New
Vision,New
Direction
Annual Report 2016
For the fiscal year ended March 31, 2016

To Our Stakeholders
Greetings
In 2018, we will mark the 100th year of thehave worked to strengthen our businessCompany’s founding. The time since myfoundations in line with our basic strategy

appointment as president last April has

to“Pursue Quality.”Although thepassed quickly. Guided by our company

environment in which the Company

slogan,“New Vision, New Direction,”weoperates has been difficult in somerespects, many issues have been identified
and there have been some satisfactory
results. In Japan, performance was firm
thanks to the impact of inbound tourism
demand and deregulation on our mainstay
areas of products for use in food stuffs andpharmaceuticals. Overseas, we converted
an Indian subsidiary into a consolidated
company, and a collagen peptide plant
went on line in North America. We also
made steady progress toward recovering
the investments we made to expand our
global production platform. Going forward,
we will continue striving to enhance
corporate value.

Koichi Ogata
Representative Director
and President

Contents

Nitta Gelatin
Business Segments

About Nitta Gelatin
2

Nitta Gelatin
Snapshots of 2016

4

Nitta Gelatin Group History

Vision & Strategy

Collagen Material
Business

6

Top Management Interview
The Nitta Gelatin Group’s
Growth Strategies andFuture Prospects

Special Feature
Gelatin Business

Peptide Business

Collagen Casing Business

10

Pursuing the Potential of the
Collagen Material Business

Performance

Life Science Business

12

Business Activities

13

Segment Performance

Formula Solution
Business

14

Corporate GovernanceFood Material Business17

Outside Director Interview

18

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

Adhesive Business

Fundamentals

Data Section

The earnings forecasts in this Annual Report are forward-looking statements made on the basis of
information available at the time and other certain assumptions deemed reasonable. Therefore, actual
earnings may differ from forecast figures as a result of changes in business performance and otherfactors.

20

Corporate Information

21

Shareholder and Investor
Information

22

Management’s Discussion
and Analysis

24

Business Risks

26

Consolidated Financial
StatementsAbout Nitta Gelatin
Nitta Gelatin Snapshots of 2016
Five-Year Consolidated Financial Highlights
Net Sales

32,814(Millions of yen)

27,763

28,772

Operatingincome36,88531,914

2,015(Millions of yen)

1,595

1,273
955
392

12/3

Net income
attributableto owners of
the parent

1,375

13/3

14/3

15/3

16/3

12/3

1,525

23,371

665

14/3

610

15/3

Dividend/

8,108

16/3

12/3

Payout ratio
(%)

14.00
10.00

36.1

31.7
12.00

12.00

Depreciation andamortization
Capital expenditure

14.5
10.0

12/3

13/3

14/3

15/3

15,373

13/3

14/3

16,876

16/3

15/3

2,949

2,670

2,449

(Millions of yen)）

12.00

37,597

9,724

Depreciation andamortization /Capital expenditure

46.2(Year/yen)

33,93225,19013,781

477

16/3

15/3

31,389(Millions of yen)

(Millions of yen)

13/3

14/3

Net assets /Total assets
Net assets
Total assets

12/3

13/3

1,562
1,193
841 769

16/3

12/3

825

914

13/3

14/3

1,115

16/3

15/3

Progress on the Medium-Term Management Plan
Company
Slogan“New Vision, New Direction”

Basic
Strategy“Pursue Quality”

Consolidated Financial Targets for the Fiscal Year Ending March 31, 2018
Net sales¥41.0

Operating income

billion¥2.0

Operating margin

4.9

billion%Overseas sales ratio

50.0

%

Strategic Priorities
Develop high-value-

1 added products

Ensure optimal production,

2 optimal sales

Nitta Gel at i n A nnual R eport 2016

2

Strengthen global

3 business foundations

Thousands of
U.S. dollars

Millions of yen

73rd term

74th term

75th term

76th term

77th term

77th term

March, 2012

March, 2013

March, 2014

March, 2015

March, 2016

March, 2016

¥27,763¥28,772¥32,814¥31,914¥36,885$327,517

Operating income

2,015

1,595

955

392

1,273

11,303

Net income attributable toowners of the parent

1,375

1,525

665

610

477

4,235

Comprehensive income

986

1,913

1,227

1,530

(136)

(1,208)

Research and development
expenses

895

1,026

1,004

915

1,058

9,394

Capital expenditure

769

1,193

2,949

2,449

2,670

23,708Depreciation and amortization

841

825

914

1,115

1,562

13,870Net cash provided by (used in)operating activities

568

2,050

(692)

2,074

2,385

21,177

Net cash used in investing
activities(733)(1,557)(3,105)(2,505)(1,860)(16,516)

Net cash provided by (used in)financing activities

713

(376)

3,875

544

(473)

(4,200)

2,078

2,258

2,406

2,602

2,536

22,518¥5,387¥6,287¥8,804¥10,848¥13,724$121,861

Net assets

8,108

9,724

13,781

15,373

16,876

149,849

Noncurrent liabilities

6,087

5,828

7,528

8,283

9,644

85,63323,371

25,19031,38933,93237,597

333,839

Net assets per share (BPS)¥ 509¥ 607¥ 742¥Net income per share (EPS)

100

97

38

33

26

Equity ratio

34.4

38.0

43.4

45.0

39.8

Return on equity (ROE)

19.4

17.3

5.7

4.2

3.2

Return on assets (ROA)

5.9

6.3

2.4

1.9

2.7

Dividend (yen)

10.00

14.00

12.00

12.00

12.00

Payout ratio

10.0

14.5

31.7

36.1

46.2

For the year:
Net sales

Cash and cash equivalents at endof period
At year-end:
Property, plant and equipment

Total assets
Per share information (yen, U.S.
dollars):

831

¥

815

Other (％)：

Note: The U.S. dollar amounts are translated from Japanese yen at the rate of ¥112.62 = U.S.$1, the prevailing exchange rate at March 31, 2016.

Nitta Gel at i n A nnual R eport 2016

3

$

7.24
0.23

About Nitta Gelatin

Nitta Gelatin Group History
Note: The company names used are the current ones.

1979
1971
1918
Established Nitta Gelatin
NA Inc. (U.S.)

Started an adhesive business

Sales of gelatin and other items

Commenced an adhesive business by

1990

developing high-speed, hot-melt-type

Started productionof gelatin andanimal glue

adhesive as a replacement for animal glue

1974

Started production of animal glue andindustrial gelatin for the first time in Japan
with industrial production methods
introduced from the West1935

Established Nitta Gelatin
Canada, Inc. (Canada)Started a food material business

Production of gelatin

Began marketing various food products
containing natural polysaccharides andother ingredients, in addition to gelatin

Completed the Osaka Plant

1980

1918

1982

1970
1930

Established
Bostik-Nitta
Co., Ltd.
Sales of adhesives

1968

Succeeded in
producing thinleaf gelatin
Began producing
high-quality edible thinleaf gelatin

1990

Established
Hikone Gelatin
Inc.

1975

Production of gelatin

1937

Started productionof photographic
gelatinEstablished Nitta Gelatin

After having relied on imports,
research yielded Japan’s firstdomestically madephotographic gelatin

India Ltd. (India)

Production of raw materials for gelatin

Nitta Gel at i n A nnual R eport 2016

4

2004

2014

Established Nitta Gelatin
USA, Inc. (U.S.)

Started production ofcollagen peptide in the U.S.

1996

Established Nitta Casings
Inc. (U.S.)

Production of gelatin

2001

Moved into the consumer
products business
Established Nitta Casings(Canada) Inc. (Canada)

2018

Began marketing Collagenaid®, a collagen100thanniversary

food supplement, to general consumers

Production and sales of collagen casings

2004
EstablishedNitta Biolab Inc.

1996
Started a casing
business

2018

Sales of dietary
supplements andcosmetics

Commercialized a collagencasing business in North
America, after many yearsof research

2000
2000

2016

2010
2004

2013

EstablishedNitta Gelatin
Foods Inc.
Sales of food materials

Started a
peptide business
Fully entered the collagen
peptide business in responseto new applications, including
as a health foodEstablished Nitta Gelatin
Vietnam Co., Ltd. (Vietnam)
Production and sales of gelling agents

1999

2010

2011

2012

Began production of gelatin
in India

Established Guangdong
Baiwei Bio Material Co.,
Ltd. (China)

Established Shanghai Nitta
Gelatin Co., Ltd. (China)

Established Beijing Qiushi
Collagen Casing Co., Ltd.
(China)Started production of gelatin in India in
response to the demand in Asia

Sales of collagen peptides, gelatin andother items

Production of collagen peptides

Nitta Gel at i n A nnual R eport 2016

5

Production and sales of collagen casingsVision & Strategy
Top Management Interview
The Nitta Gelatin Group’s Growth Strategies and Future Prospects

Operating Performance for the Fiscal
Year Ended March 31, 2016

Overseas, demand for use in foods was firm inNorth America. As a base for procuring raw
material for gelatin and supplying halal-certified

During the fiscal year ended March 31, 2016, theproducts, Nitta Gelatin India Ltd. and its two local

Nitta Gelatin Group companies worked as one toaffiliates in India were consolidated as subsidiaries

bring about a recovery in earnings by adopting aof Nitta Gelatin Inc. in April 2016.

new management structure and focusing on the

In the Formula Solution business, sales were

production and sale of gelatin, collagen peptides

strong thanks to successful efforts to cultivate newand collagen casings, mainly in Japan, North

customers.
As a result, net sales rose 15.6% year on year toAmerica and Asia.
In Japan, the Collagen Material business¥36,885 million; operating income surged 224.2%

experienced favorable demand for edible gelatin,

to ¥1,273 million; and ordinary income increased

mainly for use in confectionery and delicatessen

1.2% to ¥979 million. As a consequence of

items. Demand for gelatin for capsules was also

consolidating the three companies in India as

robust, underpinned by strong demand fromsubsidiaries and converting a subsidiary in China

inbound travelers and the launch of Labelinginto an equity-method affiliate, the Group reported

System of Foods with Function Claims.

¥727 million in extraordinary income and ¥666

Consolidated
Net Sales

Consolidated
Operating Income

500

20

400

¥36.8 ¥38.2
billion

¥41.0

¥2.0
billion¥1.5

billionbillion15¥1.27

billionbillion

300
10
200

5
100

0

16/3

Actual17/3

Forecast

0

18/3

Planned

16/3

ActualNitta Gel at i n A nnual R eport 2016

6

17/3

Forecast

18/3

Plannedmillion in extraordinary loss. After allowing for net

bones (bone prosthetic materials). In collagen

income attributable to non-controlling interests, net

peptides, I believe room for growth exists, notably

income attributable to owners of the parent

in Japan, China, North America and Asia. We

decreased 21.7% year on year to ¥477 million.

conducted sufficient research on the functionalityof collagen peptides and acquired a great deal of

Progress on the Medium-Term
Management Planevidence. These efforts are sources of pride for us
around the world. By moving ahead throughsufficient research and development, we plan to(For the Fiscal Year Ended March 31, 2016 to the Fiscal Year Ending March 31, 2018)

strengthen the Company further by converting thisresearch to global sales.

This year was the first of our three-year mediumterm management plan. Here, we report progress2

on our strategic priorities.

1

Develop High-ValueAdded Products

Ensure Optimal Production,
Optimal Sales
Promoting Local Production for Local
Consumption

Continuing to Differentiate Ourselves from
Other Companies

We export gelatin produced in Japan to North

I believe it is important to take up the challenge ofamount of pig-skin gelatin from North America.

developing new high-value-added products that

Going forward, we plan as far as possible toprovide customers with new value. Particularly in

produce in Japan and India for consumption locallythe field of regenerative medicine, we are pursuingand in other parts of Asia, and to sell products

research and development and contributing tomade in North America within the continent.

America and import approximately the same

society through the use of synthetic tissue andNitta Gel at i n A nnual R eport 2016

7

Vision & Strategy
Top Management Interview

3

Strengthen Global Business
Foundations

During the first year of our medium-term
management plan, we succeeded in posting a

Fostering Diversity in the Management Teamand Interaction among Human Resources

recovery in earnings. We expect to maintain thispositive momentum in the upcoming year.

We are encouraging human resources, particularly

Medium- to Long-Term Management
Strategies and Issues Facing the Company

young employees, to gain experience throughresidence in North America, India and China. Our
objective is to help them to acquire skills and growas global human resources. For instance,

Guided by our basic strategy,“Pursue Quality,”under

employees from Japan are acquiring skills related

the slogan“New Vision, New Direction,”we plan toto the production of pig-skin gelatin and casings atboost quality in all aspects of our operations,our production facilities in North America. In Marchincluding sales, production, quality assurance, and2016, we established an International Business

R&D. Furthermore, we will proactively implement theDivision. Canadian director of the Company,

strategic priorities outlined below.

Raymond Merz, has been put in charge of thisCollagen Material Businessdivision. Going forward, the International Business
Division will handle the management of ourIn the gelatin field, Nitta Gelatin plans to raiseoverseas subsidiaries.

competitiveness by achieving global cost-

Nitta Gel at i n A nnual R eport 20168

competitiveness through increased production

progress toward these targets. To this end, theefficiency and a strengthened supply chain of raw

Company will strive to raise the quality of its

materials. In addition, the Company will sell the

products and all business activities, from sales andproducts of its Group companies in growing

production to quality assurance and R&D. At themarkets and optimal regions. In collagen peptide,same time, it will rigorously cut costs, mainly by

Nitta Gelatin will open up highly profitable new

producing and selling products in optimal locations,markets by launching products with enhanced

and reducing the cost of raw materials.

functional properties, while expanding business

In Japan, the Company foresees thecontinuation of a robust business trend in edible

globally in Asia and North America.

gelatin and pharmaceutical gelatin and expects

In collagen casings, the Group intends toenhance its sales and earnings by increasing

deregulation of the functional labeling of foods to

productivity at its production facilities in North

breathe new life into its markets. Furthermore,

America and upgrading its production and sales

despite the challenges faced by an appreciating

framework in China.

dollar and intensifying competition in North
America, the Company projects growing demand in

In the life science field, based on R&D activities
focused on materials for use in research andAsia for gelatin, collagen peptide, collagen casing

medicine, Nitta Gelatin will popularize theand high-performance gaskets. Eyeing this demand,

application of these materials in the field of

the Company will work to expand sales globally,

regenerative medicine as it works to nurture future

centered on Asia as a growing market.
With regard to capital investment, the Company

business.

will invest in projects that realize products andFormula Solution Businessservices of high added value in Japan. Overseas,

In the food material business, Nitta Gelatin will

the Company will invest in projects aimed at

expand business through food solutions with newenhancing productivity to increase production

value for customers that leverage its application

capacity, as well as in response to the environment.

technologies. In the adhesives field, Nitta Gelatin

Based on these assumptions, in the fiscal year

will continue to increase production, as it

ending March 31, 2017, the Company forecasts

anticipates rising demand for their use in hygiene

consolidated net sales of ¥38.2 billion, up 3.6%

products. As for high-performance gaskets, theyear on year; consolidated operating income ofCompany will strive to increase its sales by finding¥1.5 billion, up 17.8%; consolidated ordinary

new uses and developing new products.

income of ¥1.4 billion, up 42.9%; and net income
attributable to owners of the parent of ¥0.8 billion,

Earnings Forecasts for the Fiscal Yearup 67.5%.

Ending March 31, 2017

In Conclusion

Nitta Gelatin will mark its 100th founding
anniversary in 2018, and has formulated a new

Nitta Gelatin has grown by drawing on thethree-year medium-term management plan, started

characteristics of collagen and gelatin. By creatingin the fiscal year ended March 31, 2016, in time for

new technologies, we believe that ample room forthis milestone. Our targets are to attain net sales offurther expansion exists in the years to come.

¥41.0 billion and operating income of ¥2.0 billion

I would like to ask our stakeholders for yourin the final fiscal year of the plan, ending March 31,

ongoing support and encouragement as the Nitta

2018.

Gelatin Group works to achieve new
breakthroughs.

Nitta Gelatin is positioning the fiscal year ending
March 31, 2017 as an important year for achieving

Nitta Gel at i n A nnual R eport 20169

Special Feature
Pursuing the Potential of the Collagen
Material Business
Gelatin

Collagen is the protein most common in animals’
bodies, typically making up around 30% of all

proteins. It is the main constituent of connective
tissues, such as the skin, bones, cartilage and tendons.
Collagen molecules in the body form a regulartriple-helical structure. Although insoluble in water, if
s triplesubjected to heat over a long period, collagen’
strand structure comes undone at a certain
temperature, and collagen can then be melted in hot
water. After collagen has been denatured by heat andmelted in hot water, it is called“gelatin.”Collagen peptide is a lower molecular form ofgelatin that has been processed through thehydrolysis of gelatin using proteolytic enzymes.

Solidify

Retain foamGummiesMarshmallows

Create films

Produce a gloss

CapsulesSugar-coated tablets

Change thetexture of food

RetainmoistureCream croquettes

Dumplings

Solidify, dissolve

Add richness
to food

Collagen

Moisturize
Cosmetics

Create films
Sausage casings

Ready-to-eat meals forconvenience stores
Nitta Gel at i n A nnual R eport 2016

10

Ramen

Brand Development

Collagen Peptide

Wellnex is the global brand for the highly
functional collagen peptide Nitta Gelatin has
developed. Collagen peptide, produced byfragmenting gelatin into smaller peptide
chains, is known to be effective in maintaining
the functional health of skin, joints, bones andmuscles. Collagen peptide is used in the foodproducts sector, in nutritional foods anddietary supplements. Please be sure to have alook at“Wellnex-Collagen.com,”ourinformational site that describes the functionsof Wellnex.

G-zain is used to make smartphones, digital
cameras and other electronic devices airtight.
G-zain is our brand of high-performancegaskets that enable the process of attachinggaskets to products to be fully automated,
and this was generated through a patented
technology developed during research into
adhesives. The new Adhesive Innovation
Center, located within our Osaka Plant, ispursuing further possibilities for G-zain.

Maintain bodily functions(skin, bones, joints)
Health foods, nutritional supplements

Nitta Gelatin is proactively making inroads inthe field of medicine. As collagen has a closeaffinity with biological tissue, it is used as abiomaterial in synthetic tissue and bones,
which promote self-regeneration andrestoration of tissue. beMatrix collagen wasused in the world’s first operation totransplant retinal pigment epithelial tissue
derived from induced pluripotent stem cells totreat geriatric onset blindness, a major causeof age-related macular degeneration.

Nitta Gel at i n A nnual R eport 201611

Performance
Business Activities
Collagen Material
Business

Formula Solution
Business

In the Collagen Material Business, we manufacture

We manufacture and sell high-value-and sell gelatin, collagen peptide, collagenadded food formulations throughcasings, collagen and other products made fromformulation technologies for a variety ofanimal bones and skin or fish scales and skin.

materials. Our goal is to provide theproduct proposals and applications
required by customers as we help them

Gelatin Business
Besides its gelling ability, gelatin has a variety of functions suchto solve the issues they face.

as water-binding, foaming, film-forming, glossing, texturizing,
thickening and adhesion. For this reason, gelatin has a range ofapplications, from food to pharmaceuticals and photosensitizedmaterials. In the gelatin business, we manufacture and sell

Food Material BusinessWe sell various food formulations, such as gelling
agents and stabilizers for ham. Gelling agents aregelatin for applications in such industrial sectors.

food formulations consisting of plant-based
polysaccharides such as carrageenan, agar, pectin,

Peptide BusinessWe manufacture and sell collagen peptide, a lower molecularform of gelatin. Collagen peptide is produced throughand natural gum, as well as gelatin and collagen
peptide, and are used for instance in jelly anddesserts, dairy products, and frozen food.

hydrolysis of gelatin using proteolytic enzymes. As collagen
peptide is recognized as a bioactive compound and a material
that has bioregulatory functions, it is used in foodstuffs such as
nutritional agents and supplements that advertise functional

Stabilizers for ham consist of plant-based
polysaccharides such as carrageenan and naturalgum, and animal-based materials such as collagen-benefits for the skin, bones and joints.

derived proteins. We also manufacture and sell

Collagen Casing Businessfood and cosmetics.

consumer products such as collagen beverages,

We manufacturer and sell edible collagen casings. Collagencasings are tubular materials that are filled with meat in thesausage production process. Collagen casings are marketed to
the livestock food processing sector as an alternative to natural
casings made from sheep and pig intestine.

Adhesive BusinessIn the adhesive business, we supply various types
of hot-melt adhesives and animal glue adhesives.
The biggest advantage of hot-melt adhesives,
which are applied after heating to melt and thenLife Science Business
Collagen is extracted and refined from animal skin and tendons
using acid solutions and enzymes, while preserving its triple
spiral molecular structure. As collagen has a close affinity withbiological tissue, it is used as a biomaterial for artificial skin andbone, which promote self-regeneration and restoration ofhuman tissue, in addition to use as a research reagent for cell
culture. Collagen for all of these applications is marketed to
medical device manufacturers and university research institutes.
We have also developed a highly refined medical gelatin as aadhere as they cool and solidify, is their high-speed
adhesion. Accordingly, hot-melt adhesives are usedwidely not only in packaging applications, but also
in the hygienic goods, bookbinding, construction
and woodwork, electrical, housing and othersectors. In other areas, high-performance gaskets
hardened with ultraviolet exposure are used as asealant for instance in electronic goods and home
appliances.

biomaterial that induces self-repair and regeneration of humantissue in tissue engineering. This gelatin is marketed to medical
device manufacturers and other entities that are pursuingresearch into the commercialization of this technology.
Nitta Gel at i n A nnual R eport 201612

Segment Performance
Collagen Material Business
Sales
Sales
(millions(millionsof yen)of yen)22,43622,436
17,433
17,433

Sales
Sales(millions(millionsof yen)of yen)27,686
27,68630,00030,00020,00020,000

Formula Solution Business
12,00012,00022,95922,95918,674
18,674

0

12/3
12/3

13/3
13/3

14/3
14/3

0

16/3
16/3

15/3
15/3

0

12/3
12/3

13/3
13/3

14/3
14/3

Segment
Segment
profits
profits(millions(millionsof yen)of yen)

3,000
3,000

1,500
1,500

2,255
2,255

1,082
1,082

1,832
1,832

1,794
1,794

2,000
2,000

15/3
15/3

16/3
16/3

1,151
1,151
920920

1,000
1,000

1,420
1,420

647647

1,101
1,101
1,000
1,000

0

9,199
9,199

4,000
4,000

Segment
Segment
profits
profits(millions(millionsof yen)of yen)

0

8,955
8,955

8,000
8,000

10,00010,0000

10,32910,329 10,097
10,377
10,097 10,377

812
812

500 500

12/3
12/3

13/3
13/3

14/3
14/3

15/3
15/3

0

16/3
16/3

Japan

0

12/3
12/3

13/3
13/3

14/3
14/3

15/3
15/3

16/3
16/3

Gelling agents used in confectionery and

Demand for gelatin for use in confectionery

desserts attracted new customers, resulting

Sales of gelatin for production of capsules

Sales of adhesives used for bookbindingin higher sales.

and delicatessen items remained steady.

applications declined because of theused in health foods increased.

shrinking market, while sales of adhesives

Sales of collagen peptides were robust as its

used for packaging remained firm. Sales offunctionality was reacknowleged.

adhesives used in sanitary materials

Overseasincreased.

We converted three subsidiaries in India into
consolidated subsidiaries.
Revenues declined due to more intensecompetition for collagen casings.

Others 906 (2.5%)

Canada 2,044(5.5%)
UnitedStates9,109(24.7%)
Asia
2,225(6.0%)

Sales byregion(millions of yen)

India 3,290(8.9%)

Nitta Gel at i n A nnual R eport 2016

13

Japan
19,307(52.4%)

Corporate Governance System

Fundamentals

Reasons for Adopting Corporate Governance System
Nitta Gelatin believes that an effective corporate governanceCorporate
Governancesystem comprises directors, a Board of Directors, Audit &Supervisory Board members and Audit & Supervisory Board
that perform management supervisory and oversightfunctions.
We introduced an executive officer system in January2005 to enhance management efficiency. We have also taken
steps to separate business execution and supervisory

Basic Stance on
Corporate Governancefunctions, improve management transparency, accelerate themanagement decision-making process, and strengthen
management oversight functions.

Nitta Gelatin's Corporate Philosophy is“Based on a spirit of
empathy and sincerity, we, the members of the Nitta Gelatin

Functions of Each Body

Family are dedicated to the development of our business andBoard of Directors and Executive Structure

contributions to the global community. We will lead

As a rule, Nitta Gelatin’s Board of Directors meets once a

prosperous and fulfilling lives through our competence andmonth in its role as the Company’s highest authority regarding

utmost efforts.”To this end, the Nitta Gelatin Group, as amanagement decisions. It formulates management guidelines,

world leading gelatin manufacturer, uses its proprietaryproposes management strategies, and votes to resolve

technology to quickly and efficiently provide superior

important issues regarding business operations, as well as

products and services to global customers. Our stance is also

approve matters prescribed by laws and regulations and theto produce healthy, functional and valuable products in

Company's Articles of Incorporation. The Board of Directors,

multinational facilities that are safe, reliable andmoreover, supervises and monitors the conduct of theenvironmentally friendly. We aim to continue satisfying our

executive officers to ensure that management guidelines andcustomers with our products and services, and to leverage

strategies are followed.

this as our means to sustain and secure growth, andAudit & Supervisory Board and Audit & Supervisory

ultimately enhance our corporate value.

Board members

It is therefore imperative that each and every director,

Nitta Gelatin has adopted an Audit & Supervisory Board

executive officer and employee of the Group is a person

System that consists of three Audit & Supervisory Board

trusted by all stakeholders; whether shareholders, customers,

members (two of whom are outside Audit & Supervisorybusiness partners or communities and society at large. To

Board members) who provide management oversight.

achieve this, we recognize that nothing is more important

Executive Committee

than to strengthen and enhance our corporate governance,

A Executive Committee is held twice a month to discuss

ensure the transparency of our management and raise ourmatters of importance related to the Company’s businessbusiness efficiency.

execution. This Executive Committee is made up of theAnnual General Meeting of Shareholders
Appoint anddismiss

Appoint anddismiss

Audit &
Supervisory Board

Collaborate

Appoint anddismiss

Audit

Accounting
Auditor

Representative
Director andPresident

Collaborate

ReportInternal Audit
OfficeAppoint, dismiss
and supervise

ReportCollaborate
Accounting
audit

Board ofDirectors

MonitorInternal
audit

Execution of duties

Supervise

ReportExecutive
department

Nitta Gel at i n A nnual R eport 201614

Executive Committee

Corporate
Attorneys,
etc.

Strategy Committee
Compliance andRisk Management
Committee

Advise andguideCompany’s standing directors, standing Audit & Supervisoryand employees are also appointed to director positions at

Board members, standing executive officers in Japan, andour subsidiaries. This facilitates information sharing

other members appointed by the Company’s president. In a

throughout the Group and encourages subsidiaries to execute

further addition, a Strategy Committee meets once a monthbusiness operations correctly, ensuring that the businessto discuss individual issues of particular importance to theoperations of the Group are appropriate. Furthermore, ourCompany and offer its support to enable the Company’scompany has created a set of Management Bylaws forpresident and Board of Directors to make decisions promptly.

Affiliated Companies, and developed a management structureThis Strategy Committee is made up of members appointed

based on a reporting system. We are also drafting a principles

by either the president or the Board of Directors.

of business conduct that is applicable throughout the Groupand establishing and operating a compliance and risk

Corporate Governance System and Internal Control

management structure.

Organization Chart (p14)

Agreements Concerning Limited Liability
Internal Control System

Based on Article 427, Paragraph 1 of the Companies Act,

Having created documentation and checklists for a company-

pursuant to Article 423, Paragraph 1 of the Act, the Company

wide internal control system, an internal business practices

has entered into agreements with outside directors andcontrol system, an IT internal control system and an internal

outside Audit & Supervisory Board members that limit liability

control system for subsidiaries, Nitta Gelatin launched thefor damages. As prescribed by the agreement, compensation

systems in fiscal 2012 following inspection and evaluation offor damages by outside directors shall be limited to thetheir operation and correction of deficiencies.

minimum liability amount stipulated by Article 425, Paragraph
1, of the Companies Act, for outside directors, andFurthermore, in accordance with the Companies Act, weresolved at a Board of Directors meeting to devise a Basiccompensation for damages by outside Audit & Supervisory

Policy on Building an Internal Control System.

Board members shall be limited to the minimum liability
amount stipulated by Article 425, Paragraph 1, for outside

Risk Management Structure

Audit & Supervisory Board members. This limited liability

Nitta Gelatin believes that improving the enforcement of its

agreement is restricted to compensation for damages thatcompliance regulations is the optimal method to reducearise when outside directors and outside Audit & Supervisorybusiness risks. We devised the Basic Policy on Building an

Board members act in good faith and are not grosslyInternal Control System in line with this fundamental stance.

negligent.

Furthermore, the Company’s Compliance Bylaws and Risk

Internal and Corporate Audits

Management Bylaws were formulated in accordance with thisbasic policy.

The Internal Audit Division, comprising three members,

We established the Compliance and Risk Management
Committee as an organization that provides oversight for the

conducts Nitta Gelatin’s internal audits. The division performs

overall Nitta Gelatin Group. The committee is chaired by theinspections to verify that the business operations of eachs president. As a general rule, the committee meets
Company’

department are in compliance with relevant laws andonce every two months to review the latest complianceregulations and executed appropriately and effectively, andissues, and to examine measures to prevent potential risks

that the Company’s assets are safeguarded. The Internal

and manage risks that have emerged.

Audit Office collaborates with the Company’s accounting
auditor, Ernst & Young ShinNihon LLC, to plan and implement

We also devised the Principles of Business Conduct inNovember 2010 and disseminated the new principles

internal audits that are reported to the Company’sthroughout the Group. These principles require all Groupmanagement. Input from the accounting auditors is used todirectors, executive officers and employees to rigorously

improve the execution of duties of the Internal Audit Officecomply with all relevant laws and regulations, conduct

and the Audit & Supervisory Board members.
In addition to one standing Audit & Supervisory Board

business operations with fairness and integrity, and recognizethat as members of society they must act as both goodmember, two part-time Audit & Supervisory Board members

corporate citizens and individual members of society.

attend Board of Directors meetings, and provide appropriate

Moreover, we receive advice and guidance concerning

oversight over the directors in the execution of their duties.

compliance and risk management issues from attorneys and

The standing Audit & Supervisory Board member also attends

other consultants as required.

the Executive Committee and other important meetings
within the Company to further monitor the execution of

Framework to Ensure That Subsidiaries Perform Theirduties by the directors. This auditor also conducts in-house

Duties Appropriately

audits of various organizational entities within the Group,

The Nitta Gelatin Group disseminates and discusses theinterviewing the people in charge to make assessments, andbusiness activities and financial status of subsidiaries, incollaborates with the Internal Audit Office and accounting

addition to other material information, at Board of Directors

auditors to inspect the execution of the Group's businessand Executive Committee meetings. The Company’s directors

operations.

Nitta Gel at i n A nnual R eport 201615

Fundamentals

Nitta Gelatin. Mr. Tsuda also serves as the head of the Tsuda
Certified Public Accountant Office, and as an outside director

Corporate Governanceof Techno Associe Co., Ltd., Tatsuta Electric Wire & Cable
Co., Ltd. and Daihatsu Diesel Mfg. Co., Ltd. There are no

Outside Directors and Outside Audit& Supervisory Board members

conflicts of interest between Nitta Gelatin and these

Nitta Gelatin has appointed two outside directors and two

and outside Audit & Supervisory Board members Shigeoki

outside Audit & Supervisory Board members. Our

Tougou and Tamon Tsuda, have been designatedmanagement practices seek to leverage the objectivity,

independent directors as prescribed by the Tokyo Stockcompanies.
Outside directors Mayumi Ishihara and Hisayuki Suekawa,

wealth of experience and knowledge of these outside

Exchange. We have submitted“Independent Directors/

executives, and their oversight strengthens our corporate

Auditors Notifications”to confirm compliance with thegovernance.

relevant codes of conduct.

Outside director Mayumi Ishihara brings a wealth ofNote that information regarding monitoring and audits

experience and knowledge as an attorney. We believe that

performed by outside directors and outside Audit &she strengthens management transparency and compliance

Supervisory Board members, collaboration between internal

and further enhances oversight functions relating to businessaudits, auditor’s audits and accounting audits, and theoperations. Ms. Ishihara also works as an attorney at Oh-

relationship with the Internal Control Department may be

Ebashi LPC & Partners, and serves as an outside Audit &found in the Internal and Corporate Audits section. This

Supervisory Board member at Morishita Jintan Co., Ltd. andinformation is also reported and opinions are exchanged at

as an outside director at both Morito Co., Ltd. and OS Co.,

Board of Directors and Audit & Supervisory Board meetings.

Ltd. Nitta Gelatin receives legal consultations from Oh-Ebashi

Executive Remuneration andOther Compensation

LPC & Partners, where Ms. Ishihara is currently an attorney,and sells products to Morishita Jintan Co., Ltd. However, shesatisfies the independence standards required to serve as an
outside director and outside Audit & Supervisory Board

Total remuneration by executive classification, total

member of Nitta Gelatin. There are no conflicts of interest

amount by type of remuneration, and number of target

between Nitta Gelatin and Morito Co., Ltd. or OS Co., Ltd.

executives

Outside director Hisayuki Suekawa has developed
significant experience and insight over several years as a

Executiveclassification

manager. We believe that these skills enable him toappropriately perform his responsibilities as an outside

Directors

director, including deciding important management issues

excludingoutsidedirectors

and supervising the execution of business operations. Mr.
Suekawa also currently serves as a consultant for Shiseido

Audit &
Supervisory
Board
members

Company, Limited. There are no conflicts of interest between
Nitta Gelatin and Shiseido Company, Limited.

excludingoutside Audit& Supervisory
Board
members

Outside Audit & Supervisory Board member Shigeoki
Tougou has a wealth of experience, most notably as amanager. We believe that this experience will allow him totake a comprehensive approach to ensuring management

Outsideexecutives

practices are appropriate and impartial. Mr. Tougou also

Total
remunerationand other
compensation

Total amount by type of
remuneration (millions of yen)

No. ofqualifying
Retirement officers
benefits

Basic
remuneration

Stock
options

Bonus

102

102

－

－

－

6

14

14

－

－

－

1

19

19

－

－

－

4

(millions of yen)serves as president of Higashi Nippon Gakuen University andas an outside director of JAC Recruitment Co., Ltd. There are

Policy on Determining the Calculation Method andno conflicts of interest between Nitta Gelatin and theseAmount of Total Executive Officer Remuneration andentities.

Other Compensation

Outside Audit & Supervisory Board member Tamon Tsuda

Basic remuneration aims to incentivize executive officers to

is a certified public accountant. We believe that the

improve the Company’s medium- to long-term performanceknowledge and experience he has developed over his longand is primarily based on each officer’s role and position.

career as an accountant will enable him to utilize his role toAfter evaluating the overall factors, including the Company’sensure that our management practices are appropriate andperformance and management environments, remuneration

fair. Mr. Tsuda previously belonged to the accounting firm ofamounts are determined within the limits approved at theErnst & Young ShinNihon LLC, and has provided auditing

Annual General Meeting of Shareholders, and based onservices to our company. However, he left his position at

discussions at the Board of Directors meeting with regard to

Ernst & Young ShinNihon LLC three years ago and satisfies the

remuneration for directors, and discussions at Audit &independence standards required to serve as an outside

Supervisory Board meetings with regard to remuneration for

director and outside Audit & Supervisory Board member ofAudit & Supervisory Board members.

Nitta Gel at i n A nnual R eport 201616

Outside Director Interview

Outside Director Mayumi Ishihara presents her views on the Nitta Gelatin Groupapproach to M&A and other projects, and legal risks stemmingfrom such transactions. I also frequently raise simple questions
and express my views on everyday things I notice as both aconsumer and a woman.
Certain things that appear reasonable to a company orparticular industry are sometimes irrational from the perspective ofsociety and the consumer—this is true of all companies.
Consequently, as an outside director, I believe that I am a litmus test
for the Company.
During Board of Directors meetings, outside directors andoutside Audit & Supervisory Board members express numerous
points of view, which allows for lively discussions. The
management team provides sincere answers, showing that theylisten carefully to ideas and are willing to incorporate them into

An Objective View of Nitta Gelatinmanagement practices, which is a testament to the effectivenessof our corporate governance functions.

Nitta Gelatin, as suggested by its name, mainly manufactures andMessage for the Management Teamsells gelatin. When the Company was founded about 100 years
ago, it got its start in the manufacture and sale of glue. However,to respond flexibly to changing market conditions and customer

Mr. Ogata took office as the new president one year ago, and I

needs, Nitta Gelatin has gradually taken up new challenges.

look forward to seeing his unique“footprint”gradually taking

Today, it sells gelatin for applications in fields such as

shape. The marks left by a number of presidents over the 100

photography, foods and pharmaceuticals. In recent years, ouryears since our founding have made us the company we areadvanced technologies have also made contributions in the field

today. I am therefore excited to see the new footprint that willof regenerative medicine, including treatments related to induced

become a part of our legacy.
Furthermore, we must undertake the major task of cultivating

pluripoitent stem cells. Reflecting on this sustainability, it can besaid that Nitta Gelatin“detects subtle changes as time evolves,the next generation of employees and managers to sustain ourand responds by creating advanced technologies for each age.”Incompany and growth. Nitta Gelatin only has a few women ina positive sense, the Company may be called“unyielding.”

management positons, so I believe that it is important to cultivate

Another of Nitta Gelatin’s defining characteristics is its

more. I would like to see more women in the management teamwillingness to aggressively pursue business opportunities

in the near future. To bring more women into its ranks, theoverseas. Following its first foray overseas into India in 1975, themanagement team itself must adopt human resource measures

Company has gone on to establish operations in North America,that aggressively appoint women. Although it is important to be

China, Vietnam and other countries. This development haspatient, I hope that we tackle this problem quickly and carefully

produced a wealth of opportunities for employees to become

to avoid reverse discrimination and hurting motivation in thefamiliar with English, and English is commonly used within theworkplace.

Company. The global capabilities possessed by individual

Moreover, from a global perspective, Nitta Gelatin also has an

employees are a remarkable attribute.

international component, demonstrated by the fact that thes corporate culture is based on a strong spirit of
Nitta Gelatin’present Board of Directors and executive committee include one

dedication, authenticity and perseverance. Our original DNA, theU.S. and one Canadian citizen. Going forward, from a diversity

ability to create quality products, lives on today. This spirit isperspective, I hope that we appropriately select management

evident in the tenacity and curiosity of its employees, who areteam members who meet the needs of each age.

fully engaged in creating high-quality products. That said, despite

I have always valued the“circle”that binds each one of us,

harnessing our combined efforts to create quality products, theincluding at work and in our daily lives. It has been seven years

reality is that many people remain unaware of the quality of oursince I was appointed as an outside director, and now that I haveproducts and our technical capabilities. I believe that going

been given the opportunity to express my views on the status offorward it will be necessary to take more aggressive steps to

Nitta Gelatin, I believe that everything springs from the circle thatappeal to customers; that is, to strategically reach out to them inbinds us. I sense that this company, in its management practices,a manner that highlights our quality.

also effectively utilizes this circle. Even when we entered theIndian market, even when we develop global businessRole of Outside Directors

opportunities, such as in North America and China, synergy
springs from the circle that binds different peoples.

As I am an attorney, at Board of Directors meetings, I actively

Let me close by saying that as the Nitta Gelatin Group leaps

provide a legal perspective on issues of corporate law, ouronto the global stage, I am excited about its future.

Nitta Gel at i n A nnual R eport 201617

Fundamentals

Board of Directors, Audit & Supervisory
Board Members and Executive Officers(As of June 28, 2016)

Back row from the left: Raymond Merz, Director and Executive Officer; Yoshihisa Sugimoto, Director and Executive Officer; Hiroshi Nitta, Director and Executive Officer;
Hiroshi Takase, Standing Audit & Supervisory Board Member; Shigeoki Tougou, Outside Audit & Supervisory Board Member; Tamon Tsuda, Outside Audit & Supervisory
Board Member
Front row from the left: Hisayuki Suekawa, Outside Director; Norimichi Soga, Director and Chairman, Executive Officer; Koichi Ogata, Representative Director andPresident, Executive Officer; Toru Tamaoka, Director and Executive Officer; Mayumi Ishihara, Outside Director

Board of Directors
Norimichi Soga

Koichi Ogata

Apr. 1971

Joined Kobe Kiito Co., Ltd.

Apr. 1981

Joined Kanebo Foods, Ltd. (currently Kracie Foods, Ltd.)

July 1973

Joined the Company

Dec. 2005

Joined the Company

July 1991

General Manager, Overseas Sales and Marketing
Division of the Company

Mar. 2008

General Manager, R&D Department, Sales & Marketing
Division of the Company

July 1992

General Manager, Sales & Marketing Department,
Gelatin Division of the Company

June 2010

Executive Officer of the Company

Nov. 1996

Director of the Company

June 2012

Director of the Company

July 1997

General Manager, Sales & Marketing Division andGeneral Manager, Tokyo Branch of the Company

Mar. 2013

General Manager, Sales & Marketing Division of theCompany

June 1999

Managing Director of the Company

Apr. 2015

Representative Director and President of the Company(to present)

Sep. 1999

General Manager, Operating Division of the Company

July 2015

Executive Officer of the Company (to present)

June 2003

Senior Managing Director of the Company

June 2004

Representative Director, Senior Managing Director of
the Company

June 2006

Representative Director and President of the Company

Apr. 2015

Director and Chairman of the Company (to present)

July 2015

Executive Officer of the Company (to present)

Director and Chairman, Executive Officer

Representative Director and President, Executive Officer

Nitta Gel at i n A nnual R eport 201618

Directors

Audit & Supervisory Board Members

Toru Tamaoka

Hiroshi Takase

Apr. 1984

Joined the Company

Apr. 1978

Joined the Company

Mar. 2008

General Manager, Planning and Management Department,
Gelatin Division of the Company

Mar. 2004

Team Leader (General Manager), Finance Department,
General Administration Division of the Company

July 2010

General Manager, Adhesives Division of the Company (to present)

Nov. 2005

General Manager, in charge of the North America business

June 2012

Executive Officer of the Company (to present)

Mar. 2006

Dispatched to Nitta Gelatin Holding, Inc.

June 2014

Director of the Company (to present)

July 2006

Director and CEO of Nitta Gelatin Holding, Inc.

July 2011

General Manager, Finance Division of the Company

Mar. 2013

General Manager, Finance Department, General
Administration Division of the Company

Director and Executive Officer, General Manager, Adhesives Division

Raymond Merz

Director and Executive Officer, General Manager,
International Business DivisionSep. 1984

Joined Alcan Aluminium Limited (Canada)Jan. 1995

Joined Cangel Inc. (currently Nitta Gelatin Canada, Inc.)

Jan. 1996

General Manager, Production Division of Nitta Gelatin
Canada, Inc.

Jan. 2000

Director and Vice President of Nitta Gelatin Canada, Inc.

May 2002

Chief Operating Officer (COO) of Nitta Gelatin Canada, Inc.

Dec. 2004

Director and CEO of Nitta Gelatin USA, Inc.

Apr. 2006

Director and CEO of Nitta Gelatin Canada, Inc.

June 2013

Executive Officer of the Company (to present)

Mar. 2014

General Manager, Gelatin Division of the Company (to present)

June 2014

Director of the Company (to present)

Mar. 2016

General Manager, International Business Division of theCompany (to present)

Standing Audit & Supervisory Board Member

June 2013

Executive officer, in charge of casing business in China

June 2016

Standing Audit & Supervisory Board Member (to present)

Shigeoki Tougou

Outside Audit & Supervisory Board Member

Yoshihisa Sugimoto

Director and Executive Officer, General Manager of Sales & Marketing Division

Apr. 1966

Joined the Bank of Japan

July 1993

General Manager, Secretariat of the Policy Board of
Bank of Japan

Apr. 1995

General Manager, International Department of the Bankof JapanJune 1996

Managing Director of The Nippon Credit Bank, Ltd.
(currently Aozora Bank, Ltd.)

Aug. 1997

President of Aozora Bank, Ltd.

June 2000

President and Representative Director of Osaka
Shipbuilding Co., Ltd. (currently Daizo Corporation)

June 2010

President of Nippon RAD Inc.

June 2011

Chief Executive Officer of Nippon RAD Inc.

June 2012

Outside Audit & Supervisory Board Member of theCompany (to present)

Apr. 1986

Joined Nitta Corporation

Sep. 2006

General Manager, Sales Department, Sales & Marketing
Division of the Company

June 2012

General Manager, Sales & Marketing Division of the Company

Tamon Tsuda

Mar. 2013

General Manager, Sales Department, Sales & Marketing
Division of the Company

Apr. 1975

June 2014

Executive Officer of the Company (to present)

Joined The Sumitomo Bank, Limited (currently
Sumitomo Mitsui Banking Corporation)

Mar. 2015

General Manager, Sales & Marketing Division of the Company(to present)

Oct. 1981

Joined Arthur Andersen, LLP

Mar. 1985

Registered as a certified public accountant

June 2016

Director of the Company (to present)

Dec. 1994

Partner of Century Audit Corporation (currently Ernst &Young ShinNihon LLC)

Nov. 2000

Representative Partner of Century Ota Showa & Co.
(currently Ernst & Young ShinNihon LLC)

Hiroshi Nitta

Director and Executive Officer, General Manager, Food Division
Apr. 2003

Joined Nitta Corporation

Apr. 2003

Dispatched to Nitta Haas Inc.

June 2009

Director of the Company (to present)

Jan. 2011

Deputy General Manager, Gelatin Division of the Company

Mar. 2011

Deputy General Manager, Manufacturing Division of the Company

July 2015

Executive Officer of the Company (to present)

Nov. 2015

General Manager, Food Division (to present)

July 2008

Senior Partner of Ernst & Young ShinNihon LLC

July 2012

Head of Tsuda Certified Public Accountant Office (to present)

June 2014

Outside Audit & Supervisory Board Member of theCompany (to present)

Managing Executive Officer
Takeo Yamaki

Mayumi Ishihara

In charge of Nitta Gelatin India Ltd.

Outside Director
Apr. 1986

Outside Audit & Supervisory Board Member

Worked at the Kobe District Court

Executive Officers

Oct. 1994

Passed the bar exam

Apr. 1997

Registered as an attorney-at-law

Apr. 1997

Joined Oh-Ebashi Law Offices (currently Oh-Ebashi LPC &Partners) (to present)

June 2010

Outside Director of the Company (to present)

Hidenori Takemiya Shoichi Takagi
General Manager,
Peptide Division

Yuji Yamamoto

Hisayuki Suekawa

Plant Manager ofGelatin Division

Outside Director
Apr. 1982

Joined Shiseido Company, Limited

Feb. 2007

General Manager of the Business Planning Department of
Shiseido Company, Limited

Apr. 2008

Corporate Officer, General Manager of the Corporate Planning
Department of Shiseido Company, Limited

June 2009

Director of Shiseido Company, Limited

Apr. 2011

Representative Director, President & CEO of Shiseido
Company, Limited

Apr. 2013

Senior Adviser of Shiseido Company, Limited (to present)

June 2014

Outside Director of the Company (to present)

Yoshitaka Oda
Nitta Biolab Inc.
President

Seiichi Nishikawa
General Manager,
Gelatin Division

Dispatched to Nitta Casings Inc.

Norifumi Nagaoka

Deputy General Manager,
International Business Division
and General Manager, Collagen
Casings Department,International Business Division

Juergen Gallert
Director and CEO of
Nitta Gelatin NA Inc.

Director and CEO of
Nitta Gelatin Canada, Inc.
Director and CEO of
Nitta Gelatin USA, Inc.

Nitta Gel at i n A nnual R eport 201619

Data Section
Corporate Information
Company Outline (As of March 31, 2016)
Headquarters

4-26, Sakuragawa 4-chome, Naniwa-ku, Osaka 556-0022, Japan

Establishment

January 1918

Incorporation

February 1945

Capital¥3,144 million

Net Sales

Non-consolidated: ¥22.7 billion

Consolidated: ¥36.8 billion

Non-consolidated: 261

Consolidated: 1,192(year ended March 31, 2016)

Employees(as of March 31, 2016)

Main Businesses(year ended March 31, 2016)(as of March 31, 2016)

Production and sales of edible gelatin, pharmaceutical gelatin and photographic gelatin
Production and sales of collagen peptides
Production and sales of collagen casings
Production and sales of collagen for cosmetics, biomaterials and biochemical products,
manufacture and sales of cell-culture collagen
Production and sales of edible gelling agents, stabilizers and other food materials
Production and sales of adhesives for packaging, bookbinding, building materials andhygiene products

Operating Facilities

10 locations in Japan, 15 locations overseas

Affiliates (As of March 31, 2016)
Domestic

Nitta Gelatin Foods Inc.
Nitta Biolab Inc.
Hikone Gelatin Inc.
Bostik-Nitta Co., Ltd.
Shinju Service Co., Ltd.

Overseas

Nitta Gelatin NA Inc. (U.S.A.)

Nitta Gelatin India Ltd. (India)

Nitta Gelatin Canada, Inc. (Canada)Bamni Proteins Ltd. (India)

Nitta Gelatin USA, Inc. (U.S.A.)

Reva Proteins Ltd. (India)

Nitta Casings Inc. (U.S.A.)

Shanghai Nitta Gelatin Co., Ltd. (China)

Nitta Casings (Canada) Inc. (Canada)

Guangdong Baiwei Bio Material Co., Ltd. (China)

Nitta Gelatin Holding, Inc. (U.S.A.)

Beijing Qiushi Collagen Casing Co., Ltd. (China)
Nitta Hong Kong Ltd. (China)
Nitta Gelatin Vietnam Co., Ltd. (Vietnam)

Nitta Gel at i n A nnual R eport 201620

Shareholder and Investor Information
Stock Information (As of March 31, 2016)
Number of Shares Authorized

50,000,000

Number of Shares Issued

18,373,974

Number of Shareholders

6,412

Major Shareholders (Top 10)
Shareholder name

Number of Shareholding
sharespercentage

IBP Co., Ltd.

2,966,516

16.15

Nitta Corporation

840,014

4.57

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

701,000

3.82

Sumitomo Mitsui Banking Corporation

630,286

3.43

The Bank of Tokyo-Mitsubishi UFJ, Ltd.

621,074

3.38

Iwaki Co., Ltd.

533,600

2.90

Overseas investors 502,600
Financial institutions
Nitta Gelatin Employees Shareholding Association
2.74

0.8% (53)

0.5% (31)Japan Trustee Services Bank, Ltd. (trust account)
Domestic

406,800
2.21
Financial instruments

Ishizuka Corporation

382,014

2.08
0.4%
(24)

334,672

1.82

companiesbusiness operators

1.2% (75)Resona Bank, Limited

Total
number of
Shareholders

Share Distribution (As of March 31, 2016)

6,412

Individual,
other

97.1%
(6,228)

Breakdown of Shareholding
by Investor Type

Breakdown of Shareholding
by Number of Shares Held

Overseas investors

Financial institutions

Overseas investors

Domestic
companies

Financial instruments
business operators

0.8% (53)

0.5% (31)

1.2% (75)

0.4% (24)Financial instruments
business operators

4.1% (763,695)

1.0% (184,826)

Financial
institutions

24.4%(4,481,274)

Totalnumber ofshares issued

Total
number of
Shareholders

6,412

Individual,
other

97.1%
(6,228)Overseas investors

4.1% (763,695)

18,373,974

Domestic
companies

Individual,other(6,024,736)(6,919,281)

32.8%

Financial instruments
business operators

1.0% (184,826)

Financial
institutions

24.4%(4,481,274)

Totalnumber ofshares issued

Nitta Gel at i n A nnual R eport 201621

18,373,974

Domestic

Individual,

37.7%

Data Section

Management’s Discussion and Analysis
Business Performance Summary

collagen peptide remained steady, thanks mainly tofor the Fiscal Year Ended March 31, 2016

firm demand from the food market and theIn the fiscal year ended March 31, 2016, the global

Ltd. and two other companies into consolidated

economic situation remained uncertain, clouded bysubsidiaries.

contribution from the conversion of Nitta Gelatin India

As a result, sales increased ¥4,970 million, or

low oil prices, turmoil in the financial markets and a

15.6%, year on year, to ¥36,885 million.

Chinese economic slowdown, among other factors. On
the other hand, the United States, Europe and Southeast

Gross Profit

Asia continued to record moderate growth. Meanwhile,

Consolidated gross profit increased ¥1,718 million, or

the Japanese economy continued to experience a

28.8%, year on year to ¥7,689 million.

gradual recovery, spurred primarily by an increase in

Selling, General and Administrative Expenses

corporate earnings and inbound tourism demand.

Selling, general and administrative expenses increased

However, this trend in Japan could falter due to factors¥838 million, or 15.0%, year on year to ¥6,416 million.

such as the sharp yen appreciation and dramatic

Operating Income

declines in the stock market since the beginning of

As a result of the foregoing, operating income rose

2016, as well as the earthquakes in Kumamoto.

¥880 million, or 224.2%, year on year to ¥1,273 million.

Amid these circumstances, the Nitta Gelatin GroupNet income Attributable to Owners of Parent

worked as one to bring about a recovery in earnings

Net income attributable to owners of the parent

by adopting a new management structure in April

decreased ¥132 million, or 21.7%, year on year, to2015 and focusing efforts on the marketing of gelatin¥477 million.

and collagen peptide mainly in Japan, North America

Due mainly to the conversion of three companies inand Southeast Asia.

India into consolidated subsidiaries and the conversion

In addition, as a base for procuring raw material forof a subsidiary in China into an equity-method affiliate,

gelatin and supplying halal-certified products, equity-

the Company booked extraordinary income of ¥727

method affiliate Nitta Gelatin India Ltd. and its two

million and extraordinary losses of ¥666 million.

local affiliates in India were consolidated as

Segment Performancesubsidiaries of Nitta Gelatin in April 2015.
As a result, in the fiscal year ended March 31,
2016, net sales increased 15.6% year on year, toCollagen Material Business¥36,885 million. Operating income rose 224.2%, toIn the gelatin field, demand for edible gelatin in Japan,¥1,273 million, but ordinary income expanded only

which is mainly in confectionery and delicatessen

1.2%, to ¥979 million, mainly due to foreign exchange

items, remained steady. Demand for gelatin for making

losses. As a consequence of consolidating the threecapsules was also robust, driven by strong demand forcompanies in India as subsidiaries and converting a

dietary supplements from inbound travelers and forsubsidiary in China into an equity-method affiliate, thefood products that claim to have proven efficacies

Group reported ¥727 million in extraordinary income

following the deregulation of such products. As aand ¥666 million in extraordinary losses. After allowing

result, gelatin sales increased in Japan. In Northfor net income attributable to non-controlling interests,

America, the nutritional supplement market is still

net income attributable to owners of the parent

recovering from negative press coverage of healthdecreased 21.7% year on year to ¥477 million.

foods since 2014, in contrast to buoyant demand foredible gelatin. However, the Company’s overall sales

Consolidated Business Performanceof gelatin rose substantially, owing to a ¥3,489 million
contribution to sales from the consolidation of Nitta

for the Fiscal Year Ended March 31, 2016

Gelatin India Ltd. and two affiliates into subsidiaries.
Following re-acknowledgement by the market of

Net Sales and Earnings
In the fiscal year ended March 31, 2016, despite

the benefits of collagen peptide, including forlackluster sales of collagen casings, sales of gelatin andregulating bodily functions, sales expanded on strong

Nitta Gel at i n A nnual R eport 201622

Financial Position

demand for use in health foods, and further adoption
for use in general food products. Collagen casing sales
fell and profits declined substantially following fiercer

Assetscompetition and a drop in exports from North America

Total assets amounted to ¥37,597 million at March 31,

due to the appreciation of the U.S. dollar.

2016, ¥3,665 million higher than at March 31, 2015.

As a result, net sales in the Collagen Material

This increase was primarily due to increases inbusiness increased 20.6% year on year to ¥27,686

trade notes and accounts receivable, inventories

million. Segment profit (operating income) was up(including merchandise and finished goods), and66.3% to ¥1,832 million.

property, plant and equipment, despite a decrease ininvestment securities.

Formula Solution Business
The Company saw robust sales of food materials for

Liabilities

use in desserts and confectionery, partly as a result ofTotal liabilities stood at ¥20,720 million at March 31,

efforts to cultivate new customers. However, profits

2016, ¥2,162 million higher than at March 31, 2015.

were largely unchanged year on year due to a rise inThis rise was primarily due to increases in trade

the price of raw materials.

notes and accounts payable, short-term loans payable,

Adhesives sales for use in packaging were robust,

long-term loans payable (including the current portion),and increased year on year for use in hygiene products,

and deferred tax liabilities.

reflecting the resumption of the customers’

Net Assets

procurement from Nitta Gelatin. However, adhesive

Net assets stood at ¥16,876 million at March 31,

sales for bookbinding declined due to the shrinking

2016, ¥1,503 million higher than at March 31, 2015.

market. Profit, on the other hand, expanded in line withThis change was mainly attributable to a rise in theefforts to cut costs.

portion attributable to non-controlling interests.

As a result, net sales in the Formula Solution businessAs a result, the equity ratio stood at 39.8% atincreased 2.7% year on year to ¥9,199 million. Segment

March 31, 2016 compared to 45.0% as of March 31,

profit (operating income) grew 25.5% to ¥812 million.

2015.

Cash Flows

Dividend Policy
Our basic policy on profit distribution is to continuously

Net Cash Provided by Operating Activities
Operating activities generated net cash of ¥2,385

pay steady dividends, while securing the internal

million (¥2,074 million in the previous period). Main

reserves needed to develop future businesses andcontributing factors were income before taxes andstrengthen our operating structure.
Furthermore, our basic policy is to pay dividends

minority interests of ¥1,040 million, depreciation andamortization expenses of ¥1,562 million, an increase in

twice every fiscal year, with interim and year-end

trade notes and accounts payable of ¥724 million, adividends determined by the Board of Directors andloss on step acquisitions of ¥620 million, and a gain on

the Annual General Meeting of Shareholders,

negative goodwill of ¥502 million.

respectively.
Regarding dividends for the fiscal year ended MarchNet Cash Used in Investing Activities
Net cash used in investing activities came to ¥1,860

31, 2016, in accordance with the aforementioned

million (¥2,505 million in the previous period). The

policies, management has decided to pay a year-end

main cash used was ¥1,548 million for the purchase ofdividend of ¥6.00 per common share. Combined withproperty, plant and equipment and ¥222 million for

the interim dividend of ¥6.00, the annual dividend per

the purchase of shares in affiliates.

common share is ¥12.00.
Regarding funds set aside as internal reserves, we

Net Cash Used in Financing Activities
Net cash used in financing activities totaled ¥473

intend to effectively invest these funds in enhancing

million (against ¥544 million in net cash provided incost competitiveness further still, bolstering our

the previous period). This mainly reflected a nettechnology and product development structure in

decrease in short-term loans payable of ¥544 million

response to market needs, as well as implementing

and proceeds from long-term loans payable of ¥2,821

global strategies. These investments will help us tomillion, which were partly offset by ¥2,502 million in

address anticipated changes in the businessrepayment of long-term loans payable.

environment going forward.

Nitta Gel at i n A nnual R eport 201623

Data Section

Business Risks

This section provides information about the principal business risks concerning the Nitta Gelatin Group’s operations andrelated matters that may have a material impact on the decisions of investors. Matters that do not necessarily constitutesuch risks but are considered to have a material impact on the investment decisions of investors are also disclosed below
in the interest of actively disclosing information to investors. Recognizing the possibility of such risks, we endeavor toprevent their occurrence and to respond properly if they do occur. This section includes forward-looking statements
determined based on information available to us as of the date of the publication of this report.

1 Product Development

the fiscal year ended March 31, 2016. Raw material prices fluctuate fora variety of reasons. In the Collagen Material business, primary raw

As the Group prides itself on the ability to quickly offer products andmaterials such as bovine bones and hides, pig skin and fish scales areservices that match changing market and customer needs, it actively

all byproducts of the livestock and fishery industries. The raw material

conducts R&D and capital investment. However, there is no guarantee

price may fluctuate depending on changes in meat consumptionthat we can successfully develop new products. In addition, even if a newreflecting global economic conditions, as well as changes in supply-

product is successfully developed, it may not match customer needs anddemand dynamics driven by regulations governing food processing andmay thus fail to gain their acceptance. In regard to products for medical

distribution in response to various animal epidemics and other factors.

applications, customers using our products require an extensive lead time

In the Formula Solution business, prices of natural polysaccharides, theto develop and launch medical products. During this period, the customer

primary raw material in the food material divisions, may fluctuate due tomay suspend product development or face protracted developmentchanges in the climate of growing regions and other factors. Prices ofdelays, among other contingencies, mainly on account of shifting market

petroleum resins, the key raw material for adhesives, may fluctuate due

conditions, changes in operating performance, or delays in obtaining

to changes in commodity prices and supply-demand dynamics for heavy

approval from regulatory authorities. In the event that we face delays or

oil and naphtha. Meanwhile, in some cases the market environment andare unable to recover R&D expenses and capital investment as a result,

other factors can make it difficult to transfer the impact of priceour operating results and financial position may be negatively impacted.

fluctuations for these key raw materials to the selling price of our
products. Accordingly, fluctuations in raw materials prices could have a

2 Overseas Markets

negative impact on our operating results and financial position.

5 Animal Diseases

Ever since the establishment of our first overseas sales subsidiary in the
U.S. in July 1979, we have been actively working to expand sales inoverseas markets. In the fiscal year ended March 31, 2016, sales in

Our primary products, including gelatin, collagen peptide, collagenoverseas markets accounted for 47.7% of our net sales. In the Northcasing and collagen, are made from animal byproducts derived from

American market, our primary region for business development so far,livestock and fishery production, such as bovine bones and hides, pig

our sales expansion may be negatively impacted by competition arisingskins, and fish scales. Accordingly, these materials are subject to thebetween our products and those of our competitors in the samerisk of animal diseases. We therefore procure these materials only after

industry. In addition, in the future strategic Chinese, Indian andconfirming that they are free from any animal infectious diseases, while

Southeast Asian markets, our sales expansion may be negatively

working to diversify the sourcing region of raw materials in order to

impacted by even greater competition than in North America between

ensure their safety. Despite these efforts, in the event that an extensive

our products and those of our competitors in the same industry. The

outbreak of animal disease occurs in a region from which we procure

Group is working to enhance its competitiveness, mainly by reducing

raw materials, the supply of raw material bones and skins may decline

costs, improving quality, developing unique new products, andor stop due to a suspension or stoppage of meat production, or may

conducting production in optimal locations. However, if these measurescause us to switch to an alternative region for sourcing raw materials.

prove ineffective, sales growth could stagnate. This could have a

These and other related factors may have a negative impact on thenegative impact on our operating results and financial position.

stable procurement of raw materials. In addition, our product sales may
be affected by the outbreak of an animal disease in countries in which

3 Exchange Rate Movements

raw materials are produced or products are manufactured. Specifically,
product sales may stagnate due to import restrictions and other

When selling products to overseas customers either directly or throughmeasures imposed on animal products made from raw materials

a subsidiary, we export products on a U.S. dollar-denominated basis.

originating from or products manufactured in these countries. As a

On the procurement front, we purchase raw materials for gelatin, such

result of the foregoing, the Group may be impacted by higher raw

as bovine bones and ossein, primarily using U.S. dollars. We also importmaterial procurement costs, reduced revenue due to lower productpig-skin gelatin from overseas on a Canadian dollar-denominated basis.

sales, higher inventories and so forth. This could negatively affect our

For this reason, we hedge our foreign exchange risk by concluding

operating results and financial position.

foreign exchange forward contracts with financial institutions with

6 Laws and Regulations

respect to U.S. dollar-denominated exports, as well as U.S. dollar- andCanadian dollar-denominated imports. Through these measures, wereduce our exposure to foreign exchange risk related to operating

In the execution of its business activities is subject to Japanese laws

transactions. However, in the event of unforeseeable foreign exchange

and regulations, including the Food Sanitation Law, the Japanese

rate movements, our operating results and financial position could be

Agricultural Standard and the Pharmaceutical and Medical Device Act

negatively impacted. Furthermore, gains and losses arising from foreign

as well as directives issued by the competent authorities. In the event

currency-denominated transactions, as well as the translation intothat these laws and regulations are amended or abolished, or if new

Japanese yen of foreign currency-denominated receivables andlaws and regulations are established, we may incur additional costs andpayables and the financial statements of overseas consolidated

other outlays to address these developments, or face restrictions in

subsidiaries prepared in foreign currencies, are subject to foreignterms of the scope of our business activities. Furthermore, the Group is

exchange rate movements. This could have a negative impact on our

subject to various laws and regulations in overseas countries where it

operating results and financial position.

conducts business. Our operating results and financial position could be
negatively impacted by changes to these laws and regulations and our

4 Price Fluctuations for Primary Raw Materials

status of legal compliance. In regard to the environment, gelatin
production requires large amounts of water in the whole process, fromRaw material costs accounted for 57.5% of our cost of manufacturing in

raw materials to gelatin. For this reason, our plants are supplied with

Nitta Gel at i n A nnual R eport 201624and release large amounts of water, and are subject to the laws and

11 Interest Rate Fluctuations

regulations of each country and region in regard to wastewater volume
and water quality. Efforts are made at each plant to recycle and reusewater and to upgrade production processes so as to reduce the volume

We primarily borrow funds from financial institutions to finance capitalof water supplied and released and to maintain water quality. In theinvestments. The percentage of interest bearing liabilities relative toevent of a major amendment to national or regional laws andtotal assets was 27.9% (including lease obligations) in the fiscal year

regulations, we may incur costs associated with addressing such new

ended March 31, 2016. We endeavor to reduce borrowings and otherlegislative changes. The foregoing impacts could negatively affect ourinteres-bearing liabilities. However, in the event of an increase in market

operating results and financial position.

interest rates going forward, our operating results and financial position
could be negatively impacted.

7 Religious Rules

12 Taxation

Gelatin is an animal-derived product that is widely used in food,
pharmaceutical capsules and other items. However, due to religious

In Japan, a 17% tariff is levied on gelatin imported other than for

injunctions, consumption of some of these items may be forbidden,

photographic use.

depending on the animal species and the manufacturing method. The

However, we expect to see tariffs gradually reduced and eventually

main examples of such religious rules include the halal (Islam) andeliminated following the conclusion of the Trans-Pacific Strategic

kosher (Judaism) codes. Followers of these religions are forbidden from

Economic Partnership Agreement (TPP) negotiations in October 2015.

consuming pig-derived products. In order to sell proper gelatin toThis situation could result in lower sales prices for imports.

business customers who manufacture products for these consumers,

A price difference may arise between imports such as South

we produce gelatin by procuring raw materials derived from permissible

American bovine hide gelatin and Indian bovine bone gelatin, andanimal species and by using appropriate manufacturing methods in line

bovine bone gelatin produced at the Company’s Osaka Plant. In suchwith religious rules. To make certain that our products conform toan event, our operating results and financial position could be

religious rules, we obtain certification through audits by the certifying

negatively affected. Moreover, the Group conducts production andentities of each religion. In this context, we strictly manage our raw

sales activities on a global scale, and materials, semi-finished goods andmaterials and manufacturing. However, in the event that our certification

other items are mutually supplied within the Group. Each Groupis revoked as a result of a breach of a religious rule due to abusiness entity complies with the tax laws to follow the proper

management deficiency, we will lose sales opportunities, which could

procedures for calculating and paying taxes in the country of its

have a negative impact on our operating results and financial position.

8

jurisdiction. While the Group pays close attention to international
taxation risks such as the transfer pricing taxation applicable in each

Natural Disasters, Accidents, Terrorism,
War and Other Contingencies

country, additional taxes may be imposed in the event that the Group’s
views on this matter conflict with those of the tax authorities.

13 Information Security

In the event of natural disasters such as earthquakes, storms and floods,
accidents, problems with local communities, regional terrorism, wars andother contingencies at our business locations, the procurement of raw

We have established an information system that enables us to obtainmaterials and the production and sale of products could be disrupted,

and analyze necessary information in real time in various processes,

which could have a negative impact on our operating results andincluding purchasing, production, sales and management. We put

financial position. Our business locations include our main offices andparticular emphasis on the strict management of access rights to themajor outsourcing partners (including Japan, Canada, U.S.A., India, China

system for the purpose of ensuring stable system operation andand Vietnam), regions from which primary raw materials are procured

preventing any leaks of sales data, including client data and personal(including India, Canada, U.S.A., New Zealand, Thailand, Pakistan andinformation stored on the system. These efforts notwithstanding, in the

China), and primary regions where products are sold (including Japan,

event of difficulty in maintaining the stable operation of the information

North America, India, China and various other Asian countries).

system due to a software malfunction, unauthorized external access orother factors, our business activities could be disrupted. In the event

9 Product Qualitythat sales or client data are leaked outside our Group, we could faceconsequences such as claims for damages from customers, and a loss

We endeavor to put quality first in order to earn our customers’
trust.

of public trust in our Group. As a result, our operating results andTo this end, we develop products focused on customer needs, andfinancial position could be negatively affected.

manufacture products under an internationally accepted quality

14 Infringement of Intellectual Property Rights

assurance system. One particular focus lies in ensuring traceability fromraw materials to finished products in an effort to market safe products.
We have enrolled in product liability insurance policies, among otherWe protect our intellectual property rights through such means as

safeguards. However, in the event that a customer suffers damages as aobtaining patents on proprietary technology and other innovations weresult of defects in our products, there is no guarantee that our liability

have developed. Efforts are also made in the product development

for damages will be covered within the compensation limits of theseprocess to prevent any infringement of rights held by third parties,

insurance policies. Accordingly, in the event of a serious quality

including intellectual property rights. These efforts notwithstanding, we

problem, the ensuing claims for damages, loss of public trust in thecannot completely rule out the possibility of allegations and claims byGroup and other factors could negatively impact our operating results

third parties concerning the ownership or infringement of intellectualand financial position.

property and other rights. In the event that we are subject to claims fordamages or cease-and-desist orders as a result, our operating results

10 Alternative Products

and financial position could be negatively affected.

15 Legal Disputes and Litigation

There is a growing trend to switch the raw materials used in certain
pharmaceuticals, cosmetics and food from animal to plant-derived
materials. In the capsule market, one of our core markets for gelatin,

In the course of our business activities, we endeavor to enhance ourthis trend has given impetus to the development of plant-derived (starchinternal control system and strengthen compliance, encompassing legal

and cellulose derivative) capsule products. Certain pharmaceutical andcompliance and observance of social norms, while reducing ourhealth food manufacturers have adopted these capsules as an

exposure to various forms of risk. At the same time, the Group receives

alternative to gelatin capsules. We believe that the popularization ofadvice from lawyers and other experts as necessary. These efforts

plant-derived capsules has been limited to certain segments of thenotwithstanding, the Group may be subject to lawsuits in the course of

market. Nevertheless, in the event of new regulations on animal derived

business activities, irrespective of whether there is a breach of laws or

products or a change in consumer sentiment, the rapid popularization

regulations. In such an event, our operating results and financialof plant-derived capsules could reduce demand for gelatin capsules,

position could be negatively affected.

and have a negative impact on our operating results and financial
position.

Nitta Gel at i n A nnual R eport 201625

Data Section ︱ Consolidated Financial Statements

Consolidated Balance Sheets
Nitta Gelatin Inc. and Consolidated Subsidiaries
Years ended March 31, 2016 and 2015

Thousands of
U.S. dollars

Millions of yen

Fiscal 2015

Fiscal 2016

Fiscal 2016

¥ 2,622¥ 2,688$ 23,868

Notes and accounts receivable–trade (Note 9)

6,726

7,375

65,486Merchandise and finished goods

4,821

5,262

46,723Work in process

1,243

1,429

12,689AssetsCurrent assets:
Cash and deposits (Notes 5, 9 and 18)

Raw materials and supplies

2,156

2,275

20,201

Deferred tax assets (Note 6)

139

182

1,616

Other

330

447

3,969

(2)

(2)

(18)

18,03819,657

174,543

Buildings and structures (Note 5)

9,700

10,267

91,165

Machinery, equipment and vehicles (Note 5)

13,02815,937

141,511

Allowance for doubtful accounts
Total current assets

Noncurrent assets:

781

2,542

22,571

Lease assets (Note 8)

1,195

1,188

10,549Construction in process

435

957

8,498

1,339

1,362

12,094(15,632)(18,531)(164,544)

10,84813,724

121,861

69

357

3,170

69

357

3,170

3,984

2,919

25,919Long-term loans receivable

5

136

1,208

Deferred tax assets (Notes)

185

189

1,678

Net defined benefit assets (Note 7)

689

421

3,738

Other

109

191

1,696

Land (Note 5)

Other
Accumulated depreciation
Total property, plant and equipment

Intangible assets:
Other
Total intangible assets

Investments and other assets:
Investment securities (Notes 4, 5, and 9)

Total investments and other assets

4,974

3,858

34,257

Total noncurrent assets

15,893

17,940159,297¥33,932¥37,597$333,839

Total assets

Note: The U.S. dollar amounts are translated from Japanese yen at the rate of ¥112.62 = U.S.$1, the prevailing exchange rate at March 31, 2016.

Nitta Gel at i n A nnual R eport 201626

Thousands of
U.S. dollars

Millions of yen

Fiscal 2015

Fiscal 2016

Fiscal 2016

¥ 3,768¥ 4,252$ 37,755

Short-term loans payable (Note 5)

1,705

2,186

19,410Current portion of long-term loans payable (Notes 5 and 9)

2,127

2,215

19,668

Lease obligations (Notes 5 and 8)

232

230

2,042

Accounts payable–other (Note 9)

Liabilities
Current liabilities:
Notes and accounts payable–trade (Note 9)

1,435

1,261

11,197

Income taxes payable

206

145

1,288

Provision for bonuses

173

213

1,891

Other

626

569

5,052

10,274

11,076

98,348

4,867

5,380

47,771

Lease obligations (Notes 5 and 8)

475

469

4,164

Deferred tax liabilities

189

769

6,828
26,088

Total current liabilities
Noncurrent liabilities:
Long-term loans payable (Notes 5 and 9)

2,661

2,938

Provision for directors' retirement benefits

38

－

Other

50

85

755

Total noncurrent liabilities

8,283

9,644

85,633

Total liabilities

18,55820,720183,982

Capital stock

3,144

3,144

27,917

Capital surplus

2,966

2,966

26,336

Retained earnings

9,312

9,569

84,967

(0)

(0)

(0)

15,423

15,680139,229

1,121

1,024

9,093

Deferred gains (losses) on hedges

33

(38)

(337)

Foreign currency translation adjustments

601

466

4,138

(1,908)(2,160)(19,180)

Total accumulated other comprehensive loss

(152)

(707)

(6,278)Non-controlling interests

102

1,904

16,906

Net defined benefit liability (Note 7)

Net Assets
Shareholders’equity:

Treasury stock
Total shareholders’equity
Accumulated other comprehensive income (loss):
Valuation difference on other available-for-sale securities

Remeasurements of defined benefit plans (Note 7)

Total net assets
Total liabilities and net assets

15,373

16,876

149,849¥33,932¥37,597$333,839

Note: The U.S. dollar amounts are translated from Japanese yen at the rate of ¥112.62 = U.S.$1, the prevailing exchange rate at March 31, 2016.

Nitta Gel at i n A nnual R eport 201627

Data Section ︱ Consolidated Financial Statements

Consolidated Statements of Income
Nitta Gelatin Inc. and Consolidated Subsidiaries
Years ended March 31, 2016 and 2015

Thousands of
U.S. dollars

Millions of yen

Fiscal 2015

Fiscal 2016

Fiscal 2016

¥31,914¥36,885$327,517

Cost of sales (Note 3)

25,94429,196259,243

Gross profit on sales

5,970

7,689

68,274

Selling, general and administrative expenses (Note 12)

5,577

6,416

56,970392

1,273

11,303

Interest income

0

27

240

Dividend income

23

29

258

Rent income

36

44

391

Equity in earnings of affiliates

112

29

258

Foreign exchange gains

578

－

－

Other

53

69

613

805

202

1,794

151

315

2,797

Net sales

Operating income
Non-operating income:

Total non-operating income
Non-operating expenses:
Interest expenses
Foreign exchange losses

－

151

1,341

Commissions paid

66

13

115

Other

11

14

124

Total non-operating expenses

230

495

4,395

Ordinary income

967

979

8,693

Gain on sales of noncurrent assets

－

67

595

Gain on negative goodwill (Note 13)

－

502

4,457

Gain on change in equity (Note 14)

－

157

1,394

－

727

6,455

Loss on retirement of noncurrent assets

34

45

400

Loss on stepped acquisitions (Note 13)

－

620

5,505

Total extraordinary losses

34

666

5,914

Income before income taxes and minority interests

933

1,040

9,235

Income taxes (Note 6)

376

425

3,774

Income taxes–deferred

(23)

3

27

Total income taxes

353

428

3,800

Net income

580

612

5,434

Net income (loss) attributable to non-controllinginterests

(29)

134

1,190

Extraordinary gains:

Total extraordinary gains
Extraordinary losses:

Net income attributable to owners of the parent (Note 17)

¥

610

¥

477

Note: The U.S. dollar amounts are translated from Japanese yen at the rate of ¥112.62 = U.S.$1, the prevailing exchange rate at March 31, 2016.

Nitta Gel at i n A nnual R eport 2016

28

$

4,235

Consolidated Statements ofComprehensive Income
Nitta Gelatin Inc. and Consolidated Subsidiaries
Years ended March 31, 2016 and 2015

Thousands of
U.S. dollars

Millions of yen

Net income

Fiscal 2015

Fiscal 2016

Fiscal 2016¥ 580¥ 612$5,434

498

(96)

(852)

Other comprehensive income (loss) (Note 19):
Valuation difference on other available-for-salesecurities
Deferred gains (losses) on hedges

18

(68)

(604)

Foreign currency translation adjustments

638

(731)

(6,491)

Pension liability adjustment

(370)

(255)

(2,264)

Share of other comprehensive income ofassociates accounted for using equity method

165

402

3,570

950

(748)

(6,642)¥1,530¥(136)$(1,208)¥1,555¥(100)$ (888)

(24)

(35)

(311)

Total other comprehensive income (loss)
Total comprehensive income (loss)
Comprehensive income (loss) attributable to:
Owners of the parent
Non-controlling interests

Note: The U.S. dollar amounts are translated from Japanese yen at the rate of ¥112.62 = U.S.$1, the prevailing exchange rate at March 31, 2016.

Nitta Gel at i n A nnual R eport 201629

Data Section ︱ Consolidated Financial Statements

Consolidated Statements of Changes in Net Assets
Nitta Gelatin Inc. and Consolidated Subsidiaries
Years ended March 31, 2016 and 2015

Millions of yen

Shareholders’equity
Capital stock
Balance at the beginning of fiscal year
Changes during the fiscal year

¥ 3,144

Capital surplus¥ 2,966

Retained earnings

Net income attributable to owners of the parent
Gain (loss) in non-controlling interests due
to increase in consolidated subsidiaries

Total changes during fiscal year
Balance at the end of fiscal year

¥ ( 0)¥ 15,423

(220)
477

Dividends from surplus

Net changes of items other thanshareholders’equity

Treasury stock Total shareholders’equity¥ 9,312

(220)
477
－
－

－
¥3,144－¥2,966257¥9,569－¥(0)257¥15,680

Millions of yen

Other accumulated comprehensive income
Valuationdifference on
available-forsale securities

Balance at the beginning of fiscal year
Changes during the fiscal year

¥ 1,121

Deferred
gains orlosses onhedges¥ 33

Foreigncurrencytranslation
adjustment

¥ 601

Non-

RemeasureTotal otherments ofaccumulated controllingdefinedcomprehensive interests
benefit plansincome¥ (1,908)¥ (152)¥ 102

Net income attributable to owners of the parent
Gain (loss) in non-controlling interests due
to increase in consolidated subsidiaries

Total changes during fiscal year
Balance at the end of fiscal year

¥ 15,373(220)
477

Dividends from surplus

Net changes of items other thanshareholders’equity

Total net
assets

(96)

(71)

(96)
¥1,024

(71)
¥(38)

(135)

1,848

1,848

(252)

(555)

(46)

(602)

(135)
(252)
¥466 ¥(2,160)(555)¥(707)

1,801¥1,904

1,503¥16,876

Thousands of U.S. dollars

Shareholders’equity

Capital stock
Balance at the beginning of fiscal year
Changes during the fiscal year

$ 27,917

Capital surplus$ 26,336

Retained earnings

Net income attributable to owners of the parent
Gain (loss) in non-controlling interests due
to increase in consolidated subsidiaries

Total changes during fiscal year
Balance at the end of fiscal year$0

$ 136,947(1,953)
4,235

Dividends from surplus

Net changes of items other thanshareholders’equity

Treasury stock Total shareholders’equity$ 82,685(1,953)
4,235
－
－

－
$27,917－$26,336

2,282$84,967

－
$0

2,282
$139,229

Thousands of U.S. dollars

Other accumulated comprehensive income
Valuationdifference on
available-forsale securities

Balance at the beginning of fiscal year
Changes during the fiscal year

$9,954

Deferred
gains orlosses onhedges$ 293

Foreigncurrencytranslation
adjustment

Non-

RemeasureTotal otherments ofaccumulated controllingdefinedcomprehensive interests
benefit plansincome$5,337 $(16,942)$(1,350)$

906 $136,503(1,953)
4,235

Dividends from surplus
Net income attributable to owners of the parent
Gain (loss) in non-controlling interests due
to increase in consolidated subsidiaries
Net changes of items other thanshareholders’equity
Total changes during fiscal year
Balance at the end of fiscal year

Total net
assets

(852)

(630)

(1,199)(2,238)(4,928)(852)$9,093(630)$(337)(1,199)(2,238)$4,138 $(19,180)(4,928)$(6,278)

16,40916,409(408)(5,345)

15,992
13,346$16,906 $149,849

Note: The U.S. dollar amounts are translated from Japanese yen at the rate of ¥112.62 = U.S.$1, the prevailing exchange rate at March 31, 2016.

Nitta Gel at i n A nnual R eport 201630

Consolidated Statements of Cash Flows
Nitta Gelatin Inc. and Consolidated Subsidiaries
Years ended March 31, 2016 and 2015

Thousands of
U.S. dollars

Millions of yen

Fiscal 2015

Fiscal 2016

Fiscal 2016

Cash flows from operating activities:
Income before income taxes and minority interests
Depreciation and amortization
Increase (decrease) in provision for directors' retirement benefits
Increase (decrease) in provision for bonuses
Decrease in allowance for doubtful accounts
Increase in net defined benefit liability
Interest and dividends income
Interest expenses
Foreign exchange losses (gains)
Equity in earnings of affiliates
Gain on sales of property, plant and equipment
Loss on retirement of noncurrent assets
Loss on change in equity
Gain on negative goodwill
Loss on stepped acquisitions
Decrease (increase) in notes and accounts receivable–trade
Increase in inventories
Increase (decrease) in notes and accounts payable–trade
Increase in accrued consumption taxes
Other, net
SubtotalInterest and dividends income received
Interest paid
Income taxes paid
Net cash provided by operating activities¥ 933
1,115
1
(8)
(13)
9
(24)
151
(267)
(112)
－
34
－
－
－
1,740
(308)
(802)
117
(125)
2,441
106
(152)
(321)
2,074

¥1,040
1,562
(38)
42
(0)
21
(57)
315
188
(29)
(67)
45
(157)
(502)
620
(479)
(109)
724
36
(103)
3,051
125
(315)
(476)
2,385

$ 9,235
13,870
(337)
373
(0)
186
(506)
2,797
1,669
(258)
(595)
400
(1,394)(4,457)
5,505(4,253)
(968)
6,429
320
(915)
27,091
1,110(2,797)(4,227)
21,177

Cash flows from investing activities:
Payments into time deposits
Proceeds from withdrawal of time deposits
Proceeds from the sale of property, plant and equipment
Purchase of property, plant and equipment
Purchase of intangible assets
Proceeds from the sale of investment securities
Purchase of investment securities
Purchase of stocks of affiliates
Purchase of insurance funds
Other, net
Net cash used in investing activities

(20)
20
－
(2,449)
(30)
－
(6)
－
(2)
(15)
(2,505)

(148)
27
73
(1,548)
(17)
2
(6)
(222)
(2)
(17)
(1,860)(1,314)240
648(13,745)
(151)
18
(53)
(1,971)(18)(151)(16,516)454
2,495(2,147)
214
(235)
－
－
(220)
(16)
544
83
196
2,406
－

(544)
2,821
(2,502)
228
(254)
29
(21)
(220)
(10)
(473)
(103)
(51)
2,602
24

(4,830)25,049(22,216)
2,025(2,255)258(186)(1,953)(89)(4,200)(915)(453)
23,104
213

－

(38)

(337)

¥2,602¥2,536$22,518

Cash flows from financing activities:
Net increase (decrease) in short-term loans payable
Proceeds from long-term loans payable
Repayment of long-term loans payable
Proceeds from sale-and-leaseback transactions
Repayments of lease obligations
Payments from non-controlling interests
Repayments to non-controlling interests
Cash dividends paid
Cash dividends paid to non-controlling interests
Net cash (used in) provided by financing activities
Effect of exchange rate change on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents, beginning of the fiscal year

Increase in cash and cash equivalents from newly consolidated subsidiaries
Decrease in cash and cash equivalents from exclusion of subsidiaryfrom consolidation

Cash and cash equivalents at end of the fiscal year (Note 18)

Note: The U.S. dollar amounts are translated from Japanese yen at the rate of ¥112.62 = U.S.$1, the prevailing exchange rate at March 31, 2016.

Nitta Gel at i n A nnual R eport 201631

Data Section

Notes to Consolidated Financial Statements
Nitta Gelatin Inc. and Consolidated Subsidiaries

1. Basis of Presenting Consolidated Financial Statements
The accompanying consolidated financial statements of Nitta Gelatin Inc. “the(Company”) and its consolidated
subsidiaries (together,“the Group”) have been prepared in accordance with the provisions set forth in the Financial
Instruments and Exchange Act of Japan and its related accounting regulations and in conformity with accounting principles
generally accepted in Japan which are different in certain respects as to application and disclosure requirements ofInternational Financial Reporting Standards.
In preparing these consolidated financial statements, certain reclassifications and rearrangements have been made to
the consolidated financial statements issued domestically in order to present them in a form which is more familiar toreaders outside Japan. In addition, certain reclassifications have been made in the 2015 financial statements to conform tothe classifications used in 2016.
The consolidated financial statements are stated in Japanese yen, the currency of the country in which the Company isincorporated and operates. As permitted by the regulations under the Financial Instruments and Exchange Act of Japan,
amounts of less than one million yen have been omitted. As a result, the totals shown in the accompanying consolidated
financial statements in yen do not necessarily agree with the sums of the individual amounts.
The U.S. dollar amounts shown in the accompanying consolidated financial statements and notes thereto weretranslated from the presented Japanese yen amounts into U.S. dollar amounts at the rate of ¥112.62 = U.S. $1, theapproximate rate of exchange at March 31, 2016, and were then rounded to the nearest thousand. As a result, the totals
shown in the accompanying consolidated financial statements in U.S. dollars do not necessarily agree with the sums of theindividual amounts. This translation of Japanese yen amounts into U.S. dollar amounts is included solely for theconvenience of readers outside Japan. Such translation should not be construed as a representation that Japanese yen
could be converted into U.S. dollars at that or any other rate.

2. Significant Accounting Policies(1) ‌Principles of consolidation and accounting for investments in unconsolidated subsidiaries andaffiliates

The consolidated financial statements as of and for the year ended March 31, 2016 include the accounts of the Company
and its 15 significant subsidiaries (14 significant subsidiaries in 2015). The fiscal year-end of two consolidated subsidiaries(December 31) is different than the consolidated fiscal year-end (March 31), and necessary adjustments are made for any
significant transactions between their fiscal year-end and the consolidated fiscal year-end.
Under the control or influence concept, those companies in which the Company, directly or indirectly, is able toexercise control over operations are consolidated, and those companies over which the Group has the ability to exercise
significant influence are accounted for using the equity method.
For the year ended March 31, 2016 three affiliates (three affiliates in 2015) are accounted for using the equity method.
Investments in companies accounted for using the equity method whose fiscal year-ends are different than the
consolidated fiscal year-end are accounted for on the basis of the companies’respective fiscal year-end. Investments in
one unconsolidated subsidiary and two affiliates are excluded from the application of the equity method and stated atcost because the Group’s share of their net income and retained earnings have only slight effects on the accompanying
consolidated financial statements and are considered insignificant overall.

(2) Foreign currency translation

Receivables and payables denominated in foreign currencies are translated into yen at the exchange rates as of theconsolidated balance sheet date, and differences arising from the translation are included in the consolidated statements
of income.
The asset and liability accounts of the overseas consolidated subsidiaries are translated into yen at the exchange rates
as of the consolidated balance sheet date, and revenue and expense accounts are translated into yen at the average rateduring the year. Differences arising from the translation are presented under foreign currency translation adjustment andminority interests under net assets.

Nitta Gel at i n A nnual R eport 201632

(3) Cash and cash equivalents

Cash and cash equivalents consist of cash on hand, cash in banks which can be withdrawn at any time and short-term
investments with a maturity of three months or less when purchased which are readily convertible into cash and are
exposed to insignificant risk of changes in value.

(4) Investment securitiesc

In general, securities are classified into three categories: trading, held-to-maturity and available-for-sale securities. Securities
held by the Group are all classified as available-for-sale securities. Available-for-sale securities with a determinable market
value are stated at fair value, with any changes in unrealized holding gain or loss, net of the applicable income taxes,
included directly in net assets. Cost of securities sold is determined by the moving-average method. Available-for-salesecurities without a determinable market value are stated at cost determined by the moving-average method.

(5) Inventories

Finished goods are mainly stated at the lower of cost determined by the gross average method or net selling value.
Merchandise, semi-finished goods, work in process, raw materials and supplies are mainly stated at the lower of cost
determined by the moving-average method or net selling value.

(6) Property, plant and equipment and depreciation (excluding lease assets)

Depreciation of property, plant and equipment held by the Company and its domestic consolidated subsidiaries iscomputed by the declining-balance method, except for buildings on which depreciation is computed by the straight-line
method. Depreciation of property, plant and equipment held by overseas consolidated subsidiaries is computed mainly by
the straight-line method.
The useful lives of property, plant and equipment are summarized as follows:
Buildings and structures:

7 to 50 years

Machinery, equipment and vehicles: 2 to 10 years(7) Intangible assets and amortization (excluding lease assets)

Intangible assets are amortized by the straight-line method. Internal use software is amortized by the straight-line method
over the estimated useful life of five years.

(8) Lease assets

Lease assets are depreciated by the straight-line method over the lease term with no residual value (residual value
guarantee amount if agreed).

(9) Allowance for doubtful accounts

The Company and its domestic consolidated subsidiaries provide allowance for doubtful accounts mainly to cover a loss
from uncollectible receivables at an amount determined based on the historical experience of bad debt with respect toordinary receivables and an estimated uncollectible amount based on individual collectibility of specific doubtfulreceivables such as doubtful accounts receivable.
The foreign consolidated subsidiaries provide allowance for doubtful accounts mainly at an estimated uncollectible
amount for specific doubtful receivables.

(10) Provision for bonuses

The Company and its consolidated subsidiaries recorded provision for bonuses at an amount estimated to cover thebonus payments for services rendered by employees during the year ended March 31, 2016.

(11) Accounting method for retirement benefits

The retirement benefit obligation is calculated by allocating the estimated retirement benefits to period of service by the
projected benefit method.
Prior service benefits and costs are recognized as income or expense by the straight-line method over a certain period(mainly 10 years) which is within the average remaining years of service of the employees at the time they arise.
Actuarial gains and losses are amortized by the straight-line method over a certain period (mainly 10 years), which iswithin the average remaining years of service of the employees at the time when the gains or losses arise, from the fiscal
year following the fiscal year in which it arises.

Nitta Gel at i n A nnual R eport 201633

(12) Hedge accounting

In principle, deferral hedge accounting is adopted for hedge transactions. Interest rate swaps are accounted for by
exceptional treatment if the interest rate swaps meet certain criteria.
The following summarizes hedging derivative instruments used by the Group and items hedged:
Hedging instruments

Hedged items

Foreign exchange forward contracts‌Forecast transactions denominated in foreign currencies in connection with
exports and payables denominated in foreign currencies and forecast
transactions denominated in foreign currencies in connection with imports

Interest rate swaps

Loans and debt

As a policy, the Group utilizes derivative transactions within a certain range to hedge market fluctuations in connection
with hedged items in accordance with internal management rules defining authorization policies and transaction limits. The
Group assesses the hedge effectiveness by comparing the accumulated gains or losses on the hedging instruments andthe related hedged items during the period from the commencement of the hedging transactions to the assessment ofeffectiveness. For interest rate swaps accounted for by exceptional treatment, however, the assessment of effectiveness is
not performed.

(13) Income taxes

Income taxes are computed based on the taxable income of each Group company.
Deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences
between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred
tax assets and liabilities are measured using the enacted tax rates expected to apply to taxable income in the years inwhich those temporary differences are expected to be recovered or settled. The effect of deferred tax assets and liabilities
due to the change in tax rate is recognized in the statement of income for the period including the enacted date.

(14) Accounting change(Adoption of Accounting Standard and Guidance for Business Combinations)Starting in the year ended March 31, 2016, the Company has adopted the Accounting Standard for Business Combinations(ASBJ Statement No. 21, September 13, 2013, hereinafter the“Business Combination Accounting Standard”), the
Accounting Standard for Consolidated Financial Statements (ASBJ Statement No. 22, September 13, 2013, hereinafter the“Consolidated Accounting Standard”) and the Accounting Standard for Business Divestitures (ASBJ Statement No. 7,
September 13, 2013, hereinafter the“Business Divestiture Accounting Standard”). As a result, gain or loss arising from achange in the Company’s equity in subsidiaries in cases where control is retained was revised to a method recognizingthem as an adjustment to capital surplus, and recognizing the acquisition costs in connection with business combinations
as expenses in the consolidated fiscal year in which they arise. At the same time, for business combinations that takeplace in or after the fiscal year ended March 31, 2016, the disclosure method was revised to restate the distribution of
acquisition cost on provisional accounting recognition in the statements of the fiscal year in which the combination took
place. In addition, the presentation of quarterly net income, etc., was changed, and the presentation of minority interests
was changed to the presentation of non-controlling interests. To reflect the relevant changes, the consolidated financial
statements for the year ended March 31, 2015 have been restated.
With regard to the adoption of the Business Combination Accounting Standard and other accounting standards, theCompany has adopted these standards from April 1, 2015, the beginning of the year ended March 31, 2016, in
accordance with the transitional treatment set forth in Article 58-2 (4) of the Business Combination Accounting Standard,
Article 44-5 (4) of the Consolidated Accounting Standard, and Article 57-4 (4) of the Business Divestiture AccountingStandard.
There was no impact from the application of these standards on the consolidated financial statements.

Nitta Gel at i n A nnual R eport 201634

(15) New accounting standards

Revised Implementation Guidance on Recovery of Deferred Tax Assets(1) Overview
The Revised Implementation Guidance on Recovery of Deferred Tax Assets (ASBJ Guidance No. 26, March 28, 2016,
hereinafter, the“Revised Guidance on Recovery of Deferred Tax Assets”) was set forth by the Accounting Standards Boardof Japan (ASBJ) upon transfer of the Implementation Guidance on Tax Effect Accounting and the Audit Implementation
Guidance on Tax Effect Accounting (sections on accounting treatment) from the Japanese Institute of Certified Public
Accountants (JICPA) to the ASBJ. The Revised Guidance on Recovery of Deferred Tax Assets provides guidance on therecoverability of deferred tax assets when implementing the Accounting Standard on Tax Effect Accounting (BusinessAccounting Council), in conformity with the guidance on recoverability as set forth in JICPA Audit Committee Report No.
66,“The Auditing Treatment on Determining the Recoverability of Deferred Tax Assets,”which provides a framework for
dividing companies into five categories and the accounting treatment when determining the amount of deferred tax assets
by each category. In order to conform to this framework, the ASBJ’s guideline was revised to provide criteria forcategorizing the companies and update part of the accounting treatment for determining the amount of tax-deferredassets as necessary.
(2) Scheduled adoption date
The Revised Guidance on Recovery of Deferred Tax Assets will be adopted effective April 1, 2016, the start of the year
ending March 31, 2017.
(3) Impact of applying the accounting standard and guidance
The effect of the Revised Guidance on Recovery of Deferred Tax Assets on the consolidated financial statements iscurrently being evaluated.

3. Inventories
The balances of inventories as of March 31, 2016 and 2015 consisted of the following:Thousands of
U.S. dollars

Millions of yen

2015

2016

2016

¥ 4,821¥ 5,262$ 46,723

Work in process

1,243

1,429

12,689Raw materials and supplies

2,156

2,275

20,201¥ 6,831¥ 8,966$ 79,613

Merchandise and finished goods

Inventories, total

Inventory write-downs of ¥9 million ($80 thousand) and ¥39 million were recorded in the cost of sales for the years
ended March 31, 2016 and 2015, respectively, due to a decline in value.

Nitta Gel at i n A nnual R eport 201635

4. Investment Securities
Information on available-for-sale securities as of March 31, 2016 and 2015 was as follows:
Millions of yen

2016

2015
Carrying
value

Acquisition
cost

Difference

Carrying
value

Acquisition
cost

Difference¥ 1,893¥238¥ 1,655¥ 1,710¥

230¥ 1,480

2

(0)

11

15

(3)

240

¥ 1,654¥ 1,722

245¥ 1,476

Securities whose carrying value exceeds theiracquisition cost:
Equity securities
Securities whose carrying value does notexceed their acquisition cost:
Equity securities

2

Total

¥ 1,895¥¥Thousands of U.S. dollars

2016
Carrying
value

Acquisition
cost

Difference$15,184$ 2,042$13,142

98

133

(27)

$15,290$ 2,175$13,106Securities whose carrying value exceeds their acquisition cost:
Equity securities
Securities whose carrying value does not exceed their acquisition cost:
Equity securities
Total

Unlisted equity securities of ¥31 million ($275 thousand) and ¥18 million as of March 31, 2016 and 2015, respectively,
were not included in the above tables as there were no market prices available and it is extremely difficult to determine
their fair value.

5. ‌Short-Term Loans Payable, Long-Term loans payable, Bonds
and Lease Obligations
Millions of yen

Thousands of
U.S. dollars

2015

2016

Due

AmountAmountMillions of yen

2016
Amount¥ 2,186

Short-term loans payable
Current portion of long-term loans payable
Lease obligations (current portion)
Long-term loans payable excluding current portion
Lease obligations excluding current portion

Weighted averageinterest rate (%)－¥ 1,705$ 19,410

2,215

1.418

−%

－

2,127

19,668

230

−

－

232

2,042

5,380

1.886

2017 to 2023

4,867

47,771469−

2017 to 2022

475

4,164

¥ 9,408$ 93,083¥10,483

The weighted average interest rate of short-term loans payable at March 31, 2016 was 3.066%. The average interest
rate on lease obligations is not provided because the balance of lease obligations includes interest equivalent that iscontained in the total lease payments.

Nitta Gel at i n A nnual R eport 2016

36

The maturities of bonds, long-term loans payable and lease obligations outstanding on April 1, 2016 were as follows:
Millions of yen

Thousands of U.S. dollars

Long-termloans payable

Lease obligations

Long-termloans payable

Lease obligations2017¥ 2,186¥ 230$ 19,410$ 2,042

2018

1,899

201

16,862

1,785

2019

1,591

134

14,127

1,190

2020

1,097

94

9,741

835

Year ending March 31,

2021

744

37

6,606

329

Total

¥ 7,517¥ 696$ 66,747$ 6,180

The following assets were pledged as collateral as of March 31, 2016 and 2015.
Thousands of
U.S. dollars

Millions of yen

2015

2016

2016

¥ 1,757¥ 1,976$ 17,546

Machinery, equipment and vehicles

196

253

2,246

Land

191

191

1,696

Investment securities

328

279

2,477

¥ 2,473¥ 3,379$ 30,004¥ 1,757¥ 1,686$ 14,971

Machinery, equipment and vehicles

196

181

1,607

Land

191

191

1,696

Total

¥ 2,145¥ 2,058$ 18,274

Buildings and structures

Total
Assets pledged as factory foundation mortgage included in
the above assets:
Buildings and structures

The obligations collateralized by the above assets as of March 31, 2016 and 2015 were as follows:
Thousands of
U.S. dollars

Millions of yen

2015

2016

2016

Long-term loans payable¥ 3,302¥ 4,162$ 36,956

Factory foundation mortgage included in the above liabilities:
Long-term loans payable¥ 3,021¥ 3,429$ 30,448

For the purpose of effective securing of working funds, the Company and two consolidated subsidiaries have enteredinto overdraft agreements and loan commitment agreements amounting to ¥6,058 million ($53,792 thousand) and ¥4,950
million in total with nine banks at March 31, 2016 and 2015, respectively. Borrowings outstanding under these agreements
as of March 31, 2016 and 2015 were ¥680 million ($6,038 thousand) and ¥400 million, respectively.

Nitta Gel at i n A nnual R eport 201637

6. Income Taxes
Income taxes applicable to the Company and its domestic consolidated subsidiaries comprise corporation, inhabitants andenterprise taxes. The statutory tax rate applicable to the Company was approximately 33.1% and 35.6% for the years
ended March 31, 2016 and 2015, respectively. For the years ended March 31, 2016 and 2015, reconciliations between
the statutory income tax rate and the effective income tax rate as a percentage of income are as follows:
2015

2016

35.6%

33.1%

Non-deductible expenses for income tax purposes

0.9

1.1

Statutory tax rate
Adjustments for:Non-taxable income

(0.1)

(1.0)

Inhabitants taxes—per capita levy

1.1

0.9

Tax credit for research and development, etc.

(5.7)

(4.0)

Net increase (decrease) in unrecognized tax effects of net operating losses of subsidiaries, etc.

(3.4)

5.9

−

4.3

Difference in tax rates between the Company and subsidiaries

(2.8)

0.2

Downward revision of deferred tax assets at end of year due to changes in tax rates

5.5

3.3

Equity in earnings of affiliates

(4.3)

(0.9)

−

(5.0)

Gain on negative goodwill−(16.0)

Loss on step acquisitions

−

19.7

Unrecognized tax effects pertaining to unrealized gains and losses

Gain on change in equity

Other
Effective tax rates

(1.4)

(0.4)

37.8%

41.2%

The significant components of deferred tax assets and liabilities at March 31, 2016 and 2015 were as follows:
Thousands of
U.S. dollars

Millions of yen

2016

2015

2016

Deferred tax assets:
Loss on valuation of inventories¥

Unrealized profit

61
31

¥

63
43

$

559
382

Provision for bonuses

64

75

666

Accrued enterprise tax

19

22

195

Loss on valuation of golf club membership

1

1

9

Loss on valuation of investment securities

225

4

36

Provision for retirement benefits

642

931

8,267

Long-term accounts payable—other

28

27

240

Impairment loss
Tax loss carryforward
Other

26

25

222

1,221

1,281

11,375

54

69

613

2,378

2,546

22,607

Valuation allowance(1,067)(828)(7,352)

Total deferred tax assets

1,311

1,718

15,255

Subtotal

Deferred tax liabilities:
Depreciation
Gain on valuation of land as a result of new consolidations

(582)

(913)

(8,107)−(623)(5,532)

Valuation difference on available-for-sale securities

(533)

(450)

(3,996)

Asset for retirement benefits

(59)

(129)

(1,145)

Total deferred tax liabilities
Net deferred tax assets(1,175)(2,116)(18,789)135¥ (398)$ (3,534)¥

Nitta Gel at i n A nnual R eport 201638

Restatement of amounts of deferred tax assets and deferred tax liabilities due to changes in the corporate income tax
rate, etc.
Following the promulgation of the“Act for Partial Revision of the Income Tax Act”(Act No. 15, 2016) and“Act for
Partial Revision of the Local Tax Act”(Act No. 13, 2016) on March 29, 2016, the corporate income tax rate, etc., will be
reduced from years beginning on or after April 1, 2016, among other revisions. In line with this change, the statutory
income tax rate used to calculate deferred tax assets and deferred tax liabilities for temporary differences expected toreverse in the year beginning on April 1, 2016, as well as the year beginning on April 1, 2017 has been reduced from theprevious 32.3% to 30.9%, and that for temporary differences expected to reverse in the year beginning on April 1, 2018 to
30.6%. As a result of these changes in the tax rate, the amount of deferred tax assets (less the amount of deferred tax
liabilities) was reduced by ¥6 million. Deferred income taxes increased by ¥25 million, and the valuation difference onother available-for-sale securities by ¥24 million, while remeasurements of defined benefit plans decreased by ¥4 million,
and deferred gains (losses) on hedges by ¥1 million.

7. Retirement Benefit Plans
The Company and certain consolidated subsidiaries have defined benefit plans and defined contribution plans for
employees’retirement benefits. Defined benefit plans are composed of lump-sum payment plans and defined benefit
corporate pension plans.
The lump-sum payment plans which certain consolidated subsidiaries have are calculated using the simplified
accounting method.

(1) Defined benefit plans including plan applied simplified method(a) Retirement benefit obligations

Thousands of
U.S. dollars

Millions of yen

2015

2016

2016

Retirement benefit obligations:¥ 8,379¥ 8,827

Cumulative effects of changes in accounting policies

(464)

−

−

Restated balance

7,914

8,827

78,379Balance at beginning of year$ 78,379

−

167

1,483

Service cost

221

256

2,273

Interest cost

239

253

2,246

−

(7)

(62)

330

170

1,510

Increase as a result of new consolidations

Prior service gains and losses
Actuarial gains and losses
Contributions from employees
Benefits paid
Foreign currency translation adjustment
Balance at end of year

−

2

18

(460)

(485)

(4,307)

580

(370)

(3,285)¥ 8,827¥ 8,814$ 78,263(b) Plan assets

Thousands of
U.S. dollars

Millions of yen

2015

2016

2016

¥ 6,107¥ 6,885$ 61,135

−

80

710

Expected return on plan assets

286

305

2,708

Administrative fees

(22)

(3)

(27)

Actuarial gains and losses

211

(420)

(3,729)Contribution paid by the employer

161

163

1,447

Contribution paid by the employees

2

2

18
(3,410)Plan assets:
Balance at beginning of year
Increase as a result of new consolidations

Benefits paid

(364)

(384)

Foreign currency translation adjustment

472

(300)

2,664

¥ 6,855¥ 6,297$ 55,914

Balance at end of year

Nitta Gel at i n A nnual R eport 201639

(c) Reconciliation from retirement benefit obligations and assets to liability (assets) for retirement benefits

Thousands of
U.S. dollars

Millions of yen

2016

2015
Funded retirement benefit obligations¥Plan assets

6,905$ 61,312(6,855)(6,297)(55,914)

305

607

5,390

7,160

¥

2016

1,908

16,942

Total net liability (asset) for retirement benefits

¥

1,972

¥

2,516

$ 22,341

Liability for retirement benefits

¥

2,661

¥

2,938

$ 26,088

Unfunded retirement benefit obligations

1,666

Asset for retirement benefits(689)

Total net liability (asset) for retirement benefits

¥

1,972

(d) Retirement benefit costs

¥

(421)

(3,738)2,516$ 22,341
Thousands of
U.S. dollars

Millions of yen

2016

2015
Service cost

¥

221

¥

2016

256

$

2,273

Interest cost

239

253

2,246

Expected return on plan assets(2,708)

(286)

(305)

Administrative fees

22

3

27

Amortization of actuarial gains and losses

92

95

844

Amortization of prior service benefit and cost

(21)

(13)

Retirement benefit expenses for defined benefit plan

¥

276

(e) Adjustments for retirement benefits

¥

281

2,495

Thousands of
U.S. dollars

Millions of yen

2016

2015

(186)
$

2016

Adjustments for retirement benefits:
Prior service cost¥

Actuarial gains and losses

(13)

¥

(277)

Total

¥

(290)

(f) Accumulated adjustments for retirement benefits

¥

(13)

(115)
(3,179)(372)$ (3,303)
Thousands of
U.S. dollars

Millions of yen

2016

2015

$

(358)

2016

Accumulated adjustments for retirement benefits:
Unrecognized prior service costs¥

Unrecognized actuarial gains and losses
Total

41

¥

27

$

240

(1,950)(2,308)(20,494)¥ (1,908)¥ (2,280)$ (20,245)(g) Plan assets
Plan assets comprise:

2015

2016

Bonds

50%

48%

Equity securities

45

41

Cash and deposits

1

8

Other

4

3

Total

100%

100%

Current and target asset allocations and current and expected returns on various categories of plan assets havebeen considered in determining the long-term expected rate of return.

Nitta Gel at i n A nnual R eport 201640

(h) Actuarial assumptions

2016

2015

Discount rate:
The Company and domestic consolidated subsidiaries
Overseas consolidated subsidiaries

1.0%

0.2%

4.2%～4.4%

3.7%～8.0%

Long-term expected rate of return
The Company and domestic consolidated subsidiaries
Overseas consolidated subsidiaries

2.1%

2.1%

4.3%～6.5%

2.5%～8.7%(2) Defined contribution plans

Certain consolidated subsidiaries that have defined contribution plans are expected to contribute ¥117 million ($1,039
thousand) and ¥76 million to the defined contribution plans for the years ended March 31, 2016 and 2015, respectively.

8. Leases(1) Finance leases (lessee)

The Company leases production facilities (machinery, equipment and vehicles) in connection with the collagen material
business as a lessee through finance lease transactions that do not transfer ownership of the leased property to thelessee. Depreciation of leased assets is calculated using the straight-line method over the useful lives of the respective
leased assets with zero residual value (guaranteed amount if it is specified in the lease contract).

(2) Operating leases

Future minimum lease payments subsequent to March 31, 2016 for non-cancelable operating leases were as follows:Year ending March 31,

Millions of yen

2017

¥

2018 and thereafter
Total

Thousands of
U.S. dollars

58

$

515

170

1,510

¥ 229$ 2,033

9. Financial Instruments(1) Overview(a) Policy for financial instruments
In consideration of plans for capital investment, the Group raises necessary funds mainly through bank borrowings.
The Group invests temporary surplus funds mainly in highly liquid financial assets and raises short-term operating
capital through bank borrowings. The Group uses derivatives to avoid after-mentioned risks and does not enter into
derivatives for speculative purposes.
(b) Descriptions of financial instruments and related risk
Trade receivables such as notes and accounts receivable are exposed to customer credit risk. Trade receivables
denominated in foreign currencies arising from overseas operations are exposed to foreign currency risk.
Investment securities are mainly composed of equity securities of business partner companies and are exposed tomarket risk.
Substantially all trade payables such as notes and accounts payable have payment due dates within five months.
Certain payables denominated in foreign currencies are exposed to foreign currency risk.
Long-term loans payable, bonds and lease obligations under finance leases are principally for the purpose of
making capital investments and due up to eight years from the balance sheet date. Although certain of these areexposed to interest rate fluctuation risk, such risk is hedged by derivatives (interest rate swaps).
As for derivatives, the Group has entered into foreign exchange forward contracts to hedge the foreign currency
risk arising from trade payables denominated in foreign currencies and interest rate swap transactions to hedge
fluctuation risk deriving from interest payments of long-term loans payable.
Information regarding the method of hedge accounting, hedging instruments and hedged items, hedging policy andassessment of hedge effectiveness is disclosed in Note 2.“Significant Accounting Policies (12) Hedge accounting.”

Nitta Gel at i n A nnual R eport 201641

(c) Risk management for financial instruments

Credit risk management (risk of default by customers or counterparties)
In accordance with the credit management rules of the Nitta Gelatin Group, for trade receivables and long-term loans
receivable, the sales departments of each division monitor the creditworthiness of their main customers periodicallyand manage due dates and outstanding balances by customer. In addition, the Group is working to identify
uncollectibility at an earlier stage and mitigate the risks of bad debts from customers in financial difficulty.
The Group believes that the credit risk of derivatives is insignificant as it has entered into derivative transactions
only with financial institutions with a sound credit rating.

Market risk management (risks of fluctuations in foreign exchange rates, interest rates and others)
For trade payables and forecast transactions denominated in foreign currencies, the foreign currency risk of the Nitta
Gelatin Group identified by currency on a monthly basis is hedged by foreign exchange forward contracts. In addition,
to mitigate the interest rate risk for interest payments of long-term loans payable, the Group has entered into interest
rate swap transactions.
For investment securities, the Group periodically monitors the fair values and the financial position of the issuers(business partner companies) and continuously reviews the holding status, taking into account market conditions andrelationships with the issuers.
Derivative transactions are conducted and managed by the responsible division with the approval of authorized
personnel in accordance with the internal management rules which define the authorization policies and transaction
limits.
Consolidated subsidiaries have not entered into derivative transactions.

Management of liquidity risk in funding (risk of default at due dates)
Based on reports from each division, the responsible division of the Nitta Gelatin Group prepares and updates its cash
flow plan on a timely basis and manages liquidity risk by maintaining liquid funds.
(d) Supplementary explanation of the fair value of financial instruments
The fair value of financial instruments is based on their market price if available. When there is no market priceavailable, fair value is reasonably calculated. Since various assumptions and factors are reflected in the calculation offair value, different assumptions and factors could result in different fair value. In addition, the notional amounts ofderivatives in Note 10.“Derivative Transactions”are not indicative of the market risk involved in the derivativetransactions.

(2) Fair value of financial instruments

The carrying value and the fair value of financial instruments on the consolidated balance sheets as of March 31, 2016 and2015, fair value and the difference between them are shown in the table below. Financial instruments whose fair value isextremely difficult to determine are not included in the table.
Millions of yen

2016
Carrying value¥¥

Difference

2,688

−

Notes and accounts receivable

7,375

7,375

−

Investment securities

1,722

1,722

−

Cash and deposits

2,688

Fair value¥ 11,785¥ 11,785−

Notes and accounts payable

4,252

4,252

−

Other payable

1,261

1,261

−

Short-term loans payable

2,186

2,186

−

Long-term loans payable (including current portion)

7,596

7,620

23

¥ 15,297¥ 15,321¥¥Total assets

Total liabilities
Derivative transactions *( )(*) The value of assets and liabilities arising from derivative transactions is shown at net value.

Nitta Gel at i n A nnual R eport 2016

42

3

3

¥

23
−

Millions of yen

2015
Carrying value

Cash and deposits¥

Fair value

2,622

¥

Difference

2,622

−

Notes and accounts receivable

6,726

6,726

−

Investment securities

1,895

1,895

−

¥ 11,245¥ 11,245−

Notes and accounts payable

3,768

3,768

−

Other payable

1,435

1,435

−

Short-term loans payable

1,705

1,705

−

Total assets

Long-term loans payable (including current portion)
Total liabilities
Derivative transactions (*)

6,995

7,005

¥ 13,904¥ 13,915

¥

¥

20

10
¥

10

20

−

(*) The value of assets and liabilities arising from derivative transactions is shown at net value.

Thousands of U.S. dollars

2016
Cash and deposits

Carrying value

Fair value

Difference$ 23,868$ 23,868−

65,48665,486−

Notes and accounts receivable

15,29015,290−$104,644$104,644−

Notes and accounts payable

37,75537,755−

Other payable

11,197

11,197−

Short-term loans payable

19,41019,410−Long-term loans payable (including current portion)

67,44867,661

204

Investment securities
Total assets

Total liabilities
Derivative transactions (*)$135,828$136,042

$

$

27

$

204

27

−

(*) The value of assets and liabilities arising from derivative transactions is shown at net value.

Note 1. ‌Methods to calculate the fair value of financial instruments and other matters related tosecurities and derivative transactions
Assets:Cash and deposits and Notes and accounts receivable
Since these items are settled in a short period of time, their carrying value approximates fair value.

Investment securities
The fair value of equity securities is based on quoted market prices. Information on securities classified by holding
purpose is disclosed in Note 4.“Investment Securities.”
Liabilities:

Notes and accounts payable and Other payable
Since these items are settled in a short period of time, their carrying value approximates fair value.

Short-term loans payable and Long-term loans payable
The fair value of long-term loans payable is based upon the present value of the total of principal and interest
discounted by the interest rate to be applied if similar new borrowings were entered into.
Derivative transactions:
Information on derivative transactions is disclosed in Note 10.“Derivative Transactions.”

Note 2. ‌Financial instruments whose fair value is extremely difficult to determine
Millions of yen

2015

2016

¥ 18

¥ 31

Thousands of
U.S. dollars

2016

Carrying value:
Unlisted equity securities$ 275

These are not included in investment securities in the above table because there was no quoted market price available
and it is extremely difficult to determine the fair value.
Nitta Gel at i n A nnual R eport 201643

(3) As of March 31, 2016 and 2015, monetary receivables with maturities were deposits of ¥2,684 million ($23,832

thousand) and ¥2,617 million and notes and accounts receivable of ¥7,375 million ($65,486 thousand) and ¥6,726
million, respectively. These were all due within one year.

10. Derivative Transactions
Hedge accounting has been applied to all derivative transactions held by the Group as of March 31, 2016 and 2015, andtheir fair value information is stated below. Fair value is measured based on quotes and prices provided by counterparty
financial institutions.
Currency related:

Millions of yen

2016

2015
Contract ornotional
amountMaturing
after oneyear¥ 620¥−

Fair value

Contract ornotional
amountMaturing
after oneyear

Fair value¥ 20¥ 881¥−¥ (37)¥1,894

¥

−

¥ 41

Deferral hedge accounting
Foreign exchange forward contracts
Buy: USD and CAD
Forecast transactions Sell: USD

Thousands of U.S. dollars

2016
Contract ornotional
amountMaturing
after oneyear

Fair value

Buy: USD and CAD$ 7,823$−$(329)Forecast transactions Sell: USD$16,818$−$ 364

Deferral hedge accounting
Foreign exchange forward contracts

Interest related:

Millions of yen

2016

2015
Contract ornotional
amountMaturing
after oneyear

Fair value¥ 750¥ 175( )Contract ornotional
amountMaturing
after oneyear

Fair value¥ 550¥ 266( )Exceptional treatment
Interest rate swaps
Receive/floating and pay/fixed**

Thousands of U.S. dollars

2016
Contract ornotional
amountMaturing
after oneyear

Fair value$ 4,884$ 2,362( )Exceptional treatment
Interest rate swaps
Receive/floating and pay/fixed*(*) Interest‌rate swaps to which the exceptional treatment is applied are accounted for together with long-term loans payable designated as a hedged item. Therefore,

their fair value is included in the fair value of long-term loans payable.

11. Contingent Liabilities
As of March 31, 2016 and 2015, the Group was contingently liable for the assignment of receivables with recourse in theamount of ¥200 million ($1,776 thousand) and ¥292 million, respectively.

Nitta Gel at i n A nnual R eport 201644

12. Selling, General and Administrative Expenses
The main components of selling, general and administrative expenses for the years ended March 31, 2016 and 2015 wereas follows:

Thousands of
U.S. dollars

Millions of yen

2016

2015
Packing and freightage expenses

¥

¥

805

2016

956

$

8,489

Salaries

1,394

1,559

13,843

Bonuses

224

232

2,060

Provision for bonuses

54

69

613

Retirement benefit costs

94

86

764

Provision for directors’retirement benefits:

1

1

9

Provision of allowance for doubtful accounts

(14)

(2)

(18)

Depreciation

95

112

994

Research and development expenses

753

802

7,121

13. Gain on Negative Goodwill and Loss on Step Acquisitions
For the year ended March 31, 2016 the Group recorded a ¥502 million ($4,457 thousand) gain on negative goodwill anda ¥620 million ($5,505 thousand) loss on step acquisitions as a result of the conversion of Nitta Gelatin India Ltd., Bamni
Proteins Ltd., and Reva Proteins Ltd. into consolidated subsidiaries.

14. Gain on Change in Equity
A gain on change in equity was the result of a third-party allotment of shares of Beijing Qiushi Collagen Casing Co., Ltd.

15. Information on Related Party Transactions(1) Related party transactions

There were no transactions of the Company with affiliates for the year ended March 31, 2016.
Transactions of the Company with affiliates for the year ended March 31, 2015 were as follows:
Name

Paid in capital

Principal business

Ownership
ratio

Description oftransaction

Millions of yen

Thousands of
U.S. dollars

Nitta Gelatin India
Ltd. (Kerala, India)(Thousandsof rupees)
90,791

Manufacture andsales of gelatin
and ossein

Direct43.0%

Purchase of
raw materials

¥

2,109

¥ 18,727(2) Notes to affiliates
No items to report

Nitta Gel at i n A nnual R eport 201645

16. ‌Information Related to Consolidated Statements of Changes
in Net Assets(1) Number of issued shares for the years ended March 31, 2016 and 2015
As of March 31

2014

Change2015

2016

ChangeNumber of issued shares:
Common shares
Total

18,373,974−

18,373,974−

18,373,974

18,373,974−

18,373,974−

18,373,974

162

−

162

−

162

Treasury stock:
Common shares(2) Dividends paid to shareholders
2016Type of shares

Amount(Millionsof yen)Amount(Thousands of
U.S. dollars)

Amount per
share
(Yen)

Amount per
share(U.S. dollars)

Record date

Effective dateJune 25, 2015
Annual general
meeting ofshareholders

Common
stock

¥ 110

$ 977

¥ 6.00$ 0.05

March 31,2015

June 26,
2015

November 6, 2015
Board of Directors
meeting

Common
stock

110

977

6.00

0.05

September
30, 2015

December 4,
2015

Amount per
share
(Yen)

Amount per
share(U.S. dollars)

Record date

Effective date

Resolution

2015
Amount(Thousands of
U.S. dollars)

Type of shares

Amount(Millionsof yen)June 26, 2014
Annual general
meeting ofshareholders

Common
stock

¥ 110

¥ 6.00March 31,2014

June 27,
2014

November 6, 2014
Board of Directors
meeting

Common
stock

110

6.00

September
30, 2014

December 5,
2014

Resolution(3) Dividends with a record date during the fiscal year but an effective date subsequent to the fiscal
year
2016
Resolution

June 28, 2016
Annual general
meeting ofshareholders

Type ofsharesAmount(Millions ofyen)Amount(Thousands of
U.S. dollars)

Paid fromAmount per
share
(Yen)

Amount per
share(U.S. dollars)

Record date

Effective dateCommon
stock

¥ 110

$ 977

Retainedearnings¥ 6.00$ 0.05

March 31,2016

June 26,
2016

Type ofsharesAmount(Millions ofyen)

Paid fromAmount per
share
(Yen)

Record date

Effective dateCommon
stock

¥ 110

Retainedearnings¥ 6.00March 31,2015

June 26,
2015

2015
Resolution

June 26, 2015
Annual general
meeting ofshareholders

Nitta Gel at i n A nnual R eport 201646

17. Amounts per Share
Net assets per share is computed based on net assets available for distribution to the shareholders of common stock andthe number of shares of common stock outstanding at the year-end.
Yen

U.S. dollars

2015

2016

2016

Net assets per share¥ 831.15¥ 814.90$ 7.24

Net income per share

33.20

26.00

0.23

Diluted net income per share is not disclosed due to the absence of dilutive shares for the years ended March 31, 2016
and 2015.

18. Cash Flow Information
Reconciliations between cash and cash equivalents in the consolidated statements of cash flows for the years ended
March 31, 2016 and 2015 and cash and deposits in the consolidated balance sheets as of March 31, 2016 and 2015
were as follows:

Thousands of
U.S. dollars

Millions of yen

Cash and deposits
Time deposits with a maturity in excess of three months
Cash and cash equivalents

2015

2016

2016

¥ 2,622¥ 2,688$ 23,868

(20)

(151)

(1,341)¥ 2,602¥ 2,536$ 22,518

Nitta Gel at i n A nnual R eport 201647

19. Comprehensive Income
Reclassification adjustments and income tax benefit (expense) on components of other comprehensive income for theyears ended March 31, 2016 and 2015 were as follows:

Thousands of
U.S. dollars

Millions of yen

2015

2016

2016

¥ 689¥ (180)$ (1,598)

0

0

0

Pre-tax amount

689

(179)

(1,589)

Income tax benefit

(191)

83

737

Valuation difference on available-for-sale securities

498

(96)

(852)

Losses arising during the period

89

(132)

(1,172)Adjustments to aquisition cost of assets

(61)

54

479

Valuation difference on available-for-sale securities:
Losses arising during the period
Reclassification adjustments

Deferred gains or losses on hedges:

Pre-tax amount

28

(77)

(684)

Income tax expense

(9)

9

80

Deferred gains or losses on hedges

18

(68)

(604)

638

(704)

(6,251)

−

(26)

(231)

638

(731)

(6,491)

−

−

−

638

(731)

(6,491)

(369)

(457)

(4,058)

78

84

746

Pre-tax amount

(290)

(372)

(3,303)

Income tax expense

(79)

117

10,389Pension liability adjustment

(370)

(255)

(2,264)Foreign currency translation adjustment:
Losses arising during the period
Reclassification adjustments
Pre-tax amount
Income tax expense
Foreign currency translation adjustments
Pension liability adjustment:
Losses arising during the period
Reclassification adjustments

Share of other comprehensive income of associates
accounted for using equity method:
Losses arising during the period
Reclassification adjustments
Share of other comprehensive income of associates
accounted for using equity method
Total other comprehensive income

166

(41)

(364)

(1)

443

3,934

165

402

3,570

¥ 950¥ (748)$ (6,642)

20. Segment Information(1) Overview of reportable segments

Reportable segments are defined as a component of the Group for which separate financial information is available andwhose operating results are regularly evaluated by the Board of Directors to make decisions about how resources areallocated among the Group members and assess its performance.
The Group plans comprehensive domestic and overseas strategies for its products and services and develops businessactivities based on business segments by product and service.
Accordingly, the Group consists of two segments by product and service based on the business activities as follows:“Collagen material business”produces gelatin, collagen peptide, collagen casings and others.
“Formula solution business”produces various materials for foods, adhesives and others.

Nitta Gel at i n A nnual R eport 201648

(2) Basis of measurement for the amounts of net sales, profit, assets and other items by reportablesegment

The accounting policies of each reportable segment are consistent with those disclosed in Note 2.“Significant Accounting
Policies.”Segment profit is based on operating income, and intersegment sales and transfers are based on actual market
prices.

(3) Information about net sales, profit, assets and other items by reportable segment
Millions of yen

2015
Collagenmaterial
business

Formulasolutionbusiness

Total

Reconciliation(Note 1)

Amounts on
consolidated
financialstatements(Note 2)

Net sales:¥ 22,959¥8,955¥ 31,914¥−Intersegment sales and transfers

Sales to third parties

1,430

−

1,430

(1,430)−Total

24,3908,955

33,345(1,430)31,914¥ 31,914

Segment profit

1,101

647

1,749

(1,356)392

Segment assets

25,6985,310

31,0092,922

33,932

981

98

1,079

36

1,115

1,759

5,629

2,322

59

2,381

Other items:
Depreciation and amortization
Increase in property, plant and equipment
and intangible assets

Millions of yen

2016
Collagenmaterial
business

Formulasolutionbusiness

Total

Reconciliation(Note 1)

Amounts on
consolidated
financialstatements(Note 2)

Net sales:¥27,686¥9,199¥36,885¥−Intersegment sales and transfers

1,911

8

1,920

(1,920)−Total

29,5989,207

38,805(1,920)36,885

Sales to third parties¥36,885

Segment profit

1,832

812

2,645

(1,371)

1,273

Segment assets

29,907

5,474

35,381

2,216

37,597

Depreciation and amortization

1,420

100

1,520

42

1,562

Increase in property, plant and equipment
and intangible assets

1,362

37

1,399

62

1,462

Other items:

Thousands of U.S. dollars

2016
Collagenmaterial
business

Formulasolutionbusiness

Total

Reconciliation(Note 1)

Amounts on
consolidated
financialstatements(Note 2)

Net sales:
Sales to third parties$ 245,836$ 81,682$ 327,517$−$ 327,517

Intersegment sales and transfers

16,96971

17,048(17,048)−

Total

262,81381,753

344,566(17,048)

327,517

Segment profit

16,267

7,210

23,486(12,174)

11,303

Segment assets

265,557

48,606314,163

19,677

333,839

Depreciation and amortization

12,609888

13,497373

13,870

Increase in property, plant and equipment
and intangible assets

12,094329

12,422551

12,982Other items:

Nitta Gel at i n A nnual R eport 201649

Note 1.“Reconciliation”included the following:Thousands of
U.S. dollars

Millions of yen

2016

2015

2016

Segment profit:
Intersegment elimination

¥

Total

¥

2

0

$

0

(1,358)(1,372)(12,183)¥ (1,356)¥ (1,371)$ (12,174)

Corporate expense *( )(*)“Corporate expense”presents mainly general and administrative expenses that are not allocated to reportable segments.

Thousands of
U.S. dollars

Millions of yen

2016

2015

2016

Segment assets:
Intersegment elimination¥

Corporate expense *

¥

(524)
3,447

( )

Total

¥

¥

2,922

(718)

$

(6,375)2,934

26,0522,216$ 19,677(*)“Corporate assets”presents mainly cash and deposit, property, plant and equipment and investment securities that are not allocated to reportable segments.

Note 2. Segment profit is reconciled to operating income on the consolidated statements of income.
Note 3. Related information for the years ended March 31, 2016 and 2015(a) Information by geographical area
Net sales:
Millions of yen

2015
Japan

¥‌ 18,435

India

¥‌

Asia

150

U.S.

¥‌ 18,661

¥‌

8,084

Canada

¥‌

2,550

Other

¥‌

827

Total

¥‌ 31,914

Millions of yen

2016
Japan

¥‌ 19,307

India

¥‌

Asia

3,290

¥‌

U.S.

2,225

¥‌

9,109

Canada

¥‌

2,044

Other

¥‌

906

Total

¥‌ 36,885

Thousands of U.S. dollars

2016
Japan

India

Asia

U.S.

Canada$‌ 171,435$‌ 29,213$‌ 19,757$‌ 80,883$ 18,150

Other

$‌

8,045

Total

$‌ 327,517

Property, plant and equipment:
Millions of yen

2015
Japan

¥‌

India

3,514

Asia

−

¥‌

U.S.

181

¥‌

6,328

Canada

¥‌

824

Total

¥‌ 10,848

Millions of yen

2016
Japan

¥‌

3,324

India

¥‌

3,718

Asia

¥‌

U.S.

34

¥‌

5,892

Canada

¥‌

754

Total

¥‌ 13,724

Thousands of U.S. dollars

2016
Japan

India

$‌ 29,515$‌ 33,014

Asia

$‌

302

U.S.

$‌ 52,318

Canada

$

6,695

Total

$‌ 121,861(b) Information by major customer has been omitted since there were no sales to a single external customer
accounting for 10% or more of the consolidated sales.

Nitta Gel at i n A nnual R eport 201650

(Supplementary Note)

As stated in Note 1.“Basis of Presenting Consolidated Financial Statements,”the Company, by its own judgment, has
prepared the accompanying consolidated financial statements by making reclassification and rearrangements to thefinancial statements issued domestically in order to present them in a form which is more familiar to readers outside
Japan. These financial statements have not been audited by independent auditors.
The Group’s consolidated financial statements for the years ended March 31, 2016 and 2015, which were included in
the Annual Securities Report, have been prepared in thousands of yen and audited by Ernst & Young ShinNihon LLC in
accordance with Article 193-2 (1) of the Financial Instruments and Exchange Act of Japan.

Nitta Gel at i n A nnual R eport 201651