ANNUAL REPORTFor the year ended March 31, 2012

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
by utilizing 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’sbusiness structure.

The JSR Group’s Essential Elements
The JSR Group’s Essential Elements consists of its
Corporate Mission (“significance of existence”),
Management Policies (evaluation standards),
and Course of Action (individual work styles).
The Corporate Mission is to create value throughmaterials to enrich society, people, and theenvironment. In this process, it is important that
we act with integrity as a good corporate citizen
and live up to the trust that our stakeholders placein us. Our Group CSR represents the initiatives we
employ to successfully achieve our mission, and assuch we view CSR as a key management issue.

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

Mid-Term
Business Plan
JSR20i3

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

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

Enhancement ofCorporate Governance

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

Contents

02
BUSINESS
02 Business Highlights
03 To Our Shareholders

08 Special Features –The JSR Group’s Life
Sciences Business

10
Review of Operations
12 Fine Chemicals and Other Products Business

15 Petrochemicals Business18 Global R&D and Production
Network

21
GOVERNANCE
21 JSR Governance System

26 CSR Activities

28
FINANCIAL
28 Ten-Year Summary
30 Management Discussion andAnalysis
32 Risk Information
34 Consolidated Financial
Statements

40 Notes to Consolidated Financial
Statements
57 Independent Auditors’ Report58
CORPORATE DATA
58 Corporate Data and Investor
Information

59 Board of Directors, Corporate
Auditors and Officers

Financial Highlights

Net Sales

Operating Income

Net Income

Up 2.7% toDown 8.0% to

Down 4.2% toEquityROE

Equity Ratio

Up 6.9% toDown 1.1 point to

Down 2.1 point to¥349.9 billion¥280.9 billion¥35.9 billion

9.7%¥26.4 billion

65.2%

The JSR Group’s major customer industry, tires for automobiles,
maintained strong operations throughout the year, responding toworldwide growth in demand. With the help of production capacity
expansion and optimization of supply chains and production, thePetrochemical Products Business achieved the highest operating income
in its history.
On the other hand, the Fine Chemicals Business, which has a highoverseas sales ratio, was negatively affected by falling global demand for
LCD televisions, as well as the strong yen.
As a result, consolidated revenue and earnings fell well under targets,
although the Group net sales topped the figure of the previous term.

02

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To Our Shareholders

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MITSUNOBU KOSHIBA
Representative Director andPresident

In the year under review, the JSRGroup’s Petrochemical Products
business grew on the back of an
upturn in the global automobile
industry and rising demand for
fuel-efficient tires. However,uncertainty in the semiconductor
and flat panel display (FPD)
sectors resulted in a decline inrevenue and earnings in the Fine
Chemicals segment.

Performance Overview
In fiscal 2012, ended March 31, 2012, the JSR Group faced extremely challenging business conditions, such as the Great East Japan Earthquake and tsunami, aslump in LCD markets, very volatile prices for key raw materials, and the yen’s prolonged and historic appreciation. Amid these circumstances, although net sales
increased 2.7% year-on-year, to ¥349.9 billion, the Company fell short of achieve
its initial earnings targets. Operating income fell 8.0%, to ¥35.9 billion, and net
income decreased 4.2%, to ¥26.4 billion. Rising prices of raw materials and the
yen’s appreciation also had a negative impact on earnings.
The disaster had a huge effect on the Japanese economy, although it began torecover with the resumption of production activities following the restoration of
supply chains. Moreover, Japanese manufacturers in Thailand that had sustained
flood damage were back to normal operations by the fall of 2011. Nonetheless,the challenging operating environment continued amid the yen’s rise to historiclevels and volatile prices of crude oil and its derivatives.
With respect to the JSR Group’s major customer industries, domestic automobile production, which declined sharply after the disaster, began to recover fasterthan expected. Furthermore, automobile tire production, which was only slightly
affected, remained strong throughout the year thanks to worldwide growth indemand. In the semiconductor industry, demand for smartphones and multifunctional mobile terminals increased, although demand for DRAMs for personal computers remained mostly unchanged from fiscal 2011. Sales of flat panel displays
slumped due to falling global demand for LCD televisions, resulting in considerably
lower capacity utilization rates at leading panel manufacturers.

JSR Corporation   Annual Report 201203

Meanwhile, the price of naphtha, a key raw material in the Petrochemical
Products segment, rose in the first and fourth quarters of fiscal 2012. These priceincreases placed pressure on earnings in this business segment.
In response to these conditions, we strove to quickly restore and optimize
production and the supply chain in order to minimize the disaster’s impact on the
Petrochemical Products business. In terms of business development, we expanded
production capacity for globally competitive products, such as S-SBR, to satisfy
growing demand for fuel-efficient tires. At the same time, we adjusted sales prices
to compensate for significant changes in raw material prices. In the Fine Chemicals
business, we focused on expanding sales of technical cutting-edge products, suchas ArF photoresists for immersion lithography and new alignment films. Thanks tothese efforts, we increased the market shares of these competitive offerings. We
also promoted E-100 plus, a project to enhance and improve our earnings structure, by implementing continuous cost reductions, improving productivity, andpursuing other efforts throughout all Group companies.
In Strategic Businesses, we worked to reinforce our business foundation
through organizational reforms aimed at future business expansion and establishment of new manufacturing infrastructure.

Outlook
The outlook for the Japanese economy in fiscal 2013, ending March 2013, is fora mild upturn owing to full-scale recovery from the Great East Japan Earthquake.
We also see signs of recovery in the North American economy and moderate
growth in emerging countries, such as China. However, sluggishness in the European economy and volatile prices of crude oil and petrochemical raw materials areleading to continuing uncertainty about the future.
We looked forward to increased production in the automobile sector, a majoruser industry for products made by the Petrochemical Products segment. This forecast is based on expectations of tax incentives for new eco-cars and other government subsidies, an increase in vehicle exports to emerging markets, and ongoinggrowth in demand for automobile tires. The Group is targeting higher sales andearnings from full utilization of increased solution polymerization styrene butadiene
rubber (S-SBR) production capacity at the Yokkaichi Plant, which was implemented
to address a leap in demand for fuel-efficient tires.
In the Fine Chemicals segment, we forecast strong demand for smartphones andmultifunctional mobile devices from the semiconductor and FPD industries. However, given the uncertain prospects of a recovery in demand for personal computersand LCD televisions, the segment’s operating environment remains unpredictable. In
response, the JSR Group will focus on developing cutting-edge materials, expanding sales, and reinforcing profitability by making good use of the global production, supply, and development structures we have put in place aimed at increasing
revenue and earnings.
For fiscal 2013, we forecast consolidated net sales of ¥405.0 billion (up 15.7%
year-on-year), operating income of ¥42.0 billion (up 16.8%), and net income of¥29.0 billion (up 9.8%). These forecasts assume an exchange rate of ¥80.00 per
U.S. dollar and a naphtha price of ¥54,000 per kiloliter.

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Basic Policy on Profit Appropriation
With respect to profit appropriation, the Company regards business growth overthe long term as its top priority. To generate sustainable long-term growth, we
strive to increase competitiveness by developing new businesses through the reinforcement of research and development activities.
Following this basic policy, we will appropriate profits in line with our consolidated performance while paying continuous, stable cash dividends based oncomprehensive consideration of a balance between appropriating profits andretaining earnings necessary for future business advancement. We allocate retained earnings to R&D activities linked to future growth businesses, as well as tostrategic investments. The Company works hard to return profits to shareholders
by enhancing corporate value and through the purchase of treasury stock over the
medium and long terms.
Mid-Term Business Plan “JSR20i3”
The JSR Group is currently executing its mid-term business plan, entitled “JSR20i3,”
covering the three-year period from April 2011 to March 2014. The use of theletter “i” in “20i3” emphasizes our corporate mission, which is “Materials Innovation—We create value through materials to enrich people’s lives and contribute tosociety and the environment.” The plan signifies the first stage of policies that will
guide the JSR Group’s evolution to its envisioned position in fiscal 2021 based on
an analysis of predicted business conditions through to 2030.
Under the plan, the JSR Group is targeting top global market shares for highly
competitive products made in its core businesses, namely the Petrochemical
Products and Fine Chemicals segments. In addition, we will accelerate the launchof Strategic Businesses that we have been focusing on since fiscal 2009. In theseways, we will swiftly transform Strategic Businesses into a third business pillar on apar with our two core segments. We are targeting operating income of ¥60 billion
by fiscal 2014, the final year of “JSR20i3,” and ¥75 million and ¥100 billion by
fiscal 2016 and fiscal 2021, respectively. Our goal is to become regarded as a ¥1
trillion company in terms of total market value by fiscal 2021.
JSR group long-term business targets

FY2021(ending March 2021)

FY2016FY2014(ending March 2014)

Operatingincome target:¥ 60.0 billion

Operatingincome target:(ending March 2016)

Operatingincome target:¥

75.0 billion

100.0 billion¥* Total stock market value:¥1.0 trillion(Reach the target of the previous
mid-term business plan “JUMP2010”)(Return to record profit level)

Mid-term Business Plan “JSR20i3”

JSR Corporation   Annual Report 201205

Business Growth Scenario
The analysis of predictions through 2030 identified three major factors that will
impact the environment: global warming, the rise of emerging economies, andemergence of gas-based ethylene plants. While these factors represent risks, atthe same time they also present new business opportunities.
Let us take a look at one measure for preventing global warming being adopted in the field of petrochemicals. To promote the use of fuel-efficient tires, automobile tire industries around the world are introducing new tire labeling systems that
grade tires according to rolling resistance and wet grip performance. It is expectedthat these systems will see the proliferation and growth of fuel-efficient tires.
Another recent change within the global petrochemicals industry is the abundance of natural gas and shale gas stocks that can be used as substitutes fornaphtha. This is revolutionizing the global structure of the petrochemical industry.
In Japan, too, the outlook is for industry contraction accompanying the restructuring of ethylene plants.
In the information technology industry, as well, the JSR Group views the commoditization of digital technologies and the shift of IT businesses to Asia as exciting impacts on our businesses.
Predicted Changes up to 2030
Impacts on JSR and the JSR Group− Growth in demand for
fuel-efficient tires− Growth of renewable energy sources− Acceleration of commoditization ofdigital technologies− Continuation and increasein shortages of the raw
material butadiene

Need to reduce
environmental impact

Asian globalization

Contraction of Japan’s
petrochemical industry

Global warming

Rise of emerging economies

Emergence of gas-based
ethylene plants

In light of this outlook for increasingly uncertain and diversified business conditions, the JSR Group will strive to achieve the targets set for fiscal 2014, the final
year of “JSR20i3.” We will steadily tackle future business challenges by adapting
to the changing environment with speed, flexibility, and sensitivity.

Fields of Focus
The JSR Group seeks to expand Strategic Businesses into a core segment on apar with our mainstay operations in Fine Chemicals and Petrochemical Products.
We are working hard to expand businesses in three areas: precision materials andprocessing, environment and energy, and biomedical materials for life sciences.

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In the precision materials and processing business, we will offer competitive
products by deploying our materials development capabilities, micro-fabrication
technologies, and added functionalities. We will also take advantage of ARTON™
heat-resistant transparent resin to expand sales of retardation films for mobile
terminals and mobile phone camera lenses.
With respect to the environment and energy, in the lithium ion capacitor business, handled by consolidated subsidiary JM Energy Corporation, we added ultra
low resistance flat prismatic type cells to our product lineup and marketed theseofferings for transportation and vehicle applications. They have also found increasing commercial applications in instantaneous power drop/interruption backup
units.
In life sciences, we have built a business foundation by establishing JSR Life
Sciences Corporation and a joint venture in China called J&W Beijing Biotech Co.,
Ltd., as well as by making strategic investments in European companies. We willcontinue establishing business systems on a global scale by utilizing our cuttingedge particle and micro-fabrication technologies as differentiating factors, in orderto accelerate development of particles for purification of antibody drugs, particle
materials used in diagnostic products, and medical polymers.

Enhancing Corporate Governance
JSR constantly focuses on the soundness and transparency of its corporate constitution so that it adheres to its corporate mission and continues to achieve sustainablegrowth and enrich people’s lives through the provision of materials and products.
We are constantly improving our system of corporate governance. In the year
under review, we made a change to the Board of Directors, the Company’s highest body with decision-making authority. To ensure the transparency of the Boardof Directors, we have a corporate auditor system in which our four corporate auditors, three of whom are outside auditors, attend Board meetings. In fiscal 2012,
we further strengthened this oversight function by appointing two outside directors, bringing the total number of directors to six. This reform has contributed tomore lively and in-depth discussions at Board meetings.
The Company will continue striving to enhance corporate value. Seeking to improveshareholder value as well, we will endeavor to strengthen R&D from a long-term
perspective. In particular, we will step up R&D in Strategic Businesses, with top priority on accelerating their transformation into full-scale operations. In addition, we willreinforce global competitiveness by developing products with unique material technologies. Here, our aim is to improve our business performance over the long term.
In its quest to achieve stable, continuous growth in the future, the JSR Groupwill fulfill its social responsibilities and generate solid earnings, while earning thetrust and meeting the expectations of shareholders and all other stakeholders.

MITSUNOBU KOSHIBA
Representative Director and President

JSR Corporation   Annual Report 201207

Special Feature

Focused Investments inLife Sciences Business

The JSR Group is actively fostering and expanding Strategic Businesses as its third businesssegment behind the Petrochemical Products andFine Chemicals segments. Among these is thelife sciences field, which we have positioned as anext-generation business pillar.
Strategic Businesses
We have identified three fields inwhich exciting technological innovations are taking place: precision materials and processing, environment andenergy, and biomedical materials (life
Income targets● Positioning the start-up of strategic businesses as the No.1 priority.
● Allocating business resources intensively.
● Steadily creating a business model along with the establishment of technology.
● Aiming to generate annual net sales of ¥35.0 billion in fiscal 2014.

X28.0

Strategic businesses growth rate

Aiming to grow at a faster rate than semiconductor and FED materials in the past.

Actively promoting M&As

X11.0

X6.0

1.0
1990s

FY201108

X2.5

FY2012

X4.0

FY2013

JSR Corporation Annual Report 2012

FY2014FY2016FY2021

sciences). Under the Mid-Term Business
Plan “JSR20i3” (April 1, 2011 to March
31, 2014), the Group is prioritizing theallocation of resources in order to foster and reinforce these three businessareas.
JSR has set a sales target for theStrategic Businesses segment. Our aim
is to achieve annual sales of ¥35.0 billion in fiscal 2014. This targeted expansion will elevate Strategic Businesses toa mainstay segment that complements
our existing Fine Chemicals and Petrochemical Products segments.
Concentrating on Life Sciences
Business
JSR anticipates considerable growthpotential in biomedical materials forlife sciences owing to the proprietary
technologies the Group possesses inthis field. Our involvement in this area
dates back to the 1980s, when wedeveloped proprietary precision particle technology and precision processing technology by drawing on our
existing emulsion technologies. Taking
advantage of these technologies, wehave developed highly competitive
materials, including materials used formolecular diagnosis, affinity particles,
and latex diagnostic agents. Going forward, the Group will take advantage

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of its proprietary to establish a businessthat manufactures diagnostic agentsand biopharmaceuticals. To reinforce
the life sciences business, we will also
form global business alliances.

Head office of JSR Life Sciences Corporation

Establishment of New Company
To date, JSR’s involvement in the fieldof medical products has included
particles for diagnostic agents andmedical polymers, such as butyl rubber used for syringes and vial stoppers,
butadiene resin and DYNARON used
for transfusion bags and tubes, andstyrene isoprene thermoplastic elastomers used for transdermal patches.
Because these products are madefrom different materials, however, theresources related to those products
were dispersed among different departments. Consequently, we decided
to consolidate these dispersed resources into a new company, called JSR Life
Sciences Corporation. The advantagesof this consolidation are quicker product development, more specializedclient services, and better quality assurance.
Creating a Global Businesses
JSR has formed a joint venture with
Beijing Wantai Biological Pharmacy Enterprise Co., Ltd., a leading manufacturer of diagnostic drugs in China. The
know-how and resources that bothparties bring to the new company,
called J&W Beijing Biotech Co., Ltd.,
set the stage for further expansion of
the Group’s diagnostic drug business.
Through this partnership, JSR will
gain access to large medical institutions in and around Beijing and to
Beijing Wantai’s strong sales network.

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In addition, we will be able to broaden
our lineup of diagnostic drugs by engaging in joint development activities.
J&W Beijing Biotech is scheduled tocommence sales activities in summer
2012.
JSR will continue pursuing alliancesin the field of life sciences with Group
companies in Europe and the UnitedStates to develop biomedical materials
for life sciences into a global business.
In November 2011, JSR enteredinto a strategic partnership with
Austria-based company BIA Separations, who has a unique technology
in separation biochromatography andbiomolecule purification processes.
The alliance enables both companies
to work together on sales and marketing of chromatography columns usedin vaccines, gene therapy drugs, andantibody drugs. We are hopeful thatthe partnership will make a huge contribution to advancements in the fieldof medicine.
Under the corporate mission of “Materials Innovation --We create value
through materials to enrich people’s
lives and contribute to society and theenvironment,” JSR and JSR Life Sciences will actively cooperate with outsideorganizations, placing emphasis on its
wide range of polymer technologies inorder to both develop a new businessand provide benefits to society.

JSR Corporation Annual Report 201209

Review of Operations
In accordance with the “Accounting Standard for Disclosure of
Segment Information,” the Group classifies its products into three segments:
Fine Chemicals and Other Products, Elastomers, and Plastics.

Fine Chemicals and Other Products Business
Segment

Products

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, New FPD Materials (OLED, etc.)

Strategic Businesses and Other
Precision Materials andProcessing Business■ Heat-Resistant Transparent Resin "ARTONTM", ARTONTM Optical Films■ Transparent Conductive Films "ELART", etc.

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

Biomedical Materials (Life Sciences)■ Size Standard Particles■ Particles for Clinical Diagnostics■ Research Agents■ Magnetic Particles, etc.

Performance Chemicals■ High-Functional Dispersant "DYNAFLOWTM"■ Organic/Inorganic Hybrid Coating Materials "GLASCATM"■ Battery Materials■ Thermal Management Materials

Optical Materials■ UV Curing Optical Fiber Coatings, etc.

Petrochemical Products Business
Elastomers
General-Purpose Synthetic Rubbers■ Styrene-Butadiene Rubber (SBR)/Polybutadiene Rubber (BR)Special-Purpose Synthetic Rubbers■ Nitrile Rubber (NBR)■ Butyl Rubber (IIR)■ Ethylene-Propylene Rubber (EPM/EPDM)

Thermoplastic Elastomers (TPEs)■ Syndiotactic 1, 2-Polybutadiene “JSR RBTM”■ Hydrogenated Polymer “JSR DYNARONTM”■ Styrene-Butadiene Thermoplastic Elastomers “JSR TRTM”■ Styrene-Isoprene Thermoplastic Elastomers “JSR SISTM,” etc.

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

Plastics■ Acrylonitrile-Butadiene-Styrene (ABS) Plastics■ Acrylonitrile-Ethylene-Propylene-Styrene (AES) Plastics■ Bioplastics

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JSR Corporation Annual Report 2012

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Consolidated Net Sales(¥ billions)

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Fine Chemicals and Other Products
Elastomers
Plastics

500

400

349.9

300

200

100

0

FY2008

2009

2010

2011

2012

Applications■ Process materials for semiconductor manufacturing

Fine Chemicals and Other Products Business■ Process materials for liquid crystal display (LCD) panel manufacturing, etc.
■ Anti-reflection for display surfaces, organic/inorganic hybrid hard coating
materials, prism lens, adhesive for optical discs, etc.

■ Touch panel sheets/films■ Optical lens, retardation films, light guiding plates, etc.

33.7%

■ Voltage sag mitigation system, UPS, industrial machinery, transportation, etc.
■ In-vitro diagnostics and life sciences, antibody conjugated magnetic beads andchromatography media for antibody purification■ Anti-staining coating materials■ Exterior coatings, various functional coating materials■ Optical fiber coating

Elastomers■ Automobile tires, various industrial products, etc.
■ Automobile parts, tires, various industrial products etc.

51.7%

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

■ Carpet backings, various binders■ Paper coating for printing purposes■ Floor polish, paint, binders, adhesives

Plastics■ Automobile parts, electrical appliances, office automation equipment, etc.

14.6%
JSR Corporation Annual Report 201211

Net Sales of Fine Chemicals
and Other Products

Fine Chemicals
and Other Products(¥ billions)
200
150
117.8
100
50
0
FY 2008 09

In fiscal 2012, ended March
31, 2012, consolidated sales inthis segment decreased 7.6%
year-on-year, to ¥117.8 billion.
Operating income fell 33.6%,
to ¥14.4 billion. The operating
income margin declined 4.8
points, from 17.1% to 12.3%.
The Fine Chemicals andOther Products segment
encompasses three corebusinesses: Semiconductor
Materials, Flat Panel Display
Materials, and Strategic
Businesses and Other.

Performance Overview
Semiconductor Materials
The semiconductor market has remained strong owing to worldwide
growth in demand for smartphones
and multifunctional mobile terminals.
In the year under review, however,
JSR’s semiconductor materials business declined due to falling demandfor dynamic random access memory(DRAM) devices stemming from aslump in demand for personal computers. This, combined with the historic
appreciation of the yen, resulted in a
year-on-year decline in segment sales.
By contrast, sales of immersion argon
fluoride (ArF) photoresists used in
cutting-edge processes and multilayermaterials increased on the back ofglobal market growth underpinned bycompetitive advanced technologies.
Flat Panel Display (FPD) Materials
LCD materials are one of the mainstay
products in JSR’s FPD materials business. In the year under review, thebusiness felt the impact of a significant
decrease in the operating rates of LCD
panel manufacturers stemming froma downturn in LCD television markets, mainly in Japan, North America,
and Europe. The yen’s appreciation
also had an adverse impact. This was

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10

11

12

despite an increase in the adoption ofan advanced type of alignment film inhigh-resolution, high luminance LCD
televisions. As a result, sales of FPD
materials were down compared withthe previous year.
Significant demand for JSR’s FPD
materials comes from companies
operating in South Korea and Taiwan. Therefore, in order to reinforce
research and development in thosecountries, we decided to build new
research facilities with clean rooms at
Group subsidiaries JSR Micro Korea
Co., Ltd. and JSR Micro Taiwan Co.,
Ltd. Construction of these facilities wascompleted in July 2011 and February
2012, respectively.
JSR intends to further expand its
FPD materials business on a global
scale by taking advantage of thisreinforced structure, which integrates
manufacturing, sales, and R&D inJapan, South Korea, and Taiwan.

Strategic Businesses andOther Products
In the precision materials and processing field, sales of heat-resistant transparent ARTON™ film for polarizer increased year-on-year. This sales growth
was attributable to the expanding
smartphone and multifunctional device
markets. JSR has developed transpar-

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ent conductive indium tin oxide (ITO)
film for high-end touch panels usedin mobile phones. We have installed
manufacturing equipment at a Groupaffiliate in South Korea, and began
making and selling this new product in
the previous fiscal year.
In the environment and energy
field, electric power companies areusing lithium-ion capacitors developed by consolidated subsidiary JM
Energy Corporation in new voltage dip
compensators. JM Energy completed
construction of a plant for manufacturing flat prismatic-type capacitors in
October 2011. It plans to expand thisbusiness globally by pursuing further
applications targeting mainly transportation equipment.
In the life sciences field, JSR consolidated its development, manufacturing,and selling functions, which had beendispersed within the Company. The
new company, called JSR Life Sciences
Corporation, began operating in April
2012. In China, we established a joint
venture, J&W Beijing Biotech Co., Ltd.,
together with Beijing Wantai Biological Pharmacy Enterprise Cop., Ltd., adiagnostic drug manufacturer. The
company is scheduled to commence
sales activities in summer 2012.
As for other businesses, JSR recorded a year-on-year increase in sales

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of optical fiber coating materials. This
growth was attributable to the restoration of production by electric cablemanufacturers in Japan, whose opera-

tions had been affected by the Great
East Japan Earthquake in March 2011,
as well as an increase in optic fiber
exports.

Future Strategies for the Fine
Chemicals and Other Products
Businesscalled extreme ultraviolet (EUV) exposure.
To ensure the effective use of our
substantial R&D expenditures in the
Semiconductor Materials field, we
will accelerate the development andmarket release of peripheral materials.
More specifically, we will expand ourbusiness in cutting-edge packaging
materials, including thick-film photoresists and photosensitive insulating films. These are used in wiring
processes that are in strong demandin the field of 3D packaging. JSR will
also grow its business in CMP materials, which are made using proprietary
materials technologies.

Our forecast is for high global growthin the semiconductor and FPD industries, which are the main sources ofdemand for products made by the Fine
Chemicals and Other Products segment. This is based on projections offurther expansion in the mobile device
market and strong demand for Internet servers and car electronics, despite
the growing commoditization of LCD
displays and large televisions.

Semiconductor Materials
Amid such trends, JSR will strive toexpand its market share by responding
to further miniaturization in the Semiconductor Materials business. To thisend, we will continue developing ArF
photoresists for immersion lithography
and multilayer materials, in which weare globally competitive. We are also
gearing up for full-scale developmentof photoresists that can be used in anext-generation exposure technology,

FPD Materials
Amid intense cost competition in the
FPD industry, many companies havebeen establishing manufacturing plants
in Asia. We will utilize the R&D facilities we established in South Korea andTaiwan in year under review to boost
technical support for local customers
and reinforce marketing. In China, therecently established sales and market-

JSR Corporation   Annual Report 201213

ing company JSR (Shanghai) Co., Ltd.
will work hard to increase JSR’s presence in the local market.
With respect to LCD displays, theproliferation of 3D televisions, tablet
PCs, and smartphones is expected togenerate a surge in demand for highresolution devices. To tap into this market, JSR will develop its differentiatedtechnologies into a growth market,
centering on alignment layers thatmake it possible to develop devices
with enhanced resolution.

Strategic Businesses andOther Products
JSR has positioned the precision materials and processing field, the environment and energy field, and biomedical
materials for life sciences as Strategic
Businesses. Our aim is to develop thesebusinesses into JSR’s third largest corebusiness behind the Fine Chemicals
and Other Products Business and thePetrochemicals Business.
Precision Materials andProcessing
In the precision materials and processing field, we will expand our businessby supplying products with a market
advantage. This will be achieved byharnessing the synergistic effects
of materials development, precision
processing, and adding functionality to

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JSR Corporation   Annual Report 2012products. We will expand the ITO film
business by making cost-competitive
products at our ITO manufacturing
facility in South Korea. We will increase
sales of thin retardation films used in
mobile devices that take advantageof the distinctive features of the heatresistant 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.

Environment and Energy
Regarding the environment and energy, the JSR Group will seek to expand
sales of lithium ion capacitors, as wellas binders used in lithium ion batteries. At a time when lithium ion capacitors are being increasingly adopted
in voltage dip compensators, Groupsubsidiary JM Energy Corporation has
added a flat prismatic can-type cell toits lineup. JM Energy has already commenced marketing activities for thisnew offering for use in transportationequipment. It has also signed a joint
development agreement with a U.S.based company with the aim of establishing a next-generation water meterbusiness. JM Energy will target further
applications as it works to expand thisbusiness on a global scale. Meanwhile,

JSR aims to steadily establish new businesses for a number of new products.
These include a proprietary latent heatstorage material called CALGRIP™, anemulsion for use in thermal insulation
paint called SIFCLEAR™, as well as for
JSR’s unique bioplastic BIOLLOY™.

Biomedical Materials forLife Sciences
The JSR Group has been actively building up its life sciences business. In theyear under review, we established JSR
Life Sciences in Japan, formed a joint
venture company in China, and madea strategic investment in a European
company. Going forward, we willcontinue developing a global businessthrough the development of first-classmaterials. For example, by leveraging
our expertise in particle technology
and micro-processing technology as
differentiation factors, we are able todevelop particle materials used in refining antibody drugs, particle materials
used in diagnostic agents, and medical
polymers.

BUSINESS
GOVERNANCE
FINANCIALCORPORATE DATA

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Petrochemical
Products

In fiscal 2012, consolidated
sales in the Elastomers
business segment rose 12.4%,
to ¥180.8 billion. Operating
income grew 31.3%, to ¥19.3
billion. As a result, the operating
income margin increased 1.5
points, from 9.2% to 10.7%.
Consolidated sales in the
Plastics business segment
declined 2.0%, to ¥51.2 billion.
Operating income decreased
16.6%, to ¥2.1 billion. As aresult, the operating income
margin edged down 0.7 point,
from 4.9% to 4.2%.

Net Sales of Elastomers(¥ billions)
200

180.8

150
100
50
0
FY 2008 09

10

11

Performance Overview> Elastomers
Synthetic Rubbers
In the first half of the year underreview, sales volumes of synthetic
rubber declined compared with theprevious corresponding period dueto the effects of the Great East Japan
Earthquake. This decrease stemmed
from suspension of production at the
Kashima Plant until May 2011 due toearthquake damage, as well as theimpact of a significant downturn indomestic automobile production. By
contrast, production of automobile
tires rose on the back of worldwide
growth in demand. For the full year,
however, we reported year-on-yearsales growth in both volume andvalue terms. Contributing factors weresynthetic rubber price adjustments in
response to fluctuating costs of major
raw materials, as well as the expansionof JSR’s production capabilities.
On the production side, in December 2011 JSR completed construction

work at its Yokkaichi Plant to increase
production capacity for solution polymerization styrene-butadiene rubber(S-SBR), in order to keep pace withgrowing demand in Japan and Europe for fuel-efficient tires. Producing
an additional 25,000 tons/year, theplant is now operating at full capacity. Combined with JSR’s capacity rightagreement with Styron Europe GmbH
(formerly Dow Europe), this raises theGroup’s annual production capacity to
90,000 tons.
To keep up with further growthin demand, we decided to establish a
joint venture for the manufacture of SSBR in Thailand. A new manufacturing
plant is currently under construction,and is scheduled to commence production in June 2013. Furthermore, weare considering increasing the plant’s
production capacity by an additional
50,000 tons/year. These plans forincreasing production will bolster our
supply structure in Japan, Europe, andAsia and thus contribute to the global
expansion of our S-SBR business.

12

JSR Corporation   Annual Report 201215

We have decided to increase
production of butyl rubber in order tomeet growing demand for this product. Joint venture company Japan Butyl
Co., Ltd. will increase production capacity of halogenated butyl rubber at
its Kashima Plant by 10,000 tons/year.
When completed in 2012, JSR’s total
annual production capacity for halogenated butyl rubber will be 80,000 tons.

Emulsions
Sales of emulsions rose year-on-year
thanks to price revisions to compensate for higher prices for major raw
materials. However, the operating
environment for paper coating latex,
one of our mainstay emulsion products, remained challenging. In bothvolume and value terms, sales of thisproduct declined year-on-year due to
production cuts by paper manufacturers stemming from damage to facilities
caused by the Great East Japan earthquake.

16

JSR Corporation   Annual Report 2012

> Plastics
In Japan, the sales volume in the
Plastics business declined in the year
under review. This was due to sluggish
demand for office equipment applications and plastics for the industrial materials sector. Although sales of plastics
for automobile applications dropped
dramatically in the first half of the year
due to earthquake and tsunami damage, they recovered in the second half.
Overseas, sales of plastic products
declined year-on-year, in both volume
and value terms. The sales volume declined due to a drop in demand fromthe automobile sector stemming fromfloods in Thailand, as well as sluggish
demand for amusement applications.
Sales in value terms also declined despite efforts to adjust prices to compensate for increasing costs of major
raw materials.

Net Sales of Plastics(¥ billions)
80
60

51.2

40
20
0
FY 2008 09

10

11

12

BUSINESS
GOVERNANCE
FINANCIALCORPORATE DATA

Future Strategies for the
Petrochemical Products
Business
Demand from the automobile andautomobile tire industries, the majoruser industries for products made by
the Petrochemical Products segment,
is expected to continue growing. We
also forecast growth in global demandfor high-value-added products, suchas fuel-efficient tires, that have a low
environmental impact, as well as ongoing expansion in demand for generalpurpose products in emerging markets,primarily China. Meanwhile, we expect
ongoing volatility in markets for suchproducts as crude oil and naphtha. The
accompanying changes in prices of major raw materials are expected to havea progressively negative impact on the
Petrochemical Products business.
In consideration of these circumstances, as well as the outlook
for strong demand growth and theGroup’s technical superiority, we havepositioned S-SBR and butyl rubber
as growth products. We will developthese businesses into global number
one players through active reinforcement of production capacity and sales
expansion activities. We are currently

increasing production capacity for SSBR for fuel-efficient tire applicationsin Thailand, and are doing the samefor butyl rubber applications at the
Kashima Plant in Japan. Our aim is tocomplete both projects safely and according to schedule.
In the general-purpose product category, which includes emulsion polymerization SBR, nitrile rubber, and ethylene propylene rubber, we will focus on
raising productivity, including operating production plants continuously for
two years between major preventative
maintenance shutdowns. At the sametime, we will strive to maintain earnings by adopting pricing policies that
address rising prices of raw materials.
In addition, we will strengthen
initiatives targeting the procurement of
butadiene, which is predicted to be inshort supply. We will establish a supply
structure that ensures the stable provision of products to customers, andthus build a stable earnings structure.
The JSR Group will continue bolstering its Cost-Reduction Plan E-100
Project, directed at strengthening
profitability under the new nameE-100plus Project. We will continue
working hard to reduce fixed and variable costs from the bottom up. We will

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also implement cost-structure reforms
by introducing new technologies andmethods, while raising productivity
and enhancing supply chain efficiency.
In addition, we will strive to bolster
earnings by applying these strategies
not only to all Group companies, but
to outsourced activities as well.

JSR Corporation   Annual Report 201217

Global R&D, Production, and Marketing Operations

Contribution of Patents
In JapanFine Chemicals and Other Products
Petrochemical Products
OthersOverseas
Fine Chemicals and Other Products
Petrochemical Products
OthersTotal

Global R&D Strategy“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, andprecision chemistry. Since its founding,the JSR Group has contributed to theadvancement of society through thecreation of groundbreaking materials.

18

JSR Corporation Annual Report 2012

FY2008FY2009FY2010FY2011FY2012

1,103
428
67
1,598

1,269
428
73
1,770

1,465
374
75
1,914

1,685
377
67
2,129

1,972
387
79
2,438

493
1,721
36
2,250
3,848

512
1,955
34
2,501
4,271

492
2,164
39
2,695
4,609

489
2,365
36
2,890
5,019

507
2,516
33
3,056
5,494

The Group possesses unique, worldrenowned strengths in R&D, andcurrently holds around 5,500 patents,
primarily in technologies related to finechemicals and petrochemicals.
As a technology-oriented materials organization, the JSR Group hasaggressively entered new fields—suchas precision materials and processing,environment and energy, and biomedical materials for life sciences—with thebacking of earlier activities in synthetic

rubber and petrochemicals. This new
research and development work isalready bearing fruit.
JSR’s domestic R&D organizationconsists of several facilities, of which
the Yokkaichi Research Center forms
the core. Others include the Precision
Processing Technology Center, Tsukuba
Research Laboratories, and the JSR
Functional Materials Research Center.
Together, these facilities engage in thedevelopment of next-generation key

BUSINESS
GOVERNANCE
FINANCIALCORPORATE DATA

products.
Overseas, we have establishedresearch facilities in Taiwan and South
Korea, where there is a concentration of semiconductor and flat panel
display (FPD) production bases.
With numerous products that
represent the world standards in theirfields, JSR will strive to solidify its position as a global comprehensive materials supplier.
Global Structure of Fine
Chemicals Segment
In South Korea and Taiwan, whichhave the largest world markets for
FPDs, JSR Micro Korea Co., Ltd. and
JSR Micro Taiwan Co., Ltd. hold important positions. Both companies have
expanded the scale of production andthe items they handle in order to meetdemand from the rapidly expanding
FPD market. To enhance and accelerate
their future responses to customers,
they are building new research laboratories.
Meanwhile, many LCD panel
manufacturers are planning to build
new production facilities in China.
They include local companies, as wellas major corporations from Japan,
South Korea, and Taiwan. To address
the needs of those customers, the JSRGroup is working to provide technicalservices and build a product development system in China.
In the Semiconductor Materials
business, Silicon Valley based JSR Micro, Inc. manufactures, provides technical support and sells cutting-edge
ArF photoresists. It has also introduced
exposure equipment comparable withthat of client companies in order tosupport R&D on leading-edge products.
In the life sciences field, we established JSR Life Sciences Corporation in
Japan and J&W Beijing Biotech Co.,
Ltd. in China. The latter is a joint venture company with a local company. In
the summer of 2012, the joint venture
will start manufacturing and selling
products to promote the life sciencesbusinesses of JSR Group companies
in Europe and North America, withthe aim of building a global businessstructure and expediting the Group’s
responsiveness to market movements.
Global Structure of Petrochemical
Products Segment
For some years, the Petrochemical
Products segment, which engages
mainly in synthetic rubber and plastic
products, has been building a global
manufacturing and sales network. The
Group has sales operations in major
centers in China and Southeast Asia

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to closely monitor the needs of local customers in the automobile andelectronics 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 automobile parts and fuel-efficient tires, which have enjoyed growing demand in recent years. In addition
to producing synthetic rubber for fuelefficient tires at the Yokkaichi Plant inJapan, we also make and sell this product in collaboration with Styron EuropeGmbH (formerly Dow Europe). In June
2011, we decided to establish JSR BST
Elastomer Co., Ltd. in collaboration
with Bangkok Synthetics Co., Ltd., alocal business partner in Thailand. The
new company is currently building
Thailand’s first S-SBR manufacturing
plant, due to commence operations inJune 2013. It will start with a capacityof 50,000 tons per year, with plans for
expansion to 100,000 tons.
For other synthetic rubber products, Elastomix (Thailand) Co., Ltd.
engages in the stable production andsupply of CMB — a raw material usedin synthetic rubber parts — for local
automakers and parts manufacturers.

JSR Corporation Annual Report 2012

19

1

A
6
5
14
16

8
12

9

3
6

13 7

JSR Corporation (Japan)

15
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.

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.

JSR Life Sciences Corporation
Production and sales of life sciences
related materials.

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.

JSR Micro Kyushu Co., Ltd.
Production of photoresists forsemiconductors and materials forflat panel displays.

● Elastomers Business
ELASTOMIX CO., LTD.
Compounding of crude rubbers andsales of compounded products.

JSR Optech Tsukuba Co., Ltd.
Production of UV curing type opticalfiber coating materials.

Japan Butyl Co., Ltd.(*)
Production and sales of butyl rubbers.

JAPAN FINE COATINGS Co., Ltd.(*)
Sales of coating materials forfiber-optic cables reinforced byultraviolet or electron
radiation and for other apparatus.

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

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

KRATON JSR ELASTOMERS K.K.(*)
Production, purchase, and sales ofthermoplastic rubbers.
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.
4 JSR Micro Taiwan Co., Ltd.
Development, production and sales ofmaterials for flat panel displays.

20

JSR Corporation Annual Report 2012

5 JSR (Shanghai) Co., Ltd.
Sales and marketing of JSR products.
6 J&W Beijing Biotech Co., Ltd.

Development, manufacturing and saleof latex reagents intermediates andchemiluminescent reagents intermediates.
● Elastomers Business
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.

14 Techno Polymer (Shanghai) Co., Ltd.

10 JSR BST Elastomer Co., Ltd.

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

Sales and Manufacturing of S-SBR (Solution
Polymerization Styrene-Butadiene Rubber)
11 JSR Trading, Inc.
Sales of synthetic rubber.

● Plastics Business
12 TECHNO POLYMER HONG KONG CO., LTD.
Sales and technical services of synthetic resinsin Hong Kong and neighboring regions.
13 Techno Polymer (Thailand) Co., Ltd.
Sales and technical services of synthetic
resins in ASEAN region.

Sales and technical services of synthetic
resins in China.

15 TECHNO POLYMER AMERICA, INC.

16 Shanghai Rainbow Color Plastics

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

(*) Equity method affiliate

BUSINESS
GOVERNANCE
FINANCIALCORPORATE DATA

Corporate Governance Systems

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Enhancing Trust and Achieving Sustained GrowthMaterials Innovation—We create value through materials to enrichpeople’s lives and contribute to 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 andall other stakeholders and building an appealing corporate constitution.
As of June 15, 2012, the Board of Directors has eight members—three outside directors and five internal
directors. (In the year under review, there were two outside directors and four internal directors.) In addition,
the Board of Corporate Auditors has four members, including three outside corporate auditors (unchanged
from the year under review). In this way, we are able to raise the transparency and soundness of operations.
At the same time, we undertake ongoing reassessments aimed at further strengthening management monitoring and supervision.

As of June 15, 2012

Shareholders’ Meeting
Appointment/
Dismissal

Appointment/
Dismissal

ReportBoard ofCorporate
Auditors

Appointment/
Dismissal

ReportFinancial
AuditsAuditsBoard of Directors

Independent
Auditors

ReportAppointment/
Dismissal
ReportOversight/
Supervision
Cooperation
Appointment/
Dismissal
ReportRepresentative
Directorand President

Cooperation

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

JSR Corporation Annual Report 201221

JSR’s Corporate Governance System

advisor, and in principle meetings are held once monthly.
It also includes three outside directors who, together withn Officer Systemfour corporate auditors (including three outside ones) en-

JSR has introduced an officer system to separate Company-

gage in robust exchanges of opinions at Board meetings.

wide management monitoring by directors and business ex-

By introducing independent and neutral outside directors

ecution by officers. The system accelerates decision-making

with extensive business experience, we seek to reinforce theand business execution by directors and officers, respectively,

appropriateness of judgments made by management andand also strengthens the supervisory function of directors

monitor the legality of their execution of duties.

and clarifies roles and responsibilities.
Executive Committeen Audit System

The Executive Committee holds extensive discussions on

Under the Company’s audit system, business execution au-

items concerning fundamental management initiatives,

dits and account audits make significant contributions to fair,management policies, and management plans, along withtransparent, and timely management. Business audits coverimportant matters concerning the execution of businessthe execution of duties by directors, and account audits

activities at each department. The committee thus gives

cover financial statements submitted at Ordinary General

direction concerning these issues. As required, certain items

Meetings of Shareholders. The Company has four corporate

submitted to this committee are passed on to the Board ofauditors, three of whom are outside corporate auditors andDirectors for further discussion.

a standing corporate auditor.

This committee is made up of the president, the execu-

To ensure fairness and transparency, the Company ap-

tive managing officer, managing officers, and officers ap-

points independent attorney and certified public accountant

pointed by the president, and responds to important busi-

as outside corporate auditors.

ness execution with the aim to expedite decision making
and improve the efficiency of such operations. As a rule,n Internal Control System

this committee meets once a week, and is chaired by the

In accordance with The Companies Act of Japan, the JSR

president. The standing corporate auditor also attends theseGroup has established a basic policy governing its internal

committee meetings.

control system. Guided by this policy, the Company works
to strengthen and augment its internal controls. The InternalBusiness Issues Committee

Audit Department systematically audits business execution

The Business Issues Committee engages in broad-ranging

and compliance systems in each division and Group compa-

debate about items related to fundamental management

ny, and confirms that rigorous legal compliance is observed

strategies and policies, basic policies behind specific projects,

throughout the Group.

and changes to business strategies. It also shares information to ensure a common understanding of such matters

22

Board of Directors

and discusses company directions. Its findings are reflected

The Board of Directors consists of eight directors. The Boardin deliberations of the Board of Directors and the Executive

discusses and makes decisions on important business mat-Committee. The Business Issues Committee, which meets

ters, and also supervises directors and officers’ execution

once a week, consists of the president (who also serves asof business duties. The Board is headed by the executive

chair), the executive managing officer, managing officers,

JSR Corporation Annual Report 2012

BUSINESS
GOVERNANCE
FINANCIALCORPORATE DATA

and officers appointed by the president.

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The CSR Committee is chaired by the executive managing officer responsible for CSR, with managing officers,

Officers Committee

senior officer, and officers. Bureaus of the four committees

This committee is held in order to share information from all

listed above also attend meetings of the CSR Committee.

departments concerning the execution of business activities,

The Committee clarifies the company’s stance toward CSR

to ensure members’ thorough understanding of important

and works to strengthen CSR efforts at JSR.

business matters and to enhance their communications. This
committee consists of the president, senior officers, officers

Corporate Ethics Committee

and a standing corporate auditor, except overseas represent-

The Corporate Ethics Committee chaired by the executive

atives. As a rule, this committee meets twice a month and ismanaging officer, in charge of general affairs, was estab-chaired by the president.

lished under the CSR Committee to implement corporate
ethics standards and prevent improper actions throughout

Board of Corporate Auditors

the JSR Group. The JSR Group Principles of Corporate Ethics

With four members, including three outside auditors, thishave been prepared to provide a code of conduct for execu-

board meets every month as stipulated in the regulations

tives and employees. It is also prepared in Traditional Chi-governing this body. The corporate auditors receive reports

nese, Thai, and Korean, in addition to English and Simplified

on important matters, hold discussions, and make decisions.

Chinese, so that Group employees all over the world can

In accordance with standards for audits by corporate audi-

become better acquainted with the Principles. As for the re-tors, the auditors attend meetings of the Board of Direc-

porting system, along with the internal hotline linked to thetors, and the standing corporate auditor attends Executive

Corporate Ethics Committee and the external hotline linked

Committee and other important committees to monitor

to an external attorney, JSR introduced a hotline, which is

how important decisions are reached and business activi-

linked to a specialized external agency and is also available

ties are executed. The auditors also receive reports from thein English, Chinese, Korean and Thai.

independent auditors, directors, and others. Through these
activities, the Board of Corporate Auditors hold deliberation

Responsible Care Committee

in order to form auditing opinions.

JSR conducts a Responsible Care program to fulfill its obligations to achieve sustainable development. The Responsible

CSR Committee

Care Committee was established under the CSR Committee

The CSR Committee was established to ensure that JSR

to ensure that Responsible Care activities are conducted ef-

fulfills its responsibilities to society and complies with laws

fectively across the entire company. The committee is chaired

and regulations. Under the CSR Committee, four commit-

by the managing officer for safety and environmental affairs,

tees were established: the Corporate Ethics Committee, thedemonstrating Responsible Care position as a core compo-

Responsible Care Committee, the Risk Management Com-nent of JSR’s management.

mittee, and the Social Contribution Committee. The CSRThis committee approves Responsible Care plans, evalu-

Committee integrates and guides the activities of the above

ates and verifies results of activities, and helps to maintainfour committees and meets four times each year along withand upgrade JSR’s programs to eliminate accidents, reduce

special meetings as necessary to further strengthen theenvironmental impact, manage chemical substances, andCompany’s CSR efforts.

ensure safety of products. Details and results of Responsible

JSR Corporation Annual Report 201223

Care activities are disclosed through the CSR Report andBoard of Corporate Auditors.

Responsible Care Reports prepared by individual plants. The

The corporate auditors work closely with the independ-

CSR Report is audited by a third party to improve the reliabil-

ent auditors. The corporate auditors receive reports on the

ity and transparency of the data. Through these activities,

financial accountant’s audit plan and audit results. Further-

the committee is dedicated to winning greater trust from

more, the corporate auditors and financial accountants ex-customers and addressing any concerns among residents inchange information and opinions as necessary in the course

the neighborhoods of JSR’s facilities.

of each fiscal year. The internal audit has been conducted

To make the information widely available, the CSR Re-

by the Internal Audit Department as a specialized internal

port is posted on the JSR website (http://www.jsr.co.jp/jsr_e/

auditing unit. The corporate auditors receive reports on the

csr/index.shtml).

audit plan and audit results from the Internal Audit Department regularly, exchange opinions, and enhance the audit-

Risk Management Committee

ing system.

JSR places strong management priority on preventing serious crises from occurring and on minimizing the impact ofRemuneration

crises that do occur on its business activities. To this end,

The remuneration of the Company’s directors consists of a

the Company established the Risk Management Committee

basic salary, a bonus based on consolidated performance forunder the CSR Committee, with the officer responsible forthe year, and stock options that serve as a long-term incen-

Corporate Planning as chair. The Committee decides policies

tive. The level of remuneration is commensurate with theand plans in response to crises, both present and potential,

Company’s business results and is compared with those ofand promote continuous improvement.

other companies in the same industry and of similar size.
The total limit for monthly salaries is decided by resolution

Social Contribution Committee

at the Ordinary General Meeting of Shareholders. Perform-

The Social Contribution Committee was established underance-based bonuses and stock options are also approved by

the CSR Committee and is chaired by the officer responsible

resolution at the Ordinary General Meeting of Shareholders.

for Corporate Communications. JSR has been involved in

Total remuneration paid in fiscal 2012 was ¥370 million,

many activities that contribute to society at the local level.

paid to 11 directors, included two outside directors and

JSR will expand its activities to cover the whole society anddirectors who retired during fiscal 2012.

provide more active approaches. The Social Contribution

Corporate auditors are paid a basic fixed salary that is

Committee studies the formulation of new programs andnot performance-based. In fiscal 2012, total salaries paid topursues initiatives according to its “Basic Approach to Social

corporate auditors amounted to ¥61 million, including ¥45

Contribution,” published in January 2009.

million paid to internal corporate auditors and ¥16 million tooutside corporate auditors.

24

Status of Internal Audit, Audits by Corporate Auditors
and Financial Audits

Reasons for Selecting Outside Directors

JSR has adopted the corporate auditor system. There are

The Company has appointed three outside directors in orderfour corporate auditors, including three from outside the JSR

to further reinforce the monitoring function of the Board

Group. These auditors are staffed by one individual. Audits

of Directors. By welcoming outside directors with extensive

are performed as described in the section concerning theexperience and highly impartial, neutral perspectives, we

JSR Corporation Annual Report 2012

BUSINESS
GOVERNANCE
FINANCIALCORPORATE DATA

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and reinforce our ability to monitor the legality of business

Reasons for Selecting Outside
Corporate Auditors

execution.

To ensure the fairness and transparency of management, thewill ensure more appropriate management decision-making

Company appoints one standing corporate auditor, as well
Takuya Goto
Takuya Goto served as Representative Director and President, andas three outside corporate auditors. The outside corporate
auditors have no personal, financial, or business interests

Chairman, Board of Directors of Kao Corporation. Mr. Goto hasin the Company. They are called upon to ensure the soundextensive experience in the management of Kao, a prominent inter-governance of the Company while drawing on their respec-

national consumer products and chemical company. He has helped

tive careers.

strengthen corporate governance by deploying this experience toensure reasonable judgments by management from external, independent and neutral perspectives, as well as management transpar-

Kenji Itoency and soundness. For this reason, Mr. Goto has been named an

Kenji Ito does not concurrently hold the position of director inoutside director, as he was in the previous year.

another company. Mr. Ito contributes to ensuring reasonable judgments by management, as well as management transparency andMichio Kariya

soundness by auditing the Company from a position of independence while drawing on the extensive expertise and a wealth ofMichio Kariya currently serves as Representative Director and Chair-experience in finance and accounting he possesses as a certified

man of the Board of Nikon Corporation. Mr. Kariya has extensive

public accountant.

experience in the management of Nikon, a globally renowned
optical equipment company. He has helped strengthen corporate
governance by deploying this experience to ensure reasonable

Hiroichi Uekusa

judgments by management from external, independent and neutral

Hiroichi Uekusa does not concurrently hold the position of director

perspectives, as well as management transparency and soundness.

in another company. Mr. Uekusa contributes to ensuring reasonable

For this reason, Mr. Kariya has been named an outside director, as

judgments by management, as well as management transparency

he was in the previous year.

and soundness by auditing the Company from a position of independence while drawing on the extensive knowledge and experi-

Kazunori Yagi
Kazunori Yagi is Director and Executive Managing Officer of
Yokogawa Electric Corporation, and also serves as advisor to thatence in legal matters he possesses as an attorney.

Nobuko Kato

company. Mr. Yagi has extensive experience in the management of

Ms. Kato is currently Fellow, Assistant to Vice President and Officer,

Yokogawa Electric, a globally renowned producer of control systems

Central Research, Bridgestone Corporation. As a major customer

and measurement instruments. JSR anticipates that Mr. Yagi will

and major shareholder of JSR Corporation, Bridgestone Corporation

help strengthen corporate governance by deploying this experience

falls under the category of “specified related business entity.” Ms.

to ensure reasonable judgments by management from external,

Kato contributes to ensuring reasonable judgments by manage-

independent and neutral perspectives, as well as management

ment, as well as management transparency and soundness by au-transparency and soundness. For this reason, Mr. Yagi has been

diting the Company. Here, she draws on her expertise and extensive

named an outside director.

experience in business and in R&D on elastomers.

JSR Corporation Annual Report 201225

Corporate Social Responsibility

The JSR Group has earned highacclaim in Japan and overseas
as a CSR-driven entity. For example, we are included in the
FTSE4Good Index Series, anauthoritative international index
for socially responsible investing (SRI) companies, and wehave received an Ethibel Pioneer& Excellence label. We are also
among Morningstar’s MS-SRI
Index, a Japan’s famous index.

Biodiversity Conservation
JSR views biodiversity conservation as a
top management priority that is consistent with its basic policy of making a
positive contribution to society. Under
this policy, we pursue a variety of activities, centering on the Japan BusinessInitiative for Biodiversity (JBIB).
In fiscal 2012, we created a “Mapof Corporate Activities and Biodiversity” to understand the interrelationships between biodiversity and ourbusiness activities involving synthetic
rubber and fine chemicals products.
Using this map, we identified how werely and have an impact on biodiversity
in each process, from raw material
procurement and manufacturing totransportation, use, and recycling.
As a member of the JBIB, JSR
played a role in the development of
the “Land Use Score Card.” Using thiscard, we conducted a survey to determine whether or not the land within
our manufacturing complexes has an
impact on biodiversity. This included
observing vegetation in order to verify
what kinds of plants, insects, and birds
exist at the Company’s sites. We intend
to broaden the use of the “Land Use
Score Card” in the future.
Going forward, to enable the JSRGroup to grow as a sustainable operation, we will further clarify existingrisks and opportunities, and formulate
and implement concrete policies, targets, and plans.
Recovery Support in Wake of Great
East Japan Earthquake
Following the Great East Japan Earthquake in March 2011, the Company
set up a volunteer program, underwhich employees are able to takevolunteer leave to assist with relief and26

JSR Corporation Annual Report 2012

JSR volunteers participate in restoration activities inearthquake-affected area.

recovery activities in areas affected by
the disaster. In addition to our own
volunteer program, we encouraged
employees to take volunteer leave totake part in a collective action project
organized by the United Nations Global Compact Japan Network. In theyear under review, the Company bore
the cost of participation in such volunteer activities by employees.
Risk Management
Learning from the valuable lesson
provided by last year’s Great East Japan
Earthquake, JSR held earthquake andtsunami evacuation drills at its domestic plants. At the Kashima Plant, which
was greatly affected by the disaster,
we held evacuation drills in response
to simulated tsunami warnings, as wellas drills in response to simulated fires
and butadiene and isoprene leaks.
In disaster drills held simultaneously
at the Company’s plants, we practiced
under conditions that closely resembled real-life emergency situations. For
example, we implemented disasterprevention measures and establishedemergency communication between
the Disaster Task Force Headquarters at
JSR’s Head Office and the Disaster Task
Force Office at the Kashima Plant using two video-conferencing systems. In
addition, the Company held a joint risk

BUSINESS
GOVERNANCE
FINANCIALCORPORATE DATA

management exercise between Head
Office and the Chiba Plant simulating
earthquake with seismic intensity of
5.0-upper on the Japanese scale. On
this occasion too, we responded to afull-scale emergency scenario, which
included Head Office, using a videoconferencing system to check on thesituation at the site of the “disaster.”

Educational Initiatives
Science Classes
Today, the waning interest in scienceamong Japanese children is becoming a matter of considerable concern.
Seeking to help reverse this trend,
the JSR Group has established a joint
program with the Education Boardsof Yokkaichi City, Mie Prefecture andKamisu City, Ibaraki Prefecture, where
the Group has manufacturing plants.
Under the program, JSR regularly
sends employees to junior high schools
where they take science classes. In fiscal 2012, JSR launched a similar program for elementary schools in which
JSR visit local schools where they hold
“Fun Labs.” The children get to takepart in experiments and use materials
that they usually wouldn’t have accessto at school, such as witnessing thevery moment when rubber is created.
The aim of these educational activities

High-tech university at JSR Yokkaichi Plant

is to arouse the children’s curiosity andstimulate an interest in science.
Workplace Experience
JSR helps foster the next generationof employees by inviting students tovisit the Company to gain workplace
experience. At the Yokkaichi Plant,
two junior high school students from
Yokkaichi City get to be plant manager
for a day. Their duties include goingon a safety patrol, writing a report for
the Company magazine, sorting waste
at the recycling center, and observing
a solution polymerization experiment.
In addition, our Head Office in Tokyo
invites five students from Kamisu City.
Their program includes attending aseminar on the Company’s activities
and observing employees at work. Our
aim in sponsoring such activities is toprovide school students with an opportunity to learn about a corporate
organization and the role that companies play in society.
High-Tech Classes for Senior HighSchool Students
Semiconductors Equipment and Materials International (SEMI) is a global
industry organization that sponsors theHigh-Tech University Program. Targeting senior high school students, theprogram gives students an introduction
to the high-tech industry with the aimof promoting greater understanding of
the role played by the semiconductor
industry. Selected students visit JSR’s
Yokkaichi Plant, where they take partin hands-on activities and observe theworkings of a large industrial plant.
Activities include visiting the petrochemicals plant and the optical andelectronic materials plant. The students learn about each plant’s processes, from research and development

02-18
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58-59

through to manufacturing. To gain abetter understanding of the distinctive
features and comprehend the differences of these two plants, which sharethe same site, the students also observe the finishing process for synthetic
rubber and the finishing process forelectronic materials. At the Fine Electronic Materials Research Laboratories,
they get the chance to observe a photolithography experiment conductedby staff, as well as see a staff operate aminiature plant.
Teacher Training
In fiscal 2011 and fiscal 2012, JSR
held a two-day training course forteachers from elementary, junior high,and senior high schools. The aim of
the training program was to increaseteachers’ understanding of our operations by explaining the principles
behind our corporate activities andenvironmental initiatives. The program
began at the Head Office, where theteachers were briefed on a variety of
topics, ranging from an introduction to
JSR to environmental safety and human resources. Next, they visited the
Chiba Plant, where they took part inhands-on activities and were given atour of the plant. The teachers cameaway knowing a lot more about thevarious activities of the JSR Group andthe chemical industry. We intend tocontinue holding this teacher training
program so that participants can share
their experiences with their pupils, aswell as put their new skills to good use
in their roles as educators and school
managers.

JSR Corporation Annual Report 201227

Ten-Year Summary
Fiscal year means year ended March 31														FY2003
FY2004
FY2005
FY2006

For the fiscal year													Net sales¥247,139¥275,071¥305,368¥338,160

Costs and expenses

226,345

242,452

260,035

284,803

20,79432,61945,33353,357

Interest and dividend income

431

397

519

635

Interest expenses

(750)

(693)

(475)

(420)

Income before income taxes and minority interests

17,85530,37843,47149,038Net income

10,991

19,35327,56430,555

Capital expenditures

16,04817,15618,13423,361

Depreciation

16,48914,97015,245

16,206

Operating income													At fiscal year-end													Total assets

281,874

308,581

325,031

381,097

24,20813,92013,857

1,607

Total liabilities

139,682

146,280

139,249

164,389

Equity139,447

159,497

182,476

212,751

Current ratio (times)

1.6

1.6

1.8

1.7

Return on assets (%)

3.9

6.3

8.7

8.7

Return on equity (%)

7.9

12.9

16.1

15.5

Equity ratio (%)

49.5

51.7

56.1

55.8

Long-term debt due after one year													Per share data (Yen and U.S. dollars)													Net income

42.46

75.12

107.54119.63

Cash dividends

7.00

9.00

14.00

20.00

544.94623.14717.13

836.31EquityNote: U.S. dollar amounts are translated, for convenience only, at ¥82.19 =US$1.00, the rate prevailing on March 31, 2012.												

28JSR Corporation Annual Report 2012

BUSINESS
GOVERNANCE
FINANCIALCORPORATE DATA

Millions of yen												FY2012
FY2007
FY2008FY2009FY2010FY2011

02-18
21-27
28-57
58-59

Thousands of
U.S. dollars

FY2012													¥365,831¥406,968¥352,503¥310,184¥340,666¥349,947$4,257,780

310,588346,958

322,155

289,954

301,571

313,9823,820,202

55,24360,01030,34820,23039,09535,964

437,577

1,030

1,309

1,230

568

626

634

7,709

(399)

(256)

(271)

(172)

(146)

(147)

(1,788)53,44054,86720,803

19,45840,674

41,245501,820

33,65536,994

13,981

13,64527,571

26,407321,294

22,09429,076

19,081

17,707

11,801

19,728240,028

18,133

21,18024,83322,38019,245

17,784

216,376																										408,949

416,951

339,498

373,566

390,591

430,693

5,240,207

2,745

1,525

1,500

1,500

1,028

500

6,083

168,963

159,288

97,512

122,865

126,475

148,335

1,804,784

235,186

252,539

240,896

249,440

262,679

280,955

3,418,364

1.8

1.9

2.5

2.3

2.4

2.3

­—

8.2

8.9

4.1

3.7

7.1

6.4

—

15.0

15.2

5.7

5.6

10.8

9.7

—

57.5

60.6

71.0

66.8

67.3

65.2

—

																										133.10147.26

56.36

55.87

113.07109.46

1.33

24.00

32.00

32.00

26.00

32.00

32.00

0.39

935.47

1,009.27

986.33

1,021.31

1,088.87

1,164.63

14.17												JSR Corporation Annual Report 201229

Management’s Discussion and Analysis

Business Performance
In fiscal 2012 (April 1, 2011 to March 31, 2012), the JSRGroup reported consolidated net sales of ¥349.9 billion,
up 2.7% from the previous fiscal year. Operating income
declined 8.0%, to ¥36.0 billion, and net income was down
4.2%, to ¥26.4 billion.
These results reflected a number of factors. The mainstay business in elastomers for use automobile tires washealthy owing to worldwide growth in demand. In the Fine
Chemicals business, however, demand for DRAMs for use
in personal computers stagnated despite signs of demand
growth in the semiconductor market. Moreover, productionof flat-panel displays was depressed significantly by unstabledemand for LCD televisions. Such factors had a major negative impact on both sales and income of the Group’s Fine
Chemicals business.

ucts business.)
The Fine Chemicals 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 general-purpose synthetic rubber
for automobile tires, special high-performance rubber for automobile components, thermoplastic elastomers for plasticenhancement, and emulsion for paper coating. The Plastics
segment mainly covers the manufacture and sale of ABS
plastics for use in automobile, OA equipment, and amusement machines.
Fine Chemicals
Fine Chemicals
In fiscal 2012, sales in the Fine Chemicals segment declined
7.6% year-on-year, to ¥117.9 billion. Operating income
fell 33.6%, to ¥14.5 billion, and the operating margin was
down 4.8 points, from 17.1% to 12.3%.

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, Elastomers, and Plastics. (Elastomers and Plastics segments together constitute the Group’s Petrochemical Prod-

Petrochemical Products
Elastomers
Sales in the Elastomers segment—including styrene-buta-

Segment Sales/Operating Income(¥ millions)Fine Chemicals and Other Products Business
Operating income
Elastomer Business
Operating income
Plastics Business
Operating income
Net Sales
Operating income

Net Sales/Net Income(¥ billions)

10

11

12

¥126,286
19,859136,086
372
47,812(1)
310,184¥ 20,230¥127,515
21,793160,854
14,73952,297
2,563
340,666¥ 39,095¥117,876
14,468
180,835
19,35851,2362,138
349,947¥ 35,964

Total Assets/ROA(¥ billions)
50

400

40

300

30

200

20

100

70

(%)
21

60

18

50

15

40

12

30

9

20

6

10

3

10

FY2008

09

10

11

12

Net sales
Net income

30

09¥137,396
20,082150,085
8,951
65,022
1,315
352,503¥ 30,348

Operating Income/Operating Income Margin

500

0FY2008¥174,702
43,805
163,421
13,192
68,845
3,013
406,968¥ 60,010

00FY200809

10

Operating income
Operating income margine

11

12

0

(¥ billions)
500

(%)
10

400

8

300

6

200

4

100

2

0

FY200809

10

Total assets
ROA

JSR Corporation Annual Report 2012

Shareholders' Equity/ROE

R&D Expenses/

Shareholder Return /

11

12

0

BUSINESS
GOVERNANCE
FINANCIALCORPORATE DATA

02-18
21-27
28-57
58-59

research facilities at subsidiaries in South Korea and Taiwan.
Intangible assets remained mostly unchanged, edging down
¥0.1 billion, to ¥5.2 billion, due mainly to amortization ofexisting equipment. Investments and other assets climbed¥5.9 billion, to ¥52.6 billion, stemming mainly from an increase in investment in a joint venture company establishedin Thailand and a rise in valuation of shares in equity-method
affiliates.

diene rubber, polybutadiene rubber, and emulsions—rose
12.4%, to ¥180.8 billion, and operating income jumped
31.3%, to ¥19.4 billion. The operating margin climbed 1.5
points, from 9.2% to 10.7%.
Plastics
In the Plastics segment, sales declined 2.0%, to ¥51.2 billion. Operating income fell 16.6%, to ¥2.1 billion, and theoperating margin slipped 0.7 point, from 4.9% to 4.2%.

Liabilities
Total liabilities increased ¥21.9 billion, to ¥148.3 billion.
Within this amount, current liabilities rose ¥23.0 billion, to¥129.9 billion, and long-term liabilities declined ¥1.2 billion,to ¥18.5 billion. Major changes during the year to current
liabilities included a ¥17.7 billion increase in notes and accounts payable, stemming from rising prices of raw materials. Other factors include a ¥2.4 billion decrease in income
Financial Position
taxes payable and an increase in accrued payables associated
AssetsSales/Net
IncomeOperating
Income/Assets/ROA
with expansion of S-SBR Total
production
capacity at the YokkaiAtNet
March
31, 2012,
total assets amounted to ¥430.7
billion,Operating Income Marginchi
Plant.
up¥40.1
billionfromayear
earlier.
(¥ billions)(¥ billions)(¥ billions)(%)(%)
70 billion. Main
500 Current assets rose ¥33.7 billion,50to ¥292.4
500
10
21
Net
Assetsfactors boosting current assets included a ¥15.8
billionyear60
18
400
400
40
At fiscal year-end, the JSRGroup had net assets of ¥282.4 8
on-yearincrease in notes and accounts
receivable, a ¥13.5
50
15
billion, up ¥18.2 billion from a year earlier. During the year,
billion rise in short-term investment securities, and a ¥7.1
300
300
30
6
40 was a ¥23.7
12
shareholders’ equity
increased ¥18.7 billion, to ¥284.3 bilbillion increase in inventories. By contrast, there
lion, and valuationand translation
adjustments fell from 4
billiondecrease in cash. This was mainly
due to30 transfers
9
200
200
20
minus ¥2.9 billion to minus ¥3.3 billion. Subscription rightsfrom cash to negotiable certificates of deposit (included in
20
6
to shares edged up ¥0.1100
billion, to ¥0.6 billion, and minority2
short-term
investment securities). 10100
10interests edged 3down ¥0.1 billion, to ¥0.7 billion.
Property, plant, and equipment edged up ¥0.7 billion,
Retained earnings
increased¥18.7 billion, to ¥263.1 0
to 0¥80.5 billion. Main factors includeda ¥2.6 billion
decline0000FY2008 09
10
11
10
11
12
FY2008 09
1011billion.
Maincomponents weredividend payments
of 12
¥7.7
in machinery,equipment,
and 12
vehicles and a ¥1.3FY2008
billion 09
Net sales
Operating income
Total assets
billion and net income of ¥26.4
Net inincomeOperating income margine
ROAbillion. In addition, there
decreasebuildings and structures. Major capital expendiwas a ¥1.0 billion decrease in foreign currency translationture projects during the year included expansion of S-SBR
adjustment.
production capacity the Yokkaichi Plant and construction ofSales by Geographical Segment
Sales in Japan rose 3.4% year-on-year, to ¥196.5 billion. This
represented 56.1% of consolidated net sales, up 0.3 pointfrom the previous year. Overseas sales increased 1.9%, to¥153.5 billion, or 43.9% of net sales.

Shareholders' Equity/ROE(¥ billions)

R&D Expenses/
Capital Expenditures

Shareholder Return /Dividend Payout Ratio(%)
24(¥ billions)(¥ billions)

300

30

20

(%)
80

250

20

25
15

60

200

16

20

150

12

15

10

40

100

8

10
5

20

50

4

5

0

0

0

FY200809

10

Shareholders' equity
ROE

11

12

FY200809

10

R&D expenses
Capital expenditures

11

12

0

FY2008

09

10

11

12

0

Dividend
Share Buyback
Dividend Payout Ratio

JSR Corporation Annual Report 201231

As a result, the equity ratio declined 2.1 points, to65.2%. Net assets per share increased ¥75.76, to ¥1,164.63.
Cash FlowsAt March 31, 2012, cash and cash equivalents stood at¥67.2 billion, down ¥0.2 billion, or 0.3%, from a year earlier.
Cash Flows from Operating Activities
Net cash provided by operating activities amounted to ¥29.0
billion, down ¥25.3 billion from the previous year. Main factors included income before income taxes of ¥41.2 billion
and depreciation and amortization of ¥17.8 billion (down¥1.5 billion year-on-year). In addition, there were major increases in notes and accounts receivable, notes and accounts
payables, and income taxes paid.
Cash Flows from Investing Activities
Net cash used in investing activities totaled ¥21.1 billion,
down ¥14.0 billion from the previous year. This was mainly
due to ¥16.6 billion in payments for purchase of noncurrent
assets, ¥4.4 billion in proceeds from sales of noncurrent assets, and ¥4.9 billion in payments for purchase of shares inaffiliates.
Cash Flows from Financing Activities
Net cash used in financing activities was ¥7.7 billion, down
¥4.6 billion from the previous year. Major factors included¥7.7 billion in cash dividends paid (up from ¥7.1 billion in
the previous year) and ¥1 million in purchase of treasury
stock (down from ¥5.1 billion).
Profit Appropriation
The Company strives to pay cash dividends in a continuousand consistent manner, based on a policy of appropriating
profits according to improvements in its consolidated financial results. For the year under review, the Company has
declared a year-end dividend of ¥16.00 per share. Added tothe ¥16.00 interim dividend already paid, this will bring annual cash dividends to ¥32.00 per share.
In the year ending March 2013, the Company plans to
pay an interim dividend of ¥17.00 and a year-end dividendof ¥17.00, for total annual dividends of ¥34.00 per share,depending on its consolidated results.

Risk Information
The JSR Group is exposed to the following risks that may impact on operating results, financial position, cash flows andother aspects of performance. Forward-looking statementsin this discussion are based on JSR’s judgments as of March
31, 2012. Risks at JSR include, but are not limited to, the following items:(1) Changes in Demand due to Economic Trends
In the major industries where the JSR Group’s products are
sold such as automobiles and electronics, demand is influenced by the economic climate in a country or region. An
economic slowdown could reduce demand in an industry
and adversely affect the JSR Group’s operating results.
(2) Higher Prices for Crude Oil, Naphtha and Other
Major Raw Materials
Higher prices for crude oil and naphtha, or changes in themarkets for JSR’s major raw materials, could raise prices ofraw materials and adversely affect the JSR Group’s operating results, especially in the Petrochemical Products sector ofelastomers, emulsions and plastics.
(3) Fluctuation in Exchange Rates
As the JSR Group undertakes product exports in foreign
currencies and imports goods such as raw materials, theCompany takes measures to reduce risks such as entering into forward exchange contracts; however, fluctuationin exchange rates could give rise to adverse outcomes. In
addition, operating results of consolidated subsidiaries andequity method affiliates located overseas are converted
into Japanese yen amounts for the purposes of preparing
the consolidated financial statements. However, due to the
yen’s appreciation, the JSR Group’s business results could be
adversely affected.
(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
to an accident, bankruptcy or quality problem at a supplier could adversely affect production activities and the JSRGroup’s operating results.
(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

32

JSR Corporation Annual Report 2012

BUSINESS
GOVERNANCE
FINANCIALCORPORATE DATA

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
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

02-18
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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 201233

Consolidated Balance Sheets
JSR Corporation and Consolidated Subsidiaries
March 31, 2011 and 2012

Thousands of
U.S. dollars(Note 1)Millions of yen

ASSETS

2011

2012

2012

¥  44,238¥  20,490$   249,304

Notes and accounts receivable―trade, net (Notes 4 and 5)

73,32489,194

1,085,215

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

55,99669,496

845,554

Inventories

57,85464,947790,202

Accounts receivable―other

17,676

24,953

303,605

Deferred tax assets (Note 9)

4,523

3,670

44,649Other (Notes 3, 9 and 16)

5,104

19,674

239,368

Total current assets

258,715

292,424

3,557,897

Current assets:
Cash and deposits (Notes 3 and 5)

Noncurrent assets:
Property, plant and equipment (Notes 7, 10 and 11):
Buildings and structures, net

28,85727,514

334,761

Machinery, equipment and vehicles, net

24,831

27,399333,361Land

19,15018,453

224,516

Construction in progress

3,099

4,075

49,583

3,911

3,063

37,273

79,84880,504

979,494

5,294

5,167

62,861

Investment securities (Notes 5 and 6)

29,06637,129451,746

Deferred tax assets (Note 9)

5,146

3,841

46,729Other, net (Notes 4 and 16)

Other, net
Total property, plant and equipment
Intangible assets
Investments and other assets

12,522

11,628141,480

Total investments and other assets

46,73452,598

639,955

Total noncurrent assets

131,876

138,269

1,682,310

Total assets¥390,591¥430,693$5,240,207

See accompanying notes.

34

JSR Corporation Annual Report 2012

BUSINESS
GOVERNANCE
FINANCIALCORPORATE DATA

Thousands of
U.S. dollars(Note 1)Millions of yen

LIABILITIES AND NET ASSETS

02-18
21-27
28-57
58-59

2011

2012

2012

¥  65,381¥   83,077$1,010,792

Short-term loans payable (Notes 5 and 7)

14,612

15,184

184,742

Income taxes payable (Note 9)

8,780

6,331

77,025

Other (Notes 9, 12 and 16)

18,05825,286

307,655

Total current liabilities

106,831

129,878

1,580,214

Provision for retirement benefits (Note 8)

14,176

13,967

169,935

Provision for environmental measures

2,961

2,701

32,860Current liabilities:
Notes and accounts payable — trade (Note 5)

Noncurrent liabilities:

2,507

1,790

21,775

Total noncurrent liabilities

19,644

18,458

224,570

Total liabilities

126,475

148,336

1,804,784

23,32023,320283,735

Capital surplus

25,17925,179306,356

Retained earnings

244,413

263,100

3,201,131(27,320)(27,321)(332,419)

Unrealized gains on securities, net of taxes

3,606

4,218

51,318Foreign currency translation adjustment(6,519)(7,541)(91,757)

545

656

7,981

Other (Notes 7, 9 and 16)

Contingent liabilities (Note 18)
Net assets (Note 14)
Shareholders' equity
Common stock:
Authorized — 696,061,000 shares
Issued— 255,885,166 shares in 2011 and 2012

Treasury stock
14,644,993 shares in 2011 and 14,645,692 shares in 2012
Accumulated other comprehensive income

Subscription rights to shares (Note 15)
Minority interests
Total net assets

892

746

9,078

264,116

282,357

3,435,423¥390,591¥430,693$5,240,207

JSR Corporation Annual Report 201235

Consolidated Statements of Income
JSR Corporation and Consolidated Subsidiaries
Years ended March 31, 2010, 2011 and 2012

Thousands of
U.S. dollars(Note 1)Millions of yen

2010

2011

2012

2012

¥310,184¥340,666¥349,947$4,257,780

235,479
54,475289,954
20,230249,281
52,290301,571
39,095

260,487
53,496
313,983
35,964

3,169,320
650,8833,820,203
437,577

276
292
(172)
1,764
(750)
—
—
—
—
(1,728)—(1,191)
737(772)
19,458

276
349
(146)
3,206
(307)
—
—
—
(445)
—
(1,063)
(422)
131
1,579
40,674

247
386
(147)
4,730
(262)
4,288
(1,920)(1,182)
(816)
(534)
—
—
491
5,281
41,245

3,007
4,702(1,788)57,548(3,185)52,169(23,357)(14,387)(9,932)(6,496)——
5,962
64,243501,820

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

12,144852
12,996
27,67812,2992,489
14,78826,457

149,625
30,288
179,913
321,907

Minority interests in net income of consolidated subsidiaries(52)
Net income¥  13,645(107)¥  27,571(50)¥  26,407(613)$   321,294

Net sales (Note 20)
Costs and expenses (Note 19):
Cost of sales
Selling, general and administrative expenses
Operating income (Note 20)
Other income (expenses):
Interest income
Dividends income
Interest expenses
Equity in earnings of affiliated companies
Depreciation
Gain on sales of noncurrent assets (Note 10)
Impairment loss (Note 11)
Loss on abandonment of noncurrent assets
Loss on disaster (Note 12)
Loss on abandonment of inventories
Loss on valuation of investment securities
Restructuring charges (Note 11)
Other, net
Income before income taxes and minority interests
Income taxes (Note 9):
Current
DeferredIncome before minority interests

U.S. dollars(Note 1)Yen

Per share of common stock:
Net income
Diluted net income
Cash dividends applicable to the year
See accompanying notes.

36

JSR Corporation Annual Report 2012

2010

2011

2012

2012

¥    55.87
55.81
26.00

¥  113.07
112.9132.00¥  109.46
109.2732.00$         1.33
1.33
0.39

Consolidated Statements of Comprehensive Income
JSR Corporation and Consolidated Subsidiaries

BUSINESSGOVERNANCE
FINANCIALCORPORATE DATA

02-18
21-27
28-57
58-59

Years ended March 31, 2010, 2011 and 2012

Thousands of
U.S. dollars(Note 1)Millions of yen

2010

2011

2012

2012

¥13,697¥27,678¥26,457$321,907

Unrealized gains on securities, net of taxes

2,952

(3)

654

7,953

Foreign currency translation adjustment(40)(1,757)(619)(7,537)

288

(455)

(454)

(5,523)

3,200(2,215)(419)(5,107)¥16,897¥25,463¥26,038$316,800¥16,830¥25,390¥25,997$316,305

67

73

41

495

Income Before Minority Interests
Other Comprehensive Income:

Share of other comprehensive income of associates   accounted for using equity method
Other comprehensive income (Note 13)
Comprehensive Income
Comprehensive income attributable toComprehensive income attributable to   owners of the parent
Comprehensive income attributable to minority interests

See accompanying notes.

JSR Corporation Annual Report 201237

Consolidated Statements of Changes in Net Assets
JSR Corporation and Consolidated Subsidiaries
Years ended March 31, 2010, 2011 and 2012

Millions of yen

Balance at April 1, 2009

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¥218,515¥(22,217)¥645¥(4,546)

¥311

¥779

Net income

—

—

—

13,645

—

—

—

—

—

Purchase of treasury stock

—

—

—

—

(2)

—

—

—

—

Disposal of treasury stock

—

—

—

—

—

—

—

—

—

Dividends from surplus

—

—

—

(7,083)

—

—

—

—

—

Change of scope of consolidation

—

—

—

(1,186)

—

—

—

—

—

Net changes of items other than   shareholders’ equity

—

—

—

—

—

2,965

205

116

55

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

¥427

¥834

Net income

—

—

—

27,571

—

—

—

—

—

Balance at March 31, 2010
Purchase of treasury stock

—

—

—

—

(5,114)

—

—

—

—

Disposal of treasury stock

—

—

—

(13)

13

—

—

—

—

Dividends from surplus

—

—

—

(7,083)

—

—

—

—

—

Change of scope of consolidation

—

—

—

47

—

—

—

—

—

—

—

—

—

—

(4)

(2,178)118

58

Net changes of items other than   shareholders’ equity
Balance at March 31, 2011

255,885¥23,320¥25,179¥244,413¥(27,320)¥3,606¥(6,519)

¥545

¥892

Net income

—

—

—

26,407

—

—

—

—

—

Purchase of treasury stock

—

—

—

—

(1)

—

—

—

—

Dividends from surplus

—

—

—

(7,720)

—

—

—

—

—

Net changes of items other than   shareholders’ equity
Balance at March 31, 2012

—

—

—

—

—

612

(1,022)

111

(146)

255,885¥23,320¥25,179¥263,100¥(27,321)¥4,218¥(7,541)

¥656

¥746

Thousands of U.S. dollars (Note 1)
Balance at April 1, 2011

$283,735

306,356 $2,973,761 $(332,406)$43,876$(79,324)$6,632$10,853

Net income——

321,294

—

—

—

—

—

Purchase of treasury stock

—

—

—

(13)

—

—

—

—

Dividends from surplus——(93,924)

—

—

—

—

—

—

—

—

—

7,442

(12,433)

1,349(1,775)$306,356 $3,201,131 $(332,419)$51,318$(91,757)$7,981$9,078Net changes of items other than   shareholders’ equity
Balance at March 31, 2012

See accompanying notes.

38

JSR Corporation Annual Report 2012

$283,735

BUSINESS
GOVERNANCE
FINANCIALCORPORATE DATA

Consolidated Statements of Cash FlowsJSR Corporation and Consolidated Subsidiaries

02-18
21-27
28-57
58-59

Years ended March 31, 2010, 2011 and 2012

Thousands of
U.S. dollars(Note 1)Millions of yen
Cash flows from operating activities:
Income before income taxes and minority interests
Adjustments to reconcile income before income taxes and   minority interests to cash provided by operating activities:
Depreciation and amortization
Interest and dividends income
Interest expenses
Equity in earnings of affiliates
Gain on sales of noncurrent assets
Loss on abandonment of noncurrent asset
Impairment loss
Loss on valuation of investment securities
Loss on disaster
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, net
SubtotalInterest and dividends income received
Interest expenses paid
Income taxes paid
Net cash provided by operating activities
Cash flows from investing activities:
Decrease(increase) in time deposits
Purchase of short-term investment securities
Purchase of noncurrent assets
Proceeds from sales of noncurrent assets
Purchase of stocks of subsidiaries and affiliates
Payments of 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 loans payable
Purchase of treasury stock
Cash dividends paid
Cash dividends paid to minority shareholders
Other, net
Net cash used in financing activities
Effect of exchange rate change 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)

2010

2011

2012

2012

¥19,458¥40,674¥41,245$501,820

22,380(568)
172(1,764)—————

19,245(626)
146(3,206)
—
—
—
1,063
445

17,784(634)
147(4,730)(4,288)
1,182
1,920
—
816

216,376(7,709)1,788(57,548)(52,169)
14,38723,357—
9,932(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(16,250)(7,629)18,510(6,274)
41,7992,219(146)(14,891)
28,981(197,709)(92,817)225,206(76,340)
508,574
26,992(1,780)(181,179)
352,607(1,907)(6,000)(18,982)——(3,548)2,618
476(27,343)(15,000)(8,500)(13,309)612(19)(1,948)2,530
515(35,119)

8,491(12,000)(16,564)
4,401(4,851)(2,538)2,277(346)(21,130)

103,311(146,003)(201,536)
53,546(59,017)(30,886)
27,700(4,207)(257,092)

(221)
(4)
(2)
(7,082)(11)(5)(7,325)37
24,024
37,125(158)(25)(5,114)(7,084)(15)
80(12,316)
(890)
5,934
61,404

107
(56)
(1)
(7,721)(10)(13)(7,694)(421)(264)
67,462

1,311
(673)
(13)
(93,939)
(127)
(156)
(93,597)(5,125)(3,207)
820,803

255¥61,404

124¥67,462—¥67,198—$817,596

See accompanying notes.
JSR Corporation Annual Report 201239

Notes to Consolidated Financial Statements
JSR Corporation and Consolidated Subsidiaries
Years ended March 31, 2010, 2011 and 2012

1. Basis of Consolidated Financial Statements

ity, and Excel Tokai Co., Ltd. has been excluded from the scope of

The accompanying consolidated financial statements of JSR Cor-

consolidation since 2010 due to transfer of all the shares.

poration (the “Company”) and its consolidated subsidiaries have

Effective June 16, 2009, JSR Service Co., Ltd. merged JNT Sys-

been prepared in accordance with the provisions set forth in the

tem Co., Ltd. and altered corporate name to JSR Business Service

Japanese Securities and Exchange Law and its related accounting

Co., Ltd.

regulations, and in conformity with accounting principles gener-(b) Equity method — Investments in affiliated companies (allally accepted in Japan (“Japanese GAAP”), which are different inof those 20% to 50% owned and certain others 15% to 20%

certain respects as to application and disclosure requirements ofowned) were accounted for by the equity method (6 affiliatedInternational Financial Reporting Standards.

companies in 2010, 2011 and 2012). Unconsolidated subsidiaries

The accounts of the Company’s overseas subsidiaries and affili-

and the other affiliated companies are stated at cost since theirates are based on their accounting records maintained in conform-

net income and retained earnings in the aggregate are not mate-

ity with generally accepted accounting principles prevailing in the

rial compared to consolidated net income and retained earnings,

respective countries of domicile and make necessary amendments

respectively.

for consolidated financial statements required by Practical Issues(c) Cash and cash equivalents — In preparing the consolidated

Task Force No.18 issued by ASBJ. The accompanying consolidated

statements of cash flows, cash on hand, readily available depos-

financial statements have been restructured and translated into

its and short-term highly liquid investments with maturities not

English (with some expanded descriptions) from the consolidated

exceeding three months at the time of purchase are considered tofinancial statements of the Company prepared in accordance

be cash and cash equivalents.

with Japanese GAAP and filed with the appropriate Local Finance(d) Short-term securities and investment securities — The

Bureau of the Ministry of Finance as required by the JapaneseCompany and its consolidated subsidiaries (the “Companies”) had

Securities and Exchange Law. Some supplementary information

no trading securities or held-to-maturity debt securities. Equity se-

included in the statutory Japanese language consolidated financial

curities issued by subsidiaries and affiliated companies, which arestatements, but not required for fair presentation, is not presented

not consolidated or accounted for using the equity method, arein the accompanying consolidated financial statements.

stated at moving-average cost. Available-for-sale securities with

The translations of the Japanese yen amounts into U.S. dollars

available fair market values are stated at fair market value andare included solely for the convenience of readers outside Japan,

unrealized gains and losses on these securities are reported, net

using the prevailing exchange rate at March 31, 2012, which wasof applicable income taxes, as a separate component of net assets¥82.19 to U.S.$1.00. The convenience translations should not be

via the Consolidated Statements of Comprehensive income (Seeconstrued as representations that the Japanese yen amounts have(u) Consolidated Statements of Comprehensive Income). Realized

been, could have been, or could in the future be, converted into

gains and losses on sale of such securities are computed using

U.S. dollars at this or any other rate of exchange.

moving-average cost. Available-for-sale securities with no available
fair market values are stated at moving-average cost or amortized

2. Summary of Significant Accounting Policies

cost.

(a) Consolidation — The accompanying consolidated financial(e) Inventories — Inventories are stated at cost, which is deter-statements include the accounts of the Company and its signifi-

mined mainly based on the average method (for the value statedcant subsidiaries (28 subsidiaries in 2010, 2011 and 2012).

on the balance sheet, book value is written down to reflect the

All significant intercompany accounts and transactions havebeen eliminated in consolidation.
Techno Polymer Guangzhou has been consolidated since 2011(f) Property, plant and equipment, and depreciation —Property, plant and equipment are stated at cost. Depreciation

due to increase of materiality, and Kyushu Gomu Kako Co., Ltd.

is computed using the declining-balance method at rates based

has been excluded from the scope of consolidation since 2011

on their estimated useful lives except for buildings acquired after

due to completion of liquidation.

March 31, 1998, which are depreciated based on the straight-line

JM Energy Corporation and JSR Trading (Shanghai) Co., Ltd.
have been consolidated since 2010 due to increase of material-

40

lower profitability).

JSR Corporation Annual Report 2012

method.
(g) Intangible assets — Goodwill is amortized by the straight-line

BUSINESS
GOVERNANCE
FINANCIALCORPORATE DATA

method over the estimated useful lives up to twenty years.

02-18
21-27
28-57
58-59

ing purposes are reflected as deferred income taxes in the consoli-

Software for its own use is amortized over the estimated useful

dated financial statements using the asset and liability method.

life (five years) using the straight-line method.

(n) Derivative and hedging activities — The Companies use(h) Leased assets — Assets of finance leases are depreciated overderivative financial instruments to manage their exposures to fluc-the lease term using the straight-line method that residual value istuations in foreign exchange and interest rates. Foreign exchange

zero.

forward contracts, foreign currency swaps and interest rate swaps(i) Allowance for doubtful accounts — Allowance for doubtful

are utilized by the Companies to reduce foreign currency ex-

accounts is provided in amounts sufficient to cover possible losses

change and interest rate risks. The Companies do not enter intoon collection. Allowance for doubtful accounts consists of the esti-

derivatives for trading purposes or speculative purposes. Derivativemated uncollectible amount with respect to specific items, and thefinancial instruments and foreign currency transactions are classi-

amount calculated using the actual percentage of collection losses

fied and accounted for as follows:in the past with respect to other items.

(i) All derivatives are recognized as either assets or liabilities(j) Provision for retirement benefits — Employees of theand measured at fair value, and gains or losses on theseCompanies are entitled, under most circumstances, to lump-derivative transactions are recognized in the consolidated

sum severance payments or pension payments upon reaching thestatements of income.

mandatory retirement age, or earlier in the case of voluntary or(ii) For derivatives used for hedging purposes, if derivatives

involuntary termination, based on the compensation at the timequalify for hedge accounting because of high correlationof severance and years of service.

and effectiveness between the hedging instruments and

The Companies provided provision and expenses for employees’ severance and retirement benefits at year-end based on thethe hedged items, gains or losses on these derivatives aredeferred until maturity of the hedged transactions.

estimated amounts of projected benefits obligation and the fair      The interest rate swaps that qualify for hedge account-value of the pension assets.

ing and meet specific matching criteria are not remeasured

The prior service costs are recognized as expenses using theat market value, but the differential paid or received understraight-line method over three years, which falls within thethe swap agreements is recognized and included in interest

estimated average remaining service lives, commencing with theexpense or income as incurred.

following period. Actuarial differences are recognized as expenses(o) Foreign currency transactions — The Companies trans-

at once in the following period.

late assets and liabilities denominated in foreign currencies into(i) The accounting change

Japanese yen at exchange rates prevailing at the balance sheet

Effective for the year ended March 31, 2010, the Companies

dates. Resulting exchange gains or losses are credited or charged

adopted “Partial Amendments to Accounting Standard forto income as incurred.

Retirement Benefits (Part 3)” (Statement No. 19 by ASBJ on(p) Translation of foreign currency financial statements —July 31, 2008). The impact of this change did not have a

Financial statements of overseas subsidiaries are translated intomaterial effect on net income.

Japanese yen using the respective year-end rate for assets and(k) Provision for environmental measures — A provision for

liabilities, the average rate for revenues and expenses, and theenvironmental measures is provided based on estimated costs forhistorical rates for shareholders’ equity accounts. Foreign currency

the disposal of polychlorinated biphenyl (PCB) as mandated by thetranslation adjustments are contained in accumulated other com-

Law Concerning Special Measures Against PCB Waste.

prehensive income and minority interests.

(l) Provision for loss on disaster — A provision for loss on disas-(q) Amounts per share of common stock — The computation

ter is provided for estimated expenditure of restoring the facilitiesof net income per share of common stock is based on the averagedamaged by Great East Japan Earthquake.

number of shares outstanding during each fiscal year. Treasury(m) Income taxes — The Companies provide for income taxes

stock has been excluded in the calculation of amounts per share

applicable to all items included in the consolidated statements ofof common stock.

income regardless of when such taxes are payable. Income taxes
based on temporary differences between tax and financial report-

Cash dividends per share represent actual amounts applicableto the respective years.

JSR Corporation Annual Report 201241

(r) Practical solution on unification of accounting policies

ing Standard for Accounting Changes and Error Corrections

applied to foreign subsidiaries for consolidated financial(Guidance No. 24 by ASBJ  on December 4, 2009) for accounting

statements —changes and corrections of prior period errors which are made(i) The accounting change

from the fiscal year beginning on April 1, 2011.

Effective April 1, 2010, the company adopted “”Account-(u) Consolidated Statements of Comprehensive Income —ing Standard for Equity Method of Accounting for invest-

Effective for the year ended March 31, 2011, the Companies

ments”” (Statement No.16 by ASBJ on March 10, 2008),

adopted “Accounting Standard for Presentation of Comprehen-and “”Practical Solution on Unification of Accounting Poli-sive Income” (Statement No. 25 by ASBJ on June 30, 2010).

cies Applied to Associates Accounted for Using the Equity

Accordingly, the Company prepared the Consolidated Statements

Method “”(ASBJ Practical Issues Task Force No. 24 issued onof Comprehensive Income for the year ended March 31, 2010,

March 10, 2008).

2011 and 2012.

      According to this change, the company integrated ac-(v) Asset Retirement Obligations — Effective April 1, 2010, thecounting treatment between investing company and eq-

Company adopted “Accounting Standard for Asset Retirementuity method affiliates in principle. And the company madeObligations” (Statement No.18 by ASBJ on March 31, 2008), andnecessary adjustments for significant differences between“Guidance on Accounting Standard for Asset Retirement Obliga-

Japanese GAAP and U.S. GAAP or IFRS about foreign equity

tions” (Guidance No. 21 by ASBJ on March 31, 2008). The adop-

method affiliates. The adoption of this rule did not have ation of this rule had no significant effect on net income.

material effect on net income.

(w) Segment Information — Effective April 1, 2010, the(s) Reclassifications — Certain prior year amounts have been

Company adopted “Accounting Standard for Disclosures about

reclassified and restated to conform to the current year presenta-

Segments of an Enterprise and Related Information (Statementtion.

No.17 by ASBJ on March 27, 2009) and “Guidance on Account-

These reclassifications and restatements had no effect on pre-ing Standard for Disclosures about Segments of an Enterprise andviously reported results of operations or retained earnings.

Related Information” (Guidance No. 20 by ASBJ on March 21,(t) Accounting Standards for Accounting Changes and Error2008). As a result, the Company disclosed segment information

Corrections — The Companies adopted “”Accounting Standard

based on classification for a management decision and perform-

for Accounting Changes and Error Corrections””(Statement No.

ance evaluation.

24 by ASBJ on December 4, 2009) and “”Guidance on Account-

3. Cash and Cash Equivalents
Cash and cash equivalents at March 31, 2010, 2011 and 2012 consisted of the following:Thousands of
U.S. dollars

Millions of yen

Cash and deposits
Short-term investment securities
Time deposits over three months
Current assets : Other
Cash and cash equivalents

2010

2011

2012

2012

¥36,677
34,000(9,273)—¥61,404¥ 44,238
55,996(32,772)—¥ 67,462¥ 20,490
69,496(36,281)
13,493¥ 67,198$ 249,304
845,554(441,434)
164,172$ 817,596

4. Allowance for doubtful accounts
Allowance for doubtful accounts as of March 31, 2011 and 2012 were as follows:
Thousands of
U.S. dollars

Millions of yen

42

Allowance for doubtful accounts

2011

2012

2012

Current asset : Notes and accounts receivable — trade
Investments and other assets : Other¥(751)(84)¥(719)(323)$(8,745)(3,926)JSR Corporation Annual Report 2012

BUSINESS
GOVERNANCE
FINANCIALCORPORATE DATA

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, 2011 and 2012.

02-18
21-27
28-57
58-59

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

Millions of yen
Book value

Fair value

March 31, 2011:(1) Cash and deposits(2) Notes and accounts receivable — trade(3) Short-term investment securities and investment securities(4) Current assets : other (short-term loans receivable)      Total assets(5) Notes and accounts payable — trade(6) Short-term loans payable      Total liabilities

Difference¥     44,238
74,07574,531—¥   192,844
65,381
14,612¥     79,993¥     44,238
74,07574,480—¥   192,793
65,381
14,612¥     79,993¥   ­——(51)—¥  (51)——¥   —March 31, 2012:(1) Cash and deposits(2) Notes and accounts receivable — trade(3) Short-term investment securities and investment securities(4) Current assets : other (short-term loans receivable)      Total assets(5) Notes and accounts payable — trade(6) Short-term loans payable      Total liabilities¥     20,490
89,91388,54813,493¥   212,444
83,077
15,184¥     98,261¥     20,490
89,91388,481
13,493¥   212,377
83,077
15,184¥     98,261

¥   —
—
(67)
—
¥  (67)——¥   —

Thousands of U.S. dollars

March 31, 2012:(1) Cash and deposits(2) Notes and accounts receivable — trade(3) Short-term investment securities and investment securities(4) Current assets : other (short-term loans receivable)      Total assets(5) Notes and accounts payable — trade(6) Short-term loans payable      Total liabilities
1. Method to determine the estimated fair values of financial instruments and other matters related to securities and derivativetransactions(1) Cash and cash equivalents, and time deposits
The carrying values of cash and cash equivalents, and time
deposits approximate fair value because of their short maturities.
(2) Notes and accounts receivable — trade
The carrying values of notes and accounts receivable —trade approximate fair value because of their short maturities$   249,304
1,093,960
1,077,355
164,171$2,584,790
1,010,792
184,742$1,195,534$   249,304
1,093,960
1,076,536
164,171$2,583,971
1,010,792
184,742$1,195,534$    ——(819)—$(819)——$    —(3) Short-term investment 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. Negotiable deposit, commercial
paper and cash in trust approximate fair value.
(4) Current assets — other (short-term loans receivable)
The carrying values of short-term loans receivable approximate fair value because of their short maturities(5) Notes and accounts payable — trade
The carrying values of notes and accounts payable — tradeapproximate fair values because of their short maturities.
(6) Short-term loans payable
Short-term loans payable approximate fair value.

JSR Corporation Annual Report 201243

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

Millions of yen

Non-listed equity securities

2011

2012

2012

¥10,531¥18,077$219,945

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

March 31, 2011:(1) Cash and deposits(2) Notes and accounts receivable — trade(3) Short-term investment securities and   investment securities available-for-sale   securities with fixed maturities
Total
March 31, 2012:(1) Cash and deposits(2) Notes and accounts receivable — trade(3) Short-term investment securities and   investment securities vailable-for-sale   securities with fixed maturities
Total

Due
withinone year

Due after
one year
and within
five years

Due after
five years
and within
ten years

Dueover tenyears¥     23,073
74,075¥   200
—

¥  —
—

¥  —
—

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

—
¥  —

—
¥  —

55,996¥   153,344¥       9,581
89,913¥   200
—

¥  —
—

¥  —
—

¥       9,781
89,91369,496¥   168,990—¥   200

—
¥  —

—
¥  —

69,496¥   169,190

Total

Thousands of U.S. dollars

March 31, 2012:(1) Cash and deposits(2) Notes and accounts receivable — trade(3) Short-term investment securities and   investment securities available-for-sale securities
   with fixed maturities
Total$   116,577
1,093,960$2,433
—

$  —
—

$  —
—

$   119,010
1,093,960

845,554$2,056,091—$2,433

—
$  —

—
$  —

845,554$2,058,524

4. See Note 7 for scheduled repayments of long term debt and lease liability.

44

JSR Corporation Annual Report 2012

BUSINESS
GOVERNANCE
FINANCIALCORPORATE DATA

02-18
21-27
28-57
58-59

6. Short-term Investment Securities and Investment Securities(1) The following tables summarize the acquisition cost and book value of available-for-sale securities with available fair value as ofMarch 31, 2011 and 2012:(a) Securities with book value exceeding acquisition cost
Millions of yen
2011

Equity securities

Acquisition cost

Book value

Difference¥  11,384¥17,549¥6,165

Millions of yen
2012

Equity securities

Acquisition cost

Book value

Difference¥9,122¥16,119¥6,997

Thousands of U.S. dollars
2012

Equity securities

Acquisition cost

Book value

Difference$110,990$196,117$85,127(b) Securities with book value not exceeding acquisition cost
Millions of yen
2011

Equity securities

Acquisition cost

Book value¥  598¥  517

Difference¥  (81)Millions of yen
2012

Equity securities

Acquisition cost

Book value

Difference¥    2,809¥    2,437¥   (372)

Thousands of U.S. dollars
2012

Equity securities

Acquisition cost

Book value

Difference$   34,179$  29,655$    (4,524)(2) Total sales of available-for-sale securities sold and the related gains and losses for the years ended March 31, 2010, 2011 and 2012
are as follows:
Thousands of
U.S. dollars

Millions of yen

Total sales
Gain
Loss

2010

2011

2012

2012

¥177
37
—

¥200
104
—

¥29
10
—

$355
119
—

JSR Corporation Annual Report 201245

7. Short-Term Loans Payable and Long-Term Loans Payable
Short-term loans payable represent primarily overdrafts from banks bearing interest at 0.8% per annum (weighted average interest rate)
at March 31, 2011 and 2012.
Long-term loans payable at March 31, 2011 and 2012 consisted of the following:Thousands of
U.S. dollars

Millions of yen

Loans principally from banks and insurance companies due through2017 with interest rates 1.3% and 0.9% per annum(weighted average interest rate) in 2011and 2012, respectively:
SecuredUnsecuredLess amount due within one year

Lease liabilityLess amount due within one year

2011

2012

2012

¥       1
1,570
1,571
(543)
¥1,028¥         1
1,506
1,507
(1,007)¥     500$         1218,32918,341(12,257)$    6,08443(12)¥     3134
(13)¥       21

418
(158)
$       260

At March 31, 2012, property, plant and equipment, at book value of ¥7,308 million ($88,928 thousand) were pledged as collateralfor secured loans.
The annual maturities of long-term debt at March 31, 2012 were as follows:
Millions of yen
Year ending March 31,

2013
2014
2015
2016
2017
2018 and thereafter46

JSR Corporation Annual Report 2012

Thousands of U.S. dollars

Long-term loans
payableLease liability¥1,007———500—¥1,507

¥13
10
8
3
0
—
¥34

Long-term loans
payable$12,257
—
—
—
6,084
—
$18,341

Lease liability

$158
121
96
41
2
—
$418

BUSINESS
GOVERNANCE
FINANCIALCORPORATE DATA

02-18
21-27
28-57
58-59

8. Employees’ Severance and Retirement Benefits
Provision for retirement benefits included in the liability section of the consolidated balance sheets as of March 31, 2011 and 2012 consisted of the following:													Millions of yen		Projected benefit obligation
Less fair value of pension assets
Unfunded retirement benefit liabilities
Unrecognized actuarial differences
Net retirement benefit liabilities
Provion for retirement benefits

Thousands of
U.S. dollars

2011

2012

2012

¥48,734(34,684)
14,050126
14,176¥14,176¥49,994(34,768)
15,226(1,259)13,967¥13,967$608,271(423,019)
185,252(15,317)
169,935$169,935

Included in the consolidated statements of income for the years ended March 31, 2010, 2011 and 2012 were retirement benefit
expenses consisting of the following:															 Millions of yen

Thousands of
U.S. dollars

2010

2011

2012

2012

Service costs-benefits earned during the year
Interest cost on projected benefits obligation
Expected return on plan assets
Amortization of actuarial differences
Retirement benefit expenses¥1,758
946
(324)
1,679
¥4,059¥ 1,953965(275)(1,220)¥ 1,423¥1,984
940
(278)
(125)
¥2,521$24,137
11,440(3,384)(1,524)$30,669

The discount rates used by the Companies for the years ended
March 31, 2011 and 2012 are mainly 2.1% and 1.8%, respectively. The rates of expected return on plan assets used by the Companies for the years ended March 31, 2011 and 2012 are mainly

0.9%. The estimated amount of all retirement benefits to be paid
at the future retirement date is allocated equally to each service
year using the estimated number of total service years.

9. Income Taxesin the period from Aplil 1, 2012 to March 31, 2015 is 38.0% andfor periods subsequent to March 31, 2015 is 35.6%. As a result of
this change, deferred tax assets decreased by ¥568 million ($6,911
thousand). Income taxes—deferred and unrealized gains on securities increased by ¥902 million ($10,976 thousand), ¥334 million($4,065 thousand) for the year ended March 31, 2012 respectively.
The following table summarizes the significant differences
between the statutory income tax rate and the Companies’ effective tax rates for financial statement purposes for the years ended
March 31, 2010, 2011 and 2012:

Income taxes in the accompanying consolidated statements ofincome comprise corporation, enterprise and inhabitants’ taxes.
The statutory income tax rate was approximately 40.7%.
Amendments to the Japanese tax regulations were enacted
into law on December 2, 2011. As a result of these amendments,
the statutory income tax rate will be reduced from 40.7% to38.0% effective from the year beginning April 1, 2012, and to35.6% effective from the year beginning April 1, 2015, thereafter.
Consequently, the statutory income tax rate utilized for deferred tax assets and liabilities expected to be settled or realized

JSR Corporation Annual Report 201247						

2010

2011

2012

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

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

40.7%
(3.2)
(3.3)
(2.9)
—
—
0.7
32.0%

40.7%
(4.7)
(3.4)
(2.2)
2.7
2.2
0.6
35.9%

Significant components of the Companies’ deferred tax assets and liabilities as of March 31, 2011 and 2012 were as follows:													Millions of yen		

48

Thousands of
U.S. dollars

2011

2012

2012

Deferred tax assets:
Provision for retirement benefits
Loss carried forward
Impairment loss
Accured bonuses
Provision for environmental measures
Unrealized gain on sale of noncurrent assets
Unrealized gain on sale of inventories
Other					 Sub-total		
Valuation allowance
Total deferred tax assets¥ 5,709
2,027
1,346
1,642
1,202
907
1,097
3,152
17,082(2,351)
14,731¥ 4,925
2,162
1,543
1,527
962
842
825
3,336
16,122(2,983)
13,139$ 59,925
26,306
18,77918,578
11,702
10,24910,03240,585
196,156(36,298)
159,858

Deferred tax liabilities:
Deferred gain on sale of noncurrent assets
Unrealized gains on securities
Other			Total deferred tax liabilities
Net deferred tax assets(2,560)(2,473)(642)(5,675)¥ 9,056(3,163)(2,358)(909)(6,430)¥ 6,709(38,487)(28,691)(11,060)(78,238)$ 81,620

JSR Corporation Annual Report 2012

BUSINESS
GOVERNANCE
FINANCIALCORPORATE DATA

02-18
21-27
28-57
58-59

10. Gain on Sales of Noncurrent Assets
Gain on sales of noncurrent assets is as follows:															 Millions of yen

Thousands of
U.S. dollars

2010

2011

2012

2012

¥—

¥—

¥4,288$52,169

Land				11. Impairment loss of Noncurrent Assets
The Companies recognized impairment losses on the following group of noncurrent assets for the year ended March 31, 2011 and 2012.
												Millions of yen

					

2011

				
				
Use
Location
Land

Machinery, 		equipment and		
vehicles
Other

Facility for plastic products

Yokkaichi City, Mie Prefecture¥—

Buildings andstructures

¥ 92

¥71

¥ 2

					

Millions of yen

					

2012

				
				
Use
Location
Land

Machinery, 		equipment and		
vehicles
Other

Assets for fine chemical business
Manufacturing facilities for elastomers

Hidaka City, Saitama Prefecture
Yokkaichi City, Mie Prefecture¥1,141—

Buildings andstructures

¥225
104

¥   —
448

¥—
2

					

Thousands of U.S. dollars

					

2012

				
				
Use
Location
Land

Machinery, 		equipment and		
vehicles
Other

Assets for fine chemical business
Manufacturing facilities for elastomers

Hidaka City, Saitama Prefecture
Yokkaichi City, Mie Prefecture

The impariment loss for the year ended March 31, 2011, is
included in restructuring charges of ¥422 million in the otherexpenses section of the consolidated statement of income. 		
The Companies have grouped their noncurrernt assets into

$13,882—

Buildings andstructures$2,732
1,266$     —
5,448

$—
29

Total

¥ 165

Total

¥1,366554

Total$16,614
6,743

business units. Noncurrent assets that are idle or not being used
for business activities are assessed individually. The book value ofmachinery and equipment etc. was written down to its recoverable value.

JSR Corporation Annual Report 201249

12. Loss on Disaster
Loss on disaster for the year ended March 31, 2011, included thefollowing items in relation to the Great East Japan Earthquake. Estimated amounts of expenditures for restoring the dameged facilities (mainly loading berth at Kashima Plant), loss on inventories andothers were ¥401 million, ¥39 million and ¥5 million, respectively.
Loss on disaster for the year ended March 31, 2012, mainly
included expenses relevant to facilities (mainly at Kashima Plant)that had been inactive by Great East Japan Earthquake.

13. Comprehensive Income
Amounts reclassified to net income in the current period that were recognized in other comprehensive income in the current or previous
periods and tax effects for each component of other comprehensive income were as follows:																			Millions of yen		

2012

2012

Unrealized gains in securities:
		Occurrence amount				Recycling					Total				

¥ 518
21
¥ 539

$ 6,296260$ 6,556

Foreign currency translation adjustments
		Occurrence amount				Total				¥(619)¥(619)$(7,537)$(7,537)

Share of other comprehensive income of associates accounted for using equity method		Occurrence amount				Total				¥(454)¥(454)$(5,523)$(5,523)¥(534)¥ 115¥(419)$(6,504)$ 1,397$(5,107)

Total other comprehensive income before tax		
Tax effect				Other comprehensive income, net of tax		
All tax effect of other comprehensive income arise from unrealized gains on securities.

14. 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.

50

Thousands of
U.S. dollars

JSR Corporation Annual Report 2012

Additional paid-in capital and all legal earnings reserve may betransferred to other capital surplus and retained earnings, respectively, which are potentially available 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 15, 2012,
the shareholders resolved cash dividends amounting to ¥3,860
million ($46,962 thousand). Such appropriations have not been
accrued in the consolidated financial statements as of March 31,
2012. Such appropriations are recognized in the period in which
they are resolved.

BUSINESS
GOVERNANCE
FINANCIALCORPORATE DATA

02-18
21-27
28-57
58-59

15. 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, 2012
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

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, 2012
Exercise price per share		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

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, 2012
Exercise price per share		June 17, 2011
81,000 shares
From July 13, 2011
to July 12, 2031
81,000 shares
¥1
$0.01

The compensation cost recognized for these stock options for the years ended March 31, 2010, 2011 and 2012 was ¥116 million,¥118 million and ¥111 million ($1,349 thousand) respectively, and was included in selling, general and administrative expenses in the
consolidated statements of income.

16. Derivative Transactions(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.
(2) Quantitative disclosure about derivatives
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.

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
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 fluctuations ininterest rates. Due to the fact that counterparties to the Companies 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.

Contract amounts, market values and recognized gains orlosses on the derivative transactions, except those accounted
for using hedge accounting, at March 31, 2011 and 2012were as follows:

JSR Corporation Annual Report 201251

(a) Related to currencies					Millions of yen																	Contract amountOver one year
Market value

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, Taiwan dollar				 Total¥2,528
546

¥

¥

—
—

¥ 2,536
573

266
101
9

—
—
—

269
105
9

3
4
0

2,909
—

1,805
¥ —

613
—

613
¥ 585

					

¥

¥4,467
587

¥

223
59
21
1,806
¥     —					¥JSR Corporation Annual Report 2012

Recognized
gains or losses¥ 4,525611¥ (58)
(24)

—
—
—

224
63
22

1
4
1

—
—

410
¥      —

410
¥ 334

Thousands of U.S. dollars
Recognized
gains or losses$54,348
7,137$     ——

$55,052
7,436$ (704)
(299)

2,711
—
250

—
—
—

2,730
765
271

19
44
21

21,972$        —

—$     —

4,994$        —4,994$4,075Market values are calculated using foreign exchange forward rates.

52

(8)
(27)

—
—

																	Contract amountOver one year
Market value

March 31, 2012:
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, Taiwan dollar				 Total¥

Millions of yen																	Contract amountOver one year
Market value

March 31, 2012:
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, Taiwan dollar				 Total

Recognized
gains or losses

BUSINESS
GOVERNANCE
FINANCIALCORPORATE DATA

02-18
21-27
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58-59

(b) Related to interests						

Millions of yen					Contract amountOver one year

Market value¥ 1,000¥ 1,000¥1,000¥1,000¥8¥8March 31, 2011:
Special treatment for interest rate swaps
Interest rate swaps (paid floating / received fix)
(Hedged item: Long-term loans payable)
		 Total						

Millions of yen					Contract amountOver one year

Market value¥ 1,000¥ 1,000¥      —
¥      —

¥5
¥5

March 31, 2012:
Special treatment for interest rate swaps
Interest rate swaps (paid floating / received fix)
Hedged item: Short-term loans payable)
		 Total						

					
March 31, 2012:
Special treatment for interest rate swaps
Interest rate swaps (paid floating / received fix)
(Hedged item: Short-term loans payable)
		 TotalThousands of U.S. dollars

Contract amountOver one year

Market value$12,167$12,167$      —
$      —

$56
$56

17. Information for Certain Lease Payments
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 accounted 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):													Millions of yen		Machinery, equipment and vehicles:
Purchase price equivalent
Accumulated depreciation equivalentBook value equivalent
Tools, furniture and fixtures:
Purchase price equivalent
Accumulated depreciation equivalentBook value equivalent
Total:
Purchase price equivalent
Accumulated depreciation equivalentBook value equivalentThousands of
U.S. dollars

2011

2012

2012

¥134
117
¥ 17

¥3
3
¥0

$  40
34
$    6

¥ 37
31
¥ 6

¥5
5
¥0

$  62
61
$    1

¥171
148
¥ 23

¥8
8
¥0

$102
95
$    7(2) Lease commitments (including the interest portion thereon):													Millions of yen		Due within one year
Due over one year					Thousands of
U.S. dollars

2011

2012

2012

¥22
1
¥23

¥  1
—
¥  1

$  8
—
$  8

JSR Corporation Annual Report 201253

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

2010

2011

2012

2012

¥56
56

¥35
35

¥22
22

$273
273

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.

18. Contingent Liabilities
At March 31, 2012, the Company and certain consolidated subsidiaries were contingently liable as guarantors for loans of employees andothers in the amount of ¥19 million ($235 thousand).

19. Research and Development Expenses
Research and development expenses of the Companies for theyears ended March 31, 2010, 2011 and 2012 were ¥18,052 mil-

20. Segment Information
As described in Note 2. (w), the companies change the methodology of presentation of Segment information. The main point
is to have included Emulsions segment in Elastomers segment.
Therefore, the Companies’ business segments are classified into
the following three business segments: (1) Elastomers business, (2)lion, ¥16,939 million and ¥17,373 million ($211,373 thousand),
respectively, which are included in selling, general and administrative expenses or manufacturing costs.
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, 2010, 2011 and 2012 were as follows:

					

54

Millions of yen																														
Elastomers
Plastics

Fine			chemicals		and other		
products
Total
Reconciliation

For 2010:
Sales to external customer		Inter-segment sales/transfers		
Operating income		
Identifiable assets		
Depreciation and amortization		Impairment loss		Capital expenditures		
Amortization of goodwill		Goodwill				¥136,086
3,386
¥
372
¥145,110
9,007
211
6,376
—
—

¥47,812—¥(1)¥31,895
1,450
—
922
44
841

¥126,286—¥ 19,859¥123,844
11,923—
10,409——¥310,184
3,386¥ 20,230¥300,849
22,380211
17,70744841¥—(3,386)¥—¥ 72,717—————¥ 310,184—¥ 20,230¥ 373,566
22,380211
17,70744841

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				¥160,854
4,331¥ 14,739¥145,293
8,516
—
5,123
—
—

¥52,297—¥ 2,563¥32,170
1,320
165
1,286
44
797

¥127,515—¥ 21,793¥109,682
9,409
—
5,392
—
—

¥340,666
4,331¥ 39,095¥287,145
19,245165
11,801
44797¥¥ 340,666—¥ 39,095¥ 390,591
19,245165
11,801
44797

JSR Corporation Annual Report 2012—
(4,331)¥—¥103,446—————

Consolidated

BUSINESS
GOVERNANCE
FINANCIALCORPORATE DATA					For 2012:
Sales to external customers		
Inter-segment sales/transfers		
Operating income		
Identifiable assets		
Depreciation and amortization		Impairment loss		Capital expenditures		
Amortization of goodwill		Goodwill				

02-18
21-27
28-57
58-59

Millions of yen¥180,835
4,887¥  19,358¥181,673
8,377
554
9,642
—
—

¥51,236—¥  2,138¥34,146
1,333
—
1,035
44
753

¥117,876—¥  14,468¥106,706
8,074
1,366
9,051
—
—

									¥349,947
4,887¥  35,964¥322,525
17,784
1,920
19,72844753¥          —(4,887)¥          —¥108,168—————¥349,947—¥  35,964¥430,693
17,784
1,920
19,72844753

Thousands of U.S. dollars

For 2012:
Sales to external customers		 $2,200,204
Inter-segment sales/transfers		
59,458Operating income		 $   235,529
Identifiable assets		 $2,210,399
Depreciation and amortization		
101,920
Impairment loss		
6,743
Capital expenditures		
117,308$623,389—$  26,015$415,451
16,220—12,596$1,434,187—$   176,033$1,298,283
98,237
16,614
110,124$4,257,780
59,458$   437,577$3,924,133
216,377
23,357240,028$            —(59,458)$            —$1,316,074———$4,257,780—$   437,577$5,240,207
216,376
23,357240,028

—
—

539
9,158

—
—

539
9,158

—
—

539
9,158

Amortization of goodwill		Goodwill				

Assets in reconciliation are related mainly to Cash, Short-term investment securities and Investment securities of the Company.
Geographic segment information with respect to net sales for the years ended March 31, 2010, 2011 and 2012 were as follows:							

							For 2010:			
For 2011:			
For 2012:

Millions of yenJapan¥171,305¥190,031¥196,470								For 2012:$2,390,441

Others¥138,879¥150,635¥153,477

Total¥310,184¥340,666¥349,947

Thousands of U.S. dollars$1,867,339$4,257,780

JSR Corporation Annual Report 2012

55

The geographical segments consist of Japan and Others. Japan has been divided as independent segments considering the materialityof the sales. Main countries included in Others segment were as follows:
Korea, China, Taiwan, Thailand, United States, Belgium
Geographic segment information with respect to property, plant and equipment for the years ended March 31, 2010, 2011 and 2012were as follows:																	For 2010:			
For 2011:			
For 2012:

Millions of yenJapan¥79,249¥70,713¥69,317

Others¥ 9,072¥ 9,135¥11,187								For 2012:			

Total¥88,321¥79,848¥80,504

Thousands of U.S. dollars$843,373$136,121$979,494

Major customer information with respect to sales for the years ended March 31, 2010, 2011 and 2012 were as follows:							

									For 2010:			
For 2011:			
For 2012:

Millions of yen

Customer Name
BRIDGESTONE Corporation
BRIDGESTONE Corporation
BRIDGESTONE Corporation								For 2012:

Segment
Elastomers
Elastomers
Elastomers

Sales¥28,025¥34,496¥40,527

Thousands of U.S. dollars

BRIDGESTONE Corporation

Elastomers$493,089

21. Related Parties
Significant transactions and balances with related parties as of and for the years ended March 31, 2010, 2011 and 2012 were as follows:													Millions of yen			

Thousands of
U.S. dollars

2010

2011

2012

BRIDGESTONE Corporation (a major shareholder):Sales					Notes and accounts receivable—trade, net¥27,749
13,328¥34,261
11,793¥40,090
17,382$487,768
211,487

Tobu Butadiene Co., Ltd. (an affiliated company):
Purchases		
Notes and accounts payable—trade
Supply of raw material gas
Accounts receivable—other

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

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

11,152
6,251
9,421
5,212

135,687
76,057
114,621
63,418——

11,323
4,135

9,930
5,083

120,823
61,839KRATON JSR Elastomers K.K. (an affiliated company):
Purchases		
Notes and accounts payable—trade2012

22. Subsequent Events
At the June 15, 2012 annual meeting, the Companies’ shareholders approved the following appropriations of retained earnings:
Payment of a year-end cash dividend of ¥16.00 per share aggregating ¥3,860 million ($46,962 thousand).

56

JSR Corporation Annual Report 2012

Independent Auditors’ Report

BUSINESSGOVERNANCE
FINANCIALCORPORATE DATA

02-18
21-27
28-57
58-59

JSR Corporation Annual Report 201257

Corporate Data (As of March 31, 2012)

JSR Corporation
Established
December 10, 1957
Capital (Common Stock)¥23,320 million ($280 million)
Employees
5,403
Closing date
JSR books are closed on March 31, each year.

Ordinary General Meeting of 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, 2012)
Stock Listing
Tokyo Stock Exchange, Osaka Securities Exchange
Number of Shares Issued
255,885,166 shares
Number of Shareholders
21,334

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)
The Chase Manhattan Bank 385036
Nippon Life Insurance Company
Mizuho Corporate Bank, Ltd.
State Street Bank Client Omnibus OMO4State Street Bank and Trust Company 505225
SSBT OD05 OMNIBUS ACCOUNT-TREATY CLIENTS

15.97
6.21
4.12

40,866
15,906
10,560

3.09
2.45
2.14
2.00
1.81
1.73
1.64

7,927
6,290
5,494
5,125
4,632
4,427
4,205

		
High
FY2004Low
High
FY2005Low
High
FY2006Low
High
FY2007Low
High
FY2008Low
High
FY2009Low
High
FY2010Low
High
FY2011Low
High
FY2012
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
1,724
1,413

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
1,655
1,221

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
1,582
1,218

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
1,790
1,408

* 14,645,692 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				31,82776,81955,691
90,195
1,351
255,885

By Type of Shareholders
Foreigninvestors

30.02%

Financial
institutions& securities
companies

35.78%

20,525
402
276
88
43
21,3342,500

By Number of Shares Held
Less than 1
trading units

0.02%

2,000

1,500

1,000

1,000 trading
units or more

90.43%

1 tradingunits or more

500

4.11%

0
’09/3

Individuals/
others12.44%

58

Other domestic
corporations

21.76%JSR Corporation Annual Report 2012

50 trading
units or more

3.70%

500 trading
units or more

1.74%

’09/9

’10/3

’10/9

’11/3

’11/9

’12/3

BUSINESS
GOVERNANCE
FINANCIALCORPORATE DATA

Directors, Corporate Auditors, and Officers
As of June 15, 2012

02-18
21-27
28-57
58-59

Directors and Corporate Auditors
Mitsunobu Koshiba

Hayato Hirano

Corporate Auditors:

Representative Director and President

Director

Shoichi Kataoka

Masaki Hirose

Takuya Goto

Representative Director

Outside Director

Yoshinori Yoshida

Michio Kariya

Director, Executive Advisor

Outside Director

Hozumi Sato

Kazunori Yagi

Director

Outside Director

Standing Corporate Auditor

Kenji Ito
Corporate Auditor (Outside)

Hiroichi Uekusa
Corporate Auditor (Outside)

Nobuko Kato
Corporate Auditor (Outside)

Officers (* Directors)
Masaki Hirose*

Nobuo Kawahashi

Hozumi Sato*

Takeshi Wakabayashi

Executive Managing Officer
CSR, General Affairs, Human Resources

Managing Officer
Research and Development, Strategic Businesses
Chairman of J&W Beijing Biotech Co., Ltd.

Yasuki Sajima

Managing Officer
Fine Chemicals Sector

Koichi Kawasaki

Managing Officer
Petrochemicals Sector (including plastics),
Safety and Environment Affairs,
General Manager of Petrochemical Products Div.,
President of Techno Polymer Co., Ltd.,
President of Japan Butyl Co., Ltd.,
President of KRATON JSR ELASTOMERS K. K.

Hisao Hasegawa

Managing Officer
Procurement, Logistics, Manufacturing andTechnology, Product Safety & Quality Assurance,
Information Technology
General Manager of Manufacturing andTechnology Group,
President of Tobu Butadiene, Co., Ltd.

Yasuhisa Nagahiro

Managing Officer
Yokkaichi Plant Manager

Atsushi Kumano

Senior Officer
Research & Development (deputy),
General Manager of R&D Department,
General Manager of Tsukuba Research Lab.

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

Senior Officer
Vice President of Kumho Polychem Co., Ltd.

Takatoshi Nagatomo

OfficerPresident of JSR BST Elastomer Co., Ltd.

Takeshi Sugimoto

Officer
General Manager of Electronic Materials Division

Tsuyoshi Watanabe

Officer
General Manager of Business Planning,
Strategic Business

Hayato Hirano*

Officer
Accounting and Finance, Corporate Communications,Group Company
General Manager of Group Companies Coordination
Department

Katsuya Inoue

Officer
General Manager of Business Planning,
Fine Chemical Business

Kazumasa Yamawaki

Officer
General Manager of Department for Global
Business Alliance

Eric Johnson

OfficerPresident of JSR Micro, Inc.

Eiichi Kobayashi

Officer
Strategic Businesses, Precision Materials andProcessing and Lithium Ion Capacitors (deputy)
General Manager of Precision Materials andProcessing

Makoto Doi

Officer
Legal
General Manager of Legal Department

Takao Shimizu

Officer
Corporate Planning
General Manager of Corporate Planning Department

Tsutomu Shimokawa

Officer
Yokkaichi Research Center
General Manager of Yokkaichi Research Center,
General Manager of Fine Electronic Materials
Research Laboratories

Fumio Tsutsumi

Officer
Strategic Businesses, Performance Chemicals (deputy)
General Manager of Performance Chemicals Division

JSR Corporation Annual Report 201259

JSR Corporation Annual Report 2012

Shiodome Sumitomo Bldg.
1-9-2 Higashi-Shinbashi, Minato-ku, Tokyo
105-8640, Japan
Telephone: +81-3-6218-3500
Facsimile: +81-3-6218-3682

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

Printed in Japan 2012, 6E600