Breakthroughsfor the Future
Annual Report 2015
Year ended March 31, 2015

Profile

In the 100-plus years since its founding in Japan in 1906, Bando Chemical Industries, Ltd. has
been pursuing industrial development by making various contributions to rubber and plastic
processing technologies in such areas as power transmission belts and systems, belts used inprecision equipment, and multimedia parts made from urethane and resins.
We are highly regarded by customers throughout the world owing to our efforts to develop newtechnologies and products that meet today’s needs while manufacturing and stably supplying
people- and environmentally-friendly products of unsurpassed performance and quality.
Possessing an unwavering spirit spanning back to our foundation, we will create a brighter
future through the ceaseless innovation of our business.

Management Philosophy

With a spirit of harmony and in good faith,
and to ensure the company’s growth,
the Bando Group will work to earn the trustof our customers and society
by creating and providing products and services

Contents
ProfileFinancial Section

Snapshot2

Products

4

History

6

Global Network

8

Highlights

10

To Our Stakeholders and Investors

14

Message from the President

16“eco moving”

22

Review of Operations

24

CSR

28

Corporate Governance

30

Management

33

Message from Bando’s External Director

34

35
38
39
40
42
43
44
45

35

Management’s Discussion and Analysis
Business Risks
Message from the CFO
Consolidated Balance Sheets
Consolidated Statements of Income andConsolidated Statements of Comprehensive Income
Consolidated Statements of Changes in Net Assets
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements

Corporate Data / Investor Informationof added value and high quality.
With pride as members of the Bando Group,
we will contribute to society as a whole.

58

Cautionary Note Concerning
Forward-Looking Statements
This annual report includes forward-looking statements related to the Company’s future performance
forecasts. These statements are rationally determined by management based on information available at the time and therefore are subject to risk and uncertainty. Actual performance may differ fromtargets due to such factors as changes in the operating environment.

Annual Report 20151

Snapshot
Bando Chemical Industries is expanding businessin growth markets.

3

Top Share in OEM Supply of Automotive Belts

1

The snapshot below describes our strengths anddistinctive features.

No.
global share

We have built up a good reputation basedon our meticulous service to satisfy individual customer needs, excellent quality, andstable supply capabilities. As of the end of
fiscal 2014, we command the top global
share for OEM supply of automotive belts.

OEM supply of automotive belts

1

Core Business in Automotive Parts Fields
Sales of automotive
parts business

45,680 million¥
2015(¥ million)

Sales of automotive parts
business as % of total

47.9%

*

Consolidated net sales

95,396 million

The auto industry continues to expand,driven by increased motorization in
emerging countries and steady market
expansion in Europe and the U.S.
Automotive businesses account for
47.9%* of total consolidated net sales
at Bando. We expect the automotive
parts business to provide good growth
opportunities moving forward.

Overseas Sales Ratio Continues to Expand
Overseas sales
Overseas sales ratio
Overseas sales(¥ million)
50,000Overseas sales ratio(%)
50

40,00040

30,00030

20,00020

10,00010

002006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Top Share in OEM Supply of Power Transmission Belts
for Injection Molds and Machine Tools in Japan
Our power transmission belts for injection
molds and machine tools have been highly
evaluated for their high power transmission capability and durability, and we holdthe top share in Japan for these products.

1

No.
share in Japan* ‌Sales of automotive parts business/Consolidated net sales

¥

2

4

We a re m e e t i n g t h e n e e d s o f o u rJapanese customers developing global
operations and are also expanding
our business with overseas customers.
Overseas sales are therefore rising and
now account for a higher percentage ofthe total.

5

Synchronous belts for high-load power transmission applications

Building an Even Stronger Financial Position
Capital expenditure / Net interest-bearing debt*
D/E ratio
Capital expenditure(¥ million)
10,000Net interest-bearing debt*

D/E ratio(times)
0.5

8,000

0.4

6,000

0.3

4,000

0.2

2,000

0.1

0

0.0

-2,000

2011

2012

2013

2014

We are working to build an even stronger
financial position, even as we continue
the capital expenditures needed for
growth. At the end of fiscal 2014, our net
interest-bearing debt and D/E ratio wereat all-time lows.

2015* Net interest-bearing debt =short-term borrowings + long-term borrowings + corporate bonds – cash and deposits

2

BANDO CHEMICAL INDUSTRIES, LTD.

Annual Report 20153

Products

The Bando Group’s products boast world-classperformance and quality based on technologies
developed over many years. Bando’s specialty products
display our superior design and development capabilities.

Belt BusinessNet sales bybusiness segment

2015

We excel in OEM business in the automotive, industrial machinery, agricultural
machinery and conveyance sectors, where we hold a large global market share.
We develop environmentally-friendly power transmission systems andprovide comprehensive product lines suitable for various fields.
Core Technologies

83.3%

Rubber and resins compound design, dispersion and processing technologies,
power transmission system technologies

Automotive Power
Transmission Belts

Main Products

Conveyor Belts
Strengths and Characteristics‌ full lineup of rubber conveyor belts andAlight-duty resin conveyor belts‌Precisely
meeting customers’ needs with heatand oil-resistant specifications, as well as frayprevention, non-slip, anti-static and many othermodelsG-CARRYTM

Pipe Conveyor Belts

Mr. COOKTM F2224 Non-Stick
Belts

Lightweight Jointless P-Series
Belts

Main Products

For four- and two-wheeled vehicles

Strengths and Characteristics
Integrated‌
development of automotive auxiliary
drive belts and power transmission systems(Tier 1 manufacturer of power transmission belt
systems for automotive manufacturers)

RIB ACETM V-Ribbed Belts

Automatic Tensioners

Elastomer Products Business

Development‌
of continuously variable transmission (CVT) high efficiency belts for two-wheeledvehiclesTENSION MASTERTM

Industrial Power
Transmission Belts

VS Belts

Main Products

16.7%

Main Products‌
Development
and provision of high performance,
clean precision parts
HFD SystemTM

RedTM SII V Belts for agricultural machinery

STS/HP-STS/CeptorTM-VI

Long Synchronous Belts‌
Globalproduction and sales network, with 21
bases in 14 countries

BANDO CHEMICAL INDUSTRIES, LTD.

Core Technologies

2015

Strengths and Characteristics

Strengths and Characteristics

4

We maximize materials characteristics through the use of our precision
processing, material and structural design technologies, and add optimalfunctionality to develop pioneering products with high precision and highquality, in consideration of the environment.

Elastomer and resins compounding design,
dispersion and processing

For industrial and agricultural machinery‌
Developmentof energy-efficient belts and belts
suited to high power machinery

Net sales bybusiness segment‌
Development
and provision of functional films forvarious applications, such as in the printing andmedical fields

BANCOLLANTM
Development Rollers
CLEANING BLADE G-ModuleTM

BANDO GLANMESSETM

Medical films

Annual Report 2015

5

History
We have worked to build trust and brand recognition over morethan 100 years since our founding.
Without contenting ourselves with this, we will incessantly strive
to change and challenge to achieve the next “Breakthrough.”

History of Global Expansion

2014
Developed Thermal Conductive
Sheets for electronic devices
Established new plant in India
2013
Opened technical center in Thailand
2013
Reorganized Shanghai-based subsidiary into a management company
2012
Commenced sales of TENSION MASTER, atension meter featuring an acceleration sensor
Established subsidiary in Vietnam
2012
Opened technical center in China
2012
Commenced sales of non-flammable BANDO GLANMESSE
2011
2011

Opened Representative
Office in Russia
2009

Opened Representative Officein Argentina

2008

2010
2010

Commenced sales of BANCOLLAN Cleaning Blade G-Module
Developed BANDO MDEC, a new method for removing
microscopic dust

Commenced sales of DS5M, double-sided, synchronous power transmission belts
Commenced sales of G-CARRY environment-friendly,
energy-saving conveyor belts

Commenced sales of RIB ACE ECO-HT high-load automotive V-ribbed belts
Commenced sales of thin polyolefin films
Commenced sales of FlowMetal, low-temperature sintering nanoparticles
Commenced sales of the Hyper Flat Drive System
2008

2008
2008
2008

Established subsidiaries in India and Turkey
2003
Established subsidiary in Shanghai, China
2002
Established subsidiary in Tianjin, China
1998
Established subsidiary in Hong Kong
1995
Established subsidiaries in Indonesia, Malaysia, and South Korea
1988
Established subsidiaries in Thailand and Spain
1987
Established subsidiary in Taiwan
1985
1982
1981

Established subsidiary in Singapore
1980
Established subsidiaries in the United States and West Germany
1978
Equity participation in industrial rubber product1975
Commenced full-scale production of photocopier cleaning blades
manufacturers in the Philippines and Malaysia
1972
Commenced sales of Japan’s first light-duty conveyor belts
1970

Opened Representative Offices
1969
in the United States and West Germany 1964

Commenced sales of polyurethane products
1959
Commenced sales of SYNCHROBELT toothed belts
1950
Commenced sales of plastic films and sheets
1932
Commenced sales of Japan’s first V belts
1921
Commenced production of Japan’s first conveyor belts
1913
Commenced production of rubber belts
1906
Commenced production of cotton belts

6

BANDO CHEMICAL INDUSTRIES, LTD.

Commenced sales of BANDO Automatic Tensioners, automatic automotive belt tensioners
Developed BANDO AVANCE, the world’s first dry belt for continuously variable transmissions (CVT)

Commenced sales of MULITE high-performance plastics products
Commenced sales of RIB ACE automotive V-ribbed belts

Other1970 Listed on the First Sectionof the Tokyo Stock Exchange

Commenced production of Japan’s first single-ply conveyor belts

1962
1961

History of Product Development

1962 Listed on the Second Sectionof the Osaka Securities Exchange

A pioneer belt manufacturer since its founding in Japan, the Company
has now grown to manufacture and sell products throughout theworld as it continues to develop products in support of industry.

Annual Report 2015

7

Global Network

Aiming to become a standout supplier worldwide,
we are expanding our global network based inJapan, China, Asia, the United States, and Europe.

EuropeAsia

Bando Belt
Manufacturing(Turkey), Inc.

Bando Jungkong
Ltd.

Bando
Manufacturing(Dongguan) Co., Ltd.

Pengeluaran Getah
Bando (Malaysia)
Sdn. Bhd.

Bando Iberica,
S.A.

Bando Korea Co.,Ltd.

Bando Siix Ltd.

Kee Fatt
Industries, Sdn.
Bhd.

Bando Europe
GmbH

Bando Belt
(Tianjin) Co., Ltd.

Sanwu Bando Inc.

Bando Chemical
Industries’
Global Network

Japan*

Bando (Singapore)
Pte. Ltd.
Head OfficeAmerica
Bando (Shanghai)Management Co.,
Ltd.*

Philippine Belt
Manufacturing
Corp.

P.T. Bando
Indonesia

Bando (Shanghai)
Bando
Industry Equipment Manufacturing
Element Co., Ltd.
(Vietnam) Co., Ltd.

BL Autotec(Shanghai), Ltd.

8

Sales by Region(as of March 2015)

Overseas sales
ratio: 48.7%

Bando USA, Inc.

BANDO CHEMICAL INDUSTRIES, LTD.

Bando
Manufacturing(Thailand) Ltd.**Japanese business locations are leading
the development of environment-friendly
products and the expansion of highvalue-added businesses.

Bando (India) Pvt.
Ltd.

Business locations

Japan: 51.3%
Asia: 25.6%
China: 12.4%
Europe, America &other: 10.7%*China Technical Center and Asia Technical Center wereopened in 2012 and 2013, respectively, both of which aredeveloping products with optimal specifications for markets.

Ashikaga Plant
Tokyo Branch Office
Nagoya Branch OfficeNankai Plant

Kobe Head Office/
R&D Center
Kakogawa Plant

Wakayama Plant/
Power Transmission Technical Research Center

Sales and Fabrication Service Affiliates

Manufacturing Affiliates

Bando Fukushima Products, Inc.
Higashinihon Bando Co., Ltd.
Vann Corporation
Koyo Sangyo Co., Ltd.
Hokuriku Bando, Inc.
Nishinihon Bando Co., Ltd.
Bando Elastomer Co., Ltd.

Fukui Belt Industries, Ltd.
BL Autotec, Ltd.
Bando-Scholtz Corporation
Other Service Affiliates

Bando Trading Co., Ltd.
Bando Kosan Co., Ltd.

Annual Report 20159

Highlights
10–Year Summary of Consolidated Financial Statements
Fiscal year endings are March 31 in the years shown below
2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

Net sales

Millions of yen

84,257

95,20098,66287,45373,59384,811

86,37285,77293,434

95,396

Operating income

Millions of yen

5,057

8,027

7,325

2,115

2,450

5,056

4,571

4,095

5,518

4,797

Operating margin

%

6.0%

8.4%

7.4%

2.4%

3.3%

6.0%

5.3%

4.8%

5.9%

5.0%

Net income

Millions of yen

3,713

3,985

5,289

(255)

1,234

3,333

1,440

2,510

4,280

3,757

Net cash provided by operating activities

Millions of yen

6,057

9,641

7,805

7,621

8,724

9,529

6,595

7,004

6,459

8,061

Net cash used in investing activities

Millions of yen(8,984)(6,288)(9,830)(4,937)(3,147)(4,922)(4,768)(5,781)(5,038)(3,931)

Net cash provided by (used in) financing
activities

Millions of yen

234

1,888

(1,575)(675)(2,516)805(4,363)(463)(1,548)(2,472)

Depreciation and amortization

Millions of yen

4,661

4,660

5,684

6,073

5,411

4,907

4,804

4,389

4,174

4,386

Capital investment

Millions of yen

9,377

7,692

7,166

4,176

2,791

3,381

4,619

5,052

5,046

4,198

Net assets

Millions of yen

39,61542,56844,97238,35240,02040,54239,444

43,22649,27756,777

Total assets

Millions of yen

87,887

96,53090,801

76,621

78,02082,90579,65982,20789,623

94,700Interest-bearing debt

Millions of yen

15,49918,717

18,525

17,66915,744

17,653

14,595

15,74615,753

14,487

Shareholders’ equity*

Millions of yen

39,61541,70744,04637,34539,18839,67738,55942,775

48,77256,273

Earnings per share

Yen

35.23

39.34

52.68

(2.55)

12.31

33.74

14.84

26.47

45.49

39.95

Net assets per share

Yen

390

412

439

372

391

405

402

455

518

598

Annual dividend per share

Yen

13.00

10.00

10.00

7.00

6.00

8.00

8.00

8.00

10.00

10.00

Thousand shares

102,791

101,310

100,393

100,313100,294

98,78897,034

94,811

94,095

94,063

%

45.1

43.2

48.5

48.7

50.2

47.9

48.4

52.0

54.4

59.4

times

0.391

0.449

0.421

0.473

0.402

0.445

0.379

0.368

0.323

0.257

ROA

%

4.2

4.1

5.8

(0.3)

1.6

4.0

1.8

3.1

4.8

4.0

ROE

%

10.0

9.8

12.3

(0.6)

3.2

8.5

3.7

6.2

9.4

7.2

times

14.9

15.5

6.8

–

24.1

11.5

20.8

11.1

9.3

11.6

%

36.9

25.4

19.0

–

48.7

23.7

53.9

30.2

22.0

25.0

3,177

3,393

3,414

3,436

3,285

3,427

3,545

3,592

3,817

3,930

Average number of shares outstanding
during the period
Equity ratio
D/E ratio

P/E ratio
Payout ratio
Number of employees* ‘Shareholders’ equity’ for 2007 and thereafter = net assets – minority interests

10

BANDO CHEMICAL INDUSTRIES, LTD.

Annual Report 201511

Highlights

Major Indicators

Fiscal 2014 Topics

Fiscal year endings are March 31 in the years shown below

Net sales

Operating income(¥ million)
100,000(¥ million)
8,000

(%)
8

6,000

6

4,000

4

2,000

2

80,000

Product Development and Others

Operating margin

Opened a demo room for the BANDO MDEC™ cleaning system,
which applies our proprietary contact charging control technology

60,00040,00020,000002010 2011 2012 2013 2014 201502010 2011 2012 2013 2014 2015

HFD™ System, a next-generation energy-saving transmission belt, was awarded the Kinki
Region Invention Prize and the Hyogo Institute of Invention and Innovation’s Chairman Award

2010 2011 2012 2013 2014 2015

Capital investment

Free cash flow

Net assets
Total assets(¥ million)
8,000(¥ million)
6,000(¥ million)
100,000

6,000

4,500

4,000

3,000

2,000

1,500

0

0

Net assets

Shareholders’ equity(¥ million)
60,000(%)
60.0

55,00057.5

50,00055.0

45,0002015
Concluded an “Agreement for comprehensive industry-university cooperation” with Kobe University

20,00002010 2011 2012 2013 2014 2015

Annual dividend per share
(yen)
10

Payout ratio
(%)
60

8

48

6

36

4

24

50.0

35,000

47.5

2

12

30,00045.0

00Interest-bearing debt(¥ million)
30,0002010 2011 2012 2013 2014 2015

(times)0.5
0.4

18,000

0.3

ROE

0.1

2010 2011 2012 2013 2014 2015

CottonNatural rubber

Aluminum

Commenced sales ofWallpaper Media forinkjet printers.

8
6August20

July

Wallpaper Media
2010 2011 2012 2013 2014 2015

Management

Thermal Conductive Sheets

Exchange rate transition

1.4

USD
(%)
160

1.2

140

1.0

120

0.8

100

0.0

0.6

’11/12’12/12’13/12’14/12 ’15/6* Raw materials cost (indicators) base is 2011/12.

BANDO CHEMICAL INDUSTRIES, LTD.

September

Display of website image

12

THB

EUR

May
Developed Thermal Conductive Sheets™
that contributes to lower thermal resistance in electronic devices

0.2

6,000

12

ROA
(%)
14

October

Created website for light-duty
conveyor belt selection

June
Naphtha

24,00002010 2011 2012 2013 2014 20154

Raw material costs (indicators)

D/E ratio

12,000November

10

40,000Interest-bearing debt
D/E ratio

DecemberPresident Yoshii and Kobe University President
shaking hands

ROA
ROE

52.5

2010 2011 2012 2013 2014 2015

January

80,000

Annual dividend per share
Payout ratio

Equity ratio

February

Product development

40,000Shareholders’ equity*
Equity ratio

Participated in the Cabinet Office
Strategic Innovation Promotion
Program (SIP)

Total assets

60,0002010 2011 2012 2013 2014 2015

March

80

’10/12’11/12’12/12’13/12* Exchange rate base is 2010/12.

’14/12’15/6

April

We restructured our subsidiaries and sub-subsidiaries in South Korea (Bando Korea Co.,
Ltd. acquired Bando Jungkong Ltd., which had
been owned by BL Autotec, Ltd., along withother shareholders’ equity, and made Bando
Jungkong Ltd. its wholly owned subsidiary [asub-subsidiary of Bando Chemical Industries]).

March
2014

Annual Report 201513

To Our Stakeholders and Investors

The second half of Bando’s five-year
mid-term business plan has started.
We will make full use of our expandedbusiness foundation and acceleratemeasures to achieve target figures.
Mitsutaka Yoshii
President and Representative Director,
Bando Chemical Industries, Ltd.

In fiscal 2014, the second year of Bando’s five-year mid-termbusiness plan, net sales increased for the second consecutive
year. However, profits declined owing to an increase in personnel
expenses in Japan due to an increase in actuarial differences
related to retirement benefit obligations, and an increase in selling,
general and administrative expenses mainly due to the expansionof overseas business bases.
Fiscal 2015 marks the start of the second half of Bando’s five-year
mid-term business plan. As our moves to reinforce the businessfoundation in India, Thailand, China and Indonesia steadilytranslate into earnings growth, we will accelerate measures toincrease sales and profits.

Annual Report 201515

Message from the President
Performance in Fiscal 2014

“Breakthroughs for the future” mid-to-long term business plan: Overview and progress

Sales up but profits down due to higher personnel expenses resulting fromexpansion of global production structure

Aiming to be a standout global supplier in two steps: 1st stage and 2ndstage of mid-to-long term business planIn fiscal 2014, we implemented measures for thesecond year of its mid-to-long term business plan
“Breakthroughs for the future.” Belt Businesssales rose 0.8% year-on-year to ¥78,101 million on
account of growth, mainly overseas, in automotive
power transmission belts and conveyor belts. In the
Elastomer Products Business, sales were ¥15,713
million, an increase of 4.8% year-on-year thatreflected robust demand for precision equipment
parts, particularly in Japan. As a result, consolidated
net sales increased 2.1% from the previous fiscal
year to ¥95,396 million for the second consecutive

In 2013, the Bando Group embarked on its midto-long term business plan “Breakthroughs for the
future,” which ends in fiscal 2022. Under this plan,we aim to further refine our core technologies
and reliable product quality in the fields of rubber,elastomers, and resins—where we have built up
extensive expertise since the Company’s founding—
to become a standout supplier of belts andhigh-performance products in the global market.
In the first stage of the plan, from fiscal 2013 to
fiscal 2017, we will work to evolve and deepen theGroup’s current operations, particularly in the belt
business, and strengthen research and development

year of growth. However, operating income declined
13.1% year on year to ¥4,797 million, owing to anincrease in personnel expenses from the expansionof production facilities in Asia, as well as an increasein actuarial differences related to retirement benefit
obligations in Japan. Net income totaled ¥3,757
million, a year-on-year decline of 12.2% due to thewrite-down of impairment losses on manufacturing
facilities for high-performance films. We declared ayear-end dividend of ¥5 per share, unchanged fromlast year, bringing the annual dividend to ¥10 per
share, the same as last year.

as well as market development in order to establish
new businesses.
In the second stage, from fiscal 2018 to fiscal
2022, we will create new business to contributeto our earnings, second only to our belt business.
Leveraging the two earnings drivers, we willconcentrate on expanding earnings to becomea truly global supplier with net sales of around¥150 billion.
As the first step to achieving this plan, Bandoaims to generate sales of ¥100 billion and operating
income of ¥10 billion in fiscal 2017, the final fiscal
year of the first stage.

Consolidated earnings
Fiscal 2013 results

Fiscal 2014
Results

YoY¥93,434 million¥95,396 million+1,962

Operating income¥5,518 million¥4,797 million−721

Net income¥4,280 million¥3,757 million−523

Net sales

Overview of the mid-to-long term business plan —“Breakthroughs for the future”
Aiming to be a standout global supplier• Global development of belt and high-performance product businesses• Provide value-added products that contribute to environmental preservation, energy conservation andhigher functionality• Leverage core technologies and reliable product quality in rubber, elastomers and resins
Breakthroughs for the future
2nd stage (fiscal 2018~2022)

Breakthroughs for the future
1st stage (fiscal 2013~2017)• Evolution and deepening of current businesses• Enhancement of R&D and market development• Realization of aspirations for 10 years ahead• Establishment of businesses to accompany
the Belt Business

BF-1: Five Guidelines

Mitsutaka Yoshii
President and Representative Director,
Bando Chemical Industries, Ltd.

Evolution of global
market strategy

Product evolution

Evolution in
manufacturing

Fiscal 2017 targets

BANDO CHEMICAL INDUSTRIES, LTD.

Evolution in management quality

Numerical targets in mid-term business plan BF-1
Net sales

16

New businesses
creation¥100,000 million

Operating income¥10,000 million

Annual Report 201517

Message from the President

Achieve fiscal 2017 targets in sales and profit growthunder the mid-term business planIn fiscal 2014, the second year of the 1st stage ofthe mid-to-long term business plan, both sales andoperating income fell below our original targets, due
to factors such as production stoppages at Korean
automakers in the first half of the fiscal year, lower
automobile production in Thailand due to politicalturmoil, and a decline in demand for agricultural
machinery in China as government subsidies cameto an end.
However, we are moving confidently toward theachievement of higher sales and profits under the
mid-term business plan. At the Bando Group, we

Key Initiatives for Fiscal 2015

collectively believe our investments in production
facilities in India, Thailand, China and Indonesia overthe initial 2.5 years of the mid-term business plan
will strongly boost growth in earnings going forward,
backed by our products with leading shares of theworld market in the OEM supply of automotive
belts for automakers, CVT belts for motorcycles, andpolyurethane rubber parts for printers.
While maximizing these strengths, we intend
to make up for some slight lost time in fiscal 2014
by reducing costs and steadily implementing key
measures from fiscal 2015 onward.

Bando products with top market shares*

Top Market
Share

Product evolution

The external factors that depressed earnings in the previous fiscal year have begun to turn around. In Thailand,
the political situation has stabilized, leading to a recovery
in automobile output. In China, the resumption of government subsidies has raised expectations for stronger
demand for agricultural machinery. In Europe and the
U.S., demand looks likely to remain strong for belts, centered on automotive-related applications. In this businessenvironment, we are in position to accelerate earnings
growth by focusing our attention on cost reductions
while further strengthening marketing activities.
More specifically, we are focusing on the key
measures outlined below based on the five guidelines ofthe mid-term business plan: evolution of global market
strategy, product evolution, evolution in manufacturing,new businesses creation, and evolution in management
quality.

As for product evolution, we have been expanding product applications to new fields and incrementally adding
functions to products with the aim of further increasing
the added value of its products.
In the Belt Business for example, we updated our
product lineup in the Sunline™ Belt series of light-duty
conveyor belts in April 2014. Sales of Sunline™ Belts,
which had mainly been used for food conveyance, havegrown strongly as a result of expanding their application
to the logistics field. Sales growth in Double Cog Belts,
super high-performance CVT belts for large buggies
and large scooters,
has also picked up
momentum thanks tocustomers appreciating their contributions
to better fuel economy through improved
power transmission
efficiency and out» Double Cog Belts
standing durability.
We a re a d v a n c i n g s i m i l a r m e a s u re s i n t h eElastomer Products Business. In April 2014, we released
Wallpaper Media for inkjet printers, creating a lineup
of products for the wallpaper market under the Bando
GLANMESSE™ brand of films for decorative displays.
As new added value, the product features an adhesive
coating and compatibility with digital printing, and weare marketing these features to unearth demand in thecommercial and residential markets. Our development
rollers with longer service life for OA equipment offer
vastly improved durability thanks to the use of polyurethane rubber technology, and sales have expanded forthis high-value-added product for printers and copiers.

Evolution of global market strategy

Top Market
Share
OEM supply of automotive belts

Automotive automatic belt tensioners (Japan)

Top Market
Share

Top Market
Share
CVT belts for two-wheeled vehicles

Polyurethane rubber printer parts* Fiscal 2014

Key facilities expansion during first half of the mid-term business plan, BF-1
Location

18

Operating environment

Descriptions

Date

India / Bangalore Plant

Opened integrated production plant

Fiscal 2013

Thailand / Bando Manufacturing (Thailand) Ltd.

Renewed the equipment of the main plant

Fiscal 2013

China / Bando (Shanghai) Industry Equipment
Element Co., Ltd.

Expanded production capacity

Fiscal 2014

Indonesia / P.T. Bando Indonesia

Expanded production capacity

Fiscal 2013

BANDO CHEMICAL INDUSTRIES, LTD.

Leveraging our expanded sales network and value chain,
we aim to build a globally optimized procurement,
production and supply structure while increasing sales
and developing new markets.
First, we plan to accelerate the development ofmarkets by taking advantage of our expanded production capacity in India, Indonesia, Thailand and China. We
are now expanding production in accordance with growing demand for motorcycle belts in India and other Asian
countries, as well as for automotive belts in Thailand. At
the same time, we are taking steps to bolster our costcompetitiveness through the planning and simulation ofan optimal production structure to identify which business bases are the best places to produce and supply
products. At our plant in Bangalore, India, establishedin 2013, for example, we have been switching to locally
produced products and have been improving the cost
structure there.
In the underdeveloped Greater Mekong market, we
are working to enhance recognition of the Bando brand.
In addition, we are gaining momentum on measures
to strengthen our global marketing system, such as
launching in Europe our electronic trading system thathas been successfully used in Japan between our sales
companies and agencies.

» Development Rollers with longer service life

Annual Report 201519

Message from the President

Increasing sales of these high-value-added products requires a finely tuned
sensitivity to the particular needs of customers in countries around the world.
At the China Technical Center, opened in 2012, and the Asia Technical Center,
opened in Thailand in 2013, we have reinforced our technical service structureby hiring more local staff and focused on the development of products withmarket-optimized specifications. In addition to making detailed modifications toeach product, we are also locally developing new products to fill needs in nichemarkets, such as tile conveyor belts, in a bid to strengthen our competitivenessin each region.

new elastic strain sensor, and released an R&D Kit in July 2015. This novel
product was made possible with our core technologies in rubber and urethanematerial mixing design and film processing, combined with conductive material
dispersion technologies. Featuring excellent flexibility and softness, the sensor
is able to measure large distortions without altering the shape of the measured
material. Since it shares a strong affinity with the way people move, we expect
the product to sell well in the medical and healthcare fields.
As another external alliance, Bando has participated in Japan’s Cabinet Office
Strategic Innovation Promotion Program (SIP) since October 2014. In this program,
Bando has been involved in the design and production of tailor-made rubber
products using reactive 3D printers, and the research and development of productsthat create value for society. Bando is developing cross-linked rubber that can beformed into objects using a 3D printer.

» China Technical Center

Evolution in manufacturing
Within the Group’s global network, the Head Office, R&D Center, manufacturing
plants and the Power Transmission Technical Research Center in Japan lead thedevelopment of environmentally-friendly products and high-value-added businesses. With the “evolution in manufacturing” guidelines, we aim to strengthen
our global competitiveness by improving quality and productivity at our bases inJapan. To this end, we are modernizing production lines at the Kakogawa Plant
and the Ashikaga Plant while fostering innovation in manufacturing methods.
At the Kakogawa Plant, our main plant for conveyor belts, we are upgrading production lines. Out of a total budget of approximately ¥2 billion, we plan
to invest about ¥0.8 billion on capital equipment in fiscal 2015 and commence
operations on the new production lines in January 2016.
At the Ashikaga Plant, where precision belts are made, we are upgrading
production lines for polyurethane precision belts with the aim of solidifying customer confidence in these products. With an investment of around ¥0.2 billion,
we plan to start up the new production lines in October 2015. The Ashikaga
Plant has established a new production method for polyurethane precision belts
that we think will lead to lower costs and stronger competitiveness.

New business creation:
accelerating test marketing and mass production» Asia Technical Center» Thermal Conductive Sheets» Kakogawa Plant» Optically clear adhesive (OCA)

New business creation: strengthening alliances» Ashikaga Plant
We have been consistently investing in R&D with the aim of creating new
businesses. Using environmental protection, energy conservation and highperformance as key objectives in new businesses, we are focusing R&D on themarkets for optoelectronics, transportation/automobiles, energy, and robotics,
while specifically concentrating on the fields of power electronics, printer elec» C-STRETCH™ elastic strain
sensor and R&D Kit
tronics, and welfare/nursing care. In fiscal 2014, the R&D Center, Manufacturing
Planning Center and Power Transmission Technical Research Facility led ourefforts in R&D. Spending on research and development, including the development of product improvements, totaled ¥3,834 million in fiscal 2014.
As an external alliance to advance new business creation, in September
2014, Bando entered into an agreement with Kobe University to promotecomprehensive cooperation between industry and academia. Kobe University
has been designated by the Ministry of Education, Culture, Sports, Science andTechnology as a university to enhance
Analogresearch capabilities with the aimof helping universities create worldclass research programs. Through its
alliance with Kobe University, Bando
Bluetoothdeveloped C-STRETCH™, a completely
SensorFor Windows 7/8
20

BANDO CHEMICAL INDUSTRIES, LTD.

» Room-temperature sintering

silver nanoparticle ink andlow-temperature sintering silver
nanoparticle bonding material

In fiscal 2015, we also intend to accelerate the transformation of projects thathave been under development for several years into new businesses by working
to establish mass production and conducting test marketing.
In May 2015, we began to test market Thermal Conductive Sheets that
help lower the thermal resistance of electronic devices. This product is a rubber
sheet with high thermal conductivity made possible with the vertical orientationof thermally conductive filler. It can efficiently transfer heat away from theheat-generating part. We expect the product to satisfy needs in the electronic
devices field, such as for power semiconductors and LEDs.
In the second half of fiscal 2015, we plan to commence the mass production of Free Crystal™, an optically clear adhesive (OCA), in thicknesses ranging
from 50 μm to 2,000 μm. Made from the application of Bando’s excellent thickfilm technologies, this product is a type of optical film that helps improve theimage quality of LCD displays. We expect demand for this product in LCD
displays for car navigation systems, for example.
In the second half of fiscal 2015, we plan to launch the mass production
and marketing of room-temperature sintering silver nanoparticle ink. This new
product offers better performance than FlowMetalTM, the low-temperature
sintering silver nanoparticle product the Company introduced in 2008. It wasdeveloped for compatibility with a wider range of applications. The new productis an optoelectronic material that can form electronic circuits without heatingby providing conductivity after drying at room temperature. Bando has been
making steady progress spinning a web of patents related to this technology.
Based on the patents that we have already filed and the patents currently underapplication, we expect to obtain a broad range of intellectual property rights
related to receiving layers that can be sintered at room temperature.
As another application of FlowMetalTM, low-temperature sintering silver
nanoparticle bonding material is an optoelectronic product that can join tocircuit boards without damaging electronic devices, such as semiconductor
elements, at a melting point of 250 °C, which is lower than that of gold-tin alloy
solder. We are currently conducting marketing activities for the product in order
to expand sales.

Annual Report 201521

“eco moving”— Enhancing corporate value through the development of environmentally friendly products.

Striving to
expand our lineup and sales
We are committed to people-friendly and environment-friendly manufacturing. Since
2010, Bando is accelerating the development of green products based on its “ecomoving” brand to meet the increasing environmental and energy-saving needs ofvarious industries.
With this brand, Bando has quantitatively defined the added value provided tocustomers as “Environmental Claims,” and strives to enhance corporate value by
expanding the lineup and sales of products that satisfy this criterion.

Power transmission belts
that have achieved global record-levels of transmission capability

High-load V-ribbed belts
Added value
1 	This product has an approximate 30% increasein transmission capability for each gradation of belt
width (one rib), by making use of high-strength
rubber and a high-strength core.
Conventional products High-load V-ribbed belts
24.92 mm17.80 mm –» −7.12 mm

Labeling standards for “eco moving” products

2 	The belt width (determined by number of ribs) is only

about 2/3 of a conventional belt, while maintaining
the same life cycle as the conventional belt.

Products receive the “eco moving” label if they meet any of the following three criteria.
1 	Compared with reference products, shows reduced CO2 emissions over the products’ life cycle, and meet

one or more internally established Environmental Claims (Energy Conservation, Waste Reduction, Use of
Ecological Resources (recycled/non-petroleum), Carbon Offset, Resource Conservation, Use of Recycled
Materials, Reduction of CO2 Emissions)2 	Be granted certification from a third party operating an environmental certification system

Rib rubber: Development anduse of a high-strength rubber

Core: Highstrength core

Contributing to making automobile
engines with improved weight
reduction, compactness and fuel economy

3 	Industry standards may be used for comparison purposes for a new product without a correspondingreference product, so long as the new product meets other necessary criteria

G-CARRY

Environmental Claims
1.	Saving energy

5.	Using eco materials

	The product’s energy loss during use is cut by 15%
or more, in comparison with the correspondingreference product.

	The product uses 80% or more eco materials
by weight (recycled materials as well as nonpetrochemical natural resources and materials).

2.	Saving resources

6.	Reduction of CO2 emissions

	The raw materials used for the product are reducedby 10% or more by mass, in comparison with thecorresponding reference product.

	The product reduces CO2 emissions by 10% ormore during its lifecycle, in comparison with thecorresponding reference product.
	Or, the product reduces CO2 emissions by 15%
or more during any stage of its lifecycle (material
procurement, production, transportation, use,
disposal).

3.	Reduction in quantity of waste	Product-related waste is reduced by 10% or moreby mass when it is used by the customer, in comparison with the corresponding reference product.

4.	Using recycled materials
	The product uses 20% or more by weight recycledmaterials.

22

BANDO CHEMICAL INDUSTRIES, LTD.

Environmentally friendly conveyor belt

7.	Carbon offset
	The product is certified by the carbon offset
certification system (third party institution), andthe appropriate carbon offset activities have been
implemented.

Added value
1 	CO2 reduction by lowering the percentage of petroleum-based materials used from 65% to 37%2 	Approximate 3% reduction in power consumption by

decreasing roller abrasion resistance3

Excellent pliability due to a reduced-ply structure4 	Excellent resistance to impact, sand-wiching and tearing due to the special corebody canvas

Accelerating the change-over from conventional
conveyance products used for such materials as
gravel, aggregate, soil, limestone and ore

Annual Report 201523

Review of Operations

Belt Business
Leveraging the Company’s expanded businessfoundation to further strengthen our competitiveness
Automotive Component Market Value
by Region

Market Conditions
Position and Target in the Mid-to-Long Term Business Plan
The Belt Business serves as the greatest earnings driverto achieve the Group’s mid-to-long term business plan,
Breakthroughs for the future. Under BF-1—the first part ofthat plan—which finishes in the fiscal year ending March
31, 2018, we will achieve earnings growth centered on thissegment in a bid to solidify our growth foundation for the
five-year period of BF-2 (from the fiscal year ending March
31, 2019 to the fiscal year ending March 31, 2023) andbeyond.

The worldwide sales volume of automotive components in 2014 wasapproximately ¥96 trillion. It is expected to grow firmly going forward,
and to reach approximately ¥114 trillion in 2020. Looking at the annual
average growth rate, growth is forecast of 6.9% per year for BRICS, and5.7% per year for China.

Key Initiatives for the Fiscal Year Ending March 31, 2016
Performance for the Fiscal Year Ended March 31, 2015
The segment achieved net sales of ¥78,101 million, up 0.8% from the previous fiscal year. Sub-segment results are as follows.

Automotive Power Transmission Belts
Sales of power transmission belts in Japan decreased due to adecrease in automobile production. However, in China sales of accessory drive power transmission belts and of Automatic Tensioners
were brisk, and in the U.S. we focused on expanding sales in theaftermarket. Moreover, in Asia there was a decrease of automobile
production in Thailand, but sales of variable speed belts for scooterswere favorable, including in India. As a result of these and otherfactors, sub-segment sales climbed 1.9% year on year.

Industrial Power Transmission Belts
In Japan, sales of power transmission belts increased due toproactive marketing activities rooted in local communities andthe introduction of electronic commerce. However, sales declined
elsewhere. In China state financial subsidies to agricultural machinery
manufacturers ceased, in Thailand the political instability caused abusiness recession, in Europe there was sluggish capital investment,
and in the U.S. the OEM business contracted. As a result, sub-segment sales were down 7.5% year on year.

Conveyor Belts
In Japan, we enjoyed increased sales of conveyor belts for steel
works and of light-duty conveyor belts for the distribution industry.
In Asia, sales of conveyor belts increased, and in Southeast Asia
sales of light-duty conveyor belts rose. As a result, sub-segment
sales increased 5.2% year on year.

Sales of Automotive Power Transmission
Belts by Product(¥ billion)
50

44.8

45.6

40

Other
Power transmission systemproducts
Power transmission belts

30
20
10
0

2014

2015

Note: Sales by product represents
the figure after deduction ofinter-segment transactions.

Sales of Industrial Power Transmission
Belts by Product(¥ billion)
20
15

Other

14.8

13.7

For industrial and agricultural
machinery

10
5
0

2014

2015

Note: Sales by product represents
the figure after deduction ofinter-segment transactions.

Sales of Conveyor Belts by Product
20

17.6

18.5

15

Industrial productsLight-duty conveyor belts

24

BANDO CHEMICAL INDUSTRIES, LTD.

096,746
RoW

5,802

BRI

7,397

China

21,322

Japan/Korea22,772Europe23,352

2014

2015

7,832

➡ 5.1%

11,024➡ 6.9%

29,734➡ 5.7%

13,924➡ -2.2%

25,673➡ 2.0%

26,398➡ 2.1%

2014

2020e

Source: Global Automotive Supplier Study 2014/Roland Berger/Lazard(¥ million)

Net sales
Automotive power transmission belts
Industrial power transmission belts
Conveyor belts
Segment profit

77,483
44,833
14,88017,634
4,892

2015 (results)

78,10145,68013,765
18,545
4,155

Change618
847(1,115)911(737)

Ongoing capital investment (for the fiscal year ending Mar. 31, 2016)
Location

Description

Nankai Plant% change
0.8%
1.9%
–7.5%
5.2%
–15.1%(¥ million)

Amount invested

Expected completion date

Expansion of equipment relating to powertransmission belts, etc.

574Mar. 2016

Kakogawa Plant

Expansion of equipment relating to industrial products, including conveyor belts, etc.

974Mar. 2016

Wakayama Plant

Expansion of equipment relating to powertransmission belts, etc.

59Mar. 2016

Power Transmission Technical Research Center

Investment in testing and research facilities

Bando USA, Inc.
Note: Sales by product represents
the figure after deduction ofinter-segment transactions.

CAGR ,
2014 – 20

15,955

NAFTA

2014

Conveyor belts

10(¥ billion)

114,732

Net sales and segment profit(¥ billion)

5

Segment profit declined 15.1% year on year to ¥4,155 million, mainly due to increased personnel expenses at our expanded overseas
production bases, offset by the benefits of cost reductions.

We will continue our initiatives designed to continuously solidify ourleading position in Asia’s belt markets.
In terms of sales activities, we will make full use of the businessfoundation that we have been expanding up to last fiscal year in China, India
and the ASEAN region, and we will strive further to deeply cultivate markets.
In product development, we will seek to increase the added value ofexisting products, and focus on achieving such product features as reduced
environmental impact, higher efficiency, compactness and multi-functionality.
In Japan, which we have positioned as the core to improve the global
competitiveness of our products, we will push ahead with manufacturing
innovations, upgrade our production technology and cost competitiveness,and strive to expand production in China, India and the ASEAN region.

Total CAGR: 2.9%

Bando Korea Co., Ltd.
Bando Belt (Tianjin) Co., Ltd.
Bando Manufacturing (Thailand) Ltd.

Expansion of equipment relating to powertransmission belts, etc.

84Mar. 2016

221

Mar. 2016

320

Mar. 2016

212

Mar. 2016

448

Mar. 2016

Annual Report 201525

Elastomer Products BusinessAccelerating the change toa high-added-value product portfolio

Worldwide Copier and Multifunction PrinterShipment Forecast on a Quantity Basis(Million units)
6(¥ billion)
700
Quantity of color copiers
Quantity of black-and-white copiersMonetary amount of color copiersMarket Conditions
Global shipment quantities in the copier and multi-function printer markets, which include major customers for our precision parts business, areexpected to grow around 3.8% in 2015 and around 2.6% in 2016*. While
the Japanese market for color copiers is somewhat saturated and thetime between replacements is longer, we expect increased demand forcolor copiers in Europe and the U.S., and for black-and-white copiers in
Asia.

Position and Target in the Mid-to-Long Term Business PlanThe Elastomer Products Business offers clean, highperformance products made of elastomers and resins
in a bid to contribute to target achievement in the midto-long term business plan, Breakthroughs for the future(from the fiscal year ended March 31, 2014 to the fiscal
year ending March 31, 2023). As our second core business

For the fiscal year ended March 31, 2015, net sales grew 4.8% year on year, to ¥15,713 million. Sub-segment results are
as follows.

Sales of Precision Parts Businessby Product(¥ billion)
12
10

10.2

11.0
Other

8

Precision belts

6

Blades, high performancerollers4
2
0

High-Performance Films
Despite sales of new premium wall covering film products, salesof film used in construction materials decreased due to decreased
demand following the consumption tax increase. As a result of
these and other factors, sub-segment sales decreased 3.3% year
on year.

2014

2015

Note: Sales by product represents
the figure after deduction ofinter-segment transactions.

Sales of High-Performance Films Businessby Product(¥ billion)
6

4.7

4.5

Other
Medical-related

4

Manufacturing materials
Decorative display

Segment profit increased 16.9% year on year to ¥329 million
mainly due to favorable growth in sales of products with comparatively high added value, including high-performance rollers andprecision polishing materials.

26

BANDO CHEMICAL INDUSTRIES, LTD.

The number of domestic housing starts, which are closely linked to salesof high-performance film products, is basically projected to decrease
going forward. Nevertheless, the renovation market, which is anothertarget market, is projected to maintain its market size due to theincreasing service life of housing.
Source: News Release published on June 15, 2015, Nomura Research Institute, Ltd.

Performance for the Fiscal Year Ended March 31, 2015

We increased sales of new types of high-performance rollers for
major office machinery equipment manufacturers, and achieved
strong sales of precision belts. Sales of precision polishing materials in the optoelectronics market gradually increased. As a resultof these and other factors, sub-segment sales increased 8.1% year
on year.

0

350

2013

2014

2015

2016

(Projection) (Forecast) (Forecast)0

Monetary amount of
black-and-white copiers
Source: Japan Business Machine andInformation System Industries
Association's “Projections of2014 global shipments ofoffice machinery, and forecasts
for 2015 and 2016” (publishedFebruary 6, 2015).

Performance and Forecasts of Size of
Housing Renovation Market(¥ trillion)
10.0

in a broad sense* Quantitative baseafter the Belt Business, the Elastomer Products Businesswill achieve steady growth by accelerating the change toa high-added-value product portfolio, aimed at driving
forward the uses of our core elastomer and resin compounddesign, dispersion and processing technologies.

Precision Parts

3

2

Construction materials

0

Note: Sales by product represents
the figure after deduction ofinter-segment transactions.

2014

2015

5.0

0

in a narrow sense
Performance

1989

Forecast

2014

2030
(Year)*Size of the narrow-sense renovation market: This refers to extension andreconstruction building that is recorded under housing starts, statistically“new housing,” together with repair and maintenance costs for facilities, etc.
*Size of the broad-sense renovation market: This refers to the size of the narrow-sense
renovation market plus a financial amount that mainly comprises the purchase costsof consumer durables related to the renovation including air conditioners andfurniture, etc. and the purchase costs of interior goods, etc.
Source: Extracted from the Center for Housing Renovation and Dispute
Settlement Support's “Size of Housing Renovation Market(published 2013). Forecasts are provided by NRI.

Key Initiatives for the Fiscal Year Ending March 31, 2016
We will continue to refine our technologies for compounding, dispersing and combining elastomers and resins, which
are our core technologies, and accelerate our actions torebuild our product portfolio with a greater emphasis onhigh value-added products.
In precision parts business, we will focus on
increasing sales and earnings centered on TOPX PrecisionAbrasive Film and the BANDO MDEC cleaning systemin the growing optoelectronics market. Moreover, we
will greatly increase the added value of products forprinter-related markets by concentrating on markets which

demand high durability and high quality.
In high-performance films business, we will focus
on proprietary brand products and strive to expand ourmarket share in the volume zone of the domestic market,
and we aim to further expand sales overseas. Moreover, as
one of our initiatives to realize business structural reforms,
we will accelerate making full use of and evolving our own
technology (films, adhesive materials, ink-jet printing), andengage in the decorative products business.

Net sales and segment profit(¥ million)
2014

Net sales
Precision equipment parts
High-performance films
Segment profit

14,98910,2634,707
281

2015 (results)

15,713
11,0964,550
329

Change
723
833
(157)
47

% change
4.8%
8.1%
–3.3%
16.9%

Ongoing capital investment (for the fiscal year ending Mar. 31, 2016)
Location

Description

Nankai Plant

Expansion of equipment relating to chemical products, etc.
Expansion of equipment relating to industrial products and powertransmission belts, etc.

Ashikaga Plant(¥ million)
Amount invested

Expected completion date

270

Mar. 2016

565

Mar. 2016

Annual Report 2015

27

CSR
Note: The tables below refer to Bando’s domestic facilities in Japan.

Basic Stance on Corporate Social Responsibility (CSR)
The Bando Group’s stance on CSR lies in business activities rooted in the positive contributions it makes to people’s lives
and the development of society, which are embodied in the Group’s management philosophy. In an effort to harmoniously
coexist with stakeholders—customers, shareholders and investors, employees, business partners (including suppliers
and retailers), and local communities—it is vital that we provide products and services that meet the needs of society
while undertaking business activities that help preserve the global environment. The chief objective of the Group’s CSR
activities is to gain the trust of society, which is consistent with its corporate culture and in keeping with its obligations tostakeholders.

CSR Management

Reduction of Energy Consumption

Curtailment of Waste Generation

Energy consumption

Waste generation(KL/GJ)
40,000CSR Promotion
Committee

President

Head office/business facilities
Group affiliates

Chair: Executive incharge of CSR

CSR Promotion
Committee
secretariat

6,000
4,000
30,0002,000
0FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 FY2013 FY2014

The Company’s industrial waste largely consists of rubber and plastics. Since
recycling rubber is difficult, Bando works to curtail the generation of thistype of waste.

Emission and Transfer Volumes of
PRTR Substances

Reduction of VOC Gas Emissions

PRTR substance emission and transfer volumes(t)250

Transfer volume (t)VOC emission volume(t)
400

Emission volume (t)Transfer volume + emission volume

300
Target
200

100
100

Major
achievements

CSR promotion themes

Major
achievements

CSR promotion themes

50

28

Compliance/Business Ethics

The Environment

Quality

Legal compliance and acting withintegrity to gain the trust of society

Work for environmental preservation
by developing eco-friendly products
and by being attentive to the environment in manufacturing practices

Provide safe and reliable products
and services

Head Office Environment Committee;
Manufacturing Planning Center, Safety andEnvironmental Promotion Department

Manufacturing Planning Center,
Quality Control Department• Reduced unit volume of waste generation
by 2.5%• Reduced unit volume of energy consumption by 4.7%
• Suppressed VOC gas emissions by 66.7%(compared to fiscal 2000)• Conducted energy conversion to LNG byusing ESCO at Wakayama Plant• Held QC Circle activities and conventionsin Japan and overseas• Convened a product quality case study
exhibition• Implementation of an assessment of
product conformity to standards• Updated the information management
system for chemicals used as raw materials

Human Rights/Labor/Safety

Social Contribution

Information Disclosure

Allow employee growth throughtheir work, and provide safe, dynamic
workplaces

Recognize the importance of communication with society, individual
contributions to the community, andcompany-wide contributions to society for environmental preservation

Timely and proper information
disclosure to stakeholders• Held lectures for affiliates about the Bando
Group Code of Conduct• Installed a system to detect tamperingon our websites, and taught information
security using e-learning

Head Office Health and Safety Committee;
Human Resources Department;
Manufacturing Planning Center, Safety
and Environmental Promotion Department• Held mental health classes and walking
activities• Enhanced training programs for eachcareer stage and position• Health and safety education and installationof disaster simulation equipment (Threework-related injuries resulted in lost time
during the fiscal year under review)BANDO CHEMICAL INDUSTRIES, LTD.

Fiscal 2014 emission target: 150 t

150

The Group engaged in various activities in line with six CSR promotion themes.

Legal Compliance Committee

FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 FY2013 FY2014

In fiscal 2014, at the Wakayama Plant we started using air conditioning
using exhaust heat. Although this reduced the energy consumption by 3.6%
compared to the previous fiscal year, we failed to reach our target volume
of energy consumption.

200

CSR Promotion Themes and Major Achievements in Fiscal 2014

Waste generation (t)35,00025,000

The Bando Group’s CSR promotion system is led by the Company’s
CSR Promotion Committee.
Chaired by Bando’s executive in charge of CSR, the CSR
Promotion Committee decides on CSR policy for the entire Group,and monitors committees established for each CSR promotion
theme as well as the CSR functions of individual departments. The
Committee is also responsible for prioritizing issues, tracking the
progress of CSR activities, promoting public information disclosure,and interacting with stakeholders.

(t)
8,000

Energy consumption (KL/GJ)

General Administration Department

Finance and Accounting
Department; General
Administration Department• Supported volunteer activities• Participated in activities organized by local
resident associations, and cleanup, public
safety and disaster prevention initiatives• Conducted tours of Company facilities• Convened procurement policy briefings• Published periodic CSR reports andbusiness reports, and provided information
via the Group’s websites• Held investor relations briefings

00

FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 FY2013 FY2014

FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 FY2013 FY2014

In fiscal 2014, we updated our VOC detoxification facilities and ensured
proper VOC handling. In so doing, we achieved a 61% reduction in VOC
compared with fiscal 2000, exceeding the industry’s target of 50%.

We identified materials we handle that are listed in the Pollutant Release
and Transfer Register, and are working to reduce their use mainly byappropriate management and substituting other materials.

Environmental Accounting
The Company uses environmental accounting tools to determine and manage overall environmental costs, effectiveness,and volumes.
(¥ thousand)Environmental Conservation Costs

Pollution control
Business Global environmental
area costconservation
Resource recycling

Fiscal 2012

Fiscal 2013

Fiscal 2014

Depreciation
andCapitalamortization+
personnel
investment
expenses +overhead

Depreciation
andCapitalamortization+
personnel
investment
expenses +overhead

Capitalamortization
investment + personnel

Depreciation
andMain projects in fiscal 2014

expenses +overhead

7,387

68,024468

76,425

13,70859,535

Revamped underground tank, installed
dirt collector

97,8203,976

14,770

5,091

3,344

3,623

Switched to LED lighting, updated
facilities

0172,594686

217,480

847

166,114

Upstream/downstream cost

0

0

0

0

0

0

Administration cost

0

11,231035,063023,350

Monitored and measured environmental
burden, operated management systems

10,56034,033031,354

029,493Developed products with reduced
environmental burden

168

9,590

3,715

8,396

0

5,634

Greening and beautification costs,
environmental and social activities

R&D cost
Social activity cost
Environmental remediation cost
Total

0

0

0

722

0

1,177

115,936

299,448

19,640374,532

17,899288,927

Industrial waste treatment and disposal(¥ thousand)Environmental conservation benefit
Business area
Upstream/downstream
Other
Total

Fiscal 2012
51,1950247
51,442

Fiscal 2013
59,518083
59,601

Fiscal 2014
20,0770
0
20,077

Annual Report 201529

Corporate Governance

Basic Stance on Corporate Governancemonth. All of the Company’s audit & supervisory

In order to improve corporate value, the actions ofand monthly management conferences. Moreover,

the Company are based on an adherence to the law

the Audit & Supervisory Board assigns individual

and social norms as a member of society. In addition,

audit & supervisory board members to attend various

the Company recognizes the importance of building

internal committee meetings and conduct hearings topositive relationships with customers (end users),

determine the operational status of subsidiaries whencurrent and potential investors, business partners, local

deemed necessary. Through these and other actions,communities and others. Accordingly, the Company

the audit & supervisory board member system is able

focuses on ensuring sound, transparent and efficient

to fully monitor the performance of directors andmanagement by enhancing its corporate governancecorporate executive officers. In the fiscal year ended

system.

March 31, 2015, the Audit & Supervisory Board met 13
times, with the three external audit & supervisory board

Board of Directors
The Company maintains a system centered on
directors and audit & supervisory board members toensure management efficiency and to strengthen its
audit and supervisory functions. The Company’s Board

members attending 97% of those meetings.

Nominating Committee and Compensation
Committee
Despite having no legal obligation under theof Directors consists of six directors, including two

Companies Act, the Company has established theexternal directors (as of June 2015). The Board makes

Nominating Committee and Compensation Committee

decisions concerning basic management policies,

to serve as consultative bodies of the Board ofimportant management issues, and legally stipulated

Directors in an effort to further strengthen corporate

matters, as well as monitoring the work performance

Numberof
Personsboard members attend Board of Directors’ meetings

governance.

of directors and corporate executive officers. As a

Decisions regarding director appointments andrule, the Board meets once per month. In addition,compensation are made by a resolution of the Board

the Company maintains a corporate executive officer

of Directors following deliberations by the Nominating

system to improve operational efficiency and speed,

and Compensation committees. In addition, theseand has established the Management Advisory Council

committees include the external director and external

to assist the president with management decisions. In

audit & supervisory board members who have been

the fiscal year ended March 31, 2015, Board of Directors

designated as independent executives to maintain

Meetings were held 15 times, with the external director

a highly transparent system for making decisions

attending 100% of those meetings.

about director nominations and compensation. In the

Directors
Audit &
Supervisory
Board
Members8

Total
Compensation

Compensation
Limit¥93 million¥240 million
or less annually

The Company has adopted an audit & supervisoryboard member system. The Audit & Supervisory Board
consists of one internal and three external audit &supervisory board members. The internal audit &To meet the requirements stipulated in the Financial
Instruments and Exchange Act pertaining to financial
reporting performed by internal control reporting
systems, the Bando Group maintains internal control in

5¥54 million¥7 million
or less monthly

accordance with the basic frameworks for internal control outlined in Financial Services Agency criteria, andundertakes evaluations and reporting as defined bysaid criteria. The Company will work to further improve

Total

13

the effectiveness of internal control primarily through¥146 million

the Internal Control Promotion Office and based on
Notes:
1. ‌As of March 31, 2015, there are five directors (including one external director)
and four audit & supervisory board members (including three external audit &supervisory board members)
2. ‌The numbers above include three directors who resigned at the conclusion of
the ordinary general meeting of shareholders held on June 24, 2014, and one
audit & supervisory board member who retired on April 27, 2014.

the four objectives of internal control: (1) reliability offinancial reporting, (2) operational effectiveness andefficiency, (3) legal compliance regarding businessactivities, and (4) asset protection.

3. ‌The total amount of external director and external audit & supervisory board
member compensation listed above is as follows.
One external director: ¥8 million
Four external audit & supervisory board members: ¥34 million
4. ‌The total amount of director compensation includes performance-relatedsalary based on the Company’s performance-related salary criteria (for full-timebasis directors only) for the fiscal year ended March 31, 2015. Performancerelated salary will not be paid for the fiscal year ended March 31, 2015 because
the performance did not satisfy the criteria.
5. ‌In addition to the above-listed information, salaries and bonuses for employees who concurrently serve as directors are as follows.
Three employee salaries: ¥34 million
Two employee bonuses: ¥11 million

Basic Stance on the Elimination of Antisocial
ForcesThe Group takes stringent measures to eliminate
antisocial forces by investigating prospective business
partners prior to commencing new transactions basedon relevant Group policies and the Bando Group Code6. ‌In addition to the above-listed information, retirement benefit for a retired
director was paid pursuant to the resolution at the ordinary general meetingof shareholders held in 2004 as below.
One director: ¥71 millionof Conduct, which stresses the overriding importanceof adhering to the law and corporate ethics. In
addition, the Group maintains an internal reporting

Management organization and corporate governance
General Meeting of Shareholders
Election

Electionof director and audit & supervisory board member
compensation is shown below.

MonitorCompensation Committee

Audit & Supervisory Board/
Audit &
Supervisory Board Members

Nominating Committee

Audit

President/
Corporate Executive Officers

supervisory board member and one external audit &supervisory board member serve on a full-time basis.

Appointment

Board of Directors

fiscal year ended March 31, 2015, the total amount

Audit & Supervisory Board

Internal Control

Accounting Auditors/
Certified Public Accountants
Accounting
audit

Executive Organizational Units

The Audit & Supervisory Board Meeting is held every

30

BANDO CHEMICAL INDUSTRIES, LTD.

Annual Report 201531

Corporate Governancesystem to thoroughly raise awareness of the necessityof avoiding any actions that are illegal or contrary to

Information Disclosure

corporate ethics. In the event that a business partner

The Company promotes fair and highly transparent

is revealed to be an antisocial organization, the Groupmanagement by disclosing important information in anwill immediately dissolve its relationship with thisappropriate and timely manner to shareholders and allorganization.

other stakeholders.

Management (As of June 23, 2015)

Board of Directors

The Company maintains PR functions thatCompliance Promotion

include timely information disclosure by the General
Administration Department. In addition, the Company

The Group has formulated and distributes to all

has established a system to facilitate the timely disclo-

Group executives and employees the Bando Groupsure of information to stock exchanges and discloses

Code of Conduct, which stipulates proper actions insuch information on the Company website.

such areas as “compliance with laws and corporate
ethics,” “product and service safety,” “honest andfair business activities,” and “fair and equitableprocurement transactions.” In addition, the Group

President andRepresentative Director:

Representative Director:

Director:

Yoshihisa Tamagaki

Kyosuke Nakamura

Director:

External Director:

External Director:

Shinji Kashiwada

Yutaka Kato

Takashi Shigematsu

Mitsutaka Yoshii

works to raise awareness of compliance by designating
October as the Bando Group Corporate Ethics Month,conducting training sessions on the Bando Group
Code of Conduct at Company business facilities ordomestic and overseas affiliates every other year,
and providing opportunities to discuss these topics
internally. Moreover, the Group has established asystem to further promote compliance by adopting aninternal reporting system that includes external lawyers
as well as a service for providing information on theformulation, revision and abolition of relevant laws.

Internal Audits
The Company has established the Internal Audit
Department, an independent organization that

Audit & Supervisory Board Members

Corporate Executive Officers

president. The Internal Audit Department implements

Audit & Supervisory Board Member:(full-time)

President:

Executive Officers:systematic and comprehensive internal audits (which

Shinichiro Miyamoto

Mitsutaka Yoshii

Yoshitaka Oshima

is staffed by four people reporting directly to the

Senior Executive Officers:

Shinji Kashiwada

ments as well as domestic and overseas affiliates.

External Audit & Supervisory Board Member:(full-time)

Yoshihisa Tamagaki

Joseph David Laudadio

Accompanied by audit & supervisory board members,

Takahiro Matsusaka

Masao Ohara

Katsuhiko Hata

External Audit & Supervisory Board Members:

Keiji Iwai

Katsuya Yamaguchi

Hiroshi Kii

Masayuki Kitabayashi

Takayuki Nagase

Toru Tada

Hisashi Samejima

Kazuyuki Mamba

Kyosuke Nakamura

Satoshi Matsuo

include the internal control system) of all depart-the Internal Audit Department conducts on-site audits
within the Company and at affiliates, the results ofwhich are reported to the president, directors andaudit & supervisory board members.

32

BANDO CHEMICAL INDUSTRIES, LTD.

Annual Report 201533

Message from Bando’s External Director

Supporting global growth and transition
to a new stage of management, aiming tomaximize corporate value

Yutaka Kato
External Director

In June 2015, the Corporate Governance
Code was officially announced in Japan. I
provide support for venture companies andmanagement guidance for Japanese andforeign companies as a business scholar anda specialist in managerial accounting and cost accounting. Drawing from my experience in thesecapacities, I believe the reforms in corporate governance taking place in Japan are a logical step
forward for Japanese companies.
Bando is moving in a direction that agrees with the Corporate Governance Code. Whilecollaborating with newly appointed External Director Takashi Shigematsu, I will do my best toeffectively support decision-making on such issues as management strategy, Bando’s unwaveringcommitment to global business development, and the launch of new businesses.
Lately, it has become more important for listed companies to work closely with stakeholders
other than their shareholders, including employees, customers, suppliers, creditors and local
communities, in order to continue growing and enhance corporate value over the medium- andlong- terms. In this regard as well, I vigorously support the efforts of Bando.
Bando continues to engage in CSR activities, and I think that the Company has put in place
an effective platform for collaborating with their stakeholders. Among Bando’s initiatives, I would
like to highlight the Company’s decision in 2014 to launch a comprehensive industry-academia
relationship with Kobe University, and its participation in the Cabinet Office Strategic Innovation

Management’s Discussion and Analysis

Operating Environment
During the fiscal year ended March 31, 2015, theUnited States economy steadily recovered due toimproved employment conditions and a rebound inpersonal consumption. In Europe, although the region
faced geopolitical risks and sovereign debt problems,
there were signs of economic recovery. On the other
hand, in ASEAN and China, there was a generalslowing of growth, and, notably in Thailand, economic
stagnation continued due to political instability. In
Japan, while there was a reactive decline to last-minutedemand before the consumption tax increase, the yen
continued to depreciate and stock prices rose amid aneasing of monetary policy and the economy remainedon a modest recovery track through the second half.
Automotive is a key market for the Bando Group.
Despite firm automobile production in the UnitedStates and China, there was a substantial decreaseof production in Thailand. In Japan, harsh conditions
continued with a decrease in automobile production
and an increase in the production of beltless vehicles,
especially hybrid vehicles. Meanwhile, in the industrial machinery field, domestic demand for capital
investment remained strong, but the housing andarchitectural field, a major market for high-performancefilm, suffered a protracted slump in demand after the
consumption tax increase.

Business Overview
Under these market conditions, the Bando Group,in line with the second year of the first stage of our
mid-to-long term business plan “Breakthroughs forthe future,” from fiscal 2013 to fiscal 2022, sought toachieve its aspirations for fiscal 2022, and aggressively

Net sales*
Net sales*

80,00086,37286,37285,77285,772are closely related with the development of the new businesses that will carry the future for Bando.

40,000(¥ million)
6,000(¥ million)
6,000

5,056
5,056

5,518
5,518
4,571
4,571

4,000

4,095
4,095

4,797
4,797

2,000

40,0002,000
20,00020,000

0

2011
2011

2012
2012

* Fiscal year endings are March 31.

BANDO CHEMICAL INDUSTRIES, LTD.

95,396
95,39660,000034

93,43493,4344,000
60,000new stage of a sustained increase in corporate value.

As a result of our efforts, consolidated net sales in thefiscal year ended March 31, 2015 increased 2.1% year
on year to ¥95,396 million, buoyed by the effects of
weaker Japanese yen exchange rates.
Operating income decreased 13.1% to ¥4,797
million. This was due to an increase in personnel following the expansion of our global production system,
an increase in labor costs due to a rise in actuarial
differences pertaining to retirement benefit obligationsin Japan, and other factors, offset by the effects of cost
cutting and a higher sales gross profit margin.
The cost to sales ratio improved 0.1 point to 73.4%,
but the SG&A ratio rose 1.0 point over the previous
fiscal year due to an increase in labor costs. As a result,the operating margin decreased 0.9 point to 5.0%.
Net income declined 12.2% year on year to ¥3,757
million, mainly due to a decrease in operating income
and the booking of an extraordinary loss owing to an
impairment loss on fixed assets.

80,000

Promotion Program (SIP). Both of these initiatives entail cooperation with public institutions andWhen these initiatives coalesce into Bando’s growth, I believe Bando will have transitioned to a

84,811
84,811

Operating Results

Operating income*Operating income*(¥ million)(¥100,000
million)
100,000

worked to meet targets in the plan based on fiveguidelines including “evolution of global market
strategy.”Specifically, the Bando Group focused on
expanding its production capacity in China and Asia,
proactively carrying out its marketing activities, reinforcing its sales system for the Hyper Flat Drive (HFD®)
System, which won the Grand Prize for Excellence inEnergy Efficiency. We also focused on creating new
products and businesses, including the start of new
product development through industry, university, andgovernment cooperation.

2013
2013

2014
2014

2015
2015

0
0

2011
2011

2012
2012

2013
2013

2014
2014

2015
2015

Annual Report 201535

Management’s Discussion and Analysis

Operating Results by Business Segment
Belt Business
Sales of automotive accessory drive power transmission
belt and system products increased overall due to continued brisk sales in the United States and China, despite
decreased automobile production in Japan and Thailand.
Sales of variable speed belts for scooters increasedon continued market growth for two-wheeled vehicles
in Asia.
Sales for industrial power transmission belt
products also increased buoyed by strong demand forcapital investment in Japan and the success of locally
based sales.
Sales of belts for agricultural machinery decreased
due to the temporary suspension of subsidies for thepurchase of agricultural machinery in China and lower
demand for agricultural machinery caused by politicalturmoil in Thailand.
Overseas sales of conveyor belts for resource
development declined, despite strong sales of conveyor belts for steel in Japan.
Sales of resin conveyor belts (SunlineTM Belts)
were strong in Japan’s distribution field.
Segment net sales increased 0.8% year-on-yearto ¥78,101 million, and segment profit fell 15.1% to¥4,155 million.

Elastomer Products BusinessIn precision performance products, sales of cleaning
blades declined due to in-house production by major
customers, but strong sales of precision belts used
in office machinery and new high-performance roller
products contributed to sales growth. Sales of precision
polishing products, which had been promoted to the

Net income*

optoelectronics market, gradually increased.
In high-performance film products, despite salesof new premium wall covering film products, sales offilm used in construction materials decreased due toprotracted sluggish demand in the housing market following the consumption tax increase. In light of these
deteriorating market conditions, the Company had an
impairment loss on fixed assets of the Nankai Plant
where it manufactures high-performance film products
and recorded an extraordinary loss of ¥410 million.
Segment net sales increased 4.8% year-on-yearto ¥15,713 million, and segment profit rose 16.9% to¥329 million.

Other Business
Bando is engaged in other business, such as the
manufacture and sales of robot-related devices. Salesin other business grew 18.6% year-on-year to ¥2,646
million. Segment profit increased 5.7% to ¥198 million.

Total assets as of March 31, 2015 increased ¥5,077 million to ¥94,700 million compared with the previous fiscal year-end. This was due to a ¥3,578 million increasein cash and cash equivalents (current assets) and a ¥915
million increase in other asset, largely reflecting a risein share prices of investments in securities.
Total liabilities decreased ¥2,422 million comparedwith the previous fiscal year-end to ¥37,923 million.
Current liabilities decreased ¥813 million, and long-term
liabilities fell ¥1,608 million due to a decrease in net
defined benefit liability.
Net assets increased ¥7,500 million from theprevious fiscal year-end to ¥56,777 million.

Net assets

4,280
3,757

Total assets

82,90580,00079,65982,20789,623

3,333
3,000

2,000

40,0001,440

40,54239,4442011

2012

43,22649,27720,0001,000

094,70056,77760,000

2,510

2011

2012

2013

2014

2015

Capital investment undertaken in the fiscal year-ended
March 31, 2015 totaled ¥4,198 million. Major capital
investment items are shown below. The financing
required was obtained from the following sources: theCompany’s own funds, the liquidation of notes andaccounts receivable, and borrowings.
Business
Segment

Amount(¥ million)

Main Activities¥2,688Installed new-and expanded or
upgraded-existing manufacturing
equipment, upgraded molds

Elastomer
Products

645

Streamlined and improved theenergy efficiency of manufacturing
equipment, improved manufacturing processes

Other

864

Installed new and expanded or
upgraded system and researchequipment

Total¥4,198Financial Position(¥ million)
100,000

4,000

Capital Investment andFund Procurement

Belts

Net assets
Total assets*(¥ million)
5,000

Retained earnings increased ¥3,386 million due
partly to the booking of net income, and accumulated
other comprehensive income increased ¥4,127 million
largely on foreign currency translation adjustments. As aresult, the equity ratio increased 5.0 percentage points
from 54.4% at the previous fiscal year-end to 59.4%.

0

2013

2014

Cash Flow
Net cash provided by operating activities totaled¥8,061 million, compared with ¥6,459 million in the previous fiscal year, with the recording of income before
income taxes and minority interests of ¥5,320 million
and depreciation and amortization of ¥4,386.
Net cash used in investing activities was ¥3,931
million, compared with ¥5,038 million used in the previous fiscal year. This was primarily due to the bookingof ¥2,945 million in expenses for purchase of property,
plant and equipment.
Net cash used in financing activities was ¥2,472
million, compared with ¥1,548 million in the previous
fiscal year, largely reflecting cash dividends paid
totaling ¥941 million and the decrease in short-termborrowings of ¥763 million .
As a result, cash and cash equivalents as of March

31, 2015 totaled ¥15,697 million, up ¥2,715 million
compared with the previous fiscal year-end.

Earnings Forecasts for the Year Ending
March 31, 2016
The macro economy in the year ending March 31,
2016 is expected to remain on a moderate growthpath, despite continued economic growth in ASEAN.
Depending on financial market trends in China, there
are concerns that growth could further slow.
Meanwhile, a strong U.S. economy is expected on
improved unemployment and strong consumer spending, while in Japan, improved employment conditions
and a rebound in consumer spending are expected.
Moreover, we foresee continued robust growth in
the year ahead for our principal customer segment, theautomotive industry, on increased global production
volumes for automobiles and two-wheeled vehicles.
Based on this prognosis, the Group will takepriority measures in the third year of the “Breakthroughsfor the future” mid-to-long term business plan. We
forecast consolidated net sales of ¥100,000 million, up
4.8% year on year, operating income of ¥5,800 million,
up 20.9%, and net income of ¥4,500 million, up 19.7%.

Basic Policy Regarding
the Distribution of Profits
The Company’s basic policy is to enhance profits andmaintain stable dividend payments to shareholders
while taking into consideration its earnings position. In
addition, distribution of profits is based on an examination of total shareholder returns, including share repurchases. Internal reserves are invested over the longterm in such areas as R&D; new product, production
technology and market development; the strengthening of business structure; internationalization; and the
expansion into new business domains. Through these
initiatives, we will work to further increase corporate
value. In line with this basic policy, we paid a yearend dividend of ¥5 per share for the fiscal year ended
March 31, 2015, the same as the previous fiscal year,
and an annual dividend of ¥10 per share including theinterim dividend, also the same as the previous fiscal
year. We plan to pay a dividend of ¥12 per share, a ¥2
increase, in the fiscal year ending March 31, 2016.

2015* Fiscal year endings are March 31.

36

BANDO CHEMICAL INDUSTRIES, LTD.

Annual Report 201537

Business Risks

Message from the CFO

The Group considers the following to be important risks related to the performance and financial

Maintaining and improving a healthyfinancial position in support of the“Breakthroughs for the future"business plan

position of the Bando Group that could have a material effect on the decisions of investors. The
forward-looking statements listed in this document are based on judgments made by the Group asof March 31, 2015.

Increasing Overseas Transactions
The Group primarily uses foreign exchange contracts

Raw Material Market Fluctuations andProcurement

to hedge the risks associated with the significant

The Group negotiates with business partners regarding

number of foreign currency receivables it currently

delivery dates and prices by closely examining market

carries, and will implement other appropriate measures

prices as well as supply-demand circumstances, but

to hedge against such risks in the future. Nevertheless,there could be sharply rising raw material prices

the Group’s performance could be adversely affectedaccompanying higher crude oil prices. Accordingly,

by fluctuations in foreign currency exchange rates.

the Group promotes research on alternative materials

In addition, the Group’s performance and finan-

to stabilize supply and demand; revises and increases

cial position could be adversely affected by changes

product prices in response to rising raw material

in economic conditions in individual regions, despite

prices; and strengthens measures to reduce overall

efforts to strengthen its overseas production and sales

costs. Nevertheless, the Group’s performance could

systems.

be adversely affected by a downturn in demand, or
prolonged increases in material and/or fuel prices that

Recalls
As a components manufacturer, the Company delivers
items to automotive, office automation equipment,
consumer product and other manufacturers.

exceed expectations.

Earthquakes and Other Natural Disasters
There are indications that a major earthquake could

In addition, its subsidiaries and affiliates mainly

occur in the Tokai, Tonankai or Nankai regions of

manufacture, process and sell these parts. Considering

Japan. In addition, the potential for typhoons andproduct quality to be of paramount importance forfloods exists. In the event of such a disaster, businessmaintaining and developing current business oper-

sites including the Nankai Plant could sustain damage

ations, the Group focuses on implementing various

to production or other facilities, potentially leading toinitiatives to ensure product quality to the maximum

a temporary cessation of operations. Accordingly, eachextent possible. However, recalls and other actionsof the Company’s four plants has formulated a businesscould arise in cases where defects in automobiles andcontinuity plan (BCP) based on the assumption that

other items are caused by products (components)

it could be damaged under such circumstances.

supplied by the Group.

The BCPs include creating mechanisms to minimize

In such cases, the Group will likely be required todisruptions to operations, notably the formulation ofcover all obligatory legal or contractual costs of recalls

repair plans and the supplementary supply of products

and other actions, which could adversely affect theby overseas plants. Nevertheless, the Group’s perfor-

Group’s performance.

mance could be significantly impacted by disasters,
depending on the size of the disaster.

38

BANDO CHEMICAL INDUSTRIES, LTD.

The Bando Group has set the following specific targets
under the first stage of the “Breakthroughs for the
future” mid-to-long term business plan.
‌Consolidated targets in the final year of BF-1

in the mid-to-long term plan
Fiscal 2017 net sales¥100 billion

Fiscal 2017 operating income¥10 billion

Fiscal 2017 ROA

6.0 %The following guidelines will drive our business tomake these targets: 1) Evolution of global market
strategy, 2) Product evolution, 3) Evolution in manufacturing, 4) New businesses creation, and 5) Evolution in
management quality. In my role as CFO, I am focusing
my attention on efficiently raising the funds necessary
for strategic investment to maintain and improve ourhealthy financial position, based on the fifth guideline
on evolution in management quality. During the fiveyear BF-1, we plan total capital investment of ¥25,000
million and will also invest ¥5,000 million in R&D
to support the development of new businesses, inaddition to our normal R&D investment.
We have diversified our fundraising methods
since we were rated* by the credit ratings agency
Rating and Investment Information, Inc. in fiscal 2007.
We aim to choose the optimum fundraising methodby contrasting the characteristics of the target investment with the interest rate and foreign-exchange
trends on the market.
* Rating as of March 31, 2015: BBB+ (Issuer Rating)/a-2 (Short-term Rating)

Healthy financial position
Cash balance exceeds interest-bearing debt
We have improved our cash balance to the extent
that it exceeded our interest-bearing debt by theend of fiscal 2014. This was achieved through cash
flows generated by strategic investment in growth

Yoshitaka Oshima
Executive Officer, andChief Financial Officer

products, defined through stronger management ofour global portfolio, although our net interest-bearing
debt was ¥2,600 million in fiscal 2013. We also aim to
maintain this trend from now on.

Improving the equity ratio
The equity ratio reached an all-time high of 59.4%,
due to contributions from net income of ¥3,757
million and an increase in foreign currency translation
adjustment of ¥3,024 million.

Achieving our ROA target,
and ROE
Strategic investment is necessary for growth, but wemust invest judiciously if we are to maintain a healthyfinancial position. Our ROA target of 6% is based on
total assets of around ¥100,000 million when operating income reaches ¥10,000 million (¥6,400 million
on a net income basis). Accordingly, we will monitor
and control any change in assets such that there is no
significant increase in the balance of total assets fromthe ¥94,700 million as of March 31, 2015. If we achieve
our ROA target, past trends suggest that ROE could
surpass the previous all-time high of 12.3% in fiscal
2007, although this is not a direct target indicator for
us. Our ROE in fiscal 2014 was 7.2%, and basically andessentially we aim to maintain a value of 10% or more.

Managing financial risk
We cannot ignore political change and other geopolitical risk that may impact our subsidiaries overseas,
as well as foreign exchange and interest rate risk inJapan, including measures to counter the strong yen
and a reversal of low interest rates. To hedge against
such risks, we gather information from a consolidated
business management perspective and need torespond rapidly to unusual events. We are steadily
working on this and trying to prepare countermeasures based on various hypothetical scenarios.

Annual Report 201539

Consolidated Balance Sheets
Bando Chemical Industries, Ltd. and Consolidated Subsidiaries
March 31, 2015 and 2014

Thousands of
U.S. dollars(Note 4)

Millions of yen

2015

Assets2014

2015

Time deposits (Note 6)

Millions of yen

2015

2014

2015

¥ 2,739¥ 3,348$ 22,797

1,996

2,238

16,616

		Trade11,254

13,41893,667

Liabilities and Net Assets
Current Liabilities:

Current Assets:
Cash and cash equivalents (Note 6)

Thousands of
U.S. dollars(Note 4)

¥ 15,697¥ 12,981$ 130,647

502

211

4,177

Short-term borrowings (Notes 6 and 9)
Current portion of long-term debt (Notes 6 and 9)
Notes and accounts payable (Note 6):

Notes and accounts receivable (Note 6):
		Trade18,35818,815

152,788

		Other

87

1,077

722

		

Electronically recorded obligations — operating

3,035

749

25,257

		Electronically recorded monetary claims — operating

965

90

8,033

		

Construction and other

3,131

2,526

26,056

		Allowance for doubtful accounts

Inventories (Note 5)
Deferred tax assets (Note 11)
Other current assets
Total Current Assets

(31)

(31)

(258)

11,801

10,811

98,220

606

656

5,043

1,135

931

9,446

49,12045,541

408,818

Income taxes payable (Note 6)

431

1,364

3,590

3,385

3,142

28,17525,971

26,785

216,158

Long-term debt (Notes 6 and 9)

9,801

10,202

81,575Net defined benefit liability (Note 10)

2,058

3,160

17,132

93

199

769

11,952

13,561

99,476

10,952

10,952

91,152

Capital surplus

2,968

2,968

24,705Retained earnings

38,74035,353

322,427

(114)

(102)

(956)

52,54649,171

437,328

2,061

1,498

17,152

(0)

4

(2)

Other current liabilities (Notes 6 and 11)
Total Current Liabilities
Long-term Liabilities:

Other long-term liabilities (Notes 6 and 11)
Total Long-term Liabilities

Property, Plant and Equipment:
Land

6,768

6,644

56,328

Buildings and structures

27,892

26,824

232,147

Machinery and equipment

56,79754,729472,720

Construction in progress

1,349

718

11,224

Other

13,442

12,840111,874

106,248

101,755884,293

Accumulated depreciation(75,158)(70,933)(625,537)

Property, Plant and Equipment, Net

31,09030,822

258,756

Net Assets (Note 12):
Common stock		

Authorized: 378,500,000 shares		Issued 2014 and 2015 — 94,427,073 shares

Treasury stock, at cost		2014 — 347,060 shares		2015 — 378,000 shares

Total Shareholders’ Equity
Accumulated other comprehensive income
Other Assets:		

Unrealized gains on available-for-sale securities

Intangible assets

1,375

1,059

11,442

		

Deferred gains on hedges

Investments in securities (Notes 6 and 7)

6,262

5,513

52,121		Foreign currency translation adjustments

2,171

(852)

18,069Investments in affiliates (Note 6)

5,266

4,637

43,830		Remeasurements of defined benefit plans(504)(1,049)(4,189)Deferred tax assets (Note 11)

207

724

1,726

Total Accumulated Other Comprehensive Income

3,728

(399)

31,030

1,380

1,327

11,485

503

505

4,186

14,49013,260120,604

Total Net Assets

56,77749,277472,544¥ 94,700¥ 89,623$ 788,178

Total Liabilities and Net Assets¥94,700¥89,623$788,178

Other, net (Note 6)
Total Other Assets
Total Assets

Minority interests

See accompanying notes to consolidated financial statements.

40

BANDO CHEMICAL INDUSTRIES, LTD.

Annual Report 201541

Consolidated Statements of Income andConsolidated Statements of Comprehensive Income

Consolidated Statements of Changes in Net Assets
Bando Chemical Industries, Ltd. and Consolidated Subsidiaries
Years ended March 31, 2015 and 2014

Bando Chemical Industries, Ltd. and Consolidated Subsidiaries
Years ended March 31, 2015 and 2014
Millions of yen

Consolidated Statements of Income

2015

2014

2015

Net Sales
Cost of Sales
Gross profit¥95,396
69,99725,399¥93,434
68,71024,724$793,971
582,577
211,394

Selling, General and Administrative Expenses (Note 13)
Operating Income

20,602
4,797

19,206
5,518

171,466
39,928Other Income (Expenses):
Interest and dividend income
Interest expense
Equity in earnings of affiliates
Foreign exchange gains (losses), net
Loss on disposal of property, plant and equipment
Impairment loss (Note 17)
Other, net
Income before income taxes and minority interests
Income Taxes (Note 11):
Current
DeferredIncome before minority interests
Minority Interests
Net Income

188
(290)
504
238
(85)
—
64
619
6,137

220
(320)
646
223
(42)
(410)
206
523
5,320

1,831
(2,666)
5,374
1,855
(346)
(3,412)
1,717
4,353
44,281

1,503
(33)
1,470
3,850

1,946
(180)
1,766
4,371

12,517(278)
12,23932,04293¥ 3,757

91¥ 4,280764$ 31,278

2014

2015
¥39.9510.00¥45.49
10.00

2015
$0.33
0.08

See accompanying notes to consolidated financial statements.

Thousands of
U.S. dollars(Note 4)

Millions of yen

Consolidated Statements of Comprehensive Income

2015

2014

2015

Income before Minority Interests
Other Comprehensive Income (Note 15):
Unrealized gains (losses) on available-for-sale securities
Deferred gains on hedges
Foreign currency translation adjustments
Remeasurements of defined benefit plans
Share of other comprehensive income in affiliates
Total other comprehensive income
Comprehensive Income¥3,850¥4,371$32,042

567
(1)
3,378
546
218
4,708
¥8,558

388
4
3,106
—
180
3,678
¥8,0494,721(11)
28,1174,540
1,817
39,184$71,226

Comprehensive Income Attributable to:Shareholders of the parent
Minority interests¥8,408150¥7,906
143$69,982
1,244

Millions of yen

Number ofshares ofcommonstock
outstanding

Commonstock

CapitalsurplusRetainedearnings

Treasurystock,
at cost94,427¥10,952¥2,968¥31,920¥ (90)¥1,107¥—¥(4,082)

Net income

—

—

—

4,280

—

—

—

Cash dividends

—

—

—

(847)

—

—

—

Purchases of treasury stock

—

—

—

—

(12)

—

Sales of treasury stock

—

—

0

—

0

—

Net change in the year

—

—

—

—

—

Balance at April 1, 2013

Balance at April 1, 2014

Unrealized
Foreign
gains oncurrency Remeasurements
available- Deferred
Minorityof defined
for-salegains on transaction
interests
securities
hedges adjustments benefit plans

¥

Total
net assets

—

¥451

¥43,226

—

—

—

4,280

—

—

—

(847)

—

—

—

—

(12)

—

—

—

—

0

391

4

3,230

(1,049)54

2,630

94,427

10,952

2,968

35,353

(102)

1,498

4

(852)

(1,049)505

49,277

Cumulative effects of changes
in accounting policies

—

—

—

149

—

—

—

—

—

—

149

Restated Balance
at April 1, 2014—

10,952

2,968

35,502

(102)

1,498

4

(852)

(1,049)505

49,426

Net income

—

—

—

3,758

—

—

—

—

—

—

3,758

Cash dividends

—

—

—

(941)

—

—

—

—

—

—

(941)

Purchases of treasury stock

—

—

—

—

(12)

—

—

—

—

—

(12)

Change in fiscal year-end of
consolidated subsidiaries

—

—

—

421

—

—

—

—

—

—

421

Net change in the year

—

—

—

—

—

563

(4)

3,023

545

(2)

4,125

Balance at March 31, 2015

94,427¥10,952¥2,968¥38,740¥(114)¥2,061¥ (0)¥ 2,171¥  (504)¥503¥56,777

Total
net assets

Thousands of U.S. dollars (Note 4)

U.S. dollars(Note 4)Yen
Per Share of Common Stock (Note 14)
Basic net income
Cash dividends

Thousandsof shares

Thousands of
U.S. dollars(Note 4)

CapitalsurplusRetainedearnings

Treasurystock,
at costUnrealized
Foreign
gains oncurrency Remeasurements
available- Deferred
Minorityof defined
for-salegains on transaction
interests
securities
hedges adjustments benefit plans$91,152 $24,705$294,242$(849)$12,471$ 31$ (7,096)$(8,729)$4,200$410,127

Commonstock

Balance at April 1, 2014
Cumulative effects of changes
in accounting policies

—

—

1,236

—

—

—

—

—

—

1,236

91,152

24,705295,478(849)

12,47131(7,096)(8,729)4,200

411,363

Net income——

31,278

—

—

—

—

—

—

31,278Cash dividends——(7,834)

—

—

—

—

—

—

(7,834)Purchases of treasury stock

—

—

—

(107)

—

—

—

—

—

(107)

Change in fiscal year-end of
consolidated subsidiaries

—

—

3,505

—

—

—

—

—

—

3,505

Net change in the year

—

—

—

—

4,681

(33)

25,165

4,540

(14)

34,339$91,152 $24,705 $322,427$(956)$17,152$ (2)$18,069$(4,189)

Restated Balance
at April 1, 2014

Balance at March 31, 2015

$4,186 $472,544

See accompanying notes to consolidated financial statements.

See accompanying notes to consolidated financial statements.

42

BANDO CHEMICAL INDUSTRIES, LTD.

Annual Report 201543

Consolidated Statements of Cash Flows

Notes to Consolidated Financial Statements

Bando Chemical Industries, Ltd. and Consolidated Subsidiaries
Years ended March 31, 2015 and 2014

Bando Chemical Industries, Ltd. and Consolidated Subsidiaries

Thousands of
U.S. dollars(Note 4)

Millions of Yen
2015

2014

2015

¥ 5,320¥ 6,137$ 44,281(2,480)(1,078)(20,640)

8

153

67

4,386

4,174

36,503

3

(27)

26

410

—

3,412

(5)

(18)

(46)

Increase (decrease) in liability for retirement benefits

24

(500)

201

Foreign exchange (gains) losses, net

(26)

25

(215)

Equity in earnings of affiliates

(646)

(504)

(5,374)

Cash Flows from Operating Activities:
Income before income taxes and minority interests
Adjustments for:
Income taxes paid
Income taxes refunded
Depreciation and amortization
Amortization of goodwill and negative goodwill
Impairment loss
Decrease in allowance for doubtful accounts

Loss on sales and disposal of property, plant and equipment

15

81

122

Gain on sales of investments in securities

—

(26)

—

Decrease (increase) in notes and accounts receivable — trade

559

(662)

4,649

Decrease (increase) in inventories

(282)

822

(2,345)

Changes in assets and liabilities:

Decrease in notes and accounts payable — trade
Other, net
Net Cash Provided by Operating Activities(557)(1,905)(4,638)

1,332

(213)

11,090

8,061

6,459

67,093(143)

59(1,190)(2,945)(4,934)(24,510)

67

17

558

Purchases of intangible assets

(502)

(164)

(4,175)Purchases of investments in securities

(16)

(20)

(132)

Proceeds from sales of investments in securities

12

59

101

Proceeds from redemption of investments in securities

—

100

—

(241)

(67)

(2,006)

Purchases of property, plant and equipment
Proceeds from sales of property, plant and equipment

Purchases of investments in subsidiaries
Other, net
Net Cash Used in Investing Activities

(163)

(88)

(1,365)(3,931)(5,038)(32,719)

Cash Flows from Financing Activities:(Decrease) increase in short-term borrowings

(763)

530

(6,347)

Proceeds from long-term borrowings

1,500

1,659

12,484

Payments on long-term borrowings(18,576)(2,232)(2,864)Purchases of treasury stock

(12)

(12)

(99)

Cash dividends paid

(941)

(847)

(7,834)

Cash dividends paid to minority shareholders

(4)

(3)

(37)

Other, net

(20)

(11)

(167)

Net Cash Used in Financing Activities(2,472)(1,548)(20,576)

Effect of Exchange Rate Changes on Cash and Cash Equivalents

1,053

841

8,769

Net Increase in Cash and Cash Equivalents

2,711

714

22,567

Cash and Cash Equivalents at Beginning of Year
Increase in cash and cash equivalents due to change
in fiscal year-end of consolidated subsidiaries
Cash and Cash Equivalents at End of Year12,981

12,267108,0425—

38¥15,697¥12,981$130,647

See accompanying notes to consolidated financial statements.

44

BANDO CHEMICAL INDUSTRIES, LTD.

Bando Chemical Industries, Ltd. (hereinafter, the “Company”) is apioneer belt manufacturer in Japan. The Company manufacturesand sells power transmission belts for automobiles, industrial
machines, agricultural machines, home appliances and information terminal devices, heavy and light duty conveyor belts, products for office automation and household appliances and films fora variety of markets.


2. Basis for Preparation of Consolidated Financial
Statements
The accompanying consolidated financial statements havebeen 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, which are different in certain respects as to application and disclosure requirements fromInternational Financial Reporting Standards.
In preparing these consolidated financial statements, certain
reclassifications and rearrangements have been made to thefinancial statements issued domestically in order to present themin a form which is more familiar to readers outside Japan. In addition, certain reclassifications have been made to the prior year’s
financial statements to conform to the current year’s presentation.


Cash Flows from Investing Activities:(Increase) decrease in time deposits

1. Description of Business

3. Summary of Significant Accounting Policies(1) Consolidation
The accompanying consolidated financial statements include theaccounts of the Company and its 25 subsidiaries (collectively, the“Companies”) as of March 31, 2015 (25 subsidiaries as of March
31, 2014).
Bando Machinery, Ltd. and BL Autotec, Ltd. merged on April
1, 2014. BL Autotec, Ltd. was the surviving company. As a result,
Bando Machinery, Ltd. was excluded from the scope of consolidation. Bando (Shanghai) Industry Equipment Element Co.,
Ltd. was founded on July 29, 2014 and included in the scope of
consolidation.
Investments in 7 affiliates, on which the Company has significant influence, are accounted for by the equity method as ofMarch 31, 2015 and 2014, respectively.
Previously, for 17 overseas consolidated subsidiaries with fiscal year-end of December 31, their financial statements as of thatdate were used in consolidation with necessary adjustments forthe significant transactions that took place between December 31
and March 31. Starting the year ended March 31, 2015, however,in order to aim at more proper disclosure of the consolidated
financial statements, those subsidiaries either changed their fiscal
year-end to March 31 or prepared preliminary financial statements
as of March 31.
As a result of this change, the period between April 1, 2014
and March 31, 2015 is included in the consolidated fiscal year
ended March 31, 2015. Earnings of the period between January
1, 2014 and March 31, 2014 are recorded directly in retained
earnings.
All significant intercompany balances and transactions
have been eliminated in consolidation. All material unrealized

profits included in assets resulting from transactions within the
Companies are eliminated.
(2) Foreign currency transactions
All monetary assets and liabilities denominated in foreign currencies are translated into Japanese yen at the exchange rate prevailing at the balance sheet date. The foreign currency exchange
gains or losses from transactions are charged to income.
Assets and liabilities of the overseas subsidiaries are translated
into Japanese yen at the exchange rate prevailing at each balance
sheet date. Income and expense accounts are translated at the
average exchange rate for the year. Differences arising from suchtranslations are recorded as foreign currency translation adjustments and minority interests in the consolidated balance sheet.
(3) Cash and cash equivalents
Cash and cash equivalents are composed of cash on hand,demand deposits, and short-term investments with original
maturities of three months or less that are readily convertible tocash and exposed to insignificant risk of fluctuation of values.
(4) Allowance for doubtful accounts
Allowance for doubtful accounts is provided at the amounts
calculated based on the past loss experience and an additional
estimate of potential losses in the specific receivables.
(5) Inventories
Finished goods, work in process and raw materials are statedat the lower of cost determined by the first-in, first-out method
or net selling value. Merchandise and supplies are stated at thelower of cost determined by the gross average method or net
selling value.
Meanwhile, inventories held by domestic consolidated subsidiaries are stated at the lower of cost determined principally by
the gross average method or net selling value. Inventories heldby overseas consolidated subsidiaries are stated at the lower ofcost determined mostly by the first-in, first-out method or net
selling value.
(6) Investments in securities
Investments in securities are classified into three categories: trading securities, held-to-maturity debt securities or available-for-salesecurities. Trading securities are carried at fair value. Gain or loss,
both realized and unrealized, is recognized in income. Held-tomaturity debt securities are carried at amortized cost. Marketablesecurities classified as available-for-sale securities are carriedat fair value with changes in unrealized holding gain or loss, netof the applicable income taxes, reported in net assets. Nonmarketable securities classified as available-for-sale securities arecarried at cost determined by the moving-average method.
(7) Property, plant and equipment
Property, plant and equipment except for lease assets are
depreciated principally by the declining-balance method overtheir estimated useful lives. Buildings acquired on or after April 1,
1998 by the Company and its domestic consolidated subsidiaries
are depreciated by the straight-line method over their estimateduseful lives. Useful lives are as follows: three to 50 years forbuildings and structures, and five to ten years for machinery andequipment.

Annual Report 201545

Notes to Consolidated Financial Statements

Goodwill represents the cost in excess of fair value of net assets
acquired in business combination accounted for by the purchasemethod. Goodwill and negative goodwill which occurred before
March 31, 2010 are amortized over five to ten years by thestraight-line method.

and payables denominated in foreign currencies are translated
at the contracted rates. The interest rate swap contracts which
qualify for hedge accounting and meet certain hedging criteria
are not measured at market value, but the differential paid or
received under the swap contracts is recognized and included ininterest expense.

(9) Other intangible assets(15) Per share information

Capitalized computer software costs for internal use are amortizedby the straight-line method over five years.

Net income per share is computed by dividing net income available to common shareholders by the weighted-average numberof common shares outstanding for the year.
Cash dividends per share presented in the consolidated
statements of income are dividends attributable to the respective
years including dividends to be paid after the year-end.

(8) Goodwill(10) Research and development costs
Research and development costs are charged to income as incurred.
(11) Leases
Leased assets under finance leases which do not transfer ownershipto the lessee are capitalized and depreciated or amortized by thestraight-line method with no residual value over their lease terms.
(12) Retirement benefits
Employees serving the Company and certain of its consolidated subsidiaries are generally entitled to retirement benefits
determined by reference to current basic rates of pay, lengthof service and conditions under which the terminations occur.
The Companies principally account for allowance for retirement
benefits based on projected benefit obligations and plan assets
at each balance sheet date. The retirement benefit obligations
are attributed to each period on a benefit formula basis overestimated years of the eligible employees.
Prior service cost is amortized by the straight-line method
over ten years from the year in which they arise.
Actuarial gain or loss is amortized by the straight-line method
over ten years from the next year in which they arise.
Certain consolidated subsidiaries adopt the simplified
method to calculate net defined benefit liability and retirement
benefit costs.
(13) Income taxes
The provision for income taxes is computed based on income
before income taxes in the consolidated statements of income. The
liability method is used to recognize deferred tax assets and liabilities for the future tax consequences of the temporary differences
between the carrying amounts of assets and liabilities for financial
and income tax reporting purposes. The Companies provide a
valuation allowance when they believe that deferred tax assets are
not recoverable based on expected future taxable income.
(14) Derivatives and hedging activities
The Companies use derivative financial instruments to manage
their exposures to changes in foreign currency exchange rates
and interest rates. Foreign currency forward contracts are used
to reduce foreign exchange risk. Interest rate swap contracts
are used to reduce interest rate risk. Interest rate and currency
swap contracts are used to reduce interest rate risk and foreignexchange risk. The Companies do not enter into derivatives for
trading or speculative purpose.
If derivatives are used for hedging purpose and qualify forhedging accounting, gains or losses on derivatives are deferred
until maturity of hedged items. If the foreign currency forward
contracts qualify for hedge accounting, the hedged receivables

46

BANDO CHEMICAL INDUSTRIES, LTD.

(16) Changes in accounting policies
Effective from the year ended March 31, 2015, the Company
and its consolidated domestic subsidiaries have applied the
Accounting Standard for Retirement Benefits (AccountingStandards Board of Japan (“ASBJ”) Statement No. 26, May 17,
2012 (hereinafter, “ASBJ Statement No. 26”)) and Guidance on
Accounting Standard for Retirement Benefits (ASBJ Guidance No.
25, March 26 2015 (hereinafter, “ASBJ Guidance No. 25”)) withrespect to provisions described in Article 35 of ASBJ Statement
No. 26 and Article 67 of ASBJ Guidance No. 25. As a result, theCompany has reviewed the calculation method of retirement
benefit obligations and service costs and changed the methodof attributing expected retirement benefit to service periods fromthe straight-line basis to the benefit formula basis. The Company
has also changed the method of determining the discount ratefrom the use of the period approximate to the average remaining
service period of employees to the use of a single weighted average discount rate reflecting the estimated timing and amount of
retirement benefit payments.
The Company applied the transitional treatment provided in
Article 37 of ASBJ Statement No. 26, and any impact as a result of
these changes are adjusted in the beginning balance of retained
earnings as of April 1, 2014.
As a result, the beginning balance of net defined benefit liability decreased by ¥231 million ($1,920 thousand) and the beginningbalance of retained earnings increased by ¥149 million ($1,236
thousand). The impact of these changes on operating income,ordinary income and income before income taxes and minority
interests for the year ended March 31, 2015 was insignificant.
Also, the impact of these changes on net assets per share asof March 31, 2015 increased by ¥1.61 ($0.01), and net income pershare for the year ended March 31, 2015 was insignificant.
(17) Accounting pronouncements that have not been adopted
by the Company• ASBJ Statement No. 21, “Accounting Standard for Business
Combinations” (September 13, 2013)• ASBJ Statement No.22, “Accounting Standard for Consolidated
Financial Statements” (September 13, 2013)• A SBJ Statement No.7, “Accounting Standard for Business
Divestitures” (September 13, 2013)• ASBJ Statement No.2, “Accounting Standard for Earnings Per
Share” (September 13, 2013)• ASBJ Guidance No.10, “Guidance on Accounting Standard forBusiness Combinations and Accounting Standard for Business

Divestitures” (September 13, 2013)• ASBJ Guidance No.4, “Guidance on Accounting Standard for
Earnings Per Share” (September 13, 2013)(a) Overview
These pronouncements amended mainly (a) treatment of changes
in a parent’s ownership interest in a subsidiary due to additionalpurchase of subsidiary’s shares that do not result in loss of control,(b) treatment of expenses related to acquisition, (c) presentation of
net income and change from minority interests to non-controllinginterests and (d) treatment of finalizing transitional accounting
treatment.
(b) Scheduled date of adoption
The Company expects to adopt these pronouncements effective
April 1, 2016.
The treatment of finalizing transitional accounting treatment
will be applied to business combinations to be executed after
April 1, 2015.
(c) Effect of adopting the standard
The Company is currently evaluating the amount of impact ofamendments to “Accounting Standard for Business Combination”
etc., on the consolidated financial statements.
(18) Changes in the method of presentation
For the year ended March 31, 2015, “Electronically recordedmonetary claims — operating” which was included in “Notes andaccounts receivable” for the year ended March 31, 2014 is separately presented because it became material. In order to reflect
this change, the consolidated financial statements for the year
ended March 31, 2014 were reclassified.
As a result, ¥90 million which was included in “Notes andaccounts receivable” of “Current Assets” for the year ended March
31, 2014 was reclassified as “Electronically recorded monetaryclaims — operating.”
For the year ended March 31, 2015, “Electronically recorded
obligations — operating” which was included in “Notes andaccounts payable” for the year ended March 31, 2014 is separately presented because it became material. In order to reflect
this change, the consolidated financial statements for the year
ended March 31, 2014 were reclassified.
As a result, ¥749 million which was included in “Notes andaccounts payable” of “Current Liabilities” for the year ended
March 31, 2014 was reclassified as “Electronically recorded
obligations — operating.”(Retirement benefit)
Following the amendment of Guidance on Accounting Standard
for Retirement Benefits (ASBJ Guidance No. 25, March 26 2015),
presentation of notes related to retirement benefits under themultiemployer plan was changed and the consolidated financial
statements for the year ended March 31, 2014 were reclassified.
Details of the reclassification and the corresponding amount for
the year ended March 31, 2014 for major accounts of the consolidated financial statements are presented in the relevant notes.
(19) Additional information
The Company and certain of its domestic consolidated subsidiaries have applied the consolidated taxation system from the year
ended March 31, 2015.

4. U.S. Dollar Amounts
The translations of Japanese yen amounts into U.S. dollar
amounts are included solely for the convenience of readers outside Japan. These translations should not be construed as representations that the Japanese yen amounts actually represent, or
have been or could be converted into U.S. dollars.
The rate of ¥120.15 = U.S.$1.00, the approximate rate ofexchange as at March 31, 2015, has been used for the purpose ofsuch translations.


5. Inventories
Inventories held by the Companies as of March 31, 2015 and 2014
consisted of the following:
Millions of yen

Merchandise and finished goods
Work in process
Raw materials and supplies
Total

Thousands of
U.S. dollars

2015

2014

2015

¥ 7,309
1,535
2,957¥11,801¥ 6,580
1,467
2,764¥10,811$60,832
12,77824,610$98,220



6. Financial Instruments(1) Policy for financial instruments
The Companies raise funds from stable and low-cost financing
sources, mainly bank borrowings and bonds, as needed in light of
the financial plan developed as a part of the annual management
plan. The Companies invest temporary cash surplus in highly liquidand secured financial instruments. The Companies use derivatives
to the extent necessary for financial risk management purposes.
(2) Nature and extent of risks arising from financial instruments
Receivables such as Notes and accounts receivable-trade,
Electronically recorded monetary claims — operating are exposed
to customers’ credit risk. Receivables denominated in foreign
currencies are exposed to foreign exchange risk.
Investments in securities, mainly equity instruments, areexposed to market risk. The Companies quarterly review fairvalues of marketable securities.
Payables such as notes and accounts payable-trade,
Electronically recorded obligations — operating are generally paid
within four months. Payables denominated in foreign currencies
are exposed to foreign exchange risk.
Bank borrowings and bonds are used to fund working capitaland capital expenditures. Some of them are exposed to interest
rate risk. The Companies reduce such risk arising from certain
long-term borrowings by interest rate swap contracts.
Derivatives include foreign currency forward contracts used tohedge foreign exchange risk on receivables and payables denominated in foreign currencies, and interest rate swap contracts used
to hedge interest rate risk on bank borrowings, and interest rateand currency swap contracts used to hedge interest rate risk andforeign exchange risk on bank borrowings.
(3) Risk management for financial instruments(a) Credit risk management
The Companies regularly monitor the financial position of customers to reduce the risk of defaults.

Annual Report 201547

Notes to Consolidated Financial Statements

Since the Companies enter into derivative transactions onlywith highly-rated financial institutions, they believe there is little
risk of defaults.
(b) Market risk management
The Companies use foreign currency forward contracts to hedge
foreign exchange risk identified by currency and month for receivables and payables denominated in foreign currencies. With
respect to investments in securities, the Companies regularly
monitor fair values and the financial positions of the issuers andreview the holding purpose of these securities.
(c) Liquidity risk management in financing activities
The Companies prepare and update the cash management plan
in a timely manner, and maintain a certain level of liquidity on
hand to reduce liquidity risk. The Companies have commitmentline contracts to prepare for any contingency.
(4) Fair values of financial instruments
Fair values of financial instruments include market prices andvalues calculated reasonably when market prices are not readily
available. As calculation of such value incorporates variablefactors, using different assumptions may result in different values.
The contract amounts and other information described in Note
8, “Derivatives” are not indicative of market risk exposure toderivative transactions.
Book values and fair values of the financial instruments as ofMarch 31, 2015 and 2014 were as follows:
Financial instruments whose fair values were not readily available were excluded from the following table:
Millions of yen
2015

Cash and cash equivalents
Time deposits
Notes and accounts receivable-trade
Electronically recorded monetaryclaims — operating
Investments in securities
Available-for-sale securities
Total
Notes and accounts payable-trade
Electronically recorded
obligations — operating
Short-term borrowings
Income taxes payable
Long-term borrowings
Bonds
Total
Derivative transactions
Contracts to which hedge
accounting was not applied
Contracts to which hedge
accounting was applied

Book value

Fair value

Difference¥15,697502
18,358¥15,697502
18,358

¥—
—
—

965

965

6,124
¥41,646¥11,254

6,124¥41,646¥11,254

—
—
—
¥—
¥—

3,035
2,739
431
8,748
3,000
¥29,207

3,035
2,739
431
8,813
3,023
¥29,295

—
—
—
65
23
¥88

¥

(1)
(18)

¥

(1)

¥—

(18)

—

Millions of yen
2014

Cash and cash equivalents
Time deposits
Notes and accounts receivable-trade
Electronically recorded monetaryclaims — operating
Investments in securities
Available-for-sale securities
Total
Notes and accounts payable-trade
Electronically recorded
obligations — operating
Short-term borrowings
Income taxes payable
Long-term borrowings
Bonds
Total
Derivative transactions
Contracts to which hedge
accounting was not applied
Contracts to which hedge
accounting was appliedThousands of U.S. dollars
Due after
1 yearthrough
5 years

Due after
5 years
through
10 years

Due after
10 years

$—
—

$—
—

$—
—

—

—

—

—
$—

—
$—

—
$—

Book value

Fair value

Difference¥12,981
211
18,815¥12,981
211
18,815¥———

The fair values represent present values of the aggregatedinterest and principal discounted at interest rates that would beapplied to new similar borrowings. Long-term borrowings include
the current portion of long-term borrowings.

90

90

—

Bonds

5,372
¥37,469¥13,418

5,372¥37,469¥13,418

—
¥—
¥—

749
3,348
1,364
9,407
3,000
¥31,286

749
3,348
1,364
9,427
3,032
¥31,338

—
—
—
20
32
¥52

The fair values are measured at the quoted market prices.

¥

(11)

¥

63

(11)

¥—

63

—

Thousands of U.S. dollars
2015

Cash and cash equivalents
Time deposits
Notes and accounts receivable-trade
Electronically recorded monetaryclaims — operating
Investments in securities
Available-for-sale securities
Total
Notes and accounts payable-trade
Electronically recorded
obligations — operating
Short-term borrowings
Income taxes payable
Long-term borrowings
Bonds
Total
Derivative transactions
Contracts to which hedge
accounting was not applied
Contracts to which hedge
accounting was appliedLong-term borrowings

Book value

Fair value

Difference$130,647
4,177
152,788$130,647
4,177
152,788

$ —
—
—

8,033

8,033

50,973$346,618$ 93,667

50,973$346,618$ 93,667

—
—
—
$ —
$ —

25,257
22,7973,590
72,80824,969$243,087

25,257
22,797
3,590
73,35325,161$243,825

—
—
—
546
192
$738

Derivative transactions
Please see Note 8, “Derivatives.”
Financial instruments whose fair values were not available as ofMarch 31, 2015 and 2014 were as follows:
Thousands of
U.S. dollars

Millions of yen

Available-for-sale securities
Unlisted equity securities
Investments in affiliates
Total

2015

2014

2015

¥  1385,266¥5,404¥  141
4,637¥4,778$ 1,149
43,830$44,979

The above items were not included in investments in securities (available-for-sale securities) because their market price was
not available and it was extremely difficult to determine their fairvalues.
Monetary assets and investments in securities with maturities
were as follows:2015

Due within
1 yearCash and cash equivalents$130,647
Time deposits
4,177
Notes andaccounts receivable-trade152,788
Electronically recordedmonetary claims — operating
8,033
Total
$295,645

Please see Note 9, “Short-term Borrowings and Long-term
Debt” for annual maturities of long-term debt.

7. Investments in Securities
Marketable securities classified as available-for-sale securities asof March 31, 2015 and 2014 were as follows:
Millions of yen
2015

Securities with gross unrealized gains:
Equity securities
Securities with gross unrealized losses:
Equity securities
Total

Acquisition
cost

Fair value(Book value)

Unrealized
gains (losses)¥3,172¥6,124¥2,9520¥3,1720¥6,124(0)¥2,952Millions of yen

Millions of yen

2015

$

(12)
(143)

$

(12)

$ —

(143)

—

Cash and cash equivalents, Time deposits, Notes andaccounts receivable-trade, Electronically recorded monetaryclaims — operating
The fair values approximate book values because of the short-term
maturities of these instruments.

Due within
1 yearCash and cash equivalents¥15,697
Time deposits
502
Notes andaccounts receivable-trade
18,358
Electronically recordedmonetary claims — operating
965
Total
¥35,5222014

Due after
1 yearthrough
5 years

Due after
5 years
through
10 years

Due after
10 years

¥—
—

¥—
—

¥—
—

—

—

—

—
¥—

—
¥—

—
¥—

Securities with gross unrealized gains:
Equity securities
Securities with gross unrealized losses:
Equity securities
Total

2014

Due within
1 yearCash and cash equivalents¥12,981Time deposits
211
Notes andaccounts receivable-trade
18,815
Electronically recordedmonetary claims — operating
90
Total¥32,097

Due after
5 years
through
10 years

Due after
10 years

¥—
—

¥—
—

¥—
—

—

—

—

—
¥—

—
¥—

—
¥—

Fair value(Book value)

Unrealized
gains (losses)¥3,099¥5,316¥2,21759¥3,15856¥5,372(3)¥2,214

Thousands of U.S. dollars
2015

Millions of yen
Due after
1 yearthrough
5 years

Acquisition
cost

Securities with gross unrealized gains:
Equity securities
Securities with gross unrealized losses:
Equity securities
Total

Acquisition
cost

Fair value(Book value)

Unrealized
gains (losses)$26,403$50,973$24,5701$26,404

0$50,973(1)$24,569

Investments in securities
The fair values are measured at the quoted market prices of thestock exchange.
Notes and accounts payable-trade, Electronically recorded
obligations — operating, Short-term borrowings,
Income taxes payable
The fair values approximate book values because of the short-term
maturities of these instruments.

48

BANDO CHEMICAL INDUSTRIES, LTD.

Annual Report 201549

Notes to Consolidated Financial Statements

8. Derivatives(2) Interest rate

Derivative transactions to which hedge accounting was not applied for the years ended March 31, 2015 and 2014 were as follows:

Millions of yen(1) Currencies
Millions of yen
2014

2015
Contract
amountForeign currency forward contracts:
Buy:Japanese yen

Contract
amount due
after 1 year

Fair value

Unrealized
gains (losses)

Contract
amountContract
amount due
after 1 year

Fair value

Unrealized
gains (losses)

Interest rate swap contracts:
Floating rate receipt, fixed rate payment

Main hedged
item

Contract
amountContract
amount due
after 1 year

Long-term
borrowings¥6,250¥4,900

¥—

¥(1)

¥(1)

¥260

¥—

¥(11)

¥(11)

Contract
amountContract
amount due
after 1 year

Fair value*

Long-term
borrowings¥6,306¥4,750*Interest rate swap contracts:
Floating rate receipt, fixed rate payment

Contract
amountContract
amount due
after 1 year

Fair value

Unrealized
gains (losses)$2,508

$—

$(12)

$(12)

Main hedged
item

Contract
amountContract
amount due
after 1 year

Fair value

Long-term
borrowings$52,018$40,782** The fair value of such derivative transactions was included in that of hedged items.

(3) Interest rate and currencies
Millions of yen* The fair value is based on prices provided by financial institutions.

(1) Currencies
Millions of yen
2014

2015
Main hedged
item

2014

2015

Derivative transactions to which hedge accounting was applied for the years ended March 31, 2015 and 2014 were as follows:

Euro
Buy:
U.S. dollar
Japanese yen
Great Britain pound
Total

Main hedged
item

2015

¥301

2015

Foreign currency forward contracts:
Sell:
U.S. dollar

Fair value

Thousands of U.S. dollars

Thousands of U.S. dollars

Foreign currency forward contracts:
Buy:Japanese yen

2014

2015

Contract
amountContract
amount due
after 1 year

Fair value

Main hedged
item

Contract
amountContract
amount due
after 1 year

Fair value

Interest rate swap contracts:
Floating rate receipt, fixed rate payment:
Japanese yen receipt/India rupee payment
U.S. dollar receipt/India rupee payment
Total

Main hedged
item

Contract
amountContract
amount due
after 1 year

Long-term
borrowings

¥240
562
¥802

¥160
398
¥558

Fair value¥(115)
97¥ (18)

Main hedged
item

Contract
amountContract
amount due
after 1 year

Fair value

Long-term
borrowings

¥320
660
¥980

¥240
514
¥754

¥ (43)
106¥ 63

Thousands of U.S. dollars
2015

Notes andaccounts
receivable-trade

¥282

¥—

*

190

—

*

Notes andaccounts
payable-trade

40
—
—
¥512

—
—
—
¥—

*
*
*
*

Notes andaccounts
receivable-trade

¥334

¥—

*

282

—

*

Notes andaccounts
receivable-trade

30
22
2
¥670

—
—
—
¥—

*
*
*
*

Interest rate swap contracts:
Floating rate receipt, fixed rate payment:
Japanese yen receipt/India rupee payment
U.S. dollar receipt/India rupee payment
Total

Main hedged
item

Contract
amountContract
amount due
after 1 year

Fair value

Long-term
borrowings$1,998
4,681$6,679$1,332
3,315$4,647$(954)
811$(143)* The fair value is based on prices provided by financial institutions.

Thousands of U.S. dollars
2015

Foreign currency forward contracts:
Sell:
U.S. dollar
Euro
Buy:
U.S. dollar
Japanese yen
Great Britain pound
Total

Main hedged
item

Contract
amountContract
amount due
after 1 year

Fair value

Notes andaccounts
receivable-trade$2,350

$—

*

1,584

—

*

Notes andaccounts
payable-trade335——$4,267

—
—
—
$—

*
*
*
*

* The fair value of such derivative transactions was included in that of hedged items.

50

BANDO CHEMICAL INDUSTRIES, LTD.

Annual Report 201551

Notes to Consolidated Financial Statements

9. Short-term Borrowings and Long-term Debt

10. Retirement Benefits

Short-term borrowings as of March 31, 2015 and 2014 represented bank overdrafts with weighted average interest rates of
2.26% and 1.97%, respectively. The Companies had commitmentline contracts to prepare for any contingency with one financial
institution for an aggregated maximum amount of ¥4,100 million($34,124 thousand). ¥2,056 million ($17,108 thousand) was unused
as of March 31 2015.
Long-term debt as of March 31, 2015 and 2014 consisted of
the following:

The details of retirement benefits for the year ended March 31,
2015 and 2014 were as follows:

Millions of yen
2015

Unsecured long-term borrowings
from banks and other financial
institutions with weighted
average interest rate of 1.46%
in 2015 and 1.57% in 2014
Unsecured bonds due 2017, 0.99%
Obligations under finance leases
Less current portion of
long-term debt
Total

2014

Thousands of
U.S. dollars
2015

The Company and certain of its consolidated subsidiaries havedefined contribution pension plans and defined benefit pension
plans for employees. The Company places plan assets in an
employee retirement benefit trust. Certain domestic consolidated
subsidiaries join the Smaller Enterprise Retirement Allowance
Mutual Aid system.
Certain consolidated subsidiaries adopt the simplified
method to calculate net defined benefit liability and retirement
benefit costs.
(1) Defined benefit plans¥ 8,747
3,000
50
11,797
1,996¥ 9,801¥ 9,407
3,000
33
12,4402,238¥10,202$72,808
24,969414
98,191
16,616$81,575

Annual maturities of long-term debt outstanding as of March
31, 2015 were as follows:Year ending at March 31

Millions ofyen

Thousands of
U.S. dollars

2016
2017
2018
2019
2020
2021 and thereafter
Total¥ 1,996
3,637
2,984
1,680
1,500
0
¥11,797$16,616
30,26924,836
13,97912,4883$98,191(a) Movement in retirement benefit obligations, except defined
benefit plans to which the simplified method was appliedThousands of
U.S. dollars

Millions of yen

Beginning balance
Cumulative effect due tochanges in accounting
policies
Beginning balance reflectingchanges in accounting policies
Service cost
Interest cost
Actuarial losses (gains) arisingduring the year
Retirement benefits paid
Prior year service cost arisingduring the year
Other
Ending balance

2015

2014

2015

¥11,274¥10,952$93,834—454
139

91,914
4,256
1,014

600
(693)

271
(618)

4,994
(5,768)2
48¥11,633—76¥11,27419394$96,823

Thousands of
U.S. dollars

2015

2014

2015

¥8,395¥7,548$69,871

175

152

1,454

1,107

478

9,212

811
(667)
54
¥9,875

775
(611)
53
¥8,3956,750(5,549)447$82,185(c) Movement in net defined benefit liability of defined benefit
plans to which the simplified method was applied
Millions of yen

52

BANDO CHEMICAL INDUSTRIES, LTD.

Millions of yen

Retirement benefit obligations
under the funded plans
Fair value of plan assets
Retirement benefit obligations
under the unfunded plans
Net liabilities or assets recordedon the Consolidated balance
sheetsNet defined benefit liability
Net liabilities or assets recordedon the Consolidated balance
sheets

2015

2014

2015

¥12,276(10,342)
1,934¥11,913(8,847)
3,066$102,170(86,075)
16,095

122

94

1,020

2,056

3,160

17,115

2,056

3,160

17,115¥ 2,056¥ 3,160$ 17,115* Defined benefit plans to which the simplified method was applied areincluded in the above table.

Thousands of
U.S. dollars

2015

2014

2015

¥281
96
(35)
(44)
¥298

¥337
27
(36)
(47)
¥281

$2,336
796
(290)
(366)
$2,476(h) Plan assets
Plan assets consisted of the following:
2015

Equity securities
Bonds
General accountCash and deposits
Other
Total

47%
34
10
7
2
100%

Thousands of
U.S. dollars

Service cost
Interest cost
Expected return on plan assets
Amortization of actuarial losses(gains)Amortization of prior service cost
Retirement benefit costs basedon the simplified method
Total retirement benefit costs ofdefined benefit plans

2015

2014

¥ 511
122
(175)

¥ 454
139
(152)

$ 4,256
1,014(1,454)

421
(40)

(57)
(46)

3,503
(333)

96

27

796

¥ 935

¥ 365

$ 7,7822015(f) Remeasurements of defined benefit plans (Other comprehensive income)Breakdown of remeasurements of defined benefit plans (before
tax effects)
Thousands of
U.S. dollars

Millions of yen
2015

Prior service cost
Actuarial losses (gains)
Total

2014

¥—
—
¥—

¥ (42)
927
¥885

2015

$ (352)
7,719$7,367(g) Remeasurements of defined benefit plans (Accumulated othercomprehensive income)Breakdown of remeasurements of defined benefit plans (before
tax effects)
Thousands of
U.S. dollars

Millions of yen

Unrecognized prior service cost
Unrecognized actuarial losses(gains)
Total

2015

2014

¥ 30

¥

(774)
¥(744)(1,702)¥(1,629)

73

2015

$

256

(6,444)$(6,188)

2014

44%
28
12
6
10
100%

* Employee retirement benefit trust set up for the corporate pension planaccounts for 20% and 19% of total plan assets for the year ended March
31, 2015 and 2014.

Expected rate of return on plan assets
The long-term expected rate of return on plan assets is determined based on the current and expected allocation of plan
assets and on the current and expected future long-term rates ofreturn on various assets composing plan assets.
(i) Actuarial assumptions
The principal actuarial assumptions at March 31, 2015 were as
follows:(e) Retirement benefit costs(1,920)11,043511
122

Millions of yen

Beginning balance
Retirement benefit costs
Retirement benefit paid
Contributions to the plans
Ending balance

Thousands of
U.S. dollars

Millions of yen

—

(231)

(b) Movement in plan assets, except defined benefit plans towhich the simplified method was applied

Beginning balance
Expected return onplan assets
Actuarial gains (losses) arisingduring the year
Contributions paid by
the employer
Retirement benefits paid
Other
Ending balance(d) R econciliation of retirement benefit obligations and plan
assets with net defined benefit liability and net defined benefit asset on the Consolidated balance sheets

Discount rate
Expected rate of return on plan assets

2015

2014

Mainly 0.7%
Mainly 2.5%

Mainly 1.2%
Mainly 2.5%

(2) Defined contribution pension plans
Contributions to the defined contribution pension plans were¥192 million ($1,595 thousand) and ¥182 million for the year
ended March 31, 2015 and 2014, respectively.
(3) Multiemployer plan(a) The funded status of the multiemployer plan:
Millions of yen

Plan assets
Total of actuarial obligations forcalculation of pension financeand minimum policy reserve *Total

Thousands of
U.S. dollars

2015

2014

2015

¥ 33,179¥ 32,317$276,145

45,192¥(12,013)

45,527¥(13,211)

376,133$ (99,988)* This was previously presented as “Retirement benefit obligations forcalculation of pension finance” for the year ended March 31, 2014.

(b) Ratio of total required contribution amount of the Companies
to total funds of the plan
(From April 1, 2014 to March 31, 2015)
1.5%(From April 1, 2013 to March 31, 2014)
1.4%(c) Supplementary explanation
The main reason for the differences in the amounts describedabove in (a) was the balance of prior service cost of ¥12,209
million ($101,616 thousand) and ¥12,758 million as of March 31,
2015 and 2014. Prior service cost is amortized by the straight-line
method over 17 years. The Companies record special contributionof ¥32 million ($264 thousand) as expenses.

Annual Report 201553

Notes to Consolidated Financial Statements

11. Income Taxes
Deferred tax assets and liabilities as of March 31, 2015 and 2014
consisted of the following:
Millions of yen
2015

Deferred tax assets:
Contributions toretirement benefit trust
Net defined benefit liability
Tax loss carryforwards
Impairment loss
Other
Valuation allowancefor deferred tax assets
Total
Deferred tax liabilities:
Gain on set-up of
retirement benefit trust
Unrealized gain on
available-for-sale securities
Reserve for deferred capitalgains related to property,
plant and equipment
Other
Total
Net deferred tax assets*

2014

Thousands of
U.S. dollars
2015¥ 1,265
706
414
285
1,697

¥ 1,381
1,089
563
230
1,424

$ 10,529
5,876
3,445
2,370
14,127(979)¥ 3,388(1,058)¥ 3,629(8,150)$ 28,197

12. Net Assets¥ (979)
(891)

(242)
(489)
¥(2,601)¥ 787¥(1,080)
(718)

(266)
(234)
¥(2,298)¥ 1,331$ (8,152)(7,417)(2,011)(4,068)$(21,648)$ 6,549* Net deferred tax assets were included in the following accounts in the
consolidated balance sheets as of March 31, 2015 and 2014:
Millions of yen

Current assets — Deferred tax assets
Other assets — Deferred tax assets
Current liabilities — Other
Long-term liabilities — Other

Change in statutory effective tax rate
“Act for Partial Amendment of the Income Tax Law (Law No.
9/2015)” and “Act for Partial Amendment of the Local Tax Law(Law No. 2/2015) were promulgated on March 31, 2015. As aresult, the normal effective statutory tax rate used to calculatedeferred tax assets and liabilities will be changed from 35.6%
to 33.0% for a temporary difference which is expected to bereversed during the period from the fiscal year beginning on
April 1, 2015, and to 32.3% for a temporary difference which is
expected to be reversed during the period from the fiscal year
beginning on or after April 1, 2016. This change had no material
impact on the consolidated financial statements for the year
ended March 31, 2015.

Thousands of
U.S. dollars

2015

2014

2015

¥606
207
0
¥ 26

¥656
724
2
¥ 47

$5,043
1,726
0$  220Reconciliation of the statutory tax rate to the effective income
tax rate for the years ended March 31, 2015 and 2014 was asfollows:
Statutory tax rate
Different income tax rates applicable
to income in certain foreign countries
Equity in earnings of affiliates
Nondeductible expenses
Nontaxable income
Tax deduction
Change in valuation allowance
Prior year income taxes
Adjustment on deferred tax assets at year-end
due to tax rate change
Other, net
Effective income tax rate

2015

2014

35.6%

38.0%

(7.5)
(4.3)
2.7
(0.3)
(2.1)
(1.5)
2.0

(6.9)
(3.1)
1.8
(0.3)
(1.9)
(0.2)
—

1.8
1.2
27.6%

—
1.4
28.8%

Significant provisions in the Companies Act of Japan (the “Act”)
that affect financial and accounting matters are summarized below:(3) Treasury stock and treasury stock acquisition rights
The Act also permits Japanese companies to repurchase/disposeof treasury stock by resolution of the Board of Directors. The
amount of treasury stock to be purchased cannot exceed theamount available for distribution to the shareholders which isdetermined by specific formula.
Under the Act, stock acquisition rights are presented as aseparate component of equity.
The Act also provides that companies can purchase bothtreasury stock acquisition rights and treasury stock. Such treasury
stock acquisition rights are presented as a separate componentof equity or deducted directly from stock acquisition rights.

13. Selling, General and Administrative Expenses
Selling, general and administrative expenses for the years ended
March 31, 2015 and 2014 principally consisted of the following:
Millions of yen(1) Dividends
The Act allows Japanese companies to pay dividends at any time
during the year in addition to the year-end dividend upon resolution at the shareholders’ meeting.
The Act permits Japanese companies to distribute dividends
in kind (non-cash assets) to shareholders subject to certain limitations and additional requirements. Semiannual interim dividends
may also be paid once a year upon resolution by the Board of
Directors if the articles of incorporation of the company sostipulate. The Act continues to provide certain limitations on theamounts available for dividends or the purchase of treasury stock.
The limitation is defined as the amount available for distribution
to the shareholders, but the amount of equity after dividends
must be maintained at no less than ¥3 million.
(2) Increases/decreases and transfer of common stock, reserveand surplus
The Act requires that an amount equal to 10% of dividends must
be appropriated as legal reserve (of retained earnings) or as
additional paid-in capital (of capital surplus) depending on theequity account charged upon the payment of such dividends until
the sum of legal reserve and additional paid-in capital equals
25% of the common stock. Under the Act, additional paid-in
capital and legal reserve may be reversed without limitation. The
Act also provides that common stock, legal reserve, additional
paid-in capital, other capital surplus and retained earnings can betransferred among the accounts under certain conditions upon
resolution of the shareholders.

Salaries
Packing and delivery expenses
Research and development costs
Retirement benefit costs
Provision for doubtful accounts

Thousands of
U.S. dollars

2015

2014

2015

¥5,973
2,471
1,205
533
¥
—

¥5,535
2,201
1,142
209
¥   11$49,714
20,562
10,0284,438$—

14. Net Income per Share
The Companies had no dilutive securities for the years ended
March 31, 2015 and 2014.
Basic net income per share for the years ended March 31,
2015 and 2014 was as follows:
Millions of yen

Net income available
to common stockholders

Thousands of
U.S. dollars

2015

2014

2015

¥3,757¥4,280$31,278

Thousands of shares

Weighted-average number of shares

2015

2014

94,06494,096Yen

Net income per share

U.S. dollars

2015

2014

2015

¥39.95¥45.49$0.33

15. Consolidated Statements of Comprehensive
IncomeReclassification adjustments regarding other comprehensive
income and related income tax effects for the years ended March
31, 2015 and 2014 are as follows:
Thousands of
U.S. dollars

Millions of yen

Unrealized gains (losses)
on available-for-sale securities:
Recognized during the year
Reclassification adjustments
Before tax effects
adjustments
Income tax effects
Unrealized gains (losses)
on available-for-salesecurities
Deferred gains on hedges:
Recognized during the year
Before tax effects
adjustments
Income tax effects
Deferred gain on hedges
Foreign currencytranslation adjustments:
Recognized during the year
Foreign currencytranslation adjustments
Remeasurements of defined
benefit plans:
Recognized during the year
Reclassification adjustments
Before tax effects
adjustment
Income tax effects
Remeasurements ofdefined benefit plans
Share of other comprehensive
income in affiliates accounted
for by the equity method:
Recognized during the year
Share of othercomprehensive income
in affiliates accounted
for by the equity method
Total othercomprehensive income

2015

2014

2015

¥  745(7)¥  601(26)$ 6,205
(61)

738
(171)

575
(187)

6,143
(1,422)

567

388

4,721

(2)

5

(16)

(2)
1
(1)

5
(1)
4

(16)
5
(11)

3,378

3,106

28,117

3,378

3,106

28,117

580
305

—
—

4,831
2,536

885
(339)

—
—

7,367
(2,827)

546

—

4,540

218

180

1,817

218

180

1,817

¥4,708¥3,678$39,184

16. Segment Information(1) Description of reportable segments
The Companies’ reportable segments are components for which separate financial information is available, whose operating results arereviewed regularly by the chief operating decision maker in order to decide allocations of resources and assess segment performance.
The Companies have adopted the division system. Each operating division develops a comprehensive strategy for respective products/services for domestic and overseas markets and conducts business activities. Therefore, the Companies consist of two reportablesegments according to products based on operating divisions: “Belt Business” and “Elastomer Products Business.”
The “Belt Business” segment includes manufacturing and sales of automotive power transmission belt products, industrial powertransmission belt products and conveyor belts, etc. The “Elastomer Products Business” segment includes manufacturing and sales ofcomponents for printers and other electrophotographic output equipment, and high-performance film products, etc.

54

BANDO CHEMICAL INDUSTRIES, LTD.

Annual Report 201555

Notes to Consolidated Financial Statements(2) Methods of measurement for sales, profit or loss, assets and other items by reportable segments(4) Changes in reportable segments

17. Impairment loss

The accounting treatments applied to the reportable segments is the same as those described in Note 3, “Summary of Significant
Accounting Policies.” Segment profit is based on operating income. Intersegment sales are based on market prices.

For the year ended March 31, 2015, part of the products in “BeltBusiness” were transferred to “Elastomer Products Business” as a resultof reviewing product category belonging to reportable segments.
Segment information for the year ended March 31, 2014 has been
prepared based on the reviewed reportable segments.

The details of Impairment loss for the year ended March 31, 2015
were as follows:(3) Sales, profit or loss, assets and other items by reportable segments
Millions of yen
2015
Reportable segments
Belt BusinessNet sales
Sales to customers
Intersegment sales
Total
Segment profit
Segment assets
Other:
Depreciation and amortization
Increase in property,
plant and equipment
and other intangible assets
Impairment loss

Elastomer
Total reportable
Products Businesssegments

Other

Total

Adjustments

Consolidated
Financial
Statements¥77,988113¥78,101¥ 4,155¥76,333¥15,647
66¥15,713¥   329¥11,522¥93,635
179¥93,814¥ 4,484¥87,855¥1,761885¥2,646¥  198¥2,818¥95,3961,064¥96,460¥ 4,682¥90,673¥—(1,064)¥(1,064)¥ 115¥ 4,027¥95,396—¥95,396¥ 4,797¥94,700¥ 3,505¥   730¥ 4,235¥  108¥ 4,343¥¥ 4,431¥ 2,688¥—¥   646¥   410¥ 3,334¥   410¥   52¥—¥ 3,386¥   410

¥
¥

88

812
—

2014
Reportable segments
Belt BusinessNet sales
Sales to customers
Intersegment sales
Total
Segment profit (loss)
Segment assets
Other:
Depreciation and amortization
Increase in property,
plant and equipment
and other intangible assets
Impairment loss

Elastomer
Total reportable
Products Businesssegments

Other

Total

Adjustments

Consolidated
Financial
Statements¥1,117
1,114¥2,231¥  188¥2,375¥93,434
1,269¥94,703¥ 5,361¥86,174¥—(1,269)¥(1,269)¥ 157¥ 3,449¥93,434—¥93,434¥ 5,518¥89,623

Assets held
for sale

Location

Sennan,Osaka

Information related to reportable segments
Information about geographic areas was as follows:(a) Net sales

Total

Millions of yen
2015
Japan

Asia

China

Other

Total

¥48,918¥24,452¥11,802¥10,224¥95,396

Millions of yen
2014
Japan

Asia

China

Other

Total

¥50,165¥22,781¥11,092¥9,396¥93,434¥ 4,198¥   410

Millions of yen

Purpose of use

Thousands of U.S. dollars
2015
Japan

Asia

China

Other

Total

$407,143$203,514$98,222$85,092$793,971

Asset type

Buildings andstructures
Machinery andequipment
Other

Millions ofyen

Thousands of
U.S. dollars¥ 32$  265

328
50
¥410

2,732
415
$3,412In reviewing impairment loss, the Companies classify theiroperating assets mainly by operating division and idle assets byindividual property.
For the year ended March 31, 2015, impairment loss wasrecognized as the book value of each devaluated asset exceeded
its recoverable amount.
Recoverable amount is measured using net selling price orvalue in use. Net selling price is based on estimated selling priceand value in use is calculated by discounting future cash flows at
0.2%.

(b) Property, plant and equipment
Millions of yen¥77,347
136¥77,483¥ 4,892¥72,207¥14,970
19¥14,989¥   281¥11,592¥92,317155¥92,472¥ 5,173¥83,799¥ 3,288¥   754¥ 4,042¥   85¥ 4,127¥112¥ 4,239¥ 2,630¥—¥   959¥—¥ 3,589¥—¥  569¥ —¥ 4,158
¥
—

¥
¥

889
—

¥ 5,047
¥
—

2015
Japan

Asia

China

Other

Total

¥17,213¥8,906¥1,664¥3,307¥31,090

Millions of yen
2014
Japan

Asia

China

Other

Total

¥17,526¥8,425¥1,679¥3,192¥30,822

Thousands of U.S. dollars

Thousands of U.S. dollars

2015
Japan

Asia

China

Other

Total

$143,261$74,125$13,851$27,519$258,756

2015
Reportable segments
Belt BusinessNet sales
Sales to customers
Intersegment sales
Total
Segment profit
Segment assets
Other:
Depreciation and amortization
Increase in property,
plant and equipment
and other intangible assets
Impairment loss

Elastomer
Total reportable
Products Businesssegments

Other

Total

Adjustments

Consolidated
Financial
Statements$649,090
944$650,034$ 34,585$635,314$130,229
546$130,775$  2,735$ 95,894$779,319
1,490$780,809$ 37,320$731,208$14,652
7,372$22,024$ 1,650$23,459$793,971
8,862$802,833$ 38,970$754,667$—(8,862)$ (8,862)$   958$33,511$793,971—$793,971$ 39,928$788,178$ 29,170$  6,079$ 35,249$  894$ 36,143$   739$ 36,882$ 22,375$—$  5,376$  3,412$ 27,751$  3,412$  434$—$ 28,185$  3,412$ 6,758$—$ 34,943$  3,412*1 “Other” category represents operating segments not included in reportable segments.
*2 “Adjustments” are as follows:(a) Adjustments of segment profit (loss) include ¥26 million ($217 thousand) and ¥12 million of the elimination of intersegment transactions, and ¥89 million($741 thousand) and ¥145 million of corporate expenses for the years ended March 31, 2015 and 2014, respectively. Corporate expenses represent
differences between the estimated general administrative expenses and research and development costs allocated to each reportable segment andthe actual amount incurred.
(b) Adjustments of segment assets include ¥(3,307) million ($(27,533) thousand) and ¥(4,166) million of the elimination of intersegment balances, and¥7,334 million ($61,044 thousand) and ¥7,615 million of corporate assets for the years ended March 31, 2015 and 2014, respectively.
(c) Adjustments of “Increase in property, plant and equipment and other intangible assets” is principally related to those not attributable to reportable segments.
*3 “Segment profit (loss)” is adjusted to operating income described in the consolidated statements of income.
*4 “Depreciation and amortization” includes amortization of long-term prepaid expenses.
*5 “Increase in property, plant and equipment and other intangible assets” includes an increase in long-term prepaid expenses.

56

BANDO CHEMICAL INDUSTRIES, LTD.

Annual Report 201557

Corporate Data / Investor Information

Corporate Data
Company name:Bando Chemical Industries, Ltd.

Founded:April 14, 1906

Capital:¥10,952 mil. (As of March 31, 2015)

Consolidated sales:¥95,396 mil. (FYE March 2015)

Employees (Consolidated): 3,930 (As of March 31, 2015)

Investor Information (As of March 31, 2015)
Capital Stock

Principal Shareholders (As of March 31, 2015)

Shares Authorized:

378,500,000

Shares Outstanding:

94,427,073

Bando business partner stakeholders
Sumitomo Mitsui Banking Corporation
Mitsubishi UFJ Trust and Banking
Corporation
Meiji Yasuda Life Insurance Company
Mizuho Bank, Ltd.
The Bank of Tokyo-Mitsubishi UFJ, Ltd.
Nippon Life Insurance Company
Japan Trustee Services Bank, Ltd.
(trust account)
The Master Trust Bank of Japan, Ltd.
(trust account)
Tokio Marine & Nichido Fire InsuranceCo., Ltd.

(including 317,350 shares of treasury stock)

Number of Shareholders:

9,517

Securities Traded: Tokyo Stock Exchange, Inc.
Composition of Shareholders
Individuals and others:
32,640,428
34.68%

Financial institutions/
Securities firms:
35,838,669
38.08%

Other corporations:
11,891,013
12.64%

64

Foreign Corporations:
13,739,613
14.60%
132

Investment
ratio
(%)

7,270
4,651

7.72
4.94

4,004

4.25

4,000
3,600
3,150
2,349

4.25
3.82
3.34
2.49

2,227

2.36

1,852

1.96

1,839

1.95

Notes: 1. Investment ratios are calculated after deducting treasury stock(317,350 shares).
2. Investment ratios listed above are rounded down to two decimal places.

9,066

254

Number ofshares held
(thousands)

Number of shareholders

Stock Price and Trading Volume
(Yen)

500
400
300
200
100
(Thousand shares)

0

10,000
8,000
6,000
4,000
2,000
0

58

4

7

2010

10

1

4

BANDO CHEMICAL INDUSTRIES, LTD.

7

2011

10

1

4

7

2012

10

1

4

7

2013

10

1

4

7

2014

10

1

2015

Bando Chemical Industries, Ltd.

Annual Report 2015

www.bando.co.jp

6-6, Minatojima Minamimachi 4-chome, Chuo-ku, Kobe, 650-0047, Japan