Issues Facing the Company

(1) Basic Management Policies

The Group's medium- to long-term management issue is breaking free from low growth and achieving怀sustainable growth. We implement medium-term management plans to become a Life & Work Style Company.
The Group has adopted "Enabling sustainable growth ? Smart & Sustainable Transformation 2021" as a basic management policy under the second medium-term management plan for the next three years starting from FY2019.
Meanwhile, the next theme to tackle medium- to long-term management issues and to achieve our goals is growth with a sustainable scale of business. It is precisely now as we improve profitability that we shall seek to expand the scale of our business by engaging new areas of promising growth and customer needs as our medium- to long-term efforts.
In addition to sustaining and strengthening the profitability of existing business, by expanding in growth怀domains and new domains (150-200 billion yen), by 2030 we shall achieve our vision for the medium- to longterm with companywide net sales of 450 to 500 billion yen and operating margin of 8% to 9%.
Long-term Vision 2030, laying out KOKUYO's goals for 2030, will be formulated and announced in 2020.

(2) Target Management Indicators

Targets for FY2021, the final fiscal year of the Medium-Term Management Plan, are as follows.

FY2018 FY2021
Results Target Compared to FY2018
Net sales 315.1 billion yen 346.0 billion yen + + 9.8%
Gross profit margin 35.7% 37.0% + + 1.9pt
Operating income 18.2 billion yen 21.5 billion yen + + 18.1%
Operating margin 5.8% 6.2% + 2.2pt

(3) Medium- and Long-Term Management Strategy

In the Second Medium-Term Management Plan, "Enabling sustainable growth ? Smart & Sustainable Transformation 2021," the Group shall improve our smart revenue-earning capabilities with an eye toward怀variety, and we shall implement streamlined business operations premised on rapid growth over the mediumto long-term.

惻Business domain operation

To take on the challenge of reaching beyond business divisions for more dynamic improvement and bolder growth than ever before, we have identified three business domains based on our observations about customers' changing needs in the future: spatial value, business supplies and global stationery. We will thus engage in more diverse investment and resource allocations by clarifying strategic policy in each business domain with net sales growth ratios, business profitability and efficiency, among other factors.

ā‘ Spatial value domain

In this domain, which includes ACTUS as well as our furniture businesses in Japan and overseas, there is worldwide growth in the need for activity-based working (ABW) where the space and approach are怀suited to the worker's purpose and way of working. In response, we shall establish sustainable growth怀for our domestic furniture business as we explore growth areas (global, living, etc.) for the medium- to怀long-term. We will thereby lay the foundation for a revenue base and improved share in the domestic怀furniture business with the aim of expanding net sales and operating income.

ā‘” Business supplies domain

This domain includes office supply wholesaling and the office supply mail-order business. In response to business issues that have become prominent due to changes in the distribution business' environment, we will conduct structural reform and strengthen our customer base for greater sustainability by streamlining the wholesale and mail-order models as a single business model. We will thereby sustain operating margin with an efficient use of working capital, the aim being to improve the efficiency of our business.

ā‘¢ Global stationery domain

This domain includes our stationery business in Japan and abroad. We will take advantage of our top share as a stationery maker in Japan to continue growing in each market as we formulate and review growth strategies with new growth areas in mind. We will thus select areas to concentrate on in Japan and overseas, grow net sales overseas, and sustain market share and improve gross profit margin in Japan, with the goal of expanding our market share in the global stationery market.

惻Stronger strategic investment

In addition to streamlining existing business, we will enter promising new areas and categories for growth and work on research and development to address new customer needs. Over the coming three years, we will set aside approximately 15 billion yen for strategic investments, which will be separate from our regular investments in updating existing equipment and so on.