations 6,673 6,844

(2) Reconciliation between the beginning and ending balances of plan assets (excluding pension plans using a simplified valuation method) Millions of yen 2016 2017

Beginning balance of plan assets 3,917 3,750

Expected return on plan assets 84 82

Actuarial gains or losses (229) 76

Employer contributions 411 410


Others (139) (105)

Ending balance of plan assets 3,750 4,026

S A K A T A S E E D

60

(3) Reconciliation between the beginning and ending balances of net defined benefit liability for plans using a simplified valuation method Millions of yen 2016 2017

Beginning balance of net defined benefit liability 101 133

Retirement benefit expenses 46 23


Others (5) (0)

Ending balance of net defined benefit liability 133 140

(4) Reconciliation of retirement benefit obligations and plan assets with net defined benefit liability and net defined benefit asset as stated on the consolidated balance sheet Millions of yen 2016 2017

Funded retirement benefit obligations 6,568 6,754

Plan assets (3,750) (4,026)

2,818 2,728

Unfunded retirement benefit obligations 237 230

Net consolidated balance-sheet value of pension liability

3,055 2,958

Net defined benefit liability 3,055 2,958

Net consolidated balance-sheet value of pension liability

3,055 2,958

(5) Breakdown of retirement benefit expenses Millions of yen 2016 2017

Service cost 333 388

Interest cost 75 48

Expected return on plan assets (84) (82)

Amortization of actuarial gains or losses 7 136

Amortization of past service cost (1) (1)

Retirement benefit expenses (simplified valuation method)

46 23

Retirement benefit expenses for defined benefit plans 377 513

S A K A T A S E E D

61

(6) Remeasurements of defined benefit plans in the statement of comprehensive income

The breakdown of remeasurements of defined benefit plans (before tax-effect) is as follows: Millions of yen 2016 2017

Past service cost (1) (1)

Actuarial gains or losses (723) 167

(724) 166

(7) Remeasurements of defined benefit plans in the balance sheet

The breakdown of remeasurements of defined benefit plans (before tax-effect) is as follows: Millions of yen 2016 2017

Unrecognized past service cost 1 0

Unrecognized actuarial gains or losses (640) (472)

(638) (471)

(8) Matters regarding plan assets

1) Main breakdown of plan assets

Plan assets are categorized as follows: 2016 2017

Bonds 42.6% 43.6%

Stocks 24.3% 24.1%

Life insurance (general account) 18.8% 18.4%

Cash and deposits 11.5% 10.8%

Others 2.8% 3.1%

100.0% 100.0%

2) Method of setting the long-term expected rate of return on plan assets

The long-term expected rate of return on investment for plan assets is determined based on the current and projected composition of plan assets and the projected long-term rates of return on various asset types.

S A K A T A S E E D

62

(9) Actuarial assumptions

Principal actuarial assumptions as of the end of May 2016 and 2017 are shown below. 2016 2017

Discount rate Mainly 0.03% Mainly 0.03%

Long-term expected rate of return Mainly 2.0% Mainly 2.0%

Projected wage increase Mainly 1.0% Mainly 1.0%

Defined contribution pensions

The required amount of the defined contribution retirement plans for the Company’s consolidated subsidiaries amounted to ¥227 million for 2017 and ¥185 million for 2016.

Deferred taxes Millions of yen 2016 2017

Deferred tax assets 3,632 4,077

Deferred tax liabilities (2,988) (3,401)

Deferred tax assets - net 643 675

Percentage

Statutory tax rate 33.0% 30.8%

(Adjustment)

Expenses not deductible for tax purposes (such as entertainment expenses)

2.0% 1.5%

Dividend income and other income permanently excluded from taxable income

(1.2)% (0.8)%

Per capita rate of inhabitant tax 0.4% 0.4%

Decrease in valuation allowance (1.4)% (1.2)%

Special corporate tax credit (5.2)% (7.9)%

Deferred tax asset adjustment due to change in tax rate 0.4% -

Differences in tax rates at consolidated subsidiaries 0.9% (0.0)%

Tax surcharges/overdue tax - 0.2%

Retained earnings of affiliates 1.7% 3.1%

Others (0.6)% 0.1%

Income tax and others accompanying adoption of tax effect accounting

30.1% 26.1%

S A K A T A S E E D

63

Accounting Policies Summary of accounting policies: Consolidated

Basis for presentation Japanese GAAP; consolidated


Available-for-sale securities

Quoted securities: market value method, based on market prices as of the fiscal year-end

All differences in valuations are credited directly to net assets, with the costs of assets sold calculated primarily based on the moving-average method.

Nonquoted securities: valued at cost using the moving-average method

Derivatives Market value method

Inventories Valued at cost, computed on a periodic-average basis (where amounts shown on the balance sheet take into account declines in book values based on reduced outlooks for profitability).

Depreciation Property, plant and equipment (except leased assets): declining-balance method

Provided that buildings acquired after April 1, 1998 (excluding appurtenances) are depreciated on a straight-line basis. Appurtenances and structures acquired on or after April 1, 2016 are also depreciated on a straight-line basis.

The useful life of buildings and structures is 2-50 years, that of machinery, equipment and vehicles is 2-15 years and that of others is 2-20 years.

Intangible assets (except leased assets): straight-line method

Software for internal use is amortized on a straight-line basis (assuming 5 years of internal useful life).

Leased assets: leased assets related to finance leases that do not transfer ownership The Company employs lease terms as years of useful life and assumes residual values to be zero; depreciation is assumed to be on a straight-line basis.

Allowance for doubtful accounts The Company recognizes an amount calculated on the basis of a historical bad loss ratio for general accounts receivable, plus an amount for specific accounts for which collection appears doubtful.

Provision for directors' retirement benefits

Recognition of the full amount of liabilities at term-end based on internal regulations

S A K A T A S E E D

64

Accounting treatment of retirement benefits

1. Attribution methodology for projected retirement benefits Projected retirement benefits in the current accounting period are calculated on a benefit formula basis.

2. Expensing methodology for actuarial gains or losses and past service costPast service cost recognized as expenses are amortized on a straight-line basis over a prescribed number of years (usually 10 years) within the average remaining service period of employees at the time the liability arises. Actuarial gains or losses are amortized on a straight-line basis over a prescribed number of years (usually 10 years) from the year after accrual over the average remaining service period of employees as of the end of the fiscal period in which they are recognized.

3. Application of simplified valuation methods by small businesses Some consolidated subsidiaries use a simplified valuation method of calculating net defined benefit liability and retirement benefit expenses that assumes the amounts required for voluntary resignations at the fiscal year-end to be retirement benefit obligations.

Important standards for the recognition of revenues and expenses

Recognition of revenues and expenses for construction projects Construction for which progress under construction contracts can be estimated with a high degree of certainty: percentage of completion method (in which the estimate of the percentage of completion is based on the cost-to-cost method)

Other construction: completed contract method

Significant hedge accounting methods

Method of accounting for hedges: For interest rate swaps, the Company applies exceptions when the swap in question meets the conditions for application of such exceptions.

Hedging instruments and risks hedged: Hedging methods: interest rate swaps Items hedged: loans payable

Hedging policies: Hedging policy: The Company hedges against interest rate fluctuations as prescribed in a set of internal regulations entitled “Regulations for the Management of Derivative Transactions.”

Method of evaluating the effectiveness of hedging: As interest rate swaps are treated as a special case, there is no evaluation of their effectiveness.

Opinion of independent auditors Auditors: KPMG AZSA LLC

Opinion: unqualified

S A K A T A S E E D

65

Share-related Information Shares issued

Class of shares Common

Registered or bearer Registered

Number of shares authorized 104,000,000

Issued

As of May 31, 2017 48,410,750

As of August 29, 2017 48,410,750

Stock exchange listings Tokyo Stock Exchange, First Section

Comments The standard stock of the Company, with no limitations on rights

100 share min. trading unit

Changes in common stock

Millions of yen Shares outstanding Capital stock Legal capital surplus

Date Increase or

decrease BalanceIncrease or

decrease BalanceIncrease or

decrease Balance

(Shares) May 6, 2010 (2,500,000) 48,410,750 - 13,500 - 10,823

Shareholders by type of investor

Type of investor Number of

shareholdersShares held

(100 shares) % of total units

National and local government agencies - - -

Financial institutions 38 134,239 27.77

Financial instrument firms 24 3,112 0.64

Business and other corporations 224 129,742 26.83

Non-residents: other than individuals 146 52,288 10.82

Non-residents: individuals 12 543 0.11

Individuals and others 23,200 163,559 33.83

23,644 483,483 100.00

Shares less than one unit 62,450

S A K A T A S E E D

66

Largest shareholders

Name Thousands of shares owned

Thousands of shares held in

trust accounts % of shares outstanding

TM Kosan Co., Ltd. 7,607.9 15.71

Mizuho Bank, Ltd. 2,245.5 4.63

Sumitomo Mitsui Banking Corp. 1,990.7 4.11

The Master Trust Bank of Japan, Ltd. (Trust Account) 1,681.4 1,669.6 3.47

Japan Trustee Services Bank, Ltd. (Trust Account) 1,360.9 1,356.3 2.81

Japan Trustee Services Bank (Trust Account 9) 828.9 828.9 1.71

The Bank of Yokohama, Ltd. 744.0 1.53

Kikkoman Corporation 678.0 1.40

Japan Trustee Services Bank (Trust Account 5) 607.9 607.9 1.25

Maruichi Steel Tube Ltd. 600.2 1.23

18,345.6 37.89

Share information

Business year June 1 to May 31

Ex-rights date May 31

Dates of record for dividends November 30 and May 31

Annual General Meeting of Shareholders August

Trading unit 100 shares

Transfer agent Mitsubishi UFJ Trust and Banking Corporation, 1-4-5 Marunouchi, Chiyoda-ku, Tokyo

Publication of record The Nihon Keizai Shimbun

S A K A T A S E E D

67

Contact

Akifumi Ujita Director, Senior Executive Officer, General Manager of General Administration Division SAKATA SEED CORPORATION 2-7-1 Nakamachidai, Tsuzuki-ku, Yokohama, Kanagawa Prefecture Telephone: 81-45-945-8800 Facsimile: 81-45-945-8841

Printed in Japan

7-1, Nakamachidai, 2-Chome, Tsuzuki-ku, Yokohama, Kanagawa, 224-0041 Japan TEL : 81-45-945-8800FAX : 81-45-945-8841http : //www.sakataseed.co.jp/

YUHO REPORT Annual · 3. Retailing (the Company) The retailing division procures products for...

Documents

Transcript of YUHO REPORT Annual · 3. Retailing (the Company) The retailing division procures products for...