Annual Report2020Profile

Since its founding in 1898, Mitsubishi Paper Mills has contributed to the development of information media such as
printing, publishing, and photography by developing and providing high value-added products that change with thetimes and meet the demand of the times, as “technological Mitsubishi” in paper manufacturing. As time passes andthe ICT digital technology advances, the information society is transforming into a social structure that does not
require paper as a medium. Amidst these drastic changes in the market and the management environment, with theaim of achieving sustainable growth and increasing the corporate value of the Mitsubishi Paper Mills Group, we haveentered into a capital and business alliance agreement with Oji Holdings Corporation and, in March 2019, we
increased our capital through a third-party allocation of new shares, becoming an equity method affiliate of Oji
Holdings.
Under the alliance with the Oji Group, we have realized cooperation in biomass power generation business,household and consumer paper business, joint procurement of raw materials, and strengthening of sales agency
agreements. Going forward, we will continue to build strong collaborative relationships in all business fields, not justproduction, sales and raw material procurement, in accordance with the New Mid-Term Management Plan formulated in 2019.
We are seeking to shift from a business portfolio centered on printing and communication paper by leveraging
our technological capabilities in the fields of paper making, coating, and imaging while focusing on functional products for growth. For this reason, we have made an organizational change to establish the Functional Products
Division by integrating the Imaging Division and the Speciality Materials Division. We aim to strengthen our revenue
base by utilizing the sales and distribution systems of both divisions to expand our business globally, focusing on
promising areas such as battery separators and other non-woven fabrics, high-performance filtering materials,
electronics industrial materials, and IJ transfer paper.
Mitsubishi Paper Mills Group will continue to expand and cement its capital and business alliance agreementwith the Oji Group and, under the following corporate philosophy, will strive to contribute to society and improve
corporate value by strengthening and diversifying its business base while flexibly responding to the managerial
impact of COVID-19 that is currently shaking the world.
Dedicated to contributing to society by providing customers with products backed by advanced
technological capabilities, we have the following three goals as a Group Philosophy:
1. A corporate group that lives up to the trust of its customers in the world market
2. A corporate group that is always on the leading edge of technology
3. A corporate group that contributes to preserving the global environment and creating a recycling society

Contents
FINANCIAL HIGHLIGHTS (CONSOLIDATED) ............. 1
MESSAGE FROM THE PRESIDENT ............................ 2
BREAKDOWN OF OPERATIONS BY BUSINESS ........ 4
TOPICS ........................................................................ 6
OUR MILLS AND THEIR PRODUCT LINES ................. 8
FIVE-YEAR SUMMARY (CONSOLIDATED) ................. 9

CONSOLIDATED STATEMENTS OF
CHANGES IN NET ASSETS ..................................... 14
CONSOLIDATED STATEMENTS OF CASH FLOWS.......... 15
NOTES TO CONSOLIDATEDFINANCIAL STATEMENTS....................................... 16
INDEPENDENT AUDITOR’S REPORT ....................... 32

CONSOLIDATED BALANCE SHEETS........................ 10

BOARD OF DIRECTORS, EXECUTIVE OFFICERS AND
AUDIT & SUPERVISORY BOARD MEMBERS ......... 35

CONSOLIDATED STATEMENTS OF OPERATIONS .. 12

COMPANY DATA ....................................................... 36

CONSOLIDATED STATEMENTS OFCOMPREHENSIVE INCOME.................................... 13

Mitsubishi Paper Mills Limited and Consolidated Subsidiaries

Financial Highlights (Consolidated)
Millions of yen (1)Thousands of
U.S. dollars (1) and (2)For the years ended March 31
Net sales
Operating income (loss)
Net income attributable to owners of parent
Net income per share (in yen and dollars)
Cash dividends per share (in yen and dollars)

2020

2019

¥ 194,575
1,976
801
17.96
5.00

¥203,997
(40)
351
10.04
5.00

$1,787,880
18,161
7,369
0.17
0.05

As of March 31
Total assets
Total net assets
Common stock
Net assets per share (in yen and dollars)¥ 212,217
60,52736,561
1,355.27¥232,758
67,00436,561
1,485.64$1,949,990
556,169
335,951
12.45

12,741
3,676

12,681
3,668

Number of shareholders
Number of employees

2020

Notes: (1) In this annual report, Japanese yen (in millions) and U.S. dollars (in thousands) are indicated with fractions omitted.
(2) U.S. dollar amounts in this report represent translations of yen amounts at the rate of ¥108.83 = U.S.$1, as of March 31, 2020.

Net Sales

16
17
18
19
20

216,340
201,955
201,492
203,997
194,575

Operating Income(Loss)

16
17
18
19
20

3,872

(¥ Millions)(¥ Millions)

Net Income(Loss)
Attributable to
Owners of Parent(¥ Millions)

Total Net Assets(¥ Millions)

Sales
Composition

16
17
18
19
20

1,790

(40)

4,313

1,976
2,217

1,152
351

3,198

801

16
17
18
19
20

51,492
56,631
61,07760,527

Others 1.9%
Warehouse & Transportation
2.6%
Speciality Materials
6.9%

Paper & Pulp 73.9%

Imaging
14.7%

167,004

Message from the President
es with the Oji Group, started operations from this term. In addition,
the Company also participated with funds in a joint procurementcompany to import chip of Oji Holdings Corporation and Chuetsu
Pulp & Paper Co., Ltd. With this, we started procurement from OCM
Fiber Trading Co., Ltd. This has led to our alliance with the Oji
Group steadily producing results. For example, we have significantly reduced the cost of raw materials.
This term saw effects from a transportation adjustment
payments system for paper we introduced in the previous term anda revision of prices. Nevertheless, a decrease in the volume of salesin Japan and overseas for paper and a decrease in existingproducts focused on the overseas imaging market resulted inconsolidated net sales of ¥194,575 million (down 4.6% year-on-year)(US$1,787 million).
As for profits and losses, consolidated operating income was¥1,976 million (US$18 million) and consolidated ordinary income
was ¥2,696 million (US$24 million). This was due to the effect ofrevising the price of paper and implementing various cost reduction
measures. Net income attributable to owners of parent was ¥801
million (US$7 million). This was because we recorded an impairment loss on the paper machine No. 4 at Hachinohe Mill.
As for non-consolidated performance, our net sales were ¥106,452
million (US$978 million), operating income was ¥422 million (US$3
million), ordinary income was ¥898 million (US$8 million) and net
loss was ¥971 million (-US$8 million).

Our Goals to Address[Impact of the Novel Coronavirus (COVID-19)]
Our corporate group has been taking measures (e.g., staggered
working hours, shift work and a reduction in contact opportunities)
in manufacturing sites to protect the lives and safety of ouremployees as the risk of novel coronavirus (COVID-19) infections
increases. We have also been taking measures to prevent infections(e.g., promoting telecommuting in sales and management departments). The decline in demand for printing and communication
paper has accelerated due to restrictions on going out and thecancellation of events. The imaging field for image output has also
taken a hit. Therefore, it is impossible to avoid a negative impact.
We will solidify the “defense” in our management to deal with thissituation. For example, we will maintain a production structure that
responds to demand trends while temporarily furloughing employees.
On the other hand, household and consumer paper and filter
related demand has increased due to a rise in needs in terms ofhygiene. Moreover, the power generation business is indispensable
in supporting social infrastructure. In addition, paper, which is usedin various aspects in life, has an important mission to prop up
society. We will also focus our efforts on such “offense” in ourmanagement by flexibly responding to dramatic and suddenchanges due to the novel coronavirus (COVID-19).

Yukihiro Tachifuji, President & C.E.O.

Overview of the Reporting Term
The global economy was destabilized by the lengthened trade
friction between the U.S. and China in this term. Against thisbackground, the spread of novel coronavirus (COVID-19) infections
further increased fears about the impact on the Japanese andglobal economies from January 2020 onward. The paper and pulp
industry faces a difficult situation due to the structural decline indemand arising from the digitization of information media and thecontinuing high price of raw materials and fuels.
Under such circumstances, our corporate group formulated our
New Mid-Term Management Plan (April 2019 to March 2022) withthe basic principle to “Strengthening and diversifying the businessbase for a new stage” and we have started working on this.
We give the following as our three priority strategies in our New
Mid-Term Management Plan.
(1)To establish a robust management base through the alliance with
the Oji Group(2)To make structural reforms and enrich existing businesses(3)To diversify the business base by fostering new profit pillars
We are advancing various measures toward them vigorously.
The biomass power generation business (MPM Oji Eco EnergyCo., Ltd.) and the household and consumer paper business (MPM
Oji Home Products Co., Ltd.), which are the collaborative business-[Regarding the New Mid-Term Management Plan]
We have adopted a basic principle to “Strengthening and diversifying
the business base for a new stage” in our New Mid-Term Management Plan (April 2019 to March 2022). We will establish strong
management foundations through an alliance with the Oji Group,
make structural reforms and enrich existing businesses, anddiversify our business base by fostering new profit pillars. With this,we will aim to achieve the sound and sustainable growth of thecompany and to maximize mid- to long-term corporate value.

2

Oji Group in the future.
April 2019
MPM Oji Home Products Co., Ltd.
Started operations (household and consumer
paper business)
September 2019 MPM Oji Eco Energy Co., Ltd.
Started operations (biomass power generation
business)
November 2019 Mitsubishi Oji Paper Sales Co., Ltd.
Strengthened handling of Oji brand products bychanging the trade name from Mitsubishi Paper
Sales Co., Ltd.
November 2019 OCM Fiber Trading Co., Ltd.
Started joint procurement with capital participation in the procurement company to import chipof Oji Holdings Corporation and Chuetsu Pulp &Paper Co., Ltd.
November 2019 Decided to accept production and sales ofcarbonless paper from Oji Imaging Media Co.,Ltd.
From July 2020 Plan to accept the carbonless business of Oji
Imaging Media Co., Ltd.’s Kanzaki Mill to theCompany’s Takasago Mill

PeriodFY 2020 to FY 2022 (3 years)

Basic Principle

Strengthening and diversifying the business base for a
new stage
Key strategies

1 To establish a robust management base through thealliance with Oji Group

2 To make structural reforms and enrich existing
businesses

3 To diversify the business base by fostering new proﬁt
pillars[To establish a robust management base through the alliance with
the Oji Group]
By mutually utilizing the managerial resources and know-how of theOji Group and our corporate group, we will foster a firm cooperative
relation in all business fields, including manufacturing, sale,procurement of raw materials, distribution, engineering, equipment
investment, R&D, and back-office operation, to streamline ourbusiness operation and reduce costs as soon as possible and thenenhance our competitiveness.
Especially for the paper business, we will reinforce the mutual OEM
with the Oji Group, enhance the sales structure of agents, reduce
distribution costs through the mutual utilization of warehouses andlogistics facilities, develop manufacturing systems for foreseeing
demand, improve production efficiency, further cut down on the
expenses for buying raw materials and fuels, and so on, in order tostabilize our revenue.

CSR (Corporate Social Responsibility)
Our corporate group recognizes that the purpose of CSR is toimprove our corporate value by winning the trust and sympathy of
stakeholders and solve problems from the aspects of the environment, society, and finance, and considers CSR as an importantmanagement issue to address in our business activities.
In FY 2020, we worked on “enhancement of activity on safety
and health” and “product development for coexisting with society”
as the most important missions. We also strived to enrich environmentally friendly products, including FSC® forest certified products,
which would help attain UN Sustainable Development Goals(SDGs).
In the 156th term, too, we aim to keep improving our corporate
value and carry out unique CSR activities with the two importantmissions: “enhancement of activity on safety and health” and“product development for coexisting with society.”[To make structural reforms and enrich existing businesses]
For the imaging business, while striving to strengthen the operationbase through the alliance with FUJIFILM Corporation for photographic materials base paper, etc., we will further enhance ourexisting products which are already maturing by actively expanding
the business in foreign markets.
For the speciality materials business, we strive to expand sales in
Asia with focus on China, the U.S. and Europe and will make steadyprogress in the businesses of non-woven fabric which handles
water treatment membrane supporting body, thermo rewrite,
decorative laminate base paper and tape base paper by utilizing
our own technologies.

Forecast

It is expected that the Japanese and global economies will be
seriously impacted by the spread of novel coronavirus (COVID-19)
infections in our forecast for the next term. Therefore, it appears thatthe outlook remains uncertain.
It is predicted that demand for printing paper and communication paper will decrease (e.g., event cancellation and decrease indemand for offices), and that demand for photo and IJ for image
output will also decrease due to worldwide restrictions on going out
in addition to the sluggish demand accompanying the shrinkage ineconomic activities in general. Nevertheless, it is difficult to make areasonable earnings forecast at the present time. Therefore, we will
not yet announce our forecast figures.

[To diversify the business base by fostering new profit pillars]
We are aiming to stabilize our earnings base while transforming ourbusiness structure in our Hachinohe Mill. For example, we havestarted manufacturing barrier paper aimed at doing away withplastics. This is in addition to the household and consumer paper
business and biomass power generation business we have been
operating jointly with the Oji Group there.
We will expand our business in promising fields, such as functionalfilms and IJ transfer paper based on the imaging technology andbattery separators and inorganic fiber paper that have excellent
quality, and work on the growth and diversification of new businesses.
We have made the following progress in our alliance with the
Oji Group in this term – the first year of our New Mid-Term Management Plan. We will continue to work to expand our alliance with theJune 2020

Yukihiro Tachifuji,
President & C.E.O.

3

FSC® C021528

Breakdown of Operations by Business

Paper and Pulp
Business

Net sales (¥ Millions)18

152,220

19

156,780
146,413

20
As for the domestic market, we strived to maintain prices.
However, demand for both printing paper and communication
paper continued to decline further. This led to a reduction in boththe volume and monetary amount of sales. Regarding exports,
the volume of sales increased with a focus on printing paper for
Asia. Nevertheless, the monetary amount of sales decreased
due to the slump in market conditions. We have already stopped
the paper machine No. 4 at Hachinohe Mill to establish a
production structure that responds to demand trends. However,in response to a decline in demand that has been accelerating
greater than we expected, we looked to further decrease
production in the third quarter onward to respond to the supply
and demand situation.
European subsidiaries have been experiencing the effect ofa revision to prices since the last year. Nevertheless, we were
impacted by the exchange rate in addition to the decrease in

Imaging Businesssales volume of thermal paper and pressure-sensitive paper.
Consequently, the monetary amount of sales decreased. As forcommercial pulp, both the volume of sales and the monetaryamount of sales decreased. This was due to the sharp deterioration in international market conditions. As a result of the above,
the total net sales of the paper and pulp business were ¥146,413
million (US$1,345 million). Operating income was ¥1,140 million(US$10 million) due to the effect of the revision to the prices of
paper. We will continue to aim to stabilize earnings as soon as
possible in the future. We will do this by looking to transform ourportfolio through sales promotions of new products (e.g., barrier
coated paper and bleached kraft paper) as business to do way
with plastic and through strengthened collaboration with the Oji
Group, in addition to the efforts we have taken so far.

Net sales (¥ Millions)
36,90718

35,28719

33,60720
As for the domestic market, the monetary amount of sales
increased thanks mainly to the strong sales of photographic
sensitive materials. In the overseas market, orders forphotographic sensitive materials were steady due to the effect of
our alliance. Furthermore, demand for inkjet paper expanded inemerging countries and for business applications. Nevertheless,there was a significant impact from a decline in demand forexisting products. This led to a decrease in the monetary amountof sales. As a result of the above, the total net sales of theimaging business were ¥33,607 million (US$308 million).
Operating loss was ¥330 million (-US$3 million). We saw a drop
in both revenue and profit. This was due to the weak prices andrising production costs resulting from the strong yen in addition
to the decrease in the volume of sales in overseas markets
accompanying a drop in demand of existing products. We

attempted to improve profitability by securing the quantity ofphotographic materials base paper through an enhancement of
our alliance with FUJIFILM Corporation and by enhancing oursales strengths and reviewing transactions following theconstruction of a direct sales system overseas for existingproducts. Together with this, we strove to improve productivity
and reduce fixed costs. However, we were not able to cover for
the factors responsible for the decrease in revenue and profit in
the end. We will continue to work on securing profits in the
future. We will do this by striving to optimize our production
structure through further strengthening of our business foundations from our alliance with FUJIFILM Corporation. We will alsoestablish electronics-related product business and enhance oursales strengths to build a collaborative structure with overseas
customers.

4

Speciality Materials
Business

Net sales (¥ Millions)18

17,02619

17,485
16,17820

As for speciality materials, there was an increase in the

million). Profit increased. This was thanks to a revision in themonetary amount of sales for battery separators, but a decreaseprice of some products in addition to the effect of low raw

for thermo rewrite and water treatment membrane supporting

material and fuel prices and decreased mill costs. We will

body. As for chemical paper, the monetary amount of sales

continue to focus on acquiring new users for water treatment

decreased for wallpaper lining paper and tape base paper inmembrane supporting body, expanding into membrane bio-reac-

addition to our mainstay product of decorative laminate basetor (MBR) applications, promoting the sale of heat-resistantpaper. As a result of the above, the total net sales of thebattery separators, attracting new customers (e.g., decorative

speciality materials business overall were ¥16,178 million

laminate base paper and tape base paper) and reducing costs.

(US$148 million). Operating income was ¥953 million (US$8

Warehouse andTransportation BusinessNet sales (¥ Millions)
18

8,575

19

8,333

20

8,087

Net sales of the warehouse and transportation business were
¥8,087 million (US$74 million), down 2.9% year on year.

Net sales (¥ Millions)

8,262

18

Others

6,508

19

7,208

20
Net sales were ¥7,208 million (US$66 million), up 10.8% year on
year, due to the increase in sales of engineering-related
subsidiaries, etc.

5Topics

barricote® and barrisherpa™ Coated Paper for Packaging
We commercialized barricote® in our German subsidiary of Mitsubishi HiTec Paper Europe GmbH. It has been
adopted by major European food manufacturers since the spring of 2019. We started sales of barricote® andbarrisherpa™ in May 2020 with production of these products in our Japanese mills. The aim of this is to widely
support diverse packaging needs in the Japanese and Asian markets toward a plastic-free society. We have beenpromoting sales with the aim of acquiring a wide range of customers in the Japanese and Asian markets. We will
expand our product portfolio and establish a stable production structure for barricote® and barrisherpa™. At thesame time, we will develop and sell these products by linking up with Mitsubishi HiTec Paper Europe GmbH. With
this, we will develop this business globally.

®

™

Operation of the No. 10 Coater in our Kyoto MillWe successfully started operation of the new No. 10 coater that we installed last year in our Kyoto Mill. We havemainly used this to produce new electronics industry material products. We have also been utilizing it indevelopment and trial manufacture to greatly contribute to an increase in our development speed. We exhibitednew products and development products at the Asia’ s leading electronics technology show (34th NEPCON
Japan), which was held in January this year. In particular, our positive type dry film resist attracted a great deal ofattention.

6

Support for an Increase in Production of Functional Filters
We have been receiving an increase in inquiries about our functional filters (product name: Aller Sweep) fromJapanese and overseas air cleaner manufacturers since February of this year. This filter holds plant extracts (e.g.,
ginkgo leaves). Therefore, it has the effect of suppressing bacteria, allergens and viruses trapped in the filter. Thereis interest in particular about the effect of suppressing viruses. We are currently reinforcing the production structurein the mill of our Chinese subsidiary to meet the increased demand from Japan and overseas.

7

Our Mills and Their Product Lines

SHIRAKAWA SITE

Address:

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

KITAKAMI HITEC PAPER CORP.

Address:

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

HACHINOHE MILL
Address:

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

KJ SPECIALTY PAPER CO., LTD.
FUJI MILL
Address:

TAKASAGO MILL
Address:

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

KYOTO MILL
Address:

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

Overseas

7-1, Shinbashicho, Fuji-shi,
Shizuoka 417-0004
Telephone: +81-545-52-4075
Products: Base paper for decorative
laminates, Impregnateddecorative sheet,
Base paper for wall paper,
Stencil paper

Mitsubishi HiTec Paper Europe GmbH Flensburg Mill
Address: Husumer Strasse 12 D-24941
Flensburg, Germany
Telephone: +49-461-8695-204
Products: Thermal paper, etc.
(Flensburg, Germany)

Mitsubishi HiTec Paper Europe GmbH Bielefeld Mill
Address: Niedernholz 23, D-33699 Bielefeld,
Germany
Telephone: +49-521-2091-401
Products: Carbonless paper, Thermal paper,
Inkjet paper(Bielefeld, Germany)

MP Juarez LLC
Address: Ave. Valle del Cedro #1551 Paraq. Ind Intermex
C.P. 32690 Cd. Juarez. Chih., Mexico
Telephone: +1-915-534-8230 (U.S. Head Office)Products: Inkjet paper(Juarez, Mexico)Zhuhai MPM Filter, Ltd.
Address: #17 Yijing Lane, Pingsha Town, Jinwan District,Zhuhai, Guangdong, China
Telephone: +86-756-8895033
Products: Various filters(Zhuhai, China)

8

Five-Year Summary (Consolidated)Thousands of
U.S. dollars

Millions of yen

For the years ended March 31

Net sales
Operating income (loss)
Net income attributable to owners of parent
Net income per share (in yen and dollars)
As of March 31
Total assets
Total net assets

2020

2019

2018

2017

2016

2020

¥ 194,575
1,976
801
17.96

¥ 203,997
(40)
351
10.04

¥201,492
1,790
3,198
93.57

¥201,955
4,313
1,152
33.72

¥216,340
3,872
2,217
64.85

$1,787,880
18,1617,369
0.17¥ 212,217
60,527¥ 232,758
67,004¥237,379
61,077¥234,891
56,631¥240,681
51,492$1,949,990
556,169

Notes: (1) On October 1, 2016, the share consolidation was executed at a ratio of 1share per 10 shares.
Net income per share is calculated based on the assumption that the share consolidation was executed at the beginning of the fiscal year ended March 31, 2016.
(2) From the beginning of the fiscal year ended March 31,2019, the Company has applied "Partial Amendments to Accounting Standard for Tax Effect Accounting"(ASBJ Statement No.28, February 16, 2018), which has been applied to main management indicators of previous periods, retroactively.

9Mitsubishi Paper Mills Limited and Consolidated Subsidiaries

Consolidated Balance Sheets
As of March 31, 2020 and 2019
Thousands of
U.S. dollars (Note 2)

Millions of yen
2020

2019

2020

¥ 9,260¥11,617$85,095

31,358
1,646

37,6862,307

288,145
15,13233,005(157)

39,993(175)

303,278(1,448)32,84848,484
1,982

39,81844,557
3,696

301,830
445,50918,214

92,576

99,689850,649

Land
Buildings and structures
Machinery, equipment and vehicles
Construction in progress
Leased assets
Other

21,89897,214
370,506
467
3,704
9,345

21,913
95,872
365,551
9,446
2,718
9,349

201,216
893,269
3,404,455
4,299
34,04185,876

Less: Accumulated depreciation
Accumulated impairment losses

503,138(407,482)(1,946)504,852(402,871)(789)

4,623,158(3,744,214)(17,886)

93,708101,191

861,056

13,303
2,459
2,115
962
(74)
4,318
2,846

16,479
1,262
2,118
5,331
(54)
2,965
3,775

122,243
22,601
19,435
8,847(683)
39,67926,15925,932

31,877238,283¥ 212,217¥232,758$1,949,990

ASSETS

Current assets:

Cash and deposits (Note 3 (11))
Receivables:
Trade notes and accounts (Note 10)
Other
Less: Allowance for doubtful accounts
Inventories
Other
Total current assets

Non-current assets:
Property, plant and equipment (Note 4):

Net property, plant and equipment

Investments and other assets:
Investment securities (Notes 4, 10 and 11)
Investments in unconsolidated subsidiaries and affiliated companies
Long-term loans receivable
Net defined benefit asset (Note 13)
Less: Allowance for doubtful accounts
Deferred tax assets (Note 14)
Other
Total investments and other assets
Total assets
The accompanying notes are an integral part of these financial statements.

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

Millions of yen
2020

2019

2020

¥ 49,407
14,8604,000
334¥49,599
15,5757,000
367$453,989
136,544
36,754
3,077

22,082
3,934
833
6,509
431
3,126

25,347
5,390
989
7,185
366
9,038

202,905
36,148
7,657
59,8093,965
28,732

105,519

120,860

969,584

Long-term debt (Note 10)
Lease obligations (Note 10)
Provision for directors' retirement benefits
Net defined benefit liability (Note 13)
Deferred tax liabilities (Note 14)
Asset retirement obligations
Other

33,495
901
50
9,423
119
883
1,293

32,855
424
60
8,718
696
882
1,254

307,778
8,287
466
86,592
1,102
8,119
11,888

Total non-current liabilities

46,16944,893424,235¥ 151,689¥165,754$1,393,820¥ 36,561
8,555
13,719(152)¥36,561
9,682
13,145(150)$335,951
78,616
126,063(1,399)58,684

59,240539,231

1,206
1,095
(461)

3,635
1,209
2,265

11,082
10,067(4,238)

1,840

7,110

16,911

2

654

26

Total net assets¥ 60,527¥67,004$556,169

Total liabilities and net assets¥ 212,217¥232,758$1,949,990

LIABILITIES AND NET ASSETS
Current liabilities:

Short-term loans payable (Note 10)
Current portion of long-term debt (Note 10)
Commercial Paper
Lease obligations (Note 10)
Payables:Trade notes and accounts (Note 10)
Electronically recorded obligations (Note 10)
Other
Accrued expenses
Income taxes payable
Other
Total current liabilities

Non-current liabilities:

Total liabilities
NET ASSETS
Shareholders’ equity:
Capital stock
Authorized: 90,000,000 shares at March 31, 2020
Issued: 44,741,433 shares at March 31, 2020
Capital surplus
Retained earnings
Treasury shares
Total shareholders’ equity
Accumulated other comprehensive income:
Valuation difference on available-for-sale securities
Foreign currency translation adjustment
Remeasurements of defined benefit plans
Total accumulated other comprehensive income
Non-controlling interests

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

11Mitsubishi Paper Mills Limited and Consolidated Subsidiaries

Consolidated Statements of Operations
For the years ended March 31, 2020 and 2019
Thousands of
U.S. dollars (Note 2)

Millions of yen
2020

2019

2020

¥ 194,575
164,492¥203,997
174,602$1,787,880
1,511,465

30,08229,394276,415

Selling, general and administrative expenses

28,10529,435258,254

Operating income（loss）

1,976

(40)

18,161

542
1,196
(991)
120
(167)
240
123
(615)
(1,740)
1,740
(0)
−
(168)
(1,159)
(96)

622
(142)
(1,372)
168
89
497
1,562
(463)
−
146
(275)
(576)
(697)
(124)
(239)

4,982
10,997(9,108)1,107(1,543)
2,213
1,133(5,654)(15,996)
15,996(0)−(1,549)(10,656)
(891)

Total

(976)

(804)

(8,968)Net income (loss) before income taxes and non-controlling interests

1,000

(845)

9,192

Income taxes:
Current
Deferred (Note 14)

503
(246)

252
(1,567)

4,623(2,266)

Net income

743

470

6,835

(58)
¥ 801

118
¥351

(533)
$7,369Net sales
Cost of sales
Gross profit

Other income (expenses):
Interest and dividend income
Equity in gains (losses) of affiliates
Interest expenses
Royalty income
Foreign exchange gains (losses)
Insurance income
Gain on sales of investment securities
Gain (loss) on disposal of non-current assets (Note 7)
Loss on tax purpose reduction entry of non-current assets
Subsidy income
Advisory fee
Special retirement expenses
Loss on disaster
Impairment loss (Note 8)
Other, net

Net income (loss) attributable to non-controlling interests
Net income attributable to owners of parent
The accompanying notes are an integral part of these financial statements.

12Mitsubishi Paper Mills Limited and Consolidated Subsidiaries

Consolidated Statements of Comprehensive Income
For the years ended March 31, 2020 and 2019
Thousands of
U.S. dollars (Note 2)

Millions of yen
2020

2019

2020

Net income
Other comprehensive income:
Valuation difference on available-for-sale securities
Foreign currency translation adjustments
Remeasurements of defined benefit plans, net of tax
Share of other comprehensive income of entities
accounted for using equity method

¥ 743

¥470

$6,835(2,428)(121)(2,692)(1,673)
(307)
1,052

(22,316)(1,118)(24,737)

(11)

(15)

(109)

Total other comprehensive income
Comprehensive income(5,254)(4,510)

(944)
(474)

(48,281)(41,445)

Comprehensive income attributable toComprehensive income attributable to owners of parent
Comprehensive income attributable to non-controlling interests(4,467)(¥ 42)(564)¥89(41,053)($392)

Yen

Amounts per share:
Net income — basic (Note 3 (10))
Cash dividends applicable to the year
The accompanying notes are an integral part of these financial statements.

13

U.S. dollars (Note 2)

2020

2019

2020

¥ 17.965.00¥10.04
5.00

$0.17
0.05

Mitsubishi Paper Mills Limited and Consolidated Subsidiaries

Consolidated Statements of Changes in Net Assets
For the years ended March 31, 2020 and 2019
Millions of yen

Shareholders’ equity

Capitalstock

CapitalsurplusRetainedearnings

Total
Treasury shareholders’equityshares34,258,433 ¥32,756¥6,132¥12,965¥ (148) ¥51,706¥5,204

3,805

3,805

Number ofshares in
issue

Balance at April 1, 2018
Changes during the year:

10,483,000
Issurance of new shares
Dividends of surplus
Net income attributable to owners of parent
Acquisition of treasury stock
Disposal of treasury stock
Change in treasury shares of parent arisingfrom transactions with non-controlling shareholders

3,805

(1)

44,741,433 ¥ 36,561

Balance at the beginning of the term reflecting
the change of accounting policies

36,561¥8,025

7,610
(170)
351
(1)
−

(255)

(255)
(915)
(915)

¥ 9,682 ¥ 13,145¥ (150) ¥ 59,240¥ 3,635¥ 1,209¥ 2,265¥ 7,110

(4)

(4)

9,682

13,140

1,209

(1)

(6)

653

66,998

(2)
0

−
(223)
801
(2)
0

(1,127)(1,127)(550)(2,429)(2,429)

(113)
(113)

¥ (152) ¥ 58,684¥ 1,206¥ 1,095(2,726)(2,726)

7,110¥ 654 ¥ 67,004

−
(223)
801
(2)
0

(2)

2,265

(1,606)
5,927

59,235578¥ 8,555 ¥ 13,719

3,635

(691)
(691)

(150)

(1,127)(1,127)¥1,345 ¥61,077

7,610
(170)
351
(1)
−
955
955

(1)

(0)

44,741,433 ¥ 36,561¥1,309

(302)
(302)

180

(223)
801

Changes in items other than shareholders’ equity
Total changes during the year

¥1,511

Total
accumulated
otherRemeasurements
comprehensive Non-controlling Total netof definedincomeassetsinterests
benefit plans(1,568)(1,568)Changes during the year:
Issurance of new shares
Dividends of surplus
Net income attributable to owners of parent
Acquisition of treasury stock
Disposal of treasury stock

Change in treasury shares of parent arisingfrom transactions with non-controlling shareholders

Foreigncurrencytranslation
adjustment

7,534

3,549

Cumulative effect of changes in accounting policies

Balance at March 31, 2020

(170)
351

(255)

Changes in items other than shareholders’ equity
Total changes during the year
10,483,000
Balance at April 1, 2019

Total accumulated other comprehensive income

Valuationdifference
on availablefor-salesecurities(5,269)(5,269)(¥ 461) ¥ 1,840

(650)
(650)

(5,920)(6,470)¥ 2 ¥ 60,527

Thousands of U.S. dollars
Total accumulated other comprehensive income

Shareholders’ equity
Number ofshares in
issue

Balance at April 1, 2019

Capitalstock

44,741,433 $335,951

Total
shareholders’equityValuationdifference
on available-for-salesecurities

Total
Foreignaccumulated
currency Remeasurements
otherof defined comprehensive Non-controlling Total net
translation
adjustment benefit plansinterests
assetsincome$88,972 $120,792$(1,380) $544,335$33,406$11,109

(45)

(45)

$88,972 $120,747$(1,380) $544,290

Capitalsurplus

Cumulative effect of changes in accounting policies
Balance at the beginning of the term reflecting
the change of accounting policies$335,951

Changes during the year:
Issurance of new shares
Dividends of surplus
Net income attributable to owners of parent
Acquisition of treasury stock
Disposal of treasury stock
Change in treasury shares of parent arisingfrom transactions with non-controlling shareholders
Changes in items other than shareholders’ equity
Total changes during the year
Balance at March 31, 2020

Retainedearnings(2,052)
7,369(10,355)(10,355)
44,741,433 $335,951(0)Treasuryshares(19)
1$20,817 $65,334$(10)$33,406$11,109$20,817 $65,334−(2,052)
7,369
(19)
0

$78,616 $126,063

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

14

$(55)

6,001 615,625−(2,052)
7,369
(19)
0

(10,355)
5,316$6,011 $615,680(10,355)(5,058)(22,324)(22,324)(1,042)(1,042)(25,055) (48,423)(25,055) (48,423)(5,973) (54,397)(5,973) (59,455)$(1,399) $539,231$11,082$10,067$(4,238) $16,911$26 $556,169(18)

Mitsubishi Paper Mills Limited and Consolidated Subsidiaries

Consolidated Statements of Cash Flows
For the years ended March 31, 2020 and 2019

Thousands of
U.S. dollars (Note 2)

Millions of yen
2020

2019

2020

¥ 1,000
9,824
168
1,159
1,210
340
(10)
(542)
(1,196)
991
(123)
615
1,740
(1,740)6,229(4,273)(4,537)(1,018)(¥845)
10,116
697
124
632
238
4
(622)
142
1,372
(1,562)
463
−
(146)
8,533
(1,469)4,190(1,937)$9,192
90,274
1,549
10,656
11,122
3,124(94)(4,982)(10,997)
9,108(1,133)
5,654
15,996(15,996)
57,240(39,266)(41,690)(9,362)Sub-total

9,837

19,93390,395

Net cash provided by (used in) operating activities

9,976

19,066

91,674(7,243)
139
(33)
416
(450)
822
(222)

(10,223)
12
(22)
2,633
(1,035)
14(359)(66,561)
1,284
(310)
3,824
(4,138)7,554(2,039)(6,571)(8,979)(60,387)(52)(3,000)16,000(16,075)
(570)
−
0
(223)
(0)
(58)

(1,370)4,000
2,775(19,618)
(374)
7,610
−
(170)
(1)
(112)

(478)
(27,565)
147,018(147,711)(5,245)−0(2,052)(8)(541)(1,673)(922)(15,376)

Net cash provided by (used in) financing activities(5,655)(8,185)(51,962)

IV Effect of exchange rate change on cash and cash equivalents
V Net increase (decrease) in cash and cash equivalents
VI Cash and cash equivalents at beginning of period(106)(2,356)
11,617

(28)
1,873
9,744

(978)
(21,653)
106,749¥ 9,260¥11,617$85,095

I Cash flows from operating activities:
Net income (loss) before income taxes and non-controlling interests
Depreciation
Loss on disaster
Impairment loss (Note 8)
Decrease (increase) in net defined benefit asset (Note 13)
Increase (decrease) in net defined benefit liability (Note 13)
Increase (decrease) in provision for directors' retirement benefits
Interest and dividend income
Equity in gains (losses) of affiliates
Interest expense
Loss (gain) on sales of short-term and long-term investment securities
Loss (gain) on disposal of non-current assets (Note 7)
Loss on tax purpose reduction entry of non-current assets
Subsidy income
Decrease (increase) in trade notes and accounts receivable
Decrease (increase) in inventories
Increase (decrease) in trade notes and accounts payable
Other, net

885
(213)
552
(998)
(87)

Subsidy income received
Payments for loss on disaster
Interest and dividend income received
Interest expenses paid
Income taxes paid
II Cash flows from investing activities:
Purchase of property, plant and equipment and intangible assets
Proceeds from sales of property, plant and equipment and intangible assets
Purchase of investment securities
Proceeds from sales of investment securities
Payments of loans receivableCollection of loans receivable
Other, net
Net cash provided by (used in) investing activities
III Cash flows from financing activities:
Net increase (decrease) in short-term loans payable
Net increase (decrease) in commercial paper
Proceeds from long-term debt
Repayments of long-term debt
Repayments of lease obligations
Proceeds from issuance of shares
Proceeds from sales of treasury shares
Dividends paid
Purchase of treasury shares
Dividends paid to non-controlling shareholders
Payments from changes in ownership interests in subsidiaries
that do not result in change in scope of consolidation

VII Cash and cash equivalents at end of period (Note 3 (11))
The accompanying notes are an integral part of these financial statements.

15

146
(84)
619
(1,378)
(171)

8,139
(1,957)
5,078(9,176)(803)

Mitsubishi Paper Mills Limited and Consolidated Subsidiaries

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

2. United States Dollar Amounts
The Company maintains its accounting records in yen. The dollar amounts included in the accompanying consolidated financial
statements and notes thereto represent the arithmetical results of translating yen to dollars on the basis of ¥108.83 = U.S.$1, theexchange rate prevailing as of March 31, 2020. The inclusion of such U.S. dollar amounts is solely for convenience and is notintended to imply that yen amounts have been or could be readily converted, realized or settled in U.S. dollars at that rate or any
other rate.

3. Summary of Significant Accounting Policies(1) Scope of consolidation

The Company had 33 subsidiaries as of March 31, 2020 (33 as of March 31, 2019). The accompanying consolidated financial
statements include the accounts of the Company and 26 (26 for 2019) of its subsidiaries for the year ended March 31, 2020
(together, hereinafter referred to as the “Companies”).
The accounts of the remaining 7 (7 for 2019) unconsolidated subsidiaries for the year ended March 31, 2020 have been
excluded from consolidation since the aggregate amounts of these subsidiaries in terms of combined assets, net sales, retained
earnings and net income were immaterial in relation to those of the consolidated financial statements of the Companies.
The fiscal year end of Mitsubishi Paper Holding (Europe) GmbH and other 5 (5 for 2019) consolidated subsidiaries is December 31. For the purpose of preparing the consolidated financial statements, the Company used their financial statements as of theirrespective fiscal year end. The Company made adjustments for the purpose of consolidation as necessary for the materialtransactions that occurred between such fiscal year-end dates and the consolidated account closing date.

(2) Consolidation and elimination

For the purposes of preparing the accompanying consolidated financial statements, all significant intercompany transactions,account balances and unrealized profits among the Companies have been eliminated.
Elimination of investments in shares of consolidated subsidiaries, together with the underlying equity in net assets of such
subsidiaries, has been made to include equity in net income of subsidiaries subsequent to the respective dates of acquisition in the
consolidated statements of income. Any difference between the cost of an investment in a subsidiary and the amount of underlying
equity in net assets of the subsidiary, unless specifically identified and reclassified to the applicable accounts from which the value
originates, is treated as goodwill or negative goodwill. Goodwill and negative goodwill (only incurred before March 31, 2010) areamortized over five years on a straight line basis.
Assets and liabilities of subsidiaries are remeasured based on their fair value at the date of acquisition of control of thesubsidiaries.

(3) Investments in unconsolidated subsidiaries and affiliates

The Company had 10 affiliates as of March 31, 2020 (10 for 2019). 3 affiliated companies were accounted for by the equity method.
However, the remaining 7 (7 for 2019) subsidiaries and 7 (7 for 2019) affiliates did not have a material effect on net income andretained earnings in the accompanying consolidated financial statements and, therefore, these investments have been carried atcost.

(4) Financial instruments(i) Derivatives

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

16

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

Finished products, merchandise and work in process are primarily stated at lower of cost or market, cost being determined by theweighted average method and other inventories are stated at lower of cost or market, cost being determined by the moving
average method.

(6) Property, plant and equipment

Depreciation of buildings (excluding for leased assets) is computed by the straight-line method. Depreciation of other property,
plant and equipment (excluding for leased assets) is mainly computed by the straight-line method, but in part, thedeclining-balance method is used at the head office of the Company and certain consolidated subsidiaries. However, depreciationof structures acquired after April 1, 2016 is computed by the straight-line method.
Estimated useful lives of assets used in computing depreciation are as follows:
Buildings and structures...................... 31 to 47 years
Machinery and equipment............................ 12 years
Leased assets under finance lease agreements of the Company and its domestic consolidated subsidiaries, which do not
stipulate the transfer ownership of the leased assets to the lessee, are depreciated over the lease term by the straight-line methodwith no residual value.

(7) Allowance for doubtful accounts

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

(8) Accounting method for retirement benefits(i) Method of attributing the projected benefits to periods of service
As for the calculation of retirement benefit obligation, the benefit formula basis is used for including estimated retirement benefits ina period till the end of this consolidated fiscal year. Some consolidated subsidiaries adopt the simplified method for calculating theliabilities and costs for retirement benefits, while defining the term-end privately necessary payment for retirement benefits asretirement benefit obligation for the lump-sum severance pay plan, and defining the actuarial obligation in the latest pension financecalculation as retirement benefit obligation for the corporate pension plan.
(ii) Amortization of unrecognized prior service cost
Unrecognized prior service cost is amortized on a straight-line basis over a term that does not exceed the average remaining
service period of the employees who are expected to receive benefits under the plans (8 to 15 years).
(iii) Amortization of unrecognized net actuarial gain or loss
Unrecognized net actuarial gains or losses are amortized from the year following the year in which such gains or losses arerecognized on a straight-line basis over a term that does not exceed the average remaining service period of the employees whoare expected to receive benefits under the plans (8 to 15 years).

17

(9) Translation of foreign currency financial statements (accounts of overseas subsidiaries and affiliates)

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

(10) Net income or loss per share

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

(11) Cash and cash equivalents

Cash and cash equivalents in the consolidated statements of cash flows are composed of cash on hand, bank deposits that are able
to be withdrawn on demand and short-term investments with original maturities of three months or less that are exposed to a minor
risk of fluctuation in value.
A reconciliation of cash and cash equivalents in the accompanying consolidated statements of cash flows and cash and bankdeposits in the accompanying consolidated balance sheets at March 31, 2020 and 2019 is shown below:
Thousands of
U.S. dollars

Millions of yen

Cash and bank deposits
Cash and cash equivalents

2020

2019

2020

¥ 9,260¥ 9,260¥11,617¥11,617$85,095$85,095(12) Dividends
The Companies Act of Japan (the “Law”) provides that an amount equal to 10% of the amount to be distributed as distributions ofcapital surplus (other than the capital reserve) and retained earnings (other than the legal reserve) be transferred to the capitalreserve and the legal reserve, respectively, until the sum of the capital reserve and the legal reserve equals 25% of the common
stock amount. Such distributions can be made at any time by resolution of the shareholders, or by the Board of Directors if certain
conditions are met, however neither the capital reserve nor the legal reserve is available for distributions.
(13) Reclassification
Certain reclassification have been made to the prior years’ consolidated financial statements to conform to the presentation for theyear ended March 31, 2020.
(14) Changes in accounting policies
At foreign subsidiaries and affiliates, International Financial Reporting Standards 16, “Leases” (hereinafter called “IFRS 16”) havebeen adopted since the beginning of the fiscal year ended March 31, 2020. In line with this adoption, the Company generally
recognizes all leases as a lessee as assets or liabilities on the consolidated balance sheet. As a result, the balance of property,
plant and equipment, lease obligations included in current liabilities, and lease obligations included in long-term liabilities at theend of the fiscal year ended March 31, 2020 increased by ¥662 million, ¥184 million, and ¥457 million, respectively. The effects ofthese revisions on the consolidated statements of income for the fiscal year ended March 31, 2020 are immaterial.
(15) Additional information
The effect of COVID-19 to the economy and cooperate activities is extensive. the Group is making accounting estimationsof collectability for deferred tax assets etc. based on the assumption that effects of COVID-19 will continue until the endof September, 2020.

18

4. Assets Pledged as Collateral
Assets pledged as collateral primarily for short-term loans, long-term debt and debentures at March 31, 2020 and 2019 were as
follows:

Thousands of
U.S. dollars

Millions of yen

Buildings and structures
Machinery and equipment
Land
Investment securities
Other

2020

2019

2020

¥ 12,981
15,370
9,131
2,222
45

¥13,974
19,215
10,4084,269
49$119,281
141,234
83,907
20,421416¥ 39,751¥47,916$365,260

5. Contingent Liabilities
As of March 31, 2020 the Companies were contingently liable for guarantees of loans, primarily of their employees and unconsolidated subsidiaries and affiliates, in the aggregate amount of ¥375 million ($3,446 thousand), and also liable for a recourse
obligation of credit securitization in the aggregate amount of ¥1,558 million ($14,315 thousand).

6. The accumulated reduced-value entry
The accumulated reduced-value entry deducted from the acquisition cost by acceptance of government subsidies at March 31,
2020 and 2019 were as follows:

Thousands of
U.S. dollars

Millions of yen
2020

¥ 678
1,059
2
¥ 1,740

Buildings and structures
Machinery and equipment
Software

2019

2020

¥–
–
–
¥–

$6,2369,739
21$15,996

7. Disposal of Property, Plant and Equipment(1) Gains on disposal of property, plant and equipment

Main items under gains on disposal of property, plant and equipment were as follows:

Thousands of
U.S. dollars

Millions of yen
2020

¥ 12
–
1

Machinery and equipment
Land
Other

2019

2020

¥7
0
1

$114
0
17

(2) Losses on disposal of property, plant and equipment

Main items under losses on disposal of property, plant and equipment were as follows:

Thousands of
U.S. dollars

Millions of yen

Scrapping and removal expenses
Machinery and equipment
Buildings and structures
Land
Other

19

2020

2019

2020

¥ 318
257
25
1
25

¥254
195
7
–
15

$2,924
2,370
236
16
237

8. Impairment Loss
Consolidated fiscal year under review (April 1, 2019 – March 31, 2020)

Application
Idle assets

Location
Aomori

Millions of yen

Category

Impairment loss

Machinery and equipment, etc.

¥1,15910,656

Our group’s main business assets are the factories that are used as production bases. Idle assets are grouped per individual unit.
The book values of assets to be disposed of and idle assets are reduced to recoverable values. Such loss is reported as an
impairment loss under extraordinary losses. Furthermore, the recoverable value is measured with the net sale value. Machinery andequipment, etc. are reduced their book value to the residual value.
Previous consolidated fiscal year (April 1, 2018 – March 31, 2019)

Application
Idle assets
Idle assets
Idle assets

Location
Aomori
Aomori
Tochigi

Millions of yen

Category

Thousands of
U.S. dollars

Impairment loss
¥ 61
41
22

Land
Machinery and equipment, etc.
Land

$551
373
199

Our group’s main business assets are the factories that are used as production bases. Idle assets are grouped per individual unit.
The book values of assets to be disposed of and idle assets are reduced to recoverable values. Such loss is reported as an
impairment loss under extraordinary losses. Furthermore, the recoverable value is measured with the net sale value. Land isevaluated based on the values by real estate appraisers, and other assets are reduced their book value to the residual value.

9. Other Comprehensive Income
The following table shows reclassification adjustment for each component of other comprehensive income for the year ended
Thousands ofMarch 31, 2020:
Millions of yen
U.S. dollars

Net unrealized gain (loss) on available-for-sale securities
Amount arising during the year
Reclassification adjustments for gain and losses included in net income
Amount before tax effectTax effectTotal
Foreign currency translation adjustment
Amount arising during the year
Remeasurements of defined benefit plans
Amount arising during the year
Reclassification adjustments for gains and losses included in net income
Amount before tax effectTax effect
Total
Share of other comprehensive income of affiliates accounted for by the equity method
Amount arising during the year
Total other comprehensive income

20

2020

2019

2020

¥ (3,013)(104)¥(1,036)(1,404)$(27,692)(964)(3,118)689¥ (2,428)(2,440)767¥(1,673)(28,656)
6,340$(22,316)¥ (121)¥(307)$(1,118)¥ (4,763)
1,072

¥953
310

$(43,767)
9,854(3,690)998¥ (2,692)

1,263
(211)
¥1,052(33,913)
9,175$(24,737)

(11)

(15)

(109)

¥ (5,254)¥(944)$(48,281)

10. Financial Instruments(1) Summary of Financial Instruments(i) Policy regarding financial instruments
To carry out its capital expenditure plans to develop its paper, pulp, photosensitive material products and other manufacturing
activities, the Group raises the funds it needs principally through bank loans and issuance of corporate bonds. Temporary
surpluses are managed as short-term deposits, and temporary working capital is procured through bank loans and issuance ofcommercial paper. The Company has a policy of not entering into any speculative derivative transactions and only enters into
derivative transactions to avoid exposure to interest-rate risk on loans.
(ii) Details of financial instruments and related risk and management of risk
Trade notes and accounts receivable are exposed to the credit risk of customers. In accordance with the internal policy for credit
risk management regulations, the Group manages both the due dates and balance of such transactions by customer, and has
systems to accurately assess the credit status of its major customers at any time.
Receivables in foreign currencies originating overseas businesses are exposed to foreign exchange-rate risk. The majority ofthese risks are diminished through the use of a balance of accounts payable denominated in foreign currencies.
Investment securities are exposed to risks of changes in market prices. However, market prices of the shares held for
operational purposes are periodically reviewed.
Trade notes and accounts payable are obligations due within one year.
Short-term borrowings are raised mainly in connection with business activities, while long-term debt, corporate bonds andlease obligations related to finance lease transactions are the main means for procurement of funds needed for capital expenditures. In most cases, the repayment date is within five years from the balance sheet date. For some long-term debt with floatinginterest rates exposed to interest-rate fluctuation risk, the Company uses derivative transactions (interest-rate swaps) for hedging
purposes.
For derivative transactions, the Company uses forward exchange contracts to hedge against exchange-rate risk affecting
trade notes and accounts receivable and payable denominated in foreign currencies, and interest rate swap transactions to hedge
interest rate fluctuation risks on loans. We do not assess the effectiveness of our hedging strategies, since all derivative transactions meet the conditions for special accounting treatment for interest rate swaps.For carrying out and managing derivativetransactions, the Company adheres closely to internal policies delimiting the authority for engaging in such transactions. To reduce
credit risk in using derivatives, the Company works only with the financial institutions with good credit-ratings.
The Company is exposed to liquidity risk in its payables and borrowings. Risk-management methods including compilation ofa monthly cash flow plan are used to mitigate the risks by each Group company.
(iii) Additional notes on the fair value of financial instruments, etc.
Calculations of the fair value of financial instruments are based on their quoted market prices, as well as their reasonably estimatedfair value when the quoted market prices are not available. Since various assumptions and factors are reflected in estimating thefair value, different assumptions and factors could result in different fair value. In addition, the contract values of derivatives in Note
12. Derivatives are not necessarily indicative of the actual market risk involved in derivative transactions.

(2) Fair value of financial instruments

Book value, fair values and differences between them as of March 31, 2020 are as follows. The following table does not include
financial instruments for which the fair value is extremely difficult to determine (please refer to note below).

21

Millions of yen
2020

Trade notes and accounts receivable
Investment securities
Available-for-sale securities
Total of assets

Trade notes and accounts payable
Electronically recorded obligations
Short-term loans payable (excluding current portion of long-term debt)
Commercial Paper
Long-term debt (including current portion of long-term debt)
Total of liabilities
Derivative transactions

Book value

Fair value

Difference¥ 31,358¥ 31,358¥−

12,63843,997

12,63843,997−−22,082
3,934
49,4074,000
48,355
127,779¥−

22,082
3,934
49,4074,000
48,767
128,191

¥−

−
−
−
−
411
411
¥−

Thousands of U.S. dollars
2020

Trade notes and accounts receivable
Investment securities
Available-for-sale securities
Total of assets
Trade notes and accounts payable
Electronically recorded obligations
Short-term loans payable (excluding current portion of long-term debt)
Commercial Paper
Long-term debt (including current portion of long-term debt)
Total of liabilities
Derivative transactions

Book value

Fair value$288,145$288,145$−

116,127404,273
202,905
36,148453,989
36,754444,323
1,174,121

116,127404,273
202,905
36,148453,989
36,754448,106
1,177,905

−
−
−
−
−
−
3,783
3,783

$−

$−

Difference$−

Millions of yen
2019

Trade notes and accounts receivable
Investment securities
Available-for-sale securities
Total of assets
Trade notes and accounts payable
Electronically recorded obligations
Short-term loans payable (excluding current portion of long-term debt)
Commercial Paper
Long-term debt (including current portion of long-term debt)
Total of liabilities
Derivative transactions

Book value

Fair value¥37,686¥37,686¥−

15,82253,50925,347
5,390
49,5997,000
48,431
135,769¥−

15,82253,50925,347
5,390
49,5997,000
49,041
136,380

−
−
−
−
−
−
610
610

¥−

Difference¥−(i) Trade notes and accounts receivable
Because these are settled in a short period of time, fair value approximates book value. Accordingly, fair value is recognized asbook value.
(ii) Investment securities
Fair value of investment securities is based on quoted share prices at stock exchanges, and bond prices are based on indicative
published prices in the papermaking sector.
(iii) Trade notes and accounts payable, (iv) Electronically recorded obligations
Because these are settled in a short period of time, fair value approximates book value. Accordingly, fair value is recognized asbook value.
(v) Short-term loans payable
Because these are settled in a short period of time, fair value approximates book value. Accordingly, fair value is recognized asbook value.

22

(ⅵ) Commercial Paper
Because these are settled in a short period of time, fair value approximates book value. Accordingly, fair value is recognized asbook value.
(vii) Long-term debt
The fair value of long-term debt is calculated by discounting the total principal and interest using the assumed interest rate given
equivalent new borrowings.
For long-term debt with floating interest rates, loans are subject to special settlement for interest swaps. The fair value iscalculated by discounting the total principal and interest (including interest-rate swap) using the interest rate reasonably estimatedgiven equivalent new borrowings. The amount also includes the total current portion of long-term debt of ¥14,860 million ($136,544
thousand).
(viii) Derivatives
Please see Note 12.
Unlisted equity securities (in the amount of ¥3,125 million ($28,717 thousand) on the consolidated balance sheet) are not included
in available-for-sale securities, due to the difficulty of measuring their fair value as the stock has no quoted share price and future
cash flow cannot be predicted.
Thousands of
U.S. dollars

Millions of yen

Unlisted equity securities

2020

2019

2020

¥ 3,125¥1,919$28,717

Planned repayment of debentures, long-term debt, lease obligations and other interest-bearing liabilities after the balance sheet
date (consolidated basis)
Millions of yen
2020

Short-term loans payable
Long-term debt
Lease obligations
Other interest-bearing debt
Total

Due within
1 year

1-2 years

2-3 years

3-4 years

4-5 years

Over 5 years¥ 49,407
14,860
334
4,000

¥−
11,798
287
−

¥−
6,882
260
−

¥−
4,742
206
−

¥−
8,692
127
−

¥−
1,378
20
−

¥ 68,602¥ 12,086¥ 7,143¥ 4,948¥ 8,819¥ 1,399

Thousands of U.S. dollars
2020

Short-term loans payable
Long-term debt
Lease obligations
Other interest-bearing debt
Total

Due within
1 year

1-2 years

2-3 years

3-4 years

4-5 years

Over 5 years$453,989
136,544
3,077
36,754$−
108,416
2,643−$−
63,241
2,393−$−
43,577
1,895−$−
79,873
1,169−$−
12,670186−$630,365$111,059$65,634$45,473$81,042$12,856

Millions of yen
2019

Short-term loans payable
Long-term debt
Lease obligations
Other interest-bearing debt
Total

Due within
1 year

1-2 years

2-3 years

3-4 years

4-5 years

Over 5 years¥49,599
15,575
367
7,000

¥−
13,963
118−¥−
10,798
98
−

¥−
5,882
83
−

¥−
742
60
−

¥−
1,467
63
−

¥72,542¥14,082¥10,897¥5,965¥803¥1,53023

11. Investment Securities
The acquisition cost, carrying amount, gross unrealized holding gains and gross unrealized holding losses for securities with fairvalue by security type at March 31, 2020 and 2019 are summarized as follows:
Available-for-sale securities:
Millions of yen
2020

Acquisition

Carrying amountGross unrealized
holding gains

Gross unrealized
holding losses¥ 10,546¥ 12,638¥ 3,417¥ 1,326¥ 10,546

Equity securities¥ 12,638¥ 3,417¥ 1,326

Thousands of U.S. dollars
2020

Acquisition

Carrying amountGross unrealized
holding gains

Gross unrealized
holding losses$96,910$116,127$31,404$12,188$96,910Equity securities$116,127$31,404$12,188

Millions of yen
2019

Equity securities

Acquisition

Carrying amountGross unrealized
holding gains¥10,594¥15,822¥5,644¥10,594¥15,822¥5,644Gross unrealized
holding losses

¥416

¥416

12. Derivatives(1) Transactions not subject to hedge accounting
No applicable transactions(2) Transactions subject to hedge accounting(i) Currency-related

No applicable transactions(ii) Interest-rate related

2020

2019

Hedge accounting
methodType of derivativetransaction, etc.

Main targets of hedging

Contract value

Contract value of
instruments
due within morethan a year

Special settlement ofinterest rate swap

Interest rate swap
transactions,fixed
payments,variable
receivables

Long-term debt

¥8,383 million¥3,500 million$77,031 thousand$32,160 thousand

Special settlement ofinterest rate swap

Interest rate swap
transactions,fixed
payments,variable
receivables

Long-term debt

¥12,210 million¥3,883 million$110,009 thousand$34,988 thousand

Transactions subject to special settlement for interest rate swaps are settled as a combined sum with the long-term debt being
hedged so the fair value is included in the fair value of the long-term debt.

24

13. Retirement and Pension Plans(1) Outline of retirement benefit plan
The Company and consolidated subsidiaries adopt reserve-type and non-reserve-type defined benefit and defined contributionplans for the retirement benefits of our employees.
In the defined benefit pension plan (reserve-type), employees will receive lump-sum payments or pensions, which arecalculated based on their salaries and employment periods.
In the lump-sum retirement benefit plan (non-reserve-type), employees will receive lump-sum retirement benefits, which arecalculated based on their salaries and employment periods. The Company and some consolidated subsidiaries establish
retirement benefit trusts for the lump-sum retirement benefit plan to make it reserve-type.
In addition, additional retirement benefits may be paid, at the time of the retirement, etc. of our employees.
In the defined benefit pension and lump-sum retirement benefit plans adopted by some consolidated companies, thesimplified method is used for calculating the liabilities and costs for retirement benefits.
As for defined contribution plans, the Company and some consolidated subsidiaries establish the defined contribution
pension plan, while the other consolidated subsidiaries subscribe to Smaller Enterprise Retirement Allowance Mutual Aid System.
(2) Defined benefit plans(i) The schedule of the defined benefit obligation at 2020 and 2019, were as follows:

Thousands of
U.S. dollars

Millions of yen

Balance at the beginning of the year (period)
Current service cost
Interest cost
Actuarial gain and loss
Benefit paid
Other
Balance at the end of the year (period)

2020

2019

2020

¥ 22,490
988
122
762
(914)
(194)

¥22,882
1,052
125
43
(1,263)(351)¥ 23,254$206,656
9,087
1,121
7,006
(8,404)(1,790)¥22,490(ii) The schedule of the pension assets at 2020 and 2019 were as follows:

Thousands of
U.S. dollars

Millions of yen

Balance at the beginning of the year (period)
Expected return on pension assets
Actuarial gain and loss
Contributions by the employer
Benefit paid
Balance at the end of the year (period)

2020

2019

2020

¥ 19,819
14(4,028)49(346)¥19,516
14
931
53
(697)

$182,114
134(37,020)458(3,181)¥ 15,508¥19,819(iii) The schedule of the net defined benefit liability for simplified method at 2020 and 2019 were as follows:
Millions of yen

Balance at the beginning of the year (period)
Benefit cost
Retirement benefit paid
Contribution to systems
Balance at the end of the year (period)$142,505

Thousands of
U.S. dollars

2020

2019

2020

¥ 715
90
(17)
(73)

¥698
105
(71)
(17)

$6,574
832
(158)
(674)

¥ 715

25

$213,676¥715$6,574

(iv) The reconciliation of the defined benefit obligations and pension assets to the liabilities and assets on retirement benefits
recognized in the consolidated balance sheet as of 2020 and 2019 were as follows:

Thousands of
U.S. dollars

Millions of yen

Funded defined benefit obligations
Pension assets

2020

2019

2020

¥ 15,394(15,862)¥15,211(20,181)$141,451(145,758)

(468)
8,929

Unfunded defined benefit obligations

Net amount of liabilities and assets recognizedin consolidated balance sheet

8,461

Retirement benefit liabilities
Retirement benefit asset

Net amount of liabilities and assets recognizedin consolidated balance sheet(4,969)8,355(4,307)
82,052

3,386

77,745

9,423
(962)

8,718
(5,331)

86,592(8,847)¥ 8,461¥3,386$77,745(v) The profits and losses related to retirement benefits for fiscal period ended March 31, 2020 and 2019 were as follows:
Thousands of
U.S. dollars

Millions of yen
2020

2019

2020

Current service cost
Interest cost
Expected return on pension assets
Actuarial gain and loss recognized in the year
Prior service cost recognized in the year
Periodic benefit cost in simplified method

¥ 988
122
(14)
1,086
(14)
90

¥1,052
125
(14)
345
(34)
105

Periodic benefit costs of retirement benefit plan

$9,087
1,121
(134)
9,986
(131)
832

¥ 2,259¥1,579$20,761

In addition to the above, the premium severance payment has been reported as extraordinary losses of ¥576 million for the consolidated fiscal year ended
March 31,2019.

(vi) The breakdown of items in other comprehensive income for fiscal period ended March 31, 2020 and 2019 were as follows:
Thousands of
U.S. dollars

Millions of yen
2020

2019

2020

Actuarial gain and loss
Prior service cost

¥ (3,676)(14)¥1,298(34)$(33,781)
(131)

Total

¥ (3,690)¥1,263$(33,913)(vii) The breakdown of items in accumulated other comprehensive income for fiscal period ended March 31, 2020 and 2019 were as
follows:

Thousands of
U.S. dollars

Millions of yen
2020

2019

2020

Unrecognized actuarial gain and loss
Unrecognized prior service cost

¥ (343)14¥3,33328$(3,155)
131

Total

¥ (329)¥3,361$(3,023)

26

(viii) The breakdown of pension assets by major category as of March 31, 2020 and 2019 were as follows:
2020

Equities
Bonds
General account of life insurance
Other

2019

34%
40%
24%
2%

36%
39%
23%
2%

100%

100%

(ix) The items of actuarial assumptions as of fiscal period ended March 31, 2020 and 2019 were as follows:

Discount rate
Expected long-term return on plan assets
Assumed wage increase rate

2020

2019

0.0〜1.3％
0.0〜2.0％
1.5〜4.0％

0.0〜2.1％
0.0〜2.1％
1.7〜4.0％(3) Defined contribution plan
The necessary contribution to the defined contribution plan of our company and consolidated subsidiaries is ¥342 million($3,147 thousand) and ¥351 million for the consolidated fiscal year ended March 31, 2020 and 2019, respectively.

14. Deferred Income Taxes(1) At March 31, 2020 and 2019, significant components of deferred tax assets and liabilities were as follows:
Millions of yen

Deferred tax assets:
Accrued enterprise taxes
Accrued expenses
Net defined benefit liability
Allowance for doubtful accounts
Loss on revaluation of fixed assets
Unrealized gains on property, plant and equipment
Tax loss carry forwards
Other

Gross deferred tax assets
Valuation allowance for tax loss carry forward
Valuation allowance for total deductible temporary difference
Gross valuation allowance
Total deferred tax assets

Deferred tax liabilities:
Gain on securities contributed to retirement benefit trust
Return of securities contributed to retirement benefit trust
Reserve based on Special Taxation Measures Law
Unrealized gains on available-for-sale securities
Other

Total deferred tax liabilities

2020

2019

2020

¥ 96
547
3,751
43
676
255
8,523
2,603

¥69
551
2,313
33
324
135
9,918
2,325

$891
5,031
34,467
395
6,211
2,350
78,31523,922

16,497(7,347)(2,740)(10,087)27

15,671(7,946)(2,548)(10,494)

151,585(67,513)(25,176)(92,690)

6,409

5,177

58,895(1,121)
(163)
(14)
(653)
(258)

(1,121)(163)(15)(1,343)(264)(10,301)(1,504)(129)(6,003)(2,379)(2,908)(20,318)(2,211)¥ 4,198

Net deferred tax assets

Thousands of
U.S. dollars¥2,269$38,577

(2) For the year ended March 31, 2020 and 2019, a reconciliation of the statutory tax rate to the effective tax rates was as follows:
2020

2019

−
−
−
−
−
−
−
−

30.6%
3.5
(7.5)
5.1
42.0
(15.0)(36.6)
3.5

Statutory tax rate
Permanently non-deductible expenses
Permanently non-taxable income
Per capita inhabitants’ taxes
Valuation allowance
Unrealized gains (losses)
Equity in gains (losses) of affiliates
Other

Effective tax rates(25.6)%−For the year ended March 31,2019, notes were omitted due to the posting of loss before income taxes and non-controlling interests.

15. Asset Retirement Obligations
Asset retirement obligations recorded in the consolidated balance sheets(1) Summary of the asset retirement obligations

The Company recognized the asset retirement obligations with regard to the obligations to remove asbestos which was used inproperty, plant and equipment.

(2) Method of calculating the amount of the asset retirement obligations

The asset retirement obligations are calculated based on the expected period of use of 12 years and at a discount rate of 1.3%,
mainly.

(3) Increase or Decrease of the amount of the asset retirement obligations
Thousands of
U.S. dollars

Millions of yen

Balance at the beginning of the year
Adjustment of the passage of time
Effect of the execution of the asset retirement obligations
Balance at the end of the year

2020

2019

2020

¥ 882
0
−
¥ 883

¥888
0
(6)
¥882

$8,113
6−$8,11916. Real Estate for Lease
The importance of the amount of real estate for lease is not significant, and so its notes are omitted.

28

17. Segment Information(1) Reportable segment information

The Company’s reportable segments are components for which discrete financial information is available and which are regularly
reviewed by the Board of Directors to determine resource allocation and evaluate business results.
The Company’s businesses are divided into segments, which handle specific products and carry out comprehensive strategy
planning in Japanese and overseas markets.
The Company consists of four reportable segments, identified by product portfolio, which are classified as the “Paper and Pulp
Segment,” the “Imaging Segment,” the “Speciality Materials Segment,” and the “Warehouse and Transportation Segment.”
The “Paper and Pulp Segment” develops writing and printing paper, premium-quality paper and pulp. The “Imaging Segment”
handles product portfolios, including photo-sensitive printing plates, inkjet paper, photographic materials. The “Speciality Materials
Segment” handles speciality and other product portfolios. The “Warehouse and Transportation Segment” handles warehousing andcarrying service.
Consolidated fiscal year under review (April 1, 2019–March 31, 2020)
Millions of yen
Reportable segments

Year ended March 31, 2020

Paper
and Pulp

Imaging
Media

Speciality
Materials

Warehouse
andTransportation

Total¥ 5,117¥ 190,953

2,970

13,334

3,586¥ 1,900

¥ 133

Sales
Sales to unaffiliated customers ¥ 143,845 ¥ 28,503 ¥ 13,487
Intersegment sales and
2,568
5,104
2,691
transfers
Total sales

Segment income（loss）

Segment assets
Amortization
Investment in equity-method
affiliates
Increase in tangible andintangible fixed assets

146,413¥ 1,140

33,607¥ (330)8,087

204,287¥ 4,395
122¥ 208,407
9,794

16,178

¥ 136

¥ 953

¥ 151,651 ¥ 35,972 ¥ 16,388
7,313
1,730
628

Other

Total

Adjustments

Consolidated¥−¥ 194,575

16,920 (16,920)−¥ 3,621 ¥ 194,575

7,208

211,495 (16,920)

194,575¥ 7,957 ¥ 216,364 ¥ (4,147)
134
9,929
(104)

¥ 212,217
9,824¥ 2,034¥ (57)¥ 1,976

1,460

−

−

−

1,460

1,440

2,901

−

2,901

4,092

794

540

138

5,566

42

5,609

(84)

5,524

Adjustments

Consolidated$−$1,787,880

Thousands of U.S. dollars
Reportable segments
Year ended March 31, 2020

Paper
and Pulp

Imaging
Media

Speciality
Materials

Warehouse
andTransportation

Sales
Sales to unaffiliated customers $1,321,741 $261,907 $123,933
Intersegment sales and23,597
46,90024,726transfers
Total sales

Segment income（loss）

1,345,339$10,482

308,808$(3,034)

148,659$8,762

Segment assets$1,393,471 $330,540 $150,584
67,19915,898
5,779
Amortization
Investment in equity-method
affiliates
13,421−−
Increase in tangible andintangible fixed assets
37,607
7,300
4,970

29

Total

Other

Total

$47,020 $1,754,602 $33,278 $1,787,880
27,29774,317

122,522

1,877,124

32,956

66,235$17,467$1,225−

13,421

1,270

51,150$1,256

155,479 (155,479)−

1,943,360 (155,479) 1,787,880$18,692$(530)$18,161

13,23526,656−

26,656394

51,544(780)

50,763$40,384 $1,914,981 $73,116 $1,988,097 ($38,107) $1,949,990
90,0001,238
91,238(963)
90,274
1,123

(i) The engineering business and others are included in “Other.” They are not included in the reportable segments.
(ii) Adjustments are:• Adjustments and eliminations for segment income include ¥(57) million ($(526) thousand) of elimination of inter-segment income
and loss and ¥(0) million ($(3) thousand) of corporate expenses, which are general and administrative expenses and are notallocable to the reportable segments.
• Adjustments and eliminations for segment assets include ¥14,002 million ($128,659 thousand) of corporate assets and ¥(18,149)
million ($(166,766) thousand) of elimination of inter-segment assets.
• Adjustments and eliminations for amortization of ¥(104) million ($(963) thousand) is elimination of inter-segment.
• Adjustments and eliminations for increase in tangible and intangible fixed assets include ¥(84) million ($(780) thousand) ofelimination of inter-segment increase in tangible and intangible fixed assets.
(iii) Segment income (loss) is adjusted with consolidated operating income.

Previous consolidated fiscal year (April 1, 2018 – March 31, 2019)
Millions of yen
Reportable segments
Year ended March 31, 2019

Sales
Sales to unaffiliated customers
Intersegment sales andtransfers
Total sales

Segment income（loss）

Segment assets
Amortization
Investment in equity-method
affiliates
Increase in tangible andintangible fixed assets

Paper
and Pulp

Imaging
Media

Speciality
Materials

Warehouse
andTransportation

Total¥152,860¥29,499¥14,449¥5,093¥201,903

3,035

3,239

¥653

¥184

3,919

5,787

156,780

35,287

17,485¥165,791
7,597¥37,987
1,753

1,456
9,618

¥(1,427)

15,982

Other

Total

Adjustments

Consolidated¥−¥203,997

20,396 (20,396)−¥2,093 ¥203,997
4,414

8,333

217,886

6,508¥17,724
610¥4,528123¥226,032
10,085¥9,561 ¥235,593 ¥(2,834) ¥232,758
133
10,218(101)
10,116

−

−

−

1,456

1,823

985

137

12,565

¥537

¥(51)

¥98

224,394 (20,396) ¥203,997
¥46

¥(87)

¥(40)

262

1,719

−

1,719

44

12,609(127)

12,481(i) The engineering business and others are included in “Other.” They are not included in the reportable segments.
(ii) Adjustments are:• Adjustments and eliminations for segment income include ¥(61) million of elimination of inter-segment income and loss and ¥(25)
million of corporate expenses, which are general and administrative expenses and are not allocable to the reportable segments.
• Adjustments and eliminations for segment assets include ¥14,633 million of corporate assets and ¥(17,468) million of eliminationof inter-segment assets.
• Adjustments and eliminations for amortization of ¥(101) million is elimination of inter-segment.
• Adjustments and eliminations for increase in tangible and intangible fixed assets include ¥(127) million of elimination of inter-segment increase in tangible and intangible fixed assets.
(iii) Segment income(loss) is adjusted with consolidated operating loss.

30

(2) Geographical information(i) Net sales to third parties by countries or areas grouped according to geographical classification for the years ended March 31,
2020 and 2019 are as follows:

Thousands of
U.S. dollars

Millions of yen
2020

Japan
EuropeAsia
North America
Other

Consolidated

2020

2019

¥ 131,121
33,153
13,624
13,572
3,103¥131,855
36,755
16,39015,205
3,791$1,204,825
304,632
125,188
124,71328,520¥ 194,575¥203,997$1,787,880

Net sales information above are based on customer location.
(ii) Property, plant and equipment by countries or geographical areas at March 31, 2020 and 2019 are as follows:
Thousands of
U.S. dollars

Millions of yen
2020¥ 84,672
8,685
300
49

Japan
EuropeAsia
North America

Consolidated

2020

2019

$778,028
79,8052,763
458¥92,148
8,621
337
83

¥ 93,708$861,056¥101,191(3) Impairment loss on fixed assets by reportable segments

Consolidated fiscal year under review (April 1, 2019 – March 31, 2020)
Millions of yen

Reportable segments
Year ended March 31, 2020

Impairment losses

Paper
and Pulp¥ 1,159

Imaging
Media

Speciality
Materials

Warehouse
andTransportation

¥−

¥−

¥−

Reportable segments
Year ended March 31, 2020

Impairment losses

Paper
and Pulp$10,656

Imaging
Media

Speciality
Materials

$−

$−

Total

Other

Total

¥ 1,159¥−¥ 1,159

CorporateandAdjustments¥−

Consolidated¥ 1,159

Thousands of U.S. dollars

Warehouse
andTransportation

Total

Other

Total

$− $10,656$−$10,656

CorporateandAdjustments$−

Consolidated$10,656

Previous consolidated fiscal year (April 1, 2018 – March 31, 2019)
Reportable segments
Year ended March 31, 2019

Impairment losses

Millions of yen

Paper
and Pulp

Imaging
Media

Speciality
Materials

Warehouse
andTransportation

Total

Other

Total

¥124

¥−

¥−

¥−

¥124

¥−

¥124

31

CorporateandAdjustments¥−

Consolidated¥124

Mitsubishi Paper Mills Limited and Consolidated Subsidiaries

Independent Auditor’s Report

Independent Auditor’s Report

The Board of Directors
Mitsubishi Paper Mills Limited
OpinionWe have audited the accompanying consolidated financial statements of Mitsubishi Paper Mills
Limited and its consolidated subsidiaries (the Group), which comprise the consolidated balance
sheet as at March 31, 2020, and the consolidated statements of income, comprehensive
income, changes in net assets, and cash flows for the year then ended, and notes to the consolidated
financial statements.
In our opinion, the accompanying consolidated financial statements present fairly, in all material
respects, the consolidated financial position of the Group as at March 31, 2020, and its
consolidated financial performance and its consolidated cash flows for the year then ended inaccordance with accounting principles generally accepted in Japan.
Basis for Opinion
We conducted our audit in accordance with auditing standards generally accepted in Japan. Our
responsibilities under those standards are further described in the Auditor’s Responsibilities for
the Audit of the Consolidated Financial Statements section of our report. We are independent of
the Group in accordance with the ethical requirements that are relevant to our audit of theconsolidated financial statements in Japan, and we have fulfilled our other ethical responsibilities
in accordance with these requirements. We believe that the audit evidence we have obtained issufficient and appropriate to provide a basis for our opinion.
Responsibilities of Management, the Audit and Supervisory Board Member and the Audit
and Supervisory Board for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated
financial statements in accordance with accounting principles generally accepted in Japan, and forsuch internal control as management determines is necessary to enable the preparation of
consolidated financial statements that are free from material misstatement, whether due to fraud
or error.
In preparing the consolidated financial statements, management is responsible for assessing theGroup’s ability to continue as a going concern and disclosing, as required by accounting principles
generally accepted in Japan, matters related to going concern.
The Audit and Supervisory Board Member and the Audit and Supervisory Board are responsible
for overseeing the Group’s financial reporting process.

32

Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial
statements as a whole are free from material misstatement, whether due to fraud or error, and toissue an auditor’s report that includes our opinion. Misstatements can arise from fraud or error
and are considered material if, individually or in the aggregate, they could reasonably be expected
to influence the economic decisions of users taken on the basis of these consolidated financial
statements.
As part of an audit in accordance with auditing standards generally accepted in Japan, we exercise
professional judgment and maintain professional skepticism throughout the audit. We also:࣭ Identify and assess the risks of material misstatement of the consolidated financial
statements, whether due to fraud or error, design and perform audit procedures responsive tothose risks, and obtain audit evidence that is sufficient and appropriate to provide a basis forour opinion.
࣭ Consider internal control relevant to the audit in order to design audit procedures that areappropriate in the circumstances for our risk assessments, while the purpose of the audit of
the consolidated financial statements is not expressing an opinion on the effectiveness of theGroup’s internal control.
࣭ Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by management.
࣭ Conclude on the appropriateness of management’s use of the going concern basis ofaccounting and, based on the audit evidence obtained, whether a material uncertainty exists
related to events or conditions that may cast significant doubt on the Group’s ability tocontinue as a going concern. If we conclude that a material uncertainty exists, we are required
to draw attention in our auditor’s report to the related disclosures in the consolidated financial
statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are
based on the audit evidence obtained up to the date of our auditor’s report. However, future
events or conditions may cause the Group to cease to continue as a going concern.
࣭ Evaluate the overall presentation, structure and content of the consolidated financial
statements, including the disclosures, and whether the consolidated financial statements
represent the underlying transactions and events in a manner that achieves fair presentation inaccordance with accounting principles generally accepted in Japan.
࣭ Obtain sufficient appropriate audit evidence regarding the financial information of the entities
or business activities within the Group to express an opinion on the consolidated financial
statements. We are responsible for the direction, supervision and performance of the groupaudit. We remain solely responsible for our audit opinion.
We communicate with the Audit and Supervisory Board Member and the Audit and Supervisory
Board regarding, among other matters, the planned scope and timing of the audit and significant
audit findings, including any significant deficiencies in internal control that we identify during
our audit.

33

We also provide the Audit and Supervisory Board Member and the Audit and Supervisory Board
with a statement that we have complied with the ethical requirements regarding independence thatare relevant to our audit of the financial statements in Japan, and to communicate with them all
relationships and other matters that may reasonably be thought to bear on our independence, andwhere applicable, related safeguards.
Interest Required to Be Disclosed by the Certified Public Accountants Act of Japan
Our firm and its designated engagement partners do not have any interest in the Group which is
required to be disclosed pursuant to the provisions of the Certified Public Accountants Act ofJapan.
Convenience Translation
The U.S. dollar amounts in the accompanying consolidated financial statements with respect tothe year ended March 31, 2020 are presented solely for convenience. Our audit also included thetranslation of Japanese yen amounts into U.S. dollar amounts and, in our opinion, such translation
has been made on the basis described in Note 1 to the consolidated financial statements.

Ernst & Young ShinNihon LLC
Tokyo, Japan
June 25, 2020

/s/Akira Sato
Designated Engagement Partner
Certified Public Accountant/s/Chihiro Yasunaga
Designated Engagement Partner
Certified Public Accountant

34

Mitsubishi Paper Mills Limited

Board of Directors, Executive Officers and Audit & Supervisory Board Members
Managing Executive Officers

Kunio Suzuki

Yukihiro Tachifuji

President and Chief Executive Officer

Director, Chairman

Naoki Okawa

Director andManaging Executive Officer

Nobuhiro Sato

Director andManaging Executive Officer

Kazuyoshi Ando

Kunio Suzuki

President and Chief Executive Officer

Yukihiro Tachifuji
President

Director and Senior Managing
Executive Officers

Yoshiaki Takeda

In charge of Finance & Accounting
Dept.

Naoki Okawa

In charge of General Affairs &Personnel Dept., Legal Dept. andShirakawa Office;Director responsible for Corporate
Social Responsibility

Nobuhiro SatoIn charge of Paper Div.
;General Manager, Paper Div.

Keiichi SatoIn charge of Functional Materials
Div, German Operations andKitakami Div; General Manager, Functional
Materials Div.

President & CEO, MPM Operation
Co., Ltd.; Head, Hachinohe Mill;
Deputy General Manager, PaperDiv.;In charge of Corporate Planning Dept.,;dupty charge of German Operations

Executive Officers

Masaya Sawada

In charge of Research and Development Div., Energy Business Dept,
Technology & Environmental Dept
General Maneger, Energy Business
Dept
General Maneger, Technology &Environmental Dept

Takao Fujiura

Teiji Ota

Hironori Oikawa

President & CEO,Kitakami HiTec
Paper Corp.
General Manager, Kitakami Div
Deputy General Manager,
Functional Materials Div.

Outside Directors

Soumitsu Takehara

Yoshihiro Kataoka
Senior Executive Officers

Hiroaki Kobayashi

Deputy General Manager,
Functional Materials Div.

Shigeharu Sanada

In charge of Raw Materials & Purchasing
Dept. and Internal Audit Dept.

Director andManaging Executive Officer

Director andManaging Executive Officer

Shimpei Yamada

Kazuyoshi Ando

Shimpei Yamada

Shigeharu Sanada

Director andManaging Executive Officer

Director, Chairman

Yoshiaki Takeda

Director and Senior Executive Vice President

Yuji Takagami

Deputy General Manager,
Functional Materials Div.
General Manager, Imaging Media
Dept.

Takeshi Sunakawa

President & CEO, KJ SPECIALTY
PAPER Co., Ltd.

35

Deputy General Manager, Paper
Div.
General Manager, Finance &Accounting Dept.

Audit & Supervisory Board Member

Koichi Nakayama

Outside Audit & Supervisory Board
Members

Hiroaki Tonooka
Takayuki Nakazato
Takeshi Kobayashi(as of June 26,2020)

Mitsubishi Paper Mills Limited

Company Data

Established:
April 1, 1898

Corporate Research Center:
Tsukuba R&D Laboratory
Kyoto R&D Laboratory
Process Development Laboratory

Head Office:2-10-14, Ryogoku, Sumida-ku, Tokyo 130-0026, Japan
Telephone:Mills:+81-3-5600-1488 (Information)
Takasago+81-3-5600-1481 (Corporate Planning Dept.)
Kyoto+81-3-5600-1459 (Commercial Printing & Business Communication
Hachinohe
Paper Sales Dept. Paper Division)+81-3-5600-1460 (Home & Industry Products Sales Dept.
Paper Division)
Major Affiliates:+81-3-5600-1465 (Sales Administration Dept. Paper Division)
Domestic+81-3-5600-1536 (International Sales Dept. Paper Division)
Mitsubishi Oji Paper Sales Co., Ltd.
+81-3-5600-1478 (Imaging Media Dept. Functional Materials Division) Toho Tokushu Pulp Co., Ltd.
+81-3-5600-1471 (Specialty Materials Dept. Functional Materials Division) MPM OJI Home Products Co., Ltd.
+81-3-5600-1472 (Industrial Materials Dept. Functional Materials Division) MPM Operation Co., Ltd.
+81-3-5600-1471 (Strategy & Management Dept. Functional Materials Division) Hachinohe Paper Processing Co., Ltd.
+81-48-912-0010 (Filter Dept. Functional Materials Division)
Hachiryo Co., Ltd.
+81-3-5600-1453 (Raw Materials & Purchasing Dept.)
Takasago Paper Processing Co., Ltd.
Hakuryo Paper Technology Co., Ltd.
Facsimile:
Shin-Hokuryo Forest Products Co., Ltd.
Kitakami HiTec Paper Corp.
+81-3-5600-1489 (Information)
Kyoryo Chemical Co., Ltd.
+81-3-5600-1489 (Corporate Planning Dept.)
Diamic Co., Ltd.
+81-3-5600-1467 (Commercial Printing & Business Communication
Hokuryo Co., Ltd.
Paper Sales Dept. Paper Division)
KJ Specialty Paper Co., Ltd.
+81-3-5600-1467 (Home & Industry Products Sales Dept.
NAMITSU Co., Ltd.
Paper Division)
Mitsubishi Paper Engineering Co., Ltd.
+81-3-5600-1469 (Sales Administration Dept. Paper Division)
Ryoko Co., Ltd.
+81-3-5600-1539 (International Sales Dept. Paper Division)+81-3-5600-1418 (Imaging Media Dept. Functional Materials Division) Ryoshi Co., Ltd.
+81-3-5600-1419 (Specialty Materials Dept. Functional Materials Division) MPM CAE Center Co., Ltd.
+81-3-5600-1419 (Industrial Materials Dept. Functional Materials Division) MPM OJI Eco-Energy Co., Ltd.
+81-3-5600-1419 (Strategy & Management Dept. Functional Materials Division)+81-48-912-0012 (Filter Dept. Functional Materials Division)+81-3-5600-1451 (Raw Materials & Purchasing Dept.)
Overseas

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

Sales Branch:
Osaka

Disclaimer Regarding Forward-Looking Statements
This material contains forward-looking statements relating to thebusinesses and prospects of the Company. These statements are basedon our expectations at MAY 2020. and are subject to the risks anduncertainties that may affect our businesses, which could cause actual
results to differ materially from those anticipated.
We will not be liable for any damage or loss incurred by you arisingout of or in connection with this material.

362-10-4 Ryogoku, Sumida-ku,
Tokyo 130-0026, JAPANURL https://www.mpm.co.jp/