Annual Report
Year Ended March 31, 2017

HARIMA CHEMICALS GROUP, INC.

Business Overview
During the current fiscal year, the economy in the US is continued recovering, also in Europe recovered
gently. However, in China, the economic growth became slowdown, from the latter half of the fiscal year
remained signs of some recovery. Meanwhile, about the domestic economic situation in Japan, theemployment conditions and corporate earnings improved, and the economic is continued recovering
gently.
Regarding the business environment surrounding our group, about overseas business, paper chemicals inNorth America and China, sales and profit decreased as compared to the last year. Lawter, whose major
market is Europe, due to the foreign exchange rates, although sales decreased, because of revenue returned
to surpluses, the total revenue of overseas business has increased. Regarding the domestic business,
although due to sales quantity decreased, the sales also decreased, the revenue is the same level as theprevious period.
As a result of these conditions, the group’s consolidated net sales for the current fiscal year decreased by
9,593 million Yen (down 11.8%) year-on-year to 71,384 million Yen. Operating income increased by
1,538 million Yen (up 63.1%) year-on-year to 3,975 million Yen. Ordinary income increased by 706
million Yen (up 21.9%) year-on-year to 3,931 million Yen. Net income attributable to Harima Chemicals
Group, INC. was 2,421 million Yen, increased by 1,198 million Yen (up 98.0%) year-on-year.
From the current fiscal year, for properly evaluating the segment income, our group has changed theallocation standard of the expense. By way of comparison, the operating income about the previous fiscal
year has been compared based on the changed operating income.
Status of Business Segments(Resin & Tall Oil Products)
With regard to the printing ink industry, although the production volume was as the same level as theprevious year, the commercial printing business has continued to decrease because the publication ofnewspapers and magazines have continued to shrink. Our sales of printing inks resins continued to decline
and as a result, the total sales decreased from the previous fiscal year.
In the paint industry, although the production volume was as the same level as the previous year, thevolume of building paints which is our main products, decreased from the previous fiscal year. As thiseffect, the total sales of paint resins decreased from the previous fiscal year.
Moreover, in the synthetic rubber industry, because the production volume of tires has decreased, oursales of synthetic rubber emulsifiers also decreased.
(Paper Chemicals)
In the current fiscal year, cardboard production volume was increased, but the production volume of
paper for printing information was decreased from the previous fiscal year. About the overseas market, in
US, the demand for newspaper and printing information was reduced, paper and cardboard production
volume was lower than the previous fiscal year. On the other side, paper and cardboard production volume
increased in China.
Due to the foreign exchange rates, although sales decreased from the previous fiscal year. Devoting to
improve the corporate earnings, operating income increased from the previous fiscal year.
(Electronics Materials)
With regard to the performance of the car industry to which this segment is related, the volume ofvehicles manufactured in North America, Europe and China was higher than the previous fiscal year. On
the other hand, the volume of vehicles manufactured in domestic market was no change.
The sales of solder paste decreased from the previous fiscal year, but brazing materials used in heatexchangers increased in sales.
(Lawter)In this segment, the main production adhesives resins, compared to the previous fiscal year was slowing
down in North America and Oceania. On the other hand, in Europe, North America and Asia was steadily
increasing, the total sales quantity has increased than the previous fiscal year.
On the other side, due to digitization of the information, resins for printing inks which global demand wasstagnant, especially North America and Asia. However in our main market in Europe, for the reason that-1-the company of Sunpine which we has invested in Sweden, began to supply us the main raw material-resin
in a stable way. In this reason, the sales quantity has increased from the previous fiscal year.
About the total sales of Lawter, the drop in the price due to the foreign exchange rates and the price ofmain raw material-resin was declined, the sales quantity has decreased from the previous fiscal year.
However, because of making exertions to cut down the cost, operating earnings in Lawter has improved,
and returned into surplus.

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Consolidated Business Performance Trends(Millions of Yen unless otherwise stated)
72th Fiscal Year

73th Fiscal Year

74th Fiscal Year

75th Fiscal Year

(Fiscal year ended
March 2014)(Fiscal year ended
March 2015)(Fiscal year ended
March 2016)(Fiscal year ended
March 2017)

Net sales

75,17582,69280,977

71,384

Ordinary income

2,608

249

3,225

3,931

280

△1,026

1,222

2,421

10.80

△39.53

47.12

93.31

Total assets

70,47175,256

70,772

67,352

Net assets

31,46633,08031,36233,813Category

Net income(loss)
attributable to Harima
Chemicals Group,INC.
Net income (loss) per
share (Yen)(Notes) 1. Net income (loss) per share is calculated based on the weighted average number of issued shares
during the fiscal year after deducting treasury stocks.

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HARIMA CHEMICALS GROUP, INC.
and Consolidated Subsidiaries
Consolidated Balance Sheet
March 31, 2017

Millions of Yen
2017
2016

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
Total current assets

¥

4,002

¥

5,881

Thousands of
U.S. Dollars(Note 1)
2017
$

1,748
17,044
201
1,118
(80 )
12,198374
451

15,991
142,303
1,542
10,830(972 )
97,781
2,995
6,881

35,11838,935313,023

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

9,391
18,11026,517
845
447
4,296
59,606(36,794 )9,645
18,111
25,172
867
1,470
4,284
59,549(36,360 )

83,706
161,423
236,358
7,532
3,984
38,292531,295(327,961 )Net property, plant and equipment

22,812

23,189203,334

6,271
936

55,896
8,343

448
1,771
(3 )

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

9,423

8,648

83,991INVESTMENTS 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

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 (Note 12)
Other current liabilities

35,672

1,794
15,965173
1,215(109 )
10,970336
772¥ 67,353¥ 70,772

¥

4,759
717

¥

8,186
2,423

$

42,419
6,391

375
8,608
85
330
464
2,217

322
8,474
106
487
282
2,102

3,343
76,727
758
2,941
4,136
19,761

Total current liabilities

17,55522,382

156,476

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

11,584
1,940
741
1,433
48
239

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

103,253
17,292
6,605
12,773428
2,131

Total long-term liabilities

15,98517,028142,482

10,013
9,744
11,366

10,0139,744
9,334

89,25086,853
101,310

(62 )

(62 )

(553 )

1,735(972 )(176 )
31,6482,165

1,003(320 )(477 )
29,2352,127

15,465(8,664 )(1,569 )282,092
19,29833,81331,362

301,390¥ 67,353¥ 70,772$ 600,348

COMMITMENTS AND CONTINGENT LIABILITIES(Notes 7, 14 and 16)
EQUITY (Note 10):
Common stock, authorized 59,500,000 shares; issued, 26,080,396
shares in 2017 and 2016
Capital surplus
Retained earnings
Treasury stock - at cost: 132,049 shares in 2017 and 131,882 shares in2016
Accumulated other comprehensive income:Unrealized gain on available-for-sale securities
Foreign currency translation adjustments
Defined retirement benefit plans
Total
Noncontrolling interests

3,993
15,786(27 )Total equity
TOTAL

Millions of Yen
2017
2016

LIABILITIES AND EQUITY

Thousands of
U.S. Dollars(Note 1)
2017

TOTAL

$ 600,348

See notes to consolidated financial statements.

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HARIMA CHEMICALS GROUP, INC.
and Consolidated Subsidiaries
Consolidated Statement of Income
Year Ended March 31, 2017

Millions of Yen
2016
2017
NET SALES

Thousands of
U.S. Dollars(Note 1)
2017

¥ 71,384¥ 80,978$ 636,278

54,08264,210482,057

17,302

16,768154,221

13,327

14,331

118,790

3,975

2,437

35,431150(306 )
116(130 )(2 )(152 )
(12 )
(41 )
35
50

121
(352 )
115
658
49(235 )
(13 )
(16 )
39

1,337
(2,728 )1,034(1,159 )(18 )(1,355 )(107 )(365 )
312
446

COST OF SALES
Gross profit
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES(Notes 11 and 13)
Operating income
OTHER INCOME (EXPENSES):Interest and dividend income
Interest expense
Rental income
Foreign exchange (loss) gain
(Loss) gain on sale of property, plant and equipment
Loss on impairment of long-lived assets (Note 5)
Commission paid
Loss on disposal of property, plant and equipment
Equity in earnings of associated companies
Gain on sale of investment securities
Expense on disposal of property, plant and equipment
Other – net

87

(48 )
177

776

(205 )

495(1,827 )

3,770

2,932

33,604

783
304

853
570

6,979
2,710

1,087

1,423

9,689

NET INCOME

2,683

1,509

23,915NET INCOME ATTRIBUTABLE TO NONCONTROLLINGINTERESTS(262 )(286 )(2,336 )Other (expenses) income – net
INCOME BEFORE INCOME TAXESINCOME TAXES (Note 12):Current
Deferred
Total income taxes

NET INCOME ATTRIBUTABLE TO OWNERS OF THE
PARENT

¥

2,421

¥

1,223

Yen
PER SHARE OF COMMON STOCK (Notes 2.s and 18):
Net income
Cash dividends applicable to the year
See notes to consolidated financial statements.

-5-¥93.31
17.00$

21,579U.S. Dollars¥47.12
14.00

$0.83
0.15

HARIMA CHEMICALS GROUP, INC.
and Consolidated Subsidiaries
Consolidated Statement of Comprehensive Income
Year Ended March 31, 2017

Millions of Yen
2017
2016
NET INCOME

Thousands of
U.S. Dollars(Note 1)2017

¥ 2,683¥ 1,509$ 23,915

733(793 )
311
0
251(495 )(2,461 )166
0(2,790 )6,534(7,069 )
2,772
0
2,237

COMPREHENSIVE INCOME (LOSS) (Note 17)¥ 2,934¥ (1,281 )$ 26,152

TOTAL COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE
TO (Note 17):
Owners of the parent
Noncontrolling interests¥2,803
131¥(1,462 )181$24,984
1,168

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

See notes to consolidated financial statements.

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HARIMA CHEMICALS GROUP, INC.
and Consolidated Subsidiaries
Consolidated Statement of Changes in Equity
Year Ended March 31, 2017
Thousands

BALANCE, APRIL 1, 2015
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
Net income attributable to owners of the parent
Cash dividends, ¥15.00 per share
Purchase of treasury stock
Change in ownership interest in subsidiaries
Net change in the year
BALANCE, MARCH 31, 2017

BALANCE, MARCH 31, 2016

Number of Sharesof Common Stock
Outstanding

CommonStockCapitalSurplusRetained
Earnings

TreasuryStock25,949¥ 10,013¥ 9,744¥¥ (62 )

¥ 1,497¥ 2,035

Total

Noncontrolling
Interests

Total Equity¥ (642 )¥ 31,060¥ 2,020¥ 33,080

107

1,223
(364 )(0 )(2,577 )2,127

31,362

1,223(364 )(0 )25,949(494 )(2,355 )

165

1,223
(364 )(0 )(2,684 )1,003(320 )(477 )

29,235(652 )

301

2,421(389 )
(0 )
0
381

38

2,421
(389 )(0 )0419(972 )¥ (176 )¥ 31,648¥ 2,165¥ 33,813

Total

Noncontrolling
Interests

Total Equity$ (4,252 )$ 260,584$ 18,959$ 279,543

339

21,579(3,467 )
(0 )
0
3,735

$ 19,298$ 301,390(0 )
10,013

9,744

9,334

(62 )

2,421
(389 )
(1 )

(0 )
0
732

25,948¥ 10,013¥ 9,744¥ 11,366¥ (62 )

CommonStockCapitalSurplusRetained
Earnings

TreasuryStock$ 89,250$ 86,853$$ (553 )Net income attributable to owners of the parent
Cash dividends, $0.13 per share
Purchase of treasury stock
Change in ownership interest in subsidiaries
Net change in the year
BALANCE, MARCH 31, 2017

8,475

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

83,198¥ 1,735¥

Thousands of U.S. Dollars (Note 1)
Accumulated Other Comprehensive Income
Foreign
Unrealized
DefinedCurrency
Gain on AvailableRetirement
Translation
for-sale Securities
Benefit Plans
Adjustments
$

8,940

$ (2,852 )

21,579(3,467 )
6,525(5,812 )2,683

21,579(3,467 )
(0 )
0
3,396

$ 15,465$ (8,664 )$ (1,569 )$ 282,092(0 )0$ 89,250$ 86,853$ 101,310$ (553 )See notes to consolidated financial statements.

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HARIMA CHEMICALS GROUP, INC.
and Consolidated Subsidiaries
Consolidated Statement of Cash Flows
Year Ended March 31, 2017

Millions of Yen
2017
2016
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 (gain) on sales of property, plant and equipment
Gain on sales of investment securities
Changes in assets and liabilities:
Decrease in trade notes and accounts receivable
Decrease in inventories
Increase (decrease) in trade notes and accounts payable
Other – net
Total adjustments
Net cash provided by operating activities

Thousands of
U.S. Dollars(Note 1)2017

¥ 3,770¥ 2,932$ 33,604(594 )
2,125
152
121
2
(50 )

(953 )
2,214
235(686 )(49 )(5,295 )18,941
1,355
1,079
18
(446 )

675
882
575(818 )
3,070
6,840

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

6,017
7,862
5,125
(7,291 )27,36560,969INVESTING 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(2,039 )7(155 )(415 )
311(33 )(2,324 )(2,529 )136(279 )(229 )
100
82(2,719 )(18,175 )62(1,382 )(3,699 )2,772(293 )(20,715 )FINANCING ACTIVITIES:
Decrease in short-term bank loans - net
Proceeds from long-term debt
Repayments of long-term debt
Dividends paid
Other – net
Net cash used in financing activities(3,293 )977(3,297 )(389 )(173 )(6,175 )(723 )
8,382(7,984 )(363 )(208 )(896 )(29,352 )
8,708(29,388 )(3,467 )(1,542 )(55,041 )(220 )(150 )(1,961 )NET (DECREASE) INCREASE IN CASH AND CASH
EQUIVALENTS(1,879 )445(16,748 )CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR

5,881

5,436

52,420¥ 4,002¥ 5,881$ 35,672

FOREIGN CURRENCY TRANSLATION ADJUSTMENTS ON
CASH AND CASH EQUIVALENTS

CASH AND CASH EQUIVALENTS, END OF YEAR

See notes to consolidated financial statements.

-8-

HARIMA CHEMICALS GROUP, INC.
and Consolidated Subsidiaries
Notes to Consolidated Financial Statements
Year Ended March 31, 2017
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 2016
consolidated financial statements to conform to the classifications used in 2017.
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 ¥112.19 to $1, the approximate rate of exchange at March 31, 2017.
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.

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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 to Foreign Subsidiaries for theConsolidated Financial Statements," the accounting policies and procedures applied to a parent company
and its subsidiaries for similar transactions and events under similar circumstances should be unified forthe preparation of the consolidated financial statements. However, financial statements prepared byforeign 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 of pensions that has beenrecorded in equity through other comprehensive income; (c) expensing capitalized development costs ofresearch and development; and (d) cancellation of the fair value model of accounting for property, plant,
and equipment and investment properties and incorporation of the cost model of accounting.

c.

Business Combinations – Business combinations are accounted for using the purchase method.
Acquisition-related costs, such as advisory fees or professional fees, are accounted for as expenses in the
periods in which the costs are incurred. If the initial accounting for a business combination is incompleteby the end of the reporting period in which the business combination occurs, an acquirer shall report in its
financial statements provisional amounts for the items for which the accounting is incomplete. During
the measurement period, which shall not exceed one year from the acquisition, the acquirer shallretrospectively adjust the provisional 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 the measurement of the amounts recognized as of that date. Such adjustments shall berecognized 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 the acquisition dateafter reassessing and confirming that all of the assets acquired and all of the liabilities assumed have been
identified after a review of the procedures used in the purchase price allocation. A parent's ownershipinterest in a subsidiary might change 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 ownershipinterest in its subsidiary while the parent retains its controlling interest in its subsidiary. Any difference
between the fair value of the consideration received or paid and the amount by which the noncontrollinginterest is adjusted is accounted for as capital surplus as long as the parent retains control over its
subsidiary.

d.

Cash Equivalents – Cash equivalents are short-term investments that are readily convertible into cash andexposed to insignificant risk of changes in value. Cash equivalents include time deposits and certificatesof 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.

- 10 -

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, and building improvements and structures acquired on or after April 1, 2016.
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 andfrom 4 to 17 years for machinery and equipment.
Pursuant to an amendment to the Corporate Tax Act, the Company adopted ASBJ PITF No. 32, "Practical
Solution on a change in depreciation method due to Tax Reform 2016" and changed the depreciation
method for building improvements and structures acquired on or after April 1, 2016, from the decliningbalance method to the straight-line method. There was not a material impact on the consolidated financial
statements from these accounting changes.

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 plans and severance lump-sum payment planscovering 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 abenefit 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 fortax effects and are recognized in profit or loss over 14 years, no longer than the expected averageremaining service period of the employees. Prior service costs are recognized in the period in which they
are incurred.
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.

- 11 -

k.

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 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 – 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.
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 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, which allows companies to basetax payments on the combined profits or losses of the parent company and its wholly owned domestic
subsidiaries.

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.

- 12 -

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.

3.

Accounting Changes and Error Corrections – Under ASBJ Statement No. 24, "Accounting Standard for
Accounting Changes and Error Corrections," and ASBJ Guidance No. 24, "Guidance on AccountingStandard for Accounting Changes and Error Corrections," accounting treatments are required 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 which case the entity shall comply with the specifictransitional provisions. (2) Changes in Presentation – When the presentation of financial statements ischanged, prior-period financial statements are reclassified in accordance 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 is accounted 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.

INVESTMENT SECURITIESInvestment securities as of March 31, 2017 and 2016, consisted of the following:
Millions of Yen
2016
2017

Thousands of
U.S. Dollars
2017

Non-current:
Equity securities
Trust fund investments and other¥ 6,129142¥ 5,031410$ 54,631
1,265

Total

¥ 6,271¥ 5,441$ 55,896- 13 -

The costs and aggregate fair values of investment securities as of March 31, 2017 and 2016, were as follows:
Millions of Yen
Unrealized
Unrealized
Gains
LossesFair
Value

March 31, 2017

Cost

Securities classified as:
Marketable available-for-sale:
Equity securities
Debt securities¥1,635147¥2,3300¥(14 )(5 )¥3,951142¥1,644416¥1,3880¥(56 )(6 )¥2,976410

March 31, 2016
Securities classified as:
Marketable available-for-sale:
Equity securities
Debt securities

March 31, 2017

Cost

Securities classified as:
Marketable available-for-sale:
Equity securities
Debt securities$14,574
1,310

Thousands of U.S. Dollars
Unrealized
Unrealized
Gains
Losses$20,768

Fair
Value

$(125 )
(45 )

$35,217
1,265

Carrying amounts of available-for-sale securities whose fair value is not readily determinable as of March 31,2017 and 2016, were as follows:
Millions of Yen
2016
2017
Nonmarketable available-for-sale:
Equity securities¥2,178

Thousands of
U.S. Dollars
2017¥2,055$19,414

The information for available-for-sale securities which were sold during the years ended March 31, 2017 and2016, were as follows:
Millions of Yen
Realized
Gains

Realized
LossesMarch 31, 2017

Proceeds

Available-for-sale:
Equity securities
Debt securities

¥ 62
300

¥ 49

¥ 0

Total

¥ 362

¥ 49

¥ 0

¥

¥

¥

¥ -

¥

March 31, 2016
Available-for-sale:
Equity securities
Debt securities

100

Total

¥ 100

- 14 -

Thousands of U.S. Dollars
Realized
Realized
Proceeds
Gains
LossesMarch 31, 2017
Available-for-sale:
Equity securities
Debt securities

$

Total
4.

553
2,674

$ 437

$ 0

$ 3,227

$ 437

$ 0

INVENTORIESInventories as of March 31, 2017 and 2016, consisted of the following:
Millions of Yen
2017
2016

5.

Finished products
Work in process
Raw materials and supplies

¥

5,068
312
5,590

Total

¥ 10,970¥

Thousands of
U.S. Dollars
2017

5,803
302
6,093

$ 45,174
2,781
49,826¥ 12,198$ 97,781

LONG-LIVED ASSETSThe Group recorded impairment losses of ¥152 million ($1,355 thousand) and ¥235 million for the years
ended March 31, 2017 and 2016, respectively. The Group recognized a decline in value of a golf course andhotel facilities for the year ended March 31, 2016. Also, the Group recognized a decline in value of unused
real estate in Japan for the year ended March 31, 2017. The impairment loss was recognized since therecoverable value of the assets was lower than the carrying amounts of the assets. The recoverable value ofthe assets was measured at the fair value considering the third-party appraisal report for the facility.

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, 2017 and 2016, were ¥106 million($945 thousand) and ¥108 million, respectively.
In addition, the carrying amounts, changes in such balance and market prices of such properties were as
follows:

April 1,2016
¥2,518Millions of Yen
Carrying Amount
Increase/
March 31,
Decrease
2017¥123¥2,641- 15 -

Fair Value
March 31,2017
¥3,400April 1,
2015¥2,776

April 1,
2016
$22,444

Millions of Yen
Carrying Amount
Increase/
March 31,
Decrease
2016¥(258)

Fair Value
March 31,2016

¥2,518¥3,294

Thousands of U.S. Dollars
Carrying Amount
Increase/
March 31,
Decrease
2017

Fair Value
March 31,2017

$1,096$23,540$30,306

Notes:

7.

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, 2017, primarily represents the capital expenditure
for current investment properties of ¥308 million ($2,745 thousand), and the decrease primarily
represents depreciation of ¥33 million ($294 thousand), and impairment loss of ¥152 million ($1,355
thousand). Increase during the fiscal year ended March 31, 2016, primarily represents the capital
expenditure for current investment properties of ¥29 million, and the decrease primarily represents
depreciation of ¥38 million, properties sold of ¥14 million, and impairment loss of ¥235 million.

3)

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

SHORT-TERM BANK LOANS AND LONG-TERM DEBT
Short-term bank loans as of March 31, 2017 and 2016, 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, 2017 and 2016, were 1.3% and 1.4%, respectively. As of March 31, 2017 and 2016, the totalcommitted line of credit was ¥5,000 million ($44,567 thousand) and ¥5,000 million, and unused balance was¥5,000 million ($44,567 thousand) and ¥3,000 million, respectively.
Long-term debt as of March 31, 2017 and 2016, consisted of the following:
Millions of Yen
2016
2017

Thousands of
U.S. Dollars
2017

Unsecured loans from banks and other financial
institutions, due serially to 2022 with interest rates
ranging from 0.4% to 2.1% (2017) and from 0.4%
to 2.1% (2016)
Obligations under finance leases
Total
Less current portion¥ 11,117
1,184
12,301(717 )¥ 14,084
1,253
15,337(2,423 )$Long-term debt, less current portion¥ 11,584¥ 12,914$ 103,253- 16 -

99,091
10,553
109,644(6,391 )Annual maturities of long-term debt as of March 31, 2017, for the next five years and thereafter were as
follows:
Millions ofYen

Thousands of
U.S. Dollars

2018
2019
2020
2021
2022
2023 and thereafter

¥

$

Total

¥ 12,301

Year Ending March 31

717
2,758
2,310
1,559
4,139
818

6,391
24,583
20,59013,89636,8937,291$ 109,644

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 keep the indicators above a certain level. Based on the financial results forthe years ended March 31, 2017 and 2016, the covenants were not applied since the Group met therequirements.
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 foreign 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 certain domestic subsidiaries participate in multi-employer pension plans. Since
the pension assets attributable to the Company and certain domestic subsidiaries cannot be reiably 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, 2017 and 2016, for directors was ¥405 million ($3,610
thousand) and ¥399 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, 2017 and 2016, were as
follows:
Millions of Yen
2016
2017

Thousands of
U.S. Dollars
2017

Balance at beginning of year
Service cost
Interest cost
Actuarial losses (gains)
Benefits paid
Foreign currency translation differences
Liabilities extinguished on settlements
Others¥ 4,104161
25
86(151 )(145 )(1,247 )5¥ 4,205
335
55
(88 )
(155 )(192 )(56 )$ 36,581
1,435
223
767
(1,346 )(1,292 )(11,115 )43

Balance at end of year

¥ 2,838¥ 4,104$ 25,296- 17 -

(2) The changes in plan assets for the years ended March 31, 2017 and 2016, were as follows:
Thousands of
U.S. Dollars
2017

Millions of Yen
2017
2016
Balance at beginning of year
Expected return on plan assets
Actuarial losses (gains)
Contributions from the employer
Benefits paid
Foreign currency translation differences
Assets distributed on settlements
Others¥ 2,6191085
197(151 )(92 )(730 )
5¥ 2,614
33
(42 )
281
(155 )(116 )
4$ 23,344
89
758
1,756
(1,346 )(820 )(6,507 )45

Balance at end of year

¥ 1,943¥ 2,619$ 17,319(3) The changes in defined benefit obligation under the simplified method for the years ended March 31,2017 and 2016, were as follows:
Millions of Yen
2017
2016

Thousands of
U.S. Dollars
2017

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

¥ 119
18
0
(4 )

¥ 113
27
(20 )
(1 )

$ 1,061
160
0
(36 )

Balance at end of year

¥ 133

¥ 119

$ 1,185(4) Reconciliation between the liability recorded in the consolidated balance sheet and the balances ofdefined benefit obligation and plan assets as of March 31, 2017 and 2016, were as follows:
Millions of Yen
2016
2017

Thousands of
U.S. Dollars
2017

Funded defined benefit obligation
Plan assets
Total
Unfunded defined benefit obligation¥ 2,838(1,943 )895
133¥ 4,104(2,619 )1,485
119$ 25,297(17,319 )
7,978
1,185

Net liability arising from defined benefit
obligation¥ 1,028¥ 1,604$

Millions of Yen
2017
2016

9,163

Thousands of
U.S. Dollars
2017

Liability for retirement benefits¥ 1,028¥ 1,604$ 9,163

Net liability arising from defined benefit
obligation¥ 1,028¥ 1,604$ 9,163- 18 -

(5) The components of net periodic benefit costs for the years ended March 31, 2017 and 2016, were as
follows:
Millions of Yen
2016
2017

Thousands of
U.S. Dollars
2017

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

¥ 161
25
(10 )
42
4
17
(130 )

¥ 335
55
(33 )
93
(10 )
27
(86 )

$ 1,435
223
(89 )
374
36
152
(1,159 )Net periodic benefit costs

¥ 109

¥ 381

$

972

(6) Amounts recognized in other comprehensive income (before income tax effect) in respect of defined
retirement benefit plans for the years ended March 31, 2017 and 2016, were as follows:
Millions of Yen
2017
2016

Thousands of
U.S. Dollars
2017

Prior service cost
Actuarial gain
Others¥ (35 )467
39

¥ (98 )
201
64

$ (312 )
4,162
348

Total

¥ 471

¥ 167

$ 4,198(7) Amounts recognized in accumulated other comprehensive income (before income tax effect) in
respect of defined retirement benefit plans as of March 31, 2017 and 2016, were as follows:
Millions of Yen
2017
2016

Thousands of
U.S. Dollars
2017

Unrecognized prior service cost
Unrecognized actuarial losses

¥ 56
210

¥ 21
716

$

Total

¥ 266

¥ 737

$ 2,371- 19 -

499
1,872

(8) Plan assets as of March 31, 2017 and 2016a.

Components of plan assets
Plan assets consisted of the following:

b.

2017

2016

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)
Others12.9 %
8.3
3.2
7.9
1.0
63.7
3.0

8.4 %
6.1
2.6
5.8
0.8
73.7
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, 2017 and 2016, were set forth as follows:

Discount rate
Expected rate of return on plan assets

2017

2016

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, 2017 and 2016, was ¥195 million ($1,738 thousand) and ¥123 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, 2017 and 2016, was ¥123 million ($1,096 thousand) and¥158 million, respectively.
(1) The funding condition of multi-employer pension funds as of March 31, 2016 and 2015, was asfollows:
Millions of Yen
2015
2016

Thousands of
U.S. Dollars
2016

Amount of fair value of plan assets
Amount of benefit obligations for pension
financing calculations¥ 306,491¥ 334,668$ 2,731,892

365,489

381,438

3,257,768

Net balance¥ (58,998 )¥ (46,770 )$(525,876 )(2) The Group's ratio in the multi-employer pension funds based on the contributions as of March 31,
2016 and 2015, were 1.3% and 1.2%, respectively.
(3) Supplementary explanation
The above information is obtained from the latest available information.

- 20 -

The primary factors for the net balance in (1) above are ¥47,872 million ($426,705 thousand) and¥49,404 million of past service liabilities used in calculating the projected benefit obligation, andzero and ¥2,634 million of general reserve in the pension fund, and ¥11,125 million ($99,162
thousand) and zero lack carryforward for the years ended March 31, 2016 and 2015, respectively.
The amount of principle and interest of past service liabilities in this plan are amortized equally over
15 years.
The ratio in (2) above does not agree to the actual contribution ratio of the Group because of theadditional contribution paid for past service liabilities.
9.

ASSET RETIREMENT OBLIGATIONS
The changes in asset retirement obligations for the years ended March 31, 2017 and 2016, were as follows:
Millions of Yen
2016
2017
Balance at beginning of year
Reconciliation associated with passage of time
Balance at end of year

10.

¥48
0
48

¥47
1
48

Thousands of
U.S. Dollars
2017
$428
0
428

EQUITYJapanese companies are subject to the Companies Act of Japan (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 thatmeet 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 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 hasprescribed 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, compensationcommittee and audit committee) or (b) an audit and supervisory committee (as implemented under theCompanies Act effective May 1, 2015) may also declare dividends at any time because such companies,
by nature, meet the criteria under the Companies Act. The Company is organized as a company with anaudit 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 years.
The Companies Act permits companies to distribute dividends-in-kind (noncash assets) to shareholders
subject to a certain limitation and additional requirements.

- 21 -

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, 2017 and 2016, principallyconsisted of the following:
Millions of Yen
2016
2017
Employees' salaries and bonuses
Net periodic retirement benefit
Transport
Depreciation
RentalResearch and development
Amortization of goodwill

12.

¥3,333
130
2,973
276
234
2,496
87

¥3,571
329
3,374
347
241
2,371
87

Thousands of
U.S. Dollars
2017$29,709
1,159
26,5002,460
2,086
22,248775

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 30.8% and 33.0% for the years
ended March 31, 2017 and 2016, respectively. Foreign subsidiaries are subject to income taxes of thecountries in which they operate.

- 22 -

The tax effects of significant temporary differences and tax loss carryforwards which resulted in deferred tax
assets and liabilities at March 31, 2017 and 2016, were as follows:
Millions of Yen
2016
2017
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 and equipment
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 and intangible fixed assets offoreign subsidiaries
OthersTotal
Net deferred tax liabilities

Thousands of
U.S. Dollars
2017¥ 2,541
1,279
172
124
97
997
(3,867 )¥ 1,343¥ 2,944
1,265
64
122
97
1,095
(3,970 )¥ 1,617$ 22,649
11,400
1,533
1,105
865
8,887
(34,468 )$ 11,971

¥

¥

$

(53 )
(565 )(212 )(556 )(56 )(312 )(200 )(247 )(472 )(5,036 )(1,890 )(4,956 )(80 )(1,033 )¥ (2,499 )(188 )(1,079 )¥ (2,082 )(713 )(9,208 )$ (22,275 )¥ (1,156 )¥$ (10,304 )(465 )A reconciliation between the normal effective statutory tax rate and the actual effective tax rate reflected in theaccompanying consolidated statement of operations for the years ended March 31, 2017 and 2016, were as
follows:

13.

2017

2016

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(Decrease) 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
Amortization of goodwill
Other – net

30.8 %(0.1 )
0.8

33.0 %
0.3
1.0

0.1(3.2 )(1.2 )(3.1 )
17.0(1.8 )

0.3
0.7
0.6

0.7
1.1
1.0
(0.7 )

Actual effective tax rate

28.8 %

48.5 %RESEARCH AND DEVELOPMENT COSTS
Research and development costs charged to income were ¥2,496 million ($22,248 thousand) and ¥2,371
million for the years ended March 31, 2017 and 2016, respectively.

- 23 -

14.

LEASESThe Group leases certain buildings and structures, machinery and equipment and other assets.
Total lease expenses included for the years ended March 31, 2017 and 2016, were ¥322 million ($2,870
thousand) and ¥312 million, respectively.
The future minimum lease payments commitment under noncancelable operating leases as of March 31, 2017,
are as follows:
Millions of
Yen

15.

Thousands of
U.S. Dollars

Due within one year
Due after one year

¥ 73
913

$

651
8,138

Total

¥ 986

$ 8,789

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 not used 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.
(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 terms 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,
2017.
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.

- 24 -

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 is the risk that the Group cannot meet its contractual obligations in full on their maturity
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.
(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.
(a) Fair value of financial instruments
Carrying amounts, fair values and the differences between carrying amounts and fair values as ofMarch 31, 2017 and 2016, 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, 2017

4,002
19,147
4,093

Unrealized
Gain (Loss)

4,002
19,147
4,093¥¥ 27,242¥ 27,242¥

Notes and accounts payable
Short-term bank loans
Long-term debt
Long-term deposits received

¥

¥

¥

Total

¥ (27,199 )March 31, 2016

Carrying
AmountFair Value

Cash and cash equivalents
Notes and accounts receivable
Investment securities

¥

¥

Total

(9,398 )(4,759 )(12,301 )(741 )(9,398 )(4,759 )(12,332 )(688 )¥ (27,177 )

(31 )
53
¥ 22

Millions of Yen

5,881
20,111
3,386¥¥ 29,378¥ 29,378¥

Notes and accounts payable
Short-term bank loans
Long-term debt
Long-term deposits received

¥

¥

9,389
8,186
15,341
672

¥

Total

¥ 33,665¥ 33,588¥ 77- 25 -

5,881
20,111
3,386

Unrealized
Gain (Loss)

9,389
8,186
15,337
753

(4 )
81

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

March 31, 2017
Cash and cash equivalents
Notes and accounts receivable
Investment securities

$

Total

35,672
170,666
36,48235,672
170,666
36,482$$ 242,820$ 242,820$

Notes and accounts payable
Short-term bank loans
Long-term debt
Long-term deposits received

$

$

$

Total

$ (242,437 )(83,769 )(42,419 )(109,644 )(6,605 )$(83,769 )(42,419 )(109,921 )(6,132 )$ (242,241 )(277 )
473$ 196

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 ofthe stock 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 byclassification 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 thedebt at the Group's assumed corporate borrowing rate for the fiscal year ended March 31, 2017.
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.

- 26 -

(b) Carrying amount of financial instruments whose fair value cannot be reliably determined
Thousands of
U.S. Dollars
2017

Millions of Yen
2017
2016
Investments in equity instruments that do nothave a quoted market price in an active
market¥3,114¥2,966$27,756(5) Maturity Analysis for Financial Assets with Contractual Maturities

Due inOne Year or
Less

March 31, 2017
Cash and cash equivalents
Notes and accounts receivable
Investment securities
Available-for-sale securities with
contractual maturities
Total

4,002
19,147

Cash and cash equivalents
Notes and accounts receivable
Investment securities
Available-for-sale securities with
contractual maturities
Total¥ 23,149¥

5,881
20,111

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

¥

¥

¥ 100

¥

¥

Millions of Yen
Due after
Due after
One Year
Five Years
through Five through Ten
Years
Years
¥

¥

Due after
Ten Years¥200¥ 25,992

Due inOne Year or
Less

March 31, 2017¥

Due after
Ten Years

100

Due inOne Year or
Less

March 31, 2016

16.

¥

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

$

35,672
170,666

¥ 200

200
¥

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

¥ 200

Due after
Ten Years

$

$

$

$

891
$ 206,338$ 891

DERIVATIVESThe Group also enters into interest rate swap contracts to manage its interest rate exposures on certain
liabilities.

- 27 -

All derivative transactions are entered into to hedge interest exposures incorporated within the Group'sbusiness. Accordingly, market risk in these derivatives is generally 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 Not Applied
March 31, 2017
Not applicable
March 31, 2016
Not applicable
Derivative Transactions to Which Hedge Accounting Is Applied
March 31, 2017
Not applicable
March 31, 2016
Not applicable- 28 -

17.

OTHER COMPREHENSIVE INCOME (LOSS)
The components of other comprehensive income (loss) for the years ended March 31, 2017 and 2016, were as
follows:
Thousands of
U.S. Dollars
2017

Millions of Yen
2017
2016
Unrealized gain (loss) on available-for-sale securities:
Gains (losses) arising during the year
Reclassification adjustments to profit or loss
Amount before income tax effect
Income tax effect(652 )
157$ 9,217(428 )
8,789(2,255 )(495 )$ 6,534¥ (793 )¥ (2,461 )$ (7,069 )(793 )(2,461 )(7,069 )¥ (793 )¥ (2,461 )$ (7,069 )

¥

38
433
471
(160 )

¥

172
(5 )
167
(1 )

$

¥

311

¥

166

$ 2,772

¥

0

¥

(0 )

$

0

Total

¥

0

¥

(0 )

$

0

Total other comprehensive income (loss)

¥

251

Total
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 income (loss) in associatedcompanies - Gains (losses) arising during the year18.

¥ 1,034(48 )
986(253 )

¥

¥

¥

733

(652 )¥ (2,790 )

338
3,860
4,198
(1,426 )$ 2,237NET INCOME PER SHARE
Details of the basic net income per share ("EPS") for the years ended March 31, 2017 and 2016, were as
follows:
Millionsof YenNet Income
Attributable to
Owners of the
ParentThousandsof Shares¥ 2,42125,948¥ 93.31¥ 1,223

25,949¥ 47.12Yen

WeightedAverage
Shares

Dollars

EPS

For the year ended March 31, 2017:
Basic EPS
Net income available to common shareholders$ 0.83For the year ended March 31, 2016:
Basic EPS
Net income available to common shareholders

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

- 29 -

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, 2017 and 2016, were as follows:
Fiscal year ended March 31, 2017

Type 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
CapitalAmountMillions ofYen
Description ofBusiness

Percentage of Equity Ownershipin the Company¥40

Insurance agent(Owned)Direct 22.34

Nature of Transactions
Payment of insurance premium

Thousands of
U.S. Dollars
Amount¥14$125

Hasegawa Kosan Co., Ltd. is wholly owned by Yoshihiro Hasegawa, the representative director of the Company.
The insurance premium is determined on an arm's-length basis.

Fiscal year ended March 31, 2016

Type 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
CapitalAmountMillions ofYen
Description ofBusiness

Percentage of Equity Ownershipin the Company¥40

Insurance agent(Owned)Direct 17.56

Nature of Transactions

AmountPayment of insurance premium¥22

Other current assets, end of year

13

Hasegawa Kosan Co., Ltd. is wholly owned by Yoshihiro Hasegawa, the representative director of the Company.
The insurance premium is determined on an arm's-length basis.

(2) The Transactions between Subsidiaries and Related Parties
Transactions between subsidiaries and related parties for the years ended March 31, 2017 and 2016, were as follows:
Fiscal year ended March 31, 2017

Type 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
CapitalAmount¥30

Millions ofYen
Description ofBusiness

Percentage of Equity Ownershipin the Company

Food
manufacturing-

Nature of Transactions
Lease payments
Minimum rental commitments
Other current assets, end of year

Note:

Amount
¥ 5

$ 45

36
0

321
0

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, 2016

Type 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
CapitalAmount¥30

Millions ofYen
Description ofBusiness

Percentage of Equity Ownershipin the Company

Food
manufacturing-

Nature of Transactions
Lease payments
Minimum rental commitments
Sales
Other current assets, end of year

- 30 -

Thousands of
U.S. Dollars

Amount¥ 542
120Note:

20.

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

SUBSEQUENT EVENT
Appropriations of Retained Earnings
The following appropriation of retained earnings at March 31, 2017, was approved at the Company's Board of
Directors' meeting held on May 18, 2017:

Year-end cash dividends, ¥9 ($0.08) per share
21.

Millionsof YenThousands of
U.S. Dollars¥234$2,086

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 isrequired 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 isevaluated regularly by the chief operating decisionmaker in deciding how to allocate resources and inassessing performance. Generally, segment information is required to be reported on the same basis as is usedinternally 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 andregular 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 andsynthetic 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 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."
Effective April 1, 2016, the Group changed its expense allocation rules in order to allow for a more
appropriate evaluation of segment performance. The segment information for the year ended March 31,
2016, has been retrospectively restated to conform to the new allocation standards.

- 31 -

(3) Information about Sales, Profit and Other Items Is As Follows.
Millions of Yen
2017
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¥ 18,286250¥ 18,536¥943¥ 16,209
238¥ 16,447¥1,716¥ 5,326

632
(27 )

598
(4 )

Lawter

Total

Other

Total

Reconciliations¥ 5,326¥310¥ 29,855
143¥ 29,998¥1,392¥ 69,676
631¥ 70,307¥4,361¥ 1,685132¥ 1,817¥ (21 )

¥ 71,361
763¥ 72,124¥4,34023(763 )¥ (740 )¥(365 )

147
(3 )

529
(124 )

1,906(158 )

132
12

2,038
(146 )(97 )¥Consolidated¥ 71,384¥ 71,384¥3,9752,038(243 )"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 ¥69 million ($615 thousand) and company-wide expenses of ¥517 million ($4,608 thousand), 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.
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¥ 20,092
508¥ 20,600¥1,055¥ 18,131384¥ 18,515¥1,693¥ 5,008

626
(39 )

549
(11 )

Lawter

Total

Other

Total

¥ 5,008¥279¥ 36,123
222¥ 36,345¥(312 )

¥ 79,354
1,114¥ 80,468¥2,715¥ 1,641137¥ 1,778¥(52 )¥ 80,995
1,251¥ 82,246¥2,663

138
(7 )

671
(77 )

1,984
(134 )

143
(14 )

2,127
(148 )

Reconciliations¥(17 )(1,251 )¥ (1,268 )¥(226 )
(155 )

Consolidated¥ 80,978¥ 80,978¥2,4372,127(303 )"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 loss of inventories of ¥7 million and company-wide expenses of ¥290 million, which are not attributable to any reportable segment. Assets are not allocated to reportable segments asthey 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
2017
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$ 162,991
2,228$ 165,219$8,405$ 144,479
2,121$ 146,600$15,295$ 47,473

5,633(241 )

5,330
(36 )

LawterTotal$ 47,473$2,763$ 266,111
1,275$ 267,386$12,408$ 621,054
5,624$ 626,678$38,871

1,310
(27 )

4,715
(1,105 )16,998(1,409 )- 32 -

Other

Total

$ 15,019 $ 636,073
1,177
6,801
$ 16,196 $ 642,874$ (187 )$38,684
1,177
107

18,165(1,302 )Reconciliations$

205(6,801 )$ (6,596 )$(3,253 )(865 )

Consolidated$ 636,278$ 636,278$35,431
18,165(2,167 )[Related information]
1.

Information about geographical areas
Net sales to customers and property, plant and equipment by region for the years ended March 31,2017 and 2016, were as follows:(1) Net sales
Millions of Yen
2017
Japan

South andNorth
America

Asia

Europe

Other

Total

¥30,419¥15,366¥9,493¥13,226¥2,880¥71,384

Millions of Yen
2016
Japan

South andNorth
America

Asia

Europe

Other

Total

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

Thousands of U.S. Dollars
2017
Japan

South andNorth
America

Asia

Europe

Other

Total

$271,138$136,964$84,615$117,889$25,672$636,278

Note: Sales are classified by country or region based on the location of customers.
(2) Net property, plant and equipment
Millions of Yen
2017
Japan

South andNorth
America

Asia

Europe

Other

Total

¥13,310¥4,030¥2,020¥2,326¥1,126¥22,812

Millions of Yen
2016
Japan

South andNorth
America

Asia

Europe

Other

Total

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

Thousands of U.S. Dollars
2017
Japan

South andNorth
America

Asia

Europe

Other

Total

$118,638$35,921$18,005$20,733$10,037$203,334- 33 -

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, 2017 and 2016, was as follows:
Millions of Yen
2017
Resin & Tall
Oil Products
Loss on impairment¥

Reportable Segment
Paper
Electronics
Chemicals
Materials¥¥

Lawter

Total

Other

Eliminations/
Corporate

Consolidated

¥

¥

¥7

¥145

¥152

Eliminations/
Corporate

Consolidated

Millions of Yen
2016
Resin & Tall
Oil Products
Loss on impairment¥

Reportable Segment
Paper
Electronics
Chemicals
Materials¥¥

Lawter

Total

Other

¥

¥

¥235

¥

¥235

Thousands of U.S. Dollars
2017
Resin & Tall
Oil Products
Loss on impairment$

Reportable Segment
Paper
Electronics
Chemicals
Materials$$

Lawter

Total

Other

Eliminations/
Corporate

Consolidated

$

$

$63

$1,292$1,355[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, 2017 and 2016, were as follows:
Millions of Yen
2017
Resin & Tall
Oil Products
Amortization of goodwill
Amount of goodwill¥

Reportable Segment
Paper
Electronics
Chemicals
Materials¥¥

Lawter

Total

Other

¥86

¥86

¥1

Eliminations/
Corporate¥

Consolidated¥87

Millions of Yen
2016
Resin & Tall
Oil Products
Amortization of goodwill
Amount of goodwill¥

Reportable Segment
Paper
Electronics
Chemicals
Materials¥¥- 34 -

Lawter

Total

Other

¥86
86

¥86
86

¥1
1

Eliminations/
Corporate¥

Consolidated¥87
87

Thousands of U.S. Dollars
2017
Resin & Tall
Oil Products
Amortization of goodwill
Amount of goodwill$

Reportable Segment
Paper
Electronics
Chemicals
Materials$$******- 35 -

Lawter

Total

Other

$766

$766

$9

Eliminations/
Corporate$

Consolidated$775

- 36 -

Corporate Overview (as of March 31, 2017)
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

88 (Consolidated: 1,462)

Number of Group Companies 35
Business Activities

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

Websitehttp://www.harima.co.jp/en/index.html- 37 -

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
38,349 thousand Brasil
real

100

Harima do Brasil Industria Quimica
Ltda.

99.87

Harimatec Hangzhou Co., Ltd.

8,690 thousand
Chinese yuan

85

Harimatec Malaysia Sdn. Bhd.

1,356 thousand
Malaysian ringgit

85

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 yuan

100

- 38 -

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
Control of U.S.
operations
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, 2017)
President
Senior Executive
Managing Director
Executive Director
Executive Director
Managing Director
Audit＆Supervisory
Committee Member
Audit＆Supervisory
Committee Member *Audit＆Supervisory
Committee Member *Yoshihiro Hasegawa
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, 2017)(1) Total number of shares authorised to be issued
59,500,000(2) Total number of shares outstanding
26,080,396(including 132,049 shares of treasury stocks)(3) Number of shareholders
2,543(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
22.45
Harima Chemicals Mutual
Prosperity Association
Sumitomo Mitsui Banking
Corporation
Shorai, Ltd.

1,132

4.36

1,094

4.21

1,073

4.13

Shorai Foundation for Scienceand Technology
Japan Trusty-Service Trust bank

805

3.10

771

2.97

Hyogo Prefectural Credit
Federation of Agricultural
Cooperatives
The Minato Bank, Ltd

728

2.80

692

2.66

Keihansin Kougyou
Corporation
Japan Master-Trust Trust bank

672

2.58

495

1.91

(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 (132,049 shares),which amounts to 25,948,347 shares. The numbers shown are rounded down to two decimal
places.

- 39 -