Annual Report
Year Ended March 31, 2020

HARIMA CHEMICALS GROUP, INC.

Business Overview
As for the world economy during the current fiscal year, economy in the US continued recovering, also in
Europe which recovered gently. But Chinese economy showed growing signs of slowdown. Meanwhile,
though Japanese economy has recovered gently, because consumption tax increased from October 1, 2019,Japanese economy has dropped again. Furthermore, from January 2020, the global economy and theJapanese economy are facing severe conditions due to the effects of the COVID 19.
In the fiscal year 2019 which was the first year of our new 3-year medium-term management plan “NEWHARIMA 2021”, our group has challenged to make new growth in our business.
About the oversea business of our group, the results of our subsidiaries in China remained stable. On theother hand, sales volume decreased in Europe and North America, which decreased along with sales andearnings than the previous fiscal year. Domestic business decreased in the sales and earnings as well.
As a result of these conditions, the group’s consolidated net sales for the current fiscal year decreased by
6,789 million Yen (down 8.6%) year-on-year to 71,799 million Yen. Operating income decreased by 914
million Yen (down19.6%) to 3,752million. Ordinary income decreased by 1,228 million Yen (down 25.5%)
to 3,589 million Yen.
Due to additional accounting (additional corporate tax adjustment -1,239 million Yen which was income)of deferred tax asset in the consolidated subsidiaries in the previous fiscal year, net income attributable toHarima Chemicals Group, INC. in this fiscal year was 2,217 million Yen, decreased by 1,913 million Yen(down 46.3%).
Status of Business Segments(Resin & Tall Oil Products)
In the printing ink industry and the paint industry, the production volume both decreased than the previous
fiscal year. As a result of the decrease in sales volume of printing ink resin, slump in sales of paint resin
which was affected by natural disasters and consumption tax hike, the total sales of this segment decreased
than the previous fiscal year. Also, the operating income of this segment decreased with the decrease in sales
and the price increase in main raw materials.
(Paper Chemicals)
In the domestic paper industry, demand for paperboard and information printing papers declined. As aresult, the total production volume decreased. At the same time, about overseas market, demand for paper
and paperboard in China increased, but which decreased in the US.
Consequently, China subsidiaries still kept a good business performance but the sales of domestic and the
US subsidiaries decreased. Total sales and income of this segment also decreased than the previous fiscal
year.
(Electronics Materials)
Production volume in automobile industry, which is mainly related to this segment, decreased in domestic
market because consumption tax has increased. In Europe, automobile production volume increased slightly
because of last-minute demand before environmental regulations but which decreased in North America
market due to the reduced demand. On the other hand, under the effect of US-China trade conflicts andeconomic slowdown in China, production volume in China market decreased significantly.
In this segment, sales of soldering materials increased, but sales of brazing materials for automobile heatexchangers, functional resin for semiconductors and conductive paste decreased greatly. Especially in China
market, sales volume decreased under the influence of the COVID 19.
Consequently, the total sales and income both decreased than the previous fiscal year.
(Lawter)
Lawter segment, developing business in 7 countries around the world, which main business ismanufacturing and sales of adhesive resin and printing ink resin. Because demand for adhesive resin
increased steadily and the sales in Europe and South America kept a good performance, sales volume
increased than the previous fiscal year.
Due to the demand for printing inks was sluggish on the background of digitization of information, salesof the printing ink resin showed signs of slowdown and sales volume decreased than the previous fiscal year.
However, though the sales volume and the total sales decreased, operating income of this segment increased,because we changed our production structure and reduced the manufacturing cost.

-1-Consolidated Business Performance Trends(Millions of Yen unless otherwise stated)
75th Fiscal Year76th Fiscal Year

77th Fiscal Year

78th Fiscal Year

(Fiscal year ended
March 2017)(Fiscal year ended
March 2018)(Fiscal year ended
March 2019)(Fiscal year ended
March 2020)

Net sales

71,38473,31078,58971,799Ordinary income

3,931

4,008

4,818

3,589

2,421

2,725

4,131

2,217

93.31

105.03159.02

87.67

Total assets

67,134

69,63772,87071,395

Net assets

33,81336,09737,81137,745

Category

Net income attributable
to Harima Chemicals
Group, INC.
Net income per share(Yen)(Notes) 1. Net income per share is calculated based on the weighted average number of issued shares during
the fiscal year after deducting treasury stocks.
2. We applied ASBJ Statement No.28, “Partial Amendments to Accounting Standard for Tax EffectAccounting” issued on Febryary16,2018 form the beginning on the 77th Fiscal year.
The information from the 75th Fiscal year to the 76th Fiscal year was changed into new data whichallows retroactive application of the new statement above.

-2-

HARIMA CHEMICALS GROUP, INC.
and Subsidiaries
Consolidated Balance Sheet
March 31, 2020

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 receivables
Inventories (Note 4)
Other current assets
Total current assets
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
Net property, plant and equipment
INVESTMENTS AND OTHER ASSETS:
Investment securities (Notes 3 and 15)
Investments in associated companies
Deferred tax assets (Note 12)
Other assets
Allowance for doubtful accounts
Total investments and other assets¥

Millions of Yen
2020
2019

Thousands of
U.S. Dollars(Note 1)
2020

3,911

$

¥

3,289

LIABILITIES AND EQUITYCURRENT 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 (Note 12)
Other current liabilities

35,9372,442
14,964
168
943
(91 )
12,9381,208

2,864
18,438224
932(102 )
11,558949

22,439137,499
1,544
8,665(836 )
118,883
11,10036,48338,152335,2318,516
18,78427,494
739
1,258
5,138
61,929(38,814 )

8,530
18,453
26,679
760
456
4,770
59,648(37,611 )78,250172,599
252,633
6,790
11,55947,212569,043(356,648 )

23,11522,037

212,395

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

3,363
5,532
1,328
1,577
(3 )

3,832
5,765
1,414
1,674
(3 )

30,901
50,832
12,203
14,489(28 )

11,797

12,682

108,397

EQUITY (Note 10):
Common stock, authorized 59,500,000 shares; issued,
26,080,396 shares in 2020 and 2019
Capital surplus
Retained earnings
Treasury stock – at cost: 974,643 shares in 2020 and 428,851
shares in 2019
Accumulated other comprehensive income:Unrealized gain on available-for-sale securities
Foreign currency translation adjustments
Defined retirement benefit plans
Total
Noncontrolling interests

Total current liabilities
LONG-TERM LIABILITIES:Long-term debt (Notes 7, 14, 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
Total long-term liabilities

Total equity
TOTAL¥ 71,395¥ 72,871

TOTAL$ 656,023

See notes to consolidated financial statements.

-3-

Millions of Yen
2020
2019

Thousands of
U.S. Dollars(Note 1)2020

¥ 12,384
1,400¥ 13,423
1,688$ 113,792
12,864

869
7,799
195
1,497
495
1,929

358
8,545
116
1,516
674
2,209

7,985
71,662
1,792
13,755
4,548
17,726

26,56828,529244,124

4,121
625
583
1,484
49
219

3,345
844
684
1,402
49
207

37,866
5,743
5,357
13,636
450
2,013

7,081

6,531

65,065

10,013
9,768
18,201

10,013
9,768
16,95092,00689,755167,242(1,028 )(422 )(9,446 )872(2,440 )(250 )
35,1362,610

1,234(2,020 )(166 )
35,3572,454

8,012(22,420 )(2,297 )322,852
23,98237,74637,811

346,834¥ 71,395¥ 72,871$ 656,023

HARIMA CHEMICALS GROUP, INC.
and Subsidiaries
Consolidated Statement of Income
Year Ended March 31, 2020

Millions of Yen
2020
2019
NET SALES

Thousands of
U.S. Dollars(Note 1)
2020

¥ 71,799¥ 78,589$ 659,735

53,84359,461

494,744

17,956

19,128

164,991

14,203

14,461

130,506

Operating income

3,753

4,667

34,485OTHER INCOME (EXPENSES):Interest and dividend income
Interest expense
Rental income
Commission paid
Foreign exchange (loss) gain
Gain on sale of property, plant and equipment
Loss on impairment of long-lived assets (Note 5)
Loss on disposal of property, plant and equipment
Gain on sale of investment securities
Equity in losses of associated companies
Other – net

147(292 )
39(9 )(112 )
9
(76 )
(26 )
6
(40 )
115

263
(275 )
117
(16 )
208
10
(270 )(74 )(13 )(133 )

1,351(2,683 )358(83 )(1,029 )83(698 )(239 )
55(368 )
1,057(239 )(183 )(2,196 )

3,514

4,484

32,289

838
49

1,201
(1,240 )

7,700
450

887

(39 )

8,150

NET INCOME

2,627

4,523

24,139NET INCOME ATTRIBUTABLE TO NONCONTROLLINGINTERESTS(409 )(392 )(3,759 )¥ 2,218¥ 4,131$ 20,380

COST OF SALES
Gross profit
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES(Notes 11 and 13)

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

NET INCOME ATTRIBUTABLE TO OWNERS OF THE
PARENTYen
PER SHARE OF COMMON STOCK (Notes 2.t and 18):
Net income
Cash dividends applicable to the year
See notes to consolidated financial statements.
-4-¥87.67
38.00

U.S. Dollars¥159.02
36.00

$0.81
0.35

HARIMA CHEMICALS GROUP, INC.
and Subsidiaries
Consolidated Statement of Comprehensive Income
Year Ended March 31, 2020

Millions of Yen
2020
2019
NET INCOME

Thousands of
U.S. Dollars(Note 1)2020

¥ 2,627¥ 4,523$ 24,139(363 )(485 )(85 )(0 )(933 )(445 )(1,043 )8(0 )(1,480 )(3,335 )(4,457 )(781 )(0 )(8,573 )COMPREHENSIVE INCOME (Note 17)¥ 1,694¥ 3,043$ 15,566

TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO(Note 17):
Owners of the parent
Noncontrolling interests¥1,351343¥2,784259$12,4143,152

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

See notes to consolidated financial statements.

-5-

HARIMA CHEMICALS GROUP, INC.
and Subsidiaries
Consolidated Statement of Changes in Equity
Year Ended March 31, 2020
Thousands

BALANCE, APRIL 1, 2018
Net income attributable to owners of the parent
Cash dividends, ¥29.00 per share
Purchase of treasury stock
Change in ownership interest in subsidiaries
Net change in the year
BALANCE, MARCH 31, 2019
Net income attributable to owners of the parent
Cash dividends, ¥38.00 per share
Purchase of treasury stock
Change in ownership interest in subsidiaries
Net change in the year
BALANCE, MARCH 31, 2020

BALANCE, MARCH 31, 2019

Number of
Shares ofCommon Stock
Outstanding

CommonStockCapitalSurplusRetained
Earnings

TreasuryStock

26,025¥ 10,013¥ 9,767¥ 13,573¥¥ 1,679¥ (1,110 )Total

Noncontrolling
Interests

Total Equity¥ (173 )¥ 33,723¥ 2,375¥ 36,098

79

4,131(754 )(396 )
1(1,269 )2,454

37,8114,131(754 )(373 )(445 )(910 )

74,131(754 )(396 )
1(1,348 )1,234(2,020 )(166 )

35,357156

2,218(967 )(606 )(0 )(710 )(396 )
1

25,652

10,013

9,768

16,950(422 )

2,218(967 )(546 )(362 )(420 )

(84 )

2,218
(967 )(606 )(0 )(866 )¥ 872¥ (2,440 )¥ (250 )¥ 35,136¥ 2,610¥ 37,746

Total

Noncontrolling
Interests

Total Equity$ (1,525 )$ 324,883$ 22,549$ 347,432

1,433

20,380(8,885 )(5,568 )(0 )(6,525 )$ 23,982$ 346,834(606 )(0 )25,106¥ 10,013¥ 9,768¥ 18,201¥ (1,028 )CommonStockCapitalSurplusRetained
Earnings

TreasuryStock$ 92,006$ 89,755$ 155,747$ (3,878 )Net income attributable to owners of the parent
Cash dividends, $0.35 per share
Purchase of treasury stock
Change in ownership interest in subsidiaries
Net change in the year
BALANCE, MARCH 31, 2020

(26 )Millions of Yen
Accumulated Other Comprehensive Income
Unrealized
Foreign
Gain onCurrency
DefinedAvailable-for-Sale
Translation
Retirement
Adjustments
Benefit Plans
Securities

Thousands of U.S. Dollars (Note 1)
Accumulated Other Comprehensive Income
Unrealized
Foreign
Gain onCurrency
DefinedAvailable-for-Sale
Translation
Retirement
Adjustments
Benefit Plans
Securities$ 11,339$ (18,561 )

20,380(8,885 )(3,327 )(3,859 )(772 )

20,380(8,885 )(5,568 )(0 )(7,958 )$ 8,012$ (22,420 )$ (2,297 )$ 322,852(5,568 )(0 )$ 92,006$ 89,755$ 167,242$ (9,446 )See notes to consolidated financial statements.

-6-

HARIMA CHEMICALS GROUP, INC.
and Subsidiaries
Consolidated Statement of Cash Flows
Year Ended March 31, 2020

Millions of Yen
2020
2019
OPERATING ACTIVITIES:
Income before income taxes
Adjustments for:
Income taxes – paid
Depreciation and amortization
Loss on impairment of long-lived assets
Foreign exchange loss (gain)
Loss on sales of property, plant and equipment(Gain) loss on sales of investment securities
Changes in assets and liabilities:
Decrease (increase) in trade notes and accounts
receivable
Increase in inventories(Decrease) increase in trade notes and accounts
payableOther – net
Total adjustments
Net cash provided by operating activities

Thousands of
U.S. Dollars(Note 1)2020

¥ 3,514¥ 4,484$ 32,289(1,024 )
2,258
76
101
(9 )
(6 )

(960 )
2,031
270(227 )(10 )0(9,409 )20,748
698
928
(83 )
(55 )

3,767
(1,492 )(1,606 )(197 )

34,614(13,709 )(89 )(909 )
2,673
6,187

311
83
(305 )
4,179(818 )(8,353 )24,561
56,850(3,484 )36(177 )(4 )37
129(3,463 )(2,529 )68(50 )(2,595 )100(29 )(5,035 )(32,013 )331(1,626 )
(37 )
340
1,185
(31,820 )FINANCING ACTIVITIES:(Decrease) increase in short-term bank loans – net(754 )
Proceeds from long-term debt
2,198
Repayments of long-term debt
(1,594 )Dividends paid
(967 )
Other – net(928 )Net cash (used in) provided by financing activities (2,045 )

2,941
1,706
(2,682 )(755 )(629 )
581(6,928 )20,197(14,647 )(8,885 )(8,528 )(18,791 )INVESTING 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

FOREIGN CURRENCY TRANSLATION ADJUSTMENTS ON
CASH AND CASH EQUIVALENTS

(57 )

(96 )

(523 )NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS

622(371 )

5,716

3,289

3,660

30,221¥ 3,911¥ 3,289$ 35,937

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

See notes to consolidated financial statements.

-7-

HARIMA CHEMICALS GROUP, INC.
and Subsidiaries
Notes to Consolidated Financial Statements
Year Ended March 31, 2020
1.

BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS
The accompanying consolidated financial statements have been prepared in accordance with theprovisions 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 in certain respects as to the application and disclosure
requirements of International Financial Reporting Standards.
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 is more familiar to readers outside Japan. In addition, certain reclassifications
have been made in the 2019 consolidated financial statements to conform to the classifications usedin 2020.
The consolidated financial statements are stated in Japanese yen, the currency of the country inwhich HARIMA CHEMICALS GROUP, INC. (the "Company") is incorporated and operates. The
translations of Japanese yen amounts into U.S. dollar amounts are included solely for theconvenience of readers outside Japan and have been made at the rate of ¥108.83 to $1, theapproximate rate of exchange at March 31, 2020. 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 isable to exercise 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 the date of acquisition is 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 isalso eliminated.

-8-

b.

Unification of Accounting Policies Applied to Foreign Subsidiaries for the Consolidated
Financial Statements – Under Accounting Standards Board of Japan ("ASBJ") Practical Issues
Task Force ("PITF") No. 18, "Practical Solution on Unification of Accounting Policies Applied toForeign Subsidiaries for the Consolidated Financial Statements," the accounting policies andprocedures 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 witheither International Financial Reporting Standards or generally accepted accounting principles
in the United States of America (Financial Accounting Standards Board Accounting Standards
Codification) 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 inaccordance with Japanese GAAP, unless they are not material: (a) amortization of goodwill;(b) scheduled amortization of actuarial gain or loss of pensions that has been recorded in equity
through other comprehensive income; (c) expensing capitalized development costs of R&D;(d) cancellation of the fair value model of accounting for property, plant and equipment andinvestment properties and incorporation of the cost model of accounting; and (e) recording again or loss through profit or loss on the sale of an investment in an equity instrument for thedifference between the acquisition cost and selling price, and recording impairment loss throughprofit or loss for other-than-temporary declines in the fair value of an investment in an equity
instrument, where a foreign subsidiary elects to present in other comprehensive income
subsequent changes in the fair value of an investment in an equity instrument.

c.

Unification of Accounting Policies Applied to Foreign Associated Companies for the
Equity Method – ASBJ Statement No. 16, "Accounting Standard for Equity Method of
Accounting for Investments," requires adjustments to be made to conform the associate's
accounting policies for similar transactions and events under similar circumstances to those of
the parent company when the associate's financial statements are used in applying the equity
method, unless it is impracticable to determine such adjustments. In addition, financial
statements prepared by foreign associated companies in accordance with either International
Financial Reporting Standards or generally accepted accounting principles in the United Statesof America tentatively may be used in applying the equity method if the following items areadjusted 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 lossof pensions that has been recorded in equity through other comprehensive income;(c) expensing capitalized development costs of R&D; (d) cancellation of the fair value model ofaccounting for property, plant and equipment and investment properties and incorporation of thecost model of accounting; and (e) recording a gain or loss through profit or loss on the sale ofan investment in an equity instrument for the difference between the acquisition cost and selling
price, and recording impairment loss through profit or loss for other-than-temporary declines in
the fair value of an investment in an equity instrument, where a foreign associate elects topresent in other comprehensive income subsequent changes in the fair value of an investment
in an equity instrument.

-9-

d.

Business Combinations – Business combinations are accounted for using the purchasemethod. Acquisition-related costs, such as advisory fees or professional fees, are accounted foras expenses in the periods in which the costs are incurred. 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 financial statements provisional amounts forthe items for which the accounting is incomplete. During the measurement period, which shallnot 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.
The acquirer recognizes any bargain purchase gain in profit or loss immediately on theacquisition date after reassessing and confirming that all of the assets acquired and all of theliabilities assumed have been identified after a review of the procedures used in the purchaseprice allocation. A parent's ownership interest in a subsidiary might change if the parent
purchases or sells ownership interests in its subsidiary. The carrying amount of noncontrollinginterest 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. Any difference between the fair valueof the consideration received or paid and the amount by which the noncontrolling interest is
adjusted is accounted for as capital surplus as long as the parent retains control over its
subsidiary.

e.

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

f.

Inventories – Inventories are principally stated at the lower of cost, determined by the movingaverage 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.

g.

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

h.

Property, Plant and Equipment – Property, plant and equipment are stated at cost.
Depreciation of property, 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, and building improvements andstructures acquired on or after April 1, 2016. Certain domestic subsidiaries and foreignsubsidiaries 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.

i.

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

j.

Software – Amortization of capitalized software costs is computed using the straight-line
method over five years, the estimated useful life of the assets.
- 10 -

k.

Retirement and Pension Plans – The Company and certain domestic subsidiaries havefunded defined benefit pension plans, defined contribution pension plans, and severance lumpsum payment plans covering substantially all of their employees. Certain foreign subsidiaries
have adopted funded defined benefit plans and defined contribution pension plans.
The Company accounts 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 benefit formula basis. Actuarial gains and losses and past 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 are recognized in profit or loss
over 14 years, no longer than the expected average remaining service period of the employees.
Prior service costs are recognized in the period in which they are incurred.
Retirement allowances for directors are recorded as a liability at the amount that would be
required if all directors retired at each balance sheet date.

l.

Asset Retirement Obligations – An asset retirement obligation is recorded for 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 theretirement of such tangible fixed asset. The asset retirement obligation is recognized as the sumof 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 reasonableestimate of the asset retirement obligation cannot be made in the period the asset 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 therelated 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 timingor the amount of the original estimate of undiscounted cash flows are reflected as an
adjustment to the carrying amount of the liability and the capitalized amount of the related asset
retirement cost.

m. Research and Development Costs – Research and development costs are charged to income
as incurred.
n.

Leases – Finance lease transactions are capitalized by recognizing leased assets and leased
obligations in the balance sheet.
All other leases are accounted for as operating leases.

o.

Bonuses to Directors – Bonuses to directors are accrued at the end of the year to which suchbonuses are attributable.

p.

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 torecognize deferred tax assets and liabilities for the expected future tax consequences of
temporary differences between the carrying amounts and the tax basis 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, whichallows companies to base tax payments on the combined profits or losses of the parent
company and its wholly owned domestic subsidiaries.

q.

Foreign Currency Transactions – All short-term and long-term monetary receivables andpayables 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 arerecognized in the consolidated statement of operations to the extent that they are not hedged byforward exchange contracts.

- 11 -

r.

Foreign Currency Financial Statements – The balance sheet accounts of the consolidated
foreign subsidiaries are translated into Japanese yen at the current exchange rate as of thebalance sheet date except for equity, which is translated at the historical rate. Differences
arising from such translation are shown as "Foreign currency translation adjustments" underaccumulated other comprehensive income in a separate component of equity. Revenue andexpense accounts of consolidated foreign subsidiaries are translated into yen at the averageexchange rate.

s.

Derivative and Hedging Activities – The Group uses derivative financial instruments tomanage its exposures to fluctuations in interest rates. Interest rate swaps are utilized by theGroup 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
are recognized as either assets or liabilities and measured at fair value, and gains or losses onderivative transactions are recognized in the consolidated statement of operations; and (2) for
derivatives used for hedging purposes, if such derivatives qualify for hedge accounting becauseof high correlation and effectiveness between the hedging instruments and the hedged items,
gains or losses on derivatives are deferred until maturity of the hedged transactions.
Interest rate swaps which qualify for hedge accounting and meet specific matching criteria are
not remeasured at market value, but the differential paid or received under the swap
agreements is recognized and included in interest expense.

t.

Per Share Information – Basic net income per share is computed by dividing net income
attributable to common 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 theend of the year.

u.

New Accounting Pronouncements- Accounting Standard for Revenue Recognition (ASBJ Statement No. 29 revised on March 31,
2020)- Implementation Guidance on Accounting Standard for Revenue Recognition (ASBJ Guidance
No. 30 revised on March 31, 2020)(a) Overview
This is a comprehensive accounting standard for revenue recognition. Specifically, theaccounting standard establishes the following five-step model that will apply to revenue
from customers:
Step 1: Identify the contract(s) with a customer
Step 2: Identify the performance obligations in the contract
Step 3: Determine the transaction price
Step 4: Allocate the transaction price to the performance obligations in the contract
Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation(b) Scheduled date of adoption
The Company expects to apply the accounting standard and guidance for annual periods
beginning on or after April 1, 2021.
(c) Impact of the adoption of accounting standard and implementation guidance
The Company is in the process of measuring the effects of applying the accounting
standard and guidance in future applicable periods.
- 12 -

- Accounting Standard for Fair Value Measurement (ASBJ Statement No. 30 on July 4, 2019)- Implementation Guidance on Accounting Standard for Fair Value Measurement (ASBJ
Guidance No. 31 on July 4, 2019)- Accounting Standard for Measurement of Inventories (ASBJ Statement No. 9 revised on July4, 2019)- Accounting Standard for Financial Instruments (ASBJ Statement No. 10 revised on July 4,
2019)- Guidance on Disclosures about Fair Value of Financial Instruments (ASBJ Guidance No. 19
revised on March 31, 2020)(a) Overview
In order to enhance comparability of financial statements among domestic and overseas
companies, ASBJ developed an "Accounting Standard for Fair Value Measurement" andissued a new standard together with its implementation guidance. The sections revised by
the new accounting standards and implementation guidance are as follows:・

Financial instruments defined by "Accounting Standard for Financial Instruments"

・Measurement methods of inventories held for trading purposes defined by "AccountingStandard for Measurement of Inventories"(b) Scheduled date of adoption
The Company expects to apply the accounting standard and guidance for annual periods
beginning on or after April 1, 2021.
(c) Impact of the adoption of accounting standard and implementation guidance
The Company is in the process of measuring the effects of applying the accounting
standard and guidance in future applicable periods.
- Accounting Standard for Accounting Policy Disclosures, Accounting Changes and Error
Corrections (ASBJ Statement No. 24 revised on March 31, 2020)(a) Overview
This revised accounting standard requires disclosure of the accounting principles andprocedures adopted where there are no clear rules or guidance offered elsewhere in therelevant accounting standards.
(b) Scheduled date of adoption
The Company expects to apply the accounting standard for annual period ending on March
31, 2021.
- Accounting Standard for Disclosure of Accounting Estimates (ASBJ Statement No. 31 on
March 31, 2020)(a) Overview
This accounting standard requires disclosure of more detailed information regarding
accounting estimates that have potentially significant effect on the next fiscal year's
financial statements.

- 13 -

(b) Scheduled date of adoption
The Company expects to apply the accounting standard for annual period ending on March
31, 2021.
v.

Additional Information – Regarding the impact of the COVID-19
Due to the spread of the COVID-19, some of the production facilities of foreign subsidiaries incountries such as China, Malaysia and the Czech Republic suffered temporary shutdown ofbusiness, which resulted in a deterioration in operation after the end of January 2020. The
Group's consolidated financial statements for the fiscal year ended March 31, 2020 have been
prepared using the financial statements as of December 31, 2019 for foreign subsidiaries.
Therefore, it is expected that the Group's business performance will deteriorate from the firstquarter of the fiscal year ending March 31, 2021. At this point, we are restarting operations
sequentially and we anticipate that the Group's business performance will gradually recover tothe previous year's level. The Group makes accounting estimates for impairment of fixed assets
and recoverability of deferred tax assets based on the assumptions above. As a result, we
believe that COVID-19 will not have a significant impact on the accounting estimates. However,
it is still uncertain when the COVID-19 pandemic will end, and loss may occur in the future if theeffect is prolonged.

3.

INVESTMENT SECURITIESInvestment securities as of March 31, 2020 and 2019, consisted of the following:Thousands of
U.S. Dollars
2020

Millions of Yen
2020
2019
Non-current:
Equity securities
Trust fund investments and other¥ 3,363¥ 3,80131$ 30,901

Total¥ 3,363¥ 3,832$ 30,901

The costs and aggregate fair values of investment securities as of March 31, 2020 and 2019, wereas follows:

March 31, 2020
Securities classified as:
Marketable available-for-sale:
Equity securities
Debt securities

Cost

Millions of Yen
Unrealized
Unrealized
Gains
LossesFair
Value¥2,095¥1,405¥(159 )

¥3,341¥2,09130¥1,7081¥(21 )¥3,77831

March 31, 2019
Securities classified as:
Marketable available-for-sale:
Equity securities
Debt securities

March 31, 2020
Securities classified as:
Marketable available-for-sale:
Equity securities
Debt securities

Cost$19,250- 14 -

Thousands of U.S. Dollars
Unrealized
Unrealized
Gains
LossesFair
Value$12,910$30,699$(1,461 )Carrying amounts of available-for-sale securities whose fair value is not readily determinable as ofMarch 31, 2020 and 2019, were as follows:
Millions of Yen
2019
2020
Nonmarketable available-for-sale:
Equity securities¥22

Thousands of
U.S. Dollars
2020

¥23

$202

The information for available-for-sale securities which were sold during the years ended March 31,
2020 and 2019, were as follows:
Millions of Yen
Realized
Realized
Proceeds
Gains
LossesMarch 31, 2020
Available-for-sale:
Equity securities
Debt securities

¥ 5
32

¥4
2

¥

Total

¥ 37

¥6

¥

0
100

¥

¥0

¥ 100

¥

¥0

March 31, 2019
Available-for-sale:
Equity securities
Debt securities

¥

Total

Thousands of U.S. Dollars
Realized
Realized
Proceeds
Gains
LossesMarch 31, 2020

4.

Available-for-sale:
Equity securities
Debt securities

$ 46
294

$ 37
18

$

Total

$ 340

$ 55

$

INVENTORIESInventories as of March 31, 2020 and 2019, consisted of the following:
Millions of Yen
2020
2019

Thousands of
U.S. Dollars
2020

Finished products
Work in process
Raw materials and supplies¥ 5,666
163
7,109¥ 5,671
195
5,692$ 52,063
1,498
65,322

Total¥ 12,938¥ 11,558$ 118,883- 15 -

5.

LONG-LIVED ASSETSThe Group recorded impairment losses of ¥76 million ($698 thousand) and ¥270 million for the years
ended March 31, 2020 and 2019, respectively. The Group recognized a decline in value of a golfcourse, hotel facilities, and unused real estate in Japan for the year ended March 31, 2019. Also, theGroup recognized a decline in value of a golf course and hotel facilities for the year ended March 31,
2020. The impairment loss was recognized since the recoverable value of the assets was lower thanthe carrying amounts of the assets. The recoverable value of the assets was measured at the fairvalue considering a third-party appraisal report for the facility.

6.

INVESTMENT PROPERTYThe Group owns certain rental properties, such as office buildings and land. The net of rental
income and operating expenses for those rental properties for the years ended March 31, 2020 and
2019, were ¥117 million ($1,075 thousand) and ¥109 million, respectively.
In addition, the carrying amounts, changes in such balances, and market prices of such properties
were as follows:

April 1,2019
¥2,100April 1,2018
¥1,986

April 1,
2019
$19,296

Millions of Yen
Carrying Amount
Increase/
March 31,
Decrease
2020
¥(91)

¥2,009Millions of Yen
Carrying Amount
Increase/
March 31,
Decrease
2019¥114¥2,100Thousands of U.S. Dollars
Carrying Amount
Increase/
March 31,
Decrease
2020$(836)$18,460

Fair Value
March 31,2020
¥2,915
Fair Value
March 31,2019
¥2,862
Fair Value
March 31,2020
$26,785

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, 2020, primarily represents the capital
expenditure for current investment properties of ¥26 million ($239 thousand), and thedecrease primarily represents depreciation of ¥26 million ($239 thousand), impairment lossof ¥76 million ($698 thousand), and sale of ¥15 million ($138 thousand). Increase during
the fiscal year ended March 31, 2019, primarily represents the capital expenditure forcurrent investment properties of ¥403 million, and the decrease primarily represents
depreciation of ¥28 million, impairment loss of ¥260 million, and sale of ¥1 million.

3)

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

- 16 -

7.

SHORT-TERM BANK LOANS AND LONG-TERM DEBT
Short-term bank loans as of March 31, 2020 and 2019, consisted of an outstanding balance of lineof credit, notes to banks and bank overdrafts. The average interest rates applicable to the short-termbank loans as of March 31, 2020 and 2019, were 0.8% and 0.9%, respectively. As of March 31,
2020 and 2019, the total committed line of credit was ¥4,000 million ($36,755 thousand) and ¥4,000
million, and unused balance was ¥3,200 million ($29,404 thousand) and ¥3,900 million, respectively.
Long-term debt as of March 31, 2020 and 2019, consisted of the following:Thousands of
U.S. Dollars
2020

Millions of Yen
2020
2019
Unsecured loans from banks and other financial
institutions, due serially to 2024 with interest
rates ranging from 0.5% to 3.7% (2020) andfrom 0.4% to 3.7% (2019)
Obligations under finance leases
Total
Less current portion¥ 4,578
943
5,521(1,400 )¥ 4,008
1,025
5,033(1,688 )$ 42,065
8,665
50,730(12,864 )Long-term debt, less current portion¥ 4,121¥ 3,345$ 37,866

Annual maturities of long-term debt as of March 31, 2020, for the next five years and thereafter wereas follows:Year Ending March 31

Millions ofYen

Thousands of
U.S. Dollars

2021
2022
2023
2024
2025
2026 and thereafter¥ 1,400
503
366
1,626
1,163
463

$ 12,864
4,622
3,363
14,941
10,686
4,254

Total

¥ 5,521$ 50,730

Certain bank loans and the commitment lines of credit are subject to financial covenants, which use
total equity and continuous operating income without extraordinary items for the most recent year as
credit risk indicators, and require the Group to maintain the financial measures above a certain level.
Based on the financial results for the years ended March 31, 2020 and 2019, the covenants were
not breached since the Group met the requirements.
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. Someforeign subsidiaries have defined contribution plans and defined benefit plans. Some domestic
subsidiaries apply the simplified method to calculate liabilities for retirement benefits and retirement
benefit costs.
In addition, the Company and certain domestic subsidiaries participate in multi-employer pension
plans. Since the pension assets attributable to the Company and certain domestic subsidiaries
cannot be reliably determined based on their contributions, the plan is accounted for as a defined
contribution plan.

- 17 -

Also, the Group has a severance payment plan for directors. The retirement benefits for directors
are paid subject to the approval of the shareholders in accordance with the Companies Act of Japan(the "Companies Act"). The liability for retirement benefits for directors as of March 31, 2020 and2019 was ¥487 million ($4,475 thousand) and ¥447 million, respectively, and included in liability for
retirement benefits in the consolidated balance sheet.
<1> Defined Benefit Plan
(1) The changes in defined benefit obligation for the years ended March 31, 2020 and 2019,were as follows:
Millions of Yen
2020
2019

Thousands of
U.S. Dollars
2020

Balance at beginning of year
Service cost
Interest cost
Actuarial losses (gains)
Benefits paid
Foreign currency translation differences
Others¥ 2,953174
2762(182 )(21 )6¥ 2,945173
26(0 )(161 )(36 )6$ 27,134
1,599
248
570
(1,672 )(193 )
55

Balance at end of year

¥ 3,019¥ 2,953$ 27,741(2) The changes in plan assets for the years ended March 31, 2020 and 2019, were as follows:
Millions of Yen
2019
2020

Thousands of
U.S. Dollars
2020

Balance at beginning of year
Expected return on plan assets
Actuarial losses
Contributions from the employer
Benefits paid
Foreign currency translation differences
Others¥ 2,146
62
(73 )
228
(182 )(19 )6¥ 2,091
60
(30 )
212
(161 )(32 )6$ 19,719
570(671 )
2,095(1,672 )(175 )
55

Balance at end of year

¥ 2,168¥ 2,146$ 19,921(3) The changes in defined benefit obligation under the simplified method for the years ended
March 31, 2020 and 2019, were as follows:
Millions of Yen
2020
2019

Thousands of
U.S. Dollars
2020

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

¥ 147
2
(1 )
(2 )

¥ 150
4
(3 )
(4 )

$ 1,351
18
(9 )
(19 )

Balance at end of year

¥ 146

¥ 147

$ 1,341- 18 -

(4) Reconciliation between the liability recorded in the consolidated balance sheet and thebalances of defined benefit obligation and plan assets as of March 31, 2020 and 2019, was
as follows:
Millions of Yen
2019
2020

Thousands of
U.S. Dollars
2020

Funded defined benefit obligation
Plan assets
Total
Unfunded defined benefit obligation¥ 3,019(2,168 )851
146¥ 2,953(2,146 )807
147$ 27,741(19,921 )
7,820
1,341

Net liability arising from defined benefit
obligation

¥

¥

$

997

954

Millions of Yen
2020
2019

9,161

Thousands of
U.S. Dollars
2020

Liability for retirement benefits

¥ 997

¥ 954

$ 9,161

Net liability arising from defined benefit
obligation

¥ 997

¥ 954

$ 9,161(5) The components of net periodic benefit costs for the years ended March 31, 2020 and
2019, were as follows:
Millions of Yen
2020
2019

Thousands of
U.S. Dollars
2020

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

¥ 174
27
(62 )
30
4
2

¥ 173
26
(60 )
30
4
4

$ 1,599248(570 )
276
37
18

Net periodic benefit costs

¥ 175

¥ 177

$ 1,608(6) Amounts recognized in other comprehensive income (before income tax effect) in respectof defined retirement benefit plans for the years ended March 31, 2020 and 2019, were as
follows:
Millions of Yen
2020
2019

Thousands of
U.S. Dollars
2020

Prior service cost
Actuarial gains
Others¥4(105 )
2

¥ 4
(0 )
3

$

Total

¥ (99 )

¥ 7

$ (910 )- 19 -

37(964 )
17

(7) Amounts recognized in accumulated other comprehensive income (before income tax
effect) in respect of defined retirement benefit plans as of March 31, 2020 and 2019, wereas follows:
Millions of Yen
2019
2020

Thousands of
U.S. Dollars
2020

Unrecognized prior service cost
Unrecognized actuarial losses

¥ 44
307

¥ 50
202

$ 404
2,821

Total

¥ 351

¥ 252

$ 3,225(8) Plan assets as of March 31, 2020 and 2019a.

Components of plan assets
Plan assets consisted of the following:

b.

2020

2019

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

8.3 %
6.1
3.5
6.0
1.0
68.2
6.9

8.7 %
6.9
3.3
6.9
0.9
65.8
7.5

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 of return 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, 2020 and 2019, were set forth as follows:

Discount rate
Expected rate of return on plan assets

2020

2019

Mainly 0.7%
Mainly 3.0%

Mainly 0.7%
Mainly 3.0%

<2> Defined Contribution Plan
The amount of contributions required for the defined contribution plan of the Group for the years
ended March 31, 2020 and 2019, was ¥225 million ($2,067 thousand) and ¥221 million,
respectively.

- 20 -

<3> Multi-Employer Pension Plan
As of March 28, 2018, Osaka Yakugyo Kosei Pension Fund had dissolved, and the Company
and certain domestic subsidiaries joined Osaka Yakugyo Kigyo Pension Fund, a new multiemployer plan. This disclosure uses the most recently available information.
The contributions to the multi-employer plan, which are accounted for using the same method
as a defined contribution plan, were ¥85 million ($781 thousand) and ¥84 million for the years
ended March 31, 2020 and 2019, respectively.
(1) The funded status of the multi-employer plan as of March 31, 2019 and 2018, was asfollows:
Osaka Yakugyo Kigyo Pension Fund
There is no available information about 2018.
Millions of
Yen
2019

Thousands of
U.S. Dollars
2019

Plan assets
Actuarial liabilities of pension plan

¥ 38,528
68,843$ 354,020
632,574

Net balance¥ (30,315)$ (278,554 )(2) The contribution ratio of the Group in Osaka Yakugyo Kigyo Pension Fund for the year
ended March 31, 2019, was 2.1%.
(3) Supplementary explanation
The net balance in (1) above is mainly caused by past service cost of ¥33,225 million($305,293 thousand) for 2019, and a deficiency brought forward of ¥2,910 million ($26,739
thousand) for 2019. Past service cost under the plan is amortized on a straight-line basis
over 24 years, and the special contributions of ¥37 million ($340 thousand) for 2019, which
are utilized for such amortization, were expensed in the consolidated statement of incomeof the Group.
The ratios in (2) above do not represent the actual actuarial liability ratio of the Group.
9.

ASSET RETIREMENT OBLIGATIONS
The changes in asset retirement obligations for the years ended March 31, 2020 and 2019, were as
follows:
Millions of Yen
2020
2019
Balance at beginning of year
Reconciliation associated with passage of time
Balance at end of year

- 21 -

¥49
49

¥49
0
49

Thousands of
U.S. Dollars
2020
$450
450

10.

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, forcompanies that meet certain criteria including (1) having a Board of Directors, (2) having
independent auditors, (3) having an Audit & Supervisory Board, and (4) the term of service ofthe directors being prescribed as one year rather than the normal two-year term by its articles ofincorporation, the Board of Directors may declare dividends (except for dividends-in-kind) at any
time during the fiscal year if the company has prescribed so in its articles of incorporation. With
respect to the third condition above, the Board of Directors of companies with (a) board
committees (namely, appointment committee, compensation committee, and audit 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
and supervisory committee, effective June 25, 2015. The Company meets all the above criteria
and, accordingly, the Board of Directors may declare dividends (except for dividends-in-kind) at
any time during the fiscal year.
The Companies Act permits companies to distribute dividends-in-kind (noncash assets) toshareholders subject to a certain limitation and additional requirements.
Semiannual interim dividends may also be paid once a year upon resolution by the Board of
Directors if the articles of incorporation of the company so stipulate. The Companies Act
provides certain limitations on the amounts available for dividends or the purchase of treasury
stock. The limitation is defined as the amount 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 asa legal reserve (a component of retained earnings) or as additional paid-in capital (a componentof capital surplus) 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 the Companies Act, the total amount of additional paid-in capitaland 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 under certain 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 ofsuch treasury stock by resolution of the Board of Directors. The amount of treasury stock
purchased cannot exceed the amount available for distribution to the shareholders, which isdetermined 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 thatcompanies can purchase both treasury stock acquisition rights and treasury stock. Suchtreasury stock acquisition rights are presented as a separate component of equity or deducted
directly from stock acquisition rights.

- 22 -

11.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses for the years ended March 31, 2020 and 2019,principally consisted of the following:
Millions of Yen
2019
2020
Employees' salaries and bonuses
Net periodic retirement benefit
Transport
Depreciation
RentalResearch and development

12.

¥3,600
215
3,465
298
243
2,635

¥3,709
258
3,464
248
247
2,595

Thousands of
U.S. Dollars
2020$33,079
1,976
31,8392,738
2,233
24,212

INCOME TAXESThe Company and its domestic subsidiaries are subject to Japanese national and local income taxes
which, in the aggregate, resulted in normal effective statutory tax rates of approximately 30.6% and30.6% for the years ended March 31, 2020 and 2019, respectively. Foreign subsidiaries are subject
to the income taxes of the countries in which they operate.
The tax effects of significant temporary differences and tax loss carryforwards which resulted indeferred tax assets and liabilities at March 31, 2020 and 2019, were as follows:
Millions of Yen
2020
2019
Deferred tax assets:
Tax loss carryforwards
Impairment loss on long-lived assets
Loss on revaluation of investment securities
Retirement benefits to directors
Unrealized gain on property, plant andequipment
OthersTotal of tax loss carryforwards and temporary
differences
Less valuation allowance for tax loss
carryforwards
Less valuation allowance for temporary
differences
Total valuation allowance
Deferred tax assets
Deferred tax liabilities:
Reserve for deferred gains on sales of property,
plant and equipment
Unrealized gain on available-for-sale securities
Undistributed earnings of foreign subsidiaries
Depreciation of foreign subsidiaries
Intangible fixed assets of foreign subsidiaries
OthersDeferred tax liabilities
Net deferred tax assets- 23 -

Thousands of
U.S. Dollars
2020¥ 1,717
1,468
113
149

¥ 1,800
1,482
114
137

$ 15,777
13,489
1,038
1,369

97
896

97
865

891
8,234

4,440

4,495

40,798(576 )(588 )(5,293 )(1,692 )(2,268 )¥ 2,172(1,710 )(2,298 )¥ 2,197(15,547 )(20,840 )$ 19,958¥(49 )(364 )(318 )(466 )(62 )(210 )¥ (1,469 )

¥

(50 )
(443 )(278 )(476 )(71 )(309 )¥ (1,627 )

$

¥

¥

$

703

570

(450 )(3,345 )(2,922 )(4,282 )(570 )(1,929 )$ (13,498 )6,460

The expiration of tax loss carryforwards, the related valuation allowances, and the resulting net
deferred tax assets as of March 31, 2020 and 2019, were as follows:

March 31, 2020
Deferred tax assets
relating to tax loss
carryforwards
Less valuation
allowances for tax
loss carryforwards
Net deferred tax assets
relating to tax loss
carryforwards

1 Year or
Less

After
1 Yearthrough
2 Years

¥ 2

¥

After
2 Years
through
3 Years

Millions of Yen
After
After
4 Years
3 Years
throughthrough
5 Years
4 Years

After
5 Years

Total¥ 1,707¥ 1,717(575 )(576 )

8

1,132

1,141

¥6

¥ 1,759¥ 1,800(566 )(588 )

1,193

1,212

Thousands of U.S. Dollars
After
After
After
4 Years
3 Years
2 Years
throughthroughthrough
5 Years
4 Years
3 Years

After
5 Years

Total$$ 15,685$15,777(5,284 )(5,293 )10,401

10,484

¥

¥

¥8

(1 )
1

March 31, 2019
Deferred tax assets
relating to tax loss
carryforwards
Less valuation
allowances for tax
loss carryforwards
Net deferred tax assets
relating to tax loss
carryforwards

March 31, 2020
Deferred tax assets
relating to tax loss
carryforwards
Less valuation
allowances for tax
loss carryforwards
Net deferred tax assets
relating to tax loss
carryforwards

¥ 34

¥1

(21 )

(1 )

¥

¥

13

6

1 Year or
Less

After
1 Yearthrough
2 Years

$18

$

$

$74

(9)
9

74

Net deferred tax assets relating to tax loss carryforwards were ¥1,141 million ($10,484 thousand)and ¥1,212 million for the years ended March 31, 2020 and 2019, respectively. They were mainly
recorded at Lawter BVBA as a result of future taxable income consideration.

- 24 -

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 years ended March 31,
2020 and 2019, were as follows:

13.

2020

2019

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
foreign countries
Decrease in valuation allowance
Tax credit
Adjustment of deferred tax assets and liabilities at end of
period due to change in tax rates
Undistributed earnings of foreign subsidiaries
Other – net

30.6 %
0.1
0.9

30.6 %
3.6
0.7(8.2 )(0.5 )(1.2 )(5.9 )(27.5 )
(1.8 )

1.2
2.4

0.0
0.6
(1.2 )

Actual effective tax rate

25.3 %(0.9 )%RESEARCH AND DEVELOPMENT COSTS
Research and development costs charged to income were ¥2,635 million ($24,212 thousand) and¥2,595 million for the years ended March 31, 2020 and 2019, 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, 2020 and 2019, were ¥315 million($2,894 thousand) and ¥309 million, respectively.
The future minimum lease payments commitment under noncancelable operating leases as ofMarch 31, 2020, are as follows:

15.

Millions ofYen

Thousands of
U.S. Dollars

Due within one year
Due after one year

¥ 177
995

$ 1,626
9,143

Total

¥ 1,172$ 10,769

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-term bank loans are used to fund the Group's ongoing operations. Derivatives are notused for speculative purposes, but to manage exposure to financial risks as described in (2)below.

- 25 -

(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 terms of 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 pricefluctuations. Short-term bank loans and long-term debt are related to ongoing operations andworking capital. Although a part of such bank loans are exposed to market risks from changes
in variable interest rates, those risks are mitigated by using interest rate swaps. Long-term
deposits received are mainly related to deposits for membership at a golf course and are
exposed to liquidity risk.
(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
based on internal guidelines, which include monitoring of payment terms and balances of major
customers by each business 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 ofMarch 31, 2020.
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 ofissuers on a regular 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 is the risk that the Group cannot meet its contractual obligations in full on theirmaturity dates. The Group manages its liquidity risk by holding adequate volume of liquid assets
at the level of one month's sales volume, along with adequate financial planning by the
corporate treasury department.

- 26 -

(4) Fair Value of Financial Instruments
Fair values of financial instruments are based on quoted prices in active markets. If a quoted
price is not available, another rational valuation technique is used instead.
(a) Fair value of financial instruments
Carrying amounts, fair values, and the differences between carrying amounts and fairvalues as of March 31, 2020 and 2019, were as follows. The accounts for which fair value
cannot be reasonably determined 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, 2020

3,911
18,517
3,341

Unrealized
Gain (Loss)

3,911
18,517
3,341¥¥ 25,769¥ 25,769¥

Notes and accounts payable
Short-term bank loans
Long-term debt
Long-term deposits received¥ (10,360 )(12,384 )(5,521 )(583 )¥ (10,360 )(12,384 )(5,538 )(549 )¥ (17 )
34

Total

¥ (28,848 )¥ (28,831 )¥ 17March 31, 2019

Carrying
AmountFair Value

Cash and cash equivalents
Notes and accounts receivable
Investment securities

¥

¥

Total

Millions of Yen

3,289
22,4583,809¥¥ 29,556¥ 29,556¥

Notes and accounts payable
Short-term bank loans
Long-term debt
Long-term deposits received¥ (10,535 )(13,423 )(5,033 )(684 )¥ (10,535 )(13,423 )(5,054 )(639 )¥ (21 )
45

Total

¥ (29,675 )¥ (29,651 )¥ 24- 27 -

3,289
22,4583,809

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

March 31, 2020
Cash and cash equivalents
Notes and accounts receivable
Investment securities

$

Total

35,937
170,147
30,699$35,937
170,147
30,699$$ 236,783$ 236,783$

Notes and accounts payable
Short-term bank loans
Long-term debt
Long-term deposits received$ (95,194 )(113,792 )(50,730 )(5,357 )$ (95,194 )(113,792 )(50,887 )(5,045 )$ (157 )
312

Total

$ (265,073 )$ (264,918 )$ 155

Cash and Cash Equivalents and Notes and Accounts Receivable
The carrying values of cash and cash equivalents and notes and accounts receivableapproximate fair value because of their short maturities.
Investment Securities
The fair values of marketable and investment securities are measured at the quoted market
price of the stock exchange for the equity instruments, and at the quoted price obtained
from the financial institution for certain debt instruments. The fair value information forinvestment 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 long-term debt approximate fair value because of their short maturities.
Long-Term Debt
The fair values of long-term debt are determined by discounting the future cash flows
related to the debt at the Group's assumed corporate borrowing rate for the fiscal year
ended March 31, 2020.
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.
(b) Carrying amount of financial instruments whose fair value cannot be reliably determined
Millions of Yen
2020
2019
Investments in equity instruments that do
not have a quoted market price in an
active market- 28 -¥22¥23

Thousands of
U.S. Dollars
2020

$202

(5) Maturity Analysis for Financial Assets with Contractual Maturities

March 31, 2020

Due inOne Yearor Less

Cash and cash equivalents
Notes and accounts receivable¥ 3,91118,517¥¥¥¥ 22,428

¥

¥

¥

Total

Millions of Yen
Due after
Due after
Five Years
One YearthroughthroughTen Years
Five Years

Due after
Ten Years

March 31, 2019

Due inOne Yearor Less

Cash and cash equivalents
Notes and accounts receivable¥ 3,289
22,458¥¥¥¥ 25,747

¥

¥

¥

Total

Thousands of U.S. Dollars
Due after
Due after
Five Years
One YearthroughthroughTen Years
Five Years

Due after
Ten Years

March 31, 2020

Due inOne Yearor Less

Cash and cash equivalents
Notes and accounts receivable$ 35,937
170,147$$$$ 206,084

$

$

$

Total
16.

Millions of Yen
Due after
Due after
Five Years
One YearthroughthroughTen Years
Five Years

Due after
Ten Years

DERIVATIVESThe Group also enters into interest rate swap contracts to manage its interest rate exposures oncertain liabilities.
All derivative transactions are entered into to hedge interest exposures incorporated within theGroup's business. Accordingly, market risk in these derivatives is generally offset by opposite
movements in the value of the hedged liabilities.
Because the counterparties to these derivatives are limited to major international financial
institutions, the Group 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 Not Applied
March 31, 2020
Not applicable
March 31, 2019
Not applicable- 29 -

17.

OTHER COMPREHENSIVE INCOME (LOSS)
The components of other comprehensive income (loss) for the years ended March 31, 2020 and
2019, were as follows:
Thousands of
U.S. Dollars
2020

Millions of Yen
2019
2020
Unrealized loss 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
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
Share of other comprehensive loss in associatedcompanies – Losses arising during the year
Total
Total other comprehensive income (loss)18.

¥ (448 )6(442 )
79¥ (595 )(0 )(595 )150$ (4,116)
55(4,061)726¥ (363 )¥ (445 )$ (3,335)¥ (485 )¥ (1,043 )$ (4,457)(485 )(1,043 )(4,457)¥ (485 )¥ (1,043 )$ (4,457)¥ (133 )
34
(99 )
14

¥

(27 )
34
7
1

$ (1,222)
312
(910)
129

¥ (85 )

¥

8

$

(781)

¥

(0 )

¥

(0 )

$

(0)

¥

(0 )

¥

(0 )

$

(0)

¥ (933 )¥ (1,480 )$ (8,573)

NET INCOME PER SHARE
Details of the basic net income per share ("EPS") for the years ended March 31, 2020 and 2019,were as follows:
Millionsof YenNet Income
Attributable to
Owners of the
ParentThousandsof Shares¥ 2,218

25,294¥ 87.67¥ 4,131

25,980¥ 159.02

WeightedAverage
SharesYen

Dollars

EPS

For the year ended March 31, 2020:
Basic EPS
Net income available to commonshareholders
For the year ended March 31, 2019:
Basic EPS
Net income available to commonshareholders- 30 -$ 0.81

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, 2020 and 2019, were as follows:
Fiscal year ended March 31, 2020
Not applicable
Fiscal year ended March 31, 2019
Not applicable(2) Transactions between Subsidiaries and Related Parties
Transactions between subsidiaries and related parties for the years ended March 31, 2020 and 2019, were as follows:
Fiscal year ended March 31, 2020

Type of Related Parties

Name

Owned by certain directors of theCompany and their relatives

Harima Food, Inc.

Note:

Address
Kakogawa-shi,
Hyogo, Japan

Millions of
Yen
CapitalAmount¥30

Millions ofYen
Description ofBusiness

Percentage of Equity
Ownership in the Company

Food
manufacturing-

Nature of Transactions

AmountLease payments

¥ 5

$ 46

Other current assets, end of year
Minimum rental commitments

0
21

0
193

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

Fiscal year ended March 31, 2019

Type of Related Parties

Name

Owned by certain directors of theCompany and their relatives

Harima Food, Inc.

Note:

Address
Kakogawa-shi,
Hyogo, Japan

Millions of
Yen
CapitalAmount¥30

Millions ofYen
Description ofBusiness

Percentage of Equity
Ownership in the Company

Food
manufacturing-

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

- 31 -

Thousands of
U.S. Dollars

Nature of Transactions

AmountLease payments¥ 5

Other current assets, end of year
Minimum rental commitments

0
26

20.

SUBSEQUENT EVENT
Appropriations of Retained Earnings
The following appropriation of retained earnings at March 31, 2020, was approved at the Company's
Board of Directors' meeting held on May 20, 2020:

Year-end cash dividends, ¥19.00 ($0.17) per share
21.

Millionsof YenThousands of
U.S. Dollars¥477$4,383

SEGMENT INFORMATION
Under ASBJ Statement No. 17, "Accounting Standard for Disclosures about Segments of anEnterprise and Related Information," and ASBJ Guidance No. 20, "Guidance on AccountingStandard for Disclosures about Segments of an Enterprise and Related Information," an entity isrequired to report financial and descriptive information about its reportable segments. Reportablesegments 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 for which such information is evaluated regularly by the chief operating decisionmaker 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 for evaluating
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 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 paperstrengthening 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, and Other Items for
Each Reportable Segment
The accounting policies of each reportable segment are consistent with those disclosed in Note2, "Summary of Significant Accounting Policies."- 32 -

(3) Information about Sales, Profit, and Other Items Is As Follows:
Millions of Yen
2020
Reportable Segments

Sales:
Sales to external customers
Intersegment sales or transfers
Total
Segment profit
Other:
Depreciation
Net result of interest income and interest expense
Equity in earnings (losses) of associated companies
Notes:

Resin &
Tall Oil
Products

Paper
ChemicalsElectronics
Materials¥ 18,189
209¥ 18,398¥419¥ 18,92848¥ 18,976¥1,839¥ 5,298

766
(5 )

745
(6 )

164
(1 )

¥ 5,298¥158

Lawter

Total

Other

Total

¥ 27,655
38¥ 27,693¥1,655¥ 70,070
295¥ 70,365¥4,071¥ 1,726
181¥ 1,907¥140¥ 71,796
476¥ 72,272¥4,211451(156 )(51 )

2,126(168 )
(51 )

132
(3 )

2,258
(171 )(51 )Reconciliations¥

Consolidated

3(476 )¥ (473 )¥(458 )

¥ 71,799¥ 71,799¥3,753

(69 )
11

2,258
(240 )(40 )"Other" comprises business segments not attributable to a reportable segment and is mainly comprised of real estate management.
Reconciliations of segment profit include reconciliation gain of inventories of ¥104 million ($956 thousand) and company-wide expenses of ¥579 million ($5,320 thousand), which are not attributable to any reportablesegment. Assets are not allocated to reportable segments as they are not used to determine allocation of management resources or for assessment of performance of the Company.
Millions of Yen
2019
Reportable Segments

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

Resin &
Tall Oil
Products

Paper
ChemicalsElectronics
Materials¥ 20,309
210¥ 20,519¥1,376¥ 19,950
120¥ 20,070¥1,882¥ 5,737

676
(9 )

665
(6 )

147
(1 )

¥ 5,737¥421

Lawter

Total

Other

Total

¥ 30,980
148¥ 31,128¥1,503¥ 76,976
478¥ 77,454¥5,182¥ 1,580118¥ 1,698¥ (49 )

¥ 78,556
596¥ 79,152¥5,133428(142 )(32 )

1,916(158 )
(32 )

115
(4 )

2,031
(162 )(32 )Reconciliations¥

Consolidated

33(596 )¥ (563 )¥ (466 )¥ 78,589¥ 78,589¥4,667

(66 )
19

2,031
(228 )(13 )"Other" comprises business segments not attributable to a reportable segment and is mainly comprised of real estate management.
Reconciliations of segment profit (loss) include reconciliation gain of inventories of ¥91 million and company-wide expenses of ¥620 million, which are not attributable to any reportable segment. Assets are not allocatedto reportable segments as they are not used to determine allocation of management resources or for assessment of performance of the Company.
Thousands of U.S. Dollars
2020
Reportable Segments

Sales:
Sales to external customers
Intersegment sales or transfers
Total
Segment profit
Other:
Depreciation
Net result of interest income and interest expense
Equity in earnings (losses) of associated companies

Resin &
Tall Oil
Products

Paper
ChemicalsElectronics
Materials$ 167,132
1,920$ 169,052$3,850$ 173,923
441$ 174,364$16,898$ 48,681

7,039
(46 )

6,846
(55 )

1,507
(9 )

$ 48,681$1,452

Lawter

Total

Other

Total

$ 254,112349$ 254,461$15,207$ 643,848
2,710$ 646,558$37,407$ 15,859
1,664$ 17,523$1,286$ 659,707
4,374$ 664,081$38,693

4,144(1,433 )(469 )

19,536(1,543 )(469 )

1,212
(28 )

20,748(1,571 )(469 )- 33 -

Reconciliations$

28(4,374 )$ (4,376 )$(4,208 )(634 )
101

Consolidated$ 659,735$ 659,735$34,485
20,748(2,205 )(368 )

[Related information]
1.

Information about geographical areas
Net sales to customers and property, plant and equipment by region for the years ended March
31, 2020 and 2019, were as follows:(1) Net sales
Millions of Yen
2020

Japan

South and North
America
UnitedStates
Other

China

Other

Europe

Other

Total

¥31,193¥10,083¥9,391¥1,682¥12,560¥2,980¥71,799

Asia¥3,910Millions of Yen
2019

Japan

South and North
America
UnitedStates
Other

China

Other

Europe

Other

Total

¥32,542¥11,188¥9,707¥2,905¥15,052¥3,090¥78,589

Asia¥4,105

Thousands of U.S. Dollars
2020

Japan
$286,621

South and North
America
UnitedStates
Other

China

Other

Europe

Other

Total

$92,649$86,291$15,455$115,409$27,382$659,735$35,928

Asia

Notes:
1)

Sales are classified by country or region based on the location of customers.

2)

Change in method of presentation
Net sales in "United States," which was previously presented in "South and North
America" as of March 31, 2019, as well as net sales in "China," which was previously
presented in "Asia" as of March 31, 2019, are separately presented as of March 31,
2020 due to increased materiality. 1. Information about geographical areas (1) Net
sales as of March 31, 2019, has been reclassified to reflect the change in the methodof presentation. As a result, net sales of ¥15,293 million, which was previously
presented in "South and North America," is now presented as ¥11,188 million in"United States" and ¥4,105 million in "South and North America, — Other" as of March
31, 2019. Further, net sales of ¥12,612 million, which was previously presented in"Asia," is presented as ¥9,707 million in "China" and ¥2,905 million in "Asia, — Other"as of March 31, 2019.

- 34 -

(2) Net property, plant and equipment
Millions of Yen
2020

Japan

South and North
America
UnitedStates
Other

China

Other

Europe

Other

Total

¥13,061¥4,272¥2,109¥10¥2,292¥1,247¥23,115

Asia

¥124

Millions of Yen
2019

Japan

South and North
America
UnitedStates
Other

China

Other

Europe

Other

Total

¥12,521¥3,590¥2,272¥8¥2,397¥1,104¥22,037

Asia

¥145

Thousands of U.S. Dollars
2020

Japan
$120,013

South and North
America
UnitedStates
Other

China

Other

Europe

Other

Total

$39,254$19,379$92$21,060$11,458$212,395$1,139Asia

Note:
Change in method of presentation
Net property, plant and equipment in "United States," which was previously presented in"South and North America" as of March 31, 2019, as well as net property, plant andequipment in "China," which was previously presented in "Asia" as of March 31, 2019, areseparately presented as of March 31, 2020, due to increased materiality. 1. Information
about geographical areas (2) Net property, plant and equipment as of March 31, 2019, hasbeen reclassified to reflect the change in the method of presentation. As a result, net
property, plant and equipment of ¥3,735 million, which was previously presented in "Southand North America," is now presented as ¥3,590 million in "United States" and ¥145 million
in "South and North America, — Other" as of March 31, 2019. Further, net property, plantand equipment of ¥2,280 million, which was previously presented in "Asia," is presented as¥2,272 million in "China" and ¥8 million in "Asia, — Other" as of March 31, 2019.
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.

- 35 -

[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, 2020 and 2019, was as follows:
Millions of Yen
2020
Reportable Segments

Loss on impairment

Resin & Tall Oil
Products

Paper Chemicals¥¥

Electronics Materials

Lawter

¥

¥

Total
¥

Other

Eliminations/
Corporate

¥76

¥

Other

Eliminations/
Corporate

¥260

¥

Other

Eliminations/
Corporate$698$

Consolidated¥76

Millions of Yen
2019
Reportable Segments

Loss on impairment

Resin & Tall Oil
Products

Paper Chemicals¥¥10Electronics Materials

Lawter

¥

¥

Total
¥10

Consolidated¥270

Thousands of U.S. Dollars
2020
Reportable Segments

Loss on impairment

Resin & Tall Oil
Products

Paper Chemicals$$

Electronics Materials$

Lawter$******- 36 -

Total$

Consolidated$698

- 37 -

- 38 -

- 39 -

Corporate Overview (as of March 31, 2020)
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

85 (Consolidated: 1,466)

Number of Group Companies 34
Business Activities

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

Websitewww.harima.co.jp- 40 -

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

Nippon Filler Metals, Ltd.

45,000 thousand yen

100

HARIMA USA, Inc.

3,350 thousand U.S.
dollars

100

Harima do Brasil Industria Quimica
Ltda.

42,589 thousand Brasil
real

99.88

Harimatec Hangzhou Co., Ltd.

8,690 thousand
Chinese yuan

100

Harimatec Malaysia Sdn. Bhd.

1,357 thousand
Malaysian ringgit

100

Hangzhou Hanghua Harima
Chemicals Co., Ltd.

52,296 thousand
Chinese yuan

56.07

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 yuan100

- 41 -

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 electronicmaterials
Raw material
procurement,
Business support in
the U.S.
Holding company
of U.S. group
Manufacture andsale of rosin and its
derivatives
Manufacture andsale of electronicmaterials
Manufacture andsale of electronicmaterials
Manufacture andsale of papermaking
chemicals
Manufacture andsale of rosin and its
derivatives
Manufacture andsale of electronicmaterials
Manufacture andsale of rosin and its
derivatives
Control of Lawter
Group’s operations
Support of Chinese
businessDirectors and Corporate Auditors (as of March 31, 2020)
President
Senior Executive
Managing Director
Executive Director
Executive Director
Managing Director
Managing Director
Managing Director
Audit＆Supervisory
Committee Member
Audit＆Supervisory
Committee Member *Audit＆Supervisory
Committee Member *Yoshihiro Hasegawa
Teruo Kaneshiro
Ichiro Taninaka
Tsutomu Nishioka
Shunichiro Taoka
Ryohei Kataoka
Eiketsu Ro
Hideo Yamada
Tatsuya Michigami
Tsuneo Takahashi* denotes Outside Corporate Auditors.
Status of Shares (as of March 31, 2020)(1) Total number of shares authorised to be issued
59,500,000(2) Total number of shares outstanding
26,080,396(including 974,643 shares of treasury stocks)(3) Number of shareholders
2,779(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.
5,826
23.20
Harima Chemicals Mutual
Prosperity Association
Shorai, Ltd.

1,290

5.13

1,273

5.07

Sumitomo Mitsui Banking
Corporation
Shorai Foundation for Scienceand Technology
Japan Master-Trust Trust bank

1,094

4.35

965

3.84

827

3.29

Hyogo Prefectural Credit Federationof Agricultural Cooperatives

728

2.90

The Minato Bank, Ltd

692

2.75

Keihansin Kougyou
Corporation
Bank of Mitsubishi UFJ, Ltd.

672

2.67

476

1.89

(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 (974,643 shares),which amounts to 25,105,753 shares. The numbers shown are rounded down to two decimal places.

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