MATERIALSINNOVATIONANNUAL REPORT 2017
For the year ended March 31, 2017

01

JSR Corporation Annual Report 2017

Contents

11

Creating
Corporate
Value

12 At a Glance
13 Petrochemical Products
Business
15 Fine Chemicals and Other
Products Business
15 Semiconductor Materials

02 Overview

16 Display Materials
17 Life Sciences Business18 R&D Policy and Organization

02 Profile
03 Business Outline
04 Consolidated Financial
Highlights

19

Creating
Sustainable
Value

20 Corporate Mission and CSR

05

Our
Strategy

06 The JSR Vision
07 To Our Shareholders

21 Contributing to Society
Through Materials Innovation
24 Corporate Governance
System31 Directors, Audit &Supervisory Board Members,
and Officers
32 JSR Global Network
33 Corporate Data

* In this report, Fiscal Year (FY) means the year ending March 31.
For example, FY2016 means April 1, 2015 – March 31, 2016.

Financial Section(Supplementary Volume)

Forward-Looking Statements
Statements regarding the Company’s future plans, strategies, projected performance and outlook are based on information available at the time of writing. Readers are cautioned that economic trends in JSR’s target markets andother risks, and factors beyond the Company’s control could cause actual results to differ materially from those projected by management.

02

JSR Corporation Annual Report 2017

Overview

PROFILEJSR Corporation (formerly Japan Synthetic Rubber Co., Ltd.) was established in December
1957 under the Special Measures Law for the Synthetic Rubber Manufacturing Industry withthe aim of pioneering synthetic rubber production in Japan. Since that time, the Company hasremained among Japan’s market share leaders in synthetic rubber and other petrochemicalmaterials. We also apply our polymer technologies in the field of fine chemicals to produce
semiconductor materials, display materials, and other products, which command among thehighest market shares in the industry.
JSR aims to leverage its stable core businesses of petrochemical products and fine chemical materials, to pursue sustained growth through life sciences business.

CORPORATE MISSION

MAT ERIAL S I NNOVATI O N
We create value through materials toenrich society, people and the environment

03

JSR Corporation Annual Report 2017

Overview

BUSINESS OUTLINEJSR Group aims to create new value through materials and to help in solving social problems.

1960s

SocialPriorities

1980s

2000s

PRODUCTION OFS Y N T H E T I C R U B B E R I N J A PA N

CHANGES IN
THE INDUSTRIAL STRUCTURE

SOCIAL PRIORITIES FOR
THE FUTURE

Petrochemicals played a vital role as industrial raw materials during Japan’s postwar
recovery and reconstruction phase. There
was an urgent need to establish synthetic
rubber manufacturing in Japan because reliance on imports left Japan vulnerable to atight supply-demand environment.

Electronic materials were vital to the emergence of the new computer industry andproducts such as electronically controlled
appliances with embedded microchips, anddigital communications devices.

Awareness of environmental problems isreflected in the need to create environmentally
responsible living. Another major social priority in Japan, which is at the head of the pack in
the global trend toward super-aging societies,
is the development of medical services.

Fine Chemicals
and
Other Products
Business

Use for polymer and precision
processing technology

Life Sciences
Businessand Others

Life Sciences Business• in-vitro Diagnostics and Life Science Research• Bioprocess Materials

Lithium Ion Capacitors Business
Use for polymer technology

Our
Businesses

Petrochemical
Products
Business• Lithium Ion Capacitors

Fine Chemicals
Business

Semiconductor Materials Business• Lithography Materials• Process Materials• Device Integration Materials• Chemical Mechanical Planarization
Materials (CMPs)

Elastomers Business• General-Purpose Synthetic Rubbers• Special-Purpose Synthetic Rubbers

Display Materials Business• LCD Materials• New FPD Materials

Optical Materials Business• Precision Materials and Processing• Optical Materials

Plastics Business• Thermoplastic Elastomers• Emulsions• Wide Range of ABS Resins and ABS Alloys

JSR Corporation Annual Report 2017

CONSOLIDATED FINANCIAL HIGHLIGHTS
In the FY ended March 31, 2017 (FY 2016), consolidated operating profit declined year on year due to factors such as a stronger yen but
substantially outpaced our initial FY 2016 forecast owing to the market recovery in the Petrochemical Products Business.

390.6

billion386.7 billion

Previous year ¥376.7

billion362.4 billion

Previous year ¥

+4.0%

¥

32.4

ROIC

8.4

%

34.4 billion

-5.9%

ROE

9.2

billionPrevious year ¥

>

+1.0%

¥

Operating Profit

Previous year

%

7.6%

Previous year

+1.6%

>

¥

Net Assets>

Net Sales>

Overview

>

04

6.8%

+1.6%

Consolidated net sales rose

Consolidated net assets grew

Consolidated operating profit

ROIC increased by 1.6 per-ROE increased by 1.6 per-year on year on sales growthyear on year on a ¥6.5 bil-fell year on year amid a stron-

centage point on factors suchcentage point on factors suchat the life sciences businesslion increase in sharehold-ger yen overall against theas an increase in profit attrib-

as an increase in profit attrib-

as well as a second-half mar-ers’ equity and a ¥6.1 billion

year-earlier level. In the plas-

utable to owners of parent,

utable to owners of parent.

ket price recovery and higher

increase in non-controllingtics business, margin ero-

despite continuing invest-

sales volumes at the elasto-

interests. The equity ratiosion reflected weaker productment to capture growthmers business.

was 62.7%.

prices on lower raw materi-opportunities.

als prices, and in the display
materials business, stiffer
competition depressed prod-

(%)
13

(%)
10

uct prices.

10

9
10

8

9

8
7

8

Note: FY means year ended March 31(FY) 2013

2014

2015

2016

2017

(FY) 2013

2014

2015

2016

2017

05

JSR Corporation Annual Report 2017

Our Strategy

A COURSE CHANGE TOREALIZE THE BUSINESS VISION
In a difficult business environment, JSR has identified growth opportunities ineach business. We are examining and selecting areas for allocation of enterprise
resources. Nevertheless, our business vision is unchanged, and we will steadily
invest in growth opportunities to realize the vision.

MITSUNOBU (Nobu) KOSHIBA
Representative Director and President

06

JSR Corporation Annual Report 2017

We will achievesustainable growth to fulfill
our responsibility toall our shareholders

THE JSR VISIONOur Strategy

The trends toward diversification and the formation ofa multipolar world are expected to accelerate.
We see these environmental changes
as opportunities to expand
our corporate value throughinitiatives based on

JSR20i9Phase

our business philosophy.

III

Strengthening Competitivenessfor the Future
Mission of JSR 20i9
• Solid earnings growth by SSBR,
semiconductors materials and the Life
Sciences Business

JSR20i6
Phase

II

Results of JSR 20i6

460.0

(billions yen)

• Progress of globalization• Restructuring of the Strategic
Business and focusing on the Life
Sciences Business

371.5

349.9
36.0

35.2

394.3

404.1

36.1

38.1

386.7

390.6
42.0

34.4

32.4

JSR20i3

Net sales
Operating profit

Phase

I

JSR20i3

Results of JSR 20i3
• Clarification of the strategy
toward growth

2011

2012

JSR20i6
2013

2014

2015

JSR20i9
2016

2017

2018

2019

• Decision of resource investment* The “i” in “JSR20i6” (twenty-sixteen) emphasizes “Innovation” to realize materials innovation,
which is the heart of our corporate mission.

07

JSR Corporation Annual Report 2017

Our Strategy

TO OUR SHAREHOLDERS

Why did sales grow and operating profit decline at
the consolidated level in FY 2016?
Sales growth at the elastomers business and life science business contributed to the increase in consolidated net sales. Margin erosion at
the plastics business led to a decline in consolidated operating profit
due to the impact of a stronger yen at the fine chemicals business andprice declines on fiercer competition in display materials.
Key trends in FY ended March 31, 2017 in the JSR Group’s main customer industries
were as follows. While global production of automobiles and automobile tires were up
slightly year on year, domestic tire production declined year on year. Semiconductor market demand grew, and panel production for the display market was robust. In foreignexchange, the yen strengthened against the year-earlier level.
In this business environment, net sales in the Petrochemical Products Business segment remained unchanged from previous year. At the elastomers business, an increase inexports and sharp volume growth in sales of Solution Polymerization Styrene-Butadiene
Rubber (SSBR) for fuel-efficient tires supported year-on-year sales growth despite a sluggish elastomer products market, where there was no improvement in the supply-demandbalance owing to elastomers oversupply in East Asia in the first half. In contrast, at theplastics business, sales fell year on year owing to the large impact of declines in productprices attendant with lower raw materials prices. Operating profit at the Petrochemical
Products Business segment, by contrast, fell year on year. At the elastomers business,despite margin erosion in the first half on softer markets and a stronger yen, operating
profit rose year on year on higher sales volumes and improved margins on rebounding
markets in the second half. Yet operating profit fell year on year at the plastics business in
response to the impact of margin erosion on product price declines stemming from lower
raw materials prices.
At the Fine Chemicals and Other Products Business segment, sales volumes of semiconductor materials and display materials rose against the previous year on brisk demand
trends in the semiconductor and display markets. In contrast, sales fell year on year at the08

JSR Corporation Annual Report 2017

Our Strategy

TO OUR SHAREHOLDERS

fine chemicals business owing to price declines on stiffer competition in some parts ofthe display materials market and a stronger yen. Yet, with sales increasing substantially at
the life sciences business which is a new business mainstay of the JSR Group, net sales
at the segment increased year on year. Operating profit at the segment fell from the previous year owing to the large impact of the sales decline at the fine chemicals business.
Ordinary profit increased compared to the previous year owing mainly to a decrease inforeign exchange losses recorded at Group companies in the previous fiscal year. Profit
attributable to owners of parent rose year on year due to the non-reoccurrence of impairment losses at Group companies recorded in the previous fiscal year as well as gains on
the sale of investment securities and other factors.
For FY ended March 31, 2017, we reported net sales of ¥390,599 million (up 1.0%
year on year), operating profit of ¥32,370 million (down 5.9% year on year), ordinary profitof ¥36,264 million (up 7.8% year on year) and profit attributable to owners of parent of¥30,078 million (up 25.0% year on year).

What benefits were derived from JSR20i6?
The measures adopted at each business produced some results,
although JSR20i6 targets were not attained.
We unfortunately failed to achieve the earnings targets in the JSR20i6 medium-term business plan.
At the elastomers business, the main reasons were delays in constructing a new
SSBR plant in Thailand for fuel-efficient tires and margin erosion on weak market prices.
Weak sales of general-use elastomers due to the shrinking domestic tire market also hada negative impact. At the display materials business, the main reasons were a decline inmarket share owing to fiercer competition in some parts of the market and a marked erosion in business profitability owing to product price declines.
The measures in each business, however, produced some results. At the elastomers
business, the first-phase facility at the Thai SSBR plant continues to operate at a high utilization rate, and the second-phase facility began operations from October 2016 to respond

09

JSR Corporation Annual Report 2017

Our Strategy

TO OUR SHAREHOLDERS

to further demand growth in the future. With the launch of operations at a plant under construction in Hungary scheduled for 2018, initiatives to construct a global production system

FY2019Operating Profit

have moved forward. In the plastics business, the JSR Group decided to partner with othercompanies and merge its resin businesses with theirs. The semiconductor materials busi-¥

ness gained high shares in leading-edge materials for 14nm and 16nm processes, and JSR

42 billion

FY2017
Operating Profit

has set up a joint venture in Belgium to manufacture EUV resists which is expected to be
used for commercial production of next-generation 7nm and sub-7nm processes. The dis-

35 billion¥

play materials business is focusing on China, where production of LCD panels is growing,
and JSR Micro (Changshu) Co., Ltd., set up as a local joint venture to manufacture LCD
materials, is expected to commence operations in FY ending March 31, 2018.
The life sciences business has expanded its business scale by consolidating US-based
KBI Biopharma, Inc., a contract manufacturer that develops production processes for biopharmaceuticals, and Medical & Biological Laboratories Co., Ltd. as subsidiaries. Moreover, the
JSR-Keio University Medical and Chemical Innovation Center (JKiC), under construction for aplanned October 2017 opening, is to lead efforts at discovering future business themes.

Fine Chemicals
and
Other Products

Fine Chemicals
and
Other Products+Life Sciences

How will JSR expand profits under JSR20i9,
the new medium-term business plan?
Under JSR20i9, we expect three profit drivers, SSBR, the semiconductormaterials business, and the life sciences business, to propel expansion.

Petrochemical
Products

We are strengthening our competitiveness for the future with the launch of JSR20i9, our
new medium-term business plan in April 2017. The plan sets targets for sales of ¥460
billion, operating profit of ¥42 billion, and ROE of 8% or higher (the effect of merger ofour plastics business with those of other resin makers is still a work in progress, and is
not included in our earnings targets).
For the elastomers business, we will expand SSBR sales in the global market. The
plastics business will seek to expand sales overseas based on a merger of our resin business with those of partners. The semiconductor materials business will look to maintainits high share in cutting-edge lithographic materials and expand sales by broadening its

2015

2016

2017

2018

2019 (FY)10

JSR Corporation Annual Report 2017

Our Strategy

TO OUR SHAREHOLDERS

product portfolio to include peripherals such as CMP materials, packaging materials, andcleaning solutions. The display materials business will seek to increase sales in China,
where demand has risen considerably. The life sciences business will expand its operations, especially in fields relating to antibody drugs, which is expected to be a source of
future growth.
As ways to harness digitalization, we strive to make large labor productivity gains
by improving manufacturing efficiency via the adoption of ICT technologies such as IoT
devices at plants and by substantially improving R&D efficiency via the deployment ofartificial intelligence (AI) and robots. Looking ahead to the post-2020 era, we aim to further improve operational efficiency. At the same time, we will consider ways to build new
business models and advance efforts to develop capable human resources that can movebusiness models forward.

What is management’s view on
returning profits to shareholders?
We will continue to properly return profits to shareholders while balancing this against allocations to growth investments.
The JSR Group is working to strengthen R&D from a long-term perspective and strengthen
its competitiveness by developing new businesses, reflecting our conviction that improving our earnings over the long haul is the most important issue for the Group. Regarding dividends, we take into account our earnings and medium- and long-term demand for funds,
while paying continuous, stable cash dividends based on a consideration of how to balance
returning profits to shareholders with retaining sufficient earnings for investments into theGroup’s future growth. Keeping in mind factors such as stock market conditions, the Groupwill consider share repurchases from an overall perspective as a way to return profits toshareholders. The Group allocates earnings it retains to a variety of investments linked tofuture growth businesses, contributing to increasing corporate value.
I request the continued support of our shareholders and investors in the years to come.

11

JSR Corporation Annual Report 2017

Creating
Corporate Value

Display
Materials

Bioprocess
Materials

The three strategic domains for JSR Group are petrochemical products, fine chemicals,
and life sciences. In each of these areas, we are developing business activities based on
medium- and long-term perspectives.
Revenue Breakdown by
Business Segment
In Vitro
Diagnostics
and Life
ScienceResearch

Elastomers

Elastomers

Petrochemical
Products
Business
Thermoplastic
Elastomers

47.5%

40.7%

Fine Chemicals andOther Products
Business

Plastics

11.8%
Semiconductor
Materials

Plastics

Emulsions

OpticalMaterials

12

JSR Corporation Annual Report 2017

Creating Corporate Value

AT A GLANCE

Sales at segments and key businesses (Millions of yen)
2015

198,958

55,161

2016

179,253

52,207

155,2502017

185,345

46,035

159,218

Elastomers business
Plastics business
Fine chemicals &other products business

149,954(FY)
0500,00100,000

150,000

200,000

250,000

300,000

350,000

400,000

450,000* Note: FY means year ended March 31

Petrochemical Products Business

Elastomers

Plastics

Fine Chemicals and Other Products Business

Fine Chemicals
Semiconductor Materials

General-Purpose Synthetic Rubbers•Solution Polymerization Styrene-Butadiene
Rubber (SSBR), Emulsion polymerization
Styrene-Butadiene Rubber (ESBR)
Polybutadiene Rubber (BR)Special-Purpose Synthetic Rubbers•Nitride Rubber (NBR), Butyl Rubber (IIR)•Ethylene-Propylene Rubber (EPM/EPDM)
Thermoplastic Elastomers (TPEs)•Syndiotactic 1, 2-Polybutadiene “JSR RB™”
•Hydrogenated polymer “JSR DYNARON™”•Styrene-butadiene thermoplastic elastomers“JSR TR™”•Styrene-isoprene thermoplastic elastomers“JSR SISTM,” etc.

Styrenic Resins•Acrylonitrile-Butadiene-Styrene (ABS) plastic•Acrylonitrile-Ethylene-Propylene-Styrene (AES)
plastic

Lithography Materials•Photoresists, multilayer materials, etc.
CMP (Chemical Mechanical Planarization)
Materials•CMP slurries and pads
Packaging Materials•Thick-film photoresists, photosensitive
insulation materials, etc.

Display Materials

LCD Materials•Alignment films, protective coatings, color
pigment dispersed resists, photosensitive
spacers, etc.
New FPD Materials•Optical coatings, OLED, etc.

Optical Materials

Life Sciences and Others
Life Sciences Materials

in-vitro Diagnostic and Research Reagents•Beads for clinical diagnostics•Research reagents•Magnetic beads•Size standard beads
Bioprocess Materials•Protein A affinity material•Ion-exchange material

Lithium Ion Capacitors

Emulsion Products•Paper coating latex, SB latex, Acrylic
emulsions, etc.
Performance Chemicals•High-functional dispersant “DYNAFLOW™”•Organic/Inorganic hybrid coating materials“GLASCA™”•Battery materials•Thermal management materials

Precision Materials and Processing
Business•Heat-resistant transparent resin “ARTON™”•ARTONTM optical films, etc.
Optical Materials•High-performance UV curable resins, etc.

Cells
•Laminate cell•Prismatic cell
Modules•Laminate cell module•Prismatic cell module

13

JSR Corporation Annual Report 2017

Creating Corporate ValuePETROCHEMICAL PRODUCTS BUSINESSElastomers

The SSBR Business Strategy

Performance Overview

We expect annual average growth in global SSBR sales volume to be 6%-8%
attendant with expanding demand for fuel-efficient tires due to growing environ-

Net Sales

185.3

>

¥

mental awareness. JSR’s aggregate SSBR production capacity in Thailand andJapan is 160,000 tons at present. Moreover, a new plant in Hungary is to com-billion+3.4%

Operating Profit

8.3

>

¥

mence production in 2018, increasing JSR’s capacity to 220,000 tons. Utilizing
this capacity, we aim to expand sales volumes at over 10% per annum, outpacing
overall market growth.
Also, we established JSR Elastomer Europe GmbH in Germany to reinforce
the Group’s sales bases in Europe, where SSBR demand will increase, and built abillion+11.3%

Tianjin technical center in China, where market needs exist. Although we are now
introducing fourth-generation SSBR, we are also establishing the technology fora fifth-generation product. In addition, we are working to introduce a product for
the high-volume segment with the aim of increasing JSR’s global market share• While automobile tire and automobile
production grew mildly year on year at
the global level, domestic automobile tire
production fell against the previous year.

for SSBR.

•T otal elastomer sales volume increased
year on year.
•T otal elastomer sales also rose against
the previous year on a large increase
in SSBR sales volume reflecting export
growth and a high operating rate at thefirst-phase plant producing SSBR at JSR
BST Elastomer Co., Ltd. (JBE), the Thai
joint venture.
• Despite tighter margins on a stronger
yen and deterioration of market conditions in the first half, operating profit
rose year on year on higher sales volumes and improved margins on thesecond-half market recovery.

Expansion of SSBR Production Capacity
FY ended March 31, 2019

220,000
FY ended March 31, 2017per year+Hungary:

160,000 tons

60,000 tons

Japan:
60,000 tons

60,000 tons

Thailand:
100,000 tons

100,000 tons

per yearJapan:

Thailand:

tons

14

JSR Corporation Annual Report 2017

Creating Corporate ValuePETROCHEMICAL PRODUCTS BUSINESS

Plastics

Preparing for a Leap Forward in Plastics

Performance Overview

JSR, Ube Industries, and Mitsubishi Chemical are proceeding with integrationof the ABS resin businesses of their respective resins subsidiaries through the

Net Sales
¥

>

46.0

merger of Techno Polymer, a wholly-owned subsidiary of JSR, and UMG ABS, inwhich Ube Industries and Mitsubishi Chemical each holds a 50% equity interest.

billion-11.8%

Operating Profit
¥

>

3.8

On March 30, 2017, the three companies signed an agreement to integrate theABS resin businesses of Techno Polymer and UMG ABS and are to jointly operate the newly integrated company, with a scheduled effective date of October 1,
2017. Annual production capacity at the integrated new company will be 400,000
tons. In addition to improving manufacturing efficiencies and securing cost com-billion-26.2%

petitiveness so as to provide a stable product supply in Japan, the integrated newcompany will strive to expand sales in high-end markets overseas.

• Against a backdrop of steady global
automobile production, total plastics
sales volume grew year on year withsales volume for automobile applications increasing.
• Total plastics sales, however, fell year on
year reflecting the large impact of product price declines due to a stronger yen
and lower raw materials prices.
• Operating profit also plunged year on
year on margin erosion reflecting thelarge impact of lower product prices.

Overview of New Company

Techno Polymer(TPC)

Integrated
new company

UMG ABS(UMG)

Production capacity

51%

400,000 tons
per year

TPC: 250,000 tons +UMG: 150,000 tons

49%

15

JSR Corporation Annual Report 2017

Creating Corporate Value

Performance Overview
Net Sales

159.2

>

¥

+2.6%

>

20.3
-7.1%

14nm and 16nm processes, JSR aims to secure commercial rights for 10nm gen-billionexpand sales as the industry frontrunner.
In March 2017, the EUV Resist Manufacturing & Qualification Center NV (EUVbillionSemiconductor
Materials
Performance Overview
Net Sales

>

-0.7%

RMQC), a joint venture between JSR Micro NV, a leading materials company, andimec, the world-leading research and innovation hub in nanoelectronics and digitaltechnology, announced the completion of a new manufacturing facility in Belgium,• Sales at the life sciences business, a new
business pillar, grew sharply.

62.1

eration patterns. Moreover, JSR seeks to be the first to mass produce EUV lithography materials for next-generation sub-7nm processes in an ongoing effort to• Sales rose and operating profit
decreased on price declines stemmingfrom a stronger yen and fiercer competition in display materials.

¥

Preparing for Commercialization of EUV Resists
While remaining the market share leader in leading-edge lithography materials forOperating Profit¥

FINE CHEMICALS AND OTHER PRODUCTS BUSINESS

billionenabling manufacturing and quality control of EUV photoresists for the semiconductor industry. The new facility is equipped with four sizes of vessels in its cleanroom environment and is run by a team of trained staff.
We are also working to expand sales of semiconductor peripheral materials
such as CMP materials, cleaning solutions, and packaging materials, and withboth lithography and peripheral materials, we strive to expand sales of a widerange of semiconductor materials.
EUV Joint Venture:
EUV Resist Manufacturing & Qualification Center N.V. (EUV RMQC)
Nations wherecutting-edge
semiconductor
makers are based

JSR Group’s Strengths
Production technologies and quality
control for high functional materials

BelgiumJapan

Joint venture EUV RMQC

• Semiconductor demand grew steadily.
• Total semiconductor materials sales
volume expanded, driven mainly byleading-edge photoresists.
• With the stronger yen having a large
impact, total semiconductor materials
sales declined year on year.

imec’s Strengths
Cutting-edge facilities & processes

South Korea

Contract
manufacturing

Sales

Qualitycontrol

Production and quality control services
for EUV lithography materials
TaiwanAnalyticalequipment
United States

Equipmentforphotoresist
production

Rights touse EUV
exposureequipment

EUV
exposureequipment

16

JSR Corporation Annual Report 2017

Creating Corporate Value

Display Materials
Performance Overview

>

56.8

Development of the Display Business in the Chinese
MarketJSR entered the Chinese market, where continued high growth is expected,

Net Sales¥

FINE CHEMICALS AND OTHER PRODUCTS BUSINESS

ahead of competitors and will proceed steadily with sales expansion in China.
Specifically, we are constructing a plant at JSR Micro (Changshu) Co., Ltd.

billion-8.7%• The trend in panel production was steady.
• Total display materials sales fell year
on year on a stronger yen and selling
price declines on stiffer materials market
competition.

(JMCH), a joint venture established in China to manufacture display materials,
and plan to start operation in 2017. In response to the commoditization of liquid crystal panels, we are working to secure business profit through operational
reforms and are pursuing expansion of the product line related to mobile products, from which continued growth can be expected. Furthermore, we will work
to maintain profit from the business overall through drastic structural reform ofoperations at each production site and aim to continuously expand the productportfolio.

Expansion of Display Materials Business in China
Beijing branch• Sales and marketing toperipheral customers

JSR Micro (Changshu) Co., Ltd.
• Produces materials for
LCD panelHefei branch• Sales and marketing toperipheral customers
Chongqing branch• Sales and marketing toperipheral customers

Shenzhen branch• Sales and marketing toperipheral customers

Plans to commence production
within FY2017
JSR (Shanghai) Co., Ltd.
• Performs oversight function for
display materials business•Conducts R&D for Chinese customers

Analysis lab

17

JSR Corporation Annual Report 2017

Creating Corporate ValueFINE CHEMICALS AND OTHER PRODUCTS BUSINESSLife Sciences
Businesses

Life Sciences as a New Business Pillar
The Company will reposition its activities in the life sciences area, which has
been positioned as a strategic business in the Fine Chemicals and Other Products

Performance Overview

Business segment, as a new pillar of the business portfolio comparable to the>

Net Sales

40.2¥

Fine Chemicals business. We focus on two fields: bioprocess fields and diagnostic
and research reagent fields.
In the area of bioprocess materials, the Group will make efforts to increase

billion+32.2%

KBI’s contract development and manufacturing of biopharmaceuticals for which
demand is growing year by year, in Europe as well as the United States. KBI• Sales grew sharply on sales growth at
KBI Biopharma Inc. (KBI) and the conversion of MBL* into a consolidated subsidiary from second half of FY 2015.
* MEDICAL & BIOLOGICAL LABORATORIES CO., LTD.

invested $30 million to expand its biopharmaceutical manufacturing capacity andcapabilities, and it plans to commence commercial manufacturing in 2017. KBI’s
strong development capabilities and track record of success in clinical bulk drug substance manufacturing are the foundation for its expansion into commercial manufacturing. With these efforts, KBI is able to respond to a wide-range of customer needsfrom clinical tests to commercial production. KBI also plans to expand in Europe
with the opening of an analytical services laboratory at JSR’s subsidiary, JSR Micro

Forecast of sales in the Life Science business

NV, in Leuven, Belgium in the first quarter of 2018. This expansion will allow KBI to(billions yen)
50

serve the European market with the high value analytical characterization and cGMP

40

30

• Turnaround to
black figures

testing services which remain at the heart of KBI’s business.
Also, we expanded production capacity of Amsphere A3 protein-A chromatog-• A base for Amsphere inEurope will begin
operations.
• KBI’s base in Europe
will begin operations.

raphy resin at JSR Micro NV to meet growing market demand. This expansion will
effectively increase its production capacity by six times by the end of 2019.
The diagnostic intermediates business of J&W Beijing Biotech Co., Ltd. (J&W),
a joint venture in China, is also progressing steadily.

• Achieved black
figures in EBITDA
20

In Japan, we are proceeding with construction of JSR-Keio University Medical• Consolidation of
MBL, KBI

and Chemical Innovation Center (JKiC), a joint research facility with Keio which is
to open in October 2017. Through joint research conducted with Keio University

10

School of Medicine and Keio University Hospital, where JKiC is sited, JSR will
work to develop groundbreaking materials and products to support new medical

0

2015

2016

2017

2018

2019

2020

fields.

18

JSR Corporation Annual Report 2017

R&D POLICY AND ORGANIZATION

Creating Corporate ValueR&D Structure
Next Generation
Third Pillar
Core BusinessLife Sciences and Others

With deep expertise in its core polymer and precision manufacturing technolo-

Fine Chemicals BusinessPetrochemical Products Businessgies, the JSR Group has widened the scope of its technological domains by integrating technologies from disparate fields such as photochemistry, inorganic“Basis of JSR”
Technology
innovation

chemistry, precision processing, and biotechnologies. On this basis, the Group

Precision
manufacturing
technology

Polymertechnology

has advanced R&D activities, and its accumulated efforts have enabled it toSociety’s
diversifying
needsdevelop unique strengths relative to chemical companies worldwide, which is
our driving force to expand superior materials and technologies globally.

M a te ri a l s I nnovation

Support Research

Next Generation
Technology Research
Yokkaichi Research Center

The JSR Group’s main R&D centers are located at Yokkaichi City in Mie Prefecture
and Tsukuba City in Ibaraki Prefecture. There we carry out R&D activities aimed at
Seed Research
JSR Functional Materials
Research Center

tracking swiftly evolving societal needs such as the changes that are emanating fromthe digital revolution.
Our R&D mission can be broadly divided into three categories: “support research”
for business domains we are developing; “next-generation technology research” suchas novel and application research for peripheral fields; and “seeds research” suchas R&D for cutting-edge materials that will be necessary in the future. In promoting
research, we highly value the close linkages in the Group’s value chain from market

Collaboration

Business Collaboration
Division

Customer andMarket Needs

development to process development and manufacturing technology development,

Proposal on
Technology Seeds
Performance Polymer Research Laboratories
Display Solution Research Laboratories
Fine Electronic Materials Research Laboratories
Advanced Materials Research Laboratories
Edge Computing Research Laboratories

Tsukuba Research Laboratories

Consignment
Research

Collaboration

bring together our businesses and R&D in ways that enable our researchers to directly
contact customers to delve deeper into customers’ needs. Moreover, we are enhancUniversities

ing technical services in a number of countries and constructing a system capable ofproviding global and timely support for customer’s businesses promotion.

Consortia
Research Institutes
Joint Researchextending out to manufacturing, sales, and distribution. In our “support research”, weExternal Projects
Institutions

For next-generation technology and seed research, it is necessary for R&D to
anticipate latent market needs. Particularly in the case of new R&D fields, we promote open innovation such as joint research with universities and research institutions in Japan and overseas. We have established the JSR-Keio University Medical
and Chemical Innovation Center (JKiC), a joint research facility on Keio University’s
Shinanomachi campus, which is to open in October 2017.

Market Needs

Technology Seeds
CVC Activities(Corporate Venture Capital)

We will create innovation through investigating the wholly novel concept of fusing
medicine and chemistry, which will lead to establish practical technologies that contribute to global society with people living long and healthy lives.

19

JSR Corporation Annual Report 2017

Creating
Sustainable Value
JSR aims to become a corporate group that is essential to a wide range ofstakeholders from its ability to create useful new value through its businessactivities. We will achieve this by integrating management based on ourbusiness philosophy with CSR as an indicator of the appropriateness ofour business activities.

20

JSR Corporation Annual Report 2017

Corporate Mission and CSR
By integrating business management with CSR, we will generate profit for society and JSR Group.
We will also contribute to the creation of a sustainable society.

Corporate Mission

Materials Innovation
We create value through materials toenrich society, people and the environment

Management Policies—Fundamental Pillars of Management

Proactive CSR

Business
Strategy

We aim to respond to society’s needs through our business activities.

To respond to social priorities through businessactivities based on our corporate philosophy,
management policies and medium-term management plan (April 2017–March 2020)• Continuous creation of businesses• Enhancement of corporate culture• Increase in corporate value
We will base our business activities
on specific priorities leading to therealization of our vision for 2020.

Management Policies—Responsibility to our Stakeholders• Responsibility to our customers / business
partners• Responsibility to our employees• Responsibility to society• Responsibility to shareholders

Course of Action (4Cs)
Challenge
Communication
Collaboration
Cultivation

BusinessBase

A business base is essential to therealization of our strategies and corporate management.

Key Social Priorities and Issues
Energy, resources, water, food, biodiversity,
disaster prevention and safety, aging society,climate change, human rights, U.N. Global
Compact, U.N. Sustainable Development
Goals (SDGs)

Petrochemical Products BusinessWe will globally market products that offer new value in response to
the needs of society and markets, such as Solution Polymerization
SBR (SSBR).
Fine Chemicals Business
By taking JSR’s advanced technologies global, we will help support
the further growth of digital industries while contributing to the quality of the IT society and social convenience.
Life Science Business
The environment and aging are both major areas of social concern.
By combining its materials and technologies to create solutions forthese problems, JSR aims to contribute to the creation of a society
in which people can enjoy healthy, fulfilling lives while using energy
in environmentally responsible ways.

E2
Initiative™
Keeping them
foremost inmind to qualify our products
for environmental labeling

Supply Chain Management
We work to improve value across entire supply chains by establishing standards for CSR initiatives and other actions by suppliers, aspart of our efforts to ensure that our customers are reliably suppliedwith quality products.
Voluntary Environmental, Health and Safety Activities (Responsible Care)
Initiatives by chemical manufacturers to protect the environment and the safety andhealth of all stakeholders
Compliance
We will maintain our status as a trusted company by complying with rules and moral
standards.
Governance
The aim of our management policies is to maintain the value of JSR for society and awide spectrum of stakeholders.

Defensive CSR
A foundation for sustainable business activities

Human Rights
As a company with a presence in society, we will always consider and respect theindividuality of all stakeholders.

21

JSR Corporation Annual Report 2017

Creating Sustainable ValueCONTRIBUTING TO SOCIETY THROUGH MATERIALS INNOVATIONJSR Group practices a unique brand of CSR. For us, what CSR means is becoming a company that continuously
grows while contributing to society through the provision of essential materials and that discharges its
responsibilities to stakeholders in accordance with the Corporate Mission.

CSR Management

issued compliance handbooks based on regulations in South Korea

CSR Advancement Structure

and China and distributed to JSR Group companies in South Korea

JSR promotes CSR through a system of committees and the CSR

and China. Our compliance with South Korean and Chinese rules

Department, established to reinforce CSR-related initiatives. Thereand regulations is comprehensive and rigorous.

are four committees that function under the supervision of the
CSR Committee: the Corporate Ethics Committee, which imple-

Risk Management

ments corporate ethics standards and works to prevent improper

JSR Group considers preventing major crises from occurring andactions throughout the Group; the Responsible Care Committee,

minimizing the effects of crises on business activities as an import-

which works to realize a sustainable society through the imple-

ant management priority and engages in risk management activi-

mentation of initiatives that safeguard the environment, health, andties. Using an independently developed system, each division andsafety; the Risk Management Committee, which seeks to further

Group company periodically identifies, assesses, and formulates

strengthen the Group’s risk management system; and the Social

countermeasures against a wide range of risks, including explo-

Contribution Committee, which devises and promotes activities tosion, fire, major earthquake, and pandemic outbreak. We desig-

help the Group make a contribution to society.

nate particularly serious risks as “major company-wide risks,” andthe Risk Management Committee and the CSR Committee man-Complianceage improvement in risk management. JSR holds crisis manage-JSR Group’s concept of legal compliance is grounded in the principle

ment training once a year, and in the event of an emergency, ourof ethical action based on compliance with the law. The Corporatepresident directs the emergency headquarters. In FY ended March

Ethics Committee promotes activities to encourage employees to2017, the annual crisis management training was held assuming

maintain high ethical standards and act with fairness and integrity.

that a Tonankai earthquake (a large-scale earthquake centered on

We conduct a Corporate Ethics Awareness Survey at business sites

the Nankai Trough) occurred and caused big damage in the Chukyo

in Japan and overseas to ascertain the state of awareness of corpo-

area where JSR’s Yokkaichi Plant is located. We also held our first-

rate ethics among employees and identify issues and we prepare

ever information security training event as a crisis managementa follow-up plan to address any issues identified in the survey. To

exercise premised on an accident caused by an information leak.

strengthen compliance, in April 2013 we prepared the Compliance

JSR will continue to prepare through various forms of training to

Handbook containing key points concerning laws and regulations

ensure safety, reduce damage and keep our businesses running into be observed and distributed to all employees in Japan. JSR has

the event of a serious crisis.

22

JSR Corporation Annual Report 2017

Creating Sustainable ValueCONTRIBUTING TO SOCIETY THROUGH MATERIALS INNOVATION
Responsibility to Our Stakeholders

promoting biodiversity, factoring in natural capital considerations,

JSR’s Group’s essential elements include values to be sharedand supporting socially beneficial activities.

among all JSR employees for them to act responsibly with confidence towards all stakeholders. For JSR, the term “stakeholder”

Responsibility to Shareholders

refers to all customers and business partners, employees, society,

Through investor relations activities, we strive to promptly andand shareholders.

accurately communicate to shareholders and investors information
about the business situation and our corporate policies. We holdResponsibility to Customers and Business Partners

the Ordinary General Meeting of Shareholders at an early date,

We believe that JSR Group’s most important role is to offer inno-

promptly send the notice of convocation to shareholders, enable

vative materials and excellent products that meet customer needs

the exercise of voting rights via the internet, and take other mea-

and contribute to a better society. We devote effort to initiatives tosures to ensure smooth exercise of voting rights by shareholders.

ensure the quality and safety of our products so that our customers

We hold quarterly results briefings, seminars for institutional inves-

can use them in relief. These efforts have been recognized, and wetors and analysts, and technical seminars (JSR Tech Seminars) andhave received top-rank supplier awards from global customers.

promote wide-ranging, two-way communication.

Responsibility to Our Employees

Aiming to increase corporate value by creating business opportuni-

JSR Group develops mechanisms and fosters a corporate cul-

ties through materials

ture that enables all employees to accurately recognize and solve• Constantly enhancing its management efficiencies

issues and maintains and enhances organizational capabilities.

• Inspiring trust by being highly transparent and conducting soundMoreover, we encourage whole new ways of working and are
directing our energies into initiatives to improve labor productiv-

corporate management practices• In April 2009, JSR Group became a participant in the United

ity. On a different front, we have put the JSR Group global per-Nations Global Compact. Amid growing calls for corporate social

sonnel system into place and pursue personnel development

responsibility, the Global Compact enables companies that oper-and management at the Group and global levels. Throughout JSR

ate on a worldwide level to declare their commitment to observ-

Group, synergies are generated through the contributions of a

ing the Compact’s ten principles. The principles include humandiverse workforce.

rights, labor, the environment, and anti-corruption. Having
declared its participation in the Global Compact and its commit-

Responsibility to Society

ment to act responsibly as a member of the international com-

JSR Group engages in responsible care management including

munity, JSR Group will work even harder to actively fulfill its

the creation of highly trustworthy business sites and initiatives tosocial responsibilities.

reduce environmental impacts. We also engage in activities that
contribute to the development of a sustainable society, such as

23

JSR Corporation Annual Report 2017

Creating Sustainable ValueCONTRIBUTING TO SOCIETY THROUGH MATERIALS INNOVATIONJSR Recognized Internationally for Inclusions in Socially Responsible Investment Approaches
JSR has been selected for inclusion in international indices andinvestment universes for socially responsible investment (SRI).
Our selection proves that our corporate activities are highly valued around the world, and is a testament to our value.

JSR has also been selected for inclusion in the Global Compact 100.
In 2016, JSR was named one of the top 100 sustainable companies in Asia, according to the Channel NewsAsia 2016 Sustainability
Ranking by the Asian television news channel and its partners.

Recognition for Socially Responsible Investment

FTSE4Good (U.K.)
We have been listed in the
FTSE4Good Index Series since
2004.

SNAM Sustainability Index(Japan)We were selected for inclusion in the SNAM Sustainability
Investment Fund as a company
that Sompo Japan Nipponkoa
Asset Management (SNAM) evaluates highly on environment,social and governance (ESG).

EURONEXT Vigeo Eiris World
120 (France)
We were selected as one of
the top 120 global companies
included in the Euronext Vigeo
Eiris World 120 Index.

NADESHIKO Brand (Japan)
We were selected for a second
successive year for excellencein promoting women’s workplace success in a program organized by the Japanese Ministryof Economy, Trade and Industry(METI) and the Tokyo Stock
Exchange.

ETHIBEL PIONEER &EXCELLENCE Investment
Registers (Belgium)
We have been reconfirmed forinclusion in the Ethibel Pioneer &Excellence Investment Registers
since June 2017.

Next Generation Certification
Mark “Kurumin” (Japan)
The Kurumin logo is an accreditation for raising the next generation awarded by the Ministryof Health, Labour and Welfare(MHLW) to companies that support parenting.

MS-SRI (Japan)*(January 4, 2017)

We have been selected as amember of the Morningstar
Socially Responsible Investment
Index, Japan’s major SRI index,
since 2009.

Health and Productivity
Management program 2017
“White 500” (Japan)
We were recognized as a company demonstrating outstanding
health and productivity management by the Ministry of Economy,
Trade and Industry (METI) andNippon Kenko Kaigi.

*T he Morningstar Socially Responsible Investment Index comprises 150 companies selected from among listed companies in Japan by assessing their social responsibility. This index does notguarantee future performance, accuracy, completeness, etc. Morningstar Japan K.K. and Morningstar, Inc. shall not bear any responsibility for damage that might result from use of the index.
Copyright and all other rights rest with Morningstar Japan K.K. and Morningstar, Inc. Copies, reproductions, and citations without permission are prohibited.

24

JSR Corporation Annual Report 2017

Creating Sustainable ValueCORPORATE GOVERNANCE SYSTEM
Target Period: April 1, 2016—March 31, 2017
(Some parts include activities and initiatives conducted since April 2017)

Aiming to Maintain a Trusted, Appealing Corporate Structure
JSR is constantly improving its system of corporate governance with the aim of obtaining the trust of shareholders andall other stakeholders and building an appealing corporate structure. We will strengthen and enhance our corporate governance to ensure that management processes are implemented fairly, transparently and promptly, by implementing
initiatives targeting each of the items required under the corporate governance code.

(As of June 16, 2017)

Strengthening Corporate Governance2011• Appointment of two independent outside directors to its Board of Directors
consisting of six directors in total

2012• Appointment of three independent outside directors to its Board of Directors
consisting of eight directors in total• Establishment of the Remuneration
Advisory Committee, with participation
by independent outside directors

2014• Appointment of three independent outside directors to its Board of Directors,
consisting of seven directors in total andappointment of two independent outside
Audit & Supervisory Board (ASB)members to its Audit & Supervisory Board,consisting of three members in total

2015• Establishment of Nomination Advisory
Committee, of which a majority ofmembers are independent outside
directors and of which the chair is anindependent outside director to ensure
the transparency of the policies andprocedures for nominating candidates
for directors and Audit & Supervisory
Board members.

• Enhancement of functions ofRemuneration Advisory Committee of
which a majority of members are independent outside directors and of which
the chair is an independent outside
director to further ensure the objectivity and transparency of the remuneration scheme for directors, ASB
members and officers.
• Introduction of medium-term performancebased bonuses by using three years
average of the consolidated ROE as performance evaluation reference.
•D isclosure of policies for cross shareholding, policies and procedures fornominating candidates for directors
and Audit & Supervisory Board members, policies and procedures to determine remuneration for directors, and
JSR’s own criteria for judging independence for outside directors and Audit &Supervisory Board members

Shareholders’ Meeting
Appointment/
Dismissal

Appointment/
Dismissal

ReportAudit &
Supervisory
Board

Financial
AuditsAuditsBoard of Directors

Independent
Auditors

ReportAppointment/
Dismissal
Oversight/
Supervision

Nomination
Advisory Committee

ReportRemuneration
Advisory Committee

Cooperation

Cooperation

Report2016• Implementation of an evaluation ofeffectiveness of the Board of Directors,
with assistance from an external consultant. The Company acknowledged thatthe Board of Directors is managed in an
effective and appropriate manner after
reviewing the size, composition, andspecific operating policies etc. thereof.

Appointment/
Dismissal

ReportRepresentative
Directorand PresidentInternal
AuditsReportOversight/
Supervision

Executive
Committee

Corporate Ethics
Committee

Business Issues
Committee

Responsible Care
Committee

Officers
Committee

Internal Audit
Department

Appointment/
Dismissal

CSR
Committee

Risk Management
Committee
Social Contribution
Committee

Officers
Business Operations

Report25

JSR Corporation Annual Report 2017

Creating Sustainable ValueCORPORATE GOVERNANCE SYSTEM
Directors andAudit & Supervisory Board Member(As of March 31, 2017)
Chairman of the Board

Hozumi Sato
Representative Director and President

Mitsunobu Koshiba
Representative Director

Kouichi Kawasaki
Director

Nobuo Kawahashi
Takao Shimizu
Standing Audit & Supervisory
Board Member

Atsushi Kumano
Independent Outside Director

Kazunori Yagi
Yuzuru Matsuda
Shiro Sugata
Independent Outside Audit & Supervisory
Board Member

Hiroichi Uekusa

Audit System
Enhancement of the management monitoring function and assurance of transparency
Under the Company’s audit system, business execution audits andaccount audits make significant contributions to fair, transparent,
and timely management. Business audits cover the execution ofduties by directors, and account audits cover financial statements
submitted at Ordinary General Meetings of Shareholders. In orderto further enhance monitoring and checking functions of its Audit& Supervisory Board, the Company appoints independent attorney and certified public accountant as independent outside Audit &Supervisory Board member.

Internal Control System
Efforts to ensure the effectiveness of and improve internal controls
In accordance with the Companies Act of Japan, JSR Group has
established a basic policy governing its internal control system.
Guided by this policy, the Company works to strengthen and augment its internal controls. The Internal Audit Department systematically audits business execution and compliance systems in eachdivision and Group company, and confirms that rigorous legal compliance is observed throughout the Group.

Hisako Kato

Officer System
Clear segregation of the management and business executionfunctions
JSR has introduced an officer system to separate company-wide
management monitoring by directors and business execution by
officers. The system accelerates decision-making from the functions of business execution by directors and officers, respectively,
and also strengthens the supervisory function of directors and clarifies roles and responsibilities.

(1) Board of Directors
Management decisions that reflect outside opinions
The Board of Directors discusses and makes decisions on important business matters, and also supervises directors and officers’
execution of business duties. The Board holds meetings monthly,in principle. It also includes three independent outside directors who, together with three Audit & Supervisory Board members (including two independent outside ones), engage in robust
exchanges of opinions at Board meetings. By introducing independent and neutral outside directors with extensive business experience, we seek to reinforce the appropriateness of judgments
made by management and monitor the legality of their executionof duties.

26

JSR Corporation Annual Report 2017

Creating Sustainable ValueCORPORATE GOVERNANCE SYSTEM
Independent Outside Directors (As of March 31, 2017)
The Company has appointed three independent outside directors
in order to further reinforce the monitoring function of the Boardof Directors. By welcoming independent outside directors withextensive experience and highly impartial, neutral perspectives, weensure more appropriate management decision-making and reinforce our ability to monitor the legality of business execution.

Kazunori Yagi
Mr. Kazunori Yagi served as Director andExecutive Managing Officer at Yokogawa Electric
Corporation, and subsequently also served asadvisor at the same company. He has vast experience in the corporate management of global
companies especially in the field of control systems and measurement devices, and possesses the independent
perspectives as outside personnel. He has contributed his experiences and independent viewpoints to help the Company in making crucial decisions, to supervise the Company at the Board level,
and to strengthen the Company’s fair corporate governance throughenhancing fair and reasonable business judgment and transparent
and sound management. He is therefore nominated again for theyear starting from June 17, 2016.
Major activities in the year under review
Mr. Yagi participated in all 17 meetings of the Board of Directors
held during the year under review, at which he contributed amply
to fair and reasonable management decisions and transparent andsound management by addressing the Board as appropriate concerning matters under discussion. Mr. Yagi brought to the Board
an independent outside perspective based on his extensive experience in the management of a company that operates an international business in control systems and measurement instruments.

Yuzuru Matsuda
Mr. Yuzuru Matsuda served as the President
and Chief Officer of KYOWA HAKKO KOGYO
CO., LTD. and Kyowa Hakko Kirin, Co., Ltd. He
has vast experience in corporate management
for global companies especially in the field of
medical products and biochemical. He also possesses an independent perspective as a non-employee. He has
utilized his experiences and independent viewpoints to help theCompany in making crucial decisions, to supervise the Company
at the Board level, and to strengthen the Company’s fair corporate
governance through enhancing fair and reasonable business judgment and transparent and sound management. He is therefore
nominated again as a candidate for Independent Outside Director.
Major activities in the year under review
Mr. Matsuda participated in all 17 meetings of the Board of
Directors held during the year under review. Mr. Matsuda draws on
his vast experience as a corporate executive responsible for international operations in prescription drugs and biochemicals as wellas his independent outside perspective to address the Board as
appropriate concerning matters under discussion, and by ensuring
fair and reasonable judgment is brought to bear in the service oftransparent and sound management, he contributes to continuous
improvement of corporate value.

Shiro Sugata
Mr. Shiro Sugata served as the Representative
Director and President of USHIO INC., where
he currently serves as the Director and Advisor.
He also serves as Vice Chairman, Executive
Director at the Japan Association of Corporate
Executives. He has vast experience in the corporate management of global companies especially in the field of optical

27

JSR Corporation Annual Report 2017

Creating Sustainable ValueCORPORATE GOVERNANCE SYSTEM
application products and industrial machineries and also has experience obtained through activities in the business community, andpossesses the perspectives as an independent outside personnel.
He has utilized his experiences and independent viewpoints to help
the Company in making crucial decisions, to supervise the Company
at the Board level, and to strengthen the Company’s fair corporate
governance through enhancing the fair and reasonable businessjudgment and transparent and sound management. He is therefore
nominated as a candidate for Independent Outside Director.
Major activities in the year under review
Mr. Sugata participated in all 13 meetings of the Board of Directors
held after his appointment as director. Mr. Sugata draws on his vast
experience as a corporate executive responsible for international
operations in optical application devices, industrial-use machineryand other areas and as a corporate representative at industry organizations as well as his independent outside perspective to address
the Board as appropriate concerning matters under discussion, andby ensuring fair and reasonable judgment is brought to bear in theservice of transparent and sound management, he contributes tocontinuous improvement of corporate value.

(2) Executive Committee
Rapid response to changes in the business environment
The Executive Committee holds extensive discussions on items
concerning fundamental management initiatives, management policies, and management plans, along with important matters concerning the execution of business activities at each department.
The committee thus gives direction concerning these issues. As
required, certain items submitted to this committee are passed on
to the Board of Directors for further discussion.
This committee is made up of the president, officers withdirectorship status, and officers appointed by the president, andresponds to important business execution with the aim to expedite
decision-making and improve the efficiency of such operations. Asa rule, this committee meets once a week, and is chaired by thepresident. The standing Audit & Supervisory Board member also
attends these committee meetings.
(3) Business Issues Committee
Review of policies and strategies for individual projects
The Business Issues Committee engages in broad-ranging debate
about items related to fundamental management policies and strategies, basic policies behind specific projects, and changes to business strategies. It also shares information to ensure a common
understanding of such matters and discusses company directions. Itsfindings are reflected in deliberations of the Board of Directors andthe Executive Committee. The Business Issues Committee, whichmeets once a week, consists of the president, officers with directorship status, and officers appointed by the president.
(4) Officers Committee
Sharing of information on business conditions and issues
The Officers Committee is held in order to share information fromall departments concerning the execution of business activities, toensure members’ thorough understanding of important businessmatters and to enhance their communications. This committee
consists of the president, senior officers, officers and a standing Audit & Supervisory Board member, except overseas representatives. As a rule, this committee meets twice a month and ischaired by the president.
(5) Audit & Supervisory Board
Auditing by specialists in an independent position
The Audit & Supervisory Board meets every month as stipulated in theregulations governing this body. The Audit & Supervisory Board receive
reports on important matters, hold discussions, and make decisions.
In accordance with standards for audits by the Audit &Supervisory Board members of the Company, the Audit &Supervisory Board members attend meetings of the Board of
Directors, and the standing corporate auditor attends the Executive
Committee and other important committee meetings to monitor how important decisions are reached and business activities

28

JSR Corporation Annual Report 2017

Creating Sustainable ValueCORPORATE GOVERNANCE SYSTEM
are executed. The Audit & Supervisory Board members also
receive reports from the independent auditors, directors, and others. Through these activities, the Audit & Supervisory Board holds
deliberations in order to form auditing opinions.

Independent Outside Audit &Supervisory Board Members
To ensure the fairness and transparency of management, theCompany appoints one standing Audit & Supervisory Board member, as well as two independent outside Audit & Supervisory Board
members. The independent outside Audit & Supervisory Board
members have no personal, financial, or business interests in the
Company. They are called upon to ensure the sound governance of
the Company while drawing on their respective careers.

Hiroichi Uekusa
Hiroichi Uekusa has vast experience as a lawyer and does not concurrently hold the positionof director in another company. Mr. Uekusa contributes to ensuring reasonable judgments bymanagement, as well as management transparency and soundness by auditing the Company from a positionof independence while drawing on the extensive knowledge andexperience in legal matters he possesses as an attorney.
Major activities in the year under review
Mr. Uekusa attended all 17 meetings of the Board of Directors and all
17 meetings of the Audit & Supervisory Board held during the year
under review. He contributed amply to the auditing of the Company
and to fair and reasonable management decisions and transparent
and sound management by addressing the Board of Directors and the
Audit & Supervisory Board as appropriate concerning matters underdiscussion. Mr. Uekusa brought to both boards an independent outside perspective based on his extensive experience as an attorney at
law and his expert knowledge in a broad range of legal matters.

Hisako Kato
Hisako Kato as a Certified Public Accountant
both in Japan and U.S. and a Certified Tax
Accountant greatly contributes to further
enhance its corporate governance by providing
fair and reasonable judgment for and accountable and sound management of the businessesof the Company through utilization of her range of professional
knowledge and vast experience on accounting and tax matters, aswell as independent and neutral view point as an independent outside member.
Major activities in the year under review
Ms. Kato attended all 17 meetings of the Board of Directors and all
17 meetings of the Audit & Supervisory Board held during the year
under review. She contributed amply to the auditing of the Company
and to fair and reasonable management decisions and transparent
and sound management by addressing the Board of Directors andthe Audit & Supervisory Board as appropriate concerning mattersunder discussion. Ms. Kato brought to both boards an independent
outside perspective based on her extensive experience as a certified public accountant, certified public tax accountant and her expert
knowledge in a broad range of finance and accounting.

(6) CSR Committee
Implementation of CSR activities and rigorous compliance
The CSR Committee was established to ensure that JSR fulfills its
responsibilities to society and complies with laws and regulations.
Under the CSR Committee, four committees were established: theCorporate Ethics Committee, the Responsible Care Committee,
the Risk Management Committee, and the Social Contribution
Committee. The CSR Committee integrates and guides the activities of the above four committees and meets four times each year
along with special meetings as necessary to further strengthen the29

JSR Corporation Annual Report 2017

Creating Sustainable ValueCORPORATE GOVERNANCE SYSTEM
Company’s CSR efforts.
The CSR Committee is chaired by the officer responsible
for CSR and consists of officers responsible for manufacturing,
manufacturing technology, environment & safety, R&D, humanresources development, accounting & financing, corporate planning, corporate communication, legal, general affairs, petrochemicals businesses, fine businesses and life sciences businesses
and secretaries of the four committees listed above also attend
meetings of the CSR Committee. The Committee clarifies theCompany’s stance toward CSR and works to strengthen CSR
efforts at JSR.
(7) Corporate Ethics Committee
Promotion of ethical business activities group-wide
The Corporate Ethics Committee, chaired by the officer in chargeof general affairs, was established under the CSR Committee
to implement corporate ethics standards and prevent improper
actions throughout JSR Group. JSR Group Principles of Corporate
Ethics have been prepared to provide a code of conduct for executives and employees. It is also prepared in Traditional Chinese,Thai, and Korean, in addition to English and Simplified Chinese,so that Group employees all over the world can become better
acquainted with the principles. As for the reporting system, alongwith the internal hotline linked to the Corporate Ethics Committee
and the external hotline linked to an external attorney, JSR introduced a hotline that is linked to a specialized external agency andis also available in English, Chinese, Korean and Thai.
(8) Responsible Care Committee
Working to enhance safety, the environment, and quality
JSR conducts a responsible care program to fulfill its obligations to achieve sustainable development. The Responsible Care
Committee was established under the CSR Committee to ensurethat responsible care activities are conducted effectively acrossthe entire company. The committee is chaired by the officer forsafety and environmental affairs, demonstrating responsible careposition as a core component of JSR’s management. This committee approves responsible care plans, evaluates and verifies resultsof activities, and helps to maintain and upgrade JSR’s programs toeliminate accidents, reduce environmental impact, manage chemical substances, and ensure safety of products. Details and resultsof responsible care activities are disclosed through the CSR reportand responsible care reports prepared by Yokkaichi plant.
The CSR report is audited by a third party to improve the reliability and transparency of the content. Through these activities,
the committee is dedicated to winning greater trust from customers and addressing any concerns among residents in the neighborhoods of JSR’s facilities.
To make the information widely available, the CSR Report isposted on the JSR website (http://www.jsr.co.jp/jsr_e/csr/).
(9) Risk Management Committee
Further strengthening risk management systems
JSR places strong management priority on preventing serious crises
from occurring and on minimizing the impact of crises that do occur
on its business activities. To this end, the Company established the
Risk Management Committee under the CSR Committee, with theofficer responsible for corporate planning as chair. The committee
decides policies and plans in response to crises, both present andpotential, and promotes continuous improvement.
(10) Social Contribution Committee
Examining and promoting socially beneficial activities
The Social Contribution Committee was established under the CSR
Committee and is chaired by the officer responsible for corporate
communications. JSR has been involved in many activities that
contribute to society at the local level. JSR will expand its activities
to cover the whole society and provide more active approaches.
The Social Contribution Committee studies the formulation of new
programs and pursues initiatives according to its “Basic Approachto Social Contribution,” published in January 2009.

30

JSR Corporation Annual Report 2017

Creating Sustainable ValueCORPORATE GOVERNANCE SYSTEM
Status of Internal Audit, Audits by Audit & Supervisory Board
Members and Financial Audits
Management oversight from various perspectives
JSR has adopted the Audit & Supervisory Board member system. There are three Audit & Supervisory Board members, including two from the outside JSR Group. The two outside members
are independent. Audits are performed as described in the section
concerning the Audit & Supervisory Board.
The Audit & Supervisory Board members work closely with theindependent auditors. The Audit & Supervisory Board members
receive reports on the financial accountant’s audit plan and audit
results. Furthermore, the Audit & Supervisory Board members andfinancial accountants exchange information and opinions as necessary
in the course of each fiscal year. The internal audit is conducted by
the Internal Audit Department as a specialized internal auditing unit.
The Audit & Supervisory Board members receive reports on the audit
plan and audit results from the Internal Audit Department regularly,
exchange opinions, and enhance the auditing system.
Nomination
Deliberation on nominations for corporate officers by the
Nomination Advisory Committee
JSR established the Nomination Advisory Committee of which amajority of members are independent outside directors to ensure
the transparency of the policies and procedures for nominating candidates for directors and Audit & Supervisory Board members. The committee deliberates criteria for ensuring the diversity
in breadth of knowledge, experience, and capability as well as thesize necessary for the Board of Directors, criteria and procedures
for nomination, and candidates for future president, directors, officers with directorship status (including senior officers), and Audit &Supervisory Board members, and submits its findings to the Boardof Directors.

Remuneration
Deliberation on remuneration for corporate officers by the
Remuneration Advisory Committee
Reflecting the remuneration policies of the Company to ensure
continuous and sustainable growth towards further improvement
in corporate value by motivating its directors while maintaining
transparency and accountability vis-a-vis its shareholders, remuneration for Company directors consist of, each being within the maximum amount approved at the General Meeting of Shareholders,
basic fixed remuneration, annual bonuses linked to the consolidated annual performance, medium-term performance bonuses
linked to the level of achievement of medium-term business targets, and restricted stock shares designed to facilitate sharing ofvalue between directors and the shareholders of the Company.
The remuneration for independent outside directors and Audit& Supervisory Board members are only the basic fixed remunerations in light of their respective rolls.
In FY ended March 31, 2017, the amount of remuneration
paid to its directors including those for independent outside directors was ¥316 million in aggregate while those for the Audit &Supervisory Board members amounted for ¥45 million in total.
The Remuneration Advisory Committee, of which a majorityof members are independent outside directors and of which thechair is an independent outside director, report to the Board of
Directors on policies, structure, appropriateness of the amount for
the remuneration in order to secure objectivity, transparency andaccountability.

31

JSR Corporation Annual Report 2017

Creating Sustainable Value

DIRECTORS, AUDIT & SUPERVISORY BOARD MEMBERS, AND OFFICERS(As of June 16, 2017)

Directors and Audit & Supervisory Board Members

Representative Director
and President

Mitsunobu Koshiba

Representative Director

Officers (*Directors)
Executive Managing Officer

Senior Officer

Officer

Koichi Kawasaki*

Tsuyoshi Watanabe

Yoichi Mizuno

Procurement, Logistics, Manufacturing
and Technology, Product Safety & Quality
Assurance, Safety and Environment Affairs,
General Manager of Manufacturing andTechnology Group

China Business, Chairman of JSR(Shanghai) Co., Ltd.

Edge Computing Business, General
Manager of Edge Computing Div.

Senior Officer

Officer

Kazumasa Yamawaki

Mika Nakayama

Petrochemical Products Sector (deputy),
Deputy General Manager of Petrochemical
Products Div., General Manager of Business
Planning Dept., Petrochemical Products,
President of KRATON JSR ELASTOMERS
K. K., Director of JSR Elastomer Europe GmbH

General Manager of Intellectual Property
Dept.

Petrochemical Products Sector (including
Plastics), General Manager of Petrochemical
Products Div., President of Techno Polymer
Co., Ltd., President of Japan Butyl Co., Ltd.

Senior Officer

OfficerManaging Officer

Senior Officer

Katsuya Inoue

Kiichiro Kamiya

Business Planning and Investment &Business Development, Fine Chemical
Business, General Manager of Investment& Business Development., Fine Chemical,
Chairman of JSR Micro (Changshu) Co., Ltd.

Life Sciences (deputy), Deputy General
Manager of Life Sciences Div., President of
JSR Life Sciences Corporation, Director of
MEDICAL & BIOLOGICAL LABORATORIESCO., LTD., JSR Life Sciences Limited
Liability Company Executive Officer

Executive Managing Officer

Koichi Kawasaki

Nobuo Kawahashi*
Research & Development
Managing Officer

Hayato Hirano

Director

Director

Nobuo Kawahashi

Takao Shimizu

Standing Audit &Supervisory Board Member

Atsushi Kumano

Managing Officer

Eric Johnson
Outside Director

Outside Director

Outside Director

Yuzuru Matsuda

Shiro Sugata

Tadayuki Seki

Takatoshi Nagatomo
President of JSR MOL Synthetic Rubber Ltd.

Takeshi Sugimoto

Hisako Kato

Sumio Moriwaki

Yoshikazu Yamaguchi
Corporate Planning, Emerging Business,
Group Companies Coordination, General
Manager of Corporate Planning, General
Manager of Group Companies Coordination
Dept.
Officer

Senior Officer

Outside Audit & Supervisory
Board Member

Legal, General Affairs, CSR, General
Manager of Legal Dept.

Senior Officer

Life Science, North America Business,
General Manager of Life Science Div.,
President of JSR Micro, Inc.
Senior Officer

Outside Audit & Supervisory
Board Member

Makoto Doi

Electronic Materials Business,
General Manager of Electronic Materials Div.
Senior Officer

Takao Shimizu*

Office of President, Accounting, Finance,
Corporate Communications, IT Strategy,
General Manager of Office of President

Eiichi Kobayashi
Executive Vice President of JSR Micro, Inc.
Officer

Hiroaki Nemoto
Display Solution Business, Representative
Director of JSR Micro Korea Co., Ltd.

Officer

Koichi Saeki
Yokkaichi Plant, Yokkaichi Plant Manager

Kazushi Abe
President of ELASTOMIX CO., LTD.,
President of ELASTOMIX (FOSHAN) CO.,LTD., The Chief Director of JSR Group
Corporate Pension Fund
Officer

Seiji Takahashi
Manufacturing and Technology (deputy),
General Manager of Yokkaichi Plant
Production Dept.III, General Manager
of Manufacturing & Technology Group,
SSBR Global Manufacturing & Technology
Management Dept.
Officer

Yasufumi Fujii
Human Resources, Diversity Development,
General Manager of Human Resources
Development Dept, General Manager ofDiversity Development Office, The Chief
Director of JSR Health Insurance Society,
The Chief Director of JSR Pension Fund
Officer

Mikio Yamachika
Lithium Ion Capacitors Business,
President of JM Energy Corporation

32

JSR Corporation Annual Report 2017

JSR GLOBAL NETWORK(As of June 30, 2017)

JAPAN

HEAD OFFICEJSR Corporation
1-9-2, Higashi-Shimbashi, Minato-ku, Tokyo
105-8640, Japan
BRANCH OFFICES
Nagoya Branch
Taiwan Branch
PLANTS
Yokkaichi Plant
100 Kawajiri-cho Yokkaichi, Mie 510-8552,
Japan
Chiba Plant
5, Chigusakaigan, Ichihara, Chiba 229-0108,
Japan
Kashima Plant
34-1, Tohwada, Kamisu, Ibaraki 314-0102,
Japan
LABORATORIES
Yokkaichi Research Center
100 Kawajiri-cho Yokkaichi, Mie 510-8552,
Japan
Tsukuba Research Laboratories
25, Miyukigaoka, Tsukuba-shi,
Ibaraki 305-0841 JapanOVERSEAS

Elastomers BusinessBusiness in Other Fields

Elastomers Business

Fine Chemicals and Other Products Business

ELASTOMIX CO., LTD.
Compounding of crude rubber and salesof compounded products

Kumho Polychem Co., Ltd.
Production and sales of ethylene-propylene rubber(EPR)

JSR Micro N.V.
Production and sales of semiconductor materials

Japan Butyl Co., Ltd.
Production, processing, and sales of butyl
rubberJSR Trading Co., Ltd.
Export, import, purchase, and sales of thefollowing: various chemicals, machinery,equipment, physical distribution materials,
living necessaries, foodstuffs, beverages,
and non-life insurance

KRATON JSR ELASTOMERS K. K.
Production, purchase, and sales ofthermoplastic rubber

JEY-TRANS CO., LTD.
Freight forwarding, warehousing, anddelivery management

PT.ELASTOMIX INDONESIA
Compounding of crude rubber and sales ofcompounded products

Emulsion Technology, Co., Ltd.
Production and sale of acrylic emulsions,latex processed products including CL,
adhesives, and cement admixture

JSR Logistics & Customer Center Co.,Ltd.
Customer service agent and logistics
management

ELASTOMIX (FOSHAN) CO., LTD.
Compounding of crude rubber and sales ofcompounded products

Plastics Business

JSR ENGINEERING CO., LTD.
Engineering and consultation for chemicalengineering equipment

Techno Polymer Co., Ltd.
Production, sales, and R&D of synthetic
resinJAPAN COLORING CO., LTD.
Coloring of synthetic resin and sales ofcolored products
Fine Chemicals and Other Products
Business
D-MEC LTD.
Commissioned generation of 3D models,sales of solid modeling systems,
and optically-hardened resins, andcommissioned analysis by CAE

JSR Business Services Co., Ltd.
Performs general affairs, accounting,payroll calculation, and welfare
JN System Partners Co., Ltd.
Computer system design, programmingand system operation, and maintenance
CMIC JSR Biologics Co., Ltd.
Developing design and manufacturing
processes for next-generation antibodies

ELASTOMIX (THAILAND) CO., LTD.
Compounding of crude rubber and sales ofcompounded products

ELASTOMIX MEXICO S.A. de C.V.
Production and sales of rubber carbon master batch
Tianjin Kuo Cheng Rubber Industry Co., Ltd.
Compounding of crude rubber and sales ofcompounded products
JSR BST Elastomer Co., Ltd.
Sales and manufacturing of SSBR (Solution
Polymerization Styrene-Butadiene Rubber)
JSR MOL Synthetic Rubber, Ltd.
Sales and manufacturing of Solution Polymerization
Styrene-Butadiene Rubber (SSBR).
JSR Elastomer Korea Co., Ltd.
Sales agency of products such as synthetic rubber
JSR Elastomer Europe GmbH
Sales agency of products such as synthetic rubber

JSR Micro Kyushu Co., Ltd.
Production of photoresist,
semiconductors, and materials fordisplays.

Plastics BusinessJAPAN FINE COATINGS Co., Ltd.
Sales of coating materials for fiber-optic
cables reinforced by ultraviolet or electron
radiation and for other apparatus

Techno Polymer (Thailand) Co., Ltd.
Sales and technical services of synthetic resin in
ASEAN region

JM Energy Corporation
Development, manufacturing, and sales oflithium ion capacitors and modules
JSR Life Sciences Corporation
Production and sales of life science
related materials
MEDICAL & BIOLOGICALLABORATORIES CO., LTD.
Research, development, manufacturing,and sales of diagnostic and research
reagents

Techno Polymer Hong Kong Co., Ltd.
Sales and technical services of synthetic resin in
Hong Kong and neighboring regions

Techno Europe N.V.
Sales and technical services of synthetic resin in
EuropeTechno Polymer (Shanghai) Co., Ltd.
Sales and technical services of synthetic resin in
China.
Techno Polymer Shanghai TechnicalDevelopment Co., Ltd.
Production and processing of plastics and technicalservices related to plastics in China
Techno Polymer Guangzhou Co., Ltd.
Sales and technical services of synthetic resin in
Guangzhou and neighboring regions
TECHNO POLYMER AMERICA, INC.
Sales of plastics and technical services related toplastics in North America

JSR Micro, Inc.
Production and sales of semiconductor materials
JSR Micro Korea Co., Ltd.
Production, development, and sales of display
materials and semiconductor materials
JSR Electronic Materials Korea Co., Ltd.
Sales agent for semiconductor materials
JSR Micro (Changshu) Co., Ltd.
Production of display materials
JSR Micro Taiwan Co., Ltd.
Production, development, and sales of display
materials
EUV Resist Manufacuturing & Qualification
Center N.V.
EUV resist manufacturing (production & quality
control)
JSR (Shanghai) Co., Ltd.
Sales agency of products such as synthetic rubber,semiconductor materials, liquid crystal display
materials, and performance chemicals
J&W Beijing Biotech Co., Ltd.
Development, manufacturing and sale of latex
reagent intermediates and chemiluminescentreagent intermediates
MBL Beijing Biotech Co., Ltd.
Sales of in-vitro diagnostic reagents, basic research
reagents, IVD reagent materials and bioprocessmaterials, sales and contract manufacturing ofgene diagnostic materials and synthetic DNA, RNAproducts
MBL International Corporation
Development, manufacturing and sales of solutionsbased products for both life science research andclinical diagnostics
KBI Biopharma, Inc.
Biopharmaceutical contract development andmanufacturing services
Selexis SA
Cell-line development services.
JSR Trading, Inc.
Purchases and sales of synthetic rubber
JSR Trading (Shanghai) Co., Ltd.
Export, import, and purchases of industrial-use
chemical products
JSR Trading Bangkok Co., Ltd.
Exports and imports, purchase and sales ofchemicals and testing machinery
JSRT Mexico S.A. de C.V.
Sales of synthetic rubber, steel box, materials andmarket development

33

JSR Corporation Annual Report 2017

CORPORATE DATA
(As of March 31, 2017)

JSR Corporation

Composition of Shareholders

Established
December 10, 1957

Shareholders

15,704

18,635

Foreign corporations and individuals

533

96,235

Other domestic corporations

229

35,238Financial institutions

87

73,517

Securities companies

33

2,450

16,586226,075

Individuals and others

Capital (Common Stock)¥23,320 million
Employees
6,790

Total

Closing date
JSR books are closed on March 31, each year.

By Type of Shareholders

Shareholders Information (As of March 31, 2017)

Individuals/others
8.24%(Yen/share: Tokyo Stock Exchange)

FY2006
FY2007
FY2008FY2009FY2010Stock Listing
Tokyo Stock Exchange

Other domestic
corporations
15.59%

Number of Shares Issued
226,074,545 shares

FY2011FY2012Foreigncorporations
and individuals
42.57%

Financial institutions
33.60%

Number of Shareholders
16,586FY2013
FY2014FY2015FY2016

By Number of Shares Held
1 trading unit or more
3.70%

Major Shareholders
Name of shareholder

Common stock price range
Shares held
(thousands)

Percentageof shares
held (%)

Number ofshares held
(thousands)

Bridgestone Corporation

10.05

22,366

Japan Trustee Services Bank, Ltd.
(trust account)

4.22

9,391

The Master Trust Bank of Japan, Ltd.
(trust account)

4.12

9,175

BNYMSAMV AS AGENT/CLIENTS LUX UCITSNON TREATY 1

3.90

8,685

STATE STREET BANK CLIENT OMNIBUS OM04

3.04

6,779

Japan Trustee Services Bank, Ltd. (trust account 9)

2.79

6,213

JP MORGAN CHASE BANK 385632

2.24

4,993

Mizuho Bank, Ltd.

1.89

4,225

HSBC BANK PLC A/C CLIENTS 1

1.88

4,191

Japan Trustee Services Bank, Ltd. (trust account 9)

1.73

3,867

* 3,560,532 shares of treasury stock held by the Company are not included in theabove breakdown of major shareholders.

Less than 1
trading unit
0.02%

50 trading
units or more
4.50%
500 trading
units or more
2.24%

1st Q

2nd Q

3rd Q

High

3,710

2,930

3,170

4th Q
3,240

Low

2,535

2,280

2,505

2,530

High

2,985

3,120

3,020

2,875

Low

2,540

2,445

2,465

1,886
1,312

High

2,460

2,180

1,397

Low

2,000

1,246

795

990

High

1,687

1,960

1,959

1,974

Low

1,162

1,561

1,545

1,714

High

1,999

1,666

1,543

1,875

Low

1,436

1,201

1,341

1,183

High

1,724

1,655

1,582

1,790

Low

1,413

1,221

1,218

1,408

High

1,695

1,455

1,644

1,994

Low

1,255

1,274

1,224

1,670

High

2,360

2,073

2,049

2,085

Low

1,748

1,713

1,663

1,694

High

1,933

1,975

2,229

2,171

Low

1,622

1,681

1,711

1,893

High

2,296

2,227

2,054

1,903

Low

1,998

1,626

1,688

1,455

High

1,682

1,635

1,872

2,115

Low

1,292

1,287

1,437

1,835

(Yen)
2,500

2,000

1,000 trading
units or more
89.54%

Ordinary General Meeting of Shareholders
The annual General Meeting of Shareholders is held in Juneeach year. The 2017 annual General Meeting was held on
June 16, 2017.

1,500

1,000

500

Transfer Agent and Register
The Chuo Mitsui Trust and Banking Co., Ltd.
0

Auditors
KPMG AZSA & Co.

’13/3

’13/9

’14/3

’14/9

’15/3

’15/9

’16/3

’16/9

’17/3

FINANCIAL SECTION 2017

Contents
01

Ten-Year Summary

03 Management’s Discussion and Analysis
05 Risk Information
07 Consolidated Financial Statements:
07 Consolidated Balance Sheets
09 Consolidated Statements of Income
10

Consolidated Statements of Comprehensive Income

11

Consolidated Statements of Changes in Net Assets

12

Consolidated Statements of Cash Flows13

Notes to Regarding Consolidated Financial Statements

31

Independent Auditors’ Report

01

JSR Corporation Annual Report 2017

TEN-YEAR SUMMARY
2008

2009

2010

2011

¥ 406,968¥ 352,503¥ 310,184¥ 340,666

Costs and expenses

346,958

322,155

289,954

301,571

Operating profit

60,01030,34820,23039,095Interest and dividends income

1,309

1,230

568

626

Fiscal Years ended March 31

Results for the year
Net salesInterest expenses

(256)

(271)

(172)

(146)

Profit before income taxes

54,86720,803

19,45840,674

Profit attributable to owners of parent

36,994

13,981

13,64527,571

Capital expenditures

29,076

19,081

17,707

11,801

Depreciation

21,18024,83322,38019,245416,951

339,498

373,566

390,591

1,525

1,500

1,500

1,028

Total liabilities

159,288

97,512

122,865

126,475

Equity252,539

240,896

249,440

262,679

1.9

2.5

2.3

2.4

Return on assets (%)

8.9

4.1

3.7

7.1

Return on equity (%)

15.2

5.7

5.6

10.8

Equity ratio (%)

60.6

71.0

66.8

67.3

Year-end financial position
Total assets
Long-term loans payable

Current ratio (times)

Per share of common stock (Yen and U.S. Dollars)Profit attributable to owners of parent¥ 147.26

55.87¥ 113.07

32.00

32.00

26.00

32.00

1,009.27

986.33

1,021.31

1,088.87

Cash dividends
Equity

¥

56.36

¥

Note: U.S. dollar amounts are translated from yen, for convenience only, at a rate of $1=¥112.19; the exchange rate prevailing at March 31, 2017.

Net Sales/
Profit attributable to owners of parent

Operating Profit/
Operating Profit Margin(¥ billions)500(¥ billions)
40

50
390.6

400

30.1

300

200

(%)
16
32.4

30

(¥ billions)
600

576.0

30

10

FY 2013

14

15

16

17

0

(%)
12

500

10

400

8

12

8.3
20

8

10

4

300

5.5

20

100

0

40

Total Assets/ROA

0

FY 2013

14

15

16

17

0

6

200

4

100

2

0

FY 2013

14

Net sales

Operating profit

Total assets

Profit attributable to owners of parent

Operating profit margin

ROA

15

16

17

0

02

JSR Corporation Annual Report 2017

Millions of yen

Thousands of U.S. dollars

2012

2013

2014

2015

2016

2017

2017

¥ 349,947¥ 371,487¥ 394,309¥ 404,073¥ 386,709¥ 390,599$ 3,481,580

313,982

336,281358,247

366,005352,301

358,228

3,193,051

35,96435,20636,06238,06834,40832,370288,530

634

809

916

1,390

1,380

1,369

12,204

(147)

(126)

(142)

(345)

(527)

(699)

(6,227)

41,24542,84736,956

41,06927,36738,327

341,630

26,40730,27825,17329,91924,06930,078268,100

19,72827,60821,49935,157

24,276

31,785283,315

17,784

19,14518,096

17,40718,508

14,676130,811430,693482,935

501,320534,592

516,360

576,016

5,134,294

500

6,626

11,06920,38722,24938,381

342,107148,335

167,202

164,060

169,918

154,006

199,302

1,776,468

280,955

308,641

331,284

358,303353,145

361,394

3,221,267

2.3

2.3

2.5

2.5

2.7

2.5

2.5

6.4

6.6

5.1

5.8

4.6

5.5

5.5

9.7

10.3

7.9

8.7

6.8

8.4

8.4

65.2

63.9

66.1

67.0

68.4

62.7

62.7

¥ 109.46¥ 126.13¥ 106.10¥ 128.19¥ 105.87¥ 134.43

32.00

34.00

38.00

40.00

50.00

50.00

0.45

1,164.63

1,299.77

1,409.06

1,557.08

1,565.45

1,624.14

14.48

Equity/ROE$

R&D Expenses/
Capital Expenditures

Shareholder Return/
Dividend Payout Ratio(%)
20(¥ billions)40(¥ billions)
25

300

15

30

200

10

20

(¥ billions)
400

1.20

(%)
50

361.4
31.8

20

40
37.2

15

8.4
100

0

FY 2013

14

15

16

17

30

19.7

4.5
10

5

10

0

0

20
11.1

5

FY 2013

14

15

16

17

0

10

FY 201314

15

EquityR&D expenses

Dividend

ROE

Capital expenditures

Dividend payout ratio

16

Share buyback

17

0

03

JSR Corporation Annual Report 2017

MANAGEMENT’S DISCUSSION AND ANALYSIS
Analysis of Operating Results
Overview of FY ended March 2017
(April 1, 2016 to March 31, 2017)
In FY ended March 2017, among the JSR Group’s main customer
industries, automobile tire production and automobile productionrose slightly above the previous year’s level globally. However,despite returning to the previous year’s level in the latter half of theyear, domestic tire production declined from the previous year level
due to sluggish production in the first half of the year. Demand in
the semiconductor grew, and production in the flat panel display(FPD) market was robust. The exchange rate had a stronger yen
compared to the previous year.
Amid these circumstances, the Petrochemicals Business of the
JSR Group saw net sales rise in the Elastomers Business over the previous year due to an increase in exports and significant growth in salesof Solution Styrene-Butadiene Rubber (SSBR) for fuel-efficient tires.
This was despite a sluggish elastomer products market, where there
was no improvement in the supply-and-demand balance due to excessive supply of elastomers in East Asia in the first half of the year. On
the other hand, the Plastics Business saw sales fall below the previous year’s level, being significantly affected by a drop in productprices on the back of a fall in raw material prices. Thus, sales of thePetrochemicals Business as a whole remained unchanged from theprevious year. Meanwhile, operating profit of the Petrochemicals
Business decreased from the previous year. Operating profit of the
Elastomers Business saw worsened profitability due to a strong yen
and deteriorating market conditions in the first half of the year; however, improved profitability and an increase in sales volume attributable to a market recovery in the latter half drove operating profit
above the previous year’s level. At the same time, operating profitof the Plastics Business fell below the previous year as a result ofworsening profitability arising from a drop in product prices associated with a fall in raw material prices.
The Fine Chemicals and Other Products Business saw the sales
volume of semiconductor materials and display materials increase

above the previous year’s levels due to improving demand in boththe semiconductor market and FPD market. On the other hand, net
sales of the Fine Chemicals Business fell below the previous year’slevel as a result of a strong yen and a drop in prices resulting from
intensifying competition in display materials. Net sales of the Life
Sciences Business, which is a new business mainstay of the JSRGroup, had a notable increase, and net sales of the Fine Chemicals
and Other Products Business increased compared to the previous
year. Operating profit of the Fine Chemicals and Other Products
Business fell below the previous year’s level, as it was significantly
affected by the drop in sales of the Fine Chemicals Business.
Ordinary profit increased compared to the previous year due to a
reduction in the exchange losses in Group companies that occurredin the previous year among other factors.
Profit attributable to owners of parent rose above the previous
year’s level due to the fact that impairment losses in Group companies of the previous year did not apply to this fiscal year, profit fromsales of deposits and securities, and other factors.
In the fiscal year ended March 31, 2017, we reported net
sales of ¥390,599 million (up 1.0% year-on-year), operating profitof ¥32,370 million (down 5.9% year-on-year), ordinary profit of¥36,264 million (up 7.8% year-on-year), and profit attributable toowners of parent of ¥30,078 million (up 25.0% year-on-year).

Review of Operations
Elastomers Business Segment
The production of automobile tires, one of the segment’s main
customer industries, increased from the previous year in North
America, China, and Europe, while it fell below the previous year’slevel in Japan.
Under such circumstances, the Elastomers Business’s net
sales increased above the previous year’s level. This was achieved
despite sluggish sales for domestic tires due to a significant
increase in the sales volume of SSBR, which came in part from

Segment Sales/Operating Profit (¥ millions)Years ended March 31

2013

2014

2015

2016

2017

Elastomers Business¥195,797¥203,478¥198,958¥179,253¥185,345

Operating profit

17,923

17,33010,736

7,492

8,340

Plastics Business

51,75957,76455,161

52,20746,035

Operating profit

2,962

3,919

2,842

5,114

3,773

123,931133,067

149,954

155,250

159,218

14,321

14,81324,49021,803

20,257

371,487

394,309404,073

386,709

390,599¥ 35,206¥ 36,062¥ 38,068¥ 34,409¥ 32,370

Fine Chemicals and Other Products Business
Operating profit
Net Sales
Operating profit

04

JSR Corporation Annual Report 2017

growing exports and the attainment of high-level operations by
the first phase facilities for SSBR for fuel-efficient tires at JSR BST
Elastomer Co., Ltd. (JBE), a joint venture in Thailand. Operating
profit also increased above the previous year’s level, despite a sluggish elastomer products market resulting from excessive supply inthe first half of the year and a worsening of margins (the difference
between the selling price and major raw material prices), as profitability improved in the second half of the year due to rising product prices on the back of rising prices for butadiene, which is a raw
material, and sales volume expanded.
As a result, the Elastomers Business segment posted operating profit of ¥8,340 million (up 11.3% year-on-year) on net sales of¥185,345 million (up 3.4% year-on-year).
Plastics Business Segment
The sales volume of plastics increased from the previous year
owing to growing sales volume for automobiles, which came on theback of globally robust production of automobile tires, one of thesegment’s main customer industries. Net sales declined from theprevious year, as they were significantly affected by a strong yen
and a fall in product prices owing to the drop in raw material costs.
Operating profit also declined from the previous year due to worsened profitability that was largely a result of a drop in product prices.
As a result, the Plastics Business segment posted operating
profit of ¥3,773 million (down 26.2% year-on-year) on net sales of¥46,035 million (down 11.8% year-on-year).
Fine Chemicals and Other Products Business Segment
Net sales rose from the previous year, but operating profit fell
below that of the previous year in the Fine Chemicals and Other
Products Business segment as a whole.
In the semiconductor materials business, although sales volume grew particularly for cutting-edge photoresists due to healthy
growth in demand for semiconductors, net sales decreased fromthe previous sales, largely as a result of a strong yen. In the display materials business, sales volume increased from the previous year, supported by robust panel production; however, net
sales decreased from the previous year due to intensified competition in the materials market and a strong yen. Net sales of the Life
Sciences Business grew significantly owing to the JSR Group’s
making MEDICAL & BIOLOGICAL LABORATORIES CO., LTD.
(MBL) a consolidated subsidiary in the latter half of the previous
year and increased sales by KBI Biopharma, Inc. (KBI). Operating
profit fell below the previous year’s level, as it was significantly
affected by a drop in sales by the Fine Chemicals Business.
As a result, the Fine Chemicals and Other Products Businesssegment posted operating profit of ¥20,257 million (down
7.1% year-on-year) on net sales of ¥159,218 million (up 2.6%
year-on-year).

Business Outlook
The following is the outlook of our main customer industries at atime of uncertainty in global economic trends. JSR forecasts thatthe production of automobile tires and automobiles in Japan willremain unchanged from the 2016 level, but will grow globally, particularly in China and other Asian countries. The semiconductor
market will see growing new demand for cutting-edge semiconductor chips for smartphones, data centers, and the like. The FPD
market will also likely see increased production in China as panel
production becomes more robust.
In the Elastomers Business, although there is some uncertainty about whether the market recovery that began in the second
half of the previous year will stabilize and continue, JSR forecasts
growing global demand for the medium and long term. As part ofthis, we anticipate that demand for SSBR will grow steadily in linewith growth in the fuel-efficient tire market. Under such circumstances, we will strive to expand sales globally by adding the newly
launched second phase facilities at JBE in Thailand to the firstphase facilities, which have attained high-level operations.
In the Fine Chemicals and Other Products Business, our semiconductor materials business will endeavor to increase sales ofvarious semiconductor materials, such as cutting-edge lithography materials, packaging materials, detergents, and CMP materials,
amid the expected full-scale mass production of the 10 nm (nanometer) generation, a cutting-edge process. Moreover, we will movetoward mass production of EUV (extreme ultraviolet) lithographymaterials for the 7 nm generation, which will become the next generation, at EUV Resist Manufacturing & Qualification Center N.V.
(EUV RMQC), a company that provides manufacturing and quality
control services that we established as a joint-venture with imec,
an advanced research institute for nanoelectronics in Belgium. We
will also strive to increase sales of display materials by starting operations at JSR Micro (Changshu) Co., Ltd., a joint venture manufacturing company in the Chinese market, where growth is particularly
expected, while simultaneously proceeding with business reforms
to secure business revenues as materials become more generalized and competition intensifies. In the Life Sciences Business, wewill expand KBI’s contract development and manufacturing business for biopharmaceuticals, and focus on expanding sales ofAmsphereTMA3, a carrier for antibody purification expected to see
growing demand in the future. We will also strive to expand global
sales of in vitro diagnostics and research drugs at MBL.
For FY ending March 2018, JSR forecasts consolidated sales revenue of ¥405,000 million, operating profit of ¥35,000 million, andprofit for the year attributable to owners of parent of ¥26,500 million.
These forecasts assume an exchange rate of ¥110 per U.S. dollar
and a naphtha price of ¥40,000 per kiloliter.
The consolidated performance forecasts for FY ending March2018 are calculated based on the International Financial ReportingStandards (IFRS), which the JSR Group decided to voluntarily
adopt beginning with first three months of FY ending March 2018.
Accordingly, rates of change from the performance values of FY
ended March 2017, for which Japanese standards were used, are
not provided here.

05

JSR Corporation Annual Report 2017

Analysis of Financial Position
Analysis of Assets, Liabilities, and Net Assets
Total assets as of March 31, 2017 amounted to ¥576,016 million,up ¥59,657 million from a year earlier.
Current assets totaled ¥348,212 million, up ¥47,680 million,
due to an increase in cash and deposits and notes and accounts
receivable-trade, despite a decrease in securities.
Non-current assets totaled ¥227,805 million, up ¥11,977 million,
due to an increase in property, plant and equipment.
Total liabilities amounted to ¥199,302 million, up ¥45,296 million from a year earlier, due to an increase in notes and accounts
payable-trade and long-term loans payable.
In net assets, shareholders’ equity amounted to ¥335,940 million, up¥6,519 million. Accumulated other comprehensive income increasedby ¥1,730 million to ¥25,454 million. Consequently, total net assets(the total of shareholders’ equity, accumulated other comprehensive
income, subscription rights to shares, and non-controlling interests)
amounted to ¥376,715 million, up ¥14,361 million from a year earlier.

Analysis of Cash Flows
Cash and cash equivalents (“funds”) as of March 31, 2017 stood at¥97,416 million, up ¥8,021 million from a year earlier.
Net cash provided by operating activities amounted to ¥47,506
million, down ¥622 million from the previous year. The main factors included profit before income taxes of ¥38,327 million, an
increase in notes and accounts payable—trade of ¥21,407 million,
depreciation and amortization of ¥14,676 million, and increase innotes and accounts receivable—trade of ¥13,068 million.
Net cash used in investing activities totaled ¥41,807 million,up ¥22,769 million from the previous year. The main factors were¥33,727 million in the purchase of non-current assets, ¥19,714 million in expenditures purchases from an increase in time deposits,and ¥5,417 million in proceeds from sales of investment securities.
Net cash used in financing activities totaled ¥3,510 million,
down ¥12,750 million from the previous year. The main factors
were ¥24,034 million in proceeds from long-term loans payable,¥11,200 million in cash dividends paid, ¥8,098 million in expenditure from payments from changes in ownership interests in subsidiaries that do not result in change in scope of consolidation,and ¥5,285 million in expenditure from repayment of long-termloans payable.

Basic Policy on Profit Allocation and Dividends for the Fiscal Year ended March 31, 2017 andthe Fiscal Year ending March 31, 2018
With respect to profit appropriation, the Company regards businessgrowth over the long term as its top priority. To generate sustainable long-term growth, JSR strives to increase its competitiveness by developing new businesses through the reinforcement ofresearch and development activities.
The Company will appropriate profits by taking into account businessperformance and medium- and long-term demand for funds, while paying continuous, stable cash dividends based on consideration of a balance
between appropriating profits and retaining earnings necessary for futurebusiness advancement. Carefully considering the stock market environment and other factors, JSR will comprehensively study purchasesof treasury shares as a measure to return profits to shareholders. JSR
allocates retained earnings to a variety of investments linked to future
growth businesses, contributing to the enhancement of corporate value.
As already announced, we have decided to pay a year-end dividend of ¥25.00 per share, the same amount as the interim dividend. Including the interim dividend already paid, the total annual
dividend for FY ended March 2017 will be ¥50.00 per share.
With regard to the dividend for the next fiscal year (FY ending
March 2018), JSR plans to pay ¥50.00 annually (an interim dividendof ¥25.00 and a year-end dividend of ¥25.00), taking into accountthe business outlook.

Risk Information
JSR Group is exposed to the following risks that may impact on
operating results, financial position, cash flows and other aspectsof performance. Forward-looking statements in this discussion
are based on JSR’s judgments as of March 31, 2016. Risks at JSR
include, but are not limited to, the following items:(1) Changes in Demand due to Economic Trends
In the major industries where JSR Group’s products are sold, suchas automobiles and electronics, demand is influenced by the economic climate in a country or region. An economic slowdown
could reduce demand in an industry and adversely affect JSRGroup’s operating results.

(2) Fluctuation in Prices for Crude Oil, Naphtha and Other
Major Raw Materials
Higher prices for crude oil and naphtha, or changes in the markets
for JSR’s major raw materials, could raise prices of raw materials andadversely affect JSR Group’s operating results, especially in the petrochemical products sector of elastomers, emulsions and plastics.
(3) Fluctuation in Exchange Rates
As JSR Group undertakes product exports in foreign currencies andimports goods such as raw materials, the Company takes measures
to reduce risks such as entering into forward exchange contracts;
however, fluctuation in exchange rates could give rise to adverse

06

JSR Corporation Annual Report 2017

outcomes. In addition, operating results of consolidated subsidiaries and equity-method affiliates located overseas are converted into
Japanese yen amounts for the purposes of preparing the consolidated financial statements. However, due to the yen’s appreciation,
JSR Group’s business results could be adversely affected.
(4) Procurement of Raw Materials
JSR Group works to ensure a stable supply of raw materials by procuring materials from a number of sources. However, an interruption to the supply of raw materials due to an accident, bankruptcy
or quality problem at a supplier could adversely affect production
activities and JSR Group’s operating results.
(5) Development of New Products
Rapid technological progress is constantly taking place in the electronics industry, which is the primary source of demand for semiconductor manufacturing materials, FPD materials and optical materials,
the major products of JSR Group’s fine chemicals and other products
business. JSR is constantly working on developing state-of-the-art
materials in line with this progress. However, unforeseen changes in
the industry or market could prevent the timely development of new
products and adversely affect JSR Group’s operating results.
(6) R&D Involving Next-Stage Growth Businesses
JSR Group makes substantial investments in R&D to createnext-stage growth businesses. However, there is no guaranteethat these R&D activities will always yield worthwhile results.
Depending on R&D results, there could be an adverse effect on
JSR Group’s operating results.
(7) Protection of Intellectual Property
Protection of intellectual property is extremely important for JSR
Group’s business activities. JSR has established a system for protecting its intellectual property and takes various actions as required.
However, a dispute about intellectual property with another company or an infringement on JSR’s intellectual property by anothercompany could adversely affect JSR Group’s operating results.
(8) Product Quality Assurance and Product Liability
JSR Group has a product quality assurance system and product liability insurance. However, damage or injury caused by a productmanufactured by JSR Group could adversely affect JSR Group’s
operating results.
(9) Natural Disasters and Accidents
To minimize the negative effect on its business activities of any
disruption to manufacturing activities, all JSR Group manufacturing facilities have established countermeasures based on the identification of all potential sources of a crisis and conducts periodic
inspections of facilities. The Group also works constantly on safetymeasures with regard to earthquakes and other natural disasters.
However, a major natural disaster or accident that damages a production facility or disrupts manufacturing could adversely affectJSR Group’s operating results.
JSR’s main production facility, the Yokkaichi Plant, houses private power generation equipment, and the Kashima Plant is able
to access electric power from shared power generation facilities when necessary. In the event that electric power shortages
become severe due to natural disasters and the like, however, JSRGroup’s operating results could be affected.
(10) Environmental Issues
Positioning environmental protection as an important element of its
operations, JSR Group complies with all laws and regulations concerning the environment. The Group also takes actions aimed at
reducing its environmental impact, lowering and eliminating wastematerials, and cutting energy and resource consumption. The
Group has taken many actions to prevent the external release of all
types of chemicals.
However, in the event that a spill occurs or that environmental regulations become stricter, the Group’s business activities
could be restricted, the Group may have to pay compensation andother expenses, or the Group may have to make substantial capital expenditures. Any of these events could adversely affect JSRGroup’s operating results.
(11) Overseas Operations
JSR Group is aggressively expanding operations on a global scale,conducting manufacturing, sales and other activities in countries
and regions in the North America, Europe, Asia and other parts of
the world. Overseas operations are exposed to a number of risks
that include, but are not limited to, an unfavorable political environment or economic trends; labor disputes and other problems due
to differences in labor laws and other working conditions; difficulty
in recruiting and retaining employees; an adverse impact on business activities due to an inadequate social infrastructure; and theimpact of wars, terrorism and other social instability. Any of these
events could adversely affect JSR Group’s operating results.
(12) Laws and Regulations
In the countries where it operates, JSR Group is subject to various
laws and regulations involving business and investment permits,
export and import activities, trade, labor relations, intellectual property, taxes, foreign exchange and other items. The Group has established a clear compliance policy in order to ensure strict observanceof laws and regulations as well as ethical standards. In the event thata law or regulation is violated, or a law or regulation becomes stricter
or is significantly altered, there could be limitations to the Group’sbusiness activities or additional compliance costs. Any of these
events could adversely affect JSR Group’s operating results.
(13) Litigation
In conjunction with its business activities in Japan and overseas, JSRGroup may be sued or be involved in other litigation concerning a disputewith a supplier, customer or other external party. The outcome of significant litigation could adversely affect JSR Group’s operating results.

07

JSR Corporation Annual Report 2017

CONSOLIDATED BALANCE SHEETSJSR Corporation and Consolidated Subsidiaries
As at March 31, 2016 and 2017
Thousands of
U.S. dollars(Note 1)Millions of yen

ASSETS

2017

2016

2017

Current assets:
Cash and deposits (Notes 3, 5 and 7)¥ 52,081¥

98,933$881,835

Notes and accounts receivable—trade, net (Notes 4, 5 and 7)

77,87890,695

808,401

Short-term investment securities (Notes 3, 5 and 6)

60,01042,000374,365

Inventories (Note 7)

77,45881,918730,169

Other (Notes 3, 7 and 9)

33,104

34,667

308,998

Total current assets

300,532

348,2123,103,768

Buildings and structures, net (Note 7)

34,81033,903

302,193

Machinery, equipment and vehicles, net (Note 7)

37,05853,507476,931Land (Note 7)

17,136

15,734140,245

Construction in progress

17,94418,804

167,610

Other, net (Note 7)

5,746

8,212

73,198112,694130,160

1,160,176

Goodwill

9,788

8,817

78,591Other (Note 7)

6,875

8,369

74,594

16,663

17,186

153,186

67,87861,684

549,820

—

373

3,324

18,592

18,401

164,020

Total investments and other assets

86,47080,459717,164

Total non-current assets

215,827

227,805

2,030,526¥ 516,360¥ 576,016$ 5,134,294

Non-current assets:
Property, plant and equipment:

Total property, plant and equipment

Intangible assets

Total intangible assets

Investments and other assets
Investment securities (Notes 5 and 6)
Net defined benefit asset (Note 8)
Other, net (Notes 4, 5, 7 and 9)

Total assets
See accompanying notes.

08

JSR Corporation Annual Report 2017

Thousands of
U.S. dollars(Note 1)Millions of yen

LIABILITIES AND NET ASSETS

2017

2016

2017

Current liabilities:
Notes and accounts payable—trade (Note 5)¥ 53,836¥

75,026$

668,743

Short-term loans payable (Notes 5 and 7)

20,84023,740211,609

Income taxes payable

1,916

8,360

74,513

Other (Note 9)32,73032,536

290,011

109,322

139,663

1,244,877

Long-term loans payable (Notes 5 and 7)

22,24938,381

342,107

Net defined benefit liability (Note 8)

15,18013,904

123,932

Other (Note 9)

7,254

7,354

65,553

Total non-current liabilities

44,684

59,639531,592

Total liabilities

154,006

199,302

1,776,468

23,32023,320207,863

Capital surplus (Note 18)

25,17917,469155,708

Retained earnings

281,878

300,547

2,678,907(957)(5,396)(48,096)

Unrealized gains on securities, net of taxes

15,231

17,311

154,299

Foreign currency translation adjustment

9,307

7,231

64,451Remeasurements of defined benefit plans (Note 8)

(815)

913

8,136

930

912

8,126

8,279

14,409128,433

Total current liabilities

Non-current liabilities:

Contingent liabilities (Note 19)

Net assets (Note 12)
Shareholders‘ equity
Common stock:
Authorized —696,061,000 shares
Issued—226,074,545 shares in 2016 and 2017

Treasury stock
488,223 shares in 2016 and 3,560,532 shares in 2017
Accumulated other comprehensive income

Subscription rights to shares (Note 13)
Non-controlling interests
Total net assets
Total liabilities and net assets
See accompanying notes.

362,354376,715

3,357,826¥ 516,360¥ 576,016$ 5,134,294

09

JSR Corporation Annual Report 2017

CONSOLIDATED STATEMENTS OF INCOMEJSR Corporation and Consolidated Subsidiaries
Years ended March 31, 2016 and 2017
Thousands of
U.S. dollars(Note 1)Millions of yen

2016

2017

2017

¥ 386,709¥ 390,599$ 3,481,580

Cost of sales

280,176

274,6142,447,757

Selling, general and administrative expenses (Note 15)

72,12583,615745,294352,301

358,228

3,193,051

34,40832,370288,530

Dividends income

1,143

1,143

10,189Interest expenses

(527)

(699)

(6,227)

Foreign exchange gains (losses)(3,036)

1,676

14,938

Share of profit of entities accounted for using equity method

1,849

714

6,365

Gain on investments in partnership

322

1,188

10,586

Loss on abandonment of non-current assets

(254)

(283)

(2,520)Gain on sales of non-current assets

—

630

5,612

Gain on sales of investment securities

634

2,868

25,568Net sales (Note 16)
Costs and expenses:

Operating profit (Note 16)
Other income (expenses):Gain on sales of shares of subsidiaries and associates

—

939

8,372

Gain on transfer of business

—

749

6,680

1,758

—

—

Loss on valuation of shares of subsidiaries and associates

—

(598)

(5,327)

Loss on valuation of investment securities

(53)

(415)

(3,700)

Impairment loss (Note 10)(7,539)(2,111)(18,817)

Other, net(1,337)

155

1,381

(7,042)

5,957

53,101

27,36738,327

341,630

5,073

9,938

88,583(16,947)

Gain on step acquisitions

Profit before income taxes
Income taxes (Note 9):
Current
DeferredProfitProfit (Loss) attributable to non-controlling interests
Profit attributable to owners of parent(37)(1,901)

5,036

8,037

71,63622,33030,291

269,994(1,738)213¥ 24,069¥ 30,078

1,894$

268,100

U.S. dollars(Note 1)

Yen

2016

2017

2017

Per share of common stock:¥ 105.87¥ 134.43

Diluted profit attributable to owners of parent

105.60134.04

1.19

Cash dividends applicable to the year

50.00

50.00

0.45

Profit attributable to owners of parent

See accompanying notes.

$

1.20

10

JSR Corporation Annual Report 2017

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOMEJSR Corporation and Consolidated Subsidiaries
Years ended March 31, 2016 and 2017
Thousands of
U.S. dollars(Note 1)Millions of yen

2016

2017

2017

¥ 22,330¥ 30,291$ 269,994

Unrealized gains on securities, net of taxes(3,990)2,058

18,344Foreign currency translation adjustment(4,320)(730)(6,509)

(907)

1,676

14,938(1,187)(1,130)(10,069)(10,405)

1,874

16,704¥ 11,926¥ 32,165$ 286,698¥ 14,043¥ 32,330$ 288,168(2,117)(165)(1,470)

ProfitOther comprehensive income

Remeasurements of defined benefit plans, net of tax (Note 8)
Share of other comprehensive income of entities accounted for using equity
methodOther comprehensive income (Note 11)
Comprehensive income

Comprehensive income attributable to:
Owners of parent
Non-controlling interests
See accompanying notes.

11

JSR Corporation Annual Report 2017

CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETSJSR Corporation and Consolidated Subsidiaries
Years ended March 31, 2016 and 2017
Millions of yen
Number ofshares ofcommon stock(thousands)

Balance at April 1, 2015

237,973

Commonstock

Capital surplus

Retainedearnings¥ 23,320¥ 25,179¥ 291,151

Unrealized
gains onsecurities,
Treasury stock net of taxes¥ (15,329)¥ 19,257

Foreigncurrencytranslation
adjustment

Remeasurements ofdefinedbenefit plans¥ 14,576¥ 149

Subscription
rightsNon-controllingto shares
interests¥ 852¥ 5,519

Changes of items during the period
Dividends of surplus

—

—

—

(10,242)

—

—

—

—

—

—

Profit attributable to owners of parent

—

—

—

24,069

—

—

—

—

—

—

Purchase of treasury stock

—

—

—

—

(8,998)

—

—

—

—

—

Disposal of treasury stock

—

—

—

(25)

52

—

—

—

—

—

(11,899)——(23,319)

23,319

—

—

—

—

—

Change of scope of consolidation

—

—

—

243

—

—

—

—

—

—

Change in ownership interest ofparent due to transactions with
non-controlling interests

—

—

—

—

—

—

—

—

—

—

Net changes of items other thanshareholders’ equity

—

—

—

—

—

(4,026)(5,268)

(963)

78

2,760

Retirement of treasury stock

Total changes of items during theperiod(11,899)——(9,274)

Balance at March 31, 2016

226,074¥ 23,320¥ 25,179¥ 281,878¥

14,373(4,026)(5,268)

(963)

78

2,760

(957)

¥ 15,231¥ 9,307¥ (815)¥ 930¥ 8,279

Changes of items during the period
Dividends of surplus

—

—

—

(11,202)

—

—

—

—

—

—

Profit attributable to owners of parent

—

—

—

30,078

—

—

—

—

—

—

Purchase of treasury stock

—

—

—

—

(4,526)

—

—

—

—

—

Disposal of treasury stock

—

—

8

—

87

—

—

—

—

—

Change of scope of consolidation

—

—

—

(207)

—

—

—

—

—

—

Change in ownership interest ofparent due to transactions with
non-controlling interests——(7,718)

—

—

—

—

—

—

—

Net changes of items other thanshareholders’ equity

—

—

—

—

—

2,079

(2,077)

1,727

(18)

6,130

Total changes of items during theperiodBalance at March 31, 2017——

(7,711)

18,669(4,439)2,079(2,077)

1,727

(18)

6,130

226,074¥ 23,320¥ 17,469¥ 300,547¥ (5,396)¥ 17,311¥ 7,231

¥ 913

¥ 912

¥ 14,409

Thousands of U.S. dollars (Note 1)
Number ofshares ofcommon stock(thousands)

Balance at April 1, 2016

Commonstock

Capital surplus

Retainedearnings$ 224,435 $2,512,502

Unrealized
gains onsecurities,
Treasury stock net of taxes

Foreigncurrencytranslation
adjustment

Remeasurements ofdefinedbenefit plans$ (8,528) $ 135,764$ 82,961$ (7,260)

Subscription
rightsNon-controllingto shares
interests

226,074$ 207,863$ 8,290$ 73,793

Dividends of surplus

—

—

—

(99,845)

—

—

—

—

—

—

Profit attributable to owners of parent

—

—

—

268,100

—

—

—

—

—

—

Changes of items during the period

Purchase of treasury stock

—

—

—

—

(40,340)

—

—

—

—

—

Disposal of treasury stock

—

—

68

—

772

—

—

—

—

—

Change of scope of consolidation

—

—

—

(1,849)

—

—

—

—

—

—

Change in ownership interest ofparent due to transactions with
non-controlling interests——(68,796)

—

—

—

—

—

—

—

Net changes of items other thanshareholders’ equity

—

—

—

—

—

18,535(18,510)

15,396(164)

54,639(68,727)

166,405(39,568)

18,535(18,510)

15,396(164)

54,639$ (48,096) $ 154,299$ 64,451$ 8,136$ 8,126$ 128,433

Total changes of items during theperiodBalance at March 31, 2017
See accompanying notes.

——

226,074$ 207,863$ 155,708 $2,678,907

12

JSR Corporation Annual Report 2017

CONSOLIDATED STATEMENTS OF CASH FLOWSJSR Corporation and Consolidated Subsidiaries
Years ended March 31, 2016 and 2017
Thousands of
U.S. dollars(Note 1)Millions of yen

Cash flows from operating activities:
Profit before income taxes
Adjustments to reconcile profit before income taxes to cash provided by operating
activities:
Depreciation and amortization
Interest and dividends income
Interest expenses
Share of (profit) loss of entities accounted for using equity method
Loss (gain) on step acquisitions
Loss (gain) on investments in partnership
Impairment loss
Loss (gain) on sales of investment securities
Changes in operating assets and liabilities—net:
Decrease (increase) in notes and accounts receivable—trade
Decrease (increase) in inventories
Increase (decrease) in notes and accounts payable—trade
Other, net
SubtotalInterest and dividends income received
Interest expenses paid
Income taxes paid
Income taxes refund
Net cash provided by (used in) operating activities
Cash flows from investing activities:
Decrease(increase) in time deposits
Net decrease (increase) in short-term investment securities
Purchase of non-current assets
Proceeds from sales of non-current assets
Proceeds from transfer of business
Purchase of investment securities
Proceeds from sales of investment securities
Proceeds from purchase of shares of subsidiaries resulting in change in scope of
consolidation
Payments for sales of shares of subsidiaries resulting in change in scope of
consolidation
Purchase of shares of subsidiaries and associates
Proceeds from sales of shares of subsidiaries and associates
Payments for investments in capital of subsidiaries and associates
Payments of loans receivableCollection of loans receivable
Other, net
Net cash provided by (used in) investing activities
Cash flows from financing activities:
Net increase (decrease) in short-term loans payable
Repayment of long-term loans payable
Proceeds from long-term loans payable
Payments from changes in ownership interests in subsidiaries that do not result inchange in scope of consolidation
Proceeds from share issuance to non-controlling shareholders
Purchase of treasury stock
Cash dividends paid
Dividends paid to non-controlling interests
Other, net
Net cash provided by (used in) financing activities
Effect of exchange rate change on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of year
Increase (decrease) in cash and cash equivalents resulting from change of scope of
consolidation
Cash and cash equivalents at the end of year (Note 3)
See accompanying notes.

2016

2017

2017

¥ 27,367¥ 38,327$ 341,630

18,508(1,380)527(1,849)(1,758)
(323)
7,539
(634)
4,831
1,677
(17,160)
19,37056,717
1,962(342)(10,210)—
48,128

14,676(1,369)699(714)—(1,188)2,111(2,868)(13,068)(4,558)21,407(5,302)
48,153
2,127(531)(4,100)1,858
47,506130,811(12,204)
6,227(6,365)—(10,586)
18,817(25,568)(116,484)(40,626)
190,815(47,258)
429,209
18,963(4,734)(36,548)
16,557423,447

7,998
3,500
(27,052)
51
—
(930)
1,285

(19,714)4,500(33,727)
1,368
772(1,766)
5,417(175,718)
40,111(300,622)
12,193
6,880(15,745)
48,282

3,954

—

—

—
(6,025)779(1,273)(5,266)
3,113
828(19,038)(98)(1,140)
1,249
—
(294)
1,549
77
(41,807)(875)(10,160)
11,131—(2,619)13,809687(372,645)(2,768)(2,788)
7,373

952(5,285)24,034

8,485(47,103)214,222—1,434(8,998)(10,242)(35)(236)(16,260)(1,342)
11,48977,906(8,098)1,141(4,526)(11,200)(81)(448)(3,510)(1,755)434
89,395(72,182)
10,170(40,340)(99,829)(721)(3,990)(31,289)(15,640)
3,873
796,816—¥ 89,395

7,587¥ 97,416

67,626$ 868,315

13

JSR Corporation Annual Report 2017

NOTES TO REGARDING CONSOLIDATED FINANCIAL STATEMENTS
JSR Corporation and Consolidated Subsidiaries
Years ended March 31, 2016 and 2017

1. Basis of Consolidated Financial Statements
The consolidated financial statements of JSR Corporation (hereinafter called “the Company”) and its consolidated subsidiaries havebeen prepared in accordance with the provisions set forth in theJapanese Financial Instruments and Exchange Law and its related
accounting regulations, and in conformity with accounting principles generally accepted in Japan (Japanese GAAP), which are
different in certain respects as to application and disclosure requirements of International Financial Reporting Standards.
The accounts of the Company’s overseas subsidiaries and associates are based on their accounting records maintained in conformity with generally accepted accounting principles prevailing in
the respective countries of domicile and make necessary amendments for consolidated financial statements required by Practical
Issues Task Force No.18 issued by ASBJ. The consolidated financial statements have been restructured and translated into English(with some expanded descriptions) from the consolidated financial
statements of the Company prepared in accordance with Japanese
GAAP and filed with the appropriate Local Finance Bureau of
the Ministry of Finance as required by the Japanese Financial
Instruments and Exchange Law. Some supplementary information
included in the statutory Japanese language consolidated financial
statements, but not required for fair presentation, is not presented
in the consolidated financial statements.
The translation of the amounts in Japanese yen into U.S. dollars
are included solely for the convenience of readers outside Japan,
using the prevailing exchange rate on March 31, 2017, which was¥112.19 to U.S. $1.00. The amounts translated should not be construed as representations that the amounts in Japanese yen havebeen, could have been, or could in the future be, converted into
U.S. dollars at this or any other rate of exchange.

2. Summary of Significant Accounting Policies(a) Consolidation—The consolidated financial statements include
the accounts of the Company and its significant subsidiaries (43subsidiaries in 2016 and 2017).
All significant inter-company accounts and transactions havebeen eliminated in consolidation.
Effective from the current fiscal year, JSR MOL Synthetic RubberLtd., PT.ELASTOMIX INDONESIA, and Techno Europe N.V., were
included in the scope of consolidation due to increase of their materiality. JSR Optech Tsukuba Co., Ltd. was excluded from the scopeof consolidation due to transfer of all shares to an external entity.
(b) Equity method—Investments in associates (all of those 20%
to 50% owned and some of those 15% to 20% owned) were
accounted for by the equity method (13 associates in 2016 and12 in 2017). Unconsolidated subsidiaries and the other associates
to which the equity method is not applied are stated at cost since
their profit attributable to owners of parent and retained earnings
in the aggregate are not material compared to consolidated profit
attributable to owners of parent and retained earnings, respectively.
(c) Cash and cash equivalents—In preparing the consolidated
statement of cash flows, cash on hand, readily available deposits and short-term highly liquid investments with maturities notexceeding three months at the time of purchase are considered tobe cash and cash equivalents.
(d) Short-term securities and investment securities—The
Company and its consolidated subsidiaries (referred to as “theGroup”) had no trading securities or held-to-maturity debt securities. Equity securities issued by subsidiaries and associates, which
are not consolidated or accounted for using the equity method, arestated at moving-average cost.
Available-for-sale securities with available fair market values
are stated at fair market value and unrealized gains and losses onthese securities are presented, net of applicable income taxes, as aseparate component of net assets via the consolidated statementsof comprehensive income.
Realized gains and losses on sale of such securities are computed using moving-average cost.
Available-for-sale securities with no available fair market values
are stated at moving-average cost or amortized cost.
(e) Inventories—Inventories are stated at cost, which is determined mainly based on the gross average method (for the value
stated on the balance sheet, book value is written down to reflect
the lower profitability).
(f) Property, plant and equipment—Property, plant and equipment are stated at cost. The straight-line method is used for
depreciation.
(g) Intangible assets—Goodwill is amortized by the straightline method over the estimated useful lives up to twenty years.
Software for its own use is amortized over the estimated useful life
(five years) using the straight-line method.
(h) Leased assets—Assets of finance leases are depreciated over thelease term using the straight-line method that residual value is zero.
(i) Allowance for doubtful accounts—Allowance for doubtful
accounts is provided in amounts sufficient to cover possible losses
on collection. Allowance for doubtful accounts consists of the estimated unrecoverable amount with respect to specific items, andthe amount calculated using the actual percentage of losses in thepast with respect to other items.
(j) Net defined benefit asset/liability—Employees of the Groupare entitled, under most circumstances, to lump-sum severance
payments or pension payments upon reaching the mandatory
retirement age, or earlier in the case of voluntary or involuntary termination, based on the compensation at the time of severance andyears of service.
Net defined benefit asset/liability is presented by deducting

14

JSR Corporation Annual Report 2017

the amount of plan assets from that of retirement benefits obligations based on the projected benefits obligations and plan assets
deemed to have accrued at the end of the current fiscal year.
The benefit formula basis is applied as the method for attributing expected retirement benefit to the relevant periods ending at
the end of the current fiscal year.
Actuarial gains or losses are recognized as expense in lump sum
during the following period.
Unrecognized actuarial gains or losses are, after tax effect adjustment, recorded as remeasurements of defined benefit plans underaccumulated other comprehensive income in the net assets section.
(k) Provision for environmental measures—A provision for environmental measures is provided based on estimated costs for the
disposal of polychlorinated biphenyl (PCB) as mandated by the Law
Concerning Special Measures Against PCB Waste.
(l) Income taxes—The Group provides for income taxes applicable to all items included in the consolidated statement of income
regardless of when such taxes are payable. Income taxes basedon temporary differences between tax and financial reporting purposes are reflected as deferred income taxes in the consolidated
financial statements using the asset and liability method.
(i) Application of consolidated corporate-tax return system
The consolidated corporate-tax return system is applied.
(m) Derivative and hedging activities—The Group uses derivative financial instruments to manage their exposures to fluctuations in foreign exchange and interest rates. Foreign exchange
forward contracts and interest rate swaps are utilized by the Groupto reduce foreign currency exchange and interest rate risks. The
Group does not enter into derivatives for trading purposes or
speculative purposes. Derivative financial instruments and foreign
currency transactions are classified and accounted for as follows:(i) All derivatives are recognized as either assets or liabilities
and measured at fair value, and gains or losses on thesederivative transactions are recognized in the consolidated
statement of income.
(ii) The interest rate swaps that qualify for hedge accounting and meet specific matching criteria are not remeasured
at market value, but the differential paid or received under
the swap agreements is recognized and included in interest
expense or income as incurred.
(n) Foreign currency transactions—The Group translates assets
and liabilities denominated in foreign currencies into Japanese
yen at exchange rates prevailing at the balance sheet dates.
Resulting exchange gains or losses are credited or charged toincome as incurred.
(o) Translation of foreign currency financial statements—Financial
statements of overseas subsidiaries are translated into Japanese
yen using the respective year-end rate for assets and liabilities, theaverage rate for revenues and expenses, and the historical rates forshareholders’ equity accounts. Foreign currency translation adjustments are contained in accumulated other comprehensive income
and non-controlling interests.

(p) Change in accounting policy which is difficult to distinguishfrom change in accounting estimate(i) Change in the depreciation method of property, plant andequipment
Effective from the current fiscal year, the Company andsome of its consolidated subsidiaries has altered the methodof depreciation for property, plant and equipment from thedeclining balancing method to the straight-line method
although they had traditionally adopted the declining balance method for property, plant and equipment excluding
lease assets with the exception of adopting the straight-line
method for buildings (other than the equipment attachedthereto) acquired on or after April 1, 1998.
The Company has been actively pursuing global expansion of its business in accordance with its Mid-Term Business
Plan. From the current fiscal year onward, it has and will
accelerate overseas investments for establishment of overseas sales and production sites in order to expand overseas
production capacity. The Company came to the conclusion,
upon changes in the resource allocation and after reviewing the method for depreciation of the JSR Group, that it wasappropriate to uniformly adopt the straight-line method for
depreciation of the Group’s property, plant and equipment
due to the following reasons; the straight-line method would
more appropriately reflect economic reality of depreciating
the property, plant and equipment of the JSR Group whichwere constructed after establishment of sound technologies and development of the products and which therefore
had generally long stable usable life; adoption of the straightline method would further contribute globalization of the JSRGroup as this would enable the Company to compare cost
structures among the Group and subsequently to determine
an appropriate allocation of resources as well as to make iteasier to analyze business performances of multi-national
companies operating globally.
As a result of this change, depreciation expense on
the straight-line basis incurred in the current fiscal year
decreased by ¥3,273 million ($29,172 thousand) whichbrought the increase of the same amount on the Group’s
consolidated operating profit, ordinary profit and profit before
income taxes, compared to what they otherwise would havebeen had the traditional depreciation method been used.
(q) Amounts per share of common stock—The computation of
profit attributable to owners of parent per share of common stockis based on the average number of shares outstanding during eachfiscal year. Treasury stock has been excluded in the calculation ofamounts per share of common stock.
Cash dividends per share represent actual amounts applicable to
the respective years.
(r) Reclassifications—Certain prior year amounts have been
reclassified and restated to conform to the current year presentation. These reclassifications and restatements had no effect on

15

JSR Corporation Annual Report 2017previously reported results of operations or retained earnings.
(s) Additional notes(i) Application of “Revised Implementation Guidance on
Recoverability of Deferred Tax Assets”
The Group applies “Revised Implementation Guidance on
Recoverability of Deferred Tax Assets” (Implementation
Guidance on Accounting Standards, No.26 issued on March
28, 2016) as from the current fiscal year.
(ii) Change on treatment of research and development
expenses
Effective from the current fiscal year, the Company and someof its consolidated subsidiaries post all research and development expenses as general and administrative expenses
upon reorganization of research laboratories, which enhances
more fundamental and extensive R&D activities of the Group
with innovative communication and collaboration. In the past,
however, R&D expenses related to product development
had been classified as costs of manufacturing since R&D for
product development often involved improvement of existingproducts and were viewed as a part of manufacturing activities, while those related to fundamental research had beenclassified as administrative expenses.
Research and development expenses which were

included in costs of manufacturing in the previous fiscal year
were ¥9,074 million ($80,876 thousand).
(iii) Shareholders agreement for integration of ABS resin business
On March 30, 2017, Ube Industries, Ltd. (“Ube”), JSR
Corporation (“JSR”), and Mitsubishi Rayon Co., Ltd. (“MRC”)
signed a shareholders agreement to integrate the ABS resin
business of Techno Polymer Co., Ltd., a wholly-owned subsidiary of JSR, and UMG ABS, Ltd. (“UMG ABS), a 50/50
joint venture between Ube and MRC, and to jointly operate
the integrated new company scheduled to be effective on
October 1, 2017.
The integration will take the form of an absorption-type
split, with UMG ABS as the absorbed company andTechno Polymer as the successor company. Upon completing the absorption-type split, Techno Polymer will allocate common shares to UMG ABS so that, on the day thatthe absorption-type split takes effect, JSR will own 51%
and UMG ABS will own 49% of the issued shares of the
new company.
This absorption-type split becomes effective only after allprocedures regulated by competition laws and other related
laws of countries concerned have completed.

3. Cash and Cash Equivalents										Cash and cash equivalents at March 31, 2016 and 2017 consisted of the following:Thousands of
U.S. dollars

Millions of yen

2016

2017

2017

¥ 52,081¥ 98,933$ 881,835

60,01042,000374,365

Time deposits over three months(5,825)(25,542)(227,664)

Negotiable certificates of deposit over three months(22,500)(18,000)(160,442)

Cash and deposits
Short-term investment securities

Current assets: Other (repurchase agreement)
Cash and cash equivalents

5,628

25

221

¥ 89,395¥ 97,416$ 868,315

4. Allowance for Doubtful Accounts
Allowance for doubtful accounts as of March 31, 2016 and 2017 were as follows:
Thousands of
U.S. dollars

Millions of yen

Allowance for doubtful accounts

2016

2017

2017

Current assets: Notes and accounts receivable—trade¥ (418)¥ (647)$ (5,765)

(359)

(471)

(4,198)Investments and other assets: Other16

JSR Corporation Annual Report 2017

5. Fair Value of Financial Instruments
The following is a summary of the amount on consolidated balance sheet, fair value and the difference between these two items
by major financial instruments as of March 31, 2016 and 2017.

Financial instruments which fair value is extremely difficult to estimate is excluded from the following table.
Millions of yen
Book value

Fair value

Difference

March 31, 2016:(1) Cash and deposits¥

52,081¥

52,081¥—(2) Notes and accounts receivable—trade78,29678,296—(3) Short-term investment securities and investment securities

94,89594,895—

Total assets¥

225,273¥

225,273¥—(4) Notes and accounts payable—trade

53,836

53,836—(5) Short-term loans payable

14,346

14,346—(6) Long-term loans payable (included repayment due within one year)
Total liabilities

28,335(409)¥

28,74496,925¥96,516¥ (409)¥98,933¥98,933¥

March 31, 2017:(1) Cash and deposits—(2) Notes and accounts receivable—trade91,341

91,341—(3) Short-term investment securities and investment securities

77,847

77,847—

Total assets¥

268,121¥268,121¥—(4) Notes and accounts payable—trade75,02675,026—(5) Short-term loans payable

15,496

15,496—

46,626(6) Long-term loans payable (included repayment due within one year)
Total liabilities¥

137,148

46,617¥137,139

(8)
¥

(8)

$

—

Thousands of U.S. dollars

March 31, 2017:(1) Cash and deposits$

881,835$

881,835(2) Notes and accounts receivable—trade814,167

814,167—(3) Short-term investment securities and investment securities

693,884

693,884—$ 2,389,885$ 2,389,885(4) Notes and accounts payable—trade668,743668,743—(5) Short-term loans payable

138,119

138,119—

Total assets(6) Long-term loans payable (included repayment due within one year)
Total liabilities$—

415,597

415,521(75)$ 1,222,459$ 1,222,384$ (75)

17

JSR Corporation Annual Report 2017

1. Method to determine the estimated fair values of financial instruments and other matters related to securities and derivativetransactions(1) Cash and cash equivalents, and time deposits
The book values of cash and cash equivalents, and time
deposits approximate fair value because of their shortmaturities.
(2) Notes and accounts receivable—trade
The book values of notes and accounts receivable—tradeapproximate fair value because of their short maturities.
(3) Short-term investment securities and investment securities
The fair value of securities and investment securities are measured at the quoted market price of the stock exchange forthe equity instruments. Negotiable deposit, commercial paperand cash in trust approximate fair value.

(4) Notes and accounts payable—trade
The book values of notes and accounts payable—tradeapproximate fair values because of their short maturities.
(5) Short-term loans payable
Short-term loans payable approximate fair value.
(6) Long-term loans payable
The fair value of long-term loans payable is measured at thepresent value by discounting expected repayments of principal and interest in the remaining period using an assumed
interest rate on an equivalent new loan.
The fair value of long-term loans payable subject to a special accounting method for interest rate swaps which qualify
for hedge accounting meet specific matching criteria is measured at the present value by discounting expected repayments of principal and interest together with the interest rate
swaps in the remaining period using an assumed interest rateon an equivalent new loan.

2. Financial instruments for which it is extremely difficult to estimate the fair values were as follows:

Thousands of
U.S. dollars

Millions of yen

Non-listed equity securities
Investments in capital

2016

2017

2017

¥ 32,993¥ 25,837$ 230,301

5,784

7,022

62,587

3. Redemptions schedule of monetary claims and securities with fixed maturities were as follows:Due
Withinone year

Millions of yen
Due after one Due after five
year and within
years andDue over ten
five years
within ten years
years

Total

March 31, 2016:(1) Cash and deposits(2) Notes and accounts receivable—trade

¥

5,825

¥ —

¥ —

¥ —

78,296———¥78,296

5,825

60,010———60,010¥ 144,132

¥ —

¥ —

¥ —

¥ 144,132¥ 25,542

¥—

¥—

¥—

¥ 25,542

91,341———

91,341(3) Short-term investment securities and investment securities
Available-for-sale securities with fixed maturities
Other
Total
March 31, 2017:(1) Cash and deposits(2) Notes and accounts receivable—trade(3) Short-term investment securities and investment securities
Available-for-sale securities with fixed maturities
Other
Total

42,000———42,000¥ 158,883

¥—

¥—

¥—

¥ 158,883

18

JSR Corporation Annual Report 2017

Due
Withinone yearThousands of U.S. dollars
Due after one Due after five
year and within
years andDue over ten
five years
within ten years
years

Total

March 31, 2017:(1) Cash and deposits(2) Notes and accounts receivable—trade$227,664

$—

$—

$—

814,167

—

—

—

$

227,664
814,167(3) Short-term investment securities and investment securities
Available-for-sale securities with fixed maturities
Other
Total

374,365———

374,365$ 1,416,195

$—

$—

$ —

$ 1,416,195

4. See Note 7 for scheduled repayments of long term debt.

6. Short-Term Investment Securities and Investment Securities(1) The following tables summarize the acquisition cost and book value of available-for-sale securities with available fair value as of March
31, 2016 and 2017:(a) Securities with book value exceeding acquisition cost
Millions of yen

2016
Equity securities

Acquisition cost

Book value

Difference¥ 12,483¥ 34,591¥ 22,108

Millions of yen

2017
Equity securities

Acquisition cost

Book value

Difference¥ 10,041¥ 35,056¥ 25,015

Thousands of U.S. dollars

2017
Equity securities

Acquisition cost

Book value

Difference$ 89,500$ 312,473$ 222,973(b) Securities with book value not exceeding acquisition cost
Millions of yen

2016
Acquisition cost

Equity securities¥ 2,724

Book value

Difference¥ 294¥ (2,430)

Millions of yen

2017
Acquisition cost

Equity securities¥ 2,637

Book value¥ 790

Difference¥ (1,847)

Thousands of U.S. dollars

2017
Equity securities

Acquisition cost

Book value

Difference$ 23,509$ 7,046$ (16,463)

19

JSR Corporation Annual Report 2017

(2) Total sales of available-for-sale securities sold and the related gains and losses for the years ended March 31, 2016 and 2017 were as follows:
Thousands of
U.S. dollars

Millions of yen

2016

2017

2017

¥ 1,285¥ 5,718$ 50,965

Gain

634

2,935

26,158

Loss

—

30

269

Total sales

7. Short-Term Loans Payable and Long-Term Loans Payable
Short-term loans payable at March 31, 2016 and 2017 consisted of the following:Thousands of
U.S. dollars

Millions of yen

2017

2016

2017

Short-term loans principally from banks with interest rates 0.9% per annum(weighted average interest rate) at March 31, 2016 and 2017:
¥

—

$

—

Secured¥ 1,110

Unsecured

13,236

15,496138,119¥ 14,346¥ 15,496$ 138,119

Long-term loans payable (including repayment due within one year) at March 31, 2016 and 2017 consisted of the following:Thousands of
U.S. dollars

Millions of yen

2017

2017

752

¥ 2,245$ 20,009

27,991

44,381

395,588

28,744

46,626

415,597

6,494

8,245

73,490¥ 22,249¥ 38,381$ 342,107

2016

Loans principally from banks and insurance companies due through 2023 withinterest rates 2.0% and 1.4% per annum (weighted average interest rate) in2016 and 2017, respectively:
Secured¥UnsecuredLess amount due within one year

The following assets were pledged as collateral for secured loans at March 31.
Thousands of
U.S. dollars

Millions of yen

2017

2016

Cash and deposits

¥

445

¥

2017

798

$

7,115

3,767

3,467

30,901Inventories

816

1,940

17,289Current assets: Other

910

864

7,700

2,868

2,425

21,619Machinery, equipment and vehicles, net

1,182

1,939

17,280

Land

4,593

4,466

39,808Construction in progress

—

223

1,986

Property, plant and equipment: Other, net

114

93

832

Intangible assets: Other

110

172

1,534

Investments and other assets: Other, net

160

956

8,523

¥ 14,964¥ 17,343$ 154,587

Notes and accounts receivable—trade, net

Buildings and structures, net

Total

20

JSR Corporation Annual Report 2017

The annual maturities of long-term debt at March 31, 2017 were as follows:Year ending March 31
2018
2019
2020
2021
2022
2023 and thereafter

Millions of yen

Thousands of
U.S. dollars¥ 8,245
6,897
7,164
8,937
6,414
8,968
¥ 46,626$ 73,490
61,47363,86079,661
57,17479,939$ 415,597

8. Employees’ Severance and Retirement Benefits
The Company and domestic consolidated subsidiaries have the corporate pension fund plan and the lump-sum payment plan as
defined benefit plans.
Defined benefit plans
1. Movements in retirement benefit obligation
Thousands of
U.S. dollars

Millions of yen

Balance at April 1
Current service cost
Interest cost
Actuarial loss (gain)
Benefits paid
Other
Balance at March 31

2016

2017

2017

¥ 50,197
2,590
286
1,292
(2,685)(21)¥ 51,659¥ 51,659
2,196
183
(980)
(2,814)(119)¥ 50,124$ 460,463
19,571
1,627(8,737)(25,087)(1,060)$ 446,777

2. Movements in plan assets
Thousands of
U.S. dollars

Millions of yen

Balance at April 1
Expected return on plan assets
Actuarial loss (gain)Contributions paid by the employer
Benefits paid
Other
Balance at March 31

2016

2017

2017

¥ 36,451
149
199
1,618
(1,909)(29)¥ 36,479¥ 36,479
130
342
1,598
(1,882)(74)¥ 36,593$ 325,155
1,156
3,052
14,241(16,773)(663)$ 326,169

3. Reconciliation from retirement benefit obligation and plan assets to liability (asset) for retirement benefit
Thousands of
U.S. dollars

Millions of yen

2016

2017

2017

Unfunded retirement benefit obligation
Total net liability (asset) for retirement benefit at March 31¥ 40,002(36,479)
3,523
11,657
15,180¥ 38,506(36,593)
1,913
11,61813,531$ 343,223(326,169)
17,054
103,555
120,609

Net defined benefit liability
Net defined benefit asset
Total net liability (asset) for retirement benefit at March 31

15,180—¥ 15,180

13,904(373)¥ 13,531

123,932(3,324)$ 120,609

Funded retirement benefit obligation
Plan assets

21

JSR Corporation Annual Report 2017

4. Retirement benefit costThousands of
U.S. dollars

Millions of yen

Current service cost

2016

2017

2017

¥ 2,590¥ 2,196$ 19,571

Interest cost

285

181

1,612

Expected return on plan assets

(149)

(130)

(1,156)

(220)

1,093

9,742

¥ 2,506¥ 3,340$ 29,769

Net actuarial loss amortization
Total retirement benefit costs for the fiscal year ended March 31

5. Other comprehensive income on remeasurements of defined benefit plans, before tax
Thousands of
U.S. dollars

Millions of yen

2016

2017

2017

Actuarial gains and losses¥ (1,313)¥ 2,415$ 21,530

Total balance at March 31¥ (1,313)¥ 2,415$ 21,530

6. Accumulated other comprehensive income on remeasurements of defined benefit plans, before tax
Thousands of
U.S. dollars

Millions of yen

2016

2017

2017

Unrecognized actuarial gains and losses¥ (1,093)¥ 1,323$ 11,788

Total balance at March 31¥ (1,093)¥ 1,323$ 11,788

7. Plan assets(1) Plan assets comprise:
2016

2017

Bonds

70.1%

64.3%

Equity securities

8.3

7.9

Cash and cash equivalents

2.9

9.3

Alternative investments

18.7

18.5

Total

100.0%

100.0%(2) Long-term expected rate of return
Current and target asset allocations, historical and expected returns on various categories of plan assets have been considered to determine long-term expected rate of return.
8. Actuarial assumptions
Principal actuarial assumptions at March 31
2016

2017

Discount rate (mainly)

0.40%

0.50%

Long-term expected rate of return (mainly)

0.35

0.40

22

JSR Corporation Annual Report 2017

9. Income Taxes
Income taxes in the consolidated statement of income comprise
corporation, enterprise and inhabitants’ taxes. The statutory income
tax rate was approximately 30.9%.
The following table summarizes the significant differences

between the statutory income tax rate and the Group’s effective tax rates for financial statement purposes for the years ended
March 31, 2016 and 2017:

2016

2017

Statutory income tax rate

33.1 %

30.9 %Tax credit on research and development expenses

(3.5)

(4.8)

Difference in tax rates applied by overseas consolidated subsidiaries

0.1

(1.7)

Valuation allowance(10.6)(1.1)

Dividends and other income not taxable

(0.3)

(0.8)

Deductions for special reconstruction district

(0.4)

(0.8)

Other

0.0

(0.7)

Effective tax rate

18.4 %

21.0 %

Significant components of the Group’s deferred tax assets and liabilities as of March 31, 2016 and 2017 were as follows:
Thousands of
U.S. dollars

Millions of yen

2017

2016

2017

Deferred tax assets:
Net defined benefit asset and liability

¥

4,181

¥

4,083

$

36,396

Impairment loss

1,872

2,241

19,974

Unrealized gain on sales of inventories

1,295

1,538

13,705

Loss carried forward

1,132

1,514

13,497

Accrued bonuses

1,294

1,432

12,768

Unrealized gain on sales of non-current assets

850

800

7,129

Loss on valuation of investment securities

430

481

4,291

Research and development expenses

92

475

4,236

Other
Sub-total

3,452

3,476

30,981

14,59816,041

142,977

Valuation allowance(2,515)(2,540)(22,636)

Total deferred tax assets

12,083

13,501

120,341(6,716)(7,637)(68,069)

Deferred tax liabilities:
Unrealized gains on securities
Deferred gain on sales of non-current assets(2,705)(2,561)(22,830)

Other(1,652)(1,912)(17,040)(11,073)(12,110)(107,938)

Total deferred tax liabilities
Net deferred tax assets (liabilities)

¥

1,011

¥

1,392

$

12,403

23

JSR Corporation Annual Report 2017

10. Impairment Loss of Non-Current Assets
The Group recognized impairment losses on the following group of non-current assets for the year ended March 31, 2016 and 2017.
Millions of yen

Use

Location

Asset category

Buildings and structures
Assets for fine chemicals and otherproducts business

Hokuto City, Yamanashi Prefecture

Other

Machinery, equipment and vehicles

2016¥ 2,287
3,471

Land

118

Other

264

Land and buildings and Other

Total

1,398
¥ 7,539
Millions of yen

Use
Assets for fine chemicals and otherproducts business

Location

Tsu City, Mie Prefecture

Asset category

2017¥ 2,111Land¥ 2,111

Total

Thousands of
U.S. dollars

Use
Assets for fine chemicals and otherproducts business
Total

Location

Tsu City, Mie Prefecture

Asset category

Land

2017

$ 18,817$ 18,817

The Group has grouped their non-current assets into business units. Non-current assets that are idle or not being used for business activities are assessed individually. The book value of non-current asset was written down to its recoverable value.

24

JSR Corporation Annual Report 2017

11. Comprehensive Income
Amounts reclassified to profit in the current period that were recognized in other comprehensive income in the current or previous periods
and tax effects for each component of other comprehensive income were as follows;
Thousands of
U.S. dollars

Millions of yen

2016

2017

2017

Unrealized gains on securities:
Occurrence amount
Recycling
Before tax effectTax effectUnrealized gains on securities, net of tax¥ (6,451)(581)(7,032)3,042¥ (3,990)¥ 5,473(2,490)2,983(925)¥ 2,058$ 48,787(22,195)
26,592(8,248)$ 18,344

Foreign currency translation adjustments
Occurrence amountForeign currency translation adjustments¥ (4,320)¥ (4,320)

¥
¥

(730)
(730)

$ (6,509)$ (6,509)

Remeasurements of defined benefit plans:
Occurrence amount
Recycling
Before tax effectTax effectRemeasurements of defined benefit plans, net of tax¥ (1,093)(220)(1,313)
406
¥
(907)

¥ 1,323
1,093
2,415
(740)
¥ 1,676$ 11,788
9,742
21,530(6,592)$ 14,938

Share of other comprehensive income of associates accounted forusing equity method
Occurrence amount
Share of other comprehensive income of associates accounted forusing equity method¥ (1,187)¥ (1,130)$ (10,069)¥ (1,187)¥ (1,130)$ (10,069)

Total other comprehensive income before tax
Tax effect
Other comprehensive income, net of tax¥ (13,852)¥ 3,448¥ (10,404)¥ 3,539¥ (1,665)¥ 1,874$ 31,544$ (14,840)$ 16,704

12. Net Assets
Under the Japanese laws and regulations, the entire amount
paid for new shares is required to be designated as common
stock. However, a company may, by a resolution of the Board of
Directors, designate an amount not exceeding one-half of the priceof the new shares as additional paid-in capital, which is included incapital surplus.
Under the Japanese Corporate Law (hereinafter called “theLaw”), in the case where a dividend distribution of surplus ismade, the smaller of an amount equal to 10% of the dividends orthe excess, if any, of 25% of common stock over the total of additional paid-in capital and legal earnings reserve must be set aside
as additional paid-in capital or legal earnings reserve. Legal earnings reserve is included in retained earnings in the consolidatedbalance sheet.
Additional paid-in capital and all legal earnings reserve may betransferred to other capital surplus and retained earnings, respectively, which are potentially available for dividends. The maximum
amount that the Company can distribute as dividends is calculated based on the non-consolidated financial statements of theCompany in accordance with the Japanese laws and regulations.
At the annual shareholders meeting held on June 16, 2017,
the shareholders resolved cash dividends amounting to ¥5,562
million ($49,584 thousand). Such appropriations have not been
accrued in the consolidated financial statements as of March 31,
2017. Such appropriations are recognized in the period in which
they are resolved.

25

JSR Corporation Annual Report 201713. Stock Option Plans
The shareholders of the Company approved the issuance of stock options to the directors and the executive officers of the Company as follows:
Date of resolution of the general shareholders’ meeting
The maximum number of shares to be issued
Exercisable period of stock options
Stock subscription rights which have been vested
outstanding as of March 31, 2017

June 17, 2005

The maximum number of shares to be issued
Exercisable period of stock options
Stock subscription rights which have been vested
outstanding as of March 31, 2017

62,500 shares

39,100 shares

48,500 shares

From August 2, 2006
to June 16, 2026

From July 11, 2007
to July 10, 2027

15,900 shares

14,600 shares

25,700 shares

¥1

¥1

¥1

$0.01

$0.01

$0.01

June 13, 2008

Date of resolution of the general shareholders’ meeting
Exercisable period of stock options
Stock subscription rights which have been vested
outstanding as of March 31, 2017

Date of resolution of the general shareholders’ meeting
Exercisable period of stock options
Stock subscription rights which have been vested
outstanding as of March 31, 2017
Exercise price per share

June 18, 2010

73,900 shares

80,200 shares

84,200 shares

From July 15, 2009
to July 14, 2029

From July 14, 2010
to July 13, 2030

40,400 shares

65,100 shares

75,900 shares

¥1

¥1

¥1

$0.01

$0.01

$0.01

June 17, 2011

June 15, 2012

June 21, 2013

81,000 shares

95,200 shares

50,100 shares

From July 13, 2011
to July 12, 2031

From July 11, 2012
to July 10, 2032

From July 17, 2013
to July 16, 2033

81,000 shares

95,200 shares

48,500 shares

Exercise price per share

The maximum number of shares to be issued

June 16, 2009

From July 16, 2008
to July 15, 2028

Exercise price per share

The maximum number of shares to be issued

June 15, 2007

From June 18, 2005
to June 17, 2025

Exercise price per share

Date of resolution of the general shareholders’ meeting

June 16, 2006

¥1

¥1

¥1

$0.01

$0.01

$0.01

June 17, 2014

June 17, 2015

June 17, 2016

55,800 shares

51,600 shares

74,200 shares

From July 31, 2014
to July 30, 2034

From July 29, 2015
to July 28, 2020

From July 28, 2016
to July 27, 2021

54,000 shares

51,600 shares

74,200 shares

¥1

¥1

¥1

$0.01

$0.01

$0.01

The compensation cost recognized for these stock options for the year ended March 31, 2017 was ¥90 million ($803 thousand), which was ¥90
million in 2016, and was included in selling, general and administrative expenses in the consolidated statement of income.

26

JSR Corporation Annual Report 201714. Derivative Transactions(1) Qualitative disclosure about derivatives
The Group enters into foreign exchange forward contracts andinterest rate swap contracts as derivative financial instruments. The
Group deals with foreign exchange forward transactions to hedge
exchange rate risks of trade receivables and payables denominatedin foreign currency. Interest rate swap transactions are made inorder to reduce interest rate risks on loans payable.
The Group does not enter into derivatives for speculative transaction purposes. Hedge accounting is used for interest rate swaps
in the case where there is a high degree of correlation between thehedging instruments and the hedged items.
Significant conditions surrounding hedging instruments are thesame as those for the items hedged, the risks of which will likely

continue to be hedged through hedge transactions.
Foreign exchange forward contracts that the Group entered
have risks due to fluctuations in foreign exchange rates. Interest
rate swap contracts that the Group entered have risks due to fluctuations in interest rates. Due to the fact that counterparties to theGroup represents major financial institutions that have high creditworthiness, the Group believes that the overall credit risk related toits financial instruments is insignificant.
Derivative transactions are executed and controlled based on
the Group’s internal rules and are approved by the responsible officials. The balances of such transactions with counterparties are
periodically confirmed.

(2) Quantitative disclosure about derivatives
The following contract amounts are only nominal or notional amounts of derivatives, and do not necessarily indicate the magnitude of market risk associated with the derivative transactions.
Contract amounts, market values and recognized gains or losses on the derivative transactions, except those accounted for using
hedge accounting, at March 31, 2016 and 2017 were as follows:(a) Related to currencies

Millions of yen
Contract amountMarch 31, 2016:
Items not traded on exchanges
Foreign exchange forward contracts
Selling: U.S. Dollars
Euro
Chinese Yuan
Buying: U.S. Dollars
Euro
Swiss Franc
Japanese Yen
Total¥ 1,242
1,711
22
1,318
384
0
672
¥ —

Over one year

Market value

¥—
—
—
—
—
—
—
¥—

¥ 30
30
0
(3)
(2)
(0)
1
¥ 56

Recognized
gains or losses

¥ 30
30
0
(3)
(2)
(0)
1
¥ 56

Millions of yen
Contract amountMarch 31, 2017:
Items not traded on exchanges
Foreign exchange forward contracts
Selling: U.S. Dollars
Euro
Chinese Yuan
Japanese Yen
Thai Baht
Buying: U.S. Dollars
Euro
Swiss Franc
Total¥ 6,653
1,922
98
72
57
3,170
35
7
¥
—

Over one year

¥—
—
—
—
—
—
—
—
¥—

Market value

¥ (3)
79
0
(6)
(1)
5
0
0
¥ 75

Recognized
gains or losses

¥ (3)
79
0
(6)
(1)
5
0
0
¥ 75

27

JSR Corporation Annual Report 2017

Thousands of U.S. dollars
Contract amountMarch 31, 2017:
Items not traded on exchanges
Foreign exchange forward contracts
Selling: U.S. Dollars
Euro
Chinese Yuan
Japanese Yen
Thai Baht
Buying: U.S. Dollars
Euro
Swiss Franc
Total$ 59,304
17,129871
644
504
28,252
310
64$—

Over one year

$—
—
—
—
—
—
—
—
$—

Market value

Recognized
gains or losses$ (24)
705
1
(54)
(8)
45
1
1
$ 666

$ (24)
705
1
(54)
(8)
45
1
1
$ 666

Market values are calculated using foreign exchange forward rates.
(b) Related to interests
Millions of yen
Contract amountOver one year

Market value¥ 16,158¥ 16,158¥ (312)¥ 16,158¥ 16,158¥ (312)

March 31, 2016:
Special treatment for interest rate swaps
Interest rate swaps (paid fix / received floating)(Hedged item: Long-term loans payable)
Total

Millions of yen
Contract amountOver one year

Market value¥ 15,527¥ 15,527¥ (17)¥ 15,527¥ 15,527¥ (17)March 31, 2017:
Special treatment for interest rate swaps
Interest rate swaps (paid fix / received floating)(Hedged item: Long-term loans payable)
Total

Thousands of U.S. dollars
Contract amountOver one year

Market value$ 138,400$ 138,400$ (151)$ 138,400$ 138,400$ (151)March 31, 2017:
Special treatment for interest rate swaps
Interest rate swaps (paid fix / received floating)(Hedged item: Long-term loans payable)
Total

15. Research and Development Expenses
Research and development expenses of the Group for the year ended March 31, 2017 were ¥19,463 million ($173,487 thousand), whichwas ¥21,260 million in 2016, and included in selling, general and administrative expenses.

28

JSR Corporation Annual Report 201716. Segment Information
The Group’s business segments are classified into the following three business segments: (1) Elastomers business, (2) Plastics business,and (3) Fine chemicals and other products business.
The summary of net sales, costs and expenses, operating profit, identifiable assets, depreciation, impairment loss and capital expenditures by segment of business activities for the years ended March 31, 2016 and 2017 were as follows:

Elastomers

Plastics

Millions of yen
Fine chemicals andother products¥ 179,253¥ 52,207¥ 155,250

Total¥ 386,709

Reconciliation

Consolidated

For 2016:
Sales to external customers
Inter-segment sales/transfers
Sales total¥—¥ 386,709

3,734

—

—

3,734

(3,734)—

182,987

52,207

155,250

390,443(3,734)

386,709

Operating profit

¥

7,492

¥ 5,114¥ 21,803¥ 34,408¥—¥ 34,408

Identifiable assets¥ 221,029¥ 32,842¥ 156,413¥ 410,284¥ 106,076¥ 516,360

7,662

1,051

9,795

18,508—18,508

—

—

7,539

7,539

—

7,539

15,278837

8,161

24,276—24,276

Amortization of goodwill

—

45

401

446

—

446

Goodwill

—

585

9,204

9,788

—

9,788

Reconciliation

Consolidated

Depreciation and amortization
Impairment loss
Capital expenditures

Elastomers

Plastics

Millions of yen
Fine chemicals andother products¥ 185,345¥ 46,035¥ 159,218

Total¥ 390,599

For 2017:
Sales to external customers
Inter-segment sales/transfers
Sales total¥—¥ 390,599

3,786

—

—

3,786

(3,786)—

189,13146,035

159,218

394,384(3,786)

390,599

Operating profit

¥

8,340

¥ 3,773¥ 20,257¥ 32,370¥—¥ 32,370

Identifiable assets¥ 265,434¥ 33,644¥ 166,741¥ 465,819¥ 110,198¥ 576,016

6,401

669

7,606

14,676—

14,676

—

—

2,111

2,111

—

2,111

20,709

1,189

9,887

31,785—31,785

Amortization of goodwill

—

45

520

565

—

565

Goodwill

—

540

8,278

8,817

—

8,817

Reconciliation

Consolidated

Depreciation and amortization
Impairment loss
Capital expenditures

Thousands of U.S. dollars
Fine chemicals andother products

Elastomers

Plastics

Total

Sales to external customers$ 1,652,066$ 410,330$ 1,419,185$ 3,481,580

Inter-segment sales/transfers

33,742——

33,742

For 2017:

Impairment loss
Capital expenditures—

410,330$ 33,628$$ 2,365,930$ 299,881$ 1,486,240$ 4,152,050$ 982,244$ 5,134,294

57,054

5,961

67,795130,811—130,811

Identifiable assets
Depreciation and amortization$ 3,481,580

74,338$

180,564

3,515,322—(33,742)

1,685,808

Sales total
Operating profit

1,419,185$$

288,530(33,742)$—3,481,580$

288,530——

18,817

18,817—

18,817

184,590

10,60088,125283,315—

283,315

Amortization of goodwill

—

401

4,633

5,034

—

5,034

Goodwill—

4,810

73,78278,591—

78,591

Assets in reconciliation are related mainly to Cash, Short-term investment securities and Investment securities of the Company.

29

JSR Corporation Annual Report 2017

Geographical information with respect to net sales for the years ended March 31, 2016 and 2017 were as follows:
Millions of yen
Japan

China

OthersTotal

For 2016:¥ 171,643¥ 48,156¥ 166,909¥ 386,709

For 2017:¥ 173,735¥ 47,985¥ 168,878¥ 390,599

Thousands of U.S. dollars

For 2017:

Japan

China

OthersTotal$ 1,548,581$ 427,712$ 1,505,287$ 3,481,580

The geographical information consists of Japan, China and Others. Japan and China are individually presented considering the materialityof the sales. Main countries included in Others were as follows;
South Korea, Taiwan, Thailand, United States, Belgium
Geographical information with respect to property, plant and equipment for the years ended March 31, 2016 and 2017 were as follows:
Millions of yen
HungaryJapan

Thailand

OthersTotal

For 2016:¥ 72,550¥ 27,193¥—¥ 12,950¥ 112,694

For 2017:¥ 73,466¥ 27,402¥ 14,585¥ 14,707¥ 130,160

Japan

ThailandThousands of U.S. dollars
Hungary

OthersTotal$ 654,839$ 244,249$ 130,001$ 131,087

For 2017:$ 1,160,176

The geographical information consists of Japan, Thailand, Hungary and Others. Japan, Thailand, and Hungary are individually presented
considering the materiality of the property, plant and equipment. Main countries included in Others were as follows;
South Korea, China, Taiwan, United States, Belgium

30

JSR Corporation Annual Report 2017

17. Related Parties
Related party transactions
Significant transactions and balances with related parties as of and for the years ended March 31, 2016 and 2017 were as follows:
Thousands of
U.S. dollars

Millions of yen

2016

2017

2017

¥ 31,174¥ 28,135$ 250,776

10,611

10,114

90,147

BRIDGESTONE Corporation (a major shareholder):Net Sales
Notes and accounts receivable—trade, net
KRATON JSR Elastomers K.K. (an associate):
Purchases

9,085

9,187

81,890Notes and accounts payable—trade

3,233

4,350

38,772

Supply of raw material gas

4,083

3,488

31,094

Accounts receivable—other

1,730

1,886

16,814

18. Business Combinations
Transaction under common control
Additional acquisition of subsidiary’s shares
1. Overview of the transaction
With an aim to expand the Group’s life sciences business, the Company acquired an additional 39% of the outstanding shares of its
consolidated subsidiary KBI Biopharma, Inc., which is involved in biopharmaceutical contract development and manufacturing, from a
non-controlling shareholder on November 30, 2016. As a result of this additional share acquisition, the Company’s voting rights in KBI
Biopharma, Inc. increased from 51.0% to 90.0%.
2. Overview of the implemented accounting process
Based on “Accounting Standard for Business Combinations” and “Guidance on Accounting Standards for Business Combinations andBusiness Divestitures,” this additional share acquisition was treated as a transaction with the non-controlling shareholder under common control.
3. Details on the additional acquisition cost of subsidiary’s shares
Acquisition cost of KBI Biopharma, Inc.’s common shares acquired as a transaction in cash: ¥8,098 million ($72,182 thousand)4. Details on decrease in capital surplus due to transaction with the non-controlling shareholder(1) Reason for decrease of capital surplus
Additional acquisition of subsidiary’s shares(2) Amount of decrease in capital surplus due to transaction with the non-controlling shareholder¥7,660 million ($68,276 thousand)

19. Contingent Liabilities
At March 31, 2017, the Group was contingently liable as a guarantor for loans of CMIC JSR Biologics Co., Ltd. in the amount of ¥1,674
million ($14,925 thousand), JSR Micro (Changshu) Co., Ltd. in the amount of ¥588 million ($5,244 thousand), JEY-TRANS CO., LTD. in theamount of ¥104 million ($927 thousand), and employees in the amount of ¥1 million ($6 thousand), respectively.

31

JSR Corporation Annual Report 2017