Annual Report 2013
for the year ended March 31, 2013

Amaze the World!

The slogan for Nitta Gelatin’s 100th Year Vision is to “Amaze the World!” Under thisslogan, the Company set up a principle for action: “Be More Dynamic, Quicker,
with Team Play.”
Anticipating customer and market needs, Nitta Gelatin will work to develop products anduses and quickly provide products and services a step ahead of customers’ expectations.
In this way, Nitta Gelatin aims to impress customers, garnering even more trust andexpanding business.

Nitta Gelatin Group History
Note: The Company name recorded is the current Company name.

Contents
Consolidated Financial Highlights����������� 2
Message From the President������������������ 3
Feature: Amaze the World!��������������������� 6
Operational Review�������������������������������� 10
Board of Directors, Executive Officers andAudit & Supervisory Board Members������ 14
Investor Information������������������������������ 16
Corporate Information���������������������������� 17

1930

Succeeded in producing thin leaf gelatin
Succeeded in producing edible thin leaf
gelatin of a highquality, and beganmarketing it

1971

Started an adhesives business
Commenced an adhesives business by developing high-speed,
hot-melt-type adhesives as areplacement for animal glue

1918

1974

Started a food material business
Began marketing various foodproducts containing naturalpolysaccharides and other ingredients, in addition to gelatin

1970
1968

Established Hikone Gelatin Inc.

Financial Section
Management’s Discussion
and Analysis��������������������������������������� 18
Business Risks������������������������������������� 21
Consolidated Balance Sheets���������������� 24
Consolidated Statements of Income������� 26
Consolidated Statements ofComprehensive Income������������������������� 27

Started production ofgelatin and animal glue

1918

Started production ofanimal glue and industrial
gelatin for the first timein Japan with industrial
production methods
introduced from the West1937

Started production ofphotographic gelatin
After having relied on
imports, research yielded
Japan’s first domesticallymade photographic
gelatin1975

Established Nitta Gelatin
India Ltd. (India)

Consolidated Statements of
Changes in Net Assets�������������������������� 28
Consolidated Statements ofCash Flows������������������������������������������� 30
Notes to Consolidated
Financial Statements����������������������������� 32

The earnings forecasts in this Annual Report are
forward-looking statements
The earnings forecasts in this Annual Report are
forward-looking statements made on the basis of
information available at the time they were madeand other certain assumptions deemed reasonable.
Therefore, actual earnings may differ from forecast
figures as a result of changes in businessperformance and other factors.

1935

Completed the Osaka Plant

1979

Established Nitta Gelatin NA Inc. (U.S.)Be the Leader in Asia anda Globally Unique Enterprise

1982

1999

1980

1990

2001

Began production of gelatin in India
Started production of gelatin in India in
response to the demand in Asia

Established BostikNitta Co., Ltd.

Moved into the consumer products
business
Began marketing Collagenaid ®, acollagen food supplement, togeneral consumers

2000

2011

Established Shanghai Nitta GelatinCo., Ltd. (China)

2013

2010

2000

Started a peptide
business
Fully entered the collagen
peptide business in
response to new applications, including as ahealth food

1990

2010

Established Nitta Gelatin Canada,Inc. (Canada)

Established Guangdong Baiwei
Bio Material Co., Ltd. (China)

2013

Nitta Gelatin Vietnam Co., Ltd. (Vietnam)

1996

Started a casing business
Commercialized a collagencasing business in North
America, after many yearsof research

2004

Established Nitta Gelatin USA, Inc. (U.S.)

1996

Established Nitta Casings Inc.
(U.S.)

2012

Beijing Nitta Collagen Casing Co., Ltd.
(China)Established Nitta Casings(Canada) Inc. (Canada)

Nitta Gelatin Inc. Annual Report 2013   1

Consolidated Financial Highlights
Nitta Gelatin Inc. and Consolidated Subsidiaries

72nd term
From April 1,2010 to March
31, 2011

Millions of yen
73rd term
From April 1,
2011 to March
31, 2012

74th term
From April 1,2012 to March
31, 2013

Thousands of
U.S. dollars
74th term
From April 1,2012 to March
31, 2013

For the year:
Net sales
Operating income
Net income
Comprehensive income
Research and development expenses
Capital expenditure
Depreciation and amortization
Net cash provided by operating activities
Net cash used in investing activities
Net cash provided by (used in) financing activities
Cash and cash equivalents at end of period¥27,923
1,486
1,051
863
895
1,046
898
1,570
(1,094)
(363)
1,538

¥27,763
2,015
1,375
986
895
769
841
568
(733)
713
2,078

¥28,772
1,618
1,565
2,003
1,026
1,426
825
2,050
(1,557)
(376)
2,258

$305,922
17,203
16,64021,297
10,90915,162
8,771
21,796(16,555)(3,997)24,008At year-end:
Property, plant and equipment
Net assets
Noncurrent liabilities
Total assets¥ 5,5376,185
6,516
21,466¥ 5,387
8,108
6,087
23,371¥ 6,287
9,968
5,844
25,449$ 66,847
105,986
62,137
270,590

Per share information (yen, U.S. dollar):
Net assets per share (BPS)
Net income per share (EPS)¥449.5180.19¥509.4199.87¥622.7599.30$   6.62
1.05

28.5
17.4
4.9
4.7

34.4
19.4
5.9
10.0

38.6
17.5
6.2
14.1

Other:
Equity ratio (%)
Return on equity [ROE] (%)
Return on assets [ROA] (%)
Payout ratio (%)

Note 1: The U.S. dollar amounts are translated from Japanese yen at the rate of ¥94.05 = U.S.$1, the prevailing exchange rate at March 29, 2013.
Note 2: Net assets per share for the year ended March 31, 2011 was calculated after taking into consideration the amount of preferred stock.
Note 3: Net income per share for the year ended March 31, 2011 was calculated based on net income after deducting preferred dividends for each period, and net
income per share for the year ended March 31, 2012 was calculated based on net income after deducting the difference between the redemption amount andthe issued amount of preferred stock.
Note 4: For the year ended March 31, 2011, some Type A preferred stock was acquired and retired by a resolution of the board of directors on July 21, 2010 and
December 15, 2010. On May 23, 2011, all Type A preferred stock was acquired and retired by a resolution of the board of directors on April 27, 2011.
Note 5: Effective April 1, 2011, the Group has applied the “Accounting Standard for Earnings Per Share” (ASBJ Statement No. 2, issued on June 30, 2010), the“Guidance on Accounting Standard for Earnings Per Share” (ASBJ Guidance No. 4, issued on June 30, 2010) and the “Practical Solution on Accounting for
Earnings Per Share” (Practical Issue Task Force No. 9, issued on June 30, 2010).
The Company conducted a two-for-one stock split on April 1, 2011. The Company calculated net income per share assuming the stock split had been
conducted on April 1, 2010.

Net Income

Total Assets/Return on Assets [ROA]
Net Assets/Return on Equity [ROE](Millions of yen)

(Millions of yen)

(Millions of yen)

(%)

2,400

2,000

30,00030

Net Sales

Operating Income(Millions of yen)
30,00027,923 27,763 28,772

2,015
20,000

1,600

1,375

1,618

1,486

1,000
10,00023,371

1,565

1,500

21,46620,00010,000
500

0

11/3

12/3

13/3

2 Nitta Gelatin Inc. Annual Report 2013

6,185

0

11/3

12/3

13/3

19.4

20

17.5

1,051

800

0

17.4

25,4498,108

9,968 10

4.9

5.9

6.2

11/3

12/3

13/3

0

0
11/3

12/3

13/3

Total Assets (left)
Return on Assets [ROA] (right)
Net Assets (left)
Return on Equity [ROE] (right)

Message From the President

Since its founding in 1918, Nitta Gelatin has achieved sustained growth by surmounting hurdles brought
about by upheaval in the social landscape with a business model devoted to gelatin and collagen. And in
2018, 5 years from now, Nitta Gelatin will mark the 100th anniversary of its founding. We seek to “Amaze
the World!” over the next 5 years. This aspiration is embodied by our medium-term management plan basedon our 100th Year Vision, which we are currently advancing.

Q1: In the fiscal year ended March 31, 2013, Nitta Gelatin achieved record net sales and net income. Looking back at
the past 5 years, what kinds of strategies have you implemented, and what kinds of results have you achieved?
Because gelatin is a material with a long history, there may appear to be very little change in our
performance based solely on a comparison with the previous fiscal year. However, when we lookback at the past 5 years, we can clearly see that our performance has changed dramatically. The
first change lies in our overseas business. Nitta Gelatin first announced consolidated financial
results in the fiscal year ended March 31, 2010. That year, the Company posted overseas salesof approximately ¥7,876 million, representing no more than 29.8% of total sales. In the fiscal
year ended March 31, 2013, overseas sales reached ¥9,674 million, representing 33.6% of
total sales. During this period, total sales rose by ¥2,379 million, of which ¥1,797 million camefrom an increase in overseas sales. In terms of profits, our overseas business was in the red in
the fiscal year ended March 31, 2010. The overseas business has now become profitable. This
comparison only makes the difference between these years stand out all the more.

Q2: How has the overseas business changed?
Put simply, we have completely dismissed the notion that the overseas business’ role isto supplement operations in Japan. Rather than exporting products from Japan, we aretransforming our business model so as to conduct production in regions that are globally costcompetitive, while selling products in regions where we are price competitive. The Company’s
overseas business is still in a development phase, so I cannot say unequivocally that we haveachieved this business model as yet. However, we are starting to produce concrete results.
In terms of regions, we are starting to achieve increased sales in North America. In terms of
products, we are starting to achieve higher collagen casing sales. These results are now wellestablished within the Company as “a model of success” of sorts. Accordingly, out of our totalplanned capital investments of ¥11.0 billion over the next 3 years, we plan to allocate about¥9.0 billion, or about 80% of the whole, to upgrading overseas production capacity under the“100th Year Vision,” which is currently under way.

Q3: You are planning intensive overseas investments over the next 3 years. What is your outlook for trends in the
global collagen material market going forward?
Looking back at the Japanese market over the past 40 years, we see a correlation between
growth in per capita GDP and gelatin consumption per person. This is because demand forgelatin increased as diets became increasingly Westernized in step with improved living
standards. Similarly, we believe that demand for gelatin will continue to increase in Asianmarkets, given that Asia is home to many populous emerging countries undergoing economic
development. With regard to collagen casing, global sheep stocks have been declining. This
has reduced the supply of sheep intestines, which are used in natural casings, and pushed up
the sheep intestine price, even as sausage consumption has been rising, primarily in emerging
countries. For these reasons, demand for collagen casings, which serve as an alternative tosheep intestines, has been increasing, and we believe that this trend will continue into the
future. Collagen peptide was developed in Japan as a functional food material. Collagen peptide
is already finding an expanding market in China and Southeast Asia, where women’s beauty andhealth consciousness is even stronger than in Japan. And with European competitors entering
the fray, the market for collagen peptide is expected to expand globally going forward.

Nitta Gelatin Inc. Annual Report 2013   3

Q4: Japanese companies that have proactively carried out overseas business have seen a marked improvementin business results as a result of the yen’s recent depreciation. How does Nitta Gelatin stand in this regard?
If the yen’s exchange rate weakens, then this will have the effect of increasing Nitta Gelatin’s
consolidated net sales and earnings when the business results of overseas subsidiaries areconverted from local currencies to yen. This is true even if the business results of overseas
subsidiaries are unchanged on a local currency basis. Although we import 100% of the raw
materials for bovine gelatin produced in Japan, there is no foreign exchange impact because weexport roughly the same amount of bovine gelatin. In contrast, in Japan, we sell pig skin gelatin
imported from a North American subsidiary. For pig skin gelatin, this means that the yen’s
depreciation will lower our earnings. When earnings of the overseas business are improving,
as is the case now, our consolidated business results will show an increase in net sales and aslight decrease in earnings. To reduce the impact of foreign exchange movements on earnings,
we plan to rapidly put in place a business model where we conduct production and sales in linewith market prices, rather than conducting export and import operations centered on Japan, as I
noted earlier. In particular, now that the impact of BSE is disappearing in the Japanese market,
we will strive to expand sales in the domestic market of bovine gelatin produced in Japan, whileworking to attain a relatively lower ratio of pig skin gelatin sold domestically. Furthermore, theincrease in raw material prices for gelatin is a common trend around the world. In overseas
markets, we have been able to transfer the rising raw material cost to product prices, while
in Japan we have been unable to do so because of the drawn-out deflationary environment.
Until last year, we were able to absorb the impact of rising raw material prices with the yen’s
appreciation. However, we can no longer do so at the current exchange rate level. Therefore, we
are now transferring the higher raw material costs to prices while seeking the understanding of
our customers.

Q5: In the Japanese market, what kind of strategies have you been implementing and what results have you achieved?
Given that Japan’s population is contracting, we do not expect to expand sales volume in thedomestic market. Furthermore, we do not disagree with those who describe the gelatin industry
as a mature industry. However, in a mature industry, we must come up with effective strategies
and put them into action to generate profits and achieve sustained growth. One solution has
been our overseas strategy. On the other hand, in Japan, Nitta Gelatin is making the most of
its strengths in the Formula Solution business, along with cultivating new markets for gelatinand collagen peptide. We have produced results in this business by providing our customers
with custom-made solutions. Looking at segment per formance, most of the sales in the
Formula Solution business are from our domestic business. These sales have remained attheir second highest level over the past 5 years. However, the Formula Solution business hasachieved record segment profit.

Q6: Why has the Formula Solution business, which mainly targets the Japanese market, achieved record segment
profit?
The Formula Solution business is broadly divided into two areas. The first area is food materials.
Our customers in this area are companies conducting food businesses focused on the pursuit ofbeauty and health, including food products and medical diets. Here, we must provide proposals
offering breadth, novelty, speed and flexibility to answer consumer needs. In this climate, wehave grown because we have been able to provide high-quality solutions through such means as
developing food recipes that fulfill the product planning requirements of our customers. In termsof our major achievements, we have steadily promoted adoption of Nitta Gelatin’s food materials
in products such as delicatessen items sold in convenience stores and medical diets, whichhave been growing in recent years. The second area is adhesives. Here, Nitta Gelatin launcheda proprietary sealant in 2012 that has attracted attention for enhancing the efficiency of in-line
manufacturing lines. Considering its particularly strong affinity with high-density, compact
electronic products, we expect that this product will be increasingly adopted as a sealant for
smartphones and digital cameras. This sealant can generate large profits because it is a highly
proprietary and innovative product. Accordingly, we expect this product to become anothergrowth driver in the Formula Solution business.
4 Nitta Gelatin Inc. Annual Report 2013

“We seek to ‘Amaze the World!’ over the next 5 years.
This aspiration is embodied by the medium-term
management plan based on our 100th Year Vision, which”

we are currently advancing.

Norimichi Soga
Representative Director and President
Nitta Gelatin Inc.

Q7: In your recently announced medium-term management plan, Nitta Gelatin is projecting operating income
growth of only 6% in the fiscal year ending March 31, 2014, but growth of around 50% over the ensuing 2
years. You are also aiming for an operating margin of 10%. How can you justify such an ambitious outlook?
As I said at the outset, “We seek to ‘Amaze the World!’ over the next 5 years.” When I was
appointed president, our operating margin was less than 2%. In the fiscal year ended March
31, 2013, the operating margin had improved to 5.6%. Having achieved this feat, I believe that
Nitta Gelatin should take on the challenge of amazing the world by attaining a 10% operating
margin. We announced these targets because we have a detailed roadmap for achieving them.
Specifically, production and sales sites established through investments centered on overseas
sites will progressively start operations and begin contributing to business results. In the fiscal
year ending March 31, 2014, we will commence sales of collagen peptide and collagen casingin earnest in China, and begin operation of a food material blending plant in Vietnam. In thefiscal year ending March 31, 2015, we will start operations at a U.S. collagen peptide plant andexpand business in India by converting an Indian affiliate into a consolidated subsidiary. In thefiscal year ending March 31, 2016, we plan to grow sales on the back of increased production
at various gelatin plants, expand the sealant business in Japan and Asia, and produce and sellcollagen casing in China. To achieve these goals, we raised capital by issuing new shares for
public subscription.

Nitta Gelatin Inc. Annual Report 2013   5

100th Year Vision

Assumed Market Environment and Business Opportunities
Since formulating long-term vision CFG2016 in 2011, Nitta Gelatin has successfully listed on the First Section of the Tokyo Stock
Exchange and accelerated global business development in Asia and North America.
Japan continues to see changes in diets and consumption spurred by market maturation and the population aging.
Nitta Gelatin believes that diversification in consumer needs amid these changes will present opportunities for creating new
applications and markets for the Company’s products. Overseas, meanwhile, economic development in emerging markets
and population growth should result in market expansion for the Company’s products. In the Asian region in particular, whichis the Company’s home market, rising incomes accompanying economic growth in China, India and elsewhere, should lead toincreasingly Westernized and diverse diets. Nitta Gelatin believes that these dynamics will increase demand for the Company’s
products in the processed food, health food and pharmaceuticals markets and thus create opportunities to expand sales.
Given these changes in its operating environment and the upcoming 100th anniversary of its founding in 2018, Nitta Gelatin
decided to formulate a new long-term management vision, 100th Year Vision, and a medium-term management plan based on it.

Basic Strategy for the 100th Year Vision
Our basic strategy is encapsulated by the phrase “Win out!! in growing Asian market” Nitta Gelatin’s mainstay products—gelatin,
collagen peptide, and collagen casing—are expected to see higher demand in Asian markets experiencing ongoing economic growth.
Leveraging the competitive edge of a company that is headquartered in Asia, Nitta Gelatin plans to keep up with this growing Asianmarket demand to expand business. By doing so, Nitta Gelatin aims to be the “Leader in Asia and a Globally Unique Enterprise” interms of both business size and diversity, as a company centered on gelatin.

Business Strategies
We will keep pace with burgeoning demand in the Asian market by increasing our supply capabilities for gelatin, collagen peptide,and collagen casing, while developing proprietary products and new applications. In doing so, we will grow our sales in Japan andNorth America, with the aim of expanding business. In the fiscal year ending March 31, 2016, the final year of our current mediumterm management plan, we are targeting net sales of ¥41 billion (up 25.4% during the plan) and operating income of ¥4.2 billion (up147.1% during the plan).

6 Nitta Gelatin Inc. Annual Report 2013

Net Sales and Operating
Income Results and Targets

Domestic and Overseas Sales
Results and Targets

Sales by Segment
Results and Targets

Segment Profit
Results and Targets(Billions of yen)(Billions of yen)(Billions of yen)(Billions of yen)

45

9

38.6

45

45

41.0

38.6

32.7

32.7

30 28.7

630 28.7

16.9

38.6

18.4

32.7
30 28.7

12.7

9.6

3

2.7
1.6

1.7

13/3

14/3

15 19.0

19.9

21.5

22.5

11.1

4.2*

41.0

1.9

11.9

2.7*

4

10.4

10.0

4.2
15

6

41.0

27.5

1.2

29.0

1.6* 1.7*

22.2

1.1

15 18.6

1.8

0

0
15/3

0

0

16/3

13/3

14/3

16/3

TargetTargetNet Sales (left axis)
Operating Income (right axis)

15/3

Domestic Sales
Overseas Sales

0.9

2

3.7

2.7

2.0

0
13/3

14/3

15/3

16/3

13/3

TargetCollagen Material Business
Formula Solution Business

14/3

15/3

16/3

TargetCollagen Material Business
Formula Solution Business* Consolidated operating income after
adjustment for segment profit

1. Collagen Material Business2. Formula Solution Business

Bolster the Gelatin business’ global competitiveness andincrease supply capabilities
Nitta Gelatin plans to achieve further cost reductions throughenergy savings and increased production efficiency. With the pricesof gelatin raw materials increasing, the Company will step up
efforts to strengthen the supply chain of raw materials such as bydiversifying the source countries and cultivating new suppliers inorder to secure the stable procurement of raw materials. Throughthese initiatives, the Company believes it can achieve global costcompetitiveness. To keep pace with increasing demand in the
Asian market and expand sales, the Company intends to ramp up
production and secure new supply bases in North America andIndia to upgrade the Group’s supply capabilities.

Expand business by providing food solutions in the foodmaterial business
Nitta Gelatin will strengthen the functions of applicationlaboratories in Japan, the U.S., India, China and elsewhere,
as it seeks to expand sales by developing new applications
and products matched to customer and market needs in eachregion. Furthermore, the Company will establish production andsales systems in Vietnam and start production and sales offood agents such as gelling agents in Southeast Asia.

Expand the Collagen Peptide business globally
The Company will push ahead with research into the functional
characteristics of collagen peptides, with the view to using
the results of this research as the basis for new product andapplication development to create new markets. Nitta Gelatin
will also expand collagen peptide production and sales in China.
And at the beginning of the fiscal year ending March 31, 2015,
it will bring online a collagen peptide plant currently underconstruction in the U.S. to increase supply capabilities.
Expand the Collagen Casing business
Manufacturing facilities in North America will be revamped
and efficiency improved to raise the productivity of collagencasing production as well as quality, which should translate into
greater cost competitiveness. At the same time, the Company
will expand sales, centered on the North American market.
Furthermore, Nitta Gelatin plans to expand business in China,
where the processed meat products market is growing fast, by
putting in place a production and sales system.
Develop the Life Science business
The medical field is seeing rapid advances in practical researchsuch as regenerative medicine using tissue engineering, iPS
cells and ES cells. Gelatin and collagen are in the limelight inthis field because of their high physiological compatibility. Nitta
Gelatin will commercialize high-quality, safe gelatin and collagenmatched to the needs of medical research institutes andmedical device manufacturers worldwide.

Transform the Adhesive business into a high-profit business
Sealants (high-performance gaskets) are attracting attention
as products that can help rationalize the production ofsmartphones, smart meters, digital cameras and otherelectronic equipment. The Company plans to offer thesesealants in Asian countries, the main production regionsof electronic equipment, to grow a future earnings driver.
Furthermore, Nitta Gelatin will raise the productivity of hot-meltadhesive, a core product, develop new products, and expand
sales. To support these activities, the Company plans to rebuild
the Osaka Plant and build a sealants application center.

3. Capital Investment Plans
The Company plans to make capital investments totaling¥11.0 billion during the period covered by the medium-term
management plan. The main planned capital investments are
as follows: construct a U.S. collagen peptide plant (scheduled
to come online in the fiscal year ending March 31, 2015);
deploy new facilities to increase productivity in the U.S. casing
business (planned for completion in the fiscal year ending
March 31, 2015); deploy facilities to boost gelatin production
efficiency at the Osaka Plant (scheduled to come online in
the fiscal year ending March 31, 2015); deploy an adhesives
manufacturing facility and build a sealants application center(scheduled to come online in the fiscal year ending March 31,2015); deploy facilities to increase production capacity at
India, U.S. and Canada gelatin plants (planned for completionin the fiscal year ending March 31, 2016); and deploy casing
manufacturing facilities in China (scheduled to come online in
the fiscal year ending March 31, 2016).
Nitta Gelatin Inc. Annual Report 2013   7

4. Research and Development Plans
In the gelatin field, we will improve and upgrade production
technology for raw material and gelatin processes, develop
new gelatin (new raw materials, new functions), and optimize
quality. In the collagen peptide field, we will develop collagen
peptide production technology (peptization, refining technology),
and research functional characteristics of collagen peptide.
In the collagen casing field, we will conduct research anddevelopment focused on production technologies (production
process innovation) and develop new markets and products.

In the life science field, we will develop materials that expand
applications for advanced medical care and conduct researchand development of culture substrates for iPS cells. In the foodmaterial field, we will develop applications and new materials(for delicatessens and food products for seniors such as
medical diets), as well as plan and develop consumer products(collagen beverage and food products and cosmetics). In theadhesives field, we will conduct research and development ofenvironmentally friendly hot-melt adhesive and sealants (highperformance gaskets).

Outline of Strategic Products
Amazing Gelatin: We are developing amazing products
unrivaled by other companies that turn the conventional
notion of gelatin on its
head. Examples include
gelatin that does not melt,
and scent-free gelatin.
Scent-free gelatin has
proven popular mainly foruse in capsules, and has
now become the industry
standard. Looking ahead,
we will continue to developthese sorts of innovative
gelatin products.

Wellnex™ (collagen-derived functional peptide): Collagen
peptide is generally used for beauty applications. The Company’s
research into collagen peptide’s functional properties isdemonstrating that collagen
peptide is also beneficial to boneand joint health, healing wounds,
strengthening muscle, preventing
diabetes and more. Wellnex™ is acollagen-derived functional peptide
based on scientific evidence obtained
from our research into the functional
properties of collagen peptide. With
this new product, we aim to create
an entirely new market.

beMatrix™ (gelatin and collagenfor advanced medical care): In
the field of regenerative medicine,demand for gelatin and collagen has
developed robustly for cell scaffolds
to induce self-repair and regenerationof human tissue, biomaterial for drugdelivery systems (DDS), and cell
culture scaffolds for iPS cells andother cells. Going forward, we aim
to commercialize the beMatrix™ lineof gelatin and collagen products that
ensure a high degree of safety foradvanced medical care.

Collagen Casing: Demand for collagen casings for sausages
as a substitute for commonly used
sheep intestine is growing rapidly,
especially in China and other Asian
countries. We will advance thisbusiness by developing productsthat match customers’ needs,
such as Clear Choice™, whichmimics the texture of sheep
intestine more closely thanprevious products.

Food Solutions for Delicious Food: Harnessing a range ofmaterials such as new gelatin that other companies do notoffer, along with carrageenan, pectin and agar, we provide foodagents that ensure delicious food (texture, taste, appearance),
high logistics stability, and high productivity. Furthermore, we
provide food solutions that other companies cannot match,including new menu proposals that anticipate dietary trends.

Sealants (High-performance gaskets): Production ofsmartphones, digital cameras and tablet PCs requires gaskets
for water- and dust-proofing purposes. Leveraging technology
cultivated through hotmelt adhesives, we havedeveloped a sealant thatcures with ultraviolet
exposure. As a result,
we have enabled the fullautomation of gasket
assembly by factory
automation equipment, aprocess that was previously
conducted manually.

8 Nitta Gelatin Inc. Annual Report 2013

Basic Strategy: “Win out!! in growing Asian market”
Outlook for Global Gelatin Demand(tons)

2010

2020

Growth rateJapan

17,00017,000Asia

72,500129,000

Global346,000

425,000

0%
78 %
23 %

In Japan, we cannot expect expansion in the volume of
the market due to the country’s mature market and aging
population with fewer children. However, we believe that Japan
will serve as an important product and application development
hub for the Company, with a view to the future developmentof other Asian markets. Turning to other countries in Asia, themarkets for processed food, health food and pharmaceuticals
are expanding in line with the Westernization and diversificationof diets and growing health and beauty consciousness. Looking
back at the development of the Japanese market over the past
40 years, we can easily see that demand for gelatin, collagen
peptide, and collagen casing in Asian markets can also be
expected to increase further in step with these trends.
n Consumption of Gelatin in Japan (grams per capita)*Great Hanshin Earthquake
133g*Plaza Accord*Introduction of consumption tax

120*Collapse of
economic bubble

133g*Lehman Financial Crisis*Tanaka Doctrine for Remodeling Japan*Oil Crisis

80*Tokyo Olympics

56g
58g

40

0

1970

Japan

37g
9g

23g

China

1980

1990

2000

2010

Global Gelatin Manufacturers and Production Capacity

Other
31.8%

Overseascompany D(France)
4.7%
Nitta Gelatin
Group
5.3%

Overseascompany A(France)24.9%
Overseascompany B(Germany)
22.3%

Overseas company C (Belgium)
11.0%

Source: By Nitta Gelatin based on reports by Gelatin Manufacturers of Europe and Gelatin
Manufacturers Association Asia Pacific160*Nixon ShockWhen income levels improve, demand for collagen casing
and collagen peptide also increase. Increased prosperity isaccompanied by growth in the consumption of processed meatproducts. One of those products is sausage. Naturally, casingsare needed to manufacture sausages. Given that the supply ofnatural sheep casings is declining, demand for collagen casingsshould increase as an alternative to sheep casings. Economic
development is also accompanied by higher consumer spending
on beauty and health. In China and Southeast Asia, where
people are even more beauty conscious than in Japan, weare seeing growth in the markets for beverages and powder
products containing collagen peptide that tout beauty benefits.

15g
2020

India

Take gelatin, for example. Per capita consumption ofgelatin tends to rise in step with the westernization of dietsthat accompanies improving income levels. The proof for thisis in western foods that depend on the properties of gelatin.
Jelly, gummy candy and convenience store delicatessen items
depend on gelatin’s property to solidify or melt, while chewablecandy, rice pilaf, processed cheese and ice cream depend on
gelatin’s property to add texture to food. The foam retention
property, on the other hand, is crucial to marshmallow, mousse
and Bavarian cream, while the binding property is essential toyogurt, puddings and poultices. Capsules depend on thecoating property, and chocolate and medicine make use ofgelatin’s glossy property. In each case, gelatin is inextricably
tied to the westernization of diets and lifestyles.

For the foregoing reasons, we believe that Asian markets
offer prospects for considerable growth in business opportunities.
To capture these business opportunities, we are implementing thefollowing strategies:(1) Achieve cost competitiveness commensurate with prices
in markets where products are sold
Our first priority is to ensure stable, low-cost procurement of
raw materials. To this end, we will strengthen ties with existing
raw material suppliers while cultivating new suppliers. We will
also work to improve productivity, deploy energy-efficientfacilities and develop production technologies.
(2) Increase product supply capabilities
In the gelatin field, we will ramp up production by upgrading
production facilities at our existing plants in North America
and India. At the same time, we will obtain new gelatinmanufacturing bases through such means as alliances andM&As. In the collagen peptide field, we will ramp up the
production capacity of our plant in China, while building a newplant in the U.S. In collagen casings, we will upgrade the U.S.
plant’s production by replacing existing production facilities withnew facilities we are developing. We are also setting our sights
on producing collagen casings in China.
(3) Develop products in line with customer needs
To set Nitta Gelatin apart from its competitors and boost
its earnings capacity, we will develop new products andapplications. To do so, we will conduct R&D in line with theneeds of various countries and regions at our applicationlaboratories in Japan, the U.S., China, India and Vietnam. The
new products and applications will be proposed to customers
with the view to expanding sales.
Nitta Gelatin Inc. Annual Report 2013   9Operational Review
Fiscal Year Ended March 31, 2013

ifia® JAPAN 2013
The 18th International Food Ingredients & Additives Exhibition and Conference (Tokyo)

Global Gelatin Conference (India)

10 Nitta Gelatin Inc. Annual Report 2013

INTERNEPCON JAPAN 2013 (Tokyo)

IFT Annual Meeting & Food Expo. 2013
(Chicago, U.S.A.)

Global Gelatin Conference (Vietnam)

Global R&D Meeting (Osaka)

Nitta Gelatin Inc. Annual Report 2013   11Operational Review
Fiscal year ended March 31, 2013

Collagen Material Business
Gelatinn	For foodn	For hard and soft capsulesn	For photographic films andpapersCollagen Peptide	For dietary foodsupplementsn	For protein drinks
and foodsn	For cosmeticsn

Net Sales
Collagen Material Business

Collagen Casing	Sausage casings

Life Science	Testing reagent forlaboratory researchn	Biomaterialn	Functional materials
for cosmeticsnn¥18.67bn.
Segment Profit ¥1.81 bn.
Net Sales(YoY change+7.1%)(YoY change–19.4%)(Billions of yen)

25
22.2

20
15

64.9%

17.8

16.8

18.6

17.4

10
5
1.5

1.7

2.2

1.8

2.0

10/3

11/3

12/3

13/3

14/3

0

n Net salesn Segment profitPlann Gelatin Businessn Collagen Casing BusinessIn the gelatin business, we are working to enhance our global
competitiveness and upgrade our supply capabilities. Demandis projected to increase particularly in Asian markets, such as
China and India, driven by population growth and economic
development. Therefore, we are taking steps to upgrade our
supply capabilities in these markets by enhancing Group
companies’ productivity and developing new supply sites.
On the other hand, we expect to face increasingly stiff pricecompetition for capsule-use gelatin owing to the expanded use
of generic drugs. That is why we must cut costs at plants andcontinuously ensure stable procurement of raw materials, whileachieving even higher quality. In addition, considering thesizable environmental impact of gelatin production, the Nitta
Gelatin Group will continue working to answer societal demands
for reducing CO2 emissions and so forth by taking further steps
to conserve energy and resources, and raise efficiency.

Nitta Gelatin entered the collagen casing business in earnest
in 1996. Over the past 17 years, we have successfully driven
the evolution of this operation into a business that supplies
globally competitive products. Going forward, we aim to achieve
further business expansion. In terms of market conditions,consumption volume of sausage is projected to increase instep with economic development in emerging countries. Growthin demand will also be supported by a declining supply of
sheep intestines, which serve as natural casings. Backed bythese tailwinds, as well as increased supply capabilities andcost competitiveness underpinned by production innovation at
our North American plant and facility upgrades, Nitta Gelatin
is well positioned to achieve further earnings expansion. The
market for sausage and other processed meat products is
expanding rapidly, particularly in China. Here, we are swiftly
expanding our collagen casing production and sales framework
in response to this increase in demand.

n Peptide BusinessIn the peptide business, we are working to expand businessglobally. The collagen peptide market has grown rapidly on theback of heightened consumer awareness of collagen peptide’s
health benefits and growing recognition of its physiologicaleffects as a health food material. However, we believe that
future growth in demand will slow as the Japanese market
matures. Overseas, we are targeting the Chinese and Asianmarkets and the North American market, where new demand
is anticipated. In these markets, we aim to increase sales
by popularizing Nitta Gelatin’s global collagen peptide brandWellnex™. To drive sales growth in each market, we areworking to raise collagen peptide production efficiency andstrengthen cost competitiveness in China, while building a newcollagen peptide plant in the U.S., with the start of production
planned for the spring of 2014.

12 Nitta Gelatin Inc. Annual Report 2013n Life Science BusinessWe are nurturing the life science business into a new future
earnings driver. We have developed gelatin and collagen foradvanced medical care that ensures a high degree of safety,
which is needed in the fast growing field of regenerative
medicine. We are now working to promote widespread uptakeof this material in Japan and North America.
In the cosmetics market, collagen is highly recognized andbroadly used as a moisturizer. However, the collagen market
does not offer prospects for rapid expansion, and competition
is intensifying. In this context, we will focus on researchingcollagen’s functional properties. Our goal is to expand ourmarket share by developing collagen products for cosmetics
that are backed by scientific evidence.

Formula Solution Business
Food Materialn	Gelling agentsn	Stabilizers for meatproducts

	Stabilizers and quality enhancers
for heat-and-serve mealsn	Consumer products for mailorder salesn

Net Sales
Formula Solution Business

Adhesive	Hot-melt adhesivesn	Sealant material(High-performance gaskets)n¥10.09bn.
Segment Profit ¥1.15 bn.
Net Sales(YoY change–2.2%)(YoY change+6.3%)(Billions of yen)

12

35.1%

9

10.3

10.0

9.5

10.4

10.0

6
3
0.9

0.9

1.0

1.1

0.9

10/3

11/3

12/3

13/3

14/3

0

n Net salesn Segment profitPlann Food Material Businessn Adhesive BusinessWe aim to achieve business expansion through food solutions.
In the food material business, we sell edible formulations suchas gelling agents and stabilizers for meat products to the food
manufacturing industry. Leveraging properties such as theirjelly forming ability, water retention, binding, thickening, andemulsion stability, these food agents are used mainly to add
value to food and maintain food quality by contributing to foodshape retention and texture enhancement, and so forth. These
edible formulations are also used to improve work efficiency
and production yield during food processing. Our food agentsare custom made according to their purpose of use.
In Japan, the market for delicatessen items and the market
for medical diets for seniors are expected to expand as foodmarket needs diversify in tandem with the Japanese population
aging and having fewer children. We believe that cultivatingthese markets is a crucial task ahead.
By proactively making proposals highlighting our application
technologies developed over many years, we are striving tocapture a greater share of existing markets while cultivating
new markets.
Furthermore, we are developing products and applications
in line with market needs in each country and region. These
efforts are being led by our application laboratories in
Osaka, Tokyo, North America, China, India and Vietnam. We
will propose the products and applications we develop to
customers with the aim of expanding sales.

In the adhesive business, we are seeking to develop adhesivefunctions that closely fit customer needs and applications. To
this end, as with food materials, we provide hot-melt adhesives
containing a wide array of materials, and propose adhesives
applications optimized to production lines.
The defining feature of hot-melt adhesives is their highspeed adhesion property. As a result, hot-melt adhesives areused in a broad range of fields, including hygiene products,
bookbinding, construction, woodworking, electrical work,
housing, as well as packaging applications in food, beverages
and other fields.
In 2012, we launched a new sealant material that cureswith ultraviolet exposure. We are working to expand sales ofthis sealant material globally as a strategic product developedin Japan, with the view to nurturing a high-profit business.
Efforts are focused on enhancing productivity, developing
new products and expanding sales of core hot-melt adhesive
products, with the goal of transforming the adhesives business
into a high-profit business.

Nitta Gelatin Inc. Annual Report 2013   13Board of Directors, Executive Officers and Audit &Supervisory Board Members(As of June 26, 2013)

Back row from left: Koichi Ogata, Director and Executive Officer; Mayumi Ishihara, Outside Director; Hiroshi Nitta, Director; Yasuyuki Nakai, Standing
Audit & Supervisory Board Member; Tatsuro Otsuka, Director and Executive Officer
Front row from left: Yoshihiro Sakatani, Outside Audit & Supervisory Board Member; Tsuneo Sasaki, Director and Senior Managing Executive Officer;
Norimichi Soga, Representative Director and President; Takeo Yamaki, Director and Executive Officer; Shigeoki Tougou, Outside Audit& Supervisory Board Member

Board of Directors
Representative Director and President

Director and Senior Managing Executive Officer

Norimichi Soga

Tsuneo Sasaki

Apr. 1971 Joined Kobe Kiito Co., Ltd.

Apr. 1974 Joined Mitsui Bank (currently Sumitomo Mitsui Banking
Corporation)

July 1973 Joined the Company
July 1991 General Manager, Overseas Sales and Marketing
Division of the Company

Nov. 2002 Dispatched to the Company

July 1992 General Manager, Sales & Marketing Department,
Gelatin Division of the Company

Mar. 2004 General Manager, Finance Department, General
Administration Division of the Company

Nov. 1996 Director of the Company

Sept. 2004 General Manager, Production Planning Department,
Operating Division of the Company

July 1997 General Manager, Sales & Marketing Division andGeneral Manager, Tokyo Branch of the Company
June 1999 Managing Director of the Company
Sept. 1999 General Manager, Operating Division of the Company
June 2003 Senior Managing Director of the Company
June 2004 Representative Director, Senior Managing Director of
the Company

Nov. 2003 Joined the Company

Mar. 2005 General Manager, Production Management Department,
Operating Division of the Company
Mar. 2006 General Manager, Finance Division, General
Administration Division of the Company
June 2006 Director of the Company (to present)
June 2006 Executive Officer of the Company

Jan. 2005 Executive Officer of the Company

Sept. 2006 General Manager, Finance Division of the Company

June 2006 Representative Director and President (to present)

June 2010 Managing Executive Officer of the Company
June 2011 General Manager, General Affairs Division of the Company
June 2012 Senior Managing Executive Officer of the Company(to present)

14 Nitta Gelatin Inc. Annual Report 2013

Mar. 2013 General Manager, General Affairs Division of theCompany (to present)

Board of Directors

Audit & Supervisory Board Members

Director and Executive Officer

Standing Audit & Supervisory Board Member

Takeo Yamaki

Yasuyuki Nakai

Apr. 1982 Joined the Company

Apr. 1978 Joined Mitsui Bank (currently Sumitomo Mitsui Banking
Corporation)

Mar. 2006 General Manager, Gelatin Manufacturing Department,
Operating Division of the Company

Nov. 2007 Dispatched to the Company

Sept. 2006 General Manager, Manufacturing Department, Gelatin
Division of the Company

Mar. 2008 General Manager, Corporate Planning Division of theCompany

June 2008 Executive Officer of the Company (to present)

June 2008 Joined the Company

Sept. 2008 General Manager, Gelatin Division of the Company

June 2008 Executive Officer of the Company

June 2010 Director of the Company (to present)

July 2009 General Manager, GRM Division of the Company

Mar. 2011 General Manager, Manufacturing Division of the Company
Mar. 2013 General Manager, Gelatin Division of the Company

July 2010 General Manager, Planning and Management
Department, Gelatin Division of the Company

Director and Executive Officer

Mar. 2011 General Manager, Planning and Management
Department, Manufacturing Division of the Company

Koichi Ogata
Apr. 1981 Joined Kanebo Foods, Ltd. (currently Kracie Foods, Ltd.)Mar. 2013 General Manager, Planning and Management
Department, Gelatin Division of the Company

Dec. 2005 Joined the Company

June 2013 Standing Audit & Supervisory Board Member of theCompany

Mar. 2008 General Manager, R&D Department, Sales & Marketing
Division of the Company

Outside Audit & Supervisory Board Member

June 2010 Executive Officer of the Company (to present)

Yoshihiro Sakatani

June 2012 Director of the Company (to present)
June 2012 General Manager, R&D Department

Oct. 1979 Joined Nisshin Audit Corporation (currently Ernst &Young ShinNihon LLC)

Mar. 2013 General Manager, Sales & Marketing Division of theCompany

Mar. 1982 Registered as a certified public accountant

Director and Executive Officer

July 2002 General Manager, Osaka Public Offering Support
Division of Shin Nihon & Co. (currently Ernst & Young
ShinNihon LLC)

Tatsuro Otsuka
Apr. 1976 Joined the Company
Mar. 2001 General Manager, Business Planning Department,
Operating Division of the Company
Sept. 2006 General Manager, Quality Assurance Division of theCompany
July 2009 General Manager, Corporate Planning Division of theCompany
June 2012 Director of the Company (to present)
June 2012 Executive Officer of the Company (to present)
June 2012 General Manager, System Solutions Department of theCompany (to present)

Director

Hiroshi Nitta
Apr. 2003 Joined Nitta Corporation
Apr. 2003 Dispatched to Nitta Haas Inc.

Aug. 1998 Senior Partner and Representative Partner of Century
Audit Corporation (currently Ernst & Young ShinNihon LLC)

July 2004 Established Japan Management Consulting K.K.
Representative Director of Japan Management
Consulting Co., Ltd. (to present)
June 2006 Outside Audit & Supervisory Board Member of theCompany (to present)

Outside Audit & Supervisory Board Member

Shigeoki Tougou
Apr. 1966 Joined Bank of Japan
July 1993 General Manager, Secretariat of the Policy Board of
Bank of Japan
Apr. 1995 General Manager, International Department
June 1996 Managing Director of The Nippon Credit Bank, Ltd.
(currently Aozora Bank, Ltd.)
Aug. 1997 President of Aozora Bank, Ltd.

June 2009 Director of the Company (to present)

June 2000 President and Representative Director of Osaka
Shipbuilding Co., Ltd. (currently Daizo Corporation)

Jan. 2011 Deputy General Manager, Gelatin Division of the Company

June 2010 President of Nippon RAD Inc.

Mar. 2011 Deputy General Manager, Manufacturing Division of theCompany

June 2011 Chief Executive Officer of Nippon RAD Inc.

Jun 2011 Executive Officer of the Company

June 2012 Audit & Supervisory Board Member of the Company(to present)

Outside Director

Oct. 2012 President of Higashi Nippon Gakuen University(to present)

Mayumi Ishihara
Apr. 1986 Worked at Kobe District Court
Oct. 1994 Passed the bar exam
Apr. 1997 Registered as an attorney at law
Apr. 1997 Joined Oh-Ebashi LPC & Partners (to present)
June 2010 Director of the Company (to present)

Executive Officers
Raymond Merz
Hidenori Takemiya
Yuji Yamamoto
Toru Tamaoka
Yoshitaka Oda
Hiroshi Takase

Nitta Gelatin Inc. Annual Report 2013   15

Investor Information

Stock Information (As of March 31, 2013)
Number of shares authorized: 50,000,000 shares
Number of shares issued:

15,770,074 shares (including treasury stock of 162 shares)

Number of shareholders:

3,014

Major Shareholders (Top 10)
Shareholder NameIBP Co., Ltd.

Number of Shares

Shareholding Percentage

2,946,316

18.68%

896,500

5.68

The Master Trust Bank of Japan, Ltd. (trust account)
Nitta Corporation

840,014

5.33

The Bank of Tokyo-Mitsubishi UFJ, Ltd.

621,074

3.94

Sumitomo Mitsui Banking Corporation

600,286

3.81

Nitta Gelatin Employees Shareholding Association

484,100

3.07

Iwaki Co., Ltd.

391,000

2.48

Ishizuka Corporation

382,014

2.42

Resona Bank, Ltd.

334,672

2.12

Japan Trustee Services Bank, Ltd. (trust account)

274,900

1.74(Note) Shareholding percentage is calculated based on the total number of shares issued minus treasury stock (162 shares).
Percentages are rounded to two decimal places.

Share Distribution<Breakdown of Shareholding by Investor Type><Breakdown of Shareholding by Number of Shares Held>(Thousand shares)

Foreign companies,
others 42

Foreign companies,
others

1.39%

310
1.97%

Financial institutions

27
0.90%

Financial
institutions

Financial
instruments
business operator

Financial
instruments
business
operator27
0.90%

Domestic
companies 39

1.29%

Individual, other2,879
95.52%

16 Nitta Gelatin Inc. Annual Report 2013

267
1.69%

4,087
25.92%

Individual, other5,178
32.84%

Domestic companies

5,926
37.58%

Corporate Information (As of March 31, 2013)

Company Outline
Headquarters:	4-26, Sakuragawa 4-chome, Naniwa-ku, Osaka
556-0022, Japan

Affiliates
Nitta Gelatin NA Inc. (U.S.A.)
Nitta Gelatin Canada, Inc. (Canada)

Establishment:	Januar y 1918

Nitta Gelatin USA, Inc. (U.S.A.)

Incorporation:	Februar y 1945

Nitta Casings Inc. (U.S.A.)

Capital:	¥3,144,929,440 (As of August 28, 2013)*

Nitta Casings (Canada) Inc. (Canada)

Number ofshares issued:

Nitta Gelatin Holding, Inc. (U.S.A.)¥18,373,974 shares (As of August 28, 2013)*

Net Sales:	Non-consolidated: ¥20,261 million

Shanghai Nitta Gelatin Co., Ltd. (China)
Beijing Nitta Collagen Casing Co., Ltd. (China)(Year ended March 31, 2013)

Nitta Hong Kong, Ltd. (China)

Consolidated: ¥28,772 million

Nitta Gelatin Vietnam Co., Ltd. (Vietnam)(Year ended March 31, 2013)

Aibis Inc. (Japan)

Employees:	Non-consolidated: 255 (As of March 31, 2013)
Consolidated: 624 (As of March 31, 2013)
Main Business:	Production and sales of edible gelatin,

Alma Corporation (Japan)
Nitta Biolab Inc. (Japan)
Hikone Gelatin Inc. (Japan)

pharmaceutical gelatin and photographic gelatin.

Bostik-Nitta Co., Ltd. (Japan)

Production and sales of collagen peptides.

Nitta Gelatin India Ltd. (India)

Production and sales of collagen casings.

Guangdong Baiwei Bio Material Co., Ltd. (China)

Production and sales of collagen for cosmetics,

Shinju Ser vice Co., Ltd. (Japan)

biomaterials and biochemical products.

Bamni Proteins Ltd. (India)

Production and sales of edible gelling agents,

Reva Proteins Ltd. (India)

stabilizers and other food materials.
Production and sales of adhesives and sealants
for packaging, bookbinding, building materials,
hygiene products and automobiles.
Operating facilities:	4 locations in Japan* The Company issued new shares in July and August 2013. As a result, capitalincreased ¥1,567,171,190 and the number of shares issued increased by
2,603,900 compared with March 31, 2013.

Nitta Gelatin Inc. Annual Report 2013   17

Management’s Discussion and Analysis

Business Performance Summary for the Fiscal Year
Ended March 31, 2013
In the fiscal year ended March 31, 2013, overseas economies remained on a weak recovery track on the whole.
Although the U.S. economy continued to stage a gradual
recovery, the European debt problem and financial crisis
persisted, along with slowing expansion in the Indian andChinese economies and flat growth in the Southeast Asian
economies. On the other hand, the Japanese economy
showed signs of gradual recovery related to demand generated by post-quake reconstruction. Deflation continued tospread, however, due to factors such as the global economic slowdown, anemic exports due to the yen’s protracted appreciation, and concerns about the impact ofJapan’s strained diplomatic relations with other countries on
economic activity. Amid these circumstances, the implementation of economic recovery measures by the new Japanese
government formed at the end of last year and the Bank ofJapan’s loosening of monetary policy resulted in the outlook
improving in some aspects due mainly to the depreciation of
the yen and the rise in stock prices.
In markets overseas, demand for gelatin, collagencasing and collagen peptide increased atop economic recovery and economic development in emerging countries. In theJapanese market, demand remained sluggish, reflecting thedigitization of books and movies, and deflationary impacts.
Against this backdrop, the Nitta Gelatin Group has
adopted three basic management policies: (1) Customer
First; (2) Globalization & Innovation; and (3) Selection andConcentration. Guided by these policies, the Group has
actively worked to provide products and services that satisfy
customers, develop new products and cultivate new markets,
expand sales, improve productivity and reduce costs, withthe aim of rising above the challenging business conditions.
As a result, net sales increased 3.6% year on year to¥28,772 million in the fiscal year ended March 31, 2013,reflecting strong sales trends in overseas markets, whichcounteracted a decline in sales in Japan. Operating income
declined 19.7% to ¥1,618 million. This was due, in addition
to increases in raw material prices, to a rise in energy costs
in Japan and higher procurement costs of imports as aresult of the yen’s depreciation. Ordinary income was held toalmost the same as the previous fiscal year at ¥2,002 million
on account of increases in equity in earnings of affiliates
and foreign exchange gains. Net income increased 13.8% to¥1,565 million, mainly because of lower income taxes.

Consolidated Business Performance for the Fiscal
Year Ended March 31, 2013
Net Sales and Earnings
Net Sales
Overseas, the Group posted strong sales atop buoyant
demand. In Japan, sales declined due to deflationary
impacts. As a result, in the fiscal year ended March 31,
2013, net sales increased ¥1,009 million, or 3.6% year on
year to ¥28,772 million.

18 Nitta Gelatin Inc. Annual Report 2013

Gross Profit
Consolidated gross profit declined ¥146 million, or 2.1%
year on year to ¥6,691 million, mainly due to a rise in raw
material costs and energy costs and higher procurement
costs of imports as a result of the yen’s depreciation.
Selling, General and Administrative Expenses
Selling, general and administrative (SG&A) expenses increased¥249 million, or 5.2%, year on year to ¥5,072 million.
Operating Income
As a result of the foregoing, operating income decreased¥396 million, or 19.7%, year on year to ¥1,618 million.
Net Income­ illion
We booked a gain on sales of noncurrent assets of ¥11 m
as other income, and a loss on retirement of noncurrent
assets of ¥58 million and a loss on valuation of investment
securities of ¥12 million as other expenses. However, as aresult of a decline in income taxes paid, net income increased¥190 million, or 13.8% year on year to ¥1,565 million.

Segment Performance
Collagen Material BusinessIn the gelatin field, sales of gelatin for capsules performed
strongly in Japan. The Group posted sharply lower photographic gelatin sales because demand for film fell due tothe rapid digitization of movies. Meanwhile, sales of edible
gelatin in Japan declined, mainly reflecting the end of atemporary boost in sales from post-quake demand in theprevious fiscal year. In overseas markets, on the other
hand, sales increased due to buoyant demand for edible
gelatin and gelatin for capsules. Another contributing factor
was the positive impact of a revision of gelatin prices to theGroup’s advantage.
Collagen peptide sales declined year on year, mainlyreflecting intensified competition with other materials in thehealth foods market in Japan and stagnating sales overseas
in the Asian market.
Collagen casing sales increased, buoyed by robust
demand for collagen casings for snack sausages in the U.S.
and strong exports to China.
As a result, net sales in the Collagen Material businessincreased 7.1% year on year to ¥18,674 million. Segment
profit (operating income) was down 19.4% to ¥1,817 million.
Formula Solution BusinessIn food materials, overall sales were sluggish due to lackluster sales of ingredients for delicatessen items. This was
despite steady growth in sales of stabilizers for ham, sausage and other meat products, in addition to gelling agentsfor use in chilled desserts sold in convenience stores.
In adhesives, overall sales declined, mainly due to thesale of certain product businesses and lower sales of hotmelt adhesives for bookbinding applications owing to weak
conditions in the publishing sector. This was partly offset byfirm sales of hot-melt adhesives for building materials supported by recovery demand from the Great East Japan

Earthquake, and high-performance polymers developed by
the Company.
As a result, net sales in the Formula Solution businessdecreased 2.2% year on year to ¥10,097 million. Segment profit(operating income) rose 6.3% year on year to ¥1,151 million, as
prices of raw materials for adhesives stopped increasing.

Research and Development“As a world leading gelatin manufacturer, the Group uses its
proprietary technology to quickly and efficiently provide
superior products and services to global customers. The
Group produces healthy, functional and valuable products in
multinational facilities that are safe, reliable and environmentally friendly.” Guided by this vision, we are advancing
both the Collagen Material and Formula Solution businesses
with the aim of establishing Nitta Gelatin as a global brandthat is chosen first by customers.
The markets we face are constantly evolving and diversifying on a daily basis. True to our slogan, Amaze the World!,
our basic R&D policy is to quickly and efficiently develop
products and services that are a half step or a whole stepahead of customer expectations in order to enhance theCompany’s brand value and contribute to sustained business expansion and growth. We have organized a productdevelopment structure that is as close to customers as
possible in an effort to energize R&D activities and identify
shifts in market and customer needs with a constantly positive mindset. In other words, we have stationed sales,development and production personnel across the R&D
organization to ensure that requests from the customer,
markets and others are directly conveyed to technology,
service, product development and production technology
development units, so that timely responses are made.
While the internal research personnel are focused on
product development and customer service, we also actively
conduct joint research with and commission research toexternal research institutes, universities and other entities,
for the purpose of promoting basic research into food ingredients, obtaining new fundamental technologies and meeting other priorities.
Since 2007, we have held TPM (Technology, Product,
Market) Presentations under the guidance of external consultants, in an initiative to promote and encourage R&D
activities. These presentations are based on the “TPM
cycle” approach of obtaining Market recognition throughProduct development driven by Technology. Group R&D
Information Meetings have been held since 2010, to share
information about R&D within our Group by introducing
examples of development projects, as well as new technologies and products.
The following is a breakdown of R&D activities by division in each business during the fiscal year ended March
31, 2013. Total R&D expenses were ¥1,026 million.

Collagen Material Business
Gelatin• Improve and upgrade production technology for raw
material and gelatin processes• Develop new gelatin (new materials, new functions)• Enhance gelatin applications
Collagen Peptide• Develop collagen peptide production technology (peptide
synthesis, refining technology)• Research functional characteristics of collagen peptide
Collagen Casing• Improve and upgrade collagen casing production• Develop new markets and productsLife Science• Research and development of collagen for biomaterials
and cell cultures• Research and development of gelatin and collagen foradvanced medical care
R&D expenses in the Collagen Material business were¥647 million.
Formula Solution Business
Food Material• Develop applications utilizing application laboratories• Develop novel products• Plan and develop consumer products (collagen supplements, collagen-added cosmetics)
Adhesive• Environmentally friendly hot-melt adhesives• High-performance polymers (sealants)
R&D expenses in the Formula Solution business were¥378 million.

Cash FlowsNet cash provided by operating activities was ¥2,050 million, compared with ¥568 million in the previous fiscal year.
The main contributing factors were income before income
taxes and minority interests of ¥1,938 million, depreciation
and amortization of ¥825 million and decrease in notes andaccounts receivable of ¥897 million. These inflows werepartly offset by an increase in inventories of ¥650 million
and income taxes paid of ¥686 million.
Net cash used in investing activities was ¥1,557 million,
compared with ¥733 million in the previous fiscal year. The
main uses of cash were the purchase of property, plant andequipment of ¥1,193 million, and the purchase of stocks ofaffiliates of ¥302 million.
Net cash used in financing activities was ¥376 million,
compared to net cash provided of ¥713 million in the previous year. The main use of cash was cash dividends paid of¥220 million.
As a result, cash and cash equivalents were ¥2,258
million as of March 31, 2013, an increase of ¥180 million
from a year earlier.

Nitta Gelatin Inc. Annual Report 2013   19Capital Investment
We executed capital investment of ¥1,426 million centeredon the Collagen Material business, mainly for the purpose of
the construction of a new collagen peptide plant, rationalizing production, and maintaining and improving production
capacity and quality.
In the Collagen Material business, we executed capital
investment of ¥192 million at Nitta Gelatin USA, Inc. toconstruct a new collagen peptide plant, ¥328 million at
Nitta Casings Inc. and Nitta Casings (Canada) Inc. toupgrade and bolster collagen casing production facilities,and ¥581 million at the Osaka Plant to enhance quality,
reduce energy and maintain production capacity of gelatin
production facilities. We also made capital investment of¥56 million at Hikone Gelatin Inc., and ¥45 million at Nitta
Gelatin Canada, Inc.
In the Formula Solution business, we executed total
capital investment of ¥73 million, mainly comprising capital
investment for the purpose of upgrading testing and measurement equipment, and upgrading production facilities
and laboratory equipment to enhance the quality of adhesive products and maintain production capacity.
Furthermore, in corporate assets, we made capital
investment of ¥124 million, primarily to seismically reinforce the employee benefit and welfare facilities at the
Osaka Plant.
We allotted capital increase, own funds, and borrowings
to execute these capital investments. The capital increaseis proceeds from issuance of new shares for public subscription and disposal of treasury stock settled on December 19, 2011 and issuance of new shares for third-party
allotment settled on January 18, 2012.
In addition, we booked an ¥11 million gain on sales of
noncurrent assets from the sale of food seasoning production facilities in April 2012. We also booked a ¥58 million
loss on retirement of noncurrent assets on the ongoing
replacement of machinery and other plant and equipment.

Financial Position
Total assets were ¥25,449 million as of March 31, 2013,
an increase of ¥2,077 million from the previous fiscal
year-end.
Current Assets
Current assets were ¥15,319 million as of March 31,
2013, an increase of ¥383 million from March 31, 2012.
This was mainly attributable to a ¥180 million increase in
cash and deposits and a ¥860 million increase in inventories, partly offset by a ¥609 million decrease in notes andaccounts receivable.
Noncurrent Assets
Noncurrent assets were ¥10,129 million at March 31,
2013, an increase of ¥1,693 million from March 31, 2012.
This mainly reflected an increase of ¥900 million in net
property, plant and equipment in line with capital investments and an increase of ¥713 million in investment securities, primarily as a result of market value gains
accompanying rising share prices.

20 Nitta Gelatin Inc. Annual Report 2013

Current Liabilities
Current liabilities were ¥9,637 million as of March 31,
2013, an increase of ¥460 million from the previous fiscal
year-end. This mainly reflected an increase of ¥260 million
in notes and accounts payable, ¥220 million in short-termloans payable and an increase of ¥190 million in the current portion of long-term debt, partly offset by a decrease of¥305 million in income taxes payable.
Noncurrent Liabilities
Noncurrent liabilities were ¥5,844 million as of March 31,
2013, a decrease of ¥242 million from the previous fiscal
year-end. This mainly reflected a decrease of ¥200 million
in bonds and a decline of ¥119 million in long-term debt.
Net Assets
Net assets stood at ¥9,968 million as of March 31, 2013,
an increase of ¥1,859 million from the previous fiscal
year-end. This was mainly attributable to an increase of¥1,345 million in retained earnings and an increase of¥688 million in foreign currency translation adjustments
due to the yen’s depreciation.

Basic Profit Distribution Policy and Dividends
Our basic policy on profit distribution is to continuously pay
steady dividends, while securing the internal reserves
needed to develop future businesses and strengthen ouroperating structure.
Furthermore, our basic policy is to pay dividends twice
every fiscal year, with interim and year-end dividends determined by the Board of Directors and the Annual General
Meeting of Shareholders, respectively. In regard to dividends
for the fiscal year ended March 31, 2013, in accordancewith the aforementioned policies, management has decided
to pay a year-end dividend of ¥6.00 per common share, as
well as a commemorative dividend of ¥2.00 to mark theCompany’s designation to the First Section of the Tokyo
Stock Exchange. Combined with the interim dividend of¥6.00, the annual dividend per common share is ¥14.00.
In regard to funds set aside as internal reserves, we
intend to effectively invest these funds in enhancing costcompetitiveness even more than before, bolstering ourtechnology and product development structure in response
to market needs, as well as implementing global strategies.
These investments will help us to address anticipatedchanges in the business environment going forward.

Business Risks

This section provides information about the principal business risks concerning the Nitta Gelatin Group’s operations
and related matters that may have a material impact on thedecisions of investors. Matters that do not necessarily
constitute such risks but are considered to have a material
impact on the investment decisions of investors are also
disclosed below from the standpoint of actively disclosing
information to investors. Recognizing the possibility for suchrisks to occur, we endeavor to prevent the occurrence ofsuch risks and to respond properly in the event that suchrisks occur.
This section includes forward-looking statements determined based on information available to us as of June 26,
2013.

(1) Product Development
Guided by our motto of quickly and efficiently providing
products and services that address shifting market conditions and customer needs, we actively conduct R&D andcapital investment. However, there is no guarantee that we
can successfully develop new products. In addition, even if
a new product is successfully developed, it may not matchcustomer needs and thus fail to gain their acceptance.
In regard to products for medical applications, customers using our products require an extensive lead time todevelop and launch medical products. During this period,
the customer may suspend product development or face
protracted development delays, among other contingencies,
mainly on account of shifting market conditions, changes inoperating performance, or delays in obtaining approval from
regulatory authorities.
In the event that we face delays or are unable torecover R&D expenses and capital investment as a result,our operating results and financial position may be negatively impacted.

(2) Overseas Markets
Ever since the establishment of our first overseas sales
subsidiary in the U.S. in July 1979, we have been actively
working to expand sales in overseas markets. In the fiscal
year ended March 31, 2013, sales in overseas markets
accounted for 33.6% of our net sales. In the North American
market, our primary region for business development so far,our sales expansion may be negatively impacted by competition arising between our products and those of our competitors in the same industry.
In addition, in the future strategic Chinese, Indian andSoutheast Asian markets, our sales expansion may be
negatively impacted by even greater competition than in
North America between our products and those of our competitors in the same industry.
The Group is working to enhance its competitiveness,
mainly by reducing costs, improving quality, developing
unique new products, and conducting production in optimal
locations. However, if these measures prove ineffective,
sales growth could stagnate. This could have a negative
impact on our operating results and financial position.

(3) Exchange Rate Movements
When selling products to overseas customers either directlyor through a subsidiary, we export products on a U.S. dollardenominated basis. On the procurement front, we purchaseraw materials for gelatin, such as bovine bones and ossein,
primarily using U.S. dollars. We also import pig skin gelatinfrom overseas on a Canadian dollar-denominated basis. For
this reason, we hedge our foreign exchange risk by concluding foreign exchange forward contracts with financial institutions with respect to U.S. dollar-denominated exports, aswell as U.S. dollar- and Canadian dollar-denominatedimports. Through these measures, we reduce our exposure
to foreign exchange risk related to operating transactions.
However, in the event of unforeseeable foreign exchange
rate movements, our operating results and financial position
could be negatively impacted.
Furthermore, gains and losses arising from foreign
currency-denominated transactions as well as the translation into Japanese yen of foreign currency-denominatedreceivables and payables as well as the translation into
Japanese yen of the accounts of the financial statements ofoverseas consolidated subsidiaries prepared in foreign
currencies, are subject to foreign exchange rate movements. This could have a negative impact on our operating
results and financial position.

(4) Price Fluctuations for Primary Raw Materials
Raw material costs accounted for 55.6% of our cost of
manufacturing in the year ended March 31, 2013. Raw
material prices fluctuate for a variety of reasons. In the
Collagen Material business, primary raw materials such as
bovine bones and hides, pig skin and fish scales are all
byproducts of the livestock and fishery industries. The raw
material price may fluctuate depending on changes in meat
consumption reflecting global economic conditions, as well
as changes in supply-demand dynamics driven by regulations governing food processing and distribution in response
to various animal epidemics and other factors. In the Formula Solution business, prices of natural polysaccharides,
the primary raw material in the food material divisions may
fluctuate due to changes in the climate of growing regions
and other factors. Prices of petroleum resins, the key raw
material for adhesives, may fluctuate due to changes incommodity prices and supply-demand dynamics for heavy oil
and naphtha.
Meanwhile, in some cases the market environment andother factors can make it difficult to transfer the impact ofprice fluctuations for these key raw materials to the selling
price of our products. Accordingly, fluctuations in raw materials prices could have a negative impact on our operating
results and financial position.

Nitta Gelatin Inc. Annual Report 2013   21

(5) Animal Diseases
Our primary products, including gelatin, collagen peptide,collagen casing and collagen, are made from animal byproducts derived from livestock and fishery production, such as
bovine bones and hides, pig skins, and fish scales. Accordingly, these materials are subject to the risk of animal diseases. We therefore procure these materials only after
confirming that they are free from any animal infectious
diseases, while working to diversify the sourcing region of
raw materials in order to ensure their safety.
Despite these efforts, in the event that an extensive
outbreak of animal disease occurs in a region from which
we procure raw materials, the supply of raw material bones
and skins may decline or stop due to a suspension or stoppage of meat production, or may cause us to switch to analternative raw material source. These and other related
factors may have a negative impact on the stable procurement of raw materials.
In addition, our product sales may be affected by theoutbreak of an animal disease in countries in which raw
materials are produced or products are manufactured. Specifically, product sales may stagnate due to import restrictions and other measures imposed on animal products
made from raw materials originating from or products manufactured in these countries.
As a result of the foregoing, the Group may be impacted
by higher raw material procurement costs, reduced revenue
due to lower product sales, higher inventories and so forth.
This could negatively affect our operating results and financial position.

made at each plant to recycle and reuse water and to
upgrade production processes so as to reduce the volume
of water supplied and released and to maintain water quality. In the event of a major amendment to national orregional laws and regulations, we may incur costs associated with addressing such new legislative changes.
The foregoing impacts could negatively affect our operating results and financial position.

(7) Religious Rules
Gelatin is an animal-derived product that is widely used infood, pharmaceutical capsules and other items. However,
due to religious injunctions, consumption of some of these
items may be forbidden, depending on the animal species
and the manufacturing methods. Main examples of suchreligious rules include the Halal (Islam) and Kosher (Judaism). Followers of these religions are forbidden from consuming pig-derived products. In order to sell proper gelatin
to business customers who manufacture products for these
consumers, we produce gelatin by procuring raw materials
derived from permissible animal species and by using
appropriate manufacturing methods in line with religious
rules. To make certain that our products conform to religious rules, we obtain certification through audits by certifying entities of each religion. In this context, we strictly
manage our raw materials and manufacturing. However, inthe event that our certification is revoked as a result of abreach of a religious rule due to a management deficiency,
we will lose sales opportunities, which could have a negative impact on our operating results and financial position.

(6) Laws and Regulations
In the course of executing business activities, the Group’sbusiness is subject to Japanese laws and regulations,
including the Food Sanitation Law, the Japanese AgriculturalStandard and the Pharmaceutical Affairs Law, as well as
directives issued by the competent authorities. In the eventthat these laws and regulations are amended or abolished,or if new laws and regulations are established, we may incur
additional costs and other outlays to address these developments, or face restrictions in terms of the scope of ourbusiness activities.
Furthermore, the Group is subject to various laws andregulations in overseas countries where it conducts business. Our operating results and financial position could be
negatively impacted by changes to these laws and regulations and our status of legal compliance.
In regard to the environment, gelatin production requires
large amounts of water in the whole process, from raw
materials to gelatin. For this reason, our plants are suppliedwith and release large amounts of water, and are subject tothe laws and regulations of each country and region inregard to wastewater volume and water quality. Efforts are

22 Nitta Gelatin Inc. Annual Report 2013(8) Natural Disasters, Accidents, Terrorism,
War and Other Contingencies
In the event of natural disasters such as earthquakes,
storms and floods, accidents, problems with local communities, regional terrorism, wars and other contingencies at ourbusiness locations, the procurement of raw materials andthe production and sale of products could be disrupted,
which could have a negative impact on our operating results
and financial position. Our business locations include ourmain offices and major outsourcing partners (including
those in Osaka, Shiga and Tochigi prefectures, Japan; Province of Ontario, Canada; State of North Carolina and New
Jersey, U.S.A.; State of Kerala, India and Guangdong Province, China, Long An Province, Vietnam); regions from whichprimary raw materials are procured (including India, Canada,
U.S.A., New Zealand, Thailand and China); and primary
regions where products are sold (including Japan, North
America, India, China and various other Asian countries).
Wide spread anti-Japanese demonstrations that erupted
in China in September 2012 had no impact on the Group’sbusiness.

(9) Product Quality
We endeavor to put quality first in order to earn our customers’ trust. To this end, we develop products focused on
customer needs, and manufacture products under an internationally accepted quality assurance system. One particular focus lies in ensuring traceability from raw materials tofinished products in an effort to market safe products.
We have enrolled in product liability insurance policies,
among other safeguards. However, in the event that a customer suffers damages as a result of defects in our products, there is no guarantee that our liability for damages will
be covered within the compensation limits of these insurance policies.
Accordingly, in the event of a serious quality problem,the ensuing claims for damages, loss of public trust in theGroup and other factors could negatively impact our operating results and financial position.

(10) Alternative Products
There is a growing trend to switch the raw materials used incertain pharmaceuticals, cosmetics and food from animal toplant-derived materials. In the capsule market, one of ourcore markets for gelatin, this trend has given impetus to thedevelopment of plant-derived (starch and cellulose derivatives) capsule products. Certain pharmaceutical and healthfood manufacturers have adopted these capsules as analternative to gelatin capsules. We believe that the popularization of plant-derived capsules has been limited only tocertain segments of the market.
Nevertheless, in the event of new regulations on animalderived products or a change in consumer sentiment, therapid popularization of plant-derived capsules could reducedemand for gelatin capsules, and have a negative impact on
our operating results and financial position.

(11) Interest-Rate Fluctuations
We primarily borrow funds from financial institutions tofinance capital investments. The percentage of interest-­
bearing liabilities relative to total assets was 27.6% (including
lease obligations) in the fiscal year ended March 31, 2013.
We endeavor to reduce borrowings and other interestbearing liabilities. However, in the event of an increase inmarket interest rates going forward, our operating results
and financial position could be negatively impacted.

goods and other items are mutually supplied within theGroup. Each Group business entity complies with the tax
laws to follow the proper procedures for calculating andpaying taxes in the country of its jurisdiction. While theGroup pays close attention to international taxation risks
such as the transfer pricing taxation applicable in eachcountry, additional taxes may be imposed in the event that
the Group’s views on this matter conflict with those of the
tax authorities.

(13) Information Security
We have established an information system that enables us
to obtain and analyze necessary information in real time invarious processes, including purchasing, production, sales
and management. We put particular emphasis on the strict
management of access rights to the system for the purposeof ensuring stable system operation and preventing any
leaks of sales data, including client data and personal information stored on the system. These efforts notwithstanding, in the event of difficulty in maintaining the stable
operation of the information system due to a software malfunction, unauthorized external access or other factors, ourbusiness activities could be disrupted. In the event thatsales or client data is leaked outside our Group, we could
face consequences such as claims for damages from customers, and a loss of public trust in our Group. As a result,our operating results and financial position could be negatively affected.

(14) Infringement of Intellectual Property Rights
We protect our intellectual property rights through suchmeans as obtaining patents on proprietary technology andother innovations we have developed. Efforts are also madein the product development process to prevent any infringement of rights held by third parties, including intellectual
property rights. These efforts notwithstanding, we cannot
completely rule out the possibility of becoming subject toallegations and claims by third parties concerning the ownership or infringement of intellectual property and otherrights. In the event that we are subject to claims for damages or cease-and-desist orders as a result, our operating
results and financial position could be negatively affected.

(15) Legal Disputes and Litigation(12) Taxation
In Japan, a 17% tariff is levied on imported gelatin except forphotographic use. Going forward, the selling price of theseimports may decrease as a result of the reduction or abolition of this tariff. A price difference may arise between
imports such as South American bovine hide gelatin andIndian bovine bone gelatin, and bovine bone gelatin produced
at the Company’s Osaka Plant. In such an event, our operating results and financial position could be negatively affected.
Moreover, the Group conducts production and sales
activities on a global scale, and materials, semi-finishedIn the course of our business activities, we endeavor toenhance our internal control system and strengthen compliance, encompassing legal compliance and observance ofsocial norms, while reducing our exposure to various formsof risk. At the same time, the Group receives advice fromlawyers and other experts as necessary. These efforts
notwithstanding, the Group may be subject to lawsuits inthe course of business activities, irrespective of whether or
not there is a breach of laws or regulations. In such an
event, our operating results and financial position could be
negatively affected.

Nitta Gelatin Inc. Annual Report 2013   23Consolidated Balance Sheets
Nitta Gelatin Inc. and Consolidated Subsidiaries
As of March 31, 2013 and 2012

Thousands of U.S.
dollars (Note 1)

Millions of yen
2013

2012

2013

AssetsCurrent assets:
Cash and deposits (Notes 6, 10 and 18)
Notes and accounts receivable (Notes 3 and 10)
Inventories (Note 4)
Deferred tax assets (Note 7)
Other
Allowance for doubtful accounts
Total current assets¥  2,278
5,839
6,831
134
251
(16)
15,319¥  2,098
6,449
5,971
168
262
(14)
14,935$  24,221
62,083
72,631
1,424
2,668
(170)
162,881

Property, plant and equipment:
Buildings and structures (Note 6)
Machinery, equipment and vehicles (Note 6)
Land (Note 6)
Lease assets (Note 9)
Construction in progress
Other
Accumulated depreciation
Net property, plant and equipment

7,204
8,554
761
786
777
1,279
(13,077)
6,287

6,593
7,638
741
654
365
1,219
(11,827)
5,387

76,597
90,951
8,091
8,357
8,261
13,599(139,043)
66,847

48

18

510

2,768
13
488
523
3,793
¥ 25,449

2,055
17
477
480
3,030
¥ 23,371

29,431
138
5,188
5,560
40,329$ 270,590

Intangible assets

Investments and other assets:
Investment securities (Notes 5, 6 and 10)
Long-term loans receivable (Note 10)
Deferred tax assets (Note 7)
Other
Total investments and other assets
Total assets
See notes to consolidated financial statements.

24 Nitta Gelatin Inc. Annual Report 2013

Thousands of U.S.
dollars (Note 1)

Millions of yen
2013

2012

2013

Liabilities
Current liabilities:
Notes and accounts payable (Note 10)
Short-term loans payable (Note 6)
Current portion of long-term debt (Notes 6 and 10)
Current portion of bonds (Notes 6 and 10)
Lease obligations (Notes 6, 9 and 10)
Other payable (Note 10)
Income taxes payable
Provision for bonuses
Other
Total current liabilities¥ 3,736
1,145
2,068
200
154
1,586
81
220
443
9,637

¥ 3,476
925
1,878
330
127
1,388
387
235
426
9,176

$ 39,723
12,17421,9882,126
1,637
16,863
861
2,339
4,710
102,466

Noncurrent liabilities:
Bonds (Notes 6 and 10)
Long-term debt (Notes 6 and 10)
Lease obligations (Notes 6, 9 and 10)
Provision for retirement benefits (Note 8)
Provision for directors’ retirement benefits
Other
Total noncurrent liabilities
Total liabilities

–
3,142
319
2,276
35
70
5,844
15,481

200
3,261
348
2,158
33
85
6,087
15,263–33,407
3,391
24,199372
744
62,137
164,603

1,577

1,577

16,767

1,398
8,235

1,398
6,889

14,86487,559(0)
11,210

(0)
9,865

(0)
119,191

499
27
(662)
(1,254)(1,390)147
9,968¥25,449416
6(1,350)(903)(1,832)
74
8,108¥23,371

5,305
287(7,038)(13,333)(14,779)
1,562
105,986$270,590

Commitments and contingent liabilities (Notes 9, 11 and 12)
Net assets
Shareholders’ equity (Note 15):
Capital stock:
Authorized –– 50,000,000 shares
Issued — 15,770,074 shares in 2013 and15,770,074 shares in 2012
Capital surplus
Retained earnings
Treasury stock — 162 shares in 2013 and162 shares in 2012
Total shareholders’ equity
Accumulated other comprehensive income:
Valuation difference on available-for-sale securities
Deferred gains or losses on hedges
Foreign currency translation adjustment
Pension liability adjustment of foreign subsidiaries
Total accumulated other comprehensive income
Minority interests
Total net assets
Total liabilities and net assets
See notes to consolidated financial statements.

Nitta Gelatin Inc. Annual Report 2013   25Consolidated Statements of Income
Nitta Gelatin Inc. and Consolidated Subsidiaries
Years ended March 31, 2013 and 2012

Thousands of U.S.
dollars (Note 1)

Millions of yen

Net sales
Cost of sales (Note 4)
Gross profit
Selling, general and administrative expenses (Note 13)
Operating income
Other income (expenses):
Interest and dividends income
Interest expenses
Rent income
Equity in earnings of affiliates
Foreign exchange gains
Going public expenses
Gain on sales of noncurrent assets
Gain on transfer of business
Loss on retirement of noncurrent assets
Loss on valuation of investment securities
Loss on valuation of golf club membership
Loss on sales of golf club membership
Other, net

Income before income taxes and minority interests
Income taxes (Note 7):
Current
Deferred
Total income taxes
Income before minority interests
Minority interests in income
Net income (Note 17)
See notes to consolidated financial statements.

26 Nitta Gelatin Inc. Annual Report 2013

2013

2012

2013

¥28,772
22,0806,691¥27,763
20,924
6,838$305,922
234,768
71,143

5,072
1,618

4,822
2,015

53,92817,203

19
(147)
29
262
179
–
11
–
(58)
(12)
–
(4)
37
319

17
(167)
28
118
3
(45)
–
15
(49)
–
(4)
–
31
(51)

202
(1,562)
308
2,785
1,903
–
116
–
(616)
(127)
–
(42)
393
3,391

1,938

1,964

20,606

402
(16)
385

568
12
581

4,274
(170)
4,093

1,552
(13)
¥ 1,5651,383
7¥ 1,375

16,501(138)$ 16,640

Consolidated Statements of Comprehensive Income
Nitta Gelatin Inc. and Consolidated Subsidiaries
Years ended March 31, 2013 and 2012

Thousands of U.S.
dollars (Note 1)

Millions of yen

Income before minority interests

2013

2012

¥1,552¥1,383$16,501

2013

Other comprehensive income (Note 19):
Valuation difference on available-for-sale securities
Deferred gains or losses on hedges
Foreign currency translation adjustment
Pension liability adjustment of foreign subsidiaries
Share of other comprehensive income of associates
accounted for using equity method
Total other comprehensive income
Comprehensive income

83
17
605
(350)

8
8
(50)
(238)

882
180
6,432
(3,721)95
450¥2,003(123)(396)¥  986

1,010
4,784$21,297

Comprehensive income attributable to:
Owners of the parent
Minority interests¥2,008(4)¥  978
7$21,350(42)

See notes to consolidated financial statements.

Nitta Gelatin Inc. Annual Report 2013   27Consolidated Statements of Changes in Net Assets
Nitta Gelatin Inc. and Consolidated Subsidiaries
Years ended March 31, 2013 and 2012

Millions of yen
Shareholders’ equity
Capital stock

CapitalsurplusRetainedearnings

Treasurystock

Balance at April 1, 2011
Issuance of new shares
Dividends from surplus
Net income
Purchase of treasury stock
Disposal of treasury stock
Retirement of treasury stock
Net changes of items other than shareholders’ equity¥  875702¥  677702¥6,090¥ (82) ¥ 7,560
1,404
(48)
1,375
(528)
(528)
82
101
527
–
–

Balance at March 31, 2012
Dividends from surplus
Net income
Net changes of items other than shareholders’ equity
Balance at March 31, 2013

1,577

1,398

6,889
(220)
1,565

¥1,577¥1,398¥8,235

(48)
1,375
18
(527)

Total

(0)

9,865
(220)
1,565
–
¥  (0) ¥11,210

Millions of yen
Accumulated other comprehensive income

Balance at April 1, 2011
Issuance of new shares
Dividends from surplus
Net income
Purchase of treasury stock
Disposal of treasury stock
Retirement of treasury stock
Net changes of items other thanshareholders’ equity
Balance at March 31, 2012
Dividends from surplus
Net income
Net changes of items other thanshareholders’ equity
Balance at March 31, 2013
See notes to consolidated financial statements.

28 Nitta Gelatin Inc. Annual Report 2013

Valuationdifference on
available-forsale securities

Deferred
gains orlosses onhedgesForeigncurrencytranslation
adjustment

Pension liability
adjustment offoreignsubsidiaries

Total

Minority
interests

Total net
assets¥408¥ 2¥(1,180)¥  (665)¥(1,435)¥ 59¥6,185
1,404
(48)
1,375
(528)
101
–

7
416

4
6

(170)
(1,350)

(238)
(903)

(397)
(1,832)

15
74

(381)
8,108
(220)
1,565

83
¥499

21
¥27

688
¥  (662)(350)¥(1,254)442¥(1,390)

72
¥147

514
¥9,968

Thousands of U.S. dollars (Note 1)
Shareholders’ equity

Balance at March 31, 2012
Dividends from surplus
Net income
Net changes of items other than shareholders’ equity
Balance at March 31, 2013

Capital stock

CapitalsurplusRetainedearnings

Treasurystock$16,767$14,864$72,248(2,339)16,640$(0)$16,767$14,864$87,559$(0)$104,891(2,339)16,640–$119,191

Minority
interests

Total net
assets

Total

Thousands of U.S. dollars (Note 1)
Accumulated other comprehensive income
Valuation
Deferreddifference on gains oravailable-for- losses onsale securities hedges

Balance at March 31, 2012
Dividends from surplus
Net income
Net changes of items other thanshareholders’ equity
Balance at March 31, 2013

Foreigncurrencytranslation
adjustment

Pension liability
adjustment offoreignsubsidiaries

Total$4,423$ 63$(14,354)$ (9,601)$(19,479) $  786

$ 86,209(2,339)16,640882$5,305

223
$287

7,315
$      (7,038)(3,721)$(13,333)

4,699
765
$(14,779) $1,562

5,465$105,986

See notes to consolidated financial statements.

Nitta Gelatin Inc. Annual Report 2013   29Consolidated Statements of Cash Flows
Nitta Gelatin Inc. and Consolidated Subsidiaries
Years ended March 31, 2013 and 2012

Thousands of U.S.
dollars (Note 1)

Millions of yen
2013

2012

2013

Operating activities:
Income before income taxes and minority interests
Depreciation and amortization
Decrease in provision for retirement benefits
Increase in provision for directors’ retirement benefits
Increase (decrease) in provision for bonuses
Increase in allowance for doubtful accounts
Interest and dividends income
Interest expenses
Foreign exchange losses (gains)
Equity in earnings of affiliates
Gain on sales of property, plant and equipment
Loss on retirement of noncurrent assets
Loss on valuation of investment securities
Loss on valuation of golf club membership
Loss on sales of golf club membership
Decrease (increase) in notes and accounts receivable
Increase in inventories
Increase (decrease) in notes and accounts payable
Increase (decrease) in accrued consumption taxes
Other, net
SubtotalInterest and dividends income received
Interest expenses paid
Income taxes paid
Net cash provided by operating activities¥    1,938
825
(104)
1
(21)
1
(19)
147
(71)
(262)
(11)
58
12
–
4
897
(650)
40
(66)
13
2,732
153
(148)
(686)
2,050

¥1,964
841
(165)
1
25
4
(17)
167
12
(118)
–
49
–
4
–
(842)
(631)
(50)
22
(194)
1,072
45
(167)
(382)
568

$    20,606
8,771(1,105)
10
(223)
10
(202)
1,562
(754)
(2,785)
(116)
616
127
–
42
9,537
(6,911)
425
(701)
138
29,048
1,626(1,573)(7,293)
21,796

Investing activities:
Payments into time deposits
Proceeds from withdrawal of time deposits
Purchase of property, plant and equipment
Proceeds from sales of property, plant and equipment
Purchase of intangible assets
Purchase of investment securities
Purchase of stocks of affiliates
Proceeds from cancellation of insurance funds
Purchase of insurance funds
Payments of loans receivableCollection of loans receivable
Other, net
Net cash used in investing activities(20)
20(1,193)
14
(40)
(38)
(302)
29
(4)
(0)
4
(26)
¥(1,557)

(20)
20
(673)
7
(7)
(4)
(28)
16
(10)
(0)
5
(38)
¥  (733)(212)
212(12,684)
148
(425)
(404)
(3,211)
308
(42)
(0)
42
(276)
$(16,555)

See notes to consolidated financial statements.

30 Nitta Gelatin Inc. Annual Report 2013

Thousands of U.S.
dollars (Note 1)

Millions of yen
2013

Financing activities:
Net increase (decrease) in short-term loans payable
Proceeds from long-term debt
Repayment of long-term debt
Redemption of bonds
Proceeds from issuance of common stock
Proceeds from stock issuance to minority shareholders
Proceeds from sale and leaseback transaction
Repayments of lease obligations
Proceeds from disposal of treasury stock
Purchase of treasury stock
Cash dividends paid
Cash dividends paid to minority shareholders
Net cash provided by (used in) financing activities
Effect of exchange rate change on cash and cash equivalents
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period (Note 18)¥       842,124(2,103)
(330)
–
85
132
(140)
–
–
(220)
(8)
(376)
63
180
2,078
¥    2,2582012¥   (94)
2,047(1,987)
(260)
1,404
15
183
(111)
101
(528)
(48)
(7)
713
(8)
540
1,538
¥ 2,0782013$       89322,583(22,360)(3,508)–903
1,403(1,488)––(2,339)(85)(3,997)669
1,913
22,094$ 24,008

See notes to consolidated financial statements.

Nitta Gelatin Inc. Annual Report 2013   31

Notes to Consolidated Financial Statements
Nitta Gelatin Inc. and Consolidated Subsidiaries

1. Basis of Presenting Consolidated Financial Statements
The accompanying consolidated financial statements of Nitta Gelatin Inc. (the “Company”) and its consolidated subsidiaries(together, the “Group”) have been prepared in accordance with the provisions set forth in the Financial Instruments andExchange Act of Japan and its related accounting regulations and in conformity with accounting principles generally acceptedin Japan, which are different in certain respects as to application and disclosure requirements of International Financial
Reporting Standards.
In preparing these consolidated financial statements, certain reclassifications and rearrangements have been made to
the consolidated financial statements issued domestically in order to present them in a form which is more familiar to readers outside Japan. In addition, certain reclassifications have been made in the 2012 financial statements to conform to theclassifications used in 2013.
The consolidated financial statements are stated in Japanese yen, the currency of the country in which the Company isincorporated and operates. As permitted by the regulations under the Financial Instruments and Exchange Act of Japan,
amounts of less than one million yen have been omitted. As a result, the totals shown in the accompanying consolidated
financial statements in yen do not necessarily agree with the sums of the individual amounts.
The U.S. dollar amounts shown in the accompanying consolidated financial statements and notes thereto were translated
from the presented Japanese yen amounts into U.S. dollar amounts at the rate of ¥94.05 = U.S. $1, the approximate rate ofexchange at March 29, 2013, and were then rounded down to the nearest thousand. As a result, the totals shown in theaccompanying consolidated financial statements in U.S. dollars do not necessarily agree with the sums of the individual
amounts. This translation of Japanese yen amounts into U.S. dollars amounts is included solely for convenience of readers
outside Japan. Such translation should not be construed as a representation that Japanese yen could be converted into U.S.
dollars at that or any other rate.

2. Significant Accounting Policies(1) Principles of consolidation and accounting for investments in unconsolidated subsidiaries and affiliates
The consolidated financial statements as of and for the year ended March 31, 2013 include the accounts of the Company
and its 14 significant subsidiaries (12 significant subsidiaries in 2012). The fiscal year-end of three consolidated subsidiaries(December 31) is different than the consolidated fiscal year-end (March 31), and necessary adjustments are made for any
significant transactions between their fiscal year-end and the consolidated fiscal year-end.
Under the control or influence concept, those companies in which the Company, directly or indirectly, is able to exercise
control over operations are consolidated, and those companies over which the Group has the ability to exercise significant
influence are accounted for using the equity method.
For the year ended March 31, 2013, three affiliates (three affiliates in 2012) are accounted for using the equity method.
Investments in companies accounted for using the equity method whose fiscal year-ends are different than the consolidated
fiscal year-end are accounted for on the basis of the companies’ respective fiscal year-end. Investments in one unconsolidated subsidiary and two affiliates are excluded from the application of the equity method and stated at cost because theGroup’s share of their net income and retained earnings has a minimal effect on the accompanying consolidated financial
statements and is considered insignificant overall.

(2) Foreign currency translation
Receivables and payables denominated in foreign currencies are translated into yen at the exchange rates as of the consolidated balance sheet date, and differences arising from the translation are included in the consolidated statements of income.
The asset and liability accounts of the foreign consolidated subsidiaries are translated into yen at the exchange rates asof the consolidated balance sheet date, and revenue and expense accounts are translated at the average rate during theyear. Differences arising from the translation are presented in foreign currency translation adjustment and minority interests
in net assets.

(3) Cash and cash equivalents
Cash and cash equivalents consist of cash on hand, cash in banks which can be withdrawn at any time and short-term
investments with a maturity of three months or less when purchased which are readily convertible into cash and are exposed
to insignificant risk of changes in value.

32 Nitta Gelatin Inc. Annual Report 2013

(4) Investment securities
In general, securities are classified into three categories: trading, held-to-maturity or available-for-sale securities. Securities
held by the Group are all classified as available-for-sale securities. Available-for-sale securities with a determinable market
value are stated at fair value, with any changes in unrealized holding gain or loss, net of the applicable income taxes,
included directly in net assets. Cost of securities sold is determined by the moving-average method. Available-for-sale securities without a determinable market value are stated at cost determined by the moving-average method.

(5) Inventories
Finished goods are mainly stated at the lower of cost determined by the gross average method or net selling value. Merchandise, semi-finished goods, work in process, raw materials and supplies are mainly stated at the lower of cost determined by
the moving-average method or net selling value.

(6) Property, plant and equipment and depreciation (excluding lease assets)
Depreciation of property, plant and equipment held by the Company and its domestic consolidated subsidiaries is computed by
the declining-balance method, except for buildings, on which depreciation is computed by the straight-line method. Depreciation of property, plant and equipment held by foreign consolidated subsidiaries is computed mainly by the straight-line method.
The useful lives of property, plant and equipment are summarized as follows:
Buildings and structures:

7 to 50 years

Machinery, equipment and vehicles: 4 to 10 years(7) Intangible assets and amortization (excluding lease assets)
Intangible assets are amortized by the straight-line method. Internal use software is amortized by the straight-line method
over the estimated useful lives of five years.

(8) Lease assets
Lease assets are depreciated by the straight-line method over the lease term with no residual value (residual value guarantee amount if it is agreed).
In addition, the Group accounts for the finance lease transactions that commenced on or before March 31, 2008 and do
not transfer ownership of the leased assets to the lessee as operating lease transactions.

(9) Allowance for doubtful accounts
The Company and its domestic consolidated subsidiaries provide allowance for doubtful accounts mainly to cover a loss from
uncollectible receivables at an amount determined based on the historical experience of bad debt with respect to ordinary
receivables and an estimated uncollectible amount based on individual collectibility of specific doubtful receivables such as
doubtful accounts receivable.
The foreign consolidated subsidiaries provide allowance for doubtful accounts mainly at an estimated uncollectible
amount for specific doubtful receivables.

(10) Provision for bonuses
The Company and its consolidated subsidiaries record provision for bonuses at an amount estimated to cover the bonus
payments for services rendered by employees during each fiscal year.

(11) Provision for retirement benefits
The Company and certain consolidated subsidiaries record provision for retirement benefits based on the estimated amountsof the retirement benefit obligation and the fair value of pension plan assets as of the consolidated balance sheet date tocover future payments of employees’ retirement benefits.
Actuarial gains and losses are mainly amortized by the straight-line method over a certain period (10 years), which iswithin the average remaining years of service of the employees at the time when the gains or losses arise, from the fiscal
year following the fiscal year in which it arises.
Prior service benefits and costs are mainly recognized as income or expense by the straight-line method over a certain
period (10 years) which is within the average remaining years of service of the employees at the time they arise.

Nitta Gelatin Inc. Annual Report 2013   33(12) Provision for directors’ retirement benefits
Certain domestic consolidated subsidiaries record provision for directors’ retirement benefits to cover future payments at an
amount required according to the internal rules as of the balance sheet date.

(13) Hedge accounting
In principle, deferral hedge accounting is adopted for hedge transactions. Interest rate swaps are accounted for by exceptional treatment if the interest rate swaps meet certain criteria to adopt the treatment.
The following summarizes hedging derivative instruments used by the Group and items hedged:
2013
Hedging instruments
Foreign exchange forward contracts

Hedged items
Payables denominated in foreign currencies in connection with imports of raw
materials and forecasted transactions denominated in foreign currencies

Interest rate swaps

Loans and debt

2012
Hedging instruments
Foreign exchange forward contracts

Hedged items
Payables denominated in foreign currencies in connection with imports of raw
materials and forecasted transactions denominated in foreign currencies

Interest rate swaps

Loans and debt

As a policy, the Group utilizes derivative transactions within a certain range to hedge market fluctuations in connection
with hedged items in accordance with internal management rules defining authorization policies and transaction limits. The
Group assesses the hedge effectiveness by comparing the accumulated gains or losses on the hedging instruments andthe related hedged items during the period from the commencement of the hedging transactions to the assessment ofeffectiveness. For interest rate swaps accounted for by exceptional treatment, however, the assessment of effectivenessis not per formed.

(14) Going public expenses
Going public expenses are charged to income as incurred.

(15) Income taxes
Income taxes are computed based on taxable income of each group company.
Deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences
between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred
tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in whichthose temporary differences are expected to be recovered or settled. The effect of deferred tax assets and liabilities due tothe change in tax rate is recognized in the statement of income for the period including the enacted date.

(16) Accounting change(Changes in Depreciation Method)
In accordance with the amendment of the Corporation Tax Act, effective April 1, 2012, the Company and its domestic consolidated subsidiaries have changed the method of depreciation for property, plant and equipment acquired on or after April 1,2012 to the method of depreciation stipulated by the amended Corporation Tax Act.
This change will have only a negligible impact on operating income and income before income taxes and minority interests for the year ended March 31, 2013.

(17) New accounting standards
The Accounting Standards Board of Japan (“ASBJ”) issued “Accounting Standard for Retirement Benefits” (ASBJ Statement
No. 26, issued on May 17, 2012) and “Guidance on Accounting Standard for Retirement Benefits” (ASBJ Guidance No. 25,
issued on May 17, 2012), which replaced the previous Accounting Standard for Retirement Benefits that had been issued
and the other related practical guidance.

34 Nitta Gelatin Inc. Annual Report 2013

1. Outline(1) Treatment in the consolidated balance sheets
Actuarial gains and losses and past service costs that have yet to be recognized in profit or loss will in the future be recognized after adjustment for tax effect under net assets and other comprehensive income, with the amount recorded as a liability or asset indicating the status of reserve provision.
(2) Treatment in the consolidated statements of income and the consolidated statements of comprehensive income
The un-expensed portion of actuarial gains and losses and past service costs arising in any given accounting period will in
the future be recognized under other comprehensive income.
Moreover, the expensed portion of actuarial gains and losses and past service costs recognized under other comprehensive income will in the future be adjusted as a reclassification under other comprehensive income.
2. Effective date
The end of the fiscal year starting on or after April 1, 2013

3. Impact of application of the accounting standard and guidance
The Company is currently evaluating the impact of application of the accounting standard and guidance on financial statements when preparing the accompanying consolidated financial statements.

3. Notes Receivable and Notes Payable Maturing at Fiscal Year-End
Notes receivable maturing at the fiscal year-end are settled on the date of clearance. As March 31, 2013 and 2012 werebank holidays, the following notes receivable were included in the balances as of March 31, 2013 and 2012.
Thousands of
U.S. dollars

Millions of yen
2013

2012

¥106

Notes receivable

¥113

2013

$1,127

4. Inventories
The balances of inventories as of March 31, 2013 and 2012 consisted of the following:Thousands of
U.S. dollars

Millions of yen

Merchandise and finished goods
Work in process
Raw materials and supplies
Inventories, total

2013

2012

¥4,404918
1,508¥6,831¥4,011651
1,308¥5,971

2013$46,826
9,760
16,034$72,631

The inventory write-downs of ¥39 million ($414 thousand) and ¥23 million were recorded in cost of sales for the years
ended March 31, 2013 and 2012, respectively, due to decline in profitability.

Nitta Gelatin Inc. Annual Report 2013   35

5. Investment Securities
Information of available-for-securities as of March 31, 2013 and 2012 was as follows:
Millions of yen
2013

Securities whose carrying value
exceeds their acquisition cost:
Equity securities
Securities whose carrying value does
not exceed their acquisition cost:
Equity securities
Total

2012

Carrying value

Acquisition
cost

Acquisition
cost

Difference

Carrying value

Difference¥  977

¥201

¥775

¥820

¥158

¥661

29
¥1,006

30
¥232

(1)
¥774

30
¥850

48
¥206

(17)
¥644

Thousands of U.S. dollars
2013

Securities whose carrying value
exceeds their acquisition cost:
Equity securities
Securities whose carrying value does
not exceed their acquisition cost:
Equity securities
Total

Carrying value

Acquisition
cost

Difference$10,388$2,137$8,240308$10,696318$2,466(10)$8,229Unlisted equity securities of ¥18 million ($191 thousand) as of March 31, 2013 and 2012 were not included in theabove tables as there were no market prices available and it is extremely difficult to determine their fair value.
Investments in unconsolidated subsidiaries and affiliates of ¥1,743 million ($18,532 thousand) and ¥1,185 million were
included in investment securities as of March 31, 2013 and 2012, respectively.
Impairment losses on available-for-sale securities with fair market value are recognized if the available fair market value
declined by 50% or more from the acquisition cost or when the fair market value declined of 30% to 50% and the decline wasconsidered not recoverable.
The impairment losses on available-for-sale securities for the year ended March 31, 2013 were ¥12 million ($127
thousand).

36 Nitta Gelatin Inc. Annual Report 2013

6. Short-Term Loans Payable, Long-Term Debt, Bonds and Lease Obligations
Millions of yen

Millions of yen

Thousands of
U.S. dollars

2012

2013

2013

Current portion of long-term debt
Lease obligations (current portion)
Long-term debt excluding
current portion
Lease obligations excluding
current portion
No. 14 unsecured corporate bonds
No. 16 unsecured corporate bonds
Less: Current portion

AmountWeighted
average interest
rate (%)¥ 2,068154

1.928%
–

3,142
319
–
200
5,884
(2,422)¥ 3,461

Due

AmountAmount––¥ 1,878
127$ 21,988
1,637

1.346

2014 to 2018

3,261

33,407––
1.82

2014 to 2018–
Aug. 2013

348
330
200
6,145
(2,335)¥ 3,809

3,391
–
2,126
62,562(25,752)$ 36,799

The weighted average interest rate of short-term loans payable at March 31, 2013 was 2.487%. Average interest rate onlease obligations is not provided because the balance of lease obligations includes interest equivalent that is contained in
the total lease payments.
The maturities of bonds, long-term debt and lease obligations outstanding on or after April 1, 2013 were as follows:
Millions of yen
Year ending March 31,

2014
2015
2016
2017
2018
Total

Bonds

¥200
–
–
–
–
¥200

Long-term debt

¥2,068
1,429
974
539
198
¥5,210Thousands of U.S. dollars
Lease
obligations

¥154
134
107
56
21
¥474

Bonds

Long-term debt

Leaseobligations$2,126––––$2,126$21,988
15,194
10,356
5,730
2,105$55,396$1,637
1,424
1,137
595
223
$5,039The following assets were pledged as collateral as of March 31, 2013 and 2012.
Thousands of
U.S. dollars

Millions of yen

Time deposits
Buildings and structures
Machinery, equipment and vehicles
Land
Investment securities
Total
Assets pledged as factory foundation mortgage included in
the above assets:
Buildings and structures
Machinery, equipment and vehicles
Land
Total

2013

2012

¥       –
1,199
122
191
373
¥1,886¥   20
1,192
155
191
314
¥1,873$     –
12,748
1,297
2,030
3,965
$20,053

2013¥1,199122
191¥1,513¥1,192
155
191¥1,539$12,748
1,297
2,030$16,087

Nitta Gelatin Inc. Annual Report 2013   37The obligations collateralized by the above assets as of March 31, 2013 and 2012 were as follows:
Thousands of
U.S. dollars

Millions of yen

Long-term debt
Accounts payable (accrued liabilities such as customs duty)
Total
Factory foundation mortgage included in the above liabilities:
Long-term debt
Total

2013

2012

¥3,733–¥3,733¥4,24942¥4,291$39,691–$39,6912013¥3,277¥3,277¥3,865¥3,865$34,843$34,843

For the purpose of obtaining working funds effectively, the Company and one consolidated subsidiary have entered into
overdraft agreements and loan commitment agreements amounting to ¥4,950 million ($52,631 thousand) in total with fivebanks at March 31, 2013 and 2012. There was no borrowing outstanding under these agreements as of March 31, 2013
and 2012.

7. Income Taxes
Income taxes applicable to the Company and its domestic consolidated subsidiaries comprise corporation, inhabitants andenterprise taxes. The statutory tax rate applicable to the Company was approximately 38.01% and 40.69% for the years
ended March 31, 2013 and 2012, respectively. The effective tax rates reflected in the consolidated statements of income
for the years ended March 31, 2013 and 2012 differ from the statutory tax rate for the following reasons:Statutory tax rate
Adjustments for:Non-deductible expenses for income tax purposes
Non-taxable income
Inhabitants taxes—per capita levy
Tax credit for research and development, etc.
Adjustment to deferred tax assets due to changes in tax rates
Unrecognized tax benefits of net operating losses of subsidiaries
Difference in tax rates between the Company and subsidiaries
Equity in earnings of affiliates
Other
Effective tax rates

38 Nitta Gelatin Inc. Annual Report 2013

2013

2012

38.01%

40.69%

0.76(0.37)
0.24(2.36)–(9.87)(1.44)(5.15)
0.09
19.91%

0.53(0.36)
0.35(1.66)
4.88(9.66)(1.92)(2.45)(0.81)
29.59%

The significant components of deferred tax assets and liabilities at March 31, 2013 and 2012 were as follows:
Thousands of
U.S. dollars

Millions of yen

Deferred tax assets:
Loss on valuation of inventories
Provision for bonuses
Accrued enterprise tax
Loss on valuation of golf club membership
Loss on valuation of investment securities
Provision for retirement benefits
Provision for directors’ retirement benefits
Interest expenses
Impairment loss
Net loss carried forward
Other
Subtotal
Valuation allowance
Total deferred tax assets
Deferred tax liabilities:
Depreciation
Valuation difference on available-for-sale securities
Provision for retirement benefits
Other
Total deferred tax liabilities
Net deferred tax assets

2013

2012

2013

¥   67
70
12
1
250
807
28
9
29
853
47
2,179
(959)
1,220

¥   44
84
30
11
246
763
30
38
31
801
79
2,164
(999)
1,164

$   712
744
127
10
2,658
8,580
297
95
308
9,069
499
23,168(10,196)
12,971

(245)
(274)
(81)
(15)
(617)
¥  602

(242)
(228)
(56)
(7)
(534)
¥  629(2,604)(2,913)(861)(159)(6,560)$  6,400

8. Retirement Benefit Plans
The Company and certain consolidated subsidiaries primarily have defined benefit plans, i.e., lump-sum payment plans anddefined benefit corporate pension plans.
The company and three consolidated subsidiaries have defined benefit retirement pension plans as of March 31, 2013.
The following table sets forth the funded and accrued status of the plans and the amounts recognized in the consolidated balance sheets as of March 31, 2013 and 2012 for the Company’s and the consolidated subsidiaries’ defined
benefit plans.
Thousands of
U.S. dollars

Millions of yen

Retirement benefit obligation
Plan assets at fair value
Unfunded retirement benefit obligation
Unrecognized actuarial loss
Unrecognized prior service benefit and cost
Net retirement benefit obligation
Prepaid pension cost
Provision for retirement benefits

2013

2012

¥(7,632)
5,458(2,173)286(66)(1,953)322¥(2,276)¥(6,817)
4,572(2,244)451(89)(1,882)275¥(2,158)

2013$(81,148)
58,032(23,104)
3,040
(701)
(20,765)
3,423$(24,199)

Note: Certain consolidated subsidiaries apply the simplified method in calculating retirement benefit obligation.

Nitta Gelatin Inc. Annual Report 2013   39The components of retirement benefit expenses for the years ended March 31, 2013 and 2012 were outlined as follows:
Thousands of
U.S. dollars

Millions of yen

Service cost
Interest cost
Expected return on plan assets
Amortization of actuarial loss
Amortization of prior service benefit and cost
Retirement benefit expenses

2013

2012

2013

¥ 166
243
(239)
67
(19)
¥ 218

¥ 168
245
(222)
49
(23)
¥ 217

$ 1,765
2,583(2,541)
712(202)$ 2,317

Note: Retirement benefit expenses of consolidated subsidiaries which apply the simplified method are included in “Service cost.”

Both discount rates and expected rates of return on plan assets used in calculation of retirement benefit obligations forthe years ended March 31, 2013 and 2012 were mainly 2.10%.

9. Leases(1) Finance leases (lessee)
The Company leases production facilities (machinery, equipment and vehicles) in connection with the collagen material business as a lessee through finance lease transactions that do not transfer ownership of the leased property to the lessee.
Finance leases that do not transfer ownership of the leased property to the lessee and commenced on or before March 31,
2008 are accounted for as operating leases.
The following pro forma amounts represent the acquisition cost, accumulated depreciation and net book value of theleased properties as of March 31, 2013 and 2012, which would be reflected in the consolidated financial statements if thefinance lease accounting was applied to the finance leases currently accounted for as operating leases.
Millions of yen
2013

Machinery, equipment and vehicles
Total

Acquisition
cost

Accumulated
depreciation

¥240
¥240

¥197
¥197

2012
Net bookvalue

Acquisition
cost

Accumulated
depreciation

Net book
value

¥42
¥42

¥623
¥623

¥476
¥476

¥147
¥147

Thousands of U.S. dollars
2013

Machinery, equipment and vehicles
Total

Acquisition
cost

Accumulated
depreciation

Net bookvalue$2,551$2,551$2,094$2,094$446$446

Future minimum lease payments subsequent to March 31, 2013 for finance leases accounted for as operating leases
were as follows:Year ending March 31,

20142015 and thereafterTotal

40 Nitta Gelatin Inc. Annual Report 2013

Millions of yen

Thousands of
U.S. dollars

¥45
–
¥45

$478
–
$478

Lease payments relating to finance leases accounted for as operating leases and the pro forma depreciation expenses
and interest expenses relating to assets leased under finance leases accounted for as operating leases for the years ended
March 31, 2013 and 2012 were as follows:
Thousands of
U.S. dollars

Millions of yen
2013

Lease payments
Depreciation expenses
Interest expenses

¥66
56
4

2013

2012

$701
595
42

¥140
118
11

The pro forma depreciation expenses are computed by the straight-line method over the lease term with no residual value(residual value guarantee amount if it is agreed), and the pro forma interest expenses are computed by the interest method.
There were no impairment losses allocated to lease assets for the years ended March 31, 2013 and 2012.

(2) Operating leases
Future minimum lease payments subsequent to March 31, 2013 for non-cancelable operating leases are as follows:Year ending March 31,

20142015 and thereafter
Total

Millions of yen

Thousands of
U.S. dollars

¥392
436
¥829

$4,167
4,635$8,814

10. Financial Instruments(1) Overview(a) Policy for financial instruments
In consideration of plans for capital investment, the Group raises necessary funds mainly through bank borrowings. The
Group invests temporary surplus funds mainly in highly liquid financial assets and raises short-term operating capitalthrough bank borrowings. The Group uses derivatives to avoid after-mentioned risks and does not enter into derivatives
for speculative purposes.
(b) Descriptions of financial instruments and related risk
Trade receivables such as notes and accounts receivable are exposed to customer credit risk. Although trade receivables
denominated in foreign currencies arising from foreign operations are exposed to foreign currency risk, the balances ofreceivables are always less than payables denominated in the same currencies.
Investment securities are mainly composed of equity securities of companies with business relationships and are
exposed to market risk. The Company also provides long-term loans to companies with business relationships.
Substantially all trade payables such as notes and accounts payable have payment due dates within five months.
Although certain payables denominated in foreign currencies are exposed to foreign currency risk, such risk is hedged byforeign exchange forward contracts except for payables less than receivables denominated in the same currencies.
Long-term debt, bonds and lease obligations under finance leases are principally for the purpose of making capital
investments and due up to five years from the balance sheet date. Although certain of them are exposed to interest rate
fluctuation risk, such risk is hedged by derivatives (interest rate swaps).
As for derivatives, the Group has entered into foreign exchange forward contracts to hedge the foreign currency risk
arising from trade payables denominated in foreign currencies and interest rate swap transactions to hedge fluctuation
risk deriving from interest payments of long-term debt.
Information regarding the method of hedge accounting, hedging instruments and hedged items, hedging policy andassessment of hedge effectiveness is disclosed in Note 2. “Significant Accounting Policies (13) Hedge accounting.”

Nitta Gelatin Inc. Annual Report 2013   41(c) Risk management for financial instruments
Credit risk management (risk of default by customers or counterparties)
In accordance with the credit management rules of the Company, for trade receivables and long-term loans receivable,sales departments of each division monitor credit worthiness of their main customers periodically and manage due dates
and outstanding balances by customer. In addition, the Company is making efforts to identify uncollectibility in the earlier
stage and mitigate risks of bad debts from customers having financial difficulties. Consolidated subsidiaries similarly
manage such risks in accordance with the Company’s credit management rules.
The Company believes that the credit risk of derivatives is insignificant as it has entered into derivative transactions
only with financial institutions with a sound credit rating.
Market risk management (risks of fluctuations in foreign exchange rates, interest rates and others)
For trade payables denominated in foreign currencies, the foreign currency risk of the Company identified by currency ona monthly basis is hedged by foreign exchange forward contracts. In addition, in order to mitigate the interest rate risk forinterest payments of long-term debt, the Company has entered into interest rate swap transactions.
For investment securities, the Company periodically monitors the fair values and the financial position of the issuers(companies with business relationships) and continuously reviews the holding status taking into account market conditions and relationships with the issuers.
Derivative transactions are conducted and managed by the responsible division with the approval of authorized personnel in accordance with the internal management rules which define the authorization policies and transaction limits.
Consolidated subsidiaries have not entered into derivative transactions.
Management of liquidity risk on funding (risk of default at due dates)
Based on reports from each division, the responsible division of the Company prepares and updates its cash flow plan
on a timely basis and manages liquidity risk by maintaining liquid funds. Consolidated subsidiaries manage their liquidity
risk in a similar manner.
(d) Supplementary explanation of the fair value of financial instruments
The fair value of financial instruments is based on their market price if available. When there is no market price available,
fair value is reasonably calculated. Since various assumptions and factors are reflected in the calculation of fair value,
different assumptions and factors could result in different fair value. In addition, the notional amounts of derivatives inNote 11. “Derivative Transactions” are not indicative of the market risk involved in derivative transactions.

(2) Fair value of financial instruments
Carrying value of financial instruments on the consolidated balance sheets as of March 31, 2013 and 2012, fair value andtheir difference are shown in the following table. Financial instruments whose fair value is extremely difficult to determine are
not included in the following table.
Millions of yen
2013
Carrying value

Cash and deposits
Notes and accounts receivable
Investment securities
Total assets
Notes and accounts payable
Other payable
Long-term debt (including its current portion)
Total liabilities
Derivative transactions (*)*) The value of assets and liabilities arising from derivative transactions is shown at net value.

(

42 Nitta Gelatin Inc. Annual Report 2013

¥ 2,278
5,839
1,006¥ 9,125¥ 3,736
1,586
5,210¥10,533¥    40

Fair value¥ 2,278
5,839
1,006¥ 9,125¥ 3,736
1,586
5,231¥10,554¥    40

Difference¥     –––
¥     –
¥     ––
21
¥21¥     –

Millions of yen
2012
Carrying value

Cash and deposits
Notes and accounts receivable
Investment securities
Total assets
Notes and accounts payable
Other payable
Long-term debt (including its current portion)
Total liabilities
Derivative transactions (*)¥ 2,098
6,449
850¥ 9,398¥ 3,476
1,388
5,139¥10,005¥    13

Fair value¥ 2,098
6,449
850¥ 9,398¥ 3,476
1,388
5,175¥10,041¥    13Difference

¥   –
–
–
¥   –
¥   –
–
36
¥36
¥   –

*) The value of assets and liabilities arising from derivative transactions is shown at net value.

(

Thousands of U.S. dollars
2013
Carrying value

Fair value$ 24,22162,083
10,696$ 97,022$ 39,723
16,86355,396$111,993$    425$ 24,22162,083
10,696$ 97,022$ 39,723
16,86355,619$112,216$    425

Cash and deposits
Notes and accounts receivable
Investment securities
Total assets
Notes and accounts payable
Other payable
Long-term debt (including its current portion)
Total liabilities
Derivative transactions (*)

Difference$    –––$    –$    ––
223$223$    –*) The value of assets and liabilities arising from derivative transactions is shown at net value.

(

Note 1.	Methods to calculate the fair value of financial instruments and other matters related to securities and derivativetransactions
Assets:Cash and deposits and Notes and accounts receivable
Since these items are settled in a short period of time, their carrying value approximates fair value.
Investment securities
The fair value of equity securities is based on quoted market prices. The information on securities classified by holding purpose is disclosed in Note 5. “Investment Securities.”
Liabilities:
Notes and accounts payable and Other payable
Since these items are settled in a short period of time, their carrying value approximates fair value.
Long-term debt
The fair value of long-term debt is based upon the present value of the total of principal and interest discounted by
the interest rate to be applied if similar new borrowings were entered into.
Derivative transactions:
The information on derivative transactions is disclosed in Note 11. “Derivative Transactions.”

Nitta Gelatin Inc. Annual Report 2013   43

Note 2. Financial instruments whose fair value is extremely difficult to determine
Thousands of
U.S. dollars

Millions of yen
2013

Carrying value:
Unlisted equity securities

2013

2012

¥18

$191

¥18

These are not included in investment securities in the above table because there was no quoted market price available
and it is extremely difficult to determine the fair value.

(3) As of March 31, 2013 and 2012, monetary receivables with maturities were deposits of ¥2,275 million ($24,189
thousand) and ¥2,094 million and notes and accounts receivable of ¥5,839 million ($62,083 thousand) and¥6,449 million, respectively. These were all due within one year.

11. Derivative Transactions
The hedge accounting has been applied to all derivative transactions held by the Group as of March 31, 2013 and 2012, andtheir fair value information is stated as follows. Fair value is measured based on quotes and prices provided by counterparty
financial institutions.

Currency related:
Millions of yen
2013
Contract ornotional
amountDeferral hedge accounting
Foreign exchange forward contracts
Buy: USD and CAD¥248

Maturing after
one year2012

Fair value

Contract ornotional
amount

¥41

¥457

¥–

Maturing after
one year¥–

Fair value¥18

Thousands of U.S. dollars
2013
Contract ornotional
amountDeferral hedge accounting
Foreign exchange forward contracts
Buy: USD and CAD$2,636

Maturing after
one year$–

Fair value$435

Interest related:
Millions of yen
2013

Deferral hedge accounting
Interest rate swaps
Receive/floating and pay/fixed
Exceptional treatment
Interest rate swaps
Receive/floating and pay/fixed

44 Nitta Gelatin Inc. Annual Report 2013

Contract ornotional
amountMaturing after
one year¥1,500

1,950

2012

Fair value

Contract ornotional
amountMaturing after
one year¥    –¥(1)¥1,500

¥150

¥(5)

290

(

*)

2,450

680

(

Fair value*)

Thousands of U.S. dollars
2013

Deferral hedge accounting
Interest rate swaps
Receive/floating and pay/fixed
Exceptional treatment
Interest rate swaps
Receive/floating and pay/fixedContract ornotional
amountMaturing after
one year$15,948$    –$(10)

20,733

3,083(

Fair value*)*) Interest rate swaps to which the exceptional treatment is applied are accounted for together with long-term debt designated as a hedged item. Therefore, theirfair value is included in the fair value of long-term debt.

(

12. Contingent Liabilities
As of March 31, 2013 and 2012, the Group was contingently liable for the assignment of receivables with recourse in theamount of ¥475 million ($5,050 thousand) and ¥249 million, respectively.

13. Selling, General and Administrative Expenses
The main components of selling, general and administrative expenses for the years ended March 31, 2013 and 2012 wereas follows:
Thousands of
U.S. dollars

Millions of yen

Packing and freightage expenses
Salaries
Bonuses
Provision for bonuses
Provision for retirement benefits
Provision for directors’ retirement benefits
Provision of allowance for doubtful accounts
Depreciation
Research and development expenses

2013

2012

¥  740
1,138
236
61
81
1
4
78
793

¥  741
1,145
226
75
89
1
2
81
730

2013

$ 7,868
12,099
2,509
648
861
10
42
829
8,431

For the years ended March 31, 2013 and 2012, research and development expenses included in general and administrative expenses and manufacturing costs were as follows:
Thousands of
U.S. dollars

Millions of yen
2013

2013

2012

¥  793233¥1,026

General and administrative expenses
Manufacturing costs
Total$ 8,4312,477$10,909

¥730
164
¥895

14. Information on Related Party Transactions
Transactions of the Company with affiliates for the year ended March 31, 2013 were as follows:

Name

Paid in capital

Principal business

Reva Proteins Ltd.
(Gujarat, India)(Thousands of rupees)
405,675

Manufacture ofosseinDescription oftransaction

Millions of yen

Thousands of
U.S. dollars

Direct25.4% Subscription ofIndirect34.6% capital stock¥196$2,083

Ownership ratio

Nitta Gelatin Inc. Annual Report 2013   45For the years ended March 31, 2013 and 2012, significant affiliates were Nitta Gelatin India Ltd. and Bostik-Nitta Co.,
Ltd., and the condensed financial information prepared by combining the financial statements of these significant affiliates
was as follows:
Thousands of
U.S. dollars

Millions of yen
2013

2012

Total current assets
Total noncurrent assets¥3,371
1,599¥2,401
1,585$35,842
17,0012013

Total current liabilities
Total noncurrent liabilities

1,837
142

1,410
127

19,532
1,509

Total net assets

2,990

2,448

31,791

Net sales
Income before income taxes
Net income

7,849
1,189
747

7,026
594
337

83,455
12,642
7,942

15. Shareholders’ Equity
The Companies Act of Japan provides that an amount equivalent to 10% of the amount of deduction from surplus as a resultof the payment of dividends shall be recorded as additional paid-in capital (a component of capital surplus) or legal reserve(a component of retained earnings) on the dividend date until the total of additional paid-in capital and legal reserve equals
25% of the capital stock account.
Such distributions can be made at any time by resolution of the shareholders’ meeting or the board of directors if certain
conditions are met.
Changes in total number of shares of capital stock issued for the years ended March 31, 2013 and 2012 were as follows:
As of March 31,

Issued:Common stock
Type A preferred stock
Total
Treasury stock:
Common stock

2011

Increase/(decrease)2012

Increase/(decrease)2013

6,366,937
1,000,000
7,366,937

9,403,137(1,000,000)
8,403,137

15,770,074–
15,770,074–––

15,770,074–
15,770,074

109,503(109,341)

162

–

162

For the year ended March 31, 2012, the increase in the number of issued shares of common stock was due to a two-forone stock split on April 1, 2011 (6,366,937 shares) and issuance of new shares by public offering, the payment date ofwhich was December 19, 2011, (2,781,000 shares) and issuance of new shares by third-party allotment, the payment dateof which was January 18, 2012 (255,200 shares).
For the year ended March 31, 2012, the number of issued shares of Type A preferred stock decreased by 1,000,000
shares due to retirement of shares after acquisition.
For the year ended March 31, 2012, the number of shares of treasury stock of common stock increased by 109,503
shares due to a two-for-one stock split on April 1, 2011 and by 156 shares due to the acquisition of shares less than one unit.
For the year ended March 31, 2012, the number of shares of treasury stock of common stock decreased by 219,000
shares due to the disposal of treasury stock by public offering, the payment date of which was December 19, 2011.

46 Nitta Gelatin Inc. Annual Report 2013

16. Information Related to Consolidated Statements of Changes in Net Assets(1) Dividends paid to shareholders
2013

Resolution

June 27, 2012
Annual general meetingof shareholders
November 9, 2012
Board of directors

AmountAmount(Thousands of(Millions of yen) U.S. dollars)

Type of shares

Amountper share(Yen)

Amountper share(U.S. dollars) Record date

Effective dateCommon stock¥126$1,339

¥8.00

$0.08

March 31, June 28,
2012
2011

Common stock

94

999

6.00

0.06

September December
30, 2012 7, 20112012

Resolution

June 28, 2011
Annual general meetingof shareholders
November 7, 2011
Board of directors

Type of shares

Amountper share(Yen)

Amount(Millions of yen)

Record date

Effective dateCommon stock

¥23

¥3.75

March 31, June 29,
2011
2011

Common stock

25

2.00

September December
30, 2011 8, 2011

(2) Dividends with a record date during the fiscal year but an effective date subsequent to the fiscal year
2013

Resolution

June 26, 2013
Annual general meetingof shareholders

Type ofsharesCommonstock

AmountAmount(Thousands of(Millions of yen) U.S. dollars)¥126$1,339Paid from

Retainedearnings

Amountper share(Yen)

Amountper share(U.S. dollars) Record date

¥8.00

$0.08

Effective date

March 31, June 27,
2013
2013

2012

Resolution

June 27, 2012
Annual general meetingof shareholders

Type ofsharesCommonstock

Amount(Millions of yen)

¥126

Paid from

Retainedearnings

Amountper share(Yen)

Record date

Effective date

March 31, June 28,
2012
2012

¥8.00

17. Amounts per Share
Net assets per share is computed based on net assets available for distribution to the shareholders of common stock andthe number of shares of common stock outstanding at the year-end.
Net income per share is computed based on the net income available to shareholders of common stock and weighted
average number of shares of common stock outstanding during the period which was 15,769,912 shares and 13,496,766
shares for the years ended March 31, 2013 and 2012, respectively.
Yen

Net assets per share
Net income per share

U.S. dollars

2013

2012

¥622.7599.30¥509.41
99.87

2013

$6.62
1.05

Diluted net income per share is not disclosed due to the absence of dilutive shares for the years ended March 31, 2013
and 2012.
Nitta Gelatin Inc. Annual Report 2013   47

18. Cash Flow Information
Reconciliations between cash and cash equivalents in the consolidated statements of cash flows for the years ended March 31,
2013 and 2012 and cash and deposits in the consolidated balance sheets as of March 31, 2013 and 2012 were as follows:
Thousands of
U.S. dollars

Millions of yen
2013

Cash and deposits
Time deposits with a maturity in excess of three months
Cash and cash equivalents

2012¥2,278(20)¥2,258¥ 2,098(20)¥2,0782013$24,221(212)$24,008

19. Comprehensive Income
Reclassification adjustments and income tax benefit (expense) on components of other comprehensive income for the year
ended March 31, 2013 and 2012 were as follows:
Thousands of
U.S. dollars

Millions of yen

Valuation difference on available-for-sale securities:
Losses arising during the period
Reclassification adjustments
Pre-tax amount
Income tax benefit
Valuation difference on available-for-sale securities
Deferred gains or losses on hedges:
Losses arising during the period
Reclassification adjustments
Adjustments to acquisition cost of assets
Pre-tax amount
Income tax expense
Deferred gains or losses on hedges
Foreign currency translation adjustment:
Losses arising during the period
Pension liability adjustment of foreign subsidiaries:
Losses arising during the period
Reclassification adjustments
Pension liability adjustment of foreign subsidiaries
Share of other comprehensive income of associates accounted
for using equity method:
Losses arising during the period
Total other comprehensive income

48 Nitta Gelatin Inc. Annual Report 2013

2013

2012

2013

¥ 117
12
129
(46)
83

¥ (40)–(40)
48
8$ 1,244
127
1,371
(489)
882

75
4
(52)
27
(10)
17

(17)
8
22
13
(4)
8

797
42
(552)
287
(106)
180

605

(50)

6,432

(381)
30
(350)

(256)
18
(238)

(4,051)318(3,721)

95
¥ 450

(123)
¥(396)

1,010$ 4,784

20. Segment Information(1) Overview of reportable segments
Reportable segments are defined as components of the Group for which separate financial information is available andwhose operating results are regularly evaluated by the board of directors to make decisions about how resources are allocated among the Group and assess their performance.
The Group plans comprehensive domestic and overseas strategies for its products and services and develops businessactivities based on business segments by product and service.
Accordingly, the Group consists of two segments by product and service based on the business activities as follows:
The “Collagen material business” produces gelatin, collagen peptide, collagen casings and others.
The “Formula solution business” produces various materials for foods, adhesives and others.

(2) Basis of measurement for the amounts of net sales, profit, assets and other items by reportable segment
The accounting policies of each reportable segment are consistent with those disclosed in Note 2. “Significant Accounting
Policies.” Segment profit is based on operating income, and intersegment sales and transfers are based on actual
market prices.

(3) Information about net sales, profit, assets and other items by reportable segment
Millions of yen
2013

Collagen material
business

Net sales:
Sales to third parties
Intersegment sales and transfers
Total
Segment profit
Segment assets
Other items:
Depreciation and amortization
Increase in property, plant andequipment and intangible assets

Formula solution
business

Reconciliation
Total(Note 1)

Amounts on
consolidated
financialstatements (Note 2)¥18,674
1,304
19,9791,817
18,629¥10,097–
10,097
1,151
4,528¥28,772
1,304
30,076
2,968
23,158¥        –(1,304)(1,304)(1,349)2,290¥28,772–
28,772
1,618
25,449

721

72

793

31

825

1,229

73

1,302

124

1,426

Millions of yen
2012

Collagen material
business

Net sales:
Sales to third parties
Intersegment sales and transfers
Total
Segment profit
Segment assets
Other items:
Depreciation and amortization
Increase in property, plant and­equipment and intangible assets

Formula solution
business

Reconciliation
Total(Note 1)

Amounts on
consolidated
financialstatements (Note 2)¥17,433
1,352
18,7862,255
16,389¥10,329–
10,3291,082
4,867¥27,763
1,352
29,115
3,338
21,256¥       –(1,352)(1,352)(1,323)
2,115¥27,763–
27,763
2,015
23,371

722

78

801

40

841

670

55

726

43

769

Nitta Gelatin Inc. Annual Report 2013   49Thousands of U.S. dollars
2013

Collagen material
business

Formula solution
business

Total(Note 1)

$198,553
13,864
212,429
19,319198,075$107,357–
107,357
12,23848,144$305,922
13,864
319,787
31,557
246,230$       
–(13,864)(13,864)(14,343)
24,348$305,922–
305,922
17,203
270,590

7,666

765

8,431

329

8,771

13,067776

13,843

1,318

15,162

Net sales:
Sales to third parties
Intersegment sales and transfers
Total
Segment profit
Segment assets
Other items:
Depreciation and amortization
Increase in property, plant andequipment and intangible assets

Reconciliation

Amounts on
consolidated
financial­statements (Note 2)

Note 1. “Reconciliation” included the following:Thousands of
U.S. dollars

Millions of yen
2013

Segment profit:
Intersegment elimination
Corporate expense (*)
Total

2012

¥      2
(1,352)¥(1,349)¥    3(1,326)¥(1,323)2013$      21
(14,375)$(14,343)*) “Corporate expense” presents mainly general and administrative expenses that are not allocated to reportable segments.

(

Thousands of
U.S. dollars

Millions of yen

Segment assets:
Intersegment elimination
Corporate assets (*)

2013

2012

¥ (458)2,749¥2,290¥ (498)2,614¥2,1152013$ (4,869)
29,229$24,348*) “Corporate assets” presents mainly cash and deposits, property, plant and equipment and investment securities that are not allocated to reportable segments.

(

Note 2. Segment profit is reconciled to operating income on the consolidated statements of income.

Note 3. Related information for the years ended March 31, 2013 and 2012(a) Information by geographical area
Net sales:
Millions of yen
2013
Japan

Asia

North America¥19,098¥1,239¥7,727

Other

¥707

Total

¥28,772

Millions of yen
2012
Japan

Asia

North America¥20,037¥1,082¥6,255

Other

¥387

Total

¥27,763

Thousands of U.S. dollars
2013
Japan

Asia

North America$203,062$13,173$82,158

50 Nitta Gelatin Inc. Annual Report 2013

Other

$7,517

Total$305,922

Property, plant and equipment:
Millions of yen
2013
Japan

¥2,955

Asia

North America¥91¥3,240Total¥6,287

Millions of yen
2012
Japan

Asia

¥2,675

North America¥0¥2,711

Total¥5,387

Thousands of U.S. dollars
2013
Japan

$31,419

Asia

$967

North America

Total$34,449$66,847(b) Information by product and service has been omitted since similar information is disclosed as information byreportable segment. Information by major customer has been omitted since there were no sales to single external customers accounting for 10% or more of the consolidated sales.

(Supplementary Note)
As stated in Note 1. “Basis of Presenting Consolidated Financial Statements,” the Company, by its own judgment, has
prepared the accompanying consolidated financial statements by making reclassification and rearrangements to the financial
statements issued domestically in order to present them in a form which is more familiar to readers outside Japan. These
financial statements have not been audited by independent auditors.
The Group’s consolidated financial statements for the years ended March 31, 2013 and 2012, which were included in
the Annual Securities Report, have been prepared in thousands of yen and audited by Ernst & Young ShinNihon LLC in accordance with Article 193-2 (1) of the Financial Instruments and Exchange Act of Japan.

Nitta Gelatin Inc. Annual Report 2013   51