Annual Report
Year Ended March 31, 2016

HARIMA CHEMICALS GROUP, INC.

Business Overview
During the current fiscal year, although the US the economy continued steadily, in China and South East
Asia, the economy growth remained stagnant. Meanwhile, the domestic economy in Japan showed agradual recovery due to the improvements in corporate earnings, employment conditions and the recovery
in the capital investments.
Regarding the business environment surrounding our Group, Lawter, whose major market is Europe, hasendured intense competition resulting in continued severe situation performance. But as the paper
chemicals business in the U.S.and China Subsidiaries continued to steadily grow, foreign revenue has
increased. Regarding the domestic business, although, the consideration about domestic demand was still
serious, revenue was at the same level of the fiscal previous year, due to the price of raw materials
decreased and rationalization of production procedures.
As a result of these conditions, the Group’s consolidated net sales for the current fiscal year increased by
1,714 million Yen (down 2.1%) year-on-year to 80,978 million Yen. Operating income increased by 1,464
million Yen (up 150.5%) year-on-year to 2,437 million Yen. Ordinary income increased by 2,976 million
Yen year-on-year to 3,225 million Yen, with a foreign exchange profit of 658 million Yen. Net income
attributable to owners of the parent was 1,223 million Yen (Net loss attributable to owners of the parent
was 1,026 million Yen in the previous fiscal year).
Status of Business Segments(Resin & Tall Oil Products)
With regard to the printing ink industry, within the global and domestic market, the commercial printing
business has continued to decrease due to the continuous decrease in the publication of newspapers andmagazines. Thus the effect resulted in sales of printing inks resins to continue to decline.
In the paint industry, with the recovery trends of construction paint in reform market, shipping amountslightly increased. Although construction paint resins continued to perform strongly, the total sales of paintresins decreased.
Moreover, In the synthetic rubber industry, both export and domestic shipping amount slightly decreased.
But our sales of synthetic rubber emulsifiers for automobile tire slightly increased.
(Paper Chemicals)
In the current fiscal year, despite a decrease in the production of printing papers, domestic paper andcardboard production volume was at the same level as the prior fiscal year. In US, paper and cardboard
production volume was lower than the previous fiscal year. Also in China, the rate of increase decreased.
The domestic sales of paper chemical productions was at the same level of the previous fiscal year. In theUS, the productions registered in FDA continued to perform strongly; which was similar to the China
subsidiary’s performance.
(Electronics Materials)
With regard to the performance of the car industry to which this segment is related, the volume ofvehicles manufactured overseas was higher than the previous fiscal year. On the other hand, the volume ofvehicles manufactured in domestic market was was lower than the previous fiscal year.
The shipping amount of household electronic appliances was lower than the previous fiscal year.
Factors that significantly affected this segment was the decrease in the price of metal bullion. In addition,
the main production of this segment is solder paste, which recent research and development initiatives
have resulted in the successful promotion of lead-free paste and therefore, , the sales quantity for thisproduct has increased. However aluminium brazing materials used in heat exchangers was increased insales quantity, the total sales price was decreased.
(Lawter)In this segment, the main production is adhesives resins. As a result of the economic slowdown,
compared to the previous fiscal year, growth in the production of adhesives resins was sluggish in China
and Europe. On the other hand, in other areas of North America production has steadily increased as aresult, the total sales quantity has increased compared to the previous fiscal year.
Continuing from digitizing, printing inks continued to show slow demand. In the European, North
American and Asian markets, which are the main markets of this segment, sales quantity has decreased.
Although the price competitiveness continues due to rationalization of production procedures andcost-down, the profit was improved.

-1-Consolidated Business Performance Trends(Millions of Yen unless otherwise stated)
71th Fiscal Year72th Fiscal Year

73th Fiscal Year

74th Fiscal Year

(Fiscal year ended
March 2013)(Fiscal year ended
March 2014)(Fiscal year ended
March 2015)(Fiscal year ended
March 2016)

Net sales

64,20375,17582,69280,978

Ordinary income

1,422

2,608

249

3,225

216

280

△1,026

1,223

8.33

10.80

△39.53

47.12

Total assets

61,35570,47175,256

70,772

Net assets

29,823

31,46633,08031,362Category

Net income(loss)
attributable to ownersof the parent
Net income (loss) per
share (Yen)(Notes) 1. According to the September 2013, issued ASBJ Statement No. 21"Accounting Standard forBusiness Combinations", from current fiscal year change 「 Net income(loss) 」 to 「 Net
income(loss) attributable to owners of the parent」.
2. Net income (loss) per share is calculated based on the weighted average number of issued
shares during the fiscal year after deducting treasury stocks.

-2-

HARIMA CHEMICALS GROUP, INC.
and Consolidated Subsidiaries
Consolidated Balance Sheet
March 31, 2016

Millions of Yen
2016
2015

ASSETS
CURRENT ASSETS:
Cash and cash equivalents (Note 15)
Notes and accounts receivable (Note 15):
Trade notes
Trade accounts
Associated companies
Other
Allowance for doubtful notes and accounts
Inventories (Note 4)
Deferred tax assets (Note 12)
Other current assets

¥

5,881

¥

5,436

Thousands of
U.S. Dollars(Note 1)2016$

CURRENT LIABILITIES:
Short-term bank loans (Notes 7 and 15)
Current portion of long-term debt (Notes 7 and 15)
Notes and accounts payable (Note 15):
Trade notes
Trade accounts
Associated companies
Construction and other
Income taxes payable
Deferred tax liabilities (Note 12)
Other current liabilities

52,192

1,748
17,044
201
1,118
(80 )
12,198
374
451

1,337
18,322198
2,353(223 )
14,157492
718

15,513
151,260
1,784
9,922(710 )
108,253
3,319
4,003

38,93542,790345,536

PROPERTY, PLANT AND EQUIPMENT (Note 5):
Land (Note 6)
Buildings and structures (Note 6)
Machinery and equipment
Lease assets (Note 14)
Construction in progress
Other assets
Total
Accumulated depreciation

9,645
18,111
25,172
867
1,470
4,284
59,549(36,360 )10,07018,63524,718
963
813
4,229
59,428(35,794 )

85,596
160,729
223,394
7,694
13,04638,020528,479(322,684 )Net property, plant and equipment

23,18923,634

205,795

COMMITMENTS AND CONTINGENT LIABILITIES(Notes 7, 14 and 16)

5,441
911
87
267
1,949
(7 )

5,764
880
174
204
1,832
(22 )

48,287
8,085
772
2,370
17,297
(62 )

8,648

8,832

76,749EQUITY (Note 10):
Common stock, authorized 59,500,000 shares; issued, 26,080,396
shares in 2016 and 2015
Capital surplus
Retained earnings
Treasury stock - at cost: 131,882 shares in 2016 and 131,642 shares in2015
Accumulated other comprehensive income:Unrealized gain on available-for-sale securities
Foreign currency translation adjustments
Defined retirement benefit plans
Total
Noncontrolling interests

Total current assets

INVESTMENTS AND OTHER ASSETS:
Investment securities (Notes 3 and 15)
Investments in and advances to associated companies
Goodwill
Deferred tax assets (Note 12)
Other assets
Allowance for doubtful accounts
Total investments and other assets¥ 70,772¥ 75,256

See notes to consolidated financial statements.

-3-

8,186
2,423

¥

8,933
1,327

$

72,64821,503387
10,965
116
336
441
130
2,088

2,858
75,204
941
4,322
2,503
18,655

Total current liabilities

22,382

24,723

198,634

LONG-TERM LIABILITIES:Long-term debt (Notes 7, 15 and 16)
Deferred tax liabilities (Note 12)Long-term deposits received (Note 15)
Liability for retirement benefits (Note 8)
Asset retirement obligations (Note 9)
Other long-term liabilities

12,914
1,106
753
2,003
48
204

13,709
568
803
2,095
47
231

114,608
9,815
6,683
17,776426
1,810

Total long-term liabilities

17,02817,453

151,118

10,0139,744
9,334

10,0139,744
8,475

88,86286,47582,836

(62 )

(62 )

(550 )

1,003(320 )(477 )
29,235
2,127

1,497
2,035
(642 )
31,0602,020

8,902(2,840 )(4,233 )259,452
18,876

31,362

33,080278,328¥ 70,772¥ 75,256$ 628,080

TOTAL$ 628,080

¥

322
8,474
106
487
282
2,102

Total equity
TOTAL

Millions of Yen
2016
2015

LIABILITIES AND EQUITY

Thousands of
U.S. Dollars(Note 1)2016

HARIMA CHEMICALS GROUP, INC.
and Consolidated Subsidiaries
Consolidated Statement of Operations
Year Ended March 31, 2016

Millions of Yen
2016
2015
NET SALES

Thousands of
U.S. Dollars(Note 1)
2016

¥ 80,978¥ 82,692$ 718,655

64,21068,047569,844

16,768

14,645

148,811

14,331

13,672

127,183

Operating income

2,437

973

21,628OTHER INCOME (EXPENSES):Interest and dividend income
Interest expense
Rental income
Foreign exchange gain (loss)
Gain (loss) on sale of property, plant and equipment
Loss on impairment of long-lived assets (Note 5)
Commission paid
Provision for allowance for doubtful accounts
Expense on disposal of property, plant and equipment
Equity in earnings of associated companies
Other – net

121(352 )
115
658
49(235 )
(13 )
(48 )
39
161

96
(349 )
125(610 )(31 )(453 )(103 )
(91 )
(83 )
45
94

1,074
(3,124 )
1,021
5,840
435
(2,086 )(115 )(426 )
346
1,428

495

(1,360 )

4,393

2,932

(387 )

26,021

853
570

787
(309 )

7,570
5,059

1,423

478

12,629NET INCOME (LOSS)

1,509(865 )

13,392NET (LOSS) INCOME ATTRIBUTABLE TONONCONTROLLING INTERESTS(286 )

161(2,538 )1,223¥ (1,026 )COST OF SALES
Gross profit
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES(Notes 11 and 13)

Other income (expenses) – net
INCOME (LOSS) BEFORE INCOME TAXESINCOME TAXES (Note 12):Current
Deferred
Total income taxes

NET INCOME (LOSS) ATTRIBUTABLE TO OWNERS OF THE
PARENT¥Yen
PER SHARE OF COMMON STOCK (Notes 2.s and 18):
Net income (loss)
Cash dividends applicable to the year
See notes to consolidated financial statements.

-4-¥47.12
14.00$

10,854

U.S. Dollars¥(39.53 )
14.00

$0.42
0.12

HARIMA CHEMICALS GROUP, INC.
and Consolidated Subsidiaries
Consolidated Statement of Comprehensive Income
Year Ended March 31, 2016

Millions of Yen
2016
2015
NET INCOME (LOSS)

Thousands of
U.S. Dollars(Note 1)2016

¥ 1,509¥ (865 )$ 13,392(495 )(2,461 )166
0(2,790 )596
2,200(107 )
02,689(4,393 )(21,840 )1,473
0(24,760 )COMPREHENSIVE (LOSS) INCOME (Note 17)¥ (1,281 )¥ 1,824$ (11,368 )TOTAL COMPREHENSIVE (LOSS) INCOME ATTRIBUTABLE
TO (Note 17):
Owners of the parent
Noncontrolling interests¥(1,462 )181¥1,504
320$(12,975 )1,607

OTHER COMPREHENSIVE (LOSS) INCOME (Note 17):
Unrealized (loss) gain on available-for-sale securities
Foreign currency translation adjustments
Defined retirement benefit plans
Share of other comprehensive income in associated companies
Total other comprehensive (loss) income

See notes to consolidated financial statements.

-5-

HARIMA CHEMICALS GROUP, INC.
and Consolidated Subsidiaries
Consolidated Statement of Changes in Equity
Year Ended March 31, 2016
Thousands
Number of Sharesof Common Stock
Outstanding

CommonStockCapitalSurplusRetained
Earnings

Treasury
Stock

BALANCE, APRIL 1, 2014 (as previously reported)
Cumulative effect of accounting change (Note 2.j)25,949¥ 10,013¥ 9,744¥ 9,659205¥ (62 )BALANCE, APRIL 1, 2014 (as restated)

25,94910,013

9,744

9,864

(62 )

Net income attributable to owners of the parent
Cash dividends, ¥14.00 per share
Purchase of treasury stock
Net change in the year

BALANCE, MARCH 31, 2016

BALANCE, APRIL 1, 2015 (as restated)

(0 )

902

¥

902

10,013

9,744

8,475

(62 )

¥ 29,714
205¥ 1,752¥ 31,466
205(6 )(536 )

29,9191,752

31,671268(1,026 )(363 )
(0 )
2,798

2,020

33,080595

2,041(106 )

1,497

2,035

(642 )

31,060(2,355 )

165

1,233
(364 )(0 )(2,684 )

107

1,233
(364 )(0 )(2,577 )(320 )¥ (477 )¥ 29,235¥ 2,127¥ 31,362

Total

Noncontrolling
Interests

Total Equity$ (5,698 )$ 275,647$ 17,927$ 293,574(20,900 )1,465

10,854(3,231 )(0 )(23,818 )949

10,854(3,231 )(0 )(22,869 )(2,840 )$ (4,233 )$ 259,452$ 18,876$ 278,328(0 )¥ 10,013¥ 9,744¥ 9,334¥ (62 )

CommonStockCapitalSurplusRetained
Earnings

TreasuryStock$ 88,862$ 86,475$ 75,213$ (550 )¥ 1,003¥

Thousands of U.S. Dollars (Note 1)
Accumulated Other Comprehensive Income
Foreign
Currency
Unrealized
DefinedTranslation
Gain on AvailableRetirement
Adjustments
for-sale Securities
Benefit Plans$ 13,285$ 18,060

10,854(3,231 )(0 )(4,383 )$ 88,862$ 86,475$ 82,836$ (550 )See notes to consolidated financial statements.

-6-$

Total Equity(1,026 )(363 )(0 )2,530(494 )
25,949Noncontrolling
Interests¥ (536 )1,223(364 )
(0 )

Total

(6 )

(0 )

Net income attributable to owners of the parent
Cash dividends, $0.12 per share
Purchase of treasury stock
Net change in the year
BALANCE, MARCH 31, 2016¥

(1,026 )(363 )BALANCE, APRIL 1, 2015 (as restated)
Net income attributable to owners of the parent
Cash dividends, ¥14.00 per share
Purchase of treasury stock
Net change in the year

Millions of Yen
Accumulated Other Comprehensive Income
Foreign
Currency
Unrealized
DefinedTranslation
Gain on AvailableRetirement
Adjustments
for-sale Securities
Benefit Plans

8,902

$

HARIMA CHEMICALS GROUP, INC.
and Consolidated Subsidiaries
Consolidated Statement of Cash Flows
Year Ended March 31, 2016

Millions of Yen
2016
2015
OPERATING ACTIVITIES:
Income (loss) before income taxes
Adjustments for:
Income taxes – paid
Depreciation and amortization
Loss on impairment of long-lived assets
Foreign exchange (gain) loss
(Gain) loss on sales of property, plant and equipment
Changes in assets and liabilities:
Decrease in trade notes and accounts receivable
Decrease (increase) in inventories
Decrease in trade notes and accounts payable
Other – net
Total adjustments
Net cash provided by operating activities(387 )$ 26,021(953 )
2,214
235(686 )(49 )(889 )
2,427
453
521
31

(8,459 )19,6492,086(6,088 )(435 )

640
1,871(2,032 )
38
1,278
4,210

1,237
(2,006 )(596 )(440 )
738
351

5,680
16,605(18,033 )
336
11,34137,362INVESTING ACTIVITIES:
Purchases of property, plant and equipment
Proceeds from sales of property, plant and equipment
Purchases of intangible assets
Purchases of investment securities
Proceeds from sales of investment securities
Other – net
Net cash used in investing activities(2,529 )136(279 )(229 )
100
82(2,719 )(1,863 )5(250 )(1,611 )52(40 )(3,707 )(22,444 )
1,207(2,476 )(2,032 )887
728(24,130 )FINANCING ACTIVITIES:Net change in short-term bank loans
Proceeds from long-term debt
Repayments of long-term debt
Dividends paid
Other – net
Net cash (used in) provided by financing activities(723 )
8,382(7,984 )(363 )(208 )(896 )(4,179 )9,259(2,833 )(363 )(197 )
1,687(6,416 )74,388(70,856 )(3,222 )(1,846 )(7,952 )FOREIGN CURRENCY TRANSLATION ADJUSTMENTS ON
CASH AND CASH EQUIVALENTS(150 )

475(1,331 )NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS

445(1,194 )

3,949

5,436

6,630

48,243¥ 5,881¥ 5,436$ 52,192

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR
CASH AND CASH EQUIVALENTS, END OF YEAR

See notes to consolidated financial statements.

-7-¥ 2,932¥

Thousands of
U.S. Dollars(Note 1)2016

HARIMA CHEMICALS GROUP, INC.
and Consolidated Subsidiaries
Notes to Consolidated Financial Statements
Year Ended March 31, 2016
1.

BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS
The accompanying consolidated financial statements have been prepared in accordance with the provisions set
forth in the Japanese Financial Instruments and Exchange Act and its related accounting regulations, and in
conformity with accounting principles generally accepted in Japan ("Japanese GAAP"), which are different incertain respects as to the application and disclosure requirements of International Financial ReportingStandards.
In preparing these consolidated financial statements, certain reclassifications and rearrangements have been
made to the consolidated financial statements issued domestically in order to present them in a form which ismore familiar to readers outside Japan. In addition, certain reclassifications have been made in the 2015
consolidated financial statements to conform to the classifications used in 2016.
The consolidated financial statements are stated in Japanese yen, the currency of the country in which
HARIMA CHEMICALS GROUP, INC. (the "Company") is incorporated and operates. The translations ofJapanese yen amounts into U.S. dollar amounts are included solely for the convenience of readers outside
Japan and have been made at the rate of ¥112.68 to $1, the approximate rate of exchange at March 31, 2016.
Such translations should not be construed as representations that the Japanese yen amounts could be converted
into U.S. dollars at that or any other rate.

2.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESa.

Consolidation - The consolidated financial statements include the accounts of the Company and all its
subsidiaries (together, the "Group").
Under the control and influence concepts, those companies in which the Company directly is able toexercise control over operations are fully consolidated.
Investments in associated companies are accounted for by the equity method.
The excess of the cost of acquisition over the fair value of the net assets of an acquired subsidiary at thedate of acquisition is being amortized over a period not exceeding 20 years.
All significant intercompany balances and transactions have been eliminated in consolidation. All
material unrealized profit included in assets resulting from transactions within the Group is also
eliminated.

-8-

b.

Unification of Accounting Policies Applied to Foreign Subsidiaries for the Consolidated Financial
Statements - In May 2006, the Accounting Standards Board of Japan (the "ASBJ") issued ASBJ Practical
Issues Task Force ("PITF") No. 18, "Practical Solution on Unification of Accounting Policies Applied toForeign Subsidiaries for the Consolidated Financial Statements" which was subsequently revised in
February 2010 and March 2015 to reflect revisions of the relevant Japanese GAAP or accounting
standards in other jurisdictions. PITF No. 18 prescribes that the accounting policies and procedures
applied to a parent company and its subsidiaries for similar transactions and events under similar
circumstances should be unified for the preparation of the consolidated financial statements. However,financial statements prepared by foreign subsidiaries in accordance with either International Financial
Reporting Standards or generally accepted accounting principles in the United States of America(Financial Accounting Standards Board Accounting Standards Codification—"FASB ASC") tentatively
may be used for the consolidation process, except for the following items that should be adjusted in the
consolidation process so that net income is accounted for in accordance with Japanese GAAP unless they
are not material: (a) amortization of goodwill; (b) scheduled amortization of actuarial gain or loss ofpensions that has been recorded in equity through other comprehensive income; (c) expensing capitalized
development costs of research and development; and (d) cancellation of the fair value model ofaccounting for property, plant, and equipment and investment properties and incorporation of the costmodel of accounting.

c.

Business Combinations - In September 2013, the ASBJ issued revised ASBJ Statement No. 21,"Accounting Standard for Business Combinations," revised ASBJ Guidance No. 10, "Guidance on
Accounting Standards for Business Combinations and Business Divestitures," and revised ASBJ
Statement No. 22, "Accounting Standard for Consolidated Financial Statements." Major accountingchanges are as follows:(a) Transactions with noncontrolling interest - A parent's ownership interest in a subsidiary mightchange if the parent purchases or sells ownership interests in its subsidiary. The carrying amount of
noncontrolling interest is adjusted to reflect the change in the parent's ownership interest in its
subsidiary while the parent retains its controlling interest in its subsidiary. Under the previous
accounting standard, any difference between the fair value of the consideration received or paid andthe amount by which the noncontrolling interest is adjusted is accounted for as an adjustment of
goodwill or as profit or loss in the consolidated statement of operations. Under the revised
accounting standard, such difference is accounted for as capital surplus as long as the parent retains
control over its subsidiary.
(b) Presentation of the consolidated balance sheet - In the consolidated balance sheet, "minority
interest" under the previous accounting standard is changed to "noncontrolling interest" under therevised accounting standard.
(c) Presentation of the consolidated statement of operations - In the consolidated statement ofoperations, "income before minority interest" under the previous accounting standard is changed to"net income" under the revised accounting standard, and "net income" under the previous accounting
standard is changed to "net income attributable to owners of the parent" under the revised accounting
standard.

-9-

(d) Provisional accounting treatments for a business combination - If the initial accounting for abusiness combination is incomplete by the end of the reporting period in which the businesscombination occurs, an acquirer shall report in its consolidated financial statements provisionalamounts for the items for which the accounting is incomplete. Under the previous accounting
standard guidance, the impact of adjustments to provisional amounts recorded in a businesscombination on profit or loss is recognized as profit or loss in the year in which the measurement iscompleted. Under the revised accounting standard guidance, during the measurement period, whichshall not exceed one year from the acquisition, the acquirer shall retrospectively adjust theprovisional amounts recognized at the acquisition date to reflect new information obtained about
facts and circumstances that existed as of the acquisition date and that would have affected themeasurement of the amounts recognized as of that date. Such adjustments shall be recognized as if
the accounting for the business combination had been completed at the acquisition date.
(e) Acquisition-related costs - Acquisition-related costs are costs, such as advisory fees or professionalfees, which an acquirer incurs to effect a business combination. Under the previous accounting
standard, the acquirer accounts for acquisition-related costs by including them in the acquisition
costs of the investment. Under the revised accounting standard, acquisition-related costs shall be
accounted for as expenses in the periods in which the costs are incurred.
The above accounting standards and guidance for (a) transactions with noncontrolling interest, (b)presentation of the consolidated balance sheet, (c) presentation of the consolidated statement ofoperations, and (e) acquisition-related costs are effective for the beginning of annual periods beginning on
or after April 1, 2015. Earlier application is permitted from the beginning of annual periods beginning on
or after April 1, 2014, except for (b) presentation of the consolidated balance sheet and (c) presentation of
the consolidated statement of operations. In the case of earlier application, all accounting standards andguidance above, except for (b) presentation of the consolidated balance sheet and (c) presentation of theconsolidated statement of operations, should be applied simultaneously.
Either retrospective or prospective application of the revised accounting standards and guidance for (a)transactions with noncontrolling interest and (e) acquisition-related costs is permitted. In retrospective
application of the revised standards and guidance, the accumulated effects of retrospective adjustments
for all (a) transactions with noncontrolling interest and (e) acquisition-related costs which occurred in thepast shall be reflected as adjustments to the beginning balance of capital surplus and retained earnings forthe year of the first-time application. In prospective application, the new standards and guidance shall beapplied prospectively from the beginning of the year of the first-time application.
The revised accounting standards and guidance for (b) presentation of the consolidated balance sheet and(c) presentation of the consolidated statement of operations shall be applied to all periods presented inconsolidated financial statements containing the first-time application of the revised standards andguidance.
The revised standards and guidance for (d) provisional accounting treatments for a business combination
are effective for a business combination which occurs on or after the beginning of annual periods
beginning on or after April 1, 2015. Earlier application is permitted for a business combination which
occurs on or after the beginning of annual periods beginning on or after April 1, 2014.
The Company applied the revised accounting standards and guidance for (a) transactions with
noncontrolling interest, (b) presentation of the consolidated balance sheet, (c) presentation of theconsolidated statement of income, and (e) acquisition-related costs above, effective April 1, 2015, and (d)provisional accounting treatments for a business combination above for a business combination which
occurred on or after April 1, 2015.

- 10 -

The revised accounting standards and guidance for (a) transactions with noncontrolling interest and (e)acquisition-related costs were applied prospectively.
There was not a material impact on the consolidated financial statements from these accounting changes.
d.

Cash Equivalents - Cash equivalents are short-term investments that are readily convertible into cash andthat are exposed to insignificant risk of changes in value. Cash equivalents include time deposits andcertificates of deposit, all of which mature or become due within three months of the date of acquisition.

e.

Inventories - Inventories are principally stated at the lower of cost, determined by the moving-average
cost method, or net selling value.
The inventories of certain consolidated foreign subsidiaries are stated at the lower of cost, determined by
the first-in, first-out method, or net selling value.

f.

Investment Securities - Investment securities are classified and accounted for as follows:
Marketable available-for-sale securities are reported at fair value, with unrealized gains and losses, net of
applicable taxes, reported in a separate component of equity.
Nonmarketable available-for-sale securities are stated at cost determined by the moving-average method.
For other-than-temporary declines in fair value, investment securities are reduced to net realizable value
by a charge to income.

g.

Property, Plant and Equipment - Property, plant and equipment are stated at cost. Depreciation ofproperty, plant and equipment of the Company and its consolidated domestic subsidiaries is principally
computed by the declining-balance method, while the straight-line method is applied to buildings
acquired after April 1, 1998. Certain domestic subsidiaries and foreign subsidiaries apply the straight-line
method, using rates based on the estimated useful lives of the assets. The range of useful lives is from 5
to 50 years for buildings and from 4 to 17 years for machinery and equipment.

h.

Long-Lived Assets - The Group reviews its long-lived assets for impairment whenever events or changes
in circumstance indicate the carrying amount of an asset or asset group may not be recoverable. An
impairment loss is recognized if the carrying amount of an asset or asset group exceeds the sum of theundiscounted future cash flows expected to result from the continued use and eventual disposition of theasset or asset group. The impairment loss would be measured as the amount by which the carrying
amount of the asset exceeds its recoverable amount, which is the higher of the discounted cash flows fromthe continued use and eventual disposition of the asset or the net selling value at disposition.

i.

Software - Amortization of capitalized software costs is computed using the straight-line method over 5
years, the estimated useful life of the assets.

j.

Retirement Benefits - The Company and certain domestic consolidated subsidiaries have funded defined
benefit pension plans, defined contribution pension plan and severance lump-sum payment plan covering
substantially all of their employees. Certain foreign subsidiaries have adopted funded defined benefit
plans and defined contribution pension plans.
Effective April 1, 2000, the Company adopted a new accounting standard for retirement benefits andaccounted for the liability for retirement benefits based on the projected benefit obligations and plan
assets at the balance sheet date. The projected benefit obligations are attributed to periods on a straightline basis. Actuarial gains and losses are amortized on a declining-balance basis over 14 years within the
average remaining service period. Prior service costs are recognized in the period in which they are
incurred.

- 11 -

In May 2012, the ASBJ issued ASBJ Statement No. 26, "Accounting Standard for Retirement Benefits"
and ASBJ Guidance No. 25, "Guidance on Accounting Standard for Retirement Benefits," which replaced
the accounting standard for retirement benefits that had been issued by the Business Accounting Council
in 1998 with an effective date of April 1, 2000, and the other related practical guidance, and were
followed by partial amendments from time to time through 2009.
(a) Under the revised accounting standard, actuarial gains and losses and prior service costs that are yet
to be recognized in profit or loss are recognized within equity (accumulated other comprehensive
income), after adjusting for tax effects, and any resulting deficit or surplus is recognized as a liability(liability for retirement benefits) or asset (asset for retirement benefits).
(b) The revised accounting standard does not change how to recognize actuarial gains and losses andprior service costs in profit or loss. Those amounts are recognized in profit or loss over a certain
period no longer than the expected average remaining service period of the employees. However,actuarial gains and losses and prior service costs that arose in the current period and have not yet
been recognized in profit or loss are included in other comprehensive income, and actuarial gains
and losses and prior service costs that were recognized in other comprehensive income in priorperiods and then recognized in profit or loss in the current period, are treated as reclassification
adjustments (see Note 2.t).
(c) The revised accounting standard also made certain amendments relating to the method of attributing
expected benefit to periods, the discount rate, and expected future salary increases.
This accounting standard and the guidance for (a) and (b) above are effective for the end of annual
periods beginning on or after April 1, 2013, and for (c) above are effective for the beginning of annual
periods beginning on or after April 1, 2014, or for the beginning of annual periods beginning on or after
April 1, 2015, subject to certain disclosure in March 2015, all with earlier application being permitted
from the beginning of annual periods beginning on or after April 1, 2013. However, no retrospective
application of this accounting standard to consolidated financial statements in prior periods is required.
The Company applied the revised accounting standard and guidance for retirement benefits for (a) and (b)above, effective March 31, 2014, and for (c) above, effective April 1, 2014.
With respect to (c) above, the Company changed the method of attributing the expected benefit to periods
from a straight-line basis to a benefit formula basis and the method of determining the discount rate fromusing the period which approximates the expected average remaining service period to using a single
weighted average discount rate reflecting the estimated timing and amount of benefit payment, andrecorded the effect of (c) above as of April 1, 2014, in retained earnings. As a result, liability for
retirement benefits as of April 1, 2014, decreased by ¥321 million, and retained earnings as of April 1,
2014, increased by ¥205 million. The effects of this change on operating income, loss before income
taxes and noncontrolling interests and net loss per share for the year ended March 31, 2015, areimmaterial.
For small pension plans Japanese GAAP allows an entity to use a simplified method to measure theprojected benefit obligations. Under the simplified method, the retirement benefits are recorded as aliability at the amount that would be required if all employees in a plan retired at each balance sheet date.
Certain subsidiaries have small pension plans which are accounted for under the simplified method.
Retirement allowances for directors and Audit & Supervisory Board members are recorded as a liability
at the amount that would be required if all directors and Audit & Supervisory Board members retired ateach balance sheet date.

- 12 -

k.

Asset Retirement Obligations - In March 2008, the ASBJ issued the accounting standard for asset
retirement obligations, ASBJ Statement No. 18 "Accounting Standard for Asset Retirement Obligations"and ASBJ Guidance No. 21 "Guidance on Accounting Standard for Asset Retirement Obligations."
Under this accounting standard, an asset retirement obligation is defined as a legal obligation imposed
either by law or contract that results from the acquisition, construction, development and the normal
operation of a tangible fixed asset and is associated with the retirement of such tangible fixed asset. The
asset retirement obligation is recognized as the sum of the discounted cash flows required for the future
asset retirement and is recorded in the period in which the obligation is incurred if a reasonable estimate
can be made. If a reasonable estimate of the asset retirement obligation cannot be made in the period theasset retirement obligation is incurred, the liability should be recognized when a reasonable estimate of
the asset retirement obligation can be made. Upon initial recognition of a liability for an asset retirement
obligation, an asset retirement cost is capitalized by increasing the carrying amount of the related fixed
asset by the amount of the liability. The asset retirement cost is subsequently allocated to expense
through depreciation over the remaining useful life of the asset. Over time, the liability is accreted to its
present value each period. Any subsequent revisions to the timing or the amount of the original estimateof undiscounted cash flows are reflected as an adjustment to the carrying amount of the liability and thecapitalized amount of the related asset retirement cost.

l.

Research and Development Costs - Research and development costs are charged to income as incurred.

m. Leases - In March 2007, the ASBJ issued ASBJ Statement No. 13, "Accounting Standard for Lease
Transactions," which revised the previous accounting standard for lease transactions. The revised
accounting standard for lease transactions was effective for fiscal years beginning on or after April 1,
2008.
Under the previous accounting standard, finance leases that were deemed to transfer ownership of theleased property to the lessee were capitalized. However, other finance leases were permitted to beaccounted for as operating lease transactions if certain "as if capitalized" information was disclosed in thenotes to the lessee's financial statements. The revised accounting standard requires that all finance leasetransactions be capitalized by recognizing lease assets and lease obligations in the balance sheet.
The Company applied the revised accounting standard effective April 1, 2008. In addition, the Company
accounted for leases that existed at the transition date and do not transfer ownership of the leased property
to the lessee as acquisition cost of lease assets measured at the amount of obligation under finance leases
less interest expense at the transition date.
All other leases are accounted for as operating leases.
n.

Bonuses to Directors - Bonuses to directors are accrued at the end of the year to which such bonuses are
attributable.

o.

Income Taxes - The provision for income taxes is computed based on the pretax income included in the
consolidated statement of operations. The asset and liability approach is used to recognize deferred tax
assets and liabilities for the expected future tax consequences of temporary differences between the
carrying amounts and the tax bases of assets and liabilities. Deferred taxes are measured by applying
currently enacted income tax rates to the temporary differences.
The Group files a tax return under the consolidated corporate-tax system, which allows companies to basetax payments on the combined profits or losses of the parent company and its wholly owned domestic
subsidiaries.

- 13 -

p.

Foreign Currency Transactions - All short-term and long-term monetary receivables and payables
denominated in foreign currencies are translated into Japanese yen at the exchange rates at the balance
sheet date. The foreign exchange gains and losses from translation are recognized in the consolidated
statement of operations to the extent that they are not hedged by forward exchange contracts.

q.

Foreign Currency Financial Statements - The balance sheet accounts of the consolidated foreignsubsidiaries are translated into Japanese yen at the current exchange rate as of the balance sheet date
except for equity, which is translated at the historical rate. Differences arising from such translation are
shown as "Foreign currency translation adjustments" under accumulated other comprehensive income in a
separate component of equity. Revenue and expense accounts of consolidated foreign subsidiaries aretranslated into yen at the average exchange rate.

r.

Derivative Financial Instruments - The Group uses derivative financial instruments to manage its
exposures to fluctuations in interest rates. Interest rate swaps are utilized by the Group to reduce interest
rate risks. The Group does not enter into derivatives for trading or speculative purposes.
Derivative financial instruments are classified and accounted for as follows: (1) all derivatives arerecognized as either assets or liabilities and measured at fair value, and gains or losses on derivativetransactions are recognized in the consolidated statement of operations; and (2) for derivatives used forhedging purposes, if such derivatives qualify for hedge accounting because of high correlation andeffectiveness between the hedging instruments and the hedged items, gains or losses on derivatives aredeferred until maturity of the hedged transactions.
Interest rate swaps which qualify for hedge accounting and meet specific matching criteria are notremeasured at market value, but the differential paid or received under the swap agreements is recognized
and included in interest expense.

s.

Per Share Information - Basic net income per share is computed by dividing net income attributable tocommon shareholders by the weighted-average number of common shares outstanding for the period.
Cash dividends per share presented in the accompanying consolidated statement of operations are
dividends applicable to the respective fiscal years, including dividends to be paid after the end of the year.

t.

Accounting Changes and Error Corrections - In December 2009, the ASBJ issued ASBJ Statement No.
24, "Accounting Standard for Accounting Changes and Error Corrections" and ASBJ Guidance No. 24,"Guidance on Accounting Standard for Accounting Changes and Error Corrections." Accounting
treatments under this standard and guidance are as follows: (1) Changes in Accounting Policies - When a
new accounting policy is applied following revision of an accounting standard, the new policy is applied
retrospectively unless the revised accounting standard includes specific transitional provisions, in whichcase the entity shall comply with the specific transitional provisions. (2) Changes in Presentation - Whenthe presentation of financial statements is changed, prior-period financial statements are reclassified inaccordance with the new presentation. (3) Changes in Accounting Estimates - A change in an accounting
estimate is accounted for in the period of the change if the change affects that period only, and isaccounted for prospectively if the change affects both the period of the change and future periods. (4)Corrections of Prior-Period Errors - When an error in prior-period financial statements is discovered,those statements are restated.

- 14 -

3.

INVESTMENT SECURITIESInvestment securities as of March 31, 2016 and 2015, consisted of the following:Thousands of
U.S. Dollars
2016

Millions of Yen
2015
2016
Non-current:
Equity securities
Trust fund investments and other¥ 5,031410¥ 5,456308$ 44,648
3,639

Total

¥ 5,441¥ 5,764$ 48,287

The costs and aggregate fair values of investment securities as of March 31, 2016 and 2015, were as follows:
Millions of Yen
Unrealized
Unrealized
Gains
LossesFair
Value

March 31, 2016

Cost

Securities classified as:
Marketable available-for-sale:
Equity securities
Debt securities¥1,644416¥1,388-¥(56 )(6 )¥2,976410¥1,639316¥2,002-¥(16 )(8 )¥3,625308

March 31, 2015
Securities classified as:
Marketable available-for-sale:
Equity securities
Debt securities

March 31, 2016

Cost

Securities classified as:
Marketable available-for-sale:
Equity securities
Debt securities$14,590
3,692

Thousands of U.S. Dollars
Unrealized
Unrealized
Gains
Losses$12,318-$(497 )
(53 )

Fair
Value

$26,411
3,639

Carrying amounts of available-for-sale securities whose fair value is not readily determinable as of March 31,
2016 and 2015, were as follows:
Millions of Yen
2016
2015
Nonmarketable available-for-sale:
Equity securities¥2,055- 15 -¥1,831Thousands of
U.S. Dollars
2016$18,237

The information for available-for-sale securities which were sold during the years ended March 31, 2016 and2015, was as follows:
Millions of Yen
Realized
Gains

Realized
Losses

100

¥ -

¥ -

Total

¥ 100

¥ -

¥ -

Available-for-sale:
Equity securities
Debt securities

¥ 35
17

¥ 23
-

¥ -

Total

¥ 52

¥ 23

¥ -

March 31, 2016

Proceeds

Available-for-sale:
Equity securities
Debt securities¥

March 31, 2015

Thousands of U.S. Dollars
Realized
Realized
Proceeds
Gains
LossesMarch 31, 2016
Available-for-sale:
Equity securities
Debt securities

$

Total
4.

887

$ -

$ -

$ 887

$ -

$ -

INVENTORIESInventories as of March 31, 2016 and 2015, consisted of the following:
Millions of Yen
2016
2015

5.

Finished products
Work in process
Raw materials and supplies

¥

5,803
302
6,093

Total

¥ 12,198

¥

6,590
332
7,235

¥ 14,157

Thousands of
U.S. Dollars
2016$

51,5002,680
54,073$ 108,253

LONG-LIVED ASSETSThe Group recorded impairment losses of ¥235 million ($2,086 thousand) and ¥453 million for the years
ended March 31, 2016 and 2015, respectively. The Group recognized a decline in value of manufacturing
facilities in Japan for the year ended March 31, 2015. Also, the Group recognized a decline in value of golfcourse and hotel facilities for the years ended March 31, 2016 and 2015. The impairment loss was recognizedsince the recoverable value of the assets was lower than the carrying amounts of the assets. The recoverable
value of the assets was measured at the fair value considering the third-party appraisal report for the facility.

- 16 -

6.

INVESTMENT PROPERTYIn November 2008, the ASBJ issued ASBJ Statement No. 20 "Accounting Standard for Investment Property
and Related Disclosures" and issued ASBJ Guidance No. 23 "Guidance on Accounting Standard forInvestment Property and Related Disclosures."
The Group owns certain rental properties such as office buildings and land. The net of rental income andoperating expenses for those rental properties for the years ended March 31, 2016 and 2015, were ¥108 million($958 thousand) and ¥107 million, respectively.
In addition, the carrying amounts, changes in such balance and market prices of such properties are as follows:
Millions of Yen
Carrying Amount
Increase/
March 31,
April 1, 2015
Decrease
2016¥2,776¥2,518¥3,294

Millions of Yen
Carrying Amount
Increase/
March 31,
April 1, 2014
Decrease
2015

Fair Value
March 31,2015

¥3,113¥(258)

Fair Value
March 31,2016

¥2,776¥3,584

Thousands of U.S. Dollars
Carrying Amount
Increase/
March 31,
April 1, 2015
Decrease
2016

Fair Value
March 31,2016

$24,636¥337$(2,290)$22,346$29,233

Notes:1)

Carrying amount recognized in the consolidated balance sheets is net of accumulated depreciation
and accumulated impairment losses, if any.

2)

Increase during the fiscal year ended March 31, 2016, primarily represents the capital expenditure
for current investment properties of ¥29 million ($257 thousand), and decrease primarily represents
depreciation of ¥38 million ($337 thousand), and impairment loss of ¥235 million ($2,086
thousand), selling of ¥14 million ($124 thousand). Increase during the fiscal year ended March 31,
2015, primarily represents the capital expenditure for current investment properties of ¥72 million,
and decrease primarily represents the change in the purpose of possession of the properties to theGroup's own use by ¥20 million, depreciation of ¥46 million, and impairment loss of ¥343 million.

3)

Fair value of properties is measured by the Group in accordance with its Real-Estate Appraisal
Standard.

- 17 -

7.

SHORT-TERM BANK LOANS AND LONG-TERM DEBT
Short-term bank loans as of March 31, 2016 and 2015, consisted of an outstanding balance of line of credit,
notes to banks and bank overdrafts. The average interest rates applicable to the short-term bank loans as ofMarch 31, 2016 and 2015, were 1.4% and 1.9%, respectively. As of March 31, 2016 and 2015, the totalcommitted line of credit were ¥5,000 million ($44,373 thousand) and ¥5,000 million, and unused balance were
¥3,000 million ($26,624 thousand) and ¥1,600 million, respectively.
Long-term debt as of March 31, 2016 and 2015, consisted of the following:Thousands of
U.S. Dollars
2016

Millions of Yen
2016
2015
Unsecured loans from banks and other financial
institutions, due serially to 2020 with interest rates
ranging from 0.4% to 2.1% (2016) and from 0.6%
to 4.0% (2015)
Obligations under finance leases
Total
Less current portion¥ 14,084
1,253
15,337(2,423 )¥ 13,682
1,354
15,036(1,327 )$ 124,991
11,120136,111(21,503 )Long-term debt, less current portion¥ 12,914¥ 13,709$ 114,608

Annual maturities of long-term debt as of March 31, 2016, for the next five years and thereafter were as
follows:
Millions ofYen

Thousands of
U.S. Dollars

2017
2018
2019
2020
2021
2022 and thereafter

¥

$

Total

¥ 15,337

Year Ending March 31

2,423
721
9,766
1,148
391
888

21,503
6,399
86,670
10,1883,470
7,881$ 136,111

As is customary in Japan, the Company maintains substantial deposit balances with banks with which it hasborrowings. Such deposit balances are not legally or contractually restricted as to withdrawal.
As is customary in Japan, collateral must be provided if requested by the lending banks, and certain banks
have the right to offset cash deposited with them against any bank loan or obligation that becomes due and, incase of default and certain other specified events, against all other debt payable to the banks concerned. The
Company has never received any such request.
Certain bank loans and the commitment line of credit are subject to the financial covenants which are tied withthe total equity and continuous operating income without extraordinary items for the most recent year as
indicators and require the Group to keep the indicators above certain level. Based on the financial results forthe years ended March 31, 2016 and 2015, the covenants were not applied since the Group met therequirements.

- 18 -

8.

RETIREMENT AND PENSION PLANS
The Company and some domestic subsidiaries have a defined contribution plan and a defined benefit plan
including a defined corporate pension plan and retirement lump sum plan. Some overseas consolidated
subsidiaries have defined contribution plans and defined benefit plans. Some domestic consolidated
subsidiaries apply the simplified method to calculate liabilities for retirement benefits and retirement benefit
costs.
In addition, the Company and some domestic subsidiaries participate in multi-employer pension plan. Since
the pension asset attributable to the Company and some domestic subsidiaries cannot be rationally determinedbased on their contributions, the plan is accounted for as a defined contribution plan.
Also the Group has a severance payment plan for directors.
The liability for retirement benefits as of March 31, 2016 and 2015, for directors was ¥399 million ($3,541
thousand) and ¥390 million, respectively, and included in liability for retirement benefits in the consolidatedbalance sheet. The retirement benefits for directors are paid subject to the approval of the shareholders inaccordance with the Companies Act of Japan (the "Companies Act").
<1> Defined Benefit Plan
(1) The changes in defined benefit obligation for the years ended March 31, 2016 and 2015, were as
follows:
Millions of Yen
2016
2015

Thousands of
U.S. Dollars
2016

Balance at beginning of year (as previously
reported)
Cumulative effect of accounting change
Balance at beginning of year (as restated)
Service cost
Interest cost
Actuarial (gains) losses
Benefits paid
Prior service benefit
Balance of value transfers
Foreign currency translation differences
Others¥ 4,205
4,205
335
55
(88 )
(155 )(192 )(56 )¥ 3,477(321 )
3,156
258
52
453
(78 )
(159 )
461
63(2 )$ 37,318
37,3182,973
488(781 )(1,376 )(1,704 )(496 )

Balance at end of year

¥ 4,104¥ 4,204$ 36,422- 19 -

(2) The changes in plan assets for the years ended March 31, 2016 and 2015, were as follows:
Millions of Yen
2015
2016

Thousands of
U.S. Dollars
2016

Balance at beginning of year
Expected return on plan assets
Actuarial (gains) losses
Contributions from the employer
Benefits paid
Balance of value transfers
Foreign currency translation differences
Others¥ 2,614
33
(42 )
281
(155 )(116 )
4¥ 1,920
22
40
254
(78 )
401
56
(1 )

$ 23,198
293(373 )
2,494(1,376 )(1,029 )36

Balance at end of year

¥2,619¥ 2,614$ 23,243(3) The changes in defined benefit obligation under the simplified method for the years ended March 31,
2016 and 2015, were as follows:
Millions of Yen
2016
2015

Thousands of
U.S. Dollars
2016

Balance at beginning of year
Periodic benefit costs
Benefits paid
Foreign currency translation differences

¥ 113
27
(20 )
(1 )

¥ 112
11
(16 )
8

$ 1,003240(177 )(10 )Balance at end of year

¥ 119

¥ 115

$ 1,056(4) Reconciliation between the liability recorded in the consolidated balance sheet and the balances ofdefined benefit obligation and plan assets as of March 31, 2016 and 2015, were as follows:
Millions of Yen
2016
2015

Thousands of
U.S. Dollars
2016

Funded defined benefit obligation
Plan assets
Total
Unfunded defined benefit obligation¥ 4,104(2,619 )1,485
119¥ 4,204(2,614 )1,590
115$ 36,422(23,243 )
13,1791,056

Net liability arising from defined benefit
obligation¥ 1,604¥ 1,705$ 14,235

Millions of Yen
2016
2015

Thousands of
U.S. Dollars
2016

Liability for retirement benefits¥ 1,604¥ 1,705$ 14,235

Net liability arising from defined benefit
obligation¥ 1,604¥ 1,705$ 14,235- 20 -

(5) The components of net periodic benefit costs for the years ended March 31, 2016 and 2015, were as
follows:
Millions of Yen
2015
2016

Thousands of
U.S. Dollars
2016

Service cost
Interest cost
Expected return on plan assets
Recognized prior service benefit
Recognized actuarial (gains) losses
Periodic benefit cost in simplified method
Other

¥ 335
55
(33 )
93
(10 )
27
(86 )

¥ 258
52
(22 )
0
89
11
-

$ 2,973488(293 )
825
(89 )
240
(763 )Net periodic benefit costs

¥ 381

¥ 388

$ 3,381(6) Amounts recognized in other comprehensive income (before income tax effect) in respect of defined
retirement benefit plans for the years ended March 31, 2016 and 2015, was as follows:
Millions of Yen
2016
2015

Thousands of
U.S. Dollars
2016

Prior service benefit (cost)
Actuarial gain (losses)
Others¥ (98 )
201
64

¥ 159
(325 )(3 )$ (870 )
1,784
568

Total

¥ 167

¥ (169 )$ 1,482(7) Amounts recognized in accumulated other comprehensive income (before income tax effect) in
respect of defined retirement benefit plans as of March 31, 2016 and 2015, were as follows:
Millions of Yen
2016
2015

Thousands of
U.S. Dollars
2016

Unrecognized prior service cost (benefit)
Unrecognized actuarial losses

¥ 21
716

¥ (158 )
1,063

$

Total

¥ 737

¥

$ 6,541- 21 -

905

187
6,354

(8) Plan assets as of March 31, 2016 and 2015a.

Components of plan assets
Plan assets consisted of the following:

b.

2016

2015

Debt securities in Japan
Equity securities in Japan
Debt securities in other countries
Equity securities in other countries
Cash and time deposits
Insurance asset (general account)
Others

8.4 %
6.1
2.6
5.8
0.8
73.7
2.6

8.6 %
7.2
2.9
6.3
0.5
71.9
2.6

Total

100.0 %

100.0 %

Method of determining the expected rate of return on plan assets
The expected rate of return on plan assets is determined considering the long-term rates ofreturn which are expected currently and in the future from the various components of the plan
assets.

(9) Assumptions used for the years ended March 31, 2016 and 2015, were set forth as follows:

Discount rate
Expected rate of return on plan assets

2016

2015

Mainly 0.7%
Mainly 0.0%

Mainly 0.7%
Mainly 0.0%

<2> Defined Contribution Plan
The amount of contributions required for the defined contribution plan of the Group for the years ended
March 31, 2016 and 2015, were ¥123 million ($1,092 thousand) and ¥196 million, respectively.
The amount of contributions required for the multi-employer pension funds, accounted for as a defined
contribution plan, for the years ended March 31, 2016 and 2015, were ¥158 million ($1,402 thousand)and ¥153 million, respectively.
(1) Funding condition of multi-employer pension funds as of March 31, 2015 and 2014, were as
follows:
Millions of Yen
2015
2014

Thousands of
U.S. Dollars
2015

Amount of fair value of plan assets
Amount of benefit obligations for pension
financing calculations¥ 334,668¥ 292,417$ 2,970,075

381,438

366,867

3,385,144

Net balance¥ (46,770 )¥ (74,450 )$(415,069 )(2) The Group's ratio in the multi-employer pension funds based on the contributions as of March 31,
2015 and 2014, were 1.2% and 1.2%, respectively.

- 22 -

(3) Supplementary explanation
The above information is obtained from the latest available information. Data for the years ended
March 31, 2016 and 2015 is based on the information as of March 31, 2015 and 2014, respectively.
The primary factors for the net balance in (1) above are ¥ - million ($ - thousand) and ¥23,869
million appropriation of retained earnings, ¥2,634 million ($23,376 thousand) and ¥ - million ofGeneral reserve in pension fund, and ¥49,404 million ($438,445 thousand) and ¥50,581 million past
service liabilities in calculating the projected benefit obligation for the years ended March 31, 2015
and 2014, respectively. The amount of principle and interest of past service liabilities in this plan
are amortized equally over 16 years.
The ratio in (2) above does not agree to the actual contribution ratio of the Group.
9.

ASSET RETIREMENT OBLIGATIONS
The changes in asset retirement obligations for the years ended March 31, 2016 and 2015, were as follows:
Millions of Yen
2016
2015
Balance at beginning of year
Reconciliation associated with passage of time
Balance at end of year

10.

¥47
1
48

¥47
0
47

Thousands of
U.S. Dollars
2016
$417
9
426

EQUITYJapanese companies are subject to the Companies Act. The significant provisions in the Companies Act that
affect financial and accounting matters are summarized below:a.

Dividends
Under the Companies Act, companies can pay dividends at any time during the fiscal year in addition to
the year-end dividend upon resolution at the shareholders' meeting. Additionally for companies that meetcertain criteria including (1) having a Board of Directors, (2) having independent auditors, (3) having an
Audit & Supervisory Board, and (4) the term of service of the directors being prescribed as one year
rather than the normal two-year term by its articles of incorporation, the Board of Directors may declare
dividends (except for dividends-in-kind) at any time during the fiscal year if the company has prescribedso in its articles of incorporation. With respect to the third condition above, the Board of Directors ofcompanies with (a) board committees (namely, appointment committee, compensation committee andaudit committee) or (b) an audit and supervisory committee (as implemented under the Companies Act
effective May 1, 2015) may also declare dividends at any time because such companies, by nature, meetthe criteria under the Companies Act. The Company is organized as a company with an audit andsupervisory committee, effective June 25, 2015. The Company meets all the above criteria, andaccordingly, the Board of Directors may declare dividends (except for dividends-in-kind) at any time
during the fiscal years.
The Companies Act permits companies to distribute dividends-in-kind (noncash assets) to shareholders
subject to a certain limitation and additional requirements.

- 23 -

Semiannual interim dividends may also be paid once a year upon resolution by the Board of Directors if
the articles of incorporation of the company so stipulate. The Companies Act provides certain limitations
on the amounts available for dividends or the purchase of treasury stock. The limitation is defined as theamount available for distribution to the shareholders, but the amount of net assets after dividends must be
maintained at no less than ¥3 million.
b.

Increases/Decreases and Transfer of Common Stock, Reserve and Surplus
The Companies Act requires that an amount equal to 10% of dividends must be appropriated as a legal
reserve (a component of retained earnings) or as additional paid-in capital (a component of capitalsurplus) depending on the equity account charged upon the payment of such dividends until the aggregate
amount of legal reserve and additional paid-in capital equals 25% of the common stock. Under theCompanies Act, the total amount of additional paid-in capital and legal reserve may be reversed without
limitation. The Companies Act also provides that common stock, legal reserve, additional paid-in capital,
other capital surplus and retained earnings can be transferred among the accounts within equity undercertain conditions upon resolution of the shareholders.

c.

Treasury Stock and Treasury Stock Acquisition Rights
The Companies Act also provides for companies to purchase treasury stock and dispose of such treasury
stock by resolution of the Board of Directors. The amount of treasury stock purchased cannot exceed theamount available for distribution to the shareholders which is determined by a specific formula. Under
the Companies Act, stock acquisition rights are now presented as a separate component of equity. The
Companies Act also provides that companies can purchase both treasury stock acquisition rights andtreasury stock. Such treasury stock acquisition rights are presented as a separate component of equity or
deducted directly from stock acquisition rights.

11.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses for the years ended March 31, 2016 and 2015, principallyconsisted of the following:
Millions of Yen
2016
2015
Employees' salaries and bonuses
Net periodic retirement benefit
Transport
Depreciation
RentalResearch and development
Amortization of goodwill

12.

¥3,571
329
3,374
347
241
2,371
87

¥3,279
346
3,089
385
248
2,036
87

Thousands of
U.S. Dollars
2016$31,692
2,920
29,9433,080
2,139
21,042772

INCOME TAXESThe Company and its domestic subsidiaries are subject to Japanese national and local income taxes which, inthe aggregate, resulted in normal effective statutory tax rates of approximately 33.0% and 35.6% for the years
ended March 31, 2016 and 2015, respectively. Foreign subsidiaries are subject to income taxes of thecountries in which they operate.

- 24 -

The tax effects of significant temporary differences and tax loss carryforwards which resulted in deferred tax
assets and liabilities at March 31, 2016 and 2015, are as follows:
Millions of Yen
2015
2016
Deferred tax assets:
Tax loss carryforwards
Impairment loss on long-lived assets
Loss on revaluation of investment securities
Retirement benefits to directors and Audit &Supervisory Board members
Property, plant and equipment
Unrealized loss on available-for-sale securities
OthersLess valuation allowance
Total
Deferred tax liabilities:
Reserve for deferred gains on sales of property, plantand equipment
Unrealized gain on available-for-sale securities
Undistributed earnings of foreign subsidiaries
Depreciation of foreign subsidiaries
Negative goodwill of foreign subsidiaries
OthersTotal
Net deferred tax liabilities

Thousands of
U.S. Dollars
2016¥ 2,9441,265
64¥ 3,043
1,363
10$ 26,127
11,226
568

122
97
1,095
(3,970 )¥ 1,617

126
97
8
715
(3,718 )¥ 1,644

1,083
861
9,718
(35,233 )$ 14,350¥(56 )(312 )(200 )(247 )(188 )(1,079 )¥ (2,082 )

¥

(65 )
(470 )(168 )(351 )(203 )(389 )¥ (1,646 )

$

¥

¥

$

(465 )(2 )(497 )(2,769 )(1,775 )(2,192 )(1,668 )(9,575 )$ (18,476 )(4,126 )Due to loss before income taxes, a reconciliation between the normal effective statutory tax rate and the actual
effective tax rate reflected in the accompanying consolidated statement of operations for the year ended March
31, 2015, is not presented.
A reconciliation between the normal effective statutory tax rate and the actual effective tax rate reflected in theaccompanying consolidated statement of operations for the year ended March 31, 2016, is as follows:
Normal effective statutory tax rate
Expenses not deductible for income tax purposes
Inhabitant tax on per capita basis
Difference of income tax rates applicable to income in certain foreigncountries
Increase in valuation allowance
Tax credit
Adjustment on deferred tax assets and liabilities at the end of period due tochange in tax rates
Undistributed earnings of foreign subsidiaries
Other – net(3.1 )
17.0(1.8 )

Actual effective tax rate

48.5 %- 25 -

33.0 %
0.3
1.0

0.7
1.1
0.3

New tax reform laws enacted in 2016 in Japan changed the normal effective statutory tax rate for the fiscal
year beginning on or after April 1, 2016, to approximately 30.8% and for the fiscal year beginning on or after
April 1, 2017, to approximately 30.9% and for the fiscal year beginning on or after April 1, 2018, toapproximately 30.6%. The effect of these changes was to decrease deferred tax assets, net of deferred tax
liabilities, by ¥7 million ($62 thousand) and increase accumulated other comprehensive income for unrealized
gain on available-for-sale securities by ¥17 million ($151 thousand), and defined retirement benefit plan by ¥4
million ($35 thousand), in the consolidated balance sheet as of March 31, 2016, and to increase income taxes deferred by ¥19 million ($169 thousand) in the consolidated statement of income for the year then ended.
13.

RESEARCH AND DEVELOPMENT COSTS
Research and development costs charged to income were ¥2,371 million ($21,042 thousand) and ¥2,036
million for the years ended March 31, 2016 and 2015, respectively.

14.

LEASESThe Group leases certain buildings and structures, machinery and equipment and other assets.
Total lease expenses included for the years ended March 31, 2016 and 2015, were ¥312 million ($2,769
thousand) and ¥216 million, respectively.
The minimum payments commitments under noncancelable operating leases as of March 31, 2016, are as
follows:

15.

Millions ofYen

Thousands of
U.S. Dollars

Due within one year
Due after one year

¥ 5
37

$ 45
328

Total

¥ 42

$ 373

FINANCIAL INSTRUMENTS AND RELATED DISCLOSURES(1) Group Policy for Financial Instruments
The Group uses financial instruments, mainly bank loans based on its capital financing plan. Short-termbank loans are used to fund the Group's ongoing operations. Derivatives are used, not for speculative
purposes, but to manage exposure to financial risks as described in (2) below.
(2) Nature and Extent of Risks Arising from Financial Instruments
Receivables, such as trade notes and trade accounts, are exposed to customer credit risk. Payment termsof payables, such as trade notes and trade accounts, are primarily less than one year. Payment in foreign
currencies is exposed to the market risk of fluctuation in foreign currency exchange rates. Investment
securities are exposed to the risk of market price fluctuations. Short-term bank loans and long-term debt
are related to ongoing operations and working capital. Although a part of such bank loans are exposed tomarket risks from changes in variable interest rates, those risks are mitigated by using derivatives ofinterest rate swaps. Long-term deposits received are mainly related to deposits for membership of a golfcourse and are exposed to liquidity risk.

- 26 -

(3) Risk Management for Financial Instruments
Credit risk management
Credit risk is the risk of economic loss arising from a counterparty's failure to repay or service debt
according to the contractual terms. The Group manages its credit risk from receivables on the basis ofinternal guidelines, which include monitoring of payment term and balances of major customers by eachbusiness administration department to identify the default risk of customers at an early stage.
The counterparties to the Group's derivative contracts are limited to major international financial
institutions to reduce credit risk.
The maximum credit risk exposure of financial assets is limited to their carrying amounts as of March 31,
2015.
Market risk management (foreign exchange risk and interest rate risk)
Interest-rate swaps are used to manage exposure to market risks from changes in interest rates of loans
payable.
Investment securities are managed by monitoring market values and the financial position of issuers on aregular basis.
Derivative transactions entered into by the Group have been made in accordance with internal policies
that regulate the authorization and credit limit amount.
Liquidity risk management
Liquidity risk comprises the risk that the Group cannot meet its contractual obligations in full on theirmaturity dates. The Group manages its liquidity risk by holding adequate volumes of liquid assets at thelevel of one month's sales volume, along with adequate financial planning by the corporate treasury
department.
(4) Fair Value of Financial Instruments
Fair values of financial instruments are based on quoted prices in active markets. If a quoted price is notavailable, another rational valuation technique is used instead.
Fair Value of Financial Instruments
Carrying amounts, fair values and the differences between carrying amounts and fair values as of March
31, 2016 and 2015, are as follows. The accounts for which fair value is deemed to be extremely difficult
to calculate are not included in the following:
Millions of Yen
Carrying
AmountFair Value

Cash and cash equivalents
Notes and accounts receivable
Investment securities

¥

¥

Total

March 31, 2016

5,881
20,1113,386¥ -¥ 29,378¥ 29,378¥ -Notes and accounts payable
Short-term bank loans
Current portion of long-term debt
Long-term debt
Long-term deposits received

¥

¥

9,389
8,186
2,423
12,918672¥ (4 )
81

Total¥ 33,665¥ 33,588¥ 77- 27 -

5,881
20,111
3,386

Unrealized
Gain (Loss)

9,389
8,186
2,423
12,914753

Millions of Yen
Carrying
AmountFair Value

Cash and cash equivalents
Notes and accounts receivable
Investment securities

¥

¥

Total

March 31, 2015

5,436
22,2103,933¥-¥ 31,579¥ 31,579¥-

Notes and accounts payable
Short-term bank loans
Current portion of long-term debt
Long-term debt
Long-term deposits received¥ 11,804
8,933
1,327
13,709803¥ 11,804
8,933
1,327
13,704
652

¥

5
151

Total

¥ 36,576¥ 36,420¥ 156

March 31, 2016

Thousands of U.S. Dollars
Carrying
Unrealized
AmountFair Value
Gain (Loss)

Cash and cash equivalents
Notes and accounts receivable
Investment securities

$

Total

5,436
22,210
3,933

Unrealized
Gain (Loss)

52,192
178,479
30,05052,192
178,479
30,050$-$ 260,721$ 260,721$-

Notes and accounts payable
Short-term bank loans
Current portion of long-term debt
Long-term debt
Long-term deposits received

$

$

$

(35 )
719

Total

$ 298,767

83,32572,64821,503
114,608
6,683$

83,32572,64821,503
114,6435,964$ 298,083$ 684

Cash and Cash Equivalents and Notes and Accounts Receivable
The carrying values of cash and cash equivalents and notes and accounts receivable approximate fairvalue because of their short maturities.
Investment Securities
The fair values of marketable and investment securities are measured at the quoted market price of thestock exchange for the equity instruments, and at the quoted price obtained from the financial institution
for certain debt instruments. The fair value information for investment securities by classification is
included in Note 3.
Notes and Accounts Payable, Short-Term Bank Loans and Current Portion of Long-Term Debt
The carrying values of notes and accounts payable, short-term bank loans and current portion of longterm debt approximate fair value because of their short maturities.
Long-Term Debt
The fair values of long-term debt are determined by discounting the cash flows related to the debt at theGroup's assumed corporate borrowing rate for the fiscal year ended March 31, 2016.

- 28 -

Long-Term Deposits Received
The fair values of long-term deposits received are determined by discounting the future cash flows
estimable from the past refund experience and by the estimated interest rate reflecting assumed refund
period and credit risk.
Derivatives
The fair value information for derivatives is included in Note 16.
(5) Maturity Analysis for Financial Assets with Contractual Maturities

Due inOne Year or
Less

March 31, 2016
Cash and cash equivalents
Notes and accounts receivable
Investment securities
Available-for-sale securities with
contractual maturities
Total

¥

5,881
20,111

Cash and cash equivalents
Notes and accounts receivable
Investment securities
Available-for-sale securities with
contractual maturities

¥ -

-

200

-

200

¥ 25,992

¥ 200

¥ -

¥ 200

Total

¥

Cash and cash equivalents
Notes and accounts receivable
Investment securities
Available-for-sale securities with
contractual maturities
Total

Millions of Yen
Due after
Due after
Five Years
One Yearthrough Five through Ten
Years
Years

¥

-

Due after
Ten Years

5,436
22,210

¥ -

¥ -

-

-

-

295

¥ 27,646

¥ -

¥ -

¥ 295

Due inOne Year or
Less

March 31, 2016¥

Due after
Ten Years-

Due inOne Year or
Less

March 31, 2015

Millions of Yen
Due after
Due after
Five Years
One Yearthrough Five through Ten
Years
Years

$

$

-

Due after
Ten Years

-

$ -

-

1,775

-

1,775

$ 230,671$ 1,775$ -$ 1,775- 29 -

52,192
178,479

Thousands of U.S. Dollars
Due after
Due after
Five Years
One Yearthrough Five through Ten
Years
Years

¥

$

-

16.

DERIVATIVESThe Group also enters into interest rate swap contracts to manage its interest rate exposures on certain
liabilities.
All derivative transactions are entered into to hedge interest exposures incorporated within the Group'sbusiness. Accordingly, market risk in these derivatives is basically offset by opposite movements in the valueof the hedged liabilities.
Because the counterparties to these derivatives are limited to major international financial institutions, theGroup does not anticipate any losses arising from credit risk.
Derivative transactions entered into by the Group have been made in accordance with internal policies which
regulate the authorization and credit limit amount.
Derivative Transactions to Which Hedge Accounting Is Applied
March 31, 2016
Not applicable

March 31, 2015

Hedged Item

Interest rate swaps:
Short-term bank(fixed rate payment, floating rate receipt)
loansMillions of Yen
Contract
AmountDue after
Contract
One YearAmount

Fair
Value

¥400

¥-

¥-

The fair value of derivative transactions is measured at the quoted price obtained from the financial institution.
The contract amounts of derivatives which are shown in the above table do not represent the amounts
exchanged by the parties and do not measure the Group's exposure to credit or market risk.
The above interest rate swaps which qualify for hedge accounting and meet specific matching criteria are notremeasured at market value, but the differentials paid or received under the swap agreements are recognized
and included in interest expense or income. In addition, the fair value of such interest rate swaps is included inthat of the hedged items (short-term bank loans).

- 30 -

17.

OTHER COMPREHENSIVE INCOME
The components of other comprehensive income for the years ended March 31, 2016 and 2015, were as follows:
Thousands of
U.S. Dollars
2016

Millions of Yen
2015
2016
Unrealized (loss) gain on available-for-sale securities:
Gains arising during the year
Reclassification adjustments to profit or loss
Amount before income tax effect
Income tax effectTotal
Foreign currency translation adjustments:
Adjustments arising during the year
Reclassification adjustments to profit or loss
Amount before income tax effect
Income tax effect(652 )(652 )
157

¥

763
0
763
(167 )$(5,786 )(5,786 )1,393¥(495 )¥

596$(4,393 )¥ (2,461 )(2,461 )-¥ 2,206
(6 )
2,200
-

$ (21,840 )(21,840 )-¥ (2,461 )¥ 2,200$ (21,840 )

¥

172
(5 )
167
(1 )

¥ (257 )88(169 )
62

$

1,526
(44 )
1,482
(9 )

¥

166

¥ (107 )$1,473

Share of other comprehensive income in associated companies- Gains arising during the year
¥

(0 )

¥

0

$

(0 )

(0 )

¥

0

$

(0 )

Total
Defined retirement benefit plans:
Adjustments arising during the year
Reclassification adjustments to profit or loss
Amount before income tax effect
Income tax effect
Total

Total

¥

Total other comprehensive (loss) income18.

¥¥ (2,790 )¥ 2,689$ (24,760 )NET INCOME PER SHARE
Details of the basic net income per share ("EPS") for the years ended March 31, 2016 and 2015, were as follows:
Millionsof YenNet Income
Attributable to
Owners of the
ParentThousandsof Shares¥1,22325,949¥47.12¥ (1,026 )25,949¥ (39.53 )Yen

WeightedAverage
Shares

Dollars

EPS

For the year ended March 31, 2016:
Basic EPS
Net income available to commonshareholders
For the year ended March 31, 2015:
Basic EPS
Net income available to commonshareholders- 31 -$0.42

Diluted net income per share is not disclosed because there are no outstanding potentially dilutive securities.
19.

RELATED PARTY DISCLOSURES(1) The transactions between the Company and related parties
Transactions between the Company and related parties for the years ended March 31, 2016 and 2015, were as follows:
Fiscal year ended March 31, 2016
Millions ofYenType of Related Parties

Name

Address

Owned by certain directors of the Company
and their relatives

Hasegawa Kosan Co., Ltd.

Kakogawa-shi,
Hyogo, Japan

Note:

Millions of
Yen

CapitalAmountDescription of Business¥40

Insurance agent

Percentage of Equity
Ownership in the
Company(Owned)Direct 17.56

Nature of Transactions

Thousands of
U.S. Dollars
AmountPayment of insurance

¥22

$195

Other current assets, end of year

13

115

Hasegawa Kosan Co., Ltd. is wholly owned by Yoshihiro Hasegawa, who is the representative director of the Company, and his close relatives.
Insurance premium is determined considering an arm's-length transaction.

Fiscal year ended March 31, 2015
Millions ofYenType of Related Parties

Name

Address

Owned by certain directors of the Company
and their relatives

Hasegawa Kosan Co., Ltd.

Kakogawa-shi,
Hyogo, Japan

Millions of
Yen

CapitalAmountDescription of Business¥40

Insurance agent

Percentage of Equity
Ownership in the
Company(Owned)Direct 17.56

Nature of Transactions
Payment of insurance
Other current assets, end of year
Other assets, end of year

Note:

Amount¥ 23
13
13

Hasegawa Kosan Co., Ltd. is wholly owned by Yoshihiro Hasegawa, who is the representative director of the Company, and his close relatives.
Insurance premium is determined considering an arm's-length transaction.

(2) The transactions between the Group and related parties
Transactions between the Group and related parties for the years ended March 31, 2016 and 2015 were as follows:
Fiscal year ended March 31, 2016
Millions ofYenType of Related Parties
Owned by certain directors of the Company
and their relatives

Name
Harima Food, Inc.

Address
Kakogawa-shi,
Hyogo, Japan

Millions of
Yen

CapitalAmountDescription of Business

Percentage of Equity
Ownership in the
Company¥30

Food manufacturing-

Nature of Transactions
Lease payments

Thousands of
U.S. Dollars
Amount

¥ 5

$ 44

42
12

373
106

0

0

Minimum rental commitments
Sales
Other current assets, end of year

- 32 -

Note:

Harima Food, Inc. is a wholly owned subsidiary of Hasegawa Kosan Co., Ltd.
Lease payment is determined based on fair value (used to calculate property taxes).
Sales transactions are carried out on an arm's-length basis similar to third party transactions.

Fiscal year ended March 31, 2015
Millions ofYenType of Related Parties
Owned by certain directors of the Company
and their relatives

Name
Harima Food, Inc.

Address
Kakogawa-shi,
Hyogo, Japan

Millions of
Yen

CapitalAmountDescription of Business

Percentage of Equity
Ownership in the
Company¥30

Food manufacturing-

Nature of Transactions
Lease payments

Amount¥ 5

Minimum rental commitments
47
Other current assets, end of year
0
Note:
20.

Harima Food, Inc. is a wholly owned subsidiary of Hasegawa Kosan Co., Ltd.
Lease payment is determined based on fair value (used to calculate property taxes).

SUBSEQUENT EVENT
Appropriations of Retained Earnings
The following appropriation of retained earnings at March 31, 2016, was approved at the Company's Board of Directors' meeting held on May 20, 2016:

Year-end cash dividends, ¥7 ($0.06) per share
21.

Millionsof YenThousands of
U.S. Dollars¥182$1,615

SEGMENT INFORMATION
Under ASBJ Statement No. 17, "Accounting Standard for Segment Information Disclosures" and ASBJ Guidance No. 20, "Guidance on Accounting Standard for Segment Information Disclosures," an entity is required to report financial and descriptive
information about its reportable segments. Reportable segments are operating segments or aggregations of operating segments that meet specified criteria. Operating segments are components of an entity about which separate financial information is available
and such information is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. Generally, segment information is required to be reported on the same basis as is used internally forevaluating operating segment performance and deciding how to allocate resources to operating segments.
(1) Description of Reportable Segments
The Group's reportable segments are those for which separate financial information is available and regular evaluation by the Company's management is being performed in order to decide how resources are allocated among the Group.
"Resin & Tall Oil Products" manufactures and sells paint resin, resins for print inks, tall oil products and synthetic rubber emulsifiers. "Paper Chemicals" manufactures and sells paper-strengthening agents, sizing agents and surface-coating agents.
"Electronics Materials" manufactures and sells electronics materials. "Lawter" manufactures and sells resins for print inks and adhesives.
(2) Methods of Measurement for the Amounts of Sales, Profit, Assets, Liabilities and Other Items for Each Reportable Segment
The accounting policies of each reportable segment are consistent with those disclosed in Note 2, "Summary of Significant Accounting Policies."- 33 -

(3) Information about Sales, Profit and Other Items is as follows.
Millions of Yen
2016
Reportable Segment

Sales:
Sales to external customers
Intersegment sales or transfers
Total
Segment profit (loss)
Other:
Depreciation
Net result of interest income and interest expense
Notes:

Resin &
Tall Oil
Products

Paper
ChemicalsElectronics
Materials

Lawter

Total

Other

Total

¥ 20,092
508¥ 20,600¥1,156¥ 18,131384¥ 18,515¥1,761¥ 5,008¥ 5,008¥421¥ 36,123
222¥ 36,345¥(303 )

¥ 79,354
1,114¥ 80,468¥3,035¥ 1,641137¥ 1,778¥ 93¥ 80,995
1,251¥ 82,246¥3,128

626
(39 )

549
(11 )

138
(7 )

671
(77 )

1,984
(134 )

143
(14 )

2,127
(148 )

Reconciliations¥

Consolidated(17 )(1,251 )¥ (1,268 )¥(691 )

¥ 80,978¥ 80,978¥2,437(155 )

2,127(303 )"Other" comprises business segments not attributable to a reportable segment and includes mainly real estate management, etc.
Reconciliations of segment profit (loss) include reconciliation loss of inventories of ¥7 million ($62 thousand) and company-wide expenses of ¥755 million ($6,700 thousand), which are not attributable to any reportable segment. Assets are notallocated to reportable segments as they are not used for the determination of the allocation of management resources or the assessment of performance of the Company.
Millions of Yen
2015
Reportable Segment

Sales:
Sales to external customers
Intersegment sales or transfers
Total
Segment profit (loss)
Other:
Depreciation
Net result of interest income and interest expense
Notes:

Resin &
Tall Oil
Products

Paper
ChemicalsElectronics
Materials

Lawter

Total

Other

Total

¥ 22,077
193¥ 22,270¥1,167¥ 17,150586¥ 17,736¥1,285¥ 5,279¥ 5,279¥442¥ 36,731
208¥ 36,939¥(1,202 )¥ 81,237
987¥ 82,224¥1,692¥ 1,525165¥ 1,690¥117¥ 82,762
1,152¥ 83,914¥1,809

604
(54 )

497
-

147
(8 )

925
(29 )

2,173
(91 )

167
(17 )

2,340
(108 )

Reconciliations¥

Consolidated(70 )(1,152 )¥ (1,222 )¥(836 )

¥ 82,692¥ 82,692¥ 973(206 )

2,340(314 )"Other" comprises business segments not attributable to a reportable segment and includes mainly real estate management, etc.
Reconciliations of segment profit (loss) include reconciliation gain of inventories of ¥19 million and company-wide expenses of ¥906 million, which are not attributable to any reportable segment.
Assets are not allocated to reportable segments as they are not used for the determination of the allocation of management resources or the assessment of performance of the Company.
Thousands of U.S. Dollars
2016
Reportable Segment

Sales:
Sales to external customers
Intersegment sales or transfers
Total
Segment profit (loss)
Other:
Depreciation
Net result of interest income and interest expense

Resin &
Tall Oil
Products

Paper
ChemicalsElectronics
Materials$ 178,310
4,509$ 182,819$10,259$ 160,907
3,408$ 164,315$15,628$ 44,444$ 44,444$3,736

5,556(346 )

4,872
(98 )

1,225
(62 )

LawterTotal$ 320,581 $ 704,242
1,970
9,887
$ 322,551 $ 714,129$(2,689 )$26,934
5,955(683 )- 34 -

17,608(1,189 )

Other

Total

$ 14,564
1,215$ 15,779$ 826$ 718,806
11,102$ 729,908$27,760

1,269(124 )

18,877(1,313 )Reconciliations$

Consolidated(151 )(11,102 )$ (11,253 )$(6,132 )$ 718,655$718,655$21,628(1,376 )18,877(2,689 )[Related information]
1.

Information about geographical areas
Net sales to customers and property, plant and equipment by region for the years ended March 31,
2016 and 2015, were as follows:(1) Net sales
Millions of Yen
2016
Japan

South andNorth
America

Asia

Europe

Other

Total

¥32,043¥18,889¥10,914¥15,388¥3,744¥80,978

Millions of Yen
2015
Japan

South andNorth
America

Asia

Europe

Other

Total

¥33,649¥17,216¥11,311¥16,903¥3,613¥82,692

Thousands of U.S. Dollars
2016
Japan

South andNorth
America

Asia

Europe

Other

Total

$284,372$167,634$96,858$136,564$33,227$718,655

Note: Sales are classified by country or region based on a customer's location.
(2) Net property, plant and equipment
Millions of Yen
2016
Japan

South andNorth
America

Asia

Europe

Other

Total

¥13,622¥3,910¥2,213¥2,322¥1,122¥23,189

Millions of Yen
2015
Japan

South andNorth
America

Asia

Europe

Other

Total

¥14,025¥3,260¥2,184¥2,864¥1,301¥23,634

Thousands of U.S. Dollars
2016
Japan

South andNorth
America

Asia

Europe

Other

Total

$120,891$34,700$19,640$20,607$9,957$205,795- 35 -

2.

Information by principal customers
Information is not provided because there are no customers who account for more than 10% of total consolidated net sales.

[Loss on impairment of long-lived assets by reportable segment]
Loss on impairment of long-lived assets by reportable segment for the years ended March 31, 2016 and 2015, was as follows:
Millions of Yen
2016
Resin & Tall
Oil Products
Long-lived assets¥-

Reportable Segment
Paper
Electronics
Chemicals
Materials¥-¥-

Lawter

Total

Other

Eliminations/
Corporate

Consolidated

¥-

¥-

¥235

¥-

¥235

Millions of Yen
2015
Resin & Tall
Oil Products
Long-lived assets¥109

Reportable Segment
Paper
Electronics
Chemicals
Materials¥-¥-

Lawter

Total

Other

Eliminations/
Corporate

Consolidated

¥-

¥109

¥344

¥-

¥453

Thousands of U.S. Dollars
2016
Resin & Tall
Oil Products
Long-lived assets$-

Reportable Segment
Paper
Electronics
Chemicals
Materials$-$-

Lawter

Total

Other

Eliminations/
Corporate

Consolidated$-$-$2,086$-$2,086[Amortization of goodwill and amount of goodwill by reportable segment]
The amortization of goodwill and amount of goodwill by reportable segment for the years ended March 31, 2016 and 2015, were as follows:
Millions of Yen
2016
Resin & Tall
Oil Products
Amortization of goodwill
Amount of goodwill¥-

Reportable Segment
Paper
Electronics
Chemicals
Materials¥-¥-

Lawter

Total

Other

Eliminations/
Corporate

Consolidated

¥86
86

¥86
86

¥1
1

¥-

¥87
87

Millions of Yen
2015
Resin & Tall
Oil Products
Amortization of goodwill
Amount of goodwill¥-

Reportable Segment
Paper
Electronics
Chemicals
Materials¥-¥-

Lawter

Total

Other

Eliminations/
Corporate

Consolidated

¥ 86
172

¥ 86
172

¥1
2

¥-

¥ 87
174

Thousands of U.S. Dollars
2016
Resin & Tall
Oil Products
Amortization of goodwill
Amount of goodwill$-

Reportable Segment
Paper
Electronics
Chemicals
Materials$-$-******- 36 -

Lawter

Total

Other

Eliminations/
Corporate

Consolidated

$763
763

$763
763

$9
9

$-

$772
772

- 37 -

Corporate Overview (as of March 31, 2016)
FoundedNovember 18, 1947

Capital Stock

10,012.95 million yen

Head Office

3-8-4 Nihonbashi, Chuo-ku, Tokyo

Osaka Head Office

4-4-7 Imabashi, Chuo-ku, Osaka

Tokyo Head Office

3-8-4 Nihonbashi, Chuo-ku, Tokyo

Laboratories

Central Research Laboratory, Tsukuba Research Laboratory

PlantsKakogawa Plant, Tokyo Plant, Fuji Plant, Ibaraki Plant, Hokkaido Plant, Sendai
Plant, and Shikoku Plant

Sales Offices

Tokyo Sales Office, Osaka Sales Office, Nagoya Sales Office, Fuji Sales Office,Hokkaido Sales Office, Sendai Sales Office, and Shikoku Sales Office

Number of Employees

80 (Consolidated: 1,464)

Number of Group Companies 36
Business Activities

Manufacture and sale of Resin & Tall Oil Products, Paper Chemicals,Electronics Materials, etc.

Websitehttp://www.harima.co.jp/en/index.html- 38 -

Principal Subsidiaries
Company name

Capital stock

Percentage ofequityparticipation (%)
100

Harima Chemicals, Inc.

5,000,000 thousandyen

Harima Trading, Inc.

48,000 thousand yen

100

Seven Rivers, Inc.

14,000 thousand yen

100

Harima M.I.D., Inc.

300,000 thousand yen

75

Harima Kasei Polymer Co., Ltd.

10,000 thousand yen

100

Nippon Filler Metals, Ltd.

45,000 thousand yen

100

Harima do Brasil Industria Quimica
Ltda.

20,338 thousand Brasil
real

99.75

HARIMA USA, Inc.

3,350 thousand U.S.
dollars
52,296 thousand
Chinese yuan

100

Hangzhou Hanghua Harima
Chemicals Co., Ltd.

56.07

Harimatec Hangzhou Co., Ltd.

8,690 thousand
Chinese yuan

85

Harimatec Malaysia Sdn. Bhd.

1,356 thousand
Malaysian ringgit

85

Nanning Harima Chemicals Co., Ltd.

48,234 thousand
Chinese yuan

95

Harimatec Czech, s.r.o.

7,000 thousand Czech
koruna100

Xinyi Rihong Plastic Chemical Co.,Ltd.

27,390 thousand
Chinese yuan

100

Lawter B.V.

76,300 thousand euro

97.68

Harima Chemicals (Shanghai) Co.,Ltd

12,652 thousand
Chinese yuan

100

- 39 -

Main business
Manufacture andsale of Resin &Tall Oil Products,
Paper Chemicals,Electronics
Materials, etc.
Real estate
management, etc.
Manufacture andsale of industrial
detergents, etc.
Manufacture andsale of tall oil
products
Manufacture andsale of resins forprinting inks, etc.
Manufacture andsale of electronicmaterials
Manufacture andsale of rosin andits derivatives
Control of U.S.
operations
Manufacture andsale ofpapermaking
chemicals
Manufacture andsale of electronicmaterials
Manufacture andsale of electronicmaterials
Manufacture andsale of rosin andits derivatives
Manufacture andsale of electronicmaterials
Manufacture andsale of rosin andits derivatives
Control of Lawter
Group’soperations
Support ofChinese businessDirectors and Corporate Auditors (as of March 31, 2016)
President
Executive Director
Executive Director
Executive Director
Executive Director
Managing Director
Audit＆Supervisory
Committee Member
Audit＆Supervisory
Committee Member *Audit＆Supervisory
Committee Member *Yoshihiro Hasegawa
Masanao Kono
Teruo Kaneshiro
Masashi Inaba
Ichiro Taninaka
Fumiaki Tsuchida
Jyoichiro Tanaka
Tatsuya Michigami
Hidenori Hiramatsu* denotes Outside Corporate Auditors.
Status of Shares (as of March 31, 2016)(1) Total number of shares authorised to be issued
59,500,000(2) Total number of shares outstanding
26,080,396(including 131,882 shares of treasury stocks)(3) Number of shareholders
2,925(4) Major shareholders
Status of shareholding
Number of shares held
Ratio of number of shares held(Thousands of shares)
against total number of shares
outstanding (%)
Hasegawakosan Co., Ltd.
4,558
17.56
Yoshihiro Hasegawa

1,738

6.70

Harima Chemicals Mutual
Prosperity Association
Sumitomo Mitsui Banking
Corporation
Shorai Foundation for Scienceand Technology
Hyogo Prefectual Credit
Federation of Agricultural
Cooperatives
THE MINATO BANK, LTD

1,108

4.27

1,094

4.21

805

3.10

728

2.80

692

2.66

687

2.64

Shorai, Ltd.

Keihansin Kougyou
672
2.58
Corporation
Bank of Tokyo-Mitsubishi
476
1.83
UFJ
(Notes) 1. In “Number of shares held,” figures less than one thousand are rounded down.
2. Ratio of number of shares held against total number of shares outstanding is determined basedon the total number of shares outstanding minus the number of treasury stocks (131,882 shares),which amounts to 25,948,514 shares. The numbers shown are rounded down to two decimal
places.

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