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.

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

MESSAGE FROM THE PRESIDENT ................................... 2

CONSOLIDATED STATEMENTS OF
CHANGES IN NET ASSETS ............................................. 16

BREAKDOWN OF OPERATIONS BY DIVISION.................... 4

CONSOLIDATED STATEMENTS OF CASH FLOWS............. 17

TOPICS ............................................................................ 5

NOTES TO CONSOLIDATEDFINANCIAL STATEMENTS .............................................. 18

CORPORATE SOCIAL RESPONSIBILITY (CSR)................... 8
OUR MILLS AND THEIR PRODUCT LINES ......................... 10

INDEPENDENT AUDITOR’S REPORT ................................. 33

SIX-YEAR SUMMARY (CONSOLIDATED) ........................... 11

BOARD OF DIRECTORS, EXECUTIVE OFFICERS ANDCORPORATE AUDITORS ................................................. 34

CONSOLIDATED BALANCE SHEETS ................................. 12

COMPANY DATA .............................................................. 35

CONSOLIDATED STATEMENTS OF OPERATIONS ............. 14
CONSOLIDATED STATEMENTS OFCOMPREHENSIVE INCOME ............................................ 15

Mitsubishi Paper Mills Limited and Consolidated Subsidiaries

FINANCIAL HIGHLIGHTS (CONSOLIDATED)

Thousands of
U.S. dollars (1) and (2)Millions of yen (1)
2012

2011

2012

For the years ended March 31
Net sales
Ordinary income
Net income (loss)
Net income (loss) per share (in yen and dollars)
Cash dividends per share (in yen and dollars)¥ 194,856
888
565
1.65
—

¥ 210,846
2,116(14,497)(42.39)—$ 2,370,810
10,805
6,882
0.02
—

As at March 31
Total assets
Total net assets
Common stock¥ 276,305
52,10832,756¥ 248,506
52,11732,756$ 3,361,794
634,002398,543

18,278
4,341

19,311
4,304

Number of shareholders
Number of employees

Notes: (1) In this annual report, Japanese yen (in millions) and U.S. dollars (in thousands) are indicated with fractions omitted.
(2) U.S. dollar amounts in this report represent translations of yen amounts at the rate of ¥82.19 = U.S.$1, as of March 31, 2012.

Net Sales(¥ Million)

Ordinary Income(¥ Million)

08
09
10
11
12

08
09
10
11
12

Net Income(Loss)(¥ Million)

08
09
10
11
12

Total Net Assets(¥ Million)

08
09
10
11
12

258,536
253,102219,728
210,846
194,856

7,120
4,499
2,658
2,116
888

3,654
1,168
(1,597)(14,497)565

79,63670,436
68,70952,117
52,108Others 4.0%

Sales
Composition

Imaging & Development
17.6.%

Paper & Pulp 78.4%

1

MESSAGE FROM THE PRESIDENT

products on the market, leveraging our proprietary technologicalknow-how. As a result of this, as well as the inclusion in Octoberof KJ Specialty Paper Co., Ltd. in the scope of consolidation, werecorded a year on year increase in sales value. Declines in bothsales volume and value were recorded for inkjet paper (due to theimpact of the earthquake and tsunami as well as the yen’s appreciation) and printing plate materials (due to the business downturns in
Europe and the United States, our principal markets, as well as the
yen’s appreciation).
As a result of the above, sales on a consolidated basis posted
a decline of 7.6% from the previous year, to ¥194,856 million(US$2,370 million). In spite of the positive impact on earningsof our successful efforts to reduce costs, including fixed costs,
consolidated ordinary income came to ¥888 million (US$10 million), down 58.0% year on year, largely as a result of a decline inpaper sales volume owing to the March 11 earthquake and tsunami.
Moreover, although fixed costs accrued during the period of production operation shutdown following the disaster were recognized
as extraordinary loss, we posted a consolidated net income in theamount of ¥565 million (US$6 million). This was due to the postingof a decrease in income taxes-deferred owing to a gain on accrualof negative goodwill associated with the acquisition of KJ Specialty
Paper Co., Ltd. (which was made into a consolidated subsidiary) anddeferred tax assets, as well as the posting of insurance income, sub-Kunio Suzuki, President & C.E.O.

sidy, and a gain on the transfer of fixed assets as extraordinary gain,
among other factors.

Overview of the Reporting Term
The Mitsubishi Paper Mills Group continued to face a difficult oper-

On a non-consolidated basis, the Company posted net sales of

ating environment during the reporting term, largely as a result of¥109,567 million (US$1,333 million) and ordinary income of ¥131

the Tohoku Region Pacific Ocean Earthquake of March 11, 2011,

million (US$1 million), and a net loss of ¥1,974 million (US$24

in addition to the ongoing appreciation of the yen on the foreign

million).

exchange market. The Group’s three production centers in the
Tohoku region suffered damage in the March 11 disaster. In particu-

Mid-term Management Strategy and Issues Facing the Company

lar, the tsunami caused serious damage to our Hachinohe Mill, but

The Group’s mid-term management strategy consists of seeing to athanks to recovery efforts by the entire Group as well as swift, all-successful conclusion the goals of our First Mid-term Managementout reconstruction measures under our First Mid-term Management

Plan (lasting for three and a half years from October 2011 to the end

Plan (announced in August), operation by all production facilities

of fiscal 2014). Our priority tasks under this plan are as follows:

had resumed as of the middle of November.

• Improve earnings of printing paper business• Normalize the Group’s financial position

Against this background, our Paper and Pulp Division recorded
substantial decreases in sales value and volume of commercial print-• Develop new products within each division and nurture them into

ing and communication paper, largely due to the low production

new businesses, and achieve further development overseas, cen-rates at the Hachinohe Mill due to the tsunami-caused damage.

tered on emerging nations

In our Imaging and Development (I&D) Division, we put special

Phase 1 of the First Mid-term Management Plan lasts one and aeffort into promoting sales of photographic paper in emerging mar-half years from the second half of fiscal 2011 up to the end of fiscal

kets, thanks to which total sales volume and value posted year on

2012, and Phase 2 is the fiscal 2013-fiscal 2014 two-year period. We

year increases. In specialty materials, we launched newly-developed

have positioned this first phase as a period for “reconstruction,” and2the second phase as a period for “strengthening our revenue base for

Forecasts

growth.”The outlook for the economy is likely to remain unclear in the nearIn the second half of the reporting term, we succeeded in return-

future, in view of the aftereffects of the Tohoku Region Pacificing sales back to roughly the pre-disaster levels, thanks to all-out

Ocean Earthquake, as well as the ongoing European sovereign debt

efforts to reconstruct production facilities ahead of schedule. Fromcrisis. In the field of commercial printing and communication paper,

here onward, to further secure the Group’s earnings we aim to move

too, sales are expected to remain weak for some time to come, due

forward with positive measures such as concentrating resources

to current economic trends and the likely impact of rising paperon profitable brands, reducing inventories, and reducing logisticalimports.

costs.

Regarding the Company’s consolidated business performance

We also plan to repay all sharply-increased interest-bearing debt

for the current fiscal year, we are moving forward with efforts

as soon as possible as part of efforts to return the Group’s financial

to achieve the Basic Plan targets set out in our First Mid-term

position to normal. We intend to focus our efforts on building up a

Management Plan. Taking into account projected trends in demand

new revenue base through the injection of management resources

for paper, as well as the likely impact of the yen’s foreign exchange

into areas that promise good growth, such as our specialty materials

rate, we forecast net sales of ¥215.0 billion (US$2,615 million),business and initiatives in emerging nations, and to link up with ouroperating income of ¥6.5 billion (US$79 million), ordinary income

Second Mid-term Management Plan from fiscal 2015, under whichof ¥4.0 billion (US$48 million), and net income of ¥3.0 billion

we plan to strengthen our capabilities in growth areas.

(US$36 million).

At the same time, we recognize that corporate social responsibil-

Exchange rate assumptions for the above forecasts are ¥80/$1

ity (CSR) activities are a vital means of maintaining the trust andand ¥100/€. This earnings forecast is based on information available

support of our stakeholders, and thereby of enhancing the Group’s

at the time of the forecast, and takes into account risk factors andenterprise value. During the reporting term, we reorganized our sys-

uncertainties. At this juncture, although all potential risks have been

tem for promoting CSR activities and implemented certain changes

factored into the forecast, actual earnings results could vary substan-

to our head-office organization with the goal of strengthening

tially from the forecast due to a variety of factors.

governance functions. Also, learning a lesson from March 11 earthquake and tsunami, we established a Risk Management Committee
charged with putting in place a risk management system capable ofJune 2012

effectively handling the whole spectrum of risks to which a businesscorporation is exposed. In addition, we provided material support
to local governments in the region hit by the disaster, and supplied
surplus electric power from our in-house generators to the power
utilities.
With regard to products, we took steps to expand our lineup of
FSC forest-certified paper products and other ecologically friendly
products.

Kunio Suzuki
President & C.E.O.

For the current business term, fiscal 2012, we are pursuing fivebasic management policies –1) strengthening our CSR management foundation, 2) promoting
environmental management, 3) raising customer satisfaction levels by carefully addressing user needs, 4) taking further measures
to ensure that we provide our employees with a pleasant working
environment, and 5) pursuing activities that contribute to society.
Under these basic policies, we will take measures to raise our enterprise value in the areas of compliance, risk management, safety &hygiene, the environment, product safety, product quality, human &labor rights, information disclosure, and social contributions.

3

BREAKDOWN OF OPERATIONS BY DIVISIONPAPER AND PULPDIVISIONS

181,50910

175,713

11

Net Sales (¥ Million)

156,237

12

to push through price increases, but due to the substantial impactof the low level of production activity, sales of paper fell sharply
from the previous year in both volume and value terms.
The Company’s European subsidiaries recorded sales roughly
unchanged from the previous year in both volume and value
terms. Sales of pulp declined in both volume and value terms.
As a result, overall sales in the Paper and Pulp Divisions
posted a year on year decrease of 11.1%, to ¥156,237 million(US$1,900 million).

In commercial printing and communication paper – the Paper andPulp Divisions’ mainstay – to minimize the impact on customersof the suspension of production at our Hachinohe Mill, which wasdamaged by the earthquake and tsunami, we bought in alternative
products from other companies to make up the shortfall in ourinventories, and supplied them to our customers. We were thenable to gradually start up the mills’ papermaking machines one
after another, recovering full production levels in November. In
the latter half of the term, we also focused efforts on attempting

IMAGING AND DEVELOPMENTDIVISIONSNet Sales (¥ Million)

49,761

10
11

48,37412

49,597due to the strong adverse impact of the earthquake and tsunamion the domestic market, as well as the yen’s high exchange rate.
In specialty materials, we leveraged our technological capabilities to launch a number of new products on the market, including filters for automotive air-conditioners, and elements forbusiness-use humidifiers and evaporators. Sales of our construction-use materials benefitted from post-disaster reconstruction
demand, and sales were boosted by the inclusion in October of
KJ Specialty Paper Co., Ltd. as a consolidated subsidiary.
As a result, overall sales in the I&D Division increased by
2.5% year on year, to ¥49,597 million (US$603 million).

Amid a continuing decline in global demand for photosensitive materials, we focused on attempting to expand our sales
in emerging markets, where demand is strong, and as a result
achieved sharp increases in both sales volume and value. In thefield of printing plate materials, we worked to boost sales ofour environment-friendly CTP printing plates, but these efforts
were insufficient to offset the business downturn in Europe andthe US, as well as the effects of the strong yen. As a result, sales
were down from the previous year in both volume and value.
Sales of inkjet paper in Asian markets increased in the latter
half of the term, but sales fell in both volume and value terms

OTHER
DIVISIONS

19,11010

17,78011

Net Sales (¥ Million)

19,283

12

Ryoko Co., Ltd.

Sales of other divisions increased 8.5% year on year, to¥19,283 million (US$234 million), thanks to increased sales by
our engineering subsidiaries, notably the newly-consolidated

4

TOPICS

Progress Made under Mid-term Management Plan
Our facilities in the Tohoku Region were damaged by the massive earthquake that occurred on March 11, 2011. In particular, ourHachinohe Mill in Aomori Prefecture suffered extensive damage from the tsunami, and production at the mill came to a stop. Although acomplete restoration of production activities was achieved by November, the supply of certain products had been impossible during theintervening period. Moreover, the Company’s financial position was weakened considerably by the costs of the reconstruction.
In August of 2011 we announced our First Mid-term Management Plan with the principal goals of achieving a recovery in our sales
and restoring our financial position to its former state, and have started implementation from October.
The following section provides a detailed description of the Mid-term Management Plan and the state of progress in its
implementation.

(1) Schedule and Basic Policies
Schedule of First Mid-term Management Plan
Commenced Oct. 2011
First Mid-term Plan

Reconstruction

Second Mid-term Plan

Strengthen revenue base for growth[1 1/2 years]
FY2012 2nd halfStrengthen growth sectors[2 years]

FY2012FY2013

FY2014FY2015~

Basic Policies(1) Quickly recover printing paper business market share, build efficient finishing lines(2) Promptly repay sharply increased interest-bearing debt, normalize financial position(3) Pursue separate business strategies for each segment(2) Basic Plan Values
FY2011

Sales
Operating income
Ordinary income
Interest-bearing debt
D/E ratio

FY2012

Plans

Plans

Results

Forecasts¥200.0 bn¥230.0 bn¥194.9 bn¥215.0 bn¥3.0 bn¥7.5 bn¥2.2 bn¥6.5 bn¥1.0 bn¥4.5 bn¥0.9 bn¥4.0 bn¥170.0 bn¥170.0 bn¥158.0 bn¥165.0 bn

3.7

3.4

3.3

3.3

5

FY2013

FY2014

Plans

Plans

¥235.0 bn¥240.0 bn¥8.0 bn¥10.0 bn¥5.0 bn¥7.0 bn¥160.0 bn¥150.0 bn

3.0

2.6

(3) Breakdown of Progress by Theme➀ Quickly recover printing paper business market share, build efficient finishing lines] Net sales of printing paper business in Jan. and Feb. 2012 = 97% year on year
➁ Promptly repay sharply increased interest-bearing debt, normalize financial positiona) Normalize earning power◆ Sales recovery] Price increase completed at end of 2011; sales volume back roughly to pre-earthquake level◆ Reform fixed costs structure, with no areas off-limits] •Reorganization as of January 1st, streamline head-office organizatione head office relocation scheduled for July 2012
•Reduce labor costs by approx. ¥1.4 bn (FY2011 year on year comparison)b) Secure adequate cash flows◆ Reduce inventory assets, sell off fixed assets] Sell land and buildings (company housing, facilities for training and seminars)◆ Zero-based budgeting (ZBB) for capital investments] Secure funds for reconstruction through main bank and government-run financial institutions(4) Breakdown of Progress by Segment
Printing Paper Business
Three-and-a-half-year strategic theme ] Expand earnings amid market in which demand is maturing

6FY2011 2nd half : Priority strategies and progress
Priority strategies:

Proceed with two-pronged strategy of recovering sales level by Hachinohe Mill and pushing through price raises] Focus on recovering customers lost due to earthquake. Price raise completed by end of Dec. 2011.
6Priority strategies for FY2012•Build efficient finishing lines at Hachinohe Mill
(improve efficiency and quality in production of PPC and flat printing paper sheets)•Improve logistics capabilities(establish direct transport system, maintain inventories at ideal minimum level)

Imaging Business
Three-and-a-half-year strategic theme ] Create conditions for ensuring adequate revenues despite strong yen

6FY2011 2nd half : Priority strategies and progress
Priority strategies:

Use know-how in photosensitive materials to develop new products] Fortified product lineup with Violet DigiPlate (VDP: violet sensitive polyester based offset printing plate ),high-end electrographic paper, and other products, and expanded sales
Aggressively market photosensitive materials in emerging nations] Thermal DigiPlate (TDP; thermal digital plate and platesetter technology )e Commenced sales in Indonesia, Thailand, and other countries
6Priority strategies for FY2012•Further develop marketing capabilities in overseas markets(establish sales channels in emerging nations)6

Specialty Materials (New Business Development)
Three-and-a-half-year strategic theme ] Speed up growth, selectively focus appropriation of management resource

6FY2011 2nd half : Priority strategies and progress
Priority strategies:

Start-up of new non-woven fabric production machines at Takasago Mill; aim at early stabilization] Test runs started in Jan. 2012; commercial operation started in April
Expand scale of Chinese operations] Speed up development of new businesses
6Priority strategies for FY2012•Stabilize production and expand sales of new-brand non-woven fabric products•Launch aggressive marketing of automotive-use cabin air filters

KJ Specialty Paper
Three-and-a-half-year strategic theme ] Create synergy, develop overseas

6FY2011 2nd half : Priority strategies and progress
Priority strategies:

Maintain stable operations of existing KJ Specialty Paper’s business] Established KJSP Committee to generate synergy from consolidation
6Priority strategies for FY2012•Efficient operation of shared sales channels by KJ Specialty Paper and MSM(discuss cooperation in sales and production)

German Operations
Three-and-a-half-year strategic theme ] Utilize weak euro to stimulate exports

6FY2011 2nd half : Priority strategies and progress
Priority strategies:

Expand export volume outside the eurozone] Aggressive marketing of thermosensitive paper and commercial-use inkjet paper inside and outside the eurozone
6Priority strategies for FY2012•Make use of weak euro to increase exports

7

CORPORATE SOCIAL RESPONSIBILITY (CSR)

Overview of Our CSR Activities
At the Mitsubishi Paper Mills Group, we recognize that the fulfillment of our corporate social responsibilities is vital in winning
the trust and understanding of our stakeholders and thereby enhancing the Group’s enterprise value. During the reporting term, we
implemented certain changes to our head-office organization, reorganized our CSR promotion system to strengthen governancefunctions, and, learning a lesson from the March 11 earthquake and tsunami, established a Risk Management Committee charged
with putting in place a risk management system capable of effectively handling the whole spectrum of risks to which a business corporation is exposed. We also provided material support to local governments in the region hit by the disaster, and supplied surplus
electric power from our in-house generators to the power utilities. With regard to products, we took steps to expand our lineup of
FSC forest-certified paper products and other ecologically friendly products.
For the current business term, fiscal 2012, we are pursuing five basic management policies –1) strengthening our CSR management foundation, 2) promoting environmental management, 3) raising customer satisfaction levels
by carefully addressing user needs, 4) taking further measures to provide our employees with a pleasant working environment, and5) pursuing activities that contribute to society. Under these basic policies, we will take measures to raise our enterprise value inthe areas of compliance, risk management, safety & health, the environment, product safety, product quality, human rights & laborrights, information, and social contributions.

Our CSR Promotion System
In January 2012, we revised our CSR promotion system to strengthen governance by more clearly delineating roles andresponsibilities.
(1) Issues that need to be tackled on a Companywide basis (compliance, safety & hygiene, the environment, product safety) willcontinue to be promoted by existing committees.
(2) Authority should be transferred to divisions directly responsible (with respect to all four stages of the PDCA [plan-do-check-act]
cycle) in cases where it is deemed that such transference will clarify the chain of responsibility.
(3) Learning a lesson from the Tohoku Region Pacific Ocean Earthquake, we established a Risk Management Committee charged
with putting in place a risk management system to handle the risks to which the entire Group is exposed.
Compliance (Compliance Subcommittee)
Risk Management (Risk Management Subcommittee)
President
Safety & Health (Safety & Health Subcommittee)
CSR Director(CSR Committee)

Environment (Environmental Subcommittee)
Product Safety (Product Safety Subcommittee)
Product Quality (Technology & Environmental Dept.)
Human Rights & Labor rights (General Affairs & Personnel Dept.)
Information (General Affairs & Personnel Dept.)

Items to which changes have been madeSocial Contribution (General Affairs & Personnel Dept.)

Ten Years Since Acquisition of FSC (Forest Stewardship Council) Certification
The Group operates businesses that use timber as the primary material. We have been seeking certification from the Forest
Stewardship Council (FSC) based on our belief that sustainable forest management is necessary for wood to be a renewable
resource. In 2001 our Hachinohe Mill became the first paper mill in Japan to receive the FSC’s Chain-of-Custody (CoC)8certification, covering processing and logistics. In 2002 we acquired FM (Forest Management) certification for our plantation in
Chile, since when we have acquired CoC certification for all our paper production facilities in Japan and overseas, and have alsoacquired FM certification for Company-owned forests in Japan.
In addition, to popularize the FCS certification system in Japan, we have been taking part in “FSC forest certification support
system” activities, centered on the town of Iwaizumi in Iwate Prefecture. Meanwhile, in the village of Nishigo in Fukushima
Prefecture, we have been holding forestry and environmental education classes at the Ecosystem Academy to pass on to the next
generation the importance of carefully managing our forests. In 2011 we exhibited at the “FSC Forest Summit 2011 in Yamanashi.”
In 2011 we marked the tenth year since the start of sales of FSC-certified paper. As one of the first companies to adopt the FSC
certification system in Japan, we will work to realize a stable supply of FSC-certified paper and to further popularize the adoption of
the FSC certification system.

The FSC Certification Forest Supporter System
Companies that use FSC-certified products pay a certain proportion of the costs of managing the FSC-certified forests, and theorganizations in charge of managing the certified forests (local governments) employ these funds to create environmentally soundand economically profitable forest resources. The system allows timber that has been cut as part of the forest management process
to be used as FSC-certified products. In this way, the system assists in the maintenance of FSC-certified forests.

The Ecosystem Academy
As a result of the Tohoku Region Pacific Ocean Earthquake in March 2011,
the Ecosystem Academy was unable to undertake any hands-on-type learning experience sessions or environmental seminars during fiscal 2011, but avegetation survey was conducted at a Company-owned FSC-certified forest
in Nishigo (Fukushima), and surveys of wild bird life were conducted once
again with the cooperation of the Shirakawa (Fukushima) chapter of theWild Bird Society of Japan.

Surveying wild bird populations

FSC Forest Summit 2011 in Yamanashi
The FSC Forest Summit is held with the aim of making the value of FSC
certification more widely known among the Japanese public. The 2011
Summit was held in Yamanashi Prefecture to celebrate the 100th anniversary of the Imperial donation of the Onshirin forest, which has received
FSC certification. Mitsubishi Paper Mills also opened a booth at the 2011
Summit.
The Company manufactures products at its Hachinohe Mill using FCScertified wood chips from Yamanashi Prefecture, and sells FCS-certified
paper to companies in the prefecture under the name “Yamanashi Forest
Paper.” We made a presentation on this paper product at the Summit as an
example of a combination of the FSC system with the revitalization of local
businesses.
9

At the 2011 FSC Forest Summit

OUR MILLS AND THEIR PRODUCT LINESSHIRAKAWA SITEKITAKAMI HITEC PAPER CORP.

HACHINOHE MILL

Address:

Address:

Address:

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

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

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

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.

7-1, Shinbashicho, Fuji-shi,
Shizuoka 417-0004
Telephone: +81-545-52-4075
Products: Base paper for decorative
KYOTO MILL
laminates, Impregnateddecorative sheet,
Address:
6-6, Kaiden 1-chome,
Base paper for wall paper,
Nagaokakyo-shi, Kyoto 617-8666
Stencil paper
Telephone: +81-75-951-1181
Products: Color photographic paper, Graphic arts
materials, Inkjet photo paper, etc.

OVERSEAS
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

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)(Bielefeld, Germany)

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

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

10SIX-YEAR SUMMARY (CONSOLIDATED)

Thousands of
U.S. dollars

Millions of yen
2012

2011

2010

2009

2008

2007

2012

For the years ended March 31
Net sales
Operating income
Ordinary income
Net income (loss)
Net income (loss) per share (in yen and dollars)¥ 194,856
2,164
888
565
1.65

¥ 210,846 ¥ 219,728 ¥ 253,102
3,477
4,253
7,110
2,116
2,658
4,499
(14,497)(1,597)1,168(42.39)(4.67)
3.41¥ 258,536
9,302
7,120
3,654
10.99

¥ 244,260
7,256
5,270
7,297
22.44

$ 2,370,810
26,332
10,805
6,882
0.02

As at March 31
Total assets
Total net assets¥ 276,305
52,108¥ 248,506
52,117¥ 303,052
79,636¥ 320,603
80,326$ 3,361,794
634,002¥ 282,131
68,709¥ 294,254
70,436

Note: Effective from the year ended March 31, 2007, the Company has applied the “Accounting standards for presentation of net assets in the balance sheet,” andthe “Implementation guidance for accounting standards for presentation of net assets in the balance sheet.”11Mitsubishi Paper Mills Limited and Consolidated Subsidiaries

CONSOLIDATED BALANCE SHEETSAs at March 31, 2012 and 2011

Thousands of
U.S. dollars (Note 2)

Millions of yen
2012

ASSETS
Current assets:
Cash and bank deposits (Note 3 (11))
Receivables:
Trade notes and accounts (Note 12)
Other¥ 13,306

2011

¥

8,878

2012

$

161,904

50,121
2,651

42,1684,276

609,828
32,26052,773(493)

46,444(497)

642,089(6,008)Inventories
Deferred income taxes (Note 16)
Other52,27946,1031,393
3,013

45,94741,288702
616

636,080
560,941
16,951
36,665

Total current assets

116,096

97,432

1,412,541

Property, plant and equipment (Note 4):Land
Buildings and structures
Machinery and equipment
Construction in progress
Leased assets
Other

22,36993,814335,370
3,199
2,381
9,328

20,941
94,007
332,542
560
2,394
9,425

272,162
1,141,434
4,080,429
38,92428,976
113,500

Less: Accumulated depreciation
Accumulated impairment losses

466,463(336,685)(574)

459,871(341,504)(574)

5,675,429(4,096,430)(6,989)129,203117,792

1,572,009

23,852
1,026
469(1,229)
2,547
4,338

21,438
1,400
569
(479)
2,531
7,819

290,211
12,495
5,707(14,953)
30,99652,78631,00533,280377,244¥ 276,305¥ 248,506$ 3,361,794

Less: Allowance for doubtful accounts

Net property, plant and equipment

Investments and other assets:
Investments in securities (Notes 4, 12 and 13)
Investments in unconsolidated subsidiaries and affiliated companies
Long-term loans
Less: Allowance for doubtful accounts
Deferred income taxes (Note 16)
Other
Total investments and other assets
Total assets
The accompanying notes are an integral part of these financial statements.

12

Thousands of
U.S. dollars (Note 2)

Millions of yen
2012

2011

2012

¥ 67,572—
20,338307¥ 75,596
1,000
12,482294

36,528
3,974
9,420
316
—
5,426

20,980
3,193
8,483
227
7,439
3,427

444,437
48,360114,614
3,847—
66,027

143,885

133,124

1,750,639

68,573
1,728
7,257
65
171
869
1,645

52,251
1,868
5,373
111
201
826
2,630

834,323
21,03488,300800
2,088
10,58020,02480,312

63,264

977,151

32,756
19,716(4,989)(137)

32,756
19,717(5,577)(136)

398,543
239,894(60,705)(1,677)47,34546,758576,054

1,949
189

1,794
378

23,717
2,304

2,138

2,173

26,021

2,624

3,185

31,92652,10852,117634,002¥ 276,305¥ 248,506$ 3,361,794

LIABILITIES AND NET ASSETS
Current liabilities:
Short-term bank loans (Note 12)
Commercial paper
Current portion of long-term debt (Note 12)
Lease obligations
Payables:Trade notes and accounts (Note 12)
Other
Accrued expenses
Income taxes payable
Reserve for loss on natural disaster (Note 3 (13))
Other
Total current liabilities
Long-term liabilities:
Long-term debt (Note 12)
Lease obligations
Accrued retirement benefits for employees (Note 15)
Accrued retirement benefits for directors and statutory auditors
Deferred income taxes (Note 16)
Asset retirement obligations (Note 3 (14))
Other
Total long-term liabilities$

822,147—
247,458
3,746

Contingent liabilities (Note 5)
NET ASSETS
Shareholders’ equity:
Common stock:
Authorized: 900,000,000 shares at March 31, 2012 and 2011
Issued: 342,584,332 shares at March 31, 2012 and 2011
Capital surplus
Retained deficit
Less: Treasury stock, at cost
Total shareholders’ equity
Accumulated other comprehensive income :Net unrealized gains on available-for-sale securities
Translation adjustments
Total accumulated other comprehensive income
Minority interests in consolidated subsidiaries
Total net assets
Total liabilities and net assets
The accompanying notes are an integral part of these financial statements.

13Mitsubishi Paper Mills Limited and Consolidated Subsidiaries

CONSOLIDATED STATEMENTS OF OPERATIONS
For the years ended March 31, 2012 and 2011

Thousands of
U.S. dollars (Note 2)

Millions of yen
2012

2011

2012

¥ 194,856
163,507¥ 210,846
173,381$ 2,370,810
1,989,384

31,34937,465

381,426

29,18533,987355,094

2,164

3,477

26,332589(2,299)
1,844
(31)
(752)
(224)
—
(5,544)561(2,343)
1,298(357)(1,328)(305)(28)(13,314)

7,175(27,974)
22,447(380)(9,160)(2,735)—(67,464)

—
871

(684)
—

—
10,6072,106—

25,630(3,217)
1,543
1,851
(367)

—
—
180
243

(39,142)
18,784
22,524(4,474)

Total(3,629)(16,078)(44,163)

Loss before income taxes and minority interests(1,465)(12,601)(17,831)

Income taxes:
Current
Deferred (Note 16)344(1,944)

442
1,276

4,188
(23,656)

Income (loss) before minority interests
Minority interests in income (losses) of consolidated subsidiaries(1,600)
134
(431)

1,718
(14,320)
177(19,467)
1,635(5,247)565¥ (14,497)

Net sales
Cost of sales
Gross profit
Selling, general and administrative expenses
Operating income
Other income (expenses):
Interest and dividend income
Interest expense
Gains on disposal of property, plant and equipment (Note 6)
Losses on sales of investments in securities
Write-downs of investments in securities
Special severance payments
Loss on liquidation of a subsidiary
Loss on natural disaster (Note 9)
Effect of adoption of accounting standard for asset retirement
obligations (Note 3 (14))
Gain on negative goodwill (Note 18 (5))
Effect of partial cancellation of retirement benefit trust(Note 3 (8) and 15)
Loss on termination of qualified retirement pension plan
(Note 3 (8) and 15)
Subsidy income (Note 7)
Insurance income (Note 8)
Other, net

Net income (loss)¥

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

14

$

6,882

Mitsubishi Paper Mills Limited and Consolidated Subsidiaries

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the years ended March 31, 2012 and 2011

Thousands of
U.S. dollars (Note 2)

Millions of yen
2012

Income (loss) before minority interests
Other comprehensive income:Net unrealized gains (losses) on available-for-sale securities
Translation adjustments
Share of other comprehensive income of companies accounted forby the equity method
Other comprehensive income
Comprehensive income
Comprehensive income attributable to
Mitsubishi Paper Mills Limited
Comprehensive income attributable to minority interests

2011

2012

¥ 134

¥ (14,320)$ 1,635

101(176)(1,533)
(525)

1,229
(2,146)

(19)

(69)

(241)

(95)
39

(2,128)(16,448)(1,158)477(16,213)
(235)

6,464
$ (5,987)

531¥ (492)¥

Additional information
Accounting Standard for Presentation of Comprehensive Income
Effective the fiscal year ended March 31, 2011, the Company has applied the “Accounting Standard for Presentation ofComprehensive Income” (Accounting Standards Board of Japan (ASBJ) Statement No. 25 issued on June 30, 2010).

Yen

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

15

2012

2011

¥ 1.65—¥ (42.39)—

U.S. dollars (Note 2)2012$ 0.02—

Mitsubishi Paper Mills Limited and Consolidated Subsidiaries

CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETSFor the years ended March 31, 2012 and 2011

Millions of yen

Shareholders’ equity

Total accumulated other comprehensive income

Commonstock

CapitalsurplusRetainedearnings

Net
Total
unrealized
Accumulated Minority
Treasurygains onotherinterests in
Total
stock, shareholders’ available-for-sale Translation comprehensive consolidated Total net
assetsat costsecurities
incomesubsidiaries
equityadjustments

Balance at April 1, 2010
342,584,332 ¥ 32,756
Changes during the year:
Net loss
Acquisition of treasury stock
Disposal of treasury stock
Changes in items other than shareholders’ equity
Total changes during the year——
Balance at April 1, 2011
342,584,332 ¥ 32,756
Changes during the year:
Net income
Acquisition of treasury stock
Disposal of treasury stock
Increase due to change in scope of consolidation
Changes in items other than shareholders’ equity
Total changes during the year——
Balance at March 31, 2012
342,584,332 ¥ 32,756¥ 19,717¥ 8,919¥ (133)¥ 61,259(4)
0(14,497)(4)
0(3)¥ (136)(14,501)¥ 46,758

(1)
0

565
(1)
0
22

(0)
¥ (137)587¥ 47,345

Number ofshares inissue(14,497)(0)(0) (14,497)¥ 19,717 ¥ (5,577)
565
(0)
22
(0)
588
¥ 19,716 ¥ (4,989)¥ 2,951(1,157)(1,157)¥ 1,794155
155¥ 1,949

¥ 937

(558)
(558)
¥ 378

(189)
(189)
¥ 189

¥ 3,888(1,715)(1,715)¥ 2,173(34)(34)¥ 2,138¥ 3,560¥ 68,709

(374)
(374)
¥ 3,185(14,497)(4)
0(2,090)(16,591)¥ 52,117

(561)
(561)
¥ 2,624

565
(1)
0
22
(595)
(8)
¥ 52,108

Thousands of U.S. dollars
Shareholders’ equity

Number ofshares in
issue

Commonstock

CapitalsurplusRetainedearnings

Net
Total
unrealized
Accumulated Minority
Treasurygains onotherinterests in
Total
stock, shareholders’ available-for-sale Translation comprehensive consolidated Total net
assetsat costsecurities
incomesubsidiaries
equityadjustments

Balance at April 1, 2011
342,584,332 $ 398,543 $ 239,895 $ (67,861) $ (1,666)
Changes during the year:
Net income
6,882
Acquisition of treasury stock(14)
Disposal of treasury stock(1)
2
Increase due to change in scope of consolidation
273
Changes in items other than shareholders’ equity
Total changes during the year
—
(1)
7,156
(11)
Balance at March 31, 2012
342,584,332 $ 398,543 $ 239,894 $ (60,705) $ (1,677)
The accompanying notes are an integral part of these financial statements.

16

Total accumulated other comprehensive income$ 568,911$ 21,830$ 4,608

1,886
1,886
$ 23,717

6,882
(14)
1
273
(2,304)(418)(6,829)(7,247)(2,304)(418)(6,829)(103)$ 2,304 $ 26,021 $ 31,926 $ 634,002

6,882
(14)
1
273
7,143
$ 576,054$ 26,439$ 38,756$ 634,106

Mitsubishi Paper Mills Limited and Consolidated Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWSFor the years ended March 31, 2012 and 2011

Millions of yen

I

2012

2011

2012

¥ (1,465)
9,576
5,544
1,884
(58)
(589)
2,299
(1,543)(1,851)
(871)
31
752
10
(1,844)¥ (12,601)
12,241
13,314(1,492)
(1)
(561)
2,343
—
(180)
—
357
1,328
10
(1,298)$ (17,831)——(5,331)(3,680)7,515(5,474)
4,901
586
2,032
987
(2,279)(494)(7,663)(1,929)

684
28
5,178
3,969
(1,541)(3,245)
18,536566——(2,376)(683)—
16,043—(64,873)(44,784)
91,445(66,605)
59,636
7,132
24,72512,019(27,732)(6,014)(93,244)(23,477)(9,718)
2,212
(176)
138
(1,629)(4)
91
65(9,021)(4,320)
3,110
(31)
3,474
(109)
(909)
692
(144)
1,763

(118,243)
26,919(2,150)1,682(19,823)
(60)
1,111
797
(109,766)(7,204)(1,000)37,114(13,053)
(100)
(318)
(1)
(4)
0
15,432
(2)
4,478
8,594
¥ 13,073(2,809)(8,000)9,330(13,760)
(100)
(636)
(4)
(41)
0
(16,020)
(176)
1,609
6,985
¥ 8,594(87,653)(12,166)
451,572(158,824)(1,216)(3,880)(14)(56)
1187,760(29)
54,486
104,572$ 159,058

Cash flows from operating activities:
Loss before income taxes and minority interests
Depreciation and amortization
Loss on natural disaster (Note 9)
Accrued retirement benefits for employees
Accrued retirement benefits for directors and statutory auditors
Interest and dividend income
Interest expense
Subsidy income (Note 7)
Insurance income (Note 8)
Gain on negative goodwill (Note 18 (5))
Losses on sales of investments in securities
Write-downs of investments in securities
Write-downs of other investments
Gains on disposal of property, plant and equipment (Note 6)
Effect of adoption of accounting standard for asset
retirement obligations (Note 3 (14))
Loss from adjustment of a subsidiary
Increase or decrease in trade accounts receivable
Increase or decrease in inventories
Increase or decrease in trade accounts payable
Other, net
Sub-totalInterest and dividends received
Proceeds from insurance income (Note 8)
Proceeds from subsidy (Note 7)
Interest paid
Income taxes paid
Loss on natural disaster paid (Note 9)
Net cash (used in) provided by operating activities

II

Thousands of
U.S. dollars (Note 2)

116,51167,46422,924(714)(7,175)27,974(18,784)(22,524)(10,607)
380
9,160
123
(22,447)—

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

III Cash flows from financing activities:
Decrease in short-term bank loans
Decrease in issuance of commercial paper
Proceeds from long-term debt
Repayment of long-term debt
Redemption of bonds
Repayment of lease debt
Acquisition of treasury stock
Payments of cash dividends by subsidiaries to minority shareholders
Other, net
Net cash provided by (used in) financing activities

IV Effect of foreign currency translation on cash and cash equivalents
V Net increase in cash and cash equivalents
VI Cash and cash equivalents at beginning of year
VII Cash and cash equivalents at end of year (Note 3 (11))
The accompanying notes are an integral part of these financial statements.

17

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 ¥82.19 = U.S.$1, theexchange rate prevailing as of March 31, 2012. 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 36 subsidiaries as of March 31, 2012 (33 as of March 31, 2011). The accompanying consolidated financial
statements include the accounts of the Company and 26 (24 for 2011) of its subsidiaries for the year ended March 31, 2012
(together, hereinafter referred to as the “Companies”).
Ryoko Co., Ltd. and KJ Specialty Paper Co., Ltd. have been included in the scope of consolidation from this fiscal year.
The accounts of the remaining 10 (9 for 2011) unconsolidated subsidiaries for the year ended March 31, 2012 have been
excluded from consolidation since the aggregate amounts of these subsidiaries in terms of combined assets, net sales, retained
earnings and net income were immaterial in relation to those of the consolidated financial statements of the Companies.
Mitsubishi Paper Holding (Europe) GmbH and other four (4 for 2011) subsidiaries are consolidated using the financial statements as of the respective fiscal year end which falls on December 31 and necessary adjustments are made to their adjustments
are made to their financial statements to reflect any significant transactions from January 1 to March 31.

(2) Consolidation and elimination
For the purposes of preparing the accompanying consolidated financial statements, all significant intercompany transactions,account balances and unrealized profits among the Companies have been eliminated.
Elimination of investments in shares of consolidated subsidiaries, together with the underlying equity in net assets of such
subsidiaries, has been made to include equity in net income of subsidiaries subsequent to the respective dates of 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 an asset or a liability, as the case may be, and amortized over five years on a straightline 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 12 affiliates as of March 31, 2012 (13 for 2011). 2 affiliated companies were accounted for by the equity
method.
However, the remaining 10 (9 for 2011) subsidiaries and 10 (11 for 2011) 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,
except for those that are designated as “hedging instruments.”(ii) Securities

18

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

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

(6) Property, plant and equipment
Mainly depreciation excluding for leased assets is computed by the straight-line method for property, plant and equipment. But
in part, 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 the straight-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 their respective countries’ regulations.

(8) Accrued retirement benefits to employees
The Company and the domestic consolidated subsidiaries provide accrued retirement benefits to employees based on theestimated actuarial present value of the projected benefit obligation and the estimated fair value of plan assets.
Overseas consolidated subsidiaries provide accrued retirement benefits to employees based on the method prescribed bytheir respective countries’ regulations.
Unrecognized net actuarial gains or losses are amortized from the year following the year in which such gains or losses arerecognized on a straight-line basis over a term that does not exceed the average remaining service period of the employees whoare expected to receive benefits under the plans (10 to 15 years). Unrecognized prior service cost is amortized on a straight-line
basis over a term that does not exceed the average remaining service period of the employees who are expected to receive
benefits under the plans (10 to 15 years).
(Additional information)
The Company holds that securities have been contributed a retirement benefit trust, but which the fair value exceeds theretirement benefit obligations. As this situation was likely to continue for a long period, the Company decided to cancel certain
portion of the securities held in trust on July 29, 2011, and to recognize the effect of partial cancellation of the retirement benefit
plan as extraordinary gain of ¥2,106 million ($25,630 thousand).

19

According to the amendment of the pension plan, the Company has transferred the portion attributable to the subscribers
to a tax-qualified retirement pension plan to a retirement lump-sum payment plan and transferred the portion attributable tobeneficiaries to a tax-qualified retirement pension plan to closed pension plan. As a result of this amendment, loss on terminationof the qualified retirement pension plan was recognized as extraordinary loss in the consolidated statements of operations in theamount of ¥3,217 million ($39,142 thousand).

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

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

(11) Cash and cash equivalents
Cash and cash equivalents in the consolidated statements of cash flows are composed of cash on hand, bank deposits that areable to be withdrawn on demand and short-term investments with original maturities of three months or less that are exposed toa minor risk of fluctuation in value.
A reconciliation of cash and cash equivalents in the accompanying consolidated statements of cash flows and cash and bankdeposits in the accompanying consolidated balance sheets at March 31, 2012 and 2011 is shown below:
Millions of yen
2012

Cash and bank deposits
Time deposits with maturities of over 3 months
Cash and cash equivalents¥ 13,306(233)¥ 13,073

2011¥ 8,878(283)¥ 8,594

Thousands of
U.S. dollars
2012$ 161,904(2,845)$ 159,058(12) Dividends
The Corporation Law of Japan (the “Law”) provides that an amount equal to 10% of the amount to be distributed as distributionsof capital surplus (other than the capital reserve) and retained earnings (other than the legal reserve) be transferred to the capitalreserve and the legal reserve, respectively, until the sum of the capital reserve and the legal reserve equals 25% of the common
stock amount. Such distributions can be made at any time by resolution of the shareholders, or by the Board of Directors if
certain conditions are met, however neither the capital reserve nor the legal reserve is available for distributions.

(13) Reserve for loss on natural disaster
The Companies have provided a reserve for loss on natural disaster based on the estimated future costs of restoration of facilities
and disposal of equipment damaged by the Tohoku region Pacific Ocean earthquake that occurred in the fiscal year ended March
31, 2011.

(14) Accounting changes(i) Accounting Standard for Accounting Changes and Error Corrections
Effective the year ended March 31, 2012, the Company has applied “Accounting Standard for Accounting Changes and Error
Corrections” (ASBJ Statement No. 24), and “Guidance on Accounting Standard for Accounting Changes and Error Corrections”(ASBJ Guidance No. 24), both issued on December 4, 2009.
(ii) Accounting Standard for Asset Retirement Obligations
Effective April 1, 2010, the Company has applied the “Accounting Standard for Asset Retirement Obligations” (ASBJ Statement
No. 18 issued on March 31, 2008) and the “Implementation Guidance on Accounting Standard for Asset Retirement Obligations”(ASBJ Guidance No. 21 issued on March 31, 2008). Due to the effect of adopting this new standard, both of operating income andordinary income decreased by ¥21 million, while loss before income taxes and minority interests increased by ¥706 million.
(iii) Accounting Standard for Equity Method of Accounting for Investments
Effective April 1, 2010, the Company has applied the “Accounting Standard for Equity Method of Accounting for Investments”(ASBJ Statement No. 16 issued on March 10, 2008) and the “Practical Solution on Unification of Accounting Policies Applied to
Associates Accounted for Using the Equity Method” (ASBJ Practical Issues Task Force (PITF) No. 24 issued on March 10, 2008).
There was no effect on the financial statements for the year ended March 31, 2011.

20

4. Assets Pledged as Collateral
Assets pledged as collateral primarily for short-term loans, long-term debt and debentures at March 31, 2012 and 2011 were as
follows:
Millions of yen

Buildings and structures
Machinery and equipment
Land
Other
Investments in securities

Thousands of
U.S. dollars

2012

2011

2012

¥ 18,029
19,416
9,542
42
2,702
¥ 49,734¥ 19,664
22,671
9,542
47
2,942
¥ 54,868$ 219,368
236,240
116,099521
32,886$ 605,117

5. Contingent Liabilities

As at March 31, 2012 the Companies were contingently liable for guarantees of loans, primarily of their employees and unconsolidated subsidiaries and affiliates, in the aggregate amount of ¥2,799 million ($34,063 thousand), and also liable for a recourse
obligation of credit securitization in the aggregate amount of ¥1,727 million ($21,017 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:
Millions of yen

Land

Thousands of
U.S. dollars

2012

2011

2012

¥ 2,154¥ 1,673$ 26,217(2) Losses on disposal of property, plant and equipment
Main items under losses on disposal of property, plant and equipment were as follows:
Millions of yen

Machinery and equipment
Scrapping and removal expenses

Thousands of
U.S. dollars

2012

2011

2012

¥ 154
132

¥ 118
181

$ 1,8771,616

7. Subsidy Income

The Company and the domestic consolidated subsidiaries have received subsidies for the purpose of repairing or replacing facilities
at the Company’s Hachinohe Mill, that were damaged by the Tohoku region Pacific Ocean earthquake.
8. Insurance Income“Insurance income” refers to insurance payouts relating to damage suffered from the Tohoku region Pacific Ocean earthquake.

21

9. Loss on Natural Disaster

The Company recorded a loss due to the Tohoku region Pacific Ocean earthquake, and the components of loss on natural disaster are
as follows. The provision of reserve for loss on natural disaster is included under these expenses.
Thousands of
U.S. dollars

Millions of yen
2012

Restoration costs
Inventory valuation losses
Estimated costs of disposal of fixed assets
Fixed costs during the suspension of operations
Others
Total

¥

618
754
—
4,038
134
¥ 5,544

2011

2012

¥ 4,510
4,715
2,640
1,317
130
¥ 13,314$ 7,522
9,175—
49,133
1,632$ 67,464

10. The Amounts and Breakdown of Acquired Assets and Assumed Liabilities at the Date of Business Combination(Company Acquired through Stock Purchase)

The following is a breakdown of the assets acquired and liabilities assumed of KJ Specialty Paper Co., Ltd. (which was made into
a consolidated subsidiary of the Company through share acquisition on October 1, 2011) at the date of business combination, in
addition to the acquisition costs and the net amount of expenses involved.
Current assets
Property, plant, and equipment
Current liabilities
Long-term liabilities
Negative goodwill
Acquisition costs of shares
Cash and cash equivalents
Net expenses involved in the acquisition of KJ Specialty Paper Co., Ltd.

Millions of yen

Thousands of
U.S. dollars¥ 4,905
2,872(2,626)(2,410)
(841)
1,900
(310)
1,589

$ 59,687
34,947(31,951)(29,323)(10,243)
23,117(3,780)19,337

11. Leases

Finance leases, except those leases for which the ownership of the leased assets is considered to be transferred to the lessee, of
which transaction date is on or before March 31, 2008 were as follows:(1) Equivalent of purchase price, accumulated depreciation and net book value of leased assets
Millions of yen
2012

Purchase price equivalent
Accumulated depreciation equivalent
Net book value equivalent

Machineryandequipment

Other

¥ 62
43
¥ 18

¥ 117
97
¥ 19

Thousands of U.S. dollars
2012

2011

Total

Machineryandequipment

Other

¥ 179
141
¥ 37

¥ 146
104
¥ 41

¥ 184
138
¥ 45

Total

Machineryandequipment

Other

Total

¥ 331
243
¥ 87

$ 755
534
$ 221

$ 1,429
1,189
$ 239

$ 2,184
1,723
$ 460

(2) Lease commitments
Millions of yen

Due within one year
Due after one year
Total

22

Thousands of
U.S. dollars

2012

2011

2012

¥ 23
14
¥ 37

¥ 47
39
¥ 87

$ 289
172
$ 461

(3) Lease expenses and depreciation equivalents
Millions of yen

Lease expenses
Depreciation equivalents

Thousands of
U.S. dollars

2012

2011

2012

¥ 44
44

¥ 84
84

$ 543
540

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

Due within one year
Total

Thousands of
U.S. dollars

2012

2011

2012

¥ 0
¥ 0

¥ 2
¥ 2

$ 6
$ 6

12. 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 compilationof a 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
estimated fair value when the quoted market prices are not available. Since various assumptions and factors are reflected inestimating the fair value, different assumptions and factors could result in different fair value. In addition, the contract values ofderivatives in Note 14. Derivatives are not necessarily indicative of the actual market risk involved in derivative transactions.

23

(2) Fair Value of Financial Instruments
Book value, fair values and differences between them as of March 31, 2012 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).
Millions of yen
2012

Trade notes and accounts receivable
Investments in securities
Available-for-sale securities
Total of assets
Trade notes and accounts payable
Short-term bank loans (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¥ 50,121¥ 50,121¥—

21,802
71,92430,62367,572
88,261
186,457¥—

21,802
71,92430,62367,57288,314
186,510
¥
—

—
—
—
—
52
52
¥—

Thousands of U.S. dollars
2012Book value

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

609,828265,270875,099372,598
822,147
1,073,873
2,268,619$—

Fair value

Difference

609,828$ —265,270875,099372,598
822,147
1,074,514
2,269,260
$
—

—
—
—
—
641
641
$ —

$

Millions of yen
2011

Trade notes and accounts receivable
Investments in securities
Available-for-sale securities
Total of assets
Trade notes and accounts payable
Short-term bank loans (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¥ 42,168¥ 42,168¥ —19,396
61,56520,96075,596
63,984
160,541¥—

19,396
61,56520,96075,59664,236
160,793
¥
—

—
—
—
—
252
252
¥ —

(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 in securities
Fair value of investment in 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 borrowings
Because these are settled in a short period of time, fair value approximates book value. Accordingly, fair value is recognized asbook value.

24

(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 estimated given equivalent new borrowings. The amount also includes the total current portion of long-term debt of ¥19,688 million($239,549 thousand).
(vi) Derivatives
Please see Note 14.
Unlisted equity securities (in the amount of ¥3,076 million ($37,435 thousand) on the consolidated balance sheet) are notincluded in available-for-sale securities, due to the difficulty of measuring their fair value as the stock has no quoted share priceand future cash flow cannot be predicted.
Thousands of
U.S. dollars

Millions of yen

Unlisted equity securities

2012

2011

2012

¥ 3,076¥ 3,442$ 37,435

Planned repayment of debentures, long-term debt, lease obligations and other interest-bearing liabilities after the balance sheet
date (consolidated basis).
Millions of yen
2012

Debentures
Long-term debt
Lease obligations
Other interest-bearing liabilities
Total

Due within
1 year

1-2 years

2-3 years

3-4 years

4-5 years

Over 5 years

¥

¥

¥

¥

¥

—
8,463
197
—
¥ 8,661¥

4-5 years

Over 5 years

650
19,688307—¥ 20,646—
24,150278—¥ 24,428—
13,394245—¥ 13,639—
10,442223—¥ 10,666—
12,122783—¥ 12,906

Thousands of U.S. dollars
2012
Due within
1 yearDebentures
Long-term debt
Lease obligations
Other interest-bearing liabilities
Total

$

7,908
239,549
3,746—$ 251,205

1-2 years$—
293,8323,387—$ 297,220

2-3 years$—
162,966
2,988—$ 165,954

3-4 years

$

— $
— $
—
127,050
102,976 147,498
2,723
2,401
9,533
—
—
—
$ 129,773 $ 105,377 $ 157,031

Millions of yen
2011

Debentures
Long-term debt
Lease obligations
Other interest-bearing liabilities
Total

Due within
1 year

1-2 years

2-3 years

3-4 years

4-5 years

Over 5 years

¥

¥

¥

¥

¥

¥

100
12,382294
1,000¥ 13,776

650
19,747269—¥ 20,667—
15,607246—¥ 15,854

—
8,807
208
—
¥ 9,015

—
7,340
192
—
¥ 7,532—98951—¥ 1,050

Additional information
Effective the year ended March 31, 2010, “Accounting Standard for Financial Instruments” (ASBJ, Statement No. 10 issued on
March 10, 2008) and “Guidance on Disclosures about Fair Value of Financial Instruments” (ASBJ, Guidance No. 19 issued on
March 10, 2008) have been applied.

25

13. Investments in Securities

The acquisition cost, carrying amount, gross unrealized holding gains and gross unrealized holding losses for securities with fairvalue by security type at March 31, 2012 and 2011 are summarized as follows:
Available-for-sale securities:
Millions of yen
2012

Equity securities
Government bonds and local government bonds
Other

Acquisition

Carrying amountGross unrealized
holding gains

Gross unrealized
holding losses¥ 19,0329—¥ 19,041¥ 21,792
9—¥ 21,802¥ 3,8940—¥ 3,895¥ 1,134——¥ 1,134

Thousands of U.S. dollars
2012

Equity securities
Government bonds and local government bonds
Other

Acquisition

Carrying amountGross unrealized
holding gains

Gross unrealized
holding losses$ 231,564
116—$ 231,681$ 265,149
121—$ 265,270$ 47,3864—$ 47,391$ 13,801——$ 13,801

Millions of yen
2011

Equity securities
Government bonds and local government bonds
Other

Acquisition

Carrying amountGross unrealized
holding gains

Gross unrealized
holding losses¥ 16,5509—¥ 16,560¥ 19,3879—¥ 19,396¥ 4,4190—¥ 4,419¥ 1,582——¥ 1,582

14. 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.
Special settlement ofinterest rate swap

Main targets of hedging Contract value

Interest rate swap trans- Long-term debt
actions, fixed payments,
variable receivables

Contract value of instruments due within morethan a year

¥51,405 million¥45,085 million$625,441 thousand$548,546 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.

26

15. Accrued Retirement Benefits

Employees of the Company and the domestic consolidated subsidiaries excluding directors and statutory auditors, with more than one
year of service are generally entitled to lump-sum retirement benefits determined by reference to the current basic rate of pay, length ofservice and conditions under which termination occurs. In addition, the Company and certain consolidated subsidiaries have funded otherdefined benefit plans.
In addition, the Company employs a tax-qualified retirement pension plan system, and with effect from August 1, 2011 this pension
plan system was amended whereby the portion attributable to the subscribers to the tax-qualified pension plan was transferred to aretirement lump-sum system while the portion attributable to beneficiaries was transferred to a closed pension plan.
Millions of yen

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

Thousands of
U.S. dollars

2012

2011

2012

¥ (19,841)
14,030(5,811)(1,003)(442)(7,257)—¥ (7,257)¥ (26,399)
27,387988(1,357)(1,119)(1,487)3,885¥ (5,373)$ (241,416)
170,710(70,705)(12,207)(5,388)(88,300)—$ (88,300)

The Company holds securities in a retirement benefit trust, but as the value of the securities held in trust exceeds that of the retirement
benefit obligations, and as this situation is believed likely to continue for a long period, it was decided to cancel the retirement benefit
trust on July 29, 2011 with respect to a certain portion of the securities held in trust. The monetary effect of this change to securities
held in trust was recognized in the Company’s consolidated accounts for the reporting term as follows.
Millions of yen

Decline in pension assets
Unrecognized actuarial gain
Increase in accrued retirement benefits to employees

Thousands of
U.S. dollars

2012

2012

¥ (4,734)
2,106¥ (2,628)$ (57,606)
25,630$ (31,976)

Millions of yen

Thousands of
U.S. dollars

2012

2012

¥ 7,341(8,150)(2,975)567¥ (3,217)$ 89,320(99,163)(36,198)
6,899$ (39,142)

The monetary effects of the termination of the qualified retirement pension plan are as follows.

Decrease in retirement benefit obligations
Decrease in pension assets
Unrecognized actuarial loss
Unrecognized prior service liability
Decrease in prepaid pension cost

The net periodic retirement benefit cost for the years ended March 31, 2012 and 2011 included the following components:
Millions of yen

Service cost
Interest cost
Expected return on plan assets
Amortization of net actuarial loss (gain)
Amortization of prior service cost (reduction of the obligation)
Effect of partial cancellation of retirement benefit trust
Loss on termination of qualified retirement pension plan

27

2012

2011

¥ 1,540
341
(83)
(55)
(133)
(2,106)
3,217¥ 2,719¥ 1,687
427
(171)
(253)
(104)
—
—
¥ 1,586

Thousands of
U.S. dollars
2012$ 18,742
4,158(1,018)(675)(1,626)(25,630)
39,142$ 33,093

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

2012

2011

1.5~1.9%
2.0%
mainly on a points basis
10~15 years
10~15 years

1.5~1.9%
2.0%
mainly on a points basis
10~15 years
10~15 years

16. Deferred Income Taxes

At March 31, 2012 and 2011, significant components of deferred tax assets and liabilities were as follows:
Millions of yen
2012

Deferred tax assets:
Accrued enterprise taxes
Accrued expenses
Accrued retirement benefits to employees
Allowance for doubtful accounts
Loss on revaluation of fixed assets
Unrealized gains on property, plant and equipment
Loss on natural disasterTax 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

Thousands of
U.S. dollars

2011

2012

¥

80
1,091
3,317
451
932
164
—
13,0169,448
28,502(21,913)
6,589

¥

48
1,042
3,305
157
613
171
4,527
9,903
9,484
29,255(24,780)
4,474

$

974
13,27740,357
5,498
11,3492,006—
158,368
114,960
346,791(266,621)
80,170(27)(987)(1,380)(425)(2,820)¥ 3,768(32)(1,155)—(268)(1,456)¥ 3,018(335)(12,015)(16,796)(5,173)(34,321)$ 45,849

Due to the posting of a loss before income taxes and minority interests for the years ended March 31, 2012 and 2011, description
regarding reconciliation of the statutory tax rate to the effective income tax rate was omitted.
(Amendments to amounts of deferred tax assets and liabilities as a result of change in normal effective statutory tax rate)
On December 2, 2011, the Japanese government issued “Act for Partial Revision of the Income Tax Act, etc. for the Purpose of
Creating Taxation System Responding to Changes in Economic and Social Structures” (Act No. 114 of 2011) and “Act on Special
Measures for Securing Financial Resources Necessary to Implement Measures for Reconstruction following the Great East Japan
Earthquake” (Act No. 117 of 2011). Under these newly promulgated laws, the corporate income tax rates applicable for consolidated
accounting years beginning on or after April 1, 2012, will be changed.
Accompanying these changes, the effective statutory tax rate applicable to the calculation of deferred tax assets and deferred tax
liabilities will be changed as follows according to the time of full amortization of temporary differences:
From the fiscal year beginning April 1, 2012 through the year ending March 31, 2015: 38.0%
From the fiscal year beginning April 1, 2015 and in subsequent years: 35.6%
As a result of this change, the net amount of deferred tax assets (deferred income tax assets minus deferred income tax liabilities) registered a decrease of ¥295 million ($3,594 thousand) from the previous term, and for the reporting fiscal year the Company
posted increases in income taxes — deferred on a consolidated basis in the amount of ¥435 million ($5,298 thousand) and net
unrealized gains on available-for-sale securities in the amount of ¥140 million ($1,704 thousand).

28

17. Business Combination through Acquisition

The Company acquired KJ Specialty Paper to combine the high-level technological capabilities with effectively achieving further
development for KJ’s chemical paper operations and the Company’s existing business operations.
The resultant synergy will enable us to create and expand our specialty papers division into an operation on a considerable
scale.

(1) Outline of the business combination(i) Name and description of business of acquired company
Name of acquired company: KJ Specialty Paper Co., Ltd.
Description of business of acquired company: Manufacture and sale of chemical paper (base paper for decorative laminates;
impregnated decorative sheet; backing paper for wallpaper use; stencil paper)(ii) Date of business combination
October 1, 2011(iii) Legal form of business combination
Acquisition of shares in exchange for cash(iv) Name of the company after the combination
Unchanged(v) Percentage of voting rights acquired
100%(2) Period of the business profit of the acquired company included in Consolidated Financial Statements
From October 1, 2011 to March 31, 2012

(3) Acquisition costs of the acquired company¥1,900 million ($23,117 thousand)(4) Amount of negative goodwill recognized, generating factors(i) Amount of negative goodwill¥841 million ($10,243 thousand)(ii) Generation of factors of negative goodwill
The total net asset value of the acquired company as at the business combination was higher than the cost of acquisition; therefore
the difference was recognized as negative goodwill.
18. 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 two reportable segments, identified by product portfolio, which are classified as the “Paper andPulp Segment” and the “Imaging and Development (I&D) Segment.”
The “Paper and Pulp Segment” develops writing and printing paper, premium-quality paper and pulp. The “I&D Segment”
develops photo-sensitive printing plates, inkjet paper, photographic materials and other items.
Millions of yen
Reportable segments
Year ended March 31, 2012

Paper
and Pulp

Sales
Sales to unaffiliated customers¥ 152,766
Intersegment sales and transfers
3,471
Total sales
156,237
Segment income¥ 1,275
Segment assets¥ 205,836
Amortization
6,909
Investment in equity-method affiliates
488
Increase in tangible and intangible fixed assets
19,472

Imaging andDevelopment

Total

Other

Total

¥ 34,246
15,35149,597¥414¥ 59,750
2,410
—
2,793

¥ 187,013
18,822205,835¥ 1,690¥ 265,586
9,319
488
22,266¥ 7,843
11,43919,283¥666¥ 12,909
331—
142¥ 194,856
30,262
225,119¥ 2,356¥ 278,496
9,651
488
22,40929

Adjustments¥

Consolidated— ¥ 194,856(30,262)—(30,262) 194,856¥(192) ¥ 2,164¥ (2,190) ¥ 276,305
(75)
9,576
—
488
(279)
22,130Thousands of U.S. dollars
Reportable segments
Year ended March 31, 2012

Paper
and Pulp

Imaging andDevelopment

Total

Other

Total

Adjustments

Consolidated

Sales
Sales to unaffiliated customers$ 1,858,699 $ 416,678 $ 2,275,378 $ 95,432 $ 2,370,810 $— $ 2,370,810
Intersegment sales and transfers
42,234 186,775
229,010 139,186
368,197 (368,197)—
Total sales
1,900,934 603,454 2,504,388 234,619 2,739,008 (368,197) 2,370,810
Segment income$
15,524 $ 5,038 $
20,562 $ 8,112 $
28,674 $ (2,342) $26,332
Segment assets$ 2,504,398 $ 726,975 $ 3,231,373 $ 157,073 $ 3,388,447 $ (26,652) $ 3,361,794
Amortization
84,067
29,326113,393
4,032
117,426(914)
116,511
Investment in equity-method affiliates
5,945
—
5,945
—
5,945
—
5,945
Increase in tangible and intangible fixed assets
236,923
33,987
270,911
1,739
272,650(3,395)269,254(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 include ¥(160) million ($(1,952) thousand) of elimination of inter-segment
income and loss and ¥(32) million ($(390) thousand) of corporate expenses, which are general and administrative expenses andare not allocable to the reportable segments.
• Adjustments and eliminations for segment assets include ¥22,753 million ($276,845 thousand) of corporate assets and¥(24,944) million ($(303,498) thousand) of elimination of inter-segment assets.
• Adjustments and eliminations for amortization of ¥(75) million ($(914) thousand) is elimination of inter-segment.
• Adjustments and eliminations for increase in tangible and intangible fixed assets include ¥(279) million ($(3,395) thousand) ofelimination of inter-segment increase in tangible and intangible fixed assets.
(iii) Segment income is adjusted with consolidated operating income.
Millions of yen

Reportable segments
Year ended March 31, 2011

Paper
and Pulp

Sales
Sales to unaffiliated customers¥ 172,129
Intersegment sales and transfers
3,584
Total sales
175,713
Segment income (loss)¥ 3,180
Segment assets¥ 187,821
Amortization
9,453
Investment in equity-method affiliates
488
Increase in tangible and intangible fixed assets
2,828

Imaging andDevelopment

Total¥ 31,825 ¥ 203,954
16,54820,133
48,374224,088¥(37) ¥ 3,142¥ 51,566 ¥ 239,387
2,528
11,981
—
488
1,331
4,160

Other

Total

¥ 6,891
10,88817,780¥375¥ 12,102305—
229¥ 210,846
31,021
241,868¥ 3,518¥ 251,490
12,286
488
4,389

Adjustments

Consolidated¥— ¥ 210,846(31,021)—(31,021) 210,846¥(40) ¥ 3,477¥ (2,983) ¥ 248,506(44)
12,241
—
488
(62)
4,326

(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 ¥(5) million of elimination of inter-segment income and lossand ¥(34) million of corporate expenses, which are general and administrative expenses and are not allocable to the reportablesegments.
• Adjustments and eliminations for segment assets include ¥17,585 million of corporate assets and ¥(20,569) million of elimination of inter-segment assets.
• Adjustments and eliminations for amortization of ¥(44) million is elimination of inter-segment.
• Adjustments and eliminations for increase in tangible and intangible fixed assets include ¥(62) million of elimination of intersegment increase in tangible and intangible fixed assets.
(iii) Segment income (loss) is adjusted with consolidated operating income (loss).

30

Additional information
Effective the fiscal year ended March 31, 2011, the Company has applied the “Accounting Standard for Disclosures about
Segments of an Enterprise and Related Information” (ASBJ Statement No. 17, March 27, 2009) and the “Implementation
Guidance on Accounting Standard for Disclosures about Segments of an Enterprise and Related Information” (ASBJ Guidance
No. 20, March 21, 2008).

(2) Geographical information(i) Net sales to third parties by countries or areas grouped according to geographical classification for the years ended March 31,
2012 and 2011 are as follows:
Thousands of
U.S. dollars

Millions of yen

Japan
EuropeAsia
North America
Other
Consolidated

2012

2011

2012

¥ 141,415
27,025
9,934
10,074
6,407¥ 194,856¥ 157,463
27,691
9,431
9,759
6,500
¥ 210,846$ 1,720,596
328,814120,872
122,572
77,954$ 2,370,810

Net sales information above are based on customer location.
(ii) Property, plant and equipment by countries or geographical areas at March 31, 2012 and 2011 are as follows:
Thousands of
U.S. dollars

Millions of yen

Japan
EuropeNorth America
Consolidated

2012

2011

2012

¥ 119,836
9,284
82¥ 129,203¥ 107,182
10,52287¥ 117,792$ 1,458,046
112,9621,000$ 1,572,009(3) Impairment loss on fixed assets by reportable segments
Not applicable(4) Amortization and balance of goodwill
Millions of yen
Reportable segments
Year ended March 31, 2012

(Goodwill)
Amortization
Balance as of March 31(Negative goodwill)
Amortization
Balance as of March 31

Paper
and Pulp

Imaging andDevelopment

Total

Other

Total

Adjustments

Consolidated

¥ —
—

¥ 22
—

¥ 22
—

¥ —
—

¥ 22
—

¥—
—

¥ 22
—

108
¥ 244

—
¥—

108
¥ 244

96
¥ 100

205
¥ 345

—
¥—

205
¥ 345

Adjustments

Consolidated

Thousands of U.S. dollars
Reportable segments
Year ended March 31, 2012

(Goodwill)
Amortization
Balance as of March 31(Negative goodwill)
Amortization
Balance as of March 31

Paper
and Pulp$

Imaging andDevelopment

—
—

$ 275
—

$

1,318
$ 2,978

—
$ —

1,318
$ 2,978

31

Other

Total

275
—

$

—
—

1,175
$ 1,220

Total

$

275
—

$—
—

$

275
—

2,494
$ 4,199

—
$—

2,494
$ 4,199

Millions of yen
Reportable segments
Year ended March 31, 2011

(Goodwill)
Amortization
Balance as of March 31(Negative goodwill)
Amortization
Balance as of March 31

Paper
and Pulp

Imaging andDevelopment

Total

Other

Total

Adjustments

Consolidated

¥ —
—

¥ 42
22

¥ 42
22

¥ —
—

¥ 42
22

¥—
—

¥ 42
22

108
¥ 353

—
¥—

108
¥ 353

94
¥ 196

202
¥ 550

—
¥—

202
¥ 550

(5) Information relating to gain on negative goodwill by reporting segment
Millions of yen
Reportable segments
Year ended March 31, 2012

Paper
and Pulp

Imaging andDevelopment

Total

Other

Total

Adjustments

Consolidated

Gain on negative goodwill

¥ 29

¥ 842

¥ 871

¥—

¥ 871

¥—

¥ 871

Thousands of U.S. dollars
Reportable segments
Year ended March 31, 2012

Paper
and Pulp

Imaging andDevelopment

Total

Other

Total

Adjustments

Consolidated

Gain on negative goodwill$ 360$ 10,247$ 10,607$—$ 10,607$—$ 10,607

Regarding the Imaging and Development Segment of Mitsubishi Paper Mills, on October 1, 2011 the Company acquired KJ
Specialty Paper Co., Ltd. and made it into a wholly-owned subsidiary. Gain on negative goodwill accruing from this acquisitionwas ¥841 million ($10,243 thousand). For further details, please see Note 17.

32

Mitsubishi Paper Mills Limited and Consolidated Subsidiaries

INDEPENDENT AUDITOR’S REPORT33

Mitsubishi Paper Mills Limited

BOARD OF DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE AUDITORSManaging Executive Officers

Kunio Suzuki
President and Chief Executive
Officer

Masami Mizuno

Mitsuo Ushijima

Representative Director andSenior Managing Executive
Officer

Representative Director andSenior Managing Executive
Officer

Kanji Itakura

Hiroshi Nozawa

Fukumi Kanehama

Director and Managing
Executive Officer

Director and Managing
Executive Officer

Managing Executive Officer

President and Chief Executive
Officer

Director and Managing
Executive Officers

Kunio Suzuki

Kanji Itakura

Representative Director andSenior Managing Executive
Officers

Hiroshi Nozawa

Masami Mizuno

Managing Executive Officer

President

Supervisor, Raw Materials & Purchasing
Dept.; In charge of President’s Office andInternal Audit Dept.; Director responsible
for Corporate Social Responsibility

Mitsuo Ushijima

In charge of Paper Div. and German
Operations; General Manager, Paper Div.

Outside Director

Director and Executive Officer

Tomohisa Shinagawa

Junji Harada

Senior Executive Officers

Supervisor, Finance & Accounting Dept.

Kiyoshi Maeda

General Manager, Raw Materials &Purchasing Dept.

In Charge of General Affairs & Personnel
Dept.

Naoya Tashiro

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

Fukumi Kanehama

In Charge of Technology &Environmental Dept.

Director and Senior Executive
Officer

Kiyoharu Yamada

Kazuhisa Taguchi

Shinichi Suzuki

Deputy General Manager, Paper Div.

Supervisor, Kitakami Div. andTechnology & Environmental Dept.;
In charge of Imaging Media Div. andIntellectual Property Dept.; General
Manager, Imaging Media Div.

Head, Takasago Mill; Deputy General
Manager, Paper Div., Imaging MediaDiv. and Speciality Materials Div.

Motoshige YamadaHead, Kyoto Mill; Deputy General
Manager, Imaging Media Div.

Yoshihiko Hibino

Head, Hachinohe Mill; Deputy General
Manager, Paper Div.

In charge of Speciality Materials Div.;
General Manager, Speciality Materials
Div.

Executive Officers

Yutaka Oka

President, Mitsubishi Paper Holding(Europe) GmbH(Germany)

Masaki Shuto

General Manager, Finance & Accounting
Dept.

Akira Takeuchi

Deputy Head, Hachinohe Mill andGeneral Manager, Equipment Planning
OfficeTsuneaki Handa

President & CEO, Diamic Co.,Ltd.

Corporate Auditor

Kenji Oka
Outside Corporate Auditors

Yasuharu Takamatsu
Koji Kaihotsu(as of June 28, 2012)34

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 Paper Sales Dept.
Paper Division)+81-3-5600-1463 (Business Communication & Specialty Paper
Sales Dept. Paper Division)+81-3-5600-1464 (Sales Administration Dept. Paper Division)+81-3-5600-1479 (Ink Jet & Photo Sales Dept. Imaging MediaDivision)+81-3-5600-1475 (Graphic Systems Sales Dept. Imaging MediaDivision)+81-3-5600-1471 (Speciality Materials Division)+81-3-5600-1453 (Purchasing Dept.)+81-3-5600-1454 (Forestry Dept.)

Facsimile:+81-3-5600-1489 (Information)+81-3-5600-1489 (President’s Office)+81-3-5600-1467 (Commercial Printing Paper Sales Dept.
Paper Division)+81-3-5600-1468 (Business Communication & Specialty Paper
Sales Dept. Paper Division)+81-3-5600-1469 (Sales Administration Dept. Paper Division)+81-3-5600-1418 (Ink Jet & Photo Sales Dept. Imaging MediaDivision)+81-3-5600-1413 (Graphic Systems Sales Dept. Imaging MediaDivision)+81-3-5600-1419 (Speciality Materials Division)+81-3-5600-1451 (Purchasing Dept.)+81-3-5600-1451 (Forestry Dept.)
Sales Branch:
Osaka

Disclaimer Regarding Forward-Looking Statements
This material contains forward-looking statements relating to thebusinesses and prospects of the Company. These statements are basedon our expectations at MAY 2012. 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.

35

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

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