FINANCIAL REPORT(Report under Article 24, paragraph 1 of the Financial Instruments and Exchange Act)
Business Year from April 1, 2017 to March 31, 2018
(The 70th Term)(TRANSLATION)

ARISAWA MFG. CO., LTD.
E01152TABLE OF CONTENTS
Page Number
Cover Page
PART I. INFORMATION ON THE BUSINESS ................................................................... 1
I. General Conditions of Business .............................................................................................. 1
1. Changes in Principal Management Indicators, etc. ........................................................ 1
2. History ............................................................................................................................ 3
3. Description of Business .................................................................................................. 4
4. Status of Subsidiaries and Affiliated Companies ........................................................... 6
5. Status of Employees ....................................................................................................... 8
II. Status of Business .................................................................................................................. 9
1. Management Policy, Management Environment and Tasks to be Addressed ................ 9
2. Business Risks, etc. ...................................................................................................... 11
3. Analyses of Consolidated Financial Position, Business Resultsand Cash Flows by the Corporate Managers ............................................................... 11
4. Agreements with Managerial Implications, etc. ........................................................... 17
5. Research and Development Activities .......................................................................... 17
III. Status of Facilities .............................................................................................................. 20
1. Outline of Capital Investment ...................................................................................... 20
2. Status of Major Facilities.............................................................................................. 20
3. Plans for Installation and Retirement, etc. of Facilities ................................................ 22
IV. Status of the Submitting Company .................................................................................... 23
1. Status of Shares, etc...................................................................................................... 23(1) Total Number of Shares, etc. .................................................................................... 23(2) Status of Stock Acquisition Rights, etc. .................................................................... 24(3) Status of Exercise of Moving Strike Convertible Bonds, etc.................................... 27(4) Changes in the Number of Shares Issued and Outstanding, Capital Stock, etc. ....... 27(5) Status of Shareholder Categories .............................................................................. 28(6) Status of Major Shareholders .................................................................................... 29(7) Status of Voting Rights ............................................................................................. 30
2. Status of Acquisition of Treasury Stock, etc. ............................................................... 31
3. Dividend Policy ............................................................................................................ 32
4. Share Price Movement ................................................................................................. 32
5. Status of Directors and Officers ................................................................................... 33
6. Status of Corporate Governance, etc. ........................................................................... 37
V. Status of Accounting ........................................................................................................... 46
1. Consolidated Financial Statements, etc. ....................................................................... 47(1) Consolidated Financial Statements ........................................................................... 47(2) Other ......................................................................................................................... 93
2. Financial Statements, etc. ............................................................................................. 94(1) Financial Statements ................................................................................................. 94(2) Details of Major Assets and Liabilities ................................................................... 106(3) Other ....................................................................................................................... 106
VI. Outline of Share Handling of the Submitting Company .................................................. 107
VII. Reference Information on the Submitting Company ...................................................... 108
1. Information on Parent Company, etc. of Submitting Company .................................... 108
2. Other Reference Information ........................................................................................ 108
PART II. INFORMATION ON GUARANTY COMPANIES, ETC. OF THE
SUBMITTING COMPANY .................................................................................................. 110[Independent Auditors’ Report]

Cover Page
Document to be filed:

Financial Report

Statutory basis:

Article 24, paragraph 1 of the Financial Instruments and Exchange Act

Filing to:

Director-General of the Kanto Local Finance Bureau

Date of filing:

June 29, 2018

Business year:

The 70th Term (From April 1, 2017 to March 31, 2018)

Company name (Japanese):

Kabushiki-Kaisha Arisawa Seisakusho

Company name (English):Arisawa Mfg. Co., Ltd.

Name and title of representative:

Yuta Arisawa, President and Representative Director

Location of head office:5-5, Minami-honcho 1-chome, Joetsu-shi, Niigata

Telephone number:(025) 524-5126

Contact person:

Shuichi Kubota, General Manager, Accounting Department

Place of contact:5-5, Minami-honcho 1-chome, Joetsu-shi, Niigata

Telephone number:(025) 524-5126

Contact person:

Shuichi Kubota, General Manager, Accounting Department

Places where copies of this Financial Report

Arisawa Mfg. Co., Ltd., Tokyo Branch Office

are made available for public inspection:(12-5, Yanagibashi 2-chome, Taito-ku, Tokyo)
Tokyo Stock Exchange, Inc.
(2-1, Nihombashi Kabutocho, Chuo-ku, Tokyo)

PART I.

INFORMATION ON THE BUSINESS

I. General Conditions of Business1. Changes in Principal Management Indicators, etc.
(1) Consolidated Management Indicators, etc.
Term

66th term

67th term

68th term

69th term

70th term

Closing month

March 2014

March 2015

March 2016

March 2017

March 201830,23237,58937,22834,45140,909

2,730

4,503

3,510

2,690

4,044

4,025

4,821

2,702

2,037

3,452

7,638

5,564

1,067

1,821

4,497

43,84848,14747,602

48,55152,49258,286

65,76660,98363,80872,644

1,177.47

1,280.69

1,263.29

1,290.93

1,378.12

114.91136.77

76.02

57.20

96.31

114.26135.70

75.58

57.06

95.48

Net sales (Millions of yen)
Ordinary income or loss ()(Millions of yen)
Profit or loss () attributableto owners of the parent(Millions of yen)Comprehensive income(Millions of yen)
Net assets (Millions of yen)
Total assets(Millions of yen)
Net assets per share (Yen)
Net income or loss ()per share(Yen)

Fully diluted net income per
share

(Yen)

Equity ratio

(%)

71.0

69.1

73.8

72.2

68.3

Return on equity

(%)

10.6

11.1

6.0

4.5

7.2

Price earnings ratio (Times)

4.8

7.5

7.6

13.7

10.2

2,793

2,293

4,548

3,419

2,181

770

△5,579△1,771△1,671

△471

△4

△188

△3,540

419

△59

9,393

6,021

4,901

7,026

8,829

1,285

1,305

1,426

(189)

(139)

(295)

Cash flows from operating
activities (Millions of yen)
Cash flows from investing
activities (Millions of yen)
Cash flows from financing
activities (Millions of yen)
Cash and cash equivalents at
the end of period(Millions of yen)

Number of employees(Parenthesized figures
1,245
1,253
indicate the average number
(82)
(163)
of temporary employees notincluded in the total)
Note: Consumption tax, etc. are not included in the amount of net sales.

-1-(2) Management Indicators, etc. of the Submitting Company
Term

66th term

67th term

68th term

69th term

70th term

Closing month

March 2014

March 2015

March 2016

March 2017

March 2018

21,277

27,57825,793

23,41028,503

883

2,539

2,542

1,898

2,451

3,444

3,706

2,219

1,516

2,503

7,153

7,262

7,294

7,317

7,458

35,13135,48535,61135,67936,024

Net sales(Millions of yen)

Ordinary income or loss ()(Millions of yen)
Net income or loss ()(Millions of yen)
Capital stock (Millions of yen)
Number of shares issued andoutstanding(Thousands of shares)
Net assets(Millions of yen)

31,30633,44632,75933,852

36,138

Total assets(Millions of yen)

39,16342,98040,10242,64346,496887.11940.29916.79944.94999.83

25.00
(－)

35.00
(－)

23.00
(－)

20.00
(－)

34.00
(－)

98.31

105.13

62.43

42.59

69.83

97.75

104.30

62.06

42.48

69.22

Net assets per share(Yen)

Dividend per share(Yen)(Parenthesized figures indicate
the amount of interim dividend
per share included in the total)
Net income or loss ()per share(Yen)

Fully diluted net income per
share

(Yen)

Equity ratio

(%)

79.6

77.6

81.4

79.0

77.4

Return on equity

(%)

12.1

11.5

6.7

4.6

7.2

(Times)

5.6

9.8

9.2

18.4

14.1

(%)

25.4

33.3

36.8

47.0

48.7

576
(22)

585
(84)

583
(101)

589
(69)

592
(99)

Price earnings ratio
Dividend payout ratio

Number of employees(Parenthesized figures indicate
the average number of temporary
employees not included in the
total)
Note:

Consumption tax, etc. are not included in the amount of net sales.

-2-2. History
July 1949▪ Incorporation of Arisawa Mfg. Co., Ltd. (hereinafter referred to as either the “Company” or the“Submitting Company”, as the case may be), succeeding the businesses of “Arisawa Manufacturing”,
which was founded in 1909 and manufactured Battenburg lace, narrow woven fabrics, electricalinsulating tapes and glass fiber fabrics, etc.

April 1954

▪ Established a resin processing division.

June 1954▪ Relocated the Head Office from Ohmachi, Takada-shi (currently Joetsu-shi), Niigata to Minamihoncho, Takada-shi.

May 1959▪ Opened Tokyo Sales Office and Osaka Sales Office.

September 1960

▪ OTC trading of the Company’s stock started at Tokyo Securities Dealers Association.

October 1961

▪ The Company’s stock was listed on the Second Section of Tokyo Stock Exchange.

December 1966

▪ Incorporated Arisawa Jushi Kogyo Co., Ltd. (currently a consolidated subsidiary), which conducts
molding and processing of resin products related to industrial application structural materials.

June 1968▪ Opened a factory in Oaza-Nakadahara, Takada-shi (currently Joetsu-shi), Niigata, establishing new
resin processing facilities.

August 1973

▪ Incorporated Eagle Co., Ltd., which operates a driving range.

March 1974

▪ Incorporated Myoko Shinko Co., Ltd., which conducts processing of resin products related to electricalinsulating materials.

June 1974▪ Absorbed Arisawa Shoji Co., Ltd. and reorganized the sales division into Tokyo Branch Office andOsaka Branch Office (Osaka Branch Office was closed down in September 2015).

April 1976

▪ Incorporated Yuai Sangyo, Ltd., which manufactures glass fiber fabrics and special fiber fabrics related
to electrical insulating materials.

May 1987▪ Incorporated Arisawa Logistics, Ltd., which conducts warehouse management and logistics operations.

July 1991▪ Incorporated Polatechno Co., Ltd. (which manufactures polarizing plates for use in liquid crystal
displays) through joint capital investment with Nippon Kayaku Co., Ltd.

December 1994

▪ Opened Technological Development Center on the premises of Nakadahara Factory.

October 1996

▪ Acquired Arisawa Polywork Co., Ltd. (which conducts molding and processing of resin products

July 1999▪ Opened a factory in Oaza-Nakadahara (on the west side of the current Nakadahara Factory), Joetsu-shi,

related to industrial application structural materials) with capital contribution of Arisawa Logistics, Ltd.
Niigata, establishing new resin processing facilities.
July 2000▪ Incorporated Arisawa Fiber Glass Co., Ltd. (currently a consolidated subsidiary), spinning off the glass
cloth manufacturing division of the Submitting Company (related to electronic materials and electricalinsulating materials) and consigning manufacture of glass cloth to Arisawa Fiber Glass Co., Ltd.

September 2002

▪ The Company’s stock was listed on the First Section of Tokyo Stock Exchange.

April 2003

▪ Myoko Shinko Co., Ltd. absorbed Arisawa Polywork Co., Ltd., Yuai Sangyo, Ltd. and Arisawa
Logistics, Ltd. and changed its corporate name to Arisawa Sogyo Co., Ltd. (currently a consolidated
subsidiary).

March 2006

▪ Stock of Polatechno Co., Ltd. (currently an affiliated company accounted for under the equity method)
was listed on the JASDAQ Securities Exchange.

October 2009

▪ Acquired shares of ThinFlex Corporation (currently a consolidated subsidiary).

December 2010

▪ Howa Sangyo Ltd., a subsidiary, changed its corporate name to Protec International Holdings Co., Ltd.
(currently a consolidated subsidiary) and acquired shares of Protec Arisawa Europe, S.A. and Protec
Arisawa America, Inc. (both currently consolidated subsidiaries)

April 2011

▪ Incorporated Protec Arisawa Japan Co., Ltd. (currently a consolidated subsidiary), which conducts
sales of filament winding molded products related to industrial application structural materials.

July 2011▪ Arisawa Sogyo Co., Ltd. absorbed Eagle Co., Ltd.

October 2015

▪ Opened Kansai Sales Office in Kyoto-shi, Kyoto.

November 2017

▪ Acquired all shares of Satosen Co., Ltd., which conducts manufacturing and sales of electronicmaterials (currently a consolidated subsidiary).

-3-

3. Description of BusinessOur corporate group (hereinafter referred to as either “our Group” or the “Group”, as the case may be) is
comprised of the Company, sixteen (16) subsidiaries and four (4) affiliated companies and is engaged in
manufacturing and sales of electronic materials, industrial application structural materials, electrical insulating
materials and display materials. It also develops business activities such as sales of goods related to each businesssegment as well as logistics and other services.
Description of business of our Group and the capacities of the Company and its associated companies withrespect to each business segment are as follows.
The business segments shown below are categorized in the same manner as those shown in V. Status of
Accounting – 1. Consolidated Financial Statements, etc. – (1) Consolidated Financial Statements – [Notes]. With
the liquidation of subsidiaries, the order of statement of our Group’s business segments was revised effectivefrom the current consolidated fiscal year. Accordingly, "Related goods" which was a reportable segment iscontained in "Other".
(1) Electronic Materials
The Company manufactures and sells materials for flexible and rigid printed circuit boards, etc. that areused as electronic materials, while Arisawa Fiber Glass Co., Ltd., a subsidiary, manufactures glass clothfor printed circuit boards. ThinFlex Corporation, a subsidiary, also manufactures and sells materials forflexible printed circuit boards, etc.
(2) Industrial Application Structural Materials
The Company, Protec Arisawa Japan Co., Ltd., Protec Arisawa Europe, S.A. and Protec Arisawa
America, Inc. manufacture and sell filament winding molded products for use as industrial application
structural materials. The Company manufactures and sells honeycomb panels and prepregs, etc. for aircraft.
Arisawa Sogyo Co., Ltd., a subsidiary, manufactures and sells pultrusion molded products and FRP ski
sheets, etc.
Protec International Holdings Co., Ltd. conducts business management of the aforesaid Protec Arisawa
companies as the holding company of these subsidiaries engaged in the water treatment business with theirfilament winding molded products.
(3) Electrical Insulating Materials
Arisawa Fiber Glass Co., Ltd., a subsidiary, manufactures glass cloth and glass tapes for use as electricalinsulating materials, and the Company sells such glass cloth and glass tapes. The Company manufacturesand sells prepregs, etc. for electrical insulation, while Arisawa Sogyo Co., Ltd., a subsidiary, and Arisawa
Jushi Kogyo Co., Ltd., another subsidiary, manufacture these products.
(4) Display Materials
The Company manufactures and sells 3D display filters, etc. for use as display materials. ColorLink
Japan, Ltd., a subsidiary, manufactures and sells special optical films, with Arisawa Manufacturing(Dalian) Co., Ltd. also conducting the post-process operations for such special optical films.

PolatechnoCo., Ltd., an affiliated company, manufactures and sells polarizing plates for liquid crystal displays, etc.
Innovision FlexTech Corporation manufactures and sells screens, etc.
(5) Other Businesses
The Company conducts sales of the related goods mentioned above in (2) and (3). In addition, Arisawa
Sogyo Co., Ltd., a subsidiary, conducts logistics operations and also operates a driving range.
The above matters are abstracted in the following Business Activities Diagram.

-4-

(Business Activities Diagram)

ColorLink Japan, Ltd.

Co.,Electrical insulating materials

Arisawa Manufacturing (Dalian) Co., Ltd.

Ltd.

Arisawa Jushi Kogyo Co., Ltd.

Innovision FlexTech Corporation

Protec International Holdings Co., Ltd.

Protec Arisawa Europe, S.A.

Protec Arisawa Japan Co., Ltd.

Protec Arisawa America, Inc.

Ar i sa wa S o g yo Co . , Lt d .

Transactions of products, etc.

Other transactions

Industrial application structural materials

Satosen

Arisawa Fiber Glass Co., Ltd.

(Note)

Ltd.

Corporation

Arisawa Mfg. Co., Ltd. (Manufacture and sales)

Electronic materials

TopFlexCo.,

Display materials

Polatechno

ThinFlex Corporation

Consolidated subsidiary

Affiliated company accounted for underthe equity method

Non-consolidated subsidiary

Arisawa Sogyo Co., Ltd. is engaged in other businesses in addition to the manufacture of electricalinsulating materials and the manufacture and sales of industrial application structural materials.

-5-4. Status of Subsidiaries and Affiliated Companies

Name

Location

Capital stock(Thousands of Description of core
yen except asbusinessotherwise noted)

Votinginterest
held by theCompany

Relevant descriptions(%)(Consolidated
subsidiaries)
ThinFlex
Corporation(See Note 2)
ThinFlex
Technology
Corporation(B.V.I.)(See Note 2)
TopFlex
Corporation(See Note 2
and Note 5)
Satosen Co.,Ltd.

Kaohsiung
County, Taiwan

1,006,377(Thousands of
New Taiwan
dollar)Electronic materials

52.3

British Virgin
Islands

15,710(Thousands of
US dollar)

Electronic materials

100.0(100.0)---

Kunshan City,
P.R. China

17,000(Thousands of
US dollar)

Electronic materials

100.0(100.0)

Sales of electronic material
products

99,540Electronic materials

100.0

Leasing of land
Concurrent directorship

100.0

Consignment manufacture of glass
fiber fabrics related to electronicmaterials and electrical insulating
materials,
Leasing of buildings andmanufacturing equipment,
Financial support,
Concurrent directorship

100.0

Financial support,
Concurrent directorship

Osaka-shi,
OsakaSupply of raw materials as well as
sales of products related toelectronic materials,
Concurrent directorship

Arisawa Fiber
Glass Co., Ltd.
(See Note 2)

Joetsu-shi,
Niigata

100,000

Electronicmaterials,
Electrical insulating
materials

ProtecInternational
Holdings Co.,
Ltd.

Joetsu-shi,
Niigata

101,830

Industrial
application
structural materials

Protec Arisawa
Europe, S.A.

Munguia, Spain

1,670(Thousands of
euro)

Industrial
application
structural materials

Protec Arisawa
America, Inc.

Vista, CA,
U.S.A.

3,200(Thousands of
US dollar)

Industrial
application
structural materials

100.0(100.0)Financial support,
Concurrent directorship

Protec Arisawa
Japan Co., Ltd.

Taito-ku, Tokyo

10,000Industrial
application
structural materials

100.0(100.0)

Sales of industrial application
structural materials,
Concurrent directorship

30,950Electrical insulating
materials,
Industrial
application
structural materials,
Other businesses

100.0

Consignment manufacture as wellas consignment of warehousing
and logistics operations of resin
products related to electricalinsulating materials and industrial
application structural materials,
Leasing of buildings, machineryand equipment

100.0

Consignment manufacture of resin
products related to electricalinsulating materials,
Leasing of land and buildings,
Concurrent directorship97.2

Leasing of buildings, machineryand equipment,
Supply of raw materials,
Concurrent directorship

Arisawa Sogyo
Co., Ltd.

Joetsu-shi,
Niigata

Arisawa Jushi
Kogyo Co.,
Ltd.

Joetsu-shi,
Niigata

ColorLink
Japan, Ltd.

Joetsu-shi,
Niigata

10,000198,201

Electrical insulating
materials

Display materials

-6-

100.0
(100.0)Financial support,
Concurrent directorship

Name

Location

Capital stock(Thousands of Description of core
yen except asbusinessotherwise noted)

Votinginterest
held by theCompany(%)

Relevant descriptions(Affiliatedcompanies
accounted forunder theequity method)
Polatechno Co.,
Ltd.
(See Note 4)
Innovision
FlexTech
Corporation
Note:

1.
2.
3.
4.
5.

Joetsu-shi,
Niigata

3,095,125Display materials

22.3

Sales and purchase of products
related to display materials,
Leasing of land and buildings,
Concurrent directorship

230,490
Sales and purchase of products(Thousands of
Display materials
36.8 related to display materials,
New Taiwan
Concurrent directorship
dollar)Segment names are stated in the column “Description of core business”.
The company falls under the category of specified subsidiary.
Parenthesized figures in the column “Voting interest held by the Company” indicate the ratio of indirect ownershipto the pertinent total.
The company submits its own financial report.
Net sales (excluding inter-company sales between the consolidated companies) of TopFlex Corporation account for
more than ten hundredths (10/100) of the Group’s consolidated net sales.
Kaohsiung
City, Taiwan

Key income and loss indices, etc. of TopFlex Corporation(Thousands of yen)
(1) Net sales(2) Ordinary income

6,230,292
275,502(3) Net income(4) Net assets

225,436
1,758,532(5) Total assets

6,679,567-7-

5. Status of Employees(1) Status of Consolidated Group(As of March 31, 2018)
Segment name

Number of employees

Electronic materials

817

（171）

Industrial application structural materials

282

（67）

Electrical insulating materials

131

（12）

Display materials

123

（22）

1,353

（272）

Other

35

（16）

Unallocated (Common)

38

（7）

1,426

（295）

Total of reportable segments

Total
Note: 1.

2.

The column “Number of employees” indicates the number of full-time employees (excluding persons on loan tocompanies outside our Group from those within our Group and including persons on loan to companies within ourGroup from those outside our Group), while the annual average number of temporary employees (including parttimers, employees dispatched from staffing agencies and seasonal workers) is stated in the parentheses.
The number of employees stated as that of “Unallocated (Common)” is the number of those who belong to theadministrative departments of the Company.

(2) Status of Submitting Company
Number of employees

Average age (Years old)

Average length of service (Years)

42.5

19.0

592（99）Segment name(As of March 31, 2018)
Average annual salary(Thousands of yen)
5,655

Number of employees

Electronic materials

326

（67）

Industrial application structural materials

114

（10）

Electrical insulating materials

65

（11）

Display materials

49

（4）

554

（92）

Unallocated (Common)

38

（7）

Total

592

（99）

Total of reportable segments

Note: 1.

2.
3.

The column “Number of employees” indicates the number of full-time employees (excluding persons on loan to othercompanies from the Company and including persons on loan to the Company from other companies), while the annual
average number of temporary employees (including part-timers, employees dispatched from staffing agencies andseasonal workers) is stated in the parentheses.
“Average annual salary” includes bonuses and extra wages.
The number of employees stated as that of “Unallocated (Common)” is the number of those who belong to theadministrative departments of the Company.

(3) Status of Labor Union
The labor union of the Submitting Company belongs to the local division of the Japanese Federation of
Textile, Chemical, Food, Commercial, Service and General Workers’ Unions and has made sounddevelopment since its formation in 1946. The labor-management relations are harmonious, and efforts are
made to develop the Company’s business through mutual cooperation. The union membership as of March
31, 2018 stands at 476 members.

-8-II. Status of Business
1. Management Policy, Management Environment and Tasks to be Addressed
The matters stated concerning the future in the text are based on judgments made by our Group as ofthe end of the current consolidated fiscal year.
(1) Basic Policies of Corporate Management
Grounded in the motto “Creation, Innovation and Challenge”, our Group makes it its management policyto:(i) offer new values and enhance customer satisfaction;(ii) anticipate customer needs and create a new business with creative technology;(iii) improve quality and productivity, and strengthen business quality.
Under such management policy, we aim to create corporate value and enhance shareholder value of theCompany by means of enhancing customer satisfaction, accelerating new product development and improving
profitability through thorough cost reduction. Our Group’s mid- to long-term managerial goals in terms ofmanagement indicators are: a ratio of new product sales of 50% or more, an operating income margin of 8%
or more and an ROA (return on assets) of 5% or more.

(2) Mid- to Long-Term Management Strategies
We strive to increase profits by enhancing competitiveness of the existing products as well as to develop
new products to build the foundation for new businesses.
- In the electronic materials segment, we proceed with the development of new products, centering on
mobile devices, in-vehicle devices and semiconductors. We also continue our exhaustive cost-cutting
efforts and closely collaborate with the consolidated subsidiaries in pursuit of enhanced competitivenessand expanded market shares.
- In the industrial application structural materials segment and electrical insulating materials segment, we
promote new product development and sales expansion focusing on transportation infrastructure, water
treatment and electrical insulating, with a view to maintaining sound profitability and expanding market
shares.
- In the display materials segment, we make efforts toward early launch of new products utilizing ourunique optical technology into market, primarily in the fields of medical applications, in-vehicle devices
and large sized displays.
- We deepens collaboration with the overseas consolidated subsidiaries and work to further expand sales
by strengthening the technical service to customers.

(3) Tasks to be Addressed by the Company
Our Group promotes the following as the tasks to be addressed in order to ensure accelerated and thoroughimplementation of the aforesaid management strategies.
- Exhaustive review of manufacturing technologies and materials selection in order to realize morecompetitive cost structure- Thorough cost reduction by means of improving management techniques (centering on the Arisawa
Production System) and proprietary technologies as well as enhancing professional competence ofindividual employees- Promotion of enhanced cooperation among the manufacturing, sales and technical divisions in pursuit ofmore efficient business operations(4) Basic Policy for the Control of Kabushiki-Kaisha
1) Contents of the basic policy and the efforts toward the realization of the basic policy (including, but
not limited to, effective utilization of the assets of the Company and formation of an appropriate
corporate group)
The Company, ever since its initiation in 1909, has been working on technological innovations andproduct development to build up unique technologies that integrate the “weaving, coating and molding”
elements of its expertise while consistently fulfilling users’ needs, thereby increasing its corporate
value under favorable labor-management climate. The Company’s Board of Directors believes that
the Company is obligated to adhere to such time-honored principle of nurturing technologicalaccumulation and also to understand, foster and enhance the said corporate value in the long run.
In light of the above, our Group stands on a management policy centering on the motto “Creation,
Innovation and Challenge” as we aim to enhance profitability through creation of new business bases
and new markets with the utmost emphasis on the pursuit of safety and quality.

-9-2) Efforts to prevent inappropriate persons from controlling the Company’s financial and business
policymaking
Stock markets in late years witnessed such takeover methods that, for instance, force through largescale purchases of shares without providing sufficient explanation to, or consultation with, theshareholders and the management of the target company. Many of the takeovers using such methods
apparently entail erosion of corporate value and forced sales of shares, etc. to the detriment ofshareholders’ interests.
Such being the case, we acknowledged the need to ensure proper disclosure of necessary andsufficient information and also secure the time required for examination and consideration of an
offer to purchase by presenting a set of rules and procedures for large-block purchasers and purchaseofferors (hereinafter individually referred to as a “Purchaser”) to comply with. Thus the Company,
pursuant to the provisions of its Articles of Incorporation, established the measures to address largescale acquisitions of the Company’s shares (hereinafter referred to as the “Rules”) and obtained theshareholders’ approval of the Rules at the 69 th Ordinary General Meeting of Shareholders held on
June 28, 2017.
In the event that: (i) invocation of a countermeasure is approved under the Rules at a general
meeting of shareholders, etc. held to confirm the shareholders’ intentions; (ii) the Purchaser does notcomply with the Rules; or (iii) it is evident that a large-scale acquisition of the Company’s shares or
any similar act or an offer of any of such acts (hereinafter individually referred to as a “Purchase”)
will impair the Company’s corporate value, the countermeasure(s) shall be invoked in accordancewith the Rules.
(For the details of the Rules, please refer to the Company’s website at: http://www.arisawa.co.jp/)
3) The fact that the aforesaid efforts, in accordance with the basic policy, do not erode theCompany’s corporate value and the common interests of the shareholders and that such efforts do
not aim to maintain the status of the Company’s directors and officers
The Company’s Board of Directors believes that, with the Company’s stock listed on the stock
exchange for unfettered trading of its shares by the investors, a large-scale purchase of theCompany’s shares conducted against the will of the Company’s Board of Directors or an offer topurchase entailing a change of control of the Company should not be ruled out by the Company’s
Board of Directors if and to the extent that such acts contribute to the common interests of theshareholders through enhancement of the Company’s corporate value, and so the final judgment as
to the said acts should be made collectively by the shareholders of the Company.
If and when such Purchase is conducted, we deem it best to collect detailed information from thePurchaser and provide the shareholders with sufficient levels of disclosure (in order for theshareholders to make a proper judgment) and also to have the Company’s Board of Directors express
its opinions, inviting the shareholders to directly express their intentions at a general meeting ofshareholders, etc. as to which of the cases is more conducive to securing and enhancing theCompany’s corporate value and the common interests of the shareholders. The Rules set forth asfollows:
a. Judgment by direct resolution of the shareholders
The Rules provide that the shareholders shall directly pass judgment on whether an offer topurchase made by a Purchaser should be approved, except where the Purchaser does notcomply with the Rules, etc. It is virtually impossible, in the process and procedures ofconfirming the shareholders’ intentions, for a director of the Company to make individual
solicitations, etc. in pursuit of his or her own interests, and no room is left for an arbitrary
intent of any of the Company’s directors to impinge on the shareholders’ intentions.
b. Restrictions on invocation of countermeasures by the judgment of the Board of Directors
Invocation by the Company’s Board of Directors of a countermeasure without confirming
the shareholders’ intentions is possible only when any breach of the Rules or erosion of theCompany’s corporate value and the common interests of the shareholders is evident, and also
the so-called “sunset clause” is attached to limit the valid term of the Rules to approximately
two (2) years.
Therefore, the Company’s Board of Directors believes that this “Basic Policy for the Control of
Kabushiki-Kaisha” represents the Company’s efforts to secure and maintain the Company’s
corporate value and the common interests of the shareholders and that such basic policy does not
impair the interests of the Company’s shareholders.

- 10 -

2. Business Risks, etc.
Among the matters related to the status of business and the status of accounting, etc., which are stated in the
Financial Report, the following matters are included, as of the date of submission of the Financial Report, in thematters that may substantially affect investors’ judgment.
The matters stated concerning the future in the text are based on judgments made by our Group as of the endof the current consolidated fiscal year.

(1) Fluctuations in Demand for Products
Major users of the products manufactured and sold by our Group are consumer electronic appliancemanufacturers, electronic component manufacturers, industrial electronic device manufacturers, etc., andfluctuations in demand for consumer electronic appliances affect the results of operations of our Group.

(2) Dependence on Particular Products
Net sales of our Group depend largely on the electronic materials segment. A sales decline in this segment
may affect the results of operations of our Group.

(3) Development of New Businesses
Our Group is making efforts to launch several new businesses, and the status of progress in such efforts
may affect the results of operations of our Group.

(4) Procurement of Raw Materials
If purchase prices of the raw materials purchased by our Group rise sharply due to a surge in crude oil
prices, etc., such rise may affect the results of operations of our Group.

(5) Impact of Disasters
The vast majority of our Group’s production bases are located in Joetsu-shi, Niigata, Japan. In the eventof an earthquake or other disaster, the resultant disruption or interruption of production activities, etc. may
affect the results of operations of our Group.

(6) Environmental Regulations
Businesses of our Group are subject to various legal regulations, including, but not limited to, those
applicable to environmental protection. If any significant liability or obligation accrues to our Group inconnection with compliance with any such environmental or other kind of regulation, such liability or
obligation may affect the results of operations of our Group.

3. Analyses of Consolidated Financial Position, Business Results and Cash Flows by the
Corporate Managers(1) Overview of Operating Results, etc.
Analysis of financial conditions, results of operations and status of cash flows of the current consolidated fiscal
year is as follows.
i) Financial Position and Operating Results
The Japanese economy in the current consolidated fiscal year, against the backdrop of the government’s
economic and monetary policies, remained on a moderate overall recovery track. Meanwhile, a sense of
uncertainty regarding the economic outlook persisted due largely to the UK leaving the European Union(Brexit), the output of the U.S. Presidential Election and the deceleration of growth in most major emerging
economies.
Under such circumstances, our corporate group (the Company, its consolidated subsidiaries and theaffiliated companies accounted for under the equity method; hereinafter referred to as either “our Group” or
the “Group”, as the case may be) saw a year-on-year decline, as compared with the previous fiscal year, inthe sales in the electronic materials segment (for use primarily in multifunctional mobile terminals) and theindustrial application structural materials segment.
As a result, the business results of our Group for the current consolidated fiscal year showed net sales of
40,909 million yen (representing a 18.7% increase as compared with the previous consolidated fiscal year),- 11 -

an operating income of 3,627 million yen (representing a 102.6% increase as compared with the previous
consolidated fiscal year), an ordinary income of 4,044 million yen (representing a 50.3% increase ascompared with the previous consolidated fiscal year) and a profit attributable to owners of the parent of 3,452
million yen (representing a 69.5% increase as compared with the previous consolidated fiscal year).
Business results with respect to each segment are as follows.
In this regard, the order of statement of our Group’s business segments was revised effective from thecurrent consolidated fiscal year, and the following comparisons with the previous consolidated fiscal year
are made with figures for the previous consolidated fiscal year reclassified into the segmentation after suchchange.
1) Electronic materials
In the electronic materials segment, net sales were 20,306 million yen, representing a 9.4% decrease ascompared with the previous consolidated fiscal year and consisting mainly of the sales of our mainstay
product, i.e. materials for flexible printed circuit boards (the amount of orders received decreased by 16.7%
to 12,928 million yen, and the production output decreased by 14.5%, as compared with the previous
consolidated fiscal year on a non-consolidated basis of the Submitting Company), while the segment
income or loss recorded an income of 1,850 million yen (representing a 22.7% decrease as compared withthe previous consolidated fiscal year).
2) Industrial application structural materials
In the industrial application structural materials segment, net sales (consisting mainly of the sales offilament winding molded products, honeycomb panels and prepregs for aircraft, pultrusion molded products
and FRP ski sheets) were 7,319 million yen, representing a 9.6% decrease as compared with the previous
consolidated fiscal year, while the segment income or loss recorded an income of 568 million yen(representing a 52.4% decrease as compared with the previous consolidated fiscal year).
3) Electrical insulating materials
In the electrical insulating materials segment, net sales (consisting mainly of the sales of glass cloth,glass tapes and prepregs for electrical insulation) were 3,117 million yen, representing a 2.2% decrease ascompared with the previous consolidated fiscal year, while the segment income or loss recorded an incomeof 570 million yen (representing a 2.1% increase as compared with the previous consolidated fiscal year).
4) Display materials
In the display materials segment, net sales (consisting mainly of the sales of 3D imaging-relatedmaterials) were 2,802 million yen, representing a 12.2% increase as compared with the previous
consolidated fiscal year, while the segment income or loss recorded a loss of 172 million yen (representing
a segment loss of 174 million yen for the previous consolidated fiscal year).
5) Related goods sales
In the related goods sales segment, net sales were 749 million yen, representing a 13.2% decrease ascompared with the previous consolidated fiscal year, while the segment income or loss recorded an incomeof 46 million yen (representing a 16.6% decrease as compared with the previous consolidated fiscal year).
6) Other (other businesses)
In other businesses, net sales were 156 million yen, representing a 2.7% decrease as compared with theprevious consolidated fiscal year, while the segment income or loss recorded an income of 150 million yen(representing a 5.3% increase as compared with the previous consolidated fiscal year).
The amounts of net sales, orders received, etc. stated in this section do not include consumption tax, etc.
ii) Cash Flows
Cash and cash equivalents (hereinafter referred to as the “Funds”) as of the end of the current consolidated
fiscal year were 8,829 million yen, representing a year-on-year increase of 1,803 million yen, or 25.7%.
The following is the status of each cash flow category during the current consolidated fiscal year and the
key factors of such status.
(Cash flows from operating activities)
Funds earned from operating activities were 2,181 million yen, representing a 36.2% decrease ascompared with the previous consolidated fiscal year. This was due largely to an increase in the Funds
comprising 4,745 million yen in income before income taxes and 1,712 million yen in depreciation, etc. aswell as a decrease in the Funds comprising 2,663 million yen in increase in notes and accounts receivabletrade, etc.

- 12 -(Cash flows from investing activities)
Funds disbursed for investing activities were 471 million yen, representing a 71.8% decrease ascompared with the previous consolidated fiscal year. This was due largely to an increase in the Funds
comprising the proceeds of 2,987 million yen from sales of investment securities, etc. as well as a decreasein the Funds comprising the expenditure of 1,700 million yen for purchases of property, plant andequipment and the expenditure of 1,418 million yen for purchases of investment securities , etc.
(Cash flows from financing activities)
Funds disbursed from financing activities were 59 million yen (versus an inflow of 419 million yen forthe previous consolidated fiscal year). This was due largely to an increase in the Funds comprising theproceeds of 911 million yen from net increase in short-term loans payable and 690 million yen from longterm loans payable, etc. as well as a decrease in the Funds comprising the expenditure of 913 million yen
for repayments of long-term loans payable and 712 million yen in cash dividends paid, etc.
iii) Status of Production, Receipt of Orders and Sales
1) Production Results and Status of Receipt of Orders
Our Group (the Company and its consolidated subsidiaries; the same shall apply hereinafter)
manufactures and sells such an extensive and varied range of products that even the products of the same
type are not necessarily uniform in capacity, construction, form or other respects. Also, quite a few of our
products are not manufactured on a made-to-order basis. Such being the case, we do not indicate any
segmentalized production volume and order volume in monetary amounts or quantities.
For this reason, we indicate the status of production, receipt of orders and sales in a correlation with thebusiness results with respect to each of the segments shown in “(1) Overview of Operating Results, etc. i) Financial Position and Operating Results”
2) Sales Results
Net sales for the current consolidated fiscal year with respect to each reportable segment are as follows.
In this regard, the order of statement of our Group’s business segments was revised effective from thecurrent consolidated fiscal year, and the following comparisons with the previous consolidated fiscal year
are made with figures for the previous consolidated fiscal year reclassified into the segmentation after suchchange.
Segment nameCurrent consolidated fiscal year
(From April 1, 2017 to March 31,
2018)(Millions of yen)Comparison with the previous
consolidated fiscal year (%)

Electronic materials

26,75831.8

Industrial application structural
materials

7,220

△1.4

Electrical insulating materials

3,228

3.6

Display materials

2,988

6.6

40,195

19.8

Other

713

△21.2

Total

40,90918.7

Total of reportable segments

Note: 1. Inter-segment transactions are eliminated by setoff.
2. Sales results with respect to each major customer and their respective ratios to the total sales amount for the last two
consolidated fiscal years are as follows.

Customer name

Previous consolidated fiscal year
(From April 1, 2016 to March 31, 2017)

Current consolidated fiscal year
(From April 1, 2017 to March 31, 2018)

Amount(Millions of yen)Amount(Millions of yen)

Ratio (%)

Sumitomo Shoji Chemicals

4,695
13.6
Co., Ltd.
3. The amounts stated above do not include consumption tax, etc.

- 13 -

6,185

Ratio (%)
15.1

(2) Details of analysis and study regarding the conditions of operating results etc. from the viewpointof corporate managers.
Details of perception, analysis and study regarding the conditions of operating results etc. of our Group fromthe viewpoint of corporate managers are as followings.
The matters regarding future in the following sentences were judged as of end of the current consolidated
fiscal year.
i) Critical Accounting Policies and Estimates
The consolidated financial statements of our Group are made based upon the corporate accounting
standards which are generally accepted in Japan. In preparing this consolidated financial statements, themanagement are required to estimate for accounting. With respect to such estimates, the management
comprehensively considers and reasonably judges past results, present circumstances, etc.; nevertheless,actual results may become different from the said estimates due to uncertainty peculiar to estimating.
The critical accounting policies adopted for the preparation of financial statements are described in"Important Matters Underlying Preparation of Consolidated Financial Statements" of "V. Status of
Accounting: 1. Consolidated Financial Statements, etc.", among which the following critical accounting
policies are considered to have a profound effect on the important judging and estimating in course of
preparing consolidated financial statements.
1) Allowance for doubtful accounts
In our Group, as a reserve for potential loan losses, an estimated uncollectible amount is recorded basedon the historical loan-loss ratio in the case of general accounts receivable, and in light of the collectability
in each instance in the case of some specific accounts receivable, e.g. doubtful receivables. When a financial
condition of customers gets worse and their solvency declines, an additional allowance may need recording.
2) Assessment of recoverability of deferred tax assets
When applying tax effect accounting, our Group reasonably estimates recoverability of deferred tax
assets and records such assets after deduction of valuation allowance. Recoverability of deferred tax assets
depends on the possibility of future untaxable depreciation of taxable items and on the future taxable income
estimated on the basis of future profitability; therefore, if such estimated amount vary, a profit may fluctuate
due to reversal or additional recording of the deferred tax assets.
3) Impairment of securities and investment securities
Our Group holds securities and investment securities; we use, as valuation methods, the market method
on securities with market value and use the cost method on securities without market value. We conduct
treatments for impairment on our owned securities according to reasonable standards, because we bear therisk of price fluctuation in the stock market (if such securities have market value) and investees' businessresults etc. may worsen (if such securities have no market value).
Our Group has conducted necessary treatments for impairment on securities and investment securities.
Additionally, if any loss which is not reflected on the current book value occurs or any book value becomes
uncollectible due to deteriorating market conditions, worsening business results of investees, etc. in the
future, further treatments for impairment may be required according to the said standards.
4) Impairment of non-current assets
Our Group applies Accounting Standard for Impairment of Fixed Assets, and is grouping non-current
assets on the basis of business unit which generates cash flow independently. When the recoverable amountof an asset group falls below book amount, such different amount is perceived as an impairment loss. Whenthe recoverable amount of an asset group further goes down in the future, further recording of an impairment
loss may be required.
ii) Details of Perception, Analysis and Study regarding the Conditions of Operating Results etc. of the Current
Consolidated Fiscal Year
1) Details of perception, analysis and study regarding the conditions of operating results etc.
In the current consolidated fiscal year, we worked, anticipating the changing market, for the continuous
growth of existing business by developing new products and differentiation-products. At the same time, we
continued an aggressive effort for the market expansion and the growth of our Group by developing new
products in each segment. Electronic materials, as the core products of our Group, increased in orders(including our subsidiary, "ThinFlex Corporation") for multifunctional mobile devices and supported thewhole Group. Regarding industrial application structural materials and electrical insulating materials, welook forward to further growth and we will continue to develop new products and to increase profitability.

- 14 -

With respect to display materials, though we have segment losses continuously, we aim to return to theblack by obtaining stable orders.
Analysis of operating results etc. of our Group in the current fiscal year is as followings.

Analysis of Results of Operations(Net sales)
Net sales for the current consolidated fiscal year were 40,909 million yen (34,451million yen for theprevious consolidated fiscal year), representing a year-on-year increase of 6,457 million yen, or 18.7%.
Cost of sales was 32,730 million yen (28,557 million yen for the previous consolidated fiscal year),representing a year-on-year increase of 4,173 million yen and signifying a 2.9 percentage point
amelioration in the ratio of cost of sales to 80.0% our thoroughgoing efforts to cut costs.
As a result, gross profit was 8,178 million yen (5,894 million yen for the previous consolidated fiscal
year), representing a year-on-year increase of 2,284 million yen and signifying the ratio of gross profit to
20.0%.
(Operating income or loss)
Total selling, general and administrative expenses for the current consolidated fiscal year were 4,551
million yen (4,104 million yen for the previous consolidated fiscal year), representing a year-on-yearincrease of 447 million yen and signifying a 0.8 percentage point decrease in the ratio of selling, generaland administrative expenses to 11.1% in our thoroughgoing efforts to cut costs.
As a result, operating income was 3,627 million yen (1,790 million yen for the previous consolidated
fiscal year), representing a year-on-year increase of 1,836 million yen.
(Ordinary income or loss)
Total non-operating income for the current consolidated fiscal year was 1,203 million yen (1,253 million
yen for the previous consolidated fiscal year), representing a year-on-year decrease of 50 million yen.
This was due largely to a decrease of 24 million yen in interest income. Total non-operating expenses
were 786 million yen (353 million yen for the previous consolidated fiscal year), representing a year-onyear decrease of 432 million yen. This was due largely to the posting in the current consolidated fiscal
year of 311 million yen in Provision of allowance for doubtful accounts.
As a result, ordinary income was 4,044 million yen (2,690 million yen for the previous consolidated
fiscal year), representing a year-on-year increase of 1,353 million yen.
(Income or loss before income taxes)
Total extraordinary income for the current consolidated fiscal year was 851 million yen (152million
yen for the previous consolidated fiscal year), representing a year-on-year increase of 699 million yen.
This was due largely to an increase of 729 million yen in gain on sales of investment securities. Total
extraordinary losses were 150 million yen (36 million yen for the previous consolidated fiscal year),representing a year-on-year increase of 114 million yen. This was due largely to an increase of 62 million
yen in loss on valuation of investment securities.
As a result, income before income taxes was 4,745 million yen (2,806 million yen for the previous
consolidated fiscal year), representing a year-on-year increase of 1,938 million yen.
(Profit or loss attributable to owners of the parent)
Total income taxes for the current consolidated fiscal year were 995 million yen (591million yen forthe previous consolidated fiscal year), representing a year-on-year increase of 403 million yen. As thebottom line, profit attributable to owners of the parent for the current consolidated fiscal year was 3,452
million yen (2,037million yen for the previous consolidated fiscal year), representing a year-on-yearincrease of 1,415 million yen and signifying a 2.5 percentage point decline in the ratio of profit attributableto owners of the parent to 8.4%.

Analysis of Financial Conditions(Assets)
Total assets as of the end of the current consolidated fiscal year were 72,644 million yen (63,808 million
yen as of the end of the previous consolidated fiscal year), representing a year-on-year increase of 8,835
million yen, or 13.8%.
Balance of total current assets as of the end of the current consolidated fiscal year was 36,367 million
yen (28,288 million yen as of the end of the previous consolidated fiscal year), representing a year-on-yearincrease of 8,079 million yen, or 28.6%. This was due largely to an increase of 3,328 million yen in notes- 15 -

and accounts receivable-trade, an increase of 1,455 million yen in cash and deposits an increase of 1,313
million yen in merchandise and finished goods.
Balance of total non-current assets as of the end of the current consolidated fiscal year was 36,276
million yen (35,520 million yen as of the end of the previous consolidated fiscal year), representing a yearon-year increase of 756 million yen, or 2.1%. This was due largely to an increase of 570 million yen in
investment securities.
(Liabilities)
Total liabilities as of the end of the current consolidated fiscal year were 20,151 million yen (15,257
million yen as of the end of the previous consolidated fiscal year), representing a year-on-year increase of
4,894 million yen, or 32.1%.
Balance of total current liabilities as of the end of the current consolidated fiscal year was 15,982 million
yen (11,679 million yen as of the end of the previous consolidated fiscal year), representing a year-on-yearincrease of 4,303 million yen, or 36.8%. This was due largely to an increase of 1,751 million yen in shortterm loans payable (including current portion of long-term loans payable), an increase of 1,626 million yen
in notes and accounts payable-trade and an increase of 567 million yen in income taxes payable.
Balance of total non-current liabilities as of the end of the current consolidated fiscal year was 4,169
million yen (3,577 million yen as of the end of the previous consolidated fiscal year), representing a yearon-year increase of 591 million yen, or 16.5%. This was due largely to an increase of 265 million yen in
net defined benefit liability and an increase of 164 million yen in long-term loans payable.
(Net assets)
Total net assets as of the end of the current consolidated fiscal year were 52,492 million yen (48,551
million yen as of the end of the previous consolidated fiscal year), representing a year-on-year increase of
3,941 million yen, or 8.1%. This was due largely to an increase of 2,752 million yen in retained earnings.

Analysis of Cash Flows
Status of each cash flow category during the current consolidated fiscal year and the factors behind suchstatus are stated in II. Status of Business - 3. Analyses of Consolidated Financial Position, Business Resultsand Cash Flows by the Corporate Managers - (1) Overview of Operating Results, etc. - ii) Cash Flows.
(Cash flow indicators)
Previous consolidated fiscal year
(As of March 31, 2017)

Current consolidated fiscal year
(As of March 31, 2018)

Equity ratio (%)

72.2

68.3

Equity ratio on a mark-to-market basis (%)

43.7

48.9

Ratio of interest-bearing liabilities to cash flows(Years)1.5

3.2

Interest coverage ratio (Times)

70.5

28.5

Note:

Equity ratio: Total shareholders’ equity / Total assets
Equity ratio on a mark-to-market basis: Total market capitalization / Total assets
Ratio of interest-bearing liabilities to cash flows: Interest-bearing liabilities / Operating cash flows
Interest coverage ratio: Operating cash flows / Interest paid
1. All indicators above are calculated on the basis of the consolidated financial results.
2. Total market capitalization is calculated by multiplying the number of shares issued and outstanding at the endof the period (excluding treasury stock) by the closing price per share at the end of the period.
3. Interest-bearing liabilities represent all those liabilities (stated in the consolidated balance sheets) on whichinterest is paid.
4. For operating cash flows, the amount of “Net cash provided by (used in) operating activities” stated in the
consolidated statements of cash flows is used. For the interest paid, the amount of “Interest expenses paid” statedin the consolidated statements of cash flows is used.

Factors that May Give Material Impact to Operating Results of Our Group
Factors that may give material impact to operating results of our Group are described in "II. Status ofBusiness 2. Business Risks, etc."
2) Financial resources for capital and liquidity of funds

Our Group makes it our basic policy to stably secure the liquidity of funds and the resources of capital- 16 -

required for business operations. Though we basically use our own capital for short-term working capital, wehold a contract for overdraft with main financing banks so as to procure temporary working capital efficiently
in time of insufficiency. Regarding the capital relating to capital formation such as business investments, webasically procure our own capital and long-term borrowings from financial institutions in view of financing
cost and risk diversification. Additionally, for the purpose of efficient fund management, reducing offinancial risk and saving of interest expenses, our Group started "Group Finance".
3) Objective Indicators etc. for Judgement on the Status of Achievement of Management Policy,
Management Strategies and Managerial goals
Our Group aims to enhance shareholder value of the companies by strengthening of profit structure andimproving of asset efficiency, and also makes "Operating Income Margin" and "Return on Assets (ROA)" ascritical indicators. In the current consolidated fiscal year, the Operating Income Margin is 8.9% (representing
a 3.7 point improvement as compared with the previous year) and the Return on Assets is 5.1% (representing
a 1.8% point improvement as compared with the previous year). We intend to continue further improvementof such indicators.
4) Details of Perception, Analysis and Study regarding Financial Position and Conditions of Operating
Results of each Segment
Details of Perception, Analysis and Study regarding the financial position and conditions of operating
results of each segment in the consolidated fiscal year are described in "(1) Overview of Operating Results,
etc.; i) Financial Position and Operating Results" and "(2) Details of analysis and study regarding theconditions of operating results etc. from the viewpoint of corporate managers; ii) Details of Perception,
Analysis and Study regarding the Conditions of Operating Results etc. of the Current Consolidated Fiscal
Year; 1) Details of perception, analysis and study regarding the conditions of operating results etc."

4. Agreements with Managerial Implications, etc.
No applicable matter.

5. Research and Development Activities
Major research and development activities of our Group are conducted by the Submitting Company as well as
ThinFlex Corporation, Satosen Co., Ltd. and ColorLink Japan, Ltd., consolidated subsidiaries of the Submitting
Company, and these companies are also disseminating technologies to other consolidated subsidiaries.
As a technology-oriented corporate group, we adopt a flexible organization as a basis for our research anddevelopment activities in order to match the increasingly diversified and sophisticated needs of the users.
Centering on our core business fields, i.e. the electronic materials field, the industrial structural materials field, theelectrical insulating material field and the display materials field, we vigorously pursue research and developmentof new technologies and new products, aiming at launching new products to the market, nurturing of next
generation products, forward-looking promotion of technologies and expansion of fundamental technologies.
Examples of electronic materials include glass cloth for printed circuit boards, prepregs for special printed
circuit boards and materials for FPCs (flexible printed circuit boards), etc. Examples of industrial structural
materials include materials for use in water treatment equipment, materials for use in superconductivity
applications, materials for aircraft interiors. Examples of electrical insulating materials include prepregs for use inelectrical insulating and various molded products, etc. Examples of display materials include 3D-filters, opticalmolded products, etc.
As of the end of the current consolidated fiscal year, we had 169 employees involved in research anddevelopment activities, and our total research and development expenses incurred in the current consolidated
fiscal year amounted to 1,971 million yen.
Research and development achievements and the amount of research and development expenses incurred withrespect to each field during the current consolidated fiscal year were as follows.
(1) Electronic Materials Field- Materials for flexible printed circuit boards
Increasing amount of communicated information has accelerated the trend of high-speed telecommunication in- 17 -

the field of mobile devices. It is anticipated that next-generation 5G telecommunication will be realized by 2020
and the trend of IoT will be accelerated furthermore. Electronic components used for such high-speed
telecommunication require more reduction of signal transmission loss. In order to deal with this challenge, theCompany has developed, by means of our original technology for resin composition, low-dielectric polyimide andadhesive which have less signal transmission loss. Now the evaluation of FPC circuit boards, adhesive sheets andcoverlays is being conducted by our customers.
- Heat dissipation materials
Electronic components installed in automobiles require heat cycle resistance properties which are adaptable tovery harsh condition of repeating exposure to frigid atmosphere and heat atmosphere. Heat dissipation sheets also
require such heat cycle resistance properties. The Company has developed, by means of our original technology
for resin composition, a heat dissipation resin sheet which is improved substantially in respect of such resistance.
Now the evaluation is being conducted by our customers.
Research and development expenses incurred with respect to electronic materials amounted to 1,138 million yen.
(2) Industrial Application Structural Materials Field and Electrical Insulating Materials Field- Interior materials for railway cars
The Company deliveries flame-retardant honeycomb panels and carbon prepregs which are used as interiormaterials for cabins of airframes. We are now developing such flame-retardant technology for use as interiormaterials of railway cars. The interior materials for ceilings which we developed in the fiscal year 2017 satisfied
the standard of "Non-flammable" of JRMA (Japan Railway Rolling Stock & Machinery Association). These
interior materials for ceilings are to be used in some railway cars for sightseeing. Requirements of flame-retardant
properties for the interior materials for railway vary between wall materials, ceiling materials and floor materials.
Motivated by the said adoption of the ceiling materials, we intend to develop such new materials as satisfy eachrequirement for those above.
- FRP pressure vessels for forward osmosis membrane
In addition to Reverse Osmosis (RO), Forward Osmosis (FO) technology has attracted attention as the water
treatment technology which desalinates seawater or converts river water into drinkable water. Forward Osmosis iswater treatment technology which utilizes a natural phenomenon that saltwater will flow from dense side to thinside and water level of the thin side will rise (forward osmosis). This technology requires neither high-pressure
pumps nor high-pressure piping because of its lower pressure to put (1/3~1/10) compared with Reverse Osmosis
technology and features a reduction of running costs for desalination. The Company has developed a pressure
vessel which is suitable to such lower pressure of Forward Osmosis. Forward Osmosis is expected to be applied toelectric power generation other than water treatment and furthermore various kinds of demand are anticipated in
the future. We will continue to develop more advanced pressure vessels for Forward Osmosis in flexible response
to such demand.
Research and development expenses incurred with respect to composite materials amounted to 400 million yen.
(3) Display Materials Field- 3D display materials
The 3D display systems incorporating the Company’s “Xpol®” patterned retardation layer have been
increasingly adopted in the healthcare sector, among others, due largely to their high quality reliability andexcellent stereoscopic imaging properties. These systems have been evaluated for use of various purposes, so weare advancing the development in response to such demand. In the fiscal year 2017, we developed a new Xpol in
response to the demand for high-definition trend and launched the delivery thereof. Now we are advancing further
development and capital investment in order to respond to the demand for large screens, and we will continue
efforts to clinch adoptions thereof in the fiscal year 2018.
- Screen materials
The Company’s original fine contrast screens are optimally designed for use in the long throw projectors and ourprismatic screens are optimally designed for use in the ultra-short throw projectors, both of which are highly
regarded in respect of their excellent contrast and viewing angle characteristics.
In the fiscal year 2017, we developed an ultra-wide fine contrast screen for 150" and launched the delivery
thereof. It is suitable for home theaters, education and business, and therefore is expected to be further adopted in
the future. With respect to the prismatic screens, we are advancing the development of large and wind-up- 18 -

products, and we will accelerate promotion for future adoptions thereof.
- UV-curing optically clear adhesives (OCAs)
The Optical Clear Adhesive sheets are used for bonding various components in products such as touchscreen
devices as well as liquid crystal monitors. With the development of commercial large monitors and curved-surface
monitors, the use of clear plastic materials instead of glass materials as surface materials is being studied in recent
years. Traditional OCAs have a weakness of low adhesive reliability for clear plastic materials, and so theCompany developed an OCA which has high reliability by means of our original technology for resin
composition. The evaluation thereof is currently conducted by our customers.
Research and development expenses incurred with respect to display materials amounted to 394 million yen.

- 19 -

III. Status of Facilities
1. Outline of Capital Investment
Our Group concentrates its capital investment in the expansive and growing fields in order to keep pace withthe rapid technological innovation and the tough sales competition and made capital expenditures totalling 1,194
million yen in the current consolidated fiscal year.
The principal component of our capital investment in the current consolidated fiscal year was 882 million yen
for production equipment related to electronic materials centering on materials for flexible printed circuit boards.
In this regard, no retirement or sale, etc. of facilities or equipment that may significantly affect our Group’s
production capacity was conducted in the current consolidated fiscal year.

2. Status of Major Facilities(1) Submitting Company
As of March 31, 2018
Book value
Name ofbusiness place(Location)

Segment nameElectronic materials,
Minami-honcho Industrial application
Factory
structural materials,(Joetsu-shi,
Electrical insulating
Niigata)materials,

Nature of facilities

Electronic materials
manufacturing facilities,
Industrial application
structural materials
manufacturing facilities,
Electrical insulating
materials manufacturing
facilities,

Buildings Machinery,
Land
Lease
Number ofandequipment
Other
Total
(Thousands assets
structures and vehicles(Thousands (Thousands employeesof yen) (Thousands(Thousands (Thousandsof yen)of yen)(Area m2)of yen)of yen)of yen)455,319

103,946

Nakadahara
Factory(Joetsu-shi,
Niigata)Electronic materials
manufacturing facilities,
Electronic materials, Industrial application
Industrial application structural materials
structural materials,
manufacturing facilities,
Electrical insulating Electrical insulating
materials,
materials manufacturing
Display materials
facilities,
Display materials
manufacturing facilities

2,432,266

1,228,729

NakadaharaNishi Factory(Joetsu-shi,
Niigata)

Industrial application
Industrial application
structural materials,
structural materials,
Display materials
Display materials
manufacturing facilities

168,866

235,419

Head Office(Joetsu-shi,
Niigata)

Head office(Common)

Other facilities

659,853

6,652

Tokyo Branch
Office(Taito-ku,
Tokyo)

Electronic materials,
Industrial application
structural materials,
Electrical insulating
materials,
Other facilities
Display materials,
Other,
Head office(Common)126,499

1,749- 20 -

55,272（18,263）

290,647（114,101）

371,813（34,551）

103,742（29,230）

173,086
（478）

－

7,372

621,910

57
(11)

－

120,717

4,072,360

420
(76)

－

5,464

781,56445(4)－82,502852,751

33
(7)

860

3,550

305,74537(1)

(2) Domestic Subsidiaries
As of March 31, 2018
Book value
Company
nameName ofbusiness
place(Location)

Segment nameNature of facilities

SatosenCo., Ltd.

--(Osaka-shi,
Osaka)

Electronicmaterials,

Electronicmaterials
manufacturing--(Joetsu-shi,
Niigata)Electronicmaterials,
Electricalinsulating
materials

Arisawa
Sogyo Co.,
Ltd.

--(Joetsu-shi,
Niigata)

Industrial
application
structural
materials,
Electricalinsulating
materials,
Other

Arisawa
Jushi
Kogyo
Co., Ltd.

--(Kawaguchi-shi,
Saitama)Electricalinsulating
materials

ColorLink
Japan, Ltd.

--(Joetsu-shi,
Niigata)

Arisawa
Fiber
Glass Co.,Ltd.

Displaymaterials

Electronicmaterials
manufacturing
facilities,
Electricalinsulating
materials
manufacturing
facilities
Industrial
application
structural
materials
manufacturing
facilities,
Electricalinsulating
materials
manufacturing
facilities
Electricalinsulating
materials
manufacturing
facilities
Display materials
manufacturing
facilities

Machinery,
Buildings
equipment
Land
Number ofandLease assets
Other
Total
and
(Thousands
structures(Thousands (Thousands (Thousands employees
vehiclesof yen)(Thousandsof yen)of yen)of yen)(Thousands (Area m2)of yen)of yen)215,096

323,427

389,000(4,373)－27,342

954,866101(87)

278,339

162,267

117,092(34,671)－419

558,11784(17)276,244

55,787254,122(42,730)－

7,709

593,863119(26)

53,647

10,24431,561(2,407)－

8,151

103,60521(－)

103,380

87,07545,476(4,200)－22,262

258,19474(18)(3) Overseas Subsidiaries
As of March 31, 2018
Book value
Company
nameName ofbusiness
place(Location)

Segment nameNature of facilities

ThinFlex
Corporation--(KaohsiungCounty,Taiwan)Electronicmaterials

Electronicmaterials
manufacturing
facilities

650,643919,820－

135,161

56,289

1,761,915

206(－)

TopFlex
Corporation--(Kunshan
City,
P.R. China)

Electronicmaterials

Electronicmaterials
manufacturing
facilities

279,975

125,671

47,580（44,086）－

18,201

471,429

129(－)

ProtecArisawa
Europe,S.A.

--(Munguia,
Spain)

Industrial
application
structural
materials

73,146

157,702

4,384（8,000）－9,552

244,786

60(46)

ProtecArisawa
America,
Inc.

--(Vista, CA,
U.S.A.)

Industrial
application
structural
materials

3,595

77,578－－20,949102,123

40(2)

Industrial
application
structural
materials
manufacturing
facilities
Industrial
application
structural
materials
manufacturing
facilities

Buildings Machinery,Land
Number ofandequipment
Lease assets
Other
Total
(Thousands
structures and vehicles(Thousands (Thousands (Thousands employeesof yen)(Thousands (Thousandsof yen)of yen)of yen)(Area m2)of yen)of yen)- 21 -

Note:

Among the columns under “Book value”, “Other” indicates the total of tools, furniture and fixtures and construction in progress.
The amounts stated above do not include consumption tax, etc.
Major facilities leased out by the Submitting Company to its domestic subsidiaries are included in the facilities of the pertinentsubsidiaries respectively.
Facilities and employees in Kansai office are included in Satosen Co., Ltd. and the number of employees of Protec International
Holdings Co., Ltd. and Protec Arisawa Japan Co., Ltd. combined is shown as part of the number of employees of the Tokyo Branch
Office.
The value of the land of TopFlex Corporation represents the balance of the relevant land-use rights and is recorded as part of“Other” in “Investments and other assets”.
The parenthesized figures in the column “Number of employees” indicate the number of temporary employees not included in thepertinent total.
Facilities leased out to non-consolidated subsidiaries are included in the facilities of Tokyo Branch Office of the Submitting
Company. Major items of such leased facilities are shown below.
Machinery, equipment
Land
Buildings and structuresand vehicles
Name of associated company
AmountAmountAmount2
Area (m )(Thousands of yen)(Thousands of yen)(Thousands of yen)

1.
2.
3.

4.
5.
6.

NB Optic, Co., Ltd.

108－

39,203－

3. Plans for Installation and Retirement, etc. of Facilities(1) Installation, etc. of Material Facilities
Name ofbusiness placeorcompany

Location

Segment
nameNature of facilities

Investment amount

Source offunds

Total amountAmountto behitherto
invested
disbursed(Thousands (Thousands ofof yen)yen)
Arisawa Mfg.
Co., Ltd.

Joetsu-shi,
NiigataElectronicmaterials

Electronicmaterials
manufacturing
facilities

469,500－

Own funds

Scheduled start andcompletion months

Start

Completion

March
2018

March
2019

Capacity
increase
uponcompletion－

Electronicmaterials
Own funds
October
December
456,250
395,462－
manufacturing
and loan20172018
facilities
Note: 1. The amounts stated above do not include consumption tax, etc.
2. No amount or value is shown in the column “Capacity increase upon completion” as it is difficult to reasonably determine any pertinent
amount or value.

ThinFlex
Corporation

Kaohsiung
County,TaiwanElectronicmaterials(2) Retirement, etc. of Material Facilities
There is no plan for retirement, etc. of material facilities.

- 22 -

IV. Status of the Submitting Company
1. Status of Shares, etc.
(1) Total Number of Shares, etc.
1) Total number of shares
Class

Total number of shares authorized to be issued

Common stock

130,000,000

Total

130,000,000

2) Shares issued and outstandingClass

Number of shares issued andoutstanding as of the end of
the business year
(As of March 31, 2018)

Number of shares issued andoutstanding as of the filingdate of the Financial Report(As of June 29, 2018)

Name of financial instruments
exchange where the shares arelisted or authorized financial
instruments firms association
where the shares are registered

Remarks

Number ofsharesconstituting
one full unit:
100---

Common stock

36,024,124

36,078,924

Tokyo Stock Exchange(First Section)

Total

36,024,124

36,078,924

---

Note:

The number of shares issued through the exercise of stock acquisition rights in the period from June 1, 2018 to the filingdate of this Financial Report is not included in the column “Number of shares issued and outstanding as of the filing dateof the Financial Report”.

- 23 -

(2) Status of Stock Acquisition Rights, etc.
1) Details of Stock Option Scheme
Stock acquisition rights issued under the former Commercial Code were as follows.
Date of resolution

June 29, 2005
6 directors of the Company whose retirement bonuses werediscontinued with approval of the shareholders at the 56th
Ordinary General Meeting of Shareholders

Category and number of persons to whom stock acquisition rights
shall be granted
Number of stock acquisition rights (Units)※

271

Class, contents and number of shares subject to stock acquisitionrights ※Common stock

27,700

Amount to be paid per share at the time of exercising each stockacquisition right (Yen) ※Exercise period for stock acquisition rights

1
August 1, 2005 throughJuly 31, 2025※

Issuance price and amount credited to equity capital in the eventof share issuance through the exercise of stock acquisition rights(Yen) ※

Conditions for the exercise of stock acquisition rights※

Any transfer of stock acquisition rights shall be subject to theapproval of the Board of Directors.

Matters concerning the grant of stock acquisition rights inconnection with acts of reorganization ※※1

Amount credited to equity capital 1(1) Eligible person may exercise the stock acquisition rights
only on the occasion of his or her retirement from the post of
director of the Company; provided, however, that the eligible
person shall exercise the stock acquisition rights in the period
between the date immediately following the date of his or her
retirement (hereinafter referred to as the “Date of Commencing
Exercise of Right”) and the date elapsing ten (10) days fromthe Date of Commencing Exercise of Right (both dates
inclusive).
(2) In the event of the eligible person’s death, among his or her
heirs, only the spouse, children and lineal ascendants (first
degree) of the eligible person may exercise the stockacquisition rights; provided, however, that such heirs shall
exercise the stock acquisition rights in the period between thedate immediately following the date of retirement of theeligible person by death and the date elapsing three (3) months
from such date (both dates inclusive).

※

Matters concerning the transfer of stock acquisition rights

Issuance price---

The contents are described as of the end of the current business year (March 31, 2018). The description as of the end of themonth previous to the filing is omitted, because there is no change in what should be described from the end of the current
business year to the end of the month previous to the filing (May 31, 2018).

Note:

The stock acquisition rights were granted in lieu of payment of money to the directors of the Company whose retirement
bonuses were discontinued with approval of the shareholders at the 56th Ordinary General Meeting of Shareholders (June29, 2004).

- 24 -

Stock acquisition rights issued under the Companies Act were as follows.
Date of resolution

June 27, 2013

6 directors of the Company,
6 directors of the Company,
163 employees of the Company, 163 employees of the Company,
and 9 directors and employees of and 10 directors and employees
subsidiaries of the Companyof subsidiaries of the Company

Category and number of persons to whom stockacquisition rights shall be granted
Number of stock acquisition rights (Units)※

Class, contents and number of shares subject to stockacquisition rights

537〔444〕

1,625〔1,326〕

Common stock 53,700〔44,400〕

Common stock 162,500〔132,600〕

Amount to be paid per share at the time of exercising eachstock acquisition right (Yen) ※Exercise period for stock acquisition rights

569

741 (See Note 1)(See Note 1)

July 1, 2015 throughJune 30, 2018※

Issuance price and amount credited to equity capital in theevent of share issuance through the exercise of stockacquisition rights (Yen) ※Issuance price※2(See Note 2)

Conditions for the exercise of stock acquisition rights

June 26, 2014

July 1, 2016 throughJune 30, 2019
728 Issuance price923

Amount credited to equity capital Amount credited to equity capital

364

461.5

Matters concerning the transfer of stock acquisition rights

Any transfer of stock acquisition rights shall be subject to theapproval of the Board of Directors.

Matters concerning the grant of stock acquisition rights inconnection with acts of reorganization(See Note 3)

Date of resolution

June 26, 2015

5 directors of the Company,
5 directors of the Company,
176 employees of the Company, 187 employees of the Company,
and 21 directors and employees and 14 directors and employeesof subsidiaries of the Company of subsidiaries of the Company

Category and number of persons to whom stockacquisition rights shall be granted
Number of stock acquisition rights (Units)※

Class, contents and number of shares subject to stockacquisition rights

2,575〔2,416〕

3,049〔3,049〕

Common stock 257,500〔241,600〕

Common stock 304,900〔304,900〕

Amount to be paid per share at the time of exercising eachstock acquisition right (Yen) ※Exercise period for stock acquisition rights

867

536 (See Note 1)(See Note 1)

July 1, 2017 throughJune 30, 2020※

Issuance price and amount credited to equity capital in theevent of share issuance through the exercise of stockacquisition rights (Yen) ※Issuance price※2(See Note 2)

Conditions for the exercise of stock acquisition rights

June 24, 2016

Matters concerning the transfer of stock acquisition rights
Matters concerning the grant of stock acquisition rights inconnection with acts of reorganization

July 1, 2018 throughJune 30, 2021

1,035 Issuance price634

Amount credited to equity capital Amount credited to equity capital

518

317

Any transfer of stock acquisition rights shall be subject to theapproval of the Board of Directors.

(See Note 3)- 25 -

Date of resolution

June 28, 2017

5 directors of the Company,
5 directors of the Company,
194 employees of the Company, 211 employees of the Company,
and 10 directors and employees and 11 directors and employeesof subsidiaries of the Company of subsidiaries of the Company

Category and number of persons to whom stockacquisition rights shall be granted
Number of stock acquisition rights (Units)※

Class, contents and number of shares subject to stockacquisition rights

3,102〔3,102〕

3,323〔3,323〕

Common stock 310,200〔310,200〕

Common stock 332,300〔332,300〕

Amount to be paid per share at the time of exercising eachstock acquisition right (Yen) ※Exercise period for stock acquisition rights

1,004

Undecided (See Note 1 and 4)(See Note 1)

July 1, 2019 throughJune 30, 2022※

Issuance price and amount credited to equity capital in theevent of share issuance through the exercise of stockacquisition rights (Yen) ※Issuance price※2(See Note 2)

Conditions for the exercise of stock acquisition rights

June 28, 2018

July 1, 2020 throughJune 30, 2023

1,035
Undecided

Amount credited to equity capital

518

Matters concerning the transfer of stock acquisition rights

Any transfer of stock acquisition rights shall be subject to theapproval of the Board of Directors.

Matters concerning the grant of stock acquisition rights inconnection with acts of reorganization(See Note 3)※ The contents are described as of the end of the current business year (March 31, 2018). With respect to the items
which changed during the period from the end of the current business year to the end of the month previous to thefiling (May 31, 2018), the contents thereof are described in [ ] as of the end of the month previous to the filing. No
other contents changed from the end of the current business year.
Note 1. If the Company conducts a stock split or a reverse stock split after the issuance of stock acquisition rights, the paid-in
amount shall be adjusted in accordance with the following calculation formula, and any fraction less than 1 yen arisingfrom such adjustment shall be rounded up to the nearest integer value.
Paid-in amount after adjustment= Paid-in amount before adjustment ×

1
Ratio of stock split and reverse stock split

If the Company issues new shares (except in the case of the issuance of new shares through the exercise of stock options)or disposes of shares of treasury stock at a price less than the current market price of the Company’s common stock, thepaid-in amount shall be adjusted in accordance with the following calculation formula, and any fraction less than 1 yenarising from such adjustment shall be rounded up to the nearest integer value.
Number of shares issued &Paid-in amount after adjustment = Paid-in amount before adjustment ×

outstanding+

Number of new shares being issued × Paid-in
amount per share
Current market price per share

Number of shares issued & outstanding + Number of new shares being issued

If the Company disposes of shares of treasury stock, the “Number of new shares being issued” shall instead be read as
the “Number of shares of treasury stock being disposed of”.

2. Being a director, an advisor or an employee of the Company or a director, an advisor or an employee of a subsidiary of
the Company at the time of exercising the rights.
3. In the event that a merger agreement in which the Company becomes a defunct company has been approved, or that a
proposal for approval of a stock swap agreement (or for a transfer of shares) in which the Company becomes a wholly
owned subsidiary has been approved at a general meeting of shareholders, except where the surviving company or theCompany’s wholly owning parent company succeeds to the obligation to grant stock acquisition rights, the Company
shall be able to acquire the stock acquisition rights without consideration.
4. Amount to be paid at the time of exercising each unit of stock acquisition right shall be the amount obtained bymultiplying the paid-in amount per share determined on the date of allotment by the number of shares subject to one
unit of stock acquisition right. The said paid-in amount per share shall be the amount obtained by multiplying thesimple mean value of the closing price of shares of common stock of the Company in regular trading at the Tokyo- 26 -

Stock Exchange on the date of allotment and the closing prices for the nearest six (6) days where a closing price exists
preceding the date of allotment (or the nearest seven (7) days where a closing price exists preceding the date ofallotment, if there is no closing price on the date of allotment) by 1.05. Any fraction less than 1 yen arising from thiscalculation shall be rounded up to the nearest integer value. However, if the resulting amount is less than the closing
price on the date of allotment (or the closing price on the nearest preceding day, if there is no closing price on the dateof allotment), the closing price on the date of allotment (or the closing price on the nearest preceding day, if there is no
closing price on the date of allotment) shall be used instead.

2) Details of Rights Plan
No applicable matter.
3) Status of Other stock acquisition right
No applicable matter.

(3) Status of Exercise of Moving Strike Convertible Bonds, etc.
No applicable matter.

(4) Changes in the Number of Shares Issued and Outstanding, Capital Stock, etc.
PeriodCapital stock(Thousands of yen)

Number of shares issued andoutstanding
ChangeBalance

ChangeBalance

Legal capital surplus(Thousands of yen)
ChangeBalance

From April 1, 2013
to March 31, 2014
(See Note)

133,200

35,131,024

36,363

7,153,623

36,3636,265,645

From April 1, 2014
to March 31, 2015
(See Note)

354,800

35,485,824

108,867

7,262,490

108,867

6,374,513

From April 1, 2015
to March 31, 2016
(See Note)

125,300

35,611,124

31,857

7,294,347

31,853

6,406,366

From April 1, 2016
to March 31, 2017
(See Note)

68,50035,679,624

22,672

7,317,019

22,672

6,429,038

From April 1, 2017
to March 31, 2018
(See Note)

344,500

36,024,124

141,222

7,458,242

141,170

6,570,209

Note:

The increases are due to the exercise of stock acquisition rights.

- 27 -

(5) Status of Shareholder Categories
Status of Shares (Number of shares constituting one full unit: 100)
Category

Number ofshareholders
Number ofshares held
(Unitsexcept asotherwise
noted)
Ratio of thenumber ofshares held
(%)
Note:
1.
2.

Governments
Financialand local
institutions
governments

Financial
Foreign corporations, etc.
instruments
Otherbusiness corporations Other than
Individuals
operators
individuals

Individuals
and others

As of March 31, 2018
Status ofsharesconstituting
less thanTotal
one full
unit

－

31

41

100

85

11

10,578

10,846－－

143,405

7,456

30,88253,041

116

124,515

359,415

82,624

－

39.90

2.07

8.60

14.76

0.03

34.64

100.00－Out of 7,084 shares of treasury stock, 70 units are included in the column “Individuals and others”, and 84
shares are included in the column “Status of shares constituting less than one full unit”.
In the columns “Other corporations” and “Status of shares constituting less than one full unit”, shares held in
the name of Japan Securities Depository Center, Inc. are included by 5 units and 19 shares, respectively.

- 28 -

(6) Status of Major Shareholders

Full name or
corporate name

Address

Number ofshares held

As of March 31, 2018
Ratio of the numberof shares held to thenumber of sharesissued andoutstanding(excluding treasury
stock) (%)

Japan Trustee Services Bank, Ltd.
(Trust account)

8-11, Harumi 1-chome,
Chuo-ku, Tokyo

3,431,500

9.52

The Master Trust Bank of Japan,
Ltd. (Trust account)11-3, Hamamatsu-cho 2-chome,
Minato-ku, Tokyo

3,093,500

8.58

Mitsubishi Gas Chemical Company, 5-2, Marunouchi 2-chome,
Chiyoda-ku, Tokyo
Inc. (注１)

1,472,166

4.08

BNP PARIBAS SECURITIESSERVICESLUXEMBOURG/JASDEC/FIM/LU
33 RUE DE GASPERICH, L-5826 HOWALDXEMBOURG FUNDS/UCITSHESPERANGE, LUXEMBOURGASSETS(11-1, Nihonbashi 3-chome, Chuo-ku, Tokyo)（Standing Proxy: The Hongkong
and Shanghai Banking Corporation
Ltd., Tokyo Branch）

1,390,000

3.85

The Hachijuni Bank, Ltd.
(Standing Proxy: The Master Trust
Bank of Japan, Ltd.)

178-8, Nakagosho Okada,
Nagano-shi, Nagano(11-3, Hamamatsu-cho 2-chome,
Minato-ku, Tokyo)

1,000,930

2.77

Arisawa Kenko Ltd.

11-44, Nishishiro-cho 3-chome,
Joetsu-shi, Niigata

834,338

2.31

DFA INTL SMALL CAP VALUE
PORTFOLIO(Standing Proxy: Citibank, N.A.,
Tokyo Branch)

Palisades West 6300, Bee Cave Road, Building
One, Austin, TX 78746, U.S.A.
(27-30, Shinjuku 6-chome, Shinjuku-ku, Tokyo)

676,882

1.87

Japan Trustee Services Bank, Ltd.
(Trust account 5)

8-11, Harumi 1-chome,
Chuo-ku, Tokyo

637,700

1.77

The Daishi Bank, Ltd.
(Standing Proxy: The Master Trust
Bank of Japan, Ltd.)1071-1, Higashiborimae-dori 7-bancho,
Chuo-ku, Niigata-shi, Niigata(11-3, Hamamatsu-cho 2-chome,
Minato-ku, Tokyo)

628,903

1.74

Eiichi Arisawa

Joetsu-shi, Niigata

594,746

1.65

13,760,665

38.20

Total

---

Note: 1. The number of shares held by Mitsubishi Gas Chemical Company, Inc. includes 966,306 shares that have been contributed
by Mitsubishi Gas Chemical Company, Inc. as the trust property of retirement benefit trust. The pertinent name in the
Company’s register of shareholders is “The Master Trust Bank of Japan, Ltd. (Retirement benefit trust account and
Mitsubishi Gas Chemical Company, Inc. account).”
2. Though it is described in the Report on Bulk Holding available for public inspection as of February 7, 2018 that
Sumitomo Mitsui Asset Management Company, Limited and a joint holder thereof hold the shares described below as ofJanuary 31, 2018, the Company has confirmed no beneficial ownerships of the number of shares as of March 31, 2018.
Therefore, such number of shares is not included in above-mentioned Status of Major Shareholders. Details of the Reporton Bulk Holding are as follows:
Bulk Holders: Sumitomo Mitsui Asset Management Company, Limited and one joint holder thereof
Address: 2-5-1 Atago, Minato-ku, Tokyo
Number of shareholdings etc.
: 1,842,229
Holding ratio of share certificates etc.

: 5.12- 29 -

(7) Status of Voting Rights
1) Shares issued and outstanding
As of March 31, 2018
Number of shares

Number of voting rights(Units)Remarks

Shares without voting rights

---

---

---

Shares with restricted voting rights(Treasury stock, etc.)

---

---

---

Shares with restricted voting rights(Other)

---

---

---

---

---

Category

Shares with full voting rights (Treasury
stock, etc.)

Common stock

Shares with full voting rights (Other)(See Note 1)

Common stock 35,934,500

359,345---

Shares constituting less than one full unit
(See Note 2)

Common stock

82,624------36,024,124

---

---

359,345---

Number of shares issued and outstanding
Total number of voting rights held byshareholders

7,000

---

Note: 1. 500 shares held in the name of Japan Securities Depository Center, Inc. are included in the row “Shares with full voting
rights (Other)”. 5 units of voting rights pertaining to shares with full voting rights held in the name of Japan Securities
Depository Center, Inc. are included in the column “Number of voting rights”.
2. 84 shares of treasury stock are included in the row "Shares constituting less than one full unit".

2) Treasury Stock, etc.
As of March 31, 2018
Name and address of shareholder

Number of shares held

Ratio of the number ofshares held to thenumber of sharesissued and outstanding(%)

Full name or
corporate name

Address

Under own
name

Under thenames ofothers

Total

Arisawa Mfg. Co., Ltd.

5-5, Minami-honcho 1chome, Joetsu-shi,
Niigata

7,000

---

7,000

0.01

---

7,000

---

7,000

0.01

Total

- 30 -

2. Status of Acquisition of Treasury Stock, etc.
[Classes of Stock, etc.] Acquisition of common stock under the provisions of Article 155, item 7 of theCompanies Act.

(1) Status of Acquisition by Resolution of a General Meeting of Shareholders
No applicable matter.

(2) Status of Acquisition by Resolution of the Board of Directors
No applicable matter.

(3) Details of Acquisition not Authorized by Resolution of a General Meeting of Shareholders or
Resolution of the Board of Directors
Category

Number of shares

Total amount (Yen)Treasury stock acquired during the current business year

548

576,395

Treasury stock acquired during the current period

30

38,790Note: The row “Treasury stock acquired during the current period” does not include the shares acquired through the purchaseof shares constituting less than one full unit in the period from June 1, 2018 to the filing date of this Financial Report.

(4) Status of Disposal and Holding of Acquired Treasury Stock
Current Business Year
Category

Current Period

Numberof shares

Total disposal
amount (Yen)

Numberof shares

Total disposal
amount (Yen)

Acquired treasury stock offered for subscription

---

---

---

---

Acquired treasury stock disposed of through retirement

---

---

---

---

---

---

---

---

---

---

---

---

7,084

---

7,114

---

Acquired treasury stock transferred in relation to merger,
share exchange and company split
Other
Number of shares of treasury stock held
Note:

The “Number of shares of treasury stock held” in the “Current Period” does not include the shares acquired throughthe purchase of shares constituting less than one full unit in the period from June 1, 2018 to the filing date of thisFinancial Report.

- 31 -

3. Dividend Policy
The Company positions the distribution of profits to its shareholders as a priority management objective andintends to maintain its basic policy of profit distributions with the business results, taking into consideration
the strengthening of retained earnings for future business development and reinforcement of the corporate base.
With respect to the consolidated payout, the Company sets a target dividend payout ratio of 35% to the profit
attributable to owners of the parent.
With respect to the frequency of dividend payments, the Company specifies in its articles of incorporationthat the Company can effect interim dividend payments. Currently, however, in view of the tendency for the
net sales, etc. for the first half of fiscal year to be higher than those for the second half in the ratio to the annual
result, the Company pays a year-end dividend once a year in order to ensure equitable distribution of dividends
in light of business results.
Decisions with respect to dividends from surplus are made at a general meeting of shareholders for the yearend dividend and by the Board of Directors for the interim dividend.
As for the annual dividend for the current business year, the Company decided to pay 34 yen per share basedon the said policy. As a result, the dividend payout ratio for the current consolidated fiscal year was 35.3%.
The Company plans to appropriate its internal reserves to research and development activities and capital
investment for business expansion, etc., aiming at enhancement of the shareholder value in future years.
The distribution of dividends from surplus for the current business year is as follows.

Date of resolution

Total amount of dividends(Thousands of yen)

Dividend pershare (Yen)

1,224,579

34.00

Resolution at the Ordinary General Meeting of
Shareholders of June 28, 2018

4. Share Price Movement(1) Highest and Lowest Share Prices for Each of the Last Five Business Years
Term

66th term

67th term

68th term

69th term

70th term

Closing Month

March 2014

March 2015

March 2016

March 2017

March 2018

High (Yen)

690

1,178

1,095

827

1,349

Low (Yen)

297

473

511

482

695

Note:

The prices are those recorded on the Tokyo Stock Exchange (First Section).

(2) Highest and Lowest Share Prices for Each of the Last Six Months
Month

October 2017

November 2017

December 2017

January 2018

February 208

March 208

High (Yen)

1,063

1,319

1,349

1,284

1,205

1,087

Low (Yen)

979

987

1,189

1,152

895

902

Note:

The prices are those recorded on the Tokyo Stock Exchange (First Section).

- 32 -

5. Status of Directors and Officers(Number of female directors and officers: 0)(Percentage of female directors and officers: Nil)
Title

Position

Name

Date ofbirth

Career summary

See
Note 5469,291

See
Note 588,203See
Note 539,451

See
Note 52,307

April 1986

Chairman and
Representative
Director

Sanji
Arisawa

President andChief Executive
Representative
Officer (CEO)Director

July 7,
1942

Joined the Company as General Manager,
Development Dept.
July 1987
Director of the Company
June 1989
Managing Director of the Company
June 1992
Senior Managing Director of the Company
June 1995
President and Representative Director of theCompany
June 2003
Chief Executive Officer (CEO) of the Company
December 2010 President and Representative Director of Protec
International Holdings Co., Ltd. (Current)
December 2010 Director and Chairman of Protec Arisawa Europe,
S.A. (Current)
June 2014
Chairman and Representative Director of theCompany (Current)

Term

Numberof sharesof theCompany
held

April 1992
February 2002
August 2003
April 2007
April 2009
June 2010
Yuta
Arisawa

July 25,
1969

June 2011
June 2014
June 2015
June 2017

Director

Senior Managing
Operating Officer
supervising ElectricalInsulating &Composite Materials
Sales Dept.;
Division Chief,
Electrical Insulating& Composite
Materials Business
Div.

March 1981
July 1996
June 2008
Yoshihiko
Toda

January
24, 1958

June 2008
June 2014
May 2017
June 2017
April 1989
May 2011

Director

Senior Operating
Officer supervisingElectronic Materials
Sales Dept.;
Division Chief,
Electronic Materials
Business Div.

April 2013
Osamu
Nakajima

June 5,
1965

July 2014

October 2015
June 2016- 33 -

Joined Mitsubishi Electric Corporation
Joined JPMorgan Securities Japan Co., Ltd.
Joined the Company
Assistant General Manager, Manufacturing Dept.
Operating Officer of the Company
Director and Senior Operating Officer of theCompany
Director and Senior Managing Operating Officerof the Company
President, Representative Director of theCompany
Chief Operating Officer (COO) of the Company
Chief Executive Officer (CEO) of the Company(Current)
Joined the Company
General Manager, Tokyo Branch Office
President and Representative Director of Arisawa
Jushi Kogyo Co., Ltd. (Current)
Operating Officer of the Company
Director and Senior Operating Officer of theCompany
President and Representative Director of Arisawa
Fiber Glass Co., Ltd. (Current)
Director and Senior Managing Operating Officerof the Company (Current)
Joined Mitsui & Co., Ltd.
Department Manager, Solar Business Div.,
Functional Chemicals Business Unit of Mitsui &Co., Ltd.
Department Manager, Advanced Materials Div.,
Functional Chemicals Business Unit of Mitsui &Co., Ltd.
Department Manager, Business Development
Div., Basic Chemicals Business Unit of Mitsui &Co., Ltd.
Joined the Company as Operating Officer
Director and Senior Operating Officer of theCompany (Current)TitlePosition

Name

Date ofbirth

Career summary

See
Note 5

747

See
Note 517,000See
Note 51,500

See
Note 6

1,921

See
Note 7---

April 1983
April 2000

Director

Director

Director

Full-time
Corporate
AuditorCorporate
AuditorSenior Operating
Officer supervising
Manufacturing Dept.
and Administration
Dept.;
Division Chief,
Manufacturing
Engineering Div.,
General Affairs Div.
and Human
Resources Div.

Joined Toshiba Corporation
Vice President of Toshiba America Business
Solutions, Inc.
April 2003
General Manager, MFP Business Division,
Document Processing & Telecommunication
System Company of TOSHIBA TECCORPORATION
April 2011
General Manager, Emerging Countries Division,
Global Solutions Business Group of TOSHIBATEC CORPORATION
June 2012
Vice President, Chief Marketing Executive,
Global Solutions Business Group of TOSHIBA
Hidetaka
May 30,TEC CORPORATION
Nonami
1958
April 2015
Vice President, Deputy Managing Director,
Printing Solutions Business Group of TOSHIBATEC CORPORATION
July 2016
Audit & Supervisory Board Member of TOSHIBATEC CORPORATION
September 2016 Joined the Company as Assistant Division Chief,
Administration Division
September 2016 Operating Officer, Deputy Division Chief,
Administration Division; in charge of General
Affairs Dept., Manufacturing Engineering Dept.
and Quality Assurance Dept. of the Company
June 2017
Director and Senior Operating Officer of theCompany (Current)
June 1972
Joined GA Saxton & Co., New York
April 1987
Senior Analyst of SG Warburg Securities, Inc.
(Tokyo)April 1994
Managing Director and General Manager
Katsuchika November(Research Dept.) of Smith Barney, Inc.
Goto
20, 1944 December 1998 Senior Advisor, the Government of Singapore
Investment Corporation Pte Ltd.
March 2004
Representative Director of Unipulse Corporation
June 2010
Director of the Company (Current)
April 1968
Joined Fuji Heavy Industries Ltd. (currently
Subaru Corporation)
June 1999
Vice President and Senior General Manager,
Japan Sales & Marketing Div. of Fuji Heavy
Industries Ltd.
June 2001
Senior Vice President and Chief General Manager,
YutakaDecemberJapan Region, Subaru Sales & Marketing Div. of
Fuji Heavy Industries Ltd.
Tsukahara 21, 1945
June 2003
Senior Vice President and Chief General Manager,
Subaru Product & Portfolio Planning Div. of Fuji
Heavy Industries Ltd.
May 2005
President and Representative Director of Tokyo
Subaru Inc.
June 2017
Director of the Company (Current)
March 1973
Joined the Company
July 2002
Group Leader, Accounting Group, General Affairs
Dept.
February July 2004
General Manager, General Affairs Dept.
Koji Ohta
Full-time Corporate Auditor of the Company
9, 1955 June 2012
(Current)
June 2017
Corporate Auditor of Polatechno Co., Ltd.
(Current)
April 1984
Joined The Hachijuni Bank, Ltd.
February 2004 Hata Branch Manager of the Bank
June 2008
Tokyo Main Office Manager of the Bank
June 2010
Kenchonai Branch Manager of the Bank
June 2011
Suzaka Area-Suzaka Branch Manager of the Bank
KoichiJanuary June 2013
Ina Area-Ina Branch Manager of the Bank
Executive Officer and Ina Area-Ina Branch
Sakai
31, 1961 June 2014
Manager of the Bank
June 2015
Executive Officer and Loan Control Dept.
Manager of the Bank
June 2016
Full-time Corporate Auditor of the Bank (Current)
June 2018
Corporate Auditor of the Company (Current)

Term

Numberof sharesof theCompanyheld- 34 -

TitlePosition

Name

Date ofbirth

Career summary

April 1982
June 2006
April 2010

Corporate
AuditorShinjiro
Kawai

May 19,1959

March 2011
February 2014
June 2014
February 2016
June 2017
June 2018

Joined The Daishi Bank, Ltd.
Nagaoka Nishi Branch Manager of the Bank
Credit Supervision Div. Deputy Manager of theBank
Credit Supervision Div. Manager of the Bank
General Affairs Div. Manager of the Bank
Executive Officer and Shibata Branch Manager ofthe Bank
Executive Officer and Audit and Inspection Div.
Manager of the Bank
Director of the Bank (Audit & Supervisory
Committee Member) (Current)
Corporate Auditor of the Company (Current)

Term

Numberof sharesof theCompany
held

SeeNote 7---

Total:
620,420

Note:

1.

Yuta Arisawa, President and Representative Director, is a son of Sanji Arisawa, Chairman and Representative
Director.
2. Figures stated in the column “Number of shares of the Company held” represent the number of shares beneficiallyowned by each of the persons listed above, including their respective ownership interests under the Company’s stock
ownership plan for its directors and officers. Since the number of shares acquired in June 2018 through the said
stock ownership plan is yet to be confirmed as of the filing date of this Financial Report (June 29, 2018), the numberof shares beneficially owned by each of the persons listed above as of May 31, 2018 is stated.
3.

4.

5.
6.
7.
8.

9.

Among the Directors, Katsuchika Goto and Yutaka Tsukahara are Outside Directors (set forth in Article 2, item 15of the Companies Act) falling under the outside officers (set forth in Article 2, paragraph 3, item 5 of the Ordinancefor Enforcement of the Companies Act).
Among the Corporate Auditors, Koichi Sakai and Shinjiro Kawai are Outside Corporate Auditors (set forth in Article
2, item 16 of the Companies Act) falling under the outside officers (set forth in Article 2, paragraph 3, item 5 of theOrdinance for Enforcement of the Companies Act).
From the closing of the Ordinary General Meeting of Shareholders held on June 28, 2017 until the closing of theOrdinary General Meeting of Shareholders for the fiscal year ending on March 31, 2019.
From the closing of the Ordinary General Meeting of Shareholders held on June 24, 2016 until the closing of theOrdinary General Meeting of Shareholders for the fiscal year ending on March 31, 2020.
From the closing of the Ordinary General Meeting of Shareholders held on June 24, 2018 until the closing of theOrdinary General Meeting of Shareholders for the fiscal year ending on March 31, 2020.
The Company employs the Operating Officer system to ensure expeditious execution of the operations determinedby the Board of Directors and formulation of highly transparent management strategies. The Company has a total of
eleven (11) Operating Officers consisting of one (1) Chief Executive Officer, one (1) Senior Managing Operating
Officer, two (2) Senior Operating Officers and the following seven (7) Operating Officers.
Yasunori Kihara
Operating Officer supervising Procurement Dept. and Quality Assurance Dept.; Deputy
Division Chief, Administration Div.
Takeshi Masuda
Operating Officer supervising Corporate Planning Dept. and Accounting Dept.; Deputy
Division Chief, Administration Div.
Yoshihiro Yoshihara
Operating Officer supervising Electrical Insulating & Composite Materials Research &Development Dept. and Optical Materials Research & Development Dept.; Deputy
Division Chief, Electrical Insulating & Composite Materials Business Div.
Makoto Tai
Operating Officer supervising Electronic Materials Research & Development Dept.;
Deputy Division Chief, Electronic Materials Business Div.
Mitsuru Ogino
Operating Officer supervising Electronic Materials Manufacturing Engineering Dept.
and Technical Administration Dept.; Deputy Division Chief, Electronic Materials
Business Div.
Takeshi Aizawa
Operating Officer supervising Manufacturing Dept.; Deputy Division Chief,
Manufacturing Div.
Eiichi Matsuya
Operating Officer supervising ColorLink Japan, Ltd.
The Company appointed the substitute corporate auditors under the provisions of Article 329, paragraph 3 of theCompanies Act as a precaution against shortage in the number of corporate auditors required by the applicable laws
and regulations as follows: Yukio Takashima as a substitute for Koji Ohta, Full-time Corporate Auditor, and Hideyuki
Baba as a substitute for the Outside Corporate Auditors, i.e. Koichi Sakai and Shinjiro Kawai. The career summaryof each of the said substitute corporate auditors is shown below.

- 35 -

Name

Date of birth

Career summary

March 1972
July 1996
June 1998
June 2001
June 2003
Yukio Takashima

October 30, 1949

June 2003
June 2005
June 2014

Hideyuki Baba

March 29, 1964

June 2015
April 1998
April 2003

- 36 -

Term

Joined the Company
General Manager, Manufacturing Dept. I
Director of the Company
Managing Director of the Company
Managing Director and Senior Operating Officer of
the Company
President and Representative Director of Arisawa
1 yearFiber Glass Co., Ltd.
Director and Senior Operating Officer of theCompany
Director and Senior Managing Operating Officer of
the Company
Director of Polatechno Co., Ltd. (Current)
Registered at Niigata Bar Association
Representative, Hideyuki Baba Law Office
1 year(Current)

Numberof sharesof theCompany
held

44,887---

6. Status of Corporate Governance, etc.
(1) Status of Corporate Governance1) Corporate Governance System
a. Basic Concept of Corporate Governance
The Company has a corporate governance system in place to increase corporate value throughsustainable growth and to maintain social credibility and is also making efforts to secure efficient andequitable management and to enhance management transparency through proactive disclosure.
In terms of management efficiency, to ensure collection of highly accurate information andexpeditious decision making and executions, we aim at management by a selected few and restrict the
number of Directors to the requisite minimum. In this context, we employ the Operating Officer system
to ensure speedy execution of operations under the decisions of the Board of Directors, where the Outside
Directors and Outside Corporate Auditors also attend.
In terms of equitable management, in line with the basic policy concerning improvement of theinternal control system, we improve organizations and systems for the purpose of ensuring legal
compliance. In order to enhance transparency, we promote communication with our shareholders andgeneral investors through IR activities, etc. and conduct disclosure practices in as active and timely amanner as possible.
b. Outline of Corporate Governance System
As for execution of operations, to ensure speedy execution and control of the management policy andmanagement plans determined at the regular/monthly or extraordinary meetings of the Board of
Directors, an eleven (11)-member Board of Operating Officers (comprising one (1) Chief Executive
Officer and ten (10) Operating Officers) is in place in pursuit of management efficiency and speed.
Each Operating Officer plans and promotes operations under his or her supervision upon approval at
the regular/monthly or extraordinary meetings of the Board of Directors as well as the monthly meetingof the Board of Operating Officers and strives for efficient and speedy execution of duties pursuant to
the Regulations for the Segregation of Duties, etc.
c. Reasons for Adopting Corporate Governance System
As a company employing the Board of Corporate Auditors system, we hold the meeting of the Boardof Corporate Auditors monthly (in principle) pursuant to the Regulations for the Board of Corporate
Auditors. The Corporate Auditors attend meetings of the Board of Directors, and the Full-time Corporate
Auditor attends meetings of the Board of Operating Officers, etc. The Corporate Auditors also offer
appropriate proposals and advice as to execution of Directors’ duties and the status of improvement andoperation of the internal control system, etc., thereby exercising strict oversight over the management.
We also appoint, in order to exercise external oversight, two (2) Outside Corporate Auditors and two(2) Outside Directors, each of whom bears a part in management oversight in terms of laws andregulations, finance, accounting and corporate governance respectively from a neutral and objective
viewpoint, contributing to what we believe is a fully functioning corporate governance system.
d. Status of Improvement of Internal Control System and Risk Management System
The Company adopted, by resolution of the Board of Directors, the “Systems to Ensure Proper
Operations” as shown below.
(i) System to ensure that execution by Directors and employees of the Company and its subsidiaries of
their respective duties complies with the applicable laws and regulations and the Articles ofIncorporation
The Company and its subsidiaries shall lay down the “Arisawa Group Corporate Action Guidelines”
applicable throughout the Group, set specific internal regulations in line with the said guidelines, andthen observe the said internal regulations, thereby establishing a system which ensures that execution
by Directors and employees of their respective duties complies with the applicable laws andregulations and the Articles of Incorporation.
(ii) System concerning storage and management of information on execution of duties of Directors of
the Company- 37 -

As for the storage and management of information on execution of duties of Directors, internal
regulations for document management shall be set in line with the provisions of the applicable laws
and regulations and the Articles of Incorporation to construct a system which ensures proper storageand management of the relevant information.
(iii) System concerning reporting to the Company of the matters relating to execution of duties of
Directors, etc. of subsidiaries of the Company
Supervision over execution of duties of Directors, etc. of subsidiaries of the Company shall be
exercised through having Directors of the Company concurrently serve as Directors of subsidiariesof the Company. Also, internal regulations for management of associated companies shall be set,
establishing a system which makes it mandatory for subsidiaries of the Company to submit theirrespective board minutes to the Company and also to report the relevant material facts to theCompany, both along the lines of the provisions of the said regulations.
(iv) Regulations and other systems concerning management of risk of loss for the Company and its
subsidiaries
In order to comprehend and manage various risks surrounding the Group and its operations,internal regulations managing and coping with each risk category shall be set. Observing the said
regulations establishes a system that helps reduce and mitigate business risks.
(v) System to ensure efficient execution of duties of Directors of the Company and its subsidiaries
The Group shall improve internal regulations governing the segregation of duties and the scopeof job authorities to definitize each department’s duty assignment and job authorities and shall also
introduce a common accounting management system for the entire Group, etc., thereby establishinga system which ensures efficient execution of duties of Directors of the Company and its subsidiaries.
(vi) Matters concerning employees assigned, upon request of Corporate Auditors of the Company, toassist with duties of Corporate Auditors of the Company, the matters concerning independence ofsuch employees from Directors of the Company and the system to ensure effectiveness of
instructions from Corporate Auditors of the Company to such employees
Employees to assist with duties of a Corporate Auditor shall be appointed upon request of the
Corporate Auditor and in view of the expertise and experience, etc. required for the audit work.
The employees so appointed as assistant shall execute the relevant duties under the direction of the
Corporate Auditor and also be free from the dictates of any Director of the Company so as to ensure
the independence of such employees from Directors and the effectiveness of instructions from the
Corporate Auditor to such employees.
(vii) System to mandate reporting to Corporate Auditors of the Company by Directors and employees,
etc. of the Company as well as Directors, Corporate Auditors and employees, etc. of subsidiaries of
the Company and the system to ensure prevention of unfavorable treatment of those who have madesuch reporting on account of the pertinent report having been madeInternal regulations stipulating the matters to be reported by Directors and employees, etc. of
the Company to Corporate Auditors shall be set so as to establish a system which mandates
immediate reporting to Corporate Auditors of all material facts with implications on the Group’s
management and business results. Also, the internal hotline system prohibiting unfavorable
treatment of the whistle-blower shall be maintained so that Corporate Auditors can directly receive
the relevant reports from employees, etc.
(viii) Matters concerning policies on the processing of costs incurred from execution of duties ofCorporate Auditors of the Company
Promptly upon receipt of a request, made by a Corporate Auditor under the provisions of Article
388 of the Companies Act, for an advance payment, etc. of expenses to be incurred from executionof his or her duties, the Company shall settle the pertinent expenses or liabilities. Also, if a
Corporate Auditor deems consultations, etc. with lawyers, chartered accountants and otherspecialists to be necessary for execution of his or her duties, the Company shall allow the amount- 38 -

disbursed for enlisting such consultations, etc. as part of the necessary audit-related expenses.
(ix) Other systems to ensure execution of effective audits by Corporate Auditors of the Company
Corporate Auditors of the Company shall collect periodic reports from Directors of subsidiariesof the Company, collect reports from Corporate Auditors of subsidiaries of the Company and also
engage in other coordinated actions, as needed, so as to execute proper audits of the Group.
(x) System to ensure credibility of financial reporting
To ensure credibility of financial reporting, the Group shall make continuous evaluation of thestatus of improvement and operation of the internal control system for financial reporting andalso remedy any defect or flaw found in such system, thereby maintaining a system which allows
the Group’s internal control to function effectively and properly.
(xi) System to exclude anti-social forces
The Company and its subsidiaries shall expressly state in the “Arisawa Group Corporate Action
Guidelines” a policy to prevent and preclude any relationship with anti-social forces that pose athreat to the order and safety of civil society. The Group shall also adopt and maintain a resolute
attitude toward anti-social forces in cooperation with law enforcement and other external
specialized agencies.
The Company’s corporate governance system is abstracted in the following diagram.

General Meeting of Shareholders
Appointment& Dismissal

Board ofDirectors
7 Directors(incl. 2 Outside Directors)

Audit

Appointment, Dismissal,
Directions & Supervision
Board of
Operating
Officers
Report11 Operating Officers
Directions

Accounting
Audit(CEO and other Operating
Officers)*

Directions &Supervision
Each department, subsidiary, etc.
Internal Audit(Collaboration)*Note:The Board of Operating Officers consists of a total of eleven (11) Operating
Officers (including, but not limited to, the Chief Executive Officer), four (4) ofwhich are concurrently assumed by the relevant Directors.

- 39 -

Accounting Auditors (Ernst & Young ShinNihon LLC)

Appointment& Dismissal

Internal Audit Department

Board of Corporate Auditors

3 Corporate Auditors (incl. 2 Outside Corporate Auditors)

Appointment& Dismissal

2) Status of Internal Audit and Auditing by Corporate Auditors- As the internal audit division, two (2) full-time employees are assigned to the Internal Audit Dept., whichis independent of other organizations of the Company and conducts scheduled audits and unscheduledaudits as appropriate. As for scheduled audits, an audit plan is made for each term pursuant to the relevantinternal regulations, and audits are conducted after the final decision by the Chief Executive Officer.
Audit results are notified to the relevant departments along with specific advice and recommendations,while reporting to, and opinion exchanges with, the Corporate Auditors are also made.
- The Corporate Auditors conduct periodic audits, attend the meeting of the Board of Corporate Auditors(held monthly in principle pursuant to the Regulations for the Board of Corporate Auditors) and also raiseissues, where appropriate, as to execution of Directors’ duties and the status of improvement andoperation of the internal control system, etc.
- Results of auditing by the Internal Audit Dept. are reported to the Board of Corporate Auditors, and the
Corporate Auditors share in the recognition of such results in the course of their auditing to enhance theircollective audit function.
3) Outside Directors and Outside Corporate Auditors
a. Summary of personal, capital and business relationships and other interests between Outside Directors
and Outside Corporate Auditors and the Submitting Company- As described in "IV. 5. Status of Directors and Officers", the number of the Company's shares owned by
Katsuchika Goto, an Outside Director, is minimal. Therefore, there is no capital relationship, business
relationship or any other interests existing between Katsuchika Goto, an Outside Director, and theCompany, and we believe there is no possibility of conflict of interest between the said person as an
Outside Director and the general shareholders of the Company.
- While Yutaka Tsukahara, an Outside Director, is a former director of Subaru Corporation and Tokyo
Subaru Inc., the said company is not our major business partner, and the said person is no longer involvedin execution of the said company’s business. As described in "IV. 5. Status of Directors and Officers",
the number of the Company's shares owned by Yutaka Tsukahara, an Outside Director, is minimal. In
view of these facts, we believe there is no possibility of conflict of interest between the said person as an
Outside Director and the general shareholders of the Company.
- Although Koichi Sakai, an Outside Corporate Auditor, is a full-time corporate auditor of The Hachijuni
Bank, Ltd., which holds 2.77% of the Company’s shares issued (excluding treasury stock) andoutstanding, and the said bank is one of the Company’s partner banks, we believe there is no problem as
to the independence of the said person.
- Although Shinjiro kawai, an Outside Corporate Auditor, is a full-time corporate auditor of The Daishi
Bank, Ltd., which holds 1.74% of the Company’s shares issued (excluding treasury stock) andoutstanding, and the said bank is one of the Company’s partner banks, we believe there is no problem as
to the independence of the said person.
b. Status of appointment of Outside Directors and Outside Corporate Auditors and functions and roles
served by Outside Directors and Outside Corporate Auditors in corporate governance
The Company appoints, in order to exercise external oversight, two (2) Outside Directors and two (2)Outside Corporate Auditors, each of whom bears a part in management oversight in terms of laws andregulations, finance, accounting and corporate governance respectively from a neutral and objective
viewpoint, contributing to what the Company considers as fully functioning oversight of management. In
this regard, the names of the Outside Directors having voting rights on the Board of Directors, i.e.
Katsuchika Goto and Yutaka Tsukahara, are filed with Tokyo Stock Exchange as the independent officersof the Company.
c. Details of the standards or policy in terms of independence from the Submitting Company forappointment of Outside Directors or Outside Corporate Auditors and the Submitting Company’s
standpoint concerning the status of the relevant appointments
Although the Company has no specific standards or policy in force as to independence from the
Submitting Company applicable to appointment of Outside Directors or Outside Corporate Auditors, we
judge, in making any such appointment, the independence of each candidate in terms of his or her personal,
capital and business relationships and any other interests with the Company and also comprehensively- 40 -

judge each candidate’s experience and knowledge of corporate governance, internal control and financial
reporting, etc.
d. Mutual collaboration, etc. between supervision or auditing by Outside Directors and Outside Corporate
Auditors and internal audit, accounting audit and auditing by Corporate Auditors
The Outside Corporate Auditors, tapping into their wealth of experience and insight, audit the legalityof business operations by the Board of Directors and the effectiveness of corporate governance, etc.
through attendance at meetings of the Board of Directors and of the Board of Corporate Auditors and also
review of various reports on the status of internal audit and accounting audit, etc. obtained directly or via
the Full-time Corporate Auditor.
The Outside Directors receive, at the Board of Directors’ meetings, etc., reports, etc. on the internal
audits conducted upon request of the Board of Corporate Auditors and the audits by the Corporate
Auditors or the accounting auditors and maintain mutual collaboration including, but not limited to,opinion exchanges as appropriate.
4) Remuneration, etc. of Directors and Corporate Auditors
a. The aggregate amount of remuneration, etc. of each category of Directors and Corporate Auditors, thebreakdown of such aggregate amount by the type of remuneration, etc. and the number of Directors andCorporate Auditors covered
Category of Directors andCorporate Auditors
Directors(excluding Outside Directors)
Corporate Auditors(excluding
OutsideCorporate
Auditors)
Outside Directors and Outside
Corporate Auditors

Aggregate amountof remuneration,
etc.
(Thousands ofyen)

Breakdown by the type of
remuneration, etc.
(Thousands of yen)
Basic fixed
Stock option
remuneration

Number of
Directors or
Corporate
Auditors
covered

167,593

158,151

9,442

611,763

11,763－

1

10,188

10,188－5b. Details and method for determination of the policy concerning the amount of remuneration, etc. of
Directors and Corporate Auditors or the calculation method for such amountWith respect to the remuneration for Directors except Outside Directors, the policy concerning theamount of remuneration, etc. for Directors or the calculation method for such amount is constituted of
fixed remuneration and performance-based remuneration. We calculate annual remuneration, according
to their positions concerning the fixed portion and based on consolidated business results of the previous
fiscal year concerning the performance-based portion. And such remuneration is divided equally andpaid during the period of execution of duties thereof.
It was resolved at the 56th Ordinary General Meeting of Shareholders held on June 29, 2004 that total
amount of remuneration for Directors should be no more than 360 million yen per year and total amountof remuneration for Corporate Auditors should be no more than 36 million yen per year.

- 41 -

5)

Status of Shareholding
a. Number of the stock names of the shares of investment stock held for purposes other than pureinvestment and the aggregate amount of such shares included in the amounts of investment securities
and short-term investment securities shown on the balance sheets
27 stock names
3,621,500 thousand yen
b. Classification and purpose of shareholding, stock name, the number of shares held and the amountincluded in the relevant figure(s) on the balance sheets concerning the shares of investment stock held
for purposes other than pure investment
Previous business year
Specified Investment Stock
Stock name

Number of shares
held

Amount shown onbalance sheets(Thousands of yen)

Purpose of shareholding

Maintaining and strengthening
business relationship

Mitsubishi Gas Chemical
Company, Inc.

333,000

769,896

Mitsubishi Electric Corporation

275,000

439,175

The Hachijuni Bank, Ltd.

581,113

365,520NOK Corporation

132,700

342,896

JSR Corporation

179,800

337,484

The Daishi Bank, Ltd.

450,809

198,806

Kaneka Corporation

150,000

124,200

Mitsubishi UFJ Financial Group,Inc.

62,42043,675

The Hokuetsu Bank, Ltd.

97,64928,042

Toshiba Corporation

102,834

24,824

Sumitomo Corporation

6,655

9,965

Mizuho Financial Group, Inc.

18,283

3,729

Nishishiba Electric Co., Ltd.

17,6003,220Broadcasting System of Niigata
Inc.

1,800

1,350

Kobe Steel, Ltd.

515

523

Tohoku Electric Power Co., Inc.

104

156

Deemed Shareholding
No applicable matter.

- 42 -

Maintaining and strengthening
business relationship
Maintaining and strengtheningbanking relationship
Maintaining and strengthening
business relationship
Maintaining and strengthening
business relationship
Maintaining and strengtheningbanking relationship
Maintaining and strengthening
business relationship
Maintaining and strengtheningbanking relationship
Maintaining and strengtheningbanking relationship
Maintaining and strengthening
business relationship
Maintaining and strengthening
business relationship
Maintaining and strengthening
business relationship
Maintaining and strengthening
business relationshipStrengthening relationship with
regional companies
Maintaining and strengthening
business relationship
Maintaining and strengthening
business relationshipCurrent business year
Specified Investment Stock
Number ofsharesheld

Amount shown onbalance sheets(Thousands of yen)

Purpose of shareholding

ViSCO Technologies Corporation

322,400

1,194,492

Maintaining and strengthening
cooperative relationship

Mitsubishi Gas Chemical
Company, Inc.

333,000

848,817

Maintaining and strengthening
business relationship

Mitsubishi Electric Corporation

275,000

467,912The Hachijuni Bank, Ltd.

581,113331,234

NOK Corporation

132,700

274,158

The Daishi Bank, Ltd.

45,080211,876

Kaneka Corporation

150,000

158,250

Mitsubishi UFJ Financial Group,Inc.

62,42043,506

Toshiba Corporation

102,550

31,585

The Hokuetsu Bank, Ltd.

9,764

22,652

Sumitomo Corporation

6,655

11,919Mizuho Financial Group, Inc.

18,283

3,499

Nishishiba Electric Co., Ltd.

17,6003,027

Broadcasting System of Niigata
Inc.

1,800

1,656

Kobe Steel, Ltd.

515

548

Tohoku Electric Power Co., Inc.

104

147

Stock name

Maintaining and strengthening
business relationship
Maintaining and strengtheningbanking relationship
Maintaining and strengthening
business relationship
Maintaining and strengtheningbanking relationship
Maintaining and strengthening
business relationship
Maintaining and strengtheningbanking relationship
Maintaining and strengthening
business relationship
Maintaining and strengtheningbanking relationship
Maintaining and strengthening
business relationship
Maintaining and strengthening
business relationship
Maintaining and strengthening
business relationshipStrengthening relationship with
regional companies
Maintaining and strengthening
business relationship
Maintaining and strengthening
business relationship

Deemed Shareholding
No applicable matter.
6) Status of Accounting Audit- The certified public accountants who conducted the accounting audit of the Company are as follows.
Years of continuous
Audit corporation
service as accounting
affiliation
auditorErnst & Young
Designated Limited Liability Partner and Engagement Partner Satoshi Ejima
4 years
ShinNihon LLC
Ernst & Young
Designated Limited Liability Partner and Engagement Partner Makoto Iguchi
2 years
ShinNihon LLC
Note:Ernst & Young ShinNihon LLC has voluntarily introduced a rotation system for its engagement partners
prior to the enforcement of the regulations under the Certified Public Accountants Act andimplementation of the voluntary regulations by the Japanese Institute of Certified Public Accountants.
The composition of assistants involved in the audit work is determined in accordance with the criteria for
selection of audit corporations and includes eight (8) certified public accountants and ten (10) others.
Name of the CPA who executed the audit work

7) Maximum Number of Directors
The Company’s Articles of Incorporation stipulate that the number of Directors of the Company shallnot be more than fifteen (15).

- 43 -

8) Requirements for Appointment of Directors
The Company’s Articles of Incorporation stipulate that a resolution on appointing Directors shall be
adopted by a majority vote of the voting rights of the shareholders who are present and also hold at least
one-third (1/3) of all voting rights of the shareholders entitled to exercise voting rights.
It is also stipulated in the said Articles of Incorporation that no cumulative voting shall be allowed for a
resolution on appointing Directors.
9) Summary of the Terms of Contracts for Limitation of Liability
The Company’s Articles of Incorporation stipulate that the Company may, under the provisions ofArticle 427, paragraph 1 of the Companies Act, enter into contracts for limitation of liability with its
Outside Directors and Outside Corporate Auditors so that the Company can recruit competent persons as
Outside Directors and Outside Corporate Auditors and also that the recruited Outside Directors and Outside
Corporate Auditors can soundly fulfill their expected roles. The main purport of such contracts forlimitation of liability (entered into between the Company and the Outside Directors as well as Outside
Corporate Auditors under the said stipulation) is as follows.
The Outside Directors and Outside Corporate Auditors shall, with respect to the liability for damages
under Article 423, paragraph 1 of the Companies Act, assume such liability for damages to the extent of
the statutory minimum liability amount as long as they perform their respective duties in good faith without
being grossly negligent.
10) Matters Typically Requiring a Resolution of a General Meeting of Shareholders which may be Resolvedby the Board of Directors
The Company’s Articles of Incorporation stipulate that the Company may resolve on the following
matters by voting at a meeting of the Board of Directors instead of voting at a general meeting ofshareholders.
a. Organ to determine acquisition of treasury stock
The Company’s Articles of Incorporation stipulate that the Company may, under the provisions ofArticle 165, paragraph 2 of the Companies Act, acquire shares of treasury stock through market
transactions, etc. upon a resolution of the Board of Directors instead of that of a general meeting ofshareholders. This stipulation aims to enable an agile capital policy by authorizing the Board of Directors
to resolve on the acquisition of the Company’s treasury stock.
b. Organ to determine distribution of interim dividends from surplus
The Company’s Articles of Incorporation stipulate that the Company may, under the provisions ofArticle 454, paragraph 5 of the Companies Act, distribute interim dividends with the record date of
September 30 of every year upon a resolution of the Board of Directors instead of that of a general
meeting of shareholders. This stipulation aims to expeditiously return profits to the Company’s
shareholders by authorizing the Board of Directors to resolve on the distribution of interim dividends
from surplus.
11) Requirements for Special Resolutions of a General Meeting of Shareholders
The Company’s Articles of Incorporation stipulate that, with respect to the requirements for special
resolutions of a general meeting of shareholders provided for in Article 309, paragraph 2 of the Companies
Act, a special resolution shall be adopted by a two-thirds (2/3) majority vote of the voting rights of theshareholders who are present and also hold at least one-third (1/3) of all voting rights of the shareholders
entitled to exercise voting rights. This stipulation aims to ensure smooth operation of general meetings ofshareholders by relaxing the quorum requirement for special resolutions of a general meeting ofshareholders.

- 44 -

(2) Details, etc. of Remuneration of Accounting Auditors(Thousands of yen)

1) Details of Remuneration of Auditing Certified Public Accountants, etc.
Previous consolidated fiscal year
Category

Submitting Company
Consolidated subsidiaries
Total

Remuneration foraudit andattestation services

Current consolidated fiscal year

Remuneration for
non-audit services

Remuneration foraudit andattestation services

Remuneration for
non-audit services

32,100－34,100

－

－

－

－

－

32,100－34,100－2) Details of Other Significant Remuneration(Previous consolidated fiscal year)
Protec Arisawa Europe, S.A., a consolidated subsidiary of the Company, paid 2,578 thousand yen as
remuneration for audit and attestation services to Ernst & Young, S.L., which belongs to the same networkas the Company’s auditing certified public accountants, etc.
(Current consolidated fiscal year)
Protec Arisawa Europe, S.A., a consolidated subsidiary of the Company, paid 3,347 thousand yen as
remuneration for audit and attestation services to Ernst & Young, S.L., which belongs to the same networkas the Company’s auditing certified public accountants, etc.
3) Details of Non-audit Services Provided by Auditing Certified Public Accountants, etc. to the Submitting
Company
No applicable matter.
4) Policy for Determination of Remuneration of Accounting Auditors
The Company has no specific policy in force as to determination of remuneration of auditing certified
public accountants, etc.

- 45 -

V. Status of Accounting
1.

Method of Preparation of Consolidated Financial Statements and Financial Statements(1) The consolidated financial statements of the Company are prepared in compliance with the “Regulations
for Terminology, Forms and Preparation Methods of Consolidated Financial Statements” (Ministerial
Ordinance No. 28 of the Ministry of Finance, 1976).
(2) The financial statements of the Company are prepared in compliance with the “Regulations for
Terminology, Forms and Preparation Methods of Financial Statements, etc.” (Ministerial Ordinance No.
59 of the Ministry of Finance, 1963; hereinafter referred to as the “Regulations for Financial Statements”).
The Company falls under the Special Financial Statement-Submitting Companies and prepares its financial
statements pursuant to the provisions of Article 127 of the Regulations for Financial Statements.

2.

Certification of Audit
The Company received a review of its consolidated financial statements for the current consolidated fiscal year
(From April 1, 2017 to March 31, 2018) and its financial statements for the current business year (From April 1,2017 to March 31, 2018) conducted by Ernst & Young ShinNihon LLC under the provisions of Article 193-2,
paragraph 1 of the Financial Instruments and Exchange Act.

3.

Special Efforts to Secure Appropriateness of Consolidated Financial Statements, etc.
The Company makes special efforts to secure appropriateness of its consolidated financial statements, etc.
Specifically, we make efforts to improve our systems by subscription to professional journals aiming to gain
correct understanding of the changes, etc. in the accounting standards and also affiliation with the Financial
Accounting Standards Foundation aiming to ensure precise understanding of and appropriate responses to thecontents of the accounting standards, etc.

- 46 -

1. Consolidated Financial Statements, etc.
(1) Consolidated Financial Statements
1) Consolidated Balance Sheets(Thousands of yen)Previous consolidated fiscal year
(As of March 31, 2017)
AssetsCurrent assets
Cash and deposits
Notes and accounts receivable-trade
Securities
Merchandise and finished goods
Work in process
Raw materials and supplies
Deferred tax assets
Other
Allowance for doubtful accounts
Total current assets
Non-current assets
Property, plant and equipment
Buildings and structures
Accumulated depreciation
Buildings and structures, net
Machinery, equipment and vehicles
Accumulated depreciation
Machinery, equipment and vehicles,net
Land
Construction in progress
Other
Accumulated depreciation
Other, net
Total property, plant and equipment
Intangible assets
Other
Total intangible assets
Investments and other assets
Investment securities
Long-term loans receivable
Net defined benefit asset
Deferred tax assets
Other
Allowance for doubtful accounts
Total investments and other assets
Total non-current assets
Total assets*2

7,667,985
12,618,700
797,550
2,602,353
1,301,381
2,095,419
383,814
947,890△127,077
28,288,018

Current consolidated fiscal
year(As of March 31, 2018)*2*6

9,123,877
5,947,189
1,180,101
3,915,375
1,898,096
2,951,263
584,907
1,328,865△562,185
36,367,491*2

18,970,204△13,153,475
5,816,729
28,118,092△24,769,585*2

19,379,174△13,602,300
5,776,874
28,849,087△25,353,015*2

3,348,507*2

3,496,072*2

1,449,574
58,001
2,234,282△1,841,690
392,591
11,065,403*2

1,836,200
95,9962,350,493△1,919,982
430,511
11,635,655*2*2

65,48665,486*1*2- 47 -

23,864,265
210,592－
122,604
373,965△181,927
24,389,500
35,520,391
63,808,409

418,631418,631*1*2

23,365,824
218,734
11,731200,976
602,142△176,835
24,222,574
36,276,860
72,644,352

(Thousands of yen)Previous consolidated fiscal year
(As of March 31, 2017)
Liabilities
Current liabilities
Notes and accounts payable-trade
Current portion of bonds
Short-term loans payable
Current portion of long-term loans
payableLease obligations
Income taxes payable
Deferred tax liabilities
Provision for bonuses
Provision for directors’ bonuses
Provision for product warranties
Other
Total current liabilities
Non-current liabilities
Bonds payable
Long-term loans payable
Lease obligations
Deferred tax liabilities
Net defined benefit liability
Asset retirement obligations
Other
Total non-current liabilities
Total liabilities
Net assets
Shareholders’ equity
Capital stock
Capital surplus
Retained earnings
Treasury stock
Total shareholders’ equity
Accumulated other comprehensive
incomeValuation difference on available-forsale securities
Deferred gains or losses on hedges
Foreign currency translation
adjustment
Remeasurements of defined benefit
plans
Total accumulated othercomprehensive income
Share acquisition rights
Non-controlling interests
Total net assets
Total liabilities and net assets

Current consolidated fiscal year
(As of March 31, 2018)*6*2, *55,168,250－
2,908,630*2, *5

6,794,393
36,8004,242,472*2446,754*2

864,130

17,086362,974
25,281
447,415
3,573
169
2,299,014
11,679,149－
1,836,093
53,973
1,008,732
558,11257,44863,5993,577,960
15,257,109*2- 48 -*2*2

18,230930,52985
598,2615,956
125
2,491,601
15,982,585
164,800
1,642,485
33,691
1,274,507
603,556
92,837357,334
4,169,212
20,151,797

7,317,019
6,429,038
30,740,318△3,891
44,482,485

7,458,242
6,570,209
33,492,381△4,46747,516,364

942,763

1,214,473

5,153

－

808,002

1,081,810△187,018△176,694

1,568,901

2,119,588

143,292
2,356,620
48,551,300
63,808,409

127,640
2,728,960
52,492,554
72,644,352

2) Consolidated Statements of Income and Consolidated Statements of Comprehensive Income[Consolidated Statements of Income](Thousands of yen)

Net sales
Cost of sales
Gross profit
Selling, general and administrative expenses
Freightage and packing expenses
Salaries and allowances
Provision for bonuses
Provision for directors’ bonuses
Provision for retirement benefits
Provision of allowance for doubtful accounts
Provision for product warranties
Other
Total selling, general and administrative
expenses
Operating income
Non-operating income
Interest income
Dividends income
Share of profit of entities accounted for using
equity method
Rent income
Other
Total non-operating income
Non-operating expenses
Interest expenses
Loss on redemption of investment securities
Foreign exchange losses
Rent expenses
Provision of allowance for doubtful accounts
Other
Total non-operating expenses
Ordinary income
Extraordinary income
Gain on sales of non-current assets
Gain on sales of investment securities
Insurance income
Other
Total extraordinary income
Extraordinary losses
Impairment loss
Loss on sales of investment securities
Loss on valuation of investment securities
Other
Total extraordinary losses
Income before income taxes
Income taxes – current
Income taxes – deferred
Total income taxes
ProfitProfit attributable to non-controlling interests
Profit attributable to owners of the parent

Previous consolidated fiscal year
(From April 1, 2016
to March 31, 2017)34,451,696*1, *228,557,289
5,894,406

Current consolidated fiscal year
(From April 1, 2017
to March 31, 2018)
40,909,534*1, *2
32,730,617
8,178,916

579,862
1,172,723
88,9503,573
44,5298,281
1192,205,991

707,496
1,293,438
113,3885,956
55,16952,607－2,323,500*1

4,104,031- 49 -*1

4,551,558

1,790,375

3,627,358

335,426
93,573

310,701
92,786400,006

463,698

169,072
255,606
1,253,685

159,403
176,539
1,203,130

48,478
16,200129,510
98,591－60,939353,720
2,690,339

76,46684,446
170,966
83,031
311,796
59,534786,241
4,044,247－
13,513
129,723
9,542
152,779*3

3,268－
743,019－
105,523
851,812

－
4,236
1,350
30,55636,1432,806,975
653,576△61,839591,737
2,215,238
178,025
2,037,212*4

26,02840,202
63,59520,886
150,712
4,745,347
1,199,341△204,047
995,293
3,750,053
297,508
3,452,544

[Consolidated Statements of Comprehensive Income](Thousands of yen)

ProfitOther comprehensive income
Valuation difference on available-for-salesecurities
Deferred gains or losses on hedges
Foreign currency translation adjustment
Remeasurements of defined benefit plans, netof taxShare of other comprehensive income ofentities accounted for using equity method
Total other comprehensive income
Comprehensive income(Breakdown)Comprehensive income attributable to ownersof the parent
Comprehensive income attributable to noncontrolling interests

Previous consolidated fiscal year
(From April 1, 2016
to March 31, 2017)
2,215,238

Current consolidated fiscal year
(From April 1, 2017
to March 31, 2018)
3,750,053

295,687

271,7735,153△478,630△5,153491,053△75,362

2,861△140,791△13,356*- 50 -△393,944
1,821,294*

747,179
4,497,232

1,846,012

4,003,231△24,718

494,001

3) Consolidated Statements of Changes in Shareholders’ Equity and Other Net Assets
Previous consolidated fiscal year (From April 1, 2016 to March 31, 2017)(Thousands of yen)
Shareholders’ equity
Capital stock
Balance at beginning of current
periodChanges of items during theperiodCapital surplus

7,294,347

6,406,366

22,672

22,672Issuance of new shares

Retained earnings

Treasury stock

29,522,018

Total shareholders’equity△3,67043,219,062

45,344△818,912

Dividends from surplus
Change of scope of
consolidation
Change of scope of equity
methodProfit attributable to ownersof the parent△818,912－－

2,037,212

Purchase of treasury stock

2,037,212
△221

△221

Net changes of items otherthan shareholders' equity
Total changes of items during
the period
Balance at end of current
period22,672

22,672

1,218,299△221

1,263,423

7,317,019

6,429,038

30,740,318△3,891

44,482,485

Accumulated other comprehensive income
Valuation Deferred gains
Total
Share
differenceor losses on
Foreignaccumulated
Remeasuremeacquisitionon
hedgescurrencyother
nts of definedrightsavailabletranslation
comprehensive
benefit plansfor-saleadjustment
incomesecurities
Balance at beginning of current
periodChanges of items during theperiod647,068

1,204,968△91,934

1,760,101

117,201

Noncontrollinginterests

Total net
assets2,506,066

47,602,431

Issuance of new shares

45,344

Dividends from surplus△818,912

Change of scope of
consolidation
Change of scope of equity
methodProfit attributable to ownersof the parent－－
2,037,212△221

Purchase of treasury stock
Net changes of items otherthan shareholders' equity
Total changes of items during
the period
Balance at end of current
period295,695

5,153△396,965△95,083△191,200

26,091△149,445△314,554

295,695

5,153△396,965△95,083△191,200

26,091△149,445

948,868

942,763

5,153

808,002△187,018

1,568,901

143,292

2,356,620

48,551,300- 51 -

Current consolidated fiscal year (From April 1, 2017 to March 31, 2018)(Thousands of yen)
Shareholders’ equity
Capital stock
Balance at beginning of current
periodChanges of items during theperiodCapital surplus

7,317,019

6,429,038

141,222

141,170

Issuance of new shares
Dividends from surplus
Change of scope of
consolidation
Change of scope of equity
methodProfit attributable to ownersof the parent

Retained earnings

Treasury stock

30,740,318

Total shareholders’equity△3,891

44,482,485

282,393△713,461△713,461△4,320△4,32017,30017,3003,452,544

3,452,544

Purchase of treasury stock

△576

△576

Net changes of items otherthan shareholders' equity
Total changes of items during
the period
Balance at end of current
period141,222

141,170

2,752,062△576

3,033,879

7,458,242

6,570,209

33,492,381△4,46747,516,364

Valuationdifferenceonavailablefor-salesecurities
Balance at beginning of current
periodChanges of items during theperiod942,763

Accumulated other comprehensive income
Total
Share
DeferredForeignaccumulated
Remeasuremeacquisition
gains orcurrencyother
nts of definedrightslosses ontranslation
comprehensive
benefit planshedgesadjustment
income5,153808,002△187,018

1,568,901

143,292

Noncontrollinginterests

Total net
assets2,356,620

48,551,300

Issuance of new shares

282,393

Dividends from surplus△713,461

Change of scope of
consolidation
Change of scope of equity
methodProfit attributable to ownersof the parent△4,320△17,300△17,300

03,452,544△576

Purchase of treasury stock
Net changes of items otherthan shareholders' equity
Total changes of items during
the period
Balance at end of current
period271,709△5,153291,107

10,324567,987△15,651

372,339924,675

271,709△5,153291,107

10,324550,686△15,651

372,339

3,941,254

1,214,473－

1,081,810△176,694

2,119,588

127,640

2,728,960

52,492,554- 52 -

4) Consolidated Statements of Cash Flows(Thousands of yen)Previous consolidated fiscal year
(From April 1, 2016
to March 31, 2017)

Current consolidated fiscal year
(From April 1, 2017
to March 31, 2018)

2,806,975
1,678,117－
89
44,725

4,745,347
1,712,330
26,028
17,776
42,636119△44△15,200

131,882△3,134

2,383△70,227

352,842

7,081－

27,59936,012△428,999△828△129,723
48,47827,679△403,488－－
76,466△81,697△400,006△463,698△9,276△702,816

1,350

63,595

11,407515－－△78,205

42,556－△3,268

8,812

7,299

△8,714－－△2,054△46,229△49,932△1,037,746△2,663,182

886,484△2,152,410△33,473

1,375,862△85,945△35,911△286,709
56,101
3,017,346
605,179
129,723△31,765△260,947－△40,000

66,227
277,9312,372,440
562,878－△84,476△726,094
57,240△40,000

3,419,536

2,181,988

Cash flows from operating activities
Income before income taxes
Depreciation
Impairment loss
Amortization of goodwill
Share-based compensation expenses
Increase (decrease) in provision for productwarranties
Increase (decrease) in provision for bonuses
Increase (decrease) in provision for directors'
bonuses
Increase (decrease) in allowance for doubtful
accounts
Increase (decrease) in other provision
Increase (decrease) in net defined benefit
liability
Interest and dividends income
Loss (gain) on extinguishment of tie-in shares
Insurance income
Interest expenses
Foreign exchange losses (gains)Share of (profit) loss of entities accounted forusing equity method
Loss (gain) on sales of investment securities
Loss (gain) on valuation of investment
securities
Loss (gain) on sales of membership
Loss (gain) on sales of golf club memberships
Loss (gain) on redemption of investment
securities
Loss (gain) on sales of non-current assets
Loss on retirement of property, plant andequipment
Gain on reversal of share acquisition rights
Loss (gain) on change in equity
Other extraordinary loss (income)Decrease (increase) in notes and accounts
receivable-trade
Decrease (increase) in inventories
Increase (decrease) in notes and accounts
payable-trade
Increase (decrease) in accrued consumption
taxes
Decrease (increase) in other assets
Increase (decrease) in other liabilities
SubtotalInterest and dividends income received
Proceeds from insurance income
Interest expenses paid
Income taxes (paid) refund
Other revenue
Payments for loss on litigation
Net cash provided by (used in) operating
activities- 53 -

(Thousands of yen)Previous consolidated fiscal year
(From April 1, 2016
to March 31, 2017)
Cash flows from investing activities
Payments into time deposits
Proceeds from withdrawal of time deposits
Purchase of property, plant and equipment
Proceeds from sales of property, plant andequipment
Purchase of intangible assets
Purchase of investment securities
Proceeds from sales of investment securities
Proceeds from liquidation of subsidiaries
Payments of loans receivableCollection of loans receivable
Purchase of shares of subsidiaries resulting
in change in scope of consolidation
Decrease (increase) in other investments
Other proceeds
Net cash provided by (used in) investing
activities
Cash flows from financing activities
Net increase (decrease) in short-term loans
payableProceeds from long-term loans payable
Repayments of long-term loans payable
Repayments of lease obligations
Payments for long-term accounts payable other
Proceeds from issuance of common shares
Purchase of treasury stock
Cash dividends paid
Cash dividends paid to non-controllinginterests
Net cash provided by (used in) financing
activities
Effect of exchange rate change on cash andcash equivalents
Net increase (decrease) in cash and cash
equivalents
Cash and cash equivalents at beginning of
periodIncrease in cash and cash equivalents resulting
from merger
Decrease in cash and cash equivalents
resulting from exclusion of subsidiaries fromconsolidation
Cash and cash equivalents at end of period△289,287
421,921△1,291,804－
226,918△1,700,551

－

6,392

△21,501△1,666,784
1,377,993－△210,813
8,000△29,580△1,418,992
2,987,494
31,096△172,342
156,772－*1- 54 -

Current consolidated fiscal year
(From April 1, 2017
to March 31, 2018)*2△549,365－
392△9,302－△1,671,883△471,462

305,034

911,1072,350,244△1,310,505△19,410

690,400△913,848△22,156－△116,665

35,423△221△816,582

226,159△576△712,054△124,727△121,662

419,255△59,296△54,341

262,416

2,112,566

1,913,646

4,901,124

7,026,200

12,508－－△110,040

7,026,200*1

8,829,805

[Notes](Important Matters Underlying Preparation of Consolidated Financial Statements)
1. Matters concerning scope of consolidation(1) Number of consolidated subsidiaries: twelve (12)Names of major consolidated subsidiaries:
ThinFlex Corporation, ThinFlex Technology Corporation (B.V.I.), TopFlex Corporation, ㈱サトーセン、Arisawa Fiber Glass Co., Ltd., Protec International Holdings Co., Ltd., Protec Arisawa Europe,
S.A., Protec Arisawa America, Inc., Protec Arisawa Japan Co., Ltd., Arisawa Sogyo Co., Ltd., Arisawa
Jushi Kogyo Co., Ltd., ColorLink Japan, Ltd.,Of the above, Satosen Co., Ltd. became a consolidated subsidiary in the current consolidated fiscal
year, due to the acquisition of all shares thereof on November 30, 2017.
Arisawa Kenpan Co., Ltd., which was a consolidated subsidiary in the previous consolidated fiscal year,
was completely liquidated on May 29, 2017, and therefore has been excluded from the scope of
consolidation.
(2) Names, etc. of major non-consolidated subsidiaries
Major non-consolidated subsidiaries:
Arisawa Manufacturing (Dalian) Co., Ltd., Kashiwa Seiki Co., Ltd.
(Reasons for excluding the above-mentioned non-consolidated subsidiaries from the scope of consolidation)
The non-consolidated subsidiaries are small in size, and their aggregate total assets, net sales, net income
or loss (Amount corresponding to the Company’s equity interest) and retained earnings (Amountcorresponding to the Company’s equity interest), etc. do not materially affect the consolidated financial
statements.
2. Matters concerning application of equity method(1) Number of affiliated companies accounted for under the equity method: two (2)Names of major affiliated companies:
Polatechno Co., Ltd., Innovision FlexTech Corporation
DDD Group plc, which was an affiliated company accounted for under the equity method in theprevious consolidated fiscal year, went into liquidation and is no longer considered significant, andtherefore has been excluded from the scope of equity method.
(2) As the non-consolidated subsidiaries (Arisawa Manufacturing (Dalian) Co., Ltd. and three (3)other companies) and the affiliated companies (Ryoyu Industrial Corporation and two (2) othercompany) to which the equity method is not applied have only slight effects on the consolidated financial
statements in terms of net income or loss (Amount corresponding to the Company’s equity interest) andretained earnings (Amount corresponding to the Company’s equity interest), etc. (even if they are
excluded from the scope of application of the equity method) and also bear no significance as a whole,these companies have been excluded from the scope of application of the equity method.
(3) With respect to those companies accounted for under the equity method whose closing dates differ from theconsolidated closing date, the financial statements for the relevant business year of each such company havebeen used.
3. Matters concerning business year, etc. of consolidated subsidiaries
The closing date of ThinFlex Corporation, TopFlex Corporation, ThinFlex Technology Corporation (B.V.I.),
Protec Arisawa Europe, S.A. and Protec Arisawa America, Inc., all of which are consolidated subsidiaries, is
December 31 of each year.
In preparation of consolidated financial statements, financial statements as of the said closing date are used;provided, however, that for the important transactions conducted in the period from January 1 to March 31 (i.e.
the consolidated closing date), the adjustments necessary for consolidation purposes have been made.

- 55 -

4. Matters concerning accounting policies(1) Valuation standards and valuation methods for important assets
1) Securities
Available-for-sale securities
Securities with available fair market values:
Stated at fair market value based on the market price as of the closing date, etc. (Valuation differences
are reported as a component of net assets, and the cost of securities sold is calculated using the average
cost method.)
Securities with no available fair market value:
Stated at average cost.
2) Derivative financial instruments
Stated at fair value method
3) Inventories
Merchandise, finished goods, semi-finished goods and work in process:
The Company and its domestic consolidated subsidiaries primarily adopt the cost method on a firstin, first-out basis (The amount shown on the balance sheets is calculated by writing inventories down
due to a decline in profitability.), and the overseas subsidiaries primarily adopt the lower-of-cost-ormarket method based on the moving average method.
Raw materials and supplies:
The Company and its domestic consolidated subsidiaries primarily adopt the cost method based on
the periodic average method (The amount shown on the balance sheets is calculated by writing
inventories down due to a decline in profitability.), and the overseas subsidiaries primarily adopt thelower-of-cost-or-market method based on the moving average method.
(2) Methods of depreciation and amortization of important depreciable assets
1) Property, plant and equipment (excluding lease assets)
The Company and its domestic consolidated subsidiaries adopt the declining-balance method, except forthe buildings (excluding accompanying facilities) acquired on or after April 1, 1998, and accompanying
facilities and structures acquired on or after April 1, 2016, which are depreciated using the straight-line
method. The overseas consolidated subsidiaries adopt the straight-line method.
The useful life mostly falls within the ranges shown below:
Buildings and structures: ten (10) years to thirty-one (31) years
Machinery, equipment and vehicles: four (4) years to nine (9) years
2) Intangible assets (excluding lease assets)
The straight-line method is adopted. Software used by the Company is amortized over an estimated inhouse usable period. (Currently five (5) years)
3) Lease assets
Depreciation and amortization is based on the straight-line method that takes the lease period as the usefullife and sets the residual value at zero (0).
(3) Standards for recording important allowances and provisions
1) Allowance for doubtful accounts
As a reserve for potential loan losses, an estimated uncollectible amount is allocated based on thehistorical loan-loss ratio in the case of general accounts receivable, and in light of the collectibility in each
instance in the case of some specific accounts receivable, e.g. doubtful receivables.
2) Provision for bonuses
The Company and some of its consolidated subsidiaries, in preparation for the payment of bonuses totheir respective employees, allocate such portion of the expected aggregate bonus amount that isrecognizable in the current consolidated fiscal year.
3) Provision for directors’ bonuses
Some of the Company’s consolidated subsidiaries, in preparation for the payment of bonuses to theirrespective directors and officers, make a relevant allocation based on the expected aggregate amount ofsuch bonus payment for the current consolidated fiscal year.
4) Provision for product warranties
As a reserve for warranty expenses potentially incurred with respect to the products delivered tocustomers, an amount reasonably expected to accrue in such expenses is estimated and appropriated.
(4) Accounting methods concerning retirement benefits
1) Method of inter-period attribution of expected retirement benefits- 56 -

In calculating retirement benefit obligations, the benefit formula is employed as the method of attributing
the estimated amount of each employee’s retirement benefits to his or her service period up to the end of
the current consolidated fiscal year.
2) Method of recognizing actuarial differences as expenses
Actuarial differences are recognized as expenses, effective from the consolidated fiscal year immediately
following the year of occurrence of each such difference, in an amount prorated using the straight-line
method over a certain number of years (Currently five (5) years) within the average remaining service
period of the employees at the time of occurrence of the said difference in each consolidated fiscal year.
3) Adoption of simplified method by small-scale businesses, etc.
Some of the Company’s consolidated subsidiaries employ, in calculating their respective net defined
benefit liabilities and retirement benefit expenses, a simplified method which deems the size of retirement
benefit obligations to be equal to the aggregate amount of retirement benefits payable assuming thevoluntary retirement of all employees at the end of the current period.
(5) Standards for translating important foreign currency assets and liabilities into Japanese currency
Foreign currency monetary assets and liabilities are translated into Japanese yen at the spot exchange
rate as of the consolidated closing date, and the resulting translation differences are entered as income orloss, as the case may be. Assets and liabilities of overseas subsidiaries, etc. are translated into Japanese yenat the spot exchange rate as of the consolidated closing date, and their respective incomes and expenses
are translated into Japanese yen at the average exchange rate during the period, with the resulting
translation differences being recorded as part of “Foreign currency translation adjustment” and “Noncontrolling interests” in the “Net assets” section.
(6) Accounting method of significant hedge transactions
1) Method of hedge accounting
The Company adopts the deferred hedge accounting. With respect to the forward exchange contracts
that meet the requirements of hedge accounting, we adopt the designated hedge accounting.
2) Hedging instruments and hedged items
Hedging instruments: Forward exchange contracts
Hedged items: Monetary claims denominated in foreign currencies, Anticipated transactions in foreign
currencies
3) Hedging policy
Forward foreign exchange transactions are conducted within the scope of actual demand for the purposeof deterring risks involved in transactions denominated in foreign currencies from the fluctuations in theforeign exchange market. These transactions will never be entered for speculative purpose.
4) Method of assessing hedge effectiveness
The Company assesses the effectiveness of hedging based on the ratio of changes that is calculated bycomparing the cumulative total of the market fluctuations of hedged items with that of hedging instruments.
However, when the forward foreign exchange transactions are by designated hedge accounting, suchassessment of effectiveness is omitted.
(7) Method and period of amortization of goodwill
Goodwill is amortized using the straight-line method over a five (5)-year period.
(8) Scope of funds in the consolidated statements of cash flows
The funds consist of cash on hand, demand deposits that are immediately withdrawable and short-term
investments with a maturity of three (3) months or less from the date of acquisition which are readily
convertible to cash and carry only a negligible risk of value fluctuations.
(9) Other important matters concerning preparation of consolidated financial statements
Accounting methods concerning consumption tax, etc.
The consumption tax, etc. are accounted for using the tax exclusion method.
Accounting methods concerning deferred assets
Stock delivery expenses are fully charged to expenses when they are paid.
(Accounting Standards etc. not yet applied)- "Implementation Guidance on Accounting Standards for Tax Effect Accounting" (Accounting Standards Boardof Japan Guidance No. 28, amended on February 16, 2018)-“Implementation Guidance on Recoverability of Deferred Tax Assets” (Accounting Standards Board of Japan
Guidance No. 26, finally amended on February 16, 2018)- 57 -

(1) Overview
When the practical guidelines on tax effect accounting issued by Japanese Institute of Certified Public
Accountants (JICPA) were transferred to the Accounting Standards Board of Japan (ASBJ), the ASBJ madenecessary revisions to the practical guidelines as mentioned below while maintaining the basic concepts andissued the "Implementation Guidance on Accounting Standard for Tax Effect Accounting", etc.
(Major accounting treatments revised)- Treatment of taxable temporary differences pertaining to share of subsidiaries etc. in non-consolidated financial
statements- Treatment of recoverability of deferred tax assets for an entity classified as type 1(2) Scheduled date of application
These ASBJ guidances will be applied at the start of the fiscal year beginning on April 1, 2018.
(3) Effect of application of the accounting standard, etc.
The effect of the application of the "Implementation Guidance on Accounting Standard for Tax EffectAccounting", etc. on the consolidated financial statements is currently under evaluation.

- "Accounting Standard for Revenue Recognition" (Accounting Standards Board of Japan Statement No.29,
March 30, 2018)- "Implementation Guidance on Accounting Standard for Revenue Recognition" (Accounting Standards Board ofJapan Guidance No.30, March 30, 2018)(1) Overview
The International Accounting Standards Board (IASB) and US Financial Accounting Standards Board (FASB)
jointly developed comprehensive revenue recognition accounting standards and issued “Revenue from Contracts
with Customers” in May 2014 (IASB: IFRS 15, FASB: Topic 606). Considering that IFRS 15 will apply to fiscal
years beginning on or after January 1, 2018, and Topic 606 will apply to fiscal years beginning after December
15, 2017, the ASBJ developed a comprehensive accounting standard on revenue recognition and thus issued theaccounting standard together with the implementation guidance.
The ASBJ established the accounting standard on revenue recognition by adhering a basic policy in developing
it. This basic policy was to first, incorporate the core principles of IFRS 15 as the starting point from theperspective of facilitating comparability among financial statements, which is one of the benefits of ensuringconsistency with IFRS 15; and second, add alternative treatments, to the extent that they do not impair
comparability, where consideration should be given to conventional practices etc. in Japan.
(2) Scheduled date of application
The Accounting Standard and the Implementation Guidance mentioned above will be applied at the start of the
fiscal year beginning on April 1, 2021.
(3) Effect of application of the accounting standard, etc.
The effect of the application of the "Accounting Standard for Revenue Recognition", etc. on the consolidated
financial statements is currently under evaluation.
(Changes in Presentation)<Consolidated Statements of Income>1.
“Loss on redemption of investment securities”, which was presented as part of “Other” in “Nonoperating expenses” in the previous consolidated fiscal year, is separately stated effective from thecurrent consolidated fiscal year due to a rise in percentage of the pertinent amount to more than ten
hundredths (10/100) of the aggregate amount of non-operating expenses. In order to reflect such change- 58 -

in presentation, a reclassification has been made in the consolidated financial statements for the previous
consolidated fiscal year.
As a result, 77,140 thousand yen of “Other”, listed within “Non-operating income” in the consolidated
statements of income for the previous consolidated fiscal year, has been reclassified into the combinationof 16,200 thousand yen of “Loss on redemption of investment securities” and 60,939 thousand yen of“Other”.
2.

“Gain on sales of investment securities”, which was presented as part of “Other” in “Extraordinary
income” in the previous consolidated fiscal year, is separately stated effective from the current
consolidated fiscal year due to a rise in percentage of the pertinent amount to more than ten hundredths(10/100) of the aggregate amount of Extraordinary income. In order to reflect such change inpresentation, a reclassification has been made in the consolidated financial statements for the previous
consolidated fiscal year.
As a result, 23,055 thousand yen of “Other”, listed within “Extraordinary income” in the consolidated
statements of income for the previous consolidated fiscal year, has been reclassified into the combinationof 13,513 thousand yen of “Gain on sales of investment securities” and 9,542 thousand yen of “Other”.

3.

“Loss on retirement of non-current assets”, which was presented as part of “Other” in “Extraordinary
losses” in the previous consolidated fiscal year, is separately stated effective from the current
consolidated fiscal year due to a rise in percentage of the pertinent amount to more than ten hundredths(10/100) of the aggregate amount of extraordinary losses. Also, “Loss on retirement of non-current
assets”, which was separately stated within “Extraordinary losses” in the previous consolidated fiscal
year, is presented as part of “Other” effective from the current consolidated fiscal year due to a drop inpercentage of the pertinent amount to ten hundredths (10/100) or less of the aggregate amount of
extraordinary losses. In order to reflect such change in presentation, a reclassification has been made in
the consolidated financial statements for the previous consolidated fiscal year.
As a result, 1,350 thousand yen listed within “Other” of “Extraordinary losses” in the consolidated
statements of income for the previous consolidated fiscal year, has been reclassified as 1,350 thousand
yen of “Loss on valuation of investment securities” and 30,556 thousand yen of “Loss on retirement of
non-current assets”, listed within “Extraordinary losses” in the consolidated statements of income for theprevious consolidated fiscal year, has been reclassified as part of “Other”.

- 59 -

(Notes Related to Consolidated Balance Sheets)*1 Items related to non-consolidated subsidiaries and affiliated companies are as follows.
(Thousands of yen)Previous consolidated fiscal year
(As of March 31, 2017)

Current consolidated fiscal year
(As of March 31, 2018)

7,893,184

8,277,856

Investment securities (Stock)*2 Assets subject to a security interest and secured liabilities
Assets subject to a security interest are as follows.

(Thousands of yen)Previous consolidated fiscal year
(As of March 31, 2017)
Cash and deposits
Buildings and structures

Current consolidated fiscal year
(As of March 31, 2018)

205,2243,900,140

(
(

--- )
2,905,148)

37,7894,336,644

(
(

--- )
3,190,575)

Machinery, equipment and vehicles
Property, plant and equipment (Other)639,508
17,775((639,508)
17,775)

1,608,767
56,188((1,160,304)
56,188)Land
Investments and other assets (Other)

266,900
61,556((

199,583)--- )500,923
47,580((199,190)--- )5,091,105(

3,762,016)

6,587,892(

4,606,259)

Total

Secured liabilities are as follows.

(Thousands of yen)Previous consolidated fiscal year
(As of March 31, 2017)

Short-term loans payable

Current consolidated fiscal year
(As of March 31, 2018)491,126(---)

1,284,843(

300,000)

Current portion of long-term loans payable
Long-term loans payable

428,384
1,482,176((

428,384)
1,482,176)

825,300
927,485((

767,328)
714,848

Total

2,401,686(

1,910,560)

3,037,628(

1,782,176)

The parenthesized figures represent factory foundation mortgages and the liabilities secured by such mortgages.

*3 Guarantee liabilities
The Company provides the following associated company with a guarantee of liabilities with respect to suchcompany’s accounts payable to trade creditors.
(1) Guarantee of liabilities(Thousands of yen)Previous consolidated fiscal year
(As of March 31, 2017)
Innovision FlexTech Corporation

Current consolidated fiscal year
(As of March 31, 2018)

44,40043,800*4 Balance of discounted notes and accounts receivable
Previous consolidated fiscal year
(As of March 31, 2017)

Current consolidated fiscal year
(As of March 31, 2018)－

Discounted notes and accounts receivable

17,822*5 The Submitting Company has an overdraft agreement in effect with each of its six (6) partner banks to ensure
efficient procurement of operating funds. The following is the balance of unexecuted loans under such overdraft
agreements as of the end of the current and previous consolidated fiscal years.
(Thousands of yen)Previous consolidated fiscal year
(As of March 31, 2017)

Current consolidated fiscal year
(As of March 31, 2018)

Aggregate overdraft limit
Drawdowns

6,300,000
190,000

6,300,000
790,000

Balance of unexecuted loans

6,110,000

5,510,000- 60 -

*6 Notes, etc. maturing at the end of the consolidated fiscal year
For accounting treatment of notes, electronically recorded monetary claims and electronically recorded
obligations maturing at the end of the consolidated fiscal year, settlement is made as of the clearing date of eachnote or as of the settlement date of each electronically recorded monetary claim and electronically recorded
obligation, as the case may be. As the end of the current consolidated fiscal year falls on a bank holiday, thefollowing notes, electronically recorded monetary claims and electronically recorded obligations maturing at theend of the consolidated fiscal year are included in their respective balances as of the end of the consolidated
fiscal year.
(Thousands of yen)
Current consolidated fiscal year
(As of March 31, 2018)

Previous consolidated fiscal year
(As of March 31, 2017)
Notes and accounts receivable-trade-

49,502

Notes and accounts payable-trade
Current liabilities and others (Notes payable-facilities,-

144,191
40,343-

Electronically recorded obligations-non-operating)(Notes Related to Consolidated Statements of Income)*1 Total amount of research and development expenses included in manufacturing costs for the current
period and general and administrative expenses(Thousands of yen)Previous consolidated fiscal year
(From April 1, 2016
to March 31, 2017)

Current consolidated fiscal year
(From April 1, 2017
to March 31, 2018)
1,756,916

1,971,169*2 Closing inventories are stated in the amount after writing inventories down due to a decline inprofitability, and the following loss on valuation of inventories or gain on reversal of loss on valuation of
inventories () are included in the cost of sales.
(Thousands of yen)Previous consolidated fiscal year
(From April 1, 2016
to March 31, 2017)

Current consolidated fiscal year
(From April 1, 2017
to March 31, 2018)△7,955△79,106*3 Details of gain on sales of non-current assets are as follows.
(Thousands of yen)Previous consolidated fiscal year
(From April 1, 2016
to March 31, 2017)
Machinery, equipment and vehicles

Current consolidated fiscal year
(From April 1, 2017
to March 31, 2018)
－

3,268

*4 Impairment loss
Previous consolidated fiscal year (From April 1, 2016 to March 31, 2017)
No applicable matter.
Current consolidated fiscal year (From April 1, 2017 to March 31, 2018)
Our Group recorded an impairment loss with respect to the following asset group(s) in the current
consolidated fiscal year.
Location
Joetsu-shi, Niigata

Usage
Display materials manufacturing facilities

Type
Buildings and structures; machinery,equipment and vehicles; land; etc.

Our Group conducts asset grouping grounded in its business segments and based primarily on productlines (each line representing a family of products), while each asset becomes the subject of asset grouping in
the cases of assets for rent and idle assets, etc.

- 61 -

Of the Group’s business assets, those asset groups whose profitability significantly declined due largely
to a fall in the market price of the relevant products, etc. have been written down to the recoverable amount,and the aggregate amount of such write-downs, 26,028 thousand yen, was recorded as an impairment loss in
extraordinary losses. The said aggregate amount consists of 15,125 thousand yen of buildings and structures,
7,988 thousand yen of machinery, equipment and vehicles, 2,772 thousand yen of land and 141 thousand
yen of others.
The recoverable amount of each relevant asset group is measured according to the net selling price, whilethe value of each real-estate property is fixed at the value assessed by a licensed real-estate appraiser.
(Notes Related to Consolidated Statements of Comprehensive Income)*Reclassification adjustment and tax effects relating to other comprehensive income(Thousands of yen)Previous consolidated fiscal year
(From April 1, 2016
to March 31, 2017)
Valuation difference on available-for-sale securities:
Amount arising in the current fiscal year
Reclassification adjustment
Before tax effects
Tax effects
Valuation difference on available-for-sale securities

Current consolidated fiscal year
(From April 1, 2017
to March 31, 2018)

511,631△86,181985,771△594,730

425,449△129,761

391,041△119,267

295,687

271,773

7,437－

Deferred gains or losses on hedges:
Amount arising in the current fiscal year－

△7,437

7,437△2,283△7,437

5,153△5,153

Amount arising in the current fiscal year

△478,630

491,053

Remeasurements of defined benefit plans, net of tax:
Amount arising in the current fiscal year

△95,130△9,768△13,398

13,926△108,529

Reclassification adjustment
Before tax effects
Tax effects
Deferred gains or losses on hedges

2,283

Foreign currency translation adjustment:

Reclassification adjustment
Before tax effects
Tax effects
Remeasurements of defined benefit plans, net of tax
Share of other comprehensive income of entities
accounted for using equity method:Amount arising in the current fiscal year
Total other comprehensive income- 62 -

33,166

4,158△1,296△75,362

2,861△140,791△13,356△393,944

747,179

(Notes Related to Consolidated Statements of Changes in Shareholders’ Equity and Other Net Assets)
Previous consolidated fiscal year (From April 1, 2016 to March 31, 2017)
1. Matters concerning class and number of shares issued and outstanding and of shares of treasury stock
Number of shares at the
beginning of theconsolidated fiscal year

Increase in the numberof shares during theconsolidated fiscal year

Decrease in the numberof shares during theconsolidated fiscal year

Number of shares at theend of the consolidated
fiscal year

Common stock (See Note 1)

35,611,124

68,500－35,679,624

Total

35,611,124

68,500－35,679,624

6,215

321

－

6,536

Shares issued and outstanding

Treasury stock
Common stock (See Note 2)
Total
Note: 1.
2.

－
6,215
321
6,536
The increase of 68,500 shares in the number of shares issued and outstanding (common stock) is due to an issuance of
new shares through the exercise of stock acquisition rights.
The increase of 321 shares in the number of shares of treasury stock (common stock) is due to a purchase of sharesconstituting less than one full unit.

2. Matters concerning stock acquisition rights and treasury stock acquisition rights

Details of stockacquisition rights

Stock acquisition rights
issued as stock options

---

---

---

---

---

143,292

---

---

---

---

---

143,292

Category

Submitting
Company(Parent
company)
Total

Number of shares subject to stock acquisition
Balance at therightsend of the
At theIncrease
DecreaseAt the end of consolidated
beginning offiscal year
during theduring thethethe
consolidated consolidated consolidated (Thousands ofconsolidatedyen)fiscal year
fiscal year
fiscal year
fiscal year

Class ofshares subject
to stockacquisitionrights3. Matters concerning dividends(1) Dividends paid
Resolution

Class of shares

Total amount of dividends(Thousands of yen)

Dividend pershare (Yen)

Ordinary General
Meeting ofCommon stock
818,912
23.00
Shareholders ofJune 24, 2016
Note:
The dividend per share of 35 yen includes a special dividend of 11 yen.

Record date

Effective date

March 31, 2016

June 27, 2016

(2) Dividends whose record date belongs to the current consolidated fiscal year but whose effective date belongs
to the next consolidated fiscal year
Resolution

Class of shares

Total amount ofdividends(Thousands of yen)

Source ofdividends

Ordinary General
Meeting of
Shareholders ofJune 28, 2017

Common stock

713,461Retainedearnings- 63 -

Dividend pershare (Yen)Record date

20.00 March 31, 2017

Effective dateJune 29, 2017

Current consolidated fiscal year (From April 1, 2017 to March 31, 2018)
1. Matters concerning class and number of shares issued and outstanding and of shares of treasury stock
Number of shares at the
beginning of theconsolidated fiscal year

Increase in the numberof shares during theconsolidated fiscal year

Decrease in the numberof shares during theconsolidated fiscal year

Number of shares at theend of the consolidated
fiscal year

Common stock (See Note 1)

35,679,624

344,500－

36,024,124

Total

35,679,624

344,500－

36,024,124

6,536

548

－

7,084

Shares issued and outstanding

Treasury stock
Common stock (See Note 2)
Total
Note: 1.
2.

－
6,536
548
7,084
The increase of 344,500 shares in the number of shares issued and outstanding (common stock) is due to an issuanceof new shares through the exercise of stock acquisition rights.
The increase of 548 shares in the number of shares of treasury stock (common stock) is due to a purchase of sharesconstituting less than one full unit.

2. Matters concerning stock acquisition rights and treasury stock acquisition rights

Details of stockacquisition rights

Stock acquisition rights
issued as stock options

---

---

---

---

---

127,640

---

---

---

---

---

127,640

Category

Submitting
Company(Parent
company)
Total

Number of shares subject to stock acquisition
Balance at therightsend of the
At theIncrease
DecreaseAt the end of consolidated
beginning offiscal year
during theduring thethethe
consolidated consolidated consolidated (Thousands ofconsolidatedyen)fiscal year
fiscal year
fiscal year
fiscal year

Class ofshares subject
to stockacquisitionrights3. Matters concerning dividends(1) Dividends paid
Resolution

Class of shares

Total amount of dividends(Thousands of yen)

Dividend pershare (Yen)

Ordinary General
Meeting of
Shareholders of June
28, 2017

Common stock

713,461

20.00

Record date

Effective date

March 31, 2017

June 29, 2017

(2) Dividends whose record date belongs to the current consolidated fiscal year but whose effective date belongs
to the next consolidated fiscal year
Resolution

Class of shares

Total amount ofdividends(Thousands of yen)

Source ofdividends

Ordinary General
Meeting of
Shareholders ofJune 28, 2018

Common stock

1,224,579

Retainedearnings- 64 -

Dividend pershare (Yen)Record date

34.00 March 31, 2018

Effective dateJune 29, 2018

(Notes Related to Consolidated Statements of Cash Flows)*1 The correlation between the balance of cash and cash equivalents at the end of the current and previous
consolidated fiscal years and the amounts shown for the corresponding items on the relevant consolidated balance
sheets(Thousands of yen)Previous consolidated fiscal year
(From April 1, 2016
to March 31, 2017)
Cash and deposits
Time deposits with a deposit term of more than three months

7,667,985△761,568

Securities (Money management fund)Cash and cash equivalents*2

Current consolidated fiscal year
(From April 1, 2017
to March 31, 2018)
9,123,877△538,000

119,782

243,92

7,026,200

8,829,805

Principal assets and liabilities of a company that became a consolidated subsidiary due to acquisition of stockin the current consolidated fiscal year
Assets and liabilities of the corporation at time of its consolidation resulting from the acquisition of stock ofSatosen Co., Ltd. as well as the relationship between the acquisition price of Satosen's stock and expenditures(net) for the acquisition of Satosen are presented below.
(Thousands of yen)

Current assets
Non-current assets

1,213,804
1,100,544

Goodwill
Current liabilities

355,527△943,047

Non-current liabilities
Acquisition price of Satosen's stock
Satosen's cash and cash equivalents
Balance: Expenditures for the acquisition of
Satosen Co., Ltd.

△1,076,828
650,000△100,634
549,365(Notes Related to Lease Transactions)(As lessee)
Finance lease transactions
Finance lease transactions that do not entail transfer of title
1) Details of lease assets
Property, plant and equipment
Photovoltaic facility, mainly. (falling under “Machinery, equipment and vehicles” respectively)
2) Methods of depreciation and amortization of lease assets
As is stated in (Important Matters Underlying Preparation of Consolidated Financial Statements) - 4. Mattersconcerning accounting policies - (2) Methods of depreciation and amortization of important depreciable assets.

(Notes Related to Financial Instruments)
1. Matters concerning the status of financial instruments(1) Policies for financial instruments
Our Group obtains funds required in light of its financing plan and business plan (mainly through bankloans), and invest any temporary surplus funds in highly liquid financial instruments, and also obtains shortterm operating funds through bank loans. Our Group makes use of derivative transactions in order to avoid
the risks mentioned below and maintains a policy of eschewing speculative transactions.
(2) Description of financial instruments and risks associated with such financial instruments
Notes and accounts receivable, a type of operating receivables, are exposed to customer credit risk, andforeign currency operating receivables are also exposed to exchange rate fluctuation risk.
Securities and investment securities consist of those held primarily as pure investments and equity sharesin the Company’s business partners and are exposed to market price fluctuation risk.

- 65 -

Notes and accounts payable, a type of operating payables, are mostly due in approximately four (4) months.
The notes and accounts payable denominated in foreign currencies are exposed to exchange rate fluctuation
risk.
Loans payable are primarily aimed at obtaining funds required for capital investment. They are fixed rateloans and liabilities and therefore are not exposed to interest rate fluctuation risk.
Derivative transactions conducted by our Group are restricted to forward exchange contracts with the
purpose to hedge exchange fluctuation risk in respect of operating receivables denominated in foreign
currency. To learn about hedging instruments and hedged items with respect to hedge accounting, hedging
policy and method of assessing hedge effectiveness, etc., refer to "4. Matters concerning accounting
policies (6) Accounting method of significant hedge transactions" in [Notes] (Important Matters Underlying
Preparation of Consolidated Financial Statements) described above.

(3) Risk management system for financial instruments
1) Management of credit risk (Risks associated with default of contract by business partners, etc.)
As for notes and accounts receivable, the sales departments set a credit limit for each of the Company’s
regular customers, monitoring such customers’ respective payment schedules, remaining credit lines andoverall business conditions in an attempt to promptly recognize and reduce doubtful accounts.
As for securities and investment securities held for the purpose of fund management, higher-rated bonds
are selected to minimize credit risk.
2) Management of market risk (Risks associated with fluctuations in foreign exchange rates and interest
rates, etc.)
As for some foreign currency operating receivables and payables, forward exchange contracts may be
employed to avoid exchange rate fluctuation risk.
As for securities and investment securities, the Company continually reviews the holding status in lightof the relevant market conditions and business relations.
The execution and management of derivative transactions are conducted, pursuant to the management
rules that specify transaction authority and transaction amount limits, by the department in charge withthe approval of the person in charge of settlement.
3) Management of liquidity risk (Risk that payment cannot be made as and when due under contract) infinancing activities
The Company has entered into an overdraft agreement with its partner banks to ensure expeditious
financing and to minimize liquidity risk.
In financing activities, the Company prepares and updates a financial plan under its business plan andcapital investment plan and maintains liquidity on hand, etc. in an attempt to minimize liquidity risk.
(4) Supplementary explanations on matters concerning fair value, etc. of financial instruments
The fair value of financial instruments is based on either the quoted market price, if available, or areasonably estimated price where no market price is available. As variable factors are incorporated in thedetermination of the said reasonably estimated price, such price may vary depending on the choice among
different assumptions, etc.

- 66 -

2.

Matters concerning fair value, etc. of financial instruments
The amount shown on the consolidated balance sheets, the fair value and the difference between the former
and the latter are as follows. Financial instruments whose fair value is deemed extremely difficult to reasonably
determine are not included (See Note 2).
Previous consolidated fiscal year (As of March 31, 2017)
Amount shown on
consolidated balance sheets(Thousands of yen)
Fair value

Difference(1) Cash and deposits

7,667,985

7,667,985－(2) Notes and accounts receivable–trade12,618,700

12,618,700－(3) Securities and investment securities

24,057,039

22,669,512△1,387,526

44,343,725

42,956,198△1,387,526(1) Notes and accounts payable–trade

5,168,250

5,168,250－(2) Short-term loans payable

2,908,630

2,908,630－

362,974

362,974－

2,282,847

2,286,562

3,714

10,722,702

10,726,417

3,714

Total assets(3) Income taxes payable(4) Long-term loans payable (*1)
Total liabilities(*1) The current portion of long-term loans payable is included.
Current consolidated fiscal year (As of March 31, 2018)
Amount shown on
consolidated balance sheets(Thousands of yen)
Fair value

Difference(1) Cash and deposits

9,123,877

9,123,877－(2) Notes and accounts receivable–trade

15,947,189

15,947,189－(3) Securities and investment securities

24,023,638

25,379,821

1,356,182

49,094,705

50,450,888

1,356,182(1) Notes and accounts payable–trade

6,794,393

6,794,393－(2) Short-term loans payable

4,242,472

4,242,472－

930,529

930,529－2,506,615

2,502,645△3,96914,474,010

14,470,041△3,969Total assets(3) Income taxes payable(4) Long-term loans payable (*1)
Total liabilities(*1) The current portion of long-term loans payable is included.
Note: 1. Methods of calculating fair value of financial instruments and matters concerning securities
Assets(1) Cash and deposits and (2) Notes and accounts receivable–trade
As the fair value of these items approximates their respective book values due to their short maturities,
they are recorded at the pertinent book value.
(3) Securities and investment securities
The fair value of stock, etc. is based on the quoted price in an active market (e.g. a stock exchange),
and the fair value of bonds is based on the said quoted price or the price presented by the relevant financial
institutions, etc. For matters concerning securities with respect to each purpose of holding, refer to (Notes
Related to Securities).
Liabilities(1) Notes and accounts payable-trade, (2) Short-term loans payable and (3) Income taxes payable
As the fair value of these items approximates their respective book values due to their short maturities,
they are recorded at the pertinent book value.
(4) Long-term loans payable
The fair value of these loans is calculated based on the present value obtained by discounting the sumof the principal and the interest accruing thereon at the rate that should apply if a similar borrowing is- 67 -

newly made.
2. Financial instruments whose fair value is deemed extremely difficult to reasonably determine
Category

Previous consolidated fiscal year
(As of March 31, 2017)(Thousands of yen)
Current consolidated fiscal year
(As of March 31, 2018)604,776522,287

Unlisted stock, etc.

As these instruments have no quoted market price, and it is deemed extremely difficult to reasonably
determine their respective fair values, they are not included in “(3) Securities and investment securities”.
3. Scheduled amount of redemption after the consolidated closing date of monetary receivables and securities
with a maturity datePrevious consolidated fiscal year (As of March 31, 2017)(Thousands of yen)
Due within one
year

Due after one
year and within
five years

Due after five
years and within
ten years

Deposits

7,661,438－－－

Notes and accounts receivable–
trade

12,618,700

－

－

－

－

112,190－－(2) Corporate bonds

692,286

3,444,041

4,745,687

1,354,323(3) Other

14,023392,665

602,941

423,520

20,986,449

3,948,896

5,348,629

1,777,843

Due within one
year

Due after one
year and within
five years

Due after five
years and within
ten years

Deposits

9,111,499

3,000

－

－

Notes and accounts receivable–
trade

15,947,189

－

－

－

－

106,240－－(2) Corporate bonds

958,489

3,743,230

4,343,086

958,819(3) Other

13,280365,200

365,640－

26,030,458

4,217,670

4,708,726

958,819

Due after ten
years

Securities and investment securities
Available-for-sale securities witha maturity date(1) Government bonds, local
government bonds, etc.

Total

Current consolidated fiscal year (As of March 31, 2018)(Thousands of yen)
Due after ten
years

Securities and investment securities
Available-for-sale securities witha maturity date(1) Government bonds, local
government bonds, etc.

Total

4. Scheduled amount of repayment after the consolidated closing date of corporate bonds, long-term loans
payable, lease obligations and other interest-bearing liabilities
Previous consolidated fiscal year (As of March 31, 2017)
(Thousands of yen)
Due after one
Due after two Due after three Due after four
Due within one
Due after five
year and within years and within years and within years and within
year
years
two years
three years
four years
five years
Short-term loans payable

2,908,630

－

－

－

－

－

Long-term loans payable

446,754

1,121,245

714,848－－－

3,355,384

1,121,245

714,848

－

－

－

Total

- 68 -

Current consolidated fiscal year (As of March 31, 2018)(Thousands of yen)

Due after one
Due after two Due after three Due after four
Due within one
Due after five
year and within years and within years and within years and within
year
years
two years
three years
four years
five years
Short-term loans payable

4,242,472

－

－

－

－

－

Long-term loans payable

864,130

850,540

191,137

452,192

142,3126,304

5,106,602

850,540

191,137

452,192

142,312

6,304

Total

(Notes Related to Securities)
1. Available-for-sale securities
Previous consolidated fiscal year (As of March 31, 2017)(Thousands of yen)Type

Amount shown on
consolidated balance
sheetsAcquisition cost

(1) Equity Shares

2,668,643

967,766

1,700,876－－－

4,779,257

4,253,661

525,596

761,951

727,777

34,174(3) Other348,983

328,840

20,143

Subtotal

8,558,836

6,278,045

2,280,791

24,82430,102△5,278111,155

124,780△13,624

5,789,784

6,585,844△796,059

355,763401,895△46,131(3) Other

1,602,268

1,658,265△55,997

Subtotal

7,883,796

8,800,888△917,091

Difference(2) Bonds
Those whose amountshown on consolidatedbalance sheets exceeds theacquisition cost1) Government bonds, local
government bonds, etc.
2) Corporate bonds3) Other(1) Equity Shares(2) Bonds
Those whose amountshown on consolidatedbalance sheets does notexceed the acquisition cost

Total
Note:

1) Government bonds, local
government bonds, etc.
2) Corporate bonds3) Other

16,442,632

15,078,933
1,363,699
As shares of unlisted stock, etc. (shown in the amount of 325,999 thousand yen on the consolidated balance sheets) haveno quoted market price, and it is deemed extremely difficult to reasonably determine their respective fair values, they
are not included in the table above.

- 69 -

Current consolidated fiscal year (As of March 31, 2018)(Thousands of yen)Type

Amount shown on
consolidated balance
sheetsAcquisition cost

(1) Equity Shares

3,605,283

852,9022,752,381－－－

4,387,051

4,155,214

231,837

364,581362,3712,209(3) Other562,862

553,440

9,421

Subtotal

8,919,779

5,923,929

2,995,850－－－

104,680

124,598△19,917

5,863,278

6,955,231△1,091,953

425,871504,505△78,633(3) Other786,211

840,159△53,947

Subtotal

7,180,041

8,424,494△1,244,452

Difference(2) Bonds
Those whose amountshown on consolidatedbalance sheets exceeds theacquisition cost1) Government bonds, local
government bonds, etc.
2) Corporate bonds3) Other(1) Equity Shares(2) Bonds
Those whose amountshown on consolidatedbalance sheets does notexceed the acquisition cost

Total
Note:

1) Government bonds, local
government bonds, etc.
2) Corporate bonds3) Other

16,099,821
14,348,423
1,751,397
As shares of unlisted stock, etc. (shown in the amount of 168,247 thousand yen on the consolidated balance sheets) haveno quoted market price, and it is deemed extremely difficult to reasonably determine their respective fair values, they
are not included in the table above.

2. Available-for-sale securities sold
Previous consolidated fiscal year (From April 1, 2016 to March 31, 2017)
Type

Amount sold(Thousands of yen)

Total gain on sale

Total loss on sale

2

0

－

－

－

－

2) Corporate bonds

421,619

53,14916,2003) Other

14,635

1,861－

941,737

52,907

4,236

1,377,993

107,919

20,437(1) Equity Shares(2) Bonds
1) Government bonds,
local government
bonds, etc.

(3) Other
Total

Current consolidated fiscal year (From April 1, 2017 to March 31, 2018)
Type(1) Equity Shares

Amount sold(Thousands of yen)

Total gain on sale

Total loss on sale

976,820734,374

21

－

－

－

2) Corporate bonds

702,085

29,55886,3803) Other

178,360

12,331－(3) Other

1,130,227

8,645

40,182

Total

2,987,494

784,909

126,584(2) Bonds
1) Government bonds,
local government
bonds, etc.

- 70 -

3. Securities subject to impairment
An impairment of available-for-sale securities totalling 1,350 thousand yen was made in the previous
consolidated fiscal year.
An impairment of available-for-sale securities totalling 63,595thousand yen was made in the current
consolidated fiscal year.
In this regard, an impairment of securities is made in full if the fair value at the end of the consolidated
fiscal year is 50% or less of the acquisition cost, and in such amount as deemed necessary in view of theprospects for a price rebound, etc. if the fair value at the end of the consolidated fiscal year falls within therange of 30% to 50% of the acquisition cost.
(Notes Related to Derivative Transactions)
1. Derivative transaction not subject to hedge accounting
No applicable matter.
2. Derivatives transactions subject to hedge accounting
Currency-related transactions
Previous consolidated fiscal year (As of March 31, 2017)

Hedge accounting
methodDesignated hedge
accounting forforward foreignexchange, etc.

Type of transactions

Major hedged items

Contract amount(Thousands ofyen)Contract
amount due
after 1 yearperiod(Thousands ofyen)

Accounts receivable

630,500－

7,437

630,500－

7,437

Fair value(Thousandsof yen)Forward foreign exchangetransactions
Short open position
U.S. dollar
Total

Note: 1. The method of calculating the fair market value is based on the price presented by the counterparty financial institution.
2. Because it is calculated together with the accounts receivable considered as hedged item, the amount of fair value by
designated hedge accounting for forward foreign exchange contracts, etc. is included in the fair value of such accounts
receivable.

Current consolidated fiscal year (As of March 31, 2018)
No applicable matter.

- 71 -

(Notes Related to Retirement Benefits)
1. Outline of retirement benefit plans adopted by the GroupThe Company and some of its consolidated subsidiaries adopt, as a defined benefit scheme, the defined benefit
corporate pension plan and the retirement lump-sum distribution plan. The Submitting Company shifted to thedefined benefit corporate pension plan from the qualifying retirement pension plan as of April 1, 2007. Someof the Company’s domestic consolidated subsidiaries participate in the Smaller Enterprise Retirement
Allowance Mutual Aid System as a defined contribution scheme. Some of the Company’s overseas consolidated
subsidiaries adopt the defined contribution retirement allowance plan.
2.

Defined benefit scheme (including plans employing the simplified method)(1) Reconciliation between the beginning and ending balances of retirement benefit obligations
Previous consolidated fiscal year
(From April 1, 2016
to March 31, 2017)
Balance of retirement benefit obligations
at the beginning of year
Service cost
Interest cost
Actuarial differences generated
Retirement benefits paid
Increase resulting from acquisition of a3,905,242

4,134,272

253,927
11,637

268,528
12,32372,647△109,181

46,431△83,603－

13,5904,134,272

4,391,542

consolidated subsidiary
Balance of retirement benefit obligations
at the end of year

(Thousands of yen)
Current consolidated fiscal year
(From April 1, 2017
to March 31, 2018)(2) Reconciliation between the beginning and ending balances of plan assets

Balance of plan assets at the beginning of year
Expected return on plan assets

Previous consolidated fiscal year
(From April 1, 2016
to March 31, 2017)
3,483,259
34,832△22,483(Thousands of yen)
Current consolidated fiscal year
(From April 1, 2017
to March 31, 2018)
3,576,160
35,761Retirement benefits paid

189,552△109,001

36,663223,004△83,603

Balance of plan assets at the end of year

3,576,160

3,787,985

Actuarial differences generated
Employer contributions(3) Reconciliation between the ending balance of retirement benefit obligations and plan assets combined
and the net defined benefit liability and net defined benefit asset shown on consolidated balance sheets
Previous consolidated fiscal year
(As of March 31, 2017)
4,107,872
Retirement benefit obligations under the funded plans△3,576,160
Plan assets(Thousands of yen)
Current consolidated fiscal year
(As of March 31, 2018)
4,349,942△3,787,985

531,711561,956

Retirement benefit obligations under the unfundedplans

26,40041,599Net amount of liability and asset shown on
consolidated balance sheets

558,112603,556

Net defined benefit liability

558,112603,556

558,112603,556

Net amount of liability and asset shown on
consolidated balance sheets- 72 -

(4) Amount of retirement benefit expenses and components thereofService cost
Interest cost

Previous consolidated fiscal year
(From April 1, 2016
to March 31, 2017)
253,927
11,637(Thousands of yen)
Current consolidated fiscal year
(From April 1, 2017
to March 31, 2018)
268,528
12,323△34,832

Expected return on plan assets
Recognized actuarial loss
Retirement benefit expenses incurred under
defined benefit scheme△13,398△35,761
13,926217,333

259,016(5) Remeasurements of defined benefit plans, net of tax
Remeasurements of defined benefit plans, net of tax (before tax effects) consist of the following.

Actuarial differences

Previous consolidated fiscal year
(From April 1, 2016
to March 31, 2017)
108,529(Thousands of yen)
Current consolidated fiscal year
(From April 1, 2017
to March 31, 2018)△4,158(6) Remeasurements of defined benefit plans
Remeasurements of defined benefit plans (before tax effects) consist of the following.

Unrecognized actuarial differences
Note:

Previous consolidated fiscal year
(As of March 31, 2017)△199,774(Thousands of yen)
Current consolidated fiscal year
(As of March 31, 2018)△195,616

The figures stated above only cover the Company and its consolidated subsidiaries, while the amount shown asremeasurements of defined benefit plans includes not only the figures stated above but also the unrecognizeditems attributable to the companies accounted for under the equity method (Amount corresponding to theCompany’s equity interest).

(7) Matters concerning plan assets
1) Rough breakdown of plan assets
The categorical distribution of the total plan assets held is as follows.
Previous consolidated fiscal year Current consolidated fiscal year
(As of March 31, 2017)(As of March 31, 2018)
Life insurance company general accounts
51%
51%
Trust bank special accounts
30%
25%Life insurance company special accounts
19%
24%
Total
100%
100%
Note: Each account comprises a diverse range of investment asset classes centering on domestic bonds, in areflection of the basic policy of securing stable returns.

2) Method of determining the expected long-term rate of return on plan assets
The current and expected future allocations of the plan assets as well as the current and anticipatedlong-term rates of return on the diverse range of asset classes comprising the plan assets are taken into
account in determining the expected long-term rate of return on plan assets.
(8) Matters concerning actuarial assumptions
Major actuarial assumptions
Previous consolidated fiscal year Current consolidated fiscal year
(As of March 31, 2017)(As of March 31, 2018)
Discount rate
0.3%
0.3%
Expected long-term rate of return on plan assets
1.0%
1.0%
1.0～2.8%
1.0～2.8%
Expected rates of salary increase- 73 -

3. Defined contribution scheme
The total amount required for contributions to the defined contribution plans of some of the Company’s
domestic consolidated subsidiaries and overseas consolidated subsidiaries was 51,308 thousand yen for theprevious consolidated fiscal year (From April 1, 2016 to March 31, 2017) and 60,334 thousand yen for thecurrent consolidated fiscal year (From April 1, 2017 to March 31, 2018).
(Notes Related to Stock Options, etc.)
1. Amount recorded as expenses and item of expenses associated with stock options(Thousands of yen)Previous consolidated fiscal year
(From April 1, 2016
to March 31, 2017)

Current consolidated fiscal year
(From April 1, 2017
to March 31, 2018)

44,72542,636

Previous consolidated fiscal year
(From April 1, 2016
to March 31, 2017

Current consolidated fiscal year
(From April 1, 2017
to March 31, 2018)

8,714

2,054

Share-based compensation expenses in cost of sales
and selling, general and administrative expenses

2. Amount recorded as income due to forfeiture by non-exercise of rights(Thousands of yen)

Gain on reversal of share acquisition rights- 74 -

3. Outline and scale of stock options and changes(1) Outline of stock options
Directors’ retirement bonuses
stock option in 2005

Employees, etc.
stock option in 2012

Directors’ remuneration
stock option in 2013

Category and number ofgrantees

6 directors of the Company

165 employees and advisors of theCompany, and 6 directors andemployees of subsidiaries of theCompany

6 directors of the Company

Number of stock options(See Note)

39,700 shares of common stock

194,500 shares of common stock

80,000 shares of common stock

Grant dateAugust 1, 2005

August 16, 2012

August 16, 2013

No condition for vesting is set, but
the condition for exercising the rights
is as follows:- Being a director or an employee of
the Company (including an advisor
and a counselor) or a director or an
employee of a subsidiary of theCompany (including an advisor) at
the time of exercising the rights.

No condition for vesting is set, but
the condition for exercising the rights
is as follows:- Being a director or an employee of
the Company (including an advisor
and a counselor) or a director or an
employee of a subsidiary of theCompany (including an advisor) at
the time of exercising the rights.

Conditions for vesting

No condition for vesting is set, but
the conditions for exercising therights are as follows:(1) Eligible person may exercise thestock acquisition rights only on theoccasion of his or her retirement fromthe post of director of the Company;
provided, however, that the eligible
person shall exercise the stockacquisition rights in the period
between the date immediately
following the date of his or her
retirement (hereinafter referred to as
the “Date of Commencing Exerciseof Right”) and the date elapsing ten(10) days from the Date ofCommencing Exercise of Right (bothdates inclusive).
(2) In the event of the eligible
person’s death, among his or her
heirs, only the spouse, children andlineal ascendants (first degree) of theeligible person may exercise thestock acquisition rights; provided,
however, that such heirs shall
exercise the stock acquisition rights
in the period between the date
immediately following the date ofretirement of the eligible person bydeath and the date elapsing three (3)months from such date (both dates
inclusive).

1 year and 11 months(August 16, 2012 through June30, 2014)

1 year and 11 months(August 16, 2013 through June30, 2015)

July 1, 2014 through June 30, 2017

July 1, 2015 through June 30, 2018

Requisite service period

Exercise period

N.A.
August 1, 2005 through July 31,
2025- 75 -

Employees, etc.

Directors’ remuneration
stock option in 2014

stock option in 2013

Employees, etc.
stock option in 2014

Category and number ofgrantees

163 employees and advisors of theCompany, and 9 directors andemployees of subsidiaries of theCompany

6 directors of the Company

163 employees and advisors of theCompany, and 10 directors andemployees of subsidiaries of theCompany

Number of stock options(See Note)

203,100 shares of common stock

93,000 shares of common stock

216,500 shares of common stock

Grant dateAugust 16, 2013

August 18, 2014

August 18, 2014

Conditions for vesting

No condition for vesting is set, but
the condition for exercising the rights
is as follows:- Being a director or an employee of
the Company (including an advisor
and a counselor) or a director or an
employee of a subsidiary of theCompany (including an advisor) at
the time of exercising the rights.

No condition for vesting is set, but
the condition for exercising the rights
is as follows:- Being a director or an employee of
the Company (including an advisor
and a counselor) or a director or an
employee of a subsidiary of theCompany (including an advisor) at
the time of exercising the rights.

No condition for vesting is set, but
the condition for exercising the rights
is as follows:- Being a director or an employee of
the Company (including an advisor
and a counselor) or a director or an
employee of a subsidiary of theCompany (including an advisor) at
the time of exercising the rights.

Requisite service period

1 year and 11 months(August 16, 2013 through June30, 2015)

1 year and 11 months(August 18, 2014 through June30, 2016)

1 year and 11 months(August 18, 2014 through June30, 2016)

Exercise period

July 1, 2015 through June 30, 2018

July 1, 2016 through June 30, 2019

July 1, 2016 through June 30, 2019

Directors’
remunerationstock option in 2014

Employees, etc.stock option in 2015

Directors’
remunerationstock option in 2015

Category and number ofgrantees

5 directors of the Company

176 employees and advisors of theCompany, and 20 directors andemployees of subsidiaries of theCompany

5 directors of the Company

Number of stock options(See Note)

78,000 shares of common stock

241,400 shares of common stock

73,000 shares of common stock

Grant dateAugust 17, 2015

August 17, 2015

August 16, 2016

Conditions for vesting

No condition for vesting is set, but
the condition for exercising the rights
is as follows:- Being a director or an employee of
the Company (including an advisor
and a counselor) or a director or an
employee of a subsidiary of theCompany (including an advisor) at
the time of exercising the rights.

No condition for vesting is set, but
the condition for exercising the rights
is as follows:- Being a director or an employee of
the Company (including an advisor
and a counselor) or a director or an
employee of a subsidiary of theCompany (including an advisor) at
the time of exercising the rights.

No condition for vesting is set, but
the condition for exercising the rights
is as follows:- Being a director or an employee of
the Company (including an advisor
and a counselor) or a director or an
employee of a subsidiary of theCompany (including an advisor) at
the time of exercising the rights.

Requisite service period

1 year and 11 months(August 17, 2015 through June30, 2016)

1 year and 11 months(August 17, 2015 through June30, 2017)

1 year and 11 months(August 16, 2016 through June30, 2017)

Exercise period

July 1, 2017 through June 30, 2020

July 1, 2017 through June 30, 2020

July 1, 2018 through June 30, 2021

- 76 -

Employees, etc.stock option in2016

Directors’
remunerationstock option in 2016

Employees, etc.
stock option in 2017
194 employees and advisors of theCompany, and 10 directors andemployees of subsidiaries of theCompany

Category and number ofgrantees

187 employees and advisors of theCompany, and 14 directors andemployees of subsidiaries of theCompany

5 directors of the Company

Number of stock options(See Note)

234,000 shares of common stock

75,000shares of common stock

235,300 shares of common stock

Grant dateAugust 16, 2016

August 16, 2017

August 16, 2017

No condition for vesting is set, but
the condition for exercising therights is as follows:- Being a director or an employee of
the Company (including an advisor
and a counselor) or a director or an
employee of a subsidiary of theCompany (including an advisor) at
the time of exercising the rights.

No condition for vesting is set, but
the condition for exercising therights is as follows:- Being a director or an employee of
the Company (including an advisor
and a counselor) or a director or an
employee of a subsidiary of theCompany (including an advisor) at
the time of exercising the rights.

No condition for vesting is set, but
the condition for exercising therights is as follows:- Being a director or an employee of
the Company (including anadvisor and a counselor) or adirector or an employee of a
subsidiary of the Company(including an advisor) at the timeof exercising the rights.

Requisite service period

1 year and 11 months(August 16, 2016 through June30, 2018)

1 year and 11 months(August 16, 2017 through June30, 2019)

1 year and 11 months(August 16, 2017 through June 30,
2019)

Exercise period

July 1, 2018 through June 30, 2021

July 1, 2019 through June 30, 2022

July 1, 2019 through June 30, 2022

Conditions for vesting

Note:

Stated in terms of shares of stock.

- 77 -

(2) Scale of stock options granted and changes
Stock options that existed during the current consolidated fiscal year (fiscal year ended March 31, 2018) arecovered, with the number of stock options stated in terms of shares of stock.
(a) Number of stock options
Directors’ retirement
bonuses
stock option in 2005

Employees, etc.
stock option in 2012

Directors’ remuneration
stock option in 2013

At the end of the previous
consolidated fiscal year

－

－

－

Granted－－－Forfeited－－－

Vested－－－Outstanding

－

－

－

27,70041,40060,000

Vested－－－Exercised600

19,40060,000Forfeited－

22,000－27,100－－

Employees, etc. stock
option in 2013

Directors’ remuneration
stock option in 2014

Employees, etc. stock
option in 2014

At the end of the previous
consolidated fiscal year－－

93,000Granted－－－Forfeited－－－

Vested－－93,000

Outstanding

－

－

－

139,700

93,000

197,500－－－

Exercised

85,70045,60082,100Forfeited

300

－

300

Exercisable

53,70047,400115,100

Before vested

After vested(Shares)(Shares)At the end of the previous
consolidated fiscal year

Exercisable

Before vested

After vested
At the end of the previous
consolidated fiscal year

(Shares)(Shares)

Vested- 78 -

Directors’ remuneration
stock option in 2015

Employees, etc. stock
option in 2015

Directors’ remuneration
stock option in 2016

78,000234,300

73,000Granted－－－Forfeited－－－

78,000234,300－－－

73,000－－－

Vested78,000234,300－

Exercised

17,00034,100－Forfeited

－

3,700

－

61,000196,500－

Before vested(Shares)At the end of the previous
consolidated fiscal year

VestedOutstanding
After vested(Shares)At the end of the previous
consolidated fiscal year

Exercisable

Employees, etc. stock
option in 2016

Directors’ remuneration
stock option in 2017

232,000－

Granted－75,000235,300

Forfeited

100

－

100

Vested－－－231,900

75,000235,200

At the end of the previous
consolidated fiscal year

－

－

－

Vested－－－Exercised－－－

Forfeited－－－

Exercisable

－

－

－

Before vested(Shares)At the end of the previous
consolidated fiscal year

Outstanding
After vested

Employees, etc. stock
option in 2017

(Shares)- 79 -

(b) Unit price information
Directors’ retirement
bonuses
stock option in 2005

Employees, etc.
stock option in 2012

Directors’ remuneration
stock option in 2013

223

569

Exercise price

(Yen)

1

Average stock price at the timeof exercise

(Yen)

863

Fair value at the grant date

(Yen)

－

64

159

Employees, etc. stock
option in 2013

Directors’ remuneration
stock option in 2014

Employees, etc. stock
option in 2014

741

741

855

883

Exercise price

(Yen)

569

Average stock price at the timeof exercise

(Yen)

1,038

Fair value at the grant date

(Yen)

159

182

182

Directors’ remuneration
stock option in 2015

Employees, etc. stock
option in 2015

Directors’ remuneration
stock option in 2016

867

536

1,141

－
98

1,229

1,056

Exercise price

(Yen)

867

Average stock price at the timeof exercise

(Yen)

1,119

Fair value at the grant date

(Yen)

168

168

Employees, etc. stock
option in 2016

Directors’ remuneration
stock option in 2017

Employees, etc.
stock option in 2017
1,004

Exercise price

(Yen)

536

1,004

Average stock price at the timeof exercise

(Yen)

－

－

Fair value at the grant date

(Yen)

98

188

188

4. Method of estimating fair value of stock options
Method of estimating fair value of directors’ remuneration stock option in 2017 and employees, etc. stock
option in 2017 granted in the current consolidated fiscal year is as follows.
1) Valuation technique used
Black-Scholes model
2) Principal parameters and method of estimation
Directors’ remuneration
stock option in 2017

Employees, etc.
stock option in 2017

Stock price volatility(See Note 1)

34.26％

34.26％

Expected life

(See Note 2)

3 years and 6 months

3 years and 6 months

Expected dividends(See Note 3)

20.00 yen per share

20.00 yen per share

Risk-free interest rate

(See Note 4)

0.00％

0.00％

Note:

1.
2.
3.
4.

Calculated based on the actual stock prices during the three (3) years and six (6) months from February
2014 to August 2017.
As reasonable estimates are difficult to make due to a lack of sufficient accumulation of data, the expected
life is estimated on the presumption that the rights are exercised at the midpoint of the exercise period.
Based on the actual amount of dividends for the consolidated fiscal year ended March 31, 2017.
Japanese government bond yield for the period corresponding to the expected life.

- 80 -

5. Method of estimating the number of stock options vested
Only the actual number of forfeited stock options is reflected because it is basically difficult to reasonably
estimate the number of stock options that will be forfeited in the future.
(Notes Related to Tax Effect Accounting)
1. Breakdown by major occurrence factor of deferred tax assets and deferred tax liabilities(Thousands of yen)Previous consolidated
fiscal year
(As of March 31, 2017)

Current consolidated
fiscal year
(As of March 31, 2018)

Deferred tax assets
Impairment loss
Loss on valuation of investment securities
Tax loss carry-forward
Allowance for doubtful accounts
Provision for bonuses
Loss on valuation of inventories
Other
Deferred tax assets subtotal
Valuation allowance
Deferred tax assets total
Deferred tax liabilities
Retained earnings of subsidiaries and associates
Valuation difference on available-for-sale securities
Reserve for advanced depreciation of non-current assets
Other

410,279

386,449

411,706
313,986

326,938
289,158

145,025
138,007

204,677
185,018

151,192562,275

142,657
731,236

2,132,473△1,385,032

2,266,135△1,126,479

747,441

1,139,656△790,008△903,239△431,227△17,936△534,550△118,452△35,863△72,123△1,275,036△1,628,364
Net amount of deferred tax assets (liabilities)△527,594△488,708
Note: Net amount of deferred tax assets (liabilities) in the previous consolidated fiscal year and the current consolidated
fiscal year is included in the following items in the consolidated balance sheets.
(Thousands of yen)
Deferred tax liabilities total

Previous consolidated
fiscal year
(As of March 31, 2017)
Current assets – Deferred tax assets

383,814
122,604△25,281△1,008,732

Non-current assets – Deferred tax assets
Current liabilities – Deferred tax liabilities
Non-current liabilities – Deferred tax liabilities- 81 -

Current consolidated
fiscal year
(As of March 31, 2018)584,907
200,976△85△1,274,507

2. Breakdown by item of major causes of any significant difference between the normal effective statutory tax rate
and the effective income tax rate after tax effect accounting
Previous consolidated
fiscal year
(As of March 31, 2017)
Normal effective statutory tax rate
(Adjustments)
Valuation allowance
Share of profit of entities accounted for using equity
methodDifference in tax rates with overseas subsidiaries
Special tax deductions
Items permanently excluded from taxable income
Retained earnings of subsidiaries and associates
Dividends income eliminated in consolidation
Items permanently excluded from tax-deductible
expenses
Consolidated adjustment items
Other
Effective income tax rate after tax effect accounting

Current consolidated
fiscal year
(As of March 31, 2018)

30.7％

30.5％

△7.6％
△5.1％

△6.3％

△2.3％
△1.3％
△3.1％
△0.4％
3.8％
1.5％

△2.9％
△2.1％
△1.7％
△2.4％
2.1％
0.7％

3.9％
1.0％
21.1％

0.3％
1.0％
21.0％

△3.0％

(Business Combinations)(Notes to business combinations by acquisition)
1. Outline of the business combination(1) Names of acquired companies and their business lines
Name of acquired company : Satosen Co., Ltd.
Business of acquired company: Manufacturing and selling of industrial printed circuit boards(2) Main reasons for business combination
The company is engaged in designing and prototyping printed wiring boards to mass production. We
believe that by transforming the company with high technical strength and product development
capability into a subsidiary, we can realize synergistic effects and further enhance the corporate value of
the Group.
(3) Date of business combination
November 30, 2017(4) Legal form of business combination
Acquisition of shares(5) Company name after combination
Satosen Co., Ltd.
(6) Ratio of voting rights acquired
100%(7) Main basis for determining the acquiring company
The Company acquires shares of Satosen Co., Ltd. in consideration for cash paid.
2. Period for which the operating results of the acquired company are included in the consolidated financial
statements
From January 1, 2018 to March 31, 2018
3. Acquisition cost of the acquired companies and breakdown by type of consideration
Consideration for acquisition
Acquisition cost

Cash

650,000 thousand yen
650,000 thousand yen

4. Main details and amount of acquisition-related expenses
No applicable matter.
5. Amount, cause, amortization method and amortization period of goodwill incurred(1) Amount of goodwill arising from the business combination
355,527 thousand yen- 82 -

As allocation of the acquisition cost has not been completed, the amount of goodwill that occurred fromthis event is a provisional estimate.
(2) Cause of the goodwill
The goodwill arose due to Satosen Co.’s future additional earnings power that is expected from futurebusiness development.
(3) Amortization method and period
Straight-line amortization over 5 years.
6. Amount of assets received and liabilities undertaken on the date of the business combination and theirbreakdown
Current assets(Thousands of yen)
1,213,804

Non-current assets

1,100,544

Total assets

2,314,348

Current liabilities

943,047

Non-current liabilities

1,076,828

Total Liabilities

2,019,875

7. The allocation of acquisition cost
As classification of identifiable assets and liabilities as well as calculation of market value on the date of thebusiness combination had not been completed at the end of the current consolidated fiscal year, the allocationof acquisition cost has not been completed and therefore it is provisionally accounted based on practicalinformation available at the said time.
8. Estimated amount and calculation method for hypothetical impact on consolidated statements of income
for the fiscal year under review assuming business combination was completed on the first day of the
fiscal year under review
This information has been omitted owing to difficulties in calculating the estimated amount of suchimpact for the consolidated fiscal year ended March 31, 2018.
(Notes Related to Asset Retirement Obligations)
Asset retirement obligations that are recorded in the consolidated balance sheets(1) Outline of asset retirement obligations
These are restoration obligations, etc. in connection with real estate rental agreements for certain factories
and offices.
(2) Method of calculating the amount of asset retirement obligations
An estimated useful life of thirty-one (31) years and a discount rate at 1.9% are used in calculating theamount of asset retirement obligations.
(3) Changes in the aggregate amount of asset retirement obligations(Thousands of yen)Previous consolidated fiscal year
(From April 1, 2016
to March 31, 2017)
Balance at the beginning of year
Adjustment due to lapse of time
Increase resulting from acquisition of aconsolidated subsidiary
Other increase or decrease (: decrease)
Balance at the end of year

Current consolidated fiscal year
(From April 1, 2017
to March 31, 2018)58,31957,448158－

161
36,100△1,029△872

57,44892,837(Notes Related to Real Properties for Rent, etc.)
Statement is omitted as the aggregate value of the real properties for rent, etc. is not material.

- 83 -

(Segment Information, etc.)[Segment Information]
1. Outline of reportable segments
Reportable segments of the Company are those constituent units of the Company who make available
separate financial information and also are subject to periodic review by the board of directors aimed atdetermining the distribution of management resources and evaluating business results.
The Company has manufacturing and sales systems in place for each category of product and service at its
head office, etc. and conducts business activities based on the comprehensive strategies that the Company
develops for the domestic and overseas markets as to its products and services.
The Company’s business, therefore, consists of several segments that represent each category of product andservice and are based on the said manufacturing and sales systems. Such segments are the four (4) reportablesegments of the Company, i.e. “Electronic materials business”, “Industrial application structural materials
business”, “Electrical insulating materials business” and “Display materials business”.
“ Electronic materials business” produces materials for flexible and rigid printed circuit boards, etc.
“Industrial application structural materials business” produces filament winding molded products, honeycomb
panels and prepregs for aircraft, pultrusion molded products and FRP ski sheets, etc. “Electrical insulating
materials business” produces glass cloth, glass tapes and prepregs for electrical insulation, etc. “Display
materials business” produces 3D display filters and special optical films, etc.
With the liquidation of subsidiaries, the order of statement of our Group’s business segments was revised
effective from the current consolidated fiscal year. In this regard, "Related goods" which was a reportablesegment will be contained in "Other". Accordingly, the reportable segment information of the preceding
consolidated fiscal year is also made on the basis of the revised reportable segment.
2.

Method of calculating the amount of net sales, income or loss, assets, liabilities and other items with respect toeach reportable segment
The accounting methods applied to the reported business segments are basically the same as those stated inthe (Important Matters Underlying Preparation of Consolidated Financial Statements).
The amount of income or loss recorded for each reportable segment is based on the operating income orloss (before amortization of goodwill).
Inter-segment revenues and transfers are based on the prevailing market price.

- 84 -

3.

Information on the amount of net sales, income or loss, assets, liabilities and other items with respect to eachreportable segment
Previous consolidated fiscal year (From April 1, 2016 to March 31, 2017)(Thousands of yen)
Reportable segment

Net sales
Net sales to externalcustomers
Inter-segment sales
or transfers
Total
Segment income orloss ()Segment assets

Electronicmaterials

Industrial
application
structural
materials

Electricalinsulating
materials

Displaymaterials

Subtotal

20,306,830

7,319,538

3,117,177

2,802,618

33,546,164

905,531

34,451,696

－

－

－

－

－

753,598

753,598

20,306,830

7,319,538

3,117,177

2,802,618

33,546,164

1,659,130

35,205,294

1,850,067

568,401

570,337△172,492

2,816,313

196,884

3,013,198

20,110,482

7,487,433

3,220,313

10,387,071

41,205,300

1,131,072

42,336,373

1,064,184

189,227

96,292

203,593

1,553,297

29,826

1,583,124－－－

7,338,578

7,338,578－

7,338,578

1,163,852

121,440

21,837

100,805

1,407,934

8,635

1,416,569

Other(See Note)

Total

Other
Depreciation
Investment incompanies
accounted forunder the equity
methodIncrease inproperty, plant andequipment andintangible assets

Note: The column “Other” represents business operations that do not fall under any of the reportable segments and includes therelated goods sales, the logistics-related operations and other businesses, etc.

Current consolidated fiscal year (From April 1, 2017 to March 31, 2018)(Thousands of yen)
Reportable segment

Net sales
Net sales to externalcustomers
Inter-segment sales
or transfers
Total
Segment income orloss ()Segment assets

Other(See Note)

Electronicmaterials

Industrial
application
structural
materials

Electricalinsulating
materials

Displaymaterials

Subtotal

26,758,514

7,220,625

3,228,116

2,988,521

40,195,778

713,755

40,909,534

－

－

－

－

－

843,096

843,096

26,758,514

7,220,625

3,228,116

2,988,521

40,195,778

1,556,851

41,752,630

3,116,093

1,109,805

608,213△55,614

4,778,498

240,672

5,019,170

27,044,184

7,974,313

3,416,151

10,924,722

49,359,372

1,454,461

50,813,833

1,195,443

175,801

78,369145,435

1,595,048

25,512

1,620,561－－－

7,713,250

7,713,250－

7,713,250

894,521

136,411

36,20149,642

1,116,776

11,103

1,127,879

Total

Other
Depreciation
Investment incompanies
accounted forunder the equity
methodIncrease inproperty, plant andequipment andintangible assets

Note: The column “Other” represents business operations that do not fall under any of the reportable segments and includes therelated goods sales, the logistics-related operations and other businesses, etc.

- 85 -

4.

Difference between the total amount of reportable segments and the pertinent amount shown on the
consolidated financial statements as well as the key components of such difference (Matters concerning
difference adjustment)(Thousands of yen)
Net sales

Previous consolidated fiscal year

Current consolidated fiscal year

Total of reportable segments

33,546,164

40,195,778

Net sales in the category “Other”

1,659,130

1,556,851

Elimination of inter-segment transactions△753,598△843,096

Net sales shown on the consolidated financial
statements

34,451,696

40,909,534(Thousands of yen)

IncomePrevious consolidated fiscal year

Current consolidated fiscal year

Total of reportable segments

2,816,313

4,778,498

Income in the category “Other”

196,884

240,672

Elimination of inter-segment transactions△70,080△98,443△89△17,776△1,134,823△1,239,914△17,829△35,678

Amortization of goodwill
Unallocated corporate expenses (See Note)
Adjustment of inventories

Operating income shown on the consolidated
1,790,375
3,627,358
financial statements
Note: “Unallocated corporate expenses” are mostly general and administrative expenses that are not attributable to any of thereportable segments.
(Thousands of yen)
AssetsPrevious consolidated fiscal year

Current consolidated fiscal year

Total of reportable segments

41,205,300

49,359,372

Assets in the category “Other”
Elimination of claims to administrative departmentsof the head office
Unallocated corporate assets (See Note)

1,131,072

1,454,461△578,925△694,241

22,068,791

22,560,438△17,829△35,678

Adjustment of inventories

Total assets shown on the consolidated financial
63,808,409
72,644,352
statements
Note: “Unallocated corporate assets” are mostly investment securities, etc. that are not attributable to any of the reportablesegments.
(Thousands of yen)Amount shown on the
Total of reportable
Other
Adjustment
consolidated financial
segments
statements
Other item

Depreciation

Previous
consolidated
fiscal year

Current
consolidated
fiscal year

Previous
consolidated
fiscal year

Current
consolidated
fiscal year

Previous
consolidated
fiscal year

Current
consolidated
fiscal year

Previous
consolidated
fiscal year

Current
consolidated
fiscal year

1,553,297

1,595,048

29,82625,512

94,993

91,768

1,678,117

1,712,330

Increase in property, plantand equipment and1,407,934 1,116,776
8,635
11,103
184,71295,706 1,601,282 1,223,586
intangible assets
Note: The adjustment to “Increase in property, plant and equipment and intangible assets” represents capital investment in theassets used for the common corporate purpose.

- 86 -

[Related Information]
I Previous consolidated fiscal year (From April 1, 2016 to March 31, 2017)
1. Information by product and service(Thousands of yen)

Net sales to externalcustomers

Electronicmaterials

Industrial
application
structural
materials

Electricalinsulating
materials

Displaymaterials

Other

Total

20,306,830

7,319,538

3,117,177

2,802,618

905,531

34,451,696

2. Information by region(1) Net sales(Thousands of yen)Japan

P.R. China

16,252,218

7,451,964

Other country or
regionTotal

10,747,513

34,451,696

Note: Net sales are categorized by country or region on the basis of customer locations.

(2) Property, plant and equipment(Thousands of yen)Japan

Taiwan8,591,956

Other country or
region1,688,748

Total

784,699

11,065,403

3. Information by major customer(Thousands of yen)
Customer name

Net sales

Relevant segment

Sumitomo Shoji Chemicals Co., Ltd.

4,695,595

Electronic materials business

II Current consolidated fiscal year (From April 1, 2017 to March 31, 2018)
1. Information by product and service(Thousands of yen)

Net sales to externalcustomers

Electronicmaterials

Industrial
application
structural
materials

Electricalinsulating
materials

Displaymaterials

Other

Total

26,758,514

7,220,625

3,228,116

2,988,521

713,755

40,909,534

2. Information by region(1) Net sales(Thousands of yen)Japan
18,823,232

P.R. China
12,452,111

Other country or
region9,634,189

Total
40,909,534

Note: Net sales are categorized by country or region on the basis of customer locations.

(2) Property, plant and equipment(Thousands of yen)Japan
9,104,933

Taiwan1,759,963

Other country or
region770,758- 87 -

Total
11,635,655

3. Information by major customer(Thousands of yen)
Customer name

Net sales

Sumitomo Shoji Chemicals Co., Ltd.

Relevant segment
6,185,199

Electronic materials business[Information on impairment loss on non-current assets with respect to each reportable segment]
Previous consolidated fiscal year (From April 1, 2016 to March 31, 2017)
No applicable matter.
Current consolidated fiscal year (From April 1, 2017 to March 31, 2018)(Thousands of yen)

Impairment loss

Electronicmaterials

Industrial
application
structural
materials

Electricalinsulating
materials－－－

Displaymaterials

Unallocated/
Eliminated

Other

－

26,028

Total－

26,028[Information on amortization of goodwill and unamortized balance with respect to each reportable segment]
Previous consolidated fiscal year (From April 1, 2016 to March 31, 2017)(Thousands of yen)Amortization in
the year
Balance at theend of year

Electronicmaterials

Industrial
application
structural
materials

Electricalinsulating
materials

－

－

－

89

－

－

89

－

－

－

－

－

－

－

Displaymaterials

Unallocated/
Eliminated

Other

Total

Current consolidated fiscal year (From April 1, 2017 to March 31, 2018)(Thousands of yen)
Electronicmaterials

Industrial
application
structural
materials

Electricalinsulating
materials

Displaymaterials

Other

Unallocated/
Eliminated

Total

Amortization in
－
－
－
－
－
17,776
17,776the year
Balance at the
－
－
－
－
－
337,751
337,751
end of year
Note: As allocation of the acquisition cost has not been completed, 337,751 thousand yen at the end of year is a provisional
estimate.

[Information on gain on bargain purchase with respect to each reportable segment]
No applicable matter.
(Information on Related Parties)
1. Transactions with related parties
Transactions between the company submitting the consolidated financial statements and related parties
Directors and major shareholders (individuals only), etc. of the company submitting the consolidated financial
statements- 88 -

Previous consolidated fiscal year (From April 1, 2016 to March 31, 2017)
No applicable matter.
Current consolidated fiscal year (From April 1, 2017 to March 31, 2018)
Capital stock
Full name orType

corporate nameor investment
Locationin capital(Thousands ofRatio ofBusiness outline voting rightor occupation

Chairman,

Director

Sanji Arisawaof the－－Representative
Director of theCompany

holding

Relationship

Description

transactionof transaction (Thousands of(held), etc.

yen)

Balance at

Amount of

the end of
Item

yen)

1.30%
directly
heldyear(Thousandsof yen)Exercise of－

the right of

11,380－－20,465－－16,080－－stock option

Company
Representative

Director

Director andYuta Arisawaof the－－ Chief Executive

Company

Officer of the

0.24%
directly
held

Exercise of－

the right ofstock option

Company
Director andDirector

Yoshihikoof theCompany

Note:

Toda

－

－

0.10%

Exercise of

Senior Managing directly
Operating Officer

－

held

the right ofstock optionof the Company

Terms of transactions and the policy for determining the terms of transactions, etc.
The table above covers the exercises in the previous consolidated fiscal year of the rights of stock option granted undera resolution at the Board of Directors’ Meeting of the Company of June 27, 2013, the rights of stock option granted undera resolution at the Board of Directors’ Meeting of the Company of June 26, 2014 and the rights of stock option granted
under a resolution at the Board of Directors’ Meeting of the Company of June 26, 2015.
The column “Amount of transaction” indicates the amount obtained by multiplying the number of shares of stock
granted through the exercise in the previous consolidated fiscal year of the pertinent right of stock option by the paid-in
amount per share.

2.

Notes with respect to parent or important affiliated companies(1) Information on parent
No applicable matter.
(2) Condensed financial information on important affiliated companies
In the current consolidated fiscal year, the important affiliated company was Polatechno Co., Ltd., andits condensed consolidated financial information for the previous and current consolidated fiscal years
was as shown below.
(Thousands of yen)
Polatechno Co., Ltd.
Previous consolidated
Current consolidated
fiscal year
fiscal year

Total current assets
Total non-current assets

28,364,341
10,320,453

28,837,343
10,831,902

Total current liabilities

3,944,411

3,865,825

696,379

587,001

Total net assets

34,044,004

35,216,419

Net sales
Income before income taxes
Profit attributable to owners of
the parent

20,867,054
2,830,072

21,201,867
2,740,192

1,979,977

2,023,986

Total non-current liabilities- 89 -

(Per Share Information)
Previous consolidated fiscal year
(From April 1, 2016
to March 31, 2017)

Current consolidated fiscal year
(From April 1, 2017
to March 31, 2018)

Net assets per share

1,290.93 yen

1,378.12 yen

Net income per share

57.20 yen

96.31 yen

Fully diluted net income per share
57.06 yen
Note: The bases of calculation of net income per share and fully diluted net income per share are as follows.
Previous consolidated fiscal year
(From April 1, 2016
to March 31, 2017)95.48 yen

Current consolidated fiscal year
(From April 1, 2017
to March 31, 2018)

Net income per share
Profit attributable to owners of the parent(Thousands of yen)Amount not attributable to common
stockholders (Thousands of yen)
Profit attributable to owners of the parent
pertaining to common stock (Thousands ofyen)
Average number of shares of common stockduring the year

2,037,212

3,452,544

---

---

2,037,212

3,452,544

35,614,798

35,846,832

---

---

85,295314,832（85,295）（314,832）

Fully diluted net income per share
Adjustment of profit attributable to ownersof the parent (Thousands of yen)
Increase in the number of shares of common
stock(Number of shares subject to stockacquisition rights included in the figure
above)
Outline of dilutive shares that were notincluded in the calculation of fully diluted net
income per share due to a lack of dilutive effectFour (4) types of stock acquisitionrights:Resolution at the Board of Directors’Meeting of June 26, 2014 (93,000
shares);Resolution at the Ordinary General
Meeting of Shareholders of June 26,
2014 (197,500 shares);
Resolution at the Board of Directors’Meeting of June 26, 2015 (78,000
shares); andResolution at the Ordinary General
Meeting of Shareholders of June 26,2015 (234,300 shares).

Four (4) types of stock acquisitionrights:Resolution at the Board of Directors’Meeting of June 26, 2015 (61,000
shares);Resolution at the Ordinary General
Meeting of Shareholders of June 26,2015 (196,500 shares);
Resolution at the Board of Directors’Meeting of June 28, 2017 (75,000
shares); andResolution at the Ordinary General
Meeting of Shareholders of June 28,2017 (235,200 shares).

For details, see IV. Status of theSubmitting Company - 1. Status of
Shares, etc. - (2) Status of Stock
Acquisition Rights, etc.

For details, see IV. Status of theSubmitting Company - 1. Status of
Shares, etc. - (2) Status of Stock
Acquisition Rights, etc.

(Significant Subsequent Events)
No applicable matter.

- 90 -

(Consolidated Supplementary Schedules)[Schedule of corporate bonds]
Company

Satosen Co.,Ltd.

Satosen Co.,
Ltd.

Total

Issue

First series
unsecuredbond (Private
placement
bond)
Second series
unsecuredbond (Private
placementbond)－Issue date

Balance atBalance at end
beginning ofof current
current period
period(Thousands of (Thousands of
yen)
yen)

Interest rate(%)

Collateral

Maturity date

March 31,2017－

90,000(20,000)

0.21

None

April 15,
2022

April 28,2017－

111,600(16,800)

0.25

None

May 24, 2024－－

201,600(36,800)－－－

Note: 1. The parenthesized figures represent the outstanding balance of redemptions due within 1 year.
2. No balance at beginning of current period is shown regarding Satosen Co., Ltd. as it became a consolidated subsidiaryin the current consolidated fiscal year.
3. Redemption amounts within five years of the consolidated closing date are shown below.
Within one year
(Thousands of yen)

1-2years(Thousands of yen)

36,8002-3years(Thousands of yen)

36,8003-4years(Thousands of yen)

36,80036,8004-5years(Thousands of yen)
26,800[Schedule of loans payable, etc.]
Category

Balance at theBalance at the end
Average
beginning of currentof current period interest rate Repayment period
period(Thousands of yen)(%)(Thousands of yen)
2,908,630

4,242,472

1.24

---

Current portion of long-term loans payable

446,754864,130

0.25---

Current portion of lease obligations

17,086

18,2302.05---

1,836,093

1,642,485

0.87

2019 to 2023

53,97333,691

2.01

2019 to 2020－

125,523

1.70

---

－

270,328

1.64

2019 to 2023

5,262,537

7,196,861

Short-term loans payable

Long-term loans payable (excluding the current portion)
Lease obligations (excluding the current portion)
Other interest-bearing liabilities
Current portion of long-term accounts payable - other
Other interest-bearing liabilities
Long-term accounts payable - other(excluding the current portion)
Total
Note:

－

---

1. The column “Average interest rate” indicates the weighted average interest rate to the balance of loans payable, etc. at
the end of the current period.

- 91 -

2. The scheduled amount of repayment of long-term loans payable (excluding the current portion) , lease obligations(excluding the current portion) and long-term accounts payable - other (excluding the current portion) over the five (5)years after the consolidated closing date is as follows.
(Thousands of yen)
Due after four years
Due after one year andDue after two years
Due after three years
and within five
within two years
and within three years
and within four years
years
Long-term loans payable

850,540

191,137

452,192

142,312

Lease obligations

18,027

15,664－－Long-term
accounts
payable - other

115,173

99,17050,805

5,179[Schedule of asset retirement obligations]
As the amount of asset retirement obligations as of the beginning of the current consolidated fiscal year and as ofthe end of the current consolidated fiscal year is not more than one hundredth (1/100) of the aggregate amount ofliabilities and net assets as of the beginning of the current consolidated fiscal year and as of the end of the current
consolidated fiscal year respectively, statement has been omitted under the provisions of Article 92-2 of theRegulations for Terminology, Forms and Preparation Methods of Consolidated Financial Statements.

- 92 -

(2) Other

Quarterly Information, etc. in the Current Consolidated Fiscal Year
(Cumulative period)
Net sales(Thousands of yen)
Income before income
taxes(Thousands of yen)
Profit attributable toowners of the parent(Thousands of yen)
Net income per share(Yen)(Accounting period)
Net income per share(Yen)First quarter

Second quarter

Third quarter

Current consolidated
fiscal year

9,140,478

19,307,076

30,325,502

40,909,534

804,4222,212,767

3,642,980

4,745,347

595,281

1,557,321

2,655,699

3,452,544

16.67

43.55

74.18

96.31

First quarter

Second quarter

16.67

26.87

- 93 -

Third quarter
30.61

Fourth quarter
22.15

2. Financial Statements, etc.
(1) Financial Statements
1) Balance Sheets(Thousands of yen)Previous business year
(As of March 31, 2017)

Current business year
(As of March 31, 2018)

AssetsCurrent assets
Cash and deposits

3,971,907

Notes receivable-trade*2

Accounts receivable-trade
Electronically recorded monetary claimsoperating
Securities*2

4,393,050

546,264*2, *5439,054

6,858,753*2

8,756,848

80,246*5

131,959

797,550

1,080,611

1,669,378

2,531,491

Work in process

972,751

1,052,474

Raw materials and supplies

659,645

1,044,991

Merchandise and finished goods

Prepaid expenses

66,08673,325

Deferred tax assets

239,267

354,759*2

Accrued income
Short-term loans receivable from subsidiaries
and associates
Other

178,353*22,289,765*2

71,011

148,773
1,677,411*2614,555

Allowance for doubtful accounts△281,609△460,749

Total current assets

18,119,373

21,838,558

Non-current assets
Property, plant and equipment
Buildings*1

4,163,810*1

3,935,761

Structures*1

257,163*1

304,800

Machinery and equipment*1

1,892,202*1

1,656,081

Vehicles

14,502

15,243Tools, furniture and fixtures*1

142,631*1

165,263Land*1

1,265,075*1

1,262,302

Lease assets

1,467

Construction in progress
Total property, plant and equipment- 94 -

860

28,16756,674

7,765,020

7,396,987

(Thousands of yen)Previous business year
(As of March 31, 2017)

Current business year
(As of March 31, 2018)

Intangible assets
Software31,652

27,879Other

10,176

10,036

Total intangible assets

41,82937,915Investment securities

14,290,628

14,238,124

Shares of subsidiaries and associates

2,246,952

2,866,952

Long-term loans receivable

171,326

162,598

Long-term prepaid expenses

103,740

41,735Investments and other assets

Other86,88583,041

Allowance for doubtful accounts△181,927△169,864

Total investments and other assets

16,717,604

17,222,588

24,524,453

24,657,491

42,643,826

46,496,049

Total non-current assets
Total assets
Liabilities
Current liabilities
Notes payable-trade*2

1,126,765*2, *5

1,192,678

Accounts payable-trade*2

2,062,559*2

2,543,243

Electronically recorded obligations-operating*2

892,414*2, *5

1,432,628

Short-term loans payable*4

190,000*1, *4790,000

Current portion of long-term loans payable*1

428,384*1

767,328

Accounts payable-other*2508,132*2

600,491

Accrued expenses

81,396

101,516

Income taxes payable

283,612675,358

Unearned revenue

1,596

1,596

Deposits received

24,78723,319Provision for bonuses

309,494

Other

747,210

Total current liabilities

6,656,352- 95 -

415,000*5

327,966
8,871,127

(Thousands of yen)Previous business year
(As of March 31, 2017)

Current business year
(As of March 31, 2018)

Non-current liabilities
Long-term loans payable*1

1,482,176*1

714,848

Deferred tax liabilities

236,194

300,945

Provision for retirement benefits

331,936366,340

Asset retirement obligations

28,32528,487

Other

56,57675,6672,135,209

1,486,288

8,791,561

10,357,415

7,317,019

7,458,242

Legal capital surplus

6,429,038

6,570,209

Total capital surplus

6,429,038

6,570,209

Legal retained earnings

748,262748,262

Other retained earnings
Reserve for advanced depreciation of noncurrent assets
General reserve

20,997

19,633

14,020,000

17,020,000

4,190,417

2,981,528

18,979,677

20,769,424△3,891△4,467

Total non-current liabilities
Total liabilities
Net assets
Shareholders’ equity
Capital stock
Capital surplus

Retained earnings

Retained earnings brought forward
Total retained earnings
Treasury stock
Total shareholders’ equity

32,721,843

34,793,408

Valuation and translation adjustments
Valuation difference on available-for-salesecurities
Deferred gains or losses on hedges

981,974

1,217,584

5,153

－

Total valuation and translation adjustments

987,128

1,217,584

Share acquisition rights

143,292

127,640

33,852,265

36,138,633

42,643,826

46,496,049

Total net assets
Total liabilities and net assets- 96 -

2) Statements of Income(Thousands of yen)Previous business year
(From April 1, 2016
to March 31, 2017)

Current business year
(From April 1, 2017
to March 31, 2018)

Net sales*123,410,548*1

28,503,870

Cost of sales*1

20,463,826*1

24,016,541

Gross profit

2,946,721

Selling, general and administrative expenses*1,*2

Operating income

2,362,133

4,487,328*1,*2

584,5872,543,020
1,944,308

Non-operating income
Interest and dividends income*1

785,155*1

724,446

Rent income*1

285,597*1

252,105

Other*1

493,701*1

135,949

Total non-operating income

1,564,454

1,112,501

4,153

3,602

Non-operating expenses
Interest expenses
Foreign exchange losses
Rent expenses
Provision of allowance for doubtful accounts－

173,902194,291

166,251

2,967

175,316

Other

48,88686,292

Total non-operating expenses

250,298

605,364

1,898,743

2,451,445

323

743,019

Ordinary income
Extraordinary income
Gain on sales of investment securities
Insurance income－

129,723

Other

9,544

Total extraordinary income*159,294

139,591

802,31328,262

9,428

Extraordinary losses
Loss on retirement of non-current assets
Impairment loss
Loss on valuation of investment securities
Other

－

26,02890,935－

4

20

Total extraordinary losses

119,20235,476

Income before income taxes

1,919,132

3,218,282

Income taxes-current

446,186

866,927

Income taxes-deferred△43,740△151,854

Total income taxes

402,446

715,073

1,516,686

2,503,208

Net income- 97 -

3) Statements of Changes in Shareholders’ Equity and Other Net Assets
Previous business year (From April 1, 2016 to March 31, 2017)(Thousands of yen)
Shareholders’ equity
Capital surplus

Retained earnings
Other retained earnings

Capital stockReserve forLegal capital Total capital Legal retainedadvancedsurplussurplusearnings
depreciationof non-current
assetsTotal
retainedearnings

Generalreserve

Retainedearnings
brought
forward

14,020,000

3,491,206

18,281,903

1,437

－

Dividends from surplus△818,912△818,912

Net income (loss)

1,516,686

1,516,686－－－

Balance at beginning of current period

7,294,347

6,406,366

6,406,366

22,672

22,672

22,672

748,262

22,434

Changes of items during the period
Issuance of new shares
Reversal of reserve for advanced
depreciation of non-current assets△1,437

Provision of general reserve
Purchase of treasury stock
Net changes of items other thanshareholders' equity
Total changes of items during theperiodBalance at end of current period

22,672

22,672

22,672－△1,437－699,210

697,773

7,317,019

6,429,038

6,429,038

748,262

20,997

14,020,000

4,190,417

18,979,677

Shareholders’ equity
Treasurystock
Balance at beginning of current period△3,670

Valuation
Total
difference onshareholders’available-forequity
sale securities
31,978,947

663,135

Valuation and translation
adjustments
DeferredTotal
gains orvaluation andlosses ontranslation
hedgesadjustments－

663,135

Share
acquisitionrightsTotal net
assets117,201

32,759,284

Changes of items during the period
Issuance of new shares

45,34445,344－－

Dividends from surplus△818,912△818,912

Net income (loss)

1,516,686

1,516,686

－

－

△221

△221

Reversal of reserve for advanced
depreciation of non-current assets

Provision of general reserve
Purchase of treasury stock
Net changes of items other thanshareholders' equity
Total changes of items during theperiodBalance at end of current period△221

318,8395,153

323,993

26,091350,084△221

742,896

318,8395,153

323,993

26,091

1,092,980△3,89132,721,843

981,974

5,153

987,128

143,292

33,852,265- 98 -

Current business year (From April 1, 2017 to March 31, 2018)(Thousands of yen)
Shareholders’ equity
Capital surplus

Retained earnings
Other retained earnings

Capital stock

Legal capital Total capital Legal retained
surplussurplusearnings

Reserve foradvanceddepreciationof non-current
assetsTotal
retainedearnings

Generalreserve

Retainedearnings
brought
forward

14,020,000

4,190,417

18,979,677

1,364

－

Dividends from surplus△713,461△713,461

Net income (loss)

2,503,208

2,503,208

3,000,000 △3,000,000－

Balance at beginning of current
period7,317,019

6,429,038

6,429,038

141,222

141,170

141,170

748,262

20,997

Changes of items during the period
Issuance of new shares
Reversal of reserve for advanced
depreciation of non-current assets△1,364

Provision of general reserve
Purchase of treasury stock
Net changes of items other thanshareholders' equity
Total changes of items during theperiod141,222

141,170

141,170－△1,3643,000,000 △1,208,888

1,789,747

Balance at end of current period

7,458,242

6,570,209

6,570,209

748,262

19,63317,020,000

2,981,528

20,769,424

ShareacquisitionrightsTotal net
assets143,292

33,852,265

Shareholders’ equity

Valuation and translation adjustments
Total

Treasurystock

Valuation
Total
Deferred gains valuationdifference onor losses on
andshareholder
available-forhedges
translations’ equity sale securities

adjustments

Balance at beginning of current
period△3,89132,721,843

981,974

5,153

987,128

Changes of items during the period
Issuance of new shares

282,393282,393－－

Dividends from surplus△713,461△713,461

Net income (loss)

2,503,208

2,503,208

－

－

△576

△576

Reversal of reserve for advanced
depreciation of non-current assets

Provision of general reserve
Purchase of treasury stock△576

Net changes of items other thanshareholders' equity
Total changes of items during theperiodBalance at end of current period

235,610△5,153

230,456△15,651

214,804△576

2,071,564

235,610△5,153

230,456△15,651

2,286,368△4,467

34,793,408
1,217,584

1,217,584－

1,217,584

127,640

36,138,633- 99 -

[Notes](Important Accounting Policies)
1. Valuation standards and valuation methods for assets(1) Valuation standards and valuation methods for securities
1) Equity stakes in subsidiaries and affiliated companies
Stated at average cost.
2) Available-for-sale securities
Securities with available fair market values:
Stated at fair market value based on the market price as of the closing date, etc. (Valuation differences arereported as a component of net assets, and the cost of securities sold is calculated using the average cost
method.)Securities with no available fair market value:
Stated at average cost.
(2) Derivative financial instruments
Stated fair value method(3) Valuation standards and valuation methods for inventories
1) Merchandise, finished goods, semi-finished goods and work in process
The cost method on a first-in, first-out basis is adopted. (The amount shown on the balance sheets is
calculated by writing inventories down due to a decline in profitability.)
2) Raw materials and supplies
The cost method based on the periodic average method is adopted. (The amount shown on the balance
sheets is calculated by writing inventories down due to a decline in profitability.)
2. Methods of depreciation and amortization of non-current assets(1) Property, plant and equipment (excluding lease assets)
The declining-balance method is adopted, except for the buildings (excluding accompanying facilities)
acquired on or after April 1, 1998 and accompanying facilities and structures acquired on or after April 1,
2016, which are depreciated using the straight-line method.
The useful life mostly falls within the ranges shown below:
Buildings: fifteen (15) years to thirty-one (31) years
Machinery and equipment: eight (8) years to nine (9) years(2) Intangible assets (excluding lease assets)
The straight-line method is adopted. Software used by the Company is amortized over an estimated inhouse usable period. (Currently five (5) years)(3) Lease assets
Depreciation and amortization is based on the straight-line method that takes the lease period as the usefullife and sets the residual value at zero (0).
3. Standards for translating foreign currency assets and liabilities into Japanese currency
Foreign currency monetary assets and liabilities are translated into Japanese yen at the spot exchange rate asof the closing date, and the resulting translation differences are entered as income or loss, as the case may be.
4. Standards for recording allowances and provisions(1) Allowance for doubtful accounts
As a reserve for potential loan losses, an estimated uncollectible amount is allocated based on thehistorical loan-loss ratio in the case of general accounts receivable, and in light of the collectability in each
instance in the case of some specific accounts receivable, e.g. doubtful receivables.
(2) Provision for bonuses
In preparation for the payment of bonuses to its employees, the Company allocates an expected
aggregate amount of such payment.
(3) Provision for retirement benefits
As a reserve for the payment of retirement benefits to employees, an amount is appropriated on the basisof the estimated amounts of retirement benefit obligations and plan assets as of the end of the current
business year.
1) Method of inter-period attribution of expected retirement benefits- 100 -

In calculating retirement benefit obligations, the benefit formula is employed as the method of
attributing the estimated amount of each employee’s retirement benefits to his or her service period up
to the end of the current business year.
2) Method of recognizing actuarial differences as expenses
Actuarial differences are recognized as expenses, effective from the business year immediately
following the year of occurrence of each such difference, in an amount prorated using the straight-line
method over a certain number of years (Currently five (5) years) within the average remaining service
period of the employees at the time of occurrence of the said difference in each business year.
5. Accounting method of significant hedge transactions(1) Method of hedge accounting
The Company adopts the deferred hedge accounting. With respect to the forward exchange contracts
that meet the requirements of hedge accounting, we adopt the designated hedge accounting.
(2) Hedging instruments and hedged items
Hedging instruments: Forward exchange contracts
Hedged items : Monetary claims denominated in foreign currencies, Anticipated transactions inforeign currencies(3) Hedging policy
Forward foreign exchange transactions are conducted within the scope of actual demand for the
purpose of deterring risks involved in transactions denominated in foreign currencies from thefluctuations in the foreign exchange market. These transactions will never be entered for speculative
purpose.
(4) Method of assessing hedge effectiveness
The Company assesses the effectiveness of hedging based on the ratio of changes that is calculated bycomparing the cumulative total of the market fluctuations of hedged items with that of hedging
instruments. However, when the forward foreign exchange transactions are by designated hedge
accounting, such assessment of effectiveness is omitted.

6. Other important matters underlying preparation of financial statements(1) Accounting methods concerning retirement benefits
The method of accounting for an unappropriated portion of unrecognized actuarial differences
concerning retirement benefits is different from the method of accounting applied to the same in the caseof the consolidated financial statements.
(2) Accounting methods concerning consumption tax, etc.
The consumption tax, etc. are accounted for using the tax exclusion method.
(3)Accounting methods concerning deferred assets
Stock delivery expenses are fully charged to expenses when they are paid.

- 101 -

(Changes in Presentation)<Statements of Income>1 “Rent income”, which was presented as part of “Other” in “Non-operating income” in the previous business
year, is separately stated effective from the current business year due to a rise in quantitative materiality. In
order to reflect such change in presentation, a reclassification has been made in the financial statements for theprevious business year. As a result, 779,299 thousand yen of “Other”, listed within “Non-operating income”
in the statements of income for the previous business year, has been reclassified into the combination of
285,597 thousand yen of “Rent income” and 493,701 thousand yen of “Other”.
2 “Provision of allowance for doubtful accounts”, which was presented as part of “Other” in “Non-operating
expenses” in the previous business year, is separately stated effective from the current business year due to arise in quantitative materiality. In order to reflect such change in presentation, a reclassification has been madein the financial statements for the previous business year. As a result, 51,854 thousand yen of “Other”, listed
within “Non-operating expenses” in the statements of income for the previous business year, has been
reclassified into the combination of 2,967 thousand yen of “Provision of allowance for doubtful accounts” and48,886 thousand yen of “Other”..
3 “Gain on sales of investment securities”, which was presented as part of “Other” in “Extraordinary income” inthe previous business year, is separately stated effective from the current business year due to a rise inquantitative materiality. In order to reflect such change in presentation, a reclassification has been made in thefinancial statements for the previous business year. As a result, 9,868 thousand yen of “Other”, listed within“Extraordinary income” in the statements of income for the previous business year, has been reclassified into
the combination of 323 thousand yen of “Gain on sales of investment securities” and 9,544 thousand yen of“Other”.
(Notes Related to Balance Sheets)*1 Assets subject to a security interest and secured liabilities corresponding thereto
Assets subject to a security interest(Thousands of yen)Previous business year
(As of March 31, 2017)
Buildings
Structures

Current business year
(As of March 31, 2018)

2,795,886
109,262(2,795,886)(109,262)

3,021,950
168,624(3,021,950)(168,624)

Machinery and equipment
Tools, furniture and639,508
17,775(639,508)(17,775)

1,160,304
56,188(1,160,304)(56,188)

fixturesLand

266,900(199,583)

266,508(199,190)

Total

3,829,333(3,762,016)

4,673,576(4,606,259)

Secured liabilities(Thousands of yen)Previous business year
(As of March 31, 2017)

Current business year
(As of March 31, 2018)－(－)

300,000(300,000)

428,384(428,384)

767,328(767,328)

Long-term loans payable

1,482,176(1,482,176)

714,848(714,848)

Total

1,910,560(1,910,560)

1,782,176(1,782,176)

Short-term loans payable
Current portion of long-termloans payable

The parenthesized figures represent factory foundation mortgages and the liabilities secured by such mortgages.

- 102 -

*2

Monetary receivables and payables outstanding with associated companies (excluding those separately stated)(Thousands of yen)Previous business year
(As of March 31, 2017)

Short-term monetary receivables
Short-term monetary payables*3

Current business year
(As of March 31, 2018)699,545
509,567

842,283
581,185

Guarantee obligations with respect to associated companies’ trade payables and their performance ofcontracts(Thousands of yen)Previous business year
(As of March 31, 2017)

Protec Arisawa Europe, S.A.
(Product warranty)
Protec Arisawa America, Inc.
(Product warranty)
Innovision FlexTech Corporation(Loan guarantee)

Current business year
(As of March 31, 2018)77,87025,03844,400

Satosen Co., Ltd.

84,845(Product warranty)
Protec Arisawa America, Inc.
(Product warranty)
Innovision FlexTech Corporation(Loan guarantee)*4799,368(Loan guarantee)
Protec Arisawa Europe, S.A.

23,71043,800

The Company has an overdraft agreement in effect with each of its six (6) partner banks to ensure efficient
procurement of operating funds. The following is the balance of unexecuted loans under such overdraft
agreements as of the end of the current and previous business years.
(Thousands of yen)Previous business year
(As of March 31, 2017)

Current business year
(As of March 31, 2018)

Aggregate overdraft limit
Drawdowns

6,300,000
190,000

6,300,000
790,000

Balance of unexecuted loans

6,110,000

5,510,000*5 Notes, etc. maturing at the end of the business year
For accounting treatment of notes, electronically recorded monetary claims and electronically recorded
obligations maturing at the end of the business year, settlement is made as of the clearing date of each note oras of the settlement date of each electronically recorded monetary claim and electronically recorded obligation,
as the case may be. As the end of the current business year falls on a bank holiday, the following notes,
electronically recorded monetary claims and electronically recorded obligations maturing at the end of thebusiness year are included in their respective balances as of the end of the business year.
Previous business year
(As of March 31, 2017)(Thousands of yen)
Current business year
(As of March 31, 2018)

Notes receivable - trade
Electronically recorded monetary claims - operating－－

22,321
4,637

Notes payable - trade
Electronically recorded obligations - operating

－
－

3,321
106,975

Current liabilities and others (Notes payable-facilities,
Electronically recorded obligations-non-operating)－40,343- 103 -

(Notes Related to Statements of Income)*1 Volume of transactions with associated companies(Thousands of yen)
Current business year
(From April 1, 2017
to March 31, 2018)

Previous business year
(From April 1, 2016
to March 31, 2017)
Gross operating transaction volume
Net sales
Value of goods laid in
Gross non-operating transaction volume1,939,288

2,465,376

3,423,960
229,893

4,116,745
498,747*2 Approximately 48% of the amount of selling, general and administrative expenses recorded for the previous
business year falls under selling expenses, while the remaining 49% falls under general and administrative
expenses. Approximately 52% of the amount of selling, general and administrative expenses recorded for thecurrent business year falls under selling expenses, while the remaining 51% falls under general andadministrative expenses. The major items of selling, general and administrative expenses and their respective
amounts are as follows.
(Thousands of yen)
Current business year
(From April 1, 2017
to March 31, 2018)

Previous business year
(From April 1, 2016
to March 31, 2017)
Salaries and allowances

489,962532,210

Provision for bonuses
Retirement benefit expenses

57,72036,78678,933
45,638Freightage and packing expenses
Depreciation

642,652
63,654

762,609
63,221

1,071,357

1,060,407

Other(Notes Related to Securities)
Equity stakes in subsidiaries and affiliated companies
Previous business year (As of March 31, 2017)
Category(Thousands of yen)Amount shown onbalance sheets

Equity stakes in subsidiaries
Equity stakes in affiliated companies
Total

Fair value

1,116,334

3,505,369

2,389,035

233,9056,226,880

5,992,974

1,350,239

9,732,249

8,382,010

Current business year (As of March 31, 2018)
Category
Equity stakes in subsidiaries
Equity stakes in affiliated companies
Total
Note:

Difference(Thousands of yen)Amount shown onbalance sheets

Fair value

Difference

1,116,334

4,745,144

3,628,810

233,905

9,280,000

9,046,094

1,350,239

14,025,144

12,674,905

Amount shown on the balance sheets for the equity stakes in subsidiaries and affiliated companies whose fair value isdeemed extremely difficult to reasonably determine(Thousands of yen)
Category

Previous business year
(As of March 31, 2017)

Current business year
(As of March 31, 2018)

Equity stakes in subsidiaries

675,582

1,295,582

Equity stakes in affiliatedcompanies

221,130

221,130

As these equity stakes have no quoted market price, and it is deemed extremely difficult to reasonably
determine their respective fair values, they are not included in the tables entitled “Equity stakes in subsidiaries
and affiliated companies” shown before.

- 104 -

(Notes Related to Tax Effect Accounting)
1. Breakdown by major occurrence factor of deferred tax assets and deferred tax liabilities(Thousands of yen)Previous business year
(As of March 31, 2017)

Current business year
(As of March 31, 2018)

Deferred tax assets
Impairment loss
Loss on valuation of investment securities

407,381324,839

385,433
275,034

Allowance for doubtful accounts
Provision for bonuses

141,571
95,014

192,337
126,575

Provision for retirement benefits
Loss on valuation of inventories

101,240
98,720111,733
61,020Other

254,834

279,253

Deferred tax assets subtotal
Valuation allowance
Deferred tax assets total
Deferred tax liabilities
Valuation difference on available-for-sale securities
Reserve for advanced depreciation of non-current assets
Asset retirement obligations
Other
Deferred tax liabilities total

1,423,603

1,431,387△976,785△832,094

446,817599,292△430,938△9,220△534,335△8,616△1,301△2,283△1,170△1,357△443,743△545,479

3,073
53,813
Net amount of deferred tax liabilities
Note: Net amount of deferred tax liabilities in the previous business year and the current business year is included in thefollowing items in the balance sheets.
(Thousands of yen)Previous business year
(As of March 31, 2017)
Current assets – Deferred tax assets
Non-current liabilities – Deferred tax liabilities

2.

Current business year
(As of March 31, 2018)239,267

354,759△236,194△300,945

Breakdown by item of major causes of any difference between the normal effective statutory tax rate and theeffective income tax rate after tax effect accounting
Previous business year
(As of March 31, 2017)

Current business year
(As of March 31, 2018)

30.7％

30.5％

Valuation allowance

△6.6％

△4.4％

Special tax deductions
Items permanently excluded from taxable income

△1.1％

△2.8％

△4.8％

△2.5％
0.8％

Normal effective statutory tax rate
(Adjustments)

Items permanently excluded from tax-deductible

1.7％

expenses
Other
Effective income tax rate after tax effect accounting

1.1％

0.6％

21.0％

22.2％

(Business combinations)
Notes to business combinations by acquisition
Notes hereof are omitted as they are shown in "[Notes] (Business Combinations) of Consolidated Financial
Statements"(Significant Subsequent Events)
No applicable matter.

- 105 -(Supplementary Schedules)[Schedule of property, plant and equipment, etc.](Thousands of yen)

Category

Balance at the
beginning ofcurrent period

Amount ofincrease incurrent period

Amount ofdecrease incurrent period

Amount ofdepreciationor
amortizationin current
periodBuildings

4,163,810

63,30815,720（14,758）

275,636

3,935,761

10,450,711

Structures

257,163

83,274

2,445
（367）

33,192

304,800

1,109,137

Machineryandequipment

1,892,202

305,227

8,027（7,943）533,321

1,656,081

21,251,991

Vehicles

14,502

9,485

44
（44）

8,701

15,243

197,760

Tools,
furnitureand fixtures

142,631

91,799402（141）

68,765

165,263

1,397,274

1,265,075－

2,772（2,772）－

1,262,302－

Lease assets

1,467

－

－

607

860

2,175

Constructionin progress

28,167671,122642,614－56,674－

Total property,
plant andequipment

7,765,020

1,224,218

672,027（26,028920,223

7,396,987

34,409,051

Software31,652

9,808－

13,582

27,879－Other

10,176－－140

10,036－

Type of assets

Property,plant andequipment

Land

Intangible
assets

Note:

1.
2.

3.

Balance at theend of current
periodAccumulated
depreciation or
accumulated
amortization

Total
intangible－
41,8299,808
13,722
37,915assetsThe parenthesized figures in the column “Amount of decrease in current period” indicate the amount of impairment
loss included in the pertinent total.
Key components of the increase in the current period are as follows.
(Thousands of yen)
Machinery and equipment Electronic materials manufacturing facilities
233,062
Construction in progress
Electronic materials manufacturing facilities
355,559
Key components of the decrease in the current period are as follows.
Construction in progress:
This is mainly due to a transfer of 305,227 thousand yen for machinery andequipment from Construction in Progress.

[Schedule of allowances and provisions](Thousands of yen)
Balance at the
beginning of current
periodAmount of increasein current period

Allowance for doubtful accounts

463,537

630,613463,537

630,613

Provision for bonuses

309,494

415,000

309,494

415,000

Item

Amount of decrease Balance at the end of
in current period
current period(2) Details of Major Assets and Liabilities
Statement is omitted as the relevant information is stated in the consolidated financial statements.

(3) Other
No applicable matter.

- 106 -－

VI. Outline of Share Handling of the Submitting Company

Business year

From April 1 to March 31

Ordinary General Meeting of
Shareholders

To be held in June

Record date

March 31

Record dates of distribution ofdividends from surplus

September 30 and March 31

Number of shares per unit

100 shares

Purchase of shares constituting
less than one full unit
(Special account)
Stock Transfer Agency Dept.,
Handling place

Mitsubishi UFJ Trust and Banking Corporation
1-1 Nikko-cho, Fuchu-shi, Tokyo
Sumitomo Mitsui Trust Bank, Limited

Transfer agent

1-4-1, Marunouchi, Chiyoda-ku, Tokyo

Forwarding office

Purchase fees

Method of giving public notice

Privileges of shareholders
Note:--The amount obtained by prorating the consignment fee per unit (prescribed by
Tokyo Stock Exchange) according to the number of shares constituting lessthan one full unit purchased
Public notices of the Company shall be given by electronic means; provided,
however, that if an electronic public notice cannot be provided due to an
accident or any other unavoidable reason, the Company shall publish its public
notice in the Nikkei newspaper.
Electronic public notices URL:
http://www.arisawa.co.jp/japanese/koukoku.html
None

Pursuant to the provisions of the Articles of Incorporation of the Company, the shareholders of the Company’s sharesconstituting less than one full unit may not exercise any rights other than: (i) the rights set forth in each item of Article 189,
paragraph 2 of the Companies Act; (ii) the right to make requests under the provisions of Article 166, paragraph 1 of theCompanies Act; and (iii) the right to receive allotment of the shares offered and allotment of the stock acquisition rights
offered in proportion to the number of shares held by each such shareholder.

- 107 -

VII. Reference Information on the Submitting Company
1. Information on Parent Company, etc. of Submitting Company
The Company has no parent company, etc. provided for in Article 24-7, paragraph 1 of the Financial
Instruments and Exchange Act.

2. Other Reference Information
The Company submitted the following documents between the commencement date of the current businessyear and the date of submission of the Financial Report.
(1) Financial Report, documents attached thereto and Confirmation Letter
Business year from April 1, 2016 to March 31, 2017 (The 69th Term)
Submitted to the Director-General of the Kanto Local Finance Bureau on June 27, 2017.
(2) Internal Control Report and documents attached thereto
Submitted to the Director-General of the Kanto Local Finance Bureau on June 29, 2017.
(3) Quarterly Report and Confirmation Letter(The First Quarter of the 70th Term) (From April 1, 2017 to June 30, 2017)
Submitted to the Director-General of the Kanto Local Finance Bureau on August 10, 2017.
(The Second Quarter of the 70th Term) (From July 1, 2017 to September 30, 2017)
Submitted to the Director-General of the Kanto Local Finance Bureau on November 14, 2017.
(The Third Quarter of the 70th Term) (From October 1, 2017 to December 31, 2017)
Submitted to the Director-General of the Kanto Local Finance Bureau on February 14, 2018.
(4) Extraordinary Report
Submitted to the Director-General of the Kanto Local Finance Bureau on June 30, 2017.
This is an Extraordinary Report under the provisions of Article 19, paragraph 2, item 9-2 of the Cabinet
Office Ordinance on Disclosure of Corporate Affairs, etc. (Results of exercise of voting rights at thegeneral meeting of shareholders) .
Submitted to the Director-General of the Kanto Local Finance Bureau on June 28, 2018.
This is an Extraordinary Report under the provisions of Article 19, paragraph 2, item 2-2 of the Cabinet
Office Ordinance on Disclosure of Corporate Affairs, etc. (Issuance of stock acquisition rights as stock
options).
(5) Amendment Report of Financial Report and Confirmation Letter
Business year from April 1, 2013 to March 31, 2014 (The 66th Term)
Submitted to the Director-General of the Kanto Local Finance Bureau on November 9, 2017.
Business year from April 1, 2014 to March 31, 2015 (The 67th Term)
Submitted to the Director-General of the Kanto Local Finance Bureau on November 9, 2017.
Business year from April 1, 2015 to March 31, 2016 (The 68 th Term)
Submitted to the Director-General of the Kanto Local Finance Bureau on November 9, 2017.
Business year from April 1, 2016 to March 31, 2017 (The 69 th Term)
Submitted to the Director-General of the Kanto Local Finance Bureau on November 9, 2017.
(6) Amendment Report of Quarterly Report and Confirmation Letter(The First Quarter of the 68th Term) (From April 1, 2015 to June 30, 2015)
Submitted to the Director-General of the Kanto Local Finance Bureau on November 9, 2017.
(The Second Quarter of the 68th Term) (From July 1, 2015 to September 30, 2015)
Submitted to the Director-General of the Kanto Local Finance Bureau on November 9, 2017.
(The Third Quarter of the 68th Term) (From October 1, 2015 to December 31, 2015)
Submitted to the Director-General of the Kanto Local Finance Bureau on November 9, 2017.
(The First Quarter of the 69th Term) (From April 1, 2016 to June 30, 2016)
Submitted to the Director-General of the Kanto Local Finance Bureau on November 9, 2017.

- 108 -

(The Second Quarter of the 69th Term) (From July 1, 2016 to September 30, 2016)
Submitted to the Director-General of the Kanto Local Finance Bureau on November 9, 2017.
(The Third Quarter of the 69th Term) (From October 1, 2016 to December 31, 2016)
Submitted to the Director-General of the Kanto Local Finance Bureau on November 9, 2017.
(The First Quarter of the 70th Term) (From April 1, 2017 to June 30, 2017)
Submitted to the Director-General of the Kanto Local Finance Bureau on November 9, 2017.
(7) Amendment Report of Internal Control Report
Business year from April 1, 2013 to March 31, 2014 (The 66 th Term)
Submitted to the Director-General of the Kanto Local Finance Bureau on November 9, 2017.
Business year from April 1, 2014 to March 31, 2015 (The 67th Term)
Submitted to the Director-General of the Kanto Local Finance Bureau on November 9, 2017.
Business year from April 1, 2015 to March 31, 2016 (The 68 th Term)
Submitted to the Director-General of the Kanto Local Finance Bureau on November 9, 2017.
Business year from April 1, 2016 to March 31, 2017 (The 69 th Term)
Submitted to the Director-General of the Kanto Local Finance Bureau on November 9, 2017.

- 109 -

PART II. INFORMATION ON GUARANTY COMPANIES, ETC. OF THE
SUBMITTING COMPANY
No applicable matter.

- 110 -

Independent Auditors’ Reportconcerning consolidated financial statements and internal control report
June 27, 2018
To the Board of Directors of Arisawa Mfg. Co., Ltd.
Ernst & Young ShinNihon LLC
Satoshi Ejima[Seal]

Designated Limited Liability Partner and Engagement Partner,

Certified Public Accountant
Makoto Iguchi[Seal]

Designated Limited Liability Partner and Engagement Partner,

Certified Public Accountant<Audit of Financial Statements>
For the purpose of granting audit certification under the provisions of Article 193-2, paragraph 1 of the Financial Instruments
and Exchange Act, we have audited the consolidated financial statements of Arisawa Mfg. Co., Ltd. listed in the “Status of
Accounting” for the consolidated fiscal year from April 1, 2017 to March 31, 2018, consisting of the consolidated balance sheets,
consolidated statements of income, consolidated statements of comprehensive income, consolidated statements of changes inshareholders’ equity and other net assets, consolidated statements of cash flows, important matters underlying preparation of
consolidated financial statements, other notes and consolidated supplementary schedules.
Responsibility of Management for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance withthe corporate accounting standards generally accepted in Japan. This includes improvement and operation of such internal control
as the management deems necessary for the preparation and fair presentation of consolidated financial statements free from material
misstatement, whether due to fraud or error.
Responsibility of Auditors
Our responsibility is to express an opinion on the consolidated financial statements from an independent standpoint based on
our audit. We conducted our audit in accordance with the auditing standards generally accepted in Japan. The said auditing
standards require that we develop an audit plan and conduct an audit based on such plan in order to obtain reasonable assurance
about whether the consolidated financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the reported amounts and disclosures in the
consolidated financial statements. Audit procedures are selected and applied at our own judgment, based on the assessment of therisks of material misstatement in the consolidated financial statements, whether due to fraud or error. In making such risk
assessments, we review internal control relevant to the entity’s preparation and fair presentation of the consolidated financial
statements in order to design audit procedures that are appropriate under the circumstances, while it is not the objective of an audit
of financial statements to express an opinion on the effectiveness of the entity’s internal control. Another element of an audit isevaluating the overall presentation of the consolidated financial statements, including assessment and evaluation of the accounting
policies adopted by the management and the methods of their application as well as of the accounting estimates made by the
management.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Audit Opinion
In our opinion, the above consolidated financial statements fairly present, in all material respects, the financial conditions ofArisawa Mfg. Co., Ltd. and its consolidated subsidiaries as of March 31, 2018 as well as the results of their operations and theirstatus of cash flows for the consolidated fiscal year ended March 31, 2018 in accordance with the corporate accounting standards
generally accepted in Japan.

<Audit of Internal Control>
For the purpose of granting audit certification under the provisions of Article 193-2, paragraph 2 of the Financial Instruments
and Exchange Act, we have audited the internal control report as of March 31, 2018 of Arisawa Mfg. Co., Ltd.
Responsibility of Management for the Internal Control ReportManagement is responsible for the improvement and operation of internal control over financial reporting as well as the
preparation and fair presentation of the internal control report in accordance with the evaluation standards for internal control overfinancial reporting generally accepted in Japan.
In this regard, there is a possibility that internal control over financial reporting cannot completely prevent or detect false
statements in financial reporting.
Responsibility of Auditors
Our responsibility is to express an opinion on the internal control report from an independent standpoint based on our internal
control audit. We conducted an internal control audit in accordance with the auditing standards for internal control over financial
reporting generally accepted in Japan. The auditing standards for internal control over financial reporting require that we develop
an audit plan and conduct an internal control audit based on such plan in order to obtain reasonable assurance about whether theinternal control report is free from material misstatement.
An internal control audit involves performing procedures to obtain audit evidence about the results of evaluating internal control
over financial reporting stated in the internal control report. Audit procedures for an internal control audit are selected and appliedat our own judgment, based on the gravity of the impact on the credibility of financial reporting. Another element of an internal
control audit is evaluating the overall presentation of the internal control report, including a review of the statements made by the
management with respect to the scope, procedures and results of the assessment of internal control over financial reporting.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Audit Opinion
In our opinion, the above internal control report, in which Arisawa Mfg. Co., Ltd. represents that its internal control overfinancial reporting is effective as of March 31, 2018, fairly presents, in all material respects, the evaluation results of its internal
control over financial reporting in accordance with the evaluation standards for internal control over financial reporting generally
accepted in Japan.
Interest
There exists no special interest between the Company and this audit corporation or its engagement partners which is required
to be stated pursuant to the provisions of the Certified Public Accountants Act.
Note:

1. All the matters stated above have been electronically copied from the matters stated in the original Audit Report. The original
Audit Report is separately archived by the Company.
2. XBRL data are not included in the subject of the audit.

Independent Auditors’ Report
June 27, 2018
To the Board of Directors of Arisawa Mfg. Co., Ltd.
Ernst & Young ShinNihon LLC
Satoshi Ejima[Seal]

Designated Limited Liability Partner and Engagement Partner,

Certified Public Accountant
Makoto Iguchi[Seal]

Designated Limited Liability Partner and Engagement Partner,

Certified Public Accountant
For the purpose of granting audit certification under the provisions of Article 193-2, paragraph 1 of the Financial Instruments
and Exchange Act, we have audited the financial statements of Arisawa Mfg. Co., Ltd. listed in the “Status of Accounting” forthe 70h business year from April 1, 2017 to March 31, 2018, consisting of the balance sheets, statements of income, statements ofchanges in shareholders’ equity and other net assets, important accounting policies, other notes and supplementary schedules.
Responsibility of Management for the Financial Statements
Management is responsible for the preparation and fair presentation of the financial statements in accordance with the corporate
accounting standards generally accepted in Japan. This includes improvement and operation of such internal control as the
management deems necessary for the preparation and fair presentation of financial statements free from material misstatement,
whether due to fraud or error.
Responsibility of Auditors
Our responsibility is to express an opinion on the financial statements from an independent standpoint based on our audit. We
conducted our audit in accordance with the auditing standards generally accepted in Japan. The said auditing standards require that
we develop an audit plan and conduct an audit based on such plan in order to obtain reasonable assurance about whether thefinancial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the reported amounts and disclosures in the financial
statements. Audit procedures are selected and applied at our own judgment, based on the assessment of the risks of material
misstatement in the financial statements, whether due to fraud or error. In making such risk assessments, we review internal control
relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that areappropriate under the circumstances, while it is not the objective of an audit of financial statements to express an opinion on theeffectiveness of the entity’s internal control. Another element of an audit is evaluating the overall presentation of the financial
statements, including assessment and evaluation of the accounting policies adopted by the management and the methods of theirapplication as well as of the accounting estimates made by the management.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Audit Opinion
In our opinion, the above financial statements fairly present, in all material respects, the financial conditions of Arisawa Mfg.
Co., Ltd. as of March 31, 2018 and the results of its operations for the business year ended March 31, 2018 in accordance with thecorporate accounting standards generally accepted in Japan.
Interest
There exists no special interest between the Company and this audit corporation or its engagement partners which is required to
be stated pursuant to the provisions of the Certified Public Accountants Act.
Note:

1. All the matters stated above have been electronically copied from the matters stated in the original Audit Report. The original
Audit Report is separately archived by the Company.
2. XBRL data are not included in the subject of the audit.