Annual Report
Year Ended March 31, 2019

HARIMA CHEMICALS GROUP, INC.

Business Overview
As for the world economy during the current fiscal year, economy in the US continued recovering, also in
Europe which recovered gently. But Chinese economy showed growing signs of slowdown. Meanwhile,
about Japanese economy, employment and corporate earnings improved and also capital investment
increased.
In the current fiscal year which was the last year of our medium-term management plan “NEW HARIMA
2018”, our group has challenged to make new growth in our business.
About the oversea business of our group, with a focus on Europe and China, the sales quantity increased.
As a result, both oversea sales and earnings increased than last fiscal year. On the other hand, domestic
business increased in the sales and earnings as well.
As a result of these conditions, the group’s consolidated net sales for the current fiscal year increased by
5,278 million Yen (up 7.2%) year-on-year to 78,589 million Yen. Operating income increased by 656 million
Yen (up 16.4%) to 4,667million. Ordinary income increased by 810 million Yen (up 20.2%) to 4,818 million
Yen.
Due to additional accounting of deferred tax asset in the consolidated subsidiaries, additional corporate tax
adjustment was (1,239) million Yen (income) and net income attributable to Harima Chemicals Group, INC.
was 4,131 million Yen, increased by 1,405 million Yen (up 51.6%) year-on- year.
Status of Business Segments(Resin & Tall Oil Products)
In the printing ink industry and the paint industry, the production volume both decreased than the last fiscal
year. However, because our new products of printing ink resin and paint resin had good sales, the total sales
and the profit of this segment increased than the previous year.
(Paper Chemicals)
In the domestic paper industry, demand for paperboard increased, but which for information printing papers
declined. As a result, the total production volume decreased. At the same time, both in China and the US
market, paper industry slowed down.
However, China subsidiaries still kept a good business performance and the sales of domestic and the US
subsidiaries remained stable. Total sales and profit of this segment also increased than the previous year.
(Electronics Materials)
Production volume in automobile industry, which is mainly related to this segment, increased slightly bothin domestic market and North America market. But under the effect of US-China trade conflicts andeconomic slowdown in China, production volume in China and Europe market decreased.
In this segment, due to increased sales of brazing materials for automobile heat exchangers, soldering
materials and functional resin for semiconductors, the total sales and profit was both increased than theprevious fiscal year.
(Lawter)
Due to worldwide expansion of the internet shopping, demand for adhesive label increased and sales ofadhesive resin which is used to product adhesive label increased. Mainly in North America, sales kept astable performance and sales volume increased than the previous fiscal year.
Though demand for printing inks was sluggish on the background of digitization of information, the sales
volume of printing ink resin increased because our products acquired new market from the competingcompanies in Europe.
Furthermore, operating income of this segment increased because we changed our production structure andreduced the manufacturing cost.
As a result, Lawter segment achieved increase in total sales and profit the same to the three segments above.

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Consolidated Business Performance Trends(Millions of Yen unless otherwise stated)
74th Fiscal Year

75th Fiscal Year76th Fiscal Year

77th Fiscal Year

(Fiscal year ended
March 2016)(Fiscal year ended
March 2017)(Fiscal year ended
March 2018)(Fiscal year ended
March 2019)

Net sales

80,977

71,38473,31078,589Ordinary income

3,225

3,931

4,008

4,818

1,222

2,421

2,725

4,131

47.12

93.31

105.03159.02

Total assets

70,761

67,134

69,63772,870Net assets

31,36233,81336,09737,811Category

Net income attributable
to Harima Chemicals
Group, INC.
Net income per share(Yen)(Notes) 1. Net income per share is calculated based on the weighted average number of issued shares during
the fiscal year after deducting treasury stocks.
2. We applied ASBJ Statement No.28, “Partial Amendments to Accounting Standard for Tax EffectAccounting” issued on Febryary16,2018 form the beginning on the 77th Fiscal year.
The information from the 74th Fiscal year to the 76th Fiscal year was changed into new data whichallows retroactive application of the new statement above.

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HARIMA CHEMICALS GROUP, INC.
and Subsidiaries
Consolidated Balance Sheet
March 31, 2019

Millions of Yen
2019
2018

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

¥

3,289

¥

3,660

Thousands of
U.S. Dollars(Note 1)2019$

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

29,633¥ 13,423
1,688¥ 10,816
2,786$ 120,939
15,209

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

320
8,409
105
1,106
428
2,267

3,226
76,9891,045
13,6596,073
19,90328,52926,237

257,043

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

3,345
844
684
1,402
49
207

3,398
1,464
736
1,409
49
247

30,138
7,604
6,163
12,632441
1,865

Total long-term liabilities

6,531

7,303

58,843

10,013
9,768
16,95010,013
9,767
13,57390,21588,008
152,716(422 )(26 )(3,802 )1,234(2,020 )(166 )
35,3572,454

1,679(1,110 )(173 )
33,723
2,375

11,118(18,199 )(1,496 )318,560
22,10937,81136,098340,669¥ 72,871¥ 69,638$ 656,555

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

1,560
18,452243
1,058(122 )
11,541
1,124

25,804
166,1232,018
8,397(919 )
104,136
8,551

38,15237,516

343,743

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

8,530
18,453
26,679
760
456
4,770
59,648(37,611 )8,851
18,16627,131
777
431
4,516
59,872(37,804 )76,854
166,258
240,373
6,847
4,108
42,978537,418(338,869 )Net property, plant and equipment

22,03722,068

198,549

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

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

6,756
965
463
1,873
(3 )

34,526
51,942
12,74015,082(27 )

12,682

10,054

114,263

EQUITY (Note 10):
Common stock, authorized 59,500,000 shares; issued, 26,080,396
shares in 2019 and 2018
Capital surplus
Retained earnings
Treasury stock – at cost: 428,851 shares in 2019 and 55,330 shares in2018
Accumulated other comprehensive income:Unrealized gain on available-for-sale securities
Foreign currency translation adjustments
Defined retirement benefit plans
Total
Noncontrolling interests

Total current assets

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

Total current liabilities

Total equity
TOTAL¥ 72,871¥ 69,638

TOTAL$ 656,555

See notes to consolidated financial statements.

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Millions of Yen
2019
2018

Thousands of
U.S. Dollars(Note 1)2019

HARIMA CHEMICALS GROUP, INC.
and Subsidiaries
Consolidated Statement of Income
Year Ended March 31, 2019

Millions of Yen
2018
2019
NET SALES

Thousands of
U.S. Dollars(Note 1)
2019

¥ 78,589¥ 73,310$ 708,073

59,461

55,769535,733

19,12817,541

172,340

14,461

13,530130,291

4,667

4,011

42,049263(275 )
117
(16 )
208
10
(270 )(74 )

2,370(2,478 )1,054(144 )
1,874
90(2,433 )(667 )(13 )(133 )

247(267 )
115(7 )(190 )(8 )(648 )
(22 )
594
39
91

(183 )(56 )(1,649 )INCOME BEFORE INCOME TAXES

4,484

3,955

40,400

INCOME TAXES (Note 12):Current
Deferred

1,201(1,240 )1,168(201 )

10,821(11,172 )

(39 )

967

(351 )NET INCOME

4,523

2,988

40,751NET INCOME ATTRIBUTABLE TO NONCONTROLLINGINTERESTS(392 )(262 )(3,531 )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
Commission paid
Foreign exchange gain (loss)
Gain (loss) on sale of property, plant and equipment
Loss on impairment of long-lived assets (Note 5)
Loss on disposal of property, plant and equipment
Gain on sale of investment securities
Equity in (losses) earnings of associated companies
Other – net
Other income (expenses) – net

Total income taxes

NET INCOME ATTRIBUTABLE TO OWNERS OF THE
PARENT

¥

4,131

¥

2,726

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.

-4-¥159.02
36.00(117 )(1,198 )$37,220U.S. Dollars¥105.03
23.00

$1.43
0.32

HARIMA CHEMICALS GROUP, INC.
and Subsidiaries
Consolidated Statement of Comprehensive Income
Year Ended March 31, 2019

Millions of Yen
2019
2018
NET INCOME
OTHER COMPREHENSIVE INCOME (LOSS) (Note 17):
Unrealized loss on available-for-sale securities
Foreign currency translation adjustments
Defined retirement benefit plans
Share of other comprehensive loss in associated companies
Total other comprehensive income (loss)
COMPREHENSIVE INCOME (Note 17)
TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO(Note 17):
Owners of the parent
Noncontrolling interests
See notes to consolidated financial statements.

-5-

Thousands of
U.S. Dollars(Note 1)2019

¥ 4,523¥ 2,988$ 40,751(445 )(1,043 )8(0 )(1,480 )

(56 )
(88 )
2
(0 )
(142 )(4,009 )(9,397 )72(0 )(13,334 )¥ 3,043¥ 2,846$ 27,417¥2,784259¥2,534
312$25,083
2,334

HARIMA CHEMICALS GROUP, INC.
and Subsidiaries
Consolidated Statement of Changes in Equity
Year Ended March 31, 2019
Thousands

BALANCE, APRIL 1, 2017
Net income attributable to owners of the parent
Cash dividends, ¥20.00 per share
Purchase of treasury stock
Disposal of treasury stock
Change in ownership interest in subsidiaries
Net change in the year
BALANCE, MARCH 31, 2018
Net income attributable to owners of the parent
Cash dividends, ¥29.00 per share
Purchase of treasury stock
Disposal of treasury stock
Change in ownership interest in subsidiaries
Net change in the year
BALANCE, MARCH 31, 2019

BALANCE, MARCH 31, 2018

Number of Sharesof Common Stock
Outstanding

CommonStockCapitalSurplusRetained
Earnings

TreasuryStock25,948¥ 10,013¥ 9,744¥ 11,366¥ (62 )

¥ 1,735¥(972 )

Total

Noncontrolling
Interests

Total Equity¥ (176 )¥ 31,648¥ 2,165¥ 33,813

210

2,726
(519 )
0
68
(9 )
19

2,375

36,0982,726(519 )
77

26,025

10,013

9,767

(56 )

(138 )

3

2,726(519 )
068(9 )(191 )

1,679(1,110 )(173 )

33,723

0
36

32
(9 )
13,573

(26 )

4,131
(754 )(373 )

4,131(754 )(396 )(396 )
1

25,652¥ 10,013¥ 9,768¥ 16,950¥ (422 )CommonStockCapitalSurplusRetained
Earnings

TreasuryStock$ 90,215$ 87,999$ 122,290$

Net income attributable to owners of the parent
Cash dividends, $0.26 per share
Purchase of treasury stock
Disposal of treasury stock
Change in ownership interest in subsidiaries
Net change in the year
BALANCE, MARCH 31, 2019

Millions of Yen
Accumulated Other Comprehensive Income
Foreign
Unrealized
DefinedCurrency
Gain on AvailableRetirement
Translation
for-Sale Securities
Benefit Plans
Adjustments(234 )(445 )(910 )

7

1(1,348 )79

1(1,269 )¥ 1,234¥ (2,020 )¥ (166 )¥ 35,357¥ 2,454¥ 37,811

Total

Noncontrolling
Interests

Total Equity$ 303,837$ 21,398$ 325,235

Thousands of U.S. Dollars (Note 1)
Accumulated Other Comprehensive Income
Foreign
Unrealized
DefinedCurrency
Gain on AvailableRetirement
Translation
for-Sale Securities
Benefit Plans
Adjustments$ 15,127$ (10,001 )$ (1,559 )

37,220(6,794 )37,220(6,794 )(3,568 )(3,568 )9$ 90,215$ 88,008$ 152,716$ (3,802 )See notes to consolidated financial statements.

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4,131
(754 )(396 )

37,220(6,794 )(3,568 )(4,009 )(8,198 )63

9(12,144 )711

9(11,433 )$ 11,118$ (18,199 )$ (1,496 )$ 318,560$ 22,109$ 340,669

HARIMA CHEMICALS GROUP, INC.
and Subsidiaries
Consolidated Statement of Cash Flows
Year Ended March 31, 2019

Millions of Yen
2019
2018
OPERATING ACTIVITIES:
Income before income taxes
Adjustments for:
Income taxes – paid
Depreciation and amortization
Loss on impairment of long-lived assets
Foreign exchange (gain) loss
(Gain) loss on sales of property, plant and equipment
Loss (gain) on sales of investment securities
Changes in assets and liabilities:
Increase in trade notes and accounts receivable
Increase in inventories
Increase in trade notes and accounts payable
Other – net
Total adjustments
Net cash provided by operating activities

Thousands of
U.S. Dollars(Note 1)
2019

¥ 4,484¥ 3,955$ 40,400(960 )
2,031
270(227 )(10 )0(1,209 )
1,948
648
192
8
(594 )(8,649 )18,2992,433(2,045 )(90 )0(1,606 )(197 )
311
83(305 )
4,179(2,377 )(699 )
580
325(1,178 )2,777(14,470 )(1,775 )2,802
747(2,748 )37,652INVESTING ACTIVITIES:
Purchases of property, plant and equipment
Proceeds from sales of property, plant and equipment
Purchases of intangible assets
Purchases of investment securities
Proceeds from sales of investment securities
Other – net
Net cash used in investing activities(2,529 )68(50 )(2,595 )100(29 )(5,035 )(1,644 )140(115 )(807 )
878
21(1,527 )(22,786 )
613(450 )(23,380 )
901(262 )(45,364 )FINANCING ACTIVITIES:
Increase in short-term bank loans – net
Proceeds from long-term debt
Repayments of long-term debt
Dividends paid
Other – net
Net cash provided by (used in) financing activities

2,941
1,706
(2,682 )(755 )(629 )
581

5,474
1,432
(7,763 )(519 )(176 )(1,552 )26,49815,371(24,164 )(6,802 )(5,668 )5,235

FOREIGN CURRENCY TRANSLATION ADJUSTMENTS ON
CASH AND CASH EQUIVALENTS

(96 )

(40 )

(866 )NET DECREASE IN CASH AND CASH EQUIVALENTS(371 )(342 )(3,343 )CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR

3,660

4,002

32,976¥ 3,289¥ 3,660$ 29,633

CASH AND CASH EQUIVALENTS, END OF YEAR

See notes to consolidated financial statements.

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HARIMA CHEMICALS GROUP, INC.
and Subsidiaries
Notes to Consolidated Financial Statements
Year Ended March 31, 2019
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 2018
consolidated financial statements to conform to the classifications used in 2019.
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 ¥110.99 to $1, the approximate rate of exchange at March 31, 2019.
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 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 – 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) tentatively may be used for the consolidation process, except for thefollowing items that should be adjusted in the consolidation process so that net income is accounted for inaccordance with Japanese GAAP, unless they are not material:(a) amortization of goodwill; (b) scheduled amortization of actuarial gain or loss of pensions that has 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.

Unification of Accounting Policies Applied to Foreign Associated Companies for the Equity Method –ASBJ Statement No. 16, "Accounting Standard for Equity Method of Accounting for Investments,"
requires adjustments to be made to conform the associate's accounting policies for similar transactions
and events under similar circumstances to those of the parent company when the associate's financial
statements are used in applying the equity method, unless it is impracticable to determine suchadjustments. In addition, financial statements prepared by foreign associated companies in accordancewith either International Financial Reporting Standards or generally accepted accounting principles in the
United States of America tentatively may be used in applying the equity method if the following items areadjusted so that net income is accounted for in accordance with Japanese GAAP, unless they are notmaterial: (a) amortization of goodwill; (b) scheduled amortization of actuarial gain or loss of pensions
that has been recorded in equity through other comprehensive income;(c) expensing capitalized development costs of R&D; and (d) cancellation of the fair value model ofaccounting for property, plant and equipment and investment properties and incorporation of the costmodel of accounting.

d.

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 themeasurement 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.

e.

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.

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f.

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.

g.

Investment Securities – Investment securities are classified and accounted for as follows:
Marketable available-for-sale securities are reported at fair value, with unrealized gains 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.

h.

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.

i.

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.

j.

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

k.

Retirement and Pension Plans – The Company and certain domestic 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 are recorded as a liability at the amount that would be required if all
directors retired at each balance sheet date.

- 10 -

l.

Asset Retirement Obligations – An asset retirement obligation is recorded for a legal obligation imposed
either by law or contract that results from the acquisition, construction, development, and the normal
operation of a tangible fixed asset and is associated with 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 throughdepreciation 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 estimate ofundiscounted cash flows are reflected as an adjustment to the carrying amount of the liability and thecapitalized amount of the related asset retirement cost.

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

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

o.

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

p.

Income Taxes – The provision for income taxes is computed based on the pretax income included in the
consolidated statement of operations. The asset and liability approach is used 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.
On February 16, 2018, the ASBJ issued ASBJ Statement No. 28, "Partial Amendments to AccountingStandard for Tax Effect Accounting," which requires deferred tax assets and deferred tax liabilities to beclassified as investments and other assets and long-term liabilities, respectively. Deferred tax assets werepreviously classified as current assets and investments and other assets, and deferred tax liabilities werepreviously classified as current liabilities and long-term liabilities under the previous accounting standard.
The revised accounting standard is effective for annual periods beginning on or after April 1, 2018. The
Company retrospectively applied the revised accounting standard effective April 1, 2018, and deferred tax
assets of ¥260 million and deferred tax liabilities of ¥134 million which were previously classified as
current assets and long-term liabilities, respectively, as of March 31, 2018, have been reclassified as
investments and other assets in the accompanying consolidated balance sheet.
The amendments also require details of valuation allowance and expiration of tax loss carryforwards to bedisclosed, but comparative information is allowed to not be disclosed as transitional measures. The
Company disclosed the details of valuation allowance and the expiration of tax loss carryforwards as ofMarch 31, 2019 in Note 12.

q.

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.

- 11 -

r.

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.

s.

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

t.

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.

u.

New Accounting Pronouncements – On March 30, 2018, the ASBJ issued ASBJ Statement No. 29,"Accounting Standard for Revenue Recognition," and ASBJ Guidance No. 30, "Implementation Guidanceon Accounting Standard for Revenue Recognition." The core principle of the standard and guidance isthat an entity should recognize revenue to depict the transfer of promised goods or services to customers
in an amount that reflects the consideration to which the entity expects to be entitled in exchange forthose goods or services. An entity should recognize revenue in accordance with that core principle byapplying the following steps:
Step 1: Identify the contract(s) with a customer
Step 2: Identify the performance obligations in the contract
Step 3: Determine the transaction price
Step 4: Allocate the transaction price to the performance obligations in the contract
Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation
The accounting standard and guidance are effective for annual periods beginning on or after April 1,
2021. Earlier application is permitted for annual periods beginning on or after April 1, 2018.
The Company expects to apply the accounting standard and guidance for annual periods beginning on orafter April 1, 2021, and is in the process of measuring the effects of applying the accounting standard andguidance in future applicable periods.

- 12 -

3.

INVESTMENT SECURITIESInvestment securities as of March 31, 2019 and 2018, consisted of the following:Thousands of
U.S. Dollars
2019

Millions of Yen
2018
2019
Non-current:
Equity securities
Trust fund investments and other¥ 3,80131¥ 6,625131$ 34,247
279

Total

¥ 3,832¥ 6,756$ 34,526

The costs and aggregate fair values of investment securities as of March 31, 2019 and 2018, were as follows:
Millions of Yen
Unrealized
Unrealized
Gains
LossesFair
Value

March 31, 2019

Cost

Securities classified as:
Marketable available-for-sale:
Equity securities
Debt securities¥2,09130¥1,7081¥(21 )¥3,77831¥2,087130¥2,2871¥(5 )¥4,369131

March 31, 2018
Securities classified as:
Marketable available-for-sale:
Equity securities
Debt securities

March 31, 2019

Cost

Securities classified as:
Marketable available-for-sale:
Equity securities
Debt securities$18,840
270

Thousands of U.S. Dollars
Unrealized
Unrealized
Gains
Losses$15,3899$(189 )

Fair
Value

$34,040
279

Carrying amounts of available-for-sale securities whose fair value is not readily determinable as of March 31,
2019 and 2018, were as follows:
Millions of Yen
2018
2019
Nonmarketable available-for-sale:
Equity securities¥23- 13 -¥2,256

Thousands of
U.S. Dollars
2019
$207

The information for available-for-sale securities which were sold during the years ended March 31, 2019 and2018, were as follows:

March 31, 2019

Proceeds

Available-for-sale:
Equity securities
Debt securities¥

Millions of Yen
Realized
Gains

Realized
Losses

0
100

¥

¥ 0

Total

¥ 100

¥

¥ 0

Available-for-sale:
Equity securities
Debt securities

¥ 817
10

¥ 602

Total

¥ 827

¥ 602

March 31, 2018

¥ 6

Thousands of U.S. Dollars
Realized
Realized
Proceeds
Gains
LossesMarch 31, 2019
Available-for-sale:
Equity securities
Debt securities

$

Total
4.

¥ 6

0
901

$

$ 0

$ 901

$

$ 0

INVENTORIESInventories as of March 31, 2019 and 2018, consisted of the following:
Millions of Yen
2019
2018

5.

Finished products
Work in process
Raw materials and supplies

¥

5,671
195
5,692

Total

¥ 11,558

¥

5,527
229
5,785

¥ 11,541

Thousands of
U.S. Dollars
2019$

51,095
1,757
51,284$ 104,136

LONG-LIVED ASSETSThe Group recorded impairment losses of ¥270 million ($2,433 thousand) and ¥648 million for the years
ended March 31, 2019 and 2018, respectively. The Group recognized a decline in value of a golf course andhotel facilities for the year ended March 31, 2018. Also, the Group recognized a decline in value of a golfcourse, hotel facilities, and unused real estate in Japan for the year ended March 31, 2019. The 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 assets was measured at the fair value considering a third-party appraisal report for
the facility.

- 14 -

6.

INVESTMENT PROPERTYThe 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, 2019 and 2018, were ¥109 million($982 thousand) and ¥117 million, respectively.
In addition, the carrying amounts, changes in such balances, and market prices of such properties were as
follows:

April 1,2018
¥1,986

April 1,2017
¥2,641

April 1,
2018
$17,894

Millions of Yen
Carrying Amount
Increase/
March 31,
Decrease
2019¥114¥2,100Millions of Yen
Carrying Amount
Increase/
March 31,
Decrease
2018¥(655)¥1,986

Thousands of U.S. Dollars
Carrying Amount
Increase/
March 31,
Decrease2019$1,027$18,921

Fair Value
March 31,2019
¥2,862
Fair Value
March 31,2018
¥2,742
Fair Value
March 31,2019
$25,786

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, 2019, primarily represents the capital expenditure
for current investment properties of ¥403 million ($3,631 thousand), and the decrease primarily
represents depreciation of ¥28 million ($252 thousand), impairment loss of ¥260 million ($2,343
thousand), and sale of ¥1 million ($9 thousand). Increase during the fiscal year ended March 31,
2018, primarily represents the capital expenditure for current investment properties of ¥102 million,
and the decrease primarily represents depreciation of ¥23 million, impairment loss of ¥648 million,
and sale of ¥86 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, 2019 and 2018, 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, 2019 and 2018, were 0.9% and 0.8%, respectively. As of March 31, 2019 and 2018, the totalcommitted line of credit was ¥4,000 million ($36,039 thousand) and ¥4,000 million, and unused balance was¥3,900 million ($35,138 thousand) and ¥4,000 million, respectively.

- 15 -

Long-term debt as of March 31, 2019 and 2018, consisted of the following:Thousands of
U.S. Dollars
2019

Millions of Yen
2019
2018
Unsecured loans from banks and other financial
institutions, due serially to 2023 with interest rates
ranging from 0.4% to 3.7% (2019) and from 0.4%
to 2.1% (2018)
Obligations under finance leases
Total
Less current portion¥ 4,008
1,025
5,033(1,688 )¥ 5,069
1,115
6,184(2,786 )$ 36,112
9,235
45,347(15,209 )Long-term debt, less current portion¥ 3,345¥ 3,398$ 30,138

Annual maturities of long-term debt as of March 31, 2019, for the next five years and thereafter were as
follows:
Year Ending March 31

Millions ofYen

Thousands of
U.S. Dollars

2020
2021
2022
2023
2024
2025 and thereafter¥ 1,688
1,127
210
71
1,331
606

$ 15,209
10,154
1,892
640
11,992
5,460

Total

¥ 5,033$ 45,347

Certain bank loans and the commitment lines of credit are subject to financial covenants, which use total
equity and continuous operating income without extraordinary items for the most recent year as credit risk
indicators, and require the Group to maintain the financial measures above a certain level. Based on thefinancial results for the years ended March 31, 2019 and 2018, the covenants were not breached since theGroup met the requirements.
8.

RETIREMENT AND PENSION PLANS
The Company and some domestic subsidiaries have a defined contribution plan and a defined benefit plan,
including a defined corporate pension plan and retirement lump sum plan. Some foreign subsidiaries havedefined contribution plans and defined benefit plans. Some domestic subsidiaries apply the simplified method
to calculate liabilities for retirement benefits and retirement benefit costs.
In addition, the Company and certain domestic subsidiaries participate in multi-employer pension plans. Since
the pension assets attributable to the Company and certain domestic subsidiaries cannot be reliably 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 retirement benefits for directors are paid
subject to the approval of the shareholders in accordance with the Companies Act of Japan (the "Companies
Act"). The liability for retirement benefits for directors as of March 31, 2019 and 2018 was ¥447 million($4,030 thousand) and ¥405 million, respectively, and included in liability for retirement benefits in the
consolidated balance sheet.

- 16 -

<1> Defined Benefit Plan
(1) The changes in defined benefit obligation for the years ended March 31, 2019 and 2018, were as
follows:
Millions of Yen
2018
2019

Thousands of
U.S. Dollars
2019

Balance at beginning of year
Service cost
Interest cost
Actuarial (gains) losses
Benefits paid
Foreign currency translation differences
Others¥ 2,945173
26(0 )(161 )(36 )6¥ 2,838170
26
8(153 )
51
5$ 26,534
1,559
234
(0 )
(1,451 )(324 )
54

Balance at end of year

¥ 2,953¥ 2,945$ 26,606(2) The changes in plan assets for the years ended March 31, 2019 and 2018, were as follows:
Millions of Yen
2018
2019

Thousands of
U.S. Dollars
2019

Balance at beginning of year
Expected return on plan assets
Actuarial losses
Contributions from the employer
Benefits paid
Foreign currency translation differences
Others¥ 2,091
60
(30 )
212
(161 )(32 )6¥ 1,943
59
(16 )
207
(153 )
45
6$ 18,840
541(270 )
1,910(1,451 )(288 )
53

Balance at end of year

¥ 2,146¥ 2,091$ 19,335(3) The changes in defined benefit obligation under the simplified method for the years ended March 31,
2019 and 2018, were as follows:
Millions of Yen
2019
2018

Thousands of
U.S. Dollars
2019

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

¥ 150
4
(3 )
(4 )

¥ 133
26
(8 )
(1 )

$ 1,351
36
(27 )
(36 )

Balance at end of year

¥ 147

¥ 150

$ 1,324- 17 -

(4) Reconciliation between the liability recorded in the consolidated balance sheet and the balances ofdefined benefit obligation and plan assets as of March 31, 2019 and 2018, was as follows:
Millions of Yen
2018
2019

Thousands of
U.S. Dollars
2019

Funded defined benefit obligation
Plan assets
Total
Unfunded defined benefit obligation¥ 2,953(2,146 )807
147¥ 2,945(2,091 )854
150$ 26,606(19,335 )
7,271
1,324

Net liability arising from defined benefit
obligation¥¥ 1,004$

954

Millions of Yen
2019
2018

8,595

Thousands of
U.S. Dollars
2019

Liability for retirement benefits¥ 954¥ 1,004$ 8,595

Net liability arising from defined benefit
obligation¥ 954¥ 1,004$ 8,595(5) The components of net periodic benefit costs for the years ended March 31, 2019 and 2018, were as
follows:
Millions of Yen
2018
2019

Thousands of
U.S. Dollars
2019

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

¥ 173
26
(60 )
30
4
4

¥ 170
26
(59 )
32
4
26

$ 1,559234(541 )
270
36
37

Net periodic benefit costs

¥ 177

¥ 199

$ 1,595(6) Amounts recognized in other comprehensive income (before income tax effect) in respect of defined
retirement benefit plans for the years ended March 31, 2019 and 2018, were as follows:
Millions of Yen
2018
2019

Thousands of
U.S. Dollars
2019

Prior service cost
Actuarial (gains) losses
Others

¥ 4
(0 )
3

¥ 4
(8 )
(5 )

$ 36
(0 )
27

Total

¥ 7

¥ 7

$ 63

- 18 -

(7) Amounts recognized in accumulated other comprehensive income (before income tax effect) in
respect of defined retirement benefit plans as of March 31, 2019 and 2018, were as follows:
Millions of Yen
2018
2019

Thousands of
U.S. Dollars
2019

Unrecognized prior service cost
Unrecognized actuarial losses

¥ 50
202

¥ 57
202

$

450
1,820

Total

¥ 252

¥ 259

$ 2,270(8) Plan assets as of March 31, 2019 and 2018a.

Components of plan assets
Plan assets consisted of the following:

b.

2019

2018

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

8.7 %
6.9
3.3
6.9
0.9
65.8
7.5

11.9 %
7.9
3.6
7.2
0.9
65.1
3.4

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, 2019 and 2018, were set forth as follows:

Discount rate
Expected rate of return on plan assets

2019

2018

Mainly 0.7%
Mainly 3.0%

Mainly 0.7%
Mainly 3.0%

<2> Defined Contribution Plan
The amount of contributions required for the defined contribution plan of the Group for the years ended
March 31, 2019 and 2018, was ¥221 million ($1,991 thousand) and ¥200 million, respectively.
<3> Multi-Employer Pension Plan
As of March 28, 2018, Osaka Yakugyo Kosei Pension Fund had dissolved, and the Company and certain
domestic subsidiaries joined Osaka Yakugyo Kigyo Pension Fund, a new multi-employer plan. This
disclosure uses the most recently available information.
The contributions to the multi-employer plan, which are accounted for using the same method as adefined contribution plan, were ¥84 million ($757 thousand) and ¥93 million for the years ended March
31, 2019 and 2018, respectively.

- 19 -

(1) The funded status of the multi-employer plan as of March 31, 2018 and 2017, was as follows:a.

Osaka Yakugyo Kosei Pension Fund
There is no available information about 2018.
Millions of Yen
2017
2018

b.

Plan assets
Sum of actuarial liabilities of pension
plan and minimum actuarial reserve¥

Net balance¥¥ 291,474

Thousands of
U.S. Dollars
2018$

358,591¥ (67,117 )$Osaka Yakugyo Kigyo Pension FundAs of March 31, 2019, there is no available information about the new multi-employer plan.

(2) The contribution ratio of the Group in Osaka Yakugyo Kosei Pension Fund for the year ended March
31, 2017, was 1.3%. There is no available information about Osaka Yakugyo Kigyo Pension Fund.
(3) Supplementary explanation
The net balance in (1) above is mainly caused by past service cost of ¥46,483 million for 2017, and a
deficiency brought forward of ¥20,634 million for 2017. Past service cost under the plan isamortized on a straight-line basis over 14 years, and the special contributions of ¥64 million for
2017, which are utilized for such amortization, were expensed in the consolidated statement ofincome of the Group.
The ratios in (2) above do not represent the actual actuarial liability ratio of the Group.
9.

ASSET RETIREMENT OBLIGATIONS
The changes in asset retirement obligations for the years ended March 31, 2019 and 2018, were as follows:
Millions of Yen
2018
2019
Balance at beginning of year
Reconciliation associated with passage of time
Balance at end of year

- 20 -

¥49
0
49

¥48
1
49

Thousands of
U.S. Dollars
2019
$441
0
441

10.

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

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

- 21 -

11.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses for the years ended March 31, 2019 and 2018, principallyconsisted of the following:
Millions of Yen
2018
2019
Employees' salaries and bonuses
Net periodic retirement benefit
Transport
Depreciation
RentalResearch and development

12.

¥3,709
258
3,464
248
247
2,595

Thousands of
U.S. Dollars
2019¥3,527
223
3,150
305
271
2,464

$33,417
2,325
31,2102,234
2,225
23,380

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 30.6% and 30.8% for the years
ended March 31, 2019 and 2018, respectively. Foreign subsidiaries are subject to the income taxes of thecountries in which they operate.
The tax effects of significant temporary differences and tax loss carryforwards which resulted in deferred tax
assets and liabilities at March 31, 2019 and 2018, were as follows:
Millions of Yen
2018
2019
Deferred tax assets:
Tax loss carryforwards
Impairment loss on long-lived assets
Loss on revaluation of investment securities
Retirement benefits to directors
Unrealized gain on property, plant and equipment
OthersTotal of tax loss carryforwards and temporary
differences
Less valuation allowance for tax loss carryforwards
Less valuation allowance for temporary differences
Total valuation allowance
Deferred tax assets
Deferred tax liabilities:
Reserve for deferred gains on sales of property, 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
OthersDeferred tax liabilities
Net deferred tax assets (liabilities)- 22 -

Thousands of
U.S. Dollars
2019¥ 1,800
1,482
114
137
97
865

¥ 2,242
1,414
114
124
97
846

$ 16,218
13,353
1,027
1,234
874
7,794

4,495
(588 )(1,710 )(2,298 )¥ 2,197

4,837(3,626 )¥ 1,21140,500(5,298 )(15,407 )(20,705 )$ 19,795

¥

¥

$

(50 )
(443 )(278 )(476 )(52 )(593 )(250 )(474 )(450 )(3,991 )(2,505 )(4,289 )(71 )(309 )¥ (1,627 )(76 )(767 )¥ (2,212 )(640 )(2,784 )$ (14,659 )¥¥ (1,001 )

$

570

5,136

Valuation allowance decreased by ¥1,328 million ($11,965 thousand), mainly due to the reversal of valuation
allowance for tax loss carryforwards at Lawter BVBA.
The expiration of tax loss carryforwards, the related valuation allowances, and the resulting net deferred tax
assets as of March 31, 2019, were as follows:

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

March 31, 2019

1 Year or
Less

After
1 Yearthrough
2 Years

¥ 34

¥ 1

(21 )

(1 )

After
2 Years
through
3 Years¥

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

¥

¥ 6

13

1 Year or
Less

Deferred tax assets relating
to tax loss
carryforwards$ 306
Less valuation allowances
for tax loss
carryforwards(189 )Net deferred tax assets
relating to tax loss
carryforwards
117

After
5 Years

Total¥ 1,759¥ 1,800(566 )

(588)

1,193

1,212

After
5 Years

Total$ 15,849$ 16,218(5,100 )(5,298 )

10,74910,9206
Thousands of U.S. Dollars
After
After
After
2 Years
3 Years
4 Years
throughthroughthrough
3 Years
4 Years
5 Years

After
1 Yearthrough
2 Years

$ 9

$

$

$ 54

(9 )
54

Net deferred tax assets relating to tax loss carryforwards was ¥1,212 million ($10,920 thousand) for the year
ended March 31, 2019. It was mainly recorded at Lawter BVBA as a result of future taxable income
consideration.
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, 2019 and 2018, were as
follows:
2019

2018

Normal effective statutory tax rate
Expenses not deductible for income tax purposes
Inhabitant tax on per capita basis
Difference of income tax rates applicable to income in certain
foreign countries
Decrease in valuation allowance
Tax credit
Adjustment of deferred tax assets and liabilities at end of period due
to change in tax rates
Undistributed earnings of foreign subsidiaries
Other – net

30.6 %
3.6
0.7

30.8 %
3.6
0.8(5.9 )(27.5 )
(1.8 )

0.3(4.1 )(1.4 )

0.0
0.6(1.2 )(5.8 )
1.0(0.8 )

Actual effective tax rate

(0.9 )%

24.4 %- 23 -

13.

RESEARCH AND DEVELOPMENT COSTS
Research and development costs charged to income were ¥2,595 million ($23,380 thousand) and ¥2,464
million for the years ended March 31, 2019 and 2018, 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, 2019 and 2018, were ¥309 million ($2,784
thousand) and ¥305 million, respectively.
The future minimum lease payments commitment under noncancelable operating leases as of March 31, 2019,are as follows:
Millions of
Yen

15.

Due within one year
Due after one year

¥

176
1,140

Total

¥ 1,316

Thousands of
U.S. Dollars$

1,586
10,271$ 11,857

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 at 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,
2019.

- 24 -

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 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, 2019 and 2018, 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, 2019

3,289
22,4583,809

Unrealized
Gain (Loss)

3,289
22,4583,809¥¥ 29,556¥ 29,556¥

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

Total

¥ (29,675)¥ (29,651 )¥ 24March 31, 2018

Carrying
AmountFair Value

Cash and cash equivalents
Notes and accounts receivable
Investment securities

¥

¥

Total

Millions of Yen

3,660
21,3134,500¥¥ 29,473¥ 29,473¥

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

¥

¥

Total

¥ (27,676 )- 25 -

3,660
21,313
4,500

Unrealized
Gain (Loss)(9,940 )(10,816 )(6,184 )(736 )(9,940 )(10,816 )(6,196 )(684 )¥ (12 )
52

¥ (27,636 )¥ 40Thousands of U.S. Dollars
Carrying
Unrealized
AmountFair Value
Gain (Loss)

March 31, 2019
Cash and cash equivalents
Notes and accounts receivable
Investment securities

$

Total

29,633202,342
34,31929,633202,342
34,319$$ 266,294$ 266,294$

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

$

$

Total

$ (267,368 )(94,919 )(120,939 )(45,347 )(6,163 )$(94,919 )(120,939 )(45,537 )(5,757 )$ (190 )406$ (267,152 )$ 216

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, 2019.
Long-Term Deposits Received
The fair values of long-term deposits received are determined by discounting the future cash flows
estimable from the past refund experience and by the estimated interest rate reflecting assumed
refund period and credit risk.
Derivatives
The fair value information for derivatives is included in Note 16.
(b) Carrying amount of financial instruments whose fair value cannot be reliably determined
Millions of Yen
2018
2019
Investments in equity instruments that do nothave a quoted market price in an active
market- 26 -¥23¥2,256

Thousands of
U.S. Dollars
2019

$207

(5) Maturity Analysis for Financial Assets with Contractual Maturities

Due inOne Year or
Less

March 31, 2019
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

¥

¥

¥

¥ 25,747

¥

¥

¥

¥

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
One Year
Five Years
through FivethroughYears
Ten Years

3,660
21,313Due after
Ten Years

¥

¥

¥

¥

¥ 100
¥ 24,973

Due inOne Year or
Less

March 31, 2019

Due after
Ten Years

3,289
22,458Due inOne Year or
Less

March 31, 201816.

¥

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

$

¥ 100

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

Due after
Ten Years

29,633202,342$$$$ 231,975$$$

DERIVATIVESThe Group also enters into interest rate swap contracts to manage its interest rate exposures on certain
liabilities.
All derivative transactions are entered into to hedge interest exposures incorporated within the Group'sbusiness. Accordingly, market risk in these derivatives is 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.

- 27 -

Derivative Transactions to Which Hedge Accounting Is Not Applied
March 31, 2019
Not applicable
March 31, 2018
Not applicable
17.

OTHER COMPREHENSIVE INCOME (LOSS)
The components of other comprehensive income (loss) for the years ended March 31, 2019 and 2018, were as
follows:
Millions of Yen
2018
2019
Unrealized loss on available-for-sale securities:
Gains arising during the year
Reclassification adjustments to profit or loss
Amount before income tax effect
Income tax effectTotal
Foreign currency translation adjustments:
Adjustments arising during the year
Reclassification adjustments to profit or loss
Amount before income tax effect
Income tax effect
Total
Defined retirement benefit plans:
Adjustments arising during the year
Reclassification adjustments to profit or loss
Amount before income tax effect
Income tax effect
Total
Share of other comprehensive loss in associatedcompanies – Losses arising during the year
Total
Total other comprehensive income (loss)¥(595 )(0 )(595 )
150¥ 566(594 )
(28 )
(28 )

$

(5,360 )(0 )(5,360 )1,351¥(445 )¥ (56 )$

(4,009 )¥ (1,043 )¥ (88 )$

(9,397 )(1,043 )(88 )¥ (1,043 )¥ (88 )$

(9,397 )

¥

(27 )
34
7
1

¥ (29 )
36
7
(5 )

$

(243 )
306
63
9

¥

8

¥

2

$

72

¥

(0 )

¥

(0 )

$

(0 )

¥

(0 )

¥

(0 )

$

(0 )

¥ (1,480 )- 28 -

Thousands of
U.S. Dollars
2019¥ (142 )(9,397 )$ (13,334 )18.

NET INCOME PER SHARE
Details of the basic net income per share ("EPS") for the years ended March 31, 2019 and 2018, were as
follows:
Millionsof YenNet Income
Attributable to
Owners of the
ParentThousandsof Shares¥ 4,131

25,980¥ 159.02¥ 2,726

25,954¥ 105.03

WeightedAverage
SharesYen

Dollars

EPS

For the year ended March 31, 2019:
Basic EPS
Net income available to commonshareholders$ 1.43For the year ended March 31, 2018:
Basic EPS
Net income available to commonshareholders

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

RELATED PARTY DISCLOSURES(1) The Transactions between the Company and Related Parties
Transactions between the Company and related parties for the years ended March 31, 2019 and 2018,
were as follows:
Fiscal year ended March 31, 2019
Not applicable
Fiscal year ended March 31, 2018
Not applicable- 29 -

(2) Transactions between Subsidiaries and Related Parties
Transactions between subsidiaries and related parties for the years ended March 31, 2019 and 2018, were as follows:
Fiscal year ended March 31, 2019

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

Amount
¥ 5

$ 45

0
26

0
234

Other current assets, end of year
Minimum rental commitments
Note:

Thousands of
U.S. Dollars

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, 2018

Name

Type of Related Parties
Owned by certain directors of the Company
and their relatives

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

Amount¥ 5

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

0
31

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).

SUBSEQUENT EVENT
Appropriations of Retained Earnings
The following appropriation of retained earnings at March 31, 2019, was approved at the Company's Board of Directors' meeting held on May 16, 2019:Year-end cash dividends, ¥19.00 ($0.17) per share
21.

Millionsof YenThousands of
U.S. Dollars¥487$4,391

SEGMENT INFORMATION
Under ASBJ Statement No. 17, "Accounting Standard for Disclosures about Segments of an Enterprise and Related Information," and ASBJ Guidance No. 20, "Guidance on Accounting Standard for Disclosures about Segments of an Enterprise and RelatedInformation," 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 arecomponents of an entity about which separate financial information is available and for which 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 performed in order to decide how resources are allocated among the Group.
"Resin & Tall Oil Products" manufactures and sells paint resin, resins for print inks, tall oil products, and synthetic rubber emulsifiers. "Paper Chemicals" manufactures and sells paper-strengthening agents, sizing agents, and surface-coating agents.
"Electronics Materials" manufactures and sells electronics materials. "Lawter" manufactures and sells resins for print inks and adhesives.

- 30 -

(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."(3) Information about Sales, Profit, and Other Items Is As Follows:
Millions of Yen
2019
Reportable Segments

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

Resin &
Tall Oil
Products

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

676
(9 )

665
(6 )

147
(1 )

¥ 5,737¥421

Lawter

Total

Other

Total

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

¥ 78,556
596¥ 79,152¥5,13333(596 )¥ (563 )¥ (466 )428(142 )(32 )

1,916(158 )
(32 )

115
(4 )

2,031
(162 )
(32 )

(66 )
19

¥

Consolidated¥ 78,589¥ 78,589¥4,6672,031(228 )(13 )"Other" comprises business segments not attributable to a reportable segment and is mainly comprised of real estate management.
Reconciliations of segment profit (loss) include reconciliation gain of inventories of ¥91 million ($820 thousand) and company-wide expenses of ¥620 million ($5,586 thousand), which are not attributable to any reportable segment. Assets
are not allocated to reportable segments as they are not used to determine allocation of management resources or for assessment of performance of the Company.
Millions of Yen
2018
Reportable Segments

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

Resin &
Tall Oil
Products

Paper
ChemicalsElectronics
Materials¥ 19,087216¥ 19,303¥1,176¥ 17,334
147¥ 17,481¥1,749¥ 5,634

631
(9 )

629
2

Lawter

Total

Other

Total

Reconciliations

Consolidated¥ 71,755
511¥ 72,266¥4,601¥ 1,605138¥ 1,743¥ (19 )

¥ 73,360
649¥ 74,009¥4,582¥ (50 )
(649 )¥ (699 )¥(571 )

¥ 73,310¥ 5,634¥404¥ 29,700
148¥ 29,848¥1,272

135
(1 )

427
(149 )

1,822(157 )

126
(4 )

1,948
(161 )(69 )39¥ 73,310¥4,011
1,948(230 )
39"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 ¥109 million and company-wide expenses of ¥751 million, which are not attributable to any reportable segment. Assets are not allocated to reportablesegments as they are not used to determine allocation of management resources or for assessment of performance of the Company.
Thousands of U.S. Dollars
2019
Reportable Segments

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

Resin &
Tall Oil
Products

Paper
ChemicalsElectronics
Materials$ 182,981
1,892$ 184,873$12,398$ 179,746
1,081$ 180,827$16,956$ 51,689

6,091
(81 )

5,992
(54 )

1,324
(9 )

$ 51,689$3,793

LawterTotal$ 279,125
1,333$ 280,458$13,542$ 693,541
4,306$ 697,847$46,689

3,856(1,279 )(288 )

17,263(1,423 )(288 )- 31 -

Other

Total

$ 14,235 $ 707,776
1,063
5,369
$ 15,298 $ 713,145$ (441 )$46,248
1,036
(36 )

18,299(1,459 )(288 )

Reconciliations$

297(5,369 )$ (5,072 )$(4,199 )(595 )
171

Consolidated$ 708,073$ 708,073$42,049
18,299(2,054 )(117 )

[Related information]
1.

Information about geographical areas
Net sales to customers and property, plant and equipment by region for the years ended March 31,
2019 and 2018, were as follows:(1) Net sales
Millions of Yen
2019
Japan

South andNorth
America

Asia

Europe

Other

Total

¥32,542¥15,293¥12,612¥15,052¥3,090¥78,589

Millions of Yen
2018
Japan

South andNorth
America

Asia

Europe

Other

Total

¥30,924¥15,374¥10,622¥13,450¥2,940¥73,310

Thousands of U.S. Dollars
2019
Japan

South andNorth
America

Asia

Europe

Other

Total

$293,198$137,787$113,632$135,616$27,840$708,073

Note: Sales are classified by country or region based on the location of customers.
(2) Net property, plant and equipment
Millions of Yen
2019
Japan

South andNorth
America

Asia

Europe

Other

Total

¥12,521¥3,735¥2,280¥2,397¥1,104¥22,037

Millions of Yen
2018
Japan

South andNorth
America

Asia

Europe

Other

Total

¥12,549¥3,756¥2,113¥2,498¥1,152¥22,068

Thousands of U.S. Dollars
2019
Japan

South andNorth
America

Asia

Europe

Other

Total

$112,812$33,652$20,542$21,597$9,946$198,549- 32 -

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, 2019 and 2018, was as follows:
Millions of Yen
2019
Reportable Segments

Loss on impairment

Resin & Tall Oil
Products

Paper Chemicals¥¥10Electronics Materials¥

Lawter
¥

Total
¥10

Other

Eliminations/
Corporate

¥260

¥

Other

Eliminations/
Corporate

¥648

¥

Other

Eliminations/
Corporate$2,343$

Consolidated¥270

Millions of Yen
2018
Reportable Segments

Loss on impairment

Resin & Tall Oil
Products

Paper Chemicals¥¥

Electronics Materials¥

Lawter¥Total¥

Consolidated¥648

Thousands of U.S. Dollars
2019
Reportable Segments

Loss on impairment

Resin & Tall Oil
Products

Paper Chemicals$$90

Electronics Materials$

Lawter$******- 33 -

Total$90

Consolidated$2,433

- 34 -

Corporate Overview (as of March 31, 2019)
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

75 (Consolidated: 1,458)

Number of Group Companies 34
Business Activities

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

Websitewww.harima.co.jp- 35 -

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
40,206 thousand Brasil
real

100

Harima do Brasil Industria Quimica
Ltda.

99.87

Harimatec Hangzhou Co., Ltd.

8,690 thousand
Chinese yuan

100

Harimatec Malaysia Sdn. Bhd.

1,356 thousand
Malaysian ringgit

100

Hangzhou Hanghua Harima
Chemicals Co., Ltd.

52,296 thousand
Chinese yuan

56.07

Nanning Harima Chemicals Co., Ltd.

48,234 thousand
Chinese yuan

95

Harimatec Czech, s.r.o.

7,000 thousand Czech
koruna100

Xinyi Rihong Plastic Chemical Co.,Ltd.

27,390 thousand
Chinese yuan

100

Lawter B.V.

76,300 thousand euro

97.68

Harima Chemicals (Shanghai) Co.,Ltd

12,652 thousand
Chinese yuan100

- 36 -

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, 2019)
President
Senior Executive
Managing Director
Executive Director
Executive Director
Managing Director
Managing Director
Audit＆Supervisory
Committee Member
Audit＆Supervisory
Committee Member *Audit＆Supervisory
Committee Member *Yoshihiro Hasegawa
Teruo Kaneshiro
Ichiro Taninaka
Tsutomu Nishioka
Fumiaki Tsuchida
Shunichiro Taoka
Hideo Yamada
Tatsuya Michigami
Tsuneo Takahashi* denotes Outside Corporate Auditors.
Status of Shares (as of March 31, 2019)(1) Total number of shares authorised to be issued
59,500,000(2) Total number of shares outstanding
26,080,396(including 428,851 shares of treasury stocks)(3) Number of shareholders
3,245(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
22.71
Harima Chemicals Mutual
Prosperity Association
Sumitomo Mitsui Banking
Corporation
Shorai, Ltd.

1,236

4.82

1,094

4.26

1,073

4.18

Shorai Foundation for Scienceand Technology
Hyogo Prefectural Credit
Federation of Agricultural
Cooperatives
Japan Master-Trust Trust bank

854

3.32

728

2.83

694

2.70

The Minato Bank, Ltd

692

2.69

Keihansin Kougyou
Corporation
Bank of Mitsubishi UFJ, Ltd.

672

2.61

476

1.85

(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 (428,851 shares),which amounts to 25,651,545 shares. The numbers shown are rounded down to two decimal places.

- 37 -