ANNUAL REPORT 2011
For the year ended March 31, 2011

JSR Corporation (formerly Japan Synthetic Rubber Co., Ltd.) was established in 1957 with the aimof producing synthetic rubber domestically. Since then, JSR has progressively expanded its business toinclude the manufacture of emulsions and plastics. The Company has further diversified its operations byutilizing its proprietary polymer technologies to develop such products as semiconductor materials, display
materials, and optical materials for the fast-growing information and communication industries. This
diversification has been a strong focal point underscoring innovative changes to the Company’s businessstructure.

The JSR Group’s Essential Elements
The JSR Group has rearranged its corporate mission in order to address the changing times andbusiness conditions, fulfill its social responsibilities, and generate sound growth. The result of
this initiative is the JSR Group’s Essential Elements, consisting of three parts—Corporate Mission,
Management Policies, and Course of Action—to be observed by all Group employees.

Corporate Mission
Materials Innovation—We
create value through materials to enrich people’s lives
and contribute to society andthe environment.
Management Policies
Fundamental pillars ofmanagement
Responsibility to ourstakeholders

New Mid-TermBusiness Plan
JSR20i3

Sustainable
GrowthCourse of Action (4 Cs)
Challenge
Communication
Collaboration
Cultivation

Enhancement ofCorporate Governance

New Mid-Term Business PlanJSR Corporation recently launched its new mid-term business plan, entitled “JSR20i3,” covering the threeyear period from April 2011 to March 2014. This plan continues the initiatives pursued in the previous plan,“JUMP2010.” Under the new plan, JSR will further enhance the global competitiveness of existing products.
It will also continue providing high-performance materials and high-precision processing technologies toemerging fields that are expected to continue growing in the future. Such fields include environment and energy,
biomedical materials, and information and electronics. (The reason for using “i” in “20i3” is to emphasize the“innovation” aspect of our corporate mission.)

Contents

Business
02 To Our Shareholders
06 Special Feature		 — Launch of Strategic Businesses

Business Highlights• Year-on-year increases in revenue and earnings 		

achieved in fiscal 2011.

• Implemented share buyback aimed at 			Governance
08 Enhancing Trust and Achieving Sustained
Growth
13 Directors, Corporate Auditors, and Officers

maximizing shareholder value.

• Launched “JSR20i3,” a new mid-term businessplan covering the three-year period starting 		April 2011.

• Rearranged corporate governance and 			corporate mission to further enhance corporate
value from April 2011.

Fine Chemicals and Other Productsn Decided to build new R&D facilities at Group

companies in South Korea and Taiwan to reinforce
R&D on Liquid Crystal Display (LCD) materials.

Petrochemical Productsn Decided to expand production capacity in Yokkaichi

Plant, and also decided to form joint venture andconstruct new solution polymerization styrene
butadiene rubber (S-SBR) manufacturing plant inThailand to meet growing worldwide demand.
n Decided to expand production capacity of ethylene

propylene rubber in South Korea.

Business
14 Review of Operations: At a Glance
16 Fine Chemicals and Other Products
19 Petrochemical Products		 19 Elastomers
		 20 Plastics
22 Global R&D, Production, and Marketing
Operations

Governance
25 Corporate Social Responsibility

Financial
26 Ten-Year Summary
28 Management’s Discussion and Analysis
30 Risk Information
32 Consolidated Financial Statements
38 Notes to Consolidated Financial Statements
53 Independent Auditors’ Report

Strategic Businesses

Datan Precision materials and processing: Began selling

54 Corporate Data and Investor Information

ELART™, a newly developed transparent conductive
indium tin oxide (ITO) film for high-end touch
panels.
n Succeeded in developing LUCERA™, ahigh-performance, ultra-heat-resistant opticalisotropic film.
n Environment and energy: Launched BIOLLOY™, abioplastic that delivers improved performance.
n Successfully developed high-performance lithiumion capacitor of flat prismatic can-type cells.

Forward-Looking Statements
Statements regarding the company’s future plans,
strategies, projected performance and outlook are basedon information available at the time of writing. Readers are
cautioned that economic trends in JSR’s target markets andother risks and factors beyond the company’s control could
cause actual results to differ materially from those projectedby management.

02

To Our Shareholders

Targeting sustained growthover the next 20 to 30 years,
the JSR Group reassessed
its corporate mission andstrengthened corporate
governance. We also launched
our new mid-term businessplan, entitled “JSR20i3.”

MITSUNOBU KOSHIBA
Representative Director andPresident

Performance Overview
In fiscal 2011, ended March 31, 2011, the JSR Group
achieved quite healthy results, both in Japan and overseas,with growth in sales and earnings. This was despite the challenges of a nontransparent, uncertain operating environment. Consolidated net sales amounted to ¥340.7 billion,
up 9.8% from the previous fiscal year. Operating income
jumped 93.2%, to ¥39.1 billion, and net income rose 2.1%,
to ¥27.6 billion.
During the year, production in the automobile and tire
industries—major sources of demand for the Group—was
relatively healthy thanks to recovery in worldwide demand.
Despite depressed demand for PCs, the semiconductor
industry was buoyed by global expansion of smartphones,
multifunctional mobile devices, and other products. Meanwhile, the flat panel display (FDP) sector performed well until
around August 2010, both in Japan and overseas.
With respect to raw materials, the price of naphtha,
which has been trending higher since the previous fiscal year,
showed signs of settling until the first half of fiscal 2011. In
the second half, however, prices again turned upward, placing pressure on earnings. Nevertheless, we made a comprehensive Group-wide effort to implement our Cost-Reduction
Plan “E-100 Project,” including improvements of operation
efficiency, while also stepping up sales and marketing activities. In the petrochemical products business, we focusedparticular attention on expanding sales of high-performance

JSR Corporation Annual Report 2011

products. At the same time, we sought to adjust our prices
to address rising costs of raw materials. We also strove toboost sales of cutting-edge materials in the Fine Chemicals
and Other Products business.
As a result, the Group reported significant increases inrevenue and earnings and thus regained growth momentum. However, we also confirmed the crucial need to have“drivers” to further increase sales and profits and achieve
renewed growth in the current operating environment.

OutlookIn fiscal 2012, ending March 2012, we expected that theGreat East Japan Earthquake will continue to have a notable
impact on the domestic automobile and paper manufacturing industries. In the Petrochemical Products business, we expect a decline in demand in the automobile and tire sectors
as the demand rush ahead of the abolition of government
subsidies recedes. However, an increase in exports to newly
emerging nations should compensate for this, enabling us
to maintain moderate growth. In the Fine Chemicals andOther Products business, as we look forward to relatively
healthy expansion underpinned by increased demand forsmartphones and multifunctional mobile terminals from thesemiconductor and FPD industries.
For fiscal 2012, we forecast consolidated net sales of¥370 billion (up 8.6% year-on-year), operating income of¥41 billion (up 4.9%), and net income of ¥28 billion (upBusiness

Business Performance Highlights

Net sales:
Up 9.8% toOperating income:Up 93.2% toROE:
Up 5.2 points to¥340.7 billion¥39.1 billion

10.8%

Operating income margin
Up 6.5 points to 11.5%

ROA1.6%). These forecasts assume an exchange rate of ¥85 per
U.S. dollar and a naphtha price of ¥62,000/kilogram.
The Great East Japan Earthquake did not cause significant damage to the Group’s operations. Accordingly, we expect the disaster to have minimal direct impact on our business performance in the year ahead. However, we assume
that production of automobiles and electronic components
is being affected, and we have factored this in our forecasts.
Nevertheless, we also predict that scheduled restrictions onelectric power consumption will affect economic activity,
while declining purchasing sentiment will have a downward
impact on personal consumption.

New Mid-Term Business Plan
Since fiscal 2003, the JSR Group has promoted businessstructural reforms targeting growth. In the meantime, wehave implemented three medium-term business plans. The
period under review was the final year of our third plan,
entitled JUMP2010, covering the period from April 2008 to
March 2011.
Under JUMP2010, we have pursued various initiatives.
In the Petrochemical Products business, for example, wehave sought to expand sales, especially of high-performance
products, while at the same time adjusting our sales prices
to reflect the rising costs of main raw materials. In the Fine
Chemicals and Other Products business, we have focusedon increasing sales of cutting-edge materials, centering on
information and electronics materials. In the meantime, wehave concentrated on raising profitability by implementing
our Cost-Reduction Plan “E-100 Project” and suppressing
fixed costs. As a result, we achieved our revised forecasts forthe final year of the plan.

Up 3.4 points to 7.1%

Seeking to deliver further growth in the future, the JSRGroup has envisaged how it hopes to evolve by 2020 basedon its view of society and the business environment in 2030.
To this end, we formulated a new mid-term business plan,
entitled “JSR20i3,” (twenty thirteen) covering the three-year
period from April 2011 to March 2014. The reason for using“i” in “20i3” is to emphasize the “innovation” aspect ofMaterial Innovation, which symbolizes our corporate mission.

Future Growth Scenarios under JSR20i3
In order to generate sustained growth into the future, theJSR Group has been analyzing predictions of business conditions through to 2030 based on long-term perspectives.
Based on such analyses, we launched JSR20i3 to guide our
evolution into the “ideal JSR Group” by 2020. We have positioned this as our “activation toward growth” period, during
which we will achieve sustainable growth through 2020.
Going forward, we expect business conditions to change
more and more dramatically, and the new plan is aimed atallowing us to swiftly address such changes. With this inmind, we have devised a Business Growth Scenario and a
Resource Allocation Scenario.
Business Growth Scenario
Between now and 2020, we expect business conditions tobecome more and more diversified and uncertain. To achieve
future growth amid such circumstances, we will emphasize as a core priority the swift establishment and full-scale
operation of the Strategic Businesses that we are currently
focusing on. In Strategic Businesses, we are concentratingon three areas—precision materials and processing, environment and energy, and biomedical materials. We hope to

JSR Corporation Annual Report 2011

03

04

quickly foster these into major businesses on a par with ourcore operations in Fine Chemicals and Other Products andPetrochemical Products.
In these ways, we will target growth underpinned by
the three aforementioned Strategic Businesses, which willcomplement our existing mainstay Fine Chemicals and Other
Products and Petrochemical Products businesses. By also
incorporating “the environment” and “globalization” into
this three-business portfolio, we plan to further expand thebusiness domains of each.
One objective of JSR20i3 is to achieve growth rates atleast twice those of the relevant markets in our core businesses—Petrochemical Products and Fine Chemicals —by
fiscal 2014. We will also target world standardization in ourquest for the top global market share. Through this globalization process, we hope to expand overseas sales so thatthey account for at least 65% of net sales by 2020.

Resource Allocation Scenario
To foster the three Strategic Businesses into major businesses
for the Group, we will implement focused investments andresource allocations with respect to capital expenditures andpersonnel plans.

Under the new mid-term plan, we plan to make annual
capital expenditures of around ¥130 billion, which is arounddouble that allocated under the previous plan. Within thistotal, we plan to spend 25%, or around ¥30 billion, on
Strategic Businesses. Of the remainder, we will allot around¥40 billion to the Fine Chemicals and Other Products segment and around ¥50 billion to the Petrochemical Products
segment.
With respect to personnel, we will increase our consolidated Group workforce by 500, from the current level of
5,200 to 5,700. Around 300 of the increased workers will go
to overseas Group companies, and we also plan to increase
ratio of personnel in R&D to our entire workforce from 35%
to 37% (for the purpose of increasing resources for longrange R&D projects). In our quest for worldwide growth, wewill also target globalization and diversification of humanresources. In R&D-related activities, for example, we will
increase the number of personnel to create a 1,000-person
R&D workforce by fiscal 2016. Moreover, around 10% ofthat workforce will be devoted to development of nextgeneration products.
Since 2009, we have made investments aimed at fully
deploying our Strategic Businesses. Going forward, we willcontinue this process, including by studying M&A opportu-

Business Growth Scenario
with Three Business Domain

2020• Fine Chemical and Other Products• Petrochemical Products• Strategic Businesses
2014
2013

Resource Allocation Scenario• Capital Expenditure• Increase Workforce

Sustainable
GrowthNew Mid-TermBusiness Plan
“JSR20i3”
Activation
Toward2011
Growth2010

Mid-term Business Plan
“JUMP 2010”
2007
Mid-Term Business Plan
“JSRevolution”

JSR Corporation Annual Report 2011

Enhance Corporate
GovernanceRearranged JSR Group’s
Essential Elements

Targeting
Sustainable
GrowthMarketCapitalization:
Over ¥1,000 billion
Operating
Income:Over ¥100 billion

Business

nities in such fields as precision materials and processing,environment and energy, and biomedical materials.
In these ways, we will expedite the deployment of ourStrategic Businesses, which have received heavy investments
since fiscal 2010, and nurture them into our third major business pillar. In the process, we are targeting consolidated operating income of ¥60 billion, a record-high level, by fiscal 2014
and total market capitalization of ¥1 trillion by fiscal 2020.

Corporate Mission for Long-Term Growth
In its quest for long-term growth in the future, the JSRGroup has rearranged its corporate mission. At the core ofthis is the JSR Group’s Essential Elements: Corporate Mission(signifying our “raison d’être”), Management Policies (criteria
for corporate decision-making), and Course of Action (workguidelines for individual employees).
Specifically, the Group plans to create a framework forcontinued growth by building new corporate cultures andbusiness models that can address changing times, environments, and value propositions. At the same time, we willretain corporate cultures and business models that have
served us well in the past.
We will ensure that all employees understand the JSRGroup’s Essential Elements and behave accordingly while
sharing common objectives and values. We will also createa system enabling individual employees to grasp and swiftly
resolve any issues they face based upon their own judgmentof the Essential Elements. In these ways, we hope to earn
the confidence of our many stakeholders.
Diversifying Business Conditions, Diversifying Values
The business environment of the JSR Group has changed
dramatically on a global scale in recent years. In light of
this, we feel that conditions will become increasingly uncertain and diversified in the years ahead. To address a futureenvironment filled with uncertainty, we will slim down our
corporate structure to strengthen our responsiveness.
We will also strive to reassess our value perceptions as
we approach the future era of diversification. To this end, weare pursuing the “E2 Initiative™” (original JSR environmental initiative) and the “Personnel Diversity Campaign.”
The “E2 Initiative™” is a code of conduct that incorporates “the environment” into all business activities. This ispart of our “unwavering management alliance” that stands
firm on environmental matters even when times change.

The “E2 Initiative™” has two parts: “Energy management”(achieving balance between cost-competitiveness and environmental performance, including reductions in carbondioxide emissions) and “Eco-innovation” (identifying business opportunities, such as development of environmentallyfriendly products).
Under the “Personnel Diversity Campaign,” we will aggressively recruit human resources with diverse value perceptions. In the process, we will build an organization with abundant creative power and thus reinforce our competitive edge.

Targeting Further Improvements in Corporate andShareholder Value
Seeking to maximize corporate and shareholder value, theJSR Group will work to strengthen R&D from a long-term
perspective and reinforce its competitiveness by developing
highly exceptional products. Here, our aim is to improve ourbusiness performance over the long term.
Following this basic policy, we will pay continuous, stable
cash dividends while making decisions based on comprehensive consideration of a balance between appropriating
profits and retaining earnings necessary for future businessadvancement. In the year under review, the Company declared total annual dividends of ¥32.00 per share (including
the interim dividend). We also undertook share buybacks inorder to achieve a flexible capital strategy.
To further raise value for shareholders, we are also focusing on enhancement of corporate governance. We haveintroduced an executive officer system to boost managerial
versatility and adopted an outside corporate auditor system to raise transparency. We also decided to introduce an
outside director system, which we will implement in the next
fiscal year.
In its quest to achieve stable, continuous growth in the
future, the JSR Group will fulfill its social responsibilities andsecure solid earnings, while earning the trust and meetingthe expectations of shareholders and all other stakeholders.
June 2011

MITSUNOBU KOSHIBA
Representative Director and President

JSR Corporation Annual Report 2011

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Special Feature

Launch of Strategic Businesses
The JSR Group has been focusing on the full-scale launch of its Strategic Businesses, which
will form the Group’s third business pillar behind the Fine Chemicals and Petrochemical
Products segment. Amid accelerating advances in technologies and materials, the Group’s
capacity to keep pace with such changes will be a key determining factor in future growth.
JSR has identified three fields with enormous growth potential as Strategic Businesses:
precision materials and processing, environment and energy, and biomedical materials. To
develop these businesses into the Group’s third largest business, JSR is accelerating theirlaunch through the strategic allocation of resources. Our aim is to achieve growth thatexceeds that accomplished previously by the Semiconductor Materials and FPD Materials
businesses.
Turning the spotlight on these businesses, this special feature outlines successful R&D
initiatives and commercialization, market launches, sales, and market reaction related tothe themes tackled by the JSR Group.

Precision Materials and Processing
The adoption of ARTON®, a heat-resistant transparent resin
developed by JSR, is increasing in retardation films used in
the fast-growing smartphone and multifunctional mobile
terminal markets. JSR plans to focus on expanding sales ofapplications for mobile devices, such as smartphones andtablet PCs, that utilize ARTON®’s high phase contrast in thinfilms with a thickness of under 20 microns.
Another product aimed at mobile device applications is
the recently released ELART™. Developed for use in highperformance touch panels, ELART™ is an electrically conductive film made by fabricating a transparent indium tin oxide(ITO) electrode onto a heat-resistant transparent resin film.
This new product can be used in both resistive and capacitance touch panels. JSR will focus on high-end fields for ITO
films, which it will produce by introducing manufacturing
equipment built using in-house technologies.

JSR Corporation Annual Report 2011

A third film in the Precision Materials and Processing
field is LUCERA™, a recently developed ultra-heat-resistanttransparent film. The film combines a number of properties,
including high transparency, optical isotropy, a high refractive index, high heat-resistance, low heat contractility, flame
retardance, and low dielectric constancy. JSR plans to target
sectors that require high-performance film for applications
such as transparent flexible printed substrates and electronic
paper materials.

Business

Transparent conductive
film, “ELART TM”

Environment and Energy
JSR is currently creating new markets for recently developed
functional chemical products and environment- and energyrelated products. JSR develops these innovative offerings byadding new value to existing materials and technologies.
In the environment and energy field, JSR seeks to expand
its business in binders for electrodes used in lithium-ion batteries and lithium-ion capacitors. Also, Group subsidiary JM
Energy Corporation is increasing market opportunities for its
lithium-ion capacitor business. At a time when the adoptionof momentary-drop/blackout compensators is growing, JM
Energy has added an ultra low-resistance cell and flat prismatic can-type of lithium-ion capacitor to its product range.
The flat prismatic can-type of lithium-ion capacitor is the firstof its kind in the world and has a larger surface area thanexisting cylindrical can-type models, which enables highly efficient heat dissipation. As a result, deterioration due to heatgeneration during storing and charging is lessened. Because
this means cells can be arranged without having to leave agap, the capacitor is more compact. JSR and JM Energy
Corporation plans to expand this business globally by pursuing further applications targeting portable devices.

Flat prismatic can-type
lithium-ion capacitors

Today, growing awareness of the environment worldwide is being accompanied by shifts in social values. Against
this backdrop, the Company’s materials and technologies
are creating added value. For example, in November 2010,
JSR released BIOLLOY™, a bioplastic made by combining aplant-derived material, polylactic acid, and thermoplastic andplastics.
Other areas of focus for environment- and energy-related
applications include thermal management materials, such asheat storage and latent heat materials developed by drawing
on JSR’s proprietary technologies.
Biomedical Materials
In the strategic business of biomedical materials, JSR is
working on the commercialization of superior materials
developed in-house. Examples include materials used formolecular diagnosis, column particles, and latex diagnostic
agents developed by drawing on the Company’s strengths in

Magnetic particles“Magnosphere®”particle technology based on proprietary emulsion technology, and micro-processing technology.
We have used antibody magnetic beads to develop
materials for use as molecular diagnostic agents in suchdomains as DNA sequencing, cell division, and nucleic acidextraction; column particles used in purifying; and latex
diagnostic agents designed for markets in emerging economies. JSR seeks to advance biomedical materials as a strategic businesses by fostering in-house technologies while gaining access to technologies, markets, and customers throughM&A activities.
By the fiscal year ending March 2014, the JSR Group aims toachieve sales in excess of ¥35.0 billion in its Strategic Businesses, propelling this segment into the third spot behind
the Petrochemical Products and Fine Chemicals and Other
Products segments.

JSR Corporation Annual Report 2011

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Corporate Governance Systems

Enhancing Trust and Achieving Sustained GrowthMaterials Innovation—We create value throughmaterials to enrich people’s lives and contributeto society and the environment
By putting this corporate mission into action, we at JSR endeavor to further enhance
corporate value while maintaining management efficiency, transparency, and soundness to ensure a sustainable future.
JSR is constantly improving its system of corporate governance with the aim of obtaining the trust of shareholders and all other stakeholders and building an appealing
corporate constitution.
The Company has been adopting a corporate auditor system, in which its operations
are monitored by the Board of Directors and the Board of Auditors. Seeking to further
strengthen this oversight function, in the year ending March 2012, JSR has decided toappoint outside directors. By welcoming outside directors with abundant experienceand highly impartial, neutral perspectives, we will ensure more appropriate management decision-making and reinforce our ability to monitor the legality of businessexecution. Going forward, we will continue strengthening and upgrading corporate
governance in order to ensure fairness, transparency, and speed of business execution.

JSR’s Corporate Governance System (As of June 17, 2011)
Officer System
JSR has introduced an officer system to separate Company-wide management oversight bydirectors and business execution by officers. The system accelerates decision-making andbusiness execution by directors and officers, respectively, and also strengthens the supervisory function of directors and clarifies roles and responsibilities.

Audit System
Under the Company’s audit system, business execution audits and account audits make significant contributions to fair, transparent, and timely management. Business audits cover the
execution of duties by directors, and account audits cover financial statements submitted at
Ordinary General Meetings of Shareholders. The Company has four corporate auditors, threeof whom are outside auditors and a corporate auditor works full-time.
To ensure fairness and transparency, the Company appoints independent attorneys andcertified public accountants as outside corporate auditors.

Internal Control System
In accordance with Japan’s Corporation Law, the JSR Group has established a basic policy
governing its internal control system. Guided by this policy, the Company works to strengthen and augment its internal controls. The Audit Office systematically audits business execution and compliance systems in each division and Group company, and checks that rigorous
legal compliance is observed throughout the Group.

JSR Corporation Annual Report 2011

Governance

As of June 17, 2011

Shareholders’ Meeting
Appointment/
Dismissal

Appointment/
Dismissal

ReportAppointment/
Dismissal

ReportFinancial
AuditsAuditsBoard ofAuditors

Board of Directors
ReportIndependent
Financial
Accountants

Appointment/
Dismissal
ReportOversight/
Supervision
Cooperation
ReportRepresentative
Director

Cooperation

Appointment/
Dismissal
ReportOversight/
Supervision

Executive
Committee

Corporate Ethics
Committee

Business Issues
Committee

Responsible Care
Committee

Officers
Committee

CSR Committee

ReportRisk Management
Committee
Social Contribution
Committee

Internal Audit
Department

Internal Audits

Officers
Business Operations

Board of Directors
The Board of Directors consists of six directors. The Board
discusses and makes decisions on important business matters, and also supervises directors’ officers execution ofbusiness duties. The Board is headed by the chairman, andin principle meetings are held once monthly. The Company’s
four corporate auditors, including three outside auditors, attend Board of Directors’ meetings, where they have the opportunity to state their opinions on matters under discussion.
In order to bolster the supervisory function of the Board of
Directors, the Company has decided to appoint two outside
directors from fiscal 2012. By introducing outside directors
with extensive business experience who bring objectivity
and neutrality to Board meetings, we seek to reinforce theappropriateness of judgments made by management andmonitor the legality of their execution of duties.

Executive Committee
The Executive Committee holds extensive discussions on
items concerning fundamental management initiatives,
management policies, and management plans, along with
important matters concerning the execution of businessactivities at each department. The committee thus gives
direction concerning these issues. As required, certain items
submitted to this committee are passed on to the Board of
Directors for further discussion.
This committee is made up of the president, the executive managing officer, four managing officers, and officers
appointed by the president, and responds to importantbusiness execution with the aim to expedite decision making and improve the efficiency of such operations. As a rule,
this committee meets once a week, and is chaired by thepresident. The full time corporate auditors also attend thesecommittee meetings, where they discuss and report various
items.
JSR Corporation Annual Report 2011

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Business Issues Committee
The Business Issues Committee engages in broad-ranging
debate about items related to fundamental management
strategies and policies, basic policies behind specific projects,
and changes to business strategies. It also shares information to ensure a common understanding of such matters anddiscusses company direction, and its findings are reflected
in deliberations of the Board of Directors and the Executive
Committee. The Business Issues Committee consists of thepresident (who also serves as chair), the executive managing
officer, four managing officers, and officers appointed by
the president, and meets once a week.
Officers Committee
This committee is held in order to hear reports from all
departments concerning the execution of business activities,
to ensure members’ thorough understanding of importantbusiness matters and to enhance their communications. This
committee consists of the president, senior officers, officers
and full time corporate auditors, except overseas representatives. As a rule, this committee meets twice a month and ischaired by the president.
Board of Auditors
With four members, including three external auditors, thisboard meets every month as stipulated in the regulations
governing this body. The corporate auditors receive reports
on important matters, hold discussions, and reach decisions.
In accordance with standards for audits by corporate
auditors, the auditors attend meetings of the Board of Directors, Executive Committee, and other important committees
to monitor how important decisions are reached and business activities are executed. The auditors also receive reports
from the independent financial accountants, directors, andothers. Through these activities, the Board of Auditors holddeliberation in order to form auditing opinions.

CSR Committee
The CSR Committee was established to ensure that JSR
fulfills its responsibilities to society and complies with laws
and regulations. Under the CSR Committee, four committees were established: the Corporate Ethics Committee, theResponsible Care Committee, the Risk Management Committee, and the Social Contribution Committee. The CSR
Committee integrates and guides the activities of the above
four committees and meets four times each year along withspecial meetings as necessary to further strengthen the
Company’s CSR efforts.
The CSR Committee is chaired by the executive managing officer responsible for CSR, with three managing officers, one senior officer, and three officers. Bureaus of the fourcommittees listed above also attend meetings of the CSR
Committee. The Committee clarifies the company’s stancetoward CSR and works to strengthen CSR efforts at JSR.

Corporate Ethics Committee
The Corporate Ethics Committee chaired by the executive
managing officer, in charge of general affairs, was established under the CSR Committee to implement corporate
ethics standards and prevent improper actions throughout
the JSR Group. The JSR Group Principles of Corporate Ethics
have been prepared to provide a code of conduct for executives and employees. The committee oversees corporate ethics throughout the Group and provides guidance regarding
specific items.
As for the reporting system, along with the internal
hotline linked to the Corporate Ethics Committee and theexternal hotline linked to an external attorney, JSR introduced a new hotline in September 2008, which is linked toa specialized external agency and is also available in English
and Chinese.

Responsible Care Committee
JSR conducts a Responsible Care program to fulfill its obligations to achieve sustainable development. The Responsible
Care Committee was established under the CSR Committee
to ensure that Responsible Care activities are conducted ef-

JSR Corporation Annual Report 2011

Governancefectively across the entire company. The committee is chairedby the managing officer for safety and environmental affairs,
demonstrating Responsible Care’s position as a core component of JSR’s management.
This committee approves Responsible Care plans, evaluates and verifies results of activities, and helps to maintainand upgrade JSR’s programs to eliminate accidents, reduce
environmental impact, chemical substance management andquality assurance. Details and results of Responsible Care
activities are disclosed through Responsible Care reports prepared by individual plants, as well as for the Company as awhole. These reports are audited by third parties to improve
the reliability and transparency of the data. Through these
activities, the committee is dedicated to earning greater trustfrom customers and preventing any concerns among residents in the neighborhoods of JSR’s facilities.
Since fiscal 2007, JSR has elevated the position of its CSR
report by revamping it to include more information on CSR
activities, based on JSR’s fundamental stance regarding thethree core elements of CSR: the economy, the environment
and the community. To make the information widely available, these reports are posted on the JSR website (http://
www.jsr.co.jp/jsr_e/csr/index.shtml).

Risk Management Committee
JSR places strong management priority on preventing serious crises from occurring and on minimizing the impact ofcrises that do occur on its business activities. To this end,
the Company established the Risk Management Committee
under the CSR Committee, with the officer responsible for
Corporate Planning as chair. The Committee decides policies
and plans in response to crises, both present and potential,
and promotes crisis management training that simulates theoccurrence of large scale disasters.

Social Contribution Committee
The Social Contribution Committee was established under
the CSR Committee and is chaired by the Officer responsible
for Corporate Communications. JSR has been involved inmany activities that contribute to society at the local level.

JSR will expand its activities to cover the whole society andprovide more active approaches. The Social Contribution
Committee studies the formulation of new programs andpursues initiatives according to its “Basic Approach to Social
Contribution,” published in January 2009.
Status of Internal Audits, Audits by
Corporate Auditors and Financial Audits
JSR has adopted the corporate auditor system. There are
four corporate auditors, including three from outside the JSRGroup. These auditors are staffed by one individual. Audits
are performed as described in the section concerning theBoard of Auditors.
The corporate auditors work closely with the independent financial accountant. The corporate auditors receive
reports on the financial accountant’s audit plan and audit
results.
Furthermore, the corporate auditors and financial accountants exchange information and opinions as necessary
in the course of each fiscal year.
The internal audit has been conducted by the Internal
Audit Department as a specialized internal auditing unit.
The corporate auditors receive reports on the audit plan andaudit results from the Internal Audit Department regularly,
exchange opinions, and enhance the auditing system.
Remuneration
The remuneration of the Company’s directors consists of abasic salary, a bonus based on consolidated performancefor the year, and stock options, which serve as a long-term
incentive. The level of remuneration is commensurate with
the Company’s business results and is compared with thoseof other companies in the same industry and of similar size.
The total limit for monthly salaries is decided by resolution at the Ordinary General Meeting of Shareholders.
Performance-based bonuses and stock options are also
approved by resolution at the Ordinary General Meeting of
Shareholders. Total remuneration paid in fiscal 2011 was¥515 million.

JSR Corporation Annual Report 2011

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12

Corporate auditors are paid a basic fixed salary that is
not performance-based. In fiscal 2011, total salaries paid tocorporate auditors amounted to ¥86 million, including ¥16
million paid to outside corporate auditors.
Reasons for Selecting Outside Directors
The Company has appointed two outside directors in orderto further reinforce the oversight function of the Board of
Directors. By welcoming outside directors with abundant
experience and highly impartial, neutral perspectives, wewill ensure more appropriate management decision-making
and reinforce our ability to monitor the legality of businessexecution.

Takuya Goto
Takuya Goto served as Representative Directors and President,
and Chairman, Board of Directors of Kao Corporation. Mr. Goto
has abundant experience in the management of Kao, a prominent consumer products and chemical company. JSR anticipatesthat Mr. Goto will help strengthen corporate governance bydeploying this experience to ensure reasonable judgments bymanagement, as well as management transparency and soundness. For this reason, Mr. Goto has been named an outside director candidate.

Michio Kariya
Michio Kariya currently serves as Representative Director andChairman of the Board of Nikon Corporation. Mr. Kariya hasabundant experience in the management of Nikon, a globallyrenowned optical equipment company. JSR anticipates that Mr.
Kariya will help strengthen corporate governance by deploying
this experience to ensure reasonable judgments by management,
as well as management transparency and soundness. For thisreason, Mr. Kariya has been named an outside director candidate.

JSR Corporation Annual Report 2011

Reasons for Selecting Outside
Corporate Auditors
To ensure the fairness and transparency of management,
the Company appoints two full-time auditors, as well as
three outside auditors. The outside corporate auditors haveno personal, financial, or business interests in the Company.
They are called upon to ensure the sound governance of theCompany while drawing on their respective careers.

Kenji Ito
Kenji Ito does not concurrently hold the position of director inanother company. Mr. Ito contributes to ensuring reasonable
judgments by management, as well as management transparency and soundness by auditing the Company from a positionof independence while drawing on the extensive expertise and awealth of experience in finance and accounting he possesses asa certified public accountant.

Hiroichi Uekusa
Hiroichi Uekusa does not concurrently hold the position of
director in another company. Mr. Uekusa contributes to ensuring reasonable judgments by management, as well as management transparency and soundness by auditing the Company
from a position of independence while drawing on the extensive
knowledge and experience in legal matters he possesses as an
attorney.

Nobuko Kato
Ms. Kato is currently Fellow, Assistant to Vice President andOfficer, Central Research, Bridgestone Corporation. As a major
customer and major shareholder of JSR Corporation, Bridgestone Corporation falls under the category of “specified related
business entity.” Ms. Kato contributes to ensuring reasonable
judgments by management, as well as management transparency and soundness by auditing the Company. Here, she draws
on her expertise and extensive experience in business and in R&D
on elastomers.

Governance(As of June 17, 2011)

Directors, Corporate Auditors, and Officers

Directors and Corporate Auditors
Yoshinori Yoshida

Hozumi Sato

Chairman

Director and Managing Officer,
Research & Development, Strategic Businesses

Mitsunobu Koshiba
Representative Director and President

Takuya Goto
Outside Director

Masaki Hirose
Representative Director andExecutive Managing Officer,
CSR, General Affairs, Legal, Human
Resources

Michio Kariya
Outside Director

Corporate Auditors:
Nobuo Bessho
Corporate Auditor (Full-time)

Kenji Ito
Corporate Auditor (Outside)

Hiroichi Uekusa
Corporate Auditor (Outside)

Nobuko Kato
Corporate Auditor (Outside)

Officers
Yasuki Sajima

Yasuhisa Nagahiro

Katsuya Inoue

Managing Officer,
Fine Chemicals Sector

Senior Officer,
Yokkaichi Plant Manager

Kouichi Kawasaki

Nobuo Kawahashi

Officer,
Corporate Planning, Group Company, General
Manager of Corporate Planning Department
and Group Company Coordination Department

Managing Officer,
Petrochemical Products Sector (including plastics),
Safety and Environment Affairs, General Manager of Petrochemical Products Div. and Presidentof Techno Polymer Co., Ltd.

Senior Officer,
President of JSR Micro Korea Co., Ltd.

Fumio Tsutsumi

Takashi Wakabayashi

Officer,
Strategic Businesses (Deputy), General Manager
of Performance Chemicals Division and Manager
of Performance Chemicals Department II

Hisao Hasegawa
Managing Officer,
Procurement, Logistics, Manufacturing andTechnology, Product Safety & Quality Assurance,
Information Technology,
General Manager of Manufacturing andTechnology Group

Atsushi Kumano
Senior Officer,
Research & Development (Deputy),
General Manager of R&D Department

Officer,
General Manager of Business Planning,
Fine Chemicals

Takatoshi Nagatomo
Officer,Petrochemical Products Sector (Deputy),
Deputy General Manager of Petrochemical
Products Division

Takeshi Sugimoto
Officer,
General Manager of Electronic Materials Division

Shin-ichiro Iwanaga

Tsuyoshi Watanabe

Senior Officer,
General Manager of Tsukuba Research Lab.

Officer,
General Manager of Yokkaichi Research Center

Kazumasa Yamawaki
Officer,
General Manager of Business Planning
Department, Petrochemical Products

Eric Johnson
Officer,President of JSR Micro, Inc.

Eiichi Kobayashi
Officer,
Vice President of J.M. Energy Corporation

Hayato Hirano
Officer,
Accounting, Finance, Corporate
Communications, General Manager ofFinance Department

JSR Corporation Annual Report 2011

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14

Effective the year under review, the Group applied “Accounting Standard for Disclosure of
Segment Information” and changed its segment classification accordingly. There are now
three segments: Fine Chemicals and Other Products, Elastomers, and Plastics. The Fine
Chemicals and Other Products segment encompasses Semiconductor Materials, Flat Panel
Display (FPD) Materials, and Strategic Businesses and Other. Meanwhile, the Petrochemical
Products business is now segregated into the Elastomers segment and the Plastics segment.
As a results, the former Emulsion segment is now included in Elastomers segment.

Review of Operations

At a Glance
Segment

Products

Fine Chemicals and Other Products
Information and electronics materials, mainly for semiconductors and flat panel displays,
are the largest component of this segment.

Semiconductor Materials■ Lithography Materials (photoresists, multilayer materials, etc.)■ CMP (Chemical Mechanical Planarization) Materials (CMP slurries and pads)■ Interconnect Materials (spin-on low-k materials)■ Packaging Materials(thick-film photoresists, photosensitive insulation materials, etc.)

FPD Materials■ LCD Materials (alignment films, protective coatings, color pigment
dispersed resists, photosensitive spacers, etc.)■ Anti-Reflective Coatings

Strategic Businesses and Other
Precision Materials andProcessing Business■ Heat-Resistant Transparent Resin ARTON®, ARTON® OpticalFilms, Transparent Conductive Films

Environment and Energy Business■ Lithium-ion Capacitors Cells and Modules

Biomedical Materials■ Standard Particles, Particles for Clinical Diagnostics, Research Agents

Performance Chemicals■ High-Functional Dispersant "DYNAFLOW®", Organic/Inorganic
Hybred Coating Materials "GLASCA®", Battery Materials, etc.

Optical Materials■ UV Curing Optical Fiber Coatings, etc.

Petrochemical Products
Elastomers

The main products in this segment are synthetic rubbers and thermoplastic elastomers (TPEs).
JSR is one of the world’s largest manufacturers of synthetic rubber.

General-Purpose Synthetic Rubbers■ Styrene-Butadiene Rubber (SBR)/Polybutadiene Rubber (BR)Special-Purpose Synthetic Rubbers■ Acrylonitrile-Butadiene Rubber (NBR)■ Butyl Rubber (IIR)■ Ethylene-Propylene Rubber (EPM/EPDM)

Thermoplastic Elastomers (TPEs)■ Syndiotactic 1,2-Poly-Butadiene “JSR RB®”
■ Hydrogenated Polymer “DYNARON®”■ Styrene-Butadiene Block Copolymer “JSR TR”■ Styrene-Isoprene Block Copolymer “JSR SIS®,” etc.

Emulsion Products■ Paper Coating Latex■ SB Latex■ Acrylic Emulsions, etc.

Plastics

The major product in this segment is ABS plastics, a material with well-balanced
properties that is used in many applications worldwide.
■ Acrylonitrile-Butadiene-Styrene (ABS) Plastics■ Acrylonitrile-Ethylene-Propylene-Styrene (AES) Plastics

JSR Corporation Annual Report 2011

Consolidated Net Sales(¥ billions)

500

400

340.7

Fine Chemicals
and Other Products
Elastomers
Plastics

Business

300

200

100

0

Applications

FY2007

2008

2009

2010

2011

■ Process materials for semiconductor manufacturing■ Process materials for liquid crystal display (LCD) panels■ Anti-reflection for display surfaces, organic/inorganic hybrid hard coating
materials, prism lens, adhesive for optical discs, etc.

37.4%

■ Touch panel sheets/films■ Optical lens, retardation films, light guiding plates, etc.
■ Voltage sag mitigation system, UPS, industrial machinery, transportation, etc.
■ In-vitro diagnostics and life sciences, antibody conjugated magnetic beads andchromatography media for anthibody purification■ Anti-staining coating materials■ Exterior coatings, various functional coating materials■ Optical fiber coating■ Automotive tires■ Automotive parts, industrial rubbers, etc.

■ Various shoe soles, injection molding items■ Hot melt adhesives, hot melt binders

47.2%■ Carpet backings, various binders■ Coating paper for printing purposes■ Floor polish, paint, binders, adhesives■ Automotive parts, electrical appliances, office automation equipment, etc.
■ Automotive parts, electrical appliances, house-building materials, etc.

15.4%
JSR Corporation Annual Report 2011

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16

Net Sales of Fine Chemicals
and Other Products(¥ billions)200
150

Fine Chemicals
and Other Products

127.5

100
50
0
FY 2007 08

In the fiscal year ended March 31, 2011,
consolidated sales in this segment edged up 1.0%
year-on-year, to ¥127.5 billion. Operating income
rose 9.7% year-on-year, to ¥21.8 billion. These
increase were attributable to expanded sales andprofits, which outweighed the impact of a rapidly
appreciating yen.
The Fine Chemicals and Other Products segment
comprises three core businesses: Semiconductor
Materials, Flat Panel Display Materials, andStrategic Businesses and Other.

37.4%

JSR Corporation Annual Report 2011

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10

11

Business Performance
Semiconductor Materials
Photoresists are the mainstay product in JSR’s Semiconductor Materials business. In the year under review, productionof certain semiconductor products declined from the third
quarter due to lower-than-expected growth in demand for
personal computers. However, worldwide growth in demand for smartphones and multifunctional mobile terminals
contributed to sales expansion, centering on argon fluoride(ArF) photoresists for immersion lithography and multilayermaterials. Sales by the Company’s subsidiaries in Europe andthe United States also increased on the back of strong demand for semiconductors in those regions. The business also
reported healthy sales of packaging materials and chemicalmechanical planarization (CMP) materials. As a result, total
sales of semiconductor materials were higher compared withthe previous year.
In 2009, JSR built a new production facility at the Yokkaichi Plant in order to increase production of photoresists.
We intend to cement our dominance in the photoresist field,by not only meeting customer needs, but also satisfying
demand for high quality and strengthening the structure forthe stable and efficient supply of products.
Flat Panel Display (FPD) Materials
In the first half of the year under review, economic stimulus
policies by the Japanese government and foreign governments contributed to expansion of the LCD television market. The personal computer market was also strong, although demand was not as high as anticipated. However, inthe second half of the year, LCD panel manufacturers madesignificant cuts to operating rates stemming from a downturn in the LCD television and personal computer markets,
as well as weak exports due to the strong yen. By contrast,
JSR recorded a marked increase in shipments of alignment
layers used in high-resolution LED-LCD televisions. Meanwhile, sales of anti-reflective coatings and protective coatings decreased amid market saturation. As a result, sales ofBusiness

FPD materials remained mostly unchanged from the previous
year.
JSR’s customers for FPD materials are concentrated in the
Asian region. Therefore, in order to reinforce research anddevelopment of LCD materials in South Korea and Taiwan,
we have decided to establish research laboratories in thosecountries. Accordingly, we are building new research facilities with clean rooms at Group subsidiaries JSR Micro Korea
Co., Ltd. and JSR Micro Taiwan Co., Ltd. The two new facilities are scheduled for completion in June 2011 and December 2011, respectively.
The Company will meet future expansion in demand for
LCD materials by reinforcing the integrated manufacturing,sales, and R&D structure it has in Japan, South Korea, andTaiwan.

Strategic Businesses and OtherJSR has identified precision materials and processing, environment and energy, and biomedical materials as three fields
with potential for significant growth. Accordingly, we aretargeting full-scale business development and sales growthin each of these fields.
In the precision materials and processing field, sales ofretardation films made using the heat-resistant transparent
resin ARTON® increased year-on-year. The growing adoptionof thin retardation film in the rapidly expanding smartphone
and multifunctional mobile device markets contributed tothis sales growth. During the year, we also began selling a
newly developed transparent conductive indium tin oxide(ITO) film for high-end touch panels used in mobile phones.
In the environment and energy field, we launched abioplastic called BIOLLOY™. This new offering featuresenhanced performance achieved through the adoption ofa proprietary technology. We also reported increased shipments of biomedical materials, such as antibody magnetic
beads used in molecular diagnosis. In these and other ways,
our activities are reaping steady benefits. Meanwhile, salesof optical fiber coating materials declined year-on-year due
to intense competition in the overseas optic fiber sector.

Future Strategies
In the semiconductor and FPD industries, which are the main
sources of demand for products made by the Fine Chemicals
segment, there is escalating demand for LCD televisions,PCs, smartphones, and multifunctional mobile devices, principally in emerging economies. Going forward, the forecast
is for high global growth. Although there is rising demandin these industries for the development of new technologies
and new materials, the advancing shift to lower prices islikely to result in increasing market polarization.
Amid these circumstances, JSR will strive to expand the
Semiconductor Materials business by incorporating newtechnologies and value for achieving further miniturization,
as well as working on the development of next-generation
lithography materials. We will strive to expand the FPD
materials business by proactively introducing new products
amid ongoing diversification in application devices.
Semiconductor Materials
In the field of lithography materials, JSR will focus on boosting global sales of materials used for immersion lithography.
At the same time, we will increase our global market share
for ArF photoresists to 40%, and expand sales of multilayermaterials. The Company is also gearing up for the commercial production of cutting-edge materials adopted in a nextgeneration exposure technology called extreme ultraviolet(EUV) exposure.
In the field of process materials for semiconductor manufacturing, we will enhance the competitiveness of the CMP
materials we produce from the perspectives of both cost andquality. With respect to cutting-edge packaging materials,
we will take steps to ensure market dominance. We will dothis by increasing JSR’s market shares for thick-film photoresists and photosensitive insulating films, and by advancing
global standardization of materials used in fusion devices.
As a means of addressing growing commoditization, we will
strengthen cost competitiveness and differentiate our products by improving manufacturing technologies.

JSR Corporation Annual Report 2011

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Adhering to these strategies, we aim to achieve annual
growth of 15.0% in the semiconductor materials business, amarket with an estimated annual growth rate of 4-5%.

FPD Materials
Our strategy for the FPD Materials business is to strengthen
production in Japan, South Korea, Taiwan, and China andincrease our market shares for alignment layers, color pigment-dispersed resists, and other mainstay products, withthe aim of achieving growth rates in excess of market expansion. To this end, we will bolster the research and development functions of our bases in South Korea and Taiwan. In
addition, we will boost involvement in growth fields, including materials for larger 3D televisions and materials for highend mobile devices, such as smartphones and tablet PCs.
In China, where production of LCD panels continues toclimb, JSR (Shanghai) Co., Ltd. will establish a marketingorganization tailored to local needs. We will reinforce supplyof high-quality products to the market in China through collaborative efforts between bases in Japan, South Korea, andTaiwan.
In response to the worldwide trend toward lower prices,
we will improve competitiveness by increasing sales andprofits. We will adopt a range of measures for achieving cost
reductions, including continued promotion of our increasing sales and profit, global optimization of production sites,
and global procurement of raw materials. In addition, we
will consider establishing a new manufacturing base in
China. Under these strategies, JSR aims to achieve an annual
growth rate of 13.0% in the LCD panel market, which has
an estimated growth rate of 2-3%.
Strategic Businesses and OtherThe JSR Group is strategically allocating resources, including
research resources and funding, in order to develop Strategic
Businesses into its third largest earnings pillar, behind thePetrochemical Business and Fine Chemicals and Other Products Business.

JSR Corporation Annual Report 2011

In the precision materials and processing field, we willdevelop products with a market advantage by harnessing
the synergistic effects of materials development, precision
processing technologies, and functionality. As a first step,
we will expand our ITO film business. We will increase salesof thin retardation films used in mobile devices that exploit
the distinctive features of the heat-resistant transparent resin
ARTON® and lenses used in mobile phones. In addition, we
will strive to develop applications for the newly developed
ultra-heat-resistant transparent film LUCERA™, targeting
fields that require high performance.
With respect to the environment and energy, the Groupwill seek to expand sales of binders used in lithium-ion
batteries and lithium-ion capacitors. Group subsidiary JM
Energy Corporation develops and manufactures lithiumion capacitors. At a time when lithium-ion capacitors arebeing increasingly adopted in momentary voltage-drop andblackout compensators, JM Energy has added an ultra-low
resistance, flat prismatic can-type cell to its product lineup.
JM Energy has already commenced marketing activities forthis new offering used in portable applications. Drawing onsuch successes, JM Energy will target further applications
as it works to expand this business on a global scale. JSR is
introducing proprietary thermal management materials, andfor the unique bioplastic BIOLLOY™. Through strategies
such as these, we aim to steadily establish new businesses.
JSR is building up a biomedical materials business underpinned by the development of first-class materials. For
example, by leveraging our expertise in particle technology
and micro-processing technology as differentiation factors,
we are able to develop materials used in molecular diagnosis, column particles, and latex diagnostic agents.

Net Sales of Elastomers

Business(¥ billions)
200
160.9

150

Petrochemical
Products
Elastomers

100
50
0
FY 2007 08

In the Elastomers business segment, which
comprises styrene-butadiene rubber (SBR),
thermoplastic elastomers (TPEs), and emulsions,consolidated sales in fiscal 2011 rose 18.2%, to¥160.9 billion, owing to a recovery in demandand price revisions. Thanks to Group-wide cost
reductions, operating income also increased by ahuge 3,860.1%, from ¥0.4 billion in fiscal 2010 to¥14.7 billion.

47.2%

09

10

11

Business Performance
Styrene-Butadiene Rubber (SBR)
In Japan, we reported year-on-year growth in both sales
volumes and revenues of general-purpose synthetic rubber,such as styrene-butadiene rubber (SBR) and polybutadiene
rubber (BR). Contributing factors were a return to healthy
production levels in the automobile tire industry, along withprice revisions in response to higher costs of raw materials.
Special-purpose rubber, such as nitrile rubber, also recorded
higher sales volumes and revenues owing to an increase inautomobile production and price revisions made in response
to higher raw material prices.
Sales volumes of exports of general-purpose synthetic
rubber and special-purpose rubber declined year-on-year,
although sales revenues rose owing to price revisions as aresult of higher raw material prices.
On the production side, JSR decided to increase production capacity for solution polymerization SBR (S-SBR) at the
Yokkaichi Plant to keep up with growing demand in Japanand Europe for fuel-efficient tires. The manufacturing line isscheduled for completion in November 2011. In Thailand,
we have decided to establish a joint venture for the manufacture of S-SBR. We will build a new manufacturing plant,
and aim to commence production at the plant in June 2013.
In Europe, we will use JSR’s capacity right agreement with
Styron Europe GmbH (formerly Dow Europe) to serve the SSBR business by bolstering our production and supply structure in Japan, Europe, and Asia.
In the ethylene-propylene rubber (EPR) business, JSR
plans to build a new manufacturing plant with the aim of increasing the production capacity of South Korean joint venture company Kumho Polychem Co., Ltd. The plant is scheduled for completion in June 2013. The combined production
capacity of this new plant and the Kashima Plant will be
186,000 tons per year, making JSR a leading EPR manufacture and enabling it to meet globally expanding demand forthis product.

JSR Corporation Annual Report 2011

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20

Net Sales of Plastics(¥ billions)
80
60

52.3

40
20
0

Plastics
Thermoplastic Elastomers (TPEs)
Sales of thermoplastic elastomers (TPEs), such as butadiene
and styrene-butadiene TPEs, were strong in Japan for plastic
modification used by the food container sector. Demandfor exports of butadiene TPEs for footwear applications
recovered in Europe and Central and South America. Sales
volumes and revenues of TPEs for both domestic customers
and exports rose year-on-year owing to price revisions madein response to rising raw material prices.
Emulsions
JSR worked hard to increase sales of paper coating latex(PCL), the mainstay emulsions product, amid stagnatingproduction of high-grade art paper. These efforts combinedwith price revisions to compensate for higher prices for major raw materials resulted in higher sales volume and earnings. Healthy sales of general industrial latex used in exteriorwall paint and automotive applications contributed to yearon-year increases in both sales volumes and earnings.

FY 2007 08

09

10

11

In the year under review, consolidated sales of
the Plastics business grew 9.4% year-on-year, to¥52.3 million, despite a temporary deteriorationin profitability due to the sharp appreciationof the yen. Fortified efforts as part of the CostReduction Plan and other measures contributed
to a significant improvement in operating income,from ¥0.0 billion in fiscal 2010, to ¥2.6 billion.
Technopolymer Co., Ltd., a 100% subsidiary of
JSR, is operating plastic Business.

15.4%
Business Performance
In Japan, sales volume and revenue in the Plastics businessgrew in the year under review. Contributing factors were
healthy production levels in the automobile industry, thelargest customer base for plastics products, along with steadydemand from a recovering construction materials sector and

JSR Corporation Annual Report 2011

Business

product price hikes in response to higher raw material prices.
Exports also increased in both sales volumes and revenues on
the back of a recovery in demand from the automobile andoffice equipment sectors, as well as higher product prices tocompensate for raw material prices.
During the year, Techno Polymer introduced and launchedbioplastic called BIOLLOY™, jointly with JSR.

Future Strategies for the Petrochemical Products
Business
There are concerns of a decline in domestic demand fromthe automobile and automotive tire industries, the majoruser industries for products made by the Petrochemical Products segment. However, we forecast growth in global demand for high-value-added products, such as fuel-efficienttires, that have a low environmental impact, as well as ongoing expansion in demand for general-purpose products inemerging markets, primarily China.
In this business environment, JSR will focus on strengthening its global business structure and capturing the top
global market share in each of our main product areas. We
will target growth that outstrips levels achieved by the industries we supply, by expanding operations and reinforcing
supply capacity. To this end, we will adopt a portfolio management strategy to ensure business operations befitting
each product range with the aim of achieving return on sales
ratio of 10%.
First, we will position S-SBR and butyl rubber as the“A” category. The outlook for these products is for strong
demand growth, and the Group can also demonstrate its
technological superiority. We will develop these businesses
into global players with the aim of achieving an annual
growth rate of approximately 30% through active reinforcement of production capacity and sales expansion activities. In
the field of S-SBR for fuel-efficient tire applications, JSR has
decided to increase production capacity in both Japan and
Thailand. Together with our production structure in Europe,
we will strengthen the Group’s global supply structure withthe aim of capturing the largest share in the world market.
The “B” category includes products underpinned byproprietary technologies, such as olefin and butadiene TPEs
and hydrogenated polymers. Going forward, we will develop new applications and new markets for these productsby expanding business volume while increasing production
capacity in line with demand.
JSR aims to take full advantage of existing resources tomaximize earnings by classifying certain offerings under the“C” category. We forecast ongoing growth and stable earnings for these products, which include emulsion polymerization SBR (E-SBR), nitrile rubber, ethylene propylene rubber,
emulsions, and ABS plastics. We estimate an annual growthrate of 1.0 to 3.0% for this “C” business, achieved by raising productivity, developing distinctive applications, andenhancing operational efficiency.
In China, a rapidly expanding emerging market, JSR will
endeavor to further expand sales by reinforcing the marketing organization of JSR (Shanghai) Co., Ltd.
The JSR Group will continue bolstering the Cost-Reduction Plan E-100 Project, directed at strengthening profitability
under the new name E-100plus Project. We will continue
working hard to reduce variable and fixed costs from thebottom up. We will also implement cost-structure reforms
by introducing new technologies and methods, while raisingproductivity and enhancing supply chain efficiency. We will
strive to bolster earnings by applying these strategies not only
to all Group companies, but to outsourced activities as well.
The JSR Group seeks to transform this business segment into an organization with a highly profitable businessstructure. We will achieve this by reviewing our earnings
structure, including by strengthening initiatives targeting the
procurement of butadiene, which is predicted to be in short
supply in the near future.

JSR Corporation Annual Report 2011

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Global R&D, Production, and Marketing Operations

Contribution of Patents
		

FY2007

FY2008FY2009FY2010FY2011

In Japan						Fine Chemicals and Other Products
894
1,103
1,269
1,465
1,685
Petrochemical Products
500
428
428
374
377
Others
73
67
73
75
67
		
1,467
1,598
1,770
1,914
2,129
Overseas						Fine Chemicals and Other Products
516
493
512
492
489
Petrochemical Products
1,415
1,721
1,955
2,164
2,365
Others
30
36
34
39
36
		
1,961
2,250
2,501
2,695
2,890
Total
3,428
3,848
4,271
4,609
5,019

Business Expansion Driven by R&D“Successful research and development activities are the cornerstone of JSR Corporation.” Guided by this belief, JSR has
tackled the challenges of expanding technology domains,
ranging from core polymer technology to photochemistry,
inorganic chemistry, and precision chemistry. Leveraging the
cutting-edge technologies accumulated within the Group,
JSR will continue joint development and exchanges with major global customers, universities, and research institutions
with whom it has forged close relationships.
JSR will focus its R&D activities on three fields: precisionmaterials and processing, environment and energy, and biomedical materials. While pursuing long-term basic researchand short-term research into product commercialization, we
will concentrate on achieving the goals we have set for 2020.
JSR Corporation Annual Report 2011

As a technology-oriented materials organization, theJSR Group has aggressively entered these three new fields
with the backing of earlier activities in synthetic rubber andpetrochemicals. This new research and development work
is already bearing fruit. Since its founding, the JSR Grouphas contributed to the advancement of society through thecreation of groundbreaking materials. The Group possesses
unique strengths in R&D, and currently holds a total of 5,019
patents, primarily in diversified products.
JSR’s R&D organization consists of several facilities, eachfocusing on specific themes. At the core is the Yokkaichi Research Center, located in the same area as the main Yokkaichi Plant. There is also the Precision Processing Technology
Center, Tsukuba Research Laboratories, and the JSR Functional Materials Research Center. Together, these facilities

Businessengage in the development of next-generation key products.
We have decided to establish research laboratories overseas
at the facilities of JSR Group operations in South Korea andTaiwan, where there is a concentration of semiconductorand LCD technology production bases.
Global Strategy
JSR is developing manufacturing, sales, and R&D bases
covering both Petrochemical Products segment and the Fine
Chemicals and Other Products segment in Asia, North America, and Europe, which are the main sources of demand forits products. Many of our offerings have become the global
standard, and we will forge ahead with the aim of becoming a comprehensive materials supplier needed by customers
around the world.
We will upgrade our development, production, and sales
structures as we seek to increase the ratios of sales in Asia,
North America, and Europe to consolidated net sales.
Global Structure of Fine Chemicals andOther Products Segment
The JSR Group has manufacturing and sales operations incountries and regions that provide the main source of global
demand for products made by the Fine Chemicals and Other
Products segment. In South Korea and Taiwan, which havethe largest world markets for flat panel displays, JSR Micro
Korea Co., Ltd. and JSR Micro Taiwan Co., Ltd. hold important positions. Both companies have expanded the scaleof production and the items they handle in order to meetdemand from the rapidly expanding FPD market. To meetfurther customer demand, we have decided to build new research laboratories to strengthen the R&D functions of these
two subsidiaries. The new laboratories are scheduled forcompletion in June 2011 and December 2011, respectively.
In the Semiconductor Materials business, JSR Micro, Inc.,in California’s Silicon Valley in the United States, and JSR
Micro N.V. (Belgium) manufacture and/or sell cutting-edge
ArF photoresists. In addition, they have introduced exposure
equipment comparable with that of their client companies inorder to support R&D on leading-edge products.
Global Structure of Petrochemical Products
Segment
For some years, the Petrochemical Products segment, which
engages mainly in synthetic rubber and synthetic resin products, has been building a global manufacturing and sales
network. The Group has sales operations in major centers
in China and Southeast Asia to closely monitor the needs of
local customers in the automobile and electronics industries.
The Company is establishing manufacturing bases in Asia to
manufacture various products, ranging from synthetic rubber to carbon masterbatch (CMB).
We are also upgrading operations that manufacture
synthetic rubber used in automotive parts and fuel-efficienttires, which have enjoyed growing demand in recent years.
In addition to producing synthetic rubber for fuel-efficienttires at the Yokkaichi Plant in Japan, we also make and sellthis product in collaboration with Styron Europe GmbH
(formerly Dow Europe). Following the Company’s recent
decision to build a manufacturing site in Thailand, we areworking to expand our production and sales operations,centering on Japan, Europe, and Asia.
Elastomix (Thailand) Co., Ltd. engages in the stable production and supply of CMB—a raw material used in synthetic rubber parts—for local automakers and parts manufacturers.

JSR Corporation Annual Report 2011

23

24

1

A
12
14
15

8
10

9

3
6

11 7

JSR Corporation (Japan)

13
5

2

B
4

C

JSR Global Network
HEAD OFFICEJSR Corporation
1-9-2, Higashi-Shinbashi, Minato-ku,
Tokyo 105-8640, Japan

BRANCH OFFICES
Nagoya Branch
A Wallisellen Branch(Switzerland)
B Taiwan Office
C Singapore Office

PLANTS
Yokkaichi Plant
100 Kawajiri-cho Yokkaichi, Mie 510-8552, Japan
Chiba Plant
5, Chigusakaigan, Ichihara, Chiba 229-0108, Japan
Kashima Plant
34-1, Tohwada, Kamisu, Ibaraki 314-0102, Japan

Styron Europe GmbH
(formerly Dow Europe GmbH)
Schkopau, Germany*A production plant of synthetic
rubbers where JSR owns a capacity
right of 30,000 tons/year.

JAPAN● Fine Chemicals and Other

Products Business

JSR MICROTECH INC.
Production and sales of printed circuitboards and IC testing fixtures.
D-MEC LTD.
Commissioned generation of 3D models,sales of solid modeling systems andoptically-hardened resins,and commissioned analysis by CAE.
JSR Micro Kyushu Co., Ltd.
Production of photoresists forsemiconductors and materials forflat panel displays.
JSR Optech Tsukuba Co., Ltd.
Production of UV curing type opticalfiber coating materials.
JAPAN FINE COATINGS Co., Ltd.(*)
Sales of coating materials forfiber-optic cables reinforced byultraviolet or electron
radiation and for other apparatus.

JM Energy Corporation
Design, development, product andsales of lithium-ion capacitors.

● Plastics BusinessTechno Polymer Co., Ltd.
Production, sales and R&D of ABS resin.

JSR ENGINEERING CO., LTD.
Engineering and consultation for chemicalengineering equipment.

Tri Chemical Laboratories, Inc.(*)
Production and sales of precursors forsemiconductors.

JAPAN COLORING CO., LTD.
Coloring of synthetic resin and salesof colored products.

● Elastomers Business
ELASTOMIX CO., LTD.
Compounding of crude rubbers andsales of compounded products.
Japan Butyl Co., Ltd.(*)
Production and sales of butyl rubbers.

Business in Other Fields
JSR Trading CO., LTD.
Exports and imports, purchase and sales ofthe following: various chemicals, machinery,equipment, physical distribution materials,
living necessities, foodstuffs, beverages,
real estate.

JSR Business Service Co., Ltd.
Undertaking of general affairs, accounting,payroll calculation, welfare, computer
system design, programing and system
operation and maintenance.

KRATON JSR ELASTOMERS K.K.(*)
Production, purchase, and sales ofthermoplastic rubbers.

JSR LOGISTICS CO., LTD.
Freight forwarding, warehousing,delivery management.

Nichigo Kogyo Co., Ltd.
Product packaging and undertaking of civilengineering and general construction.

Emulsion Technology Co., Ltd.
Compounding and sales of crude latex.

OVERSEAS● Fine Chemicals and Other

Products Business

1 JSR Micro N.V.

Development, production and sales ofsemiconductor materials.
2 JSR Micro, Inc.
Development, production and sales ofsemiconductor materials.
3 JSR Micro Korea Co., Ltd.

Development, production and sales ofmaterials for flat panel displays andothers.

● Elastomers Business
5 JSR AMERICA, INC.
Sales of synthetic rubbers.
6 Kumho Polychem Co., Ltd.(*)
Production and sales of EPRs.
7 ELASTOMIX (THAILAND) CO., LTD.

Compounding of crude rubbers andsales of compounded products.

8 ELASTOMIX (FOSHAN) CO., LTD.

Compounding of crude rubbers andsales of compounded products.

9 Tianjin Kuo Cheng Rubber
Industry Co., Ltd.(*)
Compounding of crude rubbers and salesof compounded products.

12 Techno Polymer (Shanghai) Co., Ltd.

● Plastics Business
10 TECHNO POLYMER HONG KONG CO., LTD.
Sales and technical services of synthetic resinsin Hong Kong and neighboring regions.

Sales of plastics and technical services related
to plastics in North America.

11 Techno Polymer (Thailand) Co., Ltd.

Sales and technical services of synthetic
resins in ASEAN region.

Sales and technical services of synthetic
resins in China.

13 TECHNO POLYMER AMERICA, INC.

14 Shanghai Rainbow Color Plastics

Co., Ltd.
Coloring of synthetic resins and sales ofcolored products.

15 JSR (Shanghai) Co., Ltd.

Sales and marketing of JSR products.

4 JSR Micro Taiwan Co., Ltd.

Development, production and sales ofmaterials for flat panel displays.

JSR Corporation Annual Report 2011(*) Equity method affiliate

Corporate Social Responsibility

Each year, JSR publishes its CSR Report, both inEnglish and Japanese. The report describes theCompany’s activities over a one-year period.

Governance25

The JSR Group recognizes that corporate social responsibility(CSR) is a key management issue for sustained future growth.
In line with this belief, we place top priority on legal compliance and fulfilling our responsibilities on a Group-wide basis.
JSR works to enhance CSR initiatives through business activities that focus on the environment and safety.
We believe that it is our social responsibility, as well as ourduty to investors and all other stakeholders, to behave properly as a citizen of society and create a corporate culture that is
worthy of everyone’s trust.

Participation in United Nations Global Compact
In April 2009, the JSR Group became a participant in the
Global Compact policy advocated by the United Nations.
By doing so, we declare as a global organization that weare acting responsibly in the international community andare working hard to proactively fulfill our corporate social
responsibilities.
Environmentally Friendly and
Safety-Conscious Activities
As a chemicals manufacturer, the JSR Group has a responsibility to protect the global environment and pursue responsible care (RC) in order to ensure the safety and health of
all employees, local residents, and customers. The Group
adopts a range of RC initiatives at all plants in Japan andoverseas. Specific examples include the introduction of machinery and equipment that help prevent global warming,
initiatives aimed at reducing the amount of volatile organic
compounds released into the atmosphere, and initiatives
for the safe operation of plants. In addition to these on-site
activities, we also encourage all Group employees to saveenergy at home.

Social Contribution Activities
As a global corporate group with social responsibilities, theJSR Group has devised its own fundamental policy concerning the contributions it makes to society. Each plant makes
use of its expertise toengage in activities
at local schools andcommunity facilities.
Individual employees also have theirown way of contributing to local communities. To assist ouremployees, JSR has
introduced a holiday
Yokkaichi employees conduct a lecture at local school.
system to encourage
participation in volunteer activities. Also, Many membersof the JSR Group implement social contribution activities,
including companies in Taiwan and Belgium.
In FTSE4 Good Index Series for 8thConsecutive Year
In 2010, JSR Corporation was included in the FTSE4 Good
Index Series, an index that measures Socially Responsible
Investment (SRI), for the eighth year in a row. The Index wasestablished by the U.K.-based FTSE Group (an investing company jointly owned by the Financial Times and the London Stock
Exchange). Investors worldwide
with an interest in CSR use thebenchmark index as an important
tool when making investment
decisions.

Cogeneration system installed at the Yokkaichi Plant.
JSR Corporation Annual Report 2011

26

Ten-Year Summary
Fiscal year means year ended March 31														FY2002
FY2003
FY2004
FY2005For the fiscal year													Net sales¥220,058¥247,139¥275,071¥305,368

Costs and expenses

211,246

226,345

242,452

260,035

Operating income

8,812

20,79432,61945,333

Interest and dividend income

411

431

397

519

Interest expenses

(757)

(750)

(693)

(475)

Income before income taxes and minority interests

7,915

17,85530,37843,471

Net income

4,728

10,991

19,35327,564

Capital expenditures

13,265

16,04817,15618,134

Depreciation

16,507

16,48914,97015,245													At fiscal year-end													Total assets

270,054281,874

308,581

325,031

Long-term debt due after one year

22,93424,20813,92013,857

Total liabilities

135,477

139,682

146,280

139,249

Equity131,752

139,447

159,497

182,476

Current ratio (times)

1.5

1.6

1.6

1.8

Return on assets (%)

1.8

3.9

6.3

8.7

Return on equity (%)

3.6

7.9

12.9

16.1

Equity ratio (%)

48.8

49.5

51.7

56.1

													Per share data (Yen and U.S. dollars)													Net income

18.48

42.46

75.12

107.54

Cash dividends

6.00

7.00

9.00

14.00

514.93544.94623.14717.13EquityNote: U.S. dollar amounts are translated, for convenience only, at ¥83.15 =US$1.00, the rate prevailing on March 31, 2011.												JSR Corporation Annual Report 2011

Financial

Millions of yen												FY2011
FY2006
FY2007
FY2008FY2009FY2010Thousands of
U.S. dollars

FY2011													¥338,160¥365,831¥406,968¥352,503¥310,184¥340,666$4,097,001

284,803

310,588346,958

322,155

289,954

301,5713,626,832

53,35755,24360,01030,34820,23039,095

470,169

635

1,030

1,309

1,230

568

626

7,530

(420)

(399)

(256)

(271)

(172)

(146)

(1,756)49,03853,44054,86720,803

19,45840,674

489,165

30,55533,65536,994

13,981

13,64527,571

332,872

23,36122,09429,076

19,081

17,707

11,801

141,921

16,20618,133

21,18024,83322,38019,245

231,452																										381,097

408,949

416,951

339,498

373,566

390,591

4,697,425

1,607

2,745

1,525

1,500

1,500

1,028

12,367

164,389

168,963

159,288

97,512

122,865

126,475

1,521,043

212,751

235,186

252,539

240,896

249,440

262,679

3,159,098

1.7

1.8

1.9

2.5

2.3

2.4 		

8.7

8.2

8.9

4.1

3.7

7.1

15.5

15.0

15.2

5.7

5.6

10.8

55.8

57.5

60.6

71.0

66.8

67.3

																										119.63133.10147.26

56.36

55.87

113.07

1.37

20.00

24.00

32.00

32.00

26.00

32.00

0.38

836.31935.47

1,009.27

986.33

1,021.31

1,077.29

12.96												JSR Corporation Annual Report 2011

27

28

Management’s Discussion and Analysis

Business Performance

now segregated into the Elastomers segment and the Plastics segment. (the former Emulsion segment is now included
Elastomers segment)

In fiscal 2011 (April 1, 2010 to March 31, 2011), the JSRGroup reported consolidated net sales of ¥340.7 billion,
up 9.8% from the previous fiscal year. Operating income
jumped 93.3%, to ¥39.1 billion, and net income rose
102.1%, to ¥27.6 billion. A major factor boosting revenue
was a 15.9% increase in sales of the Petrochemical business, which complemented a 1.0% sales increase in theFine Chemicals and Other Products business. Main reasonsfor the jump in operating income were the fact that cost of
sales rose only 5.9% (vis-à-vis the 9.8% increase in net sales)
and a 4.0% decline in selling, general, and administrative
expenses.
Below is a report on the Group’s performance by business segment. Effective the year under review, the Groupapplied “Accounting Standard for Disclosure of Segment
Information” and changed its segment classification accordingly. There are now three segments: Fine Chemicals andOther Products, Elastomers, and Plastics. The Fine Chemicals
and Other Products segment encompasses Semiconductor Materials, FPD Materials, and Strategic Businesses andOther. Meanwhile, the Petrochemical Products business is

Business Segments
The JSR Group classifies its business according to productsegments underpinned by business divisions and core Group
companies. There are three business segments: Fine Chemicals and Other Products, Elastomers, and Plastics.
The Fine Chemicals and Other Products segment mainly
covers the manufacture and sale of photoresist for semiconductor device fabrication, color LCD display materials,
and optical fiber coating materials. The Elastomers segment
mainly encompasses the manufacture and sale of generalpurpose synthetic rubber for automobile tires, special highperformance rubber for automotive components, thermoplastic elastomers for plastic enhancement, and emulsion
for paper coating. The Plastics segment mainly covers the
manufacture and sale of ABS plastics for use in automobiles,
OA equipment, and amusement machines.
Fine Chemicals and Other Products
In fiscal 2011, sales in the Fine Chemicals and Other Prod-

Segment Sales/Operating Income(¥ millions)

FY2007

08

09

10

11

Fine Chemicals and Other Products Business
Operating income¥154,112
36,398¥174,702
43,805¥137,396
20,082¥126,286
19,859¥127,515
21,793

Elastomer Business
Operating income

147,105
14,979163,421
13,192150,085
8,951

136,086372

160,854
14,739

Plastics Business
Operating income

64,614
3,866

68,845
3,013

65,022
1,315

47,812(1)

52,297
2,563

365,831¥55,243

406,968¥60,010352,503¥30,348

310,184¥20,230

340,666¥39,095

Net Sales
Operating income

Net Sales/Net Income

Operating Income/Operating Income Margin(¥ billions)(¥ billions)

500

50

400

40

300

30

200

20

100

0

Total Assets/ROA

70

(%)
21

60

18

50

15

40

12

30

9

20

6

10

3

10

FY2007

08

09

10

11

Net sales
Net income

00FY200708

Operating income
Operating income margine

JSR Corporation Annual Report 2011

Shareholders' Equity/ROE

09

R&D Expenses/

10

11

0

(¥ billions)
500

(%)
10

400

8

300

6

200

4

100

2

0

FY200708

Total assets
ROA

09

10

11

0

Financial

Liabilities
Total liabilities increased ¥3.6 billion, to ¥126.5 billion.
Within this amount, current liabilities rose ¥6.1 billion, to¥106.8 billion, and long-term liabilities declined ¥2.5 billion,to ¥19.6 billion. Major changes during the year included a¥5.7 billion increase in notes and accounts payable—trade
stemming from an increase in production activities and rising
prices of raw materials. Another factor was a ¥2.9 billion risein income taxes payable.

ucts segment edged up 1.0% year-on-year, to ¥127.5 billion. However, operating income increased 9.7%, to ¥21.8
billion. The operating margin rose 1.4 points, from 15.7% to17.1%.
Petrochemical ProductsuElastomers
Sales in the Elastomers segment—including styrene-butadiene rubber, polybutadiene rubber, and emulsions—jumped
18.2%, to ¥160.9 billion, and operating income surged
3,860.1%, to ¥14.7 billion. The operating margin thus rosesignificantly, from 0.3% to 9.2%.

Net Assets
At fiscal year-end, the JSR Group had net assets of ¥264.1
billion, up ¥13.4 billion from a year earlier. During the year,
shareholders’ equity increased ¥15.4 billion, to ¥265.6 biluPlastics
lion, and valuation and translation adjustments fell fromIn the Plastics segment, sales increased 9.4%, to ¥52.3
minus ¥0.7 billion to minus ¥2.9 billion. Subscription rights
billion, and operating income rose from ¥0 million in theto shares increased ¥0.1 billion, to ¥0.5 billion, and minorprevious year to ¥2.6 billion in the year under review. Acity interests rose ¥0.1 billion,
toAssets/ROA¥0.9 billion. Major changes
cordingly,
theoperatingmargin
grew
from
0%
to
4.9%.
Net Sales/Net Income
Operating Income/Total
withinshareholders’equityincludeda ¥20.5 billion increased
Operating Income Margin(¥
billions)(¥
billions)(¥
billions)
(%)
(%)
in
retainedearnings(boostedbynet
income) and a ¥2.2 bilFinancial
Position
70
500
21
500
10
50
lion decrease in foreign currency translation adjustment. As
Assets60
18
a result, the equity
ratio 400
rose 0.5 point, to 67.3%. Net assets
400March 31, 2011, total assets amounted
840At
to ¥390.6 bilper
share
increased¥67.56,to ¥1,088.87.
50
15
lion, up ¥17.0 billion from a year earlier. Current assets rose
300
300
6
40
12
¥29.1
billion, to ¥258.7 billion. This 30
was due mainly
to aCash Flows¥7.6 billion increase in cash and a ¥22.0 billion30 rise in short9200
20
4At March 31, 2011,
cash200and cash equivalents stood asterm investment securities.
20¥67.5 billion, up6 ¥6.1 billion from a year earlier.
Property, plant, and equipment declined¥8.5 billion, to
100
100
10
2
3
¥79.8 billion. Intangible assets decreased ¥0.610billion, toCash Flows from Operating Activities¥5.3
billion, and investments and othernon-current
assets000000
cash provided
by operating
activities
amounted
¥54.3
08
09
10
11
FY2007 08
09 Net 1011FY200708
09
10 to11
wereFY2007
down ¥3.1
billion,to¥46.7
billion. Major changes
Net sales
Operating income
billion, down ¥4.4 billion fromTotal
theassets
previous year. This wascomparedwith the previous fiscal year-end were a ¥4.4
Net income
Operating income margine
ROA
mainly due to an increase in income taxes paid accompanybillion decline in machinery, equipment, and vehicles and a
ing a rise in income before income taxes. Another factor was¥1.8 billion decrease in buildings and structures.
a refund of income taxes in the previous fiscal year.

R&D Expenses/
Capital Expenditures

Shareholders' Equity/ROE(¥ billions)(%)
24(¥ billions)

300

250

20

25

200

16

20

150

12

15

100

8

10

50

4

5

0

0

0

FY200708

09

Shareholders' equity
ROE

10

11

30

FY2007

08

09

10

11

R&D expenses
Capital expenditures

JSR Corporation Annual Report 2011

Shareholder Return /

29

30

Net Sales/Net Income

Operating Income/
Total Assets/ROA
Operating Income Margin
in this discussion
are basedon JSR’s judgments as of March (%)
CashFlows from Investing Activities(¥ billions)(¥ billions)(¥ billions)
(%)
70
500
500
50
31, 2010. Risks 21
at JSR include,
but are not limited to, the fol-10
Net
cash used in investing activities totaled¥35.1
billion,lowing items: 18
up ¥7.8 billion from the previous year. This was60mainly due
400
8to400an increase in fixed deposits (with40terms of more than 3
5015(1) Changes in Demand due to Economic Trends
months), which contrasted with a decrease in payments for
300
300
30
6
40
12
purchase of property, plant, and equipment andintangible
In the major industries
where the JSR Group’s products areassets.
sold such as automobilesand electronics, demand is influ- 4
30
9
200
200
20
enced
by
the
economicclimatein a country or region. An
20
6economic
slowdown
could
reducedemand in an industry 2
Cash
Flows
from
Financing
Activities
100
100
10
3
and adversely affect
the JSR Group’s operating results.
Net cash used in financing activities was ¥12.310billion, up
0 billion from the previous year. Major
0 included
0
0
0
0
¥5.0
factors
FY2007 0809
10
11
FY2007 0809
10
11
FY2007 08
09
10
11
(2)
HigherPrices
for
Crude
Oil,
NaphthaandOther
cash dividends
paidandpurchaseoftreasurystock.
Net sales
Operating income
Total assets
Net income
Operating income margine
ROA
Major Raw Materials
Higherprices
for
crude
oil
and
naphtha, or changes in theProfit Appropriation
markets for JSR’s major raw materials, could raise prices ofWith respect to profit appropriation, the Company strives to
raw materials and adversely affect the JSR Group’s operatsteadily increase cash dividends and strengthen its financial
ing results, especially in the Petrochemical Products sector of
position, including through reinforcement of retained earnR&D Expenses/ elastomers, emulsions and plastics.
Shareholders' Equity/ROE
ings. Retained earnings are allocated mainly to CapitalresearchExpendituresanddevelopment
and strategic investments,
and theCompany(¥ billions)(%)(¥ billions)(3) Fluctuation in Exchange Rates
300
24
30
also
emphasizes return to shareholders
via purchasesof
As the JSR Group undertakes product exports in foreign
treasurystock over the medium and20long terms.
Total cash
250
25
currencies and imports goods such as raw materials, thedividends for the year under review amounted to ¥32.00 per
Company takes measures to reduce risks such as enter200
16
20
share
(including the interim dividend).
The Company
plans
ing into forward exchange contracts; however, fluctuation
to
pay annual dividends of ¥32.00 per
share (including
the
150
12
15
in exchange rates could give rise to adverse outcomes. In
interim dividend) in fiscal 2012.
addition, operating results of consolidated subsidiaries and8100
10equity method affiliates located overseas are converted
4505into Japanese yen amounts for the purposes of preparing
Risk Information
the consolidated financial statements. However, due to the000
FY20070809
10
11
FY200708
09
11
yen’s10appreciation,
the JSR Group’s business results could be
The JSR Group is exposed to the following risks that may imShareholders' equity
R&D expenses
adversely
affected.
pact onROEoperating results, financial position, cash flows
Capitalandexpendituresother aspects of performance. Forward-looking statements(4) Procurement of Raw Materials
The JSR Group works to ensure a stable supply of raw
materials by procuring materials from a number of sources.
However, an interruption to the supply of raw materials due
Shareholder Return /to an accident, bankruptcy or quality problem at a supDividend Payout Ratio
plier could adversely affect production activities and the JSR(¥ billions)
(%)
200
80
Group’s operating results.
150

60

100

40

50

20

0

FY2007

08

09

10

11

Dividend
Share Buyback
Dividend Payout Ratio

JSR Corporation Annual Report 20110(5) Development of New Products
Rapid technological progress is constantly taking place in theelectronics industry, which is the primary source of demand
for semiconductor manufacturing materials, FPD materials
and optical materials, the major products of the JSR Group’s
fine chemicals and other products business. JSR is constantly
working on developing state-of-the-art materials in line withthis progress. However, unforeseen changes in the industry
or market could prevent the timely development of new

Financial

products and adversely affect the JSR Group’s operating
results.
(6) R&D Involving Next-Stage Growth Businesses
The JSR Group makes substantial investments in R&D tocreate next-stage growth businesses. However, there is no
guarantee that these R&D activities will always yield worthwhile results. Depending on R&D results, there could be an
adverse effect on the JSR Group’s operating results.
(7) Protection of Intellectual Property
Protection of intellectual property is extremely important for
the JSR Group’s business activities. JSR has established a system for protecting its intellectual property and takes various
actions as required. However, a dispute about intellectual
property with another company or an infringement on JSR’s
intellectual property by another company could adversely
affect the JSR Group’s operating results.
(8) Product Quality Assurance and Product Liability
The JSR Group has a product quality assurance systemand product liability insurance. However, damage or injury
caused by a product manufactured by the JSR Group could
adversely affect the JSR Group’s operating results.
(9) Natural Disasters and Accidents
To minimize the negative effect on its business activities ofany disruption to manufacturing activities, all JSR Group
manufacturing facilities have established countermeasures
based on the identification of all potential sources of a crisisand conducts periodic inspections of facilities. The groupalso works constantly on safety measures with regard toearthquakes and other natural disasters. However, a major
natural disaster or accident that damages a production facility or disrupts manufacturing could adversely affect the JSRGroup’s operating results.
JSR’s main production facility, the Yokkaichi Plant, houses
private power generation equipment, and the Kashima Plant
is able to access electric power from shared power generation facilities when necessary. In the event that electric
power shortages become severe due to natural disasters andthe like, however, the JSR Group’s operating results could be
affected.
(10) Environmental Issues
Positioning environmental protection as an important element of its operations, the JSR Group complies with all laws
and regulations concerning the environment. The group also
takes actions aimed at reducing its environmental impact,

lowering and eliminating waste materials, and cutting energy and resource consumption. The group has taken manyactions to prevent the external release of all types of chemicals.
However, in the event that a spill occurs or that environmental regulations become stricter, the group’s businessactivities could be restricted, the group may have to pay
compensation and other expenses, or the group may have to
make substantial capital expenditures. Any of these events
could adversely affect the JSR Group’s operating results.
(11) Overseas Operations
The JSR Group is aggressively expanding operations on a
global scale, conducting manufacturing, sales and otheractivities in countries and regions in the United States, Europe, Asia and other parts of the world. Overseas operations
are exposed to a number of risks that include, but are notlimited to, an unfavorable political environment or economic
trends; labor disputes and other problems due to differences in labor laws and other working conditions; difficulty
in recruiting and retaining employees; an adverse impact on
business activities due to an inadequate social infrastructure;and the impact of wars, terrorism and other social instability.
Any of these events could adversely affect the JSR Group’s
operating results.
(12) Laws and Regulations
In the countries where it operates, the JSR Group is subject to various laws and regulations involving business andinvestment permits, export and import activities, trade, labor
relations, intellectual property, taxes, foreign exchange andother items. The group has established a clear compliancepolicy in order to ensure strict observance of laws and regulations as well as ethical standards. In the event that a law or
regulation is violated, or a law or regulation becomes stricter
or is significantly altered, there could be limitations to thegroup’s business activities or additional compliance costs.
Any of these events could adversely affect the JSR Group’s
operating results.
(13) Litigation
In conjunction with its business activities in Japan and overseas, the JSR Group may be sued or be involved in otherlitigation concerning a dispute with a supplier, customer orother external party. The outcome of significant litigation
could adversely affect the JSR Group’s operating results.

JSR Corporation Annual Report 2011

31

32

Consolidated Balance Sheets
JSR Corporation and Consolidated Subsidiaries
March 31, 2010 and 2011						
						
					
Millions of yen

ASSETS

Thousands of
U.S. dollars(Note 1)

2010

2011

2011

¥ 36,677¥ 44,238$   532,024

Notes and accounts receivable — trade (Notes 4 and 5)

73,13373,324

881,827

Short-term investment securities (Notes 3, 5 and 6)

34,00055,996

673,439

Inventories

58,13057,854

695,775

Deferred tax assets (Note 9)

4,291

4,523

54,397

Other current assets (Note 14)

23,34022,780273,965

229,571258,715

3,111,427

Buildings and structures

30,65428,857

347,048

Machinery, equipment and vehicles

29,201

24,831

298,634

Land			

19,435

19,150230,303

Construction in progress

3,855

3,099

37,271Other tangible assets

5,176

3,911

47,03388,321

79,848960,289

5,883

5,294

63,664

Investment securities (Notes 5 and 6)

28,73529,066

349,559

Deferred tax assets (Note 9)

6,299

5,146

61,892Other assets (Notes 4 and 14)

14,757

12,522

150,594		Current assets:
Cash (Notes 3 and 5)

		Total current assets

Property, plant and equipment (Notes 7 and 10):		Property, plant and equipment, net

Intangible assets
Investments and other non-current assets:

		

Total investments and other non-current assets

		

Total assets

See accompanying notes.

JSR Corporation Annual Report 2011

49,791

46,734562,045¥373,566¥390,591$4,697,425

Financial						
						
					
Millions of yen

LIABILITIES AND NET ASSETS

Thousands of
U.S. dollars(Note 1)

2010

2011

2011

¥ 59,653¥  65,381$   786,298

14,161

14,612

175,727

Current liabilities:
Notes and accounts payable — trade (Note 5)
Short-term loans payable and current portion of
long-term debt (Notes 5 and 7)
Income tax payable (Note 9)

5,837

8,780

105,592

Other current liabilities (Notes 9, 11 and 14)

21,10018,058217,178

100,751

106,8311,284,795

Allowance for retirement benefits (Note 8)

15,903

14,176

170,481

Allowance for environmental expenses

3,184

2,961

35,609Other long-term liabilities (Notes 7, 9 and 14)

3,027

2,507

30,15822,114

19,644

236,248

		Total current liabilities

Long-term liabilities:		

Total long-term liabilities

Contingent liabilities (Note 16)
Net assets (Note 12)
Shareholders’ equity
Common stock:		

Authorized — 696,061,000 shares		Issued 		23,32023,320280,459

Capital surplus

25,17925,179302,819

Retained earnings

223,891

244,4132,939,428(22,219)(27,320)(328,569)

Unrealized gains on securities, net of taxes

3,610

3,606

43,369Foreign currency translation adjustments(4,341)(6,519)(78,408)

Subscription rights to shares (Note 13)

427

545

6,555

Minority interests

834

892

10,729Total net assets

250,701

264,116

3,176,382

Total liabilities and net assets¥373,566¥390,591$4,697,425— 255,885,166 shares in 2010 and 2011

Less treasury stock, at cost
11,650,235 shares in 2010 and 11,648,666 shares in 2011
Accumulated other comprehensive income

JSR Corporation Annual Report 2011

33

34

Consolidated Statements of Income
JSR Corporation and Consolidated Subsidiaries
Years ended March 31, 2009, 2010 and 2011						
						
					
Millions of yen

Thousands of
U.S. dollars(Note 1)

2009

2010

2011

2011

¥352,503¥310,184¥340,666$4,097,001

263,018
59,137322,155
30,348235,479
54,475289,954
20,230249,281
52,290301,571
39,0952,997,968
628,864
3,626,832
470,169

1,230
(271)
—
399
(993)
1,150
(1,091)(6,042)(1,887)(1,686)——(354)(9,545)20,803568(172)(1,728)
—
962
1,764
(750)
—
—
—
(1,191)
—
(225)
(772)
19,458

626
(146)
—
—
—
3,206
—
—
(1,063)
—
(422)
(445)
(177)
1,579
40,6747,530(1,756)———38,553——(12,785)—(5,081)(5,348)(2,117)
18,996489,165

6,217
(76)
6,141
14,662

6,643
(882)
5,761
13,697

12,144852
12,996
27,678146,055
10,238156,293332,872

Minority interests in net income of consolidated subsidiaries(681)
Net income		¥ 13,981(52)¥ 13,645(107)¥  27,571(1,291)$   331,581

			Net sales (Note 18)
Costs and expenses (Note 17):
Cost of sales
Selling, general and administrative expenses					Operating income (Note 18)
Other income (expenses):
Interest and dividend income
Interest expenses
Loss on disposal of inventories
Gain (loss) on sale and disposal of property, plant and equipment
Foreign exchange gains (losses)
Equity in earnings of affiliated companies
Depreciation expenses of idle assets
Impairment loss of fixed assets (Note 10)
Loss on devaluation of investment securities
Loss on devaluation of inventories
Restructuring charges (Note 10)
Loss on disaster (Note 11)
Other — net
					
					
Income before income taxes and minority interests
Income taxes (Note 9):
Current		
Deferred							
Income before minority interests													
								Per share of common stock:
Net income
Diluted net income
Cash dividends applicable to the year
See accompanying notes.

JSR Corporation Annual Report 2011

U.S. dollars(Note 1)

Yen

2009

¥

56.36
56.31
32.00

¥

2010

2011

2011

55.87
55.81
26.00

¥  113.07
112.9132.00$         1.36
1.36
0.38

Consolidated Statements of Comprehensive Income

Financial

JSR Corporation and Consolidated Subsidiaries
Years ended March 31, 2009, 2010 and 2011						
						
					
Millions of yen

Thousands of
U.S. dollars(Note 1)

2009

2010

2011

2011

¥14,662¥13,697¥27,678$332,872

Unrealized gains on securities, net of taxes(4,178)

2,952

(3)

(32)

Foreign currency translation adjustments(3,499)(40)(1,757)(21,139)(1,774)

288

(455)

(5,476)¥ 5,211¥16,897¥25,463$306,225

			

Income Before Minority Interests
Other Comprehensive Income

Share of other comprehensive income ofassociates accounted for using equity method					Comprehensive Income					Comprehensive income attributable to					
		
		
		

Comprehensive income attributable toowners of the parent
Comprehensive income attributable to minority interests¥ 4,921¥16,830¥25,390$305,346

290

67

73

879

														See accompanying notes.

JSR Corporation Annual Report 2011

35

36

Consolidated Statements of Changes in Net Assets
JSR Corporation and Consolidated Subsidiaries
Years ended March 31, 2009, 2010 and 2011

Millions of yen

Balance at March 31, 2008

Number ofshares ofcommon stock(thousands)

Commonstock

CapitalsurplusRetainedearnings

Unrealized
gains onTreasury stock securities,
at costnet of taxes

Foreigncurrency
Subscription
translationrightsadjustments
to shares¥

Minority
interests

255,885¥23,320¥25,179¥212,503¥(13,623)¥4,807353¥194¥4,930Net income		

—

—

—

13,981

—

—

—

—

—

Increase of treasury stock

—

—

—

—

(8,611)

—

—

—

—

Disposal of treasury stock

—

—

—

(10)

17

—

—

—

—

Cash dividends paid

—

—

—

(7,959)

—

—

—

—

—

Net changes other thanshareholders’ equity

—

—

—

—

—

(4,162)(4,899)117(4,151)

255,885¥23,320¥25,179¥218,515¥(22,217)¥ 645¥(4,546)

¥311

¥ 779

Net income		

—

—

—

13,645

—

—

—

—

—

Increase of treasury stock

—

—

—

—

(2)

—

—

—

—

Disposal of treasury stock

—

—

—

—

—

—

—

—

—

Cash dividends paid

—

—

—

(7,083)

—

—

—

—

—

—

—

—

(1,186)

—

—

—

—

—

—

—

—

—

—

2,965

205

116

55

Balance at March 31, 2009

Decrease resulting from increasein consolidated subsidiaries
Net changes other thanshareholders’ equity
Balance at March 31, 2010

255,885¥23,320¥25,179¥223,891¥(22,219)¥3,610¥(4,341)

¥427

¥ 834

Net income		

—

—

—

27,571

—

—

—

—

—

Increase of treasury stock

—

—

—

—

(5,114)

—

—

—

—

Disposal of treasury stock

—

—

—

(13)

13

—

—

—

—

Cash dividends paid

—

—

—

(7,083)

—

—

—

—

—

—

—

—

47

—

—

—

—

—

Decrease resulting from increasein consolidated subsidiaries
Net changes other thanshareholders’ equity
Balance at March 31, 2011

—

—

—

—

—

(4)

(2,178)118

58

255,885¥23,320¥25,179¥244,413¥(27,320)¥3,606¥(6,519)¥545¥   892					
Balance at March 31, 2010

Thousands of U.S. dollars (Note 1)$43,417$(52,206)$5,135$10,028

Net income		

$280,450—$302,819 $2,692,615		 $(267,224)—

331,581

—

—

—

—

—

Increase of treasury stock		

—

—

—

(61,498)

—

—

—

—

Disposal of treasury stock		

—

—

(153)

153

—

—

—

—

Cash dividends paid		

——(85,182)

—

—

—

—

—

—

—

567

—

—

—

—

—

—

—

—

(48)

(26,202)

1,420

701

$302,819 $2,939,428 $(328,569)$43,369$(78,408)$6,555$10,729

Decrease resulting from increasein consolidated subsidiaries		Net changes other thanshareholders’ equity		
Balance at March 31, 2011

See accompanying notes.

JSR Corporation Annual Report 2011—
$280,459

Consolidated Statements of Cash Flows

Financial

JSR Corporation and Consolidated Subsidiaries
Years ended March 31, 2009, 2010 and 2011						
						
					
Millions of yen

			Cash flows from operating activities:
Income before income taxes and minority interests
Adjustments to reconcile income before income taxes andminority interests to cash provided by operating activities:
		 Depreciation and amortization
		 Interest and dividend income
		 Interest expenses
		 Equity in earnings of affiliated companies
			 Loss on disaster
		 Loss (gain) on sales and disposal of property, plant and equipment
		 Impairment loss of fixed assets
		 Loss on devaluation of investment securities
		 Changes in operating assets and liabilities — net:		Decrease (increase) in notes and accounts receivable — trade		
Decrease (increase) in inventories
		
Increase (decrease) in notes and accounts payable — trade		 Other					 Total
		 Interest and dividends received
		 Interest expenses paid
		 Income taxes paid
			 Net cash provided by operating activities
Cash flows from investing activities:
Payment into time deposits
Payments for purchase of securities
Payments for purchase of property, plant and equipment and intangible assets
Payments for purchase of investment of subsidiaries and affiliates
Proceeds from sales of property, plant and equipment and intangible assets
Payments for purchase of investment securities
Proceeds from sales of investment securities
Proceeds from redemption of investment securities
Payments for loans receivableCollection of loans receivable
Other — net
			 Net cash used in investing activities
Cash flows from financing activities:
Net increase (decrease) in short-term loans payable
Repayment of long-term debt
Cash dividends paid
Cash dividends paid to minority shareholders
Purchase of treasury stock
Other — net
			 Net cash used in financing activities
			 Effect of exchange rate changes on cash and cash equivalents
			 Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Increase (decrease) in cash and cash equivalents resulting
from change of scope of consolidation
Cash and cash equivalents at end of year (Note 3)

Thousands of
U.S. dollars(Note 1)

2009

2010

2011

2011

¥20,803¥19,458¥40,674$489,165

24,833(1,230)271(1,150)
—
(399)
6,042
1,887

22,380(568)
172(1,764)————

19,245(626)
146(3,206)
445
—
—
1,063

231,452(7,530)1,756(38,553)
5,348——
12,78530,235(7,105)(38,012)
11,21747,392
2,592(276)(15,787)
33,921(20,453)
19,48418,891(1,328)56,272
2,090
(175)
468
58,655

(922)
(542)
6,911
(1,623)61,565
1,863(149)(9,020)54,259(11,088)(6,518)
83,109(19,517)740,40922,405(1,789)(108,477)
652,548——(22,736)(6,384)
408
(636)
8
2,000
(5,802)
2,880(6,203)(36,465)—(6,000)(18,982)
—
—
—
189
—
(3,548)2,618(1,620)(27,343)(15,000)(8,500)(13,309)
—
—
—
220
—
(1,948)2,530
888(35,119)(180,397)(102,225)(160,062)
—
—
—
2,643
—
(23,425)
30,424
10,689(422,353)(1,162)(1,234)(7,974)(167)(8,612)(3)(19,152)(2,903)(24,599)
61,725(221)(4)(7,082)
(11)
(2)
(5)
(7,325)37
24,024
37,125(158)(25)(7,084)(15)(5,114)80(12,316)
(890)
5,934
61,404(1,900)(296)(85,196)(182)(61,498)946(148,126)(10,708)
71,361
738,477—¥37,125

255¥61,404

124¥67,462

1,489$811,327

See accompanying notes.
JSR Corporation Annual Report 2011

37

38

Notes to Consolidated Financial Statements
JSR Corporation and Consolidated Subsidiaries
Years ended March 31, 2009, 2010 and 2011

1. Basis of Consolidated Financial Statements
The accompanying consolidated financial statements of JSR Corporation (the “Company”) and its consolidated subsidiaries havebeen prepared in accordance with the provisions set forth in theJapanese Securities and Exchange Law and its related accounting
regulations, and in conformity with accounting principles generally accepted in Japan (“Japanese GAAP”), which are different incertain respects as to application and disclosure requirements ofInternational Financial Reporting Standards.
The accounts of the Company’s overseas subsidiaries and affiliates are based on their accounting records maintained in conformity with generally accepted accounting principles prevailing in therespective countries of domicile and make necessary amendments
for consolidated financial statements required by Practical Issues
Task Force No. 18 issued by ASBJ. The accompanying consolidated
financial statements have been restructured and translated into
English (with some expanded descriptions) from the consolidated
financial statements of the Company prepared in accordancewith Japanese GAAP and filed with the appropriate Local Finance
Bureau of the Ministry of Finance as required by the Japanese
Securities and Exchange Law. Some supplementary information
included in the statutory Japanese language consolidated financial
statements, but not required for fair presentation, is not presented
in the accompanying consolidated financial statements.
The translations of the Japanese yen amounts into U.S. dollars
are included solely for the convenience of readers outside Japan,
using the prevailing exchange rate at March 31, 2011, which was¥83.15 to U.S.$1.00. The convenience translations should not be
construed as representations that the Japanese yen amounts havebeen, could have been, or could in the future be, converted into
U.S. dollars at this or any other rate of exchange.

2. Summary of Significant Accounting Policies(a) Consolidation — The accompanying consolidated financial statements include the accounts of the Company and its 28
significant subsidiaries in 2011 (28 significant subsidiaries in 2009
and 2010).
All significant intercompany accounts and transactions havebeen eliminated in consolidation.
Techno Polymer Guangzhou has been consolidated since 2011
due to increase of materiality, and Kyushu Gomu Kako Co., Ltd.
has been excluded from the scope of consolidation since 2011
due to completion of liquidation.
JM Energy Corporation and JSR Trading (Shanghai) Co., Ltd.
have been consolidated since 2010 due to increase of materiality, and Excel Tokai Co., Ltd. has been excluded from the scope of
consolidation since 2010 due to transfer of all the shares.

JSR Corporation Annual Report 2011

Effective June 16, 2009, JSR Service Co., Ltd. merged JNT System Co., Ltd. and altered corporate name to JSR Business Service
Co., Ltd.
(b) Equity method — Investments in affiliated companies (allof those 20% to 50% owned and certain others 15% to 20%
owned) were accounted for by the equity method. Unconsolidated
subsidiaries and the other affiliated companies are stated at cost
since their net income and retained earnings in the aggregate are
not material compared to consolidated net income and retained
earnings, respectively.
(c) Cash and cash equivalents — In preparing the consolidated
statements of cash flows, cash on hand, readily available deposits and short-term highly liquid investments with maturities notexceeding three months at the time of purchase are considered tobe cash and cash equivalents.
(d) Marketable securities and investment securities — The
Company and its consolidated subsidiaries (the “Companies”) had
no trading securities or held-to-maturity debt securities. Equity securities issued by subsidiaries and affiliated companies, which are
not consolidated or accounted for using the equity method, arestated at moving-average cost. Available-for-sale securities withavailable fair market values are stated at fair market value andunrealized gains and losses on these securities are reported, netof applicable income taxes, as a separate component of net assets
via the Consolidated Statements of Comprehensive Income (See(t) Consolidated Statements of Comprehensive Income). Realized
gains and losses on sale of such securities are computed using
moving-average cost. Available-for-sale securities with no available
fair market values are stated at moving-average cost or amortized
cost.
(e) Inventories — Inventories are stated at cost, which is determined mainly based on the average method (for the value statedon the balance sheet, book value is written down to reflect thelower profitability).
(i) The accounting change
Effective April 1, 2008, the Company and domestic consolidated subsidiaries adopted “Accounting Standard for Measurement of Inventories” (Statement No.9 by ASBJ on July
5, 2006). As a result of this change, Operating income andIncome before income taxes and minority interests decreasedby ¥2,859 million, ¥1,934 million for the year ended March
31, 2009 respectively.
(f) Property, plant and equipment, and depreciation —Property, plant and equipment are stated at cost. Depreciationis computed using the declining-balance method at rates basedon their estimated useful lives except for buildings acquired after
March 31, 1998, which are depreciated based on the straight-line
method.

Financial(i) Additional information
Effective April 1, 2008, the Company and its domestic
consolidated subsidiaries reviewed the economic useful life
to depreciate machinery and equipment, responding to therevision of the Corporation Tax Law of Japan. The impact of
this change did not have a material effect on net income.
(g) Intangible assets — Goodwill is amortized by the straight-line
method over the estimated useful lives up to twenty years.
Software for its own use is amortized over the estimated useful life (five years) using the straight-line method.
(h) Leased assets — Assets of finance leases that do not transfer
ownership of lease property to the lessee is depreciated over thelease term using the straight-line method that residual value iszero.
(i) The accounting change
Effective April 1, 2008, the Company and domestic consolidated subsidiaries adopted “Accounting Standard for Lease
Transactions” (Statement No.13 by ASBJ on March 30, 2007)
and the Guidance on Accounting Standard for Lease Transactions (Implementation Guidance No. 16 by ASBJ on March
30, 2007).
The method of accounting for finance leases that do nottransfer ownership of leased property to the lessee changed
from treating such leases as rental transactions to treatment
as sale/purchase transactions, recognizing them as leased
assets.
Under the existing accounting standards, finance leases,
commenced prior to April 1, 2008, which do not transfer
ownership of leased property to the lessee are permitted tobe accounted for in the same manner as operating leases if
certain “as if capitalized” information is disclosed in a noteto the lessee’s financial statements.
The impacts of this change did not have a material effecton net income.
(i) Allowance for doubtful accounts — Allowance for doubtful
accounts is provided in amounts sufficient to cover possible losses
on collection. Allowance for doubtful accounts consists of the estimated uncollectible amount with respect to specific items, and theamount calculated using the actual percentage of collection losses
in the past with respect to other items.
(j) Allowance for retirement benefits — Employees of theCompanies are entitled, under most circumstances, to lumpsum severance payments or pension payments upon reaching the
mandatory retirement age, or earlier in the case of voluntary or
involuntary termination, based on the compensation at the timeof severance and years of service.

The Companies provided allowances and expenses for employees’ severance and retirement benefits at year-end based on
the estimated amounts of projected benefits obligation and thefair value of the pension assets.
The prior service costs are recognized as expenses using thestraight-line method over three years, which falls within theestimated average remaining service lives, commencing with thefollowing period. Actuarial differences of the Companies are recognized as expenses at once in the following period.
(i) The accounting change
Effective for the year ended March 31, 2010, the Companies
adopted “Partial Amendments to Accounting Standard for
Retirement Benefits (Part 3)” (Statement No. 19 by ASBJ on
July 31, 2008). The impact of this change did not have amaterial effect on net income.
(k) Allowance for environmental expenses — An allowancefor expenses is provided based on estimated costs for the disposal
of polychlorinated biphenyl (PCB) as mandated by the Law Concerning Special Measures Against PCB Waste.
(l) Allowance for loss on disaster — An allowance for loss on
disaster is provided for estimated expenditure of restoring thefacilities damaged by Great East Japan Earthquake.
(m) Income taxes — The Companies provide for income taxes
applicable to all items included in the consolidated statements ofincome regardless of when such taxes are payable. Income taxes
based on temporary differences between tax and financial reporting purposes are reflected as deferred income taxes in the consolidated financial statements using the asset and liability method.
(n) Derivative and hedging activities — The Companies use
derivative financial instruments to manage their exposures to fluctuations in foreign exchange and interest rates. Foreign exchange
forward contracts, foreign currency swaps and interest rate swaps
are utilized by the Companies to reduce foreign currency exchange and interest rate risks. The Companies do not enter into
derivatives for trading purposes or speculative purposes. Derivative
financial instruments and foreign currency transactions are classified and accounted for as follows:(i) All derivatives are recognized as either assets or liabilities andmeasured at fair value, and gains or losses on these derivative transactions are recognized in the consolidated statements of income.
(ii) For derivatives used for hedging purposes, if derivatives
qualify for hedge accounting because of high correlationand effectiveness between the hedging instruments andthe hedged items, gains or losses on these derivatives aredeferred until maturity of the hedged transactions.

JSR Corporation Annual Report 2011

39

40

The interest rate swaps that qualify for hedge accounting andmeet specific matching criteria are not remeasured at market
value, but the differential paid or received under the swap agreements is recognized and included in interest expense or income as
incurred.
(o) Foreign currency transactions — The Companies translate assets and liabilities denominated in foreign currencies into
Japanese yen at exchange rates prevailing at the balance sheet
dates. Resulting exchange gains or losses are credited or charged
to income as incurred.
(p) Translation of foreign currency financial statements —Financial statements of overseas subsidiaries are translated into
Japanese yen using the respective year-end rate for assets andliabilities, the average rate for revenues and expenses, and thehistorical rates for shareholders’ equity accounts. Foreign currency translation adjustments are contained in accumulated othercomprehensive incomevaluation and translation adjustments andminority interests.
(q) Amounts per share of common stock — The computationof net income per share of common stock is based on the average
number of shares outstanding during each fiscal year. Treasury
stock has been excluded in the calculation of amounts per shareof common stock.
Cash dividends per share represent actual amounts applicableto the respective years.
(r) Practical solution on unification of accounting policies
applied to foreign subsidiaries for consolidated financial
statements —(i) The accounting change
Effective April 1, 2008, the Company adopts “Practical Solution on Unification of Accounting Policies Applied to Foreign
Subsidiaries for Consolidated Financial Statements” (ASBJ
Practical Issues Task Force No. 18 issued on May 17, 2006).
According to this rule, the Company made necessary adjustments for significant differences between Japanese GAAP
and IFRS or U.S.GAAP. The adoption of this rule did not havea material effect on net income.
Effective April 1, 2010, the company adopted “Accounting Standard for Equity Method of Accounting for Investments” (Statement No.16 by ASBJ on March 10, 2008), and“Practical Solution on Unification of Accounting Policies Applied to Associates Accounted for Using the Equity Method”(ASBJ Practical Issues Task Force No.24 issued on March 10,2008).
Accordingly this change, the company integrated accounting treatment between investing company and equity method affiliates in principle. And the company madenecessary adjustments for significant differences between
Japanese GAAP and U.S.GAAP about foreign equity method
affiliates. The adoption of this rule did not have a material
effect on net income.
(s) Reclassifications — Certain prior year amounts have been
reclassified and restated to conform to the current year presentation.
These reclassifications and restatements had no effect onpreviously reported results of operations or retained earnings.
(t) Consolidated Statements of Comprehensive Income — Effective for the year ended March 31, 2011, the Companies newly
adopted “Accounting Standard for Presentation of Comprehensive Income” (Statement No.25 by ASBJ on June 30, 2010).
Accordingly, the Company prepared the Statement of Comprehensive Income for the year ended March 31, 2009, 2010 and
2011.
(u) Asset Retirement Obligations — Effective April 1, 2010, theCompany adopted “Accounting Standard for Asset Retirement
Obligations” (Statement No.18 by ASBJ on March 31, 2008), and“Guidance on Accounting Standard for Asset Retirement Obligations” (Guidance No.21 by ASBJ on March 31, 2008). This change
has had no significant impact on the Company’s income in thecurrent consolidated fiscal year. The adoption of this rule had noeffect on net income.
(v) Segment Information — Effective April 1, 2010, the Company adopted “Accounting Standard for Disclosures about Segmentsof an Enterprise and Related Information (Statement No.17 by
ASBJ on March 27, 2009) and “Guidance on Accounting Standard for Disclosures about Segments of an Enterprise and RelatedInformation” (Guidance No.20 by ASBJ on March 21, 2008). As aresult, the Company disclosed segment information based on classification for a management decision and performance evaluation.

3. Cash and Cash Equivalents
Cash and cash equivalents at March 31, 2009, 2010 and 2011 consisted of the following:															 Millions of yen

Cash				Short-term investment securities
Time deposits over three months
Cash and cash equivalents

JSR Corporation Annual Report 2011

Thousands of
U.S. dollars

2009

2010

2011

2011

¥16,910
21,492(1,277)¥37,125¥36,677
34,000(9,273)¥61,404¥44,238
55,996(32,772)¥67,462$532,024
679,439(394,136)$811,327

Financial

4. Allowance for Doubtful Accounts
Allowance for doubtful accounts of March 31, 2010 and 2011 were as follows:													Millions of yen		

Thousands of
U.S. dollars

Allowance for doubtful accounts

2010

2011

2011

Current asset : Notes and accounts receivable — trade		Investments and other non-current assets: Other assets		

¥(766)(103)¥(751)(84)$(9,038)(1,006)

5. Fair Value of Financial Instruments
The following is a summary of the amount on consolidated balance sheet, fair value and the difference between these two items
by major financial instruments as of March 31, 2010 and 2011.

Financial instruments which fair value is extremely difficult to estimate is excluded from the following table.
					

					

Millions of yen
Book value

Fair value

Difference

March 31, 2010:				
(1) Cash¥ 36,677¥ 36,677¥ —(2) Notes and accounts receivable — trade73,89973,899—(3) Securities and investment securities
52,61452,70893
		 Total assets¥ 163,190¥ 163,284¥ 93(4) Notes and accounts payable — trade
59,65359,653—(5) Short-term loans payable and current portion of long-term debt
14,161
14,161—
		 Total liabilities¥ 73,814¥ 73,814¥ —March 31, 2011:				
(1) Cash¥     44,238¥     44,238¥   —(2) Notes and accounts receivable — trade
74,07574,075—(3) Securities and investment securities
74,531
74,480(51)
		 Total assets¥   192,844¥   192,793¥  (51)(4) Notes and accounts payable — trade65,381
65,381—(5) Short-term loans payable and current portion of long-term debt
14,612
14,612—
		 Total liabilities¥     79,993¥     79,993
¥   —
					
March 31, 2011:(1) Cash(2) Notes and accounts receivable — trade(3) Securities and investment securities
		 Total assets(4) Notes and accounts payable — trade(5) Short-term loans payable and current portion of long-term debt
		 Total liabilities
1. Method to determine the estimated fair value of financial
instruments and other matters related to securities and derivatives
transactions(1) Cash and cash equivalents, and time deposits
The carrying values of cash and cash equivalents, and timeThousands of U.S. dollars$   532,024
890,865
896,343$2,319,232
786,298
175,727$   962,025$   532,024
890,865
895,732$2,318,621
786,298
175,727$   962,025

$   —
—
(611)
$(611)——$   —deposits approximate fair value because of there short maturities.
(2) Trade receivables
The fair value of trade receivables approximate fair value
because of there short maturities.

JSR Corporation Annual Report 2011

41

42

(3) Securities and investment securities
The fair value of securities and investment securities aremeasured at the quoted market price of the stock exchange
for the equity instruments. About negotiable deposit, commercial paper and cash in trust approximate fair value.

(4) Trade payables
Payable – trade notes and accounts approximate fair value
because of there short maturities.
(5) Short term debt
Short term debt approximate fair value.

2. Financial instruments for which it is extremely difficult to estimate the fair value are as follows:																										Thousands of					Millions of yen		
U.S. dollars

Allowance for doubtful accounts

Non-listed equity securities		

2010

2011

2011

¥10,120¥10,531$126,653

3. Redemptions schedule of monetary claims and securities with fixed maturities are as follows:
Millions of yen
					

					
					
					

March 31, 2010:(1) Cash			(2) Notes and accounts receivable — trade(3) Securities and investment securities
		 available-for-sale securities with fixed maturities
		 Total			
March 31, 2011:(1) Cash			(2) Notes and accounts receivable — trade(3) Securities and investment securities
		 available-for-sale securities with fixed maturities
		 Total			Duewithinone year¥ 20,072
73,899Due after
one year
and within
five years¥

Due after
five years
and within
ten years

Dueover ten
years

Total

200
—

¥ —
—

¥ —
—

¥ 20,272
73,89934,000¥127,971

¥

—
200

—
¥ —

—
¥ —

34,000¥128,171¥  23,073
74,075¥     200
—

¥   —
—

¥   —
—

¥  23,273
74,07555,996¥153,144—¥     200

—
¥   —

—
¥   —

55,996¥153,344

Thousands of U.S. dollars

March 31, 2011:(1) Cash			(2) Notes and accounts receivable — trade(3) Securities and investment securities
		 available-for-sale securities with fixed maturities
		 Total			$   277,478
890,865$    2,405
—

$   —
—

$   —
—

$   279,883
890,865

673,437$1,841,780—$    2,405

—
$   —

—
$   —

673,437$1,844,185

4. See Note7 for scheduled repayments of long term debt and lease liability.

JSR Corporation Annual Report 2011

Financial

6. Marketable Securities and Investment Securities(1) The following tables summarize the acquisition cost, book value and fair value of available-for-sale securities with available fairvalue as of March 31, 2010 and 2011:(a) Securities with book value exceeding acquisition cost					Millions of yen

					
					

Equity securities

2010
Acquisition cost

Book value

Difference¥ 9,787¥16,136¥6,349					Millions of yen
2011

					
					

Equity securities

Acquisition cost

Book value

Difference¥11,384¥17,549¥6,165					

Thousands of U.S. dollars
2011

					
					

Equity securities

Acquisition cost

Book value

Difference$136,905$211,054$74,149(b) Securities with book value not exceeding acquisition cost					Millions of yen

					
					

Equity securities

2010
Acquisition cost

Book value¥ 2,296¥ 2,035					Equity securities

2011
Acquisition cost

Book value¥     598¥    517					Equity securities

Difference¥    (81)Thousands of U.S. dollars
2011

					
					

¥ (261)Millions of yen

					
					

Difference

Acquisition cost

Book value

Difference$    7,191$  6,212$    (979)(2) The following tables summarize the book value of available-for-sale securities with no available fair value as of March 31, 2010 and2011:													Millions of yen						Non-listed equity securities		
Commercial paper		
Certificate of deposit		
Other			Total				Thousands of
U.S. dollars

2010

2011

2011

¥ 2,866—
30,0004,000¥36,866¥  1,826
22,99624,0009,000¥57,822$  21,957
276,564
288,635
108,238$695,394

JSR Corporation Annual Report 2011

43

44

(3) Redemption schedule of available-for-sale securities with fixed maturities are as follows:
Millions of yen
Duewithinone year

Due after
one year
and within
five years

Due after
five years
and within
ten years

Dueover ten
years

Total

March 31, 2010:
March 31, 2011:¥ 34,000¥ 55,996¥ —¥    —¥ —¥    —¥ —¥    —¥ 34,000¥ 55,996

March 31, 2011:$673,437

$   —

$   —

$673,437

Thousands of U.S. dollars$   —(4) Total sales of available-for-sale securities sold and the related gains and losses for the years ended March 31, 2009, 2010 and 2011
are as follows:															 Millions of yen

Thousands of
U.S. dollars

2009

2010

2011

2011

Total sales¥ 8
Gain			­—
2Loss			

¥177
37
—

¥200
104
—

$2,404
1,247—

7. Short-Term Loans Payable and Long-Term Debt
Short-term loans payable represent primarily overdrafts from banks bearing interest at 0.9% and 0.8% per annum (weighted averageinterest rate) at March 31, 2010 and 2011, respectively.
Long-term debt at March 31, 2010 and 2011 consisted of the following:
					
					

			
Millions of yen						

Loans principally from banks and insurance companies due through2014 with interest rates 1.2% in 2010 and 2011:
		 Secured			
		 Unsecured										Less amount due within one year									

2010

2011

2011

1
1,499
1,500
—
¥1,500¥       1
1,570
1,571
(543)
¥1,028$       1218,886
18,898(6,531)$12,367

30
(8)
22

43
(12)
¥     31520
(150)$     370¥

Lease liability			Less amount due within one year									

Thousands of
U.S. dollars¥

At March 31, 2011, property, plant and equipment, at book value of ¥8,475 million ($101,930 thousand) were pledged as collateralfor secured loans.
The annual maturities of long-term debt at March 31, 2011 were as follows:
Millions of yen

Thousands of U.S. dollars

Year ending March 31,

Long-term loans
payableLease liability

2012				2013				2014				2015				2016				2017 and thereafter
					

¥ 543
1,028
—
—
—
—
¥1,571

¥12
12
9
7
3
—
¥43

JSR Corporation Annual Report 2011

Long-term loans
payable$ 6,531
12,367————$18,898

Lease liability

$149
147
107
86
31
—
$520

Financial

8. Employees’ Severance and Retirement Benefits
Allowance for retirement benefits included in the liability section of the consolidated balance sheets as of March 31, 2010 and 2011
consisted of the following:													Millions of yen		

Thousands of
U.S. dollars						

2010

2011

2011

Projected benefit obligation		
Less fair value of pension assets		
Unfunded retirement benefit liabilities		
Unrecognized actuarial differences		Net retirement benefit liabilities		
Allowance for retirement benefits		

¥49,044(34,361)
14,683
1,220
15,903¥15,903¥48,734(34,684)
14,050126
14,176¥14,176$586,099(417,123)
168,976
1,505
170,481$170,481

		 Included in the consolidated statements of income for the years ended March 31, 2009, 2010 and 2011 were retirement benefit
expenses consisting of the following:															 Millions of yen					Thousands of
U.S. dollars

2009

2010

2011

2011

Service costs—benefits earned during the year
Interest cost on projected benefits obligation
Expected return on plan assets
Amortization of prior service costs
Amortization of actuarial differences
Retirement benefit expenses¥2,292
877
(368)
(61)
417
¥3,157¥ 1,758
946
(324)
—
1,679
¥ 4,059¥ 1,953965(275)—(1,220)¥ 1,423$ 23,492
11,613(3,311)—(14,674)$ 17,120

		 The discount rates used by the Companies for the years ended
March 31, 2010 and 2011 are mainly 2.2% and 2.1%, respectively. The rates of expected return on plan assets used by theCompanies for the years ended March 31, 2010 and 2011 aremainly 1.0% and 0.9%, respectively. The estimated amount of
all retirement benefits to be paid at the future retirement date isallocated equally to each service year using the estimated numberof total service years.

9. Income Taxes

The following table summarizes the significant differences
between the statutory tax rate and the Companies’ effective tax
rates for financial statement purposes for the years ended March
31, 2009, 2010 and 2011:

Income taxes in the accompanying consolidated statements of income comprise corporation, enterprise and inhabitants’ taxes. The
aggregated normal effective tax rate was approximately 40.7%.

						

2009

2010

2011

Statutory tax rate		Tax credit on research and development costs		
Lower tax rates for foreign consolidated subsidiaries		
Equity in earnings of affiliated companies		
Valuation allowance		
Other				Effective tax rate		

40.7%
(4.4)
(5.5)
(2.2)
3.0
(2.1)
29.5%

40.7%
(6.9)
(6.8)
(3.7)
6.0
0.3
29.6%

40.7%
(3.3)
(2.9)
(3.2)
—
0.7
32.0%

JSR Corporation Annual Report 2011

45

46

Significant components of the Companies’ deferred tax assets and liabilities as of March 31, 2010 and 2011 were as follows:													Millions of yen		

Thousands of
U.S. dollars						

2010

2011

2011

Deferred tax assets:
Excess retirement benefits		
Impairment loss of fixed assets		
Excess bonuses accrued		Allowance for environmental expenses		
Unrealized gain on sale of property, plant and equipment		
Unrealized gain on sale of inventories		
Loss carried forward		
Other						 Sub-total			
Valuation allowance		Total deferred tax assets		

¥6,409
1,904
1,603
1,294
1,054
1,179
—
4,727
18,170(2,254)
15,916¥5,709
1,346
1,642
1,202
907
1,097
2,027
3,152
17,082(2,351)
14,731$ 68,658
16,183
19,743
14,456
10,90913,191
24,37837,917
205,435(28,272)
177,163

Deferred tax liabilities:
Deferred gain on sale of fixed assets		Net unrealized holding gains on securities		
Other				Total deferred tax liabilities		Net deferred tax assets		

(2,807)(2,475)(726)(6,008)¥9,908(2,560)(2,473)(642)(5,675)¥9,056(30,783)(29,740)(7,724)(68,247)$108,916

10. Impairment of Fixed Assets
The Companies recognized impairment losses on the following group of fixed assets for the year ended March 31, 2010 and 2011.
							

																		
Buildings and		
Use		
Location
structures

Facility for compoundingof crude rubber

Tosu City, Saga Prefecture

¥117

¥68

		

											
Buildings andUse		
Location
structures
		Facility for plastic products

Yokkaichi City, Mie Prefecture

¥92

2010

Machinery,equipment and			
vehiclesOthersTotal							

					

Millions of yen

¥26

¥211

Millions of yen

2011

Machinery,equipment and			
vehiclesOthers
Total

¥71

¥2

¥165

							Thousands of U.S. dollars

					

		

											
Buildings andUse		
Location
structures
		Facility for plastic products

Yokkaichi City, Mie Prefecture

The impairment loss for the year ended March 31, 2011, is
included in restructuring charges of ¥422 million ($5,081 thousand) in the other expenses section of the consolidated statementof income.
JSR Corporation Annual Report 2011

$1,1092011

Machinery,equipment and			
vehiclesOthers
Total

$858

$22

$1,989The Companies have grouped their fixed assets into business
units. Fixed assets that are idle or not being used for business activities are assessed individually. The book value of machinery andequipment etc. was written down to its recoverable value.

Financial

11. Loss on Disaster

berth at Kashima Plant), loss on inventories and others were ¥401
million ($4,816 thousand), ¥39 million ($475 thousand) and ¥5
million ($57 thousand), respectively.

Loss on earthquake disaster includes the following items in relation to the Great East Japan Earthquake. Estimated amounts ofexpenditures for restoring the damaged facilities (mainly loading

12. Net Assets
Under the Japanese laws and regulations, the entire amount paid
for new shares is required to be designated as common stock.
However, a company may, by a resolution of the Board of Directors, designate an amount not exceeding one-half of the price ofthe new shares as additional paid-in capital, which is included incapital surplus.
Under the Japanese Corporate Law (“the Law”), in the casewhere a dividend distribution of surplus is made, the smaller ofan amount equal to 10% of the dividends or the excess, if any, of
25% of common stock over the total of additional paid-in capitaland legal earnings reserve must be set aside as additional paid-in
capital or legal earnings reserve. Legal earnings reserve is included
in retained earnings in the accompanying consolidated balance
sheets.
Under Japanese Commercial Code (“the Code”), companies
were required to set aside an amount equal to at least 10% of
the aggregate amount of cash dividends and other cash appropriations as legal earnings reserve until the total of legal earnings
reserve and additional paid-in capital equaled 25% of common
stock.
Under the Code, legal earnings reserve and additional paid-in
capital could be used to eliminate or reduce a deficit by a resolu-

tion of the shareholders’ meeting or could be capitalized by aresolution of the Board of Directors. Under the Law, both of theseappropriations generally require a resolution of the shareholders’meeting.
Additional paid-in capital and legal earnings reserve may not
be distributed as dividends. Under the Code, however, on condition that the total amount of legal earnings reserve and additional
paid-in capital remained equal to or exceeded 25% of common
stock, they were available for distribution by the resolution of theshareholders’ meeting. Under the Law, all additional paid-in capitaland all legal earnings reserve may be transferred to other capitalsurplus and retained earnings, respectively, which are potentiallyavailable for dividends.
The maximum amount that the Company can distribute as
dividends is calculated based on the non-consolidated financial
statements of the Company in accordance with the Japanese laws
and regulations.
At the annual shareholders meeting held on June 17, 2011,
the shareholders resolved cash dividends amounting to ¥3,860
million ($46,420 thousand). Such appropriations have not been
accrued in the consolidated financial statements as of March 31,
2011. Such appropriations are recognized in the period in which
they are resolved.

13. Stock Option Plans
The shareholders of the Company approved the issuance of stock options to the directors and the executive officers of the Company as follows:
Date of resolution of the general shareholders’ meeting
The maximum number of shares to be issued
Exercisable period of stock options

Stock subscription rights which have been vested
Outstanding as of March 31, 2011
Exercise price per share

Date of resolution of the general shareholders’ meeting
The maximum number of shares to be issued
Exercisable period of stock options

Stock subscription rights which have been vested
Outstanding as of March 31, 2011
Exercise price per share

June 17, 2005
62,500 shares
From June 18, 2005
to June 17, 2025

June 16, 2006
39,100 shares
From August 2, 2006
to June 16, 2026

June 15, 2007
48,500 shares
From July 11, 2007
to July 10, 2027

43,600 shares
¥ 1
$0.01

36,000 shares
¥ 1
$0.01

48,500 shares¥ 1$ 0.01

June 13, 2008
73,900 shares
From July 16, 2008
to July 15, 2028

June 16, 2009
80,200 shares
From July 15, 2009
to July 14, 2029

June 18, 2010
84,200 shares
From July 14, 2010
to July 13, 2030

73,900 shares
¥ 1
$0.01

80,200 shares
¥ 1
$0.01

84,200 shares
¥ 1
$0.01

JSR Corporation Annual Report 2011

47

48

14. Derivative Transactions

swaps that the Companies entered have risks due to fluctuations in foreign exchange rates. Interest rate swap contracts
that the Companies entered have risks due to fluctuationsin interest rates. Due to the fact that counterparties to theCompanies represent major financial institutions that have highcreditworthiness, the Companies believe that the overall credit
risk related to its financial instruments is insignificant.
Derivative transactions are executed and controlled basedon the Companies’ internal rules and are approved by the
responsible officials. The balances of such transactions withcounterparties are periodically confirmed.
(2) Quantitative disclosure about derivative
The following contract amounts are only nominal or notionalamounts of derivatives, and do not necessarily indicate themagnitude of market risk associated with the derivative transactions.
Contract amounts, market values and recognized gains orlosses on the derivative transactions, except those accounted
for using hedge accounting, at March 31, 2010 and 2011 wereas follows:(1) Qualitative disclosure about derivatives
The Companies enter into foreign exchange forward contracts,
foreign currency swap contracts and interest rate swap contracts as derivative financial instruments. The Companies deal
with foreign exchange forward transactions to hedge exchange
rate risks of trade receivables and payables denominated inforeign currency. Foreign currency swap transactions are madein order to mitigate foreign exchange risks on loans receivable
denominated in foreign currencies. Interest rate swap transactions are made in order to reduce interest rate risks on loans
payable.
The Companies do not enter into derivatives for speculativetransaction purposes. Hedge accounting is used for interest
rate swaps in the case where there is a high degree of correlation between the hedging instruments and the hedged items.
Significant conditions surrounding hedging instruments are
the same as those for the items hedged, the risks of which will
likely continue to be hedged through hedge transactions.
Foreign exchange forward contracts and foreign currency(a) Related to currencies					Millions of yen																	Contract amountOver one year
Market value

March 31, 2010:
Items not traded on exchanges
		 Foreign exchange forward contracts
			 Selling:U.S. Dollars					 Euro			 Buying:U.S. Dollars					 Euro					 Swiss Franc
		 Foreign currency swaps
			 receiving Japanese Yen paying, Taiwanese dollar				 Total
March 31, 2011:
Items not traded on exchanges
		 Foreign exchange forward contracts
			 Selling:U.S. Dollars					 Euro			 Buying:U.S. Dollars					 Euro					 Swiss Franc
		 Foreign currency swaps
			 receiving Japanese Yen paying, Taiwanese dollar				 Total

JSR Corporation Annual Report 2011

¥6,671
588
444
32
7
¥

3,594
—

¥

¥

—
—
—
—
—

2,909
—

¥2,528
546
266
101
9

¥

—
—
—
—
—

2,909
¥ —

1,805
¥ —

Recognized
gains or losses¥6,750
573
445
32
7

¥ (79)
15
1
(0)
0

564
—

564
¥501

¥2,536
573
269
105
9

¥ (8)
(27)
3
4
0

613
—

613
¥585

¥

¥

Financial						

Thousands of U.S. dollars																March 31, 2011:
Items not traded on exchanges
		 Foreign exchange forward contracts
			 Selling:U.S. Dollars					 Euro					 Buying:U.S. Dollars					 Euro							 Swiss Franc
		 Foreign currency swaps
			 receiving Japanese Yen paying, Taiwanese dollar				 Total		

Contract amountOver one year

Market value$30,406
6,567
3,199
1,218
113

$

$30,499
6,891
3,230
1,270
117

34,987$—

21,718
$
—

—
—
—
—
—

$

Recognized
gains or losses

7,369
—

$

(93)
(324)
31
52
4

7,369
$7,039Market values are calculated using foreign exchange forward rates.
(b) Related to interests
Interest rate swap contracts, for which hedge accounting is adopted, are excluded from being an object of disclosure.

15. Information for Certain Lease Payments
As described in Note 2. (h), under the existing accounting standards, finance leases, commenced prior to April 1, 2008, which

do not transfer ownership of leased property to the lessee areaccounted for in the same manner of operating leases:(1) Equivalent amounts of purchase price, accumulated depreciation and book value of leased properties were as follows(including the interest portion thereon):									Thousands of													Millions of yen		
U.S. dollars								

2010

2011

Machinery, equipment and vehicles:					Purchase price equivalent			
¥149
¥134
Accumulated depreciation equivalent			
108
117Book value equivalent			
¥ 41
¥ 17
Tools, furniture and fixtures:
Purchase price equivalent			
¥ 62
¥ 37
Accumulated depreciation equivalent			
38
31
Book value equivalent			¥ 24¥ 6
Total:								Purchase price equivalent			
¥211
¥171
Accumulated depreciation equivalent			146
148Book value equivalent			
¥ 65
¥ 23
(2) Lease commitments (including the interest portion thereon):				
													Millions of yen		2011$1,613
1,413
$ 200
$ 444
367
$ 77
$2,0571,780$ 277

Thousands of
U.S. dollars									

2010

2011

2011

Due within one year				Due over one year													

¥ 35
30
¥ 65

¥ 22
1
¥ 23

$ 270
7
$ 277

JSR Corporation Annual Report 2011

49

50

(3) Lease expenses and depreciation equivalent:								Thousands of
U.S. dollars							 Millions of yen						

2009

2010

2011

2011

Lease expenses		
Depreciation equivalent

¥119
119

¥ 56
56

¥ 35
35

$ 417
417

Depreciation equivalent is computed using the straight-line method over the term of each lease with no residual value.
There is no impairment loss on finance leases.

16. Contingent Liabilities
At March 31, 2011, the Company and certain consolidated sub-17. Research and Development Expenses
Research and development expenses of the Companies for theyears ended March 31, 2009, 2010 and 2011 were ¥21,061 mil-

18. Segment Information
As described in Note 2. (v), the companies change the methodology of presentation of Segment information. The main point is tohave included Emulsions segment in Elastomers segment. Therefore, the Companies’ business segments are classified into thefollowing three business segments: (1) Elastomers business,sidiaries were contingently liable as guarantors for loans of employees and others in the amount of ¥31 million ($379 thousand).
lion, ¥18,052 million and ¥16,939 million ($203,713 thousand),
respectively, which are included in selling, general and administrative expenses or manufacturing costs.
(2) Plastics business, and (3) Fine chemicals and other products
business.
A summary of net sales, costs and expenses, operating income, identifiable assets, depreciation, impairment loss and capital
expenditures by segment of business activities for the years ended
March 31, 2009, 2010 and 2011 was as follows:					Millions of yen																														
Elastomers
Plastics

For 2009:
Sales to external customers		
Inter-segment sales/transfers		
Operating income		
Identifiable assets		
Depreciation and amortization		Impairment loss		Capital expenditures		
Amortization of goodwill		Goodwill				Fine			chemicals		and other		
products
Total
Reconciliation

Consolidated—¥150,085
4,702¥ 8,951¥145,919
8,025
—
8,461
—
—

¥65,022—¥ 1,315¥30,522
1,619
598
1,639
—
885

¥137,396—¥ 20,082¥124,680
15,189
5,444
8,982
—
—

¥352,503
4,702¥ 30,348¥301,121
24,833
6,042
19,082—885¥—(4,702)¥—¥ 38,377—————¥352,503—¥ 30,348¥339,498
24,833
6,042
19,082—885

For 2010:										Sales to external customers		
¥136,086¥47,812¥126,286¥310,184¥—¥310,184
Inter-segment sales/transfers		
3,386
—
—
3,386
(3,386)—
Operating income		
¥
372
¥
(1)
¥ 19,859¥ 20,230¥—¥ 20,230
Identifiable assets		¥145,110¥31,895¥123,844¥300,849¥ 72,717¥373,566
Depreciation and amortization		
9,007
1,450
11,92322,380—22,380
Impairment loss		
211
—
—
211
—
211
Capital expenditures		
6,376
922
10,40917,707—
17,707
Amortization of goodwill		
—
44
—
44
—
44
Goodwill				
—
841
—
841
—
841

JSR Corporation Annual Report 2011

Financial						 Millions of yen																														
Elastomers
Plastics

Fine			chemicals		and other		
products
Total
Reconciliation

Consolidated

For 2011:
Sales to external customers		
¥160,854¥52,297¥127,515¥340,666¥—¥340,666Inter-segment sales/transfers		
4,331
—
—
4,331
(4,331)—
Operating income		
¥14,739¥ 2,563¥ 21,793¥ 39,095¥—¥ 39,095
Identifiable assets		¥145,293¥32,170¥109,682¥287,145¥103,446¥390,591
Depreciation and amortization		
8,516
1,320
9,409
19,245—
19,245
Impairment loss		
—
165
—
165
—
165
Capital expenditures		
5,123
1,286
5,392
11,801—
11,801
Amortization of goodwill		
—
44
—
44
—
44
Goodwill			
—
797
—
797
—
797
							

					For 2011:
Sales to external customers		
Inter-segment sales/transfers		
Operating income		
Identifiable assets		
Depreciation and amortization		Impairment loss
Capital expenditures		
Amortization of goodwill		Goodwill				

Thousands of U.S. dollars$1,934,504
52,089$ 177,255$1,747,358
102,419—
61,607——

Assets in reconciliation are related mainly to Cash, Short-term
investment securities and Investment securities of the Company.
Capital expenditures are recognized on an accrual basis.
As noted in Note 2. (e) (i) , effective April 1, 2008, the Company and its domestic consolidated subsidiaries adopted the “Accounting Standards for Measurement of Inventories” (Statement$628,946—$ 30,822$386,897
15,871
1,989
15,469532
9,584$1,533,551—$ 262,092$1,319,081
113,162—
64,845——$4,097,001
52,089$ 470,169$3,453,336
231,452
1,989
141,921
532
9,584

$

—
(52,089)$—$1,244,089
—
—
—
—
—

$4,097,001—$ 470,169$4,697,425
231,452
1,989
141,921532
9,584

No. 9, by ASBJ ,on July 5, 2006), and use the valuation method todevaluate a book value to reflect the lower profitability. As a resultof this change, the operating income decreased ¥1,102 million in
Elastomers segment, ¥17 million in Emulsions segment, ¥57 million in Plastics segment and ¥1,683 million in Fine chemicals andother products segment.

Geographic segment information with respect to net sales for the years ended March 31, 2009, 2010 and 2011 was as follows:
				
		
Japan

Korea

OthersTotal

For 2009:
For 2010:
For 2011:¥37,893¥40,574¥39,106¥105,653¥ 98,305¥111,529¥352,503¥310,184¥340,666¥208,957¥171,305¥190,031

Millions of yen

				Thousands of U.S. dollars
For 2011:$2,285,405$470,303$1,341,293$4,097,001

The geographical segments consist of Japan, Korea and Others. Japan and Korea have been divided as independent segments considering the materiality of the sales. Main countries included in Others segment were as follows;
		 China, Taiwan, Thailand, United States, Belgium

JSR Corporation Annual Report 2011

51

52

Geographic segment information with respect to property, plant and equipment for the years ended March 31, 2009, 2010 and 2011
was as follows:		Millions of yen

			

Japan

OthersTotal

For 2009:		
For 2010:		
For 2011:		

¥81,110¥79,249¥70,713¥10,367¥ 9,072¥ 9,135¥91,477¥88,321¥79,848

				For 2011:		
$850,428

Thousands of U.S. dollars$109,861$960,289

					

Major customer information with respect to sales for the years ended March 31, 2009, 2010 and 2011 was as follows:
					
					

		
For 2009:
For 2010:
For 2011:

Customer Name

Segment

Sales

BRIDGESTONE Corporation
BRIDGESTONE Corporation
BRIDGESTONE Corporation

Elastomers
Elastomers
Elastomers¥39,059¥28,025¥34,496				

Thousands of
U.S. dollars

				

For 2011:

Millions ofyen

BRIDGESTONE Corporation

Elastomers$414,868

19. Related Parties
Significant transactions and balances of JSR Corporation with related parties as of and for the years ended March 31, 2009, 2010 and 2011were as follows:																			Millions of yen

Thousands of
U.S. dollars									BRIDGESTONE Corporation (a major shareholder):Sales				Notes and accounts receivable

2009

2010

2011

2011

¥38,663
9,157¥27,749
13,328¥34,261
11,793$412,042
141,828

KRATON JSR Elastomers K.K. (an affiliated company):
Purchases			
Notes and accounts payable

10,867
4,219

—
—

—
—

—
—

JM Energy Corporation (an affiliated company):
Loans				Loans receivable

3,000
3,000

—
—

—
—

—
—

—
—
—
—

9,855
4,827
7,607
3,960

12,071
5,093
9,575
4,400

145,170
61,250115,148
52,912

Tobu Butadiene Co., Ltd. (an affiliated company):
Purchases			
Notes and accounts payable
Provision of materials for processing
Accounts receivable — other

20. Subsequent Events
At the June 17, 2011 annual meeting, the Companies’ shareholders approved the following appropriations of retained earnings: Paymentof a year-end cash dividend of ¥16.00 per share aggregating ¥3,860 million ($46,420 thousand).

JSR Corporation Annual Report 2011

Independent Auditors’ Report

Financial

JSR Corporation Annual Report 2011

53

54

Corporate Data (As of March 31, 2011)
JSR Corporation
Established
December 10, 1957
Capital (Common Stock)¥23,320 million ($280 million)
Employees
5,259
Closing date
JSR books are closed on March 31, each year.

Annual General Meeting Shareholders
The annual general meeting of shareholders is held in June eachyear. The 2011annual general meeting was held on June 17.
Transfer Agent and Register
The Chuo Mitsui Trust and Banking Co., Ltd.
Auditors
KPMG AZSA & Co.

Shareholders Information (As of March 31, 2011)
Stock Listing
Tokyo Stock Exchange, Osaka Securities Exchange
Number of Shares Issued
255,885,166 shares
Number of Shareholders
22,431

Common stock price range(Yen/share: Tokyo Stock Exchange)

Major Shareholders
Percentage Number ofof shares shares held
held (%) (thousands)

Bridgestone Corporation
Japan Trustee Services Bank, Ltd. (Trust Account)
The Master Trust Bank of Japan, Ltd. (Trust Account)
The Master Trust Bank of Japan, Ltd. (Trust Account)(Number of Retirement Allowance Trust Shares ofMitsubishi Chemical Corporation)
Nippon Life Insurance Company
The Chase Manhattan Bank 385036
Mizuho Coporate Bank, Ltd.
Japan Trustee Services Bank, Ltd. (Trust Account 9)
SSBT OD05 OMNIBUS ACCOUNT-TREATY CLIENTS
Meiji Yasuda Life Insurance Company

15.97
6.59
4.49

40,866
16,86911,495

3.86
2.34
2.07
2.00
1.85
1.53
1.41

9,888
5,998
5,298
5,125
4,757
3,935
3,631

* 14,644,993 shares of treasury stock held by the Company are not included in
the above breakdown of major shareholders.

Composition of Shareholders					
Shareholders						

Shares held
(thousand)Individuals and others
Foreign corporation and individuals
Other domestic corporations
Financial institutions
Securities companies
Total				32,03375,11555,93591,682
1,116
255,885

21,591
425
289
84
41
22,431		High
FY2004Low
High
FY2005Low
High
FY2006Low
High
FY2007Low
High
FY2008Low
High
FY2009Low
High
FY2010Low
High
FY2011
Low

1st Q
1,477
1,141
2,520
1,892
2,395
2,000
3,710
2,535
2,985
2,540
2,460
2,000
1,687
1,162
1,999
1,436

2nd Q
2,080
1,429
2,180
1,655
2,635
2,175
2,930
2,280
3,120
2,445
2,180
1,246
1,960
1,561
1,666
1,201

3rd Q
2,540
1,795
2,265
1,790
3,150
2,370
3,170
2,505
3,020
2,465
1,397
795
1,959
1,545
1,543
1,341

4th Q
2,435
2,055
2,255
2,040
2,810
3,040
3,240
2,530
2,875
1,886
1,312
990
1,974
1,714
1,875
1,183

3,000

2,500

2,000

1,500

1,000

By Type of Shareholders
Foreigninvestors

29.35%

Financial
institutions& securities
companies

36.27%

By Number of Shares Held
1 tradingunits or more

4.28%

1,000 trading
units or more

90.25%

0’08/3

Less than 1
trading units

0.02%

Individuals/
others

12.52%

Other domestic
corporations

21.86%JSR Corporation Annual Report 2011

50 trading
units or more

3.74%

500

500 trading
units or more

1.71%

’08/9

’09/3

’09/9

’10/3

’10/9

’11/5

55

JSR Corporation Annual Report 2011

JSR Corporation Annual Report 2011

Shiodome Sumitomo Bldg.
1-9-2 Higashi-Shinbashi, Minato-ku, Tokyo
105-8640, Japan
Telephone: 03-6218-3517
Facsimile: 03-6218-3684

This annual report was printed with vegetable-based ink on FSC-certified paper

Printed in Japan 2011. 6E600