Annual Report
Year Ended March 31, 2014

HARIMA CHEMICALS GROUP, INC.

Business Overview
With regard to the world economy during the fiscal year ended March 31, 2014 (hereinafter “the current
fiscal year”), the economic downturn in Europe has extended over a long period. Meanwhile, in emerging
countries such as China, the economic growth became stagnant. However, in the US, despite a trend
towards a quantitative reduction in the monetary easing policy, all in all, gradual signs of recovery
continued steadily. At the same time, supported by the economic and financial policy of the Japanese
government, the Japanese economy recovered gradually, because the export environment and corporate
earnings have shown improvement due to yen depreciation and the rise in stock prices. Further, rush
demand before the consumption tax increase at the end of the fiscal year also helped the recovery of theeconomy.
Regarding the business environment surrounding our group, Lawter, whose major market is Europe, wasnegatively influenced by the downturn in the European economy. However overseas sales increased on theyen depreciation. Meanwhile, regarding the domestic business, the price of our main raw material which
was imported from abroad increased due to yen depreciation. Although, we made efforts to pass on theincrease of material costs to the price of our products, the situation in the domestic market remained lessthan-optimistic.
As a result of these conditions, the group’s consolidated net sales for the current fiscal year increased by
10,972 million yen (up 17.1%) year-on-year to 75,175 million yen.
Operating income increased by 300 million yen (up 51.9%) year-on-year to 876 million yen.
Ordinary income increased by 1,186 million yen (up 83.4%) year-on-year to 2,608 million yen, with aforeign exchange gain of 1,597 million yen. Net income increased by 64 million yen (up 29.7%) year-onyear to 280 million yen.
Provided below is an overview of business segments corresponding to the company's reporting segments
structure which was implemented from October 2012 when we introduced the in-house company system.
Status of Business Segments(Resin & Tall Oil Products)
During the current fiscal year, domestic production of printing inks was almost at the same level of theprevious year due to increased demand for packaging application. Our company released new resins forlithographic ink and also expanded overseas sales in China, Southeast Asia, etc. As a result, the sales ofresins for printing inks reached the same level of the previous year.
Domestic paint production volume during the current fiscal year increased slightly. This was due toreasons such as an increase in construction due to the recovery from the Great East Japan Earthquake,
growth of imports due to Yen depreciation, and also the rush demand before the consumption tax increase.
Under such circumstances, the sales of our main products, resins for building paints, increased steadily.
Moreover, in the domestic automobile market, demand for tires recovered, and exports mainly to India
and South East Asia increased due to yen depreciation. Therefore, demand for synthetic rubber remained
strong and sales of our synthetic rubber emulsifiers increased.
(Paper Chemicals)
In the current fiscal year, domestic paper and cardboard production volume stopped decreasing andslightly increased compared to the previous year. The main reasons for this were the decrease in imports ofcoated paper due to yen depreciation and the rush demand before the consumption tax increase. Under
such circumstances, our domestic sales increased steadily.
However, sales of our products faced intensifying market competition. Despite our efforts to improve the
manufacturing process and to promote sales, profit decreased in this segment despite an increase in sales.
In China, paper and cardboard production volume was almost the same level as that of the previous year
as a result of the economic slowdown. Therefore, the production volume of raw paper used in corrugatedcardboard continued to decrease for 2 years. Further, sales competition in chemicals tended to intensify
because the major paper-manufacturing companies in China have begun in-house production. Nevertheless,sales of our surface sizing agent increased steadily.
At the same time, in the US, we launched a new surface sizing agent product which boosted the sales. As
a result, our overseas sales and profits increased.

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(Electronics Materials)
The performance of the Electronics device industry to which this segment is related improved from theprevious year. This improvement was due to an increase in automobile production volume in the domestic
market sales of automobile product parts remaining positive under the influence of a favourable economy
in the North American market.
Furthermore, though sales of household electronic appliances continued to be low, in the latter half of thecurrent fiscal year, there were signs of recovery both in car AVC equipment, including a car navigation
systems, and the flat television business.
Under such circumstances, our lead free solder paste for motor vehicles and aluminium brazing materials
used in heat exchangers sold well not only in our domestic market but also in North America and Europe.
At the same time, sales of conductive paste for through-holes used in household electronic appliances also
increased.
(Lawter)
The global market for printing inks continued to shrink due to the decreased publication of newspapers
and books, which were affected by the rapid spread of digital media. In the European and North American
markets, which are the main markets of this segment, though there were signs of recovery in the sales ofresins for printing inks, severe conditions have continued as a result of the downturn in the European
economy.
However, sales of adhesive resins continued to experience strong demand in Europe, South America,
Asia and Oceania.
Consolidated Business Performance Trends(Millions of yen unless otherwise stated)
Category

69th Fiscal Year70th Fiscal Year

71th Fiscal Year72th Fiscal Year

(Fiscal year ended
March 2011)(Fiscal year ended
March 2012)(Fiscal year ended
March 2013)(Fiscal year ended
March 2014)

Net sales

41,49571,53664,20375,175

Ordinary income

2,766

2,159

1,422

2,608

Net income (loss)

1,337

1,012

216

280

Net income (loss) per
share (yen)

51.53

38.99

8.33

10.80

Total assets

63,98363,42961,35570,471

Net assets

29,31329,581

29,823

31,466(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, 2014

Millions of Yen
2014
2013

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

¥

6,630

¥

3,471

Thousands of
U.S. Dollars(Note 1)
2014
$

2,525
17,428180(107 )
11,080
386
3,039

1,948
15,383211(123 )
9,256
367
2,493

24,534
169,335
1,749(1,040 )107,656
3,750
29,52941,16133,006399,932

10,175
18,821
23,545
4,118
843
672
58,174(35,126 )

10,66518,44322,163
3,814
621
559
56,265(33,767 )

98,863
182,870
228,770
40,012
8,191
6,529
565,235(341,294 )Net property, plant and equipment

23,04822,498

223,941

3,199
852
262
337
1,627
(15 )

2,810
828
108
122
286
1,712
(15 )

31,082
8,278
2,546
3,274
15,809(146 )

6,262

5,851

60,843

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
Deferred tax liabilities (Note 12)
Other current liabilities

64,419PROPERTY, PLANT AND EQUIPMENT (Note 5):
Land (Note 6)
Buildings and structures (Note 6)
Machinery and equipment
Furniture and fixtures
Lease assets (Note 14)
Construction in progress
Total
Accumulated depreciation

INVESTMENTS AND OTHER ASSETS:
Investment securities (Notes 3 and 15)
Investments in and advances to associated companies
Goodwill
Other intangible assets
Deferred tax assets (Note 12)
Other assets
Allowance for doubtful accounts

LIABILITIES AND EQUITY¥ 70,471¥ 61,355¥ 12,715
1,863

8,663
1,800

$ 123,543
18,101389
10,887
118
291
483
89
1,895

312
7,626
102
400
649
53
2,180

3,780
105,781
1,147
2,827
4,693
865
18,412

Total current liabilities

28,73021,785279,149

LONG-TERM LIABILITIES:Long-term debt (Notes 7 and 15)
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

6,303
646
849
2,162
47
268

6,667
531
935
1,332
46
236

61,242
6,277
8,249
21,007457
2,603

Total long-term liabilities

10,275

9,747

99,835¥

10,0139,744
9,659

10,013
9,744
9,742

97,28994,67593,850

(62 )

(62 )

(602 )

902(6 )(536 )
29,714
1,752

510(1,437 )
28,510
1,313

8,764
(58 )
(5,208 )288,710
17,022

31,46629,823

305,732¥ 70,471¥ 61,355$ 684,716

COMMITMENTS AND CONTINGENT LIABILITIES(Notes 7, 14 and 16)
EQUITY (Note 10):
Common stock, authorized 59,500,000 shares; issued, 26,080,396 sharesin 2014 and 2013
Capital surplus
Retained earnings
Treasury stock - at cost: 131,442 shares in 2014 and 131,247 shares in2013
Accumulated other comprehensive income:Unrealized gain on available-for-sale securities
Foreign currency translation adjustments
Defined retirement benefit plans
Total
Minority interests
Total equity

TOTAL

Millions of Yen
2014
2013

Thousands of
U.S. Dollars(Note 1)
2014

TOTAL

$ 684,716

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, 2014

Millions of Yen
2014
2013
NET SALES

Thousands of
U.S. Dollars(Note 1)
2014

¥ 75,175¥ 64,203$ 730,421

61,35351,859596,123

13,822

12,344

134,298

12,946

11,768125,787

Operating income

876

576

8,511

OTHER INCOME (EXPENSES):Interest and dividend income
Interest expense
Rental income
Foreign exchange gain
Equity in earnings of associated companies(Loss) gain on sale of property, plant and equipment
Loss on impairment of long-lived assets (Note 5)
Other - net

105
(333)
127
1,597
41
(428)
(422)
220

97
(370 )
117
933
23
22
(109 )
144

1,020(3,236)
1,234
15,517398(4,159)(4,100)2,139

Other income - net

907

857

8,813

INCOME BEFORE INCOME TAXES AND MINORITY
INTERESTS

1,783

1,433

17,324

INCOME TAXES (Note 12):Current
Deferred

1,264
74

1,138
124

12,281
719

1,338

1,262

13,000NET INCOME BEFORE MINORITY INTERESTS

445

171

4,324

MINORITY INTERESTS IN NET INCOME (LOSS)

165

(45 )

1,603

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

Total income taxes

NET INCOME

¥

280

¥

216

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

-4-¥10.80
14.00

$

2,721

U.S. Dollars¥ 8.33
14.00

$0.10
0.14

HARIMA CHEMICALS GROUP, INC.
and Consolidated Subsidiaries
Consolidated Statement of Comprehensive Income
Year Ended March 31, 2014

Millions of Yen
2014
2013
NET INCOME BEFORE MINORITY INTERESTS¥

Thousands of
U.S. Dollars(Note 1)
2014

445

¥ 171

392
1,624
0
2,016

289
226
0
515

3,809
15,7790
19,588COMPREHENSIVE INCOME (Note 17)¥ 2,461¥ 686$ 23,912

TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO (Note17):
Owners of the parent
Minority interests¥2,104
357

¥629
57

$20,443
3,469

OTHER COMPREHENSIVE INCOME (Note 17):
Unrealized gain on available-for-sale securities
Foreign currency translation adjustments
Share of other comprehensive income in associates
Total other comprehensive income

See notes to consolidated financial statements.

-5-

$

4,324

HARIMA CHEMICALS GROUP, INC.
and Consolidated Subsidiaries
Consolidated Statement of Changes in Equity
Year Ended March 31, 2014
Thousands

BALANCE, APRIL 1, 2012
Net income
Cash dividends, ¥14.00 per share
Purchase of treasury stock
Net change in the year
BALANCE, MARCH 31, 2013
Net income
Cash dividends, ¥14.00 per share
Purchase of treasury stock
Net change in the year
BALANCE, MARCH 31, 2014

BALANCE, MARCH 31, 2013

Number of Sharesof Common Stock
Outstanding

CommonStockCapitalSurplusRetained
Earnings

TreasuryStock25,949¥ 10,013¥ 9,744¥ 9,890¥ (62 )¥ 221

¥ (1,561 )

¥

Total

Minority
Interests

Total Equity-¥ 28,245¥ 1,336¥ 29,581

(23 )

216
(364 )
(0 )
390

1,313

29,823216(364 )(0 )25,949

289

124

-

216
(364 )
(0 )
413

510

(1,437 )-

28,5101,431(536 )

280(363 )
(0 )
1,287

439

280
(363 )
(0 )
1,726

(6 )

¥ (536 )¥ 29,714¥ 1,752¥ 31,466

Total

Minority
Interests

Total Equity-$ 277,011$ 12,757$ 289,768

13,904(5,208 )2,721(3,527 )(0 )12,505

4,265

2,721
(3,527 )(0 )16,770(58 )$ (5,208 )$ 288,710$ 17,022$ 305,732(0 )10,013

9,744

9,742

(62 )

280
(363 )
(0 )

(0 )
392

25,949¥ 10,013¥ 9,744¥ 9,659¥ (62 )

CommonStockCapitalSurplusRetained
Earnings

TreasuryStock$ 97,289$ 94,675$ 94,656$ (602 )Net income
Cash dividends, $0.14 per share
Purchase of treasury stock
Net change in the year
BALANCE, MARCH 31, 2014

Millions of Yen
Accumulated Other Comprehensive Income
Foreign
Unrealized
Currency
Gain onDefinedTranslation
Available-for-sale
Retirement
Adjustments
Securities
Benefit Plans

¥ 902

¥

Thousands of U.S. Dollars (Note 1)
Accumulated Other Comprehensive Income
Foreign
Unrealized
Currency
Gain onDefinedTranslation
Available-for-sale
Retirement
Adjustments
Securities
Benefit Plans$ 4,955$ (13,962 )

$

2,721
(3,527 )(0 )3,809$ 97,289$ 94,675$ 93,850$ (602 )See notes to consolidated financial statements.

-6-$ 8,764$HARIMA CHEMICALS GROUP, INC.
and Consolidated Subsidiaries
Consolidated Statement of Cash Flows
Year Ended March 31, 2014

Millions of Yen
2014
2013
OPERATING ACTIVITIES:
Income before income taxes and minority interests
Adjustments for:
Income taxes - paid
Depreciation and amortization
Loss on impairment of long-lived assets
Foreign exchange gain
Loss (gain) on sales of property, plant and equipment
Changes in assets and liabilities:(Increase) decrease in trade notes and accounts receivable(Increase) decrease in inventories
Increase (decrease) in trade notes and account payable
Other - net
Total adjustments
Net cash provided by operating activities

Thousands of
U.S. Dollars(Note 1)2014

¥ 1,783¥ 1,433$ 17,324(1,453)
2,284
422(1,687)428(1,102 )2,195
109(925 )(22 )(14,118 )
22,192
4,100(16,391 )
4,159(1,180)
(627)
2,188
(591)
(216)
1,567

1,721
1,326
(927 )(574 )
1,801
3,234(11,465 )(6,092)
21,259(5,743)(2,099)15,225INVESTING 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 and redemption of investment securities
Other - net
Net cash used in investing activities(1,785)
301
(26)
(190)
344
272
(1,084)(2,508 )59(55 )(332 )
654
10(2,172 )(17,344 )
2,925
(253)
(1,846)
3,342
2,644(10,532 )FINANCING ACTIVITIES:Net change in short-term bank loans
Proceeds from long-term debt
Repayments of long-term debt
Dividends paid
Other - net
Net cash provided by (used in) financing activities

3,385
900
(1,794)
(363)
(213)
1,915

(864 )(1,640 )(364 )(248 )(3,116 )32,8908,745(17,431 )(3,527)(2,070)18,607

FOREIGN CURRENCY TRANSLATION ADJUSTMENTS ON CASH
AND CASH EQUIVALENTS

761

307

7,394

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

3,159(1,747 )30,694

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR

3,471

5,218

33,725¥ 6,630¥ 3,471$ 64,419

CASH AND CASH EQUIVALENTS, END OF YEAR
See notes to consolidated financial statements.

-7-

HARIMA CHEMICALS GROUP, INC.
and Consolidated Subsidiaries
Notes to Consolidated Financial Statements
Year Ended March 31, 2014
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 inaccordance with accounting principles generally accepted in Japan ("Japanese GAAP"), which are different incertain 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 ismore familiar to readers outside Japan. In addition, certain reclassifications have been made in the 2013
consolidated financial statements to conform to the classifications used in 2014.
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 of Japanese yenamounts into U.S. dollar amounts are included solely for the convenience of readers outside Japan and have been
made at the rate of ¥102.92 to $1, the approximate rate of exchange at March 31, 2014. 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 the dateof acquisition is being amortized over a period not exceeding 20 years.
All significant intercompany balances and transactions have been eliminated in consolidation. All material
unrealized profit included in assets resulting from transactions within the Group is also eliminated.

-8-

b.

Unification of Accounting Policies Applied to Foreign Subsidiaries for the Consolidated Financial
Statements - In May 2006, the Accounting Standards Board of Japan (the "ASBJ") issued ASBJ Practical
Issues Task Force (PITF) No. 18, "Practical Solution on Unification of Accounting Policies Applied toForeign Subsidiaries for the Consolidated Financial Statements." PITF No. 18 prescribes that theaccounting policies and procedures applied to a parent company and its subsidiaries for similar transactions
and events under similar circumstances should in principle be unified for the preparation of theconsolidated financial statements. However, financial statements prepared by foreign subsidiaries inaccordance with either International Financial Reporting Standards or generally accepted accounting
principles in the United States of America 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 forin 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 been directly recorded in equity; (c)expensing capitalized development costs of R&D; (d) cancellation of the fair value model of accounting forproperty, plant, and equipment and investment properties and incorporation of the cost model ofaccounting; and (e) exclusion of minority interests from net income, if contained in net income.

c.

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

d.

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

e.

Investment Securities - Investment securities are classified and accounted for as follows: Marketableavailable-for-sale securities are reported at fair value, with unrealized gains and losses, net of applicabletaxes, 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.

f.

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 certain domestic subsidiaries and foreign subsidiaries apply the straight-line
method, using rates based on the estimated useful lives of the assets. The range of useful lives is from 5 to
50 years for buildings and from 4 to 17 years for machinery and equipment.

g.

Long-Lived Assets - The Group reviews its long-lived assets for impairment whenever events or changes incircumstance 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 amountof the asset exceeds its recoverable amount, which is the higher of the discounted cash flows from thecontinued use and eventual disposition of the asset or the net selling price at disposition.

h.

Other Assets - Amortization of capitalized software costs is computed using the straight-line method over 5
years, the estimated useful life of the assets. Amortization of customer lists costs is computed using thestraight-line method over 5 years, the estimated economic life of the assets.

-9-

i.

Retirement Benefits - The Company and certain domestic consolidated subsidiaries have a funded defined
benefit pension plan, defined contribution pension plan and severance lump-sum payment plan covering
substantially all of their employees. Certain foreign subsidiaries have adopted funded defined benefit plansand defined contribution pension plans.
Effective April 1, 2000, the Company adopted a new accounting standard for retirement benefits andaccounted for the liability for retirement benefits based on the projected benefit obligations and plan assets
at the balance sheet date. The projected benefit obligations are attributed to periods on a straight-line basis.
Actuarial gains and losses are amortized on a declining-balance basis over 14 years within the averageremaining service period. Past service costs are recognized in the period in which they are incurred.
In May 2012, the ASBJ issued ASBJ Statement No. 26, "Accounting Standard for Retirement Benefits" andASBJ Guidance No. 25, "Guidance on Accounting Standard for Retirement Benefits," which replaced theaccounting standard for retirement benefits that had been issued by the Business Accounting Council in1998 with an effective date of April 1, 2000, and the other related practical guidance, and were followed bypartial amendments from time to time through 2009.
(a) Under the revised accounting standard, actuarial gains and losses and past service costs that are yet tobe recognized in profit or loss are recognized within equity (accumulated other comprehensive
income), after adjusting for tax effects, and any resulting deficit or surplus is recognized as a liability(liability for retirement benefits) or asset (asset for retirement benefits).
(b) The revised accounting standard does not change how to recognize actuarial gains and losses and past
service costs in profit or loss. Those amounts are recognized in profit or loss over a certain period nolonger than the expected average remaining service period of the employees. However, actuarial gains
and losses and past service costs that arose in the current period and have not yet been recognized in
profit or loss are included in other comprehensive income and actuarial gains and losses and past
service costs that were recognized in other comprehensive income in prior periods and then recognizedin profit or loss in the current period shall be treated as reclassification adjustments (see Note 2.t).
(c) The revised accounting standard also made certain amendments relating to the method of attributing
expected benefit to periods and relating to the discount rate and expected future salary increases.
This accounting standard and the guidance for (a) and (b) above are effective for the end of annual periods
beginning on or after April 1, 2013, and for (c) above are effective for the beginning of annual periods
beginning on or after April 1, 2014, or for the beginning of annual periods beginning on or after April 1,
2015, subject to certain disclosure in March 2015, both with earlier application being permitted from the
beginning of annual periods beginning on or after April 1, 2013. However, no retrospective application ofthis accounting standard to consolidated financial statements in prior periods is required.
The Company applied the revised accounting standard and guidance for retirement benefits for (a) and (b)above, effective March 31, 2014. As a result, liability for retirement benefits of ¥2,162 million ($21,007
thousand) was recorded as of March 31, 2014, and accumulated other comprehensive income for the year
ended March 31, 2014, decreased by ¥536 million ($5,208 thousand), and minority interests for the year
ended March 31, 2014, decreased by ¥34 million ($330 thousand).
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 at eachbalance sheet date.

- 10 -

j.

Asset Retirement Obligations - In March 2008, the ASBJ issued the accounting standard for asset
retirement obligations, ASBJ Statement No. 18 "Accounting Standard for Asset Retirement Obligations"and ASBJ Guidance No. 21 "Guidance on Accounting Standard for Asset Retirement Obligations." Under
this accounting standard, an asset retirement obligation is defined as a legal obligation imposed either by
law or contract that results from the acquisition, construction, development and the normal operation of atangible 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 andis recorded in the period in which the obligation is incurred if a reasonable estimate can be made. If areasonable estimate 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 the related fixed asset by the amount of
the liability. The asset retirement cost is subsequently allocated to expense through depreciation over theremaining 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 estimate of undiscounted cash flows arereflected as an adjustment to the carrying amount of the liability and the capitalized amount of the related
asset retirement cost.

k.

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

l.

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

m. Bonuses to Directors and Audit & Supervisory Board Members - Bonuses to directors and Audit &Supervisory Board members are accrued at the end of the year to which such bonuses are attributable.
n.

Income Taxes - The provision for income taxes is computed based on the pretax income included in the
consolidated statements of income. The asset and liability approach is used to recognize deferred tax assets
and liabilities for the expected future tax consequences of temporary differences between the carrying
amounts and the tax bases of assets and liabilities. Deferred taxes are measured by applying currently
enacted income tax rates to the temporary differences.

o.

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 statementof income to the extent that they are not hedged by forward exchange contracts.

- 11 -

p.

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 are translated
into yen at the average exchange rate.

q.

Derivative Financial Instruments - The Group uses derivative financial instruments to manage its
exposures to fluctuations in interest rates. Interest rate swaps are utilized by the Group to reduce interest
rate risks. The Group does not enter into derivatives for trading or speculative purposes.
Derivative financial instruments are classified and accounted for as follows: (1) all derivatives arerecognized as either assets or liabilities and measured at fair value, and gains or losses on derivativetransactions are recognized in the consolidated statement of income; 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.

r.

Per Share Information - Basic net income per share is computed by dividing net income available tocommon shareholders by the weighted-average number of common shares outstanding for the period.
Diluted net income per share is not presented as the effect of including potential common shares isanti-dilutive.
Cash dividends per share presented in the accompanying consolidated statement of income are dividends
applicable to the respective fiscal years including dividends to be paid after the end of the year.

s.

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

- 12 -t.

New Accounting Pronouncements
Accounting Standard for Retirement Benefits - On May 17, 2012, the ASBJ issued ASBJ Statement No.
26, "Accounting Standard for Retirement Benefits" and ASBJ Guidance No. 25, "Guidance on AccountingStandard for Retirement Benefits," which replaced the Accounting Standard for Retirement Benefits that
had been issued by the Business Accounting Council in 1998 with an effective date of April 1, 2000, andthe other related practical guidance, and were followed by partial amendments from time to time through2009.
Major changes are as follows:(a) Treatment in the balance sheet
Under the current requirements, actuarial gains and losses and past service costs that are yet to berecognized in profit or loss are not recognized in the balance sheet, and the difference between
retirement benefit obligations and plan assets (hereinafter, "deficit or surplus"), adjusted by suchunrecognized amounts, is recognized as a liability or asset.
Under the revised accounting standard, actuarial gains and losses and past service costs that are yet tobe recognized in profit or loss shall be recognized within equity (accumulated other comprehensive
income), after adjusting for tax effects, and any resulting deficit or surplus shall be recognized as aliability (liability for retirement benefits) or asset (asset for retirement benefits).
(b) Treatment in the statement of income and the statement of comprehensive income
The revised accounting standard does not change how to recognize actuarial gains and losses and past
service costs in profit or loss. Those amounts would be recognized in profit or loss over a certain
period no longer than the expected average remaining service period of the employees. However,actuarial gains and losses and past service costs that arose in the current period and have not yet beenrecognized in profit or loss shall be included in other comprehensive income and actuarial gains andlosses and past service costs that were recognized in other comprehensive income in prior periods andthen recognized in profit or loss in the current period shall be treated as reclassification adjustments.
(c) Amendments relating to the method of attributing expected benefit to periods and relating to thediscount rate and expected future salary increases
The revised accounting standard also made certain amendments relating to the method of attributing
expected benefit to periods and relating to the discount rate and expected future salary increases.
This accounting standard and the guidance for (a) and (b) above are effective for the end of annual periods
beginning on or after April 1, 2013, and for (c) above are effective for the beginning of annual periods
beginning on or after April 1, 2014, or for the beginning of annual periods beginning on or after April 1,
2015, subject to certain disclosure in March 2015, both with earlier application being permitted from the
beginning of annual periods beginning on or after April 1, 2013. However, no retrospective application ofthis accounting standard to consolidated financial statements in prior periods is required.
The Company applied the revised accounting standard for (a) and (b) above effective March 31, 2014, andexpects to apply (c) above from April 1, 2014, and is in the process of measuring the effects of applying therevised accounting standard for (c) above in future applicable periods.

- 13 -

3.

INVESTMENT SECURITIESInvestment securities as of March 31, 2014 and 2013, consisted of the following:Thousands of
U.S. Dollars
2014

Millions of Yen
2013
2014
Non-current:
Equity securities
Trust fund investments and other¥ 2,916283¥ 2,424386$ 28,332
2,750

Total

¥ 3,199¥ 2,810$ 31,082

The costs and aggregate fair values of investment securities at March 31, 2014 and 2013, were as follows:
Millions of Yen
Unrealized
Unrealized
Gains
LossesFair
Value

March 31, 2014

Cost

Securities classified as:
Available-for-sale:
Equity securities
Debt securities¥1,652300¥1,257-¥(26 )(17 )¥2,883283¥1,676
387

¥868
7

¥153
8

¥2,391
386

March 31, 2013
Securities classified as:
Available-for-sale:
Equity securities
Debt securities

March 31, 2014

Cost

Securities classified as:
Available-for-sale:
Equity securities
Debt securities$16,051
2,915

Thousands of U.S. Dollars
Unrealized
Unrealized
Gains
Losses$12,213-$(253 )
(165 )

Fair
Value$28,0112,750

Carrying amounts of available-for-sale securities whose fair value is not readily determinable as of March 31,
2014 and 2013, were as follows:
Millions of Yen
2014
2013
Available-for-sale:
Equity securities
Other

¥33
0

- 14 -¥33
0Thousands of
U.S. Dollars
2014
$321
0

The information for available-for-sale securities which were sold during the years ended March 31, 2014 and2013, was as follows:

March 31, 2014

Proceeds

Millions of Yen
Realized
Gains

Available-for-sale:
Equity securities
Debt securities

¥ 102
243

¥ 39
4

¥ -

Total

¥ 345

¥ 43

¥ -

Available-for-sale:
Equity securities
Debt securities

¥ 13
641

¥ 2
9

¥ -

Total

¥ 654

¥ 11

¥ -

Realized
LossesMarch 31, 2013

Thousands of U.S. Dollars
Realized
Realized
Proceeds
Gains
LossesMarch 31, 2014
Available-for-sale:
Equity securities
Debt securities

$

Total
4.

991
2,361

$ 379
39

$ -

$ 3,352

$ 418

$ -

INVENTORIESInventories at March 31, 2014 and 2013, consisted of the following:
Millions of Yen
2014
2013

5.

Thousands of
U.S. Dollars
2014

Finished products
Work in process
Raw materials and supplies

¥

5,447
352
5,281

¥ 4,656
357
4,243

$

52,9243,420
51,312

Total¥ 11,080¥ 9,256$ 107,656

LONG-LIVED ASSETSThe Group recognized an impairment loss of ¥422 million ($4,100 thousand), which is included in the
consolidated statement of income, for the year ended March 31, 2014. The impairment loss recognized was
mainly for the land used for a golf course and hotel in Japan, and manufacturing facilities in China and Brazil.
This impairment loss was recognized since the recoverable value of the assets was lower than the carrying
amounts of the assets. The recoverable value of the land used for a golf course and hotel was measured at the
selling price based on the appraisal report, and the manufacturing facilities were measured at the net selling priceat disposal.

- 15 -

The Group recognized an impairment loss of ¥109 million, which is included in the consolidated statement ofincome, for the year ended March 31, 2013. The impairment loss was mainly recognized for the buildings andstructures and machinery and equipment in the Tokushima plant in Japan. This impairment loss was recognizedsince the recoverable amounts of the assets were lower than the carrying amounts of the assets. The recoverable
amounts of the assets were measured by the net selling price at disposal.
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 for Investment
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 fiscal years ended March 31, 2014 and 2013, was ¥110
million ($1,069 thousand) and ¥121 million, respectively.
In addition, the carrying amounts, changes in such balances and market prices of such properties are as follows:
Millions of Yen
Carrying AmountMarch 31,
April 1, 2013
Decrease
2014¥3,408¥295¥3,113

Millions of Yen
Carrying AmountMarch 31,
April 1, 2012
Decrease
2013¥3,450¥42¥3,408

Thousands of U.S. Dollars
Carrying AmountMarch 31,
April 1, 2013
Decrease
2014$33,113$2,866$30,247

Fair Value
March 31,2014
¥3,973
Fair Value
March 31,
2013
¥4,298Fair Value
March 31,2014
$38,603

Notes:1)

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

2)

Increase during the fiscal year ended March 31, 2014, primarily represents the acquisition of certain
properties of ¥45 million ($437 thousand), and decrease primarily represents the change in the purposeof possession of the properties from investment purpose to own use by ¥102 million ($991 thousand),depreciation of ¥48 million ($466 thousand), and impairment loss of ¥190 million ($1,846 thousand).
Increase during the fiscal year ended March 31, 2013, primarily represents the acquisition of certain
properties of ¥12 million, and decrease primarily represents the depreciation of ¥45 million.

3)

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

- 16 -

7.

SHORT-TERM BANK LOANS AND LONG-TERM DEBT
Short-term bank loans at March 31, 2014 and 2013, consisted of notes to banks and bank overdrafts. The
average interest rates applicable to the short-term bank loans as of March 31, 2014 and 2013, were 1.8% and2.1%, respectively.
Long-term debt at March 31, 2014 and 2013, consisted of the following:Thousands of
U.S. Dollars
2014

Millions of Yen
2014
2013
Unsecured loans from banks and other financial
institutions, due serially to 2017 with interest rates
ranging from 1.2% to 4.3% (1.6% to 4.3% in 2013)
Obligations under finance leases
Total
Less current portion¥ 7,160
1,006
8,166(1,863)¥ 7,752715
8,467(1,800 )$ 69,568
9,775
79,343(18,101 )Long-term debt, less current portion¥ 6,303¥ 6,667$ 61,242

Annual maturities of long-term debt at March 31, 2014, for the next five years and thereafter were as follows:Year Ending March 31

Millions ofYen

Thousands of
U.S. Dollars

2015
2016
2017
2018
2019
2020 and thereafter¥ 1,863
1,780
1,678
2,080
43
722

$ 18,101
17,29516,304
20,210
418
7,015

Total

¥ 8,166$ 79,343

Certain loans from banks are subject to the following financial covenants:
1)

Total equity shall be more than ¥22,000 million ($213,758 thousand) for the first half of the fiscal year
ended March 31, 2014, and for the fiscal year ended March 31, 2014, on a consolidated basis.

2)

Total equity shall be more than ¥19,900 million ($193,354 thousand) for the first half of the fiscal year
ended March 31, 2014, and for the fiscal year ended March 31, 2014, on a nonconsolidated basis. Total
equity for the fiscal year ended March 31, 2014, on a nonconsolidated basis is ¥26,349 million ($256,014
thousand).

3)

Ordinary income shall not be a loss for the fiscal years ended March 31, 2014 and 2013, both on aconsolidated and nonconsolidated basis.

As is customary in Japan, the Company maintains substantial deposit balances with banks with which it hasborrowings. Such deposit balances are not legally or contractually restricted as to withdrawal.

- 17 -

As is customary in Japan, collateral must be provided if requested by the lending banks and certain banks havethe right to offset cash deposited with them against any bank loan or obligation that becomes due and, in case ofdefault and certain other specified events, against all other debt payable to the banks concerned. The Company
has never received any such request.
The outstanding balance of the commitment as of March 31, 2014, was as follows:
Millions ofYen

Thousands of
U.S. Dollars

Total committed line of credit
Executed amount¥ 10,000
6,202$ 97,163
60,260Unexecuted amount¥$ 36,903

3,798

The above agreements are subject to the following financial covenants:

8.

1)

Total equity shall be more than ¥22,000 million ($213,758 thousand) for the first half of the fiscal year
ended March 31, 2014, and for the fiscal year ended March 31, 2014, on a consolidated basis.

2)

Total equity shall be more than ¥19,900 million ($193,354 thousand) for the first half of the fiscal year
ended March 31, 2014, and for the fiscal year ended March 31, 2014, on a nonconsolidated basis. Total
equity for the fiscal year ended March 31, 2014, on a nonconsolidated basis is ¥26,349 million ($256,014
thousand).

3)

Ordinary income shall not be a loss for the fiscal years ended March 31, 2014 and 2013, both on aconsolidated and nonconsolidated basis.

RETIREMENT AND PENSION PLANS
The Group has severance payment plans for employees, directors and Audit & Supervisory Board members.
Under most circumstances, employees terminating their employment are entitled to retirement benefits
determined based on the rate of pay at the time of termination, years of service and certain other factors. Suchretirement benefits are made in the form of a lump-sum severance payment or annuity payments from a trustee.
Employees are entitled to larger payments if the termination is involuntary, by retirement at the mandatory
retirement age or by death.
The liability for retirement benefits at March 31, 2014 and 2013, for directors and Audit & Supervisory Board
members is ¥493 million ($4,800 thousand) and ¥464 million, respectively, and is included in liability for
retirement benefits in the consolidated balance sheets. The retirement benefits for directors and Audit &Supervisory Board members are paid subject to the approval of the shareholders in accordance with theCompanies Act of Japan (the "Companies Act").

- 18 -

Year Ended March 31, 2014
(1) The changes in defined benefit obligation for the year ended March 31, 2014, were as follows:
Millions ofYen

Thousands of
U.S. Dollars

Balance at beginning of year
Current service cost
Interest cost
Actuarial losses
Benefits paid
Past service cost
Balance of value transfers
Exchange translation differences
Others¥ 2,701
226
35
232
(63)
0
252
96
(2 )

$ 26,244
2,196
340
2,254
(612 )
0
2,449
933
(20 )

Balance at end of year

¥ 3,477$ 33,784(2) The changes in plan assets for the year ended March 31, 2014, were as follows:
Millions ofYen

Thousands of
U.S. Dollars

Balance at beginning of year
Expected return on plan assets
Actuarial losses
Contributions from the employer
Benefits paid
Balance of value transfers
Exchange translation differences
Others¥ 1,391
6
(20)
268
(63)
252
70
16

$ 13,515
58(194 )
2,604(612 )
2,449
680
155

Balance at end of year

¥ 1,920$ 18,655(3) If simplified method was used, the changes in defined benefit obligation for the year ended March 31, 2014,
would be as follows:
Millions ofYen

Thousands of
U.S. Dollars

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

¥ 103
10
(12 )
11

$ 1,001
97(117 )
107

Balance at end of year

¥ 112

$ 1,088- 19 -

(4) Reconciliation between the liability recorded in the consolidated balance sheet and the balances of defined
benefit obligation and plan assets as of March 31, 2014
Millions ofYen

Thousands of
U.S. Dollars

Unfunded defined benefit obligation¥ 3,477(1,920)1,557
112$ 33,783(18,655 )
15,1281,088

Net liability arising from defined benefit obligation¥ 1,669$ 16,216

Millions ofYen

Thousands of
U.S. Dollars

Liability for retirement benefits¥ 1,669$ 16,216

Net liability arising from defined benefit
obligation¥ 1,669$ 16,216

Funded defined benefit obligation
Plan assets(5) The components of net periodic benefit costs for the year ended March 31, 2014, were as follows:
Millions ofYen

Thousands of
U.S. Dollars

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

¥ 226
35
(6 )
96
10

$ 2,196
340
(58 )
933
97

Net periodic benefit costs¥ 361$ 3,508(6) Accumulated other comprehensive income on defined retirement benefit plans as of March 31, 2014
Millions ofYen
Unrecognized prior service cost
Unrecognized actuarial losses

¥

Total

¥ 736

- 20 -

0736

Thousands of
U.S. Dollars
$

0
7,151

$ 7,151

(7) Plan assets as of March 31, 2014a.

Components of plan assets
Plan assets consisted of the following:b.

Debt securities in Japan
Equity securities in Japan
Debt securities in other countries
Equity securities in other countries
Cash and time depositsLife insurance company general accounts
Others10.7 %
8.0
2.9
7.9
0.6
38.2
31.7

Total

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.

(8) Assumptions used for the year ended March 31, 2014, were set forth as follows:
Discount rate
Expected rate of return on plan assets

Mainly 1.0 %Mainly 0.0 %The amount of donation required to the defined contribution plan of the Group was ¥113 million ($1,098
thousand).
Year Ended March 31, 2013
The liability for employees' retirement benefits at March 31, 2013, consisted of the following:
Millions ofYen
Projected benefit obligation
Fair value of plan assets
Unrecognized actuarial loss

¥ 2,805(1,391)(546)

Net liability¥

868

The components of net periodic retirement benefit costs for the year ended March 31, 2013, were as follows:
Millions ofYenService cost
Interest cost
Recognized actuarial loss
Net periodic retirement benefit costs
Payments to defined contribution pension plan and other

¥ 288
49
55
392
122

Total

¥ 514

- 21 -

Assumptions used for the year ended March 31, 2013 are set forth as follows:
Discount rate
1.0%
Expected rate of return on plan assets
0.0%
Allocation method of the retirement benefits expected Straight-line method
to be paid at the retirement datebased on years ofservice
Amortization period of prior service cost
1 yearRecognition period of actuarial gain or loss
14 years
9.

ASSET RETIREMENT OBLIGATIONS
The changes in asset retirement obligations for the years ended March 31, 2014 and 2013, were as follows:
Millions of Yen
2014
2013
Balance at beginning of year
Reconciliation associated with passage of time
Balance at end of year

10.

¥46
1
47

¥45
1
46

Thousands of
U.S. Dollars
2014
$447
10
457

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 theyear-end dividend upon resolution at the shareholders' meeting. For companies 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 of the directors is prescribed as one year rather than two
years of normal term by its articles of incorporation, the Board of Directors may declare dividends (except
for dividends-in-kind) at any time during the fiscal year if the company has prescribed so in its articles ofincorporation. The Company meets all the above criteria.
The Companies Act permits companies to distribute dividends-in-kind (noncash assets) to shareholders
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 thearticles 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 capital surplus)
depending on the equity account charged upon the payment of such dividends until the aggregate amount oflegal reserve and additional paid-in capital equals 25% of the common stock. Under the Companies 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 capitalsurplus and retained earnings can be transferred among the accounts under certain conditions upon
resolution of the shareholders.

- 22 -

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 specific formula. Under theCompanies 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, 2014 and 2013, principally consistedof the following:
Millions of Yen
2014
2013
Employees' salaries and bonuses
Net periodic retirement benefit
Transport
Depreciation
RentalResearch and development
Amortization of goodwill

12.

¥3,148
182
2,823
578
51
1,965
134

Thousands of
U.S. Dollars
2014¥2,473
167
2,318
566
155
1,764
89

$30,587
1,768
27,4295,616
496
19,092
1,302

INCOME TAXESThe Company and its domestic subsidiaries are subject to Japanese national and local income taxes which, in theaggregate, resulted in normal effective statutory tax rates of approximately 38.0% for the years ended March 31,
2014 and 2013.
The tax effects of significant temporary differences and tax loss carryforwards which resulted in deferred tax
assets and liabilities at March 31, 2014 and 2013, are as follows:
Millions of Yen
2014
2013
Deferred tax assets:
Tax loss carryforwards
Impairment loss on long-lived assets
Loss on revaluation of investment securities
Retirement benefits to directors and Audit &Supervisory Board members
Property, plant and equipment
Unrealized loss on available-for-sale securities
Other
Less 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
Other
Total
Net deferred tax (liabilities) assets- 23 -

Thousands of
U.S. Dollars
2014¥ 1,7811,445
209¥ 1,458
1,360
248$ 17,305
14,040
2,031

176
97
18
1,179
(4,353)
¥
552

166
97
58
694
(3,645 )
¥
436

1,710
942
175
11,455(42,295 )$ 5,363

¥

¥

$

¥

74
301
121
68
564

¥

(12)

¥

79
194
94
367

$

719
2,925
1,176
661
5,481

¥

69

$

(118)

A reconciliation between the normal effective statutory tax rate and the actual effective tax rate reflected in theaccompanying consolidated statement of income for the year ended March 31, 2014, with corresponding figuresfor 2013, is as follows:

Normal effective statutory tax rate
Expenses not deductible for income tax purposes
Inhabitants' per capita levy
Difference of income tax rates applicable to income in certain foreigncountries
Increase in valuation allowance
Tax credit
Adjustment of deferred tax assets and liabilities at the end of period due tochange in tax rates
Other - net
Actual effective tax rate

2014

2013

38.0 %
9.3
1.7

38.0 %
12.0
2.0

1.4
28.0
(4.8 )

5.7
38.9(9.3 )

0.9
0.5

0.8

75.0 %

88.1 %New tax reform laws enacted in 2014 in Japan changed the normal effective statutory tax rate for the fiscal year
beginning on or after April 1, 2014, from approximately 38.0% to 35.6%. The effects of this change on deferred
tax assets in the consolidated balance sheet and income taxes - deferred in the consolidated statement of income
are immaterial.
13.

RESEARCH AND DEVELOPMENT COSTS
Research and development costs charged to income were ¥1,965 million ($19,092 thousand) and ¥1,764 million
for the years ended March 31, 2014 and 2013, 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, 2014 and 2013, were ¥221 million ($2,147
thousand) and ¥157 million, respectively.
The minimum rental commitments under noncancelable operating leases at March 31, 2014, are as follows:

15.

Millions ofYen

Thousands of
U.S. Dollars

Due within one year
Due after one year

¥ 5
47

$ 48
457

Total

¥ 52

$ 505

FINANCIAL INSTRUMENTS AND RELATED DISCLOSURES(1) Group Policy for Financial Instruments
The Group uses financial instruments, mainly bank loans based on its capital financing plan. Short-termbank loans are used to fund the Group's ongoing operations. Derivatives are used, not for speculative
purposes, but to manage exposure to financial risks as described in (2) below.

- 24 -

(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 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 of interest
rate swaps. Long-term deposits received are mainly related to entry deposits for 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 on the basis ofinternal guidelines, which include monitoring of payment term and balances of major customers by eachbusiness administration department to identify the default risk of customers at an early stage.
The counterparties to the Group's derivative contracts are limited to major international financial
institutions to reduce credit risk.
The maximum credit risk exposure of financial assets is limited to their carrying amounts as of March 31,
2014.
Market risk management (foreign exchange risk and interest rate risk)
Interest-rate swaps are used to manage exposure to market risks from changes in interest rates of loans
payable.
Investment securities are managed by monitoring market values and the financial position of issuers on aregular basis.
Derivative transactions entered into by the Group have been made in accordance with internal policies that
regulate the authorization and credit limit amount.
Liquidity risk management
Liquidity risk comprises the risk that the Group cannot meet its contractual obligations in full on theirmaturity dates. The Group manages its liquidity risk by holding adequate volumes of liquid assets at thelevel of one month's sales volume, along with adequate financial planning by the corporate treasury
department.
(4) Fair Value of Financial Instruments
Fair values of financial instruments are based on quoted prices in active markets. If a quoted price is notavailable, another rational valuation technique is used instead.

- 25 -

Fair Value of Financial Instruments
Carrying amounts, fair values and the differences between carrying amounts and fair values as of March 31,
2014 and 2013, are as follows. The accounts for which fair value is deemed to be extremely difficult to
calculate are not included in the following:
Millions of Yen
Carrying
AmountFair Value

Cash and cash equivalents
Notes and accounts receivable
Investment securities

¥

¥

Total

March 31, 2014

6,630
20,133
3,166

Unrealized
Gain/(Loss)

6,630
20,1333,166¥ -¥ 29,929¥ 29,929¥ -Notes and accounts payable
Short-term bank loans
Current portion of long-term debt (excluding
obligations under finance leases)
Long-term debt (excluding obligations underfinance leases)
Long-term deposits received¥ 11,685
12,715¥ 11,685
12,715

¥ -

1,796

1,796

-

5,364
849

5,355
769

9
80

Total

¥ 32,409¥ 32,320¥ 89

March 31, 2013

Carrying
AmountFair Value

Cash and cash equivalents
Notes and accounts receivable
Investment securities

¥

¥

Total

Millions of Yen

3,471
17,542
2,777¥-¥ 23,790¥ 23,790¥-

Notes and accounts payable
Short-term bank loans
Current portion of long-term debt (excluding
obligations under finance leases)
Long-term debt (excluding obligations underfinance leases)
Long-term deposits received

¥

¥

¥

-

Total

- 26 -

3,471
17,542
2,777

Unrealized
Gain/(Loss)

8,440
8,663

8,440
8,663

1,737

1,737

-

6,015
935

6,020
818

(5 )
117

¥ 25,790¥ 25,678¥ 112

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

March 31, 2014
Cash and cash equivalents
Notes and accounts receivable
Investment securities

$

Total

64,419195,618
30,761$64,419195,618
30,761$-$ 290,798$ 290,798$-

Notes and accounts payable
Short-term bank loans
Current portion of long-term debt (excluding
obligations under finance leases)
Long-term debt (excluding obligations underfinance leases)
Long-term deposits received$ 113,535
123,543$ 113,535
123,543$-

17,45017,450-52,1188,249

52,031
7,472

87
777

Total

$ 314,895$ 314,031$ 864

Cash and Cash Equivalents and Notes and Accounts Receivable
The carrying values of cash and cash equivalents and notes and accounts receivable approximate 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 forcertain debt instruments. The fair value information for investment securities by classification is includedin 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 cash flows related to the debt at theGroup's assumed corporate borrowing rate for the fiscal year ended March 31, 2014.
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.

- 27 -

(5) Maturity Analysis for Financial Assets with Contractual Maturities

Due inOne Year or
Less

March 31, 2014
Cash and cash equivalents
Notes and accounts receivable
Investment securities
Available-for-sale securities with
contractual maturities
Total

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

¥ -

¥ -

-

-

-

283

¥ 26,763

¥ -

¥ -

¥ 283

¥

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

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

¥

-

Due after
Ten Years

3,471
17,542

¥ -

¥ -

-

-

-

386

¥ 21,013

¥ -

¥ -

¥ 386

Due inOne Year or
Less

March 31, 2014

Due after
Ten Years

6,630
20,133

Due inOne Year or
Less

March 31, 2013

16.

¥

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

$

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

¥

-

Due after
Ten Years

64,419195,618

$ -

$ -

$

-

-

-

-

2,750

$ 260,037

$ -

$ -

$ 2,750DERIVATIVESThe Group also enters into interest rate swap contracts to manage its interest rate exposures on certain liabilities.
All derivative transactions are entered into to hedge interest exposures incorporated within the Group's business.
Accordingly, market risk in these derivatives is basically offset by opposite movements in the value of thehedged 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.

- 28 -

Derivative Transactions to Which Hedge Accounting Is Applied

At March 31, 2014

Hedged Item

Interest rate swaps:(fixed rate payment, floating rate receipt)

Short-term bankloansMillions of Yen
Contract
AmountDue after
Contract
One YearAmount¥400¥-

Millions of Yen
Contract
AmountDue after
Contract
One YearAmount

At March 31, 2013

Hedged Item

Interest rate swaps:(fixed rate payment, floating rate receipt)

Short-term bankloans

At March 31, 2014

Thousands of U.S. Dollars
Contract
AmountDue after
Contract
One YearHedged Item
AmountInterest rate swaps:(fixed rate payment, floating rate receipt)

Short-term bank
loans

¥400

$3,887

¥-

$-

Fair
Value
¥-

Fair
Value
¥-

Fair
Value
$-

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

- 29 -

17.

COMPREHENSIVE INCOME
The components of other comprehensive income for the years ended March 31, 2014 and 2013, were as follows:
Thousands of
U.S. Dollars
2014

Millions of Yen
2013
2014
Unrealized gain on available-for-sale securities:
Gains arising during the year
Reclassification adjustments to profit or loss
Amount before income tax effect
Income tax effectTotal
Foreign currency translation adjustments:
Adjustments arising during the year
Reclassification adjustments to profit or loss
Amount before income tax effect
Total
Share of other comprehensive income in associates Gains arising during the year
Total
Total other comprehensive income
18.

¥

544
(43)
501
(109)

¥ 385
(11 )
374
(85 )

$

5,286
(418)
4,868
(1,059)

¥

392

¥ 289

$

3,809

¥ 1,624
1,624

¥ 293
(67 )
226

$ 15,779
15,779¥ 1,624¥ 226$ 15,779

¥

0

¥

0

$

0

¥

0

¥

0

$

0

¥ 2,016¥ 515$ 19,588

NET INCOME PER SHARE
Details of the basic net income per share ("EPS") for the years ended March 31, 2014 and 2013, were as follows:
Millionsof YenNet Income

Thousandsof Shares
WeightedAverage Shares¥280

25,949¥10.80¥216

25,949¥8.33

Yen

Dollars
EPS

For the year ended March 31, 2014:
Basic EPS
Net income available to commonshareholders$0.10

For the year ended March 31, 2013:
Basic EPS
Net income available to commonshareholders

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

- 30 -

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, 2014 and 2013, were as follows:
Fiscal year ended March 31, 2014
Millions ofYenType of Related Parties

Name

Address

Owned by certain directors of the Company
and their relatives

Hasegawa Kosan Co.,Ltd.

Kakogawa-shi, Hyogo,
Japan

Millions of
Yen

CapitalAmountDescription of Business¥40

Insurance agent

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

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

Thousands of
U.S. Dollars
Amount

¥ 18

$ 175

13

126

26

253

Note: Hasegawa Kosan Co., Ltd. is wholly held by Yoshihiro Hasegawa, who is the representative director of the Company, and his close relatives.
Fiscal year ended March 31, 2013
Millions ofYenType of Related Parties

Name

Address

Owned by certain directors of the Company
and their relatives

Hasegawa Kosan Co.,Ltd.

Kakogawa-shi, Hyogo,
Japan

Harima Food, Inc.

Kakogawa-shi, Hyogo,
Japan

Millions of
Yen

CapitalAmountDescription of Business¥40

Insurance agent

30

Food manufacturing

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

Nature of Transactions
Payment of insurance

Amount¥ 13

Other current assets, end of
year

23

Sales of food10

Note: Hasegawa Kosan Co., Ltd. is wholly held by Yoshihiro Hasegawa, who is the representative director of the Company, and his close relatives.
Harima Food, Inc. is a wholly owned subsidiary of Hasegawa Kosan Co., Ltd.
(2) The transactions between the Group and related parties
Transactions between the Group and related parties for the year ended March 31, 2014 were as follows:
Fiscal year ended March 31, 2014
Millions ofYenType of Related Parties
Owned by certain directors of the Company
and their relatives

Name
Harima Food, Inc.

Address
Kakogawa-shi, Hyogo,
Japan

Millions of
Yen

CapitalAmountDescription of Business

Percentage of Equity
Ownership in the
Company¥30

Food manufacturing-

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

Note: Harima Food, Inc. is a wholly owned subsidiary of Hasegawa Kosan Co., Ltd.

- 31 -

Thousands of
U.S. Dollars
Amount

¥ 0

$

0

52

505

0

0

20.

SUBSEQUENT EVENT
Appropriations of Retained Earnings
The following appropriation of retained earnings at March 31, 2014, was approved at the Company's Board of Directors' meeting held on May 20, 2014:
Millionsof YenThousands of
U.S. Dollars¥182$1,768Year-end cash dividends, ¥7.00 ($0.07) per share
21.

SEGMENT INFORMATION
Under ASBJ Statement No. 17, "Accounting Standard for Segment Information Disclosures" and ASBJ Guidance No. 20, "Guidance on Accounting Standard for Segment Information
Disclosures," an entity is required to report financial and descriptive information about its reportable segments. Reportable segments are operating segments or aggregations of operating
segments that meet specified criteria. Operating segments are components of an entity about which separate financial information is available and such information is evaluated regularly
by the chief operating decision maker in deciding how to allocate resources and in assessing performance. Generally, segment information is required to be reported on the same basis as
is used internally 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 being performed in orderto decide how resources are allocated among the Group.
"Resin & Tall Oil Products" manufactures and sells paint resin, resins for print inks, tall oil products and synthetic rubber emulsifiers. "Paper Chemicals" manufactures and sells
paper-strengthening agents, sizing agents and surface-coating agents. "Electronics Materials" manufactures and sells electronics materials. "Lawter" manufactures and sells resins
for print inks and adhesives.
(2) Methods of Measurement for the Amounts of Sales, Profit, Assets, Liabilities and Other Items for Each Reportable Segment
The accounting policies of each reportable segment are consistent with those disclosed in Note 2, "Summary of Significant Accounting Policies."(3) Information about Sales, Profit and Other Items is as follows.
Millions of Yen
2014
Reportable Segment

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

Resin &
Tall Oil
Products

Paper
ChemicalsElectronics
Materials

Lawter

Total

Other

Total

¥ 21,228
218¥ 21,446¥ 14,833
628¥ 15,461¥ 5,231¥ 5,231¥ 32,236
225¥ 32,461¥ 73,528
1,071¥ 74,599¥ 1,642131¥ 1,773¥ 75,170
1,202¥ 76,372

¥386

¥681

¥408

¥(307 )

¥1,168

¥141

667

604

155

534

1,960

(42 )

-

(14 )

(21 )

(77 )

Reconciliations¥

Consolidated

5(1,202 )¥ (1,197 )¥ 75,175¥ 75,175¥1,309¥1,298¥2,607

190

2,150

-

2,150

(17 )

(94 )

(192 )(286 )"Other" comprises business segments not attributable to a reportable segment and includes mainly real estate management, etc.
Reconciliations of segment profit (loss) include reconciliation gain of inventories of ¥323 million ($3,138 thousand), company-wide expenses of ¥557 million ($5,412
thousand) and foreign exchange gain of ¥1,217 million ($11,825 thousand), which are not attributable to any reportable segment.
Segment profits (losses) are adjusted for certain other income and expenses within operating income in the consolidated statement of income.
Assets are not allocated to reportable segments as they are not used for the determination of the allocation of management resources and how to assess performance of theCompany.

- 32 -

Millions of Yen
2013
Reportable Segment

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

Resin &
Tall Oil
Products

Paper
ChemicalsElectronics
Materials

Lawter

Total

Other

Total

¥ 20,543
277¥ 20,820¥ 12,419
571¥ 12,990¥ 4,3670¥ 4,367¥ 25,297
246¥ 25,543¥ 62,626
1,094¥ 63,720¥ 1,597148¥ 1,745¥ 64,223
1,242¥ 65,465

¥172

¥817

¥155

¥(877 )

¥ 267

¥ 86

687

551

188

489

1,915

(49 )

(17 )

(15 )

(18 )

(99 )

Reconciliations¥

Consolidated(20 )(1,242 )¥ (1,262 )¥ 64,203¥ 64,203¥ 353¥1,068¥1,421

191

2,106

-

2,106

(20 )

(119 )(207 )(326 )"Other" comprises business segments not attributable to a reportable segment and includes mainly real estate management, etc.
Reconciliations of segment profit (loss) include reconciliation loss of inventories of ¥60 million, company-wide expenses of ¥91 million and foreign exchange gain of¥888 million, which are not attributable to any reportable segment.
Segment profits (losses) are adjusted for certain other income and expenses within operating income in the consolidated statement of income.
Assets are not allocated to reportable segments as they are not used for the determination of the allocation of management resources and how to assess performance of theCompany.
Thousands of U.S. Dollars
2014
Reportable Segment

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

Resin &
Tall Oil
Products

Paper
ChemicalsElectronics
Materials

Lawter

Total

Other

Total

$ 206,257
2,118$ 208,375$ 144,121
6,102$ 150,223$ 50,826$ 50,826$ 313,214
2,186$ 315,400$ 714,418
10,406$ 724,824$ 15,954
1,273$ 17,227$ 730,372
11,679$ 742,051$3,750$6,617$3,964$(2,983 )$11,348$1,370

6,481

5,869

1,506

5,188

19,044(408 )-(136 )(204 )(748 )- 33 -

Reconciliations$

Consolidated

49(11,679 )$ (11,630 )$ 730,421$ 730,421$12,718$12,612$25,330

1,846

20,890-20,890(165 )(913 )(1,866 )(2,779 )[Related information]
1.

Information about geographical areas
Net sales to customers and property, plant and equipment by region for the years ended March 31,
2014 and 2013, were as follows:(1) Net sales
Millions of Yen
2014
Japan

South andNorth
America

Asia

Europe

Other

Total

¥31,750¥15,528¥10,462¥14,007¥3,428¥75,175

Millions of Yen
2013
Japan

South andNorth
America

Asia

Europe

Other

Total

¥30,184¥12,386¥7,842¥11,258¥2,533¥64,203

Thousands of U.S. Dollars
2014
Japan

South andNorth
America

Asia

Europe

Other

Total

$308,492$150,874$101,652$136,096$33,307$730,421

Note: Sales are classified by country or region based on a customer's location.
(2) Net property, plant and equipment
Millions of Yen
2014
Japan

South andNorth
America

Asia

Europe

Other

Total

¥14,279¥2,720¥2,003¥2,890¥1,156¥23,048

Millions of Yen
2013
Japan

South andNorth
America

Asia

Europe

Other

Total

¥15,194¥2,317¥1,823¥2,273¥891¥22,498

Thousands of U.S. Dollars
2014
Japan

South andNorth
America

Asia

Europe

Other

Total

$138,739$26,428$19,462$28,080$11,232$223,941- 34 -

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, 2014 and 2013, was as follows:
Millions of Yen
2014
Resin & Tall
Oil Products
Long-lived assets¥172

Reportable Segment
Paper
Electronics
Chemicals
Materials¥60¥-

Lawter

Total

Other

Eliminations/
Corporate

Consolidated

¥-

¥232

¥190

¥-

¥422

Millions of Yen
2013
Resin & Tall
Oil Products
Long-lived assets¥102

Reportable Segment
Paper
Electronics
Chemicals
Materials¥-¥-

Lawter

Total

Other

Eliminations/
Corporate

Consolidated

¥-

¥102

¥7

¥-

¥109

Thousands of U.S. Dollars
2014
Resin & Tall
Oil Products
Long-lived assets$1,671

Reportable Segment
Paper
Electronics
Chemicals
Materials$583$-

Lawter

Total

Other

Eliminations/
Corporate

Consolidated$-$2,254$1,846$-$4,100[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, 2014 and 2013, were as follows:
Millions of Yen
2014
Resin & Tall
Oil Products
Amortization of goodwill
Amount of goodwill¥7-

Reportable Segment
Paper
Electronics
Chemicals
Materials¥-¥-

Lawter

Total

Other

Eliminations/
Corporate

Consolidated

¥126
258

¥133
258

¥1
4

¥-

¥134
262

Millions of Yen
2013
Resin & Tall
Oil Products
Amortization of goodwill
Amount of goodwill¥-

Reportable Segment
Paper
Electronics
Chemicals
Materials¥-¥-- 35 -

Lawter

Total

Other

Eliminations/
Corporate

Consolidated

¥ 88
103

¥ 88
103

¥1
5

¥-

¥ 89
108

Thousands of U.S. Dollars
2014
Resin & Tall
Oil Products
Amortization of goodwill
Amount of goodwill$68-

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

Lawter

Total

Other

Eliminations/
Corporate

Consolidated$1,224
2,507$1,292
2,507

$10
39

$-

$1,3022,546

- 37 -

Corporate Overview (as of March 31, 2014)
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, Kyushu Sales
Office, Fuji Sales Office, Hokkaido Sales Office, Sendai Sales Office, andShikoku Sales Office

Number of Employees

56 (Consolidated: 1,520)

Number of Group Companies

37

Business Activities

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

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

Principal Subsidiaries
Company name
Harima Chemicals, Inc.

5,000,000 thousand yen

Percentage ofequityparticipation (%)
100

Harima Trading, Inc.

48,000 thousand yen

100

Seven Rivers, Inc.

14,000 thousand yen

100

Harima M.I.D., Inc.

300,000 thousand yen

75

Harima Kasei Polymer Co., Ltd.

10,000 thousand yen

100

Nippon Filler Metals, Ltd.

45,000 thousand yen

100

HARIMA USA, Inc.

3,350 thousand U.S.
dollars
8,356 thousand Brasil
real

100

Harima do Brasil Industria Quimica
Ltda.

Capital stock

99.39

Harimatec Hangzhou Co., Ltd.

8,690 thousand Chinese
yuan

85

Harimatec Malaysia Sdn. Bhd.

1,356 thousand
Malaysian ringgit

85

Hangzhou Hanghua-Harima Paper
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

Xinyi Zhonglin Rosin Co., Ltd.

12,000 thousand yuan

100

Lawter B.V.

76,300 thousand euro

97.68

Harima Chemicals (Shanghai) Co., Ltd

12,652 thousand
Chinese yuan

100

- 39 -

Main business
Manufacture andsale of Resin &Tall Oil Products,
Paper Chemicals,Electronics
Materials, etc.
Real estate
management, etc.
Manufacture andsale of industrial
detergents, etc.
Manufacture andsale of tall oil
products
Manufacture andsale of resins forprinting inks, etc.
Manufacture andsale of electronicmaterials
Control of U.S.
operations
Manufacture andsale of rosin andits derivatives
Manufacture andsale of electronicmaterials
Manufacture andsale of electronicmaterials
Manufacture andsale ofpapermaking
chemicals
Manufacture andsale of rosin andits derivatives
Manufacture andsale of electronicmaterials
Manufacture andsale of rosin andits derivatives
Manufacture andsale of rosin andits derivatives
Control of Lawter
Group’soperations
Support ofChinese businessDirectors and Corporate Auditors (as of March 31, 2014)
President
Senior Executive Director
Executive Director
Executive Director
Executive Director
Director
Director
Director
Director
Director
Director
DirectorStanding Corporate Auditor
Corporate Auditor*
Corporate Auditor*

Yoshihiro Hasegawa
Nobuo Makino
Masanao Kono
Teruo Kaneshiro
Masashi Inaba
Satoru Iwasa
Yorishige Matsuba
Yasuhiro Mizutani
Yoshinobu Matsuda
Mitsunori Kiyono
Fumiaki Tsuchida
Ichiro Taninaka
Jyoichiro Tanaka
Tatsuya Michigami
Hidenori Hiramatsu* denotes Outside Corporate Auditors.
Status of Shares (as of March 31, 2014)(1) Total number of shares authorised to be issued 59,500,000(2) Total number of shares outstanding
26,080,396(including 131,442shares of treasury stocks)(3) Number of shareholders
3,001(4) Major shareholders
Status of shareholding
Number of shares held
Ratio of number of shares held(Thousands of shares)
against total number of shares
outstanding (%)
Hasegawakosan Co., Ltd.
4,558
17.56
Yoshihiro Hasegawa

1,738

6.69

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

1,094

4.21

958

3.69

805

3.10

728

2.80

692

2.66

Shorai, Ltd.
687
2.64
Keihansin Kougyou
672
2.58
Corporation
Bank of Tokyo-Mitsubishi UFJ
476
1.83(Notes) 1. In “Number of shares held,” figures less than one thousand are rounded down.
2. Ratio of number of shares held against total number of shares outstanding is determined basedon the total number of shares outstanding minus the number of treasury stocks (131,442
shares), which amounts to 25,948,954 shares. The numbers shown are rounded down to two
decimal places.

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