Annual Report 2012
For the Year Ended 31st March 2012

PROFILE
Since its establishment in 1958, Marudai Food Co., Ltd. has been dedicated tooffering delicious, high-quality meat products. In order to understand the latest
consumer trends and to meet the needs of modern lifestyles, we have continuously
strengthened our research, sales and production operations. Intending tobecome Japan’s leading food company, we successfully listed our stock on theFirst Section of both the Tokyo and Osaka Stock Exchanges in 1972.
Starting as a ham and sausage producer, Marudai Food has steadily expanded
its range of products to include heat-processed, vacuum-packed food, cheeseand fresh meats. Ham and sausage, however, remain an integral part of our product line
and continue to account for almost half of our sales.
While pursuing a leading position in the ham and sausage market, Marudai
Food was eager to explore new avenues by developing precooked and processed foods,
which went on sale in 1973. This long shelf-life food was developed to meet the specific needfor fast meal preparation. Containing absolutely no preservatives and requiring only
several minutes to prepare, Marudai precooked and processed foods have established a strong
foothold in the market. Building on this success, we will make even greater efforts to create
new products that satisfy the increasingly discriminating tastes of consumers.

CONTENTSFINANCIAL HIGHLIGHTS ������������������������������������������������������������������������������ 1
TO OUR SHAREHOLDERS ����������������������������������������������������������������������������� 2
PRODUCTS �������������������������������������������������������������������������������������������������������� 4
CONSOLIDATED BALANCE SHEETS ����������������������������������������������������������� 6
CONSOLIDATED STATEMENTS OF INCOME ��������������������������������������������� 8
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME ����������� 9
CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS ����������� 10
CONSOLIDATED STATEMENTS OF CASH FLOWS ���������������������������������� 11
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ������������������������ 12
INDEPENDENT AUDITORS’ REPORT ��������������������������������������������������������� 31
DIRECTORS AND STATUTORY AUDITORS ����������������������������������������������� 32
OUTLINE OF THE COMPANY ���������������������������������������������������������������������� 33

Marudai Food Co., Ltd.

FINANCIAL HIGHLIGHTS
For the Years Ended 31st March 2012 and 2011
(Consolidated basis)Thousands of
U.S. dollars, except
per share amounts

Millions of yen,
except per share amounts(Note)
2012

2011

2012

Net sales ...................................................................................................

¥204,127¥198,753$2,485,413

Net income ...............................................................................................

3,933

3,855

47,887

Net income (yen and dollars) .............................................................

30.28

29.18

0.37

Net income, diluted (yen and dollars) ................................................

–

–

–

Cash dividends (yen and dollars) .......................................................

9.00

8.00

0.11

Total assets ...............................................................................................

¥124,358¥117,105$1,514,160

Per share:

Note: U.S. dollar amounts are translated from yen for convenience only at the rate of ¥82.13 to U.S.$1.00.

1Marudai Food Co., Ltd.

TO OUR SHAREHOLDERS

With the issurance of our company’s 64th annualmaterials and fuels rose sharply while consumer frugality

report, we hope that our shareholders are enjoying healthpushed sales prices lower. The business environment wasand prosperity. We would also like to take thisalso harsh for the Meat business because prices of beef

opportunity to express our deep appreciation for yourand the demand for beef remained lacklustre owing to thecontinued support.

food poisoning incidents that occurred in the first half ofthe fiscal year and caesium contamination. Meanwhile,

During the fiscal year ended 31st March 2012, theJapanese economy continued to recover from the sharp

the recovery of supplies led to a downward trend inprices of pork and chicken from the summer onward.

decline that followed the Great East Japan Earthquake as
supply chains were restored. However, the economic

In these circumstances, we strove to provide safe andoutlook remained unclear because of the prolonged

reliable foods by adhering to the Marudai Food Group’s

European sovereign debt crisis and the continued

policies of putting the customer first, thoroughappreciation of the yen.

compliance and emphasis on safety and quality. At thesame time, we implemented a diversification strategy and

The Marudai Food Group’s Processed Foods business
continued to encounter challenges as prices of raw

2

initiatives to reinforce Group management and strengthen
product development capabilities.

As a result consolidated net sales increased 2.7% year
on year to 204,127 million yen. Operating income rose
3.2% to 5,907 million yen, and net income increased 2.0%
to 3,933 million yen.
Once again we would like to thank you, ourshareholders, for your support and trust that we can rely
on your continued confidence.
June 2012

Tokuo Kudara
President3

Marudai Food Co., Ltd.

PRODUCTS

The following table shows an analysis of the consolidated sales of Marudai Food Co., Ltd. and its consolidated subsidiaries(together, the “Companies”) by product categories for the years ended 31st March 2012 and 2011:

Millions of yen(percentage of total net sales)

Processed food products ..........................................................................

Meat products ...........................................................................................

Other ........................................................................................................

Total ....................................................................................................

2012

2011

¥150,179¥145,261(73.6%)(73.1%)

53,54353,056(26.2%)(26.7%)

405

436(0.2%)(0.2%)¥204,127¥198,753

2012

Note: U.S. dollar amounts are translated from yen for convenience only at the rate of ¥82.13 to U.S.$1.00.

4

Thousands of
U.S. dollars (Note)$1,828,552

651,930

4,931$2,485,413

Processed foods products
The Ham & Sausage Products operations worked to expand sales by proposing dishes attuned to consumers’ tendency to eat
at home as well as through vigorous sales promotion of mainstay products such as “Kunseiya Jyukusei Vienna Sausage” and“Itsumo Shinsen Roast Ham” and new products such as “Jokyu Momo Ham” and “Jokyu Bacon,” for both of which salt derived
from seaweed is used.
In terms of midsummer and year-end gift products, sales of our mainstay brands, namely, “Ouha” and “Kosai,” increased. As
a result, sales of the Ham & Sausage Products operations increased 3.1% year on year.
In the Precooked & Processed Foods operations, sales of retort-pouch foods were robust, including sales of the Korean-stylesoup “Sundubu” and “Umami Kobo Curry,” as well as those of the “Sweet Cafe” series of dessert products. Overall, sales of thePrecooked & Processed Foods operations increased 3.8% year on year. Marushin Foods Co., Ltd., which became a consolidated
subsidiary in October 2011, also contributed to the operations’ sales.
As a result, sales of the Processed Foods segment amounted to 150,179 million yen, up 3.4 % year on year. Despite the harshenvironment, including the rise in material and fuel prices and the intensifying competition for sales, operating income rose 5.6%
to 5,486 million yen owing to increased sales and the impact of cost-reduction measures in both the production and sales
divisions.
Meat products
The demand for beef and prices of beef were lacklustre in view of widespread consumer preference for low-priced foods andthe impact of food poisoning incidents and caesium contamination. Despite the challenging environment, sales of beef increasedin terms of both volume and value owing to our efforts to expand sales of U.S. beef. On the other hand, pork sales were sluggish
in terms of both volume and value. Although pork prices were relatively robust in the second half, prices declined from thesummer onward in line with the recovery of supplies. As a result, sales of the Meat segment edged up 0.9% year on year to 53,543
million yen. Operating income plunged 29.7% to 243 million yen, reflecting the deteriorating profitability of sales of domestic
and Australian beef.
Other
Sales of the Other Products business were 405 million yen, down 7.2% year on year, and operating income was 178 million
yen, a decrease of 3.2%.

5

Marudai Food Co., Ltd.

CONSOLIDATED BALANCE SHEETS
31st March 2012 and 2011

Millions of yen

Thousands of
U.S. dollars (Note 1)
2012

2012

2011

¥ 12,482¥ 13,619$ 151,979

25,234530(60)
14,054
1,783
316

19,921452(62)
14,5971,895
211

307,2456,453(731)
171,119
21,7093,847

Total current assets .......................................................................

54,33950,633

661,621

Investments and other assets:
Investment securities (Notes 3 and 4)
Affiliates .......................................................................................
Other .............................................................................................
Deferred tax assets (Note 10)..............................................................
Other ...................................................................................................
Allowance for doubtful accounts .......................................................

120
9,324
60
7,914
(426)

–
8,759
55
6,804
(354)

1,461
113,527731
96,360(5,187)

Total investments and other assets ................................................

16,992

15,264

206,892

Less accumulated depreciation ..........................................................
Net property, plant and equipment...............................................
Intangible assets .....................................................................................

19,052
46,912
49,7271,385
8,078
125,154(74,056)
51,098
1,929

19,09845,51047,475
131
8,693
120,907(70,525)
50,382826

231,974
571,191
605,467
16,86498,356
1,523,852(901,692)
622,160
23,487

Total assets..........................................................................................

¥124,358¥117,105$1,514,160

ASSETS
Current assets:
Cash and time deposits (Notes 3 and 16) ...........................................
Receivables:
Trade notes and accounts (Note 3) ...............................................
Other .............................................................................................
Allowance for doubtful accounts ..................................................
Inventories (Note 6) ............................................................................
Deferred tax assets (Note 10) .............................................................
Advances and other current assets .....................................................

Property, plant and equipment, at cost:
Land (Note 8) .....................................................................................
Buildings and structures (Note 8) ......................................................
Machinery and equipment (Note 8) ...................................................
Construction in progress ....................................................................
Lease assets ........................................................................................

See accompanying Notes to Consolidated Financial Statements.

6

LIABILITIES AND NET ASSETS
Current liabilities:
Short-term borrowings (Notes 3, 7 and 8) �����������������������������������������
Long-term debt due within one year (Notes 3, 7 and 8) �������������������
Trade notes and accounts payable (Note 3) ���������������������������������������
Short-term lease obligations (Note 3) �����������������������������������������������
Accrued expenses ������������������������������������������������������������������������������
Accrued income taxes �����������������������������������������������������������������������
Other current liabilities ���������������������������������������������������������������������
Total current liabilities �����������������������������������������������������������������

Millions of yen
2012
2011

4,534
7,950
18,178
1,346
2,203
707
5,781
40,699$ 102,849
54,535
241,300
13,11327,2494,347
93,670537,063

5,388
1,884
3,273
855
540
11,940

5,154
1,542
3,966
548
486
11,69665,60322,93939,851
10,4106,576
145,379

NET ASSETS (Note 12)
Shareholders’ equity:
Common stock
Authorised — 200,000,000 shares
Issued — 132,527,909 shares in 2012 (132,527,909 shares in 2011) �����
Capital surplus �����������������������������������������������������������������������������������
Retained earnings ������������������������������������������������������������������������������
Less treasury stock at cost �����������������������������������������������������������������
Total shareholders’ equity �����������������������������������������������������������

6,716
21,68637,171(698)
64,875

6,716
21,68634,277(697)
61,982

81,773
264,045452,587(8,499)789,906

Accumulated other comprehensive income:Unrealised gains on securities �����������������������������������������������������������
Deferred gains on hedges ������������������������������������������������������������������
Foreign currency translation adjustments �����������������������������������������
Total accumulated other comprehensive income �������������������������

2,001
18
(114)
1,905

1,505
1
(92)
1,414

24,364219(1,388)23,195

Minority interests ����������������������������������������������������������������������������������
Total net assets ����������������������������������������������������������������������������������
Total liabilities and net assets ������������������������������������������������������������

1,529
68,309¥124,358

1,314
64,710¥117,105

18,617
831,718$1,514,160

Long-term liabilities:
Long-term debt due after one year (Notes 3, 7 and 8) ����������������������
Deferred tax liabilities (Note 10) ������������������������������������������������������
Long-term lease obligations (Note 3) �����������������������������������������������
Employees’ severance and retirement benefits (Note 9) �������������������
Other long-term liabilities �����������������������������������������������������������������
Total long-term liabilities ������������������������������������������������������������

¥

8,447
4,479
19,818
1,077
2,238
357
7,693
44,109¥Thousands of
U.S. dollars (Note 1)
2012

Contingent liabilities (Note 11)7

Marudai Food Co., Ltd.

CONSOLIDATED STATEMENTS OF INCOME
Years Ended 31st March 2012 and 2011

Net sales �������������������������������������������������������������������������������������������������
Cost of sales �������������������������������������������������������������������������������������������

Millions of yen
2012
2011
¥204,127¥198,753
151,654
146,683

Thousands of
U.S. dollars (Note 1)
2012$2,485,413
1,846,511

Gross profit ����������������������������������������������������������������������������������������
Selling, general and administrative expenses (Note 13) ���������������������

52,473
46,56652,07046,346

638,902566,979

Operating income ������������������������������������������������������������������������������

5,907

5,724

71,923

300
(410)
(528)
(192)
(5)
(195)
409

274
(493)
(183)
(173)
(291)
(573)
26

3,653
(4,992)(6,429)(2,338)(61)(2,374)
4,980

(621)

(1,413)(7,561)

Income before income taxes and minority interests ���������������������������

5,286

4,311

64,362

Income taxes (Note 10):
Current �����������������������������������������������������������������������������������������������
Deferred ���������������������������������������������������������������������������������������������
Income before minority interests ����������������������������������������������������������
Minority interests ����������������������������������������������������������������������������������

629
408
4,249
(316)

811
(737)
4,237
(382)

7,659
4,968
51,735(3,848)Other income (expenses):
Interest and dividend income ������������������������������������������������������������
Interest expense ���������������������������������������������������������������������������������
Loss on disposal of property, plant and equipment, net ��������������������
Loss on early retirement benefits ������������������������������������������������������
Write-down of investment in securities ���������������������������������������������
Loss on impairment of assets (Note 14) ��������������������������������������������
Other, net �������������������������������������������������������������������������������������������

Net income ���������������������������������������������������������������������������������������������

¥

3,933

¥

3,855

$

47,887

U.S. dollars (Note 1)

Yen
Net income per share (Note 2) ��������������������������������������������������������������

¥30.28¥29.18$0.37

Net income, diluted per share (Note 2)�������������������������������������������������

–

–

–

Dividends per share ������������������������������������������������������������������������������

¥ 9.00¥ 8.00$0.11

See accompanying Notes to Consolidated Financial Statements.

8

Marudai Food Co., Ltd.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Years Ended 31st March 2012 and 2011

Income before minority interests ����������������������������������������������������������
Other comprehensive income:Unrealised gains (losses) on securities ����������������������������������������������
Deferred gains (losses) on hedges �����������������������������������������������������
Foreign currency translation adjustments �����������������������������������������
Share of other comprehensive income of associates accounted for using equity method ���Total other comprehensive income (Note 18) �����������������������������
Comprehensive income �������������������������������������������������������������������������
Comprehensive income attributable to:
Owners of the parent �������������������������������������������������������������������������
Minority interests ������������������������������������������������������������������������������

Millions of yen
2012
2011
¥4,249¥4,237

Thousands of
U.S. dollars (Note 1)
2012$51,735

496
17
(15)
(7)
491
¥4,740

(180)
(3)
(4)
–
(187)
¥4,050

6,039
207
(183)
(85)
5,978
$57,713¥4,424¥ 316¥3,668¥ 382$53,865$ 3,848

See accompanying Notes to Consolidated Financial Statements.

9Marudai Food Co., Ltd.

CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS
Years Ended 31st March 2012 and 2011

Millions of yen
Number ofshares of Common
common stock stock
Balance at beginning of fiscal 2012 ���������� 132,527,909¥6,716
Net income ��������������������������������������������––Cash dividends paid – ¥8 per share �������
––Increase in unrealised gains on securities ����
––Foreign currency translation adjustments ����
––Increase in deferred gains on hedges ������
––––Purchase of treasury stock ���������������������
Balance at end of fiscal 2012 �������������������� 132,527,909
6,716

Capital Retained
surplus earnings¥21,686 ¥34,277
–
3,933
–
(1,039)
–
–
–
–
–
–
–
–
21,68637,171

Foreign
Unrealised Deferred currency
Treasury
gains
gains
translation Minority
stock on securities on hedges adjustments interests¥(697)¥1,505¥1¥ (92)¥1,314
–
–
–
–
–
–
–
–
–
–
–
496
–
–
–
–
–
–
(22)
215
–
–
17
–
–
(1)
–
–
–
–
(698)
2,001
18
(114)
1,529
Millions of yen

Number ofshares of Common
common stock stock
Balance at beginning of fiscal 2011 ���������� 132,527,909
6,716
Net income ��������������������������������������������––Cash dividends paid - ¥7 per share ��������
––Decrease in unrealised gains on securities ��––
Foreign currency translation adjustments ����
––Decrease in deferred gains on hedges �����
––––Purchase of treasury stock ���������������������
Balance at end of fiscal 2011 �������������������� 132,527,909¥6,716

Capital Retained
surplus earnings
21,686
31,349
–
3,855
–
(927)
–
–
–
–
–
–
–
–
¥21,686 ¥34,277

Foreign
Unrealised Deferred currency
Treasury
gains
gains
translation Minority
stock on securities on hedges adjustments interests
(57)
1,685
4
(88)
937
–
–
–
–
–
–
–
–
–
–
–
(180)
–
–
–
–
–
–
(4)
377
–
–
(3)
–
–
(640)
–
–
–
–
¥(697)¥1,505¥1¥ (92)¥1,314

Thousands of U.S. dollars (Note 1)
Common Capital Retained
stock
surplus earnings
Balance at beginning of fiscal 2012 ����������������������������� $81,773 $264,045 $417,351
Net income ���������������������������������������������������������������
––47,887
Cash dividends paid - ¥8 per share ���������������������������
––(12,651)
Increase in unrealised gains on securities ������������������
–––Foreign currency translation adjustments ����������������
–––Increase in deferred gains on hedges �������������������������
–
–
–
–
–
–
Purchase of treasury stock ����������������������������������������
Balance at end of fiscal 2012 ��������������������������������������� $81,773 $264,045 $452,587

See accompanying Notes to Consolidated Financial Statements.

10

Foreign
Unrealised Deferred currency
Treasury
gains
gains
translation Minority
stock on securities on hedges adjustments interests$(8,487) $18,325$ 12$(1,120) $15,999
–
–
–
–
–
–
–
–
–
–
–
6,039
–
–
–
–
–
–
(268)
2,618
–
–
207
–
–
(12)
–
–
–
–
$(8,499) $24,364$219$(1,388) $18,617

Marudai Food Co., Ltd.

CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended 31st March 2012 and 2011

Millions of yen
2012
2011

Thousands of
U.S. dollars (Note 1)
2012

Cash flows from operating activities:
Income before income taxes and minority interests ��������������������������
Depreciation and amortisation ����������������������������������������������������������
Increase in allowance for doubtful accounts �������������������������������������
Decrease in severance and retirement benefits ����������������������������������
Interest and dividend income ������������������������������������������������������������
Interest expense ���������������������������������������������������������������������������������
Write-down of investment in securities ���������������������������������������������
Loss on disposal of property, plant and equipment, net ��������������������
Loss on impairment of assets ������������������������������������������������������������
Increase in receivables �����������������������������������������������������������������������
Decrease (increase) in inventories �����������������������������������������������������
Increase (decrease) in trade notes and accounts payable ������������������
Decrease in consumption tax payable �����������������������������������������������
Other, net �������������������������������������������������������������������������������������������
Subtotal ����������������������������������������������������������������������������������������
Interest and dividends received ���������������������������������������������������������
Interest paid ���������������������������������������������������������������������������������������
Income taxes paid ������������������������������������������������������������������������������
Net cash provided by operating activities ������������������������������������

¥ 5,286
6,094
52
(816)
(300)
410
5
528
195
(4,866)
609
1,210
(39)
1,077
9,445
283
(405)
(994)
8,329

¥ 4,311
6,206
27
(830)
(274)
493
291
183
573
(76)
(31)
(233)
(106)
87
10,621
250
(491)
(555)
9,825

$ 64,362
74,199633(9,935)(3,653)
4,992
61
6,429
2,374
(59,248)
7,415
14,733(475)
13,113
115,000
3,446(4,931)(12,103)
101,412

Cash flows from investing activities:
Purchase of property, plant and equipment ���������������������������������������
Proceeds from sale of property, plant and equipment �����������������������
Purchase of short-term investments and investment securities ���������
Purchase of stocks of affiliates ����������������������������������������������������������
Purchase of investments in subsidiaries resulting in change in scope of consolidation ���Proceeds from purchase of investments in subsidiaries resulting in change in scope of consolidation ��
Other, net �������������������������������������������������������������������������������������������
Net cash used in investing activities ��������������������������������������������

(5,465)
337
(30)
(131)
(473)
5
(321)
(6,078)(3,128)
690
(28)
–
–
–
(419)
(2,885)(66,541)
4,103
(365)
(1,595)(5,759)61(3,909)(74,005)

3,913
2,980
(8,094)(1,039)(1,292)(6)(3,538)

3,574
4,569
(9,133)(926)(1,406)(645)(3,967)47,64436,284(98,551)(12,651)(15,731)(73)(43,078)0(1,287)
13,582¥12,295(7)
2,966
10,616¥13,5821(15,670)
165,372$149,702

Cash flows from financing activities:
Net increase in short-term borrowings ����������������������������������������������
Proceeds from long-term debt �����������������������������������������������������������
Repayment of long-term debt ������������������������������������������������������������Cash dividends paid ��������������������������������������������������������������������������
Repayment of lease obligations ��������������������������������������������������������
Other, net �������������������������������������������������������������������������������������������
Net cash used in financing activities ��������������������������������������������
Effect of exchange rate changes oncash and cash equivalents ��������������������������������������������������������������
Net increase in cash and cash equivalents ������������������������������������������Cash and cash equivalents at beginning of year ���������������������������������Cash and cash equivalents at end of year (Note 16) ���������������������������

See accompanying Notes to Consolidated Financial Statements.

11

Marudai Food Co., Ltd.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For years Ended 31st March 2012 and 2011

1. Basis of presenting consolidated financial statements
The accompanying consolidated financial statements of Marudai Food Co., Ltd. (the “Company”) and its consolidated
subsidiaries (together, the “Companies”) have been prepared in accordance with the provisions set forth in the Japanese Financial
Instruments and Exchange Law and its related accounting regulations and in conformity with accounting principles generally
accepted in Japan (“Japanese GAAP”), which are different in certain respects as to application and disclosure requirements fromInternational Financial Reporting Standards.
The accompanying consolidated financial statements have been restructured and translated into English from the consolidated
financial statements of the Company prepared in accordance with Japanese GAAP and filed with the appropriate Local Finance
Bureau of the Ministry of Finance as required by the Japanese Finance Instruments and Exchange Act. Certain supplementary
information included in the statutory Japanese language consolidated financial statements, but not required for fair presentation,
is not presented in the accompanying consolidated financial statements.
The translation of the Japanese yen amounts into U.S. dollar amounts is included solely for the convenience of readers outside
Japan, using the prevailing exchange rate at 31st March 2012, which was ¥82.13 to U.S. $1.00. These translations should not be
construed as representations that the Japanese yen amounts have been, could have been or could in the future be converted into
U.S. dollars at this or any other rate of exchange.
2. Significant accounting policies
Consolidation - The consolidated financial statements include the accounts of the Company and its 36 subsidiaries. Marushin
Food Co., Ltd. and Kinoumesyokuhin Co., Ltd. were added to the scope of consolidation as a result of the acquisition of shares.
Thirty-five of the Company’s subsidiaries have the same fiscal year end as the Company, 31st March. One of the Company’s
subsidiaries is consolidated using a fiscal year ending 31st December. Significant transactions occurring from 1st January to 31st
March are adjusted for in the consolidated financial statements. All significant intercompany balances, transactions and profits
have been eliminated. In the elimination of investments in subsidiaries, the assets and liabilities of the subsidiaries, including the
portion attributable to minority shareholders, are evaluated using the fair value at the time the Company acquired control of therespective subsidiary. The difference between the cost of an investment and the equity in the assets at the date of acquisition is,with minor exceptions, amortized over five years. Equity method accounting is applied to affiliates which are substantiallycontrolled. Betagro MF Deli Co., Ltd. was newly established and added to the scope of equity-method application.
Cash and cash equivalents - Cash on hand, readily available deposits and short-term highly liquid investments with maturities
not exceeding three months at the time of purchase are considered cash and cash equivalents.
Securities - Available-for-sale securities with available fair market value are stated at fair market value. Unrealized gains andlosses on these securities are reported, net of applicable income taxes, as a separate component of shareholder’s equity. Realized
gains and losses on the sale of such securities are computed using the moving average cost method. Debt securities with noavailable fair market value are stated at amortized cost, net of the amount considered not collectible. Other securities with noavailable fair market value are stated using the moving average cost method.
If the market value of equity securities or available-for-sale securities declines significantly, the difference between the fairmarket value and the carrying amount is recognised as loss in the period of the decline. If the fair market value of equity securities
is not readily available, such securities are written down to net asset value with a corresponding charge in the consolidated
statement of income in the event the net asset value declines significantly. In these cases, the fair market value or the net asset
value will be the carrying amount of the securities at the beginning of the next year.

12Derivatives and hedge accounting - The Companies account for derivative financial instruments at fair value and recognisechanges in the fair value as gain or loss unless the derivative financial instrument is used for hedging purposes. If derivative
financial instruments are used as hedges and meet certain hedging criteria, the Companies defer recognition of gain or loss
resulting from changes in the fair value of the derivative financial instrument until the related gain or loss on the hedged item isrecognised. However, foreign monetary obligations denominated in foreign currencies for which foreign exchange forward
contracts are used to hedge foreign currency fluctuation are translated at the contracted rate if the forward contracts qualify forhedge accounting (“the alternative method”). Also, if interest rate swap contracts are used as hedges and meet certain hedging
criteria, the net amount to be paid or received under the interest rate swap contract is added to or deducted from the interest on theassets or liabilities for which the swap contract was executed (“the special treatment”).
Allowance for doubtful accounts - An allowance for doubtful accounts is provided to cover possible losses on collection. With
respect to normal trade accounts receivable, it is stated at an amount based on the actual rate of historical bad debts. For certain
doubtful receivables, the uncollectible amounts are individually estimated.
Inventories - The Company and its domestic consolidated subsidiaries state inventories at the lower of average cost or net
realizable value.
Property, plant and equipment - Property, plant and equipment are stated at cost. Depreciation is computed primarily using thedeclining balance method. Buildings acquired after 31st March 1998, however, are depreciated using the straight-line method.
The useful life of buildings and structures ranges from 12 to 50 years. The useful life of machinery and equipment ranges from 4
to 10 years.
Software - The Company and its consolidated domestic subsidiaries include software in intangible assets and amortize it using
the straight-line method over the estimated useful life of five years.
Goodwill - Goodwill is amortized over a period of 5 years using the straight-line method.
Lease assets - Assets under finance leases that do not transfer ownership of the lease assets are amortized using the straightline method over the lease term with the assumption that the useful life coincides with the lease term and the residual value is
zero.
Research and development expenses - Research and development expenses for the improvement of existing products and thedevelopment of new products, including basic research and fundamental development costs, are charged to expenses as incurred.
Bonuses - The Company and its consolidated domestic subsidiaries follow the general Japanese practice of paying bonuses to
employees in July and December. Accrued bonus liabilities are determined based upon the estimated amounts to be paid in thesubsequent period and are included in accrued expenses.
Translation of foreign currencies - Short-term and long-term receivables and payables denominated in foreign currencies aretranslated into Japanese yen at year-end rates. Financial statements of consolidated overseas subsidiaries are also translated into
Japanese yen at year-end rates, except for shareholder’s equity accounts, which are translated at historical rates.
Employees’ severance and retirement benefits - The Companies have established defined contribution pension plans, defined
benefits pension plans and unfunded lump-sum payments plans. To prepare for payment of employees’ retirement benefits, areserve for retirement benefits is provided based on the projected benefit obligation and the value of pension fund assets at the endof the fiscal year. If the projected value of pension fund assets falls below the combined amount of the projected benefit obligation

13

and unrecognised actuarial gains and losses, the shortfall is recorded as reserve for retirement benefits. In the opposite case, theexcess is recorded as prepaid pension cost. As a result of the calculation, the reserve for retirement benefits of the Company andcertain consolidated subsidiaries has resulted in a debit balance in the fiscal year ended 31st March 2012 and is included in“Other” under investments and other assets. Projected benefit obligations are allocated using the straight-line method. Prior
service costs are amortized by the straight-line method over a period of 5 years, a period that is within the average remaining
service years of the eligible employees beginning in the fiscal year in which the prior service costs are recognised. Actuarial gains
and losses are amortized by the straight-line method over a period of 10 years, a period that is within the average remaining
service years of the eligible employees beginning in the fiscal year following the year in which the gains or losses are recognised.
Income taxes - The asset-liability approach is used to recognise deferred tax assets and liabilities for tax loss carryforwards
and the expected future tax consequences of temporary differences between the carrying amounts of assets and liabilities forfinancial reporting purposes and the amounts used for income tax purposes.
Amounts per share - The computations of net income per share of common stock shown on the consolidated statements ofincome are based on the weighted average number of shares outstanding during each financial period. Cash dividends per share
shown in the consolidated statements of income are the amounts applicable to the respective years. Diluted net income is notdisclosed because the Company had nothing which might have diluted the per share amounts for the years ended 31st March 2012
and 2011.
Change in accounting policy
Effective from the fiscal year ended 31st March 2011, the Company and its consolidated domestic subsidiaries have adopted
the “Accounting Standard for Asset Retirement Obligations” (ASBJ Statement No. 18, issued on 31st March 2008) and “Guidanceon Accounting Standard for Asset Retirement Obligations” (ASBJ Guidance No. 21, issued on 31st March 2008). The effect of
this change was to decrease operating income by 7 million yen and income before income taxes and minority interests by 45
million yen for the year ended 31st March 2011 compared with the amounts that would have been reported without the change.
Additional information
The Company adopted the Accounting Standard for Accounting Changes and Error Corrections (ASBJ Statement No. 24,
issued on 4th December 2009) and the Guidance on Accounting Standard for Accounting Changes and Error Corrections (ASBJ
Guidance No. 24, issued on 4th December 2009) for accounting changes and corrections of prior period errors made on or after
1st April 2011.
Effective 31st March 2011, the Company has adopted the “Cabinet Office Ordinance Partially Revising Regulation on
Terminology, Forms, and Preparation of Financial Statements” (Cabinet Office Ordinance No. 5, revised on 24th March 2009),
corresponding to “Accounting Standard for Consolidated Financial Statements” (ASBJ Statement No. 22, issued on 26th
December 2008) and presented as part of income before minority interests.
Effective 31st March 2011, the Company has adopted the “Accounting Standard for Presentation of Comprehensive Income”(ASBJ Statement No. 25, issued on 30th June 2010).
3. Financial instruments(1) Current status of financial instruments① Policy concerning financial instruments
In principle, the Marudai Food Group (the “Group”) invests its surplus funds only in principal guaranteed deposits andrelies on bank loans to raise funds. The Group uses derivatives to reduce foreign exchange and interest rate fluctuation risks,
but is not engaged in any speculative transactions.

14

② Details of financial instruments and their risks, and the Group’s risk management system
The Group is exposed to credit risk arising from operating receivables such as trade notes and accounts receivable. To
limit the risk, the Company conducts due date and outstanding receivable management by customer in accordance with its
credit exposure management guidelines and has a grading system to evaluate the credit condition of its major customers
every six months. The consolidated subsidiaries conduct risk management similarly, following the Company’s credit
exposure management guidelines.
The Group is exposed to market price risk arising from the investment securities it holds. These securities constituteshares of companies with which companies in the Group have business relationships. The fair values of such shares are
periodically assessed and the assessment reported to the Board of Directors’ meeting.
Most operating payables, such as trade notes and accounts payable, are payable within one year. Some arise inconnection with the import of raw materials and goods that are denominated in foreign currencies. The Company uses
foreign currency forward contracts to reduce foreign currency fluctuation risk that arises from operating payables in foreign
currencies that are deemed certain to occur.
The Group primarily uses loans to procure operating funds and mainly uses lease receivables from finance leases to raise
funds for capital expenditure. The Company is exposed to interest rate fluctuation risk arising from loans with floatinginterest rates. For most long-term loans with floating interest rates, the Company uses derivatives (interest rate swaps) for
each individual loan as a hedge instrument to fix interest payments. Since the requirements for special treatment for interest
rate swaps are satisfied, the Company uses the special treatment for the assessment of hedge effectiveness. To minimize
counterparty risk, the Company follows its derivative transaction rules and enters such transactions only with highly rated
financial institutions.
The Company is exposed to liquidity risk arising from its operating obligations and loan payables. To minimize this risk,
the Accounting Department prepares statements of cash flows based on other divisions’ reports and on a timely basis updates
the statements. The consolidated subsidiaries also manage liquidity risk in accordance with the methods used by theCompany.
③ Supplementary explanation on fair values of financial instruments
The fair values of financial instruments include values based on market prices or reasonably calculated values whenmarket prices are not available. Because a variety of factors, some of which are variable, are taken into account whencalculating the values, the adoption of different assumptions may result in different values.
The contract amounts of the derivative transactions stated in “(2) Fair value of financial instruments” do not reflect themarket risk involved in the derivative transactions themselves.

15

(2) Fair value of financial instruments
The following table shows consolidated balance sheet amounts, fair values and any difference between book value and fairvalue as of 31st March 2012. However, financial instruments whose fair values were deemed difficult to determine are notincluded in the table (Please refer to (※2)).
Millions of yen
Thousands of U.S. dollars (Note 1)① Cash and time deposits② Trade notes and accounts receivable③ Investment securities
Available-for-sale securities④ Trade notes and accounts payable⑤ Short-term borrowings⑥ Long-term debt
⑦ Lease obligations⑧ Derivatives (*2)

Consolidated Fair value
Difference
balance sheet (*1)
amounts (*1)
¥12,482¥12,482¥ –25,23425,234–9,230
19,818
8,447
9,867
4,350
28

9,230
19,818
8,447
9,816
4,437
28

–
–
–
51
(87)
–

Consolidated Fair value
Difference
balance sheet (*1)
amounts (*1)$151,979$151,979$–
307,245
307,245–
112,383
241,300
102,849
120,139
52,965341

112,383
241,300
102,849
119,518
54,024
341

–
–
–
621
(1,059)–(*1) Figures in parenthesis show amounts recorded as liabilities.
(*2) Derivative assets and liabilities are presented on a net basis.
(※1) Determination of fair value for financial instruments and matters concerning securities and derivative transactions① Cash and time deposits and ② Trade notes and accounts receivable
The fair values of these items are stated at their book values. Because these instruments are settled in a short periodof time, their fair value approximates the book value.
③ Investment securities
The fair values of these securities are based on the prices on securities exchanges. For information on securities
classified by the purpose for which they are held, refer to Note 4, “Securities.”④ Trade notes and accounts payable and ⑤ Short-term borrowings
The fair values of these items are stated at their book values. Because these instruments are settled in a short periodof time, their fair value approximates the book value.
⑥ Long-term debt and ⑦ Lease obligations
To calculate the fair value of these items, the combined amount of principal and interest is discounted by theinterest rate considered applicable to similar new loans or lease transactions. For the fair values of long-term debt withfloating interest rates subject to special treatment for interest rate swaps (refer to ⑧), the combined amount ofprincipal and interest processed as a single item with the interest swap is discounted by the price provided by thefinancial institutions.
⑧ Derivatives
Refer to Note 5, “Derivative financial instruments and hedging transactions.”(※2) Financial instruments whose fair values are deemed extremely difficult to determine
Category
Unlisted bonds
Unlisted stocks
Investment in affiliated company

16

Millions of yen
Consolidated balance sheet amounts¥ 12

Thousands of U.S. dollars (Note 1)
Consolidated balance sheet amounts
$ 146

82

998

120

1,461

Since no market prices were available for the above financial instruments and it was deemed difficult to determine their fairvalues by the estimation of the future cash flows, these items were not included in “③ Investment securities Available-for-salesecurities.”(※3) Estimated redemption amounts of monetary assets and available-for-sale securities with maturity dates after the
consolidated balance sheet dateMillions of yen
Thousands of U.S. dollars (Note 1)
Over one year Over five
Within one Over one year Over five
but within
years
year
but within
years
five years
five years

Within one
year
Cash and time deposits¥12,482¥ ––$151,979

Trade notes and accounts receivable

25,234

–

–

6

6

–

–
37,722–
6––

Investment securities
Available-for-sale securities with maturity
dates (bonds)
Total

$ –

–

307,245

–

–

73

73

–

–
459,297–73––(※4) For estimated repayment amounts of long-term debt, lease obligations and other interest-bearing debts, refer to Note 7,“Short-term borrowings, long-term debt and lease obligations.”
The following table shows consolidated balance sheet amounts, fair values and any difference between book value and fairvalue as of 31st March 2011. However, financial instruments whose fair values were deemed difficult to determine are notincluded in the table (Please refer to (※2)).
Millions of yen① Cash and time deposits② Trade notes and accounts receivable③ Investment securities
Available-for-sale securities④ Trade notes and accounts payable⑤ Short-term borrowings⑥ Long-term debt
⑦ Lease obligations⑧ Derivatives (*2)

Consolidated Fair value
Difference
balance sheet (*1)
amounts (*1)
¥13,619¥13,619¥ –
19,921
19,921–
8,675(18,178)(4,534)(13,104)(5,311)
1

8,675(18,178)(4,534)(13,067)(5,476)
1

–
–
–
(37)
165
–

(*1) Figures in parenthesis show amounts recorded as liabilities.
(*2) Derivative assets and liabilities are presented on a net basis.
(※1) Determination of fair value for financial instruments and matters concerning securities and derivative transactions① Cash and time deposits and ② Trade notes and accounts receivable
The fair values of these items are stated at their book values. Because these instruments are settled in a short periodof time, their fair value approximates the book value.
③ Investment securities
The fair values of these securities are based on the prices on securities exchanges. For information on securities
classified by the purpose for which they are held, refer to Note 4, “Securities.”④ Trade notes and accounts payable and ⑤ Short-term borrowings
The fair values of these items are stated at their book values. Because these instruments are settled in a short periodof time, their fair value approximates the book value.
17

⑥ Long-term debt and ⑦ Lease obligations
To calculate the fair value of these items, the combined amount of principal and interest is discounted by theinterest rate considered applicable to similar new loans or lease transactions. For the fair values of long-term debt withfloating interest rates subject to special treatment for interest rate swaps (refer to ⑧), the combined amount ofprincipal and interest processed as a single item with the interest swap is discounted by the price provided by thefinancial institutions.
⑧ Derivative
Refer to Note 5, “Derivative financial instruments and hedging transactions.”(※2) Financial instruments whose fair values were deemed extremely difficult to determine
Millions of yen
Consolidated balance sheet amounts¥ 6
77

Category
Unlisted bonds
Unlisted stocks

Since no market prices were available for the above financial instruments and it was deemed difficult to determine their fairvalues by the estimation of the future cash flows, these items were not included in “③ Investment securities Available-for-salesecurities.”(※3) Estimated redemption amounts of monetary assets and available-for-sale securities with maturity dates after the
consolidated balance sheet dateMillions of yen
Over one year Over five
but within
years
five years

Within one
year
Cash and time deposits¥13,619¥––

Trade notes and accounts receivable

19,921–––¥33,540

6¥6––Investment securities
Available-for-sale securities with maturity
dates (bonds)
Total(※4) For estimated repayment amounts of long-term debt, lease obligations and other interest-bearing debts, refer to Note 7,“Short-term borrowings, long-term debt and lease obligations.”
4. Securities
The following tables summarize historical costs and book values (fair values) of available-for-sale securities with available
fair market values as of 31st March 2012 and 2011.
Securities with book values
exceeding historical cost:

Millions of yen
2012

Thousands of U.S. dollars (Note1)
2011

2012

Type

Historical
cost

Book
value

Gain

Historical
cost

Book
value

Loss

Historical
cost

Book
value

Gain

Equity securities �������������������
Bonds �����������������������������������
Others �����������������������������������
Total �������������������������������������

¥4,223––¥4,223¥7,684––¥7,684¥3,461––¥3,461¥3,959––¥3,959¥6,958––¥6,958¥2,999––¥2,999$51,418––$51,418$93,559––$93,559$42,141––$42,141

18

Securities with book values
not exceeding historical cost:

2012

2011

2012

Type

Historical
cost

Book
value

Loss

Historical
cost

Book
value

Loss

Historical
cost

Book
value

Gain

Equity securities �������������������
Bonds �����������������������������������
Others �����������������������������������
Total �������������������������������������

¥1,934––¥1,934¥1,546––¥1,546¥(388)––¥(388)¥2,161––¥2,161¥1,716––¥1,716¥(445)––¥(445)$23,548––$23,548$18,824––$18,824$(4,724)––$(4,724)

Available-for-sale securities sold during the year:
Millions of yen
2012

Thousands of U.S. dollars (Note1)
2011

2012

Proceeds

Gains
on salesLosseson salesProceeds

Gains
on salesLosseson salesProceeds

Gains
on salesLosseson sales

–

–

–

¥1

–

¥0

–

–

–

The Group recognised impairment loss on investment securities categorised as other securities with market value in theamount of ¥5 million ($61 thousand) and ¥292 million for the year ended 31st March 2012 and 2011.
In cases of impairment of stocks whose values depreciated from 30% to 50%, the Company determined the impairment loss
by analyzing the operational performance of the issuing entities based on prevailing financial data and market value informationsuch as discrepancies between the book value and the highest or lowest market value during the year.
5. Derivative financial instruments and hedging transactions
Derivative financial instruments and hedging transactions at 31st March 2012 were as follows:(1) Currency related
Millions of yen Thousands of U.S. dollars (Note 1)
Hedge accounting
methodAlternative method

Transactions types

Major hedged Contract
items
amounts

Foreign exchange trading
Accounts
On purchased
payableU.S. dollar
Total

Due over Fair
one year value

Contract
amounts

Due over Fair
one year value¥620– (※1) ¥28$7,549

–

$341

¥620

–

$7,549

–

$341

¥28

※1 Fair value is based on information provided by financial institutions at the end of the fiscal year.
(2) Interest related
Millions of yen Thousands of U.S. dollars (Note 1)
Hedge accounting
methodTransactions types

Special treatment

Interest rate swaps
Pay fixed,
receive floating
Total

Major hedged Contract
items
amounts
Long-termdebt

Due over Fair
one year value

Contract
amounts

Due over Fair
one year value¥4,119¥2,909(※2) –$50,152$35,419–¥4,119¥2,909–$50,152$35,419–19

※2	According to the special treatment for interest rate swaps as applied to integrated and long-term debt, the fair value of thederivative financial instrument is included in the fair value of the long-term debt.
Derivative financial instruments and hedging transactions at 31st March 2011 were as follows:(1) Currency related
Millions of yen
Hedge accounting
methodProcessing method
in principle

Transaction type

Major hedged Contract
items
amounts

Foreign exchange trading
Accounts
On purchased
payableU.S. dollar
Total

Due over Fair
one year value

¥109

–

(※1) ¥1

¥109

–

¥1

※1 Fair value is based on information provided by financial institutions at the end of the fiscal year.
(2) Interest related
Millions of yen
Hedge accounting
methodTransaction typeSpecial treatment

Interest rate swaps
Pay fixed,
receive floating
Total

Major hedged Contract
items
amounts
Long-termdebt

Due over Fair
one year value¥5,809¥4,838(※2) –¥5,809¥4,838–※2	According to the special treatment for interest rate swaps as applied to integrated and long–term debt, the fair value of thederivative financial instrument is included in the fair value of the long–term debt.
6. Inventories
Inventories at 31st March 2012 and 2011 consisted of the following:Thousands of
U.S. dollars (Note 1)

Millions of yen
2012

2011

2012

Finished goods and merchandise ������������������������������������������������������������

¥ 5,902¥ 6,085$ 71,862

Work in progress �������������������������������������������������������������������������������������

688

654

8,377

Raw materials and supplies ���������������������������������������������������������������������

7,464

7,858

90,880¥14,054¥14,597$171,119

7. Short-term borrowings, long-term debt and lease obligations
Short–term borrowing at 31st March 2012 and 2011 consisted of short–term notes, which generally mature within one year,with average interest rates of 0.82% and 0.75%, respectively.

20

Long–term debt at 31st March 2012 and 2011 consisted of the following:
Millions of yen
2012
2011
Loans from banks, insurance companies and otherfinancial institution, 0.60% to 2.01% maturing through 2019
Secured ����������������������������������������������������������������������������������������������������
Unsecured �����������������������������������������������������������������������������������������������
Less current portion ��������������������������������������������������������������������������������

¥ 1,860
8,007
9,867(4,479)¥ 5,388

Thousands of
U.S. dollars (Note 1)
2012

¥

96
13,008
13,104(7,950)¥ 5,154$ 22,647
97,492
120,139(54,535)$ 65,604

The aggregate annual maturities of long–term debt as of 31st March 2012 was as follows:
Years ending 31st March,2013 ������������������������������������������������������������������������������������������������
2014 ������������������������������������������������������������������������������������������������
2015 ������������������������������������������������������������������������������������������������
2016 ������������������������������������������������������������������������������������������������
2017 ������������������������������������������������������������������������������������������������
2018 and thereafter �������������������������������������������������������������������������

Millions of yen

Thousands of U.S. dollars (Note 1)

2012

2012
¥4,479
1,722
1,796
463
1,090
317
¥9,867$ 54,535
20,967
21,868
5,637
13,272
3,860$120,139

The aggregate annual maturities of lease obligations as of 31st March 2012 was as follows:
Years ending 31st March,2013 ������������������������������������������������������������������������������������������������
2014 ������������������������������������������������������������������������������������������������
2015 ������������������������������������������������������������������������������������������������
2016 ������������������������������������������������������������������������������������������������
2017 ������������������������������������������������������������������������������������������������
2018 and thereafter �������������������������������������������������������������������������

Millions of yen

Thousands of U.S. dollars (Note 1)

2012

2012
¥1,077
790
642
571
467
803
¥4,350$13,113
9,619
7,817
6,952
5,686
9,778
$52,965

21

8. Pledged assets
At 31st March, 2012 assets pledged as collateral for short–term bank loans of ¥300 million ($3,653 thousand), the current
portion of long–term debt of ¥336 million ($4,091 thousand) and long–term debt of ¥1,525 million ($18,568 thousand) were as
follows:

Land ��������������������������������������������������������������������������������������������������������
Building and structures ���������������������������������������������������������������������������
Machinery and equipment �����������������������������������������������������������������������

Millions of yen
2012
2011
¥ 485
¥185
958
361
11
18
¥1,454¥564

Thousands of
U.S. dollars (Note 1)2012$ 5,905
11,665
134$17,704

9. Employees’ severance and retirement benefits
The liability for severance and retirement benefits included in the liability section of the consolidated balance sheets as of 31st
March 2012 and 2011 consisted of the following:

Projected benefit obligation ��������������������������������������������������������������������
Unrecognised prior service costs ������������������������������������������������������������
Unrecognised actuarial differences ���������������������������������������������������������
Fair value of pension assets ��������������������������������������������������������������������
Prepaid pension cost �������������������������������������������������������������������������������

Millions of yen
2012
2011
¥22,136¥21,832(30)–(3,782)(3,625)(19,347)(18,638)
1,878
979
¥ 855
¥ 548

Thousands of
U.S. dollars (Note 1)
2012$269,524(365)(46,049)(235,566)
22,866$ 10,410

Included in the consolidated statements of operations for the years ended 31st March 2012 and 2011 were severance andretirement benefit expenses comprising the following:

Service costs–benefits earned during the year ����������������������������������������
Interest cost on projected benefit obligation �������������������������������������������
Expected return on plan assets ����������������������������������������������������������������
Amortisation of prior service costs ���������������������������������������������������������
Amortisation of actuarial differences ������������������������������������������������������

Millions of yen
2012
2011
¥ 908
¥ 906
426
423
(746)
(719)
3
–
439
454
¥1,030¥1,064

Thousands of
U.S. dollars (Note 1)
2012$11,056
5,187(9,083)
36
5,345$12,541

The discount rate used by the Companies was 2.0% for the years ended 31st March 2012 and 2011. The rate of expected
return on plan assets used by the Companies was 4.0% for the years ended 31st March 2012 and 2011.
The losses on early retirement benefits shown separately in the consolidated statements of income were not included above.

22

10. Income taxes
The Company and its consolidated domestic subsidiaries are subject to a number of taxes based on income, which in theaggregate, indicated a statutory income tax rate in Japan of approximately 40.7% for the years ended 31st March 2012 and 2011.
The following table summarises the significant differences between the statutory income tax rate and the Companies’ effective
tax rate for financial statement purposes for the years ended 31st March 2012 and 2011.
2012
40.7%
(25.2)
1.2
(3.2)
2.3
3.8
19.6%

Statutory tax rate
Changes in valuation allowance
Non–deductible expenses, including entertainment expenses
Non–taxable income, including dividends received
Per capita inhabitants tax
Other
Effective tax rate

2011
40.7%
(36.6)
1.3
(6.4)
2.9
(0.2)
1.7%

Significant components of the Companies’ deferred tax assets and liabilities as of 31st March 2012 and 2011 were as follows:

Deferred tax assets:
Excess allowance for doubtful accounts �������������������������������������������
Accrued bonuses �������������������������������������������������������������������������������
Employees’ severance and retirement benefits ���������������������������������
Loss on impairment of assets ������������������������������������������������������������
Loss carryforwards ����������������������������������������������������������������������������
Other ��������������������������������������������������������������������������������������������������
Total deferred tax assets ��������������������������������������������������������������������������
Valuation allowance ��������������������������������������������������������������������������
Net deferred tax assets ����������������������������������������������������������������������������
Deferred tax liabilities:
Unrealised gains on securities �����������������������������������������������������������
Deferred gains on real properties ������������������������������������������������������
Prepaid pension cost ��������������������������������������������������������������������������
Other ��������������������������������������������������������������������������������������������������
Total deferred tax liabilities ��������������������������������������������������������������������
Net deferred tax assets ����������������������������������������������������������������������������

Millions of yen
2012
2011
¥ 105
¥ 127
424
449
288
218
1,449
1,591
1,603
3,099
1,999
2,206
¥5,868¥7,690(4,015)(5,740)1,853
1,950(1,074)
(39)
(668)
(113)
(1,894)¥ (41)(1,050)
(45)
(395)
(52)
(1,542)¥ 408

Thousands of
U.S. dollars (Note 1)2012$ 1,278
5,163
3,507
17,643
19,51824,339$71,448(48,886)
22,562(13,077)(475)(8,133)(1,376)(23,061)$ (499)Adjustment of deferred tax assets and liabilities for enacted changes in tax laws and rates
On 2nd December 2011, amendments to the Japanese tax regulations were enacted into law. As a result of these amendments,
the statutory income tax rate for the Company will be reduced to 38.0% for years beginning on or after 1st April 2012 and 35.6%
for years beginning on or after 1st April 2015. Based on the amendments, the statutory income tax rates utilised for themeasurement of deferred tax assets and liabilities expected to be settled or realized from 1st April 2012 to 31st March 2015 andon or after 1st April 2015 are 38.0% and 35.6%, respectively, as of 31st March 2012. Due to these changes in statutory income tax
rates, net deferred tax assets decreased by ¥137 million ($1,668 thousand) as of 31st March 2012, while deferred income tax

23

recognised for the year ended 31st March 2012 increased by ¥18 million ($219 thousand) and unrealised gains on securities
increased by ¥155 million ($1,877 thousand).
11. Contingent liabilities
The Company was contingently liable as a guarantor of loan obligations of a customer in the amount of ¥21 million ($256
thousand) at 31st March 2012 and ¥40 million at 31st March 2011.
12. Net assets
Under the Japanese laws and regulations, the entire amount paid for new shares is required to be designated as common stock.
However, a company may, by a resolution of the Board of Directors, designate an amount not exceeding one half of the price ofthe new shares as additional paid–in capital which is included in capital surplus. Under the Japanese Corporate Law (“the Law”),
in cases where a dividend distribution of surplus is made, the smaller of an amount equal to 10% of the dividend or the excess, ifany, of 25% of common stock over the total of additional paid–in capital and legal earnings reserve must be set aside as additional
paid–in capital or legal earnings reserve. Legal earnings reserve is included in retained earnings in the accompanying consolidatedbalance sheets. Under the Law, both of these appropriations generally require a resolution of the shareholders’ meeting.
Additional paid–in capital and legal earnings reserve may not be distributed as dividends. Under the Law, all additional paid–in capital and all legal earnings reserve may be transferred to other capital surplus and retained earnings, respectively, which arepotentially available for dividends. The maximum amount that the Company can distribute as dividends is calculated based on thenonconsolidated financial statements of the Company in accordance with Japanese laws and regulations.
13. Research and development expenses
Research and development expenses included in selling, general and administrative expenses for the years ended 31st March2012 and 2011 were ¥677 million ($8,243 thousand) and ¥619 million, respectively.
14. Loss on impairment of assets
The Company recorded impairment loss on the following asset groups for the year ended 31st March 2012. The Company
classified fixed assets into three categories including business assets, rental assets and idle assets. The Company groups its
business assets by cash generating units and rental assets and idle assets by each individual asset as these represent the smallest
identifiable assets generating cash inflows. The Company records impairment losses for these property, plant and equipment when
the original carrying amounts are below the recoverable amounts estimated based on projected future cash flows. The total
impairment loss for the year consisted of ¥127 million ($1,546 thousand) for land and ¥68 million ($828 thousand) for buildings
and other. The recoverable amounts are measured based on value in use for property, plant and equipment, value in use or
exchange for rental assets and value in exchange for idle assets. Value in exchange was determined using independent appraisals.
Value in use was calculated based on estimated future cash flows and was discounted at the rate of 3.6%.
The Company recorded impairment loss on the following asset groups for the year ended 31st March 2011. The Company
classified fixed assets into three categories including business assets, rental assets and idle assets. The Company groups its
business assets by cash generating units and rental assets and idle assets by each individual asset as these represent the smallest
identifiable assets generating cash inflows. The Company records impairment losses for these property, plant and equipment when
the original carrying amounts are below the recoverable amounts estimated based on projected future cash flows. The total
impairment loss for the year consisted of ¥320 million for land and ¥253 million for buildings and other. The recoverable amounts
are measured based on value in use for property, plant and equipment, value in use or exchange for rental assets and value inexchange for idle assets. Value in exchange was determined using independent appraisals. Values in use was calculated based on
estimated future cash flows and was discounted at the rate of 3.8%.

24

15. Segment information(1) Overview of the reportable segments① Method for determining reportable segments
The Group’s reportable segments are determined based on the availability of separate financial information for suchsegments that is examined periodically by the Board of Directors to make decisions regarding the allocation of management
resources and to assess the business performances of the segments. The Group has divided its business operation into tworeportable segments and on other segment. Its reportable segments are “the processed food products business” and “the meatproducts business.”② Description of the businesses that constitute each reportable segment
In the processed food products business, the Company purchases, manufactures and sells ham, sausage and cooked andprocessed foods. In the meat products business, the Company purchases, manufactures, and sells meat products.
(2) Methods of measurement for sales, profit (loss), assets, liabilities and other items for each reportable segment
Accounting policies adopted by the reportable segments is identical to those described in Note 2, “Significant Accounting
Policies.”(3) Segment information for the years ended 31st March 2012 and 2011
Segment information as of and for the fiscal year ended 31st March 2012 was as follows:
2012
Millions of yen
Reporting segments
Processed
Meatfood products
products

Sales:
Sales to third parties ���������������������
Intersegment sales and transfers ��
Net sales ���������������������������������������
Segment income ���������������������������
Segment assets �����������������������������
Other items:
Depreciation and amortization �����
Increase in property, plant andequipment and intangible fixed
assets (*4) ������������������������������������

Total

Other
(*1)

Total

¥150,179–
150,179
5,486
80,873¥53,543–
53,543
243
13,123¥203,722–
203,722
5,729
93,996

¥ 405
1,173
1,578
178
473

¥204,127
1,173
205,300
5,907
94,469

5,652

416

6,068

26

8,953

199

9,152

17

Adjustments(*2)¥

Consolidated(*3)–(1,173)(1,173)–29,889¥204,127–
204,127
5,907
124,358

6,094

–

6,094

9,169

12

9,181

25

2012
Thousands of U.S. dollars (Note 1)
Reporting segments
Processed
Meatfood products
products

Sales:
Sales to third parties ��������������������� $1,828,552–
Intersegment sales and transfers ��
Net sales ��������������������������������������� 1,828,552
66,797
Segment income ���������������������������
984,695
Segment assets �����������������������������
Other items:
68,818Depreciation and amortization �����
Increase in property, plant andequipment and intangible fixed
109,010assets (*4) ������������������������������������

Total

Other
(*1)

Total

$651,930–
651,930
2,959
159,783$2,480,482–
2,480,482
69,756
1,144,478$ 4,931
14,283
19,214
2,167
5,759$2,485,413
14,2832,499,696
71,923
1,150,237

5,065

73,883316

2,423

111,433

207

Adjustments(*2)

Consolidated
(*3)

$

–
(14,283)(14,283)–
363,923$2,485,413–
2,485,413
71,923
1,514,160

74,199–74,199111,640

146

111,786(*1) The other segment is business segments other than the reporting segments and includes the insurance agency business.
(*2)	Adjustments for total assets of ¥29,889 million ($363,923 thousand) indicate assets not attributed to any other segments and arecomposed mainly of cash and deposits, investments in securities and rental properties.
(*3)	Total segment income of the reporting segments and “Other” is equal to the operating income of the consolidated statements ofoperations.
(*4)	Increase in property, plant and equipment and intangible fixed assets of the processed food products segment include ¥2,687 million($32,716 thousand), which represents the acquisition of Marushin Food Co.,Ltd. shares.

Segment information as of and for the fiscal year ended 31st March 2011 was as follows:
2011
Millions of yen
Reporting segments
Processed
Meatfood products
products

Sales:
Sales to third parties ���������������������
Intersegment sales and transfers ��
Net sales ���������������������������������������
Segment income ���������������������������
Segment assets �����������������������������
Other items:
Depreciation and amortization �����
Increase in property, plant andequipment and intangible fixed
assets �������������������������������������������

Total

Other
(*1)

Total

¥145,261–
145,261
5,195
74,200¥53,056–
53,056345
12,026¥198,317–
198,317
5,540
86,226

¥ 436
894
1,330
184
484

¥198,753
894
199,647
5,724
86,710

5,727

453

6,180

26

4,339

229

4,568

33

Adjustments(*2)¥

Consolidated
(*3)

–
(894)
(894)
–
30,395¥198,753–
198,753
5,724
117,105

6,206

–

6,206

4,601

5

4,606

(*1) The other segment is business segments other than the reporting segments and includes the insurance agency business.
(*2)	Adjustments for total assets of ¥30,395 million indicate assets not attributed to any other segments and are composed mainly of cash
and deposits, investments in securities and rental properties.
(*3)	Total segment income of the reporting segments and “Other” is equal to the operating income of the consolidated statements ofoperations.

26

(4) Information about loss on impairment of assets by reportable segments
Information about loss on impairment of assets by reportable segments as of and for the fiscal year ended 31st March 2012
was as follows:
Millions of yen
Reporting segments
Processed
Meatfood products
products––
Loss on impairment of assets �������

Other

Total
–

Total
–

–

Adjustments

Consolidated

¥195

¥195

Adjustments

Consolidated$2,374$2,374

Thousands of U.S. dollars (Note 1)
Reporting segments
Processed
Meatfood products
products––
Loss on impairment of assets �������

Other

Total
–

Total
–

–

Information about loss on impairment of assets by reportable segments as of and for the fiscal year ended 31st March 2011
was as follows:
Millions of yen
Reporting segments
Processed
Meatfood products
products¥134–
Loss on impairment of assets �������

Other

Total
¥134

Total
–

¥134

Adjustments

Consolidated

¥439

¥573

(5) Information about amortisation and balance of goodwill by reportable segments
Information about amortisation and balance of goodwill by reportable segments as of and for the fiscal year ended 31st
March 2012 was as follows:
Millions of yen
Reporting segments
Processed
Meatfood products
products¥ 77–
Amortisation of goodwill �������������
¥836–
Balance of goodwill ���������������������

Other

Total
¥ 77
¥836

Total
–
–

¥ 77
¥836

Adjustments

Consolidated

–
–

¥ 77
¥836

Adjustments

Consolidated

–
–

$ 938
$10,179

Thousands of U.S. dollars (Note 1)
Reporting segments
Processed
Meatfood products
products$ 938–
Amortisation of goodwill �������������
$10,179–
Balance of goodwill ���������������������

Other

Total
$ 938
$10,179

Total
–
–

$ 938
$10,179

Information about amortisation and balance of goodwill by reportable segments as of and for the fiscal year ended 31st
March 2011 was as follows:
Millions of yen
Reporting segments
Processed
Meatfood products
products¥2–
Amortisation of goodwill �������������
¥6–
Balance of goodwill ���������������������

Other

Total
¥2
¥6

Total
–
–

¥2
¥6

Adjustments

Consolidated

–
–

¥2
¥6

27

(6) Information about gain on negative goodwill by reportable segments
In the Processed food products segment, negative goodwill of ¥84 million ($1,023 thousand) was incurred as a result of
the purchase of Umeya Co., Ltd. shares for the fiscal year ended 31st March 2012.
There is nothing to report for the fiscal year ended 31st March 2011.
(7) Additional information
Effective from the fiscal year ended 31st March 2011, the Company has adopted the “Accounting Standard for Disclosuresabout Segment of an Enterprise and Related information” (ASBJ Statement No. 17, issued on 27th March 2009) and“Guidance on Accounting Standard for Disclosures about Segment of an Enterprise and Related Information” (ASBJ
Guidance No. 20, issued on 21st March 2008).
16. Cash flow information
The reconciliation of cash and time deposits in the consolidated balance sheets and cash and cash equivalents in the
consolidated statements of cash flows as of 31st March 2012 and 2011 were as follows.
Thousands of
U.S. dollars (Note 1)
Millions of yen
2012
2011
2012
Cash and time deposits in the consolidated balance sheets ��������������������
¥12,482¥13,619$151,979(187)(37)(2,277)
Time deposits maturing after three months ���������������������������������������������Cash and cash equivalents in the consolidated statements of cash flows ����
¥12,295¥13,582$149,702
Assets and liabilities of newly consolidated subsidiary Marushin Foods Co., Ltd. have been newly consolidated due to theacquisition of shares on 28th October 2011. Accordingly, the following table shows the breakdown of assets and liabilities thatexisted at the time of consolidation and the relationship between the acquisition cost of the shares and the expense (net amount)required for the acquisition of the subsidiaries.
Millions of yen
Thousands of U.S. dollars (Note 1)
Current assets ����������������������������������������������������������������������������������
Noncurrent assets ����������������������������������������������������������������������������
Goodwill �����������������������������������������������������������������������������������������
Current liabilities ����������������������������������������������������������������������������
Long–term liabilities �����������������������������������������������������������������������
Acquisition price of shares ��������������������������������������������������������������Cash and cash equivalents ���������������������������������������������������������������
Balance: expenditures of investments in subsidiaries ���������������������

¥ 2,059
1,873
902
(778)
(2,250)1,806(1,333)¥ 473$ 25,070
22,805
10,983(9,473)(27,395)
21,990(16,231)$ 5,759

17. Business combinations(1) Outline of business combination① Name of the acquired company and its business:
Name of the acquired company: Marushin Foods Co., Ltd. (“Marushin Foods”)
Business: production and sales of processed food products such as hamburgers, meat balls, gyoza and others② Major reasons for business combination
To expand food processing business by integrating Marushin Foods which has well known product groups throughout
Japan such as “Marushin Hamburger” and “Utsunomiya Gyoza” into the Companies③ Date of business combination
28th October 201128

④ Legal form of business combination
Acquisition of shares⑤ Name of the company after business combination
Marushin Foods Co., Ltd.
Ownershipof voting rights acquired⑥
100%⑦ Major reasons for determining the acquiring company
Because it was the acquisition of shares in exchange for the Company’s cash(2) Period of performance results of the acquired company included in the consolidated statement of income for the year ended
31st March 2012
From 1st November 2011 through 31st March 2012
(3) Acquisition cost of shares of the acquired company and its breakdown
Millions of yen
Consideration for acquisition ����������������������������������������������������������
Direct expenses required for acquisition �����������������������������������������
Acquisition cost. �����������������������������������������������������������������������������

¥1,72878¥1,806

Thousands of U.S. dollars (Note 1)$21,040
950$21,990(4) Amount of goodwill recognised, cause of occurrence, amortisation method and amortisation period① Amount of goodwill recognised¥902 million ($10,983 thousand)Basisfor the goodwill②
Goodwill arose mainly from the synergy effect from the business integration of Marushin Foods into the Companies andexpected future earning capacity.
③ Amortisation method and amortisation period
Straight–line method over a period of 5 years(5) Major breakdown of assets purchased and liabilities assumed on the date of business combination
Millions of yen
Current assets ����������������������������������������������������������������������������������
Noncurrent assets ����������������������������������������������������������������������������
Total assets ��������������������������������������������������������������������������������������
Current liabilities ����������������������������������������������������������������������������
Long–term liabilities �����������������������������������������������������������������������
Total liabilities ��������������������������������������������������������������������������������

¥2,0591,873¥3,932¥ 778
2,250¥3,028

Thousands of U.S. dollars (Note 1)$25,070
22,805$47,875$ 9,473
27,395$36,868(6) Estimated amount of the impact on the consolidated statement of income for the current fiscal year, assuming that the businesscombination was completed at the beginning of the current fiscal year and its computation method (unaudited)
Millions of yen
Net sales ������������������������������������������������������������������������������������������
Operating loss ���������������������������������������������������������������������������������
Net loss ��������������������������������������������������������������������������������������������

¥ 2,953
(296)
(397)

Thousands of U.S. dollars (Note 1)$ 35,955(3,604)(4,834)29

(Computation method)
The above estimated amount of the impact was computed by adjusting the amounts of mainly amortisation of goodwill to theoperating results of Marushin Foods for the period from 1st April 2011 through 31st October 2011. Note that the above estimation
was unaudited.
18. Comprehensive income
Amounts reclassified to net income in the current period that were recognised in other comprehensive income in the current or
previous periods and the tax effects for each component of other comprehensive income was as follows:

Unrealised gains on securities
Increase during the year ������������������������������������������������������������
Reclassification adjustments �����������������������������������������������������
Subtotal, before tax �������������������������������������������������������������������
Tax of benefit �����������������������������������������������������������������������������
Subtotal, net of tax ��������������������������������������������������������������������
Deferred gains on hedges
Increase during the year ������������������������������������������������������������
Subtotal, before tax �������������������������������������������������������������������
Tax of benefit �����������������������������������������������������������������������������
Subtotal, net of tax ��������������������������������������������������������������������
Foreign currency translation adjustments
Decrease during the year �����������������������������������������������������������
Share of other comprehensive income of associates accounted for using equity method
Decrease during the year �����������������������������������������������������������
Total other comprehensive income �������������������������������������������������

Millions of yen

Thousands of U.S. dollars (Note 1)

2012

2012
¥515
5
520
(24)
496

$6,270
61
6,331
(292)
6,039

27

329

27

329

(10)

(122)

17

207

(15)

(183)

(7)

(85)

491

5,978

19. Subsequent events
At the annual shareholders‘ meeting held on 28th June 2012, the shareholders approved cash dividends amounting to ¥1,169
million. The appropriations have not been accrued in the consolidated financial statements as of 31st March 2012. Suchappropriations are recognised in the period in which they are approved by the shareholders. On 29th June 2012, the shareholdersof the Company authorised the payment of cash dividends to shareholders of record as of 31st March 2012 on the shares of stock
then outstanding at the rate of ¥9.0 ($0.11) per share, or a total of ¥1,169 million ($14,234 thousand).

30

Independent Auditor’s Report
To the Board of Directors of Marudai Food Co., Ltd.:We have audited the accompanying consolidated financial statements of Marudai Food Co., Ltd. and its
consolidated subsidiaries, which comprise the consolidated balance sheets as of 31st March 2012 and 2011,
and the consolidated statements of income, statements of comprehensive income, statements of changes in net
assets and statements of cash flows for the years then ended, and a summary of significant accounting policies
and other explanatory information expressed in Japanese yen.
Management’s Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial statementsin accordance with accounting principles generally accepted in Japan, and for such internal control as
management determines is necessary to enable the preparation of consolidated financial statements that are
free from material misstatements, whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We
conducted our audits in accordance with auditing standards generally accepted in Japan. Those standards
require that we comply with ethical requirements and plan and perform the audit to obtain reasonableassurance about whether the consolidated financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
consolidated financial statements. The procedures selected depend on our judgement, including the assessmentof the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In
making those risk assessments, we consider internal control relevant to the entity’s preparation and fairpresentation of the consolidated financial statements in order to design audit procedures that are appropriate
in the circumstances, while the objective of the financial statement audit is not for the purpose of expressing
an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating theappropriateness of accounting policies used and the reasonableness of accounting estimates made bymanagement, as well as evaluating the overall presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
audit opinion.
OpinionIn our opinion, the consolidated financial statements present fairly, in all material respects, the financial
position of Marudai Food Co., Ltd. and its consolidated subsidiaries as of 31st March 2012 and 2011, andtheir financial performance and cash flows for the years then ended in accordance with accounting principles
generally accepted in Japan.
Convenience Translation
The U.S. dollar amounts in the accompanying consolidated financial statements with respect to the year ended
31st March 2012 are presented solely for convenience. Our audit also included the translation of yen amounts
into U.S. dollar amounts and, in our opinion, such translation has been made on the basis described in Note 1
to the consolidated financial statements.

28th June 2012
Osaka, Japan

31

DIRECTORS AND STATUTORY AUDITORS
President andRepresentative Director:

Tokuo Kudara

Senior Executive andKeiichi KatoManaging Director:

Toshiharu Inoue

Directors:

Hiroshi Kubota
Jiro Tsuge

Statutory Auditors:

Yoshikazu Sawanaka
Yasumi Shukuri
Hiroshi Kitabayashi

Managing Directors:

Yasushi Sawada
Masahiro Oshima(As of 28th June 2012)32

OUTLINE OF THE COMPANY
Established:

10th June 1958

Major subsidiaries:
Hokkaido Marudai Food Co., Ltd.

Stated Capital:¥6,716,252,022

Tohoku Marudai Food Co., Ltd.
Shin-etsu Marudai Food Co., Ltd.

Number of Employees: 2,390

Kanto Marudai Food Co., Ltd.
Chubu Marudai Food Co., Ltd.

Head Office:21-3 Midori-cho, Takatsuki-shi,

Kansai Marudai Food Co., Ltd.

Osaka, Japan

Chu-Shikoku Marudai Food Co., Ltd.
Kyushu Marudai Food Co., Ltd.

Branch Office:4-7-5 Tsukiji, Chuou-ku, Tokyo,

Marudai Meat Co., Ltd.

Japan

Hornmeier Co., Ltd.
Marudai Service Co., Ltd.

Sales Offices:

The sales headquarters at the

Makoto Giken Co., Ltd.

Company’s head office in Osaka

Pioneer Foods Co., Ltd.

controls 13 distribution centers and23 Other subsidiaries

6 regional sales departments which(As of 31st March 2012)service 54 local outlets.
Associated company:
Plants:Hokkaido, Iwate,

Betagro MF Deli Co., Ltd.

Niigata, Kanto, Soka,
Ibaraki, Yokosuka, Shounan,
Shizuoka, Matsusaka,
Takatsuki, Hyogo,
Okayama, Hiroshima,
Karatsu

Overseas Office;

Chicago, U.S.A.

33

Head Office: 21-3 Midori-cho, Takatsuki-shi, Osaka, Japan
Telephone: 81-726-61-2518 Fax: 81-726-61-5006