Appendix

BANDO CHEMICAL INDUSTRIES, LTD.
and Subsidiaries
Fiscal year ended March 31, 2016
(April 1, 2015 ― March 31, 2016)

Consolidated financial statements,
Notes to consolidated financial statements

Consolidated Balance Sheets
Bando Chemical Industries, Ltd. and Consolidated Subsidiaries
March 31, 2016 and 2015

Thousands of
U.S. dollars(Note 4)

Millions of yen

Assets2016

Current Assets:
Cash and cash equivalents (Note 6)
Time deposits (Note 6)
Notes and accounts receivable (Note 6):
Trade
Other

￥

Electronically recorded monetary claims - operating
Allowance for doubtful accounts
Inventories (Note 5)
Deferred tax assets (Note 11)
Other current assets
Total Current Assets

Property, Plant and Equipment:
Land
Buildings and structures
Machinery and equipment
Construction in progress
Other
Accumulated depreciation
Property, Plant and Equipment, Net

Other Assets:
Intangible assets
Investments in securities (Notes 6 and 7)
Investments in affiliates (Note 6)
Deferred tax assets (Note 11)
Other, net (Note 6)
Total Other Assets
Total Assets￥

See accompanying notes to consolidated financial statements.

1

16,436
545

2015

￥

15,697
502

2016

$

145,938
4,840

16,731
265
1,617
( 38)
10,509458
997
47,52018,35887965( 31)
11,801606
1,135
49,120148,568
2,352
14,362( 340)
93,3074,070
8,857
421,954

6,507
27,60555,942
1,508
13,281
104,843( 75,356)
29,487

6,768
27,892
56,797
1,349
13,442
106,248( 75,158)
31,09057,782
245,117496,732
13,390117,921930,942( 669,117)
261,825

1,189
5,287
5,041
966
1,275
13,75890,765

1,375
6,262
5,266
207
1,380
14,49094,70010,556
46,94444,755
8,575
11,332
122,162805,941￥$

Thousands of
U.S. dollars(Note 4)

Millions of yen

Liabilities and Net Assets

2016

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

￥

1,555
3,513

2015

￥

2,739
1,996

2016

$

13,80931,196

Other current liabilities (Notes 6 and 11)
Total Current Liabilities

9,908
2,767
3,587
439
31
3,180
24,980

11,254
3,035
3,131
431
－
3,385
25,971

87,977
24,57031,855
3,898
272
28,234
221,811Long-term Liabilities:
Long-term debt (Notes 6 and 9)
Net defined benefit liability (Note 10)
Other long-term liabilities (Notes 6 and 11)
Total Long-term Liabilities

7,548
2,918
114
10,580

9,801
2,058
93
11,952

67,02525,9091,010
93,944

10,952
2,970
42,091

10,952
2,968
38,74097,247
26,374
373,741( 257)
55,756( 114)
52,546( 2,279)
495,083

1,431
1( 1,170)( 1,232)( 970)
419
55,20590,765

2,061
( 0)
2,171
( 504)
3,728
503
56,777
94,70012,7103( 10,387)( 10,942)( 8,616)
3,719
490,186
805,941

Electronically recorded obligations - operating
Construction and other
Income taxes payable (Note 6)
Provision for loss on liquidation of subsidiaries and associates

Net Assets (Note 12):
Common stock
Authorized: 378,500,000 shares
Issued 2015 and 2016 － 94,427,073 shares
Capital surplus
Retained earnings
Treasury stock, at cost2015 － 378,000 shares2016 － 654,165 shares
Total Shareholders' Equity
Accumulated other comprehensive income
Unrealized gains on available-for-sale securities
Deferred gains (losses) on hedges
Foreign currency translation adjustments
Remeasurements of defined benefit plans
Total Accumulated Other Comprehensive Income
Non-controlling interests
Total Net Assets
Total Liabilities and Net Assets

￥

2

￥

$

Consolidated Statements of Income andConsolidated Statements of Comprehensive Income
Bando Chemical Industries, Ltd. and Consolidated Subsidiaries
Years ended March 31, 2016 and 2015
Thousands of
U.S. dollars(Note 4)

Millions of yen

Consolidated Statements of Income

2016

Net Sales
Cost of Sales
Gross profit￥

Selling, General and Administrative Expenses (Note 13)
Operating Income
Other Income (Expenses):
Interest and dividend income
Interest expense
Equity in earnings of affiliates
Foreign exchange gains (losses), net
Gain on sale of investments in securities
Loss on disposal of property, plant and equipment
Impairment loss (Note 17)
Provision for loss on liquidation of subsidiaries and associates
Other, net
Income before income taxes
Income Taxes (Note 11):
Current
Prior years
DeferredProfitProfit Attributable to Non-Controlling Interests
Profit Attributable to Shareholders of the Parent￥

93,272
66,097
27,175

2015￥

95,39669,99725,3992016$

828,202586,901
241,301

21,214
5,961

20,602
4,797

188,373
52,928260( 288)
509( 148)
24( 306)
( 92)
( 92)
258
125
6,086

220
( 320)
646
223
( 42)
( 410)
－
206
523
5,320

2,307
( 2,558)
4,522( 1,313)214( 2,719)( 816)( 819)
2,295
1,113
54,041

1,598
0
30
1,628
4,458

1,503
－
( 33)
1,470
3,850

14,1883
270
14,461
39,580

72
4,386

93
3,757

￥

$

633
38,947

See accompanying notes to consolidated financial statements.
U.S. dollars(Note 4)Yen
2016
Per Share of Common Stock (Note 14)
Basic net income
Cash dividends

￥

46.65
12.00

2015
￥

39.95
10.00

ProfitOther Comprehensive Income (Note 15):
Unrealized gains (losses) on available-for-sale securities
Deferred gains (losses) on derivative instruments
Foreign currency translation adjustments
Remeasurements of defined benefit plans
Share of other comprehensive income in affiliates
Total other comprehensive income
Comprehensive Income
Comprehensive Income Attributable to:Shareholders of the parent
Non-controlling interests

￥

4,458

￥

( 636)
1( 3,063)( 729)( 293)( 4,720)( 262)￥

See accompanying notes to consolidated financial statements.

3

2016

( 312)
50

$

2015
￥

3,850

￥

567
( 1)
3,378
546
218
4,708
8,558

￥

0.41
0.11

Thousands of
U.S. dollars(Note 4)

Millions of yen

Consolidated Statements of Comprehensive Income

2016

8,408
150

2016
$

39,580$( 5,647)4( 27,197)( 6,472)( 2,597)( 41,909)( 2,329)$( 2,773)444

Consolidated Statements of Changes in Net Assets
Bando Chemical Industries, Ltd. and Consolidated Subsidiaries
Years ended March 31, 2016 and 2015
Thousandsof shares

Millions of yen

Number of

Unrealized

shares ofgains (losses)

ForeignonDeferred gains

currency

RemeasurementsstockCommonCapitalRetained

Treasury

available-for-(losses) on

transactionof defined benefit

Non-controllingTotal

outstandingstock

surplusearnings

stock, at costsale securities

hedgesadjustments

plansinterests

net assets¥(102)¥1,498¥4commonBalance at April 1, 2014

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

Cumulative effects of changes in accounting
policies

－

－

－

149

－

－

－

－

－

－

149

Restated Balance at April 1, 2014－

10,952

2,968

35,502( 102)

1,498

4( 852)( 1,049)505

49,426

Profit attributable to shareholders of the pare

－

－

－

3,758

－

－

－

－

－

－

3,758

Cash dividends

－

－

－

( 941)

－

－

－

－

－

－

( 941)

Purchases of treasury stock

－

－

－

－

( 12)

－

－

－

－

－

( 12)

Change in fiscal year-end of consolidated
subsidiaries

－

－

－

421

－

－

－

－

－

－

421

Net change in the year

－

－

－

－

－

563

( 4)

3,023

545

( 2)

4,125

Balance at April 1, 2015

94,427

10,952

2,968

38,740( 114)

2,061

( 0)

2,171

( 504)

503

56,777

Cumulative effects of changes in accounting
policies

－

－

－

－

－

－

－

－

－

－

－

Restated Balance at April 1, 2015－

10,952

2,968

38,740( 114)

2,061

( 0)

2,171

( 504)

503

56,777

Profit attributable to shareholders of the pare

－

－

－

4,386

－

－

－

－

－

－

4,386

Cash dividends

－

－

－

( 1,035)

－

－

－

－

－

－

( 1,035)

Purchases of treasury stock

－

－

－

－

( 143)

－

－

－

－

－

( 143)

Disposal of treasury stock

－

－

0

－

0

－

－

－

－

－

0

－

－

2

－

－

－

－

－

－

－

2

－

－

－

－

－

( 630)

1( 3,341)( 728)( 84)( 4,782)

94,427¥10,952¥2,970¥42,091¥(257)¥1,431¥1¥(1,170)¥(1,232)¥419¥55,205

Change in ownership interest of the parent
arising from transactions with noncontrolling shareholders
Net change in the year
Balance at March 31, 2016

Thousands of U.S. dollars (Note 4)
Unrealized
gains (losses)

Balance at April 1, 2015
Cumulative effects of changes in accounting
policies

ForeignonDeferred gains

currency

Remeasurements

CommonCapitalRetained

Treasury

available-for-(losses) on

transactionof defined benefit

Non-controlling

Total

stock

surplusearnings

stock, at costsale securities

hedgesadjustments

plansinterests

net assets$97,247$26,356$343,985$(1,020)$18,298$( 2)$19,278$( 4,469)$4,467$504,140

－

－

－

－

－

－

－

－

－

－

97,247

26,356

343,985( 1,020)

18,298( 2)

19,278( 4,469)

4,467

504,140

Profit attributable to shareholders of the parent－－

38,947

－

－

－

－

－

－

38,947

Cash dividends－－( 9,191)

－

－

－

－

－

－

( 9,191)

Purchases of treasury stock

－

－

－

( 1,262)

－

－

－

－

－

( 1,262)

Disposal of treasury stock

－

2

－

3

－

－

－

－

－

5

Restated Balance at April 1, 2015

Change in ownership interest of the parent
arising from transactions with noncontrolling shareholders
Net change in the year
Balance at March 31, 2016

－

16

－

－

－

－

－

－

－

16

－

－

－

－

( 5,588)5( 29,665)( 6,473)( 748)( 42,469)$97,247$26,374$373,741$(2,279)$12,710$3$(10,387)$(10,942)$3,719$490,186

See accompanying notes to consolidated financial statements.

4Consolidated Statements of Cash Flows
Bando Chemical Industries, Ltd. and Consolidated Subsidiaries
Years ended March 31, 2016 and 2015

Thousands of
U.S. dollars(Note 4)

Millions of Yen
2016

2015

Cash Flows from Operating Activities:
Income before income taxes￥
6,086
Adjustments for:
( 1,849)
Income taxes paid
Income taxes refunded
234
4,321
Depreciation and amortization10
Amortization of goodwill and negative goodwill
92
Impairment loss
30
Increase (decrease) in allowance for doubtful accounts
32
Increase in provision for loss on liquidation of subsidiaries and associate(Decrease) increase in liability for retirement benefits( 144)
Foreign exchange losses (gains), net
56( 509)
Equity in earnings of affiliates
Loss on sales and disposal of property, plant and equipment
257
Changes in assets and liabilities:(Increase) decrease in notes and accounts receivable－trade( 8)
Decrease (increase) in inventories
634( 810)
Decrease in notes and accounts payable－trade
Other, net
606
9,038
Net Cash Provided by Operating Activities

￥

2016

5,320

$

54,041( 2,480)
8
4,386
3
410
( 5)
－
24
( 26)
( 646)
15( 16,405)
2,073
38,368
88
816
269
283
( 1,281)493( 4,522)2,278

559( 282)( 557)
1,332
8,061

( 73)
5,628
( 7,193)
5,390
80,253

Cash Flows from Investing Activities:
Increase in time deposits
Purchases of property, plant and equipment
Proceeds from sales of property, plant and equipment
Purchases of intangible assets
Purchases of investments in securities
Proceeds from sales of investments in securities
Purchases of investments in subsidiaries
Other, net
Net Cash Used in Investing Activities( 94)( 3,883)109( 408)
( 19)
35
－
76
( 4,184)( 143)( 2,945)67( 502)( 16)
12( 241)( 163)( 3,931)( 836)( 34,475)
966( 3,620)( 165)
310－
668( 37,152)

Cash Flows from Financing Activities:
Decrease in short-term borrowings
Proceeds from long-term borrowings
Payments on long-term borrowings
Purchases of treasury stock
Cash dividends paid
Cash dividends paid to non-controlling interests( 1,050)
1,384( 2,049)( 141)( 1,035)( 106)( 763)
1,500( 2,232)( 12)( 941)( 4)( 9,320)
12,289( 18,197)( 1,254)( 9,191)( 940)( 26)－( 236)( 26)( 3,049)( 1,066)
739
15,697( 20)( 2,472)
1,053
2,711
12,981( 229)( 27,078)( 9,467)
6,556
139,382－5－

16,436￥ 15,697

Payments from changes in ownership interests in subsidiaries that
do not result in change in scope of consolidation
Other, net
Net Cash Used in Financing Activities
Effect of Exchange Rate Changes on Cash and Cash Equivalents
Net Increase in Cash and Cash Equivalents
Cash and Cash Equivalents at Beginning of Year
Increase in cash and cash equivalents due to change in fiscal
year-end of consolidated subsidiaries
Cash and Cash Equivalents at End of Year￥

See accompanying notes to consolidated financial statements.

5$145,938

Notes to Consolidated Financial Statements
Bando Chemical Industries, Ltd. and Consolidated Subsidiaries

1. Description of Business
Bando Chemical Industries, Ltd. (hereinafter, the "Company") is a pioneer belt manufacturer in Japan. The Company
manufactures and sells power transMamission belts for automobiles, industrial machines, agricultural machines, home
appliances and information terminal devices, heavy and light duty conveyor belts, products for office automation andhousehold appliances and films for a variety of markets.

2. Basis for Preparation of Consolidated Financial Statements
The accompanying consolidated financial statements have been prepared in accordance with the provisions set forth in
the Japanese Financial Instruments and Exchange Law and its related accounting regulations and in conformity withaccounting principles generally accepted in Japan, which are different in certain respects as to application anddisclosure requirements from International Financial Reporting Standards.
In preparing these consolidated financial statements, certain reclassifications and rearrangements have been made to
the financial statements issued domestically in order to present them in 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 thecurrent year’s presentation.

3. Summary of Significant Accounting Policies(1) Consolidation
The accompanying consolidated financial statements include the accounts of the Company and its 26 subsidiaries(collectively, the “Companies”) as of March 31, 2016 (25 subsidiaries as of March 31, 2015).
Bando Belting de Mexico, S.A. de C.V. was founded on October, 2015 and included in the scope of consolidation.
Investments in 7 affiliates, on which the Company have significant influence, are accounted for by the equity method
as of March 31, 2016 and 2015, respectively.
Six overseas consolidated subsidiaries with fiscal year-end of December 31 prepare the provisional financial
statements for consolidation purpose as of March 31.
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.

(2) Foreign currency transactions
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.
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 such translations are recorded as foreign currency translation adjustments and non-controllinginterests 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 to cash and exposed to insignificant risk of fluctuation ofvalues.

(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) Allowance for loss on liquidation of subsidiaries and associates
Allowance for loss on liquidation of subsidiaries and associates is provided for estimated losses arising from the liquidationof a certain consolidated subsidiary or associate of the Company.

(6) Inventories
Finished goods, work in process and raw materials are stated at the lower of cost determined by the first-in, first-out
method or net selling value. Merchandise and supplies are stated at the lower of cost determined by the gross averagemethod or net selling value.
Meanwhile, inventories held by domestic consolidated subsidiaries are stated at the lower of cost determined principally6

by the gross average method or net selling value. Inventories held by overseas consolidated subsidiaries are stated at thelower of cost determined mostly by the first-in, first-out method or net selling value.

(7) Investments in securities
Investments in securities are classified into three categories: trading securities, held-to-maturity debt securities oravailable-for-sale securities. Trading securities are carried at fair value. Gain or loss, both realized and unrealized, isrecognized in income. Held-to-maturity debt securities are carried at amortized cost. Marketable securities classified asavailable-for-sale securities are carried at fair value with changes in unrealized holding gain or loss, net of the applicable
income taxes, reported in net assets. Non-marketable securities classified as available-for-sale securities are carried atcost determined by the moving-average method.

(8) 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 estimated useful lives. Useful lives are as follows:
three to 50 years for buildings and structures, and five to ten years for machinery and equipment.

(9) Goodwill
Goodwill represents the cost in excess of fair value of net assets acquired in business combination accounted for by thepurchase method. Goodwill is amortized over ten years by the straight-line method.

(10) Other intangible assets
Capitalized computer software costs for internal use are amortized by the straight-line method over five years.

(11) Research and development costs
Research and development costs are charged to income as incurred.

(12) Leases
Leased assets under finance leases which do not transfer ownership to the lessee are capitalized and depreciated oramortized by the straight-line method with no residual value over their lease terms.

(13) 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, length of 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 on a benefit
formula basis over estimated 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.

(14) Income taxes
The provision for income taxes is computed based on income before income taxes in the consolidated statements ofincome. 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.
The Company and certain of its domestic consolidated subsidiaries have applied the consolidated taxation system.

(15) Derivatives and hedging activities
The Companies use derivative financial instruments to manage their exposures to changes in foreign currency exchange
rates and interest rates. 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 foreign exchange risk. The Companies do not enter into
derivatives for trading or speculative purpose.
If derivatives are used for hedging purpose and qualify for hedging accounting, gains or losses on derivatives are deferred
until maturity of hedged items. 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 in interest expense.

7

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

(17) Changes in accounting policies(Adoption of accounting standard for business combinations)
Effective April 1, 2015, the Company adopted the Accounting Standard for Business Combinations (ASBJ Statement No.
21, September 13, 2013, hereinafter, “Business Combinations Standard”), Accounting Standard for Consolidated Financial
Statements (ASBJ Statement No. 22, September 13, 2013, hereinafter, “Consolidated Financial Statements Standard”)
and the Accounting Standard for Business Divestitures (ASBJ Statement No. 7, September 13, 2013, hereinafter,“Business Divestitures Standard”) and other related pronouncements. Accordingly, the Company’s accounting policies
have been changed, whereby the differences arising from changes in the Company’s equity in a subsidiary over which theCompany retains control is recorded as capital surplus and acquisition-related costs are expensed in the consolidated
fiscal year of incurrence. In addition, for business combinations to be executed on or after April 1, 2015, the accounting
treatment has been changed, whereby adjustments to the provisional amount arising from the finalization of the tentative
accounting treatment relating to the allocation of acquisition cost are recognized in the consolidated financial statements
for the consolidated fiscal year to which the date of business combination belongs. Furthermore, the Company haschanged the presentation of net income and other related items, and the presentation of “minority interests” to“non-controlling interests.” Certain amounts in the consolidated financial statements for the fiscal year ended March 31,
2015 have been reclassified to reflect these changes in presentation.
The Business Combinations Standard and other related pronouncements were applied prospectively from April 1, 2015 inaccordance with transitional treatments stipulated in Paragraph 58-2(4) of the Business Combinations Standard,Paragraph 44-5(4) of the Consolidated Financial Statements Standard and Paragraph 57-4(4) of the Business Divestitures
Standard.
The impact of this change on the consolidated financial statements was insignificant.
For the consolidated statements of cash flows for the year ended March 31, 2016, cash flows related to acquisition or saleof subsidiaries’ shares not resulting in a change in the scope of consolidation are presented in the section of “cash flows
from financing activities” while cash flows related to costs incurred from acquisition or sale of subsidiaries’ shares
resulting in a change in the scope of consolidation or costs incurred from acquisition or sale of subsidiaries’ shares not
resulting in a change in the scope of consolidation are presented in the section of “cash flows from operating activities.”(18) Accounting pronouncements that have not been adopted by the Company
Implementation Guidance on Recoverability of Deferred Tax Assets (ASBJ Guidance No. 26, March 28, 2016)(a) Outline
The accounting treatment for recoverability of deferred tax assets basically continues to follow the framework of the“Auditing Treatment on determining the recoverability of deferred tax assets” (JICPA Audit Committee Report No. 66),
which classifies entities into five categories and estimates the amount of deferred tax assets to be recorded according tothese categories, with certain revisions made to the following items, based on a review.
・Accounting treatment of companies that do not satisfy any requirement for Category 1 through Category 5・Requirements for Category 2 and Category 3
・Accounting treatment for unscheduled future deductible temporary differences of companies that fall under Category 2
・Accounting treatment for reasonably estimated period for taxable income before temporary differences of companies
that fall under Category 3
・Accounting treatment for companies that satisfy the requirements for Category 4 and also fall under Category 2 orCategory 3(b) Scheduled date of application
The Company will apply the implementation guidance effective April 1, 2016.
(c) Impact of application of the accounting pronouncements
The Company is currently evaluating the amount of impact from application of “Implementation Guidance on
Recoverability of Deferred Tax Assets” on the consolidated financial statements.
(19) Change in the method of presentation
For the year ended March 31, 2016, “Loss on disposal of property, plant and equipment” which was included in “Other,8

net” for the year ended March 31, 2015 is separately presented because it became material. In order to reflect this change,
the consolidated financial statements for the year ended March 31, 2015 were reclassified.
As a result, \42 million which was included in “Other, net” of “Other Income (Expenses)” for the year ended March 31,
2015 was reclassified as “Loss on disposal of property, plant and equipment.”(20) Additional information
The Company resolved at a meeting of its Board of Directors held on March 28, 2016 to submit a proposal for the
consolidation of its shares (at a rate of one share for every two shares) to the Company’s 93rd general shareholders
meeting to be held on June 23, 2016, as described below.
(a) Reason for share consolidation and change in the share unit
Under the “Action Plan for Consolidating Share Trading Units,” all domestic Japanese exchanges aim to standardize thestock trading units for common stock of all listed domestic companies at 100 shares by October 1, 2018. The Company,
listed on the Tokyo Stock Exchange, respects the intent and decided to change its share unit from 1,000 to 100 shares. In
association with this change, the Company decided to carry out a share consolidation at a rate of one share for every twoshares with an aim to set the investment unit at a level considered desirable by domestic Japanese exchanges (\50,000 or
more and less than \500,000).
(b) Details of the share consolidation(i) Class of stock to be consolidated: Common stock(ii) Consolidation ratio: On October 1, 2016, every two shares held by shareholders on the final register of shareholders as
of September 30, 2016, will be consolidated into one share.
(iii) Number of shares to be decreased through share consolidation
Total number of issued shares before consolidation (as of March 31, 2016)
94,427,073 shares
Number of shares to be decreased through consideration
47,213,537 shares
Total number of issued shares after consolidation
47,213,536 shares(Note) “Number of shares to be decreased through consideration” and “Total number of issued shares after
consolidation” are the theoretical value based on the number of issued shares before consolidation and the consolidation
ratio.
(iv) Treatment of fractional shares less than one share
Any fractional shares arising from the share consolidation will be sold in a lump, with the proceeds to be distributed to theshareholders of the fractional shares in proportion to their respective fractions, pursuant to the provisions of Article 234
and 235 of the Companies Act of Japan (the “Act”).
(c) Change in the number of authorized shares as of effective date of share consolidation
In response to a decrease in the total number of issued shares as a result of the share consolidation, the Company will
reduce the number of authorized shares as of the effective date of October 1, 2016, in order to adjust the number ofauthorized shares to an appropriate level as below.
Number of authorized shares before change
378,500,000 shares
Number of authorized shares after change (October 1, 2016)
187,000,000 shares(d) Details of change in share unit
Effective October 1, 2016, the Company will change the share unit of its common stock from 1,000 shares to 100 shares.
(e) Scheduled effective date
Effective date of share consolidation
Effective date of change in the number of authorized shares
Effective date of change in share unit

October 1, 2016
October 1, 2016
October 1, 2016(f) Impact on per share information
The per share information assuming that the share consolidation had taken place on April 1, 2014 is as follows:Yen

Net assets per share
Net income per share

\
\

9

2016
1,168.48
93.31

\
\

U.S. dollars

2015
1,196.68
79.90

$
$

2016
10.38
0.83

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 \112.62 = U.S.$1.00, the approximate rate of exchange as at March 31, 2016, has been used for the
purpose of such translations.

5. Inventories
Inventories held by the Companies as of March 31, 2016 and 2015 consisted of the following:
Millions of yen
2016
2015

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

\

\

6,461
1,542
2,506
10,509

\

\

7,309
1,535
2,957
11,801Thousands of
U.S. dollars
2016

$

$

57,368
13,69022,24993,307

6. Financial Instruments(1) Policy for financial instruments
The Companies raise funds from stable and low-cost financing sources, mainly bank borrowings and bonds, as needed inlight of the financial plan developed as a part of the annual management plan. The Companies invest temporary cash
surplus in highly liquid and secured 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, Electronically recorded monetary claims - operating are
exposed to customers’ credit risk. Receivables denominated in foreign currencies are exposed to foreign exchange risk.
Investments in securities, mainly equity instruments, are exposed to market risk. The Companies quarterly review fairvalues of marketable securities.
Payables such as notes and accounts payable-trade, Electronically recorded obligations - operating 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 capital and capital expenditures. Some of them are exposed tointerest 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 to hedge 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 rate and currency swap contracts used to hedge interest rate risk and foreign exchange risk on bankborrowings.

(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 only with highly-rated financial institutions, they believe there islittle risk of defaults.
(b) Market risk management
The Companies use foreign currency forward contracts to hedge foreign exchange risk identified by currency and monthfor 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 and review 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 commitment line contracts to prepare for any contingency.

(4) Fair values of financial instruments
Fair values of financial instruments include market prices and values calculated reasonably when market prices are notreadily available. As calculation of such value incorporates variable factors, using different assumptions may result indifferent values. The contract amounts and other information described in Note 8, “Derivatives” are not indicative of
market risk exposure to derivative transactions.

10Book values and fair values of the financial instruments as of March 31, 2016 and 2015 were as follows:
Financial instruments whose fair values were not readily available were excluded from the following table:
Millions of yen
2016Book value

2015

Fair value

Difference

Cash and cash equivalents
Time deposits
Notes and accounts receivable-trade
Electronically recorded monetary claims operating
Investments in securities
Available-for-sale securities

\

Total

\

40,483\40,483\

Notes and accounts payable-trade

\

9,908

\

9,908

\

545

16,731

16,731

1,617

1,617

－

\

5,154

Electronically recorded obligations operating
Short-term borrowings
Bonds due within one year
Income taxes payable
Long-term borrowings
Bonds due after one year
Total
Derivative transactions
Contracts to which hedge accounting
was not applied

545

－
－
－

16,436

16,436

\

－
－
－

5,154

Book value\

Fair value

Difference

502

502

18,35818,358

－
－
－

965

965

－

15,697\

6,124

15,697

\

6,124

\

41,646\

41,646\\

11,254\

11,254

\

－
－

2,767
1,555

2,767
1,555

3,000

3,015

15

－

－

439

439

－

431

431

－
－
－
－

8,005

8,072

67

8,748

8,813

65

－

－

－

3,000

3,023

3,035
2,739

3,035
2,739

23

\

25,674\25,756\82\

29,207\29,295

\

88

\

10

\

10

\

－

\

(1)

\

(1)

\

－

Contracts to which hedge accounting
was applied

35

－

35

(18)

(18)

Thousands of U.S. dollars
2016Book value

Fair value

Difference

Cash and cash equivalents
Time deposits
Notes and accounts receivable-trade
Electronically recorded monetary claims operating
Investments in securities
Available-for-sale securities

$

Total

$

359,469$

359,469$

Notes and accounts payable-trade
Electronically recorded obligations operating
Short-term borrowings
Bonds due within one year
Income taxes payable
Long-term borrowings
Bonds due after one year$

87,977$

87,977$

Total
Derivative transactions
Contracts to which hedge accounting
was not applied$

227,974$

228,699

$

725

$

92

$

92

$

－

Contracts to which hedge accounting
was applied

－
－
－

4,840

4,840

148,568

148,568－－－

14,362

14,362－

145,938$

45,761

145,938$

45,761－－－

24,57013,80924,57013,809－－26,63826,768

130

3,898

3,898

－

71,082

71,677

595

－

313

－

313

－

－

Cash and cash equivalents, Time deposits, Notes and accounts receivable-trade, Electronically recorded monetaryclaims - operating
The fair values approximate book values because of the short-term maturities of these instruments.

Investments in securities
The fair values are measured at the quoted market prices of the stock exchange.

Notes and accounts payable-trade, Electronically recorded obligations – operating, Short-term borrowings, Income
taxes payable
The fair values approximate book values because of the short-term maturities of these instruments.

11－

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

Bonds
The fair values are measured at the quoted market prices.

Derivative transactions
Please see Note 8, “Derivatives.”
Financial instruments whose fair values were not available as of March 31, 2016 and 2015 were as follows:
Thousands of
U.S. dollars

Millions of yen

2016
2015
2016
Available-for-sale securities
Unlisted equity securities
\
133 \
138 $
1,183
Investments in affiliates
5,041
5,266
44,755Total\
5,174 \
5,404 $
45,938The 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 fair values.
Monetary assets and investments in securities with maturities as of March 31, 2016 and 2015 were as follows:
Millions of yen

2016
Due within 1 year

Cash and cash equivalents
Time deposits
Notes and accounts receivable-trade
Electronically recorded monetary claims - operating
Total

\

\

Due after 1 year
through 5 years

16,436 \545
16,731
1,617
35,329 \Due after 5years
through 10 years

－ \
－
－
－
－ \

Due after 10 years

－ \
－
－
－
－ \

－
－
－
－
－

Millions of yen

2015
Due within 1 year

Cash and cash equivalents
Time deposits
Notes and accounts receivable-trade
Electronically recorded monetary claims - operating
Total

\

\

Due after 1 year
through 5 years

15,697 \502
18,358965
35,522 \Due after 5years
through 10 years

－ \
－
－
－
－ \

Due after 10 years

－ \
－
－
－
－ \

－
－
－
－
－

Thousands of U.S. dollars

2016
Due within 1 year

Cash and cash equivalents
Time deposits
Notes and accounts receivable-trade
Electronically recorded monetary claims - operating
Total

$

$

Due after 1 year
through 5 years

145,938 $
4,840
148,568
14,362
313,708 $

－ $
－
－
－
－ $

Due after 5years
through 10 years

Due after 10 years

－ $
－
－
－
－ $

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

12

－
－
－
－
－

7. Investments in Securities
Marketable securities classified as available-for-sale securities as of March 31, 2016 and 2015 were as follows:
Millions of yen
2016
Acquisition
cost

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

\

2,034 \

Unrealized
gains (losses)

4,176

1,146
\

2015

Fair value(Book value)

\

2,142

\

1,974

978

3,180 \

Acquisition
cost

\

3,172

\

3,172

(168)

5,154

Fair value(Book value)

\

6,124

\

6,124

0

Unrealized
gains (losses)

\

2,952

\

2,952

0

(0)

Thousands of U.S. dollars
2016
Acquisition
cost

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

Fair value(Book value)$

18,065 $10,173

8,685$

28,238 $45,761

Unrealized
gains (losses)

37,076$

19,011$

17,523(1,488)

Information about available-for-sale securities sold during the years ended March 31, 2016 and 2015 were as follows:
Thousands of U.S.
dollars
2016

Millions of yen
2016
2015

Proceeds
Realized gains
Realized losses

\

35 \
24
－

－ $
－
－

310
214
－

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

8. Derivatives
Derivative transactions to which hedge accounting was not applied for the years ended March 31, 2016 and 2015 were as
follows:(1) Currencies
Millions of yen

2016
Contract
amount due
after 1 year

Contract
amountForeign currency
forward contracts:
Sell:
U.S. Dollar
Euro
Buy:
Japanese yen
U.S. Dollar

2015
Fair value

Unrealized
gains (losses)

Contract
amountContract
amount due
after 1 year

Fair value

Unrealized
gains (losses)

\

130 \
104

－ \
－

3 \
0

3
0

\

－
－

\

－
－

\

－
－

\

－
－

\

142 \
3

－ \
－

7 \
(0)

7
(0)

\

301
－

\

－
－

\

(1) \
－

(1)
－

Thousands of U.S. dollars

2016
Contract
amountContract
amount due
after 1 year

Fair value

Unrealized
gains (losses)

Foreign currency
forward contracts:
Sell:
U.S. Dollar$ 1,157 $
－ $
24 $
Euro
920
－
7
Buy:
Japanese yen$ 1,265 $－ $62 $U.S. Dollar
30－(1)* The fair value is based on prices provided by financial institutions.

13

24
7
62
(1)

Derivative transactions to which hedge accounting was applied for the years ended March 31, 2016 and 2015 were as
follows:(1) Currencies
Millions of yen

2016
Main hedged
item

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

2015
Contract
amount due
after 1 year

Contract
amount

\

－

－

Total

\

Fair value

Main hedged
item

－ \
－

－
－

－
－

Notes and accounts
receivable-trade

－

－

－

Notes and accounts
payable-trade

－ \

－

－

Contract
amount due
after 1 year

Contract
amount\\Fair value

282 \
190

－
－

*
*

40

－

*

512 \

－

*

Thousands of U.S. dollars

2016
Main hedged
item

Contract
amountContract
amount due
after 1 year

Fair value

Foreign currency
forward contracts:
Sell:
U.S. dollar
$
－ $
－
－
－
Euro
－
－
－
Buy:
U.S. dollar
－
－
－
－
Total
$
－ $
－
－
* The fair value of such derivative transactions was included in that of hedged items.
(2) Interest rate
Millions of yen

2016
Main hedged
itemInterest rate
swap contracts:
Floating rate receipt,
fixed rate payment

Long-term
borrowings

Contract
amount\4,900 \

2015
Contract
amount due
after 1 year

4,900

Fair value*

Main hedged
itemLong-term
borrowings

Thousands of U.S. dollars

2016
Main hedged
item

Contract
amountContract
amount due
after 1 year

Fair value

Interest rate
swap contracts:
Floating rate receipt, Long-termborrowings
fixed rate payment$ 43,509 $ 43,509** The fair value of such derivative transactions was included in that of hedged items.

14

Contract
amount due
after 1 year

Contract
amount\ 6,250\

4,900

Fair value*

(3) Interest rate and currencies
Millions of yen

2016
Main hedged
itemInterest rate
swap contracts:
Floating rate receipt,
fixed rate payment:
Japanese yen receipt/India rupee payment
U.S. dollar receipt/India rupee payment
Total

Contract
amount\Long-term
borrowings\

2015
Contract
amount due
after 1 year

Main hedged
item

Fair value

160 \

－ \

(23)

354

208

58

514 \

208 \

35

Contract
amount due
after 1 year

Contract
amount\Long-term
borrowings

\

240 \

160 \

(115)

562

398

97

802 \

558 \

(18)

Thousands of U.S. dollars

2016
Main hedged
item

Contract
amountContract
amount due
after 1 year

Fair value

Interest rate
swap contracts:
Floating rate receipt,
fixed rate payment:$
1,421 $－ $Japanese yen receipt/India rupee payment
Long-term
borrowings
U.S. dollar receipt
3,142
1,845
/India rupee payment
Total$
4,563 $
1,845 $* The fair value is based on prices provided by financial institutions.

(205)
518
313

9. Short-term Borrowings and Long-term Debt
Short-term borrowings as of March 31, 2016 and 2015 represented bank overdrafts with weighted average interest
rates of 2.86% and 2.26%, respectively. The commitment line agreement entered into with a bank to facilitate efficientfunding of working capital expired on January 29, 2016.
Long-term debt as of March 31, 2016 and 2015 consisted of the following:Thousands of
U.S. dollars
2016

Millions of yen
2016

Unsecured long-term borrowings from banks andother financial institutions with weighted averageinterest rate of 1.28% in 2016 and 1.46% in 2015
Unsecured bonds due 2017, 0.99%
Obligations under finance leases\

Less current portion of long-term debt
Total

\

8,005
3,000
56
11,061
3,513
7,548

2015

\

\

8,748
3,000
33
11,781
1,994
9,787

$

$

71,082
26,638501
98,221
31,19667,025

Annual maturities of long-term debt outstanding as of March 31, 2016 were as follows:Year ending at March 31

Millions of yen

2017
2018
2019
2020
2021
2022 and thereafter
Total

\

\

15

3,513
3,039
1,704
1,503
1,301
1
11,061

Fair value

Thousands of
U.S. dollars$$

31,19626,981
15,131
13,346
11,558998,221

10. Retirement Benefits
The details of retirement benefits for the year ended March 31, 2016 and 2015 were as follows:
The Company and certain of its consolidated subsidiaries have defined 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.
Tobu Rubber Employees’ Pension Fund, a multiple employer contribution system, in which some domestic consolidated
subsidiaries participated, was dissolved on October 5, 2015. Any participants including the Company have no obligation to
make additional contributions for the dissolution. The contributions to the pension fund are accounted for in a similarmanner to those to the defined contribution plan as it is impracticable to calculate the amount of pension assets
proportionate to the contributions made by the subsidiaries.
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 appliedThousands of
U.S. dollars
2016

Millions of yen
2016

Beginning balance
Cumulative effect due to changes in accounting policies
Beginning balance reflecting changes in accounting policies
Service cost
Interest cost
Actuarial losses (gains) arising during the year
Retirement benefits paid
Prior year service cost arising during the year
Other
Ending balance

\

\

2015

11,633－
11,633
533
93
486
(925)
(15)
(70)
11,735\\

11,274(231)
11,043
511
122
600
(693)
2
48
11,633$103,297－103,297
4,730
826
4,316
(8,211)(131)(626)
104,201$(b) Movement in plan assets, except defined benefit plans to which the simplified method was appliedThousands of
U.S. dollars
2016

Millions of yen
2016

Beginning balance
Expected return on plan assets
Actuarial gains (losses) arising during the year
Contributions paid by the employer
Retirement benefits paid
Other
Ending balance

\

\

2015

9,875
164
(735)
808
(918)
(43)
9,151

\

\

8,395
175
1,107
811
(667)
54
9,875

$

87,6801,460(6,523)
7,175(8,154)(384)
81,254$(c) Movement in net defined benefit liability of defined benefit plans to which the simplified method was appliedThousands of
U.S. dollars
2016

Millions of yen
2016

Beginning balance
Retirement benefit costs
Retirement benefit paid
Contributions to the plans
Ending balance

\

\

16

298
111
(23)
(53)
333

2015

\

\

281
96
(35)
(44)
298

$

$

2,641
984
(200)
(473)
2,952

(d) Reconciliation of retirement benefit obligations and plan assets with net defined benefit liability and net defined benefit
asset on the Consolidated balance sheets
Thousands of
U.S. dollars
2016

Millions of yen
2016

Retirement benefit obligations under the funded plans
Fair value of plan assets\

Retirement benefit obligations under the unfunded plans
Net liabilities or assets recorded on the Consolidated balance sheets

2015

12,466(9,663)
2,803
114
2,917

\

12,276(10,342)
1,934
122
2,056

Net defined benefit liability
2,918
2,058
Net defined benefit asset(1)(2)
Net liabilities or assets recorded on the Consolidated balance sheets \
2,917
\
2,056
* Defined benefit plans to which the simplified method was applied are included in the above table.

$$

110,695(85,805)
24,8901,009
25,89925,909(10)
25,899(e) Retirement benefit costs
Thousands of
U.S. dollars
2016

Millions of yen
2016

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 costs of defined benefit plans

\

\

2015

532
93
(164)
191
(17)
111
746

\

\

511
122
(175)
421
(40)
96
935

$

$

4,730
826
(1,459)
1,693
(149)
984
6,625

(f) Remeasurements of defined benefit plans (Other comprehensive income)Breakdown of remeasurements of defined benefit plans (before tax effects)
Thousands of
U.S. dollars
2016

Millions of yen
2016

Prior service cost
Actuarial losses (gains)
Total

\
\

2015

(2)
(1,030)(1,032)

\
\

(42)
927
885

$
$

(18)
(9,146)(9,164)(g) Remeasurements of defined benefit plans (Accumulated other comprehensive income)Breakdown of remeasurements of defined benefit plans (before tax effects)
Thousands of
U.S. dollars
2016

Millions of yen
2016

Unrecognized prior service cost
Unrecognized actuarial losses (gains)
Total

\
\

28
(1,804)(1,776)

2015

\
\

30
(774)
(744)

$
$

256
(16,022)(15,766)(h) Plan assets
Plan assets consisted of the following:
2016

2015

Equity securities
41%
47%
Bonds
41
34
General account
11
10
Cash and deposits
5
7
Other
2
2
Total
100%
100%
* Employee retirement benefit trust set up for the corporate pension plan accounts for 14% and 20% of total plan assets forthe year ended March 31, 2016 and 2015.
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 of return on various assets composing plan assets.

17

(i) Actuarial assumptions
The principal actuarial assumptions at March 31, 2016 were as follows:
2016

2015

Discount rate
Mainly 0.3%
Mainly 0.7%
Expected rate of return on plan assets
Mainly 2.1%
Mainly 2.5%
* Expected salary increase rate was not used in calculation of projected benefit obligation under the point-based benefit
system.
(2) Defined contribution pension plans
Contributions to the defined contribution pension plans were \194 million ($1,720 thousand) and \191 million for the year
ended March 31, 2016 and 2015, respectively.
(3) Multiemployer plan(a) The funded status of the multiemployer plan:
Thousands of
U.S. dollars
2016

Millions of yen
2016
2015

Plan assets
Total of actuarial obligations for calculation of pension finance andminimum policy reserve *Differences

\

－

\

33,179

$

－

\

－
－

\

45,192(12,013)$－－(b) Ratio of total required contribution amount of the Companies to total funds of the plan
(From April 1, 2015 to March 31, 2016)-%(From April 1, 2014 to March 31, 2015)
1.5%(c) Supplementary explanation
The Companies record special contribution of ¥15 million ($130 thousand) and \32 million as expenses in March 31, 2016
and 2015, respectively.

11. Income Taxes
Deferred tax assets and liabilities as of March 31, 2016 and 2015 consisted of the following:
Millions of yen
2016
2015

Thousands of
U.S. dollars
2016

Deferred tax assets:
Contributions to retirement benefit trust
\
1,111
\
1,265
$
9,871
Net defined benefit liability
861
706
7,642
Loss on valuation of shares of subsidiaries and associates
647
－
5,742
Tax loss carryforwards
603
550
5,353
Non-deductible valuation loss
503
458
4,465
Impairment loss
259
285
2,297
Elimination of gains arising from intercompany transactions
632
678
5,615
Other
288
425
2,562
Valuation allowance for deferred tax assets(1,534)(979)(13,625)
Total
\
3,370
\
3,388
$
29,922
Deferred tax liabilities:
Gain on set-up of retirement benefit trust\(928) \
(979) $
(8,239)Unrealized gain on available-for-sale securities
(541)
(891)
(4,805)Reserve for deferred capital gains related toproperty, plant and equipment
－
(242)
－
Elimination of losses arising from intercompany transactions
(260)
(37)
(2,307)
Other
(247)
(452)
(2,198)
Total\(1,976) \(2,601) $(17,549)
Net deferred tax assets*
\
1,394
\
787
$
12,373* Net deferred tax assets were included in the following accounts in the consolidated balance sheets as of March 31, 2016
and 2015:

18

Thousands of
U.S. dollars
2016

Millions of yen
2016
2015

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

\

458
966
－
30

\

606
207
0
26

$

4,070
8,575
－
272

Change in the method of presentation“Non-deductible valuation loss” and “Elimination of gains arising from intercompany transactions,” included in “Other“ ofdeferred tax assets and “Elimination of losses arising from intercompany transactions” included in “Other” of deferred tax
liabilities for the year ended March 31, 2015 are separately presented for the year ended March 31, 2016 because they
became material. The figures for the year ended March 31, 2015 in the table above were reclassified to reflect thesechanges in presentation.
As a result, \1,697 million presented as “Other” of deferred tax assets for the year ended March 31, 2015 was reclassified
into as “Non-deductible valuation loss” of \458 million, “Elimination of gains arising from intercompany transactions” of\678 million and “Other” of \561 million, and \489 million presented as “Other” of deferred tax liabilities for the year
ended March 31, 2015 was reclassified into as “Elimination of losses arising from intercompany transactions” of \37 millionand “Other” of \452 million.
Reconciliation of the statutory tax rate to the effective income tax rate for the years ended March 31, 2016 and 2015 was
as follows:
2016

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
Foreign withholding tax
Change in valuation allowance
Prior year income taxes
Adjustment on deferred tax assets at year-end due to tax rate change
Other, net
Effective income tax rate

33.0%
(7.7)
(2.8)
1.7
0.5
(1.3)
4.1
(0.2)
(2.5)
1.2
0.8
26.8%

2015

35.6%
(7.5)
(4.3)
2.7
(0.3)
(2.1)
0.6
(1.5)
2.0
1.8
0.6
27.6%

Change in the method of presentation“Foreign withholding tax” which was included in “Other, net” for the year ended March 31, 2015 is separately presented
because it became material. The figure for the year ended March 31, 2015 in the table above was reclassified to reflect thischange in presentation.
As a result, 1.2% presented as “Other, net” for the year ended March 31, 2015 was reclassified into as “Foreign
withholding tax” of 0.6% and “Other” of 0.6%.

Change in statutory effective tax rate
“Act for Partial Amendment of the Income Tax Law (Law No. 15/2016)” and “Act for Partial Amendment of the Local Tax
Law (Law No. 13/2016) were enacted in the Diet Session on March 29, 2016, and the statutory income tax rate will be
reduced from years beginning on or after April 1, 2016. As a result, the normal effective statutory tax rate used to
calculate deferred tax assets and liabilities will be changed from 32.3% to 30.8% for a temporary difference which is
expected to be reversed during the period from the fiscal year beginning on April 1, 2016 and 2017, respectively, and to
30.6% for a temporary difference which is expected to be reversed during the period from the fiscal year beginning on orafter April 1, 2018. This change had no material impact on the consolidated financial statements for the year ended March
31, 2016.

12. Net Assets
Significant provisions in 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.

19

The Act permits Japanese companies to distribute dividends in kind (non-cash assets) to shareholders subject tocertain 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 so stipulate. The Act continues toprovide certain limitations on the amounts available for dividends or the purchase of treasury stock. The limitation isdefined 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.

(2) Increases/decreases and transfer of common stock, reserve and surplus
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 the equity 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 be transferred among the accounts
under certain conditions upon resolution of the shareholders.

(3) Treasury stock and treasury stock acquisition rights
The Act also permits Japanese companies to repurchase/dispose of treasury stock by resolution of the Board of
Directors. The amount of treasury stock to be purchased cannot exceed the amount available for distribution to theshareholders which is determined by specific formula.
Under the Act, stock acquisition rights are presented as a separate component of equity.
The Act also provides that companies can purchase both treasury stock acquisition rights and treasury stock. Suchtreasury stock acquisition rights are presented as a separate component of equity or deducted directly from stockacquisition rights.

13. Selling, General and Administrative Expenses
Selling, general and administrative expenses for the years ended March 31, 2016 and 2015 principally consisted of thefollowing:Thousands of
U.S. dollars
2016

Millions of yen
2016
2015

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

\

6,211
2,485
1,193
442
33

\

5,973
2,471
1,205
533
－

$

55,15022,062
10,591
3,922
293

14. Net Income per Share
The Companies had no dilutive securities for the years ended March 31, 2016 and 2015.
Basic net income per share for the years ended March 31, 2016 and 2015 was as follows:
Thousands of
U.S. dollars
2016

Millions of yen
2016

Profit attributable to shareholders of the parent

\

2015

4,386

\

3,757

$

38,947

Thousands of shares

2016
Weighted-average number of shares2015
94,01894,064Yen

Net income per share

\

20

2016
46.65

\

U.S. dollars

2015
39.95

2016
$

0.41

15. Consolidated Statements of Comprehensive Income
Reclassification adjustments regarding other comprehensive income and related income tax effects for the years ended
March 31, 2016 and 2015 are as follows:
Thousands of
U.S. dollars

Millions of yen

2016
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-sale securities\

Deferred gains on hedges:
Recognized during the year
Before tax effects adjustments
Income tax effects
Deferred gain on hedges

2015

(959)
(24)
(983)
347
(636)

\

2016

745
(7)
738
(171)
567

$

(8,517)(214)(8,731)
3,084(5,647)

1
1
(0)
1

(2)
(2)
1
(1)

6
6
(2)
4

Foreign currency translation adjustments:
Recognized during the year
Foreign currency translation adjustments(3,063)(3,063)

3,378
3,378

(27,197)(27,197)

Remeasurements of defined benefit plans:
Recognized during the year
Reclassification adjustments
Before tax effects adjustment
Income tax effects
Remeasurements of defined benefit plans(1,231)199(1,032)
303
(729)

580
305
885
(339)
546

(10,928)
1,764(9,164)
2,692(6,472)

(293)

218

(2,597)

Share of other comprehensive income in affiliates accounted for by theequity method:
Recognized during the year
Share of other comprehensive income in affiliates accounted for by
the equity method
Total other comprehensive income
\

21

(293)
(4,720)

\

218
4,708

$

(2,597)(41,909)16. Segment Information(1) Description of reportable segments
The Companies' reportable segments are components for which separate financial information is available, whose
operating results are reviewed regularly by the chief operating decision maker in order to decide allocations ofresources 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, theCompanies consist of three reportable segments according to products based on operating divisions: "Automotive Parts
Business," "Industrial Products Business," and "Advanced Elastomer Products Business."
The main products of each segment are as follows:
Segment nameAutomotive Parts Business

Main products
Automotive power transmission belt products (accessory
drive power transmission belts and system products),
motorcycle power transmission belt products (variable
speed belts for scooters, etc.)
Industrial power transmission belt products (industrial
machinery V-belts, toothed belts, pulleys, etc.), otherpower transmission products, conveyor belts (conveyor
belts, resin conveyor belts, synchronous conveyor belts),
conveyor system products, rice-hulling rolls, Railway
rubber components, etc.
Cleaning blades, high-performance rollers, precision belts,
polyurethane functional parts, precision polishing materials,
films for construction materials, medical films, decorative
display films, industrial films, etc.

Industrial Products Business

Advanced Elastomer Products Business

For the year ended March 31, 2016, the Company changed the reportable segments as described in “(4) Change inreportable segments” below.

(2) Methods 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.

(3) Sales, profit or loss, assets and other items by reportable segments
Millions of yen

2016

Automotive
Parts Business

Reportable segments
Industrial
Advanced
Total reportable
Product
Elastomer Products
segments
Business
Business

Other

Total

Adjustments

Consolidated
Financial
Statements

Net sales
Sales to customers
Intersegment sales
Total
Segment profit (loss)\ 42,750 \ 33,028 \94
69\ 42,844 \ 33,097 \\ 3,324 \ 1,924 \

15,564 \56
15,620 \759 \91,342 \219
91,561 \6,007 \

1,930 \ 93,272 \
701
920
2,631 \ 94,192 \276 \ 6,283 \Segment assets\ 32,810 \ 28,507 \

10,670 \71,987 \2,297 \ 74,284 \ 16,481 \ 90,765

1,004 \

718 \

4,154 \

124 \

4,278 \

121 \

4,399

1,111 \
81 \

855 \
11 \

3,702 \
92 \

16 \
－ \

3,718 \
92 \

958 \
－ \

4,676
92

Other:
Depreciation and amortization \ 2,432 \Increase in property,
plant and equipment
and other intangible assets\ 1,736 \Impairment loss
\
－ \

22

－ \ 93,272(920)－(920) \ 93,272(322) \ 5,961

Millions of yen

2015
Reportable segments
Elastomer Products Total reportable
Belt BusinessBusinesssegments

Other

Total

Consolidated Financial
Statements

Adjustments

Net sales
Sales to customers
Intersegment sales
Total
Segment profit (loss)\ 77,988 \113\ 78,101 \\ 4,155 \

15,647 \66
15,713 \329 \93,635 \179
93,814 \4,484 \

1,761 \ 95,396 \
885
1,064
2,646 \ 96,460 \198 \ 4,682 \－ \(1,064)(1,064) \115 \95,396－
95,396
4,797

Segment assets\ 66,878 \

11,277 \78,155 \2,142 \ 80,297 \

14,403 \94,7003,505 \

730 \

4,235 \

108 \

4,343 \

88 \

4,431

2,688 \
－ \

646 \
410 \

3,334 \
410 \

52 \
－ \

3,386 \
410 \

812 \
－ \

4,198
410

Other:
Depreciation and amortization \Increase in property,
plant and equipment
and other intangible assets \Impairment loss\

Thousands of U.S. dollars

2016

Automotive
Parts Business

Reportable segments
Industrial
Advanced
Total reportable
Products
Elastomer Products
segments
Business
Business

Other

Total

Adjustments

Consolidated
Financial
Statements

Net sales
Sales to customers
Intersegment sales
Total
Segment profit (loss)$379,599 $ 293,270 $ 138,199 $ 811,068 $ 17,134 $828,202 $－ $828,202
837
610
496
1,943
6,226
8,169
(8,169)－$380,436 $ 293,880 $ 138,695 $ 813,011 $ 23,360 $836,371 $ (8,169) $828,202$ 29,515 $ 17,086 $
6,740 $ 53,341 $ 2,450 $ 55,791 $ (2,863) $ 52,928

Segment assets$291,336 $ 253,128 $Other:
Depreciation and amortization $ 21,599 $Increase in property,
plant and equipment
and other intangible assets$ 15,416 $Impairment loss$
－ $94,745 $ 639,209 $ 20,393 $659,602 $146,339 $805,941

8,917 $

6,374 $

36,890 $1,098 $ 37,988 $

1,070 $ 39,058

9,863 $
720 $

7,589 $
96 $

32,868 $816 $141 $ 33,009 $
－ $
816 $

8,508 $ 41,517－ $816*1 "Other" category represents operating segments not included in reportable segments.
*2 "Adjustments" are as follows:(a) Adjustments of segment profit (loss) include \(2) million ($(17) thousand) and \26 million of the elimination ofintersegment transactions, and \(320) million ($(2,846) thousand) \89 million of corporate expenses for the years
ended March 31, 2016 and 2015, respectively. Corporate expenses represent differences between the estimatedgeneral administrative expenses and research and development costs allocated to each reportable segment and theactual amount incurred.
(b) Adjustments of segment assets include \(4,794) million ($(42,575) thousand) and \(4,242) million of the elimination ofintersegment balances, and \21,275 million ($188,914 thousand) and \18,645 million of corporate assets for theyears ended March 31, 2016 and 2015, 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.

(4) Change in reportable segments
Following the organizational reform effective April 1, 2015, the Company changed its reportable segments from “BeltBusiness” and “Elastomer Products Business” to “Automotive Parts Business,” “Industrial Products Business,” and“Advanced Elastomer Products Business.” It is impracticable to prepare the segment information (sales, profit or loss,
assets and other items by reportable segments) for the year ended 31 March, 2015 under the new segmentation. The
segment information for the year ended March 31, 2016 under the previous segmentation is as follows:23

Millions of yen

2016
Reportable segments
Elastomer Products Total reportable
Belt BusinessBusinesssegments

Other

Total

Adjustments

Consolidated Financial
Statements

Net sales
Sales to customers
Intersegment sales
Total
Segment profit (loss)\ 75,778 \100\ 75,878 \\ 5,248 \15,564 \56
15,620 \759 \91,342 \156
91,498 \6,007 \

1,930 \ 93,272 \
701
857
2,631 \ 94,129 \276 \ 6,283 \

－ \
(857)
(857) \
(322) \

93,272－
93,272
5,961

Segment assets\ 61,291 \

10,670 \71,961 \2,297 \ 74,258 \

16,507 \90,7653,437 \

718 \

4,155 \

123 \

4,278 \

121 \

4,399

2,847 \
81 \

855 \
11 \

3,702 \
92 \

16 \
－ \

3,718 \
92 \

958 \
－ \

4,676
92

Other:
Depreciation and amortization \Increase in property,
plant and equipment
and other intangible assets \Impairment loss\

Thousands of U.S. dollars

2016
Reportable segments
Elastomer Products Total reportable
Belt BusinessBusinesssegments

Other

Total

Net sales
Sales to customers
Intersegment sales
Total
Segment profit (loss)$ 672,869 $ 138,199 $ 811,068 $ 17,134 $828,202 $
890
496
1,386
6,227
7,613
$ 673,759 $ 138,695 $ 812,454 $ 23,361 $835,815 $$ 46,601 $
6,740 $ 53,341 $ 2,450 $ 55,791 $Segment assets$ 544,227 $Other:
Depreciation and amortization $ 30,516 $Increase in property,
plant and equipment
and other intangible assets $ 25,279 $Impairment loss$
720 $Adjustments

Consolidated Financial
Statements－ $(7,613)(7,613) $(2,863) $828,202－828,20252,92894,745 $ 638,972 $ 20,393 $659,365 $ 146,576 $

805,941

6,374 $

36,890 $1,098 $ 37,988 $

1,070 $

39,0587,589 $
96 $

32,868 $816 $141 $ 33,009 $
－ $
816 $

8,508 $
－ $41,517816*1 "Other" category represents operating segments not included in reportable segments.
*2 "Adjustments" are as follows:(a) Adjustments of segment profit (loss) include \(2) million ($(17) thousand) of the elimination of intersegment
transactions, and \(320) million ($(2,846) thousand) of corporate expenses. Corporate expenses represent
differences between the estimated general administrative expenses and research and development costs allocatedto each reportable segment and the actual amount incurred.
(b) Adjustments of segment assets include \(4,768) million ($(42,338) thousand) of the elimination of intersegment
balances, and \21,275 million ($188,914 thousand) of corporate assets.
(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.

(5) Changes in measurement of reportable segment profit (loss)
Corporate expenses and research and development costs of the Company were previously allocated among reportablesegments using a certain allocation ratio. Starting from the year ended March 31, 2016, research and development costs
not attributable to reportable segments are not allocated in order to manage performance of each reportable segment
more properly.
As a result of this change, compared with the figures calculated using the previous method, segment profit increased by\189 million ($1,681 thousands) in Automotive Parts Business, \205 million ($1,824 thousands) in Industrial Products
Business and \120 million ($1,064 thousands) in Advanced Elastomer Products Business, and depreciation in ”Other”
decreased by \20 million ($175 thousands) in Automotive Parts Business, \18 million ($161 thousands) in Industrial
Products Business and \11 million ($101 thousands) in Advanced Elastomer Products Business. Under the previous

24segmentation applied for the year ended March 31, 2015, segment profit increased by \395 million ($3,504 thousands) in
Belt Business and \120 million ($1,064 thousands) in Elastomer Products Business, and depreciation in “Other” decreasedby \38 million ($336 thousands) in Belt Business and \11 million ($101 thousands) in Elastomer Products Business.
Segment information for the year ended March 31, 2015 was reclassified to present the information under the new
calculation method, but it had no impact on segment profit, compared with the previous calculation method.

Information related to reportable segments
Information about geographic areas was as follows:(a) Net sales
Millions of yen
2016
China
\11,533

Japan\48,025

Asia\22,584

Other\11,130

Total\93,272Japan$426,435

Thousands of U.S. dollars
2016
Asia
China
Other
$200,533 $102,409$98,825

Total$828,202Japan\48,918

Asia\24,452

2015
China\11,802

Other\10,224

Total\95,396

Asia\8,9062015
China\1,664Other\3,307

Total\31,090(b) Property, plant and equipment
Millions of yen
2016
China
\1,379Japan\17,804

Asia\7,354Other\2,950Total\29,487Japan$158,092

Thousands of U.S. dollars
2016
Asia
China
Other
$65,300$12,244$26,189

Total$261,825Japan\17,213

17. Impairment loss
The details of Impairment loss for the year ended March 31, 2016 and 2015 were as follows:
For the year ended March 31, 2016

Purpose of use

Location

Business assets

Kobe, Hyogo

Idle assets

Takamatsu, Kagawa

Osaka, Osaka

Asset type

Buildings and structures
Machinery and equipment
Other
Total
Buildings and structures
Machinery and equipment
Land
Other
Total
Buildings and structures
Land
Total

Total

AmountThousands ofMillions of yen
U.S. dollars

\

\

4
7
0
11
4
0
36
0
40
5
36
41
92

For the year ended March 31, 2015
AmountPurpose of use

Business assets

Location

Sennan, Osaka

Asset type

Buildings and structures
Machinery and equipment
Other

Total

Millions of yen

\

\

25

32
328
50
410

$

$

34
60
1
95
39
0
314
1
354
47
320
367
816

In reviewing impairment loss, the Companies classify their operating assets mainly by operating division and idle assets byindividual property.
As the recoverable amount of business assets fell below the book value due to continued operating loss and idle assets
are no longer expected to be used in the future, the Company wrote down their book value to their respective recoverable
amount and recognized impairment loss for the amount written down.
Recoverable amount is measured using net selling price or value in use. Net selling price is based on estimated selling
price and value in use is determined as zero due to negative future cash flow.

26