Annual Report 2013
For the Year Ended 31st March 2013

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 AUDITOR’S REPORT ��������������������������������������������������������� 31
DIRECTORS AND STATUTORY AUDITORS ����������������������������������������������� 32
OUTLINE OF THE COMPANY ���������������������������������������������������������������������� 33

Marudai Food Co., Ltd.

FINANCIAL HIGHLIGHTS
For the Years Ended 31st March 2013 and 2012
(Consolidated basis)Thousands of
U.S. dollars, except
per share amounts

Millions of yen,
except per share amounts(Note)
2013

2012

2013

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

¥207,009¥204,127$2,201,989

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

2,030

3,933

21,593

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

15.63

30.28

0.17

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

–

–

–

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

8.00

9.00

0.09

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

¥122,848¥124,358$1,306,755

Per share:

Note: U.S. dollar amounts are translated from yen for convenience only at the rate of ¥94.01 to U.S.$1.00.

1Marudai Food Co., Ltd.

TO OUR SHAREHOLDERS

With the issurance of our company’s 65th annual
report, we hope that our shareholders are enjoying healthand prosperity. We would also like to take thisopportunity to express our deep appreciation for yourcontinued support.

The environment in which the Marudai Food Group’s
Processed food products business operates remained
challenging owing to a decline in sales prices reflecting
frugality among consumers and intensifying competitionin the market. Despite a modest recovery in prices ofJapanese beef towards the end of the fiscal year, the Meat

During the fiscal year ended 31st March 2013, demandassociated with reconstruction in the aftermath of the

Products business also faced challenges, including
intensifying sales competition and an increase in purchase

Great East Japan Earthquake and high expectations
toward the Abe administration’s economic policies led toa recovery of share prices and weakening of the yen
towards the end of the fiscal year. However, concerns

prices resulting from exchange rate fluctuations.

over the slowdown of overseas economies posed adownside risk to the Japanese economy and personalreliability by adhering to the Marudai Food Group’s
policies of putting the customer-first, thoroughconsumption remained lacklustre.

compliance and uncompromising commitment to safety
and quality. In parallel, we implemented a diversification
strategy and initiatives to reinforce Group management
and strengthen product development capabilities.

2

Under such circumstances, we strove to offer foodproducts that satisfy the highest standards of safety andAs a result, consolidated net sales for the fiscal year
ended 31st March 2013 increased by 1.4% year on year to207,009 million yen. Operating income, however,decreased by 43.9% to 3,315 million yen, and net income
decreased by 48.4% to 2,030 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 2013

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 2013 and 2012:

Millions of yen(percentage of total net sales)

Processed Food Products .........................................................................

Meat Products ..........................................................................................

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

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

2013

2012

¥148,904¥150,179(71.9%)(73.6%)

57,71853,543(27.9%)(26.2%)

387

405(0.2%)(0.2%)¥207,009¥204,127

2013

Note: U.S. dollar amounts are translated from yen for convenience only at the rate of ¥94.01 to U.S.$1.00.

4

Thousands of
U.S. dollars (Note)$1,583,917

613,956

4,116$2,201,989

Processed Food Products
The Ham & Sausage Products operations conducted vigorous sales promotion campaigns, including a campaign to support theJapanese Olympic team and an autumn campaign for mainstay brands such as “Kunseiya Jyukusei Vienna Sausage,” winner of theMonde Selection Grand Gold Quality Award in the food products category for the fourth time in 2012. For midsummer and yearend gift products, we made proactive efforts to expand sales, offering a wide line-up centering on mainstay series, namely “Ouha”
and “Kosai.” In addition, we launched the “Usushio” series of products whose salt content is 30% less than that of comparable
products with no sugar. We also renewed the long-selling “Chicken Hamburger,” coinciding with the product’s 35th anniversary.
Despite these efforts to increase sales, sales in the Ham & Sausage Products operations declined by 2.3% from the previous year
in an increasingly competitive market.
In the Precooked & Processed Foods operations, sales of retort-pouch curry products were sluggish. On the other hand, salesof the popular “Sundubu” series of Korean-style soups were robust. We enhanced the line-up of doria (rice au gratin) sauces,which began with the introduction of “Chicken Doria Sauce” as a new product for the autumn, by adding “Baked Curry Doria
Sauce” and “Milanese Doria Sauce.” As a result of these efforts to expand sales, sales of the Precooked & Processed Foods
operations increased by 1.4% year on year.
Sales in the Processed Food Products segment amounted to 148,904 million yen, 0.8% less than the previous year. Operating
income decreased by 41.3% year on year to 3,222 million yen, owing to lower sales in the mainstay Ham & Sausage Products
operations.
Meat Products
Challenging business conditions continued for beef as price competition intensified, reflecting the preoccupation with low
prices among consumers. However, beef sales increased owing to a modest recovery in Japanese beef prices and our efforts to
expand sales of U.S. beef. With regard to pork, the market remained unfavourable because of the increased supply of pork in thefirst half of the fiscal year. Imported beef prices increased because of a decrease in supply overseas and purchase prices rose due
to rapid exchange rate fluctuations. As a result, although sales in the Meat Products segment increased by 7.8% year on year to
57,718 million yen, the segment recorded an operating loss of 84 million yen.
Other
Sales in the Other business decreased by 4.3% year on year to 387 million yen, and operating income decreased by 0.4% to
177 million yen.

5

Marudai Food Co., Ltd.

CONSOLIDATED BALANCE SHEETS
31st March 2013 and 2012

Millions of yen

Thousands of
U.S. dollars (Note 1)
2013

2013

2012

¥ 11,065¥ 12,482$ 117,700

24,995826(61)
14,445
1,147
279

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

265,876
8,786(649)
153,654
12,201
2,968

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

52,69654,339560,536

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

100
10,733
69
7,570
(408)

120
9,324
60
7,914
(426)

1,064
114,169734
80,523(4,340)Total investments and other assets ................................................

18,064

16,992

192,150

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

18,835
47,13353,141
318
6,668
126,095(75,632)
50,463
1,625

19,052
46,912
49,7271,385
8,078
125,154(74,056)
51,0981,929

200,351
501,361565,270
3,382
70,9291,341,293(804,510)
536,783
17,286

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

¥122,848¥124,358$1,306,755

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 �����������������������������������������������������������������
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 ������������������������������������������������������������

Millions of yen
2013
2012

¥

7,861
2,499
19,908
804
2,207
304
7,019
40,602

¥

8,447
4,479
19,818
1,077
2,238
357
7,693
44,109Thousands of
U.S. dollars (Note 1)
2013$

83,61926,582
211,765
8,552
23,476
3,234
74,663431,891

6,520
1,685
2,555
853
521
12,134

5,388
1,884
3,273
855
540
11,94069,354
17,924
27,1789,074
5,541
129,071

NET ASSETS (Note 12)
Shareholders’ equity:
Common stock
Authorised — 200,000,000 shares
Issued — 132,527,909 shares in 2013 (132,527,909 shares in 2012) �����
Capital surplus �����������������������������������������������������������������������������������
Retained earnings ������������������������������������������������������������������������������
Less treasury stock at cost �����������������������������������������������������������������
Total shareholders’ equity �����������������������������������������������������������

6,716
21,68638,032(698)
65,736

6,716
21,68637,171(698)
64,87571,439230,678404,553(7,425)699,245

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

2,940
0
(124)
2,816

2,001
18
(114)
1,905

31,2730(1,319)29,954

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

1,560
70,112¥122,848

1,529
68,309¥124,358

16,594
745,793$1,306,755

Contingent liabilities (Note 11)7

Marudai Food Co., Ltd.

CONSOLIDATED STATEMENTS OF INCOME
Years Ended 31st March 2013 and 2012

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

Millions of yen
2013
2012
¥207,009¥204,127
156,541
151,654

Thousands of
U.S. dollars (Note 1)
2013$2,201,989
1,665,153

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

50,46847,15352,473
46,566536,836
501,574

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

3,315

5,907

35,262

304
(319)
(271)
(207)
(151)
35

300
(410)
(528)
(192)
(195)
404

3,234
(3,393)(2,883)(2,202)(1,606)
372

(609)

(621)

(6,478)

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

2,706

5,286

28,784

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

663
(36)
2,079
(49)

629
408
4,249
(316)

7,051
(382)
22,115(522)

Other income (expenses):
Interest and dividend income ������������������������������������������������������������
Interest expense ���������������������������������������������������������������������������������
Loss on disposal of property, plant and equipment, net ��������������������
Loss on early retirement benefits ������������������������������������������������������
Loss on impairment of assets (Note 14) ��������������������������������������������
Other, net �������������������������������������������������������������������������������������������

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

¥

2,030

¥

3,933

$

21,593

U.S. dollars (Note 1)

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

¥15.63¥30.28$0.17

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

–

–

–

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

¥ 8.00¥ 9.00$0.09

See accompanying Notes to Consolidated Financial Statements.

8

Marudai Food Co., Ltd.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Years Ended 31st March 2013 and 2012

Income before minority interests ����������������������������������������������������������
Other comprehensive income:Unrealised gains 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 17) �����������������������������
Comprehensive income �������������������������������������������������������������������������
Comprehensive income attributable to:
Owners of the parent �������������������������������������������������������������������������
Minority interests ������������������������������������������������������������������������������

Millions of yen
2013
2012
¥2,079¥4,249Thousands of
U.S. dollars (Note 1)
2013$22,115

939
(18)
(27)
18
912
¥2,991

496
17
(15)
(7)
491
¥4,740

9,988
(191)
(287)
191
9,701
$31,816¥2,942¥ 49¥4,424¥ 316$31,295$ 521

See accompanying Notes to Consolidated Financial Statements.

9Marudai Food Co., Ltd.

CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS
Years Ended 31st March 2013 and 2012

Thousands of
U.S. dollars (Note 1)
2013

Millions of yen
2013
2012
Common stock:
Balance at beginning and end of the year �����������������������������������������

¥ 6,716¥ 6,716$ 71,439

Capital surplus:
Balance at beginning and end of the year �����������������������������������������

¥21,686¥21,686$230,678

Retained earnings:
Balance at beginning of the year �������������������������������������������������������Cash dividends paid ��������������������������������������������������������������������������
Net income ����������������������������������������������������������������������������������������
Balance at end of the year �����������������������������������������������������������������

¥37,171(1,169)2,030¥38,032¥34,277(1,039)3,933¥37,171$395,394(12,434)
21,593$404,553

Treasury stock, at cost:
Balance at beginning of the year �������������������������������������������������������
Purchase of treasury stock �����������������������������������������������������������������
Balance at end of the year �����������������������������������������������������������������

¥ (698)(0)¥ (698)¥ (697)(1)¥ (698)$ (7,425)(0)$ (7,425)

Unrealized gains on securities:
Balance at beginning of the year �������������������������������������������������������
Increase for the year ��������������������������������������������������������������������������
Balance at end of the year �����������������������������������������������������������������

¥ 2,001939¥ 2,940¥ 1,505496¥ 2,001$ 21,285
9,988$ 31,273

¥

18
(18)
0

¥

$

Foreign currency translation adjustments:
Balance at beginning of the year �������������������������������������������������������
Decrease for the year �������������������������������������������������������������������������
Balance at end of the year �����������������������������������������������������������������

¥ (114)(10)¥ (124)

¥

(92)
(22)
¥ (114)$ (1,213)(106)$ (1,319)

Minority interests:
Balance at beginning of the year �������������������������������������������������������
Increase for the year ��������������������������������������������������������������������������
Balance at end of the year �����������������������������������������������������������������

¥ 1,52931¥ 1,560¥ 1,314215¥ 1,529$ 16,264330$ 16,594

Deferred gains on hedges
Balance at beginning of the year �������������������������������������������������������
Increase (decrease) for the year ���������������������������������������������������������
Balance at end of the year �����������������������������������������������������������������

¥See accompanying Notes to Consolidated Financial Statements.

10

¥

1
17
18

$

191
(191)
0

Marudai Food Co., Ltd.

CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended 31st March 2013 and 2012

Millions of yen
2013
2012

Thousands of
U.S. dollars (Note 1)
2013

Cash flows from operating activities:
Income before income taxes and minority interests ��������������������������
Depreciation and amortisation ����������������������������������������������������������
Loss on impairment of assets ������������������������������������������������������������
Increase (decrease) in allowance for doubtful accounts ��������������������
Increase (decrease) in severance and retirement benefits ������������������
Interest and dividend income ������������������������������������������������������������
Interest expense ���������������������������������������������������������������������������������
Gain on sale of securities, net �����������������������������������������������������������
Write-down of investment in securities ���������������������������������������������
Loss on disposal of property, plant and equipment, net ��������������������
Decrease (increase) in receivables ����������������������������������������������������
Decrease (increase) in inventories �����������������������������������������������������
Increase 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 ������������������������������������

¥ 2,706
5,906
151
(17)
120
(304)
319
22
–
271
238
(536)
94
(191)
(496)
8,283
323
(318)
(537)
7,751

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

$ 28,784
62,823
1,606
(181)
1,277
(3,234)
3,393
234
–
2,883
2,532
(5,702)1,000(2,032)(5,275)
88,1083,436(3,383)(5,712)82,449Cash flows from investing activities:
Purchase of short-term investments and investment securities ���������
Proceeds from sale of short-term investments and investment securities ��
Purchase of property, plant and equipment ���������������������������������������
Proceeds from sale of property, plant and equipment �����������������������
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 ��������������������������������������������

(38)
20(5,659)
300
–
–
–
(149)
(5,526)(30)–(5,465)
337
(131)
(473)
5
(321)
(6,078)(404)
213(60,196)
3,191
–
–
–
(1,585)(58,781)

(610)
3,695
(4,543)(1,045)(1,169)(20)(3,692)

3,913
2,980
(8,094)(1,292)(1,039)(6)(3,538)(6,488)39,304(48,324)(11,116)(12,435)(213)(39,272)(1)(1,468)12,295¥10,827

0(1,287)
13,582¥12,295(11)(15,615)
130,784$115,169

Cash flows from financing activities:
Net increase (decrease) in short-term borrowings �����������������������������
Proceeds from long-term debt �����������������������������������������������������������
Repayment of long-term debt ������������������������������������������������������������
Repayment of lease obligations ��������������������������������������������������������Cash dividends paid ��������������������������������������������������������������������������
Other, net �������������������������������������������������������������������������������������������
Net cash used in financing activities ��������������������������������������������
Effect of exchange rate changes oncash and cash equivalents ��������������������������������������������������������������
Net decrease 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 2013 and 2012

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 Financial 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 2013, which was ¥94.01 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 34 subsidiaries.
Consolidated subsidiaries Shikoku Fresh System Co., Ltd. and Mie Fresh System Co., Ltd. were excluded from the scope of
consolidation as their liquidation was completed during the fiscal year ended 31st March 2013. As a result, the number ofconsolidated subsidiaries decreased by two. Thirty-three of the Company’s subsidiaries have the same fiscal year end as theCompany, 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 atthe time the Company acquired control of the respective subsidiary. The difference between the cost of an investment and theequity in the assets at the date of acquisition is, with minor exceptions, amortized over five years. Equity method accounting isapplied to affiliates which are substantially controlled by the Company. Betagro MF Deli Co., Ltd. is being included in the scopeof the Companies to which the equity method is applied.
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 loss or gain 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 fluctuations 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
and unrecognised actuarial gains and losses, the shortfall is recorded as reserve for retirement benefits. If the projected benefit
obligation exceeds the combined amounts, the excess is recorded as prepaid pension cost.

13

In the fiscal year ended 31st March 2013, calculation of the reserve for retirement benefits of the Company and certain
consolidated subsidiaries has resulted in a debit balance 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 overa 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 no outstanding securities which might have diluted the per share amounts for the years ended
31st March 2013 and 2012.
Changes in accounting policies that are difficult to distinguish from changes in accounting estimates
In line with the revision to the Corporation Tax Act of Japan, effective from the fiscal year ended 31st March 2013, theCompany and its domestic consolidated subsidiaries adopted a new depreciation method pursuant to the revised Corporation Tax
Act for property, plant and equipment acquired on or after 1st April 2012.
As a result of this change, operating income was ¥176 million higher and income before income taxes and net income wereboth ¥177 million higher for the fiscal year ended 31st March 2013 than the amounts that would have been reported with the priormethod.
Accounting standards and relevant regulations that are not yet adopted- Accounting Standard for Retirement Benefits (ASBJ Statement No. 26, issued on 17th May 2012)- Guidance on Accounting Standard for Retirement Benefits (ASBJ Guidance No. 25, issued on 17th May 2012)(1) Summary
Under the amended rule, actuarial gains and losses and past service costs that haven’t been recognised in profit or loss areto be recognised within the net asset section, after adjusting for tax effects, and the deficit or surplus are to be recognised as aliability or asset without any adjustments. For determining the method of attributing expected benefits to periods, the standard
now allows a choice of benefit formula basis or straight-line basis. The method for determinating the discount rate has also
been amended.
(2) Effective dates
Amendments other than those relating to the determination of retirement benefit obligations and current service costs are
effective for the end of annual periods ending on or after 31st March 2014. Amendments relating to the determination ofretirement benefit obligations and current service costs are effective from the beginning of annual periods ending on or after
31st March 2015.
(3) Effect of application of the standard
The Company and its consolidated domestic subsidiaries are currently in the process of determining the effects of the newstandard on the consolidated financial statements.

14

Additional information
The Company has 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.
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 guaranteed deposits and procuresnecessary funds through bank loans and the issuance of bonds. The Group uses derivatives to reduce foreign exchange andinterest rate fluctuation risks, but is not engaged in any speculative transactions.
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 manage credit risk 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 reported to the Board of Directors.
Operating payables, such as trade notes and accounts payables, are generally 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.
The Group primarily uses loans to procure operating funds and lease receivables from finance leases to raise funds forcapital expenditure. When the loans have floating interest rates, the Company is exposed to interest rate fluctuation risk. 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 regularly updates thestatements. The consolidated subsidiaries also manage liquidity risk in accordance with the methods used by the Company.
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 value and any difference between book value and fairvalue as of 31st March 2013. 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 (*)

Consolidatedbalance sheet
amounts¥11,065
24,995

Fair value

10,66919,908
7,861
9,019
3,359
1

10,66919,908
7,861
8,967
3,440
1

¥11,065
24,995Difference¥

Fair value

Difference––

Consolidatedbalance sheet
amounts$117,700
265,876$117,700
265,876

$ –
–

–
–
–
(52)
81
–

113,488
211,765
83,61995,93635,730
11

113,488
211,765
83,61995,38336,592
11

–
–
–
(553)
862
–

(*) 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 value of these items are stated at book value. Because these instruments are settled in a short period oftime, book value approximates fair value.
③ Investment securities
The fair value of these securities are based on 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 value of these items are stated at book value. Because these instruments are settled in a short period oftime, book value approximates fair 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 value of long-term debt withfloating interest rates subject to special treatment for interest rate swaps, the combined amount of principal andinterest processed as a single item with the interest swap is discounted by the price provided by the financial
institution.
Derivatives⑧
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¥ 6

Thousands of U.S. dollars (Note 1)
Consolidated balance sheet amounts
$ 64

58

617

100

1,064

Since no market prices were available for the above financial instruments and their fair values were difficult to determine by
the estimation of the future cash flows, these items were not included in “③ Investment securities Available-for-sale securities.”(※3) Estimated redemption amounts of monetary assets and available-for-sale securities with maturity dates after the
consolidated balance sheet dateWithin one
year

Millions of yen
Over one year Over five
but within
years
five years

Thousands of U.S. dollars (Note 1)
Within one Over one year Over fiveyear
but within
years
five years

Cash and time deposits¥11,065¥ ––$117,700$ ––Trade notes and accounts receivable

24,995––

265,876–––¥36,060

6
¥ 6

–
–

–
$383,576

64
$64

–
–

Investment securities
Available-for-sale securities withmaturity dates (bonds)
Total(※4) For estimated repayment amounts of long-term debt, lease obligations and other interest-bearing debt, refer to Note 7,“Short-term borrowings, long-term debt and lease obligations.”
The following table shows consolidated balance sheet amounts, fair value 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 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)

Consolidatedbalance sheet
amounts (*1)
¥12,482
25,234
9,230(19,818)(8,447)(9,867)(4,350)28

Fair value(*1)

Difference¥12,482
25,234

¥ –
–

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

–
–
–
51
(87)
–

(*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 value of these items are stated at book value. Because these instruments are settled in a short period oftime, book value approximates fair value.
③ Investment securities
The fair value of these securities are based on 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 value of these items are stated at book value. Because these instruments are settled in a short period oftime, book value approximates fair 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, the combined amount of principal andinterest processed as a single item with the interest swap is discounted by the price provided by the financial
institution.
⑧ Derivatives
Refer to Note 5, “Derivative financial instruments and hedging transactions.”(※2) Financial instruments whose fair values were deemed extremely difficult to determine
Category
Unlisted bonds
Unlisted stocks
Investment in affiliated company

Millions of yen
Consolidated balance sheet amounts
¥ 12
82
120

Since no market prices were available for the above financial instruments and their fair values were difficult to determine by
the estimation of the future cash flows, these items were not included in “③ Investment securities Available-for-sale securities.”(※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¥12,482¥––

Trade notes and accounts receivable

25,234––

6¥37,7226¥6––Investment securities
Available-for-sale securities withmaturity dates (bonds)
Total(※4) For estimated repayment amounts of long-term debt, lease obligations and other interest-bearing debt, 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 2013 and 2012.
Securities with book value
exceeding historical cost:

Millions of yen
2013

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

2013

Type

Historical
cost

Book
value

Gain

Historical
cost

Book
value

Gain

Historicalcost

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

¥4,827––¥4,827¥9,610––¥9,610¥4,783––¥4,783¥4,223––¥4,223¥7,684––¥7,684¥3,461––¥3,461$51,346 $102,223––––$51,346 $102,223

18

Book
value

Gain
$50,877––$50,877

Securities with book value
not exceeding historical cost:

2013

2012

2013

Type

Historical
cost

Book
value

Loss

Historical
cost

Book
value

Loss

Historical
cost

Book
value

Loss

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

¥1,356––¥1,356¥1,059––¥1,059¥(297)––¥(297)¥1,934––¥1,934¥1,546––¥1,546¥(388)––¥(388)$14,424––$14,424$11,265––$11,265$(3,159)––$(3,159)

Available-for-sale securities sold during the year:
Millions of yen
2013

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

2013

Proceeds

Gains
on salesLosseson salesProceeds

Gains
on salesLosseson salesProceeds

Gains
on salesLosseson sales

¥20

¥1

¥(23)

–

–

–

$212

$11

$(245)The Group recognized impairment loss on investment securities categorised as other securities with market value in theamount of ¥5 million for the year ended 31st March 2012.
When the value of stocks depreciated from 30% to 50%, the Company determined impairment loss by analyzing theoperational performance of the issuing entities based on prevailing financial data and market value information such 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 2013 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 overone year

Fair
value

Contract
amounts

Due overone year

Fair
value

¥226

–

(※) ¥1$2,404

–

$11

¥226

–

¥1

$2,404–$11※ 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
methodSpecial treatment

Transactions types
Interest rate swaps
Pay fixed,
receive floating
Total

Major hedged Contract
items
amounts
Long-termdebt

Due overone year

Fair
value

Contract
amounts

Due overone year

Fair
value

¥4,231¥3,760(※) –$45,006$39,996–¥4,231¥3,760–$45,006$39,996–19

※ 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 2012 were as follows:(1) Currency related
Millions of yen
Hedge accounting
methodAlternative method

Transaction type

Major hedged Contract
items
amounts

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

Due overone year

Fair
value

¥620

–

(※) ¥28

¥620

–

¥28

※ 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
methodSpecial treatment

Transaction typeInterest rate swaps
Pay fixed,
receive floating
Total

Major hedged Contract
items
amounts
Long-termdebt

Due overone year

Fair
value

¥4,119¥2,909(※) –¥4,119¥2,909–※ 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 2013 and 2012 consisted of the following:Thousands of
U.S. dollars (Note 1)

Millions of yen
2013

2012

2013

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

¥ 7,045¥ 5,902$ 74,939

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

743

688

7,903

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

6,657

7,464

70,812¥14,445¥14,054$153,654

7. Short-term borrowings, long-term debt and lease obligations
Short-term borrowing at 31st March 2013 and 2012 consisted of short-term notes, which generally mature within one year,with average interest rates of 0.63% and 0.75%, respectively.

20

Long-term debt at 31st March 2013 and 2012 consisted of the following:
Millions of yen
2013
2012
Loans from banks, insurance companies and otherfinancial institution, 0.85% to 1.75% maturing through 2023
Secured ����������������������������������������������������������������������������������������������������
Unsecured �����������������������������������������������������������������������������������������������
Less current portion ��������������������������������������������������������������������������������

¥ 1,7127,307
9,019(2,499)¥ 6,520

Thousands of
U.S. dollars (Note 1)2013¥ 1,860
8,007
9,867(4,479)¥ 5,388$ 18,211
77,72595,936(26,582)$ 69,354

The aggregate annual maturities of long-term debt as of 31st March 2013 was as follows:
Years ending 31st March,2014 ������������������������������������������������������������������������������������������������
2015 ������������������������������������������������������������������������������������������������
2016 ������������������������������������������������������������������������������������������������
2017 ������������������������������������������������������������������������������������������������
2018 ������������������������������������������������������������������������������������������������
2019 and thereafter �������������������������������������������������������������������������

Millions of yen

Thousands of U.S. dollars (Note 1)

2013

2013
¥2,499
2,633
1,274
762
1,611
240
¥9,019$26,582
28,007
13,552
8,106
17,136
2,553$95,936

The aggregate annual maturities of lease obligations as of 31st March 2013 was as follows:
Years ending 31st March,2014 ������������������������������������������������������������������������������������������������
2015 ������������������������������������������������������������������������������������������������
2016 ������������������������������������������������������������������������������������������������
2017 ������������������������������������������������������������������������������������������������
2018 ������������������������������������������������������������������������������������������������
2019 and thereafter...........................................................................

Millions of yen

Thousands of U.S. dollars (Note 1)

2013

2013
¥ 804
668
594
499
352
442
¥3,359$ 8,552
7,106
6,318
5,308
3,744
4,702
$35,730

21

8. Pledged assets
Assets were pledged as collateral for short-term borrowings of ¥250 million ($2,659 thousand), the current portion of longterm debt of ¥358 million ($3,808 thousand) and long-term debt of ¥1,354 million ($14,403 thousand) as of 31st March 2013 andfor short-term borrowings of ¥300 million, the current portion of long-term debt of ¥336 million and long-term debt of ¥1,524
million as of 31st March 2012. The assets pledged are summarized as follows:

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

Millions of yen
2013
2012
¥ 299
¥ 485
912
958
181
11
¥1,392¥1,454

Thousands of
U.S. dollars (Note 1)2013$ 3,1819,701
1,925$14,807

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 2013 and 2012 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
2013
2012
¥24,905¥22,136(23)(30)(5,014)(3,782)(20,771)(19,347)
1,756
1,878
¥ 853
¥ 855

Thousands of
U.S. dollars (Note 1)
2013$264,919(245)(53,335)(220,944)
18,679$ 9,074

Included in the consolidated statements of operations for the years ended 31st March 2013 and 2012 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
2013
2012
¥ 920
¥ 908
425
426
(580)
(746)
7
3
351
439
¥1,123¥1,030Thousands of
U.S. dollars (Note 1)2013$ 9,786
4,521(6,169)74
3,734$11,946

The discount rate used by the Companies was 0.8% and 2.0% for the years ended 31st March 2013 and 2012, respectively.
The rate of expected return on plan assets used by the Companies was 3.0% and 4.0% for the years ended 31st March 2013 and2012,respectively.
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 38.0% and 40.7% for the years ended 31st March 2013
and 2012, respectively.
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 2013 and 2012.
2013
38.0%
(18.1)
2.1
(2.1)
4.3
(1.5)
0.5
23.2%

Statutory tax rate
Changes in valuation allowance
Non-deductible expenses, including entertainment expenses
Non-taxable income, including dividends received
Per capita inhabitants tax
Tax credit for testing and research expenses
Other
Effective tax rate

2012
40.7%
(25.2)
1.2
(3.2)
2.3
–
3.8
19.6%

Significant components of the Companies’ deferred tax assets and liabilities as of 31st March 2013 and 2012 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 property ���������������������������������������������������������
Prepaid pension cost ��������������������������������������������������������������������������
Other ��������������������������������������������������������������������������������������������������
Total deferred tax liabilities ��������������������������������������������������������������������
Net deferred tax assets ����������������������������������������������������������������������������

Millions of yen
2013
2012
¥ 154
¥ 105
417
424
283
288
1,460
1,449
867
1,603
2,023
1,999
¥5,204¥5,868(3,344)(4,015)
1,860
1,853(1,548)
(38)
(623)
(120)
(2,329)¥ (469)(1,074)
(39)
(668)
(113)
(1,894)¥ (41)

Thousands of
U.S. dollars (Note 1)2013$ 1,638
4,436
3,010
15,5309,222
21,519$55,355(35,571)
19,784(16,466)(404)(6,627)(1,276)(24,773)$ (4,989)

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 has been reduced to 38.0% for years beginning on or after 1st April 2012 and35.6% 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
23

rates, net deferred tax assets decreased by ¥137 million as of 31st March 2012, while deferred income tax recognised for the year
ended 31st March 2012 increased by ¥18 million and unrealised gains on securities increased by ¥155 million from the amounts
that would have been deported without the changes.
11. Contingent liabilities
The Company was contingently liable as a guarantor of loan obligations of a customer in the amount of ¥4 million ($43
thousand) at 31st March 2013 and ¥21 million at 31st March 2012.
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 in which a dividend distribution of surplus is made, the smaller of an amount equal to 10% of the dividend or the excess,if any, of 25% of common stock over the total of additional paid-in capital and legal earnings reserve must be set aside asadditional paid-in capital or legal earnings reserve. Legal earnings reserve is included in retained earnings in the accompanying
consolidated balance 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 March2013 and 2012 were ¥709 million ($7,542 thousand) and ¥677 million, respectively.
14. Loss on impairment of assets
The Company recorded impairment loss on certain asset groups for the year ended 31st March 2013. 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 individual asset as these represent the smallest identifiable assets
generating cash inflows. The Company records impairment loss for property, plant and equipment when the original carrying
amount is below the recoverable amount estimated based on projected future cash flows. The total impairment loss for the year
ended 31st March 2013 consisted of ¥114 million ($1,213 thousand) for land and ¥37 million ($393 thousand) for buildings andother. 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 3.0%.
The Company recorded impairment loss on certain 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 individual asset as these represent the smallest identifiable assets
generating cash inflows. The Company records impairment loss for property, plant and equipment when the original carrying
amount is below the recoverable amounts estimated based on projected future cash flows. The total impairment loss for the year
ended 31st March 2012 consisted of ¥127 million for land and ¥68 million for buildings and other. The recoverable amounts aremeasured 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. Value in use was calculated based on
estimated future cash flows and was discounted at the rate of 3.6%.

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 business performance. The Group has divided its business operations into two reportable segments
and an “Other” segment. Its reportable segments are “the Processed Food Products” segment and “the Meat Products”
segment.
② Description of the businesses that constitute each reportable segment
In the Processed Food Products segment, the Company purchases, manufactures and sells ham, sausage and cooked andprocessed foods. In the Meat Products segment, 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 are identical to those described in Note 2, “Significant Accounting
Policies.”
As described in “Changes in accounting policies that are difficult to distinguish from changes in accounting estimates,” inaccordance with the revision to the Corporation Tax Act of Japan, effective from the fiscal year ended 31st March 2013, theCompany and its domestic consolidated subsidiaries adopted a new depreciation method pursuant to the revised Corporation
Tax Act for property, plant and equipment acquired on or after April 1, 2012. Accordingly, the depreciation method used inreportable segments has been changed to the depreciation method provided by the revised Corporation Tax Act.
As a result of this change, segment income of the Processed Food Products segment was ¥170 million higher and segment
loss of the Meat Products segment was ¥6 million lower for the fiscal year ended 31st March 2013 compared with the amounts
that would have been reported in accordance with the method prior to the change.
(3) Segment information for the years ended 31st March 2013 and 2012
Segment information as of and for the fiscal year ended 31st March 2013 was as follows:
2013
Millions of yen
Reporting segments
Processed
Meat
Food 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

¥148,904–
148,904
3,222
78,250¥57,718–
57,718(84)
15,003¥206,622–
206,622
3,138
93,253

¥ 387
1,156
1,543
177
425

¥207,009
1,156
208,165
3,315
93,678

5,497

386

5,883

23

5,525

251

5,776

12

Adjustments(*2)¥

Consolidated(*3)–(1,156)(1,156)–29,170¥207,009–
207,009
3,315
122,848

5,906

–

5,906

5,788

32

5,820

25

2013
Thousands of U.S. dollars (Note 1)
Reporting segments
Processed
Meat
Food Products
Products

Sales:
Sales to third parties ��������������������� $1,583,917–
Intersegment sales and transfers ��
Net sales ��������������������������������������� 1,583,917
34,273
Segment income ���������������������������
832,358
Segment assets �����������������������������
Other items:
58,472
Depreciation and amortization �����
Increase in property, plant andequipment and intangible fixed
58,770assets �������������������������������������������

Total

Other
(*1)

Total

$613,956–
613,956(894)
159,590$2,197,873–
2,197,873
33,379991,948$ 4,116
12,297
16,413
1,883
4,520$2,201,989
12,2972,214,286
35,262996,468

4,106

62,578245

2,670

61,440128

Adjustments(*2)

Consolidated
(*3)

$

–
(12,297)(12,297)–
310,287$2,201,989–
2,201,989
35,262
1,306,755

62,823–62,82361,568340

61,908(*1) The “Other” segment is business other than that of the reporting segments and includes the insurance agency business.
(*2)	Adjustments for total assets of ¥29,170 million ($310,287 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 in the consolidated statements ofoperations.

Segment information as of and for the fiscal year ended 31st March 2012 was as follows:
2012
Millions of yen
Reporting segments
Processed
Meat
Food 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

(*1) The “Other” segment is business other than that of the reporting segments and includes the insurance agency business.
(*2)	Adjustments for total assets of ¥29,889 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 in 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,
which represents the acquisition of Marushin Food Co.,Ltd. shares.

26

(4) Information about loss on impairment of assets by reportable segment
Information about loss on impairment of assets by reportable segment as of and for the fiscal year ended 31st March 2013
was as follows:
Millions of yen
Reporting segments
Processed
Meat
Food Products
Products––
Loss on impairment of assets �������

Other

Total
–

Total
–

–

Adjustments

Consolidated

¥151

¥151

Adjustments

Consolidated$1,606$1,606

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

Other

Total
–

Total
–

–

Information about loss on impairment of assets by reportable segment as of and for the fiscal year ended 31st March 2012
was as follows:
Millions of yen
Reporting segments
Processed
Meat
Food Products
Products––
Loss on impairment of assets �������

Other

Total
–

Total
–

–

Adjustments

Consolidated

¥195

¥195

(5) Information about amortisation and balance of goodwill by reportable segment
Information about amortisation and balance of goodwill by reportable segment as of and for the fiscal year ended 31st
March 2013 was as follows:
Millions of yen
Reporting segments
Processed
Meat
Food Products
Products¥183–
Amortisation of goodwill �������������
653–
Balance of goodwill ���������������������

Total

Other

¥183
653

Total
–
–

¥183
653

Adjustments

Consolidated

–
–

¥183
653

Adjustments

Consolidated––$1,947
6,946

Thousands of U.S. dollars (Note 1)
Reporting segments
Processed
Meat
Food Products
Products$1,947–
Amortisation of goodwill �������������
6,946–
Balance of goodwill ���������������������

Total

Other

$1,947
6,946

Total
–
–

$1,947
6,946

Information about amortisation and balance of goodwill by reportable segment as of and for the fiscal year ended 31st
March 2012 was as follows:
Millions of yen
Reporting segments
Processed
Meat
Food Products
Products¥ 77–
Amortisation of goodwill �������������
836–
Balance of goodwill ���������������������

Total
¥ 77
836

Other

Total
–
–

¥ 77
836

Adjustments

Consolidated

–
–

¥ 77
836

27

(6) Information about gain on negative goodwill by reportable segment
There is nothing to report for the fiscal year ended 31st March 2013.
In the Processed Food Products segment, negative goodwill of ¥84 million was incurred as a result of the purchase of
Umeya Co., Ltd. shares for the fiscal year ended 31st March 2012.
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 2013 and 2012 was as follows.
Thousands of
U.S. dollars (Note 1)
Millions of yen
2013
2012
2013
Cash and time deposits in the consolidated balance sheets ��������������������
¥11,065¥12,482$117,700
(238)
(187)
(2,531)Time deposits maturing after three months ���������������������������������������������Cash and cash equivalents in the consolidated statements of cash flows ����
¥10,827¥12,295$115,169
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.
Millions of yen
Current assets ����������������������������������������������������������������������������������
Noncurrent assets ����������������������������������������������������������������������������
Goodwill �����������������������������������������������������������������������������������������
Current liabilities ����������������������������������������������������������������������������
Long-term liabilities ������������������������������������������������������������������������
Acquisition price of shares ��������������������������������������������������������������Cash and cash equivalents ���������������������������������������������������������������
Balance: expenditures of investments in subsidiaries ���������������������

28¥ 2,059
1,873
902
(778)
(2,250)1,806(1,333)¥ 473

17. 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 were as follows:
Thousands of
U.S. dollars (Note 1)
2013

Millions of yen
2013
2012
Unrealised gains on securities
Increase during the year ��������������������������������������������������������������������
Reclassification adjustments �������������������������������������������������������������
Amount before tax effect �������������������������������������������������������������������
Tax effect �������������������������������������������������������������������������������������������
Subtotal ���������������������������������������������������������������������������������������������
Deferred gains on hedges
Increase (decrease) during the year ���������������������������������������������������
Amount before tax effect �������������������������������������������������������������������
Tax effect �������������������������������������������������������������������������������������������
Subtotal ���������������������������������������������������������������������������������������������
Foreign currency translation adjustments
Decrease during the year �������������������������������������������������������������������
Share of other comprehensive income of associates accounted for using equity method
Increase (decrease) during the year ���������������������������������������������������
Total other comprehensive income ���������������������������������������������������������

¥1,414
(1)
1,413
(474)
939

¥515
5
520
(24)
496

$15,041(11)
15,030(5,042)
9,988

(27)

27

(287)

(27)

27

(287)

9

(10)

96

(18)

17

(191)

(27)

(15)

(287)

18

(7)

191

¥ 912

¥491

$ 9,701

18. 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 sale of processed food products such as hamburgers, meat balls, gyoza and other② 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 2011
④ Legal form of business combination
Acquisition of shares⑤ Name of the company after business combination
Marushin Foods Co., Ltd.
⑥ Ownership of voting rights acquired
100%⑦ Major reasons for determining the acquiring company
The acquisition of shares was in exchange for the Company’s cash.

29

(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(4) Amount of goodwill recognised, cause of occurrence, amortisation method and amortisation period① Amount of goodwill recognised¥902 million② Basis for the goodwill
Goodwill arose mainly from the synergy effect from the business integration of Marushin Foods into the Companies andthe expected 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(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 the computation method (unaudited)
Millions of yen
Net sales ������������������������������������������������������������������������������������������
Operating loss ���������������������������������������������������������������������������������
Net loss ��������������������������������������������������������������������������������������������

¥2,953(296)(397)(Computation method)
The above estimated amount of the impact was computed mainly by adjusting the amounts of 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.
19. Subsequent events
At the annual shareholders’ meeting held on 27th June 2013, the shareholders approved cash dividends amounting to ¥1,039
million. The appropriations have not been accrued in the consolidated financial statements as of 31st March 2013. Suchappropriations are recognised in the period in which they are approved by the shareholders. On 28th June 2013, the shareholdersof the Company authorised the payment of cash dividends to the shareholders of record as of 31st March 2013 on the shares ofstock then outstanding at the rate of ¥8.0 ($0.09) per share, or a total of ¥1,039 million ($11,052 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 at 31st March 2013 and 2012,
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.
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 at 31st March 2013 and 2012, 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 2013 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 1of the Notes to Consolidated Financial Statements.

31st July 2013
Osaka, Japan

31

DIRECTORS AND STATUTORY AUDITORS
President andRepresentative Director:

Tokuo Kudara

Directors:

Yoshio Kuramori
Hiroshi Kubota
Nobuyoshi Katoh

Senior Executive andKeiichi Katoh

Managing Director:

Toshiharu Inoue

Jiro Tsuge

Statutory Auditors:
Managing Directors:

Yasushi Sawada

Yoshikazu Sawanaka
Yasumi Shukuri
Motoaki Nishimura(As of 27th June 2013)32

OUTLINE OF THE COMPANY
Established:

10th June 1958

Major subsidiaries:
Hokkaido Marudai Food Co., Ltd.

Stated Capital:¥6,716 million

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

Number of Employees: 2,310

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,

Marudaifood Co., Ltd.

Japan

Marudai Meat Co., Ltd.
Hornmeier Co., Ltd.

Sales Offices:

The sales headquarters at the

Marudai Service Co., Ltd.

Company’s head office in Osaka

Makoto Giken Co., Ltd.

controls 11 distribution centers andPioneer Foods Co., Ltd.

6 regional sales departments which

Meat Supply Co., Ltd.

service 51 local outlets.

Azumino Food Co., Ltd.
Marudai Food (Qingdao) Co., Ltd.

Plants:Hokkaido, Iwate,

Marushin Foods Co., Ltd.

Niigata, Kanto,

16 Other subsidiaries

Ibaraki, Yokosuka, Shounan,(As of 31st March 2013)

Shizuoka, Matsusaka,
Takatsuki, Hyogo,
Okayama, Hiroshima,

Associated company:
Betagro MF Deli Co., Ltd.

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