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Salt Lake City

Size Matters

Incentivisation of insiders and shareholder returns in Japan 22nd April 2016

Mike Newman

Incentive structures in

Corporate Japan all

wrong

Being blunt about Sharp

Higher ownership by management removes socialist salaryman thinking

Is it any surprise that companies tend to perform better when board members (insiders) have a

higher proportion of their remuneration linked to stock performance? Shareholders have

traditionally been well down the list of priorities of Japanese companies, much to the chagrin of

foreign investors. Stock incentives, especially in larger corporations, are often a miniscule part of

total compensation for leaders. So much so that there is little incentive to focus on chasing real

returns through more aggressive strategy. Many leaders in Japan would prefer to see out their

tenure as CEO without blemish or scandal to avoid the risk of failure and the shame it would

inevitably bring.

In hindsight looking at Sharp’s (6753) desperate long term need for crisis management could we

have honestly expected any substantial restructuring when the CEO has $33,000 in stock despite

being at the company 36 years? Had Sharp’s board held more skin in the game they might have

defended shareholders much better against Terry Gou’s constant renegotiations. Perhaps if Sharp

had learnt from Carlos Ghosn style performance based compensation structures, they might have

been able to defend their turf from Gou. As it stands now Sharp are mere whipping boys of Hon

Hai and they’ll be dealt the wrong end of the Tarot cards and have no power to prevent it.

Source: Custom Products Research

773.8%

400.7%

40.4%

-75.9% -86.5% 0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

-200.0%

-100.0%

0.0%

100.0%

200.0%

300.0%

400.0%

500.0%

600.0%

700.0%

800.0%

900.0%

10 Best Performers 50 Best Performers 50 Largest Stocks 50 Worst Performers 10 Worst Performers

Fig.1: Insider Ownership & Stock Performance in Japan (10yr returns)

Average Unweighted 1Y Return (LHS) Average Insider Shareholding


Hong Kong Tokyo

Salt Lake City

Better than corporate

governance code?

Insider ratios support returns

Bambi in the Boardroom

It also begs the question - do we really even need the rigid adoption of a Corporate Governance

Code that encourages a minimum of two independent directors. The real way to drive shareholder

returns (as we will discover) seems to be to dangle the carrot of stock options and higher insider

ownership. We have argued that Toshiba having a majority of independent directors will do

virtually nothing to resurrect fortunes.


Insiders (classified as shareholdings by the management board) seem to have a large bearing on

share price performance, clearly providing a platform of engagement with the company’s fortunes

and seemingly much more effective than just hiring two independent directors.


As we discussed in our February 4th, 2016 report, ‘Bambi in the Boardroom’, our visits to several

recruitment firms in Japan suggested that most listed corporates wanted to hire as ‘conservative

as possible’ to meet the requirements of the regulator rather than hire people that may actually

add real value. We have argued tirelessly in our corporate governance report that independent

2927.8%

1008.9%

115.5% 28.0% -51.5%

-2.00%

0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%

10 Best Performers 50 Best Performers 50 Largest Stocks 50 Worst Performers 10 Worst Performers

-500.0%

0.0%

500.0%

1000.0%

1500.0%

2000.0%

2500.0%

3000.0%

3500.0%

Fig. 2 : Insider Ownership & Stock Performance in Japan (5yr returns)

Average Unweighted 1Y Return (LHS) Average Insider Shareholding

242.6%

97.1%

-44.9%

-11.3%

-55.4%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

18.0%

20.0%

-100.0%

-50.0%

0.0%

50.0%

100.0%

150.0%

200.0%

250.0%

300.0%

10 Best Performers 50 Best Performers 50 Worst Performers 50 Largest Stocks 10 Worst Performers

Fig. 3 Insider Ownership & Stock Performance in Japan (1 year returns)

Average Unweighted 1Y Return Average Insider Shareholding

http://custprd.com/rsch/Corporate%20Governance%20in%20Japan.pdf

http://custprd.com/rsch/Corporate%20Governance%20in%20Japan.pdf

http://custprd.com/rsch/Toshiba%201%20Trillion.pdf

http://custprd.com/rsch/Bambi%20in%20the%20Boardroom.pdf


Hong Kong Tokyo

Salt Lake City

FSA

compliance but a lot of lip

service

One Year view

Reading the runes

So does the 10 year

directors should be viewed as investments not costs.

When we met the FSA late last year it seemed pleased with the progress of companies complying

with the new corporate governance code. It believed most TSE1 listed companies understood the

code’s ‘essence.’ We argued that corporates would only be too eager to admit to a thorough

understanding of the governance code, for failure to do so would only incite the wrath of the

regulator to tangle them up into further paperwork.

One Year View

On a one year view, this is how the tale of the tape falls for average insider ownership,

unweighted returns and average market capitalisation.

Fig. 4 Average Insider

Shareholding Average Unweighted

1 Year Return Average Market Cap

(¥bn)

10 Best Performers 17.20% 242.6% 185

50 Best Performers 11.33% 97.1% 287

50 Worst Performers 1.39% -44.9% 409

50 Largest Stocks 0.91% -11.3% 4,400



Five Year View

When we expand the survey to 5-year performance we see very similar results to those in the

one year with the exception that the Top 50 stocks had relatively higher insiders to the Top 10

but we are quibbling. Stocks such as MonotaRO (3064) which ranks 2nd in performance in our

screen has a small percent of insiders relative to total outstanding shares. However it is

approximately half owned by Grainger (GWW US). GWW’s David L. Rawlinson II sits on the

MonotaRO board and presumably encourages US-style returns policy.




(¥bn)

10 Best Performers 8.10% 2927.8% 236

50 Best Performers 11.20% 1008.9% 382

50 Largest Stocks 1.37% 115.5% 4,191

50 Worst Performers 1.70% 28.0% 491



10 Year View

When we expand the survey to 10 year, we again see that performance is very similar and

conclude that in the Japanese market, owner-operators tend to outperform corporates run by

salarymen who seem keen to just to preserve the status quo.




(¥bn)



50 Largest Stocks 1.34% 40.4% 4,182





Hong Kong Tokyo

Salt Lake City

Right level of insider?

1% or less has

consistently worst

performance

Small-mid cap stocks

tend to have higher

insiders

Goldilocks shareholder ratios?

So what is the ultimate level of insider ownership? We decided to breakdown the insider

ownership into segments of 0.00%~0.99%, 1.00%~1.99%, 2.00%~4.99%, 5.00%~9.99%,

10.00%~19.99%, 20.00%~29.99% and 30.00%+. This is what we discovered.


Fig.7 reveals that insider ownership below 1% consistently provides the worst returns in 1-

year, 5-year and 10-year time frames. 10%~19.99% tended to be the worst performing insider

cohort amongst the 5%+ categories. We can provide the full list of stocks to investors in

Excel. Please email me at [email protected]. Our Appendix holds a list of

stocks up to 50 names for each category.

On balance small-mid cap stocks tend to have higher ownership by insiders as founders or

their family retain vested interests. In a former life I covered ¥100 store Seria (2782) as a

fundamental analyst. The Kawai family and associated companies own around 39% of the

stock. Seria is the 7th best performer in our screen over 5-years (+1,561.7%) and 2nd best

performer over 10-years (+1,019.6%), Figs. 13-14. As an analyst I highly rated the

management on its continuous execution.

0~0.99% 1%~1.99% 2%~4.99% 5%~9.99% 10%~19.99% 20%~29.99% 30%+

1 Year -8.60% 4.5% 18.8% 8.4% 28.5% 11.3% 26.6%

5 Year 95.9% 243.5% 291.4% 424.8% 274.0% 453.2% 467.1%

10 Year 10.3% 77.8% 98.7% 119.5% 90.6% 260.2% 121.5%

-100.0%

0.0%

100.0%

200.0%

300.0%

400.0%

500.0%

Fig. 7: How much Insider Holding seems Ideal? - Performance by Insider Ratio (%)

1 Year 5 Year 10 Year

mailto:[email protected]


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Salt Lake City

Sharp

Sharp CEO owns $33k of

Sharp stock

Terry Gou owns $5bn of

Hon Hai

Crisis managers

Fig. 8 : Ten Best Performers (1 Year) – Nine have Insiders of 2%+

Ticker Company Name Price Change 1Y (%) Total % of Insiders Mkt-Cap JPY bn

6619 W-SCOPE Corporation. 557.8 15.14 80.8

4565 Sosei Group Corporation 441.5 2.25 335.2

3914 JIG-SAW, Inc. 339.4 13.97 119.4

1435 Investors Cloud Co. Ltd. 239.9 74.63 111.6

4587 Peptidream Inc. 179.2 30.95 370.2

4293 Septeni Holdings Co., Ltd. 172.8 14.02 79.2

7906 Yonex Co., Ltd. 135.6 13.88 103.1

3769 GMO Payment Gateway, 133.2 3.84 279.4

1959 Kyudenko Corporation 115.8 0.53 190.3

2685 Adastria Co.,Ltd. 110.9 2.68 183.7

Average 242.6 17.2 185.3


Fig. 9 : Ten Worst Performers (1 Year) – No insiders over 0.4%

Ticker Company Name Price Change 1Y

(%) Total % of Insiders Mkt-Cap JPY mn

3436 Sumco Corporation -67.8 0.02 202.1

8202 Laox CO.,LTD. -60.1 0.00 81.0

7013 IHI Corporation -56.1 0.05 363.5

6740 Japan Display Inc. -56.0 0.00 128.7

6807 Japan Aviation Electronics Industry -54.2 0.18 118.8

7732 Topcon Corp. -52.9 0.07 156.4

6502 Toshiba Corporation -52.3 0.03 975.1

6702 Fujitsu Limited -51.7 0.02 814.6

7240 NOK Corporation -51.5 0.39 315.8

9375 Kintetsu World Express, Inc. -51.1 0.11 102.6

Average -55.4 0.09 325.8


Sharp – Perhaps if the board were insiders they’d bargain harder

Sharp (6753) has the slightly embarrassing position of being the worst performing stock in our

screen over 5-year (-81.7%) and 10-year periods (-93.3%), Figs. 12-13. Sharp insiders hold

0.01% of outstanding shares.

Current President/CEO Kozo Takahashi holds 27,000 shares in Sharp worth $33,000. While

salary is not disclosed one can be sure that shares as a percentage of total compensation is 10%

or less. Chairman Shigeaki Mizushima holds 31,000 shares at $38,000 value. Both gentlemen

have been at Sharp since 1980.

Sharp’s new boss Terry Gou owns 12.62% (1.973bn shares) of parent Hon Hai Precision (2317

TT) or near as makes no difference US$5bn. Had Sharp’s board held more skin in the game they

might have defended shareholders much better against Terry Gou’s constant renegotiations. In a

sense Sharp must have hoped that economic recovery could help grow its way out of trouble.

Unfortunately commoditised product line ups and a technology they couldn’t monetise meant that

Sharp trod water until it had little option but to fall into the arms of the Taiwanese.

Let us be clear. Many more major corporations will go the way of Sharp. Without crisis managers

that have compensation linked to share price performance, incumbent managers simply won’t

take the risk to make drastic change.

http://www.custprd.com/rsch/Battleship%20Yamato.pdf


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Tweaking is not corp

governance friendly

Toshiba executives own small

amounts

Retirement dwarfs stock

based remuneration

Intel

Toshiba – In desperate need of crisis management

In our Jan 5th, 2016 report ‘Toshiba ended below ¥1 trillion mkt cap in 2015’ we wrote,

“The tolerance to more tweaking is the last thing Toshiba needs. Rearranging the deckchairs on

the Titanic did not stop it from sinking. It requires a Carlos Ghosn type visionary who will take to

the type of aggressive restructuring that will fix the company rather than repeated use of the

puncture repair kit.”

When we look at scandal plagued Toshiba (6502) we can argue that the management ran

relatively minor personal risks with the scandal on their minimal holdings. Corporate Exec Vice

President Naoto Nishida has been at Toshiba for 38 years yet owns $106,000 of stock (50,000

shares). Toshiba President Masashi Muromachi has 112,000 shares worth just under $240,000. In

the latest filing he received 25,000 shares for his trouble. Hardly an option scheme that will spur

him onto radical restructuring.

The problem with a lot of Japanese corporate executive management is that retirement

allowances and other benefits dwarf stock based remuneration. Therefore a Japanese CEO

invariably just wants to manage the ship until he passes the reins. Having a record of 40 years

with no blemishes trumps having a crack at true reform and vision.

We wrote in our note, ‘Japan’s Misguided Matryoshka M&A’ on December 9th 2015, that “In the

last 25 years, Intel Corp on its own has managed to make 31% more net income than all 20 of

Japan’s largest tech companies combined on a currency adjusted basis. That is right. Intel on its

own has thumped the likes of Sony, Panasonic, Toshiba, Sharp, Mitsubishi Electric, NEC, Hitachi,

Fujitsu, Fuji Film, Konica Minolta, Brother, Nidec, Kyocera, Canon, Olympus, TDK, TEL, Ricoh,

Advantest and Nikon combined.”

Source: Company data, Custom Products Research

151,348

43,065

15,076 14,240 12,414 9,832 6,187 5,772 4,921 4,648 4,254 4,030 3,147 3,101 2,404 1,979 1,911 1,723

-2,504 -3,957 -6,650 -20,000

-

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

Fig 10 : Intel vs Japan's Largest 20 Tech firms in the last 25 years (US$mn Net Profit)

http://custprd.com/rsch/Toshiba%201%20Trillion.pdf

http://www.custprd.com/rsch/Japan's%20Misguided%20Matryoshka%20MandA.pdf


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Carlos Ghosn shows

incentives can work

Clear incentives

Younger boards

perform better

Young boards and young staff

Ironically leaders like Carlos Ghosn of Nissan Motor (7201) who has ¥3bn of company stock and

was paid around ¥1bn in annual compensation at the helm of Nissan is very much the exception

not the norm. Most investors will have felt very comfortable rewarding Ghosn that it was fair

reward for turning a nearly bankrupt business into a $40bn rejuvenated, competitive and hungry

behemoth. Japanese corporates must understand that lifting the incentive proportion for

executives will please shareholders far more than hiring two independent directors who are

unlikely to rock the boat.

Buyma parent Enigmo (3665) has very clear shareholder targets for management. 50% of options

will be awarded to management if the company hits ¥3bn operating profit by FY1/2017 and 100%

if OP hits ¥5bn by FY1/2019. 41 year-old CEO Shokei Suda owns around $23mn shares.

Enigmo’s 5 year performance is 488.6% and insiders amount to c. 20% of outstanding shares.

Transparency seems to work in giving investors confidence that management is putting its money

where its mouth is.

Fig. 11 : Enigmo’s management outlines executive options based on hitting targets

Source: Enigmo

Youth in the Boardroom

In our October 16th, 2015 report ‘Age is only a number?’ we wrote,

“In terms of average performance over the last 5 years, younger boards returned 133% versus

96.8% for older boards, using 60 years old as a cut off. The best performing firm returned 915.3%

(average board age 50.6) with the older generation’s best performance of 894.7% (average board

age 64.1). The youngest board (average age 37.6 years) returned 203.4% over 5 years while the

oldest board managed just 78.1% not far off their average age of 69.9 years.”

“Combining board age and young staff we saw that the average return for the board above 60

years age and staff below the average age of 37 saw a 131% whereas boards under 60 and staff

under 37 returned 221% on the same metric. Interestingly when we analysed the average ages by

market cap decile we noted that mid cap companies tended to have the largest percentage of

young workforces which can be seen in the following chart.”

http://www.buyma.com/

http://custprd.com/rsch/Age%20shall%20not%20weary%20them.pdf


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Older boards

tend to be more likely to be embroiled

in scandal

“We have spoken of corporate governance issues in our previous reports and note that scandal

plagued companies have board averages above 60 years old. Asahi Kasei (3407) recently hit for

falsifying building data has an average age on its board of 65.4 years, Accounting scandal hit

Toshiba (6502) averages 65.7 years and Olympus (7733) 64.9 years. Takata (7312) hid defective

airbags has an average board age of 62.0 years. IHI (7013) board averages 63.7 year. Food

scandal hit Nippon Ham (2282) averages 60.3 years, pre-merger (Megmilk) Snow Brand (2270)

averages 60.8 years. Hankyu-Hanshin (9042) also hits the scales at 67.1 years. Livedoor is no

longer listed but it is fair to say these ‘incidents’ are not limited strictly to the over 60s set.”

Fig. 12 : Scandal Plagued boards tend to be aged over 60

Ticker Company Name Sector Mkt-Cap (bn yen)

Avg Employee

Age

Avg Director

Age

Price Change

since Jan 2010

9042 Hankyu Hanshin Holdings, Inc. Land Transportation 948.5 41.8 67.1 80.2

6502 Toshiba Corporation Electric Appliances 1,432.7 43.1 65.7 -33.8

3407 Asahi Kasei Corporation Chemicals 1,111.9 43.3 65.4 70.8

7733 Olympus Corp. Precision Instruments 1,298.7 43.5 64.9 27.2

7013 IHI Corporation Machinery 549.1 40.6 63.7 141.5

7312 Takata Corporation Transportation Equipment 119.2 39.8 62.0 -33.5

2270 Megmilk Snow Brand Co., Ltd. Foods 157.1 39.4 60.8 62.0

2282 NH Foods Ltd. Foods 499.0 42.2 60.3 127.7


Summary

Our investigation reveals that higher insider ownership has a strong correlation with shareholder

returns. It is unlikely that the rigid structures that pervade many large cap stocks will be able to

move substantially enough to swing stock incentivisation to a level which will change behaviours.

Among the smaller-mid cap corporates owner-operators have far more ability to swing the

pendulum to reward good behaviours that ultimately reward shareholders. It is no surprise these

stocks are outperforming.

While there is no exact science around the right number what we can deduce is that on 1, 5 and

10 year time frames insider ownership less than 1% shows consistently poorer returns than those

above. The data speak for themselves.

To those that worry about boards recklessly chasing short term targets there is no reason to

suggest that long term targets are pushed by remuneration committees with clawbacks on failure.

While the introduction of the Corporate Governance Code is certainly a positive step forward, we

conclude that foreign investors will only feel satisfied when they see a much larger step toward

share price based compensation for board members as a greater percentage of their total income.

If Prime Minister Abe needs a pump primer for the equity market this may be his best bet. Like

many things in Japan, companies often need to be goaded into accepting new practices. As much

as c. 90% of corporates on TSE1 have hired their obligatory two independent directors, if the

government mandated a much higher percentage of compensation from share performance then

that would provide a platform for companies to not only reconsider their choice of independent

directors but focus much harder on driving returns. Win-win, you know.

Prime Minister Abe, over to you.


Hong Kong Tokyo

Salt Lake City

Appendix

Fig. 13 : Twenty Best Performers (5 Year Returns) – 18 names with Insiders of 2%+

Company Name Mkt-Cap JPY bn Total % of Insiders 5-Year Return

DIP Corporation 162.3 5.91 6,375.0

MonotaRO Co., Ltd. 420.7 0.97 (50% GWW) 2,744.1

create restaurants holdings inc. 105.3 4.37 2,449.6

Kusuri No Aoki Co., Ltd. 192.2 21.29 2,155.8

Financial Products Group 129.2 2.38 2,077.6

Sosei Group Corporation 335.2 2.25 1,641.5

Seria Co., Ltd. 257.1 38.30 1,561.7

Kenkou Corp., Inc. 83.2 34.59 1,435.1

Asahi Intecc Co., Ltd. 355.3 6.33 1,326.8

Gungho Online Entertainment, 318.4 1.47 1,211.3

NEXT Co., Ltd. 144.1 34.65 1,164.3

Septeni Holdings Co., Ltd. 79.2 14.02 1,072.9

SMS Co., Ltd. 82.9 1.12 1,037.8

Ichigo Inc. 246.2 0.26 1,005.7

GMO Payment Gateway, Inc. 279.4 3.84 979.1

Relo Holdings, Inc. 224.5 2.66 968.8

Ikyu Corporation 99.7 2.26 950.7

Ai Holdings Corporation 181.9 19.85 892.3

Nihon M&A Center Inc. 264.7 20.78 890.4

Benefit One Inc. 118.1 2.33 857.7

Average 204.0 9.1 1,639.9


Fig. 14 : Twenty Best Performers (10 Year Returns) – 13 names with Insiders of 2%+


Kusuri No Aoki Co., Ltd. 192.2 21.29 1,464.8

Seria Co., Ltd. 257.1 38.30 1,019.6

Pigeon Corporation 356.7 4.82 923.0

DIP Corporation 162.3 5.91 779.3

Kakaku.com, Inc. 467.9 0.88 649.8

Pilot Corporation 210.7 0.43 647.9

GMO Payment Gateway, Inc. 279.4 3.84 611.8

Relo Holdings, Inc. 224.5 2.66 557.3

Sosei Group Corporation 335.2 2.25 542.3

Asahi Intecc Co., Ltd. 355.3 6.33 541.8

J Trust Co., Ltd. 97.0 20.77 489.8

M3, Inc. 924.3 3.32 487.7

Sysmex Corporation 1,466.6 0.51 461.1

COSMOS Pharmaceutical 382.8 13.98 450.3

Harmonic Drive Systems Inc. 272.5 3.84 441.5

Fuji Heavy Industries Ltd. 2,881.7 0.03 401.2

Nippon Shinyaku Co., Ltd. 339.0 0.19 395.4

NIPPON PAINT 866.5 0.05 384.6

Shimano Inc. 1,596.6 1.27 376.2

Ain Holdings Inc. 181.8 10.66 374.2

Zojirushi Corporation 143.5 11.87 371.7

Average 571.1 5.5 589.1



Hong Kong Tokyo

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Fig. 15 : Twenty Worst Performers (5 Year Returns) – 1 name with Insider of 2%+


Sharp Corporation 231.4 0.01 -81.7

Nippon Sheet Glass Company, Limited 76.8 0.01 -62.1

Sumco Corporation 202.1 0.02 -56.3

GREE, Inc. 156.2 51.66 -52.8

Nippon Electric Glass Co., Ltd. 292.6 0.03 -46.4

KYB Corporation 88.1 0.06 -45.5

Toshiba Corporation 975.1 0.03 -43.8

Ibiden Co., Ltd. 207.1 0.22 -42.4

Japan Steel Works, Ltd. 140.4 0.07 -42.3

Kobe Steel, Ltd. 422.7 0.05 -42.3

Inpex Corporation 1,252.0 0.02 -42.2

Kansai Electric Power Company 970.7 0.04 -42.0

Mitsui O.S.K.Lines,Ltd. 314.8 0.04 -41.4

Hokkaido Electric Power 214.6 0.06 -36.9

Japan Petroleum Exploration Co., Ltd. 141.9 0.13 -34.5

Asahi Glass Co., Ltd. 764.2 0.03 -33.8

Universal Entertainment Corporation 152.2 0.70 -31.9

Shikoku Electric Power 333.5 0.07 -31.6

Senshu Ikeda Holdings,Inc. 115.8 0.08 -29.7

Advantest Corp. 208.3 0.02 -27.8

Average 363.0 2.7 (0.1 ex-GREE) -43.4


Fig. 16 : Twenty Worst Performers (10 Year Returns) – 3 names with Insiders of 2%+



Resona Holdings, Inc. 943.6 0.01 -89.6

Aiful Corporation 192.5 13.61 -87.6


Renesas Electronics Corporation 1,133.6 0.00 -85.6

Leopalace21 Corporation 175.7 0.09 -85.6


Pioneer Corporation 122.5 0.03 -84.2

Kenedix, Inc. 127.5 0.13 -84.1

Mizuho Financial Group, Inc. 4,162.4 0.02 -82.8

Sumitomo Mitsui Construction Co., Ltd. 81.3 0.02 -82.4

Shinsei Bank, Limited 426.3 2.81 -81.6

Shinko Electric Industries Co., Ltd. 86.8 0.06 -81.2

Nomura Holdings, Inc. 1,941.5 0.03 -81.0

APLUS FINANCIAL Co., Ltd. 158.5 0.01 -80.7

SBI Holdings, Inc. 259.1 1.96 -80.6

Monex Group, Inc. 79.6 3.03 -80.5


Tokyo Electric Power Company 996.4 0.01 -79.3

Kansai Urban Banking Corporation 77.9 0.05 -79.3

Average 584.2 1.1 -83.6



Hong Kong Tokyo

Salt Lake City

Fig. 17 : Fifty Largest Companies (1 Year Returns) – 4 names with Insiders of 2%+

Ticker Company Name Price Change 1Y (%) Total % of Insiders

Mkt-Cap JPY bn

7203 Toyota Motor Corp. -30.6 0.14 19,160.1

9437 NTT DoCoMo, Inc. 22.9 0.00 10,808.8

9432 Nippon Telegraph and Telephone 24.8 0.00 10,496.6

2914 Japan Tobacco Inc. 17.3 0.00 9,536.0

9433 KDDI Corporation 10.7 0.02 8,524.7

8306 Mitsubishi UFJ Financial Group, Inc. -31.9 0.01 7,563.3

9984 SoftBank Group Corp. -21.1 19.37 7,222.0

6178 Japan Post Holdings Co. Ltd. -10.1 0.00 6,894.0

7182 Japan Post Bank Co., Ltd. -10.3 0.00 6,259.5

7267 Honda Motor Co., Ltd. -26.8 0.02 5,497.7

8316 Sumitomo Mitsui Financial Group, Inc. -25.6 0.01 4,971.8

7201 Nissan Motor Co., Ltd. -18.4 0.07 4,582.4

7751 Canon Inc. -26.6 0.02 4,398.8

4502 Takeda Pharmaceutical Co. Ltd. -9.8 0.11 4,288.6

3382 Seven & I Holdings Co., Ltd. -12.0 1.09 4,253.1

8411 Mizuho Financial Group, Inc. -21.7 0.02 4,162.4

9022 Central Japan Railway Company -8.4 0.04 4,160.2

9020 East Japan Railway Company -6.8 0.02 3,923.4

6954 Fanuc Corporation -30.5 0.01 3,811.0

6861 Keyence Corporation -4.6 7.71 3,805.0

6902 DENSO CORPORATION -24.4 0.03 3,789.1

6758 Sony Corporation -22.3 0.00 3,705.3

4503 Astellas Pharma Inc. -19.8 0.01 3,424.9

5108 Bridgestone Corporation -18.0 0.01 3,337.8

1321 Nikkei 225 Exchange Traded Fund -14.8 0.00 3,314.2

6981 Murata Manufacturing Co., Ltd. -18.2 0.69 3,202.1

8058 Mitsubishi Corporation -18.4 0.05 3,155.5

9983 Fast Retailing -39.8 21.68 3,141.4

4528 ONO Pharmaceutical Co., Ltd. 97.6 0.28 2,978.0

8802 Mitsubishi Estate Company, Limited -25.6 0.02 2,967.1

4452 Kao Corp. -3.8 0.03 2,958.0

4689 Yahoo Japan Corporation -1.9 0.00 2,921.7

7270 Fuji Heavy Industries Ltd. -6.9 0.03 2,881.7

8766 Tokio Marine Holdings, Inc. -20.8 0.02 2,849.0

4661 Oriental Land Co., Ltd. -10.8 0.09 2,800.8

8801 Mitsui Fudosan Co., Ltd. -23.5 0.02 2,738.8

1306 TOPIX ETF -14.1 0.00 2,730.1

6503 Mitsubishi Electric Corp. -17.5 0.02 2,684.0

4063 Shin-Etsu Chemical Co Ltd -19.9 0.10 2,647.5

6367 Daikin Industries, Ltd. 8.8 0.05 2,586.7

6501 Hitachi,Ltd. -35.5 0.02 2,514.9

6752 Panasonic Corporation -35.9 0.26 2,447.2

4578 Otsuka Holdings Co., Ltd. 14.8 1.58 2,445.6

8031 Mitsui & Co.,Ltd -15.7 0.02 2,401.0

7974 Nintendo Co., Ltd. -15.1 0.01 2,394.9

8001 Itochu Corporation 3.0 0.04 2,360.5

5401 Nippon Steel & Sumitomo Metal Corp. -22.1 0.02 2,264.1

6594 Nidec Corporation -8.6 14.28 2,208.3

4901 Fujifilm Holdings Corporation -7.2 0.01 2,202.6

8591 ORIX Corporation -9.9 0.03 2,152.9

Average -11.3 1.4 4,370.5



Hong Kong Tokyo

Salt Lake City

Fig. 18 : Fifty Best Performers (1 Year return) – 32 names have Insiders of 2%+


6619 W-SCOPE Corporation. 557.8 15.14 80.8

4565 Sosei Group Corporation 441.5 2.25 335.2

3914 JIG-SAW, Inc. 339.4 13.97 119.4

1435 Investors Cloud Co. Ltd. 239.9 74.63 111.6

4587 Peptidream Inc. 179.2 30.95 370.2

4293 Septeni Holdings Co., Ltd. 172.8 14.02 79.2

7906 Yonex Co., Ltd. 135.6 13.88 103.1

3769 GMO Payment Gateway, Inc. 133.2 3.84 279.4

1959 Kyudenko Corporation 115.8 0.53 190.3

2685 Adastria Co.,Ltd. 110.9 2.68 183.7

4528 ONO Pharmaceutical Co., Ltd. 97.6 0.28 2,978.0

2120 NEXT Co., Ltd. 96.1 34.65 144.1

5122 Okamoto Industries, Inc. 95.8 3.31 96.8

6728 ULVAC, Inc. 95.7 0.15 181.1

4849 En-Japan Inc. 88.2 13.49 87.0

4912 Lion Corporation 86.6 0.26 419.1

2270 MEGMILK SNOW BRAND Co., Ltd. 83.3 0.08 188.1

4246 DaikyoNishikawa Corp. 76.8 0.07 119.2

1332 Nippon Suisan Kaisha, Ltd. 68.1 0.12 167.7

3387 create restaurants holdings inc. 67.5 4.37 105.3

2678 ASKUL Corporation 65.6 2.58 254.2

6641 Nissin Electric Co., Ltd. 65.0 0.28 144.0

2379 DIP Corporation 63.8 5.91 162.3

2782 Seria Co., Ltd. 63.8 38.30 257.1

6750 Elecom Co., Ltd. 62.9 30.13 87.6

9474 Zenrin Co., Ltd. 61.7 2.93 88.1

9766 KONAMI HOLDINGS CORP 60.9 0.24 534.5

9616 Kyoritsu Maintenance Co., Ltd. 60.4 3.84 183.3

3064 MonotaRO Co., Ltd. 59.8 0.97 (50% GWW) 420.7

4571 NanoCarrier Co., Ltd. 57.2 3.78 81.5

6005 Miura Co., Ltd. 55.1 0.34 264.7

2127 Nihon M&A Center Inc. 54.3 20.78 264.7

8920 Tosho Co., Ltd. 54.2 60.91 85.9

2331 Sohgo Security Services Co., Ltd. 53.4 2.98 634.7

8572 ACOM Co., Ltd. 53.0 2.35 935.4

2871 Nichirei Corporation 52.3 0.07 286.1

2815 ARIAKE JAPAN Co., Ltd. 51.6 0.47 208.3

3148 Create SD Holdings Co., Ltd. 48.9 25.98 181.7

2001 Nippon Flour Mills Co., Ltd. 47.3 0.39 141.8

3288 Open House Co., Ltd. 46.9 45.27 132.6

3092 Start Today Co., Ltd. 46.7 43.94 507.7

2337 Ichigo Inc. 45.8 0.26 246.2

2681 GEO Holdings Corporation 45.3 1.32 90.4

1766 Token Corporation 44.7 14.55 120.3

4922 Kose Corporation 43.1 36.61 658.0

1333 Maruha Nichiro Corp. 42.6 0.09 126.1

3076 Ai Holdings Corporation 42.4 19.85 181.9

7747 Asahi Intecc Co., Ltd. 42.2 6.33 355.3

2450 Ikyu Corporation 41.9 2.26 99.7

7779 CYBERDYNE Inc. 40.3 0.30 288.6

Average 97.1 11.3 287.3



Hong Kong Tokyo

Salt Lake City

Fig. 19 : Fifty Worst Performers (1 Year returns) – Only 3 names have Insiders of 2%+


3436 Sumco Corporation -67.8 0.02 202.1

8202 Laox CO.,LTD. -60.1 0.00 81.0

7013 IHI Corporation -56.1 0.05 363.5

6740 Japan Display Inc. -56.0 0.00 128.7

6807 Japan Aviation Electronics -54.2 0.18 118.8

7732 Topcon Corp. -52.9 0.07 156.4

6502 Toshiba Corporation -52.3 0.03 975.1

6702 Fujitsu Limited -51.7 0.02 814.6

7240 NOK Corporation -51.5 0.39 315.8

9375 Kintetsu World Express, Inc. -51.1 0.11 102.6

6479 Minebea Co Limited -50.1 0.09 368.0

5406 Kobe Steel, Ltd. -49.6 0.05 422.7

8385 Iyo Bank, Ltd. -49.3 0.06 235.4

6753 Sharp Corporation -48.7 0.01 231.4

6474 Nachi-Fujikoshi Corp. -47.5 0.32 91.5

7012 Kawasaki Heavy Industries Ltd. -47.3 0.03 538.0

9706 Japan Airport Terminal Co., Ltd. -47.1 0.16 337.9

8377 Hokuhoku Financial Group, Inc. -46.7 0.04 198.7

6472 NTN Corporation -46.3 0.10 188.5

6471 NSK Ltd. -45.7 0.13 549.1

3099 Isetan Mitsukoshi Holdings -45.4 0.05 489.1

6877 Obara Group Incorporated -45.2 12.37 86.3

4755 Rakuten, Inc. -45.1 12.33 1,824.9

6816 Alpine Electronics, Inc. -44.7 0.17 88.1

8334 Gunma Bank, Ltd. -44.2 0.07 215.7

8359 Hachijuni Bank, Ltd. -43.6 0.08 253.0

6302 Sumitomo Heavy Industries, Ltd. -42.8 0.11 287.6

1662 Japan Petroleum Exploration -42.7 0.13 141.9

8327 Nishi-Nippon City Bank, Ltd. -42.5 0.02 162.5

8544 Keiyo Bank, Ltd. -41.0 0.18 119.3

8369 Bank of Kyoto, Ltd. -41.0 0.11 285.5

8341 77 Bank, Ltd. -40.9 0.34 151.8

1821 Sumitomo Mitsui Construction -40.1 0.02 81.3

6703 OKI Electric Industry Company -39.8 0.06 131.7

9983 Fast Retailing -39.8 21.68 3,141.4

6588 Toshiba Tec Corp. -39.7 0.06 124.8

6770 Alps Electric Co., Ltd. -39.6 0.52 372.9

6963 Rohm Co., Ltd. -39.5 0.02 554.0

1605 Inpex Corporation -39.4 0.02 1,252.0

6976 Taiyo Yuden Co., Ltd. -39.2 0.08 136.7

7177 GMO CLICK Holdings, Inc. -38.7 0.73 83.9

8354 Fukuoka Financial Group, Inc. -38.5 0.05 331.0

8331 Chiba Bank, Ltd. -38.1 0.03 502.5

7272 Yamaha Motor Co., Ltd. -37.4 0.09 648.7

7224 Shinmaywa Industries,Ltd. -37.3 0.11 75.9

8333 Joyo Bank, Ltd. -37.2 0.09 301.9

8379 Hiroshima Bank Ltd. -37.0 0.03 260.1

2267 Yakult Honsha Co., Ltd. -37.0 0.17 918.3

8524 North Pacific Bank, Ltd. -36.9 0.11 113.7

4612 Nippon Paint Hldgs -36.7 0.05 866.5

Average -44.9 1.0 408.5



Hong Kong Tokyo

Salt Lake City


Company Name Mkt-Cap JPY bn Total % of Insiders

5-Year Return

Toyota Motor Corp. 19,160.1 0.14 78.0

NTT DoCoMo, Inc. 10,808.8 0.00 84.0

Nippon Telegraph and Telephone Corporation 10,496.6 0.00 168.1

Japan Tobacco Inc. 9,536.0 0.00 205.3

KDDI Corporation 8,524.7 0.02 284.8

Mitsubishi UFJ Financial Group, Inc. 7,563.3 0.01 41.8

SoftBank Group Corp. 7,222.0 19.37 74.7

Honda Motor Co., Ltd. 5,497.7 0.02 0.2

Sumitomo Mitsui Financial Group, Inc. 4,971.8 0.01 46.4

Nissan Motor Co., Ltd. 4,582.4 0.07 40.5

Canon Inc. 4,398.8 0.02 -6.6

Takeda Pharmaceutical Co. Ltd. 4,288.6 0.11 37.3

Seven & I Holdings Co., Ltd. 4,253.1 1.09 124.8

Mizuho Financial Group, Inc. 4,162.4 0.02 34.7

Central Japan Railway Company 4,160.2 0.04 228.2

East Japan Railway Company 3,923.4 0.02 128.5

Fanuc Corporation 3,811.0 0.01 40.3

Keyence Corporation 3,805.0 7.71 251.7

DENSO CORPORATION 3,789.1 0.03 64.7

Sony Corporation 3,705.3 0.00 23.1

Astellas Pharma Inc. 3,424.9 0.01 144.8

Bridgestone Corporation 3,337.8 0.01 141.3

Nikkei 225 Exchange Traded Fund 3,314.2 0.00 78.3

Murata Manufacturing Co., Ltd. 3,202.1 0.69 156.2

Mitsubishi Corporation 3,155.5 0.05 -11.2

FAST RETAILING CO., LTD. 3,141.4 21.68 145.6

ONO Pharmaceutical Co., Ltd. 2,978.0 0.28 535.7

Mitsubishi Estate Company, Limited 2,967.1 0.02 52.3

Kao Corp. 2,958.0 0.03 184.1

Yahoo Japan Corporation 2,921.7 0.00 82.9

Fuji Heavy Industries Ltd. 2,881.7 0.03 550.5

Tokio Marine Holdings, Inc. 2,849.0 0.02 61.2

Oriental Land Co., Ltd. 2,800.8 0.09 354.8

Mitsui Fudosan Co., Ltd. 2,738.8 0.02 103.5

TOPIX ETF 2,730.1 0.00 64.5

Mitsubishi Electric Corp. 2,684.0 0.02 43.8

Shin-Etsu Chemical Co Ltd 2,647.5 0.10 46.8

Daikin Industries, Ltd. 2,586.7 0.05 264.0

Hitachi,Ltd. 2,514.9 0.02 30.2

Panasonic Corporation 2,447.2 0.26 1.6

Otsuka Holdings Co., Ltd. 2,445.6 1.58 102.3

Mitsui & Co.,Ltd 2,401.0 0.02 -4.3

Nintendo Co., Ltd. 2,394.9 0.01 -15.0

Itochu Corporation 2,360.5 0.04 75.5

Nippon Steel & Sumitomo Metal Corp. 2,264.1 0.02 -2.2

Nidec Corporation 2,208.3 14.28 131.4

Fujifilm Holdings Corporation 2,202.6 0.01 72.6

ORIX Corporation 2,152.9 0.03 115.4

Eisai Co., Ltd. 2,113.0 0.29 139.5

Chugai Pharmaceutical Co., Ltd. 2,056.8 0.19 176.3

Average 4,190.8 1.4 115.5



Hong Kong Tokyo

Salt Lake City




Resona Holdings, Inc. 943.6 0.01 -89.6

Aiful Corporation 192.5 13.61 -87.6


Renesas Electronics Corporation 1,133.6 0.00 -85.6

Leopalace21 Corporation 175.7 0.09 -85.6


Pioneer Corporation 122.5 0.03 -84.2

Kenedix, Inc. 127.5 0.13 -84.1

Mizuho Financial Group, Inc. 4,162.4 0.02 -82.8

Sumitomo Mitsui Construction Co., Ltd. 81.3 0.02 -82.4

Shinsei Bank, Limited 426.3 2.81 -81.6

Shinko Electric Industries Co., Ltd. 86.8 0.06 -81.2

Nomura Holdings, Inc. 1,941.5 0.03 -81.0

APLUS FINANCIAL Co., Ltd. 158.5 0.01 -80.7

SBI Holdings, Inc. 259.1 1.96 -80.6

Monex Group, Inc. 79.6 3.03 -80.5


Tokyo Electric Power Company 996.4 0.01 -79.3

Kansai Urban Banking Corporation 77.9 0.05 -79.3

Sumitomo Mitsui Trust Holdings, Inc. 1,342.4 0.02 -78.9

Showa Denko K.K. 166.2 0.10 -78.4

Mitsui Mining and Smelting Company, Limited 110.0 0.10 -75.9

Laox CO.,LTD. 81.0 0.00 -75.6

T&D Holdings, Inc. 771.4 0.03 -75.2

Ibiden Co., Ltd. 207.1 0.22 -73.3

Daikyo Incorporated 146.8 0.07 -73.1

Sega Sammy Holdings Inc. 329.1 13.08 -72.9

Kobe Steel, Ltd. 422.7 0.05 -72.6

Sumitomo Mitsui Financial Group, Inc. 4,971.8 0.01 -72.3

Orient Corporation 393.4 0.01 -72.2

Tokyo Steel Manufacturing Co., Ltd. 105.8 0.13 -71.8

Inpex Corporation 1,252.0 0.02 -71.7

Furukawa Electric Co., Ltd. 182.3 0.04 -71.7

Mitsubishi UFJ Financial Group, Inc. 7,563.3 0.01 -70.7

Japan Petroleum Exploration Co., Ltd. 141.9 0.13 -69.9

Mitsubishi Motors Corporation 833.2 0.01 -69.8

Hokuhoku Financial Group, Inc. 198.7 0.04 -69.5

Chiyoda Corp. 223.6 0.09 -68.2

Mitsui O.S.K.Lines,Ltd. 314.8 0.04 -68.1

Toshiba Corporation 975.1 0.03 -68.0

Nippon Yusen Kabushiki Kaisha 384.3 0.06 -68.0

Sojitz Corp. 287.8 0.07 -67.9

Nishi-Nippon City Bank, Ltd. 162.5 0.02 -67.6

Nippon Electric Glass Co., Ltd. 292.6 0.03 -67.6

NEC Corp. 734.5 0.02 -67.6

EDION Corp 100.0 3.23 -66.7

Tokyo Seimitsu Co., Ltd 94.8 0.13 -66.6

Ichigo Inc. 246.2 0.26 -66.3

Credit Saison Co., Ltd. 372.9 0.11 -65.3

Average 701.8 0.8 -75.9



Hong Kong Tokyo

Salt Lake City

Hong Kong 15/F Langham Place 8 Argyle Street Mong Kok, Kowloon Hong Kong S.A.R.

Tokyo 17/F Roppongi Hills North Tower 6-2-31 Roppongi, Minato-ku, Tokyo Japan 106-0032

Office Locations

Hong Kong Simon Rigney

+852-3958-2394 (HK) +81-3-5786-3712 (Tokyo) [email protected]

Tokyo Robert Rowland

+81-3-5786-3711 [email protected]

Michael Newman

+81-3-5786-3713 [email protected]

Contacts

Salt Lake City Patrick Hansen

+852-8191-6925 (HK) +1-801-230-4796 (SLC) [email protected]

Important Disclosures:

This material was prepared for you and is for your information and use only. This material

should only be distributed to other members of that organization on a need to know basis and

should not be distributed or disseminated to any other person or entity.

This material is for information purposes only and it should not be regarded as an offer to sell or

as a solicitation of an offer to buy the securities or other instruments mentioned in it. This

material is based on current public information that Custom Products Group Limited ("Custom

Products") considers reliable, but we make no representation that it is accurate or complete,

and it should not be relied on as such. No investment opinion or advice is provided, intended,

or solicited. Custom Products offers no warranty, either expressed or implied, regarding the

veracity of data or interpretations of data included in this report. This material is provided with

the understanding that Custom Products is not acting in a fiduciary capacity. Opinions

expressed herein reflect the opinion of Custom Products and are subject to change without

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The products mentioned in this document may not be eligible for sale in some states or

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Value and income may be adversely affected by exchange rates, interest rates, or other

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