BOD (Box-On-Demand system)
AUTO STORE (Automated warehouse-type picking system) (Refer to P.21)
Distribution center introduced Planet North Kanto (To be launched in Mar. 2018)

The 55th Annual
Shareholders’Meeting

Distribution center introduced
Planet Osaka
Planet Saitama (To be launched in Oct. 2018)

Automated pallet warehouse
Distribution center introduced
Planet East Kanto
Planet Saitama (To be launched in Oct. 2018)

Convocation
NoticeI-Pack (Automated packaging system)
Distribution center introduced Planet Osaka

For January 1, 2017
to December 31, 2017
1st Section, TSE

CodeAutomated bucket warehouse (Refer to P. 20)
GAS (Gate Assort System)
Distribution center introduced Planet Osaka

Distribution center introduced Planet Tokai
Planet Osaka
Planet East Kanto
Planet Saitama (To be launched in Oct. 2018)

Convocation Notice

Notice of Convocation of the 55th Annual Shareholders’ Meeting

Reference Materials for
Shareholders’ Meeting

P2

Business Report for
the 55th Period

P5

Reference Data

P16

(Securities code: 9830)
February 20, 2018

To our shareholders

Trusco Nakayama Corporation
4-28-1 Shimbashi, Minato-ku, Tokyo
Tetsuya Nakayama, President

Keep It Up, Japanese “Monozukuri”!!
I would first like to express my gratitude for your warm support.
Trusco Nakayama has further improved its unique supply system to address the requests of all
customers, both online and physical, by accelerating investment in distribution functions as well
as expanding its product lineup and inventories, and strengthening its information system.
This year’s key word is “Era of faults.” The shift of power source for cars from gasoline toelectricity will undoubtedly cause a great deal of turmoil in the industrial structure, such as adecrease in metal processing. A fault runs through the law of the times, which states that thepresent is an extension of the past, and the future is an extension of the present.
What we must do now is create a “picture of the future.” What kind of industries will develop andwhat kind will decline due to the shift to electric cars? What kind of companies will grow and whatkind will disappear? What kind of products will sell and what kind will become slow-moving? I
intend to keep a close eye on the future as a party in a company and industry where a “picture of
the future” is urgently required.
Structural changes in the industry are also an opportunity for growth without doubt. I intend to
make this year a year to learn from changes, create the future, and hone our creativity in the eraof faults. Thorough thinking will always produce an answer.
“Businesses and companies are only worthwhile if they are of use to people and society.” With
this thought always in mind, we will strive to become a company that meets the needs of ourcustomers and markets into the future.

Decided Matters upon the Convocation
Notice is hereby given that the 55th Annual Shareholders’ Meeting of Trusco Nakayama (the “Company”) will be held
as described below, and that you are invited to attend the Meeting. If you do not expect to attend the Meeting, please
review the following “Reference documents for the annual shareholders’ meeting” and return the enclosed voting form
indicating your vote “for” or “against” each of the proposals, or access the Company’s website for voting, which isindicated on the voting form, and exercise your voting rights via the Internet.
1. Date and Time: March 9 (Friday), 2018 at 10:00 a.m. (Doors open at 9:00 a.m.)
2. Place: (1) Tokyo (venue where the chairperson will attend)
Fuyo Room, Banquet Floor, the Main Building, Hotel New Otani, 4-1 Kioi-cho, Chiyoda-ku, Tokyo(2) Osaka
Naniwa Room, 8th Floor, Swissotel Nankai Osaka, 5-1-60 Namba, Chuo-ku, Osaka*You may ask questions or exercise your voting rights at either venue.
3. Matters Constituting the Purpose of the Meeting Matter to Be Reported: Reports on the Business Report and Financial Statements for the 55th Period(from January 1, 2017 to December 31, 2017)
 Matters to Be Resolved: Proposal No.1: Election of Five (5) Directors
Proposal No. 2: Election of One (1) Corporate Auditor
4. Guide to the Exercising of Voting Rights(1) If you are attending the shareholders’ meeting
Please present the enclosed Voting Form to the receptionist at the venue of the Meeting. If you are attending theMeeting as a proxy (for only one other shareholder that owns the Company’s voting rights), please present a
document evidencing your authority as a proxy.
(2) If you are not attending the shareholders’ meeting
Please refer to “Guide to the Exercise of Voting Rights” on page 4, and exercise your voting rights within the time
limit.
Time limit for exercising voting rights: March 8 (Thursday), 2018 at 5:30 p.m.
Please bring this Notice of Convocation as a material for proceedings and present the enclosed Voting Form to the receptionistat the venue of the Meeting.

2 Of the documents to be provided, the Company has posted the [Basic Policy concerning the Control of the Company], [Matters concerning the Establishmentof a System to Ensure the Propriety of the Company’s Operations] of the Business Report and [Notes to Non-consolidated Financial Statements] of the
Financial Statements on the Company’s website (http://www.trusco.co.jp/ “Finance”  “IR Library”  “Shareholders Communication”) pursuant to theprovisions of the law and Article 15 of the Articles of Incorporation. Therefore, they are not stated in this Notice of Convocation. For reference, the Business
Report and Financial Statements attached to this Notice of Convocation are part of the documents that were audited by the corporate auditor and theaccounting auditor upon preparing an audit report.
 In the event that an item in the reference materials for the Meeting, the Business Report or Financial Statements must be corrected by the day before theMeeting, the correction will be notified by posting the corrected item on the Company’s website (http://www.trusco.co.jp/ “Finance”  ”IR Library”
 ”Shareholders Communication”).

Convocation Notice[Era of faults]
I believe we are in the midst of an era of faults, even though each day seems to pass without any change.
Growth is no longer an extension of past trends, but is determined by new industry structures and rules.
Instead of reviewing and criticizing the changes of the times, we must face them by determining the essence ofthe requirements of the era and with business management that more closely reflects the market environment.

Reference Materials for
Shareholders’ Meeting

P2

Business Report for
the 55th Period

P5

Reference Data

P16

At the Green Terrace Café, 11F Trusco Fiorito Bldg. (Tokyo Head Office)3

Convocation Notice

Guide to the Exercise of Voting Rights
Voting Right Exercise Methods There are three methods to exercise your voting rights.

By attending
the Meeting

By postVia the Internet

Reference Materials for
Shareholders’ Meeting

P2

Business Report for
the 55th Period

P5

Please present the Voting
Form to the reception.
[Date and time of the Meeting]March 9 (Friday), 2018
10:00 a.m.
(reception starts at 9:00 a.m.)

Website for exercising voting rights

http://www.web54.net[Time limit for the exercise
of voting rights]
March 8 (Thursday), 2018
5:30 p.m. (latest sending time)

Guide to the Exercise of Voting Rights via the Internet
To exercise your voting rights via the Internet, please access the website to exercise your voting rights as specified by
the Company with a PC, smartphone or mobile phone, and exercise your rights by following the directions on thescreen.
Upon Use

P16
Notes

Reference Data

Please indicate your vote “for” or“against” on the Voting Form and post
the Form.
[Time limit for the exercise
of voting rights]
March 8 (Thursday), 2018
5:30 p.m. (latest arrival time)

When accessing the website to exercise your voting rights, the “Code for the Exercise of Voting Rights” and the “Password”
indicated in the enclosed Voting Form are required.

 If you exercise your voting rights twice, by post (in writing) and via the Internet, we will only
accept the exercise of your voting rights via the Internet as effective.
 If you exercise your voting rights more than once via the Internet, we will only accept thelatest exercise of your voting rights as effective.
 Exercising voting rights with a PC or smartphone, etc., may not be possible depending on
your Internet environment. In addition, exercising voting rights may not be possible withsome mobile phones.

Inquiries on Exercising Voting Rights via the Internet

Please contact the number below for inquiries on the operation method of PCs
and smartphones concerning the exercise of voting rights on the website.

Dedicated phone number for stock transfer agency web support of
Sumitomo Mitsui Trust Bank

0120-652-031 (9:00 a.m. to 9:00 p.m., throughout the year)

Aggregation of the Results of Voting on the Day of the Meeting
Due to the idea that judgment of “for” or “against” upon seeing the presentations, discussions, etc. on the day of the Meeting is important, we aggregate
the results of votes by our shareholders on the day of the Meeting as valid, and disclose them in the notice of resolutions or extraordinary reports.

Relationship between Prior Voting and Voting on the Day

1. Example of voting early and attending the Meeting
Voted “for” a proposal
in early voting

Voted “against” theproposal using the voting
form at the Meeting

The voting result
will be aggregatedas “against.”

For ‧ Against

For ‧ Against

For ‧ Against

2. Example of attending the Meeting without voting early
Voted “for” a proposal
using the voting form at
the Meeting

The vote result will beaggregated as “for.”For ‧ Against

For ‧ Against

At the Meeting, you will be asked toplace your voting form in the ballot box.

Open Judge System (OJS) on the President

4

We consider the results of the votes on the day of the Meeting for the President, who serves as the chairperson of the Meeting, as the“OJS on the President” and an important evaluation indicator for candidates. The results will be posted on the Company’s website after theclosing of the Meeting and before March 12 (Mon.), 2018.

Candidate for
executive
director
Executive officer

General manager

Result of evaluation by
all voters*2

Average OJSscore of less than
16 for two
consecutive years

Result of evaluation bydirectors, corporate
auditors, executive officers
and general managers

Average OJSscore of less than
15 for two
consecutive years*1. Meeting either one of the conditions will makethe officer a candidate for demotion*2. Approx. 150 staff members with executive
posts, such as branch managers, section
heads and center managers

Operation method of the officer evaluation system(1) The personal information of the voters is completely undisclosed.
(2) The six assessment items are each rated on a 1–4 scale.
(3) The average score will be used to determine a promotion to director candidate or
demotion from director or corporate auditor (full-time).
(4) Evaluation of outside directors and outside corporate auditors (part-time) will also be
conducted, but the results will be for reference only.
Evaluation through comments is also conducted at the same time as the evaluation byscore, and fed back to the subjects of the evaluation so as to arouse their awareness.

P2
Reference Materials for
Shareholders’ Meeting

Conditions for promotion to
director candidate
Experience as an executive officer
for three years or more and an
average OJS score of 18 or more
for two consecutive years

Conditions for demotion from director
candidate and corporate auditor (full-time)*1

P5
Business Report for
the 55th Period

The Company operates an Open Judge System (OJS: 360 degrees evaluation), a unique evaluation system, as one of its standards forthe selection of candidates for executive directors.
At the Company, remarks by staff with executive posts of general manager or higher at important meetings, etc. are shared with all
employees through the minutes. The voters evaluate the candidates based on their everyday work and remarks. The results of theevaluation will be used as standards for promoting the candidate to a director candidate or demoting him/her from director or corporate
auditor (full-time).

P16

Reference Data

Reference About the Officer Evaluation System

Convocation Notice

Reference Documents for Annual Shareholders’ Meeting

Approx. 150 voters from across the nation (56th Term Boss Conference(Nationwide Management Conference))

Reference Standards for Appointment of Outside Officers
For the appointment of outside directors and outside corporate auditors, Trusco Nakayama Corporation (hereinafter referred to as the“Company”) sets out the following criteria.
1. Criteria for the Appointment of Outside Directors
The Company appoints outside directors from among those fulfilling the conditions set out below.
(1) Candidates shall be able to contribute to the continuous growth and improvement of the corporate value of the Company, and shallhave extensive knowledge and sufficient experience of business management.
(2) Candidates shall be subject to none of the grounds for disqualification as a director set out in the items of Paragraph 1, Article 331 of
the Companies Act.
(3) Candidates shall fulfill the requirements for an outside director set out in Item 15, Article 2 of the Companies Act.
2. Criteria for the Appointment of Outside Corporate Auditors
The Company appoints outside corporate auditors from among those fulfilling the conditions set out below.
(1) Candidates shall have knowledge in fields such as law, finance accounting, and the like, and shall be able to contribute to theimprovement of corporate value from a neutral and fair standpoint.
(2) Candidates shall be subject to none of the grounds for disqualification as a corporate auditor set out in Item 1, Article 335 of theCompanies Act.
(3) Candidates shall fulfill the requirements for an outside corporate auditor set out in Item 16, Article 2 of the Companies Act.

5

Convocation Notice
Reference Materials for
Shareholders’ Meeting

P2

Business Report for
the 55th Period

P5

List of Candidates for the Election Proposal
Candidate no.

Name

Current position, responsibilities and important concurrent posts

Attendance at Board of
Directors’ meetings

Proposal No.1
100%
(12/12 meetings)

1 Reappointment Tetsuya Nakayama Representative Director and President
Senior Managing Director &2 Reappointment Takashi Nakai
Head of Corporate Management Division100%(12/12 meetings)

3 Reappointment Tadahisa Yabuno

Managing Director & Head of Sales Division
Officer in charge of Trusco Nakayama Thailand
Officer in charge of Trusco Nakayama Indonesia

100%(12/12 meetings)

Kenichi Saito
4 Reappointment
OutsideOutside director
President, ForeSight & Company
Representative Director of the Society for Problem Solving Proficiency

100%(12/12 meetings)

Outside director
Chairman of Hagihara Industries Inc.

92%
(11/12 meetings)

5

Reappointment
OutsideKuniaki Hagihara

Proposal No.2
New appointment

OutsideAkira Takada−

P16

Reference Data

Reference

List of Corporate Auditors
Current position and important concurrent posts

Attendance at Board of
Directors’ meetings

Hitoshi Komatsu

Outside corporate
auditor (full-time)

100%
100%
(12/12 meetings) (13/13 meetings)

Masaki Matsuda

Outside corporate auditor (full-time)

100%
100%
(12/12 meetings) (13/13 meetings)

Hiroho Kamakura

Outside corporate auditor (part-time)
Outside corporate auditor (part-time) of Yushin Precision
Equipment Co., Ltd.
Outside corporate auditor (part-time) of Fujio Food System Co.,
Ltd.

92%
100%
(11/12 meetings) (13/13 meetings)

Name

6
10F Visitor Room, Tokyo Head Office*Scheduled to retire at the closing of the 55th Annual
Shareholders’ Meeting to be held on March 9, 2018

Attendance at Board ofAuditors’ meetings

Convocation Notice

Proposal No.1: Election of Five (5) Directors
The terms of office of all five directors will expire at the closing of the Meeting.
Therefore, we would like to ask our shareholders to appoint five directors. The director candidates are as shown on pages
7 to 11.

Improve customers’ convenience byturning inventory into resources
Inventory becomes resources if it is put to good use, but becomes asource of damage if not. I intend to continue to put my heart and soul
into creating a company that can provide customers with the greatest
convenience in the industry by leveraging the power of resources.
Tetsuya Nakayama, President

Brief biography, status, business in charge ofand important concurrent posts

P2
Reference Materials for
Shareholders’ Meeting

Born December 24, 1958; 59 years old; 37 years with the Company

P5
Business Report for
the 55th Period

1

Tetsuya Nakayama

P16

No. of Company shares held
1,874,700 shares

March1981: Joined the Company
October 1984 : Director
December 1987 : Managing Director
December 1991 : Representative Director and Senior Managing Director
December 1994 : Representative Director and President (present)

Reference Data

Candidate no.

Attendance at Board of Directors’ meetings
100% (12/12 meetings)

Reason for nomination as a director candidate

Mr. Nakayama has been nominated as a director candidate, taking into consideration the result of the OJS on the President, which is a voteby shareholders who attended the 54th Annual Shareholders’ Meeting, as an important benchmark.

Approval rate

No. of attendees

No. of valid votes*

Affirmative votes

99.6%

1,463

1,341

1,335

* The number of valid votes does not include shareholders who did not vote on the day of the Meeting (abstention) or those the content of whose votes could not be determined (invalid).

FY2017 New employee welcoming ceremony

FY2017 Presentation of employment offer

Topping-out ceremony (Recreation facility “Rengetsu-so”
in Kaguraoka, Trusco Kyoto)

Large Meeting (Presentation for institutional investors)

Visit to construction site of Planet Saitama

October 55th Term Management Committee* The candidate has no special interest in the Company.

7

Convocation Notice
Reference Materials for
Shareholders’ Meeting

P2

Candidate no.

Takashi Nakai

2

Born January 16, 1955; 63 years old; 40 years with the Company

Create assets for the future
The business performance for the previous term ended in an unusual
pattern for Trusco Nakayama. I expect the results of the current term
to continue to be severe. This is all due to aggressive investment for
the future. I believe this is a necessary “procedure” for us to reach a
new stage. I intend to prepare the groundwork for the Company’s
future by choosing the difficult path and thinking hard to solve
problems.
Takashi Nakai, Senior Managing Director &Business Report for
the 55th Period

P5

P16

Brief biography, status, business in charge of and importantconcurrent posts

No. of Company shares held

Reference Data

Head of Corporate Management Division

March 1978 : Joined the Company
April 1996
: Tokyo Branch Manager
May 1999: Executive Officer & Head of Corporate Planning Division
June 2004: Director & Head of Logistics Division
June 2007: Managing Director & Head of Product Division
January 2017 : Senior Managing Director & Head of Corporate
Management Division (present)

Attendance at Board of Directors’ meetings

30,300 shares
100% (12/12 meetings)

Reason for nomination as a director candidate
Mr. Nakai has been nominated as a director candidate, taking into consideration the results of the 2017
OJS on Directors as an important benchmark. (Full score = 24 points)(Points)

Rating 1

Rating 2

Rating 3

Rating 4

Rating 5

Rating 6

Total

Sense of management,
foresight

Leadership

Communication ability

Fairness

Originality

Problem solving ability

Takashi Nakai

17.8

3.2

2.8

3.3

3.0

2.6

3.0

Average*

17.5

3.0

3.0

3.0

2.9

2.7

2.9

* The average score of 23 directors, executive officers and general managers

New employee training (Hakone training)

8* The candidate has no special interest in the Company.

FY2017 New employee welcoming ceremony

Shareholders’ visit to distribution sites (Planet Kobe)

Convocation Notice

FriendshipI believe in friendship as I did when I was young. I don’t like cozy
relationships or flattery. True friendship does not require much talking.
You can feel the person’s way of life or sense close communication
between each other’s soul. I am satisfied if people say they want towork with me. Sharing passion with those I am connected to throughwork—I hope to continue seeking such passionate moments this year.
Tadahisa Yabuno, Managing Director &Head of Sales Division

P2
Reference Materials for
Shareholders’ Meeting

Born March 13, 1962; 55 years old; 34 years with the Company

P5
Business Report for
the 55th Period

3Tadahisa Yabuno

P16

No. of Company shares held

Brief biography, status, business in charge of and importantconcurrent posts

27,700 shares

March 1984 : Joined the Company
April 2000
: Kanagawa Branch Manager
October 2003 : Executive Officer & Jonan Branch Manager
June 2007: Director & Head of Corporate Management Division
April 2014
: Managing Director & Head of Corporate Management Division
January 2016 : Officer in charge of Trusco Nakayama Indonesia (present)
January 2017 : Managing Director & Head of Sales Division (present)
Officer in charge of Trusco Nakayama Thailand (present)

Attendance at Board of Directors’ meetings

Reference Data

Candidate no.

100% (12/12 meetings)

Reason for nomination as a director candidate
Mr. Yabuno has been nominated as a director candidate, taking into consideration the
results of the 2017 OJS on Directors as an important benchmark. (Full score = 24 points)
Total(Points)

Rating 1

Rating 2

Rating 3

Rating 4

Rating 5

Sense of management,
foresight

Leadership

Communication ability

Fairness

Originality

Rating 6
Problem soling ability

Tadahisa Yabuno

19.9

3.5

3.7

3.0

3.4

3.1

3.2

Average*

17.5

3.0

3.0

3.0

2.9

2.7

2.9

* The average score of 23 directors, executive officers and general managers

Cross Meeting(joint meeting between the sales division and other divisions)* The candidate has no special interest in the Company.

56th Term Boss Conference(Nationwide Management Conference)

6F Tokyo Head Office (Tokyo Branch)9

Convocation Notice

Candidate no.

4

Kenichi Saito

Born November 15, 1949; 68 years old

P2
Reference Materials for
Shareholders’ Meeting

Maintain the spirit of taking on new challenges
When I look at survey results, I am surprised at how job satisfaction
among Japanese business persons has dropped and productivity has failed
to improve. One of the reasons is probably the passive way of working
and the failure to achieve results. Times change. It is extremely important,regardless of age, to think by oneself, make proposals, and take action inorder to address the changes. An attitude of constantly making efforts insomething new is needed. I intend to make efforts in reviewing mycurrent way of working, developing the necessary initiatives to achieve
my mission and expanding contacts among my peers.

Business Report for
the 55th Period

P5

Reference Data

P16

Outside director candidate
Board Brain (BB)

Kenichi Saito, outside director

Brief biography, status, business in charge of and important concurrent posts
April 1975
: Joined McKinsey & Company
January 1996 : Founded ForeSight & Company
President (present)
March 2016 : Outside director of the Company (present)
October 2017 : Founded the Society for Problem Solving Proficiency
Representative Director of the Society for Problem Solving
Proficiency (present)

No. of Company shares held
1,300 shares

Attendance at Board of Directors’ meetings
100% (12/12 meetings)

Term of office as outside director

Two years as of the closing of the Meeting

Reason for being nominated as an outside director candidate
Mr. Kenichi Saito has experience in a company that conducts business globally and has founded a management consulting firm. He has
been nominated as a candidate for outside director for the fair and objective guidance toward continuous improvement of the Company’s
corporate value, as expected of him, based on his experience and knowledge as a management professional.

FY2017 Result of OJS on Directors
Votes are cast by voters comprising only directors, corporate auditors, executive officers and general managers,
and are for reference only. (Full score = 24 points)(Points)

Rating 1

Rating 2

Rating 3

Rating 4

Rating 5

Rating 6

Total

Sense of management,
foresight

Leadership

Communication ability

Fairness

Originality

Kenichi Saito

18.3

3.1

2.9

3.4

2.7

3.2

3.0

Average*

17.5

3.0

3.0

3.0

2.9

2.7

2.9

Problem soling ability* The average score of 23 directors, executive officers and general managers

Examples of opinions at important meetings, etc.
• You must be careful not to become arrogant since it will hinder your ability to have a constantly objective point of view of your company’s
weaknesses. (At the January Management Committee)• What matters are figures, observations and questions. Align mixed information in an orderly manner by gathering factual data that areinterpreted from figures, as well as new information obtained from asking questions and observing customers and staff members of otherdepartments, and organizing them into groups of similar elements. I think this is the meaning of thinking. I hope you will think whileremaining aware of creating new ideas. (At the May Management Committee)

Notes concerning outside director candidates

10(1) On independence
Mr. Kenichi Saito and Mr. Kuniaki Hagihara are outside director candidates as set forth in Item 7, Paragraph 3, Article 2 of the Ordinance for Enforcementof the Companies Act, and fulfill the Company’s outside director appointment criteria. In addition, we have filed them as independent officers with theTokyo Stock Exchange, as they also fulfill the requirements for independence stipulated by the Tokyo Stock Exchange as well as the independence
criteria for outside officers stipulated by the Company.* If Mr. Saito and Mr. Hagihara’s reappointments are approved, we plan to continue to make them
independent officers.
(2) On the contract for limitation of liability
In order to acquire personnel who would become outside officers and to secure their effectiveness, we have concluded a contract for limitation of liability
with Mr. Saito and Mr. Hagihara, with the amount of limited liability being the minimum total liability amount as prescribed in Paragraph 1, Article 425 of
the Companies Act. If their reappointments are approved, we plan to continue the above contract for limitation of liability.

Convocation Notice

Outside director candidate
Board Brain (BB)

Born August 19, 1953; 64 years old

Two years have passed since I started serving as an outside director.
President Nakayama and the management’s focus on customers andconstant self-innovation toward comprehensive service improvement,
which I have observed through participation in the Management
Committee, etc., are efforts they should be proud of. Trusco Nakayama’s
tireless striving to strengthen competitiveness in Japan’s monozukuri willcontinue. Please look forward to it.
Kuniaki Hagihara, outside
director

Brief biography, status, business in charge of and importantconcurrent posts

No. of Company shares held
2,000 shares

March 1976
: Joined Hagihara Industries Inc.
December 1984 : President of Hagihara Industries Inc.
January 2010 : President & CEO
January 2016 : Chairman (present)
March 2016
: Outside director of the Company (present)

Attendance at Board of Directors’ meetings
92% (11/12 meetings)

P2
Reference Materials for
Shareholders’ Meeting

Trusco Nakayama’s tireless challenge will
never stop

P5
Business Report for
the 55th Period

5

Kuniaki Hagihara

P16

Term of office as outside director

Reference Data

Candidate no.

Two years as of the closing of the Meeting

Reason for being nominated as an outside director candidate
Mr. Kuniaki Hagihara has been nominated as a candidate for outside director for his abundant experience and broad knowledge as amanager in manufacturing, as well as his expected contribution to swift and bold decision-making by the management, in addition tosupervisory functions and advice from a shareholder’s/investor’s perspective toward a sustainable increase in corporate value.

FY2017 Result of OJS on Directors
Votes are cast by voters comprising only directors, corporate auditors, executive officers and general managers,
and are for reference only. (Full score = 24 points)
Total(Points)

Rating 1

Rating 2

Rating 3

Rating 4

Rating 5

Rating 6

Sense of management,
foresight

Leadership

Communication ability

Fairness

Originality

Problem soling ability

Kuniaki Hagihara

18.7

3.3

3.0

3.3

3.3

2.8

3.0

Average*

17.5

3.0

3.0

3.0

2.9

2.7

2.9

* The average score of 23 directors, executive officers and general managers

Examples of opinions at important meetings, etc.
• We never know when such disasters will happen. We must re-inspect the Company from the two perspectives of fire and industrial
accidents, and think of risk management. I believe that how we check this case and examine it as a case study will make a huge
difference. (At the February Management Committee)• How about creating a detailed indicator of workload per person and hour as reference material to be used for managing personnel. In the
manufacturing industry, we check the trend of workability, which is utilized in management, by creating data of production output andworkload per person by the hour. (At the December Management Committee)(3) On special interest in the Company
We have had a long relationship with Mr. Saito since his participation in Trusco Nakayama’s CI competition (corporate innovation, including company
name change) in 1990, when he was deputy manager of McKinsey & Company’s Osaka branch. Other occasions include his lecture on marketing at our
Nationwide Boss Conference in 2008. There is no business or other relationship between the Company and the companies that Mr. Saito concurrently
serves; therefore, they have no special interest in the Company.
We have a business relationship of approximately 20 years with Hagihara Industries Inc., of which Mr. Hagihara is a representative. Hagihara Industries’
sheet products such as blue sheets are highly valued as a subsidiary material at factories and construction work sites. Our procurement from Hagihara
Industries accounts for less than 1% of our total procurement by amount (less than 5% of the consolidated net sales of said company), and there is no
special interest that will hinder or be a problem in Mr. Hagihara’s execution of his duties as an outside director.
* The independence criteria for outside officers stipulated by the Company are described on page 12.

11

Convocation Notice

Proposal No.2: Election of One (1) Corporate Auditor
Corporate Auditor Mr. Hitoshi Komatsu will resign at the closing of the Meeting.
Therefore, we would like to ask our shareholders to appoint one corporate auditor. The consent of the Board of Auditors has beenobtained for this Proposal. The corporate auditor candidate is as follows.
Candidate

Akira Takada

Reference Materials for
Shareholders’ Meeting

P2

Business Report for
the 55th Period

P5

Reference Data

P16

New
appointment

Outside corporate
auditor candidate

Born March 9, 1958; 60 years old

Contribute to continuous development froman independent standpoint
Discussions have been held in recent years on the importance ofcorporate governance of listed companies. I intend to contribute to thecontinuous development of Trusco Nakayama Corporation by playing
a part in its corporate governance from an independent standpoint andleveraging my experience over the past 30 years in providing advisory
services to listed companies in capital markets that are undergoingchanges.
Akira Takada

Brief biography, status and important concurrent posts
April 1981: Joined Nomura Securities Co., Ltd.
June 2009: Managing Director of IB Business Development Dept.
April 2012: Director of Nomura Investor Relations Co., Ltd.
April 2015: Advisor of Nomura Investor Relations Co., Ltd.

No. of Company shares held
0 shares

Reason for being nominated as an outside corporate auditor candidate
Mr. Akira Takada has abundant experience and a high level of expertise through his long involvement in building relationships between
shareholders and companies and his working experience in a securities company and an IR consulting firm. He has been nominated as a
candidate for outside corporate auditor for his expected contribution to securing fairness and adequacy from a neutral and fair standpoint
toward the Company’s sustainable improvement in corporate value.

Notes concerning the outside corporate auditor candidate(1) On his independence
Mr. Akira Takada is an outside corporate auditor candidate as set forth in Item 8, Paragraph 3, Article 2 of the Ordinance for Enforcement of theCompanies Act, and fulfills the Company’s outside corporate auditor appointment criteria. In addition, we plan to file him as an independent officer
with the Tokyo Stock Exchange if his appointment is approved, as he also fulfills the requirements for independence stipulated by the Tokyo Stock
Exchange as well as the independence criteria for outside officers stipulated by the Company.
(2) On special interest in the Company
Mr. Akira Takada worked at Nomura Securities Co., Ltd. and Nomura Investor Relations Co., Ltd., both of which are the Company’s business
partners, but retired from the former five years and 11 months ago, and from the latter one month ago. The amount of business with the former andthe latter is small, and there is no special interest that will hinder or be a problem in Mr. Akira Takada’s execution of his duties as an outside
corporate auditor.

Criteria for the independence of outside officers

12(1) A major shareholder of the Company (holding 10% or more of the total voting rights in the Company at the end of the most recent fiscal year) or anindividual who serves as a key employee such as a director, corporate auditor, executive officer, manager, or any other post higher than generalmanager (hereinafter referred to as “Director, etc.”) in an entity that is a major shareholder of the Company(2) A director, etc. of a corporation or the like of which the Company is a major business partner (with annual business exceeding 5% of consolidated
net sales)(3) A director, etc. of a corporation or the like that is a major business partner of the Company (with annual business exceeding 5% of consolidated net
sales)(4) A director, etc. of a corporation or the like that is a major lender to the Company (the Company borrows more than 2% of its total assets from thelender)(5) An accounting auditor of the Company or its subsidiary, or an individual who is responsible for auditing the Company or its subsidiary as an
employee at the accounting auditor(6) A relative within the third degree of kinship or closer of an individual described in any of the items numbered 1 to 5 above(7) A relative within the third degree of kinship or closer of an officer, executive officer, or key employee in a post higher than general manager of theCompany or its subsidiary(8) An individual to whom any of the items numbered 1 to 7 above has applied within the last three years

Masaki Matsuda

Convocation Notice

Introduction of Two (2) Corporate Auditors

Outside corporate auditor (full-time)

Since its establishment, the Company has continued its progress as
Trusco with a strong will and attitude to continue to serve as a “trusted
company.” I intend to continue activities that will contribute to theCompany’s continuous development without excessively narrowing
the roles and responsibilities of a corporate auditor, so that theCompany can further grow as a trusted company and exceed the
expectations of everybody.
Masaki Matsuda, outside corporate auditor

No. of Company shares held

Brief biography, status and important concurrent posts

P5

P16

13,500 shares

April 1978 : Joined the Kyowa Bank, Ltd. (currently Resona Bank, Ltd.)March 2003 : Chief Credit Officer of the Osaka No. 3 Loan Department,
Resona Bank, Ltd.
June 2007 : Full-time corporate auditor of the Company (present)

Reference Materials for
Shareholders’ Meeting“Above”

P2

Business Report for
the 55th Period

Born March 30, 1956; 61 years old

Attendance at Board of Directors’ meetings

Reference Data

Reference Items

100% (12/12 meetings)

Attendance at Board of Auditors’ meetings
100% (13/13 meetings)

Term of office of the outside corporate auditor

Ten years nine months as of the time of the closing of the
Meeting

Rating of outside corporate auditors

The result of the 2017 OJS on corporate auditors is an important benchmark. (Full score=24 points)(Points)

Rating 1

Rating 2

Rating 3

Rating 4

Rating 5

Rating 6

Total

Sense ofmanagement,
foresight

Fairness, sincerity

Objectivity, neutrality,common sense,
knowledge

Compliance

Communication

Pointing out problems,
proposing
improvements

Masaki Matsuda

17.9

3.0

3.0

2.9

3.2

3.1

2.7

Average*

17.8

3.0

3.0

3.0

3.1

3.0

2.8

* The average score of three corporate auditors

Management Committee

54th Annual Shareholders’ Meeting

13
56th Term Boss Conference(Nationwide Management Conference)Convocation Notice

Hiroho Kamakura

Outside corporate auditor (part-time)

P2
Reference Materials for
Shareholders’ Meeting

Born January 27, 1947; 71 years old

To secure sound growth
As an independent institution that has been delegated by theshareholders, the duty of an auditor is to carry out auditing activities
for the sound growth of the company. I intend to actively contributeto the continuous growth of the Company as an outside corporate
auditor with expertise in finance and accounting.

Business Report for
the 55th Period

P5

Hiroho Kamakura, outside corporate auditor

Brief biography, status and important concurrent posts

Reference Data

No. of Company shares held

P16

November 1971 : Joined Tohmatsu Aoki & Co.
(currently Deloitte Touche Tohmatsu LLC)
May 1973: Registered as a certified public accountant
July 2012: Corporate auditor of the Company (part-time) (present)
Outside corporate auditor (part-time) of Yushin Precision
Equipment Co., Ltd. (present)
March 2013
: Outside corporate auditor (part-time) of Fujio Food System
Co., Ltd. (present)

2,500 shares

Attendance at Board of Directors’ meetings
92% (11/12 meetings)

Attendance at Board of Auditors’ meetings
100% (13/13 meetings)

Term of office of the outside corporate auditor
Five years eight months as of the time of the closing of
the Meeting

Rating of outside corporate auditors

Votes are cast by voters comprising only directors, corporate auditors, executive officers and generalmanagers, and are for reference only. (Full score = 24 points)(Points)

Rating 1

Rating 2

Rating 3

Rating 4

Rating 5

Rating 6

Total

Sense ofmanagement,
foresight

Fairness, sincerity

Objectivity, neutrality,common sense,
knowledge

Compliance

Communication

Pointing out problems,
proposing
improvements

Hiroho Kamakura

17.0

3.0

2.8

3.1

2.8

2.8

2.7

Average*

17.8

3.0

3.0

3.0

3.1

3.0

2.8

* The average score of three corporate auditors

Examples of opinions at important meetings, etc.
• Huge investment is required to carry out this plan. It is difficult to make a judgment since the relationship between sales and investment isunclear. (May Management Committee)• Financing of this scale requires the setting of priorities in investments after measuring the running cash flows and the necessary funds forcapital expenditure in the long-term management plan. When considering an investment, it is necessary to think of how to repay it.
Trusco Nakayama has made investments with its cash flows in the past, but not anymore. There is no guarantee that sales will continue
to rise steadily. It is necessary to set priorities based on the company’s actual state in terms of funds, and the overall image of the funds
required. (December Management Committee)

Notes concerning outside corporate auditors

14(1) There are no special interests between Mr. Masaki Matsuda, Mr. Hiroho Kamakura and the Company.
(2) Mr. Masaki Matsuda and Mr. Hiroho Kamakura are outside corporate auditors as set forth in Item 16, Article 2 of the Companies
Act, and have been filed as independent officers with the Tokyo Stock Exchange.
(3) In order to acquire personnel who would become outside officers and to secure their effectiveness, the Company and Mr. Hiroho
Kamakura have concluded a contract for limitation of liability, with the amount of limited liability being the minimum total liability
amount as prescribed in Paragraph 1, Article 425 of the Companies Act.

Convocation Notice

Trusco Nakayama as Seen from Outside Directors
From Mr. Saito, Outside Director

While it may seem easy for all members of a company to make great
efforts in continuing to build a system to create and immediately deliver
better products that customers require, including private brand (PB) products,
there are few companies that can actually do that. This is how Trusco
Nakayama continues to generate strong results. Of course, it is natural for
the Company to aim for a higher stage instead of being content with thecurrent state. I hope that the “thinking skills” of all employees will bestrengthened and led to new proposals.

Tokyo Head Office meeting room

From Mr. Hagihara, Outside Director

Reference Materials for
Shareholders’ Meeting

P2

P5
Business Report for
the 55th Period

Since I have been appointed as an outside director, I have participated in
the Company’s monthly Management Committee and annual company-wide
meetings of Bosses and top management. Although I strive to give objective
opinions as an outside director, the laudable corporate governance byPresident Nakayama, the directors and the executive officers to take anauthentic and righteous path and their attitude of disclosure to stakeholders
are of such a high standard that my opinions are almost immaterial.
I intend to continue to monitor the Company’s corporate governance froman objective point of view to the best of my meager abilities so that Trusco
Nakayama can fulfill its social responsibilities.

Reference Data

P16

Tokyo Head Office meeting room

Comment by Retiring Corporate Auditor
Hitoshi Komatsu
Born September 20, 1952; 65 years old

I am due to retire as a corporate auditor at the closing of the 55th
Annual Shareholders’ Meeting.
I would like to offer my sincerest gratitude to our shareholders
for their guidance and encouragement during my years in office.
I will be grateful for our shareholders’ continued support for
Trusco Nakayama.

Brief biography, status and important concurrent posts
April 1975
: Joined the Fuji Bank, Limited (currently Mizuho Bank, Ltd.)
October 2002 : Chief Auditor of the Internal Audit Division, Mizuho Bank, Ltd.
June 2003: Full-time corporate auditor of the Company (present)

No. of Company shares held
14,300 shares

15

Business Report for the 55th Period(Attachment to the 55th Annual Shareholders’ Meeting
Convocation Notice)(January 1, 2017 to December 31, 2017)

Convocation Notice

Note: Figures are rounded down to the nearest unit.

Reference Materials for
Shareholders’ Meeting

P2

Business Report for
the 55th Period

P5

Reference Data

P16

1. Company’s Current Status (1. Business Development and Results)(1) Business Development and Results
Results for the 55th period(Year ended December 31, 2017)

Sales

Monthly sales

Sales(100 million yen)

Year-on-yearchange (%)

195,096 million yen

Year on year

+10.2%

Gross profit margin 21.2 %Year on year

SG&A
expenses ratio
Year on year

-0.5 points

13.9 %+0.2 points

Operatingincome 14,276 million yen
Year on year

+0.8%

Ordinary
income 14,581 million yen
Year on year

+1.0%

January February March

April

May

June

July

August September October November December★18 days

20 days

20 days

22 days

20 days

19 days

20 days

22 days

21 days

20 days

20 days★ No. of operating days in the 55th period

Average sales per day (million yen)
55th period (the fiscal
year under review)

Net
income 10,173 million yen
Year on year

20 days+2.1%

Net income
per share

154.28 yen

Increase (*1)

+3.20 yen

Dividend
per share (*2)

39.00 yen

54th period

Dividend per share for the 54th period (Yearended December 31, 2016)
76.00 yen

*1. The increase compared to net income per shareof 151.08 yen that was computed by assumingthat a stock split was carried out at the beginningof the previous fiscal year
*2. The Company carried out a stock split of two
common shares to one as of January 1, 2017.

January February March

April

May

June

July

August September October November December★18 days☆+7.0%

20 days+7.7%

20 days+8.6%

22 days+10.1%

20 days+11.7%

19 days+11.0%

20 days+5.0%

22 days+7.5%

20 days+10.6%

21 days+8.9%

20 days+11.9%

20 days+6.4%★ No. of operating days in the 55th period ✩Year-on-year change

During the fiscal year under review (January 1, 2017–December 31, 2017), the Japanese economy saw steady improvement in
employment and income as well as in corporate earnings due to mild growth in the global economy, despite heightened uncertainties in thepolitical developments of foreign countries and a rise in geopolitical risk.
In the field of monozukuri, or manufacturing, in Japan, the Industrial Production Index was robust for items such as electronic components
and devices mainly for export-related automobile and IT industries, which led companies to actively increase their capital investment andproduction activities on the back of a further rise in demand for labor-saving due to labor shortage.
Under these circumstances, Trusco Nakayama further reinforced its capital investment in the IT field as well as in nationwide branches
and distribution centers with the aim of increasing the number of inventory items to 500,000 for each area, in order to accurately meet thefrequent needs of monozukuri sites for a wide variety of items in small lots. It also continued aggressive re-organization, made companywide efforts to strategically expand its inventory, and strengthened its distribution network to improve customers’ convenience.

16

Target markets(users) Factory RouteMachinery tool dealers, welding material dealers, conduction
machine dealers, tubing material dealers, electronic material
dealers, packaging material dealers, etc.

Manufacturers,
construction-related
businesses, etc.

 e-Business RouteOnline shopping firms, etc.

Manufacturers, general
consumers, etc.

 Home Center RouteHome centers, electronics retailstores, etc.

Outdoor work-related
businesses, general
consumers, etc.

 Overseas

Overseas dealers, overseas
subsidiaries, etc.

Overseas manufacturers,
etc.
Sales

 Factory route (Constituting 80.7% of total sales)(100 million yen)

Ordinary
income54th period

Sales e-Business route (Constituting 12.5% of total sales)
Sales: 24,377 million yen, +29.1% year on year

55th period

56th period
forecast

Ordinary income

P16

Reference Data

(100 million yen)

We established a unique distribution service by accelerating coordination between
our product databases, encompassing 1.66 million items, and customers’ systems toreinforce our distribution network by customer. We also carried out highly specialized
sales activities by continuing to increase the frequency of visits to users and offering
tours of distribution centers to users and holding electronic purchase seminars.

 Home Center route (Constituting 6.3% of total sales)
Sales: 12,398 million yen, +3.2% year on year

P2

P5

Sales: 157,405 million yen, +8.1% year on year
We endeavored to improve customers’ convenience by continuing to enhanceinventory at distribution centers as well as at 31 nationwide branches that carryinventory based on research of the market of each branch with the aim of increasing
the number of the branches’ inventory items to 30,000. We also reinforced sales
activities mainly in the sale of products of top manufacturers by increasing thefrequency of visits to customers and notifying the expansion of our item lineup.

Convocation Notice

Sales agents(5,333)Business Report for
the 55th Period

Manufacturers

Suppliers(2,340)

Reference Materials for
Shareholders’ Meeting

Business Model

56th period
forecast

54th period

55th period

Sales

Ordinary income(100 million yen)

We strove to stimulate demand by proposing the improvement of sales floors andreinforcing the development of store brand products mainly at professional shops
targeting users at construction sites, etc. In addition, continuous new openings ofprofessional shops contributed to the expansion of sales.
54th period

Sales Overseas (constituting 0.5% of total sales)
Sales: 915 million yen, +59.5% year on year

55th period

56th period
forecast

Ordinary income(100 million yen)

The Company treats sales of the Overseas Department, including sales tosubsidiaries Trusco Nakayama Thailand and Trusco Nakayama Indonesia, as“Overseas.”

54th period

55th period

56th period
forecast*The actual performance of the previous fiscal year, which is the target of comparison, has been adjusted due to the transfer of segments (marketing routes).

Sales and composition ratio by product category (Figures in brackets indicate year-on-year changes; pie-charts indicate the percentage of total sales.)Cutting tools

Production processing tools

Construction goods

Work supply

Hand tools

7,220 million yen (+9.3%)

16,231 million yen (+11.3%)

21,408 million yen (+9.2%)

35,867 million yen (+7.9%)

33,227 million yen (+9.6%)

Environmental safety equipment Distribution and storage

Research management
equipment

Office furniture andequipment

Other29,827 million yen (+12.6%)

equipment

23,952 million yen (+11.0%)

8,589 million yen (+12.6%)

17,098 million yen (+11.2%)

1,671 million yen (+3.7%)

17

Convocation Notice

Progress and plan of the Company’s important indices
Important indicesYear ended December 2017
Fiscal year under review

1,429,400 items(+69,000)

1,662,400 items(+233,000)

2,200,000 items(+537,600)

45,600 items(+4,100)

50,200 items(+4,600)

55,000 items(+4,800)

Total number of suppliers

2,222 firms (+95)

2,340 firms (+118)

2,480 firms (+140)

No. of domestic suppliers

2,109 firms (+83)

2,185 firms (+76)

2,295 firms (+110)

No. of overseas suppliers

113 firms (+12)

155 firms (+42)

185 firms (+30)

No. of inventory items

298,900 items(+34,400)

336,800 items(+37,900)

350,000 items(+13,200)

88.8% (+0.6)

89.5% (+0.7)

89.5% (0)No. of customer firms

5,348 firms (-67)

5,333 firms (-15)

5,310 firms (-23)

No. of customer accounts

26,327 accounts(+861)

27,140 accounts(+813)

27,800 accounts(+660)

No. of companies connected to Orange
Commerce

272 firms (+42)

293 firms (+21)

320 firms (+27)

776 factories (+120)

888 factories (+112)

1,000 factories (+112)

82.0% (+2.1)

82.0% (0)

82.0% (0)

39.3

38.6

39.0

7.04 million yen(+0.26 million yen)

7.43 million yen(+0.39 million yen)

7.26 million yen(-0.17 million yen)

2,284 (+148)

2,563 (+279)

2,810 (+247)

Circulation

249,500 copies

241,244 copies

250,000 copies

No. of pages

14,100 pages(+1,956)

17,352 pages(+3,252)

20,352 pages(+3,000)

1,460 firms (+72)

1,572 firms (+112)

1,692 firms (+120)

312,000 items(+34,000)

359,800 items(+47,800)

402,000 items(+42,200)

No. of items handled

Product

Reference Materials for
Shareholders’ Meeting

Distribution
IT

Sales

Business Report for
the 55th Period
Reference Data

P16

No. of private brand (PB) product items

Inventory hit rate
(Percentage of immediate delivery shipped frominventory out of total order intake)No. of factories connected to Orange
Commerce
Online order intake ratio(Percentage of orders processed in the systemout of total order intake)

Personnel

Average age (employees)
Average annual income (employees)*Excl. executive officers

Trusco Orange Book

Total no. of employees (incl. part-time staff)

18

Year ending December
2018
Plan

Year ended December 2016

P2

P5

56th Period

55th Period

54th Period

No. of manufacturers listed
No. of products listed

Notes: 1. Figures in brackets indicate year-on-year changes.
2. Average annual income includes financial bonds.
3. The decrease in average annual income from the 55th period to the 56th period is due to the change in the amount of performancebased bonus paid.

Convocation Notice

1. Company’s Current Status (2. Assets and Profit Situation)(2) Assets and Profit Situation
Performance indicators
Category(million yen)

46th Period

47th Period

48th Period

49th Period

50th Period

51st Period

Year ended
Mar. 2009

Year ended
Mar. 2010

Year ended
Mar. 2011

Year ended
Mar. 2012

Year ended
Mar. 2013

Year ended
Mar. 2014

52nd Period

Year ended
Dec. 2014(nine-month results)

53rd Period

54rd Period

Year ended
Dec. 2015

Year ended
Dec. 2016

55th Period

Year ended Dec. 2017
(Fiscal year underreview)

Sales

P2

SG&A
OperatingincomeOrdinary
incomeNet income
Net income
per share

52.19 yen24.38 yen

43.57 yen

59.64 yen

73.05 yen

90.28 yen

83.01 yen

124.98 yen

151.08 yen

154.28 yen

Reference Materials for
Shareholders’ Meeting

Gross profit
marginP5

Return on
equity (ROE)
Total assets
Net assets
per share

1,097.59 yen

1,115.07 yen

1,147.99 yen

1,190.73 yen

1,247.49 yen

1,319.67 yen

1,378.52 yen

1,482.65 yen

1,604.89 yen

1,723.87 yen

Return on
assets (ROA)

Notes: 1. Net income per share is based on the total number of shares outstanding during the period minus the average number of treasury shares during the period.
2. Net assets per share are based on the number of outstanding shares at the end of period minus the number of treasury shares.
3. The Company carried out a stock split of two common shares to one as of January 1, 2017. Therefore, the “Net income per share” and “Net assets per share”
are computed based on the assumption that the stock split took place at the beginning of the 46th period.

Trend of cash flows
PeriodCategory

Business Report for
the 55th Period

Net assets(million yen)
46th Period

47th Period

48th Period

49th Period

50th Period

51st Period

Year ended
Mar. 2009

Year ended
Mar. 2010

Year ended
Mar. 2011

Year ended
Mar. 2012

Year ended
Mar. 2013

Year ended
Mar. 2014

52nd Period

53rd Period

Year ended
Dec. 2014(nine-month results)

Year ended
Dec. 2015

55th Period
54rd Period Year
ended Dec. 2017
Year ended
Dec. 2016(Fiscal year underreview)

Cash flows from operating activities
Cash flows from investing activities−

Cash flows from financing activities

−

−

−
−

−
−

−

−

−

−

−

−

−

−

−

−

−

−

P16

Reference Data

PeriodBalance of cash and cash
equivalents at end of period

Sales, inventory value and share prices
Inventory value(million yen)Sales(million yen)Sales(million yen)

Share price (yen)Inventory value(million yen)
Share price
(yen)

2009

2010

2011

2012

2013

2014 Year
ended Mar.

2014
Year ended Dec.
(nine-month results)

2015

2016

2017
(Fiscal year
under review)* The Company carried out a stock split of two common shares to one as of January 1, 2017.
* Past share prices are based on the assumption that the stock split took place at the beginning of FY2009.

19

Convocation Notice
Reference Materials for
Shareholders’ Meeting

P2

1. Company’s Current Status (3. Capital Investment)(3) Major capital investments during the fiscal year under review
Oita Branch(completed in February)

Fuji Branch(completed in April) Oita City, Oita
 Site area : 770 tsubo(approx. 2,545 m2)
 Floor area: 736 tsubo(approx. 2,433 m2)
 Total investment:
740 million yen
 No. of inventory items: 28,543
 Inventory value: 170 million yen Fuji City, Shizuoka
 Site area : 983 tsubo(approx. 3,249 m2)
 Floor area: 553 tsubo(approx. 1,828 m2)
 Total investment: 710 million yen
 No. of inventory items: 10,046
 Inventory value: 80 million yen

Planet Osaka large distribution facility (introduced in June)
A large distribution facility was introduced in Planet Osaka to address
diverse distribution needs and achieve labor-saving and improved
efficiency in shipping operations. Shipping capacity has doubled.
Total investment: 700 million yen

Business Report for
the 55th Period

P5

Reference Data

P16

Planet East Kanto automated warehouse building expansion,
automated bucket warehouse
The automated warehouse building was extended and an automatedpallet warehouse was introduced in July to stock more products. An
automated bucket warehouse was introduced in December. These
measures enabled the stocking of 350,000 items.
Total investment: 800 million yen
Automated pallet warehouse (launched in July)
No. of pallets held: 1,556

Shuttle & server (Binding and temporarystorage of products)
Sorts products by transportation type
and temporarily stores them; they arethen sent to the packaging station at thetime of inspection. Sorting operations
that were carried out on each floor andlabor for sending to the shipment area
will be reduced.

I-Pack(Automatic packaging system)
Encloses delivery statements, packs,
issues and pastes tags automatically bysimply putting products in dedicatedboxes and placing them on a conveyor
belt. Enables fully automated packaging
of 360 parcels per hour.

Automated bucket warehouse (launched in
December)No. of inventory items: 80,000

Reference Major capital investments continued during the 56th period
Planet Saitama (newly established)
This will be our largest distribution center and core base. With four stories above ground, the facility features a quake-proof structurethat addresses business continuity plans (BCP). We plan to introduce cutting-edge distribution equipment.
In addition to installing a day nursery and employee canteen, nursery teachers and cooks will be hired directly.
Satte City, Saitama
Site area: 10,654 tsubo (approx. 35,219 m2)
Floor area: 12,904 tsubo (approx. 42,657 m2)
Planned total investment: 15,240 million yen
Scheduled launch: October 2018
Planned no. of inventory items: 500,000

Planet Saitama

Planet Tohoku (extension)
Apart from the extension, a distribution system that makes fulluse of the building will be introduced to improve inventory
capacity and shipping capabilities.
Sendai City, Miyagi
Floor area: To be extended from
3,251 tsubo(approx. 10,747m2) to
7,810 tsubo(approx. 25,818 m2)
Planned total investment:
5,900 million yen
Scheduled launch: 2019
Planned no. of
inventory items: 500,000

Planet Tohoku Image of completed extension

20

Planet South Kanto (reconstruction)
Complying with new quake-resistance standards, the safety ofthe building will be improved and stable supply of products during
an emergency will be achieved. Introduction of a distribution
system will improve the inventory capacity.
Isehara City, Kanagawa
Site area: 3,660 tsubo(approx. 12,099 m2)
Floor area: 7,886 tsubo(approx. 26,069 m2)
Planned total investment:
11,900 million yen
Scheduled launch: May 2020
Planned no. of
inventory items: 500,000
Planet South Kanto Image of completed buildingConvocation NoticeDistribution facility
Introduction of an automated warehouse-type picking system, AUTO STORE

Planet North Kanto automated warehouse building extension
 Planned total investment: 1,840 million yen

P2Reference Materials for
Shareholders’ Meeting

We will introduce AUTO STORE in Planet North Kanto (Isezaki City, Gunma) toraise the inventory capacity per warehouse area by storing products efficiently in alimited amount of space. It is a cutting-edge automated warehouse-type picking
system, whereby containers are densely stored by robots. It enables high-density
storage of approx. 2.6 times the capacity of ordinary shelves, holding 77,000
mainly small items. (Scheduled for launch in March 2018)
An extension will also be carried out to further improve inventory capacity,where an automated pallet warehouse will be introduced. The floor area will
increase from 4,701 tsubo (approx. 15,540 m2) to 7,186 tsubo (approx. 23,755 m2).
(Scheduled for completion in May 2019)

AUTO STORE

IBM Watson Explorer
We will introduce a product inquiry system that uses AI in spring 2018, which will be extended on a continuous basis. The aim is to makethe most of Trusco Nakayama’s product information and improve customer satisfaction by responding to customers’ inquiries about
products.
By establishing the system based on IBM Japan’s IBM Watson Explorer, the required product can be extracted immediately from thehuge product database in response to inquiries by natural language (spoken language). The system will be released in stages andincorporated in our EC site Trusco Orange Book.Com by 2019 for use by our customers.

Customer

Trusco employee
Product inquiry(spoken language)

Product inquiry(spoken language)

P16

Reference Data

 Initial construction cost: 150 million yen (maintenance costs to be incurred separately) Future plans: Spring 2018 Internal release (for 340,000 products handled)
Autumn 2018 Internal brush-up (extended to 1.5 million products handled)
Within 2019 External release (launched as a system for use by customers)

Business Report for
the 55th Period

P5

Artificial intelligence (AI)

Product inquiry system

IBM Watson Explorer

Product proposal

Product proposal• Direct inquiry in spoken
language• Immediate search of vastdata

After 2019 Continuous expansion
Product inquiry (spoken language)

Incorporation in EC site

Product proposal

Expansion of AI functions

1. Company’s Current Status (4. Financing)(4) Financing
Further enhancement of functions through aggressive capital investment
With the aim of enhancing functions to improve customers’ convenience, we are making investments for constructing a large distribution
center in Satte City, Saitama and automating distribution, in addition to the aforementioned capital investments.
The environment surrounding distribution and information systems are evolving faster than was forecast. In order to meet customers’
requests with more swift and accurate distribution functions, we financed 10 billion yen through bank borrowings in August 2017.

21

Convocation Notice
Reference Materials for
Shareholders’ Meeting

P2(5) Issues Facing the Company
Forecast for the 56th period (year ending December 2018) and subsequent years
The business environment of the Company in the next fiscal year is expected to see an increase in production activities in thesemiconductor and automobile-related sectors, as well as continued improvement in employment, income and corporate earnings. We
believe that companies will further reinforce capital investment for labor-saving. We intend to continue establishing a system that canaddress various market needs.
With regard to the business performance of the next fiscal year, we forecast sales of 210 billion yen, operating income of 13.3 billion yen,ordinary income of 13.55 billion yen, and net income of 9.05 billion yen due to an increase in depreciation owing to aggressive capital
investment and a rise in freightage and packing expenses following greater sales, despite a positive impact from the market environment.
Medium-term management plan
55th Period

56th Period

57th Period

58th Period

Year ended Dec. 2017

Year ending Dec. 2018Year ending Dec. 2019Year ending Dec. 2020

Fiscal year under review

Forecast

Forecast

Forecast

195,096 million yen

Sales(+10.2%)210.0 billion yen(+7.6%)

226.0 billion yen

243.0 billion yen(+7.6%)(+7.5%)

21.2%

21.1%

21.1%

21.1%

SG&A

27,114 million yen

31.0 billion yen

33.5 billion yen

35.9 billion yen

Ordinary income

14,276 million yen

13.3 billion yen

14.2 billion yen

15.4 billion yen

P16

Net income

14,581 million yen

13,550 million yen

14,450 million yen

15,650 million yen

Reference Data

Business Report for
the 55th Period

P5

1. Company’s Current Status (5. Issues Facing the Company)

Net income per share

10,173 million yen

9,050 million yen

9.8 billion yen

10.6 billion yen

154.28 yen

137.23 yen

148.61 yen(+11.38 yen)160.74 yen(+12.13 yen)

39.00 yen34.50 yen(-4.50 yen)

37.50 yen

40.50 yen

Gross profit margin(+12.0%)(+0.8%)(+1.0%)(+2.1%)

Divided per share(+3.20 yen)*1

Annual dividends(-)*2(+14.3%)(−6.8%)(−7.1%)(−11.0%)(-17.05 yen)(+8.1%)(+7.2%)(+6.8%)(+6.6%)(+8.5%)(+8.3%)(+3 yen)(+8.3%)(+8.2%)(+3 yen)*1. Comparison with net income per share calculated by assuming that the stock split was carried out at the beginning of the previous fiscal year (151.08 yen).
*2. The Company carried out a stock split of two common shares to one as of January 1, 2017.

Strategies for sustainable development
Product Strategy
We will improve our product supply ability by further expanding our industry’s largest product lineup(approx. 330,000 items), and increasing overseas brand products.
Logistics Strategy
Under the belief that the one who controls logistics controls the sales channels, we will enhance ourlogistics facilities toward our plan to hold half a million inventory items to further accelerate delivery.
Sales Strategy
We will grow together with our customers by expanding our product lineup and inventory items toachieve an increase in customers’ business opportunities.
IT Strategy
We will continue to make investments to reinforce our IT capability, in order to establish ourselves as
the company that offers the greatest convenience in the industry.
Human Resources Strategy
We will strive to become a company that offers job satisfaction based on the idea that companies
have the obligation to pay salaries that allow employees to set up house, save money, and pay taxes.

22

Takashi Nakai
Senior Managing Director & Head of the Corporate Management Division

Capital investment for the new stage

It is put to good use by “people.”
Key points

 Necessary procedures toward medium- tolong-term company growth Verify return on investment
 Expectation of human-led improvements

Measures1. Fostering of employees

Excerpts from Trusco Stage Trial (our original education curriculum)First stage(Acquisition of essential skills)
Second stage(Independence as a leader)
Third stage(Learning managerial
perspectives) Improvement of skills
 Improvement of motivation* “No education is better than self-awakening!”→Conduct training that promotes self- awakening and realization

Name of training

Targets

New employee training

All first-year employees

Skill-up Course
Leadership Course

All fourth-year employees
All sixth-year employees

Boss Challenge Course

Volunteers in their ninth year or above

New Boss Training
Boss Management Course

Newly appointed bosses
All bosses (once every two years)

2. Improved efficiency of work

3. Hiring of personnel

 Introduction of distribution equipment
AUTO STORE, etc.
 Introduction of systems
IBM Watson Explorer, etc.
 Review of work

Reinforcement of new graduate recruitment

P5

118 persons
35 persons

No. of newly graduated employees (persons)
University

High school

2013

2014

83 persons

2015

P2

P16

Scheduled to join company in April 2018: 118 in total (83university graduates, 35 high school graduates)

AUTO STORE
An automated warehouse-type
picking system where robots deposit
and withdraw containers

Convocation Notice

There will be no future for
the Company without thegrowth of each employee!
I intend to make this year ayear to improve myself,
excel in reason, andendeavor in many things.

Business Report for
the 55th Period

Leading investment inpersonnel to improved
business performance

Reference Materials for
Shareholders’ Meeting

This year’s keyword: “Kenma”

2016

2017

Reference Data

[Strategies for the 56th period (year ending December 2018)]

2018(Scheduled to join)

List of awards for Trusco Nakayama’s corporate value (FY2017) 2017 Certified Health and Productivity Management Organization Recognition Program (White 500)
Trusco Nakayama’s development of an organization to improve, maintain and enhance employees’ health and comprehensive
activities from the implementation of the programs and measures of evaluation and improvement received recognition.
 2017 Japan BtoB Advertising Award (Bronze)
The easily understood and enjoyable contents of Trusco PRO TOOL Magazine Ichioshi 2017 received recognition.
 22nd Best IR Award for Encouragement
Our open and earnest attitude toward IR and information disclosure received high recognition.
 2017 Good Career Company Award for Innovation
Our employees’ voluntary choice of workstyles, periodic job rotation and trainings that lead to business activity reforms received
recognition.

2017
Japan BtoB
Advertising Award
Certificate of the 2017 Certified Health andProductivity Management Organization
Recognition Program (White 500)

22nd Best IR Award for Encouragement

2017 Good Career Company Award

23

Convocation Notice[Strategies for the 56th period (year ending December 2018)]

Reference Materials for
Shareholders’ Meeting
Business Report for
the 55th Period
Reference Data

P16“Sei” is truth, honesty andsincerity.
With “sei” and “gi” close
to my heart, I hope tospend this year by beingtrue to myself.

Aim to become a major company
in PRO TOOLs by All Trusco
Tadahisa Yabuno

Managing Director & Head of the Sales Division & Officer incharge of the Product Division

P2

P5

This year’s keyword: “Seigi”

1. Maintain raison d’etre of wholesaler by All Trusco(1) Improve MRO (subsidiary materials for plants)
cover ratio(2) Improve inventory and capacity of the distribution
system(3) Reinforce sales abilities that utilize systems
Sales activities that Trusco Nakayama aims forare to influence sales agents’ decision-making
and lead to results. It is also to understand eachother well and increase the use of the system.** Refers to the programs of 330,000 inventory
items, speedy distribution, cutting-edge
information system, Trusco Orange Book.Com,and the 17,352-page Trusco Orange Book.

55th period Number of items and sales performance by broad category (excerpt)
Sales amount(100 million yen)

No. of inventory items

Average sales line

 A large number of items (inventory) does not necessarily
lead to sales.
 There are broad categories to increase inventory items.
 It is important for sales forces to improve their selling skills
and suggest inventory items that the markets require.

Mechatronic
components

Cutting
tools

Tools formachinetools

Measurement Tools forequipment
manualwork

Electric
power,
hydraulic,pneumatic
tools

Protective
equipment

Construction
work/lighting
tools

2. Make customers place online, one-stop orders
The MRO (subsidiary materials for plants) lineup can be ordered at one go from
Trusco Orange Book.Com.
(1) Increase use by sales agents
 Increase the number of visits and seek communication with a broad range ofcustomers.
 Be the first to provide new product information.
 Improve product knowledge in specialist areas. (Acquire national qualification)
 Passing on the mindset (Convey the concept, not the manuals. 16 pages intotal)(2) Deepen friendship with suppliers.
Increase general managers of factory sales from three to five.
 Enhance relationships with supplier branches, in addition to relationships withcustomers.

3. Physical and online“Passing on the mindset”
This is nothing special in sales activities. It is an
important thing that has been handed down fromsenior employees. It is a concept of sales thatshould be adhered to by Trusco Nakayama’s
employees.
Revisions are ongoing due to additions of
employees nationwide.
Index with sales in 2011 as 100

Route

2011

2012

2013

2014

2015

2016

2017

Year-onShare2017 sales
year(100 million yen) (%)(%)

FactoryeBusiness

Online shopping
companies
Electronic central
purchase brokers

Home center
Total*Does not include “overseas”

24☆ Sales of the factory route account for 80%☆The index for online shopping companies in the e-Business route grew more than seven-fold to 18.1 billion yen.

Shinsaku Miyata

Executive Officer & Head of Product Division

1. Improve market responsiveness by strengthening our relationship with suppliers
The number of new suppliers and increased inventory items, the drivers of our business expansion, hit record highs of 118 and 37,900,
respectively, in the previous fiscal year. Since one of the major roles of the Trusco Orange Book is to deliver new values to the market,
we will devise unique ways for these newly listed products to penetrate the market with the aim of improving users’ productivity and thebusiness development of our suppliers and customers.
Trusco Nakayama’s business performance has trended steadily as we utilize our intricate network, which includes 73 nationwide
branches, 16 distribution centers and five stock centers, to deliver products provided by suppliers that mainly include Tanabatakai
members, which consist of the top 300 companies in sales. During the fiscal year under review, we will focus on establishing a human
network with these suppliers to develop an environment where we can respond more swiftly to the needs of users and customers andoffer feedback.

Convocation Notice

Our role is to deliverproducts supplied by our
suppliers to customers. I
hope this year will see
manufacturers
andsellers working closely
hand in hand.

A year that is connected
through people and AI

P2Reference Materials for
Shareholders’ Meeting

This year’s keyword: “Yui”

P5
Business Report for
the 55th Period[Strategies for the 56th period (year ending December 2018)]

6th Trusco Tanabatakai in the Ritz-Carlton, Osaka

7th Trusco Tanabatakai in Hotel Okura, Kobe

Reference Data

P16

2. Improve market responsiveness by introducing AI
We will embark on improving market responsiveness using artificial intelligence. During the fiscal year under review, we will focus ourefforts on improving the product search process, which is the most effective of the various possibilities that AI offers.
In terms of improving the search ability of Trusco Orange Book.Com, which is used frequently by customers and users, we will improveusers’ convenience by adding recommended product proposal features following the completion of the system’s upgrade in September, inwhich we injected 2 billion yen. Furthermore, we are aiming to develop by 2019 a service that can respond in an extremely short time tosituations that could previously only be handled by human beings, such as searches in natural language or ambiguous words, by having AI
make judgments. An internal release of the service is scheduled in April 2018 to develop the environment for the full-scale service. We
intend to promote studies so that product lineup trends can be foreseen and inventory storage at distribution centers can be proposed
through the use of AI.
Image
searchVoicesearch

Product
adoption &development

Product
selection

Distribution
optimization

Personnel
Labor

25

Convocation Notice
Reference Materials for
Shareholders’ Meeting
Business Report for
the 55th Period
Reference Data

P16

The height of barriers to be
overcome and the number
of issues are proof that thesituation
is
full
of
opportunities for service
improvement. This year, I
want us to capture suchopportunities with our own
hands instead of waiting
patiently for them.

Seize opportunities for a leap
forward by strengthening
distribution functions
Hideki Naoyoshi

P2

P5

This year’s keyword: “Koki Shorai”[Strategies for the 56th period (year ending December 2018)]

Executive Officer & Head of Distribution Division

1. Trust from the market is determined by the quality of the product lineup
In order to seriously support monozukuri that constantly faces stringent
delivery control, we must have the specific mechanism and preparedness tomeet any demand with immediate delivery. No service is better than a broad
product lineup. “Trusco has it.” The accumulation of such impressions leads tothe customers’ sense of security and trust.
We will develop a system for providing full service to customers by
supplying 500,000 items through the aggressive introduction of highperformance distribution facilities at each base, such as the launch of Planet
Saitama, the largest distribution center of Trusco Nakayama, the expansion of
an automated warehouse and installation of an automatic shipment andpackaging line at Planet Tokai, our core base in the Chubu area, the new
installation of an automated pallet warehouse at Planet North Kanto, and theextension of Planet Tohoku.

(unit: items)

Number of inventory items listed
in the Orange Book

500,000
430,000
360,000

290,000
190,000

230,000

140,000
80,000

2008

2011

2013

2015

2017

2019

2021

2023

2. Launch of a core distribution center that supports Trusco’s business
Planet Saitama, which has the largest inventory capacity at Trusco
Nakayama, is scheduled for launch in October 2018. It adopts a quake-proof
structure that does not halt distribution even in the event of a disaster. Planet
Saitama will combine functionality and workability at a high level byintroducing cutting-edge distribution equipment that features a unique methodof maximizing the use of space within the warehouse and controls the vast
inventory. With around five times the shipment capacity of other distribution
bases, Planet Saitama can flexibly respond to requests for users’ direct
shipment using fixed route transportation, in addition to delivery to customers
using our own delivery service.
Planet Saitama will fulfill its role as a distribution center that supports
Trusco Nakayama’s business strategy of increasing the number of items
handled, and constantly provides convenient services.

Planet Saitama’s cutting-edge distribution facilities
BUTLERA robot that automaticallyconveys shelves upon
picking and storing

Automated bucket warehouse
Stores inventory of multiple
products efficiently and compactly*Photo is Planet Osaka

3. Accumulation of improvements in business processes
Efforts toward the improvement of operational efficiency within warehouses No. of receipts per day (unit: cases)
are essential at the frontline of distribution where many regular and part-time
employees work.
Accelerate improvement of the
It is especially important to eliminate excessive receiving and shipping
growing number of receiving
operations for each product at Trusco Nakayama where products of various
operations
forms, sizes and weights are received and shipped frequently. We will makeaggressive efforts to establish and operate a highly original mechanism by
eliminating the concept of maintaining the status quo and making the most of
our know-how and originality.
Operational process from receiving to shipping
Receivinginspection

26

Storing

Picking

Sortingcases

Shipping
inspection

Example of improvement of receiving operations: Aim to reduce the numberof work steps for receiving by half, by abolishing the checking of delivery
statements and volume at receipt. Storing and payment to suppliers will be
carried out as before.

2013

2014

2015

2016

2017
(Fiscal year
under review)2023

TRUSCO NAKAYAMA CORPORATION (THAILAND) LIMITED
Company information: 390 million baht (approx. 1.3 billion yen)
: September 2010
: TIP7 789/8 Moo9, Bangpla Bangplee, Samutprakarn 10540
THAILAND(Approx. 13 km south of Suvarnabhumi International Airport): 3,310 tsubo (approx. 10,942 m2): Warehouse 1,294 tsubo (approx. 4,939 m2)/
Office 137 tsubo (approx. 453 m2)

Site area
Floor area

P2

Investment amount(land, building): 124 million baht (approx. 370 million yen)
Employees: 19 (of whom three are on loan from Trusco Nakayama)
No. of inventory items: 51,523 items
Inventory value: 470 million yen
President: Noboru Yasui
Auditor: Kiyonori Unto
(As of end of December 2017)

Sales & inventory items of Trusco Nakayama Thailand (million baht (million yen))*Sales for each period in Japanese yen have been converted using the average exchange rate.
(The exchange rate in the 8th period was 1 baht = 3.31 yen)

Reference Materials for
Shareholders’ Meeting

CapitalEstablished
Address

P5

Sales
No. of inventory items

items

Business Report for
the 55th Period

Eight periods have passed since we expanded into
Thailand.
Since the construction and relocation to our own building
in 2015, we have continued expanding our sales
channels to enhance the convenience of our sales agents.
Of the 56,000 items to be listed in the Thai edition of
Trusco Orange Book Junior, which will be issued in
FY2018, Trusco Nakayama Thailand currently carries
51,523 products that can be imported and sold.
We intend to continue to accelerate our efforts to instill
our business infrastructure that utilizes the Trusco
Orange Book and to increase our inventory items.

Convocation Notice“Company’s Current Status”

1. Company’s Current Status ( Reference Overseas expansion) continues on P. 34, 47 and onward.

3rd Period(2013)

4th Period(2014)

5th Period(2015)

6th Period(2015)(Nine-monthresults)

7th Period(2016)

8th Period(2017)(Preliminary)

PT. TRUSCO NAKAYAMA INDONESIA
Two years have passed since the grand opening inJanuary 2016, following the establishment in 2015. The
company has achieved stable operation. Trusco
Nakayama Indonesia carried out a capital increase of 250
billion rupiah in the fiscal year under review to further
expand its business. It is also planning the construction ofand move to a new company building. Inventory items
have increased steadily to 49,520 items at the end of the
fiscal year under review.
In FY2018, the second edition of the English version of
Trusco Orange Book Junior will be issued, which will
include Trusco Nakayama Indonesia’s original inventory.
We are expecting synergies with the English edition of theTrusco Digital Orange Book, which will also be released.
We will continue to offer new values to the monozukuri
market in Indonesia by expanding inventory items andenhancing the distribution infrastructure.

Reference Data

P16
1st Period
2nd Period(2012)(2012)(Two-month results)

Company information
CapitalEstablished
Address: 315.6 billion rupiah (approx. 2.7 billion yen)
: January 2015
: IN JAPANESE SME’S CENTER JL
Kenari, Raya, Blok, G6-01 Kav. 9B-10B
Kawasan Industri Delta Silicon 6 Desa, Jayamukti Kecamatan
Cikarang Pusat Kabupaten, Bekasi, 17530 Indonesia(Approx. 40 km east of the capital Jakarta)
Site area: 623 tsubo (approx. 2,059 m2)
Floor area
: Warehouse 570 tsubo (approx. 1,884 m2)/
Office 43 tsubo (approx. 142 m2)
Employees: 14 (of which two are on loan from Trusco Nakayama)
No. of inventory items: 49,520 items
Inventory value: 330 million yen
President: Takeshi Yashima
Auditor: Kiyonori Unto
(As of end of December 2017)

Sales & inventory items of
Trusco Nakayama Indonesia(million rupiah (million yen))*Sales for each period in Japanese yen
have been converted using the averageexchange rate.
(The exchange rate in the fourth period
was 1 rupiah = 0.0084 yen.)

Image of new company building

Scheduled launch : 2019
Planned investment: 1.2 billion yen in land,
0.65 billion yen in building
Site area: 4,902 tsubo (approx. 16,205 m2)
Address: JL. KENARI RAYA NO. 36,
JAYAMUKTI, CIKARANGPUSAT, KEB. BEKASI 17530

items

Sales
No. of inventory items

1st Period(2014)

2nd Period(2015)

3rd Period(2016)

4th Period(2017)(Preliminary)27

Convocation Notice

1. Company’s Current Status (6. Major Lines of Business)

Reference Materials for
Shareholders’ Meeting

P2

Business Report for
the 55th Period

P5(6) Major Lines of Business (as of December 31, 2017)
We are a wholesaler that purchases PRO TOOLs and sells them to customers that include machinery tool dealers, Internet mail ordercompanies, and home centers. Our business objective is to contribute to monozukuri, or manufacturing, in Japan through the provision of
PRO TOOLs.
Supplies, tools and machinery that are necessary for professional factory workers and craftsmen at manufacturing sites
including factories and construction sites are collectively referred to as “PRO TOOLs” at the Company. We offer the broadest
possible range of various PRO TOOLs.

Products
Domestic
and overseas
Total

2,340

(Fiscal year under review)

NB products

We offer a broad selection of products from manufacturers inJapan and abroad to support the smooth procurement of PRO
TOOLs at monozukuri sites. Having added 118 new suppliers
since last year, we currently handle 1.66 million items.

Sales of PB products (100 million yen)

Private brand (PB) products
No. of PB
products

50,200Since we first launched our private brand product in 1964, wehave been developing products that offer high cost performance
added value, based on customers’ needs.

2014
2014
Year ended Mar.Year ended Dec.
(Nine-monthresults)

P16

Reference Data

PB products

Sales composition
by productNo. of manufacturers

2015

2016

2017
(Fiscal year
under review)

PB %mix<Examples of PB products>

PB gross margin

Totally enclosed
fan for factories
Zephire cube type

Sales of products newly listed on the Trusco Orange
Book among company-wide sales (100 million yen)

Universal design
Convex Unilock
Custom-madewagon

Sales of new productsof the past five years
Sales of existingproducts

2013
2014
2015
*Reference figures from past performance data converted into
January–December figures.

2016

2017
(Fiscal year underreview)

No. of overseas manufacturers and sales
Large resin platform truck
Kartio Big Off Road

Puncture-proof bicycle for within
plant and in the event of disaster
Hazzard Runner

No. of overseas
manufacturers(companies)

Cultivation of overseas manufacturer products
We are aggressively promoting our handling of overseas products.
We currently purchase products from 155 overseas manufacturers,
with sales of overseas products increasing to 3.4 billion yen. By
carrying inventory, we will strive to distribute products by top
overseas brands.

28

Main products:
Protective goggles
Ear muffs

Main products:
Screw drivers

Main products:
Tool cases

Sales(100 million yen)

2014
2014
Year ended Mar. Year ended Dec.
(Nine-monthresults)

2015

2016

2017
(Fiscal year
under review)

Owns a delivery service
that offers freight-freedelivery twice a day

Can handle small-lot
shipments of a little as
one screw driver

Fixed delivery routes
enable freight-free delivery
since expenses are also
fixed regardless of thevolume of cargo.

We can ship in small lots
since we stock products
purchased in bulk frommanufacturers. We deliver tocustomers only what theyneed.

Introducing distribution
facilities that improvestorage and shipping
efficiency
We are introducing cuttingedge distribution facilities at
distribution centers to achieve
high-density storage andefficient shipping.

Catalogue and the Web

P5
Business Report for
the 55th Period

We can respond to any typeof order by carrying inventoryof long-tail products with loworder frequency and large orlong products that are difficult
to manage or deliver.

Inventory hit rate and number of inventory items

P2

Inventory
hit rate (%)

No. ofinventory items

P16
2014
2014
Year ended Year ended Dec.
Mar.
(Nine-monthresults)

2015

2016

2017
(Fiscal year
under review)*Inventory hit rate: Percentage of shipment from inventory out of total order intake

Under the concept of “no service is better than immediatedelivery,” we will aggressively enhance inventory items in order
to meet every need of customers.

Reference Data

Carries inventory of longtail products and difficultto-deliver products

Convocation Notice◇ Characteristics of Trusco’s distribution

Reference Materials for
Shareholders’ Meeting

To deliver products smoothly and without stress, we carry a wide variety of inventories at nationwide distribution centers andour own distribution, delivering products to customers using our own delivery service.
Distribution conduct
We have 52 delivery bases (21 distribution centers, and 31 branches that carry inventory).

We offer information tools that facilitate the search for a variety of products by enabling easycomparison of similar products with unified information.

Trusco Orange Book
Annual circulation: 241,244
No. of products listed: 359,800
No. of manufacturers listed: 1,572
Total no. of pages: 17,352
The Orange Book is a comprehensive catalogue that lists all
PRO TOOLs required at monozukuri sites. It is a charged
catalogue that supports efficient product searches and purchaseby offering a page layout that enables delivery dates and top
sellers to be viewed at a glance. In 2017, we launched the digital
edition, the Trusco Digital Orange Book, which integrates the easeof viewing of a paper catalog and the portability and searchabilityof the web.

Trusco Orange Book.Com
Online order intake ratio: 82.0%
No. of items listed: 1.46 million
This is a comprehensive website for the product search andpurchase of PRO TOOLs. In addition to disclosure of information
on products, users can download SDSs (safety data sheets) andplans of products. Additionally, member sales agents can request
quotes and order placements and check the stock in real time. We
have established a system to support smooth commercial
transactions and assist customers’ sales activities.

29

Reference Organizational chart & introduction of General Managers in charge (as of January 1, 2018)

What is Board Brain (BB)?

Newly established MRO
Supply Kobe Branch
A new base wasestablished in the west
Japan area to reinforce
the introduction andsupport of Orange
Commerce (e-commerce).

Newly established HC Tokyo Branch 2
The HC Tokyo Branch was split to provide more finely tuned follow-up
and service to corporate customers.

At Trusco Nakayama, we calloutside directors “Board Brains.”
This term alludes to our hopethat they will provide advice andsupport based on their abundant
experience and knowledge, andcontribute to the Company’s
development.

Trusco Orange Book AI Dept.
The section will respond to inquiries more
quickly by using AI (artificial intelligence).

Overseas subsidiaries

Officer in charge at Trusco Nakayama Corporation: Tadahisa Yabuno

President

TRUSCO NAKAYAMA CORPORATION (THAILAND) LIMITED
Capital: 390 million baht (approx. 1.3 billion yen)
Employees: 20 (of which three are on loan from Trusco Nakayama)
President: Noboru Yasui
Corporate auditor: Kiyonori Unto

Tokyo
venue

Noboru Yasui

President
Takeshi Yashima

Takashi Nakai

PT. TRUSCO NAKAYAMA INDONESIA
Capital: 315.6 billion rupiah (approx. 2.7 billion yen)
Employees: 14 (of which two are on loan from Trusco Nakayama)
President: Takeshi Yashima
Corporate auditor: Kiyonori Unto

Senior Managing Director
Division Head, Corporate Management Division
Born January 16, 1955
62 years old; 40 years at Trusco[No. of shares held] 30,300

Corporate Management DivisionCorporate Planning Dept.

Administration Dept.

Tokyo
venue

Accounting Dept.

Information Systems Dept.
Tokyo
venue

Tokyo
venue

Tokyo Product Dept.

Osaka
venue

Tokyo
venue

Kazuo Nakai

Toshihiko Maeda

Hiroaki Imagawa

Atsushi Kazumi

Yutaka Yoneda

Executive Officer
General Manager, Corporate
Planning Dept.

General Manager, Administration
Dept.

Executive Officer
General Manager, Accounting Dept.

Executive Officer
General Manager, Information
Systems Dept.

General Manager, Tokyo Product
Dept.

Born July 7, 1969

Born August 3, 1968
49 years old; 27 years at Trusco[No. of shares held] 2,800

Born January 22, 1963
54 years old; 32 years at Trusco[No. of shares held] 20,000

Born September 10, 1970
47 years old; 25 years at Trusco[No. of shares held] 2,700

Born November 6, 1975
42 years old; 19 years at Trusco[No. of shares held] 2,000

I aim to strengthen PR with I will strive to create a company I will carry out strict accounting“Trusco presents ‘The Unknown that offers job satisfaction and and prompt disclosure.
that I can be proud of.
Gulliver.’”

I will strive to improve ourcorporate value by making gooduse of systems and IT.

I will supply a product lineup inview of the future of the constantly
evolving monozukuri.

Corporate Planning Dept.
Secretarial Dept.
IR Dept.
Human Resources Development
Dept.
Recruitment Dept.
CSR Dept.
(21 employees in total)

IT Planning Dept.
System Management Dept.
Data Management Dept.
(40 employees in total)

Tokyo NB Product Dept.
Tokyo PB Product Dept.
Tokyo Supplier Development Dept.
PB Product Design Dept.
PB Quality Assurance Dept.
Overseas Purchase Dept.
Germany Representative Office(33 employees in total)

48 years old; 25 years at Trusco[No. of shares held] 2,600

30

114 employees in total

Tokyo Administration Dept.
Osaka Administration Dept.
Personnel Dept.
Healthcare Dept.
Legal Dept.
Property Dept.
Trusco Resort & Spa Hakone(33 employees in total)

Accounting Dept.
Finance Dept.
(20 employees in total)

Manager, Germany
Representative Office*The number of shares held is as of December 31, 2017.

Norihiro Higashi

Shareholders’ Meeting
Tokyo
venue

Osaka
venue

Tokyo
venue

Board of Directors
President

Tetsuya Nakayama
President
Born December 24, 1958
59 years old; 37 years at Trusco[No. of shares held] 1,874,700

Kenichi Saito

Kuniaki Hagihara

Outside director
Outside director
Board Brain (BB)
Board Brain (BB)
Born November 15, 1949 (68 years old) Born August 19, 1953 (64 years old)[No. of shares held] 1,300[No. of shares held] 2,000
President, ForeSight & Company
Chairman, Hagihara Industries Inc.

Audit Supervision Office
four employees

Tokyo
venue

Osaka
venue

Promotion

Product Division
Osaka Product Dept.

Shinsaku Miyata

Hideki Naoyoshi

Executive Officer
Division Head, Product Division
Born June 9, 1964
53 years old; 29 years at Trusco[No. of shares held] 2,200

Executive Officer
Division Head, Distribution Division
Born December 7, 1971
46 years old; 24 years at Trusco[No. of shares held] 3,200

Distribution Division

96 employees in total
Catalogue Media Dept.
Osaka
venue

Osaka
venue

430430employees
in total
employees
in total

Distribution Dept.
Newly
appointed

Tokyo
venue

Tokyo
venue

Osaka
venue

Osamu Yamazaki

Kiyoharu Kawai

Masashi Yamamoto

Nobuyoshi Sasaki

Takuma Fukui

General Manager, Osaka Product
Dept.

Executive Officer
General Manager, Catalogue Media
Dept.

General Manager, Tokyo
Metropolitan Area Distribution Dept.

General Manager, East Japan
Distribution Dept.

General Manager, West Japan
Distribution Dept.

Born September 16, 1961
56 years old; 33 years at Trusco[No. of shares held] 1,800

Born January 27, 1958
59 years old; 42 years at Trusco[No. of shares held] 6,800

Born May 27, 1973
44 years old; 22 years at Trusco[No. of shares held] 2,500

Born January 30, 1960
57 years old; 36 years at Trusco[No. of shares held] 2,800

Born May 25, 1968
49 years old; 27 years at Trusco[No. of shares held] 1,000

I will establish various specificmeasures for risk response
related to product sales.

The evolution of the Orange Book I will incorporate changes andand AI will change the future of make the utmost efforts tocustomers.
strengthen
oursystemof
immediate delivery to customers.
Trusco Orange Book Dept.
Distribution Planning Dept.
Trusco Orange Book.Com Dept.
Delivery Management Dept.
Trusco Orange Book AI Dept.
Planet Saitama Opening Preparation(39 employees in total)
OfficePlanet East Kanto(76 employees in total)

By integrating our organizational
strength and facilities, I will aim
to provide a distribution service
that contributes significantly to
the Company.

I will improve the strengths of ourpersonnel and the work sites inorder to maximize the effects ofcapital investment.

Osaka NB Product Dept.
Osaka PB Product Dept.
Osaka Supplier Development Dept.
Supplier Management Dept.
(23 employees in total)[East Japan]
Planet Hokkaido
Planet Tohoku
Planet North Kanto
Planet Tokyo
Planet South Kanto
HC East Japan Distribution Center(120 employees in total)[West Japan]
Planet Tokai HC West Japan Distribution
CenterPlanet Nagoya HC Kyushu Distribution Center
Planet Shiga East Osaka Stock Center
Planet Osaka Nara Stock Center
Planet Kobe Okayama Stock Center
Planet Sanyo Hakata Stock Center
Planet Kyushu Kurume Stock Center(233 employees in total)

31

Board of Auditors
Corporate Auditors

Osaka
venue

Tokyo
venue

Osaka
venue

Corporate Auditor’s Office
one employee

Hitoshi Komatsu

Masaki Matsuda

Hiroho Kamakura

Outside corporate auditor (full-time)
Born September 20, 1952
(65 years old)[No. of shares held] 14,300

Outside corporate auditor (full-time)
Born March 30, 1956
(61 years old)[No. of shares held] 13,500

Outside corporate auditor (part-time)
Born January 27, 1947
(71 years old)[No. of shares held] 2,500

Osaka
venue

Tadahisa Yabuno
Managing Director
Division Head, Sales Division
Born March 13, 1962
55 years old; 34 years at Trusco[No. of shares held] 27,700

Sales Planning Dept.
Tokyo
venue

Factory Sales Dept.
Newly
appointed

Tokyo
venue

Tokyo
venue

Osaka
venue

Newly
appointed

Osaka
venue

Takeshi Okamoto

Ryo Domori

Eitaro Shimoda

Mikio Adachi

Masato Otani

Executive Officer
General Manager, Sales Planning
Dept.

General Manager,
Hokkaido/Tohoku/North Kanto
Factory Sales Dept.

General Manager, Tokyo
Metropolitan Area Factory Sales
Dept.

General Manager,
Shinshu/Hokuriku/Tokai Factory
Sales Dept.

General Manager, Kinki Area
Factory Sales Dept.

Born August 4, 1964
53 years old; 31 years at Trusco[No. of shares held] 4,200

Born April 5, 1975
42 years old; 19 years at Trusco[No. of shares held] 1,200

Born August 21, 1970
47 years old; 24 years at Trusco[No. of shares held] 1,600

Born September 20, 1969
48 years old; 24 years at Trusco[No. of shares held] 2,400

I will strive to improve our valueof sales by enhancing human(analog) sensitivities.

I will exercise our sales anddistribution abilities to further
improve customer convenience.

I will provide services that will be
useful for monozukuri in Japan.

I will contribute to users basedon equal relationships withcustomers and suppliers.

Sales Planning Dept.
Branch Support Dept.
Customer Service Office(15 employees in total)

15 branches in total
Hokkaido/Tohoku block
Sapporo Hachinohe Sendai
Akita Koriyama
North Kanto block
Mito Tsukuba Kashima Utsunomiya
Koyama Kumagaya
Isezaki Omiya Niigata Niigata-kita(177 employees in total)

32

10 branches in total
Tokyo metropolitan area block
Chiba Matsudo Jonan Itabashi
Hachioji Tokyo Edogawa Atsugi
Kawasaki Shonan(125 employees in total)

14 branches in total
Shinshu/Hokuriku block
Okaya Toyama Fukui Ueda
Kanazawa
Tokai block
Shizuoka Fuji Okazaki Kariya
Yokkaichi Hamamatsu Nagoya
Komaki Meijo(165 employees in total)

Born October 24, 1967
50 years old; 27 years at Trusco[No. of shares held] 1,000
I intend to meet users’ needs by
integrating mechanisms andhuman strength.
11 branches in total
Kinki block
Ryuo Kyoto Osaka Minami-Osaka
Neyagawa Higashi-Osaka
Kita-Osaka Himeji Kobe Akashi
Wakayama(140 employees in total)

October 2017 Management Committee (55th Anniversary Hall, 3F Tokyo Head Office)The meeting was held in a round-table layout without the distinction of upper or lower seats, to allow opinions to be exchanged freely.
Seating arrangements are changed each time so that members can participate with a fresh feeling.

Sales Division

874 employees in total

Home Center Sales Dept.
Newly
appointed

Osaka
venue

Osaka
venue

e-Business Sales Dept.
Newly
appointed

Osaka
venue

Overseas Dept.
Tokyo
venue

Osaka
venue

Yoshihiro Fujimoto

Hiroyuki Hoshino

Koichi Ezaki

Tsuyoshi Tsuchiya

General Manager, Home Center
Sales Dept.

e-Business Sales Dept.
General Manager, Mail Order Dept.

e-Business Sales Dept.
General Manager, MRO Supply Dept.

Kiyonori Unto

General Manager,
Chugoku/Shikoku/Kyushu Factory
Sales Dept.

Born March 14, 1971
46 years old; 26 years at Trusco[No. of shares held] 2,700

Born February 3, 1975
42 years old; 21 years at Trusco[No. of shares held] 2,400

Born February 19, 1978
39 years old; 18 years at Trusco[No. of shares held] 3,100

Born February 9, 1962
55 years old; 31 years at Trusco[No. of shares held] 5,000

I will make efforts to create an
attractive sales floor with our
extensive product lineup.

I intend to further instill the mailorder business using inventory,
distribution and systems.

I will further promote electronicpurchase by establishing a newbase in the west Japan area.

6 branches in total
HC Tokyo No.1
HC Tokyo No.2
HC Osaka
OkazakiFukuoka
Okinawa*Includes 3 branches that also serve asbranches of the Factory Sales Dept.
(37 employees in total)

Mail Order Tokyo No.1
Mail Order Tokyo No.2
Mail Order Osaka(33 employees in total)

MRO Supply TokyoMRO Supply Kobe
(14 employees in total)

With the start of construction of
our new company building inIndonesia, I will continue tofocus on developing overseas
infrastructure.

Born September 10, 1971
46 years old; 23 years at Trusco[No. of shares held] 400
I aim to make Trusco the no.1
wholesaler in terms of existencevalue in the areas I am in charge of.
17 branches in total
Chugoku/Shikoku block
Yonago Okayama Hiroshima
Fukuyama Ube Shunan Takamatsu
Tokushima Matsuyama
Kyushu block
Fukuoka Kokura Tosu Nagasaki
Kumamoto Oita Kagoshima
Okinawa(157 employees in total)

General Manager, Overseas Dept.

Overseas Sales Dept.
*Overseas subsidiary service center(11 employees in total)

33

Convocation Notice

Frequently Asked Questions to Trusco

Reference Materials for
Shareholders’ Meeting

P2

Business Report for
the 55th Period

P5

Reference Data

P16

Answers to questions frequently asked by our shareholders

Do you have any plan of appointing

Are there any plans for aa female executive?

share buyback?

Currently we do not have any plan to do so. We believe that
officers should be appointed based not on numerical targets buton their actual abilities, irrespective of gender. Therefore, wehave continued to enhance programs to support women so thatthey can compete equally with men even after childbirth andchildrearing. The percentage of women in the Company is on arising trend, with our most recent ratio of female management at
5.4% and female employees accounting for 33.7% of the workforce.

What are your thoughts on

Please explain your future expansion

your current ROE?

of the overseas business.

Our ROE stood at 9.3% at the end of the fiscal year ended
December 2017. We believe it is important to increase profitsand stably improve them in the long-term through continuous
investment in improving corporate value, rather than throughshort-term methods such as share buybacks with borrowings
from banks or the issuance of bonds. We think the desirable way
is to place emphasis on improving the convenience of customers,
which will thereby lead to an improvement in ROE.

Our overseas business is operated based on the following
two strategies: 1) Sales activities by Trusco Nakayama
Thailand and Trusco Nakayama Indonesia, which carryinventory locally; and 2) sales activities by the Overseas
Sales Dept., mainly for lot sales to sales agents in eachcountry. In Thailand, we will aggressively cultivate local
suppliers in the future.
We also focus on supplier cultivation activities from our basein Germany, and started business with 42 new suppliers
globally in the 55th period.

What is your view regarding the current

What are your plans in terms of distribution toward

dividend payout ratio?

achieving 500,000 inventory items?

We believe that we can provide maximum returns to ourshareholders by pursuing sustainable growth. We have been
concentrating our capital investment in distribution centers andIT infrastructure and the human resources that support thembased on a policy that continuous capital investment is essential
for the improvement of corporate value, and have achieved
steady growth. At present, as a result of examining the balance
between returns through corporate value enhancement due tocapital investment and returns through dividends, we intend tomaintain a dividend payout ratio of 25%, which is linked to ourbusiness performance, and return value to shareholders throughthe comprehensive dividend amount.

34

At the moment, we have no plans for share buybacks.
Share buybacks require high cost. We believe it is important
to improve sales and profits by effectively using funds tostrengthen functions (investing in the reinforcement of
distribution and growth areas such as IT), improving
customers’ convenience, and contributing to monozukuri. At
the moment, we hope to return our achievements to ourshareholders by increasing corporate value and providing
dividends.

Planet Saitama, which will be our largest distribution center,is scheduled for launch in October 2018. We have also
expanded existing distribution centers and enhanced ourinventory of branches carrying inventories. Furthermore, weare promoting the substantial mechanization of distribution
operations in order to prevent simple increases in personnel.
We have also established the Distribution Division andsegmented the management scope of the Distribution Dept.
to accelerate the strengthening of distribution inorganizational terms and raise the management level at thesame time.