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WORKING TOWARD OUR AGP2020 TARGETS AND SUSTAINABLE GROWTH

OUR STRENGTH AND VISION

We have consistently pursued a science-based approach to manufacturing since the very first days of ASICS. Our aim has been to develop products with consistently better performance, backed by our expertise in biomechanics and materials science, as well as craftsmanship. By carefully analyzing natural human movements and actions and the characteristics of each sport, we have developed products with innovative materials and structures that have won the support and trust of athletes worldwide. At the ASICS Institute of Sport Science, our core research and development facility, we are enhancing our research capabilities to develop ground-breaking products and services such as shoe fitting services that use 3D foot scanning. This long-term scientific approach is an ASICS strength rooted in our corporate culture.

One of our founding aims is to support the sound development of youth through sport. We want to use our expertise in sport and our brand assets accumulated over more than 60 years to help solve social issues today and in the future. People everywhere are interested in leading healthy lifestyles, regardless of age and nationality. Tapping into that growing awareness of health, we aim to contribute to society and be a positive influence on all areas of life, not just sport, by providing products and services that ultimately help to realize our vision – Create Quality Lifestyle through Intelligent Sport Technology.


AGP2020 – FIVE-YEAR STRATEGIC PLAN FOR SUSTAINABLE GROWTH

We launched the ASICS Growth Plan (AGP) 2020 in January 2016. Under this new Five-Year Strategic Plan, we are targeting net sales of ¥750 billion and an operating margin of 10% by the end of 2020. nterest in health is growing worldwide. In emerging markets, more people are taking up running as a pastime. We have been growing our business in those markets by building a leading position in performance running shoes. In developed markets, sport already plays an important role in daily life. We see growth opportunities in those markets as well, as more people introduce training regimes into their lives and use sportswear as everyday clothes. We aim to expand our consumer base – one of the core strategies in AGP2020 – through consistent branding and marketing to appeal to new consumers in developed markets and to address the needs of consumers in emerging markets.

We plan to open new flagship stores in Tokyo, New York, London and other major cities that lead global fashion and sports trends. Those stores will sell a broad range of products direct to consumers. Displaying our brands and product lineup to consumers is the most powerful form of marketing, and the feedback from visitors to our stores goes into developing future products. This is another core strategy in AGP2020 – Shift to a DTC*1 mindset. Under this strategy, our goal is to drive innovation by developing new technologies more rapidly from the perspective of consumers.

Our brands, ASICS, Onitsuka Tiger and ASICS Tiger, each have unique characteristics. ASICS is positioned as a true sports performance brand and Onitsuka Tiger and ASICS Tiger are lifestyle fashion brands. To increase the value of each brand, we need to emphasize their differences by communicating a consistent brand message through all consumer touch points. To support that, we will use the latest digital technology to give consumers new sports and lifestyle experiences. Under AGP2020, we are also enhancing individual and team capabilities and targeting efficiencies by optimizing supply chains and other areas of our operations.

*1 Direct to Consumer: The collective term for own retail and own eCommerce.


PROGRESS IN 2016 AND THE OUTLOOK FOR 2017

In 2016, our business in the U.S. struggled, but other regions reported firm sales results overall. On a currency neutral basis, consolidated net sales edged up 0.8% year on year. However, operating income declined 7.2% due to an increase in costs related to reinforcing headquarters functions. Nevertheless, we made good progress with building the foundations for sustainable growth. The biggest step was the acquisition of Boston-based running app company FitnessKeeper, Inc. in March. In conjunction with this acquisition, we established a Global Digital Division in Boston to lead the development of our digital technology. We plan to utilize the skills and resources of our new teams in Boston to roll out a diverse digital strategy.

In the U.S., our most important market, we overhauled the management structure at our Americas subsidiary and rebuilt our sales network, which will allow us to launch the right products in the right place at the right time.

Sales were firm in Europe, but we are overhauling the local sales network by drawing on our experiences in the U.S.

In China, interest in health is growing, which is spurring a rapid rise in the number of marathon events across the country. That suggests the running market is poised for dramatic growth. We plan to expand our business in China by reinforcing ASICS branding, centered on the new ASICS STORE SHANGHAI, HUAI HAI ROAD, which opened in July.

We also plan to start selling products directly to consumers through new local subsidiaries in countries and regions with future growth prospects.

In Japan, where profits have improved sharply due to business restructuring, interest in sport is likely to rise in the lead up to 2020, the final year of AGP2020. We have teamed up with external partners to offer consumers new value in products and other areas.

We will also accelerate our DTC strategy worldwide. After opening a new concept ASICS STORE in Brussels in December, we plan to open similar new flagship stores in New York and Tokyo in 2017.


HELPING TO CREATE HEALTHIER SOCIETIES

To deliver sustainable growth, we need to think about society and the environment in everything we do, together with all our business partners. Over the past few years, we have seen a number of developments that have fundamentally changed the way the sporting goods industry operates with respect to sustainability. In particular, social media has played a role in increasing customers’ awareness of the risks around unsafe and unethical working conditions and environmental damage in complex, global supply chains. Consumers expect more transparency on the origin of products, materials used and ethical supply chains. We take this responsibility very seriously and recognize that we have an influential role to play.


HIGHLY TRANSPARENT CORPORATE GOVERNANCE

We have been building a highly transparent corporate governance structure. Four out of nine ASICS directors are outside directors. They provide advice in their respective areas of expertise and oversee management from an objective standpoint. In 2016, we established a Nomination and Compensation Committee to further improve transparency. The committee is composed of four outside directors, one outside expert, and myself. We have also narrowed down the subjects discussed by the Board of Directors, to allocate more time for matters that have a material impact on corporate value.

Top managers at local subsidiaries in the Americas and EMEA have concurrent positions as executive officers at ASICS global headquarters in Japan. This ensures optimal decision-making and strategy implementation from a global perspective. Headquarters oversees the implementation of company-wide strategies, but it has also transferred some functions to the most influential regions by product category. For example, we carry out some product planning in the running category in the U.S., the world’s largest market for running shoes.

We are also promoting diversity. The Audit & Supervisory Board has had female representation since 2014 and we are actively stepping up the promotion of women to management positions and supporting career prospects for women across our organization.


REWARDING SHAREHOLDERS

Rewarding shareholders is one of our top considerations at ASICS. In principle, we pay dividends in line with profits while taking into account the need for funds to strengthen our corporate structure and grow our business. Excluding special circumstances, we allocate roughly 20% of consolidated net income for dividends. For fiscal 2016, we paid an annual dividend of 23.5 Yen per share, resulting in a consolidated dividend payout ratio of 28.7%. We have maintained the dividend at the same level for three straight terms, reflecting our firm commitment to paying stable returns to shareholders. In December 2016, we issued approximately 20 billion Yen in unsecured straight bonds to fund future growth.

Rising interest in health worldwide is likely to drive growth in the sports market over the medium and long term. In that environment, we will continue to increase corporate value by implementing the strategies in AGP2020.

We appreciate and look forward to your continued understanding and support.


May 2017

Motoi Oyama
Chairman, President and CEO, Representative Director