Nikon 2003 Annual Report Download - page 34

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7. SHAREHOLDERS’ EQUITY
The Company is subject to the Japanese Commercial Code (the “Code”) to which certain amendments became effective as from October 1,
2001.
The Code was revised whereby common stock par value was eliminated resulting in all shares being recorded with no par value and at
least 50% of the issue price of new shares is required to be recorded as common stock and the remaining net proceeds as additional paid-in
capital, which is included in capital surplus. The Code permits Japanese companies, upon approval of the Board of Directors, to issue shares
to existing shareholders without consideration as a stock split. Such issuance of shares generally does not give rise to changes within the
shareholders’ accounts.
The revised Code also provides that an amount at least equal to 10% of the aggregate amount of cash dividends and certain other
appropriations of retained earnings associated with cash outlays applicable to each period shall be appropriated as a legal reserve (a compo-
nent of retained earnings) until such reserve and additional paid-in capital equals 25% of common stock. The amount of total additional
paid-in capital and legal reserve that exceeds 25% of the common stock may be available for dividends by resolution of the shareholders.
In addition, the Code permits the transfer of a portion of additional paid-in capital and legal reserve to the common stock by resolution of the
Board of Directors.
The revised Code eliminated restrictions on the repurchase and use of treasury stock allowing Japanese companies to repurchase treasury
stock by a resolution of the shareholders at the general shareholders meeting and dispose of such treasury stock by resolution of the Board of
Directors beginning April 1, 2002. The repurchased amount of treasury stock cannot exceed the amount available for future dividend plus
amount of common stock, additional paid-in capital or legal reserve to be reduced in the case where such reduction was resolved at the
general shareholders meeting.
The amount of retained earnings available for dividends under the Code was ¥42,723 million ($355,432 thousand) as of March 31, 2003,
based on the amount recorded in the Company’s general books of account. In addition to the provision that requires an appropriation for
a legal reserve in connection with the cash payment, the Code imposes certain limitations on the amount of retained earnings available for
dividends.
Dividends are approved by the shareholders at a meeting held subsequent to the fiscal year to which the dividends are applicable.
Semiannual interim dividends may also be paid upon resolution of the Board of Directors, subject to certain limitations imposed by the Code.
On March 1, 2002, the Company made Tochigi Nikon Corporation a wholly owned subsidiary through exchange offer procedures. The
share exchange ratio was 1 common share of Tochigi Nikon Corporation for 0.58 shares of the Company. As a result, 17,748 shares of the
Company’s common stock were issued and capital surplus was increased by ¥14 million.
8. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses for the fiscal years ended March 31, 2003 and 2002 principally consisted of the following:
Advertising expenses
After service costs
Provision of warranty costs
Employees’ salaries
Employees’ retirement benefit plan
Employees’ bonuses and others
Research and development costs
Thousands of
U.S. Dollars
2003
$275,074
22,893
41,535
235,948
39,527
101,679
228,832
2002
¥27,182
2,533
6,366
29,988
3,663
14,653
27,313
2003
¥33,064
2,752
4,992
28,361
4,751
12,222
27,506
Millions of Yen
9. INCOME TAXES
The Company and its domestic subsidiaries are subject to Japanese national and local income taxes which, in the aggregate, resulted in
a normal effective statutory tax rate of approximately 42%. for the respective years.
On March 31, 2003, a new local tax law was enacted and become effective for fiscal years beginning on or after April 1, 2004. The new
local tax law decreased the local tax rate and introduced a new tax levied based on paid-in capital. As a result, the statutory effective tax rate
applied on or after April 1, 2004 to the deferred income taxes and liabilities has been decreased from 42.0% to 40.4%.