ANNUALREPORT
2

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For the year ended March 31, 2014

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JSR CORPORATIONANNUAL REPORT 2014

> CONTENTSCONTENTSStatements regarding the Company’s
future plans, strategies, projected performance and outlook are based on information available at the time of writing.
Readers are cautioned that economic
trends in JSR’s target markets and otherrisks, and factors beyond the Company’scontrol could cause actual results to differ
materially from those projected bymanagement.

Our STRATEGY

Review ofOperations

02

Overview
02

Forward-Looking Statements

Overview

Profile04

Business Outline

05

Consolidated Financial Highlights

14

At a Glance

15

Petrochemical Products Business

Global Network

Corporate Data

Our Strategy
06

To Our Shareholders

10

New Mid-term Business Plan

06
Creating Sustainable Value

17

Fine Chemicals and Other Products Business

20

Global R&D, Production,and Marketing Operations

Review ofOperations

Creating
Sustainable Value

13

23
25
27
31
32
33

The JSR Group’s Essential Elements

34
35

JSR Global Network

Corporate Social Responsibility
Corporate Governance SYSTEM
Directors, Audit & Supervisory Board Members,
and Officers
Outside Directors
Outside Audit & Supervisory Board Members

Corporate Data

Financial Section(supplementary volume)

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JSR CORPORATIONANNUAL REPORT 2014

> CONTENTS

Overview

ProfileJSR Corporation (formerly Japan Synthetic RubberCo., Ltd.) was established in December 1957 under
the Special Measures Law for the Synthetic Rubber
Manufacturing Industry with the aim of pioneering
synthetic rubber production in Japan. Since thattime, the Company has remained among Japan’s
market share leaders in synthetic rubber and otherpetrochemical materials. We also apply our polymer technologies in the field of fine chemicals to
produce semiconductor materials, display
materials, and other products, whichshares in the industry.

POLYMERTECHNOLOGIES

command among the highest market

Our STRATEGY

Review ofOperations

Creating
Sustainable Value

Global Network

Corporate Data

03>>
> CONTENTS

Overview

MATERIALS
INNOVATION<<JSR CORPORATIONANNUAL REPORT 2014

Our STRATEGY

Review ofOperations

Creating
Sustainable Value

JSR aims to leverage its stablecore businesses of petrochemical products and fine chemicalmaterials, to pursue sustained
growth through strategic development of two new businesses:
life sciences and lithium ion
capacitors (LIC). Our Corporate
Mission is “Materials Innovation—We create value throughmaterials to enrich society,people, and the environment.”

Global Network

Corporate Data

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JSR CORPORATIONANNUAL REPORT 2014

> CONTENTS

Overview

Our STRATEGY

Review ofOperations

Creating
Sustainable Value

Global Network

Corporate Data

Business Outline
The JSR Group aims to create new value
through materials and to help in solvingsocial problems by combining its technologies,
human resources, and global capabilities.

Fine Chemicals and Other Products BusinessPetrochemical
Products Business

Fine Chemicals
Business

Strategic
Business

Elastomers Business

Semiconductor Materials BusinessLife Sciences BusinessWe supply high-quality products, including general-purpose synthetic rubbers and special-purpose synthetic
rubbers, which were our first products after the foundationof JSR, thermoplastic elastomers, which have the characteristics of rubber and plastic, and emulsions, which aredeveloped based on technology for emulsion polymerization of synthetic rubbers and plastics.

Using technologies that have been cultivated in development of polymer materials, JSR develops and supplies
many products with top shares at the global level, including lithography materials, chemical mechanical planarization materials (CMPs), and packaging materials, which areessential to the production of semiconductor chips.

Products supplied globally by JSR Group in this field
include in-vitro diagnostics, reagents, and bioprocessmaterials, which meet advanced needs of medical fields
such as research and diagnosis, and bioprocess materials for personalized medicine and development ofbiotechnology-based medicine. We also supply medical
polymers for use in production of wide range of medical
supplies globally.

Plastics Business

Flat Panel Display (FPD) Materials Business

Lithium Ion Capacitor BusinessWe supply a wide range of ABS resins with unique features achieved by combining the characteristics of multiple polymers, and created by a flexible approach to
product design.

We supply materials including LCD materials and new flat
panel display materials for use in production of flat panel
displays such as LCD and organic EL displays. Moreover,
we supply ARTONTM optical film for thin retardation film
application.

We supply globally lithium ion capacitors for electricity
storage, a key device for saving energy, being the world’s
first company to enter mass-production. We have developed characteristics for them that make them ideal
devices for the efficient utilization of renewable energy
resources, such as wind and solar power, and for therecovery of regenerative energy.

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JSR CORPORATIONANNUAL REPORT 2014

> CONTENTS

Overview

Consolidated
Financial
Highlights

Our STRATEGY¥

Review ofOperations

Creating
Sustainable Value

394.3 billion(+6.1%)¥

In fiscal 2014, ended March 31, 2014,
the Company achieved
year-on-year increases in sales andoperating income in a generally weakmarket environment. Nevertheless,net income decreased as a result of
deterioration in non-operating income.

Global Network

Operating Income
Year-on-year growth, despite price deterioration in the Petrochemical Products Businessand upfront investment in the Fine Chemicals
and Other Products Business.

371.5 billion
Net Sales
Higher sales of synthetic rubber, strong sales¥

progress with sales of advanced semiconductor materials, among other factors.

36.1 billion(+2.4%)of flat panel display materials, and steady¥35.2 billion

ROI

Net Assets
Equity increased by ¥22.6 billion, and the equity ratiorose to 66.1% through increases in retained earnings andother comprehensive income. Net assets also increased.

¥

337.3 billion

Despite efforts to increase
asset efficiency, ROI
declined year on year as aresult of lower net income
and greater upfront
investment.

(+6.8%)¥

315.7 billion

ROE

ROI
ROE

(%)

11
10

increase in shareholders’ equity.

6(FY) 2010

2011

2012

2013

10.1%
14
13

2014

13

10.3%
(-2.4%)

Note:	Fiscal year means year
ended March 31(-3.0%)

the decrease in net income and

8

13.1%

(%)

ROE declined year on year due to10

Corporate Data

7.9%

10
6

(FY) 2010

2011

2012

2013

2014

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JSR CORPORATIONANNUAL REPORT 2014

> CONTENTS

Overview

Our STRATEGY

Review ofOperations

To Our Shareholders

Aimingfor higher revenue
and profit buildingon the new momentum

The JSR Group launched JSR20i6*, the second mid-termbusiness plan initiated under our vision for 2020, which defines
our long-term goals. Under the new plan, we are continuing
efforts to put the Group on a growth path with the goal ofachieving long-term, sustained growth.
* ‌The “i” in ”JSR20i6” (twenty-sixteen) emphasizes the “Innovation” to realize Materials Innovation, which is the heart of ourcorporate mission.

MITSUNOBU (Nobu) KOSHIBA
Representative Director and President

Creating
Sustainable Value

Global Network

Corporate Data

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JSR CORPORATIONANNUAL REPORT 2014

> CONTENTS

Overview

Review ofOperations

Our STRATEGY

Creating
Sustainable Value

Global Network

Corporate DataTO OUR SHAREHOLDERS

In a market environment that remains highly
uncertain, the JSR Group implemented measures
to take the next step forward.
Change in Net Sales
under JSR20i3

Change in Operating Income
under JSR20i3(Billions of yen)n Fine Chemical and Other Products Businessn Petrochemical Products Businessn Fine Chemical and Other Products Businessn Petrochemical Products Business

350.0

371.5

394.3

achieved year-on-year increases in sales and operating income amid a
weak market environment. The shift to yen depreciation provided a
tailwind, and solid performance from each business resulted in net salesof ¥394.3 billion, up 6.1% year on year. Operating income increased
2.4% to ¥36.1 billion, despite downward pressure from start-up costs forthe new Solution polymerization Styrene-Butadiene Rubber (S-SBR)
plant in Thailand and upfront investment in the Fine Chemicals and Other

Achievement of the JSR20i3 Objective
60.0

420.0
39.1

In fiscal 2014, ended March 31, 2014, the final year of JSR20i3, we

Products Business.

(Billions of yen)

340.7

Performance Overview

The JSR20i3 Mid-term Business Plan covered what we termed the “Activation toward growth” period, the first phase of a three-phase approach
toward achievement of our vision for 2020. The plan objective was to

36.0

35.2

36.1

convert the JSR Group’s business structure from one based on the corebusinesses, the Petrochemical Products Business and Fine Chemicals
business, to a structure consisting of the core businesses plus Strategic
businesses that serve as drivers of growth. Although, regrettably, we did
not achieve the earnings target in the plan, we were able to fully lay the(FY) 2011

2012

2013

JSR20i3

2014

2014

(Initial plan)(FY) 2011

2012

2013

JSR20i3

2014

2014

(Initial plan)

groundwork for a shift to the second phase of activities to achieve ourlong-term vision.
We fell short of our earnings target because of a market factor and an

Note:	Fiscal year means year ended March 31

Toward Realization of Our Vision for 2020

internal factor. The external market factor was continuing adverse business

The JSR Group has drawn up a business vision aiming toward 2020

conditions for some of our businesses in an uncertain business environ-based on a long-term forecast of the business environment to 2030 andment, and the internal factor was failure of the growth scenario to develop

has adopted a long-term management approach to realize this vision. We

according to plan. We were able to increase sales in the Petrochemical

have set forth three long-term goals: 1) Establish a corporate structure

Products Business beyond our initial expectations, despite stagnation ofresistant to environmental change on the assumption that the market

synthetic rubber prices along with prices of raw materials, and achieved

environment will change significantly; 2) Build competitiveness that makes

record-high earnings during the period of the mid-term business plan. The

possible sustained growth, so as to ensure growth in any business envi-

chief reason for the inability to achieve the earnings target was stagnation inronment; and 3) Develop a third business pillar following the Petrochemical

the Fine Chemicals and Other Products Business. We were unable to

Products Business and Fine Chemicals business to develop new growthobtain the desired results from semiconductor materials and FPD materials,

drivers. By implementing these policies, we aim to achieve our overarching

partly because we had overestimated the growth rate of the key industries,

goal of transforming JSR into a company highly valued in the market withwhich fell short of initial assumptions. In addition, we struggled to capture

market capitalization of one trillion yen.

market share of ArF photoresists for the 40nm to 30nm-generation node of

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JSR CORPORATIONANNUAL REPORT 2014

> CONTENTS

Overview

Our STRATEGY

Review ofOperations

Creating
Sustainable Value

Global Network

Corporate DataTO OUR SHAREHOLDERS

Top line expansion and internal cost control
to put us on a growth path.

semiconductors, and a customer postponed shipment by three months
due to a delay in the start-up of fabrication using photoresists for the
20nm-generation node of semiconductors, a product for which we enjoyedcompetitive advantage. In addition, commoditization of LCD materials
proceeded as expected, and more intense competition led to difficult
business conditions. Furthermore, there were delays in the start-up ofStrategic businesses designated as the Group’s third business pillar.

New Mid-Term Plan JSR20i6

Nevertheless, we achieved several important measures necessary for
activation toward growth. In the Petrochemical Products Business, we
moved ahead with global expansion of S-SBR products for fuel-efficienttires and have begun development of a supply system that can meet

Vision for 2020
Establish a corporate structure
resistant to changes.
Build up competitivenessthat enables us toachieve sustainable growth.

global demand, the start-up of the plant in Thailand and deciding toestablish a new production base in Hungary. Through efforts to control theinternal costs, we also lowered the break-even point in the Elastomers

Become an esteemed company
with ¥1 trillion market
capitalization

Business to the 70% range, which resulted in a business model thatgenerates stable earnings. In the Fine Chemicals and Other Products Business, we successfully launched a share recovery effort for semiconductor

Develop a third pillar of business.

Phase II

JSR20i6

Following Our
Path to Growth

Post JSR20i6

materials and leading-edge FPD materials and developed a production,

Sustained
Growthof South Korea and Taiwan.

sales, and technical development structure in the key geographical areas
We have laid a foundation for the Strategic businesses in preparation
for future growth. In the Life Sciences business, we established JSR Life
Sciences Corporation and invested in Medical & Biological Laboratories
Co., Ltd. (MBL). In the Lithium Ion Capacitor (LIC) business (electricity
storage device), we decided to build an additional LIC high-volume production plant which will come on stream in 2016.

JSR20i6 Mission
Phase I
JSR20i3

Activation
toward Growth
Results of JSR20i3
Define strategies
Make upfront investments

Transforming upfront
investments into results
Respond to globalization
Improvement in sustainable
competitivenessBusiness Scenario Projected in JSR20i6
Now that JSR20i3 has ended, we are implementing JSR20i6, the new
mid-term business plan covering the three-year period from fiscal 2015 tofiscal 2017. We have positioned this as a time of “Following our path to
growth,” the second phase of activities to achieve the vision for 2020.
Under JSR20i6, we are engaging in business operation to steadily link theresults of the measures implemented in JSR20i3 to revenue and profit inorder to achieve our fiscal 2017 targets of ¥500 billion in net sales and ¥50
billion in operating income. In the Strategic businesses segment, we are

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JSR CORPORATIONANNUAL REPORT 2014

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Overview

Our STRATEGY

Review ofOperations

Creating
Sustainable Value

Global Network

Corporate DataTO OUR SHAREHOLDERS

The JSR Group is working in unison to realize
the business vision for 2020.

Capital Policies
Under JSR20i6, we plan to make investments over a three year period
totaling ¥100 billion, excluding M&A expenses. Specifically, in 2015 we will
implement a second phase of plant construction at JSR BST Elastomer
Co., Ltd. (JBE) in Thailand, a joint venture, and build a high-volume pro-focusing resource allocation on key business sectors: Life Sciences andduction plant at JM Energy, and in 2016 we will invest in plant construc-the Lithium Ion Capacitor business. We are changing the focus oftion in Hungary. I think that these investments will accelerate the global

businesses previously classified as Strategic businesses. The Group willdevelopment of the JSR Group. Overseas sales currently account for

apply the technologies of the Performance Chemicals business in the

50.1% of overall net sales, and we expect that in fiscal 2017 approximately

development of new applications in the Petrochemical Products Business,

30% of the Group’s employees will be employed outside Japan. Accord-

and make the Precision Materials and Processing business a cross-organi-

ingly, we forecast an increase in personnel expenses. We aim to ensurezational function that adds value to the products of other businesses.

that these upfront investments reliably contribute to revenue and profit. We

In JSR20i6, we focus on three key priorities: market share expansion

make decisions on the return of profits to shareholders by comprehen-in the core businesses, the addition of business area and portfolios, andsively considering the balance between shareholder returns and theinternal cost control. First of all, in activities to expand market share in theinternal reserves necessary for future business development. In accor-

core businesses, we aim to maintain our overwhelmingly high share of thedance with this policy, we paid an annual dividend of ¥38 per share formarket for high-end S-SBR products through the global three-base S-SBR

fiscal 2014, ended March 31, 2014.

supply structure. In the Fine Chemicals business, we will pursue share
expansion in the advanced materials field. I consider the second point, theEnhancing Corporate Value

addition of business area and portfolios, to be particularly important. Since

In accordance with the Corporate Mission “Materials Innovation—We

commoditization has made further progress in the digital industry and thecreate value through materials to enrich society, people, and the environ-

shift in production of LCD materials to East Asia is expected to accelerate,ment,” JSR aspires to be a company that continues to grow and develop

we are reinforcing our business development structure in Asia, beginning

globally by pursuing new possibilities created by materials and creatingwith East Asia. In the Life Sciences business and Lithium Ion Capacitor

new value. As a member of the chemicals industry, we consider it ourbusiness, I feel that further market development in the U.S. and Europe is

corporate responsibility to make possible sustained development. To

necessary. We are accelerating growth in the Fine Chemicals business anddischarge our corporate social responsibility, we are devoting ourselves toStrategic businesses by expanding our business portfolio, emphasizing the

CSR activities, engage in business activities grounded in concern for theStrategic businesses. Finally, as an internal cost control initiative, we areenvironment, safety, and the principle of fair dealing, and further step up

emphasizing on efficiency in business design and portfolio development.

initiatives that contribute to the development of society. We are committed

Toward this initiative, we plan to concentrate the functions from R&D toto carrying on the benevolent corporate culture that has been built since

production systems for each business field in key geographical areas andthe founding of the Company and strive to practice expeditious manage-

optimize business development while ensuring product quality. By steadily

ment that can promptly respond to changes in the times, the environment

implementing these key priorities, the JSR Group is proceeding along aand values, and aspire to be a company deserving of the trust of society

path to growth.

and our stakeholders.
I request your continued support for our endeavors in the coming years.

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JSR CORPORATIONANNUAL REPORT 2014

> CONTENTS

Overview

Review ofOperations

Our STRATEGY

Creating
Sustainable Value

Global Network

Corporate Data

New Mid-term Business Plan—Petrochemical Products BusinessSet up a dependable global supply
structure for S-SBR and firmly establish
a position as the share leader in the S-SBR market.
JSR20i3 Resultsl Furthered global development of the S-SBR business.
l Increased resistance to and the ability to cope with volatility fromlowering of the break-even point.

Forecast of JSR’s S-SBR Production Capacity
Production capacity of 200,000 tons or more in March 2018 andexperience of manufacturing middle-end products.

250(Thousand tons)

200

JSR20i6 Strategiesl Maximize capacity utilization at the S-SBR plant in Thailand.
l Continue quality differentiation, ensuring share in high-end market.
l Achieve record-high operating income by implementing a highly
profitable business model.
l Establish a global supply structure by ensuring a smooth start for theplant construction in Hungary.

150n Hungary

100n Thailandn Germany

50

n Japan

(FY)

0

2009

2011

2012

2013

2014

2015

2016

2017

2018

Now that JSR BST Elastomer Co., Ltd. (JBE) in Thailand, a joint venture,

tons of S-SBR per year. Although an increase in supply capacity at syn-has started full-scale plant operation, the JSR Group is working to steadily

thetic rubber producers is expected to result in excess supply of S-SBR

and surely capture expanding demand for Solution polymerization Styrene-

from 2014 into 2015, we will build long-term relationships of trust with

Butadiene Rubber (S-SBR) products for fuel-efficient tires. By undertaking

customers who do business globally even as we increase production

sales expansion to enable the plant to operate at its full annual capacity ofcapacity by establishing a global supply structure with production bases in

50,000 tons and smoothly implementing the second phase of plant

Japan, Thailand, and Hungary. Furthermore, we aim to overcome the soft

construction, we aim to set a new earnings record by fiscal 2017 by

supply-demand situation and become the global S-SBR market sharemaximizing revenue and profit from the Petrochemical Products Businessleader by continuing to achieve quality differentiation through a focus onand further lowering the break-even point. In addition, to cope with further

high-end S-SBR products, not commoditized products.

demand expansion, we started plant construction at JSR MOL Synthetic
Rubber Ltd., a joint venture company established in Hungary, and aim tocomplete the plant start-up on schedule. Since preparation is underway
for the manufacture of S-SBR in Europe, we have terminated the capacity
Note:	Fiscal year means year ended March 31

2010

rights agreement with Styron Europe GmbH for the manufacture of 30,000

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JSR CORPORATIONANNUAL REPORT 2014

> CONTENTS

Overview

Our STRATEGY

Review ofOperations

Creating
Sustainable Value

Global Network

Corporate Data

New Mid-term Business Plan—Fine Chemicals BusinessMaximize revenue and profit by further increasing
market share of semiconductor materials and
FPD materials and expanding the Group’s product portfolio.
JSR20i3 Resultsl Captured high share of photoresists for the 20nm-generation node ofsemiconductors.
l In the FPD Materials business, set up full-function operations in South
Korea and Taiwan and boosted competitiveness in the East Asia.
l Explored new business fields in the Fine Chemicals business.

JSR20i6 Strategies

Sales of Lithography Materials

Sales of FPD materials

n ArF Immersionn Under layer materials, etc.

n Large-sized panels
n Small-to-medium-sized panels

n ArF Dryn Topcoat(Billions of yen)(Billions of yen)

20

100

15

80
60

10

l Steadily increase market share of advanced materials and earnings.
l Obtain adoptions for 14nm and later generation semiconductor materials.
l Increase adoptions of materials for mobile products.
l Expand the Group’s product portfolio in the digital industry.
l Concentrate R&D function and production of semiconductor materials at
the Yokkaichi Plant and that of FPD materials in South Korea and Taiwan.

40

5
0

20
2nd half of 1st half of 2nd half of 1st half of
FY2013 FY2014 FY2014 FY2015(Forecast)

2nd half of
FY2017(Forecast)

(FY)

0

2012

2013

2014

2015
(Forecast)2017(Forecast)

Semiconductor Materials

East Asia. We are pursuing share expansion in growth markets by boosting

We are working to increase sales of lithography materials, a field in which

the competitiveness of materials for large panels by means of competitive

we enjoy high market share of leading-edge 20nm-generation products,

cost, very high quality and development of a technical service structure.

and engage in development of next-generation 14nm materials to continue

We are expanding and upgrading the product portfolio of high-perfor-

to secure high share. Since customers’ quality requirements are moremance materials for small-to-medium size panels and increase sales bystrict for semiconductor materials, we are intensively investing in the

introducing new products.

Yokkaichi Plant to produce materials previously produced globally andoptimize the business functions from R&D to production systems. In thisBusiness Field Expansion

way, we are reliably meeting customer requirements by rigorously engag-

The spread of the so-called “Internet of Things” (IOT) in the digital industry

ing in manufacturing control and quality control.

has ushered in an era in which people and things are linked by the Internet,
and JSR believes that sensors will present a lot of opportunities. We will

Note:	Fiscal year means year ended March 31

FPD Materials

add to our existing line of products that support the digital industry and

There is a long-term trend of shifting FPD production to East Asia, and we

expand and upgrade the product portfolio by focusing on the sensors field.

are concentrating all business functions from research to manufacturing in

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JSR CORPORATIONANNUAL REPORT 2014

> CONTENTS

Overview

Our STRATEGY

Review ofOperations

Creating
Sustainable Value

Global Network

Corporate Data

New Mid-term Business Plan—Strategic Businesses

Intensively invest in the Life Sciences business andLithium Ion Capacitor business as Strategic businesses and undertake businessexpansion to develop these businesses into a third business pillar.
JSR20i3 Resultsl Accelerated business development in the Life Sciences businessthrough M&A activities and alliances.
l Established JSR Life Sciences Corporation (JLS).
l Invested in MEDICAL & BIOLOGICAL LABORATORIES CO., LTD. (MBL).
l Decided to construct an additional, high-volume plant for LIC.
l Commenced Corporate Venture Capital activities.

Estimated Market Size for Large-Capacity Capacitors
Our market-share target: more than 20% in 2020
(Billions of yen)

250
200
150

JSR20i6 Strategies

100l Expand the Life Sciences business through cooperation with MBL.
l Prepare for full-scale operation of the Lithium Ion Capacitor businessby starting up a high-volume production plant.

50
(FY)

2013

2014

2015

2016

2020

Life Sciences Business

Lithium Ion Capacitor BusinessThis business consists of three pillars: 1) diagnostics and other materials

Expansion of application of LICs into various fields is expected, and wefor life science research, including reagents used in research of active

have established a track record as a frontrunner in the market. As thesepharmaceutical ingredients, 2) bioprocess materials used in purificationmaterials have come into use in hybrid buses, construction machinery, andprocesses for antibody drugs, and 3) medical polymers, ingredients inhealth-care applications, we have stayed ahead of competitors in improving

medical gloves and poultices. JSR Group is expanding the global sales

the performance balance of ultralow resistance, high voltage, and highstructure dominated by JSR Life Sciences Corporation, which collaborates

durability. We will expand sales with a new plant for high-volume produc-with JSR Micro, Inc. and JSR Micro N.V. in Europe, and J and W Beijingtion of compact products, scheduled for 2015. The market for large-capac-

Biotech Co., Ltd., in China. We are also expanding into the field of ad-

ity capacitors is expected to reach ¥200 billion by 2020, and we aim tovanced diagnostics and development reagents through alliances such as

capture market share of more than 20%. Furthermore, we are pursuingwith Medical & Biological Laboratories Co., Ltd. (MBL), which has propri-

business scale expansion by developing a highly profitable business model.

etary technologies and sales channels.
Note:	Fiscal year means year ended March 31

0

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JSR CORPORATIONANNUAL REPORT 2014

> CONTENTS

Overview

Our STRATEGY

Review ofOperations

Creating
Sustainable Value

Global Network

Review ofOperations
The JSR Group’s objective is to secure stable earnings fromthe Petrochemical Products Business (Elastomers and Plastics)
and Fine Chemicals business and increase future profitability
by positioning the Life Sciences business and Lithium
Ion Capacitor business as Strategic businesses.

Revenue Breakdown
by Business Segment

Fine Chemicals andOther Products Business

33.8%

Elastomers

51.6%
Plastics

14.6%

Petrochemical
Products BusinessCorporate Data

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JSR CORPORATIONANNUAL REPORT 2014

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Overview

Our STRATEGY

Review ofOperations

Creating
Sustainable Value

Global Network

Corporate Data

At a Glance* Note: Fiscal year means year ended March 31

Petrochemical Products Business

Fine Chemicals and Other Products Business

Elastomers

Plastics

Net Sales

Net Sales(Billions of yen)
250

(Billions of yen)60

Net Sales(Billions of yen)
150

200
150
100

40

100

20

50

50
(FY)

0

2010 2011 2012 2013 2014

(FY)

0

2010 2011 2012 2013 2014

(FY)

0

2010 2011 2012 2013 2014

Semiconductor Materials

General-Purpose Synthetic Rubbers
Solution Styrene-Butadiene Rubber (S-SBR),
Emulsion polymerization Styrene-Butadiene
Rubber (E-SBR), Polybutadiene Rubber (BR)Special-Purpose Synthetic Rubbers
Nitride Rubber (NBR), Butyl Rubber (IIR)
Ethylene-Propylene Rubber (EPM/EPDM)
Thermoplastic Elastomers (TPEs)
Syndiotactic 1, 2-Polybutadiene “JSR RB™”
Hydrogenated Polymer “JSR DYNARON™”
Styrene-Butadiene Thermoplastic
Elastomers “JSR TR™”
Styrene-Isoprene Thermoplastic
Elastomers “JSR SISTM,” etc.
Emulsion Products
Paper Coating Latex, SB Latex,
Acrylic Emulsions, etc.
Performance Chemicals*
High-Functional Dispersant “DYNAFLOW™”
Organic/Inorganic Hybrid Coating Materials“GLASCA™”
Battery Materials
Thermal Management Materials*Part of Strategic businesses until March 31, 2014.

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

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.)

Flat Panel Display (FPD) Materials

LCD Materials(Alignment films, protective coatings, color
pigment dispersed resists, photosensitive
spacers, etc.)
New FPD Materials(Optical Coatings, OLED, etc.)

Strategic Businesses

Lithium Ion Capacitors
Cells and Modules
Life Sciences Materials
Size Standard Particles
Particles for Clinical Diagnostics
Research Agents
Magnetic Particles, etc.
Precision Materials
and Processing BusinessHeat-Resistant Transparent Resin “ARTON™”
ARTONTM Optical Films
Transparent Conductive Films “ELART™”, etc.
Optical Materials
UV Curing Optical Fiber Coatings, etc.

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JSR CORPORATIONANNUAL REPORT 2014

> CONTENTS

Overview

Our STRATEGY

Review ofOperations

Creating
Sustainable Value

Global Network

Corporate Data

Petrochemical Products Business
Elastomers
Performance Overview
Net
Sales

Developing the S-SBR Business Sector
The Petrochemical Products Business has developed a business model
for securing stable earnings regardless of raw materials prices and is a¥203.5 billion(+3.9%)

Operating
Income¥17.3 billion(-3.3%)l The domestic tire and automobile production markets wereweak.
l Sales volumes increased slightly, including S-SBR products.
l Net sales increased due to price revisions in line with increases
in prices of raw materials.
l The S-SBR Group company in Thailand began sales activities
and recorded net sales.
l Operating income decreased as a result of unfavorable prices,higher fixed costs due to inventory reduction, and cost increases
at overseas subsidiaries.

source of stable earnings for the company as a whole. The ability tosecure stable earnings is an outcome of significant improvement in the
break-even point. We will continue to seek scale expansion and stabilization of earning power in this business. Solution polymerization StyreneButadiene Rubber (S-SBR) products for fuel-efficient tires is a core business from which JSR expects further growth as a key product of the

Plastics

Elastomer Business. We aim to capture the top global market share in

Performance Overview

S-SBR by increasing production capacity and cost competitiveness andmaintaining technological superiority in Japan and overseas.
Worldwide demand for S-SBR is increasing by about 8% per annum,
despite weak demand for passenger car tires. The start of full-scale manufacturing at JBE in Thailand in 2015 to meet this demand is expected tocontribute to future earnings. We plan to expand total annual production of
S-SBR at three production bases in Japan, Thailand, and Hungary to over
200,000 tons. The Phase 1 plant in Thailand has production capacity of
50,000 tons, and the Phase 2 plant scheduled to go into operation in 2016
will have capacity for 50,000 tons. If the plant scheduled for construction at
JSR MOL Synthetic Rubber Ltd., a joint venture company established in
Hungary, starts operation in 2017 as planned, 60,000 tons of capacity will
be added. Implementing these plans is expected to result in the world’s
Note:	Fiscal year means year ended March 31

highest production capacity for S-SBR, a growth product, in fiscal 2018.

Net
Sales

¥57.8 billion(+11.6%)

Operating
Income¥3.9 billion(+32.3%)l Although sales of products for automobiles recovered in thesecond half, lackluster sales of plastics for industrial materials
resulted in a year-on-year decrease in sales volumes.
l Sales value increased year on year, partly as a result of the shift
to yen depreciation.
l Net sales and operating income increased as a result of productprice revisions accompanying fluctuation in raw materials prices,cost reduction efforts, and the impact of the weak yen.

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JSR CORPORATIONANNUAL REPORT 2014

> CONTENTS

Overview

Our STRATEGY

Review ofOperations

Creating
Sustainable Value

Global Network

Corporate Data

Petrochemical Products Business
Since future supply shortages of butadiene, a key raw material of
S-SBR, are expected to result from factors such as increased use of shalegas, we will develop a structure to secure stable supplies.

Sales Volume of JSR S-SBR
S-SBR market CAGR +8% (Mar. 2011 to Mar. 2014)(unit: %)250

Utilization of Performance Chemicals
The Performance Chemicals business has engaged in applications devel-200

opment as a Strategic businesses for the purpose of utilizing elastomer

150

products unique to JSR in product development in the environment andenergy conservation fields. Heretofore, this business has utilized technolo-

100

gies cultivated in the development of polymer materials to develop various

50

performance chemicals, such as a high-performance dispersant, highfunctional sol-gel materials, particles for industrial use, battery materials,
and thermal management materials. Since a certain level of R&D results
has been achieved, we will return the Performance Chemicals business tocontrol of the Petrochemical Products Business and focus on sales. In
addition, we will engage in the development of original products by applying these technologies in the development of new applications in the

(FY)

0

2008

2009

2010

2011

2012

2013

2015

2014

(Estimates)
n Sales volume of JSR S-SBR: tons (FY)– S-SBR market: tons (CY)– Demand for passenger car tires (CY)(JSR prepared the chart based on statistics of LMC2013, etc.)

Petrochemical Products Business.

How do tires enhance fuel efficiency?
1. Tire distortion is the enemy of fuel efficiency
	Energy loss arising from distortion of running tires results in rolling
resistance.

2. Reducing energy loss from tire distortion
The key point is to lower the amount of heat generated from friction
among rubber molecules and among reinforcing agents, as well as
between rubber molecules and reinforcing agents.

Note:	Fiscal year means year ended March 31

3. Secret to synthetic rubber molecules
Simplifying the process of bonding reinforcing agents to synthetic
rubber molecule extremities prevents agglutination among reinforcing agents, and the resulting dispersion reduces friction-induced
heat generation.

4. JSR’s technological strength
JSR’s S-SBR excels due to a technology that strengthens thebonding between rubber molecules and reinforcing agents. The
result is highly energy-efficient tires that are being widely adopted in
the market.

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JSR CORPORATIONANNUAL REPORT 2014

> CONTENTS

Overview

Our STRATEGY

Review ofOperations

Creating
Sustainable Value

Global Network

Corporate Data

Fine Chemicals and Other Products Business
Performance Overview
Net
Sales

¥133.1 billion(+7.4%)

Operating
Income¥14.8 billion(+3.4%)l Operating income increased year on year despite upfront investment in areas such as development of next-generation leadingedge technologies.
l Sales of FPD materials were strong, and the weak yen contributed to a year-on-year sales increase.
l Full-scale sales of LIC began, and a JSR subsidiary decided tobuild a high-volume production plant.

Steady Development of Advanced Materials
The rate of growth in worldwide silicon wafer shipment area during thepast three years was minus 1%, and the business environment in thesemiconductor market is expected to remain uncertain for some time.
Nevertheless, JSR continues to hold a high market share of materials
for the 20nm–16nm generation. Although the semiconductor market isweak, net sales of ArF immersion photoresists are increasing by 50% year
on year, and sales of JSR advanced lithography materials are likely tocontinue to increase.

Semiconductor Materials
Performance
Overview

Net
Sales

¥50.7 billion(+7.0%)l Demand in the semiconductor market was weak.
l Immersion photoresists drove sales of ArF photoresists, whilesales of multilayer materials rose only slightly.
l Net sales increased in the weak yen environment.

JSR is steadily increasing sales of lithography materials, including ArF
photoresists, and TCX topcoat materials for immersion exposure, as well
as spin-on glass (SOG), an intermediate material. To this end, we are
pursuing increased quality control and enhanced manufacturing technologies. In order to manufacture and supply photoresists for the 20nm andsub-20nm generations, we put our effort into total defect control from theraw material stage through to the finished product stage. Therefore, weare selectively investing in R&D and manufacturing facilities at our Yokkaichi Plant.

Flat Panel Display (FPD) Materials
Performance
Overview

Net
Sales

¥62.1 billion(+14.0%)l Plant operating rates at LCD panel manufacturers increased by
2% to 3% year on year.
l We recovered market share, mainly color pigmented resists,
through further reinforcement of R&D function in South Korea
and Taiwan.

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JSR CORPORATIONANNUAL REPORT 2014

> CONTENTS

Overview

Our STRATEGY

Review ofOperations

Creating
Sustainable Value

Global Network

Corporate Data

Fine Chemicals and Other Products Business
Growth Drivers

a driver for future growth in the digital market. As IOT continues to spread,

Steady growth is expected to continue in the FPD market. On a panel area

we think that technologies in five areas will be particularly important to thebasis, shipments have increased at an annual rate of 8% for the past three

digital industry: interface, connectivity, power, process, and sensors. We

years, with materials for large panels rising by 7% and materials for small-think that sensors above all will increase in importance in the future. We

to-medium size panels rising by 16%. Commoditization of large panels isplan to open up and develop the sensor market, starting with CMOS

accelerating, and in the small-to-medium size panel sector it is necessary

image sensor materials, and expand and upgrade our existing productto support advanced technologies. Shipment of small-to-medium sizelines in other market sectors.

panels, 20% of the market on a value basis in fiscal 2014, are still growing.
We will continue efforts to increase adoptions of products such as materials for mobile products.

Strategy for FPD Materials
Today, there is increasing proliferation and commoditization of large panel
displays, mainly for televisions, with demand centered on manufacturers inSouth Korea and Taiwan. Consequently, we are shifting our operations,from product development to manufacturing, to those regions and aggres-FPD Industry Trends by Panel Area and Amounts
Change in shipments from 2010 to 2013
+8% CAGR (area)(Breakdown of area: large-sized panels +7%; small-to-medium sizedpanels +16%)

Ratio of Small-to-Medium Size Panel Shipments
to Total Shipments

sively pursuing cost efficiencies.
Smartphones, tablet PCs, and similar devices that use small-to-medi-(Million m2)

um size panels are becoming increasingly sophisticated. At the same time,150

the materials used for these panels, such as LCD materials, thin retarda-(Billions of dollars)

16%

17%

18%

20%

15

tion ARTON film, and indium tin oxide (ITO) film for touch panels, need tobe high-performance, resulting in high value. We are promoting a “vertical
integration strategy” in order to expand our product portfolio in line with

100

10

50

5

the need for enhanced performance and higher added value. JSR’s
diverse product portfolio covers the different kinds of materials required byhigh-performance panels.

0

Expansion into the Sensors Market(CY)

In the past, information technology has connected us to the Internet andSource: NPD DisplaySearch

networks using mainly computers, smartphones, and tablet PCs. But
future technical advances are expected to create an Internet of Things(IOT), in which televisions, cameras, audio devices, and other objects
become interconnected. Here at JSR, we believe that the IOT will serve as

2010

2011

2012

n Area (Large-size panels)n Area (Small-to-medium size panels)– Amount (all sizes)

2013

0

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JSR CORPORATIONANNUAL REPORT 2014

> CONTENTS

Overview

Our STRATEGY

Review ofOperations

Creating
Sustainable Value

Global Network

Corporate Data

Fine Chemicals and Other Products Business
Strategic Businesses
Performance
Overview

Net
Sales

Track Record¥20.3 billion(-9.0%)l In the results for Strategic businesses and Other business, sales
performance of optical fiber coating materials and ARTON film
was lackluster.
l Steady results were achieved in the Lithium Ion Capacitor business.
l Sales of life science materials steadily increased.

Aggressive Business Development in Preparation for
Scale Expansion

Automatic Guided Vehicles (AGV)

Hybrid Excavators

Hybrid BusesRadiographic Cassettes

We intend to accelerate the growth of our Strategic businesses, centeringon life sciences and lithium ion capacitors. In order to achieve growth, we
also recognize the importance of adopting an expansion strategy thatconsiders M&A activities and capital alliances as ways to introduce outsidetechnologies.

Life Sciences
Over many years, the JSR Group has established a solid track record in
the diagnostic reagents and medical polymers business. J and W Beijing
Biotech Co., Ltd., a joint venture company located in China, engages in
the research, manufacturing, and sale of in-vitro diagnostic agents in China

Note:	Fiscal year means year ended March 31

and Southeast Asia, where diagnostic reagents for HIV, hepatitis, andLithium Ion Capacitors

other infectious diseases are attracting attention. The Company is growing

JSR believes that customer trust and quality assurance are important insteadily. In addition, in collaboration with capital alliance partner MEDICAL

the storage device business, and we have established a track record of& BIOLOGICAL LABORATORIES CO., LTD. (MBL), we are expanding ouradoptions by about ten companies. Net sales in fiscal 2014 increased

business operations into the diagnostic reagents and biologics drug

threefold year on year, and JSR subsidiary JM Energy Corporation de-discovery process markets. We plan to double the size of the businesscided to build a high-volume production plant for LICs in preparation forover the next three years from sales of about ¥10 billion in fiscal 2014. JSR

full-scale business operation. The new plant, which will have production

is affiliated in the bioprocess materials field concerning refinement tech-capacity of three million cells per year, is expected to start commercial

nologies of antibody drug production, and is exploring new technology

production in 2015. Future plans call for expansion of the Lithium Ion

seeds and business fields with the aim of efficiently linking promising

Capacitor business to a variety of applications, starting with large vehicles

technologies and products to growth from the Life Sciences business.

and hybrid cars.

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JSR CORPORATIONANNUAL REPORT 2014

> CONTENTS

Overview

Our STRATEGY

Review ofOperations

Creating
Sustainable Value

Global Network

Corporate Data

Global R&D, Production, and Marketing Operations
Global R&D Strategy

Opening Up New Technology Fields Globally asa Technology-Oriented Company
JSR got its start in the petrochemicals field, making synthetic rubbers as
its core business, and then expanded into the field of information andelectronics materials. We subsequently expanded into precision materials
and processing, life sciences, and the environment and energy fields andhave provided the world with numerous high-performance materials madepossible by unique technologies. JSR’s comprehensive research anddevelopment capabilities support this business development.

Number of Patents

JSR currently engages in R&D at four sites in Japan: the Yokkaichi
Research Center, the Precision Processing Technology Group, Tsukuba

The number of patents held by JSR is steadily increasing in Japan and overseas, mainly in the Fine
Chemicals and Other Products Business.

Research Laboratories, and the JSR Functional Materials Research Center.

As of March 31

2008

2009

2010

2011

2012

2013

2014

Petrochemical Products
Fine Chemicals and Other Products
OthersSubtotal
Overseas Petrochemical Products
Fine Chemicals and Other Products
OthersSubtotal
Total

428
1,103
67
1,598
493
1,721
36
2,250
3,848

428
1,269
73
1,770
512
1,955
34
2,501
4,271

374
1,465
75
1,914
492
2,164
39
2,695
4,609

377
1,685
67
2,129
489
2,365
36
2,890
5,019

387
1,972
79
2,438
507
2,516
33
3,056
5,494

358
2,331
89
2,778
523
2,741
34
3,298
6,076

334
2,633
104
3,071
516
2,957
33
3,506
6,577

Japan

Furthermore, in recent years we have established research bases at
Group companies in South Korea and Taiwan and we are now developinga global research structure for display materials.
JSR’s R&D centers and laboratories are responsible for supporting thecreation of new businesses as well as supporting existing businesses. To
achieve this goal, the centers and laboratories work closely with involved
business divisions to set research themes that anticipate the needs of themarket and maintain and strengthen a flexible research organization that
responds quickly to the circumstances of users. JSR also conducts
consignment research, joint research, and consortium projects, working
with clients, universities, research institutions, and other parties in Japanand overseas, with the goal of identifying the latest technologies andknowledge, incorporating them in the Company’s R&D at the first opportunity, and utilizing them on a trial basis.
Guided by the belief that successful research and development
activities shape the future of JSR, we will further cultivate our core polymer
technologies and aggressively expand into new fields by fusing polymer
technologies with photochemistry, inorganic chemistry, precision processing, and biotechnologies.

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JSR CORPORATIONANNUAL REPORT 2014

> CONTENTS

Overview

Our STRATEGY

Review ofOperations

Creating
Sustainable Value

Global Network

Corporate Data

Global R&D, Production, and Marketing Operations
Global Operations—Petrochemical Products Business
Strengthening the Global Supply System with a Focus on Asia and Europe

to customers, they are building new research laboratories.
Meanwhile, many LCD panel manufacturers are planning to build new

For some years, the Petrochemical Products Business, which engages

production facilities in China. They include local companies, as well as

mainly in synthetic rubbers and plastic products, has been building amajor corporations from Japan, South Korea, and Taiwan. To address theglobal manufacturing and sales network. The Group has sales operations

needs of those customers, the JSR Group is working to provide technicalin major centers in China and Southeast Asia to closely monitor the needs

services and build a product development system in China.

of local customers in the automobile and electronics industries.
We are also upgrading operations that manufacture synthetic rubber

Strategic Businesses: Life Sciencesused in automobile parts and fuel-efficient tires, which have enjoyed

In the life sciences sector, JSR Life Sciences Corporation was split off as a

growing demand in recent years. In addition to producing synthetic rubber

separate company that offers advanced diagnostic reagents and bioprocess

for fuel-efficient tires at the Yokkaichi Plant in Japan, we established JSR

materials developed in-house along with medical polymers, elastomer

BST Elastomer Co., Ltd. in collaboration with Bangkok Synthetics Co.,

materials for medical applications previously commercialized as part of theLtd., a local business partner in Thailand. The Company is the Thailand’s

Petrochemical Products Business. In 2012, JSR established J and W Beijing

first Solution polymerization Styrene-Butadiene Rubber (S-SBR) manufac-

Biotech Co., Ltd., a joint venture company with Beijing Wantai Biologicalturing plant that started operations in 2013. We have also decided toPharmacy Enterprise Co., Ltd., a diagnostic reagents manufacturer locatedmanufacture and sell S-SBR at a plant in Hungary, which will act as ain Beijing. J and W Beijing Biotech develops, manufactures, and sells latex

supply base for Europe.

reagents and chemiluminescent reagent intermediates. In addition, JSR has
entered into a capital alliance with Medical & Biological Laboratories Co.,

Global Operations—Fine Chemicals and Other Products
Business

Ltd. (MBL), the diagnostic reagents market leader in Japan.

Development of a Global System to Meet Market Needs

Austria-based BIA Separations and Switzerland-based ChromaCon, andFine Chemicals: Semiconductor Materials

Canada-based Natrix, leaders in purification and separation process tech-

In the semiconductor materials business, Silicon Valley based JSR Micro,

nologies in the field of biologics manufacturing. We plan to bring products toInc. and JSR Micro N.V. in Belgium manufacture, provide technical sup-market more quickly by utilizing the technologies of these companies.

JSR has also invested in and entered into operating alliances withport and sell cutting-edge lithography materials. It has also introduced
exposure equipment comparable with that of client companies in order toStrategic Businesses: Lithium Ion Capacitors

support R&D on leading-edge products. We are currently boosting com-

JSR subsidiary JM Energy Corporation plays a central role in developing

petitiveness by concentrating R&D investment in advanced fields on

the Lithium Ion Capacitor business in collaboration with Group operations

activities at the Yokkaichi Research Center.

in Europe and the North America. JM Energy Corporation, which operates
the world’s first facilities for the mass production of large-capacity LICs,

Fine Chemicals: FPD Materials

has decided to build a large high-volume production plant on the grounds

In South Korea and Taiwan, which have the largest world markets forof its current plant to reinforce the supply structure. JSR Micro, a JSR

FPDs, JSR Micro Korea Co., Ltd. and JSR Micro Taiwan Co., Ltd. holdsubsidiary with operations in Europe and North America, covers theseimportant positions. Both companies have expanded the scale of produc-

geographical areas. These business operations in Japan and overseas willtion and the items they handle in order to meet demand from the rapidly

accelerate global development of the Lithium Ion Capacitor business.

expanding FPD market. To enhance and accelerate their future responses

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JSR CORPORATIONANNUAL REPORT 2014

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Overview

Our STRATEGY

Review ofOperations

Creating
Sustainable
Value

Global Network

Corporate Data

Creating
Sustainable ValueJSR has made possible sustained growth as a company while contributing to the realization of asustainable society by engaging in CSR activities in accordance with the Corporate Mission. As an
environmental protection measure, we have incorporated into management the E2 Initiative™, agroup-wide code of conduct for energy management, reduction of greenhouse gas emissions, anddevelopment of “Eco-innovation” businesses. We work to enhance corporate value through theinteraction between the management structure for implementing the Corporate Mission and CSR.

Becoming a Company That Grows Continuously
While Contributing to Society
Corporate
MissionConstruction ofsustainable global
environment
Corporate
Governance

CSRl	New business opportunitiesl To solve societal problems

Balance social
contribution withbusiness growthl Contribute to society
through corporate missionl Management structure thatrealizes corporate mission

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Overview

Our STRATEGY

Review ofOperations

Creating
Sustainable
Value

Global Network

Corporate Data

The JSR Group’s Essential Elements
The JSR Group’s Essential Elements consists of its Corporate Mission (significant ofexistence), Management Policies (evaluation standards), and Course of Action (individual
work styles). 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 place in us. Our Group CSR represents the initiatives we employ to successfully achieve our mission, and as such we view
CSR as a key management issue.

Corporate Mission

Increase in corporate value

Materials Innovation

JSR will position itself to increase our overall corporate value by creating

We create value through materials to enrich society, people andbusinesses through materials with focuses on customer satisfaction andthe environment

the fulfillment of employees.

The corporate mission of the JSR Group clearly identifies the company’sraison d’etre. By supplying materials that are indispensable to human

Responsibility to Our Stakeholders

societies, JSR aims to be trusted.

Responsibility to our customers / business partners
When interacting with our business partners and customers, the JSRManagement Policies

Group will:

The JSR Group has established management policies as a framework forl Constantly evolve to meet the demand for new materials

decision-making and activities, and to set standards to serve as the basisl Always strive to increase customer satisfaction

for the decisions of each JSR team member. As group-wide managementl Act in good faith and maintain fair and equitable business relations

policies for sustainable growth, it consists of two basic components— fun-l Continue to be socially and environmentally conscious throughout thedamental pillars of management, and responsibility to our stakeholders—

supply chain

both of which represent JSR’s commitment as a good corporate citizen.
Responsibility to our employees

Fundamental Pillars of Management

All employees should expect:

Continuous creation of businessesl To be evaluated and rewarded based on fair standards

As society evolves, so does the demand for specialized materials andl Continuous opportunities to grow by challenging themselvesadvanced products. JSR continuously evolves to anticipate and respondl Acceptance of the diversity of fellow colleagues and to be provided ato changing marketing needs and, in doing so, achieve dynamic growth.
Enhancement of corporate culture
As society evolves, so will our organization. JSR will build on its existing
positive corporate culture to create an organization and management stylewith the vitality to keep evolving.

place where all employees can work together as a team

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JSR CORPORATIONANNUAL REPORT 2014

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Overview

Our STRATEGY

Review ofOperations

Creating
Sustainable
Value

Global Network

Corporate Data

The JSR Group’s Essential Elements
Responsibility to society

Communication

All members of the JSR Group will honor our responsibility to both the

All employees should feel comfortable and confident maintaining open

local and global communities through:lines of bi-directional communication at all levels within the JSR Group.

l Responsible and respectful business practices (Responsible Care) that

Employees should strive for organizational transparency through direct

consider the environment and safetyl Support of environmental conservation by providing eco-friendly products

conversations as the best means to share value and achieve common
goals, especially in the face of growth and diversification.

l Reduction of our environmental impact throughout the entire productlifecyclel Active contribution to conserving biodiversity throughout its businessactivities and the entire product lifecycle

Collaboration
Employees will work together in the spirit of cooperation valuing common,
corporate goals over internal or departmental barriers. Employees will also
be encouraged to actively collaborate with external resources and not be

Responsibility to shareholders

bound to conventional ideas.

Group will maintain its responsibility to its shareholders by:l Aiming to increase corporate value by creating business opportunities
through materials

Cultivation
All employees will cultivate an environment that supports bi-directionall Constantly enhancing its management efficiencies

communication between managers and subordinates and provides oppor-l	Inspiring trust by being highly transparent and conducting sound corpo-

tunities to develop together as individuals and as members of productive,

rate management practices

supportive teams.

Course of Action (4Cs)

Corporate Slogan

Challenge

With chemistry, we can.

All employees of JSR Group should share a common, global focus andJSR is determined to keep providing solutions that benefit not only cus-desire to succeed. Employees should feel confident to autonomously taketomers but also the broader society. The company’s slogan highlights theon new challenges, learning from successes while viewing setbacks asword “chemistry” to succinctly convey its corporate identity and business

opportunities to learn, grow and improve.

positioning, and also expresses the confidence JSR professionals feel inthe face of every challenge.

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JSR CORPORATIONANNUAL REPORT 2014

> CONTENTS

Overview

Our STRATEGY

Review ofOperations

Creating
Sustainable
Value

Global Network

Corporate Data

Corporate Social Responsibility

Contributing to Society through Materials Innovation
The JSR Group practices a unique brand of CSR. For us, CSR is about becoming acompany that continuously grows while contributing to society through the provision of
essential materials and a company that discharges its responsibilities to stakeholders inaccordance with the Corporate Mission.

CSR Management

Risk Management

CSR Advancement Structure

The JSR Group considers preventing major crises from occurring and

JSR promotes CSR through a system of committees and a CSR Depart-

minimizing the effects of crises on business activities an important man-ment established to reinforce CSR-related initiatives. There are four com-agement priority and engages in risk management activities. Using an

mittees that function under the supervision of the CSR Committee: theindependently developed system, each division and Group company each

Corporate Ethics Committee, which implements corporate ethics stan-year periodically identifies, assesses, and formulates countermeasures

dards and works to prevent improper actions throughout the Group; theagainst a wide range of risks, including explosion, fire, major earthquake,

Responsible Care Committee, which works to realize a sustainable society

and pandemic outbreak. We designate particularly serious risks as “major

through the implementation of initiatives that safeguard the environment,

company-wide risks,” and the Risk Management Committee and the CSR

health, and safety; the Risk Management Committee, which seeks to

Committee manage improvement in risk management. In October 2013

further strengthen the Group’s risk management system; and the Social

we conducted the first-ever business continuity management (BCM) drill at

Contribution Committee, which devises and promotes activities to help the

JSR headquarters as a means of final confirmation and verification of theGroup make a contribution to society.

JSR BCM system. We will work to perfect the system in preparation for agroup-wide rollout in fiscal 2015.

Compliance
The JSR Group’s concept of legal compliance is grounded in the principle

Responsibility to Our Stakeholdersof ethical action based on compliance with the law. The Corporate Ethics

The JSR’s Group’s Essential Elements include values to be shared among

Committee promotes activities to encourage employees to maintain highall JSR employees to enable them to act responsibly and with confidence

ethical standards and act with fairness and integrity. We conduct a

towards all stakeholders. For JSR, the term “stakeholder” refers to all

Corporate Ethics Awareness Survey at business sites in Japan andcustomers and business partners, employees, society, and shareholders.

overseas to ascertain the state of awareness of corporate ethics among
employees and identify issues and we prepare a follow-up plan to address any issues identified in the survey. To strengthen compliance, in
April 2013 we prepared the Compliance Handbook containing key points
concerning laws and regulations to be observed and distributed it to all
Note:	Fiscal year means year ended March 31

employees in Japan.

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JSR CORPORATIONANNUAL REPORT 2014

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Overview

Our STRATEGY

Review ofOperations

Creating
Sustainable
Value

Global Network

Corporate Data

Corporate Social Responsibility
Responsibility to Customers and Business Partners

institutional investors and analysts, and technical seminars (JSR Tech

We believe that the JSR Group’s most important role is to offer innovative

Seminars) and promote wide-ranging two-way communication.

materials and excellent products that meet customer needs and contributeto a better society. We devote effort to initiatives to ensure the quality and

Aiming to increase corporate value by creating business opportunities

safety of our products so that our customers can use them with peace ofthrough materials

mind. These efforts are recognized and appreciated, and we have re-l Constantly enhancing its management efficiencies

ceived top-rank supplier awards from global customers.

l	Inspiring trust by being highly transparent and conducting soundcorporate management practices

Responsibility to Our Employees
The JSR Group develops mechanisms and fosters a corporate culturel	In April 2009, the JSR Group became a participant in the United Nations

that enables all employees to accurately recognize and solve issues andGlobal Compact. Amid growing calls for corporate social responsibility,that maintains and enhances organizational capabilities. We have put in

the Global Compact enables companies that operate on a worldwide

place the JSR Group global personnel system and engage in personnel

level to declare their commitment to observing the Compact’s ten

development and management at the Group and global levels. Through-principles. The principles include human rights, labor, the environment,out the JSR Group, synergies are generated through the contributions ofand anti-corruption. Having declared its participation in the Global

a diverse workforce.

Compact and its commitment to act responsibly as a member of theinternational community, the JSR Group will work even harder to actively

Responsibility to Society

fulfill its social responsibilities.

The JSR Group engages in responsible care management by means
including the creation of highly trustworthy business sites and initiatives toreduce environmental impacts. We also engage in activities that contributeto development of a sustainable society, such as the promotion of biodiversity conservation and socially beneficial activities.
Responsibility to Shareholders

Ratings from Outside Organizations
JSR’s CSR activities are rated highly by overseas anddomestic investment-related organizations.

Through investor relations activities, we strive to promptly and accurately
communicate to shareholders and investors information about the business situation and corporate policies. We hold the Ordinary General
Meeting of Shareholders at an early date, promptly send the notice ofconvocation to shareholders, enable the exercise of voting rights via theInternet, and take other measures to ensure smooth exercise of voting
rights by shareholders. We hold quarterly results briefings, seminars for

In fiscal 2014, the JSR Group was selected for inclusion in the following Social Responsibility Indices.
l FTSE4 Good Index Series
l Ethibel Pioneer & Excellence Labell Morningstar’s MS-SRI Index

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JSR CORPORATIONANNUAL REPORT 2014

> CONTENTS

Overview

Creating
Sustainable
Value

Review ofOperations

Our STRATEGY

Global Network

Corporate Data

Corporate Governance System

Aiming to Maintain a Trusted, Appealing Corporate Constitution
By putting our 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 ofshareholders and all other stakeholders and building an appealing corporate constitution.
(As of June 17, 2014)

Overview of the Corporate Governance System
Organizational structure:
Company that employs the audit & supervisory board member system under which theBoard of Directors and Audit & Supervisory
Board members are monitoring the execution of the businesses of the Company.

Audit & Supervisory Board:consisting of 3 Audit & Supervisory Board
members including 2 independent outside
members who have highly professional
careers either as lawyers or certified public
accountants

Shareholders’ Meeting
Appointment/
Dismissal

Appointment/
Dismissal

Report

Appointment/
Dismissal

Report

Audit &
Supervisory
Board

Financial
AuditsAuditsBoard of Directors
ReportBoard of Directors:
consisting of 7 directors, including 3 independent outside members

Independent
Auditors

Appointment/
Dismissal

Remuneration
Advisory Committee

ReportOversight/
Supervision

Cooperation

Strengthening Corporate Governance
2004

2012

l Term of office of directors reduced from 2
years to 1 yearl	Establishment of the Remuneration
Advisory Committee, with participation byoutside directors

2005l	Introduction of the officer systeml Discontinuation of the retirement bonus
system for directors and audit & supervisory board members

2011l	Invitation of 2 independent outside
directors to its Board of Directors consisting of 6 directors

ReportCooperation

Internal Audit
Department

Internal
AuditsReportOversight/
Supervision

Report

Executive
Committee

Corporate Ethics
CommitteeBusiness Issues
Committee

Responsible Care
Committee

Officers
Committee

Risk Management
Committee

Social Contribution
Committee

2014l Appointment of 3 independent outside
directors to its Board of Directors
consisting of 7 directors and appointment of 2 independent outside Audit &Supervisory Board members to its Audit& Supervisory Board consisting of 3
members

Representative
Directorand President

Appointment/
Dismissal



CSR
Committee

Officers
Business Operations

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Overview

Our STRATEGY

Review ofOperations

Creating
Sustainable
Value

Global Network

Corporate Data

Corporate Governance Systemn Officer Systembusiness duties. The Board holds meetings monthly, in principle. It also

Clear segregation of the management and business execution functions

includes three outside directors who, together with three audit & supervi-

JSR has introduced an officer system to separate Company-wide man-sory board members (including two outside ones) engage in robust ex-agement monitoring by directors and business execution by officers. Thechanges of opinions at Board meetings. By introducing independent andsystem accelerates decision-making from the functions of businessneutral outside directors with extensive business experience, we seek to

execution by directors and officers, respectively, and also strengthens thereinforce the appropriateness of judgments made by management andsupervisory function of directors and clarifies roles and responsibilities.

monitor the legality of their execution of duties.

n Audit Systemb Executive Committee

Enhancement of the management monitoring function and assurance ofRapid response to changes in the business environmenttransparency

The Executive Committee holds extensive discussions on items concerning

Under the Company’s audit system, business execution audits and ac-

fundamental management initiatives, management policies, and manage-

count audits make significant contributions to fair, transparent, and timely

ment plans, along with important matters concerning the execution ofmanagement. Business audits cover the execution of duties by directors,

business activities at each department. The committee thus gives direction

and account audits cover financial statements submitted at Ordinary

concerning these issues. As required, certain items submitted to this

General Meetings of Shareholders. In order to further enhance monitoring

committee are passed on to the Board of Directors for further discussion.

and checking functions of its audit & supervisory board, the Company

This committee is made up of the president, officers with directorship

appoints independent attorney and certified public accountant as outside

status, and officers appointed by the president, and responds to important

audit & supervisory board member.

business execution with the aim to expedite decision-making and improvethe efficiency of such operations. As a rule, this committee meets once a

n Internal Control Systemweek, and is chaired by the president. The standing audit & supervisory

Efforts to ensure the effectiveness of and improve internal controls

board member also attends these committee meetings.

In accordance with The Companies Act of Japan, the JSR Group has
established a basic policy governing its internal control system. Guidedc Business Issues Committeeby this policy, the Company works to strengthen and augment its

Review of policies and strategies for individual projects

internal controls. The Internal Audit Department systematically audits

The Business Issues Committee engages in broad-ranging debate aboutbusiness execution and compliance systems in each division and Group

items related to fundamental management strategies and policies, basic

company, and confirms that rigorous legal compliance is observed

policies behind specific projects, and changes to business strategies. It

throughout the Group.

also shares information to ensure a common understanding of suchmatters and discusses company directions. Its findings are reflected ina Board of Directors

deliberations of the Board of Directors and the Executive Committee.

Management decisions that reflect outside opinions

The Business Issues Committee, which meets once a week, consists of

The Board of directors discusses and makes decisions on importantthe president, officers with directorship status, and officers appointed bybusiness matters, and also supervises directors and officers’ execution of

the president.

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Overview

Our STRATEGY

Review ofOperations

Creating
Sustainable
Value

Global Network

Corporate Data

Corporate Governance Systemd Officers Committee

The CSR Committee is chaired by the officer responsible for CSR and

Sharing of information on business conditions and issues

consists of officers, senior officers, and officers. Bureaus of the four

This committee is held in order to share information from all departments

committees listed above also attend meetings of the CSR Committee. The

concerning the execution of business activities, to ensure members’Committee clarifies the Company’s stance toward CSR and works tothorough understanding of important business matters and to enhancestrengthen CSR efforts at JSR.

their communications. This committee consists of the president, senior
officers, officers and a standing audit & supervisory board member, except

g Corporate Ethics Committee

overseas representatives. As a rule, this committee meets twice a month

Promotion of ethical business activities group-wide

and is chaired by the president.

The Corporate Ethics Committee, chaired by the officer in charge ofgeneral affairs, was established under the CSR Committee to implement

e Audit & Supervisory Board

corporate ethics standards and prevent improper actions throughout the

Auditing by specialists in an independent position

JSR Group. The JSR Group Principles of Corporate Ethics have beenThis board meets every month as stipulated in the regulations governing

prepared to provide a code of conduct for executives and employees. It is

this body. The audit & supervisory board receive reports on importantalso prepared in Traditional Chinese, Thai, and Korean, in addition tomatters, hold discussions, and make decisions.

English and Simplified Chinese, so that Group employees all over the

In accordance with standards for audits by audit & supervisory

world can become better acquainted with the Principles. As for the report-

board members of the Company, the audit & supervisory board mem-ing system, along with the internal hotline linked to the Corporate Ethics

bers attend meetings of the Board of Directors, and the standing corpo-

Committee and the external hotline linked to an external attorney, JSR

rate auditor attends Executive Committee and other important commit-

introduced a hotline that is linked to a specialized external agency and istee meetings to monitor how important decisions are reached andalso available in English, Chinese, Korean and Thai.

business activities are executed. The audit & supervisory board members also receive reports from the independent auditors, directors, andh Responsible Care Committee

others. Through these activities, the Audit & Supervisory Board holds

Working to enhance safety, the environment, and quality

deliberations in order to form auditing opinions.

JSR conducts a Responsible Care program to fulfill its obligations toachieve sustainable development. The Responsible Care Committee was

f CSR Committee

established under the CSR Committee to ensure that Responsible Care

Implementation of CSR activities and rigorous complianceactivities are conducted effectively across the entire company. The com-

The CSR Committee was established to ensure that JSR fulfills its respon-

mittee is chaired by the managing officer for safety and environmental

sibilities to society and complies with laws and regulations. Under the CSR

affairs, demonstrating Responsible Care position as a core component ofCommittee, four committees were established: the Corporate Ethics

JSR’s management. This committee approves Responsible Care plans,Committee, the Responsible Care Committee, the Risk Management

evaluates and verifies results of activities, and helps to maintain andCommittee, and the Social Contribution Committee. The CSR Committee

upgrade JSR’s programs to eliminate accidents, reduce environmental

integrates and guides the activities of the above four committees andimpact, manage chemical substances, and ensure safety of products.

meets four times each year along with special meetings as necessary to

Details and results of Responsible Care activities are disclosed through thefurther strengthen the Company’s CSR efforts.

CSR Report and Responsible Care Reports prepared by individual plants.

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Overview

Our STRATEGY

Review ofOperations

Creating
Sustainable
Value

Global Network

Corporate Data

Corporate Governance System
The CSR Report is audited by a third party to improve the reliability and

The audit & supervisory board members work closely with the indepen-transparency of the data. Through these activities, the committee isdent auditors. The audit & supervisory board members receive reports on

dedicated to winning greater trust from customers and addressing any

the financial accountant’s audit plan and audit results. Furthermore, the audit

concerns among residents in the neighborhoods of JSR’s facilities.

& supervisory board members and financial accountants exchange informa-

To make the information widely available, the CSR Report is posted on
the JSR website (http://www.jsr.co.jp/jsr_e/csr/index.shtml).

tion and opinions as necessary in the course of each fiscal year. The internal
audit has been conducted by the Internal Audit Department as a specializedinternal auditing unit. The audit & supervisory board members receive

i Risk Management Committee

reports on the audit plan and audit results from the Internal Audit Depart-

Further strengthening risk management systems

ment regularly, exchange opinions, and enhance the auditing system.

JSR places strong management priority on preventing serious crises fromoccurring and on minimizing the impact of crises that do occur on its

Remuneration

business activities. To this end, the Company established the Risk Man-

Advice on remuneration for corporate officers fromagement Committee under the CSR Committee, with the officer respon-the Remuneration Advisory Committee

sible for Corporate Planning as chair. The Committee decides policies and

The remuneration of the Company’s directors consists of a basic salary, aplans in response to crises, both present and potential, and promotes

bonus based on consolidated performance for the year, and stock op-

continuous improvement.

tions that serve as a long-term incentive. The level of remuneration iscommensurate with the Company’s business results and is comparedj Social Contribution Committeewith those of other companies in the same industry and of similar size.

Examining and promoting socially beneficial activities

The total limit for monthly salaries is decided by resolution at the Ordinary

The Social Contribution Committee was established under the CSR Com-

General Meeting of Shareholders. Performance-based bonuses and stock

mittee and is chaired by the officer responsible for Corporate Communica-

options are also approved by resolution at the Ordinary General Meetingtions. JSR has been involved in many activities that contribute to society atof Shareholders. Total remuneration paid in fiscal 2014, ended March 31,

the local level. JSR will expand its activities to cover the whole society and2014, was ¥260 million, paid to eight directors, including three outside

provide more active approaches. The Social Contribution Committee studies

directors and a director who retired during fiscal 2014.

the formulation of new programs and pursues initiatives according to its“Basic Approach to Social Contribution,” published in January 2009.

Audit & supervisory board members are paid a basic fixed salary thatis not performance-based. In fiscal 2014, total salaries paid to audit &supervisory board members amounted to ¥39 million, including ¥27 million

Status of Internal Audit, Audits by Audit & Supervisory Board Members

paid to internal audit & supervisory board members and ¥12 million to

and Financial Audits

outside corporate auditors.

Management oversight from various perspectives

The Company recently established the Remuneration Advisory Com-

JSR has adopted the audit & supervisory board member system. Theremittee, which deliberates about matters such as the basic remuneration

are three audit & supervisory board members, including two from outside

policies, the remuneration system, and the annual bonus scheme and

the JSR Group. These auditors are staffed by one individual. Audits arereports to the Board of Directors.

performed as described in the section concerning the Audit & Supervisory Board.

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Overview

Our STRATEGY

Review ofOperations

Creating
Sustainable
Value

Global Network

Corporate Data

Directors, Audit & Supervisory Board Members, and Officers (As of June 17, 2014)
Directors and Corporate Auditors
Representative Director
and President

Mitsunobu Koshiba

Director

Hayato Hirano

Representative Director

Director

Hozumi Sato

Hisao Hasegawa

Standing Audit &Supervisory Board Member

Outside Director

Shoichi Kataoka

Takuya Goto
Outside Director

Outside Audit & Supervisory
Board Member

Hiroichi Uekusa

Michio Kariya

Outside Audit & Supervisory
Board Member

Outside Director

Hisako Kato

Kazunori Yagi

Officers (*Directors)
Hozumi Sato*

Yasuhisa Nagahiro

Katsuya Inoue

Fumio Tsutsumi

Takao Shimizu

Executive Vice President
Research and Development, Strategic
Businesses, Director of MEDICAL &BIOLOGICAL LABORATORIES CO., LTD.

Managing Officer
Display Materials Business, Optical Materials
Business, Safety and Environment Affairs

Senior Officer
Business Planning, Fine Chemicals
Business, General Manager of Business
Planning, Fine Chemicals Business

OfficerPetrochemical Products Business (deputy),
General Manager of New Business
Development, Petrochemical Products

Officer
Corporate Planning, General Manager ofCorporate Planning Department

Koichi Kawasaki

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

Takatoshi Nagatomo

Kazumasa Yamawaki

OfficerPresident of JSR BST Elastomer Co., Ltd.

OfficerPetrochemical Products Sector (deputy)
General Manager of Department for
Global Business Alliance, Petrochemical
Products

Officer
Yokkaichi Research Center, General
Manager of Yokkaichi Research Center

Executive Managing Officer
Petrochemicals Sector (including Plastics),
General Manager of Petrochemical
Products Div., President of ELASTOMIXCO., LTD., Vice President of Kraton JSR
Elastomers K.K., President of Japan Butyl
Co., Ltd., President of JSR MOL Synthetic Rubber Ltd.

Hisao Hasegawa
Managing Officer
Procurement, Logistics, Manufacturing
and Technology, Product Safety & Quality
Assurance, IT Strategy, General Manager
of Manufacturing and Technology Group,
President of Tobu Butadiene Co., Ltd.

Atsushi Kumano

Nobuo Kawahashi
Senior Officer
Research & Development (deputy),
General Manager of R&D Department

Kazuyoshi Nakazawa
Senior Officer
Yokkaichi Plant, Yokkaichi Plant Manager

Hayato Hirano*
Senior Officer
CSR, Accounting and Finance, Corporate
Communications, Group Company
Coordination, General Manager of Group
Companies Coordination Department

Takeshi Sugimoto
Officer
Electronic Materials Business, General
Manager of Electronic Materials Division
and General Manager of Lithography
Materials Department

Eric Johnson
OfficerPresident of JSR Micro, Inc.

Tsuyoshi Watanabe

Eiichi Kobayashi

Officer
China Business, Chairman of J&W Beijing
Biotech Co., Ltd., Chairman of JSR(Shanghai) Co., Ltd.

Officer
Strategic Businesses (deputy), Presidentof JM Energy Corporation

Makoto Doi
Officer
Legal, General Affairs, General Manager
of Legal Department

Tsutomu Shimokawa

Yoshio Shiota
Officer
Human Resources, General Manager
of Human Resource Development
Department

Hiroaki Nemoto
Officer
Chairman of JSR Micro Taiwan Co., Ltd.

Yoichi Mizuno
Officer
General Manager of Optical Materials
Business

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Overview

Our STRATEGY

Review ofOperations

Creating
Sustainable
Value

Global Network

Corporate Data

Outside Directors
The Company has appointed three outside directors in order to further reinforce the monitoring
function of the Board of Directors. By welcoming outside directors with extensive experience andhighly impartial, neutral perspectives, we will ensure more appropriate management decisionmaking and reinforce our ability to monitor the legality of business execution.

Takuya Goto

Michio Kariya

Kazunori Yagi

Takuya Goto served as Representative Director and President,
and Chairman, Board of Directors of Kao Corporation. Mr. Goto
has extensive experience in the management of Kao, a prominent international consumer products and chemical company.
He has helped strengthen corporate governance by deploying
this experience to ensure reasonable judgments by managementfrom external, independent and neutral perspectives, as well as
management transparency and soundness. For this reason, Mr.
Goto has been named an outside director, as he was in theprevious year.

Michio Kariya served as president, CEO and COO of Nikon
Corporation and is currently a executive advisor. Mr. Kariya has
extensive experience in the management of Nikon, a globallyrenowned optical equipment company. He has helped strengthen corporate governance by deploying this experience to ensure
reasonable judgments by management from external, independent and neutral perspectives, as well as management transparency and soundness. For this reason, Mr. Kariya has been
named an outside director, as he was in the previous year.

Kazunori Yagi is a corporate advisor for Yokogawa Electric
Corporation. Mr. Yagi has extensive experience in the management of Yokogawa Electric, a globally renowned producer ofcontrol systems and measurement instruments. JSR anticipatesthat Mr. Yagi will help strengthen corporate governance bydeploying this experience to ensure reasonable judgments bymanagement from external, independent and neutral perspectives,
as well as management transparency and soundness. For thisreason, Mr. Yagi has been named an outside director.

Major activities in the year under review

Major activities in the year under review

Major activities in the year under review

Mr. Goto participated in 17 of the 18 meetings of the Board of
Directors held during the year under review, at which he contributed amply to fair and reasonable management decisions andtransparent and sound management by addressing the Board as
appropriate concerning matters under discussion. Mr. Gotobrought to the Board an independent outside perspective basedon his extensive experience in the management of a company
that operates an international business in consumer products
and industrial-use chemicals.

Mr. Kariya participated in all 18 meetings of the Board of
Directors held during the year under review, at which he contributed amply to fair and reasonable management decisions
and transparent and sound management by addressing theBoard as appropriate concerning matters under discussion. Mr.
Kariya brought to the Board an independent outside perspective based on his extensive experience in the management of acompany that operates an international business in opticalmachinery and equipment.

Mr. Yagi participated in all 18 meetings of the Board of Directors
held during the year under review, at which he contributed
amply to fair and reasonable management decisions andtransparent and sound management by addressing the Board
as appropriate concerning matters under discussion. Mr. Yagi
brought to the Board an independent outside perspective basedon his extensive experience in the management of a company
that operates an international business in control systems andmeasurement instruments.

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Overview

Our STRATEGY

Review ofOperations

Creating
Sustainable
Value

Outside Audit & Supervisory Board Members
To ensure the fairness and transparency of management, the Company appoints one standing audit &supervisory board members, as well as one outside audit & supervisory board member. The outside audit& supervisory board members have no personal, financial, or business interests in the Company. They arecalled upon to ensure the sound governance of the Company while drawing on their respective careers.

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

Major activities in the year under review
Mr. Uekusa attended all 18 meetings of the Board of Directors
and all 18 meetings of the Audit & Supervisory Board held during
the year under review. He contributed amply to the auditing of
the Company and to fair and reasonable management decisions
and transparent and sound management by addressing theBoard of Directors and Audit & Supervisory Board as appropriate
concerning matters under discussion. Mr. Uekusa brought toboth boards an independent outside perspective based on his
extensive experience as an attorney at law and his expert
knowledge in a broad range of legal matters.

Hisako Kato (New appointee)
Ms. Kato will greatly contribute to further enhance its corporate
governance by providing fair and reasonable judgment for, andaccountable and sound management of, the businesses of theCompany through utilization of her range of professional
knowledge and vast experience on counting and tax matters
as a Certified Public Accountant both in Japan and US and asa Certified Tax Accountant, as well as neutral and independentview point as an independent outsider.

Global Network

Corporate Data

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Review ofOperations

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Sustainable Value

Global Network

Corporate DataJSR 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 Branch

K Techno Polymer (Thailand) Co., Ltd.
Sales and technical services of synthetic resin in
ASEAN region.
L Techno Europe N.V.
Sales and technical services of synthetic resin in
Europe.




A
 

JSR Corporation (Japan)

A


C





B

BF

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, JapanN Techno Polymer Shanghai TechnicalDevelopment Co., Ltd.
Production and processing of plastics andtechnical services related to plastics in China.

CO Techno Polymer Guangzhou Co., Ltd.
Sales and technical services of synthetic resin in
Guangzhou and neighboring regions.

JAPAN
Elastomers Business
ELASTOMIX CO., LTD.
Compounding of crude rubber and sales ofcompounded products.
Japan Butyl Co., Ltd.
Production, processing, and sales of butyl rubber.
KRATON JSR ELASTOMERS K. K.
Production, purchase, and sales of thermoplastic
rubber.
Emulsion Technology, Co., Ltd.
Production and sale of acrylic emulsions, latex
processed products including CL, adhesives, andcement admixture.
Plastics BusinessTechno Polymer Co., Ltd.
Production, sales, and R&D of synthetic resin.

JAPAN FINE COATINGS Co., Ltd.
Sales of coating materials for fiber-optic cables
reinforced by ultraviolet or electron radiation andfor other apparatus.
JM Energy Corporation
Development, manufacturing, and sales oflithium ion capacitors and modules.
Tri Chemical Laboratories Inc.
Production and sales of semiconductormaterials and other materials for compound
semiconductors.
JSR Life Sciences Corporation
Production and sales of life science relatedmaterials.

JAPAN COLORING CO., LTD.
Coloring of synthetic resin and sales of coloredproducts.

MEDICAL & BIOLOGICAL LABORATORIESCO., LTD.
Research, development, manufacturing, andsales of diagnostic and research reagents.

Fine Chemicals and Other Products Business
D-MEC LTD.
Commissioned generation of 3D models, sales ofsolid modeling systems, and optically-hardened
resins, and commissioned analysis by CAE.

SCIVAX Life Sciences, Inc.
Sales of three-dimensional (3D) cell culture
plates, technology development, commissioned
business, and consulting related to 3D cell
culture.

JSR Micro Kyushu Co., Ltd.
Production of photoresist, semiconductors, andmaterials for flat panel displays.
JSR Optech Tsukuba Co., Ltd.
Production of UV curing type optical fiber coating
materials.

M Techno Polymer (Shanghai) Co., Ltd.
Sales and technical services of synthetic resin in
China.

Business in Other Fields
JSR Trading Co., Ltd.
Export, import, purchase, and sales of thefollowing: various chemicals, machinery,equipment, physical distribution materials,
living necessaries, foodstuffs, beverages, andnon-life insurance.

JEY-TRANS CO., LTD.
Freight forwarding, warehousing, and delivery
management.

C PT.ELASTOMIX INDONESIA
Compounding of crude rubber and sales ofcompounded products.

JSR Logistics & Customer Center Co., Ltd.
Customer service agent andlogistics management.

D ELASTOMIX (FOSHAN) CO., LTD.
Compounding of crude rubber and sales ofcompounded products.

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

E Tianjin Kuo Cheng Rubber Industry
Co., Ltd.(*)
Compounding of crude rubber and sales ofcompounded products.

JSR Business Services Co., Ltd.
Undertaking of general affairs, accounting,payroll calculation, and welfare.

F JSR BST Elastomer Co., Ltd.
Sales and manufacturing of S-SBR (Solution
Polymerization Styrene-Butadiene Rubber).

Tobu Butadiene Co, Ltd.
Production and technical services ofbutadiene.

G JSR Trading, Inc.
Purchases and sales of synthetic rubber.

JN System Partners Co., Ltd.
Computer system design, programming andsystem operation, and maintenance.

H JSR Trading (Shanghai) Co., Ltd.
Export, import, and purchases of industrial-use
chemical products.

OVERSEAS

I JSR MOL Synthetic Rubber, Ltd.
Sales and manufacturing of Solution Polymerization Styrene-Butadiene Rubber (S-SBR).

Elastomers Business
A Kumho Polychem Co., Ltd.(*)
Production and sales of ethylene-propylene
rubber (EPR).
B ELASTOMIX (THAILAND) CO., LTD.
Compounding of crude rubber and sales ofcompounded products.

Plastics Business
J	TECHNO POLYMER HONG KONG
CO., LTD.
Sales and technical services of synthetic resin in
Hong Kong and neighboring regions.

P TECHNO POLYMER AMERICA, INC.
Sales of plastics and technical services related toplastics in North America.
Q	Shanghai Rainbow Color Plastics
Co., Ltd.
Coloring of ABS resin and sales of coloredproducts in China.
Fine Chemicals and Other Products Business
R JSR Micro N.V.
Production and sales of semiconductor materials.
S JSR Micro, Inc.
Production and sales of semiconductor materials.
T JSR Micro Korea Co., Ltd.
Production, development, and sales of display
materials and semiconductor materials.
JSR Micro Taiwan Co., Ltd.
Production, development, and sales of display
materials.
JSR (Shanghai) Co., Ltd.
Sales agency of products such as synthetic
rubber, semiconductor materials, liquid crystal
display materials, and performance chemicals.
J&W Beijing Biotech Co., Ltd.
R&D of intermediate diagnostics, wholesale ofintermediate diagnostics, processed goods,
electronic products, and hardware. Import andexport of cargo, commission agency services(exclude auction), assignment of technologies,
consulting, and services.

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Overview

Our STRATEGY

Review ofOperations

Creating
Sustainable Value

Global Network

Corporate Data

Corporate Data (As of March 31, 2014)
JSR Corporation

Composition of Shareholders

Established
December 10, 1957

Shares held
(thousands)

17,96018,363Foreign corporations and individuals

438

92,725

FY2004

Other domestic corporations

248

50,965

FY2005

Financial institutions

87

74,462

Securities companies

34

1,459

18,767

237,973

Individuals and others

Capital (Common Stock)¥23,320 million
Employees
5,548
Closing date
JSR books are closed on March 31, each year.

Total

Shareholders Information (As of March 31, 2014)

Individuals/others
7.72%

Number of Shares Issued
237,973,205 shares

Other domestic
corporations
21.42%

Number of Shareholders
18,767

Foreign investors
38.96%(Yen/share: Tokyo Stock Exchange)

FY2006
FY2007
FY2008By Type of Shareholders

Stock Listing
Tokyo Stock Exchange

FY2009Financial
institutions &securities
companies
31.90%FY2010FY2011FY2012FY2013Major Shareholders

Bridgestone Corporation

Common stock price range
Shareholders

Percentageof shares
held (%)

Number ofshares held
(thousands)

15.59

36,666

By Number of Shares Held
1 tradingunit or more
4.00%

Less than 1
trading unit
0.02%

50 trading
units or more
3.60%

4.27

10,046

Japan Trustee Services Bank, Ltd.
(Trust Account)

4.09

9,620

STATE STREET BANK AND TRUST COMPANY
505223

2.63

6,195

JP MORGAN CHASE BANK 380055

2.59

6,090

Ordinary General Meeting of Shareholders
The annual general meeting of shareholders is held in June

Mizuho Bank, Ltd.

1.98

4,675

Japan Trustee Services Bank, Ltd.
(Trust Account 9)

1.87

4,398

Nippon Life Insurance Company

1.68

3,957

The Master Trust Bank of Japan, Ltd.
(Number of Retirement Allowance Trust Sharesof Mitsubishi Chemical Corporation)

1.63

3,848

Meiji Yasuda Life Insurance Company

1.54

3,631

* 2,862,706 shares of treasury stock held by the Company are not included in theabove breakdown of major shareholders.

1st Q

2nd Q

3rd Q

4th 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
1,695
1,255
2,360
1,748

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
1,455
1,274
2,073
1,713

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
1,644
1,224
2,049
1,663

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
1,994
1,670
2,085
1,694

(Yen)
2,500

The Master Trust Bank of Japan, Ltd.
(Trust Account)

500 trading
units or more
1.94%

FY2014

High
Low
High
Low
High
Low
High
Low
High
Low
High
Low
High
Low
High
Low
High
Low
High
Low
High
Low

1,000 trading
units or more
90.44%

2,000

1,500

each year. The 2014 annual general meeting was held on
June 17, 2014.
Transfer Agent and Register

1,000

500

The Chuo Mitsui Trust and Banking Co., Ltd.
Auditors
KPMG AZSA & Co.

0
’10/3

’10/9

’11/3

’11/9

’12/3

’12/9

’13/3

’13/9

’14/3

FINANCIAL
SECTION
20

CONTENTS
01 Ten-Year Summary
03 Management’s Discussion and Analysis
05 Risk Information
07 Consolidated Financial Statements:
07 Consolidated Balance Sheets
09 Consolidated Statements of Income
10 Consolidated Statements of Comprehensive Income
11 Consolidated Statements of Changes in Net Assets
12 Consolidated Statements of Cash Flows

13 Notes to Consolidated Financial Statements
30 Independent Auditors’ Report

1

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JSR CORPORATIONANNUAL REPORT 2014

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JSR CORPORATIONANNUAL REPORT 2014

> FINANCIAL SECTION

Ten-Year Summary
Fiscal year means year ended March 31
Millions of yen

Thousands of U.S. dollars

FY2005

FY2006

FY2007

FY2008FY2009FY2010FY2011FY2012FY2013

FY2014FY2014

For the fiscal year
Net sales¥305,368¥338,160¥365,831¥406,968¥352,503¥310,184¥340,666¥349,947¥371,487¥394,309$3,831,221

Costs and expenses

260,035

284,803

310,588346,958

322,155

289,954

301,571

313,982

336,281358,247

3,480,834

Operating income

45,33353,35755,24360,01030,34820,23039,09535,96435,20636,062

350,387

519

635

1,030

1,309

1,230

568

626

634

809

916

8,901

Interest and dividend income
Interest expenses
Income before income taxes and minority interests

(475)

(420)

(399)

(256)

(271)

(172)

(146)

(147)

(126)

(142)

(1,375)43,47149,03853,44054,86720,803

19,45840,674

41,24542,84736,956

359,077

Net income

27,56430,55533,65536,994

13,981

13,64527,571

26,40730,27825,173

244,584

Capital expenditures

18,13423,36122,09429,076

19,081

17,707

11,801

19,72827,60821,499208,888

Depreciation

15,245

16,20618,133

21,18024,83322,38019,245

17,784

19,14518,096

175,823

Total assets

325,031

381,097

408,949

416,951

339,498

373,566

390,591

430,693482,935

501,320

4,870,964

Long-term debt due after one year

13,857

1,607

2,745

1,525

1,500

1,500

1,028

500

6,626

11,069107,552

At fiscal year-end

Total liabilities

139,249

164,389

168,963

159,288

97,512

122,865

126,475

148,335

167,202

164,060

1,594,051

Equity ratio (%)

182,476

212,751

235,186

252,539

240,896

249,440

262,679

280,955

308,641

331,284

3,218,849

Current ratio (times)

1.8

1.7

1.8

1.9

2.5

2.3

2.4

2.3

2.3

2.5

2.5

Return on assets (%)

8.7

8.7

8.2

8.9

4.1

3.7

7.1

6.4

6.6

5.1

5.1

Return on equity (%)

16.1

15.5

15.0

15.2

5.7

5.6

10.8

9.7

10.3

7.9

7.9

Equity ratio (%)

56.1

55.8

57.5

60.6

71.0

66.8

67.3

65.2

63.9

66.1

66.1

107.54119.63133.10147.26

56.36

55.87

113.07109.46126.13106.101.03

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

14.00

20.00

24.00

32.00

32.00

26.00

32.00

32.00

34.00

38.00

0.37

Equity717.13

836.31935.47

1,009.27

986.33

1,021.31

1,088.87

1,164.63

1,299.77

1,409.06

13.69

Note: U.S. dollar amounts are translated, for convenience only, at ¥102.92 = US$1.00, the rate prevailing on March 31, 2014.

Net Sales/Net Income

Operating Income/Operating Income Margin(¥ billions)
400

394.3

40

Total Assets/ROA

Shareholders’ Equity/ROE(%)(¥ billions)(%)(¥ billions)(%)(¥ billions)(¥ billions)

(%)

40

16

600

12

350

21

30

15

50

36.1

30

30

501.3

313.0
10

12

25.2

8

400

9.1
200

20

20

8

300

0

10

FY2010Net sales
Net income

11

12

13

14

0

10

0

11

Operating income
Operating income margin

12

13

14

0

4

100

2

0

18

250

15

200

12

FY2010Total assets
ROA

11

12

13

14

0

25

21.0 21.5

4.2

12

40

35.8

20
9

9.0

30

15
150

200
4

FY2010

300

6

5.1
100

Shareholder Return/
Dividend Payout Ratio(¥ billions)

500
300

R&D Expenses/
Capital Expenditures

7.9

9

100

6

50

3

0

FY201011

Shareholders’ equity
ROE

12

13

14

0

6

20

3

10

10

5

0

FY2010

11

R&D expenses
Capital expenditures

12

13

14

0

FY201011

Dividend
Share buyback
Dividend payout ratio

12

13

14

0

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JSR CORPORATIONANNUAL REPORT 2014

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JSR CORPORATIONANNUAL REPORT 2014

> FINANCIAL SECTIONManagement’s Discussion and Analysis
Analysis of Operating Results
Overview of FY2014, ended March 31, 2014industry, one of our chief sources of demand; yet net sales value

the strategic business and other products, net sales rose steadily inpanels for smartphones and tablets. However, mounting geopoliticalbiomedical materials, but sales volumes of optical film in the precisionrisks and global economic uncertainty make our forecasts for thesematerials and process field lost momentum.

markets subject to unclear and unpredictable conditions.

In electricity storage devices, the segment started full-scale sales

In the Elastomers Business, the rate of demand growth for synthetic

Summarizing trends in the main industries where JSR Group

recorded a year-on-year gain. In other regions, particularly Asia,

customers do business, in automobile tires, production increased forincreased supply capacity at synthetic rubber firms upset theof lithium ion capacitors (LIC) and committed to construction of arubber is expected to fluctuate depending upon the rebound in the tire

the year in China and the rest of Asia and achieved slight growth indemand-supply balance and worsened market conditions. To retain

high-volume production facility.

industry. Meanwhile, because S-SBR is showing good prospects for

its profit levels, JSR implemented a new pricing structure and cost

For the Fine Chemical and Other Products Business segment

steady growth as the eco-tire market heats up, we are engaged in an

Automobile production in North America and China was up year on

reduction measures in the face of price volatility for raw materials.

overall, FY2014 net sales and operating income both surpassed theeffort to expand global sales by making use of a tire joint venture andyear, and Europe started to show signs of a recovery, but Japan was

Despite these efforts, operating income was down year on year.

corresponding results from FY2013, despite the downward pressure

plant in Thailand that has entered full-scale operation.

North America and Europe while remaining at the same level in Japan.

As a result, the Elastomers Business segment had net sales ofon operating income exerted by the JSR Group’s commitment toproduction rebounded in the second half, but full-year results¥203.5 billion (up 3.9% year on year) and operating income of ¥17.4

forward-looking investment for the development of next-generation,

on sales expansion plans in both semiconductor materials and FPD

remained at the same level owing to the effects of a first-halfbillion (down 3.3%).

leading-edge technology.

materials. In semiconductors, our efforts will focus on lithography

Plastics Business Segment

billion (up 7.4% year on year) and operating income of ¥14.8 billion

advanced 20nm generation high-volume production by the industry’s

Sales volumes in synthetics rubber were down from the previous(up 3.4%).

major players. In FPD materials, we will concentrate on small- to medium-

flat despite a second-half recovery. In the semiconductor industry,

Key results in the segment for the year were net sales of ¥133.1

slowdown. In flat panel displays (FPDs), production expanded year on
year as a result of strong sales of small- and medium-size panels formobile devices such as smartphones.
Under these circumstances, the JSR Group drove expanded sales

In the Fine Chemical and Other Products Business, we are embarking

materials, mainly photoresist, which are tied to the momentum forsize panel products, whose production outlook is quite favorable.

fiscal year. Although products for automobiles rebounded in the

In consideration of the above, our consolidated earnings forecastof its technically superior products, while it also sought to maintainsecond half, those for use in industrial materials including amusement

Business Outlook for FY2015

profits by revamping product pricing in the face of volatile raw material

and general applications fell. Net sales and operating income, on the

For FY2015, among the main customer industries, the JSR Groupfor FY2015 consists of net sales of ¥410.0 billion (a 4.0% year-on-

prices and by pushing forward with cost reductions through theother hand, both managed to increase for the year as a result of cost

expects the automobile tire and semiconductor markets to benefit

year increase), operating income of ¥38.0 billion (a 5.4% increase),

E-100plus cost restructuring initiative. The weakening yen was the

reduction measures and a restructuring of product pricing in response

from demand growth in line with the improving global economy, whichand net income of ¥28.0 billion (an 11.2% increase). The assumptions

primary factor lifting net sales, but further growth in operating income

to changes in raw material costs. Yen depreciation also helped boost

will return them to a recovery track in the first half. Our outlook for thebehind this forecast are an exchange rate of ¥100.0 per U.S. dollar

was held in check by other factors, namely the deteriorating position ofthese results.

FPD market is for continued firm growth in small- and medium-sizeand a naphtha price of ¥70,000 per kiloliter.

our products in the Petrochemical Products Business and forwardlooking investments in the Fine Chemical and Other Products Business.
Financial results for FY2014 consist of net sales of ¥394.3 billion

Owing to these factors, the Plastics Business segment had net
sales of ¥57.8 billion (up 11.6% year on year) and operating income of¥3.9 billion (up 32.3%).

Analysis of Financial Position

Fine Chemicals and Other Products Business Segment

Total assets at the fiscal year-end on March 31, 2014, amounted to(up 6.1% year on year), operating income of ¥36.1 billion (up 2.4%),
and net income of ¥25.2 billion (down 16.9%).

In semiconductor materials, net sales rose year on year, driven in thesecond half by the start of high-volume production among major

Review of Operations

customers in leading-edge 20nm generation processing, where JSR¥501.3 billion, up ¥18.4 billion from a year earlier.
Current assets totaled ¥326.5 billion, up ¥6.1 billion, due toincreases in inventories, cash and deposits, and securities.

Total liabilities amounted to ¥164.1 billion, down ¥3.1 billion froma year earlier. Major factors include an increase in long-term loans
payable and a decrease in notes and accounts payable—trade.
Net assets amounted to ¥313.0 billion, including a ¥12.5 billion
increase in shareholders’ equity. Accumulated other comprehensive

boasts a high market share. The lower yen exchange rates also

Noncurrent assets totaled ¥174.8 billion, up ¥12.3 billion. Major

Elastomers Business Segment

contributed to this result. In FPD materials, yen effects were also

factors were an increase in investment securities as a result of capitalincome was ¥18.3 billion, up ¥10.2 billion year on year. After sub-

The Company’s sales volume in synthetic rubber products was flat,

prevalent, and the operating ratios of principal customers trended

contributions in Japan and overseas and changes in the market value

scription rights to shares and minority interests are also accounted

as domestic production remained constant in the automobile tire

firmly upward, resulting in a year-on-year increase in net sales. Amongof certain securities in addition to an increase in plant, property andfor, total net assets come to ¥337.3, up ¥21.5.

equipment as a result of plant construction in Thailand.

Segment Sales/Operating Income (¥ millions)Years ended March 31

Elastomers Business
Operating income
Plastics Business
Operating income
Fine Chemicals and Other Products Business
Operating income
Net Sales
Operating income

Analysis of Cash Flows
2010

2011

2012

2013

2014

¥136,086¥160,854¥180,835¥195,797¥203,478

372

14,73919,35817,923

17,33047,812

52,297

51,23651,75957,764

(1)

2,563

2,138

2,962

3,919

126,286

127,515

117,876

123,931133,067

19,85921,793

14,46814,321

14,813

310,184

340,666

349,947

371,487

394,309¥ 20,230¥ 39,095¥ 35,964¥ 35,206¥ 36,062

Cash and cash equivalents (“funds”) on March 31, 2014, stood atup ¥66.9 billion from the previous year. Major factors include an inflow¥91.1 billion, up ¥37.3 billion from a year earlier.

of ¥28.5 billion from a decrease in short-term investment securities

Net cash provided by operating activities was a net inflow of¥35.5 billion, down ¥12.2 billion from a year earlier.
Major factors include income before income taxes and minority

and an outflow of ¥21.1 billion from purchase of noncurrent assets.
Net cash used in financing activities was a net outflow of ¥8.1
billion, down ¥2.0 billion from the previous year. Major factors

interests of ¥37.0 billion, depreciation and amortization of ¥18.1

include ¥8.5 billion for payment of cash dividends, ¥4.2 billion forbillion, a decrease in notes and accounts payable of ¥14.5 billion, andpurchase of treasury stock, and ¥4.5 billion for proceeds fromincome taxes paid of ¥11.9 billion.

long-term loans payable.

Net cash from investing activities was a net inflow of ¥8.2 billion,

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Profit Appropriation

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JSR CORPORATIONANNUAL REPORT 2014

> FINANCIAL SECTION(8) Product Quality Assurance and Product Liability

ditures. Any of these events could adversely affect the JSR Group’s

The JSR Group has a product quality assurance system and productoperating results.

The Company regards its most critical challenge to be the long-term

We allocate retained earnings to R&D connected to future growthliability insurance. However, damage or injury caused by a productenhancement of business earnings. To this end, we strive to strength-

and to strategic investments, and we work hard to enhance corporate

manufactured by the JSR Group could adversely affect the JSR(11) Overseas Operations

en our research and development from a long-term standpoint andvalue so that we can return profits to our shareholders.

Group’s operating results.

The JSR Group is aggressively expanding operations on a global

intend to enhance our business competitiveness through new busi-

scale, conducting manufacturing, sales and other activities in coun-

In accordance with this policy, we have decided to pay a yearend dividend of ¥19 per share as previously announced. This amount(9) Natural Disasters and Accidents

tries and regions in the North America, Europe, Asia and other parts

In conformance with this approach, the JSR Group has set ais the same as the interim dividend, and the total annual dividend for

To minimize the negative effect on its business activities of any disrup-of the world. Overseas operations are exposed to a number of risks

basic policy to appropriate profits, including repurchase of Company

fiscal year 2014, including the interim dividend already paid, will betion to manufacturing activities, all JSR Group manufacturing facilities

that include, but are not limited to, an unfavorable political environ-shares, in line with consolidated performance while continuing to pay¥38.00 per share.

have established countermeasures based on the identification of all

ment or economic trends; labor disputes and other problems due to

For the next fiscal year (FY2015 ending on March 31, 2015), we

potential sources of a crisis and conducts periodic inspections ofdifferences in labor laws and other working conditions; difficulty inon comprehensive consideration of the balance between appropriat-

plan in consideration of the business outlook to increase the cash divi-

facilities. The Group also works constantly on safety measures withrecruiting and retaining employees; an adverse impact on businessing profits and retaining the necessary funds for future business

dend to ¥40 per year, consisting of an interim dividend of ¥20.00 andregard to earthquakes and other natural disasters. However, a major

activities due to an inadequate social infrastructure; and the impact ofadvancement.

a year-end dividend of ¥20.00.

natural disaster or accident that damages a production facility orwars, terrorism and other social instability. Any of these events could

disrupts manufacturing could adversely affect the JSR Group’s

adversely affect the JSR Group’s operating results.

ness expansion.

a stable cash dividend. The determination of cash dividends is based

operating results.
JSR’s main production facility, the Yokkaichi Plant, houses private

Risk Information(12) Laws and Regulations

power generation equipment, and the Kashima Plant is able to accessIn the countries where it operates, the JSR Group is subject to various(4) Procurement of Raw Materials

electric power from shared power generation facilities when neces-laws and regulations involving business and investment permits, export

operating results, financial position, cash flows and other aspects of

The JSR Group works to ensure a stable supply of raw materials bysary. In the event that electric power shortages become severe due toand import activities, trade, labor relations, intellectual property, taxes,

performance. Forward-looking statements in this discussion areprocuring materials from a number of sources. However, an interrup-

natural disasters and the like, however, the JSR Group’s operating

foreign exchange and other items. The Group has established a clear

based on JSR’s judgments as of March 31, 2014. Risks at JSR

tion to the supply of raw materials due to an accident, bankruptcy or

results could be affected.

compliance policy in order to ensure strict observance of laws andinclude, but are not limited to, the following items:

quality problem at a supplier could adversely affect production activi-

The JSR Group is exposed to the following risks that may impact onties and the JSR Group’s operating results.

regulations as well as ethical standards. In the event that a law or(10) Environmental Issues

regulation is violated, or a law or regulation becomes stricter or is signifi-

Positioning environmental protection as an important element of its

cantly altered, there could be limitations to the Group’s business(5) Development of New Products

operations, the JSR Group complies with all laws and regulations

activities or additional compliance costs. Any of these events could

Rapid technological progress is constantly taking place in the electron-

concerning the environment. The Group also takes actions aimed atadversely affect the JSR Group’s operating results.

economic climate in a country or region. An economic slowdown

ics industry, which is the primary source of demand for semiconductor

reducing its environmental impact, lowering and eliminating waste

could reduce demand in an industry and adversely affect the JSR

manufacturing materials, FPD materials and optical materials, the major

materials, and cutting energy and resource consumption. The Group(13) Litigation

Group’s operating results.

products of the JSR Group’s fine chemicals and other products

has taken many actions to prevent the external release of all types of

In conjunction with its business activities in Japan and overseas, thebusiness. JSR is constantly working on developing state-of-the-art

chemicals.

JSR Group may be sued or be involved in other litigation concerning(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(2) ‌Fluctuation in Prices for Crude Oil, Naphtha andOther Major Raw Materials
Higher prices for crude oil and naphtha, or changes in the markets for

However, in the event that a spill occurs or that environmental

a dispute with a supplier, customer or other external party. The

industry or market could prevent the timely development of new

regulations become stricter, the Group’s business activities could beoutcome of significant litigation could adversely affect the JSR

products and adversely affect the JSR Group’s operating results.

restricted, the Group may have to pay compensation and otherGroup’s operating results.

materials in line with this progress. However, unforeseen changes in the

expenses, or the Group may have to make substantial capital expen-

JSR’s major raw materials, could raise prices of raw materials andadversely affect the JSR Group’s operating results, especially in the(6) R&D Involving Next-Stage Growth Businesses

petrochemical products sector of elastomers, emulsions and plastics.

The JSR Group makes substantial investments in R&D to createnext-stage growth businesses. However, there is no guarantee that

(3) Fluctuation in Exchange Rates

these R&D activities will always yield worthwhile results. Depending

As the JSR Group undertakes product exports in foreign currencies

on R&D results, there could be an adverse effect on the JSR Group’sand imports goods such as raw materials, the Company takes

operating results.

measures to reduce risks such as entering into forward exchange
contracts; however, fluctuation in exchange rates could give rise to(7) Protection of Intellectual Property

adverse outcomes. In addition, operating results of consolidated

Protection of intellectual property is extremely important for the JSR

subsidiaries and equity-method affiliates located overseas are con-Group’s business activities. JSR has established a system for protect-verted into Japanese yen amounts for the purposes of preparing theing its intellectual property and takes various actions as required.

consolidated financial statements. However, due to the yen’s appre-

However, a dispute about intellectual property with another company

ciation, the JSR Group’s business results could be adversely affected.

or an infringement on JSR’s intellectual property by another company
could adversely affect the JSR Group’s operating results.

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JSR CORPORATIONANNUAL REPORT 2014

> FINANCIAL SECTION

Consolidated BAlance Sheets
JSR Corporation and Consolidated Subsidiaries
Years ended March 31, 2013 and 2014
Thousands of
U.S. dollars(Note 1)Millions of yen

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

2013

2014

2014

¥ 32,190¥ 33,391$ 324,436

Notes and accounts receivable—trade, net (Notes 4, 5 and 17)

91,512

87,614

851,281

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

79,41281,005787,066

Inventories

74,687

78,690764,570

Other (Notes 9 and 14)

23,522

25,133244,201

Accounts receivable—other (Note 17)28,88330,663297,934

Total current liabilities

141,847

132,442

1,286,845

Long-term loans payable (Notes 5 and 7)

6,626

11,069107,552

Noncurrent assets:

Provision for retirement benefits

15,211——

Property, plant and equipment (Notes 7, 10 and 16):

Net defined benefit liability (Note 8)—

15,243

148,104

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

Other (Notes 3, 5, 9 and 14)
Total current assets

2013

2014

2014

¥ 97,226¥ 85,334$ 829,126

Short-term loans payable (Notes 5 and 7)

14,211

15,579151,368

Income taxes payable

6,888

6,396

62,150

LIABILITIES AND NET ASSETS
Current liabilities:

13,735

15,142

147,119

320,419

326,504

3,172,406

Notes and accounts payable—trade (Notes 5 and 17)

Noncurrent liabilities:

Buildings and structures, net

27,82430,623

297,544

Provision for environmental measures

2,101

1,734

16,848

Machinery, equipment and vehicles, net

25,801

37,267362,099

Other (Notes 9 and 14)

1,417

3,572

34,702

Land

18,685

18,626

180,979

Total noncurrent liabilities

25,35531,618307,206

Other, net

20,895

9,114

88,550Total liabilities

167,202

164,060

1,594,051

93,205

95,630929,172

Total property, plant and equipment

Net assets (Note 12)
Intangible assets

6,309

7,250

70,444

Shareholders’ equity
Common stock:
Authorized—696,061,000 shares

Investments and other assets
Investment securities (Notes 5 and 6)

50,532

60,952592,231

23,32023,320226,585

Other, net (Notes 4, 9 and 16)

12,47010,984

106,711

Capital surplus

25,17925,180244,656

Retained earnings

253,009269,6212,619,713(930)(5,087)(49,430)

Unrealized gains on securities, net of taxes

8,470

11,467

111,419

Foreign currency translation adjustment

(407)

6,972

67,741—(189)(1,835)

Total investments and other assets

63,002

71,936

698,942

Total noncurrent assets

162,516

174,816

1,698,558

Total assets (Note 16)¥482,935¥501,320$4,870,964

Issued—237,973,205 shares in 2013 and 2014

Treasury stock
515,440 shares in 2013 and 2,862,706 shares in 2014

See accompanying notes.

Accumulated other comprehensive income

Remeasurements of defined benefit plans (Note 8)
Subscription rights to shares (Note 13)
Minority interests
Total net assets

See accompanying notes.

728

793

7,702

6,364

5,183

50,362

315,733

337,260

3,276,913¥482,935¥501,320$4,870,964

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JSR CORPORATIONANNUAL REPORT 2014

> FINANCIAL SECTION10>>JSR CORPORATIONANNUAL REPORT 2014

> FINANCIAL SECTION

Consolidated Statements of Income

Consolidated Statements of Comprehensive Income

JSR Corporation and Consolidated Subsidiaries
Years ended March 31, 2013 and 2014

JSR Corporation and Consolidated Subsidiaries
Years ended March 31, 2013 and 2014
Thousands of
U.S. dollars(Note 1)Millions of yen

Net sales (Notes 16 and 17)

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

2013

2014

2014

¥371,487¥394,309$3,831,221

Costs and expenses (Note 15):

Income before minority interests

2013

2014

2014

¥30,291¥24,195$235,090

Other comprehensive income

Cost of sales

279,162

294,924

2,865,570

Unrealized gains on securities, net of taxes

4,274

2,968

28,839Selling, general and administrative expenses

57,11963,323615,264

Foreign currency translation adjustment

5,755

4,335

42,116336,281358,247

3,480,834

35,20636,062

350,387

Operating income (Note 16)

Share of other comprehensive income of associates accounted for using equity method
Other comprehensive income (Note 11)
Comprehensive income

2,046

3,134

30,452

12,075

10,437

101,407¥42,366¥34,632$336,497¥41,484¥35,548$345,401

882

(916)

(8,904)

Other income (expenses):
Interest income

370

257

2,497

Comprehensive income attributable to

Dividends income

439

659

6,404

Comprehensive income attributable to owners of the parent

Interest expenses

(126)

(142)

(1,375)Comprehensive income attributable to minority interests

Foreign exchange gains

2,976

1,672

16,247

Share of profit of entities accounted for using equity method

4,732

1,546

15,023

Depreciation

(141)

(320)

(3,105)

Loss on abandonment of noncurrent assets

(146)

(296)

(2,877)

Gain on sales of investment securities (Note 6)

214

—

—

Restructuring loss (Note 10)—(2,410)(23,411)

Loss on abandonment of inventories
Other, net (Note 6)
Income before income taxes and minority interests

(742)

—

—

65

(72)

(713)

7,641

894

8,690

42,84736,956

359,077

12,948

11,637113,067

Income taxes (Note 9):
Current
DeferredIncome before minority interests
Minority interests in net income of consolidated subsidiaries
Net income

(392)

1,124

10,92012,556

12,761

123,987

30,291

24,195

235,09013(978)(9,494)¥ 30,278¥ 25,173$ 244,584
U.S. dollars(Note 1)

Yen

2013

2014

2014

Per share of common stock:
Net income¥ 126.13¥ 106.10

Diluted net income

125.86105.85

1.03

Cash dividends applicable to the year

34.00

38.00

0.37

See accompanying notes.

$

1.03

See accompanying notes.

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> FINANCIAL SECTION

12>>JSR CORPORATIONANNUAL REPORT 2014

Consolidated Statements of Changes in Net Assets

Consolidated Statements of Cash FlowsJSR Corporation and Consolidated Subsidiaries
Years ended March 31, 2013 and 2014

JSR Corporation and Consolidated Subsidiaries
Years ended March 31, 2013 and 2014

> FINANCIAL SECTION

Thousands of
U.S. dollars(Note 1)Millions of yen
Number ofshares ofcommon stock(thousands)

Balance at April 1, 2012

Unrealized
gains onsecurities,
net of taxes

Foreigncurrencytranslation
adjustments

Remeasurementsof defined
benefit plans

Subscription
rightsto shares

Millions of yen

Commonstock

CapitalsurplusRetainedearnings

Treasurystock

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

—

¥656

¥746

—

—

—

(7,961)

—

—

—

—

—

—

Minority
interests

Changes of items during the period
Dividends of surplus

Cash flows from operating activities:
Income before income taxes and minority interests

2013

2014

2014

¥ 42,847¥ 36,956$ 359,077

Adjustments to reconcile income before income taxes andminority interests to cash provided by operating activities:

Net income

—

—

—

30,278

—

—

—

—

—

—

Purchase of treasury stock

—

—

—

—

(6,001)

—

—

—

—

—

Depreciation and amortization

19,232

18,096

175,823

Disposal of treasury stock

—

—

—

(4)

39

—

—

—

—

—

Interest and dividends income

(809)

(916)

(8,901)(17,912)——(32,353)

32,353

—

—

—

—

—

Change of scope of consolidation

—

—

—

(51)

—

—

—

—

—

—

Interest expenses

Net changes of items other thanshareholders’ equity

—

—

—

—

—

4,252

7,134

—

72

5,618

Restructuring Loss

Total changes of items during the period(17,912)——(10,091)

26,391

4,252

7,134

—

72

5,618

Changes in operating assets and liabilities—net:

Balance at March 31, 2013

237,973¥23,320¥25,179¥253,009(930)¥ 8,470¥ (407)—¥728¥6,364Retirement of treasury stock¥

Changes of items during the period
Dividends of surplus

—

—

—

(8,549)

—

—

—

—

—

—

—

—

—

25,173

—

—

—

—

—

—

Purchase of treasury stock

—

—

—

—

(4,182)

—

—

—

—

—

Disposal of treasury stock

—

—

1

—

25

—

—

—

—

—

Retirement of treasury stock

—

—

—

—

—

—

—

—

—

—

Change of scope of consolidation

—

—

—

(12)

—

—

—

—

—

—

Net changes of items other thanshareholders’ equity

—

—

—

—

—

2,997

7,379

(189)

65

(1,181)

Total changes of items during the period

—

—

1

16,612(4,157)

2,997

7,379

(189)

65

(1,181)

237,973¥23,320¥25,180¥269,621¥ (5,087)¥11,467¥ 6,972¥(189)¥793¥5,183Thousands of U.S. dollars (Note 1)
Number ofshares ofcommon stock(thousands)

Balance at April 1, 2013

Commonstock

CapitalsurplusRetainedearnings

237,973$226,585$244,650 $2,458,311

—

—

—

(83,061)

126

142

1,375

(4,732)(1,546)(15,023)—

2,410

23,411

203

6,050

58,786(7,952)(2,262)(21,976)

11,688(2,885)(14,467)
1,234(140,566)
11,995

SubtotalInterest and dividends income received

57,7182,566

45,6971,751

444,001
17,017

Interest expenses paid
Income taxes paid

(124)
(12,440)(125)(11,848)(1,210)(115,123)

47,72035,475

344,685

Increase (decrease) in notes and accounts payable—trade
Other, net

Net cash provided by operating activities
Cash flows from investing activities:
Decrease (increase) in time deposits

1,000

6,736

65,449Net decrease (increase) in short-term investment securities(26,000)

28,500276,914Purchase of noncurrent assets(27,869)(21,108)(205,089)

Purchase of investment securities(2,092)(1,003)(9,746)

Purchase of stocks of subsidiaries and affiliates(4,500)(1,036)(10,063)

Treasurystock

Unrealized
gains onsecurities,
net of taxes

Foreigncurrencytranslation
adjustments

Remeasurementsof defined
benefit plans

Subscription
rightsto shares—(2,800)(27,206)$ (9,046)$ 82,299$ (3,955)—$7,077$ 61,837

Payments of loans receivable(2,007)(3,226)(31,344)

—

—

—

—

—

—

Collection of loans receivable
Other, net

2,914
(143)

2,699
(541)

26,224(5,260)(58,697)

8,221

79,879Minority
interests

Changes of items during the period
Dividends of surplus

Decrease (increase) in notes and accounts receivable—trade
Decrease (increase) in inventories

Net income

Balance at March 31, 2014

Share of profit of entities accounted for using equity method

Net income

—

—

—

244,584

—

—

—

—

—

—

Purchase of treasury stock

—

—

—

—

(40,635)

—

—

—

—

—

Payments for investments in capital of subsidiaries and associates

Net cash provided by (used in) investing activities
Cash flows from financing activities:

Disposal of treasury stock

—

—

6

—

251

—

—

—

—

—

Retirement of treasury stock

—

—

—

—

—

—

—

—

—

—

Net increase (decrease) in short-term loans payable(1,113)

144

1,398

Repayment of long-term loans payable(1,000)——

Proceeds from long-term loans payable

5,417

4,538

44,094

540——

Purchase of treasury stock(6,001)(4,182)(40,635)

Cash dividends paid

(7,961)(8,464)(82,238)

(19)
(23)

(146)
(12)

(1,420)(114)(10,160)
1,773(8,122)
1,723(78,915)
16,734(19,364)
67,19837,29753,818362,383
522,913

5,984

—

—

¥ 53,818¥ 91,115$ 885,296

Change of scope of consolidation

—

—

—

(121)

—

—

—

—

—

—

Net changes of items other thanshareholders’ equity

—

—

—

—

—

29,12071,696(1,835)625(11,475)

Total changes of items during the period

—

—

6

161,402(40,384)

29,12071,696(1,835)625(11,475)

237,973$226,585$244,656 $2,619,713$(49,430)$111,419$67,741$(1,835)$7,702$ 50,362

Balance at March 31, 2014
See accompanying notes.

Proceeds from stock issuance to minority shareholders

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)
See accompanying notes.

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> FINANCIAL SECTION14>>JSR CORPORATIONANNUAL REPORT 2014

> FINANCIAL SECTION

Notes to Consolidated Financial Statements
JSR Corporation and Consolidated Subsidiaries
Years ended March 31, 2013 and 2014sand) was recorded as net defined benefit liability at the end of

1. Basis of Consolidated Financial Statements

English (with some expanded descriptions) from the consolidated

law for tangible assets purchased on or after April 1, 2012.

The accompanying consolidated financial statements of JSR Corpo-

financial statements of the Company prepared in accordance with(g) Intangible assets—Goodwill is amortized by the straight-line

the fiscal year ended March 31, 2014. In addition, accumu-

Japanese GAAP and filed with the appropriate Local Finance Bureau

method over the estimated useful lives up to twenty years.

lated other comprehensive income decreased by ¥189 million

ration (the “Company”) and its consolidated subsidiaries have been

Software for its own use is amortized over the estimated useful life($1,835 thousand).

prepared in accordance with the provisions set forth in the Japaneseof the Ministry of Finance as required by the Japanese Financial

Financial Instruments and Exchange Law and its related accounting

Instruments and Exchange Law. Some supplementary information(five years) using the straight-line method.

regulations, and in conformity with accounting principles generally

included in the statutory Japanese language consolidated financial(h) Leased assets—Assets of finance leases are depreciated over theaccepted in Japan (“Japanese GAAP”), which are different in certain

statements, but not required for fair presentation, is not presented inlease term using the straight-line method that residual value is zero.

(k) Provision for environmental measures—A provision for environ-the accompanying consolidated financial statements.

( i ) Allowance for doubtful accounts—Allowance for doubtful

mental measures is provided based on estimated costs for therespects as to application and disclosure requirements of International			The effects of this change in equity per share decreased by¥0.80 ($0.01).

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

accounts is provided in amounts sufficient to cover possible losses on

disposal of polychlorinated biphenyl (PCB) as mandated by the Law

are included solely for the convenience of readers outside Japan,

collection. Allowance for doubtful accounts consists of the estimatedConcerning Special Measures Against PCB Waste.

using the prevailing exchange rate at March 31, 2014, which was

uncollectible amount with respect to specific items, and the amount( l ) Income taxes—The Companies provide for income taxes appli-

mity with generally accepted accounting principles prevailing in the¥102.92 to U.S.$1.00. The convenience translations should not becalculated using the actual percentage of collection losses in the past

cable to all items included in the consolidated statements of income

respective countries of domicile and make necessary amendments forconstrued as representations that the Japanese yen amounts havewith respect to other items.

regardless of when such taxes are payable. Income taxes based on

consolidated financial statements required by Practical Issues Task

been, could have been, or could in the future be, converted into U.S.

( j ) Net Defined Benefit Liability—Employees of the Companies aretemporary differences between tax and financial reporting purposes

Force No. 18 issued by ASBJ. The accompanying consolidated

dollars at this or any other rate of exchange.

entitled, under most circumstances, to lump-sum severance pay-

are reflected as deferred income taxes in the consolidated financial

ments or pension payments upon reaching the mandatory retire-statements using the asset and liability method.

ment age, or earlier in the case of voluntary or involuntary termina-(m) Derivative and hedging activities—The Companies use deriva-

tion, based on the compensation at the time of severance and years

tive financial instruments to manage their exposures to fluctuations inof service.

foreign exchange and interest rates. Foreign exchange forward

Financial Reporting Standards.
The accounts of the Company’s overseas subsidiaries andaffiliates are based on their accounting records maintained in confor-

financial statements have been restructured and translated into

2. Summary of Significant Accounting Policies(c) Cash and cash equivalents—In preparing the consolidated state-(a) Consolidation—The accompanying consolidated financial statements include the accounts of the Company and its significant
subsidiaries (30 and 28 subsidiaries in 2013 and 2014, respectively).
All significant intercompany accounts and transactions have been
eliminated in consolidation.
JSR MICROTECH INC. and Nichigo Kogyo Co., Ltd. were ex-

The Companies provided provision and expenses for employees’

contracts and interest rate swaps are utilized by the Companies toments of cash flows, cash on hand, readily available deposits andseverance and retirement benefits at year-end based on the estimat-

reduce foreign currency exchange and interest rate risks. The Com-

short-term highly liquid investments with maturities not exceeding

ed amounts of projected benefits obligation and the fair value of thepanies do not enter into derivatives for trading purposes or specula-three months at the time of purchase are considered to be cash andpension assets.

tive purposes. Derivative financial instruments and foreign currency

cash equivalents.
(d) Short-term securities and investment securities—The Com-

attributing expected benefit to the accounting period is based onpany and its consolidated subsidiaries (the “Companies”) had nomainly a straight-line basis.

cluded from the scope of consolidation in the fiscal year ended March

trading securities or held-to-maturity debt securities. Equity securities

31, 2014 due to transfer of all shares thereof.

issued by subsidiaries and affiliated companies, which are not con-

JSR BST Elastomer Co., Ltd. and JSR Life Sciences Corporation

In calculating the retirement benefit obligation, the method ofsolidated or accounted for using the equity method, are stated at

Actuarial differences are recognized as expenses at once in thefollowing period.
( i ) The Accounting Changetransactions are classified and accounted for as follows:	( i )	All derivatives are recognized as either assets or liabilities andmeasured at fair value, and gains or losses on these derivativetransactions are recognized in the consolidated statements ofincome.
	(ii)	The interest rate swaps that qualify for hedge accounting andhave been consolidated since 2013 due to increase of materiality.

moving-average cost. Available-for-sale securities with available fair

In order to improve the disclosure of consolidated financial

market values are stated at fair market value and unrealized gains and“Accounting Standard for Retirement Benefits” (ASBJ State-value, but the differential paid or received under the swap

information, from the fiscal year ended March 31, 2014 the account-losses on these securities are reported, net of applicable income

ment No. 26 issued on May 17, 2012, hereinafter “Retirementagreements is recognized and included in interest expense oring periods of TECHNO POLYMER HONG KONG CO., LTD.,Techno

taxes, as a separate component of net assets via the Consolidated

Benefits Accounting Standard”) and “Guidance on Accounting

Polymer (Thailand) Co., Ltd., and TECHNO POLYMER AMERICA,

Statements of Comprehensive income. Realized gains and losses onStandard for Retirement Benefits” (ASBJ Guidance No. 25(n) Foreign currency transactions—The Companies translate assets

INC., were changed from a year ending on December 31 year-end tosale of such securities are computed using moving-average cost.

issued on May 17, 2012, hereinafter “Retirement Benefits

and liabilities denominated in foreign currencies into Japanese yen at

a March 31 year-end.

Available-for-sale securities with no available fair market values are

Guidance”) are adopted (with the exception of the main clauseexchange rates prevailing at the balance sheet dates. Resulting		Effective from the end of the fiscal year ended March 31, 2014,

meet specific matching criteria are not remeasured at market

income as incurred.

stated at moving-average cost or amortized cost.

of Article 35 of the Retirement Benefits Accounting Standard

exchange gains or losses are credited or charged to income asperiod from January 1, 2013 to March 31, 2014 have been included(e) Inventories—Inventories are stated at cost, which is determined

and the main clause of Article 67 of the Retirement Benefits

incurred.

in consolidation. The impact on the profit and loss of changing

mainly based on the average method (for the value stated on the

Guidance), where the method was changed with benefit(o) Translation of foreign currency financial statements—Financial

account closing date is immaterial.

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

obligation net of the amount of plan assets recorded as net

statements of overseas subsidiaries are translated into Japanese yen(b) Equity method—Investments in affiliated companies (all of those

profitability).

defined benefit liability and unrealized actuarial difference

using the respective year-end rate for assets and liabilities, the aver-

20% to 50% owned and certain others 15% to 20% owned) were( f ) Property, plant and equipment, and depreciation—Property,

recorded as net defined benefit liability.

age rate for revenues and expenses, and the historical rates for share-accounted for by the equity method (6 and 8 affiliated companies inplant and equipment are stated at cost. Depreciation is calculated

2013 and 2014, respectively). Unconsolidated subsidiaries and the

As a result, these above companies’ results for a 15-month fiscal

The Retirement Benefits Accounting Standard is applied inholders’ equity accounts. Foreign currency translation adjustments

using the declining-balance method at rates based on their estimatedaccordance with the transitional handling set forth in Article 37

are contained in accumulated other comprehensive income andother affiliated companies are stated at cost since their net income

useful lives except for buildings acquired after March 31, 1998, whichof the Retirement Benefits Accounting Standard, and theminority interests.

and retained earnings in the aggregate are not material compared toare depreciated based on the straight-line method.

effected amounts due to such change are adjusted in remea-(p) Amounts per share of common stock—The computation of net

surements of defined benefit plans under accumulated otherincome per share of common stock is based on the average number

comprehensive income at the end of the fiscal year endedof shares outstanding during each fiscal year. Treasury stock has been

March 31, 2014.

excluded in the calculation of amounts per share of common stock.

consolidated net income and retained earnings, respectively.
Medical & Biological Laboratories Co. and JN System Partners( i ) The accounting change		Effective April 1, 2012, due to a revision of the corporate tax law

Co., Ltd. have been included in the scope of the equity method sincein Japan, the Company and its domestic consolidated subsidiar-2014 due to the increase of materiality and establishment, respectively.

ies have applied a depreciation method based on the revised

			

			

As a result of the above, ¥15,243 million ($148,104 thou-

Cash dividends per share represent actual amounts applicable to

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JSR CORPORATIONANNUAL REPORT 2014

the respective years.

> FINANCIAL SECTION			

sified and restated to conform to the current year presentation.

	(ii)	Amendments relating to the method of attributing expected>>> FINANCIAL SECTION

5. Fair Value of Financial Instruments

financial instruments as of March 31, 2013 and 2014. Financial

The following is a summary of the amount on consolidated balance

instruments which fair value is extremely difficult to estimate is exclud-

sheet, fair value and the difference between these two items by majored from the following table.

benefit to periods and relating to the discount rate

These reclassifications and restatements had no effect on previously reported results of operations or retained earnings.

As described in Note 2 ( j ), the amended rule has beeneffective from the end of the fiscal year ended March 31, 2014.

(q) Reclassifications—Certain prior year amounts have been reclas-

16

JSR CORPORATIONANNUAL REPORT 2014

			

The revised accounting standard also made certain amend-(r) New accounting pronouncements—

ments relating to the method of attributing expected benefit to

Accounting standard for retirement benefits

periods and relating to discount rate.

Millions of yen

March 31, 2013:(1) Cash and deposits

Book value

Fair value

Difference“Accounting Standard for Retirement Benefits” (Statement No. 26 byThis accounting standard and the guidance for (ii) above are¥ 32,190¥ 32,190

ASBJ on May 17, 2012) and “Guidance on Accounting Standard for

effective from the beginning of fiscal years ending on March 31, 2015.

(2) Notes and accounts receivable—trade

91,972

91,972—Retirement Benefits” (Guidance No. 25 by ASBJ on May 17, 2012)

However, no retrospective application of this accounting standard tohave been issued.

consolidated financial statements in prior periods is required.

(3) Short-term investment securities and investment securities(4) Current assets—other (short-term loans receivable)

109,250
3,498

110,865
3,498

1,615
—

¥236,910¥238,525¥1,61597,226
14,211
6,626

97,226
14,211
6,623

—
—
(3)

¥118,063¥118,060

¥

(3)

¥

—

Major changes are as follows:

The Companies expected to apply the revised accounting standard	( i )	Treatment in the consolidated balance sheets, statements offrom the fiscal year ending March 31, 2015, and is in the process of

income and the statements of comprehensive income

measuring the effects of applying the revised accounting standard.

Total assets(5) Notes and accounts payable—trade(6) Short-term loans payable(7) Long-term loans payable
Total liabilities

3. Cash and Cash Equivalents¥—

March 31, 2014:(1) Cash and deposits

Cash and cash equivalents at March 31, 2013 and 2014 consisted of the following:Thousands of
U.S. dollars

Millions of yen

2013

2014

2014

Cash and deposits
Short-term investment securities¥ 32,190
79,412¥ 33,391
81,005$ 324,436
787,066

Time deposits over three months
Current assets: Other(61,282)
3,498(26,081)
2,800(253,410)
27,204

Cash and cash equivalents¥ 53,818¥ 91,115$ 885,296¥ 33,391¥ 33,391(2) Notes and accounts receivable—trade87,94587,945—(3) Short-term investment securities and investment securities(4) Current assets—other (short-term loans receivable)

114,6152,800

113,819
2,800

(796)
—

¥238,751¥237,955¥ (796)85,334
14,794
11,85485,334
14,794
11,773——(81)¥111,982¥111,901

Total assets(5) Notes and accounts payable—trade(6) Short-term loans payable(7) Long-term loans payable (included repayment due within one year)
Total liabilities

¥

(81)

Thousands of U.S. dollars
Book value

4. Allowance for doubtful accounts
Allowance for doubtful accounts as of March 31, 2013 and 2014 were as follows:
Thousands of
U.S. dollars

Millions of yen

Allowance for doubtful accounts

2013

2014

2014

Current asset: Notes and accounts receivable—trade
Investments and other assets: Other¥(460)(356)¥(332)(152)$(3,222)(1,474)

March 31, 2014:(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(7) Long-term loans payable (included repayment due within one year)
Total liabilities
1.	Method to determine the estimated fair values of financial instruments and other matters related to securities and derivative

Fair value

Difference$ 324,436$ 324,436

854,503854,503$——

1,113,631
27,204

1,105,894
27,204(7,737)—$2,319,774$2,312,037$(7,737)

829,126
143,746
115,174

829,126
143,746
114,386——(788)$1,088,046$1,087,258$ (788)(3) Short-term investment securities and investment securities		The fair value of securities and investment securities aretransactions

measured at the quoted market price of the stock exchange(1) Cash and cash equivalents, and time deposits

for the equity instruments. Negotiable deposit, commercial

		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—tradeapproximate fair value because of their short maturities.

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.

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JSR CORPORATIONANNUAL REPORT 2014

> FINANCIAL SECTION

			

approximate fair values because of their short maturities.
(6) Short-term loans payable		>>> FINANCIAL SECTION

6. Short-term investment securities and Investment Securities

rate on an equivalent new loan.

(5) Notes and accounts payable—trade		The carrying values of notes and accounts payable—trade18

JSR CORPORATIONANNUAL REPORT 2014

The fair value of long-term loans payable subject to a(1)	The following tables summarize the acquisition cost and book value of available-for-sale securities with available fair value as of March 31,

special accounting method for interest rate swaps which2013 and 2014:

qualify for hedge accounting meet specific matching criteria is(a) Securities with book value exceeding acquisition costmeasured at the present value by discounting expected

Short-term loans payable approximate fair value.

Millions of yen

2013

repayments of principal and interest together with the interest(7) Long-term loans payable

rate swaps in the remaining period using an assumed interest		The fair value of long-term loans payable is measured at the

Equity securities

rate on an equivalent new loan.

present value by discounting expected repayments of principal

Acquisition cost

Book value¥9,026¥22,517Difference¥13,491

and interest in the remaining period using an assumed interest
Millions of yen

2. Financial instruments for which it is extremely difficult to estimate the fair values were as follows:

2014
Thousands of
U.S. dollars

Millions of yen

Non-listed equity securities
Investments in capital

2013

2014

2014

¥20,694
1,587¥27,342
4,578$265,667
44,477

Acquisition cost

Equity securities

Book value¥10,349¥27,785

Difference¥17,436

Thousands of U.S. dollars

2014
Acquisition cost

3. Redemptions schedule of monetary claims and securities with fixed maturities were as follows:

Equity securities

Millions of yen
Due within
one yearMarch 31, 2013:(1) Cash and deposits¥(2) Notes and accounts receivable—trade

Due after one year
and within five years

Due after five years
and within ten years

Due overten years

8,583

¥200

¥—

¥—

91,972

—

—

—

Total

¥

2013
Acquisition cost

Equity securities

Total

79,412
3,498

—
—

—
—

—
—

79,412
3,498¥183,465

¥200

¥—

¥—

¥183,665(1) Cash and deposits¥(2) Notes and accounts receivable—trade

2,081

¥—

¥—

¥—

87,945———¥

Book value¥2,782¥2,338Book value¥1,440¥1,273Available-for-sale securities with fixed maturities
81,057
2,800

—
—

—
—

—
—

81,0572,800¥173,883

¥—

¥—

¥—

¥173,883

2014
Equity securities$13,995

Book value$12,374

March 31, 2014:(1) Cash and deposits(2) Notes and accounts receivable—trade$

Due after five years
and within ten years

Due overten years

Total

20,219$—$—$—854,503

—

—

—

$

854,503

20,219787,575
27,204

—
—

—
—

—
—

787,575
27,204$1,689,501

$—

$—

$—

$1,689,501(3) Short-term investment securities and investment securities
Available-for-sale securities with fixed maturities
Other(4) Current assets—other (short-term loans receivable)
Total
4. See Note 7 for scheduled repayments of long-term debt.

Difference$(1,621)(2) Total sales of available-for-sale securities sold and the related gains and losses for the years ended March 31, 2013 and 2014 were as follows:

Thousands of U.S. dollars
Due after one year
and within five years¥(167)

Thousands of U.S. dollars

Thousands of
U.S. dollars

Millions of yen
Due within
one yearDifference

2,081
87,945Acquisition costTotal¥(444)

2014
Acquisition cost(3) Short-term investment securities and investment securities
Other(4) Current assets—other (short-term loans receivable)

Difference

Millions of yen

Equity securities

March 31, 2014:$169,419

Millions of yen

91,972Available-for-sale securities with fixed maturities

Difference$269,968(b) Securities with book value not exceeding acquisition cost

8,783(3) Short-term investment securities and investment securities
Other(4) Current assets—other (short-term loans receivable)$100,549

Book value

Total sales
Gain
Loss

2013

2014

2014

¥341
223
(9)

¥62
22
(0)

$601
215
(2)

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JSR CORPORATIONANNUAL REPORT 2014

> FINANCIAL SECTION

7. Short-Term Loans Payable and Long-Term Loans Payable

20>>

JSR CORPORATIONANNUAL REPORT 2014

2. Movements in plan assets

Short-term loans payable represent primarily overdrafts from banks bearing interest at 0.7% per annum (weighted average interest rate) at MarchMillions of yen

31, 2013 and 2014.
Long-term loans payable at March 31, 2013 and 2014 consisted of the following:Thousands of
U.S. dollars

Millions of yen

2013
Loans principally from banks and insurance companies due through2020 with interest rates 1.7% and 2.0% per annum(weighted average interest rate) in 2013 and 2014, respectively:
SecuredUnsecuredLess amount due within one year

¥

1
6,625

2014

¥

1
11,853

2014$

10
115,164

6,626—

11,854785

115,174
7,622¥6,626¥11,069$107,552

At March 31, 2014, property, plant and equipment, at book value of ¥6,740 million ($65,488 thousand) were pledged as collateral for secured loans.
The annual maturities of long-term debt at March 31, 2014 were as follows:Year ending March 31,

2015
2016
2017

> FINANCIAL SECTION

Millions of yen

¥

785
1,445
2,771

Thousands of
U.S. dollars

$

7,622
14,040

Balance at April 1, 2013
Expected return on plan assets
Actuarial loss (gain)

2014

2014

¥35,310288$343,082
2,800

787

7,644

Contributions paid by the employer

1,076

10,459Benefits paid
Other

(2,300)(142)(22,346)(1,384)¥35,019$340,255

Balance at March 31, 2014
3. Reconciliation from retirement benefit obligation and plan assets to liability (assets) for retirement benefit

Millions of yen

2014

2014

¥ 39,705(35,019)$ 385,783(340,255)

Unfunded retirement benefit obligation

4,686
10,55745,528102,576

Total Net liability (assets) for retirement benefit at March 31, 201415,243

148,104

Liability for retirement benefit

2018

2,271

22,063

Total Net liability (assets) for retirement benefit at March 31, 201420192020 and thereafter

2,271
2,311

22,063
22,465¥11,854$115,174

4. Retirement benefit costs

15,243

148,104¥ 15,243$ 148,104

Millions of yen

Service cost
Interest cost

The Company and domestic consolidated subsidiaries have corporate pension fund plan and lump-sum payment plan as defined benefit plan.

1. Movement in retirement benefit obligation
Millions of yen

Balance at April 1, 2013
Service cost
Interest costThousands of
U.S. dollars

2014

2014

¥50,080
2,061$486,589
20,026727

7,067

Actuarial loss (gain)

1,080

10,495

Benefits paid
Other

(3,104)(582)(30,160)(5,658)¥50,262$488,359

Balance at March 31, 2014

Expected return on plan assets
Net actuarial loss amortization
Total retirement benefit costs for the fiscal year ended March 31, 2014

Defined benefit plans

Thousands of
U.S. dollars

Funded retirement benefit obligation
Plan assets

26,921

8. Employees’ Severance and Retirement Benefits

Thousands of
U.S. dollars

Thousands of
U.S. dollars

2014

2014

¥2,061727$20,026
7,067

(288)
(441)

(2,800)(4,292)¥2,059$20,001

5. Accumulated adjustments for retirement benefit
Millions of yen

Actuarial gains and losses that are yet to be recognized
Total balance at March 31, 2014

2014

2014

(293)
¥(293)(2,851)$(2,851)

6. Plan assets(1) Plan assets comprise:
2014
Bonds
Equity securities

80.3%
9.8

Cash and cash equivalents
Other

0.9
9.0

Total

Thousands of
U.S. dollars

100.0%

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JSR CORPORATIONANNUAL REPORT 2014

> FINANCIAL SECTION(2) Long-term expected rate of return

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JSR CORPORATIONANNUAL REPORT 2014

> FINANCIAL SECTION

Significant components of the Companies’ deferred tax assets and liabilities as of March 31, 2013 and 2014 were as follows:	Current and target asset allocations, historical and expected returns on various categories of plan assets have been considered to determine

Thousands of
U.S. dollars

Millions of yen

long-term expected rate of return.

2013
Deferred tax assets:
Provision for retirement benefits

7. Actuarial assumptions
The followings were principal actuarial assumptions at March 31, 2014
Discount rate

mainly1.53%

Long-term expected rate of return

mainly0.55%

9. Income Taxes

Consequently, the statutory income tax rate utilized for deferred
tax assets and liabilities expected to be settled or realized in theincome comprise corporation, enterprise and inhabitants’ taxes. The

period on or after April 1, 2014 is 35.6%. The impact of this change

statutory income tax rate was approximately 38.0%.

did not have a material effect.
The following table summarizes the significant differences be-law on March 31, 2014. As a result of these amendments, the statu-

tween the statutory income tax rate and the Companies’ effective tax

tory income tax rate will be reduced from 38.0% to 35.6% effective

rates for financial statement purposes for the years ended March 31,

from the year beginning April 1, 2014, thereafter.

2013 and 2014:

¥

—

2014
$

—

—

5,300

51,495

Loss carried forward

2,956

3,905

37,947

Impairment loss

1,267

1,642

15,952

Accrued bonuses

1,518

1,415

13,752

Unrealized gain on sale of inventories

1,179

1,330

12,920

916

971

9,431

Provision for environmental measures
Other

748
3,644

617
2,806

5,999
27,262Sub-total
Valuation allowance

17,630(3,911)

17,986(4,910)174,758(47,711)

Total deferred tax assets

13,71913,076

127,047

Unrealized gains on securities(4,712)(6,352)(61,718)

Deferred gain on sales of noncurrent assets
Other(3,060)(1,290)(2,988)(1,620)(29,029)(15,738)(9,062)¥ 4,657(10,960)¥ 2,116(106,485)$ 20,562

Unrealized gain on sale of noncurrent assets

Income taxes in the accompanying consolidated statements ofAmendments to the Japanese tax regulations were enacted into

¥ 5,402

Net defined benefit liability

2014

Deferred tax liabilities:

2013

2014

Statutory income tax rate
Tax credit on research and development costs

38.0%
(3.5)

38.0%
(4.8)

Share of profit of entities accounted for using equity method

(4.2)

(1.6)

Lower tax rates for foreign consolidated subsidiaries

(4.3)

(0.3)

Valuation allowance
Other

2.4
0.9

2.9
0.3

10. Restructuring Lossries ¥713 million ($6,924 thousand), Repair expenses associated with

Effective tax rate

29.3%

34.5%

The Companies recognized a loss on restructuring of production base

restructuring ¥565 million ($5,485 thousand) and Depreciation ex-

of Elastomers business and Fine chemicals and other products

penses incurred during the period in which production was stopped

business. This loss is composed of Impairment loss of noncurrent¥229 million ($2,221 thousand).

Total deferred tax liabilities
Net deferred tax assets

assets ¥645 million ($6,268 thousand), Loss on valuation of inventoImpairment loss of Noncurrent Assets
The Companies recognized impairment losses on the following group of noncurrent assets for the year ended March 31, 2014.
Thousands of
U.S. dollars

Millions of yen
Use

Location

Hidaka City, Saitama Prefecture, Japan
Assets for fine chemicals
and other products business

Chungcheongbuk-do, South Korea

Land
Machinery, equipment
and vehicles
Other

2014
¥ 67

2014
$ 651

573

5,571

5

46

The Companies have grouped their noncurrent assets into business units. Noncurrent assets that are idle or not being used for business activities
are assessed individually. The book value of noncurrent asset was written down to its recoverable value.

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> FINANCIAL SECTION24>>

JSR CORPORATIONANNUAL REPORT 2014

> FINANCIAL SECTION

11. Comprehensive income

13. Stock Option Plans

Amounts reclassified to net income in the current period that were recognized in other comprehensive income in the current or previous periods

The shareholders of the Company approved the issuance of stock options to the directors and the executive officers of the Company as follows:

and tax effects for each component of other comprehensive income were as follows;

Date of resolution of the general shareholders’ meeting

Thousands of
U.S. dollars

Millions of yen

2013
Unrealized gains on securities:
Occurrence amount
Recycling
Total
Foreign currency translation adjustments
Occurrence amount
Total
Share of other comprehensive income of associates accounted for using equity method
Occurrence amount
Total

2014

2014

¥ 6,832(205)¥ 4,57830$ 44,483
295¥ 6,627¥ 4,608$ 44,778¥ 5,755¥ 4,335$ 42,116¥ 5,755¥ 4,335$ 42,116¥ 2,046¥ 3,134$ 30,452¥ 2,046¥ 3,134$ 30,452

Total other comprehensive income before tax¥14,428¥12,077$117,346

Tax effect
Other comprehensive income, net of tax¥ (2,353)¥12,075¥ (1,640)¥10,437$ (15,939)$101,407

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, 2014
Exercise price per share

Date of resolution of the general shareholders’ meeting
The maximum number of shares to be issued
Exercisable period of stock options
Stock subscription rights which have been vested
outstanding as of March 31, 2014
Exercise price per share

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

All tax effect of other comprehensive income arise from unrealized gains on securities.
Stock subscription rights which have been vested
outstanding as of March 31, 2014
Exercise price per share

12. Net Assets

transferred to other capital surplus and retained earnings, respec-

new shares is required to be designated as common stock. However,tively, which are potentially available for dividends.

a company may, by a resolution of the Board of Directors, designate

The maximum amount that the Company can distribute as

an amount not exceeding one-half of the price of the new shares as

dividends is calculated based on the non-consolidated financial

additional paid-in capital, which is included in capital surplus.

statements of the Company in accordance with the Japanese laws

Under the Japanese Corporate Law (“the Law”), in the case where

and regulations.

a dividend distribution of surplus is made, the smaller of an amountAt the annual shareholders meeting held on June 17, 2014, theequal to 10% of the dividends or the excess, if any, of 25% of com-

shareholders resolved cash dividends amounting to ¥4,467 million

mon stock over the total of additional paid-in capital and legal earn-($43,404 thousand). Such appropriations have not been accrued inings reserve must be set aside as additional paid-in capital or legal

the consolidated financial statements as of March 31, 2014. Suchearnings reserve. Legal earnings reserve is included in retained

appropriations are recognized in the period in which they are resolved.

earnings in the accompanying consolidated balance sheets.

June 16, 2006

June 15, 2007

62,500 shares
From June 18, 2005

39,100 shares
From August 2, 2006

48,500 shares
From July 11, 2007

to June 17, 2025

to June 16, 2026

to July 10, 2027

35,100 shares

28,000 shares

38,700 shares

¥

1

¥

1

¥

1

$0.01

$0.01

$0.01

June 13, 2008

June 16, 2009

June 18, 2010

73,900 shares
From July 16, 2008

80,200 shares
From July 15, 2009

84,200 shares
From July 14, 2010

to July 15, 2028

to July 14, 2029

to July 13, 2030

66,900 shares

78,200 shares

84,200 shares

¥

1

¥

1

¥

1

$0.01

$0.01

$0.01

June 17, 2011

June 15, 2012

June 21, 2013

81,000 shares
From July 13, 2011

95,200 shares
From July 11, 2012

50,100 shares
From July 17, 2013

to July 12, 2031

to July 10, 2032

to July 16, 2033

81,000 shares

95,200 shares

50,100 shares

¥

1

$0.01

Additional paid-in capital and all legal earnings reserve may be

Under the Japanese laws and regulations, the entire amount paid forJune 17, 2005

¥

1

$0.01

¥

1

$0.01

The compensation cost recognized for these stock options for the years ended March 31, 2013 and 2014 was ¥107 million and ¥91 million ($880
thousand) respectively, and was included in selling, general and administrative expenses in the consolidated statements of income.

14. Derivative Transactions

swap contracts that the Companies entered have risks due to fluctua-(1) Qualitative disclosure about derivatives

tions in interest rates. Due to the fact that counterparties to the

The Companies enter into foreign exchange forward contracts andCompanies represent major financial institutions that have highinterest rate swap contracts as derivative financial instruments. The

creditworthiness, the Companies believe that the overall credit risk

Companies deal with foreign exchange forward transactions to hedge

related to its financial instruments is insignificant.

exchange rate risks of trade receivables and payables denominated in

Derivative transactions are executed and controlled based on theforeign currency. Interest rate swap transactions are made in order toCompanies’ internal rules and are approved by the responsible

reduce interest rate risks on loans payable.

officials. The balances of such transactions with counterparties are

The Companies do not enter into derivatives for speculative

periodically confirmed.

transaction purposes. Hedge accounting is used for interest rate
swaps in the case where there is a high degree of correlation between(2) Quantitative disclosure about derivatives

the hedging instruments and the hedged items.

The following contract amounts are only nominal or notional amounts

Significant conditions surrounding hedging instruments are thesame as those for the items hedged, the risks of which will likely
continue to be hedged through hedge transactions.

of derivatives, and do not necessarily indicate the magnitude ofmarket risk associated with the derivative transactions.
Contract amounts, market values and recognized gains or losses

Foreign exchange forward contracts that the Companies enteredon the derivative transactions, except those accounted for using

have risks due to fluctuations in foreign exchange rates. Interest rate

hedge accounting, at March 31, 2013 and 2014 were as follows:

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JSR CORPORATIONANNUAL REPORT 2014

> FINANCIAL SECTION(a) Related to currencies

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JSR CORPORATIONANNUAL REPORT 2014

> FINANCIAL SECTION(b) Related to interests
Millions of yen

Millions of yen
Contract amountOver one year

Recognized
gains or losses

Market value

Contract amountMarch 31, 2013:
Items not traded on exchanges
Foreign exchange forward contracts
Selling:
Buying:U.S. Dollars¥1,829¥—¥ (91)¥ (91)

Euro

605

—

(36)

(36)

U.S. Dollars

619

—

1

1

Euro

79

—

(1)

(1)

Swiss Franc
Australian dollar

19
2

—
—

0
0

0
0

—

¥—

¥(127)¥(127)

Total¥

March 31, 2013:
Special treatment for interest rate swaps Interest rate swaps(paid fix / received floating) (Hedged item: Long-term loans payable)
Total

Over one year

¥6,126¥(120)¥6,126¥6,126¥(120)

Millions of yen
Contract amountMarch 31, 2014:
Special treatment for interest rate swaps Interest rate swaps(paid fix / received floating) (Hedged item: Long-term loans payable)
Total

Buying:¥10,569¥(31)¥11,354¥10,569¥(31)

Market valueOver one year

Market value$110,316$102,694$(304)$110,316$102,694$(304)

¥—

¥(10)

¥(10)

Euro

907

—

(31)

(31)

U.S. Dollars

170

—

3

3

Euro

98

—

0

0

Swiss Franc

8

—

0

0

15. Research and Development Expenses

1
532

—
—

0
(1)

0
(1)

million ($202,108 thousand), respectively, which are included in selling, general and administrative expenses or manufacturing costs.

—

¥—

¥(39)

¥(39)

Total

¥

Thousands of U.S. dollars
Contract amountOver one year

Recognized
gains or losses

Market value

March 31, 2014:
Items not traded on exchanges
Foreign exchange forward contracts

Buying:March 31, 2014:
Special treatment for interest rate swaps Interest rate swaps(paid fix / received floating) (Hedged item: Long-term loans payable)
Total¥ 1,664

Australian dollar
Japanese Yen

Selling:

Market value¥11,354

Contract amountForeign exchange forward contracts
U.S. Dollars

Over one year

Thousands of U.S. dollars
Recognized
gains or losses

March 31, 2014:
Items not traded on exchanges
Selling:

Market value¥6,126

Millions of yen
Contract amountOver one year

U.S. Dollars$16,164$—$ (94)$ (94)

Euro

8,815

—

(302)

(302)

U.S. Dollars

1,651

—

34

34

Euro

950

—

3

3

Swiss Franc

78

—

1

1

9
5,166

—
—

0
(14)

0
(14)

—

$—

$(372)$(372)

Australian dollar
Japanese Yen
Total
Market values are calculated using foreign exchange forward rates.

$

Research and development expenses of the Companies for the years ended March 31, 2013 and 2014 were, ¥19,458 million and ¥20,801

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> FINANCIAL SECTION

16. Segment Information

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JSR CORPORATIONANNUAL REPORT 2014

> FINANCIAL SECTION

Geographic segment information with respect to net sales for the years ended March 31, 2013 and 2014 were as follows:

The Companies’ business segments are classified into the following three business segments: (1) Elastomers business, (2) Plastics business, andMillions of yen
Japan(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 bysegment of business activities for the years ended March 31, 2013 and 2014 were as follows:

For 2013:
For 2014:¥196,966¥196,824

Korea

China

¥36,401¥43,932¥35,261¥41,173

OthersTotal¥ 102,859¥112,380¥371,487¥394,309

Millions of yen
Elastomers

For 2013:
Sales to external customers
Inter-segment sales / transfers

Fine chemicals
and other products

Plastics

Total

Reconciliation¥195,797
5,039¥51,759—¥123,931—¥371,487
5,039

Sales total
Operating income

200,836¥ 17,923

51,759¥ 2,962

123,931¥ 14,321

376,526¥ 35,206¥

Identifiable assets
Depreciation and amortization¥214,427
7,714¥35,961
1,144¥124,607
10,287

Impairment loss¥—
(5,039)¥371,487—(5,039)—371,487¥ 35,206¥374,995
19,145¥107,940—¥482,935
19,145

—

—

—

—

—

—

14,154855

12,59927,608—27,608

Amortization of goodwill

—

44

—

44

—

44

Goodwill

—

708

—

708

—

708

Reconciliation

Consolidated

Capital expenditures

Thousands of U.S. dollars

Consolidated

For 2014:

Japan

Korea

China

OthersTotal$1,912,402$426,853$400,047$1,091,919$3,831,221

The geographical segments consist of Japan, Korea, China and Others. Japan, Korea and China have been divided as independent segments
considering the materiality of the sales. Main countries included in Others segment were as follows;
Taiwan, Thailand, United States, Belgium
Geographic segment information with respect to property, plant and equipment for the years ended March 31, 2013 and 2014 were as follows:
Millions of yen

For 2013:
For 2014:

Japan

Thailand

Others¥68,247¥69,007¥13,725¥16,258¥11,233¥10,365

Total

Japan

Thailand

OthersTotal$670,491$157,972$100,709$929,172¥93,205¥95,630

Millions of yen
Elastomers

For 2014:
Sales to external customers
Inter-segment sales / transfers

Fine chemicals
and other products

Plastics

Thousands of U.S. dollars
Total¥203,478
4,469¥57,764—¥133,067—¥394,309
4,469

¥

—
(4,469)¥394,309—

Sales total
Operating income

207,947¥ 17,330

57,764¥ 3,919

133,067¥ 14,813

398,778¥ 36,062(4,469)¥—394,309¥ 36,062

Identifiable assets
Depreciation and amortization¥223,584
7,384¥38,943
1,105¥131,521
9,607¥394,048
18,096¥107,272—¥501,320
18,096

—

—

645

645

—

645
21,499Impairment loss
Capital expenditures

10,800

1,086

9,613

21,499—Amortization of goodwill

—

44

—

44

—

44

Goodwill

—

664

—

664

—

664

Reconciliation

Consolidated

Thousands of U.S. dollars
Elastomers

Plastics

Fine chemicals
and other products$1,977,052
43,420$561,247—$1,292,922—$3,831,221
43,420

Sales total
Operating income

2,020,472$ 168,381

561,247$ 38,077

1,292,922$ 143,929

3,874,641$ 350,387$

Identifiable assets
Depreciation and amortization$2,172,403
71,747$378,384
10,737$1,277,897
93,339For 2014:
Sales to external customers
Inter-segment sales / transfers

Impairment loss
Capital expenditures

Total

$

—
(43,420)$3,831,221—(43,420)—

3,831,221$ 350,387$3,828,684
175,823$1,042,280—$4,870,964
175,823

—

—

6,268

6,268

—

6,268

104,933

10,55393,402

208,888—

208,888

Amortization of goodwill

—

430

—

430

—

430

Goodwill

—

6,453

—

6,453

—

6,453

Assets in reconciliation are related mainly to Cash, Short-term investment securities and Investment securities of the Company.

For 2014:

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

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JSR CORPORATIONANNUAL REPORT 2014

> FINANCIAL SECTION

17. Related Parties
Related party transactions
Significant transactions and balances with related parties as of and for the years ended March 31, 2013 and 2014 were as follows:
Thousands of
U.S. dollars

Millions of yen

2013

2014

2014

BRIDGESTONE Corporation (a major shareholder):Net Sales¥39,522¥37,383$363,221

Notes and accounts receivable—trade, net

16,99815,151

147,216

14,393

14,769143,497

Tobu Butadiene Co., Ltd. (an affiliated company):
Purchases
Notes and accounts payable—trade

7,131

7,242

70,368Supply of raw material gas

11,723

12,044

117,022

Accounts receivable—other

6,884

6,033

58,622

Purchases

10,38512,008116,674

Notes and accounts payable—trade

5,573

4,851

47,132

Supply of raw material gas

4,945

5,688

55,267

Accounts receivable—other

3,154

2,565

24,924KRATON JSR Elastomers K.K. (an affiliated company):

18. Subsequent Events
At the June 17, 2014 annual meeting, the Companies’ shareholders approved the following appropriations of retained earnings: Payment of ayear-end cash dividend of ¥19.00 ($0.18) per share aggregating ¥4,467 million ($43,404 thousand).

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JSR CORPORATIONANNUAL REPORT 2014

> FINANCIAL SECTION