TAKUMA-PathfindersAn investment research platform
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DOSHISHA CORPORATION

7483
TSE 1stSectionDecember 16, 2013

Summary of Business Results for the Second Quarter of
the Fiscal Year Ending March 31, 2014

On November 14, DOSHISHA Co., Ltd. (hereinafter DOSHISHA or the Company) conducted an analyst
briefing for 2Q FY3/14 (six months cumulative, hereinafter 1H), and the following memo is a summary of
the results.

1H FY3/14 Consolidated Business Results Summary
As can be seen in 【Table 1】, 1H consolidated business results were: net sales ¥49,978 million (+6.4%
YoY), gross profit ¥11,657 million (-1.0% YoY), SG&A expenses ¥8,634 million (+1.2% YoY), operating
income ¥3,022 million (-6.9% YoY), ordinary income ¥3,078 million (-8.7% YoY), and net income ¥1,780
million (-12.9% YoY). While net sales increased YoY, the development team could not offset the cost
increase for overseas purchasing due to the sharp weakening of the yen and incomes declined. Also,
both sales and profits fell short of the Company’s May 8 initial guidance. The main reason for thedifference was in the Wholesale Model business segment, the disposal of inventory through clearance
sales for year-end gifts took more time, reducing new client development for the summer gift giving
season.

 【Table 1】 1H FY3/14 Consolidated Business Results Summary
FY3/13 1H

Consolidated

FY3/14 1H

FY3/14 1H（\ million）

Actual Net Sales

YoY Chg
Actual Net Sales AmountNet Sales

46,984 100.0%

49,978 100.0%

2,994

6.4%

50,500

Product Development Model

23,41149.8%

25,064

50.2%

1,653

7.1%

Wholesale Model

22,36847.6%

23,081

46.2%

713

3.2%

Others

1,204

2.6%

1,832

3.7%

628

Gross Profit

11,78025.1%

11,657

23.3%

SG&A Expenses

8,532

18.2%

8,634

17.3%

Logistics Expenses

2,611

5.6%

2,703

Personnel Expenses

3,645

7.8%

355

Ratio toRatio toMay 8%

YoY Chg

Forecasts Amount

%

(521)

-1.0%

25,080

(15)

-0.1%

23,940

(858)

-3.6%

52.2%

1,480

352

23.8%

(123)

-1.0%

12,200

(542)

-4.4%

101

1.2%

8,650

(15)

-0.2%

5.4%

91

3.5%

-

-

-

3,683

7.4%

37

1.0%

-

-

-

0.8%

332

0.7%

(23)

-6.5%

-

-

-

1,919

4.1%

1,915

3.8%

(4)

-0.2%

-

-

-

Operating Income

3,247

6.9%

3,022

6.0%

(225)

-6.9%

3,550

(527)

-14.9%

Ordinary Income

3,370

7.2%

3,078

6.2%

(291)

-8.7%

3,550

(471)

-13.3%Net Income
2,043
4.4%
1,780
3.6%
(263) -12.9%
Notes: 1H FY3/14 estimates are based on the Company's initial guidance dated May 8, 2013.
All tables are prepared by Trias Corp. with the data disclosed by DOSHISHA CORPORATION.

2,200

(419)

-19.1%

Travel and Transportation Expenses
OthersSG&A expenses increased ¥101 million YoY. This was largely due to the ¥91 million increase in logistics
expenses from the absolute increase in net sales. However, this included promotion of optimizing
This Memo is for reference purposes only and is not intended as a solicitation for investment. The contents contained herein areprepared based on reliable
information that already exists in the public domain. The Company, however, does not guarantee complete accuracy. Any pinionrinformation contatined in the
Memo is relevant as of the day of the Information Meeting and/or Company Visit, although the views and/or facts may be altered without prior notification.
Final investment decisions shall be made by investors themselves based solely on their own judgment and responsivility.
Copyright © 2013 Trias Corporation

All rights reserved.

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TAKUMA-PathfindersAn investment research platform
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December 16, 2013

shipping origination with the new logistics base in Kashiwa City, Chiba Prefecture, increasing daily
shipping volume through raising the ratio of EOS (Electronic Ordering System)* shipments, as well as
aggregating shipment pieces, joint shipments among segments, and utilization of mixed load charterroutes of local trucking companies, and the result of a wide range of measures lowered the ratio of
logistics expenses to sales by 0.2% to 5.4%. Going forward, the Company will pursue further
improvement, including a view toward aggregating use of external warehouses.
*Note: EOS (Electronic Ordering System) stands for an online ordering system used between retail stores, the head
office and suppliers for submitting orders, purchasing, billing and payments, improving the speed andaccuracy of ordering operations versus telephone, mail or fax through use of a network.

Personnel expenses increased by ¥37 million, which was largely due to increased provisioning for
retirement allowance following a reduction in the discount rate as well as an increase in health insurance
premiums. On the other hand, the number of employees actually declined, so the rise in net sales
marked an improvement in productivity measured by net sales per employee. Also, the effect ofcommencing the cost reduction project as part of structural reforms from last term showed up in generaladministrative expenses reduced by ¥27 million YoY, contributing to a decline in travel and transportation
expenses as well as commissions paid. By continuing to promote review of the logistics system and cost
reduction project going forward, the Company is targeting a ratio to total sales for SG&A expenses of
16.3% in the 2H (last term 2H 16.9%), for full-term 16.8% (last term FY 17.5%).
The decline of GPM (Gross Profit Margin) mainly due to the weak yen could not be offset by
improvement in the SG&A expenses ratio, and the operating income margin declined by 0.9% to 6.0%.

 【Graph 1】 Trend of 1H Profit Margins (¥100 million, %)
50.0%

600

509
40.0%

396
30.0%

20.0%

469

499

500

417
400

25.4%

25.5%

18.0%

18.1%

24.5%
16.3%

25.1%
18.2%

23.3%

300

17.3%
200

10.0%

7.4%

8.2%

7.4%

6.9%

6.0%

0.0%

100

Consolidated Net Sales

Gross Profit Margin
SG&A Expenses Ratio
Operating Income Margin

0
1H

1H

1H

1H

1H

FY3/10FY3/11

FY3/12

FY3/13

FY3/14

Regarding the balance sheets, inventory of goods and products increased ¥1,229 million from the end oflast term, declining ¥494 million YoY.

This Memo is for reference purposes only and is not intended as a solicitation for investment. The contents contained herein areprepared based on reliable
information that already exists in the public domain. The Company, however, does not guarantee complete accuracy. Any pinionrinformation contatined in the
Memo is relevant as of the day of the Information Meeting and/or Company Visit, although the views and/or facts may be altered without prior notification.
Final investment decisions shall be made by investors themselves based solely on their own judgment and responsivility.
Copyright © 2013 Trias Corporation

All rights reserved.

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TAKUMA-PathfindersAn investment research platform
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December 16, 2013

Also, free cash flows, the source of capital for strategic business development, increased from 1H lastterm (¥542) million to 1H this term ¥1,551 million, a YoY increase of ¥2,093 million. As a result, thebalance of cash and cash equivalents which declined in the 1H last term by ¥874 million rose in 1H thisterm by ¥1,013 million. As a result, the balance of cash and cash equivalents at the end of 1H FY3/14
was ¥24,678 million.

1H FY3/14 Sales Trend by Operating Segment(by Business Model / Business Format)

Sales Trend by Business Model
As can be seen in 【Graph 2】, net sales increased for Product Development Model, Wholesale Model
and Others. Details of each business model are provided below.

Product Development Model: ¥25,064 million (+7.1% YoY)
For the Product Development Model business segment, the extended heat wave resulted in favorable
sales of summer items, in particular sales of fans and ice shaving machines were brisk. For sales of
televisions, last term saw a reactionary decline to special demand the previous term related to digitalterrestrial broadcasting, however bottomed coming into this term, showing a recovery in screen sizes 32”
and above. In the new item category, strengthened lineup of fabric boxes made of cloth and stainlesstumblers did well. For sales channels, newly established online shopping and mail order sales did well.
Wholesale Model: ¥23,081 million (+3.2% YoY)
For NB (national brand) processed products in the Wholesale Model business segment, in addition toexisting summer gift giving, strengthened sales of home delivery products to meet changing market
dynamics going forward increased. Also, original gift products customarily given in return for gifts
received in Buddhist memorial services did well. For high-profile brand products, in addition to increasing
demand for high-priced items, the increase in foreign tourists resulted in increased sales of expensive
watches.
Others: ¥1,832 million (+52.2% YoY)
Sales of affiliate companies in China and sales of affiliate companies in Japan engaged in nursing carebusiness were strong.

This Memo is for reference purposes only and is not intended as a solicitation for investment. The contents contained herein areprepared based on reliable
information that already exists in the public domain. The Company, however, does not guarantee complete accuracy. Any pinionrinformation contatined in the
Memo is relevant as of the day of the Information Meeting and/or Company Visit, although the views and/or facts may be altered without prior notification.
Final investment decisions shall be made by investors themselves based solely on their own judgment and responsivility.
Copyright © 2013 Trias Corporation

All rights reserved.

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TAKUMA-PathfindersAn investment research platform
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December 16, 2013

 【Graph 2】 Trend of 1H Sales by Business Model (¥100 million)
509
417

396

96

90

102

499
469
92

121

131

Wholesale (high-profile brands)
135
Wholesale (NB processed)

105

97

274
234

205

199

Others

95

250

1H

1H

1H

1H

1H

FY3/10FY3/11

FY3/12

FY3/13

FY3/14

Others

9

10

11

12

18

Wholesale (high-profile brands)

90

96

102

92

95

Wholesale (NB processed)

97

105

121

131

135

Product Development

199

205

274

234

250

Product Development

Sales Trend by Business Category
For 1H FY3/14, supermarkets increased by 8.4% YoY, GMS increased by 5.0% YoY, drug storesincreased by 10.2% YoY, home centers increased slightly by 0.1% YoY, and others rose by 10.7% YoY,
driving an increase in sales, while only electronic appliance stores declined YoY, -8.3%. The Others
channel includes high growth in mail order sales +20.3% YoY, watch & jewelry specialty stores +13.6%
YoY, 100-yen shops +13.1% YoY, and wholesale business +13.0% YoY.

Revisions to FY3/14 Consolidated Earnings Forecasts and 2H Key Measures
As can be seen from 【Table 2】, since 1H results came in below the initial guidance, FY3/14 full-term
Company estimates were revised down: net sales ¥1,050,000 million, +5.8% YoY, operating income¥7,300 million, +8.0% YoY, ordinary income ¥7,400, +0.1% YoY, and net income ¥4,400 million, -2.0%
YoY.
For 2H, in addition to introducing high margin autumn and winter items, considering the positive effect offront-loaded demand ahead of the consumption tax hike, conservative estimates were made with a view
toward certain achievement.

This Memo is for reference purposes only and is not intended as a solicitation for investment. The contents contained herein areprepared based on reliable
information that already exists in the public domain. The Company, however, does not guarantee complete accuracy. Any pinionrinformation contatined in the
Memo is relevant as of the day of the Information Meeting and/or Company Visit, although the views and/or facts may be altered without prior notification.
Final investment decisions shall be made by investors themselves based solely on their own judgment and responsivility.
Copyright © 2013 Trias Corporation

All rights reserved.

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TAKUMA-PathfindersAn investment research platform
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December 16, 2013

 【Table 2】 Summary of FY3/14 Consolidated Forecast Revisions
Consolidated

FY3/13(\ million)

Actual2H

Actual1H

October 30
Revised Forecasts

May 8
Initial Forecasts

5.8%

56,500 107,000

Product Development 23,411 26,839

6.9%

29,24054,320Wholesale

46,033

4.0%

26,05049,99046,984 52,237
22,368 23,664

23,081 24,779

47,860

YoY[Reference]

FY
2H
FY
99,221 49,978 55,022 105,000
50,251 25,064 28,636
53,700Net Sales

1H

FY3/142H

FY

Others

1,204

1,733

2,937

1,832

3,440 17.1%

1,210

2,690

Gross Profit

11,780 12,349

24,12911,657 13,243

24,9003.2%

13,90026,100

SG&A Expenses

8,532

8,835

17,368

8,634

8,966

17,600

1.3%

9,450

18,100Operating Income

3,247

3,513

6,761

3,022

4,278

7,300

8.0%

4,450

8,000

Ordinary Income

3,370

4,025

7,395

3,078

4,322

7,400

0.1%

4,450

8,000

2,448

4,491

1,780

2,620

4,400 -2.0%

2,700

4,900

Net Income

2,043

1,608

Note: 1H FY3/14 estimates are based on the Company's guidance dated May 8, 2013,
while 2H and full-term FY3/14 revised estimates are as of October 30, 3013.

2H Key Measures
Based on a view of “once again laying the groundwork for a highly profitable structure,” theCompany is carrying out business strategy on the three axes of “Products,” “Sales” and “Costs.”
Product Strategy
1. Profitable product development not susceptible to the impact of the weak yen
Coming into this FY, the yen weakened by as much as over 20% YoY, which had a significant impact on
profit plans. Since it is difficult to see the yen strengthening anytime soon, developing value-added
products that can absorb the impact of the weak yen at current levels, and negotiating with suppliers
regarding changing the settlement currency, will be pursued with an aim of improving profit margins.
2. Challenge new markets
Strengthen the home fashion category in developing storage products and peripheral sundry items. Also
as a matter of business practice, in addition to high barriers to entry for gifts customarily given in returnfor gifts received at Buddhist memorial services, vacuum-sealed stainless products, toiletry items,
eco-friendly vaporizers made of paper that don’t use electricity etc. will be introduced in new markets.
3. Strengthen tie-ups with new brands and manufacturers
The Company transacts business with over 3,500 companies, receiving high marks for its sales networkand sales strength, and tie-up offers from attractive new brands and manufacturers are increasing.

This Memo is for reference purposes only and is not intended as a solicitation for investment. The contents contained herein areprepared based on reliable
information that already exists in the public domain. The Company, however, does not guarantee complete accuracy. Any pinionrinformation contatined in the
Memo is relevant as of the day of the Information Meeting and/or Company Visit, although the views and/or facts may be altered without prior notification.
Final investment decisions shall be made by investors themselves based solely on their own judgment and responsivility.
Copyright © 2013 Trias Corporation

All rights reserved.

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TAKUMA-PathfindersAn investment research platform
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December 16, 2013

Working in concert with these new good relationships, the Company will further strengthen its
purchasing power.
4. Strengthen OEM business
As the trend toward more private brands, PB, in the retail industry progresses, the Company will identify
needs early, supporting OEM business of strong relationships.
Sales Strategy
1. Going after front-loaded business ahead of the consumption tax hike
The Company will employ sales promotions from early in the new year to respond to front-loaded
demand ahead of the consumption tax hike, targeting increased orders.
2. Strengthen existing client relationships and develop new clients through company-wide exhibitionpreviews
Every January and February DOSHISHA conducts company-wide exhibition previews involving all
divisions. Through these events, each division aims to strengthen existing strong relationships, andintroduce new categories to divisions that haven’t yet made transactions, promoting development of new
relationships as well as expanding in-store share.
3. Further strengthening of growing business categories
Amongst the over 3,500 companies with which the Company does business, the Company isstrengthening current and future growth business categories including online shopping, TV mail order,
100-yen shops, discount shops and overseas business.
Costs Strategy
The Company continues to promote the cost reduction project started last term as part of structuralreforms, as well as strengthening review of the logistics system

Reconfirmation of DOSHISHA’s Business Models: What is the Source of Profits
The following is an explanation of the Company’s basic views and principles of its business models.
Pursuit of “better products sold at cheaper prices and in a more specialized way”
At the core of DOSHISHA’s business models is a view toward popularization of luxury items. Specifically,
through review of materials, production location and the manufacturing process for goods sold in
department stores and specialty shops, selling prices are reduced to less than half of those inThis Memo is for reference purposes only and is not intended as a solicitation for investment. The contents contained herein areprepared based on reliable
information that already exists in the public domain. The Company, however, does not guarantee complete accuracy. Any pinionrinformation contatined in the
Memo is relevant as of the day of the Information Meeting and/or Company Visit, although the views and/or facts may be altered without prior notification.
Final investment decisions shall be made by investors themselves based solely on their own judgment and responsivility.
Copyright © 2013 Trias Corporation

All rights reserved.

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TAKUMA-PathfindersAn investment research platform
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December 16, 2013

department stores and specialty shops through cost reduction, with a view toward creating a larger
market. In mature markets, through changing the approach to design, cost, selection of items for saleand points of appeal etc., the Company aims to create completely new markets. Examples include
designer electronic appliances, home fashion-oriented furniture and various storage sundries.
Create selling space with a view towards “selling watches in a green grocer”
Support category changes by clients, offering a wide variety of transaction know-how that can be appliedin different formats, leveraging information on over 3,500 companies with which the Company does
business and its solid track record, expressing proposals for creating selling space in completely
different formats. Examples include selling space for watches in electronic appliance stores, and sellingspace for food gifts in home centers.
Rapid product development to satisfy clients’ needs
This refers to freedom of ideas for product development within the Company, and flexibility to work inconcert by not limiting partners when in-house skills and technology are insufficient, in order to achievebusiness objectives.
Grow profits by “not having things that are not necessary”
Being able to respond rapidly to changes is the basis for realizing the Company’s goal of becoming “acompany that doesn’t fail,” and its basic principle is being a fab-less maker. However, products withoverwhelming shares can be manufactured by consolidated subsidiaries.
Elimination and consolidation of divisions in the red for two consecutive terms, or alternatively
changing the head of the division, aiming at early improvement of profits
This is one of the Company’s methods of risk management.
Emphasize ordinary and net incomes over net sales. Steadily raise corporate value throughstable dividends in accordance with profits
DOSHISHA strives to promote this basic policy to everyone within the Company that unprofitable sales
are not needed.
Create a strong financial base that can be rebuilt under any circumstancesThis refers to aiming at creating a strong financial base that can be rebuilt under any unforeseen
circumstances, with the possibility of various disasters talked about in recent years.

This Memo is for reference purposes only and is not intended as a solicitation for investment. The contents contained herein areprepared based on reliable
information that already exists in the public domain. The Company, however, does not guarantee complete accuracy. Any pinionrinformation contatined in the
Memo is relevant as of the day of the Information Meeting and/or Company Visit, although the views and/or facts may be altered without prior notification.
Final investment decisions shall be made by investors themselves based solely on their own judgment and responsivility.
Copyright © 2013 Trias Corporation

All rights reserved.

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TAKUMA-PathfindersAn investment research platform
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December 16, 2013

Aim for becoming a global, comprehensive “distribution service industry” with “an adventurous
dream that never dies”
DOSHISHA handles many categories in a broad scope, from production to making selling space, being a
multi-faceted company not limited to a wholesale distributor, and defines itself as a “distribution service
industry.” Under this new type of format, the Company is aiming at becoming a company with “anadventurous dream that never dies” through promoting wide ranging business strategies.

Q&A
Q1. During the 1H, measures to address the rapid weakening of the yen impacting cost of goods
sold were not in time, but the 2H forecasts assume an improvement in gross profit, so this
implies you can deal with reducing CoGS? Also, assuming the weak yen does not deviate
greatly from the 100 level, can we take it that you have put in place measures to deliver astable GPM?
A1. DOSHISHA has a greater weight of seasonal product sales than competitors, so it is easy to switch
products. 1H results showed increased sales and declining profits, but this was due to not being able tochange prices for products where transactions were already completed. Since autumn and winterproducts have been reset, we believe we can achieve profit margins in-line with estimates. Our
assumption for the USD is 100, and we have put in place measures that can deal with fluctuations up to+/-10%.

This Memo is for reference purposes only and is not intended as a solicitation for investment. The contents contained herein areprepared based on reliable
information that already exists in the public domain. The Company, however, does not guarantee complete accuracy. Any pinionrinformation contatined in the
Memo is relevant as of the day of the Information Meeting and/or Company Visit, although the views and/or facts may be altered without prior notification.
Final investment decisions shall be made by investors themselves based solely on their own judgment and responsivility.
Copyright © 2013 Trias Corporation

All rights reserved.

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TAKUMA-PathfindersAn investment research platform
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December 16, 2013

 Key Stock Indicators and Financial Data
No. of Shares Issued
No. of Treasury Stock
Market Value (\mn)
BPS (\)ROE (%)ROA (%)PER (times）
PCFR (times)
PBR (times)
Share Price (\)
Unit Share (shs)Sep. 2013
37,375,636
Sep. 201384,334
Dec 13, 2013
53,858Mar. 2013
1,319.41
Mar. 2013
9.5
Mar. 2013
7.5
FY3/14 fcst.
12.2
Mar. 2013
10.8
Mar. 2013
1.1
Dec 13, 2013
1,441
Dec 13, 2013
100
Average Daily Volume (shs) Dec 13, 2013
77,391The Company conducted a 2 for 1 stock split,
effective on Arpil 1, 2013.

Total Assets (\mn)
Mar. 2013 61,560
Shareholders' Equity (\mn)
Sep. 2013 50,472
Interest-Bearing Debt (\mn)
Sep. 2013 2,703
Equity Ratio (%)
Sep. 2013
79.4
Ratio of Interest-Bearing Debt (%) Sep. 2013
5.4
Free Cash Flows (\mn)
Sep. 2013 1,551
ROE=Current Net Income÷Average Shareholders' Equity
of beginning of term and term end
ROA=Current Net Income÷Average Total Assets
of beginning of term and term end
PCFR=Maket Value÷(Current Net Income+Depreciation)
Average Daily Volume=Ave. Daily Volume for the last 12 m/s
Ratio=Interest-Bearing Debts÷Shareholders' Equity
Free Cash Flows=Operating CF+Investment CF

Consolidated
Operating
Ordinary
Net Sales
Net Income
EPS (\)DPS (\)(\million）
IncomeIncomeFY3/0980,898
5,014
5,131
2,558
70.47
22.50
FY3/1086,629
7,701
7,593
4,293
118.2727.50
FY3/11
93,494
7,698
7,614
4,395
121.1027.50
FY3/12
102,619
8,866
8,917
5,001
137.4630.00
FY3/1399,221
6,761
7,395
4,491
120.6730.00
1H FY3/14.
49,978
3,022
3,078
1,780
47.75
15.00
FY3/14 fcst.
105,000
7,300
7,400
4,400
117.9930.00
Notes: FY3/14 forecasts were announced by the Company on October 31, 2013.
EPS(¥) and DPS(¥) are calculated assuming the stock split occurred at the beginning of FY3/09.

 Share Price Charts and RSI
（Yen）

2,000

300
Closing share price1month moving average

3month moving average

RSI [days]（right）

250

1,500
200

1,000

150

100
RSI
500

70

50
30

0

0

Source: Prepared by Trias Corp. with Bloomberg data.
Note: RSI, Relative Strength Index, is the index representing the ratio of overbought or oversold share prices.
In general, over 70 in RSI shows overbought share price range, while below 30 shows oversold share price range.
RSI=averaged share price appreciation for N days÷(averaged share price appreciation for N days
+averaged share price decline for N days) x100

This Memo is for reference purposes only and is not intended as a solicitation for investment. The contents contained herein areprepared based on reliable
information that already exists in the public domain. The Company, however, does not guarantee complete accuracy. Any pinionrinformation contatined in the
Memo is relevant as of the day of the Information Meeting and/or Company Visit, although the views and/or facts may be altered without prior notification.
Final investment decisions shall be made by investors themselves based solely on their own judgment and responsivility.
Copyright © 2013 Trias Corporation

All rights reserved.

|9