Annual Report2016Profile

Mitsubishi Paper Mills Limited was established by Mitsubishi’s third president, Hisaya Iwasaki in 1898.
Since its founding, the Mitsubishi Paper Mills Group has contributed to the development of publishing,printing and photography media culture through its high value-added printing and communication
paper, and products.

Dedicated to contributing to society by providing customers with products backed by advanced
technological capabilities, we have the following three goals as a Group Philosophy:
1. A corporate group that lives up to the trust of its customers in the world market
2. A corporate group that is always on the leading edge of technology
3. A corporate group that contributes to preserving the global environment and creating a recycling society

Mitsubishi Paper Mills produces and develops not only printing paper, printing plate materials andprinting systems supporting offset and other printing, but also supplies the media for almost all recording
formats, such as pressure-sensitive, thermal, magnetic, electrographic, silver halide photography
and inkjet paper. Furthermore, we are adding functional materials such as chemical paper, highly functional
filters to our operating business domains, and increasing emphasis on research and development
in new business areas.
With production facilities and R&D sites mainly located in Japan and Germany, and sales sites
located in Japan, Germany and the United States, we have positioned ourselves to serve global
markets.

Contents
FINANCIAL HIGHLIGHTS (CONSOLIDATED) ............. 1
MESSAGE FROM THE PRESIDENT ............................ 2
BREAKDOWN OF OPERATIONS BY DIVISION ........... 4
TOPICS: Second Mid-term Management Plan ............ 6
OUR MILLS AND THEIR PRODUCT LINES ............... 12
SIX-YEAR SUMMARY (CONSOLIDATED) ................. 13

CONSOLIDATED STATEMENTS OF
CHANGES IN NET ASSETS ..................................... 18
CONSOLIDATED STATEMENTS OF CASH FLOWS.......... 19
NOTES TO CONSOLIDATEDFINANCIAL STATEMENTS....................................... 20
INDEPENDENT AUDITOR’S REPORT ....................... 38

CONSOLIDATED BALANCE SHEETS........................ 14

BOARD OF DIRECTORS, EXECUTIVE OFFICERS ANDCORPORATE AUDITORS......................................... 39

CONSOLIDATED STATEMENTS OF OPERATIONS .. 16

COMPANY DATA ....................................................... 40

CONSOLIDATED STATEMENTS OFCOMPREHENSIVE INCOME.................................... 17

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
Net income (loss) attributable to owners of parent
Net income (loss) per share (in yen and dollars)
Cash dividends per share (in yen and dollars)

2016

2015

¥ 216,340
3,872
2,217
6.49
−

¥ 214,944
1,038(4,272)(12.50)−$1,919,956
34,367
19,6760.06−

As at March 31
Total assets
Total net assets
Capital stock
Net assets per share (in yen and dollars)¥ 241,155
51,49232,756144.05¥ 253,482
55,09432,756152.16$2,140,179
456,978
290,702
1.28

15,797
3,697

17,063
3,622

Number of shareholders
Number of employees

2016

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 ¥112.68 = U.S.$1, as of March 31, 2016.

Net Sales

12
13
14
15
16

Operating Income

12
13
14
15
16

(¥ Million)(¥ Million)

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

Total Net Assets(¥ Million)

Sales
Composition

194,856
200,850
207,470
214,944
216,340
2,164
473

3,332

1,038

3,872
565

12
13
14
15
16

280
(4,272)

1,710
2,217
52,10855,37055,58655,09451,492

12
13
14
15
16
Others 3.1%
Speciality Materials
6.4%

Paper & Pulp 74.0%

Imaging Media
16.5%

1

Message from the President
Overview of the Reporting Term
Japan’s economy during this term showed some signs of improvement in corporate revenue and employment as a result of government economic policies and financial policies by the Bank of Japan.
However, economic uncertainty remained due to growing concern
over the future global economy including China’s economic
slowdown. The paper and pulp industry stayed in the severebusiness environment because of the continuous structural
decrease in paper demand in Japan as the society sifts to the useof electronic media.
Under these circumstances, as the final year of the “Phase 2
Rolling Plan for the First Mid-term Management Plan” which wasestablished in November 2013, we implemented various strategies
to “strengthen the revenue base for growth.” During this term,
continuously from the previous term, we took strong cost reduction
measures including promoting structural reform of the HachinoheMill.
For the printing paper business, sales volume increased
because of steady demand for communication paper in Japan andexport of printing paper. In order to respond to these increased
sales, we resumed operation of the Hachinohe Mill No. 3 paper
machine from July last year.
For the Imaging Media Business, the photographic sensitive
materials were affected by the fierce competition in the overseas
market. However, overall business demonstrated steady growth
because of the increase in the sales of inkjet printing paper forbusiness use.

Kunio Suzuki, President & C.E.O.

For the Speciality Materials Business, sales volume increased
as a result of increase in the sales of water treatment membrane
supporting body for non-woven fabric as well as rewritable media
and battery separator for the overseas market.
As a result, consolidated net sales were ¥216,340 million(US$1,919 million) (up 0.6% from the previous term). From profit
and loss perspectives, although several factors in losing profits
such as increase in material cost due to the yen depreciation were
present, there were stronger factors in increasing profits such as
modification of printing paper prices, improvement in the balance ofprofit and loss for the Imaging Media Business, sales promotion offunctional materials, and cost reduction effects due to reduction inlabor cost. As a result, consolidated ordinary income was ¥2,216
million (US$19 million) (up 1,535.9% from the previous term) andprofit attributable to owners of parent was ¥2,217 million (US$19
million).
For nonconsolidated results of our company, net sales were¥115,894 million (US$1,028 million), ordinary income was ¥2,874
million (US$25 million), and current net profit was ¥3,351 million(US$29 million).

2Our Goals to Address[Concerning the Second Mid-term Management Plan]

enhance the corporate values by obtaining trust and sympathy from

In line with the Phase 2 Rolling Plan for the First Mid-term Manage-

the stakeholders. Based on this recognition, we will implement

ment Plan (from April 2013 to March 2016) with a focus on

unique CSR activities for sustainable development.

“strengthening the revenue base for growth,” we had been

During this term, we carried out the activities in the following

reinforcing the revenue base by spinning off the Hachinohe Mill,priority areas: “Enhancement of activity on safety and health” andsoliciting voluntary early retirement, and restructuring Group“Initiatives to ensure strict legal compliance.” With regard tocompanies. We had also reduced interest-bearing liabilities in

products, we also tried to expand environment-conscious productaccordance with the plan.

lines such as FSC forest-certified products and Thermal DigiPlate

In order to respond to the increasingly severe business

System that will contribute to creating a sustainable society.

environment, we established the Second Mid-term Management

During the 152nd term, our priorities are set as “Securing

Plan (from April 2016 to March 2019) with a key word of “stabilizing

effectiveness of the corporate governance” and “Enhancement ofrevenue through alliances.” Through the following company-wide

activity on safety and health.” We will implement specific actions forpolicies, we will make efforts to build a stable revenue structure thateach item in the basic policies concerning corporate governancecannot be easily swayed by the external environment.

and promote CSR activities that will lead to mid- to long-term(1) Structural Reform of Printing Paper Businessdevelopment and enhancement of corporate value.

which is our main factory, to build a stable revenue structure that

Forecast

・ By strengthening alliances, we will optimize the Hachinohe Mill,cannot be easily swayed by the external environment.

Regarding the following term, we will make efforts to further improve・ We will optimize our distribution system and logistics system.

earning capacity by implementing measures in the Second(2) Improving Profit Base

Mid-term Management Plan (April 2016 – March 2019). We predict

・ We will establish a stronger alliance with Fujifilm Corporation in

the consolidated performance to be as follows: net sales, ¥220

the field of photographic materials base paper and establish an

billion (US$1,913 million); operating income, ¥4.5 billion (US$39

efficient production structure.

million); ordinary income, ¥2.5 billion (US$21 million); profit

・ We will enrich the revenue base businesses taking advantage of

attributable to owners of parent, ¥1 billion (US$ 8 million).

our strengths and positioning in the existing fields of the imaging

The above earnings forecast is under the presumption that 115

media and speciality material businesses.

yen is equal to 1 USD, and 125 yen is equal to 1 Euro.

(3) Developing New Businesses

Moreover, the earnings forecast is based on currently available

・ Taking advantage of the location of Hachinohe, we will launch a

information at the time of creating this material, and includes risksbiomass power generation business in collaboration with Oji Groupand uncertainty. Thus, actual earnings may differ from forecasted

in order to further strengthen the revenue base.

figures due to a variety of factors in the future.

・ We will strategically develop new businesses (new field offunctional film, IJ transfer paper, non-woven fabric, etc.).

・ We will carefully make strategic and selected investment in theJune 2016

focused areas (e.g. non-woven fabric, functional film, and energy).
(4) Strengthening business foundation and financial ground that will
support the Group’s earning power

・ We will restructure business process and IT infrastructure toachieve business structure reform.

・ We will further reinforce the financial foundation by reducing the

Kunio Suzuki,
President & C.E.O.

interest-bearing liabilities to the pre-Great East Japan Earthquake
level.
[Concerning Corporate Social Responsibility (CSR)]
We believe that appropriate actions to address issues fromenvironmental, financial and social perspectives through proactive
dialogues with stakeholders are critical to collaboratively build asustainable future and society.
We recognize that the purposes of the CSR activities are to3

Breakdown of Operations by Division

Paper and Pulp
Divisions

Net sales (¥ Million)
14

161,657

15

165,449

16

164,319

Domestically, sales volume of mainly business communication

factors such as yen depreciation. Moreover, there was a drop in

paper increased. As for exports, efforts were also made to

the sales figure due to a change in part of commercial distribu-

expand sales for production inkjet paper and printing paper. As ation between consolidated companies.

result, sales volume rose and the sales figure increased via the

As a result, the total net sales of the Paper and Pulp

effects of price correction, etc. As for the performance ofDivisions were ¥164,319 million (US$1,458 million), down 0.7%

European subsidiaries, sales amount increased because wefrom the previous term.

focused on promoting sales of our mainstay carbonless copy
papers and thermal papers. However, the sales figure decreased
due to influences including the exchange rate. Sales volume ofcommercial pulp dropped, yet the sales figure increased due to

Imaging MediaDivision

Net sales (¥ Million)
41,61414

43,53515
16

41,765Photographic sensitive materials and platemaking materials

Meanwhile, there was a drop in the sales figure due to aremained strong in the domestic market, and the sales figurechange in part of commercial distribution between consolidated

was at the same level as the previous term.

companies.

In the overseas market, photographic sensitive materials

As a result, the total net sales of the Imaging Media Divisionwere affected by deterioration in the market environment, whichwere ¥41,765 million (US$370 million), down 4.1% from thewas caused by fierce competition. However, we received stableprevious term.

amount of incoming orders overall as the business purposes of
inkjet printing paper were healthy. Also with influences from theyen depreciation, the sales figure increased.

4Speciality Materials
Division

Net sales (¥ Million)
16,03414
15

16,847

16

16,928

As for speciality materials, filters for overseas home electronics
were sluggish, leading to a drop in the sales figure. However,sales for water treatment membrane supporting body andrewritable media for overseas markets rose, and the sales figure
increased by selling battery separators to major battery
manufacturers. As for chemical paper, lining paper for wallpaper
was at a slump, and the sales figure decreased.
As a result, the total net sales of the Speciality Materials
Division were ¥16,928 million (US$150 million), up 0.5% from theprevious term.

Other
Divisions

Net sales (¥ Million)
15,98514

15,14015

15,81016

Net sales rose to ¥15,810 million (US$140 million), up 4.4% fromthe previous term, due to increased sales in engineering-related
subsidiaries.

5Topics
Second Mid-term Management Plan
To strengthen the stable profit structure
In March 2016, Mitsubishi Paper Mills Limited ended the First Mid-term Management Plan (including the RollingPlan) that started in October 2011, and in April 2016, we implemented the Second Mid-term Management Plan,
which is a new stage to leap into the future.
The key word of the Second Mid-term Management Plan is“To stabilize earnings through alliance.”
Each business field (i.e. Printing Paper, Imaging Media and Speciality
Materials Business) will try to take various measures from global
perspectives, utilizing the technical capabilities that have been
gained through our 118-year history and the Company’s positioning,in order to strengthen the stable profit structure.
Four basic principles of the Second Mid-term Management Plan are
as follows.

Structural Reform of Printing Paper Business・We will achieve stable earning structure not affected by the external environment through structural reformand strengthening our alliance with Oji Group.
・We will optimize our distribution and logistics systems.

2

Improving Proﬁt Base・We will strengthen our alliance with Fujifilm Corporation to build an efficient production system.
・We will improve the profit base business by effectively using the business superiority and positioning of
Mitsubishi Paper Mills.

3

Developing New Businesses

・We will launch a biomass power generation business in collaboration with Oji Group.
・We will strategically develop new businesses.
・We will make careful strategic and selective investment in the focus fields.

4 Strengthening business foundation and ﬁnancial ground that will support the Group’s earning power・We will work on the reconstruction of business process and IT infrastructure to achieve the Group’s businessstructure reform.
・We will promote reduction of interest bearing debts, which we have managed to reduce to the pre-Great East
Japan Earthquake level, and further strengthen the Group’s financial ground.

6

Stabilization of proﬁt through Alliances

1

Key player of the Printing Paper Business, Hachinohe Mill
(View from the Hachinohe port facility)

Second Mid-term Management Plan, Business target
2,500

Term ending March 31, 2019: Final year Target

Consolidated sales (100 million yen) by segment

2,000

Values: Consolidated base

230 billion yen

Sales

1,500
1,000
500

6.5 billion yen

Operating income

0-500

Term Ended
Term Ended
March 31, 2016 March 31, 2017

Term Ended
March 31, 2018

Term Ended
March 31, 2019■Speciality Materials ■Imaging Media ■Paper & Pulp ■Other

4.5 billion yen

Ordinary income

80

Consolidated operating income (100 million yen) by segment

70
60
50

Interest bearing debts

125 billion yen

40
30
20
10

2.3-fold

D/E ratio

0-10

Term Ended
Term Ended
March 31, 2016 March 31, 2017

Term Ended
March 31, 2018

Term Ended
March 31, 2019■Speciality Materials ■Imaging Media ■Paper & Pulp ■Other ■Risks (External factors)

1. Structural Reform of Printing Paper Business
The basic strategy is “to build a stable earning structure not affected by the external environment.” Based on thisstrategy, we will work on the followings:(a) Strategically expand OEM with a focus on information/specialty papers by promoting alliance with Oji Group;(b) Increase exports through OEM utilization and further export more production inkjet paper and printing paper; and(c) Increase the information/specialty paper ratio in Hachinohe Mill.
Basic Strategy

Build a stable earning structure not aﬀected by the external environment

Key Challenges
Strategic expansion of OEM

Concrete Measures●Promotion of our alliance with Oji Group centered on communication/specialty paper●Increase in exports through OEM utilization

Maintenance of our factory operating rate

●Further strengthening of production inkjet paper and printing paper exports●Increase in the information/speciality paper ratio in Hachinohe MillKey Challenges

Concrete Measures●Streamlining of distribution through a review of the roles of our ﬁrm/Mitsubishi Paper Sales by sales contact and by productStreamlining of the supply chain throughintegrated management of manufactureand sales

Improvement in the proﬁtabilityof German operation●Streamlining of production in line with a product portfolio review●Promotion of product portfolio diversiﬁcation in Mitsubishi Paper Sales●Reduction in inventory through optimization of our distribution systems●Sales strategy focused on the European market where demand for heat-sensitive paper is strong●Expansion of the eﬀect from a decrease in costs (materials, energy and yield improvement)●Examination of alliances, etc. from a mid-to-long-term perspective

7

2. Improving Profit Base
(1) Strategic Strengthening of Imaging Media Business
The basic strategies are “expansion of alliances and expansion of existing products.” Based on these basic
strategies, we will work on the followings:(a) Expand the alliance with Fujifilm Corporation to increase the production/supply of photographic base paper andsecure the top position in the market;(b) Develop the flexographic and screen printing market of printing photo-sensitive materials with thermal digital
plate (TDP) products; and(c) Expand the inkjet paper business including mini-laboratory and HP indigo method in the growing B to B market.
Basic Strategy●Expansion of alliances●Expansion of existing products

Expansion of alliances
We will further expand our alliancewith Fujifilm Corporation toincrease the production/supply ofphotographic base paper.

Photographic
Base Paper

Expansion of existing products
We will develop the flexographic
and screen printing market with
TDP products.

Inkjetand other Digital
Imaging MediaGraphic arts
materials

We will strengthen oursales capabilities
through application
development andenhanced productline-up in thecommercial field where
demand is expected toincrease.

(2) Strategic Expansion of Speciality Materials Business
The basic strategies are “further growth of non-woven fabric-related products, and increase in sales in the growing
Chinese, Korean and ASEAN markets.” Based on these basic strategies, we will work on the followings:(a) Increase sales of water treatment membrane supporting body and battery separators;(b) Increase sales of rewrite media for public/private demand in China and launch products and create markets in
the ASEAN region;(c) Strengthen functions of filter products to increase sales in East Asia; and(d) Enter the tape base paper market in Europe for the chemical paper business.
Basic Strategy●Further growth of non-woven fabric-related products (water processing and battery separators)●Increase in sales in the Chinese, Korean and ASEAN markets

・We will set up a
non-woven fabricmachine in Takasago toincrease sales.

・We will enter theEuropean tape basepaper (KJ specialty
paper) market for the
first time.

・We will increase sales for
public/private demand in China.
・We will launch products andcreate markets in the ASEAN
region.

Non-wovenfabric / water
treatment
and BS

Rewrite media

Chemicalpaper (KJ)

Filters

8

・We will strengthen functions toincrease sales in East Asia.

3. Developing New Businesses(1) Launch of Biomass Power Generation Business
Through joint investment with Oji Green Resources Co., Ltd., which has expertise in power generation business
operation and fuel procurement, we will launch a joint biomass business making the best use of advantageous
location of oceanfront plant and power generation technology and strengthen the earnings base of the Hachinohe
Site, which is our main factory.
Launch of Joint Biomass Business with Oji Group

Mitsubishi Paper Mills・Advantageous location of oceanfront plants
・Power generation technology and expertise as a paper manufacturer

Strengthening of theProﬁt Base at Our
Hachinohe Site

Oji Green Resources Co., Ltd.

Scheduled in June 2019

Start of business・Expertise in power generation business operation and fuelprocurement

Summary……Utilization of the FIT System●Company Name: MPM Oji Eco Energy Co., Ltd. (Financing: 45% from Mitsubishi Paper Mills and 55% from Oji Green Resources)●Location: In the premises of Hachinohe Mill of Mitsubishi Paper Mills●Production Capacity: Approx. 75,000kW (Power generation capacity)●Sales: Approx. 11 billion yen●Investment: 24 billion yen (Lease of main facilities, such as the boiler and turbine)(2) Functional film
We will act offensively to expand the electric conducive film business in its major markets in Taiwan, China andSouth Korea in a hurried pace, expecting that silver mesh films will be demanded for large touch panels.
Our photo resist has high resistance and adhesion capacities. Its peeling piece also melts when the resist layer ispeeled. By using these features, we will secure a certain level of sales of dry film resist* and produce them byourselves, which will lead to the expansion of the photo resist business and increase in earnings.
*Dry film resist: Resist to form wiring pattern of printed wiring boards.
Area

Application

Conductive Film

Features

Activity・Superior silver mesh film
suitable for large- sized
touchscreen devices

・To expand our target market;
Taiwan, China and Korea and accelerate
the business・Excellent resistance andadhesion・Fragmented anddissolved in stripping
process

・To improve the profitability of DFR
business by in-house production based on
its large and stable sales volume

A touchscreen device with our conductive ﬁlm

Photosensitive DFR
Step structure processed with our DFR

Main Strategic Investment
A new coating machine

TargetPlant

Expand sales volume & Improve proﬁtability by In-house Production

Kyoto Mill9

(3) Digital Textile Inkjet(IJ) Printing Transfer Paper
In the rapidly growing digital textile inklet printing transfer paper market, we will form a new market not just with ourexisting transfer paper for polyester but also newly-developed inkjet printing paper for natural materials.
Area

Application

IJ Transfer Paper

Features

Activity

・Newly developed IJ
transfer paper for cottonand silk (Natural fiber
textiles)・In addition to the existing dye sublimation
paper for polyester (Synthetic fiber); newly
developed IJ transfer paper for natural
fabrics will offer growth opportunity in thedigital textile marketplace.

Digital textile by MPM technology(4) Expansion of New Non-woven Fabric-related Areas(a) We will provide polyester separators with advanced safety that offer an inorganic coating layer for electronic
vehicles.
(b) We will deploy paper-type separators manufactured using multiple functional fibers (e.g. fine fibrous cellulose)
for electric double layer capacitors (EDLC) focused on rapid charging/discharging.
Area

Application

Activity

Features。
・Advanced safety
・Heat-resistance・Long battery life

EV separators

・ Provide polyester separators(NanoBaseX®) with an inorganic coating
layer that offer advanced safety forelectronic vehicles (EVs).

Lithium-ion Battery・Heat-resistance・Improved drying
・Thin and high-strength

EDLC separators

Paper-type Separator

・Expand newly separators of the paper type
(NanoBase2®) manufactured using
multiple functional fibers (e.g. fine fibrous
cellulose) for electric double layer
capacitors (EDLC) that focused on rapid
charging/discharging.

Main Strategic Investment

TargetA new non-woven fabricmachineTo increase non-woven fabric and battery separator sales

Plant
Takasago Mill

(5) Expansion into Other New Business Fields
We will commercialize processed products of carbon nano-tube, taking advantage of high conducive and highthermal conductive features based on the high-concentration dispersion liquid mass production technology.
Area

Application

Features・Superior electricalconductivity
・High thermal
conductance

CNT-related
products

Sheet Coated with CNT

10Concrete Measures
・Commercialize processed products (e.g.
tapes and sheets) that take advantage ofcapability on CNT(carbon nano-tube)
dispersion with high concentration.

4. Strengthening business foundation and financial ground that will support the Group’s earning power(1) Strengthening of Business Foundation
As company-wide efforts, we will establish a business structure that can flexibly correspond to the management
strategies. Specifically, we will strongly promote the followings:(a) Introduce ERP package in 2018 and restructure business process and IT infrastructure; and(b) Streamline production and sales systems and distribution stock with a focus on the Printing Paper Business.
ERP Introduction (Scheduled for 2018)
Streamline production
and sales systems
with a focus on the
Printing Paper BusinessRestructure businessprocess andIT infrastructure

Establish an optimized
business ﬂow acrossthe entire group

Strengthen proﬁtability(2) Strengthening of Financial GroundWe will aim to continue reducing our interest bearing debts and further reduce our D/E ratio.
Term Ended
March 31, 2016: ActualTerm Ending
March 31, 2019: Plan

Improvement

138.8 billion yen

125 billion yen

13.8 billion yen reduction

Interest bearing debts

2.8-fold

D/E ratio

2.3-fold

0.5 improvement

2,000

5.0
1,919

1,900

Interest bearing debts

1,626
1,598

1,600

4.0

1,616

1,580

1,530

3.5

1,553
1,500
1,490 1,450
1,448

1,435
3.2

1,400

2.9

1,300

2.8

2.8

2.4
2.5

1,100

2005/3

2006/3

2.2

2007/32.5

1,250

2008/3

2.7

2.6

2.5

2.3

2.1
2009/3

2010/3

2011/3

2012/3

2013/3First Mid-termManagement Plan :Phase 1

11

3.0

1,300

2.8

2.8

1,200

(100 million yen)

3.5
1,400
1,388
1,350

2.9

1,000

4.5

…… Plan ……

1,705

1,700

1,500

D/E Ratio…… Actual ……

1,800

Plan ActualPlan ActualPlan Actual

2014/3

2015/3

2016/3 2017/3

First Mid-term Management Plan :Phase 2 Rolling Plan

Plan

Plan

2.5
2.3
Plan

2019/3
2018/3

Second Mid-termManagement Plan

2.0
(X-fold)Our Mills and Their Product Lines

SHIRAKAWA SITEKITAKAMI HITEC PAPER CORP.

HACHINOHE MILL

Address:

Address:

Address:

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

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

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

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.

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

Overseas
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)

12

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

Millions of yen
2016

For the years ended March 31¥ 216,340
Net sales
3,872
Operating income
2,217
Net income (loss) attributable to owners of parent
6.49
Net income (loss) per share (in yen and dollars)
As at March 31
Total assets
Total net assets¥ 241,155
51,492

2015

2014

2013

2012

2011

2016

¥ 214,944
1,038(4,272)(12.50)¥ 207,470
473
280
0.82

¥200,850
3,332
1,710
5.00

¥194,856
2,164
565
1.65

¥210,846
3,477(14,497)(42.39)$1,919,956
34,367
19,676
0.06¥ 253,482
55,094¥ 258,599
55,586¥265,234
55,370¥276,305
52,108¥248,506
52,117$2,140,179
456,97813

Mitsubishi Paper Mills Limited and Consolidated Subsidiaries

Consolidated Balance Sheets
As at March 31, 2016 and 2015
Thousands of
U.S. dollars (Note 2)

Millions of yen
2016

2015

2016

¥ 11,381¥ 6,505$101,006

48,3381,950

47,045
2,588

428,987
17,31050,288(188)

49,634(149)

446,298(1,674)Inventories
Deferred tax assets (Note 14)
Other50,10045,505945
1,975

49,48549,537892
2,796

444,623
403,845
8,388
17,528

Total current assets

109,907109,217975,393Land
Buildings and structures
Machinery, equipment and vehicles
Construction in progress
Leased assets
Other

22,51896,990361,447
535
2,867
9,814

22,95098,238365,033516
3,115
10,037

199,844860,758
3,207,737
4,752
25,446
87,104

Less: Accumulated depreciation
Accumulated impairment losses

494,174(383,735)(563)

499,892(382,428)(807)

4,385,643(3,405,530)(5,001)

109,875

116,656

975,111

17,568
985
82
8
(338)
198
2,868

20,491
977
772
2,638
(1,027)247
3,508

155,913
8,748
730
74
(3,007)
1,759
25,454

21,372

27,609189,674¥ 241,155¥ 253,482$2,140,179

ASSETS

Current assets:

Cash and deposits (Note 3 (12))
Receivables:
Trade notes and accounts (Note 10)
Other
Less: Allowance for doubtful accounts

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
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.

14

Thousands of
U.S. dollars (Note 2)

Millions of yen
2016

2015

2016

¥ 53,321
27,854363¥ 56,306
20,780394$473,214247,201
3,224

23,302
2,744
7,081
345
3,665

24,062
2,861
7,270
356
3,774

206,798
24,352
62,842
3,066
32,526

118,677

115,807

1,053,228

57,443
1,240
48
121
9,165
1,213
884
866

67,234
1,617
34
115
9,682
2,069
880
945

509,790
11,008433
1,080
81,341
10,772
7,851
7,693

70,98582,580629,972¥ 189,663¥198,388$1,683,200¥ 32,756
7,456
7,447
(145)

32,756
7,523
5,147
(143)

$290,702
66,172
66,093(1,291)47,51445,284

421,676

3,014
1,577
(2,864)

4,663
1,815
254

26,752
14,000(25,423)

1,727

6,733

15,329

2,250

3,076

19,972

Total net assets¥ 51,492¥55,094$456,978Total liabilities and net assets¥ 241,155¥253,482$2,140,179

LIABILITIES AND NET ASSETS
Current liabilities:

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

Non-current liabilities:
Long-term debt (Note 10)
Lease obligations
Provision for directors' retirement benefits
Reserve for loss on dissolution of employee's fundNet defined benefit liability
Deferred tax liabilities (Note 14)
Asset retirement obligations
Other
Total non-current liabilities
Total liabilities
Contingent liabilities (Note 5)
NET ASSETS
Shareholders’ equity:
Capital stock
Authorized: 900,000,000 shares at March 31, 2016 and 2015
Issued: 342,584,332 shares at March 31, 2016 and 2015
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.

15

Mitsubishi Paper Mills Limited and Consolidated Subsidiaries

Consolidated Statements of Operations
For the years ended March 31, 2016 and 2015
Thousands of
U.S. dollars (Note 2)

Millions of yen
2016

2015

2016

¥ 216,340
184,758¥214,944
184,907$1,919,956
1,639,672

31,58230,036280,283

27,70928,997245,916

3,872

1,038

34,367473(2,320)
188
(242)
365
38
1,017
277
−
(302)
(227)
(18)
(103)

670
(2,519)
180
508
164
783
(319)
−
405
(163)
(1,665)
(386)
55

4,201
(20,592)
1,670(2,148)
3,241
344
9,029
2,464
−
(2,682)(2,015)
(167)
(919)

Total

(853)

(2,285)(7,575)

Income (loss) before income taxes and non-controlling interests

3,018(1,246)

26,791

914
81

545
2,478

8,116
720

2,023

(4,271)

17,954(193)¥ 2,2171¥(4,272)(1,721)$19,676

Net sales
Cost of sales
Gross profit
Selling, general and administrative expenses
Operating income
Other income (expenses):
Interest and dividend income
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 6)
Reversal of allowance for doubtful accounts for subsidiaries and affiliates
Compensation for damage income
Special retirement expenses
Business restructuring cost (Note 7)
Impairment loss (Note 8)
Other, net

Income taxes:
Current
Deferred (Note 14)
Net income(loss)
Net income(loss) attributable to non-controlling interests
Net income(loss) attributable to owners of parent
The accompanying notes are an integral part of these financial statements.

16Mitsubishi Paper Mills Limited and Consolidated Subsidiaries

Consolidated Statements of Comprehensive Income
For the years ended March 31, 2016 and 2015
Thousands of
U.S. dollars (Note 2)

Millions of yen
2016

2015

2016

Net Income (loss)
Other comprehensive income:
Valuation difference on available-for-sale securities
Foreigh currency translation adjustments
Remeasurements of defined benefit plans,net of tax
Share of other comprehensive income of entities
accounted for using equity method¥ 2,023¥ (4,271)$17,954(1,918)(438)(2,979)

2,217
151
1,013

(17,029)(3,891)(26,445)

3

154

32

Total other comprehensive income
Comprehensive income(5,333)(3,310)

3,536
(734)

(47,333)(29,378)(2,946)¥ (364)

(995)
¥ 260

(26,145)$(3,233)

Comprehensive income attributable toComprehensive income attributable to owners of parent
Comprehensive income attributable to non-controlling interests

Yen

Amounts per share:
Net income(loss) — basic (Note 3 (11))
Cash dividends applicable to the year
The accompanying notes are an integral part of these financial statements.

17

U.S. dollars (Note 2)

2016

2015

¥ 6.49−¥ (12.50)
−

2016

$0.06
−

Mitsubishi Paper Mills Limited and Consolidated Subsidiaries

Consolidated Statements of Changes in Net Assets
For the years ended March 31, 2016 and 2015

Millions of yen

Shareholders’ equity
Number ofshares in
issue

Balance at April 1, 2014

Total accumulated other comprehensive income

Capitalstock

CapitalsurplusRetainedearnings

Total
Treasury shareholders’equityshares342,584,332 ¥32,756¥7,523¥9,164¥(141)

Cumulative effect of changes in accounting policies
Balance at the beginning of the termreflecting the change of accounting policies

256
32,756

7,523

Changes during the year:
Net loss attributable to owners of parent
Acquisition of treasury stock
Disposal of treasury stock
Change of scope of consolidation

9,420¥49,302

Balance at April 1, 2015

Foreigncurrencytranslation
adjustment¥2,804¥1,576

Total
accumulated
otherRemeasurements
comprehensive Non-controlling Total netof definedincomeassetsinterests
benefit plans¥(924)¥3,456256(141)

49,558(2)
0(4,272)(2)
0(4,272)(0)Change in treasury shares of parent arisingfrom transactions with non-controlling shareholders

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

Valuationdifference
on availablefor-salesecurities

2,804

1,576

(924)

3,456

¥2,827¥55,586

56

312

2,883

55,898(4,272)
(2)
0
−
−

−

−

−

(4,272)

342,584,332 ¥ 32,756¥ 7,523¥5,147(4,274)

1,858
1,858

238
238

1,179
1,179

3,276
3,276

¥ (143) ¥ 45,284¥4,663¥1,815¥254¥6,733

(2)

193
193

¥3,076 ¥55,094

Cumulative effect of changes in accounting policies−

Balance at the beginning of the termreflecting the change of accounting policies

32,756

7,523

Changes during the year:
Net income attributable to owners of parent
Acquisition of treasury stock
Disposal of treasury stock
Change of scope of consolidation

Balance at March 31, 2016

5,147

(143)

2,217

(1)

82

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

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

3,470
(804)

(67)
−

(67)

2,299

342,584,332 ¥ 32,756¥ 7,456¥ 7,447−

45,284

4,663

254

6,733

3,076

55,094

2,217
(1)
−
82

2,217
(1)
−
82

(67)

(67)

2,230

(1,648)(1,648)¥ (145) ¥ 47,514¥ 3,014

(1)

1,815

(237)
(237)

(3,119)(3,119)(5,006)(5,006)¥ 1,577 ¥ (2,864) ¥ 1,727

(826)
(826)

(5,832)(3,602)¥ 2,250 ¥ 51,492

Thousands of U.S. dollars
Shareholders’ equity

Capitalstock

CapitalsurplusRetainedearnings

TreasurysharesTotalshareholders’equity342,584,332 $290,702$66,770$45,685$(1,275) $401,882$41,384$16,111$2,262 $59,757 $27,305 $488,945$290,702$66,770$45,685$(1,275) $401,882$41,384$16,111$2,262 $59,757

Number ofshares in
issue

Balance at April 1, 2015

Total accumulated other comprehensive income

Valuationdifference
on available-for-salesecurities

Total
Foreignaccumulated
currency Remeasurements
otherof defined comprehensive Non-controlling Total net
translation
adjustment benefit plansinterests
assetsincomeCumulative effect of changes in accounting policies

Balance at the beginning of the termreflecting the change of accounting policies

Changes during the year:
Net income attributable to owners of parent
Acquisition of treasury stock
Disposal of treasury stock
Change of scope of consolidation
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, 2016

19,676

(15)

731
(597)
−

−

(597)

20,407

342,584,332 $290,702$66,172$66,093

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

18$27,305 $488,945

19,676(15)731

19,676
(15)
731

(597)

(597)

19,794(14,631)(14,631)(2,110) (27,685) (44,428)(2,110) (27,685) (44,428)(7,333) (51,761)(7,333) (31,966)$(1,291) $421,676$26,752$14,000 $(25,423) $15,329$19,972 $456,978(15)

Mitsubishi Paper Mills Limited and Consolidated Subsidiaries

Consolidated Statements of Cash Flows
For the years ended March 31, 2016 and 2015

Thousands of
U.S. dollars (Note 2)

Millions of yen

I Cash flows from operating activities:
Income (loss) before income taxes and non-controlling interests
Depreciation
Impairment loss (Note 8)
Increase (decrease) in net defined benefit liability (Note 13)
Decrease (increase) in net defined benefit asset (Note 13)
Increase (decrease) in provision for directors' retirement benefits
Interest and dividend income
Interest expense
Loss (gain) on sales of short-term and long-term investment securities
Loss (gain) on disposal of non-current assets (Note 6)
Business restructuring cost (Note 7)
Decrease (increase) in trade notes and accounts receivable
Decrease (increase) in inventories
Increase (decrease) in trade notes and accounts payable
Other, net
Sub-total
Payments for business restructuring cost (Note 7)
Interest and dividend income received
Interest expenses paid
Income taxes paid

Net cash provided by (used in) operating activities
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
Purchase of shares of subsidiaries and associates
Proceeds from sales of shares of subsidiaries and associates
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
Proceeds from long-term debt
Repayments of long-term debt
Repayments of lease obligations
Purchase of treasury shares
Proceeds from sales of treasury shares
Dividends paid to non-controlling interests
Payments from changes in ownership interests in subsidiaries
that do not result in change in scope of consolidation
Net cash provided by (used in) financing activities
IV Effect of exchange rate change on cash and cash equivalents
V Net increase (decrease) in cash and cash equivalents
VI Increase in cash and cash equivalents from newly consolidated subsidiaries
VII Cash and cash equivalents at beginning of period
VIII Cash and cash equivalents at end of period (Note 3 (12))
The accompanying notes are an integral part of these financial statements.

19

2016

2015

2016

¥ 3,018
10,662
18
291
(669)
14
(473)
2,320
(38)
(1,017)227(1,530)
3,210
(384)
(117)

¥(1,246)
10,955
386
289
(272)
3
(670)
2,519
(830)
319
1,665
(5,165)
2,638(1,567)(547)$26,791
94,628167
2,584(5,944)126(4,201)
20,592(344)(9,029)2,015(13,579)
28,494(3,414)(1,041)(227)
470(2,387)(761)(2,159)670(2,557)
(522)

8,476

137,846(2,015)
4,173(21,189)(6,761)

12,626

3,907

112,053(4,196)
1,682
(28)
40
(4)
4
(2)
325
34

(4,735)
140
(29)
2,936
−
20
(9)
354
153

(37,245)
14,933
(254)
358
(43)
35
(18)
2,886
309

15,532(2,145)(1,168)(19,039)(2,343)
18,175(20,653)
(383)
(1)
(240)

2,910
14,000(21,074)
(379)
(2)
0
(30)

(20,797)
161,305(183,294)(3,402)(15)
0(2,136)(290)−(2,577)(5,737)(4,576)(50,916)

(109)
4,633
242
6,505

(40)
(1,877)
8,382

(974)
41,122
2,151
57,732¥ 11,381¥6,505$101,006

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
are prepared on the basis of accounting principles generally accepted in Japan, which are different in certain respects as toapplication and disclosure requirements of International Financial Reporting Standards, and are compiled from the consolidated
financial statements prepared by the Company as required by the Financial Instruments and Exchange Law of Japan.
Certain items presented in the consolidated financial statements submitted to the Director of Kanto Finance Bureau (a regional
branch organization of the Ministry of Finance in Japan) have been reclassified for the convenience of readers outside Japan.

2. United States Dollar Amounts
The Company maintains its accounting records in yen. The dollar amounts included in the accompanying consolidated financial
statements and notes thereto represent the arithmetical results of translating yen to dollars on the basis of ¥112.68 = U.S.$1, theexchange rate prevailing as of March 31, 2016. 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 34 subsidiaries as of March 31, 2016 (35 as of March 31, 2015). The accompanying consolidated financial
statements include the accounts of the Company and 26 (25 for 2015) of its subsidiaries for the year ended March 31, 2016
(together, hereinafter referred to as the “Companies”).
Zhuhai MPM Filter Ltd. and MPM Hong Kong Limited, non-consolidated subsidiaries in the previous consolidated fiscal year,
are included in the scope of consolidation from this consolidated fiscal year due to their increasing importance. In addition, Asahi
Diazo-Sensitive Paper Co., Ltd. has been liquidated, so it has been excluded from the scope of consolidation.
The accounts of the remaining 8 (10 for 2015) unconsolidated subsidiaries for the year ended March 31, 2016 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 6(4 for 2015) consolidated subsidiaries is December 31. For the purpose of preparing the consolidated financial statements, we used their financial statements as of their respective
fiscal year end. We made adjustments for the purpose of consolidation as necessary for the material transactions 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 acquisitionin the consolidated statements of income. Any difference between the cost of an investment in a subsidiary and the amount ofunderlying equity in net assets of the subsidiary, unless specifically identified and reclassified to the applicable accounts fromwhich the value originates, is treated as goodwill or negative goodwill. Goodwill and negative goodwill (only incurred before
March 31, 2010) are amortized 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 11 affiliates as of March 31, 2016 (11 for 2015). 3 affiliated companies were accounted for by the equity
method. In this consolidated fiscal year, MPM Oji Eco Energy Co., Ltd., which was newly established, has been included in thescope of application for the equity method.
However, the remaining 8 (10 for 2015) subsidiaries and 8 (9 for 2015) affiliates did not have a material effect on net
income and retained earnings in the accompanying consolidated financial statements and, therefore, these investments have been
carried at cost.

(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,

20

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 unrealized
holding gain or loss, net of the applicable income taxes, included directly in net assets. Non-marketable securities classified asother 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 theaverage 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

Mainly depreciation excluding for leased assets is computed by the straight-line method for property, plant and equipment. But inpart, depreciation of machinery held by the head office of the Company and certain consolidated subsidiaries is computed by the
declining-balance method. Estimated useful lives of assets used in computing depreciation are as follows:
Buildings and structures...................... 31 to 47 years
Machinery and equipment............................ 12 years
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 principally over the lease term by thestraight-line method with no residual value except for the following transactions. Lease transactions which have been entered into
before April 1, 2008 and do not stipulate the transfer of ownership of the leased assets to the lessee have been accounted for as
operating leases.

(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 theirrespective 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 (10 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 (10 to 15 years).

(9) Reserve for loss on dissolution of employee pension fund

The Company and certain domestic consolidated subsidiaries reserve for loss on dissolution of employee pension fund.

21

(10) 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.

(11) 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.

(12) 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, 2016 and 2015 is shown below:
Thousands of
U.S. dollars

Millions of yen

Cash and bank deposits
Cash and cash equivalents

2016

2015

2016

¥ 11,381¥ 11,381¥6,505¥6,505$101,006$101,006(13) 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.
(14) Accounting changes
Effective from the fiscal year of 2015, the Company adopted the “Accounting Standard for Business Combination”(ASBJ Statement
No.21,September 13,2013), “Accounting Standard for Consolidated Financial Statements” (ASBJ Statement No.22,September
13,2013), “Accounting Standard for Business Divestitures” (ASBJ Statement No.7,September 13,2013),etc, Therefore, we havechanged to a method in which we will include the difference from equity changes in the Company in regards to subsidiaries that
we continue to control as retained earnings and include the acquisition-related expenses as expenses in the consolidated fiscal
year in which they occur. Moreover, in regards to business combinations that take place after the beginning of the consolidated
fiscal year, we will switch to a method in which a review of the allocated amount of the acquisition costs after the determination of
the provisional accounting process will be reflected in the consolidated financial statements for the consolidated fiscal year thatcomes in the date of the business combination. In addition, we have changed the representation of income, etc. and changed therepresentation of minority interests to non-controlling interests.
In accordance with transitional treatment determined by article 58-2 (4) of the Accounting Standard for Business Combination, article 44-5 (4) of the Accounting Standard for Consolidated Financial Statements, and article 57-4 (4) of the AccountingStandard for Business Divestitures, we will apply these accounting standards in the future from the beginning of this consolidated
fiscal year. As a result, the capital surplus at the end of this consolidated fiscal year has been reduced by 67 million yen. There is
no impact on operating income, ordinary income or income before income taxes and non-controlling interests in this consolidated
fiscal year.
Cash flows pertaining to the acquisition or sale of subsidiaries’shares unaccompanied by a change in the scope of consolidation
will be described in the “cash flows from financing activities” section in the consolidated statements of cash flow in this consolidated fiscal year. Cash flows pertaining to expenses related to the acquisition of subsidiaries’ shares accompanied by a change inthe scope of consolidation or pertaining to expenses generated as a result of the acquisition or sale of subsidiaries’ shares
unaccompanied by changes in the scope of consolidation will be described in the “cash flows from operating activities” section in
the consolidated statements of cash flow in this consolidated fiscal year.
The year-end balance of our capital surplus in the consolidated statements of changes in net assets in this consolidated fiscal
year has been reduced by 67 million yen.
(15) Reclassification
Certain reclassification have been made to the prior years’ consolidated financial statements to conform to the presentation for theyear ended March 31, 2016.

22

4. Assets Pledged as Collateral
Assets pledged as collateral primarily for short-term loans, long-term debt and debentures at March 31, 2016 and 2015 were as
follows:

Thousands of
U.S. dollars

Millions of yen

Buildings and structures
Machinery and equipment
Land
Investment securities
Other

2016

2015

2016

¥ 17,181
32,564
10,4973,583
104¥ 18,281
37,604
10,4974,444
138$152,481
288,995
93,15931,801928¥ 63,930$567,367¥ 70,967

5. Contingent Liabilities
As at March 31, 2016 the Companies were contingently liable for guarantees of loans, primarily of their employees and unconsolidated subsidiaries and affiliates, in the aggregate amount of ¥1,927 million ($17,108 thousand), and also liable for a recourse
obligation of credit securitization in the aggregate amount of ¥691 million ($6,140 thousand).

6. 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
2016

¥4
1,455

Machinery and equipment
Land

2015

2016

¥7
0

$38
12,913(2) Losses 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

Scrapping and removal expenses
Machinery and equipment
Buildings and structures

2016

2015

2016

¥ 296
137
9

¥185
122
−

$2,634
1,217
81

7. Business Restructuring Cost
Consolidated fiscal year under review (April 1,2015 – March 31,2016)
Cost for dissolution of a consolidated subsidiary, etc.

Previous consolidated fiscal year(April 1,2014 – March 31,2015)
Additional charges of voluntary retirement, etc.

8. Impairment Loss
Consolidated fiscal year under review (April 1,2015 – March 31,2016)
Millions of yen

Application
Business assets

Location
Hyogo

Category
Machinery and equipment, etc.

Thousands of
U.S. dollars

Inpairment loss
¥ 18

$167

Our group’s main business assets are the factories that are used as production bases. Idle assets are grouped per individual unit.
Based on the decision to discontinue the use of manufacturing equipment and the scheduled disposal of assets, their book values
are reduced to recoverable values. Such loss is reported as an impairment loss under extraordinary losses. Furthermore, therecoverable value is measured with the net sale value. Land and buildings are evaluated based on the values by real estateappraisers, and other assets are reduced their book value to the residual value.

23

Previous consolidated fiscal year (April 1,2014 – March 31,2015)
Millions of yen

Application
Business assets
Idle assets

Location
Hyogo
Tokyo

Category

Inpairment loss

Machinery and equipment, etc.
Land, etc.

¥ 247
139

Our group’s main business assets are the factories that are used as production bases. Idle assets are grouped per individual unit.
Based on the decision to discontinue the use of manufacturing equipment and the scheduled disposal of assets, their book values
are reduced to recoverable values. Such loss is reported as an impairment loss under extraordinary losses. Furthermore, therecoverable value is measured with the net sale value. Land and buildings are evaluated based on the values by real estateappraisers, 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
March 31, 2016:

Thousands of
U.S. dollars

Millions of yen

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 investments for which the equity method is applied
Amount arising during the year
Total other comprehensive income

24

2016

2015

2016

¥ ( 2,946)(0)¥ 3,873(808)$(26,152)(0)(2,946)
1,028¥ (1,918)

3,065
(847)
¥ 2,217(26,153)
9,123$(17,029)¥ (438)¥ 151$(3,891)¥ (2,343)
(573)

¥ 831
68

$(20,800)(5,087)(2,917)(62)¥ (2,979)

900
112¥ 1,013(25,887)(558)$(26,445)

3

154

32

¥ (5,333)¥ 3,536$(47,333)

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. Some of these obligations are denominated in foreign
currencies in connection with imports of raw materials, and are exposed to exchange-rate fluctuation risk. The Company hedges
against risk regarding net receivables and payables denominated in foreign currencies using forward exchange contracts.
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 floating interest rates exposed to interest-rate fluctuation risk, the Company uses derivativetransactions (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 derivative transactions, the Company adheres closely to internal policies delimiting theauthority 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, 2016 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).

25

Millions of yen
2016

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

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

Book value

Fair value

Difference¥ 48,338¥ 48,338¥−

16,96265,30016,96265,300−−23,24553,321
85,297
161,865¥−

23,24553,32185,430161,997

¥−

−
−
132
132

¥−

Thousands of U.S. dollars
2016

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

Book value

Fair value$428,987$428,987$−

150,534
579,522
206,296473,214756,992
1,436,503

150,534
579,522
206,296473,214758,169
1,437,680

−
−
−
−
1,177
1,177

$−

$−

Difference$−

Millions of yen
2015

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

Book value

Fair value

Difference¥ 47,045¥ 47,045¥−

19,881
66,92724,01556,30688,015
168,337¥−

19,881
66,92724,01556,30688,155
168,477
¥−

−
−
−
−
140
140
¥−

(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
Because these are settled in a short period of time, fair value approximates book value. Accordingly, fair value is recognized asbook value.
(iv) 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.

26

(v) 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 ¥27,854 million ($247,201
thousand).
(vi) Derivatives
Please see Note 12.
Unlisted equity securities (in the amount of ¥1,591 million ($14,127 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

2016

2015

2016

¥ 1,591¥1,586$14,127

Planned repayment of debentures, long-term debt, lease obligations and other interest-bearing liabilities after the balance sheet
date (consolidated basis)
Millions of yen
2016

Short-term loans payable
Long-term debt
Lease obligations
Total

Due within
1 year

1-2 years

2-3 years

3-4 years

4-5 years

Over 5 years¥ 53,321
27,854363¥−
16,870347¥−
17,162
331¥−
11,418
309

¥−
9,633
52

¥−
2,357
199

¥ 81,539¥ 17,217¥ 17,493¥ 11,728¥ 9,686¥ 2,557

Thousands of U.S. dollars
2016

Short-term loans payable
Long-term debt
Lease obligations
Total

Due within
1 year

1-2 years

2-3 years

3-4 years

4-5 years

Over 5 years$473,214247,201
3,224$−
149,7233,080$−
152,309
2,938$−
101,338
2,745$−
85,493469$−
20,926
1,773$723,641$152,803$155,247$104,083$85,963$22,699

Millions of yen
2015

Short-term loans payable
Long-term debt
Lease obligations

Total

Due within
1 year

1-2 years

2-3 years

3-4 years

4-5 years

Over 5 years¥ 56,306
20,780394¥−
27,847364¥−
15,779346¥−
15,790
331

¥−
3,180
314

¥−
4,638
259

¥ 77,481

27¥ 28,211¥ 16,126¥ 16,122¥ 3,494¥ 4,897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, 2016 and 2015 are summarized as follows:
Available-for-sale securities:
Millions of yen
2016

Acquisition

Carrying amountGross unrealized
holding gains

Gross unrealized
holding losses¥ 12,359¥ 16,962¥ 5,371¥ 769¥ 12,359

Equity securities¥ 16,962¥ 5,371¥ 769

Thousands of U.S. dollars
2016

Acquisition

Carrying amountGross unrealized
holding gains

Gross unrealized
holding losses$109,688$150,534$47,673$6,827$109,688

Equity securities$150,534$47,673$6,827

Millions of yen
2015

Equity securities

Acquisition

Carrying amountGross unrealized
holding gains¥12,332¥19,881¥7,669¥12,332¥19,881¥7,669Gross unrealized
holding losses

¥119

¥119

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
Hedge accounting

Type of derivative

methodtransaction, etc.

Main targets of hedging

Contract value

Contract value of instruments due within morethan a year

Special settlement ofInterest rate swap trans-interest rate swap

actions,fixed payments,

Long-term debt

variable receivables¥51,796 million¥30,450 million$459,677 thousand$270,234 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.

28

13. Retirement and Pension Plans(1) Outline of retirement benefit plan
Our 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. Our 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, our 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 2016 and 2015, were as follows:

Thousands of
U.S. dollars

Millions of yen
2016

2015

2016

Balance at beginning of year (period)
Cumulative effect of changes in accounting policies
Balance at the beginning of the term reflecting the change of accounting policies
Current service cost
Interest cost
Actuarial losses
Benefit paid
Other

¥ 21,858−
21,858
1,078
262
687
(1,071)(650)¥21,539(487)
21,052
1,144
317
1,729
(2,443)57$193,983
0193,983
9,568
2,327
6,100
(9,505)(5,772)

Balance at end of year (period)¥ 22,164¥21,858$196,703(ii) The schedule of the pension assets at 2016 and 2015 were as follows:

Thousands of
U.S. dollars

Millions of yen

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

2016

2015

2016

¥ 15,45013(1,882)56(51)¥13,834
14
2,545
98(1,041)$137,118
119(16,702)496(455)¥ 13,586¥15,450(iii) The schedule of the net defined benefit liability for simplified method at 2016 and 2015 were as follows:
Millions of yen$120,576

Thousands of
U.S. dollars

2016

2015

2016

Balance at beginning of year (period)
Periodic benefit cost
Benefit paid
Contribution to systems
Increase（Decrease）of business combination

¥ 635
58
(98)
(17)
−

¥695
104
(86)
(18)
(59)

$5,644
523
(871)
(156)
−

Balance at end of year (period)

¥ 579

¥635

$5,14029

(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 2016 and 2015 were as follows:

Thousands of
U.S. dollars

Millions of yen

Funded defined benefit obligations
Pension assets

2016

2015

2016

¥ 15,065(13,931)¥ 13,755(15,771)$133,705(123,640)

1,134
8,023

Unfunded defined benefit obligations

Net amount of liabilities and assets recognizedin consolidated balance sheet

9,157

Retirement benefit liabilities
Retirement benefit asset

Net amount of liabilities and assets recognizedin consolidated balance sheet(2,015)
9,059

10,065
71,201

7,043

81,267

9,165
(8)

9,682
(2,638)81,341(74)¥ 9,157¥ 7,043$81,267(v) The profits and losses related to retirement benefits for fiscal period ended March 31, 2016 and 2015 were as follows:
Thousands of
U.S. dollars

Millions of yen

Current service cost
Interest cost
Expected return on pension assets
Actuarial loss recognized in the year
Prior service cost recognized in the year
Periodic benefit cost in simplified method
Periodic benefit costs of retirement benefit plan

2016

2015

2016

¥ 1,078
262
(13)
(477)
(95)
58

¥ 1,144
317
(14)
207
(138)
104

$9,5682,327(119)(4,238)
(849)
523

¥ 812

¥ 1,621$7,213

In addition to the above, the premium severance payment has been reported as extraordinary losses of 365 million yen ($3,241 thousand),and 1,611 million yen for the consolidated fiscal year ended March 31,2016 and 2015, respectively.
In addition, we have forecast an increase in the amount of loss we will bear due to the planned dissolution of the employees’ pension fund that some ofour consolidated subsidiaries are members of. Therefore, we have recorded a 6 million yen ($55 thousand) extraordinary loss.

(vi) The breakdown of items in other comprehensive income for fiscal period ended March 31, 2016 and 2015 were as follows:
Thousands of
U.S. dollars

Millions of yen
2016

2015

2016

Actuarial loss
Prior service cost

¥ (2,821)(95)¥1,039(138)$(25,038)
(849)

Total

¥ (2,917)¥900$(25,887)(vii) The breakdown of items in accumulated other comprehensive income for fiscal period ended March 31, 2016 and 2015 were as
follows:

Thousands of
U.S. dollars

Millions of yen
2016

2015

2016

Unrecognized actuarial loss
Unrecognized prior service cost

¥ (3,376)193¥ (559)289$(29,969)
1,718

Total

¥ (3,183)¥(270)$(28,251)30

(viii) The breakdown of pension assets by major category as of March 31, 2016 and 2015 were as follows:
2016

Equities
Bonds
General account of life insurance
Other

38%
36%
22%
4%

2015

33%
33%
32%
2%

100%

100%

2016

2015

0.0~2.5%
0.0~2.0%

0.6~2.0%
0.0~2.0%(ix) The items of actuarial assumptions as of fiscal period ended March 31, 2016 and 2015 were as follows:

Discount rate
Expected long-term return on plan assets(3) Defined contribution plan

The necessary contribution to the defined contribution plan of our company and consolidated subsidiaries is ¥371 million($3,295
thousand) and ¥388 million for the consolidated fiscal year ended March 31,2016 and 2015, respectively.
(4) Multi-employer pension plan
As for the multi-employer pension plan(comprehensive employees' pension system) used by some consolidated subsidiaries,
its importance is not significant, and so its notes are omitted.

14. Deferred Income Taxes(1) At March 31, 2016 and 2015, 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 carryforwards
Other
Gross deferred tax assets
Valuation allowance
Total deferred tax assets
Deferred tax liabilities:
Reserve based on Special Taxation Measures Law
Unrealized gains on available-for-sale securities
Liability adjustment account
Other

Total deferred tax liabilities

Net deferred tax assets (liabilities)

2016

2015

2016

¥ 73
554
2,750
175
314
221
6,344
8,248

¥ 75
690
1,752
470
610
186
6,963
8,785

$655
4,917
24,407
1,554
2,794
1,965
56,301
73,202

18,682(16,989)

19,534(17,351)

165,798(150,773)

1,693

2,182

15,025(20)(1,407)
−
(335)

(22)
(2,435)
(313)
(341)

(181)
(12,488)−(2,977)(1,763)(3,112)(15,648)¥ ( 70)31

Thousands of
U.S. dollars¥ ( 929)$(623)

(2) A reconciliation of the statutory tax rate to the effective tax rates
Consolidated fiscal year under review (March 31, 2016)
The difference between the effective statutory tax rate and the rate of burden of income taxes after tax effect accounting has
been applied is less than 5/100 of the statutory effective tax rate, so this note has been omitted.
Previous consolidated fiscal year (March 31, 2015)
Notes were omitted due to the posting of loss before income taxes and non-controlling interests.

(3) Amendments to amounts of deferred tax assets and liabilities as a result of change in normal effective statutory tax rate
“The Act for Partial Amendment of the Income Tax Act, Etc.” and “the Act for Partial Amendment of the Local Tax Act, Etc.” wereenacted on March 29, 2016. As a result, the effective statutory tax rate, used to calculate deferred tax assets and deferred tax
liabilities, will decline from 32.3%(in the previous fiscal year) to 30.9% between April 1, 2016 and March 31, 2018(the period inwhich the temporary difference and other items are expected to be abolished). As of April 1, 2018, it will be changed to 30.6%.
As a result, deferred tax assets, and deferred tax liabilities have decreased by 35 million, and 82 million yen, respectively.
And the income taxes – deferred which were reported in this consolidated fiscal year and the valuation difference on
available-for-sale securities have increased by 24 million and 72 million yen, respectively.

3215. 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 three reportable segments, identified by product portfolio, which are classified as the “Paper andPulp Segment,” the “Imaging Media Segment” and the “Speciality Materials Segment.”
The “Paper and Pulp Segment” develops writing and printing paper, premium-quality paper and pulp. The Imaging Media
Segment handles product portfolios, including photo-sensitive printing plates, inkjet paper, photographic materials. The Speciality
Materials Segment handles speciality and other product portfolios.
Consolidated fiscal year under review (April 1, 2015–March 31, 2016)
Millions of yen
Reportable segments

Year ended March 31, 2016

Sales
Sales to unaffiliatedcustomers
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¥ 160,013¥ 35,673¥ 13,859 ¥ 209,546

4,306

164,319
¥ 226

3,068

6,092

41,765

16,928¥ 2,400

¥ 902

Total

13,466

223,013¥ 3,529¥ 15,585 ¥ 241,041
579
10,523

Other

Total

¥ 6,793 ¥ 216,340
9,017

15,810¥ 371

Adjustments¥ − ¥ 216,340

22,483(22,483)¥ 3,901¥ (28)

238,824¥ 9,998 ¥ 251,040
233
10,757

Consolidated(22,483)−

216,340¥ 3,872¥ 185,155
7,817¥ 40,300
2,126¥ (9,884) ¥ 241,155(94)
10,662

1,810

−

−

1,810

4

1,815

−

1,815

3,497

941

489

4,927

87

5,015

(75)

4,939

Thousands of U.S. dollars
Reportable segments
Year ended March 31, 2016

Sales
Sales to unaffiliatedcustomers
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$1,420,069$316,591

38,21854,066

Total

Other

Total

$123,002 $1,859,663 $60,292 $1,919,956
27,228

119,51380,024$31,322$3,299$−Consolidated$1,919,956(199,537)−$(254)$34,367

1,458,287

370,658

150,231

2,119,494(199,537) 1,919,956$1,643,195
69,381$357,656
18,870$138,315 $2,139,167 $88,737 $2,227,904
5,141
93,393
2,075
95,469$(87,725) $2,140,179(841)
94,62816,069−−16,06939

16,109−16,10931,036

8,353

4,343

43,732775

44,508(670)

43,837$2,011$21,30233$8,008

1,979,176 140,317

199,537

Adjustments$34,621(i) The storage and transport business as well as the engineering business are included in “Other.” They are not included in thereportable segments.
(ii) Adjustments are:• Adjustments and eliminations for segment income(loss) include ¥(0) million ($(5) thousand) of elimination of inter-segment
income and loss and ¥(28) million ($(249) thousand) of corporate expenses, which are general and administrative expenses andare not allocable to the reportable segments.
• Adjustments and eliminations for segment assets include ¥14,448 million ($128,227 thousand) of corporate assets and ¥(24,333)
million ($(215,953) thousand) of elimination of inter-segment assets.
• Adjustments and eliminations for amortization of ¥(94) million ($(841) thousand) is elimination of inter-segment.
• Adjustments and eliminations for increase in tangible and intangible fixed assets include ¥(75) million ($(670) 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, 2014 – March 31, 2015)
Millions of yen
Reportable segments
Year ended March 31, 2015

Sales
Sales to unaffiliatedcustomers
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¥ 161,300¥ 33,496¥ 13,829 ¥ 208,626

4,149

10,039¥ (1,326)¥ 1,481

165,449

43,535

3,017

16,847

¥ 561

Total

17,205

225,832¥ 715¥ 15,976 ¥ 257,031
529
10,797

Other

Total

¥ 6,317 ¥ 214,944
8,823

15,140¥ 395

Adjustments¥ − ¥ 214,944

26,029(26,029)¥ 1,110¥ (71)

240,973

Consolidated(26,029)−

214,944¥ 1,038¥ 196,861
8,107¥ 44,192
2,160¥ 10,466 ¥ 267,497 ¥ (14,014) ¥ 253,482
245
11,043(88)
10,955

1,902

−

−

1,902

−

1,902

−

1,902

3,407

739

427

4,575

61

4,637

(70)

4,566

(i) The storage and transport business as well as the engineering business are included in “Other.” They are not included in thereportable segments.
(ii) Adjustments are:• Adjustments and eliminations for segment income(loss) include ¥(42) million of elimination of inter-segment income and loss and¥(29) million of corporate expenses, which are general and administrative expenses and are not allocable to the reportablesegments.
• Adjustments and eliminations for segment assets include ¥12,823 million of corporate assets and ¥(26,838) million of eliminationof inter-segment assets.
• Adjustments and eliminations for amortization of ¥(88) million is elimination of inter-segment.
• Adjustments and eliminations for increase in tangible and intangible fixed assets include ¥(70) million of elimination of inter-segment increase in tangible and intangible fixed assets.
(iii) Segment income(loss) is adjusted with consolidated operating income.

34

(2) Geographical information(i) Net sales to third parties by countries or areas grouped according to geographical classification for the years ended March 31,
2016 and 2015 are as follows:

Thousands of
U.S. dollars

Millions of yen
2016

Japan
EuropeAsia
North America
Other

Consolidated

2016

2015

¥ 149,130
35,36814,43911,2486,154¥ 148,059
36,66813,031
10,467
6,716$1,323,485
313,880
128,144
99,82554,621¥ 216,340¥ 214,944$1,919,956

Net sales information above are based on customer location.
(ii) Property, plant and equipment by countries or geographical areas at March 31, 2016 and 2015 are as follows:
Thousands of
U.S. dollars

Millions of yen
2016¥ 98,852
10,433
439
150

Japan
EuropeAsia
North America

Consolidated¥ 109,875

2015¥ 104,534
11,973−147¥ 116,656

2016$877,283
92,592
3,897
1,338$975,111(3) Impairment loss on fixed assets by reportable segments

Consolidated fiscal year under review (April 1, 2015–March 31, 2016)
Millions of yen

Reportable segments

Year ended March 31, 2016

Impairment losses

Paper
and Pulp

Imaging
Media

Speciality
Materials

Total

Other

Total

Adjustments

Consolidated

¥ 18

¥−

¥−

¥ 18

¥−

¥ 18

¥−

¥ 18

Thousands of U.S. dollars

Reportable segments

Year ended March 31, 2016

Impairment losses

Consolidated

Paper
and Pulp

Imaging
Media

Speciality
Materials

Total

Other

Total

Adjustments

$167

$−

$−

$167

$−

$167

$−

$167

Previous consolidated fiscal year (April 1, 2014 – March 31, 2015)
Millions of yen

Reportable segments

Year ended March 31, 2015

Impairment losses

Paper
and Pulp

Imaging
Media

Speciality
Materials

Total

Other

Total

Adjustments

Consolidated

¥ 373

¥ 13

¥−

¥ 386

¥−

¥ 386

¥−

¥ 386

35

(4) Amortization and balance of goodwill
Consolidated fiscal year under review (April 1, 2015–March 31, 2016)
No applicable transactions
Previous consolidated fiscal year (April 1, 2014 – March 31, 2015)

Millions of yen

Reportable segments

Year ended March 31, 2015

Paper
and Pulp

Imaging
Media

Speciality
Materials

Total

Other

Total

Adjustments

Consolidated(Negative goodwill)
Amortization
Balance as of March 31

¥ 30
¥−

¥−
¥−

¥−
¥−

¥ 30
¥−

¥−
¥−

¥ 30
¥−

¥−
¥−

¥ 30
¥−

(5) Information relating to gain on negative goodwill by reporting segment
Consolidated fiscal year under review (April 1, 2015–March 31, 2016)
No applicable transactions
Previous consolidated fiscal year (April 1, 2014 – March 31, 2015)
No applicable transactions

16. Important Subsequent Events
Consolidation of Shares and Change of the number of shares to constitute one unit

We decided to discuss the consolidation of shares at the 151st General Meeting of Shareholders on June 28, 2016 at a meeting of
the Board of Directors on May 31, 2016. In addition, we decided to change the number of our share units as a condition of
approving and passing a proposal pertaining to the consolidation of shares at the same General Meeting of Shareholders. This
proposal for the consolidation of shares was approved and passed at the same General Meeting of Shareholders. The details of
this are as follows below.

(1) Purpose of Consolidation of Shares and Change of the number of shares to constitute one unit

Japanese stock exchanges (including the Tokyo Stock Exchange) set a deadline of October 1, 2018 by which the trading units of
all listed companies in Japan must be unified to 100 shares. Therefore, we changed the trading unit of our common stock from thecurrent 1,000 shares to 100 shares to respect the spirit of this movement as a company that is listed on the Tokyo Stock Exchange.
In addition, we will also maintain the level desired by stock exchanges with respect to the price per trading unit of our shares(50,000 yen or more but less than 500,000 yen). Together with this, we will implement a consolidation to turn ten of our shares into
one share so that no changes occur in the number of voting rights of each shareholder.

(2) Particulars of Consolidation of Shares(i) Type of shares to be consolidated
Common shares(ii) Consolidation ratio
On October 1, 2016, shares held by shareholders recorded in the latest Shareholder Registry as of September 30, 2016 will beconsolidated at the ratio of 10 shares to 1 share.
(iii) Number of shares reduced through consolidation

Total number of issued shares before consolidation (as of March 31, 2016)
Number of shares reduced through consolidation
Total number of issued shares after consolidation

36

342,584,332 shares
308,325,899 shares
34,258,433 shares(3) Treatment of fractional shares
If any fractional shares arise as a result of the consolidation of shares, pursuant to the provisions of the Companies Act, theCompany will sell all such fractional shares and distribute the proceeds to shareholders having fractional shares in proportion totheir respective fractions.
(4) Total number of authorized shares as of effective date
90,000,000 shares(5) Schedule

Resolution of the Board of Directors
Resolution of General Meeting of Shareholders

May 31, 2016
June 28, 2016

Effective date of consolidation of sharesand change of the number of shares to constitute one unit

October 1, 2016(6) Influence on per share information
The following gives the information per share in the previous consolidated fiscal year and this consolidated fiscal year under theassumption that the applicable consolidation of shares was enforced at the beginning of the previous consolidated fiscal year.
Millions of yen

Net assets per share (in yen and dollars)
Net income(loss) per share (in yen and dollars)

37

U.S. dollars

2016

2015

2016

¥ 1,440.45
64.85¥1,521.56(124.96)$12.780.58

Mitsubishi Paper Mills Limited and Consolidated Subsidiaries

Independent Auditor’s Report38Mitsubishi Paper Mills Limited

Board of Directors, Executive Officers and Corporate Auditors
Managing Executive Officers

Kunio Suzuki

Kazuhisa Taguchi

President and Chief Executive
Officer

Director andSenior Executive Vice President

Kanji Morioka

Kiyoshi Maeda

Director andSenior Managing Executive Officer

Senior Managing Executive Officer

Junji Harada

Masaki Shuto

Tsuneaki Handa

Kiyoharu Yamada

Makoto Fujita

Director andManaging Executive Officer

Director andManaging Executive Officer

Director andManaging Executive Officer

Managing Executive Officer

Managing Executive Officer

President and Chief Executive
Officer

Kunio Suzuki
President

Director and Senior Executive Vice
President

Kazuhisa Taguchi

Director and Managing Executive
Officers

Junji Harada

In charge of Raw Materials &Purchasing Dept.

Senior Managing Executive Officer

Kiyoshi Maeda

In charge of President’s Office
General Manager, President’s Office

Tomohisa Shinagawa

In charge of Speciality Materials Div. Soumitsu Takehara
and Intellectual Property Dept.;
General Manager, Speciality
Senior Executive Officers
Materials Div.

Masaki Shuto

Supervisor, President’s Office and Imaging
In charge of Finance & Accounting
Media Div.; In charge of Kitakami Div.
Dept.
Internal Audit Dept. Energy Business Dept.
and Technology & Environmental Dept.
Tsuneaki Handa
General Manager, Kitakami Div., Director
Supervisor, German Operations; In
responsible for Corporate Social Responsibility Charge of Paper Div.; General
Manager, Paper Div.
Director and Senior Managing
Executive Officer
Managing Executive Officers

Kanji Morioka

Outside Directors

Kiyoharu Yamada

President & CEO, MPM Operation
Co., Ltd.
Head, Hachinohe Mill; Deputy
General Manager, Paper Div.

Yutaka Oka

President & CEO, Diamic Co., Ltd.

Nobuhiro SatoIn charge of German Operations; Deputy
General Manager, Paper Div.

Yukihiro TachifujiHead, Takasago Mill; Deputy General
Manager, Paper Div., Imaging Media Div. andSpeciality Materials Div.

Executive Officers

Shimpei Yamada

General Manager, Imaging Media Div. andGeneral Manager, DI & Photo Sales Dept.

Akira Inoue

Director and Managing Executive Officer,
Mitsubishi Paper Sales Co., Ltd.

Kenji Manabe

Deputy General Manager, Kitakami Div., ;President & CEO, Kitakami Hitec Paper
Corp.

Keiichi Sato

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

Corporate Auditor

Director and Executive Officer

Kenji OkaIn charge of General Affairs & Personnel
Dept., Legal Dept. and Shirakawa Office
General Manager, General Affairs &Personnel Dept.

Tsuyoshi Inoue
Hiroaki Tonooka
Hatsuhito Kaneko

Naoki Okawa

Makoto FujitaHead, Kyoto Mill; Deputy General
Manager, Imaging Media Div.

39

Outside Corporate Auditors(as of June 28, 2016)

Mitsubishi Paper Mills Limited

Company Data

Established:
April 1, 1898
Head Office:2-10-14, Ryogoku, Sumida-ku, Tokyo 130-0026, Japan
Telephone:+81-3-5600-1488 (Information)+81-3-5600-1481 (President’s Office)+81-3-5600-1459 (Commercial Printing & Business Communication
Paper Sales Dept. Paper Division)+81-3-5600-1464 (Sales Administration Dept. Paper Division)+81-3-5600-1536 (International Sales Dept. Paper Division)+81-3-5600-1479 (DI & Photo Sales Dept. Imaging Media Division)+81-3-5600-1475 (Graphic Systems Dept. Imaging Media Division)+81-3-5600-1471 (Speciality Materials Division)+81-3-5600-1453 (Raw Materials & Purchasing Dept.)
Facsimile:+81-3-5600-1489 (Information)+81-3-5600-1489 (President’s Office)+81-3-5600-1467 (Commercial Printing & Business Communication
Paper Sales Dept. Paper Division)+81-3-5600-1469 (Sales Administration Dept. Paper Division)+81-3-5600-1539 (International Sales Dept. Paper Division)+81-3-5600-1418 (DI & Photo Sales Dept. Imaging Media Division)+81-3-5600-1413 (Graphic Systems Dept. Imaging Media Division)+81-3-5600-1419 (Speciality Materials Division)+81-3-5600-1451 (Raw Materials & Purchasing Dept.)
Sales Branch:
Osaka

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

Mitsubishi Paper Sales Co., Ltd.
Toho Tokushu Pulp Co., Ltd.
Hachinohe Paper Processing Co., Ltd.
Shin-Hokuryo Forest Products Co., Ltd.
Hachiryo Co., Ltd.
Hokuryo Co., Ltd.
Hakuryo Paper Technology Co., Ltd.
Takasago Paper Processing Co., Ltd.
Kitakami HiTec Paper Corp.
Diamic Co., Ltd.
Pictorico Co., Ltd.
Kyoryo Chemical Co., Ltd.
NAMITSU Co., Ltd.
Mitsubishi Paper Engineering Co., Ltd.
Ryoshi Co., Ltd.
MPM Shared-service Co., Ltd.
MPM CAE Center Co., Ltd.
KJ Specialty Paper Co., Ltd.
Ryoko Co., Ltd.
MPM Operation Co., Ltd.
Overseas

Mitsubishi Paper Holding (Europe) GmbH (Germany)
Mitsubishi Paper 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
Forestal Tierra Chilena Ltda. (Chile)

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 2016. 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.

402-10-4 Ryogoku, Sumida-ku,
Tokyo 130-0026, JAPANURL http://www.mpm.co.jp/