Breakthroughs for the Future
Annual Report 2014
Year ended March 31, 2014

Profile
Management Philosophy
In the 100-plus years since its founding in Japan in 1906, Bando Chemical Industries, Ltd. has
been pursuing industrial development by making various contributions to rubber and plastic
processing technologies in such areas as power transmission belts and systems, belts used inprecision equipment, and multimedia parts made from urethane and resins.
We are highly regarded by customers throughout the world owing to our efforts to develop newtechnologies and products that meet today’s needs while manufacturing and stably supplying
people- and environmentally-friendly products of unsurpassed performance and quality.
Possessing an unwavering spirit spanning back to our foundation, we will create a brighter future
through the ceaseless innovation of our business.

With a spirit of harmony and in good faith,
and to ensure the company’s growth,
the Bando Group will work to earn the trustof our customers and society
by creating and providing products and services

Contents
ProfileFinancial Section

Snapshot2

Products

4

History

6

Global Network

8

Highlights

10

To Our Stakeholders and Investors

14

Message from the President

16

New Challenges

22

Review of Operations

26

CSR

30

Corporate Governance32

Management

35

Message from Bando’s External Director

3637

37 Management’s Discussion and Analysis
40 Business Risks
41 Message from the CFO
42 Consolidated Balance Sheets
44	Consolidated Statements of Income andConsolidated Statements of Comprehensive Income
45 Consolidated Statements of Changes in Net Assets
46 Consolidated Statements of Cash Flows
47 Notes to Consolidated Financial Statements

Corporate Data / Investor Informationof added value and high quality.
With pride as members of the Bando Group,
we will contribute to society as a whole.

60

Cautionary Note Concerning
Forward-Looking Statements
This annual report includes forward-looking statements related to the Company’s future performance
forecasts. These statements are rationally determined by management based on information available at the time and therefore are subject to risk and uncertainty. Actual performance may differ fromtargets due to such factors as changes in the operating environment.

Annual Report 20141

Snapshot
Bando Chemical Industries is building up a global
presence in growth markets.

3

Top Share in OEM Supply of Automotive Belts

1

The snapshot below describes our strengths anddistinctive features.

No.
global share

We have built up a good reputation basedon our meticulous service to satisfy individual customer needs, excellent quality, andstable supply capabilities. As of the end of
fiscal 2013, we command the top global
share for OEM supply of automotive belts.

OEM supply of automotive belts

1

Core Business in Automotive Fields
Sales of automotive powertransmission belts and systems

41,989 million¥
2014(¥ million)

Sales of automotive powertransmission belts and systems
as % of total

44.9%

*

Consolidated net sales

4

The auto industry continues to expand,driven by increased motorization in
emerging countries. Automotive businesses account for 44.9%* of total consolidated net sales at Bando. We expect
the automotive business to provide good
growth opportunities moving forward.

Expertise in Environment-friendly Products

Further expansion“eco moving” concept
We w i l l a c c e l e r a t e t h e“move” to “eco” throughoutt h e G ro u p , t h o ro u g h l ydevelop products that reduce
environmental burden, andspread the new “movement”
to our customers and society.

Ten products in our eco moving portfolio
HFD System
Ceptor-VI S8M type
EPDM Rubber Belts

Our customers, and society as a whole, havewelcomed the added value provided by our“eco moving” brand of environment-friendly
products. We had ten “eco moving” products in
our portfolio in fiscal 2013, mostly belt products,
and plan to expand our line-up further.

* ‌Sales of automotive power transmission belts and systems(for four- and two-wheeled vehicles) / consolidated net sales

93,434 million¥

Energy-Saving Red, Energy-Saving POWER ACE
High-load V-Ribbed Belts
G-CARRYECO CARRYTENSION MASTERBANDO GLANMESSE (non-combustible)
Polyolefin thin film

2

Overseas Sales Ratio Continues to Expand
Overseas sales
Overseas sales ratio
Overseas sales(¥ million)
50,000(%)
50

Capital expenditure(¥ million)
10,000Net interest-bearing debt*

D/E ratio(times)
0.5

6,000

0.3

20

4,000

0.2

10

2,000

0.1

30,00030

20,00010,000BANDO CHEMICAL INDUSTRIES, LTD.

Capital expenditure
Net interest-bearing debt*
D/E ratio

0.4402005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Building an Even Stronger Financial Position

8,000

40,00002Overseas sales ratio

We a re m e e t i n g t h e n e e d s o f o u rJapanese customers developing global
operations and are also expanding
our business with overseas customers.
Overseas sales are therefore rising and
now account for a higher percentage ofthe total.

5

0

0

2010

2011

2012

2013

2014

We are working to build an even stronger
financial position, even as we continue
the capital expenditures needed for
growth. At the end of fiscal 2013, our net
interest-bearing debt and D/E ratio wereat all-time lows.

0.0* Net interest-bearing debt =short-term borrowings + long-term borrowings + corporate bonds – cash and deposits

Annual Report 20143

Products

The Bando Group’s products boast world-classperformance and quality based on technologies
developed over many years. Bando’s specialty products
display our superior design and development capabilities.

Belt BusinessNet sales bybusiness segment

2014

We excel in OEM business in the automotive, industrial machinery, agricultural
machinery and conveyance sectors, where we hold a large global market share.
We develop environmentally-friendly power transmission systems andprovide comprehensive product lines suitable for various fields.
Core Technologies

86.5%

Rubber and resins compound design, dispersion and processing technologies,
power transmission system technologies

Automotive Power
Transmission Belts

Main Products

Conveyor Belts
Strengths and Characteristics‌ full lineup of rubber conveyor belts andAlight-duty resin conveyor belts‌Precisely
meeting customers’ needs with heatand oil-resistant specifications, as well as frayprevention, non-slip, anti-static and many othermodelsG-CARRYTM

BANDO ECO CARRYTM

Mr. COOKTM F2224 Non-Stick
Belts

Lightweight Jointless P-Series
Belts

Main Products

For four- and two-wheeled vehicles

Strengths and Characteristics
Integrated‌
development of automotive auxiliary
drive belts and power transmission systems(Tier 1 manufacturer of power transmission belt
systems for automotive manufacturers)

RIB ACETM V-Ribbed Belts

Automatic Tensioners

Elastomer Products Business

Development‌of high efficiency continuously
variable transmission (CVT) belts for two-wheeledvehiclesTENSION MASTERTM

Industrial Power
Transmission Belts

VS Belts

Main Products

13.5%
Main Products‌
Development
and provision of high performance,
clean precision parts
HFD SystemTM

Red SII V Belts for agricultural
machinery

STS/HP-STS/CeptorTM-VI

Long Synchronous Belts‌
Globalproduction and sales network, with 21
bases in 14 countries

BANDO CHEMICAL INDUSTRIES, LTD.

Core Technologies

2014

Strengths and Characteristics

Strengths and Characteristics

4

We maximize materials characteristics through the use of our precision
processing, material and structural design technologies, and add optimalfunctionality to develop pioneering products with high precision and highquality, in consideration of the environment.

Elastomer and resins compounding design,
dispersion and processing

For industrial and agricultural machinery‌
Developmentof energy-efficient belts and belts
suited to high power machinery

Net sales bybusiness segment‌
Development
and provision of functional films forvarious applications, such as in the printing andmedical fields

BANCOLLANTMBLADE G-ModuleTM

Development Rollers

BANDO GLANMESSETM

Medical films

Annual Report 2014

5

History
We have worked to build trust and brand recognition over morethan 100 years since our founding.
Without contenting ourselves with this, we will incessantly strive
to change and challenge to achieve the next “Breakthrough.”

History of Global Expansion

History of ProductDevelopment

Established new plant in India
2013
Opened technical center in Thailand
2013
Reorganized Shanghai-based subsidiary into a management company
2012
Commenced sales of TENSION MASTER, atension meter featuring an acceleration sensor
Established subsidiary in Vietnam
2012
Opened technical center in China
2012
Commenced sales of non-flammable BANDO GLANMESSE
2011
2011

Opened Representative
Office in Russia
2009

Opened Representative Officein Argentina

2008

2010
2010

Commenced sales of BANCOLLAN Cleaning Blade G-Module
Developed BANDO MDEC, a new method for eliminating
microscopic dust

Commenced sales of DS5M, double-sided, synchronous power transmission belts
Commenced sales of G-CARRY environment-friendly,
energy-saving conveyor belts

Commenced sales of RIB ACE ECO-HT high-load automotive V-ribbed belts
Commenced sales of thin polyolefin films
Commenced sales of FlowMetal, low-temperature sintering nanoparticles
Commenced sales of the Hyper Flat Drive System
2008

2008
2008
2008

Established subsidiaries in India and Turkey
2003
Established subsidiary in Shanghai, China
2002
Established subsidiary in Tianjin, China
1998
Established subsidiary in Hong Kong
1995
Established subsidiaries in Indonesia, Malaysia, and South Korea
1988
Established subsidiaries in Thailand and Spain
1987
Established subsidiary in Taiwan
1985
1982
1981

Established subsidiary in Singapore
1980
Established subsidiaries in the United States and West Germany
1978
Equity participation in industrial rubber product1975
Commenced full-scale production of photocopier cleaning blades
manufacturers in the Philippines and Malaysia
1972
Commenced sales of Japan’s first light-duty conveyor belts
1970

Opened Representative Offices
1969
in the United States and West Germany 1964

Commenced sales of polyurethane products
1959
Commenced sales of SYNCHROBELT toothed belts
1950
Commenced sales of plastic films and sheets
1932
Commenced sales of Japan’s first V belts
1921
Commenced production of Japan’s first conveyor belts
1913
Commenced production of rubber belts
1906
Commenced production of cotton belts

6

BANDO CHEMICAL INDUSTRIES, LTD.

Developed BANDO AVANCE, the world’s first dry belt for continuously variable transmissions (CVT)

Commenced sales of MULITE high-performance plastics products
Commenced sales of RIB ACE automotive V-ribbed belts

Other1970 Listed on the First Sectionof the Tokyo Stock Exchange

Commenced production of Japan’s first single-ply conveyor belts

1962
1961

Commenced sales of BANDO Automatic Tensioners, automatic automotive belt tensioners

1962 Listed on the Second Sectionof the Osaka Securities Exchange

A pioneer belt manufacturer since its founding in Japan, the Company
has now grown to manufacture and sell products throughout theworld as it continues to develop products in support of industry.

Annual Report 2014

7

Global Network

Aiming to become a standout supplier worldwide,
we are expanding our global network based inJapan, China, Asia, the United States, and Europe.

EuropeAsia

Bando Belt
Manufacturing(Turkey), Inc.

Bando Jungkong
Ltd.

Bando
Manufacturing(Dongguan) Co., Ltd.

Pengeluaran Getah
Bando (Malaysia)
Sdn. Bhd.

Bando Iberica,
S.A.

Bando Korea Co.,Ltd.

Bando Siix Ltd.

Kee Fatt
Industries, Sdn.
Bhd.

Bando Europe
GmbH

Bando Belt
(Tianjin) Co., Ltd.

Sanwu Bando Inc.

Bando Chemical
Industries’
Global Network

Japan*

Bando (Singapore)
Pte. Ltd.
Head OfficeAmerica
Bando (Shanghai)Management Co.,
Ltd.*

Philippine Belt
Manufacturing
Corp.

P.T. Bando
Indonesia

Bando (Shanghai)Industrial Belt Co.,Ltd.

BL Autotec(Shanghai), Ltd.

8

Sales by Region(as of March 2014)

Overseas sales
ratio: 46.3%

Bando USA, Inc.

BANDO CHEMICAL INDUSTRIES, LTD.

Bando
Manufacturing(Vietnam) Co., Ltd.

Bando
Manufacturing(Thailand) Ltd.**Japanese business locations are leading
the development of environment-friendly
products and the expansion of highvalue-added businesses.

Bando (India) Pvt.
Ltd.

Business locations

Japan: 53.7%
Asia: 24.4%
China: 11.9%
Europe, America &other: 10.0%*China Technical Center and Asia Technical Center wereopened in 2012 and 2013, respectively, both of which aredeveloping products with optimal specifications for markets.

Ashikaga Plant
Tokyo Branch Office
Nagoya Branch OfficeNankai Plant

Kobe Head Office/
R&D Center
Kakogawa Plant

Wakayama Plant/
Power Transmission Technical Research Center

Sales and Fabrication Service Affiliates

Manufacturing Affiliates

Bando Fukushima Products, Inc.
Higashinihon Bando Co., Ltd.
Vann Corporation
Koyo Sangyo Co., Ltd.
Hokuriku Bando, Inc.
Nishinihon Bando Co., Ltd.
Bando Elastomer Co., Ltd.

Fukui Belt Industries, Ltd.
BL Autotec, Ltd.
Bando-Scholtz Corporation
Other Service Affiliates

Bando Trading Co., Ltd.
Bando Kosan Co., Ltd.

Annual Report 20149

Highlights
10–Year Summary of Consolidated Financial Statements
Fiscal year endings are March 31 in the years shown below
2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

Net sales

Millions of yen

76,95884,257

95,20098,66287,45373,59384,811

86,37285,77293,434

Operating income

Millions of yen

5,760

5,057

8,027

7,325

2,115

2,450

5,056

4,571

4,095

5,518

Operating margin

%

7.5%

6.0%

8.4%

7.4%

2.4%

3.3%

6.0%

5.3%

4.8%

5.9%

Net income

Millions of yen

4,086

3,713

3,985

5,289

(255)

1,234

3,333

1,440

2,510

4,280

Net cash provided by operating activities

Millions of yen

9,814

6,057

9,641

7,805

7,621

8,724

9,529

6,595

7,004

6,459

Net cash used in investing activities

Millions of yen(6,236)(8,984)(6,288)(9,830)(4,937)(3,147)(4,922)(4,768)(5,781)(5,038)Net cash provided by (used in) financing
activities

Millions of yen(1,223)

234

1,888

(1,575)(675)(2,516)805(4,363)(463)(1,548)Depreciation and amortization

Millions of yen

4,306

4,661

4,660

5,684

6,073

5,411

4,907

4,804

4,389

4,174

Capital investment

Millions of yen

7,131

9,377

7,692

7,166

4,176

2,791

3,381

4,619

5,052

5,046

Net assets

Millions of yen

34,78939,61542,56844,97238,35240,02040,54239,444

43,22649,277

Total assets

Millions of yen

78,237

87,887

96,53090,801

76,621

78,02082,90579,65982,20789,623

Interest-bearing debt

Millions of yen

11,572

15,49918,717

18,525

17,66915,744

17,653

14,595

15,74615,753

Shareholders’ equity*

Millions of yen

34,78939,61541,70744,04637,34539,18839,67738,55942,775

48,772

Earnings per share

Yen

38.24

35.23

39.34

52.68

(2.55)

12.31

33.74

14.84

26.47

45.49

Net assets per share

Yen

335

390

412

439

372

391

405

402

455

518

Annual dividend per share

Yen

7.00

13.00

10.00

10.00

7.00

6.00

8.00

8.00

8.00

10.00

104,778

102,791

101,310

100,393

100,313100,294

98,78897,034

94,811

94,095

%

44.5

45.1

43.2

48.5

48.7

50.2

47.9

48.4

52.0

54.4

times

0.333

0.391

0.449

0.421

0.473

0.402

0.445

0.379

0.368

0.323

ROA

%

5.2

4.2

4.1

5.8

(0.3)

1.6

4.0

1.8

3.1

4.8

ROE

%

12.1

10.0

9.8

12.3

(0.6)

3.2

8.5

3.7

6.2

9.4

times

13.4

14.9

15.5

6.8

–

24.1

11.5

20.8

11.1

9.3

%

18.3

36.9

25.4

19.0

–

48.7

23.7

53.9

30.2

22.0

2,859

3,177

3,393

3,414

3,436

3,285

3,427

3,545

3,592

3,817

Average number of shares outstanding
during the period
Equity ratio
D/E ratio

P/E ratio
Payout ratio
Number of employees

Thousand shares* ‘Shareholders’ equity’ for 2007 and thereafter = net assets – minority interests

10

BANDO CHEMICAL INDUSTRIES, LTD.

Annual Report 201411

Highlights

Major Indicators

Fiscal 2013 Topics

Fiscal year endings are March 31 in the years shown below

Net sales

Operating income(¥ million)
100,000(¥ million)
8,000

(%)
8

6,000

6

4,000

4

2,000

2

80,000

Product Development and Others

Operating margin

Commenced sales of TOPXTM S035, a precision polishing film shortening
the finish polishing time for optical communication connectors and attaining
stable polishing precision

60,000Developed room-temperature sintering silver nanoparticle ink and lowtemperature sintering silver nanoparticle die-attach materials as a result of theapplication of technologies for FlowMetalTM metal nanoparticle products

40,00020,000002009 2010 2011 2012 2013 201402009 2010 2011 2012 2013 2014

Free cash flow

Net assets
Total assets(¥ million)
8,000(¥ million)
6,000(¥ million)
100,000

6,000

4,500

4,000

3,000

2,000

1,500

0

0

Net assets

Total assets(%)
57

47,50055

45,00053

42,50051

Commenced sales of environment-friendly BANDOBANLITETMEZ-StickTM

(%)
60
48

6

36

4

24
12

47

2

35,00045

02009 2010 2011 2012 2013 2014

Raw material costs (indicators)

Interest-bearing debt
D/E ratio

NaphthaD/E ratio(times)0.5
0.4

24,000

CottonNatural rubber

Aluminum

12,000

0.2

1.0

0.0

BANDO CHEMICAL INDUSTRIES, LTD.

August4
2-2

Exchange rate transition

0.7

THB

Commenced sales of STOPSHEET floor signs that users
only have to set in place

STOP SHEET
usage example

July

QUICK-CHANGE ZEUS

June

EUR

May
Commenced sales of QUICK-CHANGE
ZEUS (150-230 kg payloads), for newgeneration robots

100

April

Management
Introduced “Breakthroughs for the future,”
Bando’s new mid-to-long term business plan
Launched dual Administrative Headquarters
composed of the Belt Business segment and the
Elastomer Products Business segment
Integrated domestic sales companies (Hokkaido
Bando Co., Ltd. merged with Higashinihon
Bando Co., Ltd, with the latter being thesurviving company, and Kyushu Bando Co., Ltd.
merged with Nishinihon Bando Co., Ltd., withthe latter being the surviving company)

90

0.8

’11/12 ’12/3

2009 2010 2011 2012 2013 2014

110

’13/3

’14/3

* Raw materials cost (indicators) base is 2011/12.

12

September

120

0.9

2009 2010 2011 2012 2013 2014

BANDO eco moving Ashikaga Solar Power
Generation Plant opening ceremony

8

130

1.1

October

10

1.3

0.3

0

ROE

12

1.4

18,000

0.1

ROA
(%)
14

USD
(%)
140

1.2

6,000

Opened BANDO eco moving Ashikaga Solar
Power Generation Plant

00

November2009 2010 2011 2012 2013 2014

6

37,5002009 2010 2011 2012 2013 2014

Payout ratio

December

Introduced S3M, S5M and S14M types in the CeptorTM-VI
series of next-generation toothed belts
BANDO BANLITETMEZ-StickTM

ROA
ROE

8

49

Interest-bearing debt(¥ million)
30,00002009 2010 2011 2012 2013 2014

Annual dividend per share
(yen)
10

40,000January
2014

20,000

Annual dividend per share
Payout ratio

Equity ratio

HFDTM System

80,00040,000Shareholders’ equity(¥ million)
50,000February

Hyper Flat Drive (HFDTM ) System, which attained energy-efficient,next-generation power transmission, won the Grand Prize for
Excellence in Energy Efficiency and the Director-General’s Prize,
the Agency for Natural Resources and Energy

60,000Shareholders’ equity*
Equity ratioMarch2009 2010 2011 2012 2013 2014

Capital investment

2009 2010 2011 2012 2013 2014

TOPXTM S035

80

’10/12’11/12’12/12* Exchange rate base is 2010/12.

’13/12 ’14/6

March
2013

Annual Report 201413

To Our Stakeholders and Investors

Fiscal 2014 is our year of
implementation.
We will cement our position
as the No. 1 belt business in Asia andset our business on a growth trajectory
towards achieving the targets in
our medium-term business plan.
In fiscal 2013, the first year of our mid-term business plan,
we strengthened our global business development capabilities
in the belt business and recorded our second-highest net income
figure to date.

Mitsutaka Yoshii

Automotive markets are expanding and becoming morecompetitive. Here I describe our strategy to achieve further
breakthroughs, solidify Bando’s position as the No. 1 belt businessin Asia and generate operating income of ¥10 billion in fiscal 2017.

President and Representative Director,
Bando Chemical Industries, Ltd.

Annual Report 201415

Message from the President“Breakthroughs for the future” mid-to-long term business plan:
Overview and progress

Mitsutaka Yoshii
President and Representative Director,
Bando Chemical Industries, Ltd.

The “Breakthroughs for the future” mid-to-long termbusiness plan, which runs from fiscal 2013 to fiscal
2022, aims to further refine our core technologies
and reliable product quality in the fields of rubber,elastomers, and resins—where we have built up an
extensive fund of expertise since the Company’s
founding—to become a standout supplier of belts
and high-performance products in the global market.
In the first stage of the plan, from fiscal 2013 to
fiscal 2017, we will work to expand the Group’s overseas operations, particularly in the belt business, andstrengthen earnings structures while also focusing
on new product development. In the second stage,
from fiscal 2018 to fiscal 2022, we will create new
business to make a contribution equal in importanceto our belt business. Leveraging the two earnings

drivers, we will concentrate on expanding earnings
to become a truly global supplier with net sales ofaround ¥150 billion.
In fiscal 2013 in the first stage, operating income
was slightly below the initial target due to inventory
valuation losses, but sales were above target due tofocused business development in China and Asiaand new products that utilize our core technologies
starting to generate results. From the second yearof the plan in fiscal 2014, we recognize that theCompany will need to work harder, as earnings will
no longer receive a boost from forex factors. The
steady implementation of the guidelines in the midto-long term business plan should set our businesson a growth trajectory towards our targets.

Second-highest net income figure to date recorded in fiscal 2013
Fiscal 2013 was the first year in our mid-to-long termbusiness plan “Breakthroughs for the future.” Belt
Business sales grew 10.7% year-on-year to ¥80,034
million and segment profit grew 18.8% year-on-yearto ¥5,161 million, primarily due to sales growth overseas for our automotive power transmission belts,
industrial power transmission belts, and conveyor
belts. We attribute this to our efforts to implement
the guidelines set out in the business plan.
In our Elastomer Products Business, where wehave focused on transforming our product portfolio,
sales rose 0.5% year-on-year to ¥12,438 million andsegment profit improved by ¥174 million, moving froman operating loss last year to profit of ¥12 million.
As a result, consolidated operating income
improved 34.8% year-on-year to ¥5,518 million. Forex
gains and the absence of extraordinary losses bookedlast year meant net income rose 70.5% to ¥4,280
million. This is our second-highest net income figure
after the record-breaking ¥5,289 million we recorded
in fiscal 2007 shortly before the collapse of Lehman
Brothers.
We increased the dividend for the first time inthree years to an annual dividend of ¥10 per share,
which is on a par with the dividend paid in fiscal 2007
before the global financial crisis.

Overview of the mid-to-long term business plan—“Breakthroughs for the future”“Breakthroughs for the future” 1st stage

Sales/
profits

Mid-term plan (fiscal 2013 – 2017)

Vision for Bando Chemical 10 years from now

Five guidelines

Become a dominant global supplier of belts andhigh-performance products (including new businesses)
in growth markets, with net sales of about ¥150 billion

1. Evolution of global market strategy
2. Product evolution
3. Evolution in manufacturing
4. New businesses creation
5. Evolution in management quality

Results

YoY¥85,772 million¥93,434 million+8.9 %

Operating income¥4,095 million¥5,518 million+34.8 %Net income¥2,510 million¥4,280 million+70.5 %Net sales

16

Fiscal 2013

BANDO CHEMICAL INDUSTRIES, LTD.

New business expansion

Expand global businesses/increase added value
To achieve the vision for 2022

Consolidated earnings
Fiscal 2012 results“Breakthroughs for the future” 2nd stage

2013

1st stage (five years)

2017 2018
Net sales

Fiscal 2017 targets¥100,000 million

2nd stage (five years)

2022

Operating income¥10,000 million

Annual Report 201417

Message from the President

Bando’s current position and path to ¥10 billion operating income
Bando’s portfolio includes many products with the
top share of the global market, including automotive
belts for OEM supply, CVT belts for two-wheeledvehicles, and polyurethane rubber parts for printers.
Sales of our agricultural machinery belts are also
growing in China and Asia because of the excellent
quality of our products. Our ¥10 billion target for
operating income in fiscal 2017 may appear rather
ambitious, but we think it is within range if we focus
on the measures discussed below and leverage ourcompetitive capabilities backed by our high global
share.
In the first stage, we aim to accelerate sales in
the growth markets of China and Asia. Fiscal 2013
sales rose 45.2% year-on-year to ¥11,092 million in
China and 13.7% to ¥22,781 million in Asia, helped
by volume manufacturing as new production
facilities started operating in China, Thailand, India,
Vietnam, and Indonesia. We plan to expand our production capacity further and increase total sales in
China and Asia by an additional ¥20 billion by fiscal
2017, laying the foundations for Bando to solidify
our top position in Asian markets.

New Bangalore Plant (India)

As well as focusing on greater “volume,” theCompany must also make further improvements
in “quality” (added value, profitability) if we are to
make our operating income target of ¥10 billion.
To achieve this, we are working on guidelines 2

18

BANDO CHEMICAL INDUSTRIES, LTD.

and 3, namely product evolution and evolution in
manufacturing, and are working to expand aftermarket sales to improve profitability.
In terms of product evolution, we are stepping
up development of environmentally friendly, energyefficient, and high-performance products, such as
our BANDO MDECTM cleaning system, our precision
polishing product TOPX TM S035, and our HFD
SystemTM that has been awarded the Grand Prize for
Excellence in Energy Efficiency. We are also working
to develop and launch products with optimal
specifications for particular markets in shorter timeframes. We are expanding services at our technicalcenters in China and Thailand to strengthen our
local marketing presence and enhancing assessment
facilities to satisfy local needs. We therefore expect
to grow operating income by around ¥1 billion by
fiscal 2017.
In terms of evolution in manufacturing, wehave established the Cost Planning Department andimproved the accuracy of cost control to make our
products more cost competitive. We also reduced
costs by updating manufacturing methods andproduction facilities. In material purchasing, we arepromoting development purchasing* for functional
materials (e.g., carbon, urethane, EPDM, and CR).
Through these efforts, we aim to achieve the cost
ratio below 70% and grow operating income byaround ¥1.5 billion by fiscal 2017.
As well as efforts to reduce costs, we are also
focusing on aftermarkets. Along with our OEM sales
expansion we have established distributor networks
in China, Asia, and elsewhere to expand high-margin
aftermarket sales (repair and replacement), and raise
profitability in the automotive power transmission
belt business as a whole.

Bando Chemical products with top market shares*
Top Market Share

OEM supply of
automotive belts

Top Market ShareAutomotive automatic belttensioners

Top Market Share

Polyurethane rubber
printer parts

Top Market ShareCVT belts for two-wheeledvehiclesTop Market Share

Helical tooth belts for printers

Top Market Share

Cleaning blades for printers* Fiscal 2013

Achieving the 1st stage operating income target
Operating income(¥billion)
10.0

10.0
Sales growth in China, Asia

Further cost cuts

7.5

Greater value-added on current products
More high-return products in portfolio

5.5
5.0

4.1

* ‌Procurement Department involvement from the development stages, sothat decisions on materials are made in consideration of supply stability
and cost.

0

20122017 Target

2013

(FY)

Mid-term plan (BF-1)

Annual Report 201419

Message from the President

Taking on the challenge of developing profitable new businesses
During the five-year first stage, Bando Chemical will
invest ¥5 billion in R&D to create new businesses.
We will focus on “environmentally-friendly, energyefficient, and high performance” businesses in thepriority markets of optoelectronics, automotive/
transport, energy, and robots and the priority fieldsof power electronics, printing electronics, and publicwelfare/nursing care. In fiscal 2013, we conducted
R&D mainly at our R&D Center, Manufacturing
Planning Center, and Power Transmission TechnicalResearch Center, investing ¥3.59 billion in researchand development including projects to develop
improvements overall.

Key markets for new business development

We will focus on “environmentally-friendly,
energy-efficient, andhigh performance” businesses
R&D Center

Priority market

Optoelectronics

Priority field

Printed electronics
Power electronics
Exterior/interior materials
Display, illumination

Power Transmission Technical Research Center

As part of our drive to create new businesses,
we established the BF (Breakthroughs for the Future)
Promotion Department in fiscal 2013 to enableboth marketing and technical staff to collect andanalyze information related to new products andnew businesses. Also, in October 2013, we started
the “Venture Cup” as a way to promote proposals
on new products and enterprises. This system is amore effective way to tap into creative ideas andinformation from our employees.
Through these initiatives, new products thatutilize our core technologies have started to generate results. Fiscal 2014 should pave the way for thecommercialization of these new business ideas as
profitable products.

Automotive/
transportation

Power electronics
Exterior/interior materials
Other

EnergyPower electronics
Other

RobotsPublic welfare/nursing care
Other

Printed electronics

20

BANDO CHEMICAL INDUSTRIES, LTD.

Display, illumination

Annual Report 201421

New Challenges

Opening up the Future through“Product Evolution” and“New Businesses Creation”

Executive Officer, General Manager,
Elastomer Products Business Administrative Headquarters andthe R&D Center

Katsuhiko Hata

In its mid-to-long term business plan “Breakthroughs for the Future,” Bando isimplementing incremental innovation in order to realize “product evolution”
and is also aiming to realize radical innovation toward “new business creation.”

Product evolution — implementing incremental innovation

New business creation — taking on the challenge of radical innovation

For Guideline No. 2 “Product evolution” in our mid-to-long term business plan, we are pursuing the development of products with “optimal specifications for markets” so that they match market needs in each region of
the world.

For Guideline No. 4 “New business creation” in our mid-to-long term business plan, we are further fine tuning
our core technologies for the compounding, dispersion, and composites of elastomers and resins for our key
markets. Moreover, based on the “cutting-edge technology” through fusion with technological expertise inother fields, we are aiming to create new products and open up new markets and to develop them to be ournext generation businesses that will serve as new pillars supporting the Company (“Radical innovation”).

Through incremental innovation to continuously create products that will help our customers to “reduce theirenvironmental burden, increase efficiency, and shift to compact designs and functional composites,” we areadvancing our conversion to a portfolio consisting of high value-added products.

Transmission system“HFD SystemTM”
Through its high energy
savings performance, HFD
System can reduce annual
power consumption by 7 to
8% a year and we are working to promote its increaseduse, including a replacement
for V belts.

TOPX S035 realizes the highest levels in the industry
for abrasive speed, abrasive accuracy, and durability. It
contributes to improved quality and reduced processing
time in optical communications connectors.

Uses: blowers, air conditioners, etc.

Uses: polishing optical fibers, hard disks, color filters, etc.

Paint substitutes

Cleaning system“BANDO MDECTM”“Decorative
moldings”

In response to the rise in demand for paint substitutes,
we have developed this technology for adhering film tocurved surfaces.
Uses: paint substitutes, etc.

22

Precision abrasive film
“TOPXTM S035”

BANDO CHEMICAL INDUSTRIES, LTD.

BANDO MDEC absorbs andeliminates microscopic dustby controlling the electrification of the roller surface.
It offers high maintainability
through its original mechanism for collecting waste.
Uses: ‌eliminating microscopic dust in the manufacturing
processes of printed circuit boards, displays

Room-temperature
sintering silver
nanoparticle ink

Silver nanoparticle
die-attach material

It utilizes our core technologies in compounding, dispersion, and composites. Electroconductivity is achieved
simply through room temperature drying, which makes
possible electronic circuits without generating heat.

It applies our metallic nanoparticle creation technology
and has a melting point of 250 Celsius, which is lower
than that of gold-tin alloy solder, and so joins to circuitboards without damaging electronic devices.

Uses: electronic circuits, etc.

Uses: power semiconductors, LEDs, etc.

Thermalconductive sheets

By utilizing our compounding, dispersion, and processing technologies for rubber, we are able to verticallyorientate the thermally conductive filler to realize highlevels of thermal conductivity. It contributes to maintaining performance by lowering electronic devices’
thermal resistance.

Flexible strain
sensorThis sensor made of rubber is highly compliant withcurved surfaces as it has excellent flexibility and canbe easily installed. We are targeting sales for it in theindustrial and medical fields.
Uses: ‌industrial machines,
medical-treatment equipment, etc.

Uses: power semiconductors, etc.

Annual Report 201423

New Challenges

Steadily realizing incremental innovation

As a pioneer in energy-saving V belt development, we launched
Energy Saving Red Belts with high transmission efficiency in the
1990s, which established an excellent reputation in the market.
Society has become even more environmentally aware in the 2000s.
Demand grew for a revolutionary product that realizes even higher
energy savings, and we resolved to develop HFD System.

Our company’s Hyper Flat Drive (HFD) System was awarded the “Grand Prize for Excellence in Energy Efficiency”*1
from the “Director-General of the Agency for Natural
Resources and Energy”*2 in the fiscal 2013. HFD System isa leading example of how we achieve high added-value byimplementing incremental innovation.
We will continue to develop these types of high valueadded products and increase our competitive advantage
through the provision of unique products.

Energy Saving Red

Boldly choosing a difficult path

*1 Joint application with Mitsuya Fan Mfg. Co., Ltd.
*2 ‌Awards given in order to widely share information on companies within Japan in the industry, operations, and transportation sectors;
practitioners who are promoting energy saving in factories and places of work; and practitioners who develop excellent energy-saving
products; and also to recognize the excellent efforts of these practitioners (held by the Energy Conservation Center, Japan, andsupported by the Ministry of Economy, Trade and Industry).
In fiscal 2013, there were 146 applicants, of which 50 won awards.

At the conceptual phase, we considered that using an identical V belt would impose limitations if we were toachieve power-saving effects that surpassed those of the Energy Saving Red, so instead we focused on theflat belt, which has the highest transmission efficiency among belt drives. At times there were differences of
opinion within the Company about how to address the flat belt’s weak points of “snaking” and “reductionin tension.” But ultimately, we decided to “bravely take on the challenge of using a flat belt, no matter how
difficult,” and so we began development.

HFD System’s breakthrough point
1

24

Realizes superior energy-saving effects from high transmission efficiency, as it minimizes loss throughlower belt-bending rigidity.
Comparison with V belts: both power consumption and CO2 emissions are reduced by an average of 7%.

2

The belt thickness is thin and distortion from bending is small, so it is compliant with compact designs
as it enables reverse bending.
Comparison with V belts: a reduction of around 40%

3

Tensioning through an automatic tensioner increases lifespan and eliminates the need for maintenance.
Comparison with V belts: service life approximately 3 times

4

The increased lifespan and lower belt weight reduces the amount of industrial waste.
Comparison with V belts: a reduction to about 1/50th the amount5

Flat pulley transmission practicallyeliminates noise and vibration.

BANDO CHEMICAL INDUSTRIES, LTD.

Development background1

3

A five year development period
We spent around five years in development through continuous trial and error. To deal with the “snaking”
problem, we developed a snaking control device with a pulley at its core and ultimately solved this problem
through autonomously controlling the belt and pulley. We solved the “reduction in tension” problem by
installing a tension-control mechanism (automatic tensioner) using springs. Finally in 2008, we launched the
HFD System that combined a flat belt, a snaking control device, and an automatic tensioner.

High power-reduction effects, significant potential demand25

As of April 2013, HFD System has been installed in 1,267 units of equipment, and it is expected that in only
one year of operations, this will realize a power-reduction effect equivalent to around 133 million yen annually(1,267 units: 1 kwh × 12 yen/kwh × 24 hours × 365 days). Also, in the event that the HFD System is installed in
100,000 blowers in Japan, we anticipate that it will realize an enormous power-reduction effect equivalent toaround 10.5 billion yen a year.
Currently, HFD System is largely used in the replacement market and OEM market for air conditioners
and blowers, which is where Energy Saving Red is mostly used. In the future we are targeting replacement
needs in fields where there is considerable demand for V belts, such as for compressors and cooling towers,
and we are aiming for horizontal market expansion.

Annual Report 201425

Review of Operations

Helping to strengthen the foundations for growth
as the Company’s greatest earnings driver

Belt BusinessYoshihisa Tamagaki
Senior Executive Officer,
General Manager,
Belt Business Administrative Headquarters

Market Conditions

The Belt Business segment serves as the Company’s
greatest earnings driver, which is helping the Group achieve
its mid-to-long term business plan Breakthroughs for the
future. Especially in the first five years of the plan (BF-1,
from the fiscal year ended March 31, 2014 to the fiscal year

ending March 31, 2018), we will unfailingly achieve earnings
growth centered on this segment in a bid to solidify our
growth foundation for the five-year period of BF-2 (from thefiscal year ending March 31, 2019 to the fiscal year ending
March 31, 2023) and beyond.

Performance for the Fiscal Year Ended March 31, 2014
This segment achieved net sales of ¥80,034 million, up 10.7% from the previous fiscal year. The sub-segment results are as
follows.

Automotive Power Transmission Belts
Sales of power transmission belts in Japan decreased, along withan increase in the production of beltless hybrid vehicles. However,sales of accessory drive power transmission belts in China andthose of variable speed belts for scooters in Asia expanded. In
addition, the start of full-scale operation of the Bangalore Factoryin India and the launch of a new factory in Vietnam made significant contributions to the results. Consequently, sub-segment sales
climbed 11% year on year.

Industrial Power Transmission Belts
In China, sales of power transmission belts to Japanese agricultural machinery manufacturers increased considerably. Sales also rosein South America. In Asia, sales of belts for agricultural machineryand precision equipment expanded. Sub-segment sales were up
11% year on year.

Conveyor Belts
In Japan, we enjoyed growing sales of conveyor belts for steel
works and of steep-incline belts for coal-fired power plants. Salesof conveyor belts for resources development rose in Australia,
Canada and elsewhere. Our expansion of processing bases in
China led to increased sales of resin light-duty conveyor belts.
Sub-segment sales climbed 10% year on year.
Segment profit surged 18.8% year on year to ¥5,161 million, withincreased sales volume, the effect of cost reductions, foreignexchange impacts and a decrease in depreciation and amortization,
which offset the effects of the inventory write-down.

26

BANDO CHEMICAL INDUSTRIES, LTD.

Sales of Automotive Power Transmission
Belts by Product(¥ billion)

Other

50
40

37.8

30

42.0
0.92

1.37

17.15

18.14

19.43

21.28

20
10
0

2013

Power transmission systemproducts (accessory drive
power transmission systems)
Power transmission belts(accessory drive powertransmission belts)

Note: Sales by product represents
the figure before deduction ofinter-segment transactions.

2014

Sales of Industrial Power Transmission
Belts by Product(¥ billion)
20

17.2

3.14

3.55
2.13

15

Other

19.1
2.43

For industrial and agricultural
machinery

10

0

2013

Note: Sales by product represents
the figure before deduction ofinter-segment transactions.

2014

Sales of Conveyor Belts by Product(¥ billion)
20

3.01
1.34
2.89

15
10

2.99
1.35

Other

3.11

Light-duty conveyor belts

Industrial products

Conveyor belts

9.99

5
0

18.9

17.3

2013

11.27
2014

Note: Sales by product represents
the figure before deduction ofinter-segment transactions.

(Units)110

More than 100 million units

100
90
80
70
60
50

2013 2014 2015 2016 2017 2018 2019 2020
Source: IHS Automotive / Automotive Market Forecast(Year)Key Initiatives for the Fiscal Year Ending March 31, 2015
To continuously solidify our leading position in Asia’s belt
markets, we will further cultivate the Chinese and ASEAN
markets and aim to open new markets in the Greater
Mekong region, which has future growth potential. In product development, we will seek to increase the added valueof existing products, upgrade our production technology

and cost competitiveness, and focus on achieving suchproduct features as reduced environmental impact, higher
efficiency, compactness and multi-functionality. Primarily at
our technical centers in China and Thailand, we will speed
up development of products with optimal specifications for
local markets.

Net sales and segment profit(¥million)
2013

Net sales

72,2752014 (results)

80,034

Change% change

7,759

10.7%

Automotive power transmission belts

37,836

41,989

4,153

11.0%

Industrial power transmission belts

17,18919,128

1,939

11.3%

Conveyor belts

17,25018,917

1,667

9.7%

4,344

5,161

817

18.8%

Amount invested

Expected completion date

Segment profit

13.36

11.36

5

For office automationequipment and precisionequipment

Outlook for Worldwide Automotive
Sales Volume

Annual sales volume

Position and Target in the Mid-to-Long Term Business Plan

The worldwide automotive sales volume has been risingsteadily since the Lehman Brothers crisis to reach 84.64
million units in 2013, according to FOURIN’s Monthly
Report on the Global Automotive Industry (June 5, 2014). It
is expected to continue growing to 100 million units in 2018
and to 105 million units in 2020. (Source: IHS Automotive /Automotive Market Forecast)Global two-wheeled vehicle production volume isexpected to continue growing. Its annual average growthrate will reach 7.2% by 2016 and the volume is set to reach
134.5 million units that year. (Source: The Freedonia Group:
World Motorcycles, Feb. 1, 2013)

Ongoing capital investment (for the fiscal year ending Mar. 31, 2015)(¥million)

Company / Location

Descriptions

Nankai Plant

Expansion of equipment relating to powertransmission belts, etc.

520

Mar. 2015

Wakayama Plant

60

Mar. 2015

Kakogawa Plant

Expansion of equipment relating to industrial products, including conveyor belts, etc.

1,262Mar. 2015

Power Transmission Technical Research Center

Testing and research facilities

Bando Korea Co., Ltd.
Bando Belt (Tianjin) Co., Ltd.
Bando Manufacturing (Thailand) Ltd.

Expansion of equipment relating to powertransmission belts, etc.

52Mar. 2015

367

Dec. 2014161

Dec. 2014

741

Dec. 2014

Annual Report 201427

Review of Operations

Pushing ahead with earnings structure reforms bychanging the product portfolio

Elastomer Products Business

Katsuhiko Hata
Executive Officer, General Manager,
Elastomer Products Business
Administrative Headquarters
Market Conditions

Position and Target in the Mid-to-Long Term Business PlanThe Elastomer Products Business offers clean, highperformance products made of elastomers and resins
in a bid to contribute to target achievement in the midto-long term business plan Breakthroughs for the future(from the fiscal year ended March 31, 2014 to the fiscal
year ending March 31, 2023). Profitability in this segment
is trending downward due to a slide in product prices after

the Lehman Brothers crisis and the trend at our customers
towards internal production. We will make intensive efforts
at product evolution and offer high value-added productswith the use of our core elastomer and resin compounddesign, dispersion and processing technologies, andrestructure our product portfolio.

High-Performance Films
Sales of films for construction materials surged following an
increase in housing starts. Sales of films for decorative displays
also expanded with an enhanced product lineup. Sub-segment
sales were up 4% year on year.
Segment profit moved from minus ¥164 million in the previous
fiscal year to plus ¥12 million, regaining profitability, due partly toa reduction in depreciation expenses following impairment losseson the fixed assets of the former Multimedia Parts Business, whichwere posted in the previous fiscal year.

28

BANDO CHEMICAL INDUSTRIES, LTD.

Worldwide Copier and Multifunction Printer Shipment Forecast on a Quantity Basis2014 (forecast)Japan
Overseas
Worldwide

577,700
4,069,200
4,646,900(Units)2015 (forecast)

Change3,000
159,450
162,450% change
0.5%
4.1%
3.6%

Change3,600
163,150
166,750

581,300
4,232,350
4,813,650% change
0.6%
4.0%
3.6%

Key Initiatives for the Fiscal Year Ending March 31, 2015

For the fiscal year ended March 31, 2014, net sales grew 0.5% year on year, to ¥12,438 million. The sub-segment results are
as follows.

We obtained new business after developing high-performancerollers with longer service life, and saw domestic sales of
BANCOLLANTM belts rise. However, a shift at major customers tointernal production resulted in a sharp drop in sales of cleaning
blades. As a result, sub-segment sales were down 2% year on year.

March 31, 2014, housing starts rose a strong 11.2% year on
year, reflecting rush demand prior to the consumption tax
hike in Japan. For the fiscal year ending March 31, 2015, thefigure is forecast to fall 8.1% from the previous fiscal year,
to 910,000, due in part as a reaction to the rush demand.
For the fiscal year ending March 31, 2016, it should improve
4.4% year on year, to 950,000 starts. (Source: Material
from the 212th NRI Media Forum on July 9, 2014, held by
Nomura Research Institute)

Source: Japan Business Machine and Information System Industries Association

Performance for the Fiscal Year Ended March 31, 2014

Precision Parts

Global shipment quantities in the copier and multi-function
printer markets, which include major customers for our
precision equipment parts, are expected to grow around
3.6% annually in 2014 and 2015. We expect a slight upswing
in the Japanese color copier market, but the period until
replacement is becoming longer. In overseas markets, shipments of low-end products, among others, should increase
in Asia and elsewhere.
Sales of high performance film products are closely
linked to domestic housing starts. In the fiscal year ended

Sales of Precision Equipment Parts
by Product(¥ billion)
10

7.9

8

2.11

6

7.7
2.00

3.31

3.81

4

3.42

2
0

2013

2.20
2014

Other
BANCOLLANTM belts
Blades, high performancerollers

Note: Sales by product represents
the figure before deduction ofinter-segment transactions.

This segment’s core technologies are at a high level interms of both functional design and processing technologies. Given that it is hard to anticipate any dramatic growthin existing markets, we will accelerate our action to rebuild
our product portfolio with a greater emphasis on highvalue-added products.
For example, the floor sign product developed inJune 2013, STOP SHEET, provides extra value in enabling
unlimited full-color print designs, and complies with theflameproof standards under Japan’s Fire Service Act. Thesefeatures have been highly evaluated, and we have received
inquiries from financial institutions, medical institutions andmany other customers. We will work even harder to boost
sales going forward.
In addition, in March 2014, we released the TOPX
S035 precision abrasive film for finish polishing of opticalcommunication connectors as a new entry in the TOPX
series of precision abrasive films. Polishing power, evenwith low polishing loads, is maintained and improved andcontributes to reduced processing time and quality stabilization in optical communication connectors. For thesereasons, we have received inquiries from a large numberof prospective customers and we will work vigorously toachieve further sales expansion.
(¥million)

Net sales and segment profit

Sales of High-performance Films
by Product(¥ billion)
6

4.5
4

2013

0.33

Other
High-performance films

2014

Net sales
Precision equipment parts
High-performance films
Segment profit (loss)

12,381
7,856
4,525
(164)

2014 (results)

12,438
7,719
4,719
12

Change
57
(137)
194
174

% change
0.5%(1.7)%
4.3%–

Ongoing capital investment (for the fiscal year ending Mar. 31, 2015)

4.67

4.43

2

0

4.7
0.09

2013

Note: Sales by product represents
the figure before deduction ofinter-segment transactions.

Location

Descriptions

Nankai Plant

Expansion of equipment relating to high-performance films, etc.
Expansion of equipment relating to industrial products and powertransmission belts, etc.

Ashikaga Plant(¥million)
Amount invested

Expected completion date

470

Mar. 2015

570

Mar. 2015

Annual Report 2014

29

CSR
Note: The tables below refer to Bando’s domestic facilities in Japan.

Basic Stance on Corporate Social Responsibility (CSR)
The Bando Group’s stance on CSR lies in business activities rooted in the positive contributions it makes to people’s lives
and the development of society, which are embodied in the Group’s management philosophy. In an effort to harmoniously
coexist with stakeholders—customers, shareholders and investors, employees, business partners (including suppliers
and retailers), and local communities—it is vital that we provide products and services that meet the needs of society
while undertaking business activities that help preserve the global environment. The chief objective of the Group’s CSR
activities is to gain the trust of society, which is consistent with its corporate culture and in keeping with its obligations tostakeholders.

CSR Management

Reduction of Energy Consumption

Curtailment of Waste Generation

Energy consumption

Waste generation(KL/GJ)
40,000CSR Promotion
Committee

President

Head office/business facilities
Group affiliates

Chair: Executive incharge of CSR

CSR Promotion
Committee
secretariat

Waste generation (t)6,000
35,0004,000
30,00025,000

The Bando Group’s CSR promotion system is led by the Company’s
CSR Promotion Committee.
Chaired by Bando’s executive in charge of CSR, the CSR
Promotion Committee decides on CSR policy for the entire Group,and monitors committees established for each CSR promotion
theme as well as the CSR functions of individual departments. The
Committee is also responsible for prioritizing issues, tracking the
progress of CSR activities, promoting public information disclosure,and interacting with stakeholders.

(t)
8,000

Energy consumption (KL/GJ)

2,000
0

FY1990 FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 FY2013

FY2006 FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 FY2013

In fiscal 2013, Bando progressed with a switch to more efficient equipment
and LED lighting at the Nankai Plant. Energy-saving measures at all sites
since fiscal 2012 have reduced unit volume of energy consumption.

The Company’s industrial waste largely consists of rubber and plastics. Since
recycling rubber is difficult, Bando works to curtail the generation of thistype of waste.

Emission and Transfer Volumes of
PRTR Substances

Reduction of VOC Gas Emissions

PRTR substance emission and transfer volumes(t)300

Transfer volume (t)VOC emission volume(t)
400

Emission volume (t)Transfer volume + emission volume

Fiscal 2013 emission target: 167t

250
300

200

CSR Promotion Themes and Major Achievements in Fiscal 2013

Target150

The Group engaged in various activities in line with six CSR promotion themes.

200

100
100

Major
achievements

CSR promotion themes

Major
achievements

CSR promotion themes

50

30

Compliance/Business Ethics

The Environment

Quality

Legal compliance and acting withintegrity to gain the trust of society

Work for environmental preservation
by developing eco-friendly products
and by being attentive to the environment in manufacturing practices

Provide safe and reliable products
and services

Head Office Environment Committee;
Manufacturing Planning Center, Safety andEnvironmental Promotion Department

Manufacturing Planning Center,
Quality Control Department• Reduced unit volume of waste generation
by 1.5%• Reduced unit volume of energy consumption by 4.7%
• Suppressed VOC gas emissions by 61.4%• Installed a solar power generation systemat the Ashikaga Plant• Implemented biodiversity education andactivities• Held QC Circle activities and conventionsin Japan and overseas• Convened a product quality case study
exhibition• Implementation of an assessment of
product conformity to standards• Introduction of a chemical substance information management system for materials
usedLegal Compliance Committee• Held Code of Conduct workshops at
business locations• Strengthened preventive measures against
information leakage through the introduction of a PC operation log management
systemHuman Rights/Labor/Safety

Social Contribution

Information Disclosure

Allow employee growth throughtheir work, and provide safe, dynamic
workplaces

Recognize the importance of communication with society, individual
contributions to the community, andcompany-wide contributions to society for environmental preservation

Timely and proper information
disclosure to stakeholders

Head Office Health and Safety Committee;
Human Resources Department;
Manufacturing Planning Center, Safety
and Environmental Promotion Department• Held mental health classes and walking
activities• Enhanced training programs for eachcareer stage and position• Health and safety education and installationof disaster simulation equipment (Threework-related injuries resulted in lost time
during the fiscal year under review)BANDO CHEMICAL INDUSTRIES, LTD.

General Administration Department

Finance and Accounting
Department; General
Administration Department• Supported volunteer activities• Participated in activities organized by local
resident associations, and cleanup, public
safety and disaster prevention initiatives• Conducted tours of Company facilities• Convened procurement policy briefings• Published periodic CSR reports andbusiness reports, and provided information
via the Group’s websites• Held investor relations briefings

00

FY2006 FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 FY2013

FY2000 FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 FY2013

In fiscal 2013, we updated our VOC detoxification facilities and ensured
proper VOC handling. In so doing, we achieved a 63% reduction in VOC
compared with fiscal 2000, exceeding the industry’s target of 50%.

The Company is working to manage chemical substances designatedunder PRTR (Pollutant Release and Transfer Register), and manage themappropriately.

Environmental Accounting
The Company uses environmental accounting tools to determine and manage overall environmental costs, effectiveness,and volumes.
(¥ thousand)Environmental Conservation Costs

Pollution control
Business Global environmental
area cost conservation
Resource recycling

Fiscal 2011

Fiscal 2012

Fiscal 2013

Depreciation
andCapitalamortization+
personnel
investment
expenses +overhead

Depreciation
andCapitalamortization+
personnel
investment
expenses +overhead

Capitalamortization
investment + personnel

Depreciation
andMain projects in fiscal 2013

expenses +overhead

8,009

44,195

7,387

68,024468

76,425

Exhaust gas facilities

117,254

6,865

97,8203,976

14,7705,091

Switched to LED lighting, updated
facilities

3,855

183,1590

172,594686

217,480

Upstream/downstream cost

0

773

0

0

0

0

Administration cost

029,5760

11,231035,063

Monitored and measured environmental
burden, operated management systems

R&D cost

024,701

10,56034,033031,354Developed products with reduced
environmental burden

Social activity cost

012,588

168

9,590

3,715

8,396

Greening and beautification costs,
environmental and social activities

Environmental remediation cost
Total

0

737

0

0

0

722

129,118

301,857

115,936

299,448

19,640374,532(¥ thousand)Environmental conservation benefit
Business area
Upstream/downstream
Other
Total

Fiscal 2011
68,9830
133
69,116

Fiscal 2012
51,1950247
51,442

Fiscal 2013
59,518083
59,601

Industrial waste treatment and disposal

Installing a solar-power generation systemeffectively reduced electricity.

Annual Report 201431

Corporate Governance

Basic Stance on Corporate Governance

Board Meeting is held every month. All of the

In order to improve corporate value, the actions ofBoard of Directors’ meetings and monthly management

the Company are based on an adherence to the law

conferences. Moreover, the Audit & Supervisory Boardand social norms as a member of society. In addition,

assigns individual audit & supervisory board members

the Company recognizes the importance of building

to attend various internal committee meetings andpositive relationships with customers (end users),

conduct hearings to determine the operational statuscurrent and potential investors, business partners, local

of subsidiaries when deemed necessary. Through thesecommunities and others. Accordingly, the Company

and other actions, the audit & supervisory board mem-focuses on ensuring sound, transparent and efficient

ber system is able to fully monitor the performance ofmanagement by enhancing its corporate governancedirectors and corporate executive officers. In the fiscal

system.

year ended March 31, 2014, the Audit & Supervisory
Board met 12 times, with the three external audit &Board of Directors

supervisory board members attending 97% of thosemeetings.

The Company maintains a system centered on
directors and audit & supervisory board members
to ensure management efficiency and to strengthen
its audit and supervisory functions. The Company’s

Numberof
Persons

Company’s audit & supervisory board members attend

Nominating Committee and Compensation
Committee

Directors
Audit &
Supervisory
Board
Members

7

Total
Compensation

Compensation
Limit¥162 million¥240 million
or less annuallyInternal Control
To meet the requirements stipulated in the Financial
Instruments and Exchange Act pertaining to financial
reporting performed by internal control reporting
systems, the Bando Group maintains internal control in

5¥54 million¥7 million
or less monthly

accordance with the basic frameworks for internal control outlined in Financial Services Agency criteria, andundertakes evaluations and reporting as defined bysaid criteria. The Company will work to further improve

Total

12

the effectiveness of internal control primarily through¥216 million

the Internal Control Promotion Office and based on
Notes:

the four objectives of internal control: (1) reliability of

1. Six directors as of March 31, 2014 (including one external director)
2. ‌Four audit & supervisory board members as of March 31, 2014 (including threeexternal audit & supervisory board members)
3. ‌The total amount of external director and external audit & supervisory board
member compensation listed above is as follows.

financial reporting, (2) operational effectiveness andefficiency, (3) legal compliance regarding businessactivities, and (4) asset protection.

One external director: ¥6 million
Three external audit & supervisory board members: ¥34 million
4. ‌The total amount of director compensation includes performance-relatedsalary based on the Company’s performance-related salary criteria (for full-time
based directors only) for the fiscal year ended March 31, 2014.
5. ‌In addition to the above-listed information, salaries and bonuses for employees
who concurrently serve as directors are as follows.

Basic Stance on the Elimination of Antisocial
ForcesBoard of Directors consists of five directors, including

Despite having no legal obligation under the

one external director. The Board makes decisions

Companies Act, the Company has established theconcerning basic management policies, important

Nominating Committee and Compensation Committee

management issues, and legally stipulated matters, as

to serve as consultative bodies of the Board ofpartners prior to commencing new transactions based

well as monitoring the work performance of directors

Directors in an effort to further strengthen corporate

on relevant Group policies and the Bando Group Codeand corporate executive officers. As a rule, the Board

governance.

of Conduct, which stresses the overriding importance

The Group takes stringent measures to eliminate

Two employee salaries: ¥30 million
Two employee bonuses: ¥11 million

antisocial forces by investigating prospective businessmeets once per month. In addition, the Company

Decisions regarding director appointments andof adhering to the law and corporate ethics. In

maintains a corporate executive officer system tocompensation are made by a resolution of the Board

addition, the Group maintains an internal reporting

improve operational efficiency and speed, and hasof Directors following deliberations by the Nominating

established the Management Advisory Council to assist

and Compensation committees. In addition, these

the president with management decisions. In the fiscal

committees include the external director and external

year ended March 31, 2014, Board of Directors Meetings

audit & supervisory board members who have been

were held 15 times, with the external director attending

designated as independent executives to maintain

100% of those meetings.

a highly transparent system for making decisions

Management organization and corporate governance
General Meeting of Shareholders
Election

Election

Audit & Supervisory Board
The Company has adopted an audit & supervisoryboard member system. The Audit & Supervisory Board
consists of four audit & supervisory board members,
including three external audit & supervisory board

fiscal year ended March 31, 2014, the total amountof director and audit & supervisory board member
compensation is shown below.

MonitorCompensation Committee

Audit & Supervisory Board/
Audit &
Supervisory Board Members

Nominating Committee

Audit

President/
Corporate Executive Officers

members. The internal audit & supervisory board member and one external audit & supervisory board member

Appointment

Board of Directors

about director nominations and compensation. In the

Accounting Auditors/
Certified Public Accountants
Accounting
audit

Executive Organizational Units

serve on a full-time basis. The Audit & Supervisory

32

BANDO CHEMICAL INDUSTRIES, LTD.

Annual Report 201433

Corporate Governancesystem to thoroughly raise awareness of the necessityof avoiding any actions that are illegal or contrary to

Information Disclosure

corporate ethics. In the event that a business partner

The Company promotes fair and highly transparent

is revealed to be an antisocial organization, the Groupmanagement by disclosing important information in anwill immediately dissolve its relationship with thisappropriate and timely manner to shareholders and allorganization.

other stakeholders.

Management (As of June 24, 2014)

Board of Directors

The Company maintains PR functions thatCompliance Promotion

include timely information disclosure by the General
Administration Department. In addition, the Company

The Group has formulated and distributes to all

has established a system to facilitate the timely disclo-

Group executives and employees the Bando Groupsure of information to stock exchanges and discloses

Code of Conduct, which stipulates proper actions insuch information on the Company website.

such areas as “compliance with laws and corporate
ethics,” “product and service safety,” “honest andfair business activities,” and “fair and equitableprocurement transactions.” In addition, the Group

President andRepresentative Director:

Mitsutaka Yoshii

Representative Director:

Director:

Yoshihisa Tamagaki

Kyosuke Nakamura

works to raise awareness of compliance by designating
October as the Bando Group Corporate Ethics Month,conducting training sessions on the Bando Group
Code of Conduct at Company business facilities ordomestic and overseas affiliates every other year,
and providing opportunities to discuss these topics
internally. Moreover, the Group has established asystem to further promote compliance by adopting aninternal reporting system that includes external lawyers
as well as a service for providing information on theformulation, revision and abolition of relevant laws.

Director:

External Director:

Shinji Kashiwada

Yutaka Kato

Internal Audits
The Company has established the Internal Audit
Department, an independent organization thatis staffed by two people reporting directly to the

Audit & Supervisory Board Memberspresident. The Internal Audit Department implements

Audit & Supervisory Board Member:(full-time)systematic and comprehensive internal audits (which

Shinichiro Miyamoto

include the internal control system) of all depart-

Corporate Executive Officers
President:

Executive Officers:

Mitsutaka Yoshii

Yoshitaka Oshima

Senior Executive Officers:

Shinji Kashiwada

ments as well as domestic and overseas affiliates.

External Audit & Supervisory Board Member:(full-time)

Yoshihisa Tamagaki

Accompanied by audit & supervisory board members,

Takahiro Matsusaka

Masao Ohara

External Audit & Supervisory Board Member:

Keiji Iwai

Hiroshi Kii

Masayuki Kitabayashi

Toru Tada

Hisashi Samejima

the Internal Audit Department conducts on-site audits
within the Company and at affiliates, the results ofwhich are reported to the president, directors andaudit & supervisory board members.

Joseph David Laudadio
Katsuhiko Hata
Katsuya Yamaguchi
Takayuki Nagase

Kyosuke Nakamura

34

BANDO CHEMICAL INDUSTRIES, LTD.

Annual Report 201435

Message from Bando’s External Director

Management’s Discussion and Analysis

Operating Environment

Supporting business decisions for
global development andmaximizing corporate value

During the fiscal year ended March 31, 2014, the Chinese
economy began to show signs of recovery, while some
Asian economies experienced a slowing of growth,
notably in South Korea, Thailand and India. In the
United States, personal consumption firmed up amid animproved employment environment, and the economy
appeared to have entered a phase of sustained recovery
with solid corporate earnings and stable growth. Signsof recovery also appeared in Europe.
In Japan, moderate overall recovery momentum
set in, with the overvaluation of the yen correcting in
response to financial easing and government fiscal
measures, and capital investment picking up. Personal
spending was also robust, due in part to last-minutebuying ahead of an increase in the consumption tax.

Business Overview

Yutaka Kato
External Director

I have been engaged in providing support for venture companies and management guidance forJapanese and foreign companies as a business scholar and a specialist in managerial accounting
and cost accounting. I draw on this experience to provide effective support for Bando, particularly
in business decision-making where I look at risk taking and challenges in global business development, at the heart of the Company’s management strategy.

The year ended March 31, 2014 was the first year of
the first phase in our mid-to-long term business plan
“Breakthroughs for the future.” The Bando Groupaggressively worked to meet targets in the plan basedon five guidelines which were designed to chart ourcourse as a company over the next 10 years, such as“evolution of global market strategy.” Specific measures included the introduction of dual Administrative
Headquarters comprising our reorganized Belt andElastomer Products Business segments. We now havea business model in which it will be easier to generatesynergies and execute business strategy taking a global

perspective. We also established a special office for new
business development, integrated marketing companies
in Japan, strengthened production capacity in the Asian
region, promoted market and product development,
and worked to reduce costs to strengthen profitability.

Operating Results
As a result of our efforts, consolidated net sales in thefiscal year ended March 31, 2014 increased 8.9% year
on year to ¥93,434 million, buoyed by effects of weaker
Japanese yen exchange rates.
Operating income increased 34.8% to ¥5,518
million. Cost-cutting measures and an increase in sales
volumes combined with the weaker yen and reduced
depreciation and amortization more than offset rising
raw materials prices and valuation losses on inventory.
The cost to sales ratio improved 0.3 point from 73.8%
to 73.5%. The SG&A ratio improved by 0.8 point from
21.4% to 20.6%. The operating margin rose 1.1 pointfrom 4.8% to 5.9%.
Net income increased 70.5% year-on-year to ¥4,280
million, mainly due to booking of foreign exchange gains
and a rebound from the impairment loss booked in theprevious fiscal year.

Operating Results by Business Segment
Belt Business
Sales of automotive power transmission belt products
improved for accessory drive power transmission belt
and system products, due to growth in demand inExternal Directors are appointed to help maintain and maximize corporate value and shareholder value. I therefore investigate whether the Board of Directors is functioning well. Bando’s

Net sales*

Operating income*

Board of Directors engages in lively discussions between all the members and reaches decisions inan effective, healthy, fair, and transparent manner. I think that these decision-making processes also
certainly help improve business efficiencies.
I am confident that Bando will make the most of its strengths in global business development(¥ million)
100,000

84,81180,000and continue to expand its business, particularly in emerging markets, Europe, and the US.
The operating climate has become more complex in recent years, as business risks develop in

86,37285,77293,434(¥ million)
6,000

4,571

73,5934,000

expanding business in high value-added areas.

4,095

60,000emerging countries. In my view, the main challenges facing Bando are how to grow its businesswhile hedging against and overcoming such business risks and how to improve profitability by

5,518

5,056

2,450

40,0002,000
20,000

0

2010

2011

2012

2013

2014

0

2010

2011

2012

2013

2014

* Fiscal year endings are March 31.

36

BANDO CHEMICAL INDUSTRIES, LTD.

Annual Report 201437

Management’s Discussion and Analysis

overseas markets, chiefly in China and other Asian
countries. Bando also boosted sales of variable speed
belts for scooters in the Asian market.
Sales also grew for industrial power transmission
belt products, including belts for agricultural machinery,driven by proactive marketing activities.
Conveyor belt sales grew on sales of conveyor
belts for steelmakers and steep-incline conveyor belts
for coal-fired power plants. Conveyor belt sales forresource development in Australia and Canada werealso buoyant.
Sales likewise grew for light-duty resin conveyor
belts (Sunline Belts) as we strengthened processing
facilities in China and engaged in intensive marketing
efforts.
Segment net sales increased 10.7% year-on-yearto ¥80,034 million, and segment profit grew 18.8% to¥5,161 million.

Elastomer Products Business
Sales of precision performance products, such as cleaning blades, for electrophotographic output devices
declined amid a return by major customers to in-housemanufacture, but high-performance rollers saw sales
growth due to market recognition of their high quality,
including long service life.
In high-performance film products, we expanded
sales of films used in construction materials, benefitedby an increase in housing starts. Bando also saw growthin sales of films for decorative displays after expansionof the lineup of BANDO GLANMESSE print media forinkjet printers.

Net income*Segment net sales increased 0.5% year-on-year to¥12,438 million. Elastomer Products returned to profitability after last year’s segment loss of ¥164 million.
Segment profit was ¥12 million.

Other Business
Bando is engaged in other business, such as the manufacture and sales of robot-related devices. Sales in otherbusiness grew 49.4% year-on-year to ¥2,231 million.
Segment profit increased 156.2% to ¥188 million.

Financial Position
Total assets as of March 31, 2014 increased ¥7,415
million to ¥89,623 million compared with the previous
fiscal year-end. This was due to a ¥1,993 million
increase in notes and accounts receivable (current
assets) and a ¥2,388 million increase in property, plantand equipment, net. Other assets increased ¥1,360
million, largely reflecting a rise in share prices of investments in securities.
Total liabilities increased ¥1,364 million comparedwith the previous fiscal year-end to ¥40,345 million.
Current liabilities increased ¥639 million, and longterm liabilities rose ¥724 million due in part to bookingof net defined benefit liability following revision of
accounting standards relating to retirement benefit
provisions.
Net assets increased ¥6,051 million from theprevious fiscal year-end to ¥49,277 million.
Retained earnings increased ¥3,433 million due

Net assets
Total assets*
Net assets

Total assets(¥ million)
100,000(¥ million)
5,000

4,280
80,0004,000

78,02082,90579,65982,20789,623

3,333
3,000

60,000

2,510

2,000

40,000

1,440

1,234

38

40,54239,444

2010

2011

2012

43,22649,27720,0001,000

040,020

2010

2011

2012

BANDO CHEMICAL INDUSTRIES, LTD.

2013

2014

0

2013

2014

partly to the booking of net income, and accumulated
other comprehensive income increased ¥2,576 million
largely on foreign currency translation adjustments.
As a result, the equity ratio increased 2.4 points from
52.0% at the previous fiscal year-end to 54.4%.

Capital Investment andFund Procurement
Capital investment undertaken in the fiscal year-ended
March 31, 2014 totaled ¥5,046 million. Major capital
investment items are shown below. The financing
required was obtained from the following sources: theCompany’s own funds, the liquidation of notes andaccounts receivable, and borrowings.
Business
Segment

Belts

Elastomer
Products

Amount(¥million)

Main Activities¥2,682

Installed new and expanded
or upgraded existing manufacturing equipment, upgraded
molds

906

Streamlined and improved theenergy efficiency of manufacturing equipment, improved
manufacturing processes

Other

1,457

Total

¥5,046

Improved welfare facilities,
introduced solar powersystem(s)Cash Flow
Net cash provided by operating activities totaled¥6,459 million, compared with ¥7,004 million in theprevious fiscal year, with the recording of income before
income taxes and minority interests of ¥6,137 million.
Net cash used in investing activities was ¥5,038 million,
compared with ¥5,781 million used in the previous fiscal
year. This was primarily due to the booking of ¥4,934
million in expenses for purchase of property, plantand equipment. Net cash used in financing activitieswas ¥1,548 million, compared with ¥463 million in theprevious fiscal year, largely reflecting cash dividends
paid totaling ¥847 million.
As a result, cash and cash equivalents as of March
31, 2014 totaled ¥12,981 million, up ¥714 million compared with the previous fiscal year-end.

Earnings Forecasts for the Year Ending
March 31, 2015
The macro economy in the year ending March 31,
2015 is expected to show continued moderate overall
recovery momentum, on expanded consumption in
the United States and a pickup in Europe, as well as
ongoing financial easing in Japan. Nonetheless, in lightof increased geopolitical risk around the world andconcern over the outlook for emerging economies,
we remain cautious. At the same time, we foresee
continued robust growth in the year ahead for our principal customer segment, the automotive industry, on
increased global production volumes for automobiles
and two-wheeled vehicles.
Based on such a prognosis, the Group willcontinue to take priority measures in the second yearof the “Breakthroughs for the future” mid-to-longterm business plan. We forecast consolidated net salesof ¥95,000 million, up 1.7% year-on-year, operating
income of ¥5,800 million, up 5.1%, and net income of¥4,300 million, up 0.5%.

Basic Policy Regarding
the Distribution of Profits
The Company’s basic policy is to enhance profits andmaintain stable dividend payments for shareholders
while taking into consideration its earning position.
In addition, distribution of profits is based on an
examination of total shareholder returns, including
share repurchases. Internal reserves are invested overthe long term in such areas as R&D; new product,
production technology and market development; thestrengthening of business structure; internationalization; and the expansion into new business domains.
Through these initiatives, we will work to further
increase corporate value. In line with this basic policy,
the year-end dividend of ¥5 for the fiscal year ended
March 31, 2014, up ¥1 from the previous fiscal year end,
resulting in the annual dividend of ¥10 per share, up ¥2from the previous fiscal year. We plan to pay a dividendat the same level, ¥10, in the fiscal year ending March
31, 2015.

Annual Report 201439

Business Risks

Message from the CFO

The Group considers the following to be important risks related to the performance and financial
position of the Bando Group that could have a material effect on the decisions of investors. The
forward-looking statements listed in this document are based on judgments made by the Group asof March 31, 2014.

Increasing Overseas Transactions
The Group primarily uses foreign exchange contracts

Raw Material Market Fluctuations andProcurement

The Bando Group has set the following specifictargets under the first stage of the “Breakthroughsfor the future” mid-to-long term business plan.

to hedge the risks associated with the significant

The Group negotiates with business partners regarding

number of foreign currency receivables it currently

delivery dates and prices by closely examining market‌Consolidated targets in the final year of BF-1

carries, and will implement other appropriate measures

prices as well as supply-demand circumstances. The

in the mid-to-long term plan

to hedge against such risks in the future. Nevertheless,Group forecasts further increases in raw material prices

the Group’s performance could be adversely affectedaccompanying higher crude oil prices. Accordingly,

by fluctuations in foreign currency exchange rates.

the Group promotes research on alternative materials

In addition, the Group’s performance and finan-

to stabilize supply and demand; revises and increases

cial position could be adversely affected by changes

product prices in response to rising raw material

in economic conditions in individual regions, despite

prices; and strengthens measures to reduce overall

efforts to strengthen its overseas production and sales

costs. Nevertheless, the Group’s performance could

systems.

be adversely affected by a downturn in demand, or
prolonged increases in material and/or fuel prices that

Recalls
As a components manufacturer, the Company delivers
items to automotive, office automation equipment,
consumer product and other manufacturers.

exceed expectations.

Earthquakes and Other Natural Disasters
There are indications that a major earthquake could

In addition, its subsidiaries and affiliates mainly

occur in the Tokai, Tonankai or Nankai regions of

manufacture, process and sell these parts. Considering

Japan. In addition, the potential for typhoons andproduct quality to be of paramount importance forfloods exists. In the event of such a disaster, businessmaintaining and developing current business oper-

sites including the Nankai Plant could sustain damage

ations, the Group focuses on implementing various

to production or other facilities, potentially leading toinitiatives to ensure product quality to the maximum

a temporary cessation of operations. Accordingly, eachextent possible. However, recalls and other actionsof the Company’s four plants has formulated a businesscould arise in cases where defects in automobiles andcontinuity plan (BCP) based on the assumption that

other items are caused by products (components)

it could be damaged under such circumstances.

supplied by the Group.

The BCPs include creating mechanisms to minimize

Fiscal 2017 net sales¥100 billion

Fiscal 2017 operating income¥10 billion

Fiscal 2017 ROA

6.0 %The following guidelines will drive our business tomake these targets: 1) Evolution of global market
strategy, 2) Product evolution, 3) Evolution in
manufacturing, 4) New businesses creation, and
5) Evolution in management quality. In my role as
CFO, I am focusing my attention on efficiently raising the funds necessary for strategic investment
to maintain and improve our healthy financial
position, based on the fifth guideline on evolution
in management quality. During the five-year
BF-1, we plan total capital investment of ¥25,000
million and will also invest ¥5,000 million in R&D
to support the development of new businesses, inaddition to our normal R&D investment.
We have diversified our fundraising methods
since we were rated* by the credit ratings agency
Rating and Investment Information, Inc. in fiscal
2007. We aim to choose the optimum fundraising
method by contrasting the characteristics ofthe target investment with the interest rate andforeign-exchange trends on the market.
* Rating as of March 31, 2014: BBB+ (Issuer Rating)/a-2 (Short-term Rating)In such cases, the Group will likely be required todisruptions to operations, notably the formulation ofcover all obligatory legal or contractual costs of recalls

repair plans and the supplementary supply of products

and other actions, which could adversely affect theby overseas plants. Nevertheless, the Group’s perfor-

Reducing net interest-bearing debt to zeroGroup’s performance.

mance could be significantly impacted by disasters,

The cash flows generated by strategic investments
in growth products, defined through stronger
management of our global portfolio, are firstassigned to reduce net interest-bearing debt todepending on the size of the disaster.

40

Maintaining and improving a healthyfinancial position in support of the“Breakthroughs for the future”
business planBANDO CHEMICAL INDUSTRIES, LTD.

Healthy finances

Yoshitaka Oshima
Executive Officer, andChief Financial Officer

zero. By the end of fiscal 2013, we had reduced
net interest-bearing debt to ¥2,600 million, from
¥7,100 million in fiscal 2009, but our short-termbusiness goal is to reduce this to zero as soon as
possible. We also reduced the D/E ratio to an alltime low of 0.323 by the end of fiscal 2013 and aim
to improve this further.

Improving the equity ratio
The equity ratio reached an all-time high of 54.4%,
due to contributions from net income of ¥4,280
million and foreign currency translation adjustmentof ¥3,230 million.

Achieving our ROA target
Strategic investment is necessary for growth, but
we must invest judiciously if we are to maintain ahealthy financial position. Our ROA target of 6% isbased on total assets of around ¥100,000 million
when operating income reaches ¥10,000 million(¥6,400 million on a net income basis). Accordingly,
we will monitor and control any change in assets
such that there is no significant increase in thebalance of total assets from the ¥89,623 million asof March 31, 2014. If we achieve our ROA target,
past trends suggest that ROE could surpass theprevious all-time high of 12.3% in fiscal 2007,
although this is not a direct target indicator for us.

Managing financial risk
We cannot ignore political change and othergeopolitical risk that may impact our subsidiaries
overseas, as well as foreign exchange and interest
rate risk in Japan, including measures to counterthe strong yen and a reversal of low interest rates.
To hedge against such risks, we gather informationfrom a consolidated business management perspective and need to respond rapidly to unusual
events. We are steadily working on this and trying
to prepare countermeasures based on various
hypothetical scenarios.

Annual Report 201441

Consolidated Balance Sheets
Bando Chemical Industries, Ltd. and Consolidated Subsidiaries
March 31, 2014 and 2013

Thousands of
U.S. dollars(Note 4)

Millions of yen

2014

Assets2013

2014

Time deposits (Note 6)

Millions of yen

Liabilities and Net Assets

2014

2013

2014

¥ 3,348¥ 2,285$ 32,539

2,238

2,864

21,753Current Liabilities:

Current Assets:
Cash and cash equivalents (Note 6)

Thousands of
U.S. dollars(Note 4)

¥ 12,981¥12,267$126,179

211

226

2,050

Short-term borrowings (Notes 6 and 9)
Current portion of long-term debt (Notes 6 and 9)
Notes and accounts payable (Note 6):

Notes and accounts receivable (Note 6):
		Trade18,905

16,912

183,761

		Trade14,167

14,803

137,706

		Other

1,077

1,150

10,467

		Construction and other

2,526

2,985

24,548

(31)

(29)

(297)

Income taxes payable (Note 6)

1,364

349

13,255

		Allowance for doubtful accounts

Inventories (Note 5)

10,811

10,460105,083

Deferred tax assets (Note 11)

656

231

6,378

Other current assets

931

657

9,040

45,541

41,873442,661

Total Current Assets

Other current liabilities (Note 11)

3,142

2,860

30,551

26,785

26,145

260,352

10,202

10,62699,161

—

2,008

—

Net defined benefit liability (Note 10)

3,160

—

30,714

Other long-term liabilities (Note 11)

199

202

1,937

13,561

12,836

131,812

10,952

10,952

106,454

Total Current Liabilities
Long-term Liabilities:
Long-term debt (Notes 6 and 9)
Allowance for employees’ retirement benefits (Note 10)

Total Long-term Liabilities

Property, Plant and Equipment:
Land

6,644

6,261

64,582

Buildings and structures

26,82423,979260,734

Net Assets (Note 12):

Machinery and equipment

54,72948,767531,966

Common stock

Construction in progress

718

3,273

6,975

		

Authorized: 378,500,000 shares

12,84012,044

124,813		Issued 2013 and 2014 — 94,427,703 shares

101,755

94,324

989,070

Capital surplus

2,968

2,968

28,852

Accumulated depreciation(70,933)(65,890)(689,476)

Retained earnings

35,35331,920343,634

Property, Plant and Equipment, Net

30,82228,434

299,594

Treasury stock, at cost
(102)

(90)

(992)

49,17145,750477,948

1,498

1,107

14,565

4

—

36

Other

		

2013 — 315,201 shares		2014 — 347,060 shares

Total Shareholders’ Equity
Accumulated other comprehensive income
Other Assets:		

Unrealized gains on available-for-sale securities

Other intangible assets

1,059

1,112

10,298		

Deferred gains on hedges

Investments in securities (Notes 6 and 7)

5,513

5,052

53,588		Foreign currency translation adjustments(852)(4,082)(8,287)

Investments in affiliates (Note 6)

4,637

3,994

45,074		Remeasurements of defined benefit plans(1,049)—(10,195)

Deferred tax assets (Note 11)

724

543

7,037

Total Accumulated Other Comprehensive Income(399)(2,975)(3,881)Other — net

1,327

1,200

12,885

505

451

4,906

Total Other Assets

13,26011,900128,882

Total Net Assets

49,27743,226478,973¥ 89,623¥82,207$871,137

Total Liabilities and Net Assets¥89,623¥82,207$871,137

Total Assets

Minority interests

See accompanying notes to consolidated financial statements.

42

BANDO CHEMICAL INDUSTRIES, LTD.

Annual Report 201443

Consolidated Statements of Income andConsolidated Statements of Comprehensive Income

Consolidated Statements of Changes in Net Assets
Bando Chemical Industries, Ltd. and Consolidated Subsidiaries
Years ended March 31, 2014 and 2013

Bando Chemical Industries, Ltd. and Consolidated Subsidiaries
Years ended March 31, 2014 and 2013
Millions of yen

Consolidated Statements of Income

2014

2013

2014

Net Sales
Cost of Sales
Gross profit¥93,434
68,71024,724¥85,772
63,311
22,461$908,186
667,868
240,318

Selling, General and Administrative Expenses (Note 13)
Operating income

19,206
5,518

18,366
4,095

186,684
53,634

Other Income (Expenses):
Interest and dividend income
Interest expense
Equity in earnings of affiliates
Foreign exchange gains (losses), net
Loss on disposal of property, plant and equipment
Impairment loss
Other, net
Income before income taxes and minority interests
Income Taxes (Note 11):
Current
DeferredIncome before minority interests
Minority Interests
Net Income

163
(264)
528
437
(112)
(1,157)
(150)
(554)
3,541

188
(290)
504
238
(85)
—
64
619
6,137

1,825
(2,815)
4,897
2,313
(828)
—
625
6,017
59,651

833
149
982
2,559

1,946
(180)
1,766
4,371

49
¥ 2,51091¥ 4,280

Millions of yen

Number ofshares ofcommonstock
outstanding

Commonstock

CapitalsurplusRetainedearnings

Treasurystock,
at cost96,427¥10,952¥3,537¥30,171¥(161)¥  476¥—¥(6,415)¥     —

¥885

¥39,444

Net income

—

—

—

2,510

—

—

—

—

—

—

2,510

Cash dividends

—

—

—

(761)

—

—

—

—

—

—

(761)

Purchases of treasury stock

—

—

—

—

(498)

—

—

—

—

—

(498)

Retirement of treasury stock(2,000)

—

(569)

—

569

—

—

—

—

—

—

Net change during the year

—

—

—

—

—

631

—

2,333

—

(434)

2,530

Balance at April 1, 2012

Balance at April 1, 2013

U.S. dollars(Note 4)

2014

2013

2014

¥45.4910.00¥26.47
8.00

$0.44
0.10

See accompanying notes to consolidated financial statements.

Total
net assets

94,427

10,952

2,968

31,920

(90)

1,107

—

(4,082)—451

43,226

—

—

—

4,280

—

—

—

—

—

—

4,280

Cash dividends

—

—

—

(847)

—

—

—

—

—

—

(847)

Purchases of treasury stock

—

—

—

—

(12)

—

—

—

—

—

(12)

Sales of treasury stock

—

—

0

—

0

—

—

—

—

—

0

Net change during the year

—

—

—

—

—

391

4

3,230

(1,049)54

2,630

94,427¥10,952¥2,968¥35,353¥(102)¥1,498¥ 4¥  (852) ¥(1,049)¥505¥49,277

Total
net assets

18,914(1,749)17,16542,486878$ 41,608

Unrealized
Foreign
gains oncurrency Remeasurements
available- Deferred
Minorityof defined
for-salegains on translationinterests
securities
hedges adjustments benefit plans

Net income

Balance at March 31, 2014

Yen
Per Share of Common Stock (Note 14)
Basic net income
Cash dividends

Thousandsof shares

Thousands of
U.S. dollars(Note 4)

Thousands of U.S. dollars (Note 4)

Balance at April 1, 2013

Commonstock

CapitalsurplusRetainedearnings

Treasurystock,
at costUnrealized
Foreign
gains oncurrency Remeasurements
available- Deferred
Minorityof defined
for-salegains on translationinterests
securities
hedges adjustments benefit plans$106,454$28,851$310,263$(872)$10,759$—$4,380$420,156

Net income——

41,608

—

—

—

—

—

—

41,608Cash dividends——(8,237)

—

—

—

—

—

—

(8,237)Purchases of treasury stock

—

—

—

(123)

—

—

—

—

—

(123)

Sales of treasury stock

—

1

—

3

—

—

—

—

—

4

Net change during the year

—

—

—

—

3,806

36

31,392(10,195)

526

25,565$106,454$28,852$343,634$(992)$14,565$36$ (8,287) $(10,195)$4,906$478,973

Balance at March 31, 2014$(39,679) $      —See accompanying notes to consolidated financial statements.

Thousands of
U.S. dollars(Note 4)

Millions of yen

Consolidated Statements of Comprehensive Income

2014

2013

2014

Income before Minority Interests
Other Comprehensive Income (Note 15):
Unrealized gains (losses) on available-for-sale securities
Deferred gains (losses) on hedges
Foreign currency translation adjustments
Share of other comprehensive income in affiliates
Total other comprehensive income
Comprehensive Income¥4,371¥2,559$42,486

388
4
3,106
180
3,678
¥8,049

636
—
2,039
322
2,998
¥5,5573,773
36
30,191
1,748
35,748$78,234

Comprehensive Income Attributable to:Shareholders of the parent
Minority interests¥7,906143¥5,474
82$76,842
1,392

See accompanying notes to consolidated financial statements.

44

BANDO CHEMICAL INDUSTRIES, LTD.

Annual Report 201445

Consolidated Statements of Cash Flows

Notes to Consolidated Financial Statements

Bando Chemical Industries, Ltd. and Consolidated Subsidiaries
Years ended March 31, 2014 and 2013

Bando Chemical Industries, Ltd. and Consolidated Subsidiaries

Thousands of
U.S. dollars(Note 4)

Millions of yen
2014

2013

2014

¥ 6,137¥ 3,541$ 59,651(1,078)(1,131)(10,479)

153

202

1,490

4,174

4,389

40,576

(27)

(59)

(259)

Impairment loss

—

1,157

—

Decrease in allowance for doubtful accounts

(18)

(10)

(170)

Decrease in allowance for retirement benefits

—

(164)

—
(4,861)

Cash Flows from Operating Activities:
Income before income taxes and minority interests
Adjustments for:
Income taxes paid
Income taxes refunded
Depreciation and amortization
Amortization of goodwill and negative goodwill

Decrease in net defined benefit liability

(500)

—

Foreign exchange losses (gains), net

25

(103)

245

(504)

(528)

(4,897)

Loss on sales and disposal of property, plant and equipment

81

111

785

Loss (gain) on sales of investments in securities

(26)

0

(249)

Decrease (increase) in notes and accounts receivable — trade

(662)

1,341

(6,432)

Decrease in inventories

822

8

7,994

(1,905)(2,103)(18,516)

Equity in earnings of affiliates

Changes in assets and liabilities:

Decrease in notes and accounts payable — trade
Other, net

(213)

353

(2,095)

6,459

7,004

62,783

59

(81)

570

(4,934)(4,280)(47,955)

17

492

169

Purchases of intangible assets

(164)

(299)

(1,593)Purchases of investments in securities

(20)

(50)

(190)

Proceeds from sales of investments in securities

59

0

574

Proceeds from redemption of investments in securities

100

—

972

Purchases of investments in subsidiaries
Payments related to disposal of investments
in subsidiaries resulting in change in scope of consolidation
Other, net

(67)

(457)

(651)

—

(1,077)—

Net Cash Provided by Operating Activities
Cash Flows from Investing Activities:
Decrease (increase) in time deposits
Purchases of property, plant and equipment
Proceeds from sales of property, plant and equipment

Net Cash Used in Investing Activities

(88)

(29)

(862)

(5,038)(5,781)(48,966)

Cash Flows from Financing Activities:
Increase (decrease) in short-term borrowings

(41)

5,153

Proceeds from long-term borrowings

1,659

3,541

16,130

Payments on long-term borrowings(2,864)(2,682)(27,839)

Purchases of treasury stock

(12)

(497)

(112)

Cash dividends paid

(847)

(761)

(8,237)

Cash dividends paid to minority shareholders

(3)

(10)

(27)

Other, net

(11)

(13)

(115)

(1,548)(463)(15,047)

Effect of Exchange Rate Changes on Cash and Cash Equivalents

841

484

8,172

Net Increase (Decrease) in Cash and Cash Equivalents

714

1,245

6,942

Cash and Cash Equivalents at Beginning of Year

12,267

11,022

119,237

Cash and Cash Equivalents at End of Year¥12,981¥12,267$126,179

Net Cash Used in Financing Activities

See accompanying notes to consolidated financial statements.

46

530

BANDO CHEMICAL INDUSTRIES, LTD.

1. Description of Business
Bando Chemical Industries, Ltd. (hereinafter, the “Company”) is apioneer belt manufacturer in Japan. The Company manufacturesand sells power transmission belts for automobiles, industrial
machines, agricultural machines, home appliances and information terminal devices, heavy and light duty conveyor belts, products for office automation and household appliances and films fora variety of markets.


2. Basis for Preparation of Consolidated Financial
Statements
The accompanying consolidated financial statements havebeen prepared in accordance with the provisions set forth in
the Japanese Financial Instruments and Exchange Law and its
related accounting regulations and in conformity with accounting
principles generally accepted in Japan, which are different in certain respects as to application and disclosure requirements fromInternational Financial Reporting Standards.
In preparing these consolidated financial statements, certain
reclassifications and rearrangements have been made to thefinancial statements issued domestically in order to present themin a form which is more familiar to readers outside Japan. In addition, certain reclassifications have been made to the prior year’s
financial statements to conform to the current year’s presentation.


3. Summary of Significant Accounting Policies(1) Consolidation

Assets and liabilities of the overseas subsidiaries are translated
into Japanese yen at the exchange rate prevailing at each balance
sheet date. Income and expense accounts are translated at the
average exchange rate for the year. Differences arising from suchtranslations are recorded as foreign currency translation adjustments and minority interests in the consolidated balance sheet.
(3) Cash and cash equivalents
Cash and cash equivalents are composed of cash on hand,demand deposits, and short-term investments with original
maturities of three months or less that are readily convertible tocash and exposed to insignificant risk of fluctuation of values.
(4) Allowance for doubtful accounts
Allowance for doubtful accounts is provided at the amounts
calculated based on the past loss experience and an additional
estimate of potential losses in the specific receivables.
(5) Inventories
Finished goods, work in process and raw materials are statedat the lower of cost determined by the first-in, first-out method
or net selling value. Merchandise and supplies are stated at thelower of cost determined by the gross average method or net
selling value.
Meanwhile, inventories held by domestic consolidated subsidiaries are stated at the lower of cost determined principally by
the gross average method or net selling value. Inventories heldby overseas consolidated subsidiaries are stated at the lower ofcost determined mostly by the first-in, first-out method or net
selling value.

The accompanying consolidated financial statements include theaccounts of the Company and its 25 subsidiaries (collectively, the“Companies”) as of March 31, 2014 (27 subsidiaries as of March
31, 2013).
Higashinihon Bando Co., Ltd. and Hokkaido Bando Co., Ltd.
merged on April 1, 2013. Higashinihon Bando Co., Ltd. was thesurviving company. As a result, Hokkaido Bando Co., Ltd. was
excluded from the scope of consolidation. Nishinihon Bando
Co., Ltd. and Kyushu Bando Co., Ltd. merged on April 1, 2013.
Nishinihon Bando Co., Ltd. was the surviving company. As aresult, Kyushu Bando Co., Ltd. was excluded from the scope of
consolidation.
Investments in 7 affiliates, on which the Company have significant influence, are accounted for by the equity method as ofMarch 31, 2014 and 2013, respectively.
The overseas consolidated subsidiaries have a year-end of
December 31. Adjustments have been made for preparing theconsolidated financial statements to reflect significant transactions
which occurred between their year-end and that of the Company.
All significant intercompany balances and transactions
have been eliminated in consolidation. All material unrealized
profits included in assets resulting from transactions within the
Companies are eliminated.

(6) Investments in securities(2) Foreign currency translations

Goodwill represents the cost in excess of fair value of net assets
acquired in business combination accounted for by the purchasemethod. Goodwill and negative goodwill which occurred before
March 31, 2010 are amortized over five years by the straight-line
method.

All monetary assets and liabilities denominated in foreign currencies are translated into Japanese yen at the exchange rate prevailing at the balance sheet date. The foreign currency exchange
gains or losses from transactions are charged to income.

Investments in securities are classified into three categories:
trading securities, held-to-maturity debt securities or availablefor-sale securities. Trading securities are carried at fair value. Gainor loss, both realized and unrealized, is recognized in income.
Held-to-maturity debt securities are carried at amortized cost.
Marketable securities classified as available-for-sale securities
are carried at fair value with changes in unrealized holding gainor loss, net of the applicable income taxes, reported in net
assets. Non-marketable securities classified as available-for-salesecurities are carried at cost determined by the moving-averagemethod.
(7) Property, plant and equipment
Property, plant and equipment except for lease assets are
depreciated principally by the declining-balance method overtheir estimated useful lives. Buildings acquired on or after April 1,
1998 by the Company and its domestic consolidated subsidiaries
are depreciated by the straight-line method over their estimateduseful lives. Useful lives are as follows: three to 50 years forbuildings and structures, and five to ten years for machinery andequipment.
(8) Goodwill

Annual Report 201447

Notes to Consolidated Financial Statements(9) Other intangible assets(15) Per share information(18) Additional information

6. Financial Instruments

Capitalized computer software costs for internal use are amortized by the straight-line method over five years.

Net income per share is computed by dividing net income available to common shareholders by the weighted-average numberof common shares outstanding for the year.
Cash dividends per share presented in the consolidated
statements of income are dividends attributable to the respective
years including dividends to be paid after the year-end.

As the Company and certain of its domestic consolidated subsidiaries have been given approval to adopt the consolidated
taxation system from the year ending March 31, 2015, theCompany has applied the accounting treatment and presentation regarding deferred taxes in accordance with the “Practical
Solution on Tentative Treatment of Tax Effect Accounting underConsolidated Taxation System (Part 1)” (ASBJ Practical Issues Task
Force (“PITF”) No. 5, March 18, 2011) and “Practical Solution on
Tentative Treatment of Tax Effect Accounting under Consolidated
Taxation System (Part 2)” (ASBJ PITF No. 7, June 30, 2010) fromthe year ended March 31, 2014 under the assumption that theCompany will adopt the consolidated taxation system.

(1) Policy for financial instruments(10) Research and development costs
Research and development costs are charged to income as incurred.
(11) Leases
Leased assets under finance leases which do not transfer ownershipto the lessee are capitalized and depreciated or amortized by thestraight-line method with no residual value over their lease terms.
(12) Retirement benefits
Employees serving the Company and certain of its consolidated subsidiaries are generally entitled to retirement benefits
determined by reference to current basic rates of pay, lengthof service and conditions under which the terminations occur.
The Companies principally account for allowance for retirement
benefits based on projected benefit obligations and plan assets
at each balance sheet date. The retirement benefit obligations
are attributed to each period by the straight-line method overestimated years of the eligible employees.
Prior service cost is amortized by the straight-line method
over ten years from the year in which they arise.
Actuarial gain or loss is amortized by the straight-line method
over ten years from the next year in which they arise.
Certain consolidated subsidiaries adopt the simplified
method to calculate net defined benefit liability and retirement
benefit costs.
(13) Income taxes
The provision for income taxes is computed based on income
before income taxes in the consolidated statements of income. The
liability method is used to recognize deferred tax assets and liabilities for the future tax consequences of the temporary differences
between the carrying amounts of assets and liabilities for financial
and income tax reporting purposes. The Companies provide a
valuation allowance when they believe that deferred tax assets are
not recoverable based on expected future taxable income.
(14) Derivatives and hedging activities
The Companies use derivative financial instruments to manage
their exposures to changes in foreign currency exchange rates
and interest rates. Foreign currency forward contracts are used
to reduce foreign exchange risk. Interest rate swap contracts
are used to reduce interest rate risk. Interest rate and currency
swap contracts are used to reduce interest rate risk and foreignexchange risk. The Companies do not enter into derivatives for
trading or speculative purpose.
If derivatives are used for hedging purpose and qualify forhedging accounting, gains or losses on derivatives are deferred
until maturity of hedged items. If the foreign currency forward
contracts qualify for hedge accounting, the hedged receivables
and payables denominated in foreign currencies are translated
at the contracted rates. The interest rate swap contracts which
qualify for hedge accounting and meet certain hedging criteria
are not measured at market value, but the differential paid or
received under the swap contracts is recognized and included ininterest expense.

48

BANDO CHEMICAL INDUSTRIES, LTD.

(16) Changes in accounting policies
Effective from the year ended March 31, 2014, the Company
and its consolidated domestic subsidiaries have applied the
Accounting Standard for Retirement Benefits (AccountingStandards Board of Japan (“ASBJ”) Statement No. 26, May
17, 2012 (hereinafter, “Statement No. 26”)) and Guidance on
Accounting Standard for Retirement Benefits (ASBJ Guidance
No. 25, May 17, 2012 (hereinafter, “Guidance No. 25”)) except
article 35 of Statement No. 26 and article 67 of Guidance No. 25,
and modified to record retirement benefit obligations net of plan
assets as net defined benefit liability, and record unrecognizedactuarial gains (losses) and prior service costs as net defined
benefit liability.
In accordance with the transitional treatment stipulated inarticle 37 of Statement No. 26, the effects of such changes on
the current year have been adjusted through remeasurementsof defined benefit plans in accumulated other comprehensive
income.
As a result, net defined benefit liability of ¥3,160 million($30,714 thousand) was recorded and accumulated other comprehensive income decreased by ¥1,049 million ($10,195 thousand),as of March 31, 2014.
In addition, net assets per share decreased by ¥11.15.
(17) Accounting pronouncements that have not been adopted
by the Company
Article 35 of Accounting Standard for Retirement Benefits (ASBJ
Statement No. 26, May 17, 2012)
Article 67 of Guidance on Accounting Standard for Retirement
Benefits (ASBJ Guidance No. 25, May 17, 2012)(a) Overview
The standard includes revisions to the accounting treatment of
unrecognized actuarial gains (losses) and prior service costs, thecalculation method of retirement benefit obligations and service
costs, and the improvement of disclosure.
(b) Scheduled date of adoption
The revisions to the calculation method of retirement benefit obligations and service costs will be adopted effective April 1, 2014.
These accounting standards will not be applied retrospectively to the prior period’s consolidated financial statements inaccordance with the transitional accounting treatment.
(c) Effect of adopting the standard
The impacts of the revised calculation method of retirement benefit obligations and service costs on the consolidated financial
statements are insignificant.

4. U.S. Dollar Amounts
The translations of Japanese yen amounts into U.S. dollar
amounts are included solely for the convenience of readers outside Japan. These translations should not be construed as representations that the Japanese yen amounts actually represent, or
have been or could be converted into U.S. dollars.
The rate of ¥102.88 = U.S.$1.00, the approximate rate ofexchange as at March 31, 2014, has been used for the purpose ofsuch translations.


5. Inventories
Inventories held by the Companies as of March 31, 2014 and 2013
consisted of the following:
Millions of yen

Merchandise and finished goods
Work in process
Raw materials and supplies
Total

Thousands of
U.S. dollars

2014

2013

2014

¥ 6,580
1,467
2,764¥10,811¥ 6,5691,424
2,466¥10,460$ 63,953
14,263
26,867$105,083

The Companies raise funds from stable and low-cost financing
sources, mainly bank borrowings and bonds, as needed in light of
the financial plan developed as a part of the annual management
plan. The Companies invest temporary cash surplus in highly
liquid and secure financial instruments. The Companies use
derivatives to the extent necessary for financial risk management
purposes.
(2) Nature and extent of risks arising from financial instruments
Receivables such as notes and accounts receivable-trade areexposed to customers’ credit risk. Receivables denominated inforeign currencies are exposed to foreign exchange risk.
Investments in securities, mainly equity instruments, areexposed to market risk. The Companies quarterly review fairvalues of marketable securities.
Payables such as notes and accounts payable-trade are generally paid within four months. Payables denominated in foreign
currencies are exposed to foreign exchange risk.
Bank borrowings and bonds are used to fund working capitaland capital expenditures. Some of them are exposed to interest
rate risk. The Companies reduce such risk arising from certain
long-term borrowings by interest rate swap contracts.
Derivatives include foreign currency forward contracts used tohedge foreign exchange risk on receivables and payables denominated in foreign currencies, and interest rate swap contracts used
to hedge interest rate risk on bank borrowings, and interest rateand currency swap contracts used to hedge interest rate risk andforeign exchange risk on bank borrowings.
(3) Risk management for financial instruments(a) Credit risk management
The Companies regularly monitor the financial position of customers to reduce the risk of defaults.
Since the Companies enter into derivative transactions onlywith highly-rated financial institutions, they believe there is little
risk of defaults.
(b) Market risk management
The Companies use foreign currency forward contracts to hedge
foreign exchange risk identified by currency and month for receivables and payables denominated in foreign currencies. With
respect to investments in securities, the Companies regularly
monitor fair values and the financial positions of the issuers andreview the holding purpose of these securities.
(c) Liquidity risk management in financing activities
The Companies prepare and update the cash management plan
in a timely manner, and maintain a certain level of liquidity on
hand to reduce liquidity risk. The Companies have commitmentline contracts to prepare for any contingency.

Annual Report 201449

Notes to Consolidated Financial Statements(4) Fair values of financial instruments

Thousands of U.S. dollars

Fair values of financial instruments include market prices andvalues calculated reasonably when market prices are not readily
available. As calculation of such value incorporates variablefactors, using different assumptions may result in different values.
The contract amounts and other information described in Note
8, “Derivatives” are not indicative of market risk exposure toderivative transactions.
Book values and fair values of the financial instruments as ofMarch 31, 2014 and 2013 were as follows:
Financial instruments whose fair values were not readily available were excluded from the following table:
Millions of yen
2014

Cash and cash equivalents
Time deposits
Notes and accounts receivable-trade
Investments in securities
Available-for-sale securities
Total
Notes and accounts payable-trade
Short-term borrowings
Income taxes payable
Long-term borrowings
Bonds
Total
Derivative transactions
Contracts to which hedge
accounting was not applied
Contracts to which hedge
accounting was applied

Book value

Fair value

Difference¥12,981
211
18,905¥12,981
211
18,905

5,372¥37,469¥14,167
3,348
1,364
9,407
3,000
¥31,286

5,372¥37,469¥14,167
3,348
1,364
9,427
3,032
¥31,338

¥—
—
—
—
—
¥—
¥—
—
—
20
32
¥52

¥    (11)¥    (11)

¥—

63

63

—

Millions of yen
2013

Cash and cash equivalents
Time deposits
Notes and accounts receivable-trade
Investments in securities
Available-for-sale securities
Total
Notes and accounts payable-trade
Short-term borrowings
Income taxes payable
Long-term borrowings
Bonds
Total
Derivative transactions
Contracts to which hedge
accounting was not applied
Contracts to which hedge
accounting was applied

50

Book value

Fair value

Difference¥12,267
226
16,912¥12,267
226
16,912

¥—
—
—

4,816
¥34,221¥14,803
2,285
349
10,4623,000¥30,898

4,816¥34,221¥14,803
2,285
349
10,503
3,028¥30,967

—
¥—
¥—
—
—
40
28
¥68

¥    (15)¥    (15)

¥—

—

—

—

BANDO CHEMICAL INDUSTRIES, LTD.

2014

Cash and cash equivalents
Time deposits
Notes and accounts receivable-trade
Investments in securities
Available-for-sale securities
Total
Notes and accounts payable-trade
Short-term borrowings
Income taxes payable
Long-term borrowings
Bonds
Total
Derivative transactions
Contracts to which hedge
accounting was not applied
Contracts to which hedge
accounting was applied

Book value

Fair value

Difference$126,179
2,050
183,761$126,179
2,050
183,761

$ —
—
—
—
—
$ —
$ —
—
—
198
310
$508

52,221$364,211$137,706
32,53913,25591,43329,160$304,093$    (109)612

52,221$364,211$137,706
32,53913,25591,631
29,470$304,601$    (109)612

Financial instruments whose fair values were not available as ofMarch 31, 2014 and 2013 were as follows:
Millions of yen

Available-for-sale securities
Unlisted equity securities
Investments in affiliates
Total

2014

2013

2014

¥  141
4,637¥4,778¥  236
3,994¥4,230$ 1,367
45,074$46,441

The above items were not included in investments in securities (available-for-sale securities) because their market price was
not available and it was extremely difficult to determine their fairvalues.
Monetary assets and investments in securities with maturities
were as follows:
Millions of yen
2014—

The fair values approximate book values because of the shortterm maturities of these instruments.

Cash and cash equivalents
Time deposits
Notes andaccounts receivable-trade
Total

Due within
1 yearDue after
1 yearthrough
5 years

Due after
5 years
through
10 years

Due after
10 years¥12,981
211

¥—
—

¥—
—

¥—
—

18,905¥32,097

—
¥—

—
¥—

—
¥—

Investments in securities

Millions of yen

The fair values are measured at the quoted market prices of thestock exchange.
Notes and accounts payable-trade, Short-term borrowings,
Income taxes payable
The fair values approximate book values because of the shortterm maturities of these instruments.
Long-term borrowings

2013

Cash and cash equivalents
Time deposits
Notes andaccounts receivable-trade
Total

Bonds
The fair values are measured at the quoted market prices.
Derivative transactions
Please see Note 8, “Derivatives.”

Due within
1 yearDue after
1 yearthrough
5 years

Due after
5 years
through
10 years

Due after
10 years¥12,267
226

¥—
—

¥—
—

¥—
—

16,912¥29,405

—
¥—

—
¥—

—
¥—

2014

Cash and cash equivalents
Time deposits
Notes andaccounts receivable-trade
Total

Millions of yen

Securities with gross unrealized gains:
Equity securities
Securities with gross unrealized losses:
Equity securities
Total

Due within
1 yearDue after
1 yearthrough
5 years

Due after
5 years
through
10 years

Due after
10 years$126,179
2,050

$—
—

$—
—

$—
—

183,761$311,990

—
$—

—
$—

—
$—

Please see Note 9, “Short-term Borrowings and Long-term
Debt” for annual maturities of long-term debt.

Acquisition
cost

Fair value(Book value)

Unrealized
gains (losses)¥3,099¥5,316¥2,21759¥3,15856¥5,372(3)¥2,214

Millions of yen
2013

Securities with gross unrealized gains:
Equity securities
Securities with gross unrealized losses:
Equity securities
Total

Acquisition
cost

Fair value(Book value)

Unrealized
gains (losses)¥2,928¥4,584¥1,656249¥3,177232¥4,816(17)¥1,639Thousands of U.S. dollars
2014

Securities with gross unrealized gains:
Equity securities
Securities with gross unrealized losses:
Equity securities
Total

Acquisition
cost

Fair value(Book value)

Unrealized
gains (losses)$30,122$51,671$21,549574$30,696550$52,221(24)$21,525

Information about available-for-sale securities sold during theyears ended March 31, 2014 and 2013 was as follows:
Millions of yen

Proceeds
Realized gains
Realized losses

Thousands of U.S. dollars

The fair values represent present values of the aggregatedinterest and principal discounted at interest rates that would beapplied to new similar borrowings. Long-term borrowings include
the current portion of long-term borrowings.

Marketable securities classified as available-for-sale securities asof March 31, 2014 and 2013 were as follows:
2014

$ —

Cash and cash equivalents, Time deposits, Notes and accounts
receivable-trade

Thousands of
U.S. dollars

7. Investments in Securities

Thousands of
U.S. dollars

2014

2013

2014

¥59
26
(0)

¥0
0
(0)

$574
256
(7)

Information about available-for-sale securities redeemed
during the years ended March 31, 2014 and 2013 was as follows:
Millions of yen

Proceeds
Realized gains
Realized losses

Thousands of
U.S. dollars

2014

2013

2014

¥100
—
—

¥—
—
—

$972
—
—

The Companies recognize impairment losses on available-forsale securities when the market value declines by more than 30
percent and the possibility of market value recovery is remote.

Annual Report 201451

Notes to Consolidated Financial Statements

8. Derivatives

Thousands of U.S. dollars
2014

Derivative transactions to which hedge accounting was not applied for the years ended March 31, 2014 and 2013 were as follows:(1) Currencies
Foreign currency forward contracts:
Sell:
U.S. dollar

Millions of yen
2013

2014

Foreign currency forward contracts:
Buy:Japanese yen

Contract
amountContract
amount due
after 1 year

¥260

¥—

Fair value

Unrealized
gains (losses)

Contract
amountContract
amount due
after 1 year

¥(11)

¥(11)

¥—

¥—

Fair value

Unrealized
gains (losses)¥—¥—

Thousands of U.S. dollars
2014

Foreign currency forward contracts:
Buy:Japanese yen

Euro
Buy:
U.S. dollar
Japanese yen
Great Britain pound
Total

Contract
amountContract
amount due
after 1 year

Fair value

Notes andaccounts
receivable-trade$3,249

$—

*

2,739

—

*

Notes andaccounts
payable-trade

293
212
17
$6,510

—
—
—
$—

*
*
*
*

* The fair value of such derivative transactions was included in that of hedged items.

Contract
amountContract
amount due
after 1 year

Fair value

Unrealized
gains (losses)$2,524$—$(109)$(109)(2) Interest rate
Millions of yen

Interest rate swap contracts:
Floating rate receipt, fixed rate payment(2) Interest rate and currencies
Millions of yen
Contract
amount due
after 1 year

¥—
—
¥—

Fair value

¥—
—
¥—

Main hedged
item

Contract
amountContract
amount due
after 1 year

Long-term
borrowings¥6,306¥4,750¥——¥—

Unrealized
gains (losses)

¥—
—
¥—

Contract
amount¥  400679¥1,079Contract
amount due
after 1 year

Fair value

¥320
543
¥863

Unrealized
gains (losses)

¥(16)
1
¥(15)

¥(16)
1
¥(15)

Derivative transactions to which hedge accounting was applied for the years ended March 31, 2014 and 2013 were as follows:

Contract
amount due
after 1 year

Fair value*

Long-term
borrowings¥7,729¥5,588*2014

Interest rate swap contracts:
Floating rate receipt, fixed rate payment

Main hedged
item

Contract
amountContract
amount due
after 1 year

Fair value

Long-term
borrowings$61,292$46,170** The fair value of such derivative transactions was included in that of hedged items.

(3) Interest rate and currencies(1) Currencies

Millions of yen

2013

2014
Main hedged
item

Contract
amountContract
amount due
after 1 year

Fair value

Notes andaccounts
receivable-trade

¥334

¥—

*

282

—

*

Notes andaccounts
payable-trade

30
22
2
¥670

—
—
—
¥—

*
*
*
*

Main hedged
item

Notes andaccounts
receivable-trade

2013

2014

Millions of yen

Euro
Buy:
U.S. dollar
Japanese yen
Great Britain pound
Total

Contract
amountThousands of U.S. dollars* The fair value is based on prices provided by financial institutions.

Foreign currency forward contracts:
Sell:
U.S. dollar

Fair value

Main hedged
item

2013

2014
Contract
amount2013

2014* The fair value is based on prices provided by financial institutions.

Interest rate and currency swap contracts:
Floating rate receipt, fixed rate payment:
Japanese yen receipt/India rupee payment
U.S. dollar receipt/India rupee payment
Total

Main hedged
item

Contract
amountContract
amount due
after 1 year

Fair value

¥598

¥—

*

191

—

*

Interest rate swap contracts:
Floating rate receipt, fixed rate payment:
Japanese yen receipt/India rupee payment
U.S. dollar receipt/India rupee payment
Total

Main hedged
item

Contract
amountContract
amount due
after 1 year

Long-term
borrowings

¥320
660
¥980

¥240
514
¥754

Fair value¥ (43)
106¥ 63

Main hedged
item

Contract
amountContract
amount due
after 1 year

Fair value

Long-term
borrowings

¥—
—
¥—

¥—
—
¥—

¥—
—
¥—

Thousands of U.S. dollars
2014

¥789

¥—

*

Interest rate swap contracts:
Floating rate receipt, fixed rate payment:
Japanese yen receipt/India rupee payment
U.S. dollar receipt/India rupee payment
Total

Main hedged
item

Contract
amountContract
amount due
after 1 year

Fair value

Long-term
borrowings$3,1106,420$9,530$2,333
4,999$7,332$ (422)
1,034$  612* The fair value is based on prices provided by financial institutions.

52

BANDO CHEMICAL INDUSTRIES, LTD.

Annual Report 201453

Notes to Consolidated Financial Statements

9. Short-term Borrowings and Long-term Debt

10. Retirement Benefits

Short-term borrowings as of March 31, 2014 and 2013 represented bank overdrafts with weighted average interest rates of
1.97% and 1.08%, respectively. The Companies had commitmentline contracts to prepare for any contingency with one financial
institution for an aggregated maximum amount of ¥6,000 million($58,320 thousand). ¥3,449 million ($33,527 thousand) was unused
as of March 31 2014.
Long-term debt as of March 31, 2014 and 2013 consisted of
the following:

The details of retirement benefits for the year ended March 31,
2014 and 2013 were as follows:

Millions of yen
2014

Unsecured long-term borrowings
from banks and other financial
institutions with weighted
average interest rate of 1.57%
in 2014 and 1.69% in 2013
Unsecured bonds due 2017, 0.99%
Obligations under finance leases
Less current portion of
long-term debt
Total

2013

Thousands of
U.S. dollars
2014¥ 9,407
3,000
33
12,440¥10,4623,000
28
13,490$ 91,433
29,160321
120,9142,238¥10,202

2,864¥10,626

21,753$ 99,161

Annual maturities of long-term debt outstanding as of March
31, 2014 were as follows:Year ending at March 31

Millions ofyen

Thousands of
U.S. dollars

2015
2016
2017
2018
2019
2020 and thereafter
Total¥ 2,238
2,129
3,560
3,010
1,502
1
¥12,440$ 21,753
20,69534,60729,253
14,5988$120,914

Year ended March 31, 2014
The Company and certain of its consolidated subsidiaries havedefined contribution pension plans and defined benefit pension
plans for employees. The Company places plan assets in an
employee retirement benefit trust. Certain domestic consolidated
subsidiaries join the Smaller Enterprise Retirement Allowance
Mutual Aid system.
Certain domestic consolidated subsidiaries contribute to a
multiemployer pension plan. One domestic consolidated subsidiary has contributed to a multiemployer pension plan but left theplan on March 31, 2014. The related costs were ¥57 million ($552
thousand) and charged to income as incurred.
Certain consolidated subsidiaries adopt the simplified
method to calculate net defined benefit liability and retirement
benefit costs.
(1) Defined benefit plans(a) Movement in retirement benefit obligations, except defined
benefit plans to which the simplified method was applied

Balance at April 1, 2013
Service cost
Interest cost
Actuarial losses (gains) arisingduring the year
Retirement benefits paid
Other
Balance at March 31, 2014

Millions ofyen

Thousands of
U.S. dollars¥10,952454
139$106,455
4,408
1,352

271
(618)
76
¥11,274

2,635(6,008)743$109,585(b) Movement in plan assets, except defined benefit plans towhich the simplified method was applied

Balance at April 1, 2013
Expected return on plan assets
Actuarial losses (gains) arisingduring the year
Contributions paid by the employer
Retirement benefits paid
Other
Balance at March 31, 201454

BANDO CHEMICAL INDUSTRIES, LTD.

Retirement benefit obligations
under the funded plans
Fair value of plan assets
Retirement benefit obligations
under the unfunded plans
Net liabilities or assets recordedon the Consolidated balance sheets
Net defined benefit liability
Net liabilities or assets recordedon the Consolidated balance sheets

Service cost
Interest cost
Expected return on plan assets
Amortization of actuarial losses (gains)
Amortization of prior service cost
Retirement benefit costs
based on the simplified method
Total retirement benefit costsof defined benefit plans

Unrecognized actuarial losses (gains)
Unrecognized prior service cost
Total(g) Plan assets
Plan assets consisted of the following:

478
775
(611)
53
¥8,395

4,644
7,532(5,941)
518$81,600

Equity securities
Bonds
General accountCash and deposits
Other
Total

$3,272
262
(353)
(453)
$2,728$115,797(85,992)
29,805

94

909

3,160

30,7143,160

30,714¥ 3,160$ 30,714

Millions ofyen

Thousands of
U.S. dollars

¥454
139
(152)
(57)
(46)

$4,4081,352(1,479)
(553)
(447)

27

262

¥365

$3,543(f) Remeasurements of defined benefit plans
Breakdown of remeasurements of defined benefit plans (before
tax effects)$73,368
1,479

¥337
27
(36)
(47)
¥281

¥11,913(8,847)
3,066

included in the above table.

¥7,548152

Thousands of
U.S. dollars

Thousands of
U.S. dollars(e) Retirement benefit costs

Thousands of
U.S. dollars

Millions ofyenMillions ofyen* Defined benefit plans to which the simplified method was applied are

Millions ofyen(c) Movement in net defined benefit liability of defined benefit
plans to which the simplified method was applied

Balance at April 1, 2013
Retirement benefit costs
Retirement benefit paid
Contributions to the plans
Balance at March 31, 2014(d) R econciliation of retirement benefit obligations and plan
assets with net defined benefit liability and net defined benefit asset on the Consolidated balance sheets

Millions ofyen

Thousands of
U.S. dollars¥(1,702)73¥(1,629)$(16,541)
710$(15,831)

2014

44%
28
12
6
10
100%

* Employee retirement benefit trust set up for the corporate pension planaccounts for 19% of total plan assets.

Expected rate of return on plan assets
The long-term expected rate of return on plan assets is determined based on the current and expected allocation of plan
assets and on the current and expected future long-term rates ofreturn on various assets composing plan assets.
(h) Actuarial assumptions
The principal actuarial assumptions at March 31, 2014 were as
follows:
Discount rate
Mainly 1.2%
Expected rate of return on plan assets
Mainly 2.5%

(2) Defined contribution pension plans
Contributions to the defined contribution pension plans were¥182 million ($1,769 thousand) for the year ended March 31, 2014.
(3) Multiemployer plan(a) The funded status of the multiemployer plan:
Millions of
yen
As of March
31, 2013

Plan assets
Retirement benefit obligations for calculation of pension financeTotal¥ 32,317
45,527¥(13,211)(b) Ratio of total required contribution amount of the Companies
to total funds of the plan
(From April 1, 2012 to March 31, 2013)
1.4%
The above ratio does not match the actual contribution ratio of
the Companies.
(c) Supplementary explanation
The main reason for the differences in the amounts describedabove in (a) was the balance of prior service cost of ¥12,758
million ($124,008 thousand) as of March 31, 2013. Prior service
cost is amortized by the straight-line method over 18 years. The
Companies record special contribution of ¥29 million ($284 thousand) as expenses.
Year ended March 31, 2013
The Company and certain of its consolidated subsidiaries havedefined contribution pension plans and defined benefit plansfor employees. The Company places plan assets in an employee
retirement benefit trust.
Allowance for employees’ retirement benefits as of March 31,
2013 consisted of the following:
Millions of yen

Projected benefit obligation (*)
Plan assets at fair value
Unrecognized actuarial losses
Unrecognized prior service cost
Allowance for employees’ retirement benefits¥(11,762)
8,021
1,852
(119)
¥ (2,008)* Certain consolidated subsidiaries adopt the simplified method to calculate projected benefit obligation.

Net periodic benefit costs for the year ended March 31, 2013
consisted of the following:
Millions of yen

Service cost (*1)
Interest cost
Expected return on plan assets
Amortization of actuarial losses
Amortization of prior service cost
Other (*2)
Total

¥477
204
(134)
220
(46)
193
¥914

*1 Expenses for employees’ retirement benefits of consolidated subsidiaries are included in service cost.
*2 Other consists mainly of payments for the defined contribution pension
plans.

Annual Report 201455

Notes to Consolidated Financial Statements

Assumptions used in the calculation for the year ended March
31, 2013 consisted of the following:
Discount rate
Expected rate of return on plan assets
Method of attributing expected benefits to periods
Amortization period for unrecognized prior service costs
Amortization period for unrecognized actuarial gains or losses

Mainly 1.2%
Mainly 2.5%
Straight-line
basis
10 years
10 years

11. Income Taxes
Deferred tax assets and liabilities as of March 31, 2014 and 2013
consisted of the following:Thousands of
U.S. dollars

Millions of yen
2014

Deferred tax assets:
Contributions
to retirement benefit trust
Allowance for employees’
retirement benefits
Net defined benefit liability
Tax loss carryforwards
Impairment loss
Other
Valuation allowancefor deferred tax assets
Total
Deferred tax liabilities:
Gain on set-up of
retirement benefit trust
Unrealized gain on
available-for-sale securities
Reserve for deferred capitalgains related to property,
plant and equipment
Other
Total
Net deferred tax assets*¥ 1,3812013¥ 1,3702014$ 13,428

—
1,089
563
230
1,424

689
—
355
307
901

—
10,5815,472
2,240
13,841(1,058)¥ 3,629(924)¥ 2,698(10,287)$ 35,275¥(1,080)¥(1,080)$(10,493)

(718)

(530)

(6,975)

(266)
(234)
¥(2,298)¥ 1,331(266)(86)¥(1,962)¥   736

Millions of yen

56

Statutory tax rate
Different income tax rates applicable
to income in certain foreign countries
Equity in earnings of affiliates
Nondeductible expenses
Nontaxable income
Tax deduction
Change in valuation allowance
Other, net
Effective income tax rate

2014

2013

38.0%

38.0%

(6.9)
(3.1)
1.8
(0.3)
(1.9)
(0.2)
1.4
28.8%

(6.6)
(5.7)
3.2
(0.3)
(0.5)
(2.8)
2.4
27.7%

Change in statutory effective tax rate
The “Act for Partial Amendment of the Income Tax Act, etc.”(Act No. 10 of 2014) was promulgated on March 31, 2014, andthe Company is no longer subject to the Special Reconstruction
Corporation Tax for the fiscal years beginning on or after April
1, 2014. Consequently, the effective statutory tax rate used to
calculate the Company’s deferred tax assets and liabilities waschanged from 38.0% to 35.6% for the temporary differences
expected to be reversed during the fiscal year beginning on April
1, 2014. This change had no material impact on the consolidated
financial statements for the year ended March 31, 2014.

12. Net Assets(2,588)(2,284)$(22,340)$ 12,935* Net deferred tax assets were included in the following accounts in the
consolidated balance sheets as of March 31, 2014 and 2013:

Current assets — Deferred tax assets
Other assets — Deferred tax assets
Current liabilities — Other
Long-term liabilities — Other

Reconciliation of the statutory tax rate to the effective income
tax rate for the years ended March 31, 2014 and 2013 was asfollows:

Thousands of
U.S. dollars

2014

2013

2014

¥656
724
2
¥ 47

¥231
543
0
¥ 38

$6,3787,037
19$  461BANDO CHEMICAL INDUSTRIES, LTD.

Significant provisions in the Companies Act of Japan (the “Act”)
that affect financial and accounting matters are summarized below:(1) Dividends
The Act allows Japanese companies to pay dividends at any time
during the year in addition to the year-end dividend upon resolution at the shareholders’ meeting.
The Act permits Japanese companies to distribute dividends
in kind (non-cash assets) to shareholders subject to certain limitations and additional requirements. Semiannual interim dividends
may also be paid once a year upon resolution by the Board of
Directors if the articles of incorporation of the company sostipulate. The Act continues to provide certain limitations on theamounts available for dividends or the purchase of treasury stock.
The limitation is defined as the amount available for distribution
to the shareholders, but the amount of equity after dividends
must be maintained at no less than ¥3 million.

(3) Treasury stock and treasury stock acquisition rights
The Act also permits Japanese companies to repurchase/disposeof treasury stock by resolution of the Board of Directors. The
amount of treasury stock to be purchased cannot exceed theamount available for distribution to the shareholders which isdetermined by specific formula.
Under the Act, stock acquisition rights are presented as aseparate component of equity.
The Act also provides that companies can purchase bothtreasury stock acquisition rights and treasury stock. Such treasury
stock acquisition rights are presented as a separate componentof equity or deducted directly from stock acquisition rights.

13. Selling, General and Administrative Expenses
Selling, general and administrative expenses for the years ended
March 31, 2014 and 2013 principally consisted of the following:
Millions of yen

Salaries
Packing and delivery expenses
Research and development costs
Retirement benefit costs
Provision for doubtful accounts

Thousands of
U.S. dollars

2014

2013

2014

¥5,535
2,201
1,142
209
¥   11¥5,285
1,964
1,109
414
¥    5$53,796
21,397
11,102
2,032$   109

14. Net Income per Share
The Companies had no dilutive securities for the years ended
March 31, 2014 and 2013.
Basic net income per share for the years ended March 31,
2014 and 2013 was as follows:
Millions of yen
2013

2014

¥2,510$41,6082014

Net income available
to common stockholders¥4,280Thousands of
U.S. dollars

15. Consolidated Statements of Comprehensive
IncomeReclassification adjustments regarding other comprehensive
income and related income tax effects for the years ended March
31, 2014 and 2013 are as follows:
Thousands of
U.S. dollars

Millions of yen

Unrealized gains (losses)
on available-for-sale securities:
Recognized during the year
Reclassification adjustments
Before tax effects
adjustments
Income tax effects
Unrealized gains (losses)
on available-for-salesecurities
Deferred gains on hedges:
Recognized during the year
Before tax effects
adjustments
Income tax effects
Deferred gain on hedges
Foreign currencytranslation adjustments:
Recognized during the year
Foreign currencytranslation adjustments
Share of other comprehensive
income in affiliates accounted
for by the equity method:
Recognized during the year
Share of othercomprehensive income
in affiliates accounted
for by the equity method
Total othercomprehensive income

2014

2013

2014

¥  601(26)¥  96832$ 5,843
(249)

575
(187)

1,000
(364)

5,594
(1,820)

388

636

3,773

5

—

52

5
(1)
4

—
—
—

52
(16)
36

3,106

2,039

30,191

3,106

2,039

30,191

180

322

1,748

180

322

1,748

¥3,678¥2,998$35,748

Thousands of shares

Weighted-average number of shares

2014

2013

94,096

94,812Yen

Net income per share

U.S. dollars

2014

2013

2014

¥45.49¥26.47$0.44(2) Increases/decreases and transfer of common stock, reserveand surplus

16. Segment Information

The Act requires that an amount equal to 10% of dividends must
be appropriated as legal reserve (of retained earnings) or as
additional paid-in capital (of capital surplus) depending on theequity account charged upon the payment of such dividends until
the sum of legal reserve and additional paid-in capital equals
25% of the common stock. Under the Act, additional paid-in
capital and legal reserve may be reversed without limitation. The
Act also provides that common stock, legal reserve, additional
paid-in capital, other capital surplus and retained earnings can betransferred among the accounts under certain conditions upon
resolution of the shareholders.

The Companies’ reportable segments are components for which separate financial information is available, whose operating results arereviewed regularly by the chief operating decision maker in order to decide allocations of resources and assess segment performance.
The Companies have adopted the division system. Each operating division develops a comprehensive strategy for respective products/services for domestic and overseas markets and conducts business activities. Therefore, the Companies consist of two reportablesegments according to products based on operating divisions: “Belt Business” and “Elastomer Products Business.”
The “Belt Business” segment includes manufacturing and sales of automotive power transmission belt products, industrial powertransmission belt products and conveyor belts, etc. The “Elastomer Products Business” segment includes manufacturing and sales ofcomponents for printers and other electrophotographic output equipment, and high-performance film products, etc.

(1) Description of reportable segments(2) M ethods of measurement for sales, profit or loss, assets and other items by reportable segments
The accounting treatments applied to the reportable segments is the same as those described in Note 3, “Summary of Significant
Accounting Policies.” Segment profit is based on operating income. Intersegment sales are based on market prices.

Annual Report 201457

Notes to Consolidated Financial Statements(3) Sales, profit or loss, assets and other items by reportable segments(4) Changes in reportable segments
Millions of yen
2014

Reportable segments
Belt BusinessNet sales
Sales to customers
Intersegment sales
Total
Segment profit
Segment assets
Other:
Depreciation and amortization
Increase in property,
plant and equipment
and other intangible assets

Elastomer
Total reportable
Products Businesssegments

Other

Total

Adjustments

Consolidated
Financial
Statements¥79,894140¥80,034¥ 5,161¥74,506¥12,423
15¥12,438¥    12¥ 9,292¥92,317155¥92,472¥ 5,173¥83,798¥1,117
1,114¥2,231¥  188¥2,376¥93,434
1,269¥94,703¥ 5,361¥86,174¥    —(1,269)¥(1,269)¥   157¥ 3,449¥93,434—¥93,434¥ 5,518¥89,623¥ 3,354¥   688¥ 4,042¥   85¥ 4,127¥   112¥ 4,239¥ 2,682¥   907¥ 3,589¥  569¥ 4,158¥  889¥ 5,047

Along with the reorganization effective April 1, 2013, the Companies
reclassified reportable segments from “Power Transmission,”“Multimedia Parts,” “Industrial Products” and “Plastics Products” to“Belt Business” and “Elastomer Products Business.” Segment information for the year ended March 31, 2013 has been prepared based on
the new reportable segments.
Information related to reportable segments
Information about geographic areas was as follows:(a) Net sales
Millions of yen
2014
Japan

Asia

China

Other

Total

¥50,165¥22,781¥11,092¥9,396¥93,434

Millions of yen

Millions of yen

2013

2013
Reportable segments
Belt BusinessNet sales
Sales to customers
Intersegment sales
Total
Segment profit (loss)
Segment assets
Other:
Depreciation and amortization
Increase in property,
plant and equipment
and other intangible assets
Impairment loss

Elastomer
Total reportable
Products Businesssegments

Other

Total

Adjustments

Consolidated
Financial
Statements¥12,3783¥12,381¥ (164)¥ 9,204¥84,520
136¥84,656¥ 4,180¥76,047¥1,252242¥1,494¥   74¥1,513¥85,772378¥86,150¥ 4,254¥77,560¥    —(378)¥ (378)¥ (159)¥4,647¥85,772—¥85,772¥ 4,095¥82,207¥ 3,363¥ 1,013¥ 4,376¥   30¥ 4,406¥   32¥ 4,438¥ 3,650¥    —¥   624¥   852¥ 4,274¥   852¥  155¥  305¥ 4,429¥ 1,157¥  624¥    —¥ 5,053¥ 1,157

Reportable segments
Belt Business

Elastomer
Total reportable
Products Businesssegments

Other

Total

¥50,312¥20,029¥7,641¥7,790¥85,772

Other

2014
Japan

Asia

China

Other

Total

$487,610$221,434$107,812$91,330$908,186(b) Property, plant and equipment
Millions of yen
2014
Japan

Asia

China

Other

Total

¥17,526¥8,425¥1,679¥3,192¥30,822

Millions of yen

Total

Adjustments

Japan

Asia

China

Other

Total

¥17,039¥7,190¥1,272¥2,933¥28,434

Consolidated
Financial
Statements$776,575
1,366$777,941$ 50,170$724,201$120,752
143$120,895$    114$ 90,323$897,327
1,509$898,836$ 50,284$814,524$10,859
10,824$21,683$ 1,822$23,090$908,186
12,333$920,519$ 52,106$837,614$     —
(12,333)$(12,333)$ 1,528$ 33,523$908,186—$908,186$ 53,634$871,137$ 32,597$  6,691$ 39,288$   826$ 40,114$ 1,089$ 41,203

Thousands of U.S. dollars
2014
Japan

Asia

China

Other

Total

$170,355$81,890$16,316$31,033$299,594

17. Business Combination(Transactions under common control)
1. Overview of business combination$ 26,070$  8,813$ 34,883$ 5,533$ 40,416$ 8,637$ 49,053*1 “Other” category represents operating segments not included in reportable segments.
*2 “Adjustments” are as follows:(a) Adjustments of segment profit (loss) include ¥12 million ($122 thousand) and ¥(38) million of the elimination of intersegment transactions, and ¥145
million ($1,406 thousand) and ¥(121) million of corporate expenses for the years ended March 31, 2014 and 2013, respectively. Corporate expenses
represent differences between the estimated general administrative expenses and research and development costs allocated to each reportablesegment and the actual amount incurred.
(b) Adjustments of segment assets include ¥(4,166) million ($(40,491) thousand) and ¥(2,226) million of the elimination of intersegment balances, and¥7,615 million ($74,014 thousand) and ¥6,873 million of corporate assets for the years ended March 31, 2014 and 2013, respectively.
(c) Adjustments of “Increase in property, plant and equipment and other intangible assets” is principally related to those not attributable to reportable segments.
*3 “Segment profit (loss)” is adjusted to operating income described in the consolidated statements of income.
*4 “Depreciation and amortization” includes amortization of long-term prepaid expenses.
*5 “Increase in property, plant and equipment and other intangible assets” includes an increase in long-term prepaid expenses.

BANDO CHEMICAL INDUSTRIES, LTD.

China

2013

2014

58

Asia

Thousands of U.S. dollars¥72,142133¥72,275¥ 4,344¥66,843

Thousands of U.S. dollars

Net sales
Sales to customers
Intersegment sales
Total
Segment profit
Segment assets
Other:
Depreciation and amortization
Increase in property,
plant and equipment
and other intangible assets

Japan1) M erger of Higashinihon Bando Co., Ltd. and Hokkaido
Bando Co., Ltd.
(1) Names and business description of the merging companies
Higashinihon Bando Co., Ltd. (manufacture and sales ofpower transmission belts, conveyor belts, polyurethane
functional components)
Hokkaido Bando Co., Ltd. (manufacture and sales of powertransmission belts and conveyor belts)(2) Date of business combination
April 1, 2013

(3) Legal form of business combination
Absorption-type merger with Higashinihon Bando Co.,
Ltd. as the surviving company, and Hokkaido Bando Co.,
Ltd. ceased to exist.
(4) Name of the company after the merger
Higashinihon Bando Co., Ltd.
(5) Other matters
The purpose is to enhance the operating structure
including reorganization of the operating base in theentire general industrial and maintenance markets, aswell as to improve efficiency and competitiveness of theconsolidated management.
Shares of Higashinihon Bando Co., Ltd. were allocated to shareholders of Hokkaido Bando Co., Ltd. using
the share exchange ratio based on the financial results forthe year ended March 31, 2012.
2) Merger of Nishinihon Bando Co., Ltd. and Kyushu Bando
Co., Ltd.
(1) Names and business description of the merging companies
Nishinihon Bando Co., Ltd. (manufacture and sales ofpower transmission belts, conveyor belts, polyurethane
functional components)
Kyushu Bando Co., Ltd. (manufacture and sales of powertransmission belts, conveyor belts, polyurethane functional components)(2) Legal form of business combination
Absorption-type merger with Nishinihon Bando Co., Ltd.
as the surviving company, and Kyushu Bando Co., Ltd.
ceased to exist.
(3) Date of business combination
April 1, 2013
(4) Other matters
The purpose is to enhance the operating structure
including reorganization of the operating base in theentire general industrial and maintenance markets, aswell as to improve efficiency and competitiveness of theconsolidated management.
Shares of Nishinihon Bando Co., Ltd. were allocatedto shareholders of Kyushu Bando Co., Ltd. using the shareexchange ratio based on the financial results for the year
ended March 31, 2012.
2. Overview of the accounting treatment applied
The Company accounted for the business combination as transactions under common control in accordance with “AccountingStandard for Business Combinations” (ASBJ Statement No. 21,
December 26, 2008) and “Guidance on Accounting Standard forBusiness Combinations and Accounting Standard for Business
Divestitures” (ASBJ Guidance No. 10, December 26, 2008).

Annual Report 201459

Corporate Data / Investor Information

Corporate Data
Company name:Bando Chemical Industries, Ltd.

Founded:April 14, 1906

Capital:¥10,952 mil. (As of March 31, 2014)

Consolidated sales:¥93,434 mil. (FYE March 2014)

Employees (Consolidated):3,817 (As of March 31, 2014)

Investor Information (As of March 31, 2014)
Capital Stock

Principal Shareholders (As of March 31, 2014)

Shares Authorized:

378,500,000

Shares Outstanding:

94,427,073

Bando business partner stakeholders
Sumitomo Mitsui Banking Corporation
Mitsubishi UFJ Trust and Banking
Corporation
Meiji Yasuda Life Insurance Company
Mizuho Bank, Ltd.
The Bank of Tokyo-Mitsubishi UFJ, Ltd.
Nippon Life Insurance Company
Japan Trustee Services Bank, Ltd.
(trust account)
Tokio Marine & Nichido Fire InsuranceCo., Ltd.
Aioi Nissay Dowa Insurance Co., Ltd.

(including 289,262 shares of treasury stock)

Number of Shareholders:

10,378

Securities Traded: Tokyo Stock Exchange, Inc.
Composition of Shareholders
Composition of Shareholders
Individuals and others:
34,623,853
36.78%

Financial institutions/
Securities firms:
36,238,057
38.49%

Other corporations:
12,268,870
13.03%

76

Foreign Corporations:
11,007,031
11.69%

Investment
ratio
(%)

7,019
4,651

7.45
4.94

4,004

4.25

4,000
3,600
3,150
2,642

4.24
3.82
3.34
2.80

2,053

2.18

1,839

1.95

1,646

1.74

Notes: 1. Investment ratios are calculated after deducting treasury stock(289,262 shares).
2. Investment ratios listed above are rounded down to two decimal places.

9,913
259

130

Number ofshares held
(thousands)

Number of shareholders

Stock Price and Trading Volume
(Yen)

500
400
300
200
100
(Thousand shares)

0

10,000
8,000
6,000
4,000
2,000
0

60

4

7

2009

10

1

4

BANDO CHEMICAL INDUSTRIES, LTD.

7

2010

10

1

4

7

2011

10

1

4

7

2012

10

1

4

7

2013

10

1

2014

www.bando.co.jp

6-6, Minatojima Minamimachi 4-chome, Chuo-ku, Kobe, 650-0047, Japan