S .T.C O RP ORATION

Annual Report 2008
For the Year Ended March 31, 2008

A Fresh Twist for A New Life“Refreshing the Air”
To Become a Company that Creates New Value
Since its founding, S.T. Corporation has been focused on deodorizers
and air fresheners, with growth achieved by creating new markets insuch fields as mothproofing agents, dehumidifiers and homecare.
In 2007, having implemented a new business structure, we removed“kagaku” (chemicals) from our corporate name to become S.T. Corporation.
This represents a new beginning based on flexible ideas—ideas that are
not limited to chemicals.
Based on our corporate slogan, “Refreshing the Air,” we provide“comfort and excitement” in customers’ lifestyles through innovativeand creative products and services, and continue to accept the challenge
as a company that creates new value.

Contents
1 Financial Highlights

2 A Message from Management

5 Corporate Governance & CSR

10 Review of Operations

14 Management’s Discussion and Analysis

38 Corporate Information

39 Investor Information

6 Special Feature—Management Strategy

16 Five-Year Selected Financial Data (Unaudited)

18 Financial Section

Financial Highlights

Thousands of
U.S. dollars (Note3)

Millions of yen except per share data and financial ratios

2004

2005

2006

2007

2008

2008

¥ 45,082¥ 44,109¥ 46,134¥ 45,227¥ 47,006$ 469,164

3,419

3,748

3,133

3,342

3,219

32,126

Years ended March 31

Net Sales
Operating Income
Income before income taxes and minority interests

2,746

3,209

1,913

3,039

2,458

24,535Net Income

1,451

1,823

988

1,747

1,295

12,930

404

880

826

696

649

6,473

R&D expenses

413

423

480

489

489

4,881

Depreciation and amortization

867

845

873

837

936

9,343

Capital expenditures

Per Share Data (¥):
Net Income

48.87

63.43

34.35

65.10

54.08

0.54

Net Assets

924.33957.45966.43935.19853.90

8.52

17.0

22.0

22.0

22.0

22.0

0.22

ROE (Note 1)

5.5

6.7

3.6

6.7

6.1

ROA (Note 2)

10.2

10.9

9.0

10.0

11.2

Cash dividends
Financial Ratios (%):

Notes: 1. ROE=Net income / Average total shareholders’ equity
2. ROA=(Operating income + Interest and dividends received + Purchase discount) / Average total assets
3. Figures have been translated into U.S. dollars at ¥100.19=$1.00, the approximate exchange rate prevailing on the Tokyo Foreign Exchange Market on March 31, 2008.

Net Sales

Operating Income

Net Income(millions of yen)(millions of yen)(millions of yen)

Total Assets
Total Net Assets*

27,861

08

04

05

06

07

08

04

05

06

04

05

06

19,14428,39327,44908

24,64926,693

33,83037,90536,9591,295

36,269

1,747

1,823

Total Net Assets

988

1,451

3,219

3,342

3,748

Total Assets

3,133

07

3,419

06

47,00605

46,13404

45,22745,082

44,109(millions of yen)

07

07

0 8*

* The data previously presented as “Total shareholders’ equity” are shown as “Total net assets” based on a new accounting standard from the fiscal year ended March 31, 2007.

1

A Message from Management

A Fresh Twist for
A New Life

Kanzo Kobayashi
Representative
Executive Officer,
President and Chief
Executive Officer2

A year has passed since you assumed the position of President and Chief Execu-

Q1. tive Officer in April 2007. What are your impressions looking back on the fiscal
year ended March 31, 2008?
With the implementation of a new business structure and the change to our corporate name, fiscal 2008, the year
ended March 31, 2008, marked an important transition. It was a critical year for us as we began to move away fromthe traditional top-down approach to management and toward becoming a company where employees can take theinitiative. Regarding performance, net sales rose 3.9% compared with the previous year, to ¥47.0 billion. This wasachieved despite a severe business environment due to floods of low-priced products and intensifying competition
brought about by overseas-based companies entering the Japanese Air Care market. In the case of income, thehigher-than-expected costs of raw materials plus the cost of implementing our corporate name change in August
2007 were among the factors that caused operating income to decline 3.7% from the previous year, to ¥3.2 billion,
and net income to fall 25.8%, to ¥1.2 billion.

Q2.

Please tell us about the Company’s management reform policies.

To bolster an income-oriented management foundation, I proposed “efficient management,” “growth management,” and “teamwork management” as reform policies. Efficient management advances the development of ahigh-income structure that reduces the number of products and decreases the rate of returned products. With
growth management, we will concentrate management resources on high-value-added product development andcore brands, to expand both the size and our share of the Japanese market while vigorously pursuing global development. Next, promoting these two policies requires teamwork management.The driving force of each individual andthe teamwork of each department will bring about efficiency and growth.

Q3. Please tell us about the strategies for fiscal 2009 and the issues to be faced.
We will continue to execute management reforms. From April 2008, we will make improvements to Companywide
cross-sectional operations, strengthen global development, boost our ability to offer business proposals and accelerate management reforms.
Regarding efficiency, we are advancing to the second stage of value analysis/value engineering (VA/VE) andconstructing an income framework that will be resistant to the rising costs of raw materials, worsening levels of
consumption, as well as to the impact of the weather or other environmental factors.

3

To achieve growth management, we are focusing our efforts on high-value-added
products and believe that as a leading company we will prevail over competitors’ lowpriced products and outpace the intensifying competition. Furthermore, with our popular Shoshu-Riki and Dashu-Tan megabrands, we are expanding product demonstrations,offering seasonal products, proposals of new usages and other sales promotions to bolster brand strength. We hope to see the S.T. brand becoming well-known throughout
the world, with our global market development focused on Asia, Europe and the United States.

Q4. What is the Company policy on shareholder returns?
While the stable distribution of dividends remains a fundamental principle, our thinking is to promote a dividend policy that is linked to future performance. The payout
ratio for the fiscal year under review was 40.7%. Furthermore, we are continuously
acquiring treasury stock, acquiring four million shares in the year under review. Our
intention is to take a flexible approach to treasury stock under our long-term plan.

Q5. In conclusion, please tell us about the mid- to long-term business plan.
Traditionally, S.T. Corporation has created new markets by “Doing things no other company in the world does.”
Moreover, we have succeeded in achieving a stable income base following the strategic shift from the Cloth Carebusiness to the Air Care business. As our mid- to long-term plan progresses, we firstly want to both encourage expansion in and take the top share of the Air Care market in Japan. Next, we aim to systematically tap the enormous
markets of Europe, the United States and Asia to realize an overseas net sales ratio of 10%. By raising our incomebase through the thorough implementation of “selection and focus,” our aim is to achieve an operating income
ratio of 10%. We hope for your continued understanding of our management reforms and thank you for your support of the refreshed, new-look S.T. Corporation.

July 2008

Kanzo Kobayashi
Representative Executive Officer,
President and Chief Executive Officer

4Corporate Governance & CSR

Providing relaxation and excitement to homes through its products and services, S.T. Corporation
targets growth with sustainable earnings. The Company also places top management priority in satisfying all stakeholders, including shareholders, customers, clients, local communities and employees,
while enhancing its corporate value.

Corporate Governance
In June 2004, S.T. Corporation converted itself into a com-

Progress in the Development of the Internal
Control Systempany with a committee-based corporate governance sys-

There are five divisions under the control of the chief execu-

tem, with the aim of further reinforcing the entire organiza-tive officer: corporate staff, marketing, sales, manufacturing

tion. Five of the eight members of the Board of Directors

and international business. Each division has a chief operat-

were outside directors as of June 18, 2008. Adopting a com-

ing officer responsible for operations who delegates author-

mittee-based corporate governance system, management

ity so that he can make responsible decisions. At the same

supervisory functions and business execution have beentime, each division conducts mutual supervision through theseparated, and a large part of the responsibility for business

Executive Officer Meeting and the in-house approval sys-

execution has been transferred to executive officers. This

tem. In addition to this, the Legal Affairs Group properly su-

has created an environment for steady improvement in man-

pervises each division's compliance activities. Furthermore,agement quality, rapid decision-making and flexible business

the Company appointed a compliance officer/information

execution at the Company. In addition, the Company be-disclosure officer at every domestic subsidiary, in pursuit oflieves that the establishment of Nomination, Audit and Com-developing the Group-wide compliance structure.

pensation Committees with outside directors as majority
members is reinforcing the management supervisory func-

Social Contribution Activities

tions and management transparency.

With the aim of “Using resources efficiently and communicating with and contributing to local communities,” the S.T.
Corporation plants at Honjo in Saitama Prefecture, Iwaki in

S.T. Corporate Governance Structure

Fukushima Prefecture and Kita-Kyushu in Fukuoka Prefec-

Functions of the Board of Directors, Executive Officers and Committees

ture, held bargain sales of outlet products for the benefit ofBoard of directors (8)local residents and donated part of the proceeds to the so-

Directors double
as executive
officers

cial welfare councils in the three cities.
The Company proactively supports cultural activities,
such as musicals and stage plays. The Company-sponsored
campaign to stage musicals is now in its eleventh year andAppointment

is expected to have attracted a total
Executive officers (8)Representative
executive officer (1)audience of more than 150,000
people by December. In 2008, S.T.

Executive officers (7)Corporation plans to present theNomination Committee (5)Audit Committee (4)Compensation Committee (3)musical, Anne of Green Gables, ineight major cities nationwide. S.T.

Decisions on nomination anddismissal of directors
Outside directors

Audits of execution of duties by Decisions on compensation of
directors and executive officers individual corporate directors
and executive officers
Corporate directors
Executive officers

Corporation will present a “heartthrobbing” performance for all.

5

Special FeatureManagement Strategy
Efficient Management for Future Growth
In April 2007 we shifted to a new management structure and changed our name to S.T. Corporation in August ofthat year. These management reforms have been driven by our three core policies: efficient management, growth
management, and teamwork management. Amidst an increasingly difficult business environment, such as rising raw
material costs, floods of low-priced products and decline in consumption, we must redouble our efforts at implementing efficient management initiatives that focus on profitability if we are to achieve sustained growth. In thisSpecial Feature, we touch on some of the profit growth-orientated initiatives being implemented at S.T. Corporation.

Further expand domestic market share and create new markets
Global business expansion

GrowthManagement

P7

Focus onProfitability

1. Cost-cutting efforts
2. Profit creation

P 8- 9Teamwork

Day of Refreshing the Air

Management

Collaborative meetings and fresh ideas
Innovative product ideas

P 7- 96

GrowthGrowth Management
씰 Further expand domestic market share and create new

brands we have developed that offer innovative, revolutionary solutions
for modern lifestyle challenges. In this way, we continue to gain newmarkets

users.

S.T. Corporation has long been at the forefront of the air care (deodorizers and air fresheners), cloth care (mothproofing agents) and humidity
care (dehumidifying agents) markets. To achieve further growth in these씰 Global business expansion

markets, we have implemented two key business initiatives.

As part of our management reforms we established an international

First, we are striving to further expand our market share. Our aim isbusiness division in April 2008 to increase awareness of our brands

to deepen our presence in existing markets by developing and promot-

around the world. The new division will focus centrally on building S.T.

ing new ideas and solutions that utilize our core brands, such as Shoshu-

Corporation’s presence in South-east Asia, and take full advantage of its

Riki and Mushuda.

business alliances to expand its business presence in the U.S. and European markets. Our long-term management goal is generating 10% of

The second initiative is a focus on creating new markets for growth.

consolidated sales from our overseas businesses.

Deodorizers Air-Wash and Shoshu-Plug are just two examples of new

Enhancing Presence of Power Brands

Growth Strategy Aims
Overseas

Share increase (Japan)

Market Expansion (Japan)

Air CareAll regions

40% share target

Propose new usages

Cloth CareAsia, Europe

50% share target

Propose new usages

Humidity Care
Hand CareAsia, the United States

Propose value-added products

All regions

Propose new features and stand-out products

Thermal Care
Home Care

S.T. Group companies
New business andalliances

A leading Air Care brand

Expanding the market

Shoshu-Riki

Air-Wash

Future core brand

Unrivalled No.1 share

Shoshu-Plug

MushudaNew usages such as in the medical field
No.1 cleaner in the niche market

Propose new usages

Open up new channels
New business generations and alliances

Overseas Sales Trend (Consolidated)
Overseas sales(Billions of yen)

% of total sales

(%)

3

6

5.5
2.5
3.9

2

Japan Aroma Laboratory
In 2007, the Japan Aroma Laboratory received orders from JST (the Japan Scienceand Technology Agency) to research, develop and produce on a commercial basis

1.7

1.5

1.4

1

4

3.4

3.2

2

detoxifying agents for environmental pollutants using essential tree oil.
0005Teamwork Management

06

07

08

Teamwork

Day of Refreshing the Air
One innovative approach we are taking at S.T. Corporation to reinforce our teamwork management strategy is “Day of Refreshing the Air.” Twice a year, all employees have the opportunity to interact directlywith consumers, selling our products in stores. This ‘front lines’ experience helps all employees gain a
new perspective on their work and goals, particularly for staff that normally only work in an office environment. Not only does this initiative support our sales promotion efforts, it invigorates the entire company, and helps all employees experience first-hand the market in which we operate.

7

Efficiency

Focus on Profitability
1. Cost-cutting efforts
씰 Cutting raw material costs

씰 Improving product return rates

In the fiscal year under review, earnings were squeezed by the sharp

A key issue for the Company was the high return rate last year for

rise in material costs, including plastics and paper. Our cost-cutting ef-

disposable warmers, due to the unseasonably warm winter weather.

forts for fiscal 2009 are positioned as the second stage of VA/VE. Relat-

To address this issue, we tightened inventory controls and introduced

ed initiatives include standardizing materials used and improving productregular collaborative meetings between the production, distribution,

designs.

and marketing divisions to share information and discuss strategies.
As a result of these efforts, the product return rate for the current year씰 Streamlining our product lineup

under review improved 25% from the previous year. Going forward,

Since 1998, S.T. Corporation has pursued a “selection and focus” strategy, reducing the number of products in our lineup and concentrating
specifically on our core brands. As a result of these efforts, we success-+we aim to employ these initiatives across a range of departments andbusinesses to lower return rates for other products.

fully streamlined our lineup to 295 products as of the end of March 2008,

씰 Improved efficiency in marketing spending

down from 862 at the end of March 1998. Going forward, we will con-

S.T. Corporation believes that an aggressive marketing and sales
ales pro-tinue to focus on our “power brands,” and aim to bring the total number

motion strategy (that, for example, ties in seasonal themes) is
s key toof products in our lineup to 280 by the end of March 2009.

maximizing sales and profits. We have launched a series of effective,
ffective,
attention-grabbing TV commercials, and we also employ a 50-person
0-personmarketing team that works in the field. Going forward, the Company
ompanywill continue to work on improving marketing spending efficiency.
ency.

Streamlining Marketing Costs
Stressing points of sale

(Number of items)

Marketing costs

1,000
800

862

Advertisement cost

708
600
484
403

400

380 364

Sales expansion cost
298 295

297 282 297
200

Sales promotion cost

0
98

99

00

01

02

03

04

05

06

07

Team Management

08

Teamwork

Collaborative Meetings and Fresh Ideas
To improve Companywide efficiency and productivity, from 2007 S.T. Corporation began holding regular
joint meetings between marketing branch managers and the production division. These collaborative
meetings were a key factor behind our success in sharply improving the product return rate for disposable warmers. We have also launched a new grassroots-based work improvement system that encourages employees to offer suggestions and ideas aimed at improving work efficiency. This program has
already resulted in 39 efficiency-saving proposals that are now starting to be incorporated across theCompany.

8

Allocation

Streamlining the Number of Products

Efficiency

2. Profit creation
씰 Developing unique products

씰 Strengthening core product categories

We launched our Dashu-Tan deodorizer product in 2000. Users can see at

At S.T. Corporation, we are focusing

a glance how effective the product is, and coupled with the product’s in-on profit creation and expanding ourtuitive brand name, Dashu-Tan commands a 60% share of the refrigerator

presence in the air care and cloth

deodorizer market, and continues to expand its market share. Going for-care markets, by utilizing a variety ofward, we will continue to develop and launch unique, highly competitive

original marketing strategies, suchniche products “not made by any other company in the world,” while also

as unique, innovative commercials.

Effective TV CM

expanding our presence in new emerging personal care markets.

+

Popularity ranking: 33rd
(Source: CM DATABANK)씰 Dev
Developing successful premium products

씰 Steady global business expansion

S.T. CorporationCor
markets a variety of highly regarded premium prod-

S.T. Corporation’s global business strategy is an integral part of its over-ucts thathat offer special value-added features along with our high-quality

all growth strategy, including from a profit perspective. In the United

basic funfunctions. Examples include our Shoshu-Pot Jewelia, an elegant-States, we market dehumidifier and deodorizer agents at major retailer

ly desig
designed air care product that comes in a variety of refined fra-

Wal-Mart. We have also established a joint venture in Korea, Aekyung

grancesgrances, and our Self-Care comfortable pressure socks that use spe-

S.T., to market deodorizers, air fresheners and mothproofing agents. Go-

cial fabri
fabric material to improve comfort and give added stimuli compareding forward, we intend to aggressively continue our efforts at global

to tradit
traditional compression socks. Going forward, we will continue tobusiness expansion, including broadening our dehumidifier agent busi-

develop high value-added products and strive to increase their value

ness in the U.S. and increasing both distribution and the number of prod-

as natio
national brand products.

ucts in Asia.

DdDeodorizer
for Refrigerators Sales

Creating High-Value-Added Products(Billions of yen)6

5.5

Total Market

S.T.

5.4

5.4

High-value-added products
5.5

Premium

4

55.9%

57.0%

Deodorize

59.5%

58.0%

Basic features2

Creating high-value-added
products

0
Calendar year
04
05
(Source: S.T. Corporation)

Design+highquality fragrance

ShoshuPot
Jewelia06

Self-Care
series

3-D compressing
Functional fabricCompressing leggings

07

Teamwork
Innovative Product Ideas
One team management initiative launched recently was a program to promote employee awareness ofthe new S.T. and to solicit new product ideas like no other in the world. The campaigns were carried out
twice—in August 2007 and February 2008—and resulted in over 1,000 submissions; a number of ideas
are already well along the way to commercialization. Going forward we will continue to actively tap thecreativity of our employees to cultivate new product markets.

9Review of Operations

Composition of Net Sales by Business Segment(year ended March 31, 2008)

In the fiscal year ended March 31, 2008, the air care mar-a product that is anticipated to continue energizing the

ket was characterized by intense competition as themarket, these efforts contributed to sales growth. Fol-emergence of major overseas toiletries manufacturers

lowing a harsh winter, sales of chemical warmers also

made its mark. Against this backdrop, S.T. Corporation

enjoyed significant improvement. Moreover, the Com-

worked diligently to enhance the efficacy of its sales andpany experienced steady results at its joint-venture inpromotional activities by better linking its advertising and

Korea, which commenced in the spring of 2007, contrib-

promotional campaigns with frontline sales. Focusing on

uting to a substantial 54% year-on-year improvement in

its mainstay Shoshu -Riki brand as well as Shoshu-Plug,overall overseas sales.

HOUSEHOLD ENVIRONMENT-RELATEDPRODUCTS

MOTHPROOFING AND
HYGIENE-RELATED PRODUCTS

8.9%

21.5%

Home care(other products)

Cloth care

S.T. Corporation offers a wide
variety of unique products,
including the Powers lineup ofcleaners.

(mothproofing agents)

The Cloth Care Group, with suchproducts as Mushuda and Neopara
Ace, is one of S.T. Corporation’s
core businesses.

5.5%
Humidity care(dehumidifiers)

Our broad lineup of DryPet
dehumidifiers has continuously
led the market.

44.1%

Air care(deodorizers and air fresheners)

The Air Care Group, with such products as
Air-Wash and Shoshu-Riki, is a core business.

10

58.5%

41.5%

7.5%
Hand care(gloves)The Hand Care Groupmarkets the Family series ofhousehold gloves thatmoisturize the hands.

12.5%
Thermal care(disposable warmers)

The Thermal Care Groupmarkets the Onpacks brand of
disposable warmers.

씰 AIR CARE (Deodorizers and Air Fresheners)
Net Sales (millions of yen)

Shoshu-Riki

Shoshu-Pot
Jewelia

Shoshu-Plug
Autospray

Shoshu-Plug

Air-Wash04

18,50605

19,45706

20,35707

20,462

08

20,717

Dashu-Tan

The Air Care Group is S.T. Corporation’s mainstay business,increasingly weak private spending, in 2008 segment sales

and the market continues to hold promising growth potential.

rose 1.2% year-on-year to ¥20,717 million, thanks in part to

Our lineup of unique, innovative products includes our mega-strong sales of our new high-performance Shoshu-Pot

brand Shoshu-Riki; Air-Wash, which has been a key driver

Jewelia product, which adds an elegant design and refined

behind the steady growth in the deodorizer market and air

aroma to our traditional Shoshu-Pot deodorizer. A new

fresheners, behind our “Refreshing the Air” concept; Shoshu-

deodorizer product, Shoshu-Plug Autospray, which deodoriz-

Plug, which deodorizes even large, spacious rooms with elec-

es automatically with batteries at intervals is expected to cre-trical outlets, and the gel-type Shoshu-Pot. Despite

ate new demand.

Air care씰 CLOTH CARE (Mothproofing Agents)
Net Sales (millions of yen)Mushuda(for drawers)

Mushuda(for walk-in
closets)

Mushuda(Deodorizing
cover style)

Bikoda(for drawers)

04

10,657

05

9,862

06

10,27007

10,18908

10,113

NeoparaAce

S.T. Corporation has continued to drive overall growth for thewere essentially unchanged from the previous year, at

mothproofing market as a market leader, and the Cloth Care

¥10,113 million (down 0.7%), thanks to the launch of newGroup now stands alongside the Air Care Group as one of the

products such as Mushuda Cover, which incorporates deodor-

Company’s core business segments. Mushuda and Neopara

izer and air freshener features to our mainstay mothproofing

Ace are both major brands that continue to enjoy staunch

agent product, and other products aimed at meeting a range

customer loyalty thanks to proven success in protecting valu-

of clothing storage needs, such as in large-sized closets orable clothing. For the fiscal year under review, Group sales

hanging wardrobe cases.

Cloth care11씰 HUMIDITY CARE (Dehumidifiers)
Net Sales (millions of yen)Drypet(for wardrobes)

Bincho-Tan
Bincho-Tan
DrypetDrypet(for drawers) (for shoes/boots)

Drypet Compact

04

3,079

05

2,592

06

2,583

07

2,683

08

2,597

Bincho-Tan Drypet

S.T. Corporation continues to be one of the leaders in thesuch as Bincho-Tan Drypet that boasts deodorant effects ondehumidifier agent market, with an extensive range of prod-

top of its dehumidifying functions. We also offer products foructs meeting a variety of dehumidifying needs, such asuse with shoes, futon bedding, and shoe lockers. Segment

Drypet including stand-type products, sheet-type products forsales declined 3.2% from the previous year to ¥2,597 million.

use in drawers, hanging wardrobes cases, and closets. Ourlineup also includes high-performance dehumidifier agents

Humidity care
씰 HAND CARE (Gloves)
Net Sales (millions of yen)

Family Chamomile Family Squalene

04

3,460

05

3,166

06

3,174

07

3,257

08

3,548

Family Thin
Family Thick
Family Thin
PVC Gloves
PVC Gloves
PVC Gloves(fingertip-reinforced) (fingertip-reinforced) (for scrubbing andwashing)

The Family series of household gloves includes a broad range

and thin rubber gloves, as well as steady growth in sales inof high-value-added products that not only protect the hands,

Europe and overseas markets of medium-thin PVC gloves.

but also soothe the skin. Sales were up 8.9% from the previous year to ¥3,548 million, with growth being driven bystrong performances from industrial-use nitryle rubber gloves

12

Hand care씰 HOME CARE (Cleaners and Other Products)
Net Sales (millions of yen)Fresh-Up

Ultra-Powers
Washing Tub
Cleaner

Kome-Touban
Self-Care
PowersBaking Soda Comfortable
Scrubber Pressure Socks

04

3,667

05

4,160

06

3,999

07

4,103

08

4,171

NexcareThe Home Care Group provides a range of unique products,

tary products developed in cooperation with Sumitomo 3M,

including Ultra-Powers Washing Tub Cleaner; Powers Baking

with both products gaining favorable support from custom-

Soda Scrubber, a cleaner containing baking soda that cleans-

ers. Sales rose 7.1% year on year to ¥4,171 million, thanks to

es off scorch, rust and grease just by using water; Zippers

favorable sales of products such as Self-Care Comfortable

Food-Storage Bags; and Kome-Touban, which protects

Pressure Socks, and Fresh-Up, our newly developed deter-

uncooked rice from insects. In addition, the Company intro-

gent designed especially for dishwashing machines.

duced Scotchgard Water and Oil Repellant and Nexcare sani-Home care씰 THERMAL CARE (Disposable Warmers)
Net Sales (millions of yen)Haru-Onpacks

Haranai-Onpacks

Haru-Onpacks(for socks)

Onpacks(for shoes)

04

5,713

05

4,871

06

5,752

07

4,534

08

5,860

ThermoThera

Since July 2003, the Thermal Care Group has been marketing

ence in the self-medication market with our Thermo Theradisposable warmers under the Onpacks brand manufactured

gel sheets that are mild to the skin and help ease back pain

by Mycoal Co., Ltd. Our lineup also includes chemical warm-and stiff shoulders. Thanks in part to the cold winter, sales

ers with self-adhesive patches for attachment to clothing andwere up a strong 29.2% from the previous year, to ¥5,860

for the soles of socks. We also steadily expanded our pres-million.

Thermal care13

Management’s Discussion and Analysis

Net Sales

Net Income

In the fiscal year ended March 31, 2008, consolidated net

Net income fell 25.8% compared with the previous fiscal

sales increased ¥1,778 million, or 3.9%, year on year toyear to ¥1,295 million. This was after income before in-¥47,006 million.

come taxes and minority interests, which amounted to

In addition to steady growth in the mainstay Air Care

¥2,458 million. In addition to the aforementioned factors,(deodorizers and air fresheners) Group, this upswing in

S.T. Corporation incurred expenses in connection withrevenue was primarily attributable to harsh winter condi-

the change of its corporate name totaling ¥277 million

tions resulting in a substantial increase in Thermal Careand a ¥27 million loss on liquidation of a subsidiary com-

Group (disposable warmers) sales, up ¥5,859 million, orpany.

29.2%, compared with the previous fiscal year. In otheractivities, the Cloth Care (mothproofing agents) and Humidity Care (dehumidifers) Groups reported year-on-year

Financial Position

revenue decreases, while the Hand Care (gloves) andTotal assets as of March 31, 2008 stood at ¥28,393 mil-Home Care (cleaners and other products) Groups en-lion, a decrease of ¥5,437 million compared with the pre-joyed revenue growth.

vious fiscal year-end. This was mainly the result of a combined decrease of ¥4,864 million in cash and time
deposits, marketable securities and investment securi-

Cost of Sales
The cost of sales ratio edged up 1.4 percentage points
compared with the previous fiscal year.

ties due to treasury stock acquisition of ¥5,962 million.
Following acquisition and retirement, treasury stock,a deduction item in shareholders’ equity increased ¥5,930
million. As a result, net assets as of March 31, 2008
stood at ¥19,144 million. Shareholders’ equity declined

Operating Income¥5,494 million and the shareholders’ equity ratio was

Operating income declined 3.7% year on year to ¥3,219

65.6%.

million. While the Company made every effort to reduce
costs especially in its manufacturing activities, difficulties

14

in fully containing raw material price hikes, proactive mar-

Capital Expenditures

keting investment as well as intense competition among

Capital expenditures were ¥649 million. Investment inmainstay related companies and market contraction con-the Household Environment-Related Products Businesstributed to this drop in profit.

made up 76.3% of this total.

Cash Flows

Financial Indicators

Net cash provided by operating activities rose ¥148 mil-Compared with the previous fiscal year-end, ROE con-lion compared with the previous fiscal year to ¥2,784 mil-tracted 0.6 of a percentage point to 6.1%. ROA, on thelion. Principal components were income before income

other hand, rose 1.2 percentage points from 10.0% totaxes and minority interests totaling ¥2,458 million, down

11.2%. Net assets per share of common stock decreased¥580 million year on year, depreciation and amortizationfrom ¥935.19 to ¥853.90. The shareholders’ equity ratioof ¥936 million, decrease in accounts receivable of ¥129

decreased from 71.3% to 65.6%, while the interest cov-

million and increase in payables and accrued expenses oferage ratio was 725.0 times, down from 6,595.9 times in¥564 million. In the fiscal year under review, S.T. Corpora-the previous fiscal year.

tion paid income taxes totaling ¥1,317 million. Net income provided by investing activities was ¥871 million,
mainly reflecting the liquidation of marketable securities
held to fund the acquisition of treasury stock. Net cashused in financing activities totaled ¥6,589 million. Major
components were purchases of treasury stock amounting to ¥5,963 million and payments of dividends of ¥567
million.
Accounting for the aforementioned factors, cash andcash equivalents as of March 31, 2008 stood at ¥5,185
million, a ¥2,927 million decrease compared with the endof the previous fiscal year.

Dividends
Taking into consideration net income and the realizationof share profit, the Company has declared a fiscal yearend dividend of ¥11.0 per share. Combined with the interim dividend paid, the annual dividend is ¥22.0 per
share, in line with estimates at the beginning of the period. On this basis, the dividend payout ratio is 40.7% on
a consolidated basis.

15

Five-Year Selected Financial Data (Unaudited)
S.T. CORPORATION and Subsidiaries
For the years ended March 31

Thousands of
U.S. dollars (Note4)

Millions of yen except per share data and financial ratios

2004

2005

2006

2007

2008

2008

Net sales¥45,082¥44,109¥46,134¥45,227¥47,006$469,164

Cost of sales

24,97324,49026,08325,252

26,900268,489

Gross Profit

20,07919,62720,024

19,984

20,119200,807

Selling, general and administrative expenses

16,66015,87916,892

16,642

16,900168,681

For the Year:

Operating income

3,419

3,748

3,133

3,342

3,219

32,126

Income before income taxes and minority interests

2,746

3,209

1,913

3,039

2,458

24,535

Net income

1,451

1,823

988

1,747

1,295

12,930At Year-End:Inventories¥ 3,668¥ 3,769¥ 4,824¥ 4,647¥ 4,620$ 46,117

Property, plant and equipment, net

8,154

8,018

7,582

7,371

7,070

70,566

Current liabilities

7,887

7,910

7,973

7,494

7,581

75,663Long-term liabilities

1,175

1,079

1,591

1,687

1,667

16,643

Total liabilities

9,062

8,989

9,564

9,181

9,248

92,306

Total net assets (Note 1)

26,69327,44927,861

24,64919,144

191,080

Total assets

36,26936,95937,90533,83028,393283,387

¥

¥

¥

¥

¥

Other Selected Data:
Capital expenditures649$ 6,473

R&D expenses

413

404

423

880

480

826

489

696

489

4,881

Free cash flow

1,699

3,340

831

2,487

4,153

41,451

Net income¥ 48.87¥ 63.43¥ 34.35¥ 65.10¥ 54.08

Shareholders’ equity

924.33957.45966.43935.19853.90

8.52

17.0

22.0

22.0

22.0

22.0

0.22

Gross Profit

44.6

44.5

43.5

44.2

42.8

Selling, general and administrative expenses

37.0

36.0

36.6

36.8

36.0

Operating income

7.6

8.5

6.8

7.4

6.8

Income before income taxes and minority interests

6.1

7.3

4.1

6.7

5.2

Net income

3.2

4.1

2.1

3.9

2.8

ROE (Note 2)

5.5

6.7

3.6

6.7

6.1

ROA (Note 3)

10.2

10.9

9.0

10.0

11.2

Equity Ratio

73.6

74.3

73.5

71.3

65.6

Per Share Data (¥):

Cash dividends

$

0.54

Financial Ratios (%):
As a percent of net sales:

Note: 1. The data previously presented as “Total shareholders’ equity” are shown as “Total net assets” based on a new accounting standard from the fiscal year ended March 31,
2007.
2. ROE=Net income / Average total shareholders’ equity
3. ROA=(Operating income + Interest and dividends received + Purchase discount) / Average total assets
4. Figures have been translated into U.S. dollars at ¥100.19=$1.00, the approximate exchange rate prevailing on the Tokyo Foreign Exchange Market on March 31, 2008.

16

1,747

1,823
988

1,295

1,451

3,219

3,342

3,133

07

3,748

06

3,419

05

47,00604

46,134(millions of yen)

45,227Net Income(millions of yen)

44,109Operating Income(millions of yen)
45,082Net Sales

06

07

05

ROA

06

07

08

ROE

11.2
10.0

19,144

3.6

5.5

6.1

6.7

6.7

24,64927,861

27,44926,69304(%)

28,39305

33,83004

37,905(millions of yen)

36,959Total Net Assets*(millions of yen)
36,269Total Assets

08

9.0

05

10.9

04

10.2

08

06

07

08

04

05

06

07

08 *

04

05

06

07

08

* The data previously presented as “Total shareholders’ equity” are shown as “Total net assets” based on a new accounting standard from the fiscal year ended March 31,2007.

17

Consolidated Balance Sheets
S.T.CORPORATION and consolidated subsidiaries
March 31, 2008 and 2007

Thousands of

ASSETS

Millions of yen

U.S. dollars (Note 2)

2008

2007

2008

CURRENT ASSETS:
Cash and time deposits (Note 12)¥ 6,008¥ 8,135$ 59,964

Marketable securities (Note 4)

493

2,230

4,925

Trade notes and accounts receivable

4,297

4,451

42,892

Less—allowance for doubtful accounts

(19)

(15)

(189)

Inventories

4,620

4,647

46,117

Deferred tax assets (Note 7)

362

386

3,616

Other current assets

317

455

3,167

16,08020,289160,493

Investments in non-consolidated subsidiaries and affiliates

507

566

5,059

Investment securities (Note 4)

2,482

3,423

24,774Long-term loans

121

128

1,204

Deferred tax assets other than unrealized revaluation loss on land (Note 7)

291

205

2,906

Other assets

1,426

1,396

14,232

Total current assets

INVESTMENTS AND OTHER ASSETS:

Less—allowance for doubtful accounts

(41)

(20)

(411)

Total investments and other assets

4,785

5,699

47,764

Land

3,392

3,413

33,856

Buildings and structures

6,191

6,163

61,793

Machinery, equipment and vehicles

7,186

7,012

71,723Tools, furniture and fixtures

3,582

3,291

35,755Construction in progress

20

6

195

(13,301)(12,513)(132,755)

7,070

7,371

70,566

457

471

4,564

¥ 28,393¥ 33,830$ 283,387

PROPERTY, PLANT AND EQUIPMENT, AT COST (Notes 5 and 6):

Less—accumulated depreciation
Property, plant and equipment, net

INTANGIBLE ASSETS, NET OF ACCUMULATED AMORTIZATION
Total assets
See notes to consolidated financial statements.

18

Thousands of

LIABILITIES AND NET ASSETS

Millions of yen

U.S. dollars (Note 2)

2008

2007

2008

Trade payables¥ 4,530¥ 3,960$ 45,218

Other payables

1,866

1,931

18,625

Income taxes payable (Note 7)

391

718

3,902

Consumption taxes payable

30

110

297

Accrued expenses

529

546

5,275

Allowance for sales returns

155

169

1,550

Other current liabilities

80

61

795

7,581

7,494

75,663

1,202

1,207

11,993

Directors’ retirement and severance benefits

85

97

844

Deferred tax liabilities—unrealized revaluation profit on land (Note 5)

381

381

3,801

1

1

6

1,667

1,687

16,643Issued and outstanding—29,500,000 shares in 2008 and 2007

7,066

7,066

70,521

Capital surplus

7,068

7,068

70,544Retained earnings

15,833

15,120

158,031

Treasury stock, at cost

(11,083)(5,153)(110,616)

18,884

24,101

188,480

CURRENT LIABILITIES:

Total current liabilities

LONG-TERM LIABILITIES:
Employees’ retirement and severance benefits (Note 8)

Other long-term liabilities
Total long-term liabilities

CONTINGENT LIABILITIES (Note 14)

NET ASSETS (Note 9):
Shareholders’ equity:
Common stock:
Authorized—96,817,000 shares in 2008 and 2007

Total shareholders’ equity
Valuation, translation adjustments and other:
Unrealized holding gain on other securities, net of taxes

542

811

5,408

Unrealized revaluation loss on land, net of taxes (Note 5)

(549)

(549)

(5,479)Translation adjustments

(250)

(243)

(2,497)(257)

20(2,568)

Total valuation, translation adjustments and other
Subscription rights

28

8

279

Minority interests in consolidated subsidiaries

490

521

4,890

19,144

24,649191,080¥ 28,393¥33,830$ 283,387

Total net assets
Total liabilities and net assets
See notes to consolidated financial statements.

19

Consolidated Statements of Income
S.T.CORPORATION and consolidated subsidiaries
For the years ended March 31, 2008 and 2007

Thousands ofMillions of yen

NET SALESCOST OF SALES

U.S. dollars (Note2)

2008

2007

2008

¥47,006¥45,227$469,164

26,90025,252

268,489

20,106

19,976200,675

13

9

132

20,11919,984200,807

16,90016,642

168,681

3,219

3,342

32,126

Interest and dividends received

76

86

759

Interest expense

(4)

(0)

(38)

Cash purchase discounts

213

199

2,127

Cash sales discounts

(864)

(844)

(8,622)Gross profit before reversal of (allowance for) sales returns
Reversal of (allowance for) sales returns
Gross profit
Selling, general and administrative expenses (Note 11)
Operating income

OTHER INCOME (EXPENSES):

Gain on sales of securities, net

0

0

0

Equity in income (loss) of affiliates

(30)

36

—

Expenses for change of the Company’s name

(277)

—

(2,768)Other, net

125

219

1,248

(761)

(303)

(7,591)

Income before income taxes and minority interests

2,458

3,039

24,535Current

1,014

1,266

10,118Deferred

96

(32)

960

1,110

1,234

11,078

INCOME TAXES (Note 7):

MINORITY INTERESTS
Net income
See notes to consolidated financial statements.

20

53

58

527

¥ 1,295¥ 1,747$ 12,930

Consolidated Statements of Changes in Net Assets
S.T.CORPORATION and consolidated subsidiaries
For the years ended March 31, 2008 and 2007

Millions of yen

Balance at March 31, 2007
Cash dividends paid by distribution of retained earnings
Net income
Purchases of treasury stock
Disposition of treasury stock
Net changes in items other than those in shareholders’ equity
Balance at March 31, 2008

Number ofshares ofcommonstock(Thousands)

Commonstock

CapitalsurplusRetainedearnings

Treasurystock

29,500¥ 7,066¥ 7,068¥ 15,120
(567)
1,295

¥ (5,153)

29,500¥ 7,066¥ 7,068

Total
shareholders’equity(15)(5,963)33¥ 24,101
(567)
1,295
(5,963)18¥ 15,833¥ (11,083)¥ 18,884

Subscription
rightsMinority
interests inconsolidated
subsidiaries

Total
net assets

Millions of yen

Balance at March 31, 2007
Cash dividends paid by distribution of retained earnings
Net income
Purchases of treasury stock
Disposition of treasury stock
Net changes in items other than those in shareholders’ equity
Balance at March 31, 2008

Unrealized
holding gainon othersecurities,
net of taxes

Unrealized
revaluation
loss on land,
net of taxes(Note 5)

Translation
adjustments

Totalvaluation,translation
adjustments
and other¥ 811¥(549)¥(243)

¥ 20

¥ 8

¥ 521

(269)
¥ 542

—
¥(549)(7)¥(250)(277)¥(257)

20
¥ 28

(31)
¥ 490

¥ 24,649
(567)
1,295
(5,963)18(287)¥ 19,144

Thousands of U.S. dollars (Note 2)

Balance at March 31, 2007
Cash dividends paid by distribution of retained earnings
Net income
Purchases of treasury stock
Disposition of treasury stock
Net changes in items other than those in shareholders’ equity
Balance at March 31, 2008

Number ofshares ofcommonstock(Thousands)

Commonstock

CapitalsurplusRetainedearnings

Treasurystock

29,500$70,521$70,544$150,916(5,664)
12,9300(151)$ (51,429)(59,515)327$240,553(5,664)
12,930(59,515)176$158,031$(110,616)$188,480

Subscription
rightsMinority
interests inconsolidated
subsidiaries

Total
net assets

29,500$70,521$70,544

Total
shareholders’equityThousands of U.S. dollars (Note 2)

Balance at March 31, 2007
Cash dividends paid by distribution of retained earnings
Net income
Purchases of treasury stock
Disposition of treasury stock
Net changes in items other than those in shareholders’ equity
Balance at March 31, 2008

Unrealized
holding gainon othersecurities,
net of taxes

Unrealized
revaluation
loss on land,
net of taxes(Note 5)

Translation
adjustments

Totalvaluation,translation
adjustments
and other$ 8,098$(5,479)$(2,423)

$

196

$ 76

$5,196(2,690)$ 5,408—$(5,479)(74)$(2,497)(2,764)$(2,568)

203
$279

(307)
$4,890$246,021(5,664)
12,930(59,515)176(2,868)$191,080

Total
shareholders’equityMillions of yen

Balance at March 31, 2006
Cash dividends paid
Cash dividends paid by distribution of retained earnings
Bonuses to directors and corporate auditors by distribution of retained earnings
Net income
Purchases of treasury stock
Disposition of treasury stock
Retirement of treasury stock
Net changes in items other than those in shareholders’ equity
Balance at March 31, 2007

Number ofshares ofcommonstock(Thousands)

Commonstock

CapitalsurplusRetainedearnings

Treasurystock

30,347¥ 7,066¥ 7,068¥ 15,174
(317)
(290)
(1)
1,747

¥ (1,474)(847)
29,500¥ 7,066¥ 7,068(29)(1,164)(4,943)100
1,164¥ 27,833
(317)
(290)
(1)
1,747
(4,943)71—¥ 15,120¥ (5,153)¥ 24,101

Millions of yen

Balance at March 31, 2006
Cash dividends paid
Cash dividends paid by distribution of retained earnings
Bonuses to directors and corporate auditors by distribution of retained earnings
Net income
Purchases of treasury stock
Disposition of treasury stock
Retirement of treasury stock
Net changes in items other than those in shareholders’ equity
Balance at March 31, 2007

Unrealized
holding gainon othersecurities,
net of taxes

Unrealized
revaluation
loss on land,
net of taxes(Note 5)

Translation
adjustments

Totalvaluation,translation
adjustments
and other¥ 873¥(549)¥(297)

¥ 27

—

¥ 480

(61)
¥ 811

—
¥(549)

54¥(243)

(7)
¥ 20

¥ 8
¥ 8

40
¥ 521

Subscription
rightsMinority
interests inconsolidated
subsidiaries

Total
net assets¥ 28,341
(317)
(290)
(1)
1,747
(4,943)71—
40¥ 24,649

See notes to consolidated financial statements.

21

Consolidated Statements of Cash Flows
S.T.CORPORATION and consolidated subsidiaries
For the years ended March 31, 2008 and 2007

Thousands ofMillions of yen

2008

2007

2008

¥ 2,458¥ 3,039$ 24,535

936
7
—
2
26
(3)
(13)
(13)
(76)
4
9
30

837
41
(1)
(0)
(9)
91
2
(9)
(86)
0
(47)
(36)

9,343
68
—
21
260
(33)
(126)
(132)
(759)
38
94
299

129
34
564
(82)
4,012
93
(4)
(1,317)
2,784

111
212
(792)
138
3,493
112
(0)
(968)
2,636

1,290
335
5,628
(821)
40,040929(38)(13,145)
27,786

CASH FLOWS FROM INVESTING ACTIVITIES:
Increase in time deposits (more than 3 months)
Purchases of marketable securities
Proceeds from sales of marketable securities
Purchases of property, plant and equipment
Proceeds from sales of property, plant and equipment
Purchases of investment securities
Proceeds from sales of investment securities
Other investments, net
Net cash provided by (used in) investing activities

(300)
(457)
2,074
(481)
0
(262)
375
(78)
871

(0)
(629)
4,552
(598)
1
(1,096)
110
(120)
2,220

(2,995)(4,557)
20,699(4,804)
1(2,612)
3,745
(780)
8,698

CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of bank loans and current portion of long-term debt
Net increase or decrease of short-term debt
Purchases of treasury stock
Proceeds from sales of treasury stock
Payments of dividends
Payments of dividends to minority shareholders
Net cash used in financing activities——(5,963)
18
(567)
(76)
(6,589)(37)—(4,943)
71
(607)
(46)
(5,561)——(59,515)176(5,664)(759)(65,763)

Effect of exchange rate changes on cash and cash equivalents
Net decrease in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year (Note 12)6(2,927)
8,112¥ 5,185

14
(691)
8,802
¥ 8,11263(29,216)80,965$ 51,749

CASH FLOWS FROM OPERATING ACTIVITIES:
Income before income taxes and minority interests
Adjustments to reconcile income before income taxes andminority interests to net cash provided by operating activities:
Depreciation and amortization
Loss on sales of property, plant and equipment
Gain on sales and valuation of marketable securities
Gain on sales and valuation of investment securities(Decrease) increase in allowance for doubtful receivables
Increase in employees’ retirement and severance benefits
Increase in directors’ retirement and severance benefits(Decrease) increase in allowance for sales returns
Interest and dividends received
Interest expense
Foreign exchange gain
Equity in (income) loss of affiliates
Changes in operating assets and liabilities:
Receivables
Inventories
Payables and accrued expenses
Other, net
SubtotalInterest and dividends received
Interest paid
Income taxes paid
Net cash provided by operating activities

See notes to consolidated financial statements.

22

U.S. dollars (Note2)

Notes to Consolidated Financial Statements
S.T.CORPORATION and Consolidated Subsidiaries
March 31, 2008

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

average method. During the years ended March 31, 2008 and 2007,(a) Basis of presentation

trading securities.

the Company and its consolidated subsidiaries did not have any

S.T.CORPORATION (the “Company”) and its domestic subsidiaries
maintain their books of account in conformity with accounting principles(f) Inventories

generally accepted in Japan, and its overseas subsidiaries maintain their

Inventories of the Company and its domestic subsidiaries are stated atbooks of account in conformity with those of their countries of domicile.

cost determined by the average-cost method and those of overseas

The accompanying consolidated financial statements have been preparedsubsidiaries are stated at the lower of cost or market, cost beingin accordance with accounting principles generally accepted in Japan,

determined by the average cost method.

which are different in certain respects as to the application and disclosure requirements of International Financial Reporting Standards, and(g) Property, plant and equipment and depreciation

are compiled from the consolidated financial statements prepared by

Property, plant and equipment are stated at cost. Depreciation of

the Company as required by the Securities and Exchange Law of Japan.

property, plant and equipment of the Company and its domestic

In preparing the accompanying consolidated financial statements,

subsidiaries, except for buildings (excluding structures attached to thecertain reclassifications have been made to the consolidated financial

buildings) acquired on or after April 1, 1998, is computed by thestatements issued domestically for readers outside Japan. Furthermore,declining-balance method in conformity with the Corporation Tax Law of

the notes to the consolidated financial statements include information

Japan. Depreciation of property and equipment of overseas subsidiaries

which is not required under accounting principles generally accepted inand buildings (excluding structures attached to the buildings) acquired

Japan but is presented herein as additional information.

on or after April 1, 1998 of the Company and domestic subsidiaries iscomputed by the straight-line method.

(b) Principles of consolidation and accounting for investments in

The estimated useful lives of the major depreciable assets areunconsolidated subsidiaries and affiliates

as follows:

The accompanying consolidated financial statements for the years

Buildings and structures

ended March 31, 2008 and 2007 include the accounts of the Company

Machinery, equipment and vehicles

2 to 17 years

and its six significant subsidiaries. All significant inter-company balances

Tools, furniture and fixtures

2 to 20 years

3 to 56 years

and transactions have been eliminated in consolidation.
The equity method is applied to investments in significant affiliatesin accordance with accounting principles generally accepted in Japan.

(Change in accounting policies)
Effective the fiscal year ended March 31, 2008, the Company and its
domestic consolidated subsidiaries have changed their depreciation(c) Accounting period
The accounting period of the Company begins on April 1 and ends on

method in terms of the tangible fixed assets acquired after April 1,
2007 in accordance with the Corporation Tax Law as amended.

March 31 of the following year. The two overseas subsidiaries have

As a result of the adoption of the new method, operating income,fiscal years ending on December 31. The necessary adjustments forincome before income taxes and minority interests and net income forsignificant transactions, if any, during the intervening period are madethe year ended March 31, 2008 increased by ¥47 million (U.S.$472

on consolidation.

thousand), ¥47 million (U.S.$472 thousand) and ¥28 million (U.S.$283
thousand), respectively.

(d) Translation of foreign currency transactions and financial statements
Monetary assets and liabilities denominated in foreign currencies are

The effect on the business segment information is described in
Note 16, Segment Information.

translated into yen at the rates of exchange in effect at the balance
sheet date and the accounts of the overseas consolidated subsidiaries(Additional information)

are translated into yen at the rates of exchange in effect at the balance

Effective the fiscal year ended March 31, 2008, the residual value of the

sheet date. Foreign exchange gains and losses are credited or charged

tangible assets which were acquired before March 31, 2007 and haveto income and translation adjustments are included in net assets.

been fully depreciated up to 5 percent of the acquisition cost based on
the prior Corporate Tax Law is to be depreciated to nominal book(e) Marketable securities and investment securities

value of using a straight line method over a period of 5 years andOther securities with determinable market value are carried at market

booked as depreciation expense, according to the Corporation Tax

value with any changes in unrealized holding gain or loss, net of the

Law as amended.

related deferred income tax assets or liabilities, included in net assets.

As a result of the additional depreciation, operating income,

Other securities without determinable market value are stated at costincome before income taxes and minority interests and net income fordetermined principally by the moving -average method and the cost of

the year ended March 31, 2008 increased by ¥46 million (U.S.$461

other securities sold is principally computed based on the moving-

thousand), ¥48 million (U.S.$482 thousand) and ¥28 million (U.S.$289
thousand), respectively.

23

The effect on the business segment information is described in
Note 16, Segment Information.

Consumption taxes withheld upon sale are not included in net sales in
the accompanying consolidated statements of income, but are recorded
as a liability, “consumption taxes payable.” Consumption taxes paid by(h) Intangible assets and long-term prepaid expenses

the Company and its subsidiaries on purchases of goods and services

Intangible assets and long-term prepaid expenses are amortized by thefrom outside the group are also not included in costs or expenses instraight-line method. Cost of software purchased for internal use is

the accompanying consolidated statements of income, but are offset

amortized by the straight-line method over a period of 5 years, theagainst consumption taxes payable. The net balance is reflected as

useful life applicable to commercially available software.

consumption taxes payable in the accompanying consolidated balance
sheets at March 31, 2008 and 2007.

(i) Allowance for doubtful receivables
The Company and its domestic subsidiaries provide allowances for(o) Valuation of assets and liabilities of consolidated subsidiaries

estimated losses on bad debts at the amounts calculated based on past

Assets and liabilities of the consolidated subsidiaries acquired before

experience with receivables other than doubtful receivables andApril 1, 1999 have been valued at cost. It is the Company’s policy toamounts estimated specifically for each doubtful receivable. Overseas

value assets and liabilities of subsidiaries acquired on or after April 1,

subsidiaries provide allowances for doubtful receivables principally

1999 at fair value when the Company obtains control over suchbased on estimated uncollectable amounts.

subsidiaries; however, the Company has not acquired any subsidiaries
since April 1, 1999.

(j) Allowance for sales returns
The allowance for sales returns is generally provided for losses on sales(p) Cash and cash equivalents

returns subsequent to the balance sheet date at an amount equivalent

Cash and cash equivalents in the accompanying consolidated statements

to that calculated based on sales in conformity with the Corporationof cash flows consist of cash on hand, demand deposits and liquid

Tax Law of Japan.

short-term investments with a maturity of three months or less from

The allowance for sales returns of certain products is estimatedtheir respective dates of acquisition.

based on the actual percentage of returns in prior years.
(k) Employees’ retirement and severance benefits
Accrued retirement and severance benefits are provided based on theestimated retirement and severance benefit obligation and the pension
fund assets.
Actuarial gains and losses, and past service cost are amortizedusing the straight-line method over a period of 5 years, which is within
the estimated average remaining service years of the eligible employees.
In addition, one overseas subsidiary provides an allowance forpayments of employees’ retirement and severance benefits at 100% of

2. BASIS OF TRANSLATIONThe consolidated financial statements presented herein are expressed inyen and, solely for the convenience of the reader, have been translated
into U.S. dollars at ¥100.19=U.S.$1.00, the approximate exchange rate
prevailing on the Tokyo Foreign Exchange Market on March 31, 2008.
This translation should not be construed as a representation that theamounts shown could have been, or could in the future be, converted
into U.S. dollars at that or any other rate.

the voluntary termination payments.
(l) Directors’ retirement and severance benefits

3. CHANGE IN THE METHOD OF PRESENTATIONThe Company has accrued directors’ retirement and severance benefits(Consolidated Statement of Cash flows)at the amount which would be required to be paid if all directors

Effective the fiscal year ended March 31, 2008, increase in short-term

resigned from their positions and left the Company as of the balanceloans debt of ¥2,000 million (U.S.$19,962 thousand) of cash flows fromsheet date in accordance with its internal regulations.

financing activities and repayments of bank loans of ¥2,000 million(U.S.$19,962 thousand) of cash flows from financing activities are(m) Leases
Finance leases, except for those which transfer ownership of the leased
property to the lessee, are accounted for as operating leases.

included in net increase or decrease in short-term debt.
Since the amount of increase in short-term loans debt is equal tothe amount of the repayments of bank loans, the balance of net
increase or decrease of short-term debt is nil.

(n) Consumption taxes
Consumption taxes imposed on the Company’s and its subsidiaries’
sales to customers are withheld by the Company and its subsidiaries at
the time of sale and subsequently paid to the government.

24

4. MARKETABLE SECURITIES AND INVESTMENT SECURITIESThe redemption schedule of other securities with maturity dates at
March 31, 2008 and 2007 is summarized as follows:

The cost and related aggregate market value of other securities with adeterminable market value at March 31, 2008 and 2007 are summarized
as follows:
One year or lessThousands of
U.S. dollars

Millions of yen

2008

2007

2008

Cost

¥ 2,103¥ 3,795$ 20,992

Market value

2,927

5,047

29,218

Total unrealized gain

852

1,280

8,499

Total unrealized loss

27

27

274

The Company recognized impairment losses on securities at theThousands of
U.S. dollars

Millions of yen

2008

2007

2008

¥493

¥ 2,182$ 4,925

More than 1 year andwithin 5 years

—

400

—

More than 5 years andwithin 10 years

100

105

996

More than 10 years

—

—

—

5. LAND REVALUATION

difference between market value and book value if the market value

In accordance with the Land Revaluation Law (Proclamation No. 34

had declined by 30% or more from the book value. Impairment losses

dated March 31, 1998), land used for business activities was revalued aton securities for the years ended March 31, 2008 and 2007 were ¥2

March 31, 2002. The revaluation difference, net of taxes, is stated as

million (U.S.$20 thousand) and nil , respectively.

“unrealized revaluation difference on land, net of taxes” in net assets.

Securities at March 31, 2008 and 2007 excluded from the above

Deferred tax liabilities arising from this revaluation difference arepresented separately from deferred tax liabilities for other temporary

table are summarized at their respective book value as follows:

differences in the accompanying consolidated balance sheets. The
Millions of yen

2008

2007

Thousands of
U.S. dollars

market value of the land as of March 31, 2008 and 2007 decreased by

2008¥400 million (U.S.$3,993 thousand) and ¥454 million, respectively, after
the revaluation.

Other securities:
CP

—

¥500

Foreign securities

—

47

—
—

Unlisted stocks

¥ 48

58

$480

6. PLEDGED ASSETSAt March 31, 2008 and 2007, the following assets were pledged as

The Company recognized impairment losses on non-marketablesecurities if the net book value declined by 50% or more from thecollateral for a limit of borrowings of ¥621 million (U.S.$6,197 thousand) and ¥522 million.

book value or if the issuers of the non-marketable securities wentbankrupt or were substantially bankrupt.

Millions of yen

Sales of other securities for the years ended March 31, 2008 and2007 are summarized as follows:
Thousands of
U.S. dollars

Millions of yen

Proceeds received

2008

2007

2008

¥ 3,850¥ 6,853$ 38,431

Aggregate gain

7

0

71

Aggregate loss

7

—

72

Thousands of
U.S. dollars

2008

2007

2008

Buildings and structures

¥ 84

¥ 96

$ 843

Land

119

126

1,190

Total

¥204

¥222

$ 2,033

25

7. INCOME TAXESAt March 31, 2008 and 2007, the tax effect of the temporary differences which gave rise to a significant portion of the deferred tax assets (excluding
deferred taxes on unrealized revaluation loss on land) was as follows:
Thousands of
U.S. dollars

Millions of yen

2008

2007

2008
$ 1,455

CURRENT ASSETS:
Accrued employees’ bonuses

¥ 146

¥ 157

Allowance for sales returns

62

68

621

Accrued business taxes

30

62

297

Unrealized holding loss on other securities, net of taxes

3

1

30

124

103

1,236

365

390

3,640

Deferred gain on sales of property

(0)

(0)

(5)

Other

(2)

(4)

(20)

Other
Total current deferred tax assets
CURRENT LIABILITIES:

Total current deferred tax liabilities

(2)

(5)

(24)

Net current deferred tax assets

362

386

3,616

Allowance for employees’ retirement and severance benefits

474

476

4,729

Allowance for directors’ retirement and severance benefits

34

39

338

NON-CURRENT ASSETS:

Write-downs of securities

70

74

695

Impairment loss

181

207

1,810

10

5

101

Gross non-current deferred tax assets

Other

769

802

7,672

Valuation allowance

(173)

(135)

(1,729)Total non-current deferred tax assets

596

667

5,944

NON-CURRENT LIABILITIES:

26

Deferred gain on sales of property

(19)

(19)

(190)

Unrealized holding gain on other securities, net of taxes

(285)

(442)

(2,848)

Total non-current deferred tax liabilities

(304)

(462)

(3,038)

Net non-current deferred tax assets

¥ 291

¥ 205

$ 2,906

A reconciliation of the statutory tax rate to the Company’s effective
tax rate for the year ended March 31, 2008 is summarized as follows:

The following table summarizes the components of net retirement
benefit expenses for the years ended March 31, 2008 and 2007:
Thousands of
U.S. dollars

2008
Millions of yen

Japanese statutory tax rate

40.00%

Permanent differences such as entertainment
expenses, etc.

2.41

Permanent differences such as dividend income(0.29)

Inhabitants’ per capita taxes, etc.

0.86

Valuation allowance

1.56

Other

0.61

Effective tax rate

45.15%

Service cost

No reconciliation has been presented for the year ended March 31,
2007 as the difference between the statutory tax rate and the effective
tax rate was less than 5%.

8. EMPLOYEES’ RETIREMENT AND SEVERANCE BENEFITS

2007

2008

¥157

¥148

$ 1,571

Interest cost on benefit
obligation

57

52

568

Expected return on plan assets

(34)

(30)

(342)

Amortization of actuarial loss

17

83

165

Amortization of past service
cost

1

3

14

Extraordinary additional
retirement payments

17

16

165

Net retirement benefit
expenses

¥215

¥272

$ 2,142

The assumptions used in determining the pension benefit obligation
are presented below:

The Company and its domestic subsidiaries have defined benefit planscovering substantially all of their employees which are partially funded

2008

2008

2007

Straight-line
methodStraight-line
methodare entitled to lump-sum or pension retirement or severance benefits

Method of periodic
allocation of estimatedretirement benefits

determined by points accumulated monthly based on the employees’

Discount rate

2.0%

2.0%

contributions, length of service and the conditions under which termination

Expected rate of returnon plan assets

2.0%

2.0%

through a qualified funded pension plan. Under these plans, employees

occurs. In addition, the Company and its domestic subsidiaries pay
meritorious service awards to employees in excess of the prescribed
formula, which are charged to income as paid as it is not practicable tocompute the liability for such future payments since the amounts varydepending on the circumstances.

The new Corporation Law of Japan (the “Law”), which superseded

The following table summarizes the funded status and amounts
recognized in the accompanying consolidated balance sheets at March 31,
2008 and 2007:

most of the provisions of the Commercial Code of Japan, went into
effect on May 1, 2006. The Law provides that an amount equal to 10%of the amount to be disbursed as distributions of capital surplus (otherThousands of
U.S. dollars

Millions of yen

2008

2007

2008

¥(3,008)¥(2,898)$(30,026)

Plan assets

1,679

1,712

16,755

Unfunded benefit obligation(1,330)(1,187)(13,271)Retirement and severance
benefit obligation

9. NET ASSETS

than the capital reserve) and retained earnings (other than the legal
reserve) be transferred to the capital reserve and the legal reserve,
respectively, until the sum of the capital reserve and the legal reserve
equals 25% of the capital stock account. Such distributions can be madeUnrecognized actuarial(gain) loss

126

(24)

1,260

Unrecognized past service
cost

2

3

18

Accrued benefit obligation¥(1,202)¥(1,207)$(11,993)

at any time by resolution of the shareholders, or by the Board of
Directors if certain conditions are met.
Capital surplus and the legal reserve are not available for the
distribution of dividends but may be used to reduce or eliminate a
deficit or may be transferred to stated capital. At March 31, 2008, thelegal reserve of the Company included in retained earnings amounted
to ¥550 million (U.S.$5,487 thousand).
The maximum amount which the Company can distribute as
dividends is calculated based on the non-consolidated financial
statements of the Company and in accordance with the Commercial
Code of Japan.

27

10. AMOUNTS PER SHARE

The basis for calculation of total net assets per share as of March 31,
2008 and 2007 was as follows:

Net assets per share as of March 31, 2008 and 2007 were ¥853.90(U.S.$8.52) and ¥935.19, respectively. Net income per share for theyears ended March 31, 2008 and 2007 was ¥54.08 (U.S.$0.54) and¥65.10, respectively.

Thousands of
U.S. dollars

Millions of yen

2008

2007

2008

¥19,144¥24,649$191,080

518

528

5,169

Total net assets per share:

Diluted net income per share for the years ended March 31, 2008
and 2007 was ¥53.99 (U.S.$0.54) and ¥64.92, respectively.

Total net assets
Deductions:

The basis for calculation of basic net income per share and diluted

Subscription rights

28

8

279

net income per share for the years ended March 31, 2008 and 2007

Minority interests
in consolidated
subsidiaries

490

521

4,890

Amounts attributable
to shareholders ofcommon stock

18,627

24,121

185,9122226—

was as follows:
Thousands of
U.S. dollars

Millions of yen

2008

2007

2008

Basic net income per share:
Net income¥ 1,295¥ 1,747$ 12,930

Amount not attributable
to shareholders ofcommon stock:
Directors’ bonuses byappropriation ofretained earnings
Amount attributable toshareholders ofcommon stock
Weighted-average
number of shares
outstanding(millions of shares)

11. MAJOR EXPENSES———

Shares resulting inan anti-dilutive effect(millions of shares)

Major expenses included in selling, general and administrative expenses
for the years ended March 31, 2008 and 2007 were as follows:

1,295

1,747

12,930Thousands of
U.S. dollars

Millions of yen

24

27

2008

2007

2008

Sales promotion expenses¥ 4,208¥ 4,061$ 41,996

Advertising costs

3,111

3,300

31,046

Salaries

1,753

1,635

17,5010

Shipment and storage
expenses

1,647

1,581

16,440—

Provision for employees’
retirement andseverance benefits

174

235

1,737

Provision for directors’
retirement andseverance benefits

14

16

141

Provision for doubtful
accounts

26

—

260

—

Diluted net income per share:
Increase in number ofshares outstanding

Number of shares
outstanding at year end(millions of shares)

0

—

0

—

Research and development expenses included in general andadministrative expenses and cost of sales for the years ended March 31,
2008 and 2007 amounted to ¥489 million (U.S.$4,885 thousand) and¥489 million, respectively.

28

12. CASH AND CASH EQUIVALENTS(3) Lease payments and pro-forma depreciation charges for the years
ended March 31, 2008 and 2007 were ¥61 million (U.S.$609

A reconciliation of cash and cash equivalents at March 31, 2008 andthousand) and ¥57 million, respectively.

2007 to cash and time deposits in the accompanying consolidated(4) Depreciation is computed by the straight-line method over thebalance sheets is as follows:

respective lease terms assuming a nil residual value.
Thousands of
U.S. dollars

Millions of yen

2008
Cash and time deposits
Time deposits with a maturity
in excess of three months

2007

2008

¥ 6,008¥ 8,135$ 59,964

(823)

(523)

(8,215)Marketable securities witha maturity in excess of
three months

—

500

—

Cash and cash equivalents¥ 5,184¥ 8,112$ 51,749

Operating leases
Future minimum lease payments subsequent to March 31, 2008 and2007 were as follows:
Thousands of
U.S. dollars

Millions of yen

Payable in one year or less
Payable after one year
Total

2008

2007

2008

¥ 0

¥1

$ 4

—

0

—

¥ 0

¥1

$ 4

Deposits pledged as collateral mainly for leased office space at
March 31, 2008 and 2007 amounted to ¥23 million (U.S.$229 thousand)

14. COMMITMENTS AND CONTINGENT LIABILITIESand ¥23 million, respectively.

At March 31, 2008 and 2007, trade notes discounted with banks in the

13. LEASES

ordinary course of business amounted to ¥91 million (U.S.$912
thousand) and ¥87 million, respectively.

Finance leases, except for those which transfer ownership of the leased
property to the lessee, are accounted for as operating leases, and theassets and the related liability are not included in the balance sheets.

15. DERIVATIVES(1) A summary of the pro-forma amounts (inclusive of the related

The Company has entered into forward foreign exchange contracts tointerest) of acquisition cost, accumulated depreciation and net book

reduce its exposure to the risk of future adverse fluctuation in foreignvalue at March 31, 2008 and 2007, primarily relating to tools,

exchange rates related to its trade receivables and payables and loans

furniture and fixtures held under finance leases, is as follows:denominated in foreign currencies. It is the Company’s policy not toenter into any speculative derivatives transactions and its subsidiaries

Thousands of
U.S. dollars

Millions of yen

Acquisition cost

2008

2007

2008

¥277

¥220

$ 2,761

Accumulated depreciation

114

64

1,136

Net book value

¥163

¥156

$ 1,625(2) Future minimum lease payments, inclusive of the related interest,
subsequent to March 31, 2008 and 2007 are summarized as follows:

Millions of yen

Payable in one year or less
Payable after one year
Total

Thousands of
U.S. dollars

and associated companies do not enter into any forward foreignexchange contracts.
Unrealized gain or loss on a hedging instrument is deferred until
the Company recognizes gain or loss on the underlying hedged item.
Assets or liabilities hedged by forward foreign exchange contracts aretranslated at the forward exchange contract rates.
As the Company enters into such contracts only with domestic
banks with high credit ratings, the Company does not anticipate any riskof non-performance by these counter parties.
In addition, the execution of, and control over, derivatives transactions are carried out by the Administrative Division in accordance with

2008

2007

2008

internal control regulations which limit the nature of the transactions

¥ 64

¥ 52

$ 634

and individuals authorized to be in charge of such transactions.

99

104

991

¥163

¥156

$ 1,62529

16. SEGMENT INFORMATIONThe Company and its consolidated subsidiaries operate in two business segments and business segment information for the years ended March 31, 2008
and 2007 is summarized as follows:Year ended March 31, 2008
Millions of yen
Mothproofing
andhygiene-related
products

Householdenvironmentrelated
products

Total¥19,521¥27,485——

19,521

27,485

Eliminations
or corporate
assetsConsolidated¥47,006—¥47,006———

47,006—47,006

1. Sales(1) Sales to third parties(2) Intra-group sales and transfers
Net sales
2. Operating expenses

17,668

26,11943,787—43,787

Operating income¥ 1,853¥ 1,366¥ 3,219—¥ 3,219¥ 7,405

3. Total assets, depreciation and capital expenditures:(1) Total assets¥ 8,909¥12,079¥20,988(2) Depreciation

¥

373

¥

563

¥

936

—

¥

¥28,393936(3) Capital expenditures

¥

154

¥

495

¥

649

—

¥

649

Year ended March 31, 2007
Millions of yen
Mothproofing
andhygiene-related
products

Householdenvironmentrelated
products

Total¥17,980¥27,248

Eliminations
or corporate
assetsConsolidated¥45,227—¥45,227

1. Sales(1) Sales to third parties(2) Intra-group sales and transfers
Net sales

—

—

—

—

—

17,98027,24845,227—45,227

2. Operating expenses

16,06225,82341,885—41,885

Operating income¥ 1,917¥ 1,425¥ 3,342—¥ 3,342¥12,428¥33,830

3. Total assets, depreciation and capital expenditures:(1) Total assets¥ 8,808¥12,594¥21,402(2) Depreciation

¥

317

¥

520

¥

837

—

¥

837

(3) Capital expenditures

¥

177

¥

519

¥

696

—

¥

696

Year ended March 31, 2008
Thousands of U.S. dollars
Mothproofing
andhygiene-related
products

Householdenvironmentrelated
products

Total$194,838$274,326——

194,838

274,326

Eliminations
or corporate
assetsConsolidated$469,164—$469,164———

469,164—

469,164

1. Sales(1) Sales to third parties(2) Intra-group sales and transfers
Net sales
2. Operating expenses

176,341

260,697

437,038—

437,038

Operating income$ 18,496$ 13,629$ 32,126—$ 32,126$73,906$283,387

3. Total assets, depreciation and capital expenditures:

30(1) Total assets$ 88,922$120,559$209,481(2) Depreciation

$

3,727

$

5,615

$

9,343

—

$

9,343

(3) Capital expenditures

$

1,533

$

4,940

$

6,473

—

$

6,473

The business segments are classified according to the nature of the Company’s products and their markets. Major products in the mothproofing andhygiene-related products segment are Cloth Care, Hand Care and Thermal Care and those in the household environment-related products segment are
Air Care, Humidity Care and Home Care.
(Year ended March 31, 2008)
Change in accounting policies
Effective the fiscal year ended March 31, 2008, the Company and its domestic consolidated subsidiaries have changed their depreciation method in termsof the tangible fixed assets acquired after April 1, 2007 in accordance with the Corporation Tax Law as amended.
As a result of the adoption of the new method, operating expenses of Mothproofing and hygiene-related products segment and Household
environment-related products segment increased by ¥3 million (U.S.$32 thousand) and ¥44 million (U.S.$440 thousand), respectively. Operating income
decreased by the same amount in Mothproofing and hygiene-related products segment and Household environment-related products segment.
Additional information
Effective the fiscal year ended March 31, 2008, the residual value of the tangible assets which were acquired before March 31, 2007 and have been fully
depreciated up to 5 percent of the acquisition cost based on the prior Corporate Tax Law is to be depreciated to nominal book value of using a straightline method over a period of 5 years and booked as depreciation expense, according to the Corporation Tax Law as amended.
As a result of the additional depreciation, operating expenses of Mothproofing and hygiene-related products segment and Household environmentrelated products segment increased by ¥19 million (U.S.$193 thousand) and ¥26 million (U.S.$263 thousand), respectively. Operating income decreasedby the same amount in Mothproofing and hygiene-related products segment and Household environment-related products segment.
Geographical segment information and overseas sales are not presented as net sales and total assets in Japan exceeded 90% of the totals in bothsegments and as overseas sales were less than 10% of consolidated net sales for the years ended March 31, 2008 and 2007.

18. NOTE TO CONSOLIDATED STATEMENTS OF

Dividends from retained earnings at March 31, 2008 were as follows:

CHANGES IN NET ASSETS
Shares in issue and outstanding and treasury stock at March 31, 2008
and 2007 were as follows:(Year ended March 31, 2008)
Number of shares in issue and outstanding:Common stock

29,500 thousand

Number of shares held in treasury:
Common stock

7,686 thousand

Subscription rights at March 31, 2008 were as follows:
Subscription rights for stock options ¥28 million (U.S.$279
thousand)

Total amountof dividends(Millions of yen)

Dividend
per share(Yen)

Board ofdirectors’
meeting held on
May 14, 2007

284

11

March 31,2007

Board ofdirectors’
meeting held on
October 30, 2007

284

11

September 30, December 7,
2007
2007

Resolution

Scheduledresolution

Board ofdirectors’
meeting
held onMay 21, 2008

Total amountof dividends(Millions of yen)

240

Source ofdividends

Retainedearnings

Record date

Dividend
per share
(Yen)

11

Effective dateJune 18,
2007

Record date

Effective date

March 31,2008

June 4,200831

19. STOCK OPTION PLANS(Year ended March 31, 2007)
Number of shares in issue and outstanding:Common stock

29,500 thousand

At March 31, 2008, the Company had stock option plans, which were

Number of shares held in treasury:
Common stock

approved at the annual general meetings of the shareholders and by the

3,707 thousand

Board of Directors. Details of these stock option plans are summarized
as follows:

Subscription rights at March 31, 2007 were as follows:
Subscription rights for stock options ¥8 million

Date ofapproval

Number ofshares granted

Eligible participants

Exercisable period

June 15, 2001

140,000

1 director and23 employees(including
1 executive officer)

July 1, 2003–
June 30, 2008

June 14, 2002

225,000

1 director and
43 employees

July 1, 2004–
June 30, 2009

June 13, 2003

155,000

1 director and
25 employees

July 1, 2005–
June 30, 2010

June 15, 2004

130,000

4 officers and
9 employees

July 1, 2006–
June 30, 2011

June 14, 2005

160,000

3 officers and23 employees

July 1, 2007–
June 30, 2012

June 14, 2006

75,0003 officers and4 employees

July 1, 2008–
June 30, 2013

June 15, 2007

140,000

4 officers and
14 employees

Aug 1, 2009–
July 31, 2014

June18, 2008

95,000

Officers andemployees(the Board of Directors
will approvea resolution designating
the eligible officers
and employees)

Aug 1, 2010–
July 31, 2015

Dividends from retained earnings at March 31, 2007 were as follows:
Total amountof dividends(Millions of yen)

Dividend
per share(Yen)

Board ofdirectors’
meeting held on
May 12, 2006

317

11

Board ofdirectors’
meeting held on
October 26, 2006

290

Resolution

Scheduledresolution

Board ofdirectors’
meeting
held onMay 14, 2007

Total amountof dividends(Millions of yen)

284

11

Source ofdividends

Retainedearnings

Record date

March 31,2006

Effective dateJune 15,2006

September 30, December 8,
2006
2006

Dividend
per share
(Yen)

11

Record date

Effective date

March 31,2007

June 18,
2007

The option price per share was determined on the date theoptions were granted based on an established formula for determining
option prices. The options are exercisable during the above periods
provided that the recipients are still directors, statutory auditors or
employees of the Company or its subsidiaries.

32

(Year ended March 31, 2008)
Cost related to the 2008 stock option plan amounting to ¥20 million (U.S.$203 thousand), was included in selling, general and administrative expenses.
Contents of stock options
2002

2003

2004

2005

2006

2007

2008

Grantees

1 director and23 employees(including
1 executive
officer)

1 director and
43 employees

1director and
25 employees

4 directors and
9 employees

3 directors and23 employees

3 directors and4 employees

4 directors and
14 employeesType of stock

Commonstock

Commonstock

Commonstock

Commonstock

Commonstock

Commonstock

Commonstock

Number ofshares granted

140,000

225,000

155,000

130,000

160,000

75,000140,000

Grant date

October 11,
2001

August 1,
2002

August 1,
2003

August 4,
2004

August 4,
2005

August 1,
2006

August 1,
2007

Condition forexercise

Working from
October 11,
2001 to June 30,
2003

Working from
August 1,
2002 to June 30,
2004

Working from
August 1,
2003 to June 30,
2005

Working from
August 4,
2004 to June 30,
2006

Working from
August 4,2005 to June 30,
2007

Working from
August 1,
2006 to June 30,
2008

Working from
August 1,
2007 to July 31,
2009

Working
periodOctober 11,
August 1,
August 1,
August 4,
August 4,
August 1,
August 1,
2001 to June 30, 2002 to June 30, 2003 to June 30, 2004 to June 30, 2005 to June 30, 2006 to June 30, 2007 to, July 31,
2003
2004
2005
2006
2007
2008
2009

Exercisable
periodWithin 5 years
after the vestingdate (thoseretiring after
the vestingdate cannot
exercise theirstock options)

Within 5 years
after the vestingdate (thoseretiring after
the vestingdate cannot
exercise theirstock options)

Within 5 years
after the vestingdate (thoseretiring after
the vestingdate cannot
exercise theirstock options)

Within 5 years
after the vestingdate (thoseretiring after
the vestingdate cannot
exercise theirstock options)

Within 5 years
after the vestingdate (thoseretiring after
the vestingdate cannot
exercise theirstock options)

Within 5 years
after the vestingdate (thoseretiring after
the vestingdate cannot
exercise theirstock options)

Within 5 years
after the vestingdate (thoseretiring after
the vestingdate cannot
exercise theirstock options)33

Stock option activities during the year ended March 31, 2008 were as follows:
Number of shares
2002

2003

2004

2005

2006

2007

2008

Non-vested
outstandingat beginningof year

—

—

—

—

160,000

75,000—Granted during
the year

—

—

—

—

—

—

140,000

Forfeited
during the year

—

—

—

—

40,000——

Vestedduring the year

—

—

—

—

120,000——

Outstandingat end of year

—

—

—

—

—

75,000140,000

Vestedoutstandingat beginningof year5,000

31,00057,000110,000———

Vestedduring the year

—

—

—

—

120,000——

Exercisedduring the year—

10,00013,000————Forfeited
during the year

—

—

—

5,000

5,000

—

—

Outstandingat end of year

5,000

21,00044,000105,000

115,000——

Price of stock options
Yen

U.S. dollars

2002

2003

2004

2005

2006

2007

2008

2008

¥669

¥ 636

¥ 867

¥1,405¥1,628¥1,727¥1,517$15

Weighted-average
market price—¥1,440¥1,437

—

—

—

—

—

Fair value per option
on grant date

—

—

—

—

—

¥ 292

¥ 191

$ 2

Exercise price

The fair value of each stock option grant was estimated at the grant date using the Black-Scholes option pricing model. The fair value per option for
options granted during the year ended March 31, 2008 was estimated based on the following assumptions:
2008

34

Volatility

21.6%

Option term

4 years and 6 months

Expected dividend (per stock)¥22 (U.S.$0.22)

Risk free interest rate

1.35%

Volatility was determined based on the actual stock price over the past 4 years and 6 months.
The option term was estimated under the assumption that the options would be exercised in the middle of the exercisable period because of
insufficient data.
Expected dividend (per stock) was based on the dividend amount applicable to the 2007 fiscal year.
Risk free interest rate was based on government bonds whose terms corresponded with the terms of the above options.
Method of estimating exercised stock options
The Company estimated the number of exercised stock options based on the actual number of forfeitures because it is difficult to estimate the numberof stock options which will be forfeited in the future.
(Year ended March 31, 2007)
Cost related to the 2007 stock option plan amounting to ¥8 million , was included in selling, general and administrative expenses.
Contents of stock options
2001

2002

2003

2004

2005

2006

2007

Grantees

6 directors and4 employees(all executive
officers)

1 director and23 employees(including
1 executive
officer)

1 director and
43 employees

1director and
25 employees

4 directors and
9 employees

3 directors and23 employees

3 directors and4 employeesType of stock

Commonstock

Commonstock

Commonstock

Commonstock

Commonstock

Commonstock

Commonstock

Number ofshares granted

350,000

140,000

225,000

155,000

130,000

160,000

75,000Grant date

December 1,
2000

October 11,
2001

August 1,
2002

August 1,
2003

August 4,
2004

August 4,
2005

August 1,
2006

Condition forexercise

Working from
December 1,
2000 to June 30,
2002

Working from
October 11,
2001 to June 30,
2003

Working from
August 1,
2002 to June 30,
2004

Working from
August 1,
2003 to June 30,
2005

Working from
August 4,
2004 to June 30,
2006

Working from
August 4,2005 to June 30,
2007

Working from
August 1,
2006 to June 30,
2008

Working
periodFrom
October 11,
August 1,
August 1,
August 4,
August 4,
August 1,
December 1,
2001 to June 30, 2002 to June 30, 2003 to June 30, 2004 to June 30, 2005 to June 30, 2006 to June 30,
2000 to June 30, 2003
2004
2005
2006
2007
2008
2002

Exercisable
periodWithin 5 years
after the vestingdate (thoseretiring after
the vestingdate cannot
exercise theirstock options)

Within 5 years
after the vestingdate (thoseretiring after
the vestingdate cannot
exercise theirstock options)

Within 5 years
after the vestingdate (thoseretiring after
the vestingdate cannot
exercise theirstock options)

Within 5 years
after the vestingdate (thoseretiring after
the vestingdate cannot
exercise theirstock options)

Within 5 years
after the vestingdate (thoseretiring after
the vestingdate cannot
exercise theirstock options)

Within 5 years
after the vestingdate (thoseretiring after
the vestingdate cannot
exercise theirstock options)

Within 5 years
after the vestingdate (thoseretiring after
the vestingdate cannot
exercise theirstock options)35

Stock option activities during the year ended March 31, 2007 were as follows:
Number of shares
2001

2002

2003

2004

2005

2006

2007

Non-vested
outstandingat beginningof year

—

—

—

—

130,000

160,000—

Granted during
the year

—

—

—

—

—

—

75,000Forfeited
during the year

—

—

—

—

—

—

—

Vestedduring the year

—

—

—

—

130,000——

Outstandingat end of year

—

—

—

—

—

160,000

75,00013,00010,00052,00085,000———

Vestedduring the year

—

—

—

—

130,000——

Exercisedduring the year

13,0005,000

21,00028,00015,000——Forfeited
during the year

—

—

—

—

5,000

—

—

Outstandingat end of year

—

5,000

31,00057,000110,000——

Vestedoutstandingat beginningof yearPrice of stock options
Yen

U.S. dollars

2001

2002

2003

2004

2005

2006

2007

2007

Exercise price

¥ 698

¥ 669

¥ 636

¥ 867

¥1,405¥1,628¥1,727$15

Weighted-average
market price¥1,615¥1,711¥1,668¥1,707¥1,555

—

—

—

—

—

—

—

—

—

¥ 292

$ 2

Fair value per option
on grant date

The fair value of each stock option grant was estimated at the grant date using the Black-Scholes option pricing model. The fair value per option for
options granted during the year ended March 31, 2007 was estimated based on the following assumptions:
2007
Volatility

25.9%

Option term

4 years and 5 months

Expected dividend (per stock)¥22 (U.S.$0.19)

Risk free interest rate

1.30%

Volatility was determined based on the actual stock price over the past 4 years and 5 months.
The option term was estimated under the assumption that the options would be exercised in the middle of the exercisable period because of
insufficient data.
Expected dividend (per stock) was based on the dividend amount applicable to the 2006 fiscal year.
Risk free interest rate was based on government bonds whose terms corresponded with the terms of the above options.
Method of estimating exercised stock options
The Company estimated the number of exercised stock options based on the actual number of forfeitures because it is difficult to estimate the numberof stock options which will be forfeited in the future.

36

37

Corporate Information(June 15, 2008)

Board of Directors and Corporate Executive Officers
Takashi Suzuki

Teruyuki Maehara

The chairman of the board, member of nomination committee

Outside director, member of nomination and audit committee

Yasushi Kajiwara

Mitsuko Miyagawa

Outside director, member of nomination, audit and compensation committees

Outside director, member of audit committee

Masanori Noro

Kanzo Kobayashi

Outside director, member of nomination and compensation committees

Director, member of nomination committee

Hiroyuki Kokado

Hirohide Shimada

Outside director, member of audit committee

Director, member of compensation committee

Executive Officers
Kanzo Kobayashi

Masakazu Kinoto

Representative Executive Officer

Executive Officer

President, Chief Executive Officer

Deputy general manager of sales division
Osaka branch general manager

Noriaki Kageura
Managing Executive Officer
Senior general manager of corporate sales division

Masami Kitahara
Executive Officer
In charge of marketing

Hirohide Shimada
Senior Managing Executive Officer

Keiichi Hayasaka

In charge of corporate staff

Executive Officer
In charge of International business

Takahiko Kato
Executive Officer

Takashi Suzuki

Deputy general manager of sales division

Executive Officer

Tokyo branch general manager

In charge of group strategy

Corporate Data

Group Companies

Company name
Headquarters
Establishment
Paid-in capital
Employees

S.T. CORPORATION

Consolidated Subsidiaries

4-10, Shimo-ochiai, 1-chome, Shinjuku-ku,

S.T. Trading Co., Ltd.

Tokyo 161-8540, Japan

Sales of hand gloves, industrial paper wipes, lubricant spray and others

August 31, 1948
¥7,065,500,000
607 (Consolidated)
361 (Non-Consolidated)

Contact
E-mailTel
Fax

Hirohide Shimada, Public Relations

S.T. Auto Co., Ltd.
Sales of car chemical care products

S.T. Mycoal Co., Ltd.
Sales support and marketing of Mycoal disposable warmers

Department

S.T. Business Support Co., Ltd.

ir@st-c.co.jp

Temporary staffing and contract work for S.T. Corporation+81-3-5906-0734

Family Glove (Thailand) Co., Ltd.

+81-3-5906-0742

Manufacture and sale of hand gloves

Family Glove (Taiwan) Co., Ltd.
Manufacture and sale of hand gloves

38

Investor Information(March 31, 2008)

Fiscal year-end
Shares issued and outstanding
Listed exchange
Shareholders

March 31
29,500,000
Tokyo Stock Exchange, First Section
8,132

Primary Shareholders(Thousands of shares)(% of total)

7,686
4,674
1,671
884
812
780
681
582
485
433

26.1
15.9
5.7
3.0
2.8
2.6
2.3
2.0
1.6
1.5

S.T. Corporation
Shaldan Co., Ltd.
Nippon Life Insurance Company
TCSB(Mizuho Bank)
Takashi Suzuki
Fuamiru
The Bank of Tokyo-Mitsubishi UFJ, Ltd.
Seiichi Suzuki
Akio Suzuki
CaleineIndividuals

28.08%

Other Japanese institutions

27.75%

Financial institutions

17.56%

Non-Japanese institutions

0.55%

Treasury stock

26.06%

Registered transfer agent
AuditorAnnual shareholder’s meeting

Mizuho Trust & Banking Co., Ltd.
Ernst & Young Shin Nihon
Middle of June each year (June 15, 2008)

Stock Chart
Stock Price (Yen)
2,400

Nikkei 225 (Yen)
24,0001,800

18,0001,200

12,000600

6,000
1,000,000
0005/6 7

8

9

10

11

12 06/1 2

3

4

5

6

7

8

9

10

11

12 07/1 2

3

4

5

6

7

8

9

10

11

12 08/1 2

3

4

5

0

6

39

4-10, Shimo-ochiai, 1-chome, Shinjuku-ku, Tokyo 161-8540, Japan
http://www.st-c.co.jp

Printed in Japan