A nnual
Report2009

PROFILE

Mitsubishi Paper Mills Limited, established by Mitsubishi’s third president Hisaya Iwasaki, celebrated its
110th anniversary in 2008.
Since its founding, the Mitsubishi Paper Mills Group has contributed to the development of publishing, printing and photography media culture through its high value-added printing and communication
paper, and products.

Dedicated to contributing to society by providing customers with products backed by advanced
technological capabilities, we have the following three goals as a Group Philosophy:

1. A corporate group that lives up to the trust of its customers in the world market
2. A corporate group that is always on the leading edge of technology
3. A corporate group that contributes to preserving the global environment and creating a recycling society

Our reputation rests on our product quality, backed by advanced technological capability, in each of
our business field, which Paper products (e.g. coated paper and thermal paper), Digital imaging media(e.g. photo base paper and inkjet paper) and Specialty materials (e.g. filters).

Mitsubishi Paper Mills has production and research facilities in Japan, Germany, China, and Mexico,and this extensive network gives the Company easy access to the global market.

CONTENTSFINANCIAL HIGHLIGHTS (CONSOLIDATED) ............... 1

MESSAGE FROM THE PRESIDENT.............................. 2
BREAKDOWN OF OPERATIONS BY DIVISION............. 4
TOPICS........................................................................ 6
CORPORATE SOCIAL RESPONSIBILITY (CSR) ........... 8
OUR MILLS AND THEIR PRODUCT LINES .................. 10
SIX-YEAR SUMMARY (CONSOLIDATED).................... 11
CONSOLIDATED BALANCE SHEETS............................ 12
CONSOLIDATED STATEMENTS OF INCOME ............... 14
CONSOLIDATED STATEMENTS OF
CHANGES IN NET ASSETS ........................................ 15
CONSOLIDATED STATEMENTS OF CASH FLOWS....... 16
NOTES TO CONSOLIDATEDFINANCIAL STATEMENTS ......................................... 17
REPORT OF INDEPENDENT AUDITORS ONCONSOLIDATED FINANCIAL STATEMENTS .............. 27
BOARD OF DIRECTORS ANDCORPORATE AUDITORS ........................................... 28
COMPANY DATA ......................................................... 29

Mitsubishi Paper Mills Limited and Consolidated Subsidiaries

FINANCIAL HIGHLIGHTS (CONSOLIDATED)

Thousands ofMillions of yen (1)U.S. dollars (1) and (2)

2009

2008

2009

For the years ended March 31
Net sales
Ordinary income
Net income
Net income per share (in yen and dollars)
Cash dividends per share (in yen and dollars)¥ 253,102
4,499
1,168
3.41
2.50

¥ 258,536
7,120
3,654
10.99
5.00

$ 2,576,635
45,803
11,8930.03
0.03

As at March 31
Total assets
Total net assets
Common stock¥ 294,254
70,43632,756¥ 303,052
79,63632,756$ 2,995,570
717,057
333,465

17,854
4,577

18,362
4,574

Number of shareholders
Number of employees

Notes: (1) In this annual report, Japanese yen (in millions) and U.S. dollars (in thousands) are indicated with fractions omitted.
(2) U.S. dollar amounts in this report represent translations of yen amounts at the rate of ¥98.23 = U.S.$1, as of March 31, 2009.

Net Sales(¥ Million)

05
06
07
08
09

Ordinary Income(¥ Million)

05
06
07
08
09

Net Income(Loss)(¥ Million)

Total Net Assets(¥ Million)

Sales
Composition

234,662
228,495
244,260
258,536
253,102

1,689
4,774
5,270
7,120
4,499

05
06
07
08
09

(24,658)
7,225
7,297
3,654
1,168

05
06
07
08
09

60,47976,68080,326
79,63670,436

Others 7.8%
Photosensitive Materials
12.3%

Paper & Pulp 79.9%

Note: Effective from the year ended March 31, 2007, the Company has applied the “Accounting standards for presentation of net assets in the balance
sheet,” and the “Implementation guidance for accounting standards for presentation of net assets in the balance sheet.”
Furthermore, the Company presented its net assets in the balance sheets using the new presentation method as of March 31, 2005 and 2006 to
conform to the current year’s presentation.

1

MESSAGE FROM THE PRESIDENT

Kunio Suzuki, President & C.E.O.

Since its founding in 1898, Mitsubishi Paper Mills has constantly
sought to employ its technological strengths to contribute to society.
By developing and marketing value-added products that anticipate
the needs of the next generation, the Company has played an important role in the development of information media in Japan in the
publishing and printing industries, as well as in the development ofphotographic technology.
Today, along with the progress of digital information society,Mitsubishi Paper Mills, as an R&D-driven enterprise, is aiming tobe the “Mitsubishi Paper Mills for High Grade and Information
Media.”
We manufacture and sell almost the entire range of media products and materials used in all information recording processes,
including not only paper for offset printing, and materials for printing plates as well as printing systems, but also carbonless and thermal paper, digital photography materials, silver halide photographic
paper, and paper for inkjet printing. The Company’s strategic business portfolio also includes the production of Specialty materials
such as highly-functional filters.
The exacerbation of global warming as a result of the emission ofgreenhouse gases has become an urgent issue in recent years. The
Company is helping to address this issue through expansion of wellmanaged forest and paper production with low energy consumption,
and well as the recycling of waste materials. Specifically, thanks to
its afforestation activities, the acreage of new forest planted overseas
by the Company — compared to its total paper production
volume —is one of the highest among the world’s papermakers.
Mitsubishi Paper Mills was also one of the first companies in Japanto obtain FSC (Forest Stewardship Council) certification for its

2

paper manufacturing and marketing operations. We are continuing
our efforts in this regard with the aim of extending this certification
to a wider range of business operations. We are also expanding theuse of timber resources from forest-thinning activities in Japan, andare pursuing a number of projects with the goal of realizing sustainable use of Japan’s forests.
The recent worldwide economic downturn, in addition to the
spread of paperless electronic information media, and the saturationof the paper market resulting from the shrinkage of the Japanesereading population (mainly due to the low birthrate), are likely tomake operating conditions for Mitsubishi Paper Mills fairly difficultfrom here on. Amid these circumstances, we remain committed torealizing the Company’s corporate philosophy through significant
contributions to the community, which we expect will enable theMitsubishi Paper Mills Group to achieve further growth anddevelopment.
I look forward to the continued support and encouragement of
the Company’s shareholders and all other stakeholders.

June 2009

Kunio Suzuki
President & C.E.O.

Overview of the reporting term
The Japanese economy was greatly affected by the drastic global
slowdown in the real economy following the outbreak of financial
instability in the United States in autumn 2008. The paper and pulp
sector has suffered unprecedented and ongoing production cutbacks
in response to plummeting demand in Japan and overseas, particularly for printing and communication paper.
In the Paper and Pulp Division, demand held steady in the first
half, and we were able to increase product prices to deal with soaring raw material and energy costs. But in the beginning of the second half, demand plunged, and we were forced to cut backproduction steeply to maintain market prices and improve the supply
and demand balance.
The business environment in Germany, where we produce communication paper, was even more difficult than in Japan, in particular in the second half when the deterioration in the global economy
hit, severely affecting earnings performance.
In the Photosensitive Materials Division, despite the shrinkage ofphotography market worldwide, sales of photographic base paper
expanded through a sales campaign, but on the other hand sales ofphotographic paper and printing plate materials declined.
As a result of the foregoing, Group sales on a consolidated basis
fell 2.1% year-on-year to ¥253,102 million (US$2,576 million).
Turning to earnings, upward momentum came from priceincreases for printing and communication paper, as well as costcutting measures. However, downward pressures proved stronger,
with raw material and energy prices remaining high and sales plummeting after autumn 2008. In European businesses too, profitability
worsened due to higher raw material and energy costs, intensifiedcompetition and falling demand. As a result, ordinary income
declined 36.8% year-on-year to ¥4,499 million (US$45 million).
Net income fell year-on-year to ¥1,168 million (US$11 million),the chief factors being business restructuring costs at European subsidiaries and loss on valuation of securities, which outweighed gains
from the sale of land at Katsushika-ku in Tokyo and others.

Medium-to-long-term Management Strategies and Issues
The Post Phoenix Plan
The Group has taken a range of measures under The Post Phoenix
Plan launched in fiscal 2008. However, we have been forced tomake revisions to it in light of the deep deterioration in the economy
and the poor prospects for significant improvement.
We have made no change to our vision for the Group as presented in The Post Phoenix Plan, despite in the current businessenvironment. But to build profitability and assure our survival, weplan immediate measure for fiscal years 2009 and 2010 (see to
TOPIX page, P6-7) and together with the development of“Corporate Social Responsibility (CSR),” we will make an effort togenerate greater enterprise value.
Forecasts
In light of the recent economic crisis, we expect difficult businessconditions to persist.
In the current fiscal year ending March 2010, we forecast sales
on a consolidated basis of ¥240,000 million (US$2,400 million),
operating income of ¥7,000 million (US$70 million), ordinary
income of ¥4,000 million (US$40 million) and net income of ¥1,500
million (US$15 million).
In the above forecasts, we assume an exchange rate of¥100 /US$1, and ¥130 /€1.
These forecasts are based on information available to us at thetime of writing. They are subject to the risks and uncertainties that
may affect our businesses, which could cause actual results to differ
materially from those anticipated.

3

BREAKDOWN OF OPERATIONS BY DIVISIONPAPER AND PULPDIVISIONSNet Sales (¥ Million)

05
06
07
08
09

201,617
197,088
212,945
227,080
221,930

05
06
07
08
09

34,41433,27333,33434,78934,170

05
06
07
08
09

18,80720,084
21,352
23,08821,575PHOTOSENSITIVE MATERIALSDIVISIONNet Sales (¥ Million)OTHER
DIVISIONSNet Sales (¥ Million)

Overseas Sales Breakdown

For the year ended March 31, 2009

Millions of yen

Thousands of
U.S. dollars

EuropeAsia
North America
OthersTotal¥ 39,095
8,030
13,246
7,470¥ 67,843$ 397,997
81,753
134,849
76,053$ 690,654

4

Thanks to the robust demand of commercial printing paper (forbrochures, pamphlets and others) and of inkjet paper, we were able
to raise prices in the first half for printing and communication paper,the mainstay products in this division, we were able to raise prices
in the first half for printing and communication paper, the mainstay
products in this division. However, from the autumn, as the economic slowdown took hold, demand for printing paper and communication paper (carbonless, thermal paper and inkjet paper etc.)
declined, and we were forced to cut back production steeply tomaintain an appropriate supply and demand balance.
In specialty materials, we launched newly developed products
drawing on our technological capabilities, such as Thermorewrite®
for smart and ID cards, filters with anti-mold and anti-odor features,in addition to anti-allergy and anti-virus functions.
Our European subsidiaries have been continuously suffered bypersistently high raw material and energy prices and poor export
profitability due to the high euro, and we have been counteracting
by sales area optimization, by grade shift to higher value added
grades, and by cost down efforts. But business conditions were
badly affected by the falloff in demand due to the global economic
recession.
As a result of the foregoing, sales decreased 2.3% year-on-yearto ¥221,930 million (US$2,259 million).

Sales of photographic paper were down year-on-year in both volume
and value terms due to the global decrease in demand. However
photographic base paper sales rose in both volume and value terms
as a result of aggressive marketing. Sales were down in both value
and volume terms for printing plate materials, due to a decline inanalog products sales, which outweighed the benefits of a sales
drive targeting the digital range including Silver Digiplate® and
CTP (computer-to-plate) printing paper for the newspaper industry(PD-NEWS).

As a result of the foregoing, sales in the Photosensitive Materials
Division declined 1.8% year-on-year to ¥34,170 million (US$347
million).

Sales in Other Divisions declined 6.6% year-on-year to ¥21,575 million (US$219 million) due chiefly to a fall in sales of our engineering subsidiary, which performed well in the previous term.

5

TOPICS

Our response to the business environment since autumn 2008
Drastic reforms to cope with this environment
Demand for paper declined by approximately 20% compared with the second half of fiscal 2008, and the fall has been almost 30% forprinting and communication paper.
Paper industry is working to underpin demand by operation cut off and machine shut down at each of its paper mills. The industry
has also suffered at a significant drop in export competitiveness due to the high yen.
We plan swift and drastic organizational reforms to strengthen our corporate structure in the face of these challenges.

Hard environment of the customer
Tighter purchase policy

Strong Yen
Lowered competitiveness in export

Drastic drop in demands

Delay of raw material and energy cost reduction
Trends of re-increase in oil prices etc.

Severe Market Competition

Printing and Communication paper

German Operation

Digital Imaging

Inventory Buildup

Continuous Profit Deterioration

Plunge in revenue

Drastic production cutoff

Fundamental Restructuring

Strengthen business constitution(1) Printing and communication paper production cutoff
Due to the steep fall in demand, we too are reducing production even though we have no new production facilities. We have made the following
unprecedented cutbacks at Hachinohe Mill: (1) 25,000 tonnes in the 3rd quarter of fiscal 2008, a 10% drop in production capacity; and (2) 33,000
tonnes in the 4th quarter, a 15% cut.
In fiscal 2009, we plan production cuts totaling 64,000 tonnes in the 1st quarter, a 30% drop. In the face of continuing uncertainty about theeconomy, we plan a further 24,000 tonne (10%) cut in the 2nd quarter, for an average 20% cut in the first half.
In the second half, we have prepared a 10% cut under a full-year plan.
While working to maintain prices through these measures, we aim to build an earnings model for low capacity utilization by ensuring production planning and operation levels are appropriate for expected sales.
[Hachinohe mill]Fiscal Year
08 3Q

08 4Q

09 1Q

09 2Q

30%

1st Half 20% cut
Total curtailment volume

10%cut15%cut25,000t

33,000t

10%64,000t
April
May
June

24,000t

shut down of major machines
total mill closure for 10days(use of Japanese Golden week holidays period)
total mill closure for 14days(use of scheduled annual maintenance shut down)

Build up profitable constitution under low capacity utilization Production planning and operation fit to the Sales6

(2) Restructuring and strengthening of German operations
With regard to the restructuring of German operations, a precedent has been set in the rehabilitation under the Phoenix medium-term management plan of Kitakami Hitec Paper, which suffered red ink for 6 straight years.
Fierce global competition is buffeting the business environment surrounding the communication paper business in Europe, affecting not only
sales within the European zone but also exports from the area. At the same time, raw material and energy prices remain high. And the high euro,
regarded as an aberration until the summer of 2008, has weakened the competitiveness of exports from the area, causing loss of market share outside the Euro zone which will be difficult to regain.

Fundamental Restructuring
1. Shut down No.1 Paper Machine ( consolidation to No.3 Paper machine)
2. Shut down of 4 cast coater machines
3. 150 personnel cuts (121 employees were already notified)
4. Review product portfolio, improve Product mix
5. Drastic organization reform, consolidation (MPF & MPB)

Target 2009
Profit Improvement

1.5 billion Yen

1 Improvement of sales, purchase and logistic organization
2 Consolidation and improvement of product development organization
3 Consolidation of management and controlling organizations

Despite these efforts we are still posting ordinary losses on some German operations. However, we plan to bring the entire German business into
positive territory by the end of 2010.

(3) Strengthen the Digital Imaging Business and others
We have clearly separated the Digital Imaging Division, Specialty Material Development Division and Printing & Communication Paper
Division, and have merged the first two, and introduced an internal company system.
The reason for this move is that both the digital imaging business and the specialty material development business are R&D-intensive, producing on a consignment basis. They differ in their earnings structure and policies from the Printing & Communication Paper Division, which isa facility-based, inventory/marketing driven type of business.
Our introduction of the internal company system is designed to speed up decision-making and clarify delegation of responsibility.

Introduction of internal company system
Mitsubishi Paper Mills

Mitsubishi Paper Mills

Printing & Communication Paper Division

Printing & Communication Paper Division

Digital Imaging Division

I&D Company

Speciality Material Development Division

Incl. Kyoto Mill
Kitakami HiTec Paper
Kyoto Research* I&D: Imaging & Development

Both “Digital Imaging business” and “Speciality Material Development business” are Development Intensive business
Organization and resource input in accordance with the changes in business environment

Strengthen Marketing

High profit business integrating R&D, Production and Sales
Quick profit recovery

Swift decision making and Clear responsibility

Target : 2 billion Yen

In the face of this unprecedented crisis, we plan the above mentioned three measures.

7

CORPORATE SOCIAL RESPONSIBILITY (CSR)

For the term under review, we have set the following five priority targets: (1) better employee understanding of CSR and the Group Codeof Conduct Charter, (2) getting the right message out (better disclosure), (3) further approach to human rights and Labor relations,(4) reduction of environmental load and risk, and (5) support for community contribution activities.
Based on these initiatives, we have set a further four activity targets: (1) promotion of distinctive CSR activities, (2) fostering of better
understanding of corporate ethics and conduct, (3) review of action programs in the fields of human rights and labor relations, and(4) measures for prevention of global warming. By fulfilling our social responsibilities in areas such as compliance, safety and quality,
employee rights and labor relations, environmental protection and community contributions, we are enhancing our enterprise value.

TOPICS - 1

Morino Chonai-kai (Neighborhood Association for Forest Conservation)
In collaboration with the environmental NGO (Office Chonai-Kai), Mitsubishi Paper Mills has commenced the sale of “Morino
Chonai-Kai Copier Paper” to promote the use of timber from forest-thinning operations in Iwaizumi-cho, in northern Japan’s Iwate
Prefecture.
The most unique feature of this product is that ¥15 per kg of the selling price is used to promote forest thinning in Iwaizumi-cho.
(Forest thinning serves to improve the health of forests and increases their sustainability).
Specifically, the up charge is paid to forestry management operators to help pay the costs of thinning operations.
By buying this copier paper, Users become “Forest Thinning Supporters,” contributing to environmental preservation by helping
prevent deterioration in the quality of forests.
As “Morino Chonai-Kai Copier Paper” conforms to the new standards under the
Law Concerning the Promotion of Procurement of Eco-Friendly Goods and Services by
the national government and Other Entities (Law on promoting Green Purchasing),
which came into effect in April this year, its production and use also contributes to therecycling of waste paper.
For more information on the activities of the Morino Chonai-Kai, as well as a list ofcompanies participating in the forest-thinning support initiative, please visit the association’s website at: http://www.mori-cho.org/index_en.html

TOPICS - 2

Eco-System Academy
In July 2008 Mitsubishi Paper Mills set up an office to coordinate efforts to establish the Eco-System Academy, an educationalcourse to promote understanding of the need to protect forests and the vital role that wood products play in our society.
Background to Plan
• Mitsubishi Paper Mills engages in the management of forests
certified by the Forest Stewardship Council (FSC) in addition to other activities to help protect woodlands. We plan todevelop unique social contribution activities using forests
under our management.

8• We searched for a suitable location for the Academy thatwould meet the following conditions : relatively close to
Tokyo, Company training facility and company forest available, and support available from local forestry organizations
and local stakeholders. On this basis, we set up the Academy
at Nishigo-Mura in the Shirakawa district of Fukushima
Prefecture.

The Concept of the Academy
To promote the sustainable use of the forest resources byindustry.

Education themes• The resources contained in the forests• The benefits for us all
The benefits for industry• The responsible forest management• The application of different types of wood
• How paper is made?
• The future of recycling and paper•

Forest resources

Forest management

Sustainable use

NatureIndustry

Objectives of the Plan
To provide a place for hands-on education with the aim ofpromoting the sustainable use of the forest resources by industry, and to expand the FSC certified forest.
Main Activities in the Eco-System Academy• Guided tours of woodlands and observation of forest management methods such as tree-planting and forest thinning• Sessions to teach participants about the many ways in whichtimber is used (woodcraft, traditional charcoal-making, lumber sawing)• Hands-on experience in papermaking and related processes(pulp production, hand-made paper, printing)• Operation of Visitor Center (exhibitions, training sessions,

Schedule
FY2009: Construction of onsite educational facilities, implementation of educational courses for Company staff
FY2010: Full scale start-up of activities, including expanding
the provision of this course to staff of affiliated companies andto the general public

accommodation provided)• Guided tours of processes including the production of woodchips for pulp, used paper recycling, papermaking, printing• Explanation of management of the FSC certified forest

9

OUR MILLS AND THEIR PRODUCT LINESSHIRAKAWA SITEKITAKAMI HITEC PAPER CORP.

HACHINOHE MILL

Address:

Address:

Address:

3, Maeyamanishi, Nishigo-mura,Nishi-Shirakawa-gun,
Fukushima 961-8054
Telephone: +81-248-22-8111
Products: Transformer board

35, Sasanagane, Aisari-cho,
Kitakami-shi, Iwate 024-0051
Telephone: +81-197-67-3211
Products: Bleached kraft pulp,
Hygienic paper, Photographic
basepaper, etc.

Kawaragi-Aomoriyachi,
Hachinohe-shi,
Aomori 039-1197
Telephone: +81-178-29-2111
Products: Bleached kraft pulp,
Coated printing paper,
Uncoated printing paper,White card board, etc.

TAKASAGO MILLKYOTO MILL

Address:

Address:

105, Sakae-machi, Takasago-cho,Takasago-shi, Hyogo 676-8677
Telephone: +81-794-42-3101
Products: Carbonless paper, Thermal paper,
Inkjet paper, Speciality paper, Non
Woven Fablics, etc.

6-6, Kaiden 1-chome,
Nagaokakyo-shi,
Kyoto 617-8666
Telephone: +81-75-951-1181
Products: Color photographic paper, Graphic arts
materials, Photo Inkjet paper, etc.

OVERSEAS
Mitsubishi HiTec Paper Bielefeld GmbH
Niedernholz 23, D-33699 Bielefeld,
Address:
Germany
Telephone: +49-521-2091-232
Products: Carbonless paper, Thermal paper,
Inkjet paper

Mitsubishi HiTec Paper Flensburg GmbH
Husumer Strasse 12 D-24941
Address:
Flensburg, Germany
Telephone: +49-461-8695-295
Products: Thermal paper, etc.
(Flensburg, Germany)(Bielefeld, Germany)

MP Juarez LLC
Address:
Ave. Valle del Cedro #1551 Paraq. Ind Intermex
C.P. 32690 Cd. Juarez. Chih., Mexico
Telephone: +1-915-534-8230 (U.S. Head Office)Products: Inkjet paper

Zhuhai MPM Filter, Ltd
Address:#17 Yijing Lane, Pingsha Town, Jinwan District,Zhuhai, Guangdong, China Guangdong Province, China
Telephone: +86-756-8895033
Products: Various filters(Juarez, Mexico)(Zhuhai, China)

10

FINANCIAL STATEMENTS

SIX-YEAR SUMMARY (CONSOLIDATED)

Thousands of
U.S. dollars

Millions of yen
2009

2008

2007

2006

2005

2004

2009

For the years ended March 31
Net sales
Operating income
Ordinary income
Net income (loss)
Net income (loss) per share (in yen and dollars)¥ 253,102 ¥ 258,536 ¥ 244,260 ¥ 228,495
7,110
9,302
7,256
6,484
4,499
7,120
5,270
4,774
1,168
3,654
7,297
7,225
3.41
10.99
22.44
22.16

¥ 234,662 ¥ 236,995
4,326
4,631
1,689
1,486
(24,658)2,446(75.75)
7.48$ 2,576,635
72,39145,803
11,8930.03

As at March 31
Total assets
Total net assets¥ 294,254 ¥ 303,052 ¥ 320,603 ¥ 314,869
70,436
79,63680,326
76,680¥ 319,469
60,479$ 2,995,570
717,057¥ 374,716
80,888

Note: Effective from the year ended March 31, 2007, the Company has applied the “Accounting standards for presentation of net assets in the balance sheet,” andthe “Implementation guidance for accounting standards for presentation of net assets in the balance sheet.”
Furthermore, the Company presented its net assets in the balance sheets using the new presentation method as of March 31, 2005 and 2006 to conform tothe current year’s presentation.

11

Mitsubishi Paper Mills Limited and Consolidated Subsidiaries

CONSOLIDATED BALANCE SHEETSAs at March 31, 2009 and 2008

Millions of yen
2009
2008

ASSETS
Current assets:
Cash and bank deposits (Note 3(11))
Receivables:
Trade notes and accounts
Other

¥

3,698

¥

2,522

Thousands of
U.S. dollars (Note 2)
2009$

37,647

48,203
2,632

55,854
3,606

490,72226,80450,836(567)

59,461(730)

517,526(5,778)Inventories
Deferred income taxes (Note 8)
Other50,26959,116
1,845
1,695

58,73150,1652,808
1,905

511,748
601,819
18,785
17,260Total current assets

116,624

116,134

1,187,260

Property, plant and equipment (Note 6):Land
Buildings and structures
Machinery and equipment
Construction in progress
Lease assets
Other

22,73492,943
337,005
4,720
2,333
9,964

22,086
97,083
347,6811,550—
10,992

231,446
946,1793,430,781
48,05023,750101,435

Less: Accumulated depreciation
Accumulated impairment losses

469,700(333,307)(221)

479,394(344,552)(221)

4,781,643(3,393,129)(2,250)136,172

134,621

1,386,264

27,833
1,492
701
(318)
3,649
8,099

39,749
1,399
530
(136)
2,123
8,630

283,349
15,192
7,141(3,240)37,14982,454

41,45752,297422,045¥ 294,254¥ 303,052$ 2,995,570

Less: Allowance for doubtful accounts

Net property, plant and equipment

Investments and other assets:
Investments in securities (Notes 4 and 6)
Investments in unconsolidated subsidiaries and affiliated companies
Long-term loans
Less: Allowance for doubtful accounts
Deferred income taxes (Note 8)
Other
Total investments and other assets
Total assets
The accompanying notes are an integral part of these financial statements.

12

FINANCIAL STATEMENTS

Millions of yen
2009
2008

LIABILITIES AND NET ASSETS
Current liabilities:
Short-term bank loans
Commercial paper
Current portion of long-term debt (Note 5)
Lease obligations (Note 5)
Payables:Trade notes and accounts
Other
Accrued expenses
Income taxes payable
Other
Total current liabilities
Long-term liabilities:
Long-term debt (Note 5)
Lease obligations (Note 5)
Accrued post-employment benefits to employees (Note 7)
Accrued retirement benefits to directors and statutory auditors
Deferred income taxes (Note 8)
Other
Total long-term liabilities

Thousands of
U.S. dollars (Note 2)2009¥ 90,196
2,000
16,05760¥ 86,969
6,000
10,527—$918,213
20,360163,468
612

28,633
3,541
11,9451,058
5,290

33,4595,266
13,213
1,014
4,039

291,491
36,055
121,607
10,77253,856

158,782

160,490

1,616,437

51,549
3,606
6,286
93
505
2,994

49,499
—
6,924
115
2,670
3,714

524,779
36,71464,002946
5,144
30,48765,03562,924

662,075

32,756
19,717
11,459(129)

32,756
19,723
14,035(84)

333,465
200,727
116,655(1,320)63,80366,431

649,528

1,578
821

7,145
339

16,064
8,360

2,399

7,485

24,424

4,234

5,720

43,10470,436

79,636

717,057¥ 294,254¥ 303,052$ 2,995,570

Contingent liabilities (Note 9)
NET ASSETS
Shareholders’ equity:
Common stock:
Authorized: 900,000,000 shares at March 31, 2009 and 2008
Issued: 342,584,332 shares at March 31, 2009 and 2008
Capital surplus
Retained earnings
Less: Treasury stock, at cost
Total shareholders’ equity
Valuation and translation adjustments:
Net unrealized gains on available-for-sale securities
Translation adjustments
Total valuation and translation adjustments
Minority interests in consolidated subsidiaries
Total net assets
Total liabilities and net assets
The accompanying notes are an integral part of these financial statements.

13Mitsubishi Paper Mills Limited and Consolidated Subsidiaries

CONSOLIDATED STATEMENTS OF INCOME
For the years ended March 31, 2009 and 2008

Millions of yen
2009
2008

Net sales
Cost of sales

Thousands of
U.S. dollars (Note 2)2009¥ 253,102
205,745¥ 258,536
208,974$ 2,576,635
2,094,526

47,35749,562

482,108

40,24640,259409,717

7,110

9,302

72,391894(3,552)
3,754
(1)
(994)
(1,625)
(5)
(268)
(193)

797
(3,361)
(159)
53
(560)
(495)
—
(592)
305

9,105
(36,161)
38,219(18)(10,121)(16,545)(50)(2,731)(1,969)Total(1,991)(4,014)(20,275)

Income before income taxes and minority interests

5,119

5,288

52,116

Income taxes:
Current
Deferred (Note 8)

1,556
2,124

1,490
(43)

15,846
21,623

Minority interests in losses of consolidated subsidiaries

3,680
270

1,446
188

37,4692,752

Gross profit
Selling, general and administrative expenses
Operating income
Other income (expenses):
Interest and dividend income
Interest expense
Gains (Losses) on disposal of properties(Losses) Gains on sales of investments in securities
Write-downs of investments in securities
Losses on business restructuring
Impairment loss on fixed assets
Special severance payments
Other, net

Net income

¥

1,168

¥

3,654

The accompanying notes are an integral part of these financial statements.

14¥ 3.41
2.50

11,893

U.S. dollars (Note 2)

Yen

Amounts per share:
Net income — basic (Note 3(10))
Cash dividends applicable to the year$

¥ 10.99
5.00$ 0.030.03

FINANCIAL STATEMENTS
Mitsubishi Paper Mills Limited and Consolidated Subsidiaries

CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETSFor the years ended March 31, 2009 and 2008

Millions of yen
Shareholders’ equity

Number ofshares in Common
stock
issue

Balance at March 31, 2007
326,084,332 ¥ 30,865
Changes during the year:
Issuance of new shares
16,500,000 1,890
Net income
Cash dividends
Acquisition of treasury stock
Disposal of treasury stock
Changes in items other than shareholders’ equity
Total changes during the year
16,500,000 1,890
Balance at March 31, 2008
342,584,332 ¥ 32,756
Effects of changes in accounting proceduresat overseas subsidiaries
Changes during the year:
Net income
Cash dividends
Acquisition of treasury stock
Disposal of treasury stock
Changes in items other than shareholders’ equity
Total changes during the year——
Balance at March 31, 2009
342,584,332 ¥ 32,756

CapitalsurplusRetainedearnings¥ 17,792 ¥ 11,349

Valuation and translation adjustments
Net
Total
unrealized
valuation
TreasuryTotalgains onandstock, shareholders’ available-for-sale Translation translation
at costequitysecurities
adjustments adjustments¥ (735) ¥ 59,272

1,890
3,654
(968)
(26)
676

40
1,931
¥ 19,723¥ 12,944¥ 193¥ 13,138¥ 7,915(5,652)(5,652)¥ 7,485

3,781
3,654
(968)
(26)
717
(2,194)(7,847)(2,194)(689)¥ 5,720 ¥ 79,636

3,781
3,654
(968)
(26)
717
(5,799)(5,799)¥ 7,145

146
146
¥ 339

Minority
interests inconsolidated Total net
subsidiaries
assets¥ 80,326

2,685¥ 14,035

650
7,158¥ (84) ¥ 66,431(2,032)(2,032)(2,032)

1,168(1,712)

1,168(1,712)(74)
23(5,086)(5,086)¥ 2,399

1,168(1,712)(74)
23(1,486)(6,572)(1,486)(7,168)¥ 4,234 ¥ 70,436

Valuation and translation adjustments
Net
Total
unrealized
valuation
TreasuryTotalgains onandstock, shareholders’ available-for-sale Translation translation
at costequitysecurities
adjustments adjustments

Minority
interests inconsolidated Total net
subsidiaries
assets$ (861) $ 676,281$ 58,234 $ 810,719

(74)
29

(6)
(6)
(544)
¥ 19,717 ¥ 11,459

(45)
(595)
¥ (129) ¥ 63,803(5,567)(5,567)¥ 1,578

481
481
¥ 821

Thousands of U.S. dollars
Shareholders’ equity

Commonstock

CapitalsurplusRetainedearnings

Balance at March 31, 2008
$ 333,465 $ 200,792 $ 142,884
Effects of changes in accounting proceduresat overseas subsidiaries(20,689)
Changes during the year:
Net income
11,893
Cash dividends(17,432)
Acquisition of treasury stock
Disposal of treasury stock(64)
Changes in items other than shareholders’ equity(64)(5,539)Total changes during the year—
Balance at March 31, 2009
$ 333,465 $ 200,727 $ 116,655

(759)
300

$ 72,743$ 3,459$ 76,203(20,689)(20,689)

11,893(17,432)(759)
236

11,893(17,432)(759)
236(15,130) (66,909)(15,130) (72,971)$ 43,104 $ 717,057(458)(6,062)$ (1,320) $ 649,528(56,679)(56,679)$ 16,064

4,900
4,900
$ 8,360(51,778)(51,778)$ 24,424

The accompanying notes are an integral part of these financial statements.

15

Mitsubishi Paper Mills Limited and Consolidated Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWSFor the years ended March 31, 2009 and 2008

Millions of yen
2009
2008

I

Cash flows from operating activities:
Income before income taxes and minority interests
Depreciation and amortization
Write-downs of investments in securities
Accrued post-employment benefit costs
Accrued retirement benefit costs for directors and statutory auditors
Interest and dividend income
Interest expense
Gains on disposal of properties
Losses (gains) on sales of investments in securities
Write-downs of other investments
Losses on business restructuring
Decrease in trade accounts receivable
Increase in inventories
Decrease in trade accounts payable
Other, net

¥

¥

5,288
12,655560(3,169)
(160)
(797)
3,361
(493)
(53)
13
—
15,508(6,393)(83)(3,779)$52,116130,941
10,121(13,074)(354)(9,105)36,161(42,032)
18
40
16,54567,836(128,646)(34,924)
6,200

9,021
895
(3,668)(2,090)22,458832(3,370)(1,099)91,844
9,112(37,348)(21,281)

4,157

18,82042,327

Cash flows from investing activities:
Purchases of investment securities
Proceeds from sales of investment securities
Purchases of shares in an affiliated company and subsidiaries
Acquisition of property, plant and equipment
Proceeds from sales of property, plant and equipment
Loans madeProceeds from collection of loans
Other, net

(181)
59
(453)
(17,966)
6,322
(731)
612
78

(1,098)141(395)(19,266)
2,812
(276)
223
110

(1,849)608(4,620)(182,905)
64,365(7,449)6,230
797

Net cash (used in) provided by investing activities(12,261)(17,749)(124,823)

5,032(4,000)—19,650(10,668)—(74)(1,712)(100)(49)(15,530)
6,000
(805)
15,936(16,837)
3,781
(26)
(968)
(90)
(482)

51,232(40,720)—200,040(108,609)—(759)(17,432)(1,021)
(503)

8,077

(9,022)82,225

1,166
1,139
2,324

35
(7,915)
10,24011,87011,59923,666Sub-totalInterest and dividends received
Interest paid
Income taxes paid
Net cash provided by operating activities
II

5,119
12,862994(1,284)
(34)
(894)
3,552
(4,128)
1
3
1,625
6,663
(12,636)(3,430)609

Thousands of
U.S. dollars (Note 2)
2009

III Cash flows from financing activities:
Increase or decrease in short-term bank loans
Increase or decrease in issuance of commercial paper
Repayment of finance lease debt
Proceeds from long-term debt
Repayment of long-term debt
Proceeds from issuanse of shares
Acquisition of treasury stock
Payment of cash dividends by the Company
Payments of cash dividends by subsidiaries to minority shareholders
Other, net
Net cash used in financing activities
IV Effect of foreign currency translation on cash and cash equivalents
V Net increase or decrease in cash and cash equivalents
VI Cash and cash equivalents at beginning of year
VII Cash and cash equivalents at end of year (Note 3(12))
The accompanying notes are an integral part of these financial statements.

16

¥

3,464

¥

2,324

$

35,266

FINANCIAL STATEMENTS
Mitsubishi Paper Mills Limited and Consolidated Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Basis of Presenting the Consolidated Financial Statements

The accompanying consolidated financial statements of Mitsubishi Paper Mills Limited (the “Company”) and its subsidiaries areprepared on the basis of accounting principles generally accepted in Japan, which are different in certain respects as to application and disclosure requirements of International Financial Reporting Standards, and are compiled from the consolidated financial statements prepared by the Company as required by the Financial Instruments and Exchange Law of Japan.
Certain items presented in the consolidated financial statements submitted to the Director of Kanto Finance Bureau (a regional
branch organization of the Ministry of Finance in Japan) have been reclassified for the convenience of readers outside Japan.
2. United States Dollar Amounts

The Company maintains its accounting records in yen. The dollar amounts included in the accompanying consolidated financial
statements and notes thereto represent the arithmetical results of translating yen to dollars on the basis of ¥98.23 = U.S.$1, theexchange rate prevailing as of March 31, 2009. The inclusion of such U.S. dollar amounts is solely for convenience and is notintended to imply that yen amounts have been or could be readily converted, realized or settled in U.S. dollars at that rate or any
other rate.
3. Summary of Significant Accounting Policies(1) Scope of consolidation
The Company had 37 subsidiaries as of March 31, 2009 (39 as of March 31, 2008). The accompanying consolidated financial
statements include the accounts of the Company and 27 (28 for 2008) of its subsidiaries for the year ended March 31, 2009
(together, hereinafter referred to as the “Companies”).
Former consolidated subsidiary Hananoki Logistics has been excluded from the scope of consolidation as a result of its
merger with another consolidated subsidiary, Naniwa Transport, which is the surviving entity.
The accounts of the remaining 10 (11 for 2008) unconsolidated subsidiaries for the year ended March 31, 2009 have been
excluded from consolidation since the aggregate amounts of these subsidiaries in terms of combined assets, net sales, retained
earnings and net income were immaterial in relation to those of the consolidated financial statements of the Companies.
Mitsubishi Paper Holding (Europe) GmbH and other seven subsidiaries are consolidated using the financial statements as of
the respective fiscal year end which falls on December 31 and necessary adjustments are made to their adjustments are made totheir financial statements to reflect any significant transactions from January 1 to March 31.

(2) Consolidation and elimination
For the purposes of preparing the accompanying consolidated financial statements, all significant intercompany transactions,account balances and unrealized profits among the Companies have been eliminated.
Elimination of investments in shares of consolidated subsidiaries, together with the underlying equity in net assets of such
subsidiaries, has been made to include equity in net income of subsidiaries subsequent to the respective dates of acquisition in
the consolidated statements of income. Any difference between the cost of an investment in a subsidiary and the amount ofunderlying equity in net assets of the subsidiary, unless specifically identified and reclassified to the applicable accounts fromwhich the value originates, is treated as an asset or a liability, as the case may be, and amortized over a period of five years on astraight-line basis.
Assets and liabilities of subsidiaries are remeasured based on the full fair value method, whereby the full portion of theassets and liabilities of the subsidiaries is marked to fair value as of the date of acquisition of control.

(3) Investments in unconsolidated subsidiaries and affiliates
The Company had 15 affiliates as of March 31, 2009 (15 for 2008). 2 affiliated companies were accounted for by the equity
method.
However, the remaining 10 subsidiaries and 13 affiliates (13 for 2008) did not have a material effect on net income andretained earnings in the accompanying consolidated financial statements and, therefore, these investments have been carried atcost.

(4) Financial instruments(i) Derivatives
All derivatives are stated at fair value, with changes in fair value included in net income or loss for the year in which they arise,
except for those that are designated as “hedging instruments.”(ii) Securities
Securities other than equity securities issued by subsidiaries and affiliates are classified into three categories: trading, held-to-maturity17

or other securities. Marketable securities classified as other securities are carried at fair value with changes in unrealized holding
gain or loss, net of the applicable income taxes, included directly in net assets. Non-marketable securities classified as other securities
are carried at cost. Cost of securities sold is determined by the moving average method.
(iii) Hedge Accounting
Unrealized gains or losses arising from changes in fair value of derivative financial instruments designated as “hedging instruments” are carried as an asset or a liability until the losses or gains on the hedged items or transactions are recognized.
In accordance with the exceptional measure under the Japanese Accounting Standard for Foreign Currency Translations, theCompanies do not record certain forward exchange contracts at market value but translate the underlying foreign currency
denominated assets or liabilities using the contractual rate under these contracts as long as such contracts meet the criteria for
applying hedge accounting under the Japanese Accounting Standard for Financial Instruments.
Furthermore, in accordance with the special measure under the Accounting Standard for Financial Instruments, theCompanies do not record certain interest rate swap arrangements at market value but charge or credit net cash flows arising fromthe swap arrangements to interest arising from the hedged borrowings, as long as these arrangements meet the specific criteria
under the standard.

(5) Inventories
Until March 31, 2008, finished products, merchandise and work in process are primarily stated at cost, cost being determined by
the average method and other inventories are stated at cost, cost being determined by the moving average method. Effective
April 1, 2008, finished products, merchandise and work in process are primarily stated at lower of cost or market, cost being
determined by the average method and other inventories are stated at lower of cost or market, cost being determined by the moving average method.

(6) Property, plant and equipment
Depreciation excluding lease assets is computed by the straight-line method for property, plant and equipment, except for thoseother than the building held by the head office of the Company and certain consolidated subsidiaries, depreciation of which iscomputed by the declining-balance method. Estimated useful lives of assets used in computing depreciation are as follows:
Buildings and structures .....................31 to 47 years
Machinery and equipment ...........................12 years
Lease assets under finance lease agreements of the Company and its domestic consolidated subsidiaries, which do not stipulate the transfer of ownership of the leased assets to the lessee, are depreciated principally over the lease term by the straight-line
method with the residual value of zero except for the following transactions. Lease transactions which have been entered into
before April 1, 2008 and do not stipulate the transfer of ownership of the leased assets to the lessee have been accounted for as
operating leases.
Additional information
The Company and its domestic consolidated subsidiaries have reviewed the useful lives of their property, plant and equipment,
pursuant to the revision of the Corporation Tax Law of Japan. As a result, useful lives of certain machinery and equipment havebeen changed effective April 1, 2008. The effect of this change was to decrease both operating income and income before
income taxes and minority interests by ¥306 million ($3,125 thousand) for the year ended March 31, 2009, compared with thecorresponding amounts that would have been recorded under the previous method. The effect of this change on segment information is explained in Note 11.

(7) Allowance for doubtful accounts
The Company and the domestic consolidated subsidiaries provide the allowance for doubtful accounts based on the bad debt loss
ratio derived from their own loss history plus the amount of uncollectible receivables estimated on an individual basis.
Overseas consolidated subsidiaries provide the allowance for doubtful accounts based on methods prescribed by their respective countries’ regulations.

(8) Accrued post-employment benefits to employees
The Company and the domestic consolidated subsidiaries provide accrued post-employment benefits to employees based on theestimated actuarial present value of the projected benefit obligation and the estimated fair value of plan assets.
Overseas consolidated subsidiaries provide accrued post-employment benefits to employees based on the method prescribedby their respective countries’ regulations.
Unrecognized net actuarial gains or losses are amortized from the year following the year in which such gains or losses arerecognized on a straight-line basis over a term that does not exceed the average remaining service period of the employees whoare expected to receive benefits under the plans (13 to 15 years). Unrecognized prior service cost is amortized on a straight-line
basis over a term that does not exceed the average remaining service period of the employees who are expected to receive benefits under the plans (13 to 15 years).
18

FINANCIAL STATEMENTS(9)Translation of foreign currency financial statements (accounts of overseas subsidiaries and affiliates)
The financial statements of overseas consolidated subsidiaries are translated into Japanese yen at the exchange rates prevailingat the respective balance sheet dates of those subsidiaries for assets and liabilities, and at the historical exchange rate for capital
accounts and retained earnings. All income and expense accounts are translated at the average rates of exchange during the fiscal
year of those subsidiaries. The resulting translation adjustments are included in net assets.

(10) Net income or loss per share
Net income or loss per share is based on the weighted average-number of common shares outstanding less the number of treasury stock during each year, appropriately adjusted for subsequent free distributions of common shares.

(11) Cash and cash equivalents
Cash and cash equivalents in the consolidated statements of cash flows are composed of cash on hand, bank deposits that areable to be withdrawn on demand and short-term investments with original maturities of three months or less that are exposed toa minor risk of fluctuation in value.
A reconciliation of cash and cash equivalents in the accompanying consolidated statements of cash flows and cash and bankdeposits in the accompanying consolidated balance sheets at March 31, 2009 and 2008 is shown below:
Millions of yen
2009

2008

¥ 3,698(233)¥ 3,464

Cash and bank deposits
Time deposits with maturities of over 3 months
Cash and cash equivalents¥ 2,522(197)¥ 2,324

Thousands of
U.S. dollars
2009$ 37,647(2,380)$ 35,266(12) Accounting changes(i) Effective for the fiscal year ended March 31, 2009, the Company and its domestic consolidated subsidiaries have applied a new
accounting standard for inventories, the “Accounting Standards for Measurement of Inventories” (Accounting Standard Board ofJapan (ASBJ) Statement No. 9 on July 5, 2006).
The effect of this change was to decrease gross profit by ¥669 million ($6,817 thousand), operating income by ¥598 million($6,096 thousand), and income before income taxes and minority interest by ¥295 million ($3,010 thousand) for the year ended
March 31, 2009, compared with the corresponding amounts that would have been recorded under the previous method. The effectof this change on segment information is explained in Note 11.
(ii) Until March 31, 2008, noncancelable leases of the Company and its domestic consolidated subsidiaries are accounted for as operating leases (whether such leases are classified as operating or finance leases) except that lease agreements which stipulate the transfer of ownership of the leased assets to the lessee are accounted for as finance leases. Effective for the fiscal year ended March 31,
2009, the Company and its domestic consolidated subsidiaries adopted a revised accounting standard for leases and related implementation guidance, the “Accounting Standard for Lease Transactions” (ASBJ Statement No. 13, revised March 30, 2007) and the“Guidance on Accounting Standard for Lease Transactions” (ASBJ Guidance No. 16, revised March 30, 2007). In accordance withthe revised standard, lease transactions which have been entered into on and after April 1, 2008 and do not stipulate the transfer ofownership of the leased assets to the lessee have been accounted for as either finance or operating leases.
The effect of this change was immaterial to the consolidated financial statements for the year ended March 31, 2009.
(iii) Effective April 1, 2008, the “Practical Solution on Unification of Accounting Policies Applied to Foreign Subsidiaries for
Consolidated Financial Statements (PITF No. 18)” has been adopted.
As a result of this change, as of April 1, 2008, retained earnings decreased by ¥2,032 million ($20,689 thousand) compared withthe corresponding amount that would have been recorded under the previous method. The effect of this change was immaterial to theincome for the year ended March 31, 2009. The effect of this change on segment information is explained in Note 11.
4. Investments in Securities

The acquisition cost, carrying amount, gross unrealized holding gains and gross unrealized holding losses for securities with fairvalue by security type at March 31, 2009 and 2008 are summarized as follows:
Available-for-sale securities:
Millions of yen
2009

Equity securities
Debentures
Others

Cost

Carrying amountGross unrealized
holding gains

Gross unrealized
holding losses¥ 19,8579—¥ 19,866¥ 22,3809—¥ 22,389¥ 5,0600—¥ 5,060¥ 2,537——¥ 2,537
19

Thousands of U.S. dollars
2009

Equity securities
Debentures
Others

Cost

Carrying amountGross unrealized
holding gains

Gross unrealized
holding losses$ 202,148
97—$ 202,246$ 227,834
98—$ 227,932$ 51,519
0—$ 51,520$ 25,834——$ 25,834

Millions of yen
2008

Equity securities
Debentures
Others

Cost

Carrying amountGross unrealized
holding gains

Gross unrealized
holding losses¥ 20,80610
2¥ 20,819¥ 34,371
93¥ 34,384¥ 15,000—
0¥ 15,001¥ 1,4350—¥ 1,435

The carrying amount of securities without fair value as at March 31, 2009 and 2008 is summarized as follows:
Available-for-sale securities:
Carrying amount2009
Millions of yen

Thousands of
U.S. dollars¥ 5,443¥ 5,443$ 55,416$ 55,416

Unlisted equity securities

Carrying amount
2008
Millions of yen

Thousands of
U.S. dollars¥ 5,365¥ 5,365$ 53,549$ 53,549

Unlisted equity securities

5. Long-Term Debt
Long-term debt as at March 31, 2009 and 2008 consisted of the following:
Millions of yen
2009

Loans from banks and other financial institutions secured by collateral/mortgages
Unsecured loans from banks and other financial institutions
1.28% unsecured debentures in yen due in November 2009
1.07% unsecured debentures in yen due in September 2012
Lease obligations repayable within one year
Lease obligations with repayment period of one year or longer
Less: Current portion

20

¥

2,650
54,006
10,000950
60
3,606
71,273(16,117)¥ 55,155

Thousands of
U.S. dollars
2009

2008

¥

3,058
45,96810,0001,000——
60,026(10,527)¥ 49,499$

26,977549,797
101,801
9,671
612
36,714
725,574(164,080)$ 561,494

FINANCIAL STATEMENTS

The maturities of loans, corporate debentures and lease obligations payable within 5 years (excluding the current portion of longterm debt) are summarized as follows:
Due after 1 year through 2 years
Due after 2 years through 3 years
Due after 3 years through 4 years
Due after 4 years through 5 years

Millions of yen

Thousands of
U.S. dollars¥ 14,709
11,16016,576
10,268$ 149,741
113,613
168,749
104,539

6. Assets Pledged as Collateral
Assets pledged as collateral primarily for short-term loans and long-term debt and debentures at March 31, 2009 and 2008 were as
follows:
Millions of yen

Buildings and structures
Machinery and equipment
Land
Other
Investments in securities

Thousands of
U.S. dollars

2009

2008

2009

¥ 22,141
32,947
9,542
503
2,895
¥ 68,030¥ 23,439
38,581
9,542
100
5,380
¥ 77,044$ 225,405
335,412
97,141
5,128
29,473$ 692,562

7. Accrued Post-Employment Benefits

Employees of the Company and the domestic consolidated subsidiaries excluding directors and statutory auditors, with more than one
year of service are generally entitled to lump-sum retirement benefits determined by reference to the current basic rate of pay, length ofservice and conditions under which termination occurs. In addition, the Company and certain consolidated subsidiaries have funded noncontributory pension plans.
The following table sets forth a reconciliation of the projected benefit obligation, plan assets, funded status of the post-employment
benefit plans and net liability recognized in the accompanying consolidated balance sheets at March 31, 2009 and 2008.
In addition, in October 2006, the Company transferred a portion of its defined benefit pension plans to a defined contribution
pension plan.
Millions of yen

Projected benefit obligations
Fair value of plan assets
Funded status of the plans
Unrecognized net actuarial
Unrecognized prior service cost (reduction of the obligation)
Net post-employment benefits
Prepaid pension costAccrued post-employment benefits

Thousands of
U.S. dollars

2009

2008

2009

¥ (26,221)
20,661(5,609)4,242(1,420)(2,787)3,499¥ (6,286)¥ (26,427)
34,758
8,330(10,165)(1,570)(3,406)3,518¥ (6,924)$ (266,936)
209,833(57,103)43,188(14,457)(28,372)
35,629$ (64,002)

The net periodic post-employment benefit cost for the years ended March 31, 2009 and 2008 included the following components:
Millions of yen
2009Service cost
Interest cost
Expected return on plan assets
Amortization of net actuarial gain
Amortization of prior service cost (reduction of the obligation)
Loss on transfer to a defined contribution pension plan system¥ 1,773
549
(382)
(659)
(155)
—
¥ 1,1242008¥ 1,540
625
(472)
(575)
(161)
(3)
¥ 952

Thousands of
U.S. dollars
2009$ 18,051
5,590(3,895)(6,718)(1,580)—$ 11,446

21

Assumptions used in calculation of the above information were as follows:
Discount rate
Expected rate of return on plan assets
Method of attributing the projected benefits to periods of service
Amortization of unrecognized prior service cost
Amortization of unrecognized net actuarial gain or loss

2009

2008

2.5%
4.0%
mainly on a points basis
13~15 years
13~15 years

2.5%
4.0%
mainly on a points basis
13~15 years
13~15 years

8. Deferred Income Taxes

The statutory tax rate used for calculating deferred tax assets and liabilities for the years ended March 31, 2009 and 2008 was primarily
40.7%.
At March 31, 2009 and 2008, significant components of deferred tax assets and liabilities were as follows:
Millions of yen
2009

Deferred tax assets:
Accrued enterprise taxes
Accrued expenses
Accrued post-employment benefits to employees
Allowance for doubtful accounts
Loss on revaluation of fixed assets
Unrealized gains on property, plant and equipment
Tax loss carryforwards
Other
Gross deferred tax assets
Valuation allowance
Total deferred tax assets
Deferred tax liabilities:
Reserve based on Special Taxation Measures Law
Consolidation adjustment to book value of subsidiaries’ assets
Unrealized gains on available-for-sale securities
Other
Total deferred tax liabilities
Net deferred tax assets (liabilities)¥

Thousands of
U.S. dollars
2009

2008

237
1,376
4,123
239
522
237
12,226
8,703
27,666(21,298)
6,368

¥

(37)
(243)
(1,023)(75)(1,379)¥ 4,988(37)(402)(5,517)(64)(6,021)¥ 2,261

110
1,353
4,464
160
523
1,141
14,211
6,020
27,986(19,702)
8,283

$

2,421
14,017
41,976
2,433
5,318
2,412
124,469
88,599281,649(216,818)
64,830(380)(2,474)(10,421)(771)(14,047)$ 50,783

For the years ended March 31, 2009 and 2008, a reconciliation of the statutory tax rate to the effective tax rates was as follows:
Statutory tax rate
Permanently non-deductible expenses
Permanently non-taxable income
Per capita inhabitants’ taxes
Valuation allowance
Current operating losses of subsidiaries
Unrealized gains/losses
Other
Effective tax rates

2009

2008

40.7%
3.2
(1.9)
1.1
(18.9)
28.6
9.2
9.9
71.9%

40.7%
3.3
(2.8)
1.8
(11.9)
4.2
—
(8.0)
27.4%

9. Contingent Liabilities

As at March 31, 2009 the Companies were contingently liable for guarantees of loans, primarily of their employees and unconsolidated subsidiaries and affiliates, in the aggregate amount of ¥3,930 million ($40,009 thousand), and also liable for a recourse obligation of credit securitization in the aggregate amount of ¥3,983 million ($40,548 thousand).

22

FINANCIAL STATEMENTS

10. Leases

Finance leases, except those leases for which the ownership of the leased assets is considered to be transferred to the lessee, of
which transaction date is on or before March 31, 2008 were as follows:(1) Equivalent of purchase price, accumulated depreciation and net book value of leased properties
Millions of yen
2009

Purchase price equivalent
Accumulated depreciation equivalent
Net book value equivalent

Machineryequipment
and vehicles

Other

¥ 424
288
¥ 135

¥ 477
298
¥ 178

Thousands of U.S. dollars
2009

2008

Total

Machineryequipment
and vehicles

Other

¥ 901
586
¥ 314

¥ 785
513
¥ 271

¥ 750
441
¥ 309

Total

Machineryequipment
and vehicles

Other

Total

¥ 1,535954¥ 581$ 4,319
2,936$ 1,382$ 4,856
3,036$ 1,820$ 9,175
5,973$ 3,202(2) Lease commitments
Millions of yen

Due within one year
Due after one year
Total

Thousands of
U.S. dollars

2009

2008

2009

¥ 155
158
¥ 314

¥ 281
299
¥ 581

$ 1,583
1,618$ 3,202(3) Lease expenses and depreciation equivalents
Millions of yen

Lease expenses
Depreciation equivalents

Thousands of
U.S. dollars

2009

2008

2009

¥ 269
269

¥ 379
379

$ 2,741
2,741

Non-cancelable operating lease commitments were as follows:
Millions of yen

Due within one year
Due after one year
Total

Thousands of
U.S. dollars

2009

2008

2009

¥ 6
4
¥ 11

¥ 13
17
¥ 31

$ 69
45
$ 115

11. Segment Information(1) Industry segment information
The Companies operate primarily in the production and sale of paper, pulp, photosensitive materials and other.
Paper and pulp:
Coated paper, premium-quality paper, writing and printing paper, bleached kraft pulp
Photosensitive materials:
Photographic paper, printing and platemaking materials, related equipment and pharmaceuticals
Other:
Operation of swimming clubs, real estate, storage and transport, as well as machinery design, installment and maintenanceAccounting changes
Application of a new standard for inventories

Due to the application of a new accounting standard for inventories with effect for the year ended March 31, 2009 as stated in(12) (i) under 3.Summary of Significant Accounting Policies, operating income for the Company’s paper and pulp business declinedby ¥278 million ($2,835 thousand), while the photosensitive materials business recorded an increase in operating loss of ¥320 million ($3,259 thousand).
Application of a new accounting standard for the Practical Solution on Unification of Accounting Policies Applied to Foreign Subsidiaries
for Consolidated Financial Statements

For the year ended March 31, 2009, as stated in (12) (iii) under 3.Summary of Significant Accounting Policies, assets of the paper
and pulp business increased by ¥3,774 million ($38,421 thousand) compared with amounts calculated using the previous method.
23

Additional information

Effective from the year ended March 31, 2009, the Company and its domestic consolidated subsidiaries have reviewed the useful
lives of their property, plant and equipment, pursuant to the revision of the Corporation Tax Law of Japan. As a result, comparedwith amounts calculated using the previous method, operating income declined by ¥278 million ($2,832 thousand) for the paper andpulp business and by ¥1 million ($18 thousand) for the “other businesses” segment, while the operating loss posted by the photosensitive materials business increased by ¥26 million ($274 thousand).
Industry segment information for the years ended March 31, 2009 and 2008, was as follows:
Millions of yen
Year ended March 31, 2009

Paper
and pulp

Photosensitive
materials

1 Net sales and operating income:¥ 215,443 ¥ 30,835
Sales to unaffiliated customers
Intersegment sales and transfers
6,487
3,334
Net sales
221,930
34,17034,310Operating expenses
215,388
Operating income (loss)¥ 6,542 ¥ (139)
2 Total assets, depreciation and amortization and capital expenditures:
Total assets¥ 249,063 ¥ 34,220
Depreciation and amortization
11,605
1,068
Capital expenditures
9,358
3,265

Eliminations/
Headquarters

Consolidated¥ 6,823
14,752
21,57521,036¥539¥ 253,102 ¥—
24,574 (24,574)
277,677 (24,574)
270,735 (24,743)¥ 6,941 ¥169¥ 253,102—
253,102245,991¥ 7,110¥ 13,698
223
3,935¥ 296,981 ¥ (2,726)
12,897(34)
16,560(95)¥ 294,254
12,862
16,464

Other

Total

Thousands of U.S. dollars
Year ended March 31, 2009

Paper
and pulp

Photosensitive
materials

1 Net sales and operating income:$ 2,193,255 $ 313,912
Sales to unaffiliated customers
Intersegment sales and transfers
66,04333,948Net sales
2,259,299
347,861
Operating expenses
2,192,698
349,283
Operating income (loss)$
66,600 $ (1,422)
2 Total assets, depreciation and amortization and capital expenditures:
Total assets$ 2,535,510 $ 348,369
Depreciation and amortization
118,146
10,873
Capital expenditures
95,27333,244

Other

Total

Eliminations/
Headquarters

Consolidated$ 69,467
150,178
219,645
214,153$ 5,491$ 2,576,635 $— $ 2,576,635
250,171 (250,171)—
2,826,806 (250,171)
2,576,635
2,756,136 (251,891)
2,504,244$ 70,670 $ 1,720 $ 72,391$ 139,449
2,277
40,067$ 3,023,328 $ (27,757) $ 2,995,570
131,297(356)
130,941
168,584(972)
167,612

Millions of yen
Year ended March 31, 2008

Paper
and pulp

1 Net sales and operating income:¥ 221,098
Sales to unaffiliated customers
Intersegment sales and transfers
5,982
Net sales
227,080
220,389
Operating expenses
Operating income¥ 6,690
2 Total assets, depreciation and amortization and capital expenditures:¥ 259,746
Total assets
Depreciation and amortization
11,501
Capital expenditures
17,33624

Photosensitive
materials

Other

Eliminations/
Headquarters

Consolidated¥ 30,481
4,307
34,78932,683¥ 2,106¥ 6,957
16,131
23,08822,414¥674¥ 258,536 ¥—
26,421 (26,421)
284,958 (26,421)
275,488 (26,254)¥ 9,470 ¥ (167)¥ 258,536—
258,536
249,234¥ 9,302¥ 30,788
992
764¥ 13,129
192
79¥ 303,664 ¥
12,68618,180¥ 303,052
12,65518,052

Total

(612)
(30)
(127)

FINANCIAL STATEMENTS(2) Information by geographic segment
Accounting changes
Application of a new standard for inventories

Due to the application of a new accounting standard for inventories at the Company and its domestic subsidiaries with effect for theyear ended March 31, 2009 as stated in (12) (i) under 3.Summary of Significant Accounting Policies, operating income on business
operations in Japan decreased ¥598 million ($6,096 thousand), compared with amounts calculated using the previous method.
Application of a new accounting standard for the Practical Solution on Unification of Accounting Policies Applied to Foreign Subsidiaries
for Consolidated Financial Statements

For the year ended March 31, 2009, as stated in (12) (iii) under 3.Summary of Significant Accounting Policies, assets in Europe
increased by ¥3,774 million ($38,421 thousand) compared with amounts calculated using the previous method.
Additional information

Effective from the year ended March 31, 2009, the Company and its domestic consolidated subsidiaries have reviewed the useful
lives of their property, plant and equipment, pursuant to the revision of the Corporation Tax Law of Japan. As a result, comparedwith amounts calculated using the previous method, operating income in Japan declined by ¥306 million ($3,125 thousand).
Segment information by geographical area for the years ended March 31, 2009 and 2008, was as follows:
Millions of yen
Year ended March 31, 2009

Eliminations/
Headquarters

Consolidated

Japan

EuropeU.S.A.

Total

1 Net sales and operating income:Sales to unaffiliated customers
Intersegment sales and transfers
Net sales
Operating expenses
Operating income¥ 198,624
5,070
203,695
197,100¥ 6,594¥ 46,411
1,122
47,53347,506¥27¥ 8,066
9
8,075
7,990
¥
85

¥ 253,1026,201
259,304
252,597¥ 6,707¥—(6,201)(6,201)(6,605)¥403¥ 253,102—
253,102245,991¥ 7,110

2 Total assets¥ 251,082¥ 26,085¥ 2,876¥ 280,044¥ 14,210¥ 294,254

Eliminations/
Headquarters

Consolidated

Thousands of U.S. dollars
Year ended March 31, 2009

Japan

EuropeU.S.A.

Total

1 Net sales and operating income:Sales to unaffiliated customers
Intersegment sales and transfers
Net sales
Operating expenses
Operating income$ 2,022,038
51,6152,073,653
2,006,519$
67,134$ 472,478
11,422483,901
483,621$279$ 82,118
95
82,214
81,344$869$ 2,576,635
63,134
2,639,769
2,571,485$
68,284$—(63,134)(63,134)(67,241)$ 4,107$ 2,576,635—
2,576,635
2,504,244$
72,391

2 Total assets$ 2,556,065$ 265,551$ 29,288$ 2,850,905$ 144,665$ 2,995,570

Eliminations/
Headquarters

Consolidated

Millions of yen
Year ended March 31, 2008

Japan

EuropeU.S.A.

Total

1 Net sales and operating income:Sales to unaffiliated customers
Intersegment sales and transfers
Net sales
Operating expenses
Operating income¥ 197,246
7,847
205,094
196,886¥ 8,207¥ 50,970
1,656
52,62752,003¥624¥ 10,319
12
10,332
10,131¥200¥ 258,536
9,516
268,053
259,021¥ 9,032¥—(9,516)(9,516)(9,787)¥270¥ 258,536—
258,536
249,234¥ 9,302

2 Total assets¥ 254,104¥ 33,500¥ 3,725¥ 291,329¥ 11,722¥ 303,052

25

(3) Overseas sales
Export sales and sales by overseas consolidated subsidiaries for the years ended March 31, 2009 and 2008 were as follows:
Millions of yen

Overseas sales:
EuropeAsia
North America
Other
Total

26

Thousands of
U.S. dollars

Percentage of such sales
against consolidated net sales

2009

2008

2009

2009

2008

¥ 39,095
8,030
13,246
7,470¥ 67,843¥ 39,216
9,002
16,564
9,736¥ 74,520$ 397,997
81,753
134,849
76,053$ 690,654

15.4%
3.2%
5.2%
3.0%
26.8%

15.2%
3.5%
6.4%
3.7%
28.8%

FINANCIAL STATEMENTS
Mitsubishi Paper Mills Limited and Consolidated Subsidiaries

REPORT OF INDEPENDENT AUDITORS ON CONSOLIDATED FINANCIAL STATEMENTS

27

Mitsubishi Paper Mills Limited

BOARD OF DIRECTORS AND CORPORATE AUDITORSManaging Executive Officers

Kunio Suzuki

Shunichi Tokuda

Kazuo Nakase

Junichi Tachibana

President and Chief Executive
Officer

Director and Senior
Executive Vice President

Director and Senior
Managing Executive Officer

Director and Senior
Managing Executive Officer

Takefumi Suzuki

Takao Senga

Kanji Itakura

Director and Managing
Executive Officer

Director and Managing
Executive Officer

Director and Managing
Executive Officer

President and Chief
Executive Officer

Director and Managing
Executive Officers

Kunio Suzuki

Takefumi Suzuki

Director and Senior
Executive Vice President

Shunichi Tokuda
In charge of President’s Office;President of the Imaging &Development Company; supervisor ofInternal Audit Department; responsible
for Corporate Social Responsibility
Director and Senior
Managing Executive Officers

Kazuo Nakase
General Manager, Paper Division; incharge of German Operations

Junichi Tachibana
In charge of General Affairs andPersonnel Dept., Information Systems
Dept., and supervisor of Finance &Accounting Dept.

Vice President, Imaging & Development
Company (in charge of sales
administration)

Takao Senga
Head of Corporate Research Center;
supervisor of Technology &Environmental Dept. and Intellectual
Property Dept.; Vice President, Imaging &Development Company (in charge of
New Business Development Unit)

Kanji Itakura
In charge of Purchasing Dept. andForestry Dept; supervisor of Corporate
Planning Office, Affiliates Managing
Dept., Global Business Planning Dept.,
and Post Phoenix Plan Office (all within
President’s Office)General Manager, President’s Office andCorporate Planning Dept.
Director and Executive
AdvisorTakeshi Sato

Senior Executive Officers

Executive Officers

Mitsuo Ushijima

Kiyoshi Maeda

General Manager, Commercial Printing
Paper Sales Department; General
Manager, Information Sharing Office(within President’s Office)Hiroshi Nozawa
General Manager, General Affairs andPersonnel Dept.; General Manager,
Information Systems Dept.

Kazuhisa Taguchi
Vice President, Imaging & Development
Company (responsible for planning, marketing and the Kyoto R&D Center)

General Manager, Purchasing Dept. andForestry Dept.

Fukumi Kanehama
Head of Hachinohe Mill

Naoya Tashiro
President & CEO of Kitakami Hitec
Paper Corp. (part of Imaging &Development Company)

Motoshige Yamada(Affiliated to Imaging & Development
Company)
Head of Kyoto Mill and Head of Kyoto
R&D Center

Shinichi Suzuki
Head of Takasago Mill
Corporate Auditors

Norio Fujii
Shigeru Uemura
Yasuharu Takamatsu
Hajime Sugizaki(as of June 26, 2009)28

Mitsubishi Paper Mills Limited

COMPANY DATA

Established:
April 1, 1898
Head Office:4-2, Marunouchi 3-chome, Chiyoda-ku, Tokyo 100-0005, Japan
Telephone:+81-3-3213-3751 (Information)+81-3-3213-3641 (President’s Office)+81-3-3213-3729 (Communication & Printing Paper Sales
Dept. Paper Division)+81-3-3213-3733 (Business Communication & Specialty Paper
Sales Dept. Paper Division)+81-3-3213-3728 (Sales Administration Dept. Paper Division)+81-3-3213-3734 (Ink Jet & Photo Dept. Imaging &Development Company)+81-3-3213-3743 (Graphic Systems Dept. Imaging &Development Company)+81-3-3213-3731 (Sales Development Dept. New Business
Development Unit Imaging &Development Company)+81-3-3213-3745 (Purchasing Dept.)+81-3-3213-3646 (Forestry Dept.)

Facsimile:+81-3-3214-2338 (Information)+81-3-3213-3818 (President’s Office)+81-3-3213-2339 (Communication & Printing Paper Sales
Dept. Paper Division)+81-3-3215-8157 (Business Communication & Specialty Paper
Sales Dept. Paper Division)+81-3-3215-2339 (Sales Administration Dept. Paper Division)+81-3-3213-6715 (Ink Jet & Photo Dept. Imaging &Development Company)+81-3-3214-5936 (Graphic Systems Dept. Imaging &Development Company)+81-3-3214-5506 (Sales Development Dept. New Business
Development Unit Imaging &Development Company)+81-3-3213-3804 (Purchasing Dept.)+81-3-3213-3804 (Forestry Dept.)

Corporate Research Center:
Tsukuba R&D Laboratory
Kyoto R&D Laboratory
Process Development Laboratory
Mills:
Takasago, Kyoto, Hachinohe
Major Affiliates:
Domestic

Mitsubishi Paper Sales Co., Ltd.
Ostrich Dia Co., Ltd.
Toho Tokushu Pulp Co., Ltd.
Hachinohe Paper Processing Co., Ltd.
Hachinohe Forest Products Co., Ltd.
Hachiryo Co., Ltd.
Hokuryo Forest Products Co., Ltd.
Hokuryo Co., Ltd.
Hakuryo Co., Ltd.
Takasago Paper Processing Co., Ltd.
Kitakami Hitec Paper Corp.
Diamic Co., Ltd.
Pictorico Co., Ltd.
Asahi Diazo-Sensitive Paper Co., Ltd.
Kyoryo Chemical Co., Ltd.
Naniwa Express Co., Ltd.
Mitsubishi Paper Engineering Co., Ltd.
Ryoshi Co., Ltd.
MPM Shared-service Co., Ltd.
Overseas

Mitsubishi Paper Holding (Europe) GmbH (Germany)
Mitsubishi Paper GmbH (Germany)
Mitsubishi HiTec Paper Flensburg GmbH (Germany)
Mitsubishi HiTec Paper Bielefeld GmbH (Germany)
Mitsubishi Imaging (MPM), Inc. (U.S.A.)
MP Juarez LLC (Mexico)
Zuhai MPM Filter, Ltd. (China)

Sales Branch:
Osaka

Disclaimer Regarding Forward-Looking Statements
This material contains forward-looking statements relating to thebusinesses and prospects of the Company. These statements are basedon our expectations at MAY, 2009. and are subject to the risks anduncertainties that may affect our businesses, which could cause actual
results to differ materially from those anticipated.
We will not be liable for any damage or loss incurred by you arisingout of or in connection with this material.

29

SHIN NISSEKI BLDG.
4-2, MARUNOUCHI 3-CHOMECHIYODA-KU, TOKYO 100-0005, JAPANURL http://www.mpm.co.jp/

Printed in Japan