Annual Report 2014
For the Year Ended 31st March 2014

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 2014 and 2013
(Consolidated basis)Thousands of
U.S. dollars, except
per share amounts

Millions of yen,
except per share amounts(Note)
2014

2013

2014

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

¥213,679¥207,009$2,076,973

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

1,726

2,030

16,777

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

13.29

15.63

0.13

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

–

–

–

Dividends (yen and dollars) ...............................................................

7.00

8.00

0.07

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

¥120,694¥122,848$1,173,153

Per share:

Note: U.S. dollar amounts are translated from yen for convenience only at the rate of ¥102.88 to U.S.$1.00.

1MARUDAI FOOD CO., LTD.

TO OUR SHAREHOLDERS

With the issurance of our company’s 66th 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 Marudai Food Group’s Processed Food Products
business continues to operate in a challenging
environment characterized by sharp increases in raw
materials prices in line with the weakening of the yen andintensifying sales competition. The environment for theMeat Products business also remained challenging. While

During the fiscal year ended 31st March 2014, theJapanese economy was on a recovery path as corporate

prices of beef and pork remained firm, reflecting
decreased supply, purchase prices of imported raw

earnings improved centering on export relatedcompanies, reflecting factors including the positive
impact of the Abe administration’s economic policies.
With regard to personal consumption, however, concerns

materials further rose partly because of purchases by
emerging countries.

about the reduction in disposable income attributable tothe consumption tax increase persisted and there wasproducts that satisfy the highest standards of safety andreliability by adhering to the Marudai Food Group’s

little ground for optimism concerning consumption ofdaily necessities such as foods and household goods.

policies of putting the customer first, thoroughcompliance and uncompromising commitment to safety
and quality. In parallel, we implemented a diversification

2

Under such circumstances, we strove to offer foodstrategy and initiatives to reinforce Group management
and strengthen product development capabilities.
As a result, consolidated net sales for the fiscal year
ended 31st March 2014 increased by 3.2% year on year to213,679 million yen. Nevertheless, operating income
decreased by 13.7% to 2,862 million yen, and net income
decreased by 15.0% to 1,726 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 2014

Tokuo Kudara
President

3

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 2014 and 2013:

Millions of yen(percent of total net sales)

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

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

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

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

2014

2013

¥150,193¥148,904(70.3%)(71.9%)

63,12057,718(29.5%)(27.9%)

366

387(0.2%)(0.2%)¥213,679¥207,009

2014

Note: U.S. dollar amounts are translated from yen for convenience only at the rate of ¥102.88 to U.S.$1.00.

4

Thousands of
U.S. dollars (Note)$1,459,885

613,530

3,558$2,076,973

Processed Food Products
The Ham & Sausage Products operations made vigorous efforts to expand sales of our mainstay products, such as themainstay brand “Kunseiya-Ripened Pork Sausage,” winner of the Monde Selection Grand Gold Quality Award in the foodproducts category for the fifth time in 2013. We also conducted sales promotion campaigns, including a campaign to support theJapanese team for the Sochi 2014 Winter Olympic Games, to revitalize sales. For midsummer and year-end gift products, weenriched the line-up by introducing new products centering on our mainstay series, namely “Ouha” and “Kousai.” As a result,sales of the Ham & Sausage Products operations increased by 2.0% year on year.
In the Precooked & Processed Foods operations, sales of the “Sundubu” series of Korean-style soup mixes were robust, thanks
to the enriched line-up with the addition of “Gomatonyu (sesame & soymilk) Sundubu.” We strove to expand sales through theintroduction of new products, including the “Bistro Club Beef Curry” series, offering rich flavour with a unique blend of 51 kindsof spice and “Utsunomiya Yakigyoza,” dry-fried dumplings that can be served just by heating them up in a microwave oven. With
regard to the “SWEET CAFE” mainstay series of desserts, our sales promotion efforts included the adoption of special package
designs for limited periods on seasonal themes. However, sales of the Precooked & Processed Foods operations decreased by
0.8% year on year due mainly to weaker sales of products sold at convenience stores.
As a result, sales in the Processed Food Products segment amounted to 150,193 million yen, up 0.9% year on year. Operating
income, however, decreased by 19.3% to 2,600 million yen, owing to sharp increases in raw materials and fuel prices andintensified sales competition.
Meat Products
Sales of pork rose as a result of our efforts to expand sales of Japanese pork, but business conditions were challenging as
procurement costs rose in response to increases in prices due to decreases in supply. Sales of beef were robust as a result of ourefforts to expand sales of Japanese beef and U.S. beef amidst market recovery, as indicated by a moderate increase in selling
prices. As a result, sales in the Meat Products segment increased by 9.4% year on year to 63,120 million yen and operating
income amounted to 62 million yen.
Other
Sales of the Other business decreased by 5.5% year on year to 366 million yen, but operating income increased by 13.2% to
200 million yen.

5

MARUDAI FOOD CO., LTD.

CONSOLIDATED BALANCE SHEETS
31st March 2014 and 2013

Millions of yen

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

2014

2013

¥ 14,898¥ 11,065$ 144,809

23,146348(62)
13,662
1,124
450

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

224,9813,383(603)
132,795
10,925
4,375

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

53,566

52,696520,665

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

40
10,984
79
5,291
(396)

100
10,733
69
7,570
(408)

389
106,765768
51,428(3,849)Total investments and other assets ................................................

15,99818,064

155,501

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

18,74847,44953,9186,450
691
127,256(77,416)
49,8401,290

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

182,232
461,207524,086
62,694
6,717
1,236,936(752,488)
484,448
12,539Total assets .........................................................................................

¥120,694¥122,848$1,173,153

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) ...................................................
Lease assets ........................................................................................
Construction in progress ....................................................................

See accompanying Notes to Consolidated Financial Statements.

6

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

LIABILITIES AND NET ASSETS

Millions of yen
2014
2013

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

¥ 19,547
7,276
2,990
778
2,217
1,045
6,169
40,022¥ 19,908
7,861
2,499
804
2,207
304
7,019
40,602$ 189,998
70,72329,063
7,562
21,54910,15759,964
389,016Long-term liabilities:
Long-term debt due after one year (Notes 3, 7 and 8) ����������������������
Long-term lease obligations (Notes 3 and 7) ������������������������������������
Deferred tax liabilities (Note 10) ������������������������������������������������������
Employees’ severance and retirement benefits (Note 9) �������������������
Liabilities for retirement benefits (Note 9) ����������������������������������������
Other long-term liabilities �����������������������������������������������������������������
Total long-term liabilities ������������������������������������������������������������

4,972
2,604
1,035
–
3,018
466
12,095

6,520
2,555
1,685
853
–
521
12,134

48,32825,311
10,060–29,335
4,530
117,564

NET ASSETS (Note 12)
Shareholders’ equity:
Common stock
Authorised — 200,000,000 shares
Issued — 132,527,909 shares in 2014 (132,527,909 shares in 2013) �����
Capital surplus �����������������������������������������������������������������������������������
Retained earnings ������������������������������������������������������������������������������
Less treasury stock at cost �����������������������������������������������������������������
Total shareholders’ equity �����������������������������������������������������������

6,716
21,686
38,719(705)
66,416

6,716
21,68638,032(698)
65,73665,280210,790376,351(6,853)645,568

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

3,418
1
(106)
(2,737)
576

2,940
0
(124)
–
2,816

33,22310(1,030)(26,604)
5,599

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

1,585
68,577¥120,694

1,560
70,112¥122,848

15,406
666,573$1,173,153

Contingent liabilities (Note 11)

7

MARUDAI FOOD CO., LTD.

CONSOLIDATED STATEMENTS OF INCOME
Years Ended 31st March 2014 and 2013

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

Millions of yen
2014
2013
¥213,679¥207,009
163,988
156,541

Thousands of
U.S. dollars (Note 1)
2014$2,076,973
1,593,973

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

49,691
46,82950,46847,153

483,000
455,181

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

2,862

3,315

27,819

308
(274)
461
(59)
(182)
(248)
172

304
(319)
(22)
(271)
(207)
(151)
57

2,994
(2,663)
4,481(573)(1,769)(2,411)
1,671

178

(609)

1,730

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

3,040

2,706

29,549

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

1,137
128
1,775
(49)

663
(36)
2,079
(49)

11,052
1,244
17,253(476)

Other income (expenses):
Interest and dividend income ������������������������������������������������������������
Interest expense ���������������������������������������������������������������������������������
Gain (loss) on sale of securities, net ��������������������������������������������������
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 ���������������������������������������������������������������������������������������������

¥

1,726

¥

2,030

$

16,777

U.S. dollars (Note 1)

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

¥13.29¥15.63$0.13

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

–

–

–

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

¥ 7.00¥ 8.00$0.07

See accompanying Notes to Consolidated Financial Statements.

8

MARUDAI FOOD CO., LTD.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Years Ended 31st March 2014 and 2013

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
2014
2013
¥1,775¥2,079Thousands of
U.S. dollars (Note 1)
2014$17,253

478
0
5
13
496
¥2,271

939
(18)
(27)
18
912
¥2,991

4,646
0
49
126
4,821
$22,074¥2,222¥ 49¥2,942¥ 49$21,598$ 476

See accompanying Notes to Consolidated Financial Statements.

9

MARUDAI FOOD CO., LTD.

CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS
Years Ended 31st March 2014 and 2013

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

Millions of yen
2014
2013
Common stock:
Balance at beginning and end of the year �����������������������������������������

¥ 6,716¥ 6,716$ 65,280

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

¥21,686¥21,686$210,790

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

¥38,032(1,039)1,726¥38,719¥37,171(1,169)2,030¥38,032$369,673(10,099)
16,777$376,351

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

¥ (698)(7)¥ (705)¥ (698)(0)¥ (698)$ (6,785)(68)$ (6,853)

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

¥ 2,940478¥ 3,418¥ 2,001939¥ 2,940$ 28,577
4,646$ 33,223¥¥$

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

¥

0
1
1

¥

18
(18)
0

$

0
10
10

Foreign currency translation adjustments:
Balance at beginning of the year �������������������������������������������������������
Increase (decrease) for the year ���������������������������������������������������������
Balance at end of the year �����������������������������������������������������������������

¥ (124)18¥ (106)¥ (114)(10)¥ (124)$ (1,205)175$ (1,030)

Adjustments for retirement benefit:
Balance at beginning of the year �������������������������������������������������������
Decrease for the year �������������������������������������������������������������������������
Balance at end of the year �����������������������������������������������������������������

–¥ (2,737)¥ (2,737)––––$ (26,604)$ (26,604)

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

¥ 1,56025¥ 1,585¥ 1,52931¥ 1,560$ 15,163243$ 15,406

See accompanying Notes to Consolidated Financial Statements.

10

MARUDAI FOOD CO., LTD.

CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended 31st March 2014 and 2013

Millions of yen
2014
2013

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

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

¥ 3,040
5,609
248
(11)
903
(668)
(308)
274
(461)
11
59
1,860
809
(471)
204
(117)
10,981
308
(275)
(338)
10,676¥ 2,706
5,906
151
(17)
120
–
(304)
319
22
–
271
238
(536)
94
(191)
(496)
8,283
323
(318)
(537)
7,751

$ 29,549
54,520
2,411
(107)
8,777
(6,493)(2,994)2,663(4,481)
107573
18,0797,864(4,578)
1,983(1,137)
106,736
2,994(2,673)(3,286)
103,771

Cash 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 �����������������������
Other, net �������������������������������������������������������������������������������������������
Net cash used in investing activities ��������������������������������������������

(30)
884
(4,718)771
57(3,036)(38)
20(5,659)300(149)(5,526)

(292)
8,593
(45,859)7,494
554(29,510)

(634)
1,459
(2,516)(818)(1,039)(25)(3,573)

(610)
3,695
(4,543)(1,045)(1,169)(20)(3,692)(6,163)
14,182(24,456)(7,951)(10,099)(243)(34,730)

4
4,071
10,827¥14,898(1)(1,468)12,295¥10,827

39
39,570105,239$144,809

Cash flows from financing activities:
Net 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 increase (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 2014 and 2013

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 2014, which was ¥102.88 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 33 subsidiaries.
Consolidated subsidiary Miyazaki Kogen Farm Co., Ltd. was excluded from the scope of consolidation as its liquidation wascompleted during the fiscal year ended 31st March 2014. As a result, the number of consolidated subsidiaries decreased by one.
Thirty-two 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 evaluatedusing the fair value at the time the Company acquired control of the respective subsidiary. The difference between the cost of aninvestment 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 substantially controlled by the Company. Betagro MF Deli Co., Ltd. is being
included in the scope of 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 shareholders’ 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.
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

12

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 1st April 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 5 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 shareholders’ equity accounts, which are translated at historical rates.
Accounting for Retirement Benefits - Projected benefit obligations are attributed to periods on a straight-line basis indetermining retirement benefit obligations. Prior service costs are amortized by the straight-line method over a fixed period of 5
years, which is the average remaining service years of the eligible employees beginning in the fiscal year in which the priorservice costs are recognised. Actuarial gains and losses are amortized by the straight-line method over a fixed period of 10 years,
which is the average remaining service years of the eligible employees beginning in the fiscal year following the year in which thegains and losses are recognised. In determining the amount of retirement benefit obligations and retirement benefit costs, somesmall sized consolidated subsidiaries have adopted a simplified method where the amount that would be required if all theemployees retired voluntarily at the fiscal year end is treated as retirement benefit obligations.
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.

13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 2014 and 2013.
Accounting changes
Accounting Standard for Retirement Benefits - Effective 31st March 2014, the Company applied Accounting Standard for
Retirement Benefits (ASBJ Statement No. 26, revised on 17th May 2012; hereinafter “Retirement Benefits Standard”) and
Guidance on Accounting Standard for Retirement Benefits (ASBJ Guidance No. 25, revised on 17th May 2012; hereinafter“Retirement Benefits Guidance”), except for the provisions stated in Paragraph 35 of Retirement Benefits Standard and Paragraph
67 of Retirement Benefits Guidance, and recorded retirement benefit obligations, net of pension assets, as “Liabilities for
employees’ retirement benefits” and included unrecognised actuarial gains and losses and unrecognised prior service costs in“Liabilities for retirement benefits.” Pursuant to the transitional treatment prescribed in Paragraph 37 of Retirement Benefits
Standard, the Company added the effects from the changes to “Accumulated adjustments for retirement benefits” underaccumulated other comprehensive income. As a result, the Company recorded liabilities for retirement benefits of ¥3,018 million($29,335 thousand). In addition, accumulated other comprehensive income was ¥2,737 million ($26,604 thousand) less at 31st
March 2014 and net assets per share ¥21.07 ($0.20) less than the amounts that would have been reported without the changes.
Accounting standards and relevant regulations that have not yet been 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
The accounting standard for retirement benefits and guidance on accounting standard for retirement benefits were revised,
mainly focusing on (a) how unrecognized actuarial gains and losses and unrecognized prior service costs should be accounted
for, (b) how retirement benefit obligations and service costs should be accounted for, (c) how retirement benefit obligations
and service costs should be calculated and (d) enhancement of disclosures.
(2) Effective dates
The amendments related to the methods used to determine retirement benefit obligations and service costs will be adopted
from 1st April 2014.
(3) Effects of application of the revised standard
The effects of applying the revised accounting standard on the consolidated financial statements for the fiscal year ending
31st March 2015 are expected to be immaterial.
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 does not engage 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.

14

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 division’s 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.
(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 2014. However, financial instruments whose fair values were deemed difficult to determine are notincluded in the table (Refer below to (※2)).
Millions of yen
Thousands of U.S. dollars (Note 1)
Consolidated Fair value
Difference
Consolidated Fair value
Difference
balance sheet
balance sheet
amounts
amounts
Cash
and
time
deposits¥14,898¥14,898¥–$144,809$144,809$ –①
23,14623,146–
224,981
224,981–② Trade notes and accounts receivable③ Investment securities
Available-for-sale securities
10,923
10,923–
106,172
106,172–
19,547
19,547–
189,998
189,998–④ Trade notes and accounts payable
7,276
7,276
–
70,72370,723–⑤ Short-term borrowings
7,962
7,935
(27)
77,391
77,129(262)⑥ Long-term debt
3,382
3,475
93
32,873
33,777904⑦ Lease obligations
1
1
–
10
10
–
⑧ Derivatives (*)(*) 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.

15

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.
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

Millions of yen
Consolidated balance sheet amounts¥ 6
55

Thousands of U.S. dollars (Note 1)
Consolidated balance sheet amounts
$ 58
535

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 dateCash and time deposits
Trade notes and accounts receivable
Investment securities
Available-for-sale securities withmaturity dates (bonds)
Total

Millions of yen
Within one Over one year Over five
but within
years
year
five years¥14,898––
23,146––

6¥38,050––––

Thousands of U.S. dollars (Note 1)
Within one Over one year Over fiveyear
but within
years
five years$144,809––
224,981––58$369,848––––(※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.”

16

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 (Refer below to (※2)).
Millions of yen
Consolidated Fair value
Difference
balance sheet
amounts¥11,065¥11,065¥ –① Cash and time deposits
Trade
notes
and
accounts
receivable
24,99524,995–②③ Investment securities
Available-for-sale securities
10,66910,669–19,90819,908–④ Trade notes and accounts payable
7,861
7,861
–
⑤ Short-term borrowings
Long-term
debt
9,019
8,967
(52)
⑥
3,359
3,440
81
⑦ Lease obligations
1
1–⑧ Derivatives (*)(*) 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.
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

Millions of yen
Consolidated balance sheet amounts¥ 6
58

Since no market prices were available for the above financial instruments and their fair values were difficult to determine byan 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 date17

Cash and time deposits
Trade notes and accounts receivable
Investment securities
Available-for-sale securities withmaturity dates (bonds)
Total

Millions of yen
Within one Over one year Over five
but within
years
year
five years¥11,065¥––
24,995–––¥36,0606¥6––(※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 2014 and 2013.
Securities with book values
exceeding historical cost:

Millions of yen
2014

Historicalcost
Equity securities ������������������� ¥4,518–
Bonds �����������������������������������
–Others �����������������������������������
Total ...................................... ¥4,518

Book
value
¥9,900––¥9,900

Securities with book values
not exceeding historical cost:2014

Historicalcost
Equity securities ������������������� ¥1,264–
Bonds �����������������������������������
–Others �����������������������������������
Total ������������������������������������� ¥1,264

Book
value
¥1,023––¥1,023Type

Type

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

Gain
¥5,382––¥5,382

Historicalcost¥4,827––¥4,827Book
value¥9,610––¥9,6102014
Proceeds¥884

Gain¥4,783––¥4,783

Historicalcost$43,915––$43,915

Loss¥(241)––¥(241)

Historicalcost¥1,356––¥1,356Book
value¥1,059––¥1,059Proceeds¥20

Gain$52,314––$52,3142014
Loss¥(297)––¥(297)

Historicalcost$12,286––$12,286Book
value$9,943––$9,943Loss$(2,343)––$(2,343)

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

Losseson sales
–

Book
value
$96,229––$96,229

2013

Available-for-sale securities sold during the year:
Millions of yen
Gainson sales
¥461

2014

Gains
on sales¥1

2014
Losseson sales¥(23)

Proceeds$8,593Gains
on sales$4,481

Losseson sales–The Group recognized impairment loss on investment securities categorised as other securities with market value in theamount of ¥11 million ($107 thousand) for the year ended 31st March 2014.
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.

18

5. Derivative financial instruments and hedging transactions
Derivative financial instruments and hedging transactions at 31st March 2014 were as follows:(1) Currency related
Millions of yen Thousands of U.S. dollars (Note 1)
Hedge accounting
methodAlternative method

Transaction 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

¥468

–

(※) ¥1$4,549

–

$10

¥468

–

¥1

$4,549–$10※ 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

Transaction 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

¥3,808¥2,958(※) –$37,014$28,752–¥3,808¥2,958–$37,014$28,752–※ 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 2013 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

¥226

–

(※) ¥1

¥226

–

¥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
methodSpecial treatment

Transaction typeInterest rate swaps
Pay fixed,
receive floating
Total

Major hedged Contract
items
amounts
Long-termdebt

Due overone year

Fair
value

¥4,231¥3,760(※) –¥4,231¥3,760–19

※ 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.
6. Inventories
Inventories at 31st March 2014 and 2013 consisted of the following:Thousands of
U.S. dollars (Note 1)

Millions of yen
Finished goods and merchandise ������������������������������������������������������������
Work in progress �������������������������������������������������������������������������������������
Raw materials and supplies ���������������������������������������������������������������������

2014

2013

2014

¥ 7,469773
5,420¥13,662¥ 7,045743
6,657¥14,445$ 72,599
7,513
52,683$132,795

7. Short-term borrowings, long-term debt and lease obligations
Short-term borrowing at 31st March 2014 and 2013 consisted of short-term notes, which generally mature within one year,with average interest rates of 0.64% and 0.63%, respectively.
Long-term debt at 31st March 2014 and 2013 consisted of the following:
Millions of yen
2014
2013
Loans from banks, insurance companies and otherfinancial institution, 0.75% to 1.75% maturing through 2023
Secured ����������������������������������������������������������������������������������������������������
Unsecured �����������������������������������������������������������������������������������������������
Less current portion ��������������������������������������������������������������������������������

¥ 1,462
6,500
7,962(2,990)¥ 4,972

Thousands of
U.S. dollars (Note 1)2014¥ 1,7127,307
9,019(2,499)¥ 6,520$ 14,211
63,18077,391(29,063)$ 48,328

The aggregate annual maturities of long-term debt as of 31st March 2014 was as follows:
Years ending 31st March,2015 ������������������������������������������������������������������������������������������������
2016 ������������������������������������������������������������������������������������������������
2017 ������������������������������������������������������������������������������������������������
2018 ������������������������������������������������������������������������������������������������
2019 ������������������������������������������������������������������������������������������������
2020 and thereafter �������������������������������������������������������������������������

20

Millions of yen

Thousands of U.S. dollars (Note 1)

2014

2014
¥2,990
1,636
1,151
1,766
302
117
¥7,962$29,063
15,902
11,18817,1662,935
1,137$77,391

The aggregate annual maturities of lease obligations as of 31st March 2014 was as follows:
Years ending 31st March,2015 ������������������������������������������������������������������������������������������������
2016 ������������������������������������������������������������������������������������������������
2017 ������������������������������������������������������������������������������������������������
2018 ������������������������������������������������������������������������������������������������
2019 ������������������������������������������������������������������������������������������������
2020 and thereafter ..........................................................................

Millions of yen

Thousands of U.S. dollars (Note 1)

2014

2014
¥

778
708
618
616
333
329
¥3,382$ 7,562
6,882
6,007
5,987
3,237
3,198
$32,873

8. Pledged assets
Assets were pledged as collateral for short-term borrowings of ¥300 million ($2,916 thousand), the current portion of longterm debt of ¥369 million ($3,587 thousand) and long-term debt of ¥1,093 million ($10,624 thousand) as of 31st March 2014 andfor short-term borrowings of ¥250 million, the current portion of long-term debt of ¥358 million and long-term debt of ¥1,354
million as of 31st March 2013. The assets pledged are summarized as follows:

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

Millions of yen
2014
2013
¥ 488
¥ 299
965
912
143
181
¥1,596¥1,392Thousands of
U.S. dollars (Note 1)2014$ 4,743
9,380
1,390$15,513

9. Retirement benefits(1) Outline of retirement benefit plans adopted
The Companies have established defined benefit plans (fund type), lump-sum payment plans and defined contribution plans(prepayment of benefits can be selected). In some cases, additional severance benefits may be paid to the employees uponretirement.
(2) Defined Benefit Obligation① The changes in retirement benefit obligation for the fiscal year ended 31st March 2014 (excluding those for which thesimplified method was applied) were as follows:

Beginning balance of retirement benefit obligation ������������������������
Service costs-benefits earned during the year ���������������������������������
Interest cost on projected benefit obligation �����������������������������������
Actuarial gains and losses ���������������������������������������������������������������
Retirement benefits paid �����������������������������������������������������������������
Ending balance of retirement benefit obligation �����������������������������

Millions of yen

Thousands of U.S. dollars (Note 1)

2014

2014
¥23,988
825
192
(47)
(1,469)¥23,489$233,165
8,019
1,867
(457)
(14,279)$228,31521

② The changes in plan assets for the fiscal year ended 31st March 2014 (excluding those for which the simplified method wasapplied) were as follows:
Millions of yen

Thousands of U.S. dollars (Note 1)

2014

2014

Beginning balance of plan assets ����������������������������������������������������
Expected return on plan assets ��������������������������������������������������������
Actuarial gains and losses ���������������������������������������������������������������
Contribution from the employer �����������������������������������������������������
Retirement benefits paid �����������������������������������������������������������������
Ending balance of plan assets ���������������������������������������������������������

¥20,771623
692
567(1,267)¥21,386$201,896
6,056
6,726
5,511
(12,315)$207,874③ The changes in liabilities for retirement benefits of the plans for which the simplified method was applied for the fiscal year
ended 31st March 2014 were as follows:
Millions of yen

Thousands of U.S. dollars (Note 1)

2014

2014

Beginning balance of liabilities for retirement benefits ������������������
Retirement benefit expenses �����������������������������������������������������������
Retirement benefits paid �����������������������������������������������������������������
Ending balance of liabilities for retirement benefits �����������������������

¥ 918
106
(109)
¥ 915

$ 8,923
1,030(1,059)$ 8,894④ Reconciliation between the ending balance of projected benefit obligation and plan assets and liability and asset for
retirement benefits recorded in the consolidated balance sheet

Funded retirement benefit obligation ����������������������������������������������
Plan assets ���������������������������������������������������������������������������������������
Unfunded retirement benefit obligation ������������������������������������������
Net liability (asset) for retirement benefits recordedin the consolidated balance sheet ���������������������������������������������������
Liabilities for retirement benefits�����������������������������������������������������
Net liability (asset) for retirement benefits recordedin the consolidated balance sheet ���������������������������������������������������
Note: The plans to which the simplified method is applied are included

22

Millions of yen

Thousands of U.S. dollars (Note 1)

2014

2014
¥23,489(21,386)
2,103
915$228,315(207,874)
20,441
8,894

3,018
3,018

29,33529,335¥ 3,018$ 29,335

⑤ The components of retirement benefit expenses were as follows:
Millions of yen

Thousands of U.S. dollars (Note 1)

2014

2014

Service costs-benefits earned during the year ���������������������������������
Interest cost on projected benefit obligation �����������������������������������
Expected return on plan assets ��������������������������������������������������������
Amortisation of actuarial differences ����������������������������������������������
Amortisation of prior service costs �������������������������������������������������
Retirement benefit expenses calculated using the simplified method ���Retirement benefit expenses on defined benefit plans ��������������������

¥ 823
192
(623)
607
7
97
¥1,103$ 8,000
1,866(6,056)
5,900
68
943
$10,721

Note: In addition to the above retirement benefit expenses, additional severance benefits of ¥182 million ($1,769 thousand) were
paid and recorded under other expenses.
⑥ Accumulated adjustments for retirement benefits
The components of accumulated adjustments for retirement benefits (before tax effect) were as follows:
Millions of yen

Thousands of U.S. dollars (Note 1)

2014

2014

Unrecognised prior service costs ����������������������������������������������������
Unrecognised actuarial gains and losses �����������������������������������������
Total ������������������������������������������������������������������������������������������������

¥ 17
3,668
¥3,685$ 165
35,653$35,818⑦ Plan assets
The components of plan assets were as follows:2014
Debt securities ���������������������������������������������������������������������������������
Equity securities ������������������������������������������������������������������������������
Alternatives �������������������������������������������������������������������������������������
Short-term assets �����������������������������������������������������������������������������
General account ������������������������������������������������������������������������������
Total ������������������������������������������������������������������������������������������������

37.9%
26.8
19.6
8.7
7.0
100.0%

Method of determining long-term expected rate of return
The long-term expected rate of return on plan assets is determined by taking into consideration allocation of plan assets
which are expected currently and in the future and the long-term rates of return which are expected currently and in the
future from the various components of the plan assets.
⑧ Assumptions used for actuarial calculation for the fiscal year ended 31st March 2014 were as follows:
Discount rate: 0.8%
Long-term expected rate of return: 3.0%
(3) Define Contribution Plans
The amount of required contribution to the defined contribution plans of the Companies was ¥48 million ($467 thousand) for
the year ended 31st March 2014. The amount of prepayment of severance benefits paid to the employees of the Companies was¥28 million ($272 thousand) for the year ended 31st March 2014.

23

The liabilities for severance and retirement benefits included in the liability section of the consolidated balance sheets as of
31st March 2013 consisted of the following:
Millions of yen
2013
Projected benefit obligation ������������������������������������������������������������
Unrecognised prior service costs ����������������������������������������������������
Unrecognised actuarial differences �������������������������������������������������
Fair value of pension assets ������������������������������������������������������������
Prepaid pension cost �����������������������������������������������������������������������

¥24,905(23)(5,014)(20,771)
1,756
¥ 853

Included in the consolidated statements of operations for the year ended 31st March 2013 were severance and retirement
benefit expenses comprising the following:
Millions of yen
2013
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 ����������������������������������������������

¥ 920
425
(580)
7
351
¥1,123The discount rate used by the Companies was 0.8% for the year ended 31st March 2013. The rate of expected return on plan
assets used by the Companies was 3.0% for the year ended 31st March 2013.
The losses on early retirement benefits shown separately in the consolidated statements of income were not included above.
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% for the years ended 31st March 2014 and 2013,
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 2014 and 2013.
Statutory tax rate
Non-deductible expenses, including entertainment expenses
Non-taxable income, including dividends received
Per capita inhabitants tax
Changes in valuation allowance
Tax credit for testing and research expenses
Adjustments of deferred tax assets and liabilities due to a change in the corporate income tax rate
Other
Effective tax rate

24

2014
38.0%
2.1
(1.7)
3.9
(0.5)
(1.5)
1.7
(0.4)
41.6%

2013
38.0%
2.1
(2.1)
4.3
(18.1)
(1.5)
–
0.5
23.2%

Significant components of the Companies’ deferred tax assets and liabilities as of 31st March 2014 and 2013 were as follows:

Deferred tax assets:
Excess allowance for doubtful accounts �������������������������������������������
Accrued bonuses �������������������������������������������������������������������������������
Employees’ severance and retirement benefits ���������������������������������
Liabilities for 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
2014
2013
¥ 157
¥ 154
375
417
–
283
1,235
–
1,355
1,460
684
867
2,000
2,023
¥5,806¥5,204(3,193)(3,344)2,613
1,860(1,725)
(38)
(545)
(137)
(2,445)¥ 168(1,548)
(38)
(623)
(120)
(2,329)¥ (469)Thousands of
U.S. dollars (Note 1)2014$ 1,526
3,645–
12,004
13,171
6,649
19,439$56,434(31,036)
25,398(16,767)(369)(5,297)(1,332)(23,765)$ 1,633

Adjustments of deferred tax assets and liabilities due to a change in the corporate income tax rate:
The “Partial Amendments to Income Tax Act, etc.” (Act No. 10 of 2014), “Partial Amendments to Local Tax Act, etc.” (ActNo. 4 of 2014) and “Local Corporate Tax Act” (Act No. 11 of 2014) promulgated on 31st March 2014 will repeal the Special
Recovery Tax from fiscal years beginning on or after 1st April 2014. As a result, the statutory tax rate to be used for computing
deferred tax assets and liabilities has been reduced from 38.0% to 35.6% for the temporary differences estimated to be expired in
the fiscal years beginning on or after 1st April 2014. As a result, deferred tax assets, net of deferred tax liabilities, decreased by¥16 million ($156 thousand), and accumulated adjustments for retirement benefits and deferred income taxes increased by ¥36
million ($350 thousand) and ¥52 million ($505 thousand), respectively.
11. Contingent liabilities
The Company was contingently liable as a guarantor of loan obligations of a customer in the amount of ¥4 million at 31st
March 2013.
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.

25

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 March2014 and 2013 were ¥688 million ($6,687 thousand) and ¥709 million, respectively.
14. Loss on impairment of assets
The Company recorded impairment loss on certain asset groups for the year ended 31st March 2014. The Company classified
fixed assets into three categories: 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 isbelow the estimated recoverable amount based on projected future cash flows. The total impairment loss for the year ended 31st
March 2014 consisted of ¥131 million ($1,274 thousand) for land and ¥117 million ($1,137 thousand) for buildings and other.
The recoverable amounts are measured by 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 wascalculated based on estimated future cash flows and was discounted at the rate of 2.8%.
The Company recorded impairment loss on certain asset groups for the year ended 31st March 2013. The Company classified
fixed assets into three categories: 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 isbelow the estimated recoverable amount based on projected future cash flows. The total impairment loss for the year ended 31st
March 2013 consisted of ¥114 million for land and ¥37 million for buildings and other. The recoverable amounts are measured byvalue 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%.
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.”26

(3) Segment information for the years ended 31st March 2014 and 2013
Segment information as of and for the fiscal year ended 31st March 2014 was as follows:
2014
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

¥150,193–
150,193
2,600
71,938¥63,120–
63,12062
15,839¥213,313–
213,313
2,662
87,777

¥ 366
1,058
1,424
200
418

¥213,679
1,058
214,737
2,862
88,195

5,247

343

5,590

19

4,877

156

5,033

17

Adjustments(*2)¥

Consolidated(*3)–(1,058)(1,058)–32,499¥213,679–
213,679
2,862
120,694

5,609

–

5,609

5,050

8

5,058

Adjustments(*2)

Consolidated
(*3)

$

–
(10,284)(10,284)–
315,892$2,076,973–
2,076,973
27,8191,173,153

2014
Thousands of U.S. dollars (Note 1)
Reporting segments
Processed
Meat
Food Products
Products

Sales:
Sales to third parties ��������������������� $1,459,885–
Intersegment sales and transfers ��
Net sales ��������������������������������������� 1,459,885
25,272
Segment income ���������������������������
699,242
Segment assets �����������������������������
Other items:
51,001
Depreciation and amortization �����
Increase in property, plant andequipment and intangible fixed
47,405assets �������������������������������������������

Total

Other
(*1)

Total

$613,530–
613,530
603
153,956$2,073,415–
2,073,415
25,875853,198$ 3,558
10,284
13,842
1,944
4,063$2,076,973
10,2842,087,257
27,819857,261

3,334

54,335

185

54,520–54,5201,516

48,921

165

49,08678

49,164(*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 ¥32,499 million ($315,892 thousand) indicate assets not attributed to any other segments and comprisemainly 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.

27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

Adjustments(*2)¥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

¥

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

(*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 indicate assets not attributed to any other segments and comprise mainly cash anddeposits, 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) Information about loss on impairment of assets by reportable segment
Information about loss on impairment of assets by reportable segments as of and for the fiscal year ended 31st March 2014
was as follows:
Millions of yen
Reporting segments
Processed
Meat
Food Products
Products

Loss on impairment of assets �������

¥62

–

Other

Total
¥62

Total
–

¥62

Adjustments

Consolidated

¥186

¥248

Adjustments

Consolidated$1,808$2,411Thousands of U.S. dollars (Note 1)
Reporting segments
Processed
Meat
Food Products
Products$603–
Loss on impairment of assets �������

Other

Total
$603

Total
–

$603

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 �������

28

Other

Total
–

Total
–

–

Adjustments

Consolidated

¥151

¥151

(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 2014 was as follows:
Millions of yen
Reporting segments
Processed
Meat
Food Products
Products¥183–
Amortisation of goodwill �������������
470–
Balance of goodwill ���������������������

Total

Other

¥183
470

Total
–
–

¥183
470

Adjustments

Consolidated

–
–

¥183
470

Adjustments

Consolidated––$1,7794,568

Thousands of U.S. dollars (Note 1)
Reporting segments
Processed
Meat
Food Products
Products$1,779–Amortisation of goodwill �������������
4,568–
Balance of goodwill ���������������������

Total

Other

$1,779
4,568

Total
–
–

$1,7794,568

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

Amortisation of goodwill �������������
Balance of goodwill ���������������������

Total

Other

Total

Adjustments

Consolidated

¥183

–

¥183

–

¥183

–

¥183

653

–

653

–

653

–

653

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 2014 and 2013 was as follows.
Thousands ofMillions of yen
U.S. dollars (Note 1)
2014
2013
2014
Cash and time deposits in the consolidated balance sheets ��������������������
¥14,898¥ 11,065$144,809–(238)–
Time deposits maturing after three months ���������������������������������������������Cash and cash equivalents in the consolidated statements of cash flows ����
¥14,898¥10,827$144,80929

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)
2014

Millions of yen
2014
2013
Unrealised gains on securities
Increase during the year ��������������������������������������������������������������������
Reclassification adjustments �������������������������������������������������������������
Amount before tax effect �������������������������������������������������������������������
Tax effect �������������������������������������������������������������������������������������������
Subtotal ���������������������������������������������������������������������������������������������
Deferred gains (losses) on hedges
Increase (decrease) during the year ���������������������������������������������������
Amount before tax effect �������������������������������������������������������������������
Tax effect �������������������������������������������������������������������������������������������
Subtotal ���������������������������������������������������������������������������������������������
Foreign currency translation adjustments
Increase (decrease) during the year ���������������������������������������������������
Share of other comprehensive income of associates accounted for using equity method
Increase during the year ��������������������������������������������������������������������
Total other comprehensive income ���������������������������������������������������������

30¥1,105
(450)
655
(177)
478

¥1,414
(1)
1,413
(474)
939

$10,740(4,374)
6,366(1,720)
4,646

0
0
(0)
0

(27)
(27)
9
(18)

0
0
(0)
0

5

(27)

49

13
¥ 496

18
¥ 912

126
$ 4,821

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 2014 and 2013,
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 2014 and 2013,
and their 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 2014 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.

31st July 2014
Osaka, Japan

31

DIRECTORS AND STATUTORY AUDITORS
President andRepresentative Director:

Tokuo Kudara

Senior Executive andManaging Director:

Keiichi Katoh

Managing Directors:

Yoshio Kuramori
Yasushi Sawada

Directors:

Nobuyoshi Katoh
Shigeyoshi Chiba
Wataru Fukiage
Jiro Tsuge

Statutory Auditors:

Yoshikazu Sawanaka
Yasumi Shukuri
Motoaki Nishimura(As of 27th June 2014)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: 2,185

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,

Toda Foods Co., Ltd.

Japan

Marushin Foods Co., Ltd.
Azumino Food Co., Ltd.

Sales Offices:

The sales headquarters at thePioneer Foods Co., Ltd.

Company’s head office in Osaka

Umeya Co., Ltd.

controls 10 distribution centers andHornmeier Co., Ltd.

6 regional sales departments which

Marudaifood Co., Ltd.

service 50 local outlets.

Marudai Meat Co., Ltd.
Meat Supply Co., Ltd.

Plants:Hokkaido, Iwate,

Marbest Trading Co., Ltd.

Niigata, Kanto,

Marudai Service Co., Ltd.

Ibaraki, Yokosuka, Shounan,

Marudai Food (Qingdao) Co., Ltd.

Shizuoka, Matsusaka,

13 Other subsidiaries

Takatsuki, Hyogo,(As of 31st March 2014)

Okayama, Hiroshima,
Karatsu

Associated company:
Betagro MF Deli Co., Ltd.

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