mid to long-term management plan

SUNNY SIDE UP GROUP

Medium- to Long-Term Management Plan

August 13, 2014

December 19, 2014※the revision reflected a change in a subsidiary

(Securities Code: 2180 / JASDAQ Growth)

SUNNY SIDE UP Inc.

“Road to 2020 and beyond”

Copyright (c) SUNNY SIDE UP Inc. All rights reserved. 1

Roa

d t

o 2

020 a

nd

beyon

dkey message

The SUNNY SIDE UP Group (the “Group”) will commit to maximizing shareholder value by setting

ROE as one of our most important management indicators. We have thus been pursuing profitability

and operation efficiency after successfully evolving our business structures, aimed at bolstering growth

not only in our ongoing contract businesses but also through developing new businesses.

To achieve our goal, we also position the year 2020, when Tokyo will attract global attention,

as a crucial milestone steering our dramatic progress.


1. Review: Medium-Term Plan for FY2011-2013

- Positioning of the Plan

- Topic 1: A merger of Hong Kong trading house WIST INTERNATIONAL LIMITED and dissolution of capital ties with it

- Topic 2: Overseas inroads of our “bills” operation

- Topic 3: Globalization and solid growth in existing businesses

- Numerical management targets and outcomes

2. Medium- to Long-Term Management Visions

3. Numerical Management Targets toward FY2016 and FY2020

4. Two Axes to Accelerate Our Medium- to Long-Term Growth: Global expansion with emphasis on Asia and our focus on

Stock-type business models

5. Spurring Global Operations

- Case 1: Strategic partnership with Total Sports Asia which has offices in five countries in Asia

- Case 2: OMOTENASHI NIPPON project

6. Focus on Developing Stock-Type Business Models

- Case 1: Building solid earnings base with further openings of “bills” in Japan

- Case 2: Solution business offering professional talents

7. Pursuing Improved ROE, a New Measure for Our Business Achievement

Note: FYxx above and hereafter means our fiscal year starting from July 1, 20xx.

Roa

d t

o 2

020 a

nd

beyon

dindex


Review: Medium-Term Plan for FY2011-2013

Roa

d t

o 2

020 a

nd

beyon

d

Copyright (c) SUNNY SIDE UP Inc. All rights reserved.

1. Positioning of the Plan – Successfully reengineered our business structure –

We have completed business restructurings aimed for evolving into a new entity. In addition to bolstering existing operationswhich center on marketing communications including PR activities, we also accelerated business developments through capitalizing our know-how of the existing businesses. This reengineering proved very successful, leading us to a new stage.

Roa

d t

o 2

020 a

nd

beyon

d

Steady growth in contract businesses

� Image of earnings growth

Accelerated growth through new business developments

段階的な事業構造転換期

FY11 FY12 FY13 FYXX


Period of step-by-step business restructuring

1. Review: Medium-Term Plan for FY2011-2013 – A merger of Hong Kong trading house WIST INTERNATIONAL LIMITED and dissolution of capital ties with it –

After owning a stake in the firm, unexpected wage hikes (in mainland China) and sharp depreciation of the Japanese yen hurt price competitiveness, even though the firm had contributed to revenue growth in operations including merchandizing. We minimized the losses by promptly dissolving capital ties and at the same time secured alternative manufacturing lines to sustain our existing business model.

Point 1: Contributed to the Group revenue growth Point 2: Broadened our business areas Point 3: Prompted inroads to Asia

Enabled procuring products from high quality manufacture outsourcing

Won high appraisals from large-scale clients as these products helped hit promotions in

industries including restaurant, information/communication and auto.

Helped win orders in global campaigns

Allowed us to gain deeper knowledge in merchandizing

Capitalized this knowledge in pursuing new business creations for medium-term growth

� Contributed to contract businesses � Enabled us to form business networks in Asia, our strategic marketplace

� Contributed to new business developments

(Unit: ¥ million)

� WIST contributed to revenue growth amid the medium-term plan before the equity stake was sold out at the end of November 2013

3,066 3,301

1,108 0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

FY11 FY12 FY13 FY14

10,374

13,018

12,443

↑

No impact on FY14 and beyond after the sellout of the stake

Group Net Sales

WIST Net Sales


Roa

d t

o 2

020 a

nd

beyon

d

1. Review: Medium-Term Plan for FY2011-2013 – Overseas inroads of our “bills” operation –

We opened our first overseas “bills” in Hawaii as a foothold in globalization, adding to sustained growth in Japan. Its profitability has been rising in line with expectations, most likely shortening its payback period, despite a delay in its opening due to prolonged official permissions and construction works.

Point 1: Fully renewed approach for global stretch

� Previous structure: affiliates were jointly formed with partners

SSU Partner

51% 49%

100%

Flypan Inc

FlypanHawaii, Inc

51% 49%

100%

Flypan Inc

SSU HAWAII INC

� To boost global extensions, we thoroughly reviewed our initial strategies, buying up the rest of the stakes in our joint venture with growth prospects and converting it into a 100%-owned, fully-controlled operating subsidiary. In contrast, domestic operations remain in joint venture format.

Point 2: Our 29th fiscal year-Disparities between actual results and initial plan

Point 3: Operation performance at “bills” in Hawaii

� Opportunity losses in net sales and incomes arising from the delay of some 3 months in therestaurant opening

� Other unexpected expenses incurred from additional groundwork, rents and labor costs

� Increased expenses due to the buyout of a stake in the joint venture aimed for bolstering global reach

April JulyMay June

� Uptrend sales with some volatility

� Trying to quicken its payback through PR activities and improved daily operations

(Net sales: vs. initial budget)

Budget=100%

SSU Partner

August


Roa

d t

o 2

020 a

nd

beyon

d

1,688

2,180

3,0203,143

0

500

1,000

1,500

2,000

2,500

3,000

3,500

FY10 FY11 FY12 FY13

382361

530550

0

100

200

300

400

500

600

FY10 FY11 FY12 FY13

1. Review: Medium-Term Plan for FY2011-2013 – Solid growth in existing businesses –

Our Communication Business, the Group’s base for net sales and incomes, achieved record results with continued steady performance in line with favorable market growth.From this fiscal year on, the business should be on track for solid growth with our efforts to further enhance profitability.

Communication Business Net Sales Communication Business Segment Income

(Unit: ¥ million)


Roa

d t

o 2

020 a

nd

beyon

d

1. Review: Medium-Term Plan for FY2011-2013 – Globalization in existing businesses –

Our global operations have gained momentum in such businesses as Sports which is our Group’s flagship, Merchandizing and other existing areas. We also built an operation base to support further globalization, new businesses included.

Key Topics:

� Led “RockCorps” Events

Tying up with US social production company RockCorps, we as a business partner in Japan held the program "RockCorps, events which have been attracting more than 140,000 people as volunteers or as guests to the live events in nine countries.

� Overseas Promotion Activities for Global Entities

We achieved great success in extending effective domestic promotion activities of the world’s largest fast-food restaurant chains to Asia. Similar developments are currently carried out in Europe.

� London Olympics PR Project

In the 2012 London Olympics, we supported PR of medalists’ press conferences held at the Japan House prepared at events venue Hamilton Place in London. We also promoted “ARIGATO in LONDON”, an event held at London County Hall.

� “nakata.net Café 2014” at the 2014 FIFA World Cup Brazil

We opened “nakata.net Café 2014” in San Paolo for a limitedtime during the game. It functioned as a spot to disseminateJapanese culture and also a hospitality center offeringinformation and infrastructure.

… and more


Roa

d t

o 2

020 a

nd

beyon

d

1. Review: Medium-Term Plan for FY2011-2013 – Numerical management targets and outcomes –

We hold ourselves accountable from a management perspective for the decline in the Group’s operational performancein the final fiscal year of the medium-term plan; however, we maintained the same dividend amount as that of the previous term.This is because the negative factors were mainly of anomalous nature which is irrelevant to our fundamental earnings schemes,and in fact we achieved net sales target of the plan.

Operational Metrics Capital Policy Metrics

① Net sales ¥10 billion

② Operating income margin 5.5％

Final Fiscal Year Targets (initial)

CY11 CY12 CY13 CY11 CY12 CY13CY11 CY12 CY13 CY11 CY12 CY13

(Reference: Total amount of dividends paid）

③ Payout Ratio 30%

¥10.3 billion

� Target was achieved in the first fiscal year of the plan

� Posted record sales of ¥13 billion

¥13.0 billion¥12.4 billion

2.3%

3.1%

0.4%

11.9%

20.0%

-%

� Final fiscal year target fell short due to one-time losses with the ratio improving partially

¥25 million

¥70 million ¥70 million

Achieved Unachieved Final fiscal year total amount was maintained despite a net deficit

FY11 FY12 FY13 FY11 FY12 FY13 FY11 FY12 FY13 FY11 FY12 FY13

(*3.3%)

(* Real-term operating income of ¥400 million assuming no one-time losses)

We will commit to shareholder-focused management pursuing shareholder returns.


Roa

d t

o 2

020 a

nd

beyon

d

Medium- to Long-Term Management Visions & New Targets

Roa

d t

o 2

020 a

nd

beyon

d


Integration to a global enterprise from a pioneer in PR and sports businesses.After a take-off period in the coming three years and the harvest stage which will follow, we will seek dramatic growth beyond the year 2020, when Tokyo will become the focus of world attention.

Profits

FY11 FY12 FY13 FY14 FY15 CY16 FY17 FY18 FY19 FY21 FY22 ・・・ FYXXChallenges

Medium-Term Plan (FY11-13)“Structural shifts to an

Innovative trade house of PR”

Medium- to Long-Term Plan (FY14-20)

“Road to 2020 and beyond”

FY20FY16

Structural reengineering of operations to pursue growth through new business developments

Approaches toward a great leap by capitalizing onour accumulated knowledge & know-how

Substantial evolution and profit expansion with the year 2020 as a great opportunity


2. Medium- to Long-term Management Visions – Implication of the year 2020 & roadmap –R

oa

d t

o 2

020 a

nd

beyon

d

We set up three management visions in order to realize our desire to conduct world scale business activitiesby pursuing our universal philosophy: “Let’s have fun!”

Adhere to our philosophy since foundation: “Let’s have fun!”

Drive high margin operations by focusing on Asia

Seek high ROE

Boost globalization of our business fields

Maximize shareholder value

Never-ending odyssey for creativity and innovation1.

2.

3.


2. Medium- to Long-term Management Visions R

oa

d t

o 2

020 a

nd

beyon

d

The ideal corporate quality we seek to achieve is a lean structure which supports global activities. We focus on ROE as a crucial metric in maximizing shareholder value in order to meet expectations and win the trust of diverse stakeholders.

1.

2.

3.

Net Sales

Operating Income Margin (OI Amount)

ROE

7.0% (¥1.85 billion)

40%

¥26.5 billion


3. Numerical Management Targets toward FY2020R

oa

d t

o 2

020 a

nd

beyon

d

We pursue a management way of placing emphasis on not only operating income but also ordinary income,a more comprehensive measure, as we diversify operations into new businesses that we have been cultivating. We aim to achieve financial targets without fail for the third and final year of the take-off period.

10,37413,018 12,443

14,000

26,500

345558

153

800

1,855

0

1,000

2,000

3,000

4,000

5,000

6,000

0

5,000

10,000

15,000

20,000

25,000

30,000

FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20

売上経常利益当期純利益

� Net Sales Growth Image � Ordinary Income Growth Image� Growth Contributors

CY13 CY16Existing “bills” New Existing “bills” New

¥12,443 mn

¥14,000 mn

+¥600 mn

+¥1,000 mn

±0

+¥200 mn

+¥150 mn

+¥50 mn

¥400 mn

¥800 mn

• Existing

Incomes to rise due to improved profitability on

stabilized net sales

• “bills”

Both net sales and incomes to increase owing to

full-scale contributions from new restaurants

• New

Net sales and incomes should grow as a flurry of

new businesses bolsters medium- to long-term

growth (details follow)

� Financial Targets: (Unit: ¥ million)

Real-term value assuming no one-time losses

CY13FY13 CY13FY16 CY13FY13 CY13FY16

Forecasts


Netsales

Ordinary income

Netincome

3. Numerical Management Targets toward FY2016R

oa

d t

o 2

020 a

nd

beyon

d

Globalization & Focus of Operations Driving Medium- to Long-Term Growth

Roa

d t

o 2

020 a

nd

beyon

d


4. Two Axes to Accelerate Our Medium- to Long-Term Growth

Globalization and business focus: the two axes we are committed to in carrying out medium- to long-term business developments

PR SPORTS SP MD “bills”Domains→

ToB

Temporary staff

supports

Stock-type

・Maintain・Add onToC

Investing・Operational

returns

・CG ・Dividends

↓Business ModelsNEW

New DomainBusinesses[Media]

[Solution][Contents]

Synergy PursuingInvestments

Potential Growth Investments

Current Domain Drivers

・ PR ・Promotion ・Event・ CP ・Publicity Rights ・Goods

Foods/Beverages

Active involvements Close attention to opportunities

Resource reallocation to profitable operations

Prompt business developments focusing on high-margin and stock-type business models, beyond ongoing flow-type contract businesses.

Axis 2: Business FocusAxis 1: Globalization

Create cross-border business opportunities with a focus on Asia, as was carried out in the previous medium-term plan (FY11-13).

ASIA


Roa

d t

o 2

020 a

nd

beyon

d

We are partnering with Total Sports Asia (TSA), a No.1 independent sports marketing agency.Integrating its networks with the Group’s know-how, we aim to secure our position in sports and PR businesses in the fast-growing Asian markets. This should enable synergies with our existing businesses and accelerate inroads to Asia, our new target market.

Extending global activities ranging from media businesses to sponsorship and branding with its bases located in five countries in Asia.

A lot of track records in property developments promoted by world-popular athletes including Maria Sharapova and Michael Schumacher

Conducting media businesses and rights projects for a wide variety of sports

Roa

d t

o 2

020 a

nd

beyon

d5. Spurring Global Operations – Case 1: Strategic partnership to prompt inroads to Asia –

Brand activation at the Great Wall of China, a World Heritage with outstanding PR impacts


We offer lineups for a wide variety of strategic activities which accommodate increasingly heated-up sports movements triggered by major events such as the World Cup and the Olympics. Furthermore, our new product developments and full-scale entries into a stock-type marketing businesses, including a slew of services, should lead us to piece out our sports business integration.

Sports promotion business

Sports rights and contents business

New: Body & healthcare products, etc.

New: e-Sports learning

New: Sports conventions

Sports casting business

New: Training services

Sports media business

Sports sponsored business

Sports Marketing Business

Roa

d t

o 2

020 a

nd

beyon

d(Our Approaches to Sports Marketing)


Sunny Side Up

Do Sports

Biz Sports

Fun Sports

5. Spurring Global Operations – Case 1: Strategic partnership to accelerate inroads to Asia –

Creation of opportunities through establishing footprints in Asia should drive our growth in such areas as business developments, sports and contract operations, both respectively and integrally.

Business Development Arena

Japan

Asia

Active involvements Focus on sports marketing beyond athlete management Sustained solid growth

Area expansions in parallel with Japan

Horizontal extensionof successful cases

in Japan

Horizontal extension of successful cases

in Japan

• China• India• Malaysia• Singapore• Indonesia


Sports ArenaContract Operation

Arena

Roa

d t

o 2

020 a

nd

beyon

d

Promote Japan’s omotenashi toward the world’s OMOTENASHI

Wide Publication

CultivateTalents

EnhanceQuality

Sales Supports

Develop Services

Proactive project to publicize the OMOTENASHI brand both at home and abroad

Branding

Make omotenashi mind visible and set afloat as a brand- Disseminate information to the entire world -

Building up stock-type businesses through gaining branding charges such as royalties by establishing licenses representative of Japan toward the year 2020 when Tokyo will attract global attention.

Roa

d t

o 2

020 a

nd

beyon

d

Cultivate Talents

Corporates

Consumers

Join programs

Official programs

etc.

ProduceBrands

Next-GenerationResearches

GlobalPromotion

Designing activities, system

s and structures aim

ing for diffusion and branding of om

otenashi

The OMOTENASHI NIPPON is a “brand development/publication project” functioning as a business platform, helping publication of and logistics for corporates/associations offering omotenashi (hospitality) and relevant products/services. The project also searches products, services, corporates and talents stemming from the omotenashi mind, which Japan is universally proud of, and promotes them worldwide to have “OMOTENASHI” recognized as a global brand.

Project OutlinesBusiness Visions

(Collaborating Project Partners)


5. Spurring Global Operations – Case 2: OMOTENASHI NIPPON Project –

Participation

Publication/logistics supports

6. Focus on Developing Stock-Type Business Models – Case 1: Building a solid earnings base with further “bills” openings in Japan –“bills”, which has been sustaining growth since its foundation, plans to open two new restaurants.We will continue to enhance its brand value with our unique PR methods, and solidify its earnings base as not just a food/beverage operation but a brand-driven stock-type business.

First restaurant in Shichirigahama,

Kamakura

Second restaurant in Yokohama

Akarenga (Red Brick Warehouse)

Third restaurant

in Odaiba on Tokyo Bay

Fourth restaurant in Omotesando

0

500

1,000

1,500

2,000

2,500

729

1,535

2,2552,263

Trend of “bills” Openings and Net Sales Strategies in “bills” Opening and Operations

(Opening plans in Japan)2016: Sixth restaurant 2015: Fifth restaurant

We plan to enhance our long-cherished “bills” brand without affecting its image, by driving the business with our PR expertise and opening only “hybrid” restaurants, capable of enhancing/upholding the brand while securing profitability at the same time. This can only be achieved by our Group, which deals with PRs and branding, as was proved in our past restaurant openings.

Brand Value Profitability

×

PR Leverage

(Unit: ¥ million)


Roa

d t

o 2

020 a

nd

beyon

d

We focus on “people” as engines for creating “a fun.” Searching valuable personnel and upgrading their skills through education and learning, we at the same time plan to extend ourselves to a “talent solution business” which generates earnings from the activity itself.

Training Courses & Qualification Tests (marketing, business skills)

Internship &Student Ambassador Programs

Revenue from tuition, materials and test fees

Qualify knowledge levels of jobseekers

Revenue from student promotion contract fees

“Impound” competent students Revenue from recruitment support fees

Internship Programs(referring interns/new grads)

Existing SSU businesses(PRs, promotions)

Contract fee revenue

Revenue from tuition, training and membership fees

Training Courses & Qualification Tests(extended training)

Human Resource Services (referral and temporary placement)

Revenue from referral fees

Revenue from temporary placement fees

Boost growth in customers’ businesses

Promote growth of program graduatesHuman

Resource

UniversityStudents

UniversityStudents University

Students

Corporate (marketing dept.)

Corporate (HR dept.)

Corporate (marketing dept.)

Corporate(HR dept.)

HumanResource

Corporate(HR dept.)

ProgramGraduates

Earnings model

Transition of human resource and customers

Synergies with SSU

Enhance employee capabilities

Enhance product appeal in existing businesses

Recruit competent students

Win potential customers; support career moves

Cultivate potential customers

Increase opportunities and reduce costs in mid-career recruitment

Foster students and other human resources as potential customers

(Image of earning models)


6. Focus on Developing Stock-Type Business Models – Case 2: Solution business offering professional talents –

Roa

d t

o 2

020 a

nd

beyon

d

Pursuing Improved ROE & Enriching Shareholder Returns

Roa

d t

o 2

020 a

nd

beyon

d


With ROE newly positioned as one of the most crucial management targets,we will commit to maximizing shareholder value by pursuing higher profitability and efficiencies in the period of medium- tolong-term management plan.

Roa

d t

o 2

020 a

nd

beyon

d

� Shareholders’ eyes explicitly set as an axis of our management

– Target ROEs higher than the 10-20% level achieved in the past

– Focus aggressively on shareholder returns including dividends, on top of higher

profitability

� Achieving ROE of 40% in FY2020

– TSE listed firms with more than 40% in ROE count less than 40 in FY2013

(less than 20 among those with shareholders’ equity of more than ¥1 billion)

– Targeting to become an entity with ROE comparable to ultra-large companies,

regardless of difference in business scales


7. Pursuing Improved ROE, a New Measure for Our Business Achievement

15%

14%

0%

-31%

6%

16%

23%

-1%

-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%

FY06 FY08 FY10 FY12 FY14 2016 2018 2020

ROE averaged at approximately 15% during the past 3 years.Targeting 40% in the coming 7 years up to FY2020 through higher profitability as well as shareholder returns

Roa

d t

o 2

020 a

nd

beyon

d

Headwind period hit by the Lehman collapse

40%

Calculated ROEwithout one-time losses

Averaged at approximately 15% during the past 3 years

FY20

8%

FY06 FY08 FY10 FY12FY07 FY09 FY11 FY13


7. ROE Trends in the Past

Hurt by extraordinary impacts from one-time losses


This document has been prepared for the purpose of information only, and should not be construed as an offer, solicitation orcommercial conduct of any nature associated with any specific products. The forward-looking statements with respect to thefuture financial results contained in this document should not be construed as a guarantee of actual performance in the future.Although the information contained in this document is intended to be complete and thorough, there is no assurance ofprecision and safety of the same. Please note that the contents of this document are subject to change or cancellationwithout prior notice. It is prohibited to make duplication, reproduction, distribution or use of any part or whole of theinformation contained in this document without express written consent.

SUNNY SIDE UP Inc.

Public Relations / Investor Relations DepartmentJPR Sendagaya Bldg.4-23-5 Sendagaya, Shibuya-ku, Tokyo 151-0051 JapanPhone: +81-3-6894-3233 Fax: +81-3-5413-3052E-mail: [email protected]: http://www.ssu.co.jp/eng/

Road to 2020 and beyond
