FINANCIAL REPORT(Report under Article 24, paragraph 1 of the Financial Instruments and Exchange Act)
Business Year from April 1, 2018 to March 31, 2019
(The 71th Term)(TRANSLATION)

ARISAWA MFG. CO., LTD.
E01152TABLE OF CONTENTS
Page Number
Cover Page
PART I. INFORMATION ON THE BUSINESS ................................................................... 1
I. General Conditions of Business .............................................................................................. 1
1. Changes in Principal Management Indicators, etc. ........................................................ 1
2. History ............................................................................................................................ 3
3. Description of Business .................................................................................................. 4
4. Status of Subsidiaries and Affiliated Companies ........................................................... 6
5. Status of Employees ....................................................................................................... 8
II. Status of Business .................................................................................................................. 9
1. Management Policy, Management Environment and Tasks to be Addressed ................ 9
2. Business Risks, etc. ...................................................................................................... 10
3. Analyses of Consolidated Financial Position, Business Resultsand Cash Flows by the Corporate Managers .......................................................... 10
4. Agreements with Managerial Implications, etc. ........................................................... 16
5. Research and Development Activities .......................................................................... 17
III. Status of Facilities .............................................................................................................. 19
1. Outline of Capital Investment ...................................................................................... 19
2. Status of Major Facilities.............................................................................................. 19
3. Plans for Installation and Retirement, etc. of Facilities ................................................ 21
IV. Status of the Submitting Company .................................................................................... 22
1. Status of Shares, etc...................................................................................................... 22(1) Total Number of Shares, etc. ............................................................................... 22(2) Status of Stock Acquisition Rights, etc. ................................................................ 23(3) Status of Exercise of Moving Strike Convertible Bonds, etc. ............................... 26(4) Changes in the Number of Shares Issued and Outstanding, Capital Stock, etc. .... 26(5) Status of Shareholder Categories ........................................................................... 27(6) Status of Major Shareholders ................................................................................ 28(7) Status of Voting Rights ......................................................................................... 30
2. Status of Acquisition of Treasury Stock, etc. ............................................................... 31
3. Dividend Policy ............................................................................................................ 32
4. Status of Corporate Governance, etc. ........................................................................... 33(1) Outline of Corporate Governance.......................................................................... 33(2) Status of Directors and Officers ............................................................................ 37(3) Status of Audit ....................................................................................................... 41(4) Remuneration, etc. of Directors and Corporate Auditors ...................................... 42(5) Status of Shareholding ........................................................................................... 45
V. Status of Accounting ........................................................................................................... 50
1. Consolidated Financial Statements, etc. ....................................................................... 51(1) Consolidated Financial Statements ........................................................................ 51(2) Other ...................................................................................................................... 97
2. Financial Statements, etc. ............................................................................................. 98(1) Financial Statements .............................................................................................. 98(2) Details of Major Assets and Liabilities ............................................................... 110(3) Other .................................................................................................................... 110
VI. Outline of Share Handling of the Submitting Company .................................................. 111
VII. Reference Information on the Submitting Company ...................................................... 112
1. Information on Parent Company, etc. of Submitting Company ............................ 112
2. Other Reference Information ................................................................................ 112
PART II. INFORMATION ON GUARANTY COMPANIES, ETC.
OF THE SUBMITTING COMPANY ................................................................ 113[Independent Auditors’ Report]

Cover Page
Document to be filed:

Financial Report

Statutory basis:

Article 24, paragraph 1 of the Financial Instruments and Exchange Act

Filing to:

Director-General of the Kanto Local Finance Bureau

Date of filing:

June 28, 2019

Business year:

The 71th Term (From April 1, 2018 to March 31, 2019)

Company name (Japanese):

Kabushiki-Kaisha Arisawa Seisakusho

Company name (English):Arisawa Mfg. Co., Ltd.

Name and title of representative:

Yuta Arisawa, President and Representative Director

Location of head office:5-5, Minami-honcho 1-chome, Joetsu-shi, Niigata

Telephone number:(025) 524-5126

Contact person:

Shuichi Kubota, General Manager, Accounting Department

Place of contact:5-5, Minami-honcho 1-chome, Joetsu-shi, Niigata

Telephone number:(025) 524-5126

Contact person:

Shuichi Kubota, General Manager, Accounting Department

Places where copies of this Financial Report

Arisawa Mfg. Co., Ltd., Tokyo Branch Office

are made available for public inspection:(12-5, Yanagibashi 2-chome, Taito-ku, Tokyo)
Tokyo Stock Exchange, Inc.
(2-1, Nihonbashi Kabutocho, Chuo-ku, Tokyo)

PART I.

INFORMATION ON THE BUSINESS

I. General Conditions of Business1. Changes in Principal Management Indicators, etc.
(1) Consolidated Management Indicators, etc.
Term

67th term

68th term

69th term

70th term

71th term

Closing month

March 2015

March 2016

March 2017

March 2018

March 201937,58937,22834,45140,90944,728

4,503

3,510

2,690

4,044

4,297

4,821

2,702

2,037

3,453

2,861

5,564

1,067

1,821

4,498

2,200

48,14747,602

48,55152,49353,462

65,76660,98363,80872,38273,096

1,280.69

1,263.29

1,290.93

1,378.16

1,397.78

136.77

76.02

57.20

96.35

79.15

135.70

75.58

57.06

95.51

78.70

Net sales (Millions of yen)
Ordinary income or loss ()(Millions of yen)
Profit or loss () attributableto owners of the parent(Millions of yen)Comprehensive income(Millions of yen)
Net assets (Millions of yen)
Total assets(Millions of yen)
Net assets per share (Yen)
Net income or loss ()per share(Yen)

Fully diluted net income per
share

(Yen)

Equity ratio

(%)

69.1

73.8

72.2

68.6

69.3

Return on equity

(%)

11.1

6.0

4.5

7.2

5.7

Price earnings ratio (Times)

7.5

7.6

13.7

10.2

10.0

2,293

4,548

3,419

2,181

2,893

△5,579△1,771△1,671△471△3,304△188△3,540

419

△59

△576

6,021

4,901

7,026

8,829

7,718

Cash flows from operating
activities (Millions of yen)
Cash flows from investing
activities (Millions of yen)
Cash flows from financing
activities (Millions of yen)
Cash and cash equivalents at
the end of period(Millions of yen)

Number of employees(Parenthesized figures
1,253
1,285
1,305
1,426
1,432
indicate the average number
(163)
(189)
(139)
(295)
(313)
of temporary employees notincluded in the total)
Note: 1. Consumption tax, etc. are not included in the amount of net sales.
2. During the current consolidated fiscal year, the Company finalized the provisional accounting treatment for businesscombinations. As a result, figures as of previous consolidated fiscal year reflect the important revision of the initiallyallocated amounts of acquisition price.
3. Partial amendments to "Accounting Standards for Tax Effect Accounting" (Accounting Standards Board of Japan No. 28,
February 16, 2018), etc. were applied at the beginning of the current consolidated fiscal year. Principal Management
Indicators, etc. for the previous consolidated fiscal year are shown after retroactive application of the said AccountingStandards, etc.

-1-

(2) Management Indicators, etc. of the Submitting Company
Term

67th term

68th term

69th term

70th term

71th term

Closing month

March 2015

March 2016

March 2017

March 2018

March 201927,57825,793

23,41028,50329,269

2,539

2,542

1,898

2,451

2,602

3,706

2,219

1,516

2,503

1,947

7,262

7,294

7,317

7,458

7,541

35,48535,61135,67936,02436,226

Net sales(Millions of yen)

Ordinary income or loss ()(Millions of yen)
Net income or loss ()(Millions of yen)
Capital stock (Millions of yen)
Number of shares issued andoutstanding(Thousands of shares)
Net assets(Millions of yen)

33,44632,75933,852

36,13836,571

Total assets(Millions of yen)

42,98040,10242,643

46,19545,688940.29916.79944.94999.83

1,005.76

35.00
(－)

23.00
(－)

20.00
(－)

34.00
(－)

30.00
(－)

105.13

62.43

42.59

69.83

53.87

104.30

62.06

42.48

69.22

53.56

Net assets per share(Yen)

Dividend per share(Yen)(Parenthesized figures indicate
the amount of interim dividend
per share included in the total)
Net income or loss ()per share(Yen)

Fully diluted net income per
share

(Yen)

Equity ratio

(%)

77.6

81.4

79.0

78.0

79.7

Return on equity

(%)

11.5

6.7

4.6

7.2

5.4

(Times)

9.8

9.2

18.4

14.1

14.7

(%)

33.3

36.8

47.0

48.7

55.7

Price earnings ratio
Dividend payout ratio

Number of employees(Parenthesized figures indicate
the average number of temporary
employees not included in the
total)
Shareholders' gross yield

585

583

589

592

602

(84)

(101)

(69)

(99)

(119)

192.6
(130.7)114.5(116.6)155.5(133.7)198.6(154.9)169.1(147.1)

1,178

1,095

827

1,349

1,350

(%)

（Comparative Indicator：
dividend-included TOPIX（Tokyo Stock Price Index））
Highest share price(Yen)

Lowest share price
(Yen)
473
511
482
695
655
Note: 1. Consumption tax, etc. are not included in the amount of net sales.
2. Partial amendments to "Accounting Standards for Tax Effect Accounting" (Accounting Standards Board of Japan No. 28,
February 16, 2018), etc. were applied at the beginning of the current fiscal year. Principal Management Indicators, etc. forthe previous fiscal year are shown after retroactive application of the said Accounting Standards, etc.
3. "Highest share price" and "Lowest share price" are recorded in Tokyo Stock Exchange (First section).

-2-2. History
July 1949▪ Incorporation of Arisawa Mfg. Co., Ltd. (hereinafter referred to as either the “Company” or the“Submitting Company”, as the case may be), succeeding the businesses of “Arisawa Manufacturing”,
which was founded in 1909 and manufactured Battenburg lace, narrow woven fabrics, electricalinsulating tapes and glass fiber fabrics, etc.

April 1954

▪ Established a resin processing division.

June 1954▪ Relocated the Head Office from Ohmachi, Takada-shi (currently Joetsu-shi), Niigata to Minamihoncho, Takada-shi.

May 1959▪ Opened Tokyo Sales Office and Osaka Sales Office.

September 1960

▪ OTC trading of the Company’s stock started at Tokyo Securities Dealers Association.

October 1961

▪ The Company’s stock was listed on the Second Section of Tokyo Stock Exchange.

December 1966

▪ Incorporated Arisawa Jushi Kogyo Co., Ltd. (currently a consolidated subsidiary), which conducts
molding and processing of resin products related to industrial application structural materials.

June 1968▪ Opened a factory in Oaza-Nakadahara, Takada-shi (currently Joetsu-shi), Niigata, establishing new
resin processing facilities.

August 1973

▪ Incorporated Eagle Co., Ltd., which operates a driving range.

March 1974

▪ Incorporated Myoko Shinko Co., Ltd., which conducts processing of resin products related to electricalinsulating materials.

June 1974▪ Absorbed Arisawa Shoji Co., Ltd. and reorganized the sales division into Tokyo Branch Office andOsaka Branch Office (Osaka Branch Office was closed down in September 2015).

April 1976

▪ Incorporated Yuai Sangyo, Ltd., which manufactures glass fiber fabrics and special fiber fabrics related
to electrical insulating materials.

May 1987▪ Incorporated Arisawa Logistics, Ltd., which conducts warehouse management and logistics operations.

July 1991▪ Incorporated Polatechno Co., Ltd. (which manufactures polarizing plates for use in liquid crystal
displays) through joint capital investment with Nippon Kayaku Co., Ltd.

December 1994

▪ Opened Technological Development Center on the premises of Nakadahara Factory.

October 1996

▪ Acquired Arisawa Polywork Co., Ltd. (which conducts molding and processing of resin products
related to industrial application structural materials) with capital contribution of Arisawa Logistics, Ltd.

July 1999▪ Opened a factory in Oaza-Nakadahara (on the west side of the current Nakadahara Factory), Joetsu-shi,
Niigata, establishing new resin processing facilities.

July 2000▪ Incorporated Arisawa Fiber Glass Co., Ltd. (currently a consolidated subsidiary), spinning off the glass
cloth manufacturing division of the Submitting Company (related to electronic materials and electricalinsulating materials) and consigning manufacture of glass cloth to Arisawa Fiber Glass Co., Ltd.

September 2002

▪ The Company’s stock was listed on the First Section of Tokyo Stock Exchange.

April 2003

▪ Myoko Shinko Co., Ltd. absorbed Arisawa Polywork Co., Ltd., Yuai Sangyo, Ltd. and Arisawa
Logistics, Ltd. and changed its corporate name to Arisawa Sogyo Co., Ltd. (currently a consolidated
subsidiary).

March 2006

▪ Stock of Polatechno Co., Ltd. (currently an affiliated company accounted for under the equity method)
was listed on the JASDAQ Securities Exchange.

October 2009

▪ Acquired shares of ThinFlex Corporation (currently a consolidated subsidiary).

December 2010

▪ Howa Sangyo Ltd., a subsidiary, changed its corporate name to Protec International Holdings Co., Ltd.
(currently a consolidated subsidiary) and acquired shares of Protec Arisawa Europe, S.A. and Protec
Arisawa America, Inc. (both currently consolidated subsidiaries)

July 2011▪ Arisawa Sogyo Co., Ltd. absorbed Eagle Co., Ltd.

October 2015

▪ Opened Kansai Sales Office in Kyoto-shi, Kyoto. (Relocated to Osaka-shi, Osaka in March 2018)

November 2017

▪ Acquired all shares of Satosen Co., Ltd., which conducts manufacturing and sales of electronicmaterials (currently a consolidated subsidiary).

-3-

3. Description of BusinessOur corporate group (hereinafter referred to as either “our Group” or the “Group”, as the case may be) is
comprised of the Company, fifteen (15) subsidiaries and four (4) affiliated companies and is engaged in
manufacturing and sales of electronic materials, industrial application structural materials, electrical insulating
materials and display materials. It also develops business activities such as sales of goods related to each businesssegment as well as logistics and other services.
Description of business of our Group and the capacities of the Company and its associated companies with respect
to each business segment are as follows.
The business segments shown below are categorized in the same manner as those shown in V. Status of Accounting– 1. Consolidated Financial Statements, etc. – (1) Consolidated Financial Statements – [Notes].
(1) Electronic Materials
The Company manufactures and sells materials for flexible and rigid printed circuit boards, etc. that are used
as electronic materials, while Arisawa Fiber Glass Co., Ltd., a subsidiary, manufactures glass cloth for printed
circuit boards. ThinFlex Corporation, a subsidiary, also manufactures and sells materials for flexible printed
circuit boards, etc., while Satosen Co., Ltd., a subsidiary, manufactures and sells rigid printed circuit boards.
(2) Industrial Application Structural Materials
The Company, Protec Arisawa Europe, S.A. and Protec Arisawa America, Inc. manufacture and sell filament
winding molded products for use as industrial application structural materials. The Company manufactures andsells honeycomb panels and prepregs, etc. for aircraft. Arisawa Sogyo Co., Ltd., a subsidiary, manufactures andsells pultrusion molded products and FRP ski sheets, etc.
Protec International Holdings Co., Ltd. conducts business management of the aforesaid Protec Arisawa
companies as the holding company of these subsidiaries engaged in the water treatment business with theirfilament winding molded products.
(3) Electrical Insulating Materials
Arisawa Fiber Glass Co., Ltd., a subsidiary, manufactures glass cloth and glass tapes for use as electricalinsulating materials, and the Company sells such glass cloth and glass tapes. The Company manufactures andsells prepregs, etc. for electrical insulation, while Arisawa Sogyo Co., Ltd., a subsidiary, and Arisawa Jushi
Kogyo Co., Ltd., another subsidiary, manufacture these products.
(4) Display Materials
The Company manufactures and sells 3D display filters, etc. for use as display materials. ColorLink Japan,
Ltd., a subsidiary, manufactures and sells special optical films, with Arisawa Manufacturing (Dalian) Co., Ltd.
also conducting the post-process operations for such special optical films.

Polatechno Co., Ltd., an affiliatedcompany, manufactures and sells polarizing plates for liquid crystal displays, etc. Innovision FlexTech
Corporation manufactures and sells screens, etc.
(5) Other Businesses
The Company conducts sales of the related goods mentioned above in (2) and (3). In addition, Arisawa Sogyo
Co., Ltd., a subsidiary, conducts logistics operations and also operates a driving range.
The above matters are abstracted in the following Business Activities Diagram.

-4-

(Business Activities Diagram)

ColorLink Japan, Ltd.

Co.,

Arisawa Manufacturing (Dalian) Co., Ltd.

Ltd.

Arisawa Jushi Kogyo Co., Ltd.

Innovision FlexTech Corporation

Protec International Holdings Co., Ltd.

Protec Arisawa Europe, S.A.

Protec Arisawa America, Inc.
Ar i sa wa S o g yo Co . , Lt d .

Transactions of products, etc.

Other transactions(Note)

Consolidated subsidiary

Industrial application structural materials

Satosen

Arisawa Fiber Glass Co., Ltd.

Electrical insulating materials

Ltd.

Corporation

Arisawa Mfg. Co., Ltd. (Manufacture and sales)

Electronic materials

TopFlexCo.,

Display materials

Polatechno

ThinFlex Corporation

Affiliated company accounted for underthe equity method

Non-consolidated subsidiary

Arisawa Sogyo Co., Ltd. is engaged in other businesses in addition to the manufacture of electrical insulating
materials and the manufacture and sales of industrial application structural materials.

-5-4. Status of Subsidiaries and Affiliated Companies

Name

Location

Capital stock(Thousands of Description of core
yen except asbusinessotherwise noted)

Votinginterest
held by theCompany

Relevant descriptions(%)(Consolidated
subsidiaries)
ThinFlex
Corporation(See Note 2)
ThinFlex
Technology
Corporation(B.V.I.)(See Note 2)
TopFlex
Corporation(See Note 2
and Note 5)
Satosen Co.,Ltd.

Kaohsiung
County, Taiwan

1,006,377(Thousands of
New Taiwan
dollar)Electronic materials

52.3

British Virgin
Islands

15,710(Thousands of
US dollar)

Electronic materials

100.0(100.0)---

Kunshan City,
P.R. China

17,000(Thousands of
US dollar)

Electronic materials

100.0(100.0)

Sales of electronic material
products

99,540Electronic materials

100.0

Leasing of land
Concurrent directorship

100.0

Consignment manufacture of glass
fiber fabrics related to electronicmaterials and electrical insulating
materials,
Leasing of buildings andmanufacturing equipment,
Financial support,
Concurrent directorship

100.0

Financial support,
Concurrent directorship

Osaka-shi,
Osaka

Arisawa Fiber
Glass Co., Ltd.
(See Note 2)

Joetsu-shi,
Niigata

100,000

Electronicmaterials,
Electrical insulating
materials

ProtecInternational
Holdings Co.,
Ltd.

Joetsu-shi,
Niigata

101,830

Industrial
application
structural materials

Protec Arisawa
Europe, S.A.

Munguia, Spain

1,670(Thousands of
euro)

Industrial
application
structural materials

Protec Arisawa
America, Inc.

Vista, CA,
U.S.A.

3,200(Thousands of
US dollar)

Industrial
application
structural materials

30,950Electrical insulating
materials,
Industrial
application
structural materials,
Other businesses

Arisawa Sogyo
Co., Ltd.

Joetsu-shi,
Niigata

Arisawa Jushi
Kogyo Co.,
Ltd.

Joetsu-shi,
Niigata

ColorLink
Japan, Ltd.

Joetsu-shi,
Niigata

Name

Location

10,000198,201

Electrical insulating
materials

Display materials

Capital stock(Thousands of Description of core
yen except asbusinessotherwise noted)
-6-

100.0
(100.0)

Supply of raw materials as well as
sales of products related toelectronic materials,
Concurrent directorship

Financial support,
Concurrent directorship

100.0(100.0)Financial support,
Concurrent directorship

100.0

Consignment manufacture as wellas consignment of warehousing
and logistics operations of resin
products related to electricalinsulating materials and industrial
application structural materials,
Leasing of buildings, machineryand equipment

100.0

Consignment manufacture of resin
products related to electricalinsulating materials,
Leasing of land and buildings,
Concurrent directorship97.2

Leasing of buildings, machineryand equipment,
Supply of raw materials,
Concurrent directorship

Votinginterest
held by theCompany(%)

Relevant descriptions(Affiliatedcompanies
accounted forunder theequity method)
Polatechno Co.,
Ltd.
(See Note 4)
Innovision
FlexTech
Corporation
Note:

1.
2.
3.
4.
5.

Joetsu-shi,
Niigata

3,095,125Display materials

22.3

Sales and purchase of products
related to display materials,
Leasing of land and buildings,
Concurrent directorship

Kaohsiung
City, Taiwan

239,560(Thousands of
New Taiwan
dollar)

Display materials

35.4

Sales and purchase of products
related to display materials,
Concurrent directorship

Segment names are stated in the column “Description of core business”.
The company falls under the category of specified subsidiary.
Parenthesized figures in the column “Voting interest held by the Company” indicate the ratio of indirect ownership to thepertinent total.
The company submits its own financial report.
Net sales (excluding inter-company sales between the consolidated companies) of TopFlex Corporation account for morethan ten hundredths (10/100) of the Group’s consolidated net sales.
Key income and loss indices, etc. of TopFlex Corporation(1) Net sales(Thousands of yen)
5,989,048(2) Ordinary income(3) Net income

3,815
11,403(4) Net assets(5) Total assets

1,651,633
6,304,855-7-

5. Status of Employees(1) Status of Consolidated Group(As of March 31, 2019)
Segment name

Number of employees

Electronic materials

827

（171）

Industrial application structural materials

272

（72）

Electrical insulating materials

134

（13）

Display materials

125

（31）

1,358

（287）

Other

34

（19）

Unallocated (Common)

40

（7）

1,432

（313）

Total of reportable segments

Total
Note: 1.

2.

The column “Number of employees” indicates the number of full-time employees (excluding persons on loan to companies
outside our Group from those within our Group and including persons on loan to companies within our Group from thoseoutside our Group), while the annual average number of temporary employees (including part-timers, employees
dispatched from staffing agencies and seasonal workers) is stated in the parentheses.
The number of employees stated as that of “Unallocated (Common)” is the number of those who belong to theadministrative departments of the Company.

(2) Status of Submitting Company
Number of employees

Average age (Years old)

Average length of service (Years)

42.9

19.3

602（119）
Segment name(As of March 31, 2019)
Average annual salary(Thousands of yen)
5,842

Number of employees

Electronic materials

331

（72）

Industrial application structural materials

112

（22）

Electrical insulating materials

72

（12）

Display materials

47

（6）

562

（112）

Unallocated (Common)

40

（7）

Total

602

（119）

Total of reportable segments

Note: 1.

2.
3.

The column “Number of employees” indicates the number of full-time employees (excluding persons on loan to othercompanies from the Company and including persons on loan to the Company from other companies), while the annual
average number of temporary employees (including part-timers, employees dispatched from staffing agencies and seasonal
workers) is stated in the parentheses.
“Average annual salary” includes bonuses and extra wages.
The number of employees stated as that of “Unallocated (Common)” is the number of those who belong to theadministrative departments of the Company.

(3) Status of Labor Union
The labor union of the Submitting Company belongs to the local division of the Japanese Federation of Textile,
Chemical, Food, Commercial, Service and General Workers’ Unions and has made sound development since its
formation in 1946. The labor-management relations are harmonious, and efforts are made to develop theCompany’s business through mutual cooperation. The union membership as of March 31, 2019 stands at 482
members.

-8-

II. Status of Business
1. Management Policy, Management Environment and Tasks to be Addressed
The matters stated concerning the future in the text are based on judgments made by our Group as of theend of the current consolidated fiscal year.
(1) Basic Policies of Corporate Management
Grounded in the motto “Creation, Innovation and Challenge”, our Group makes it its management policy to:(i) create new values and enhance customer satisfaction;(ii) anticipate customer needs and create a new business with creative technology;(iii) improve quality and productivity, and strengthen business quality.
Under such management policy, we aim to create corporate value and enhance shareholder value of theCompany by means of enhancing customer satisfaction, accelerating new product development and improving
profitability through thorough cost reduction. Our Group’s mid- to long-term managerial goals in terms ofmanagement indicators are: a ratio of new product sales of 50% or more, an operating income margin of 8% ormore and an ROA (return on assets) of 5% or more.

(2) Mid- to Long-Term Management Strategies
We strive to increase profits by enhancing competitiveness of the existing products as well as to develop new
products to build the foundation for new businesses.
- In the electronic materials segment, we proceed with the development of new products, centering on mobile
devices, in-vehicle devices and semiconductors. We also continue our exhaustive cost-cutting efforts andclosely collaborate with the consolidated subsidiaries in pursuit of enhanced competitiveness and expanded
market shares.
- In the industrial application structural materials segment and electrical insulating materials segment, we
promote new product development and sales expansion focusing on transportation infrastructure, water
treatment and electrical insulating, with a view to maintaining sound profitability and expanding market shares.
- In the display materials segment, we make efforts toward early launch of new products utilizing our unique
optical technology into market, primarily in the fields of medical applications, in-vehicle devices and large
sized displays.
- We deepens collaboration with the overseas consolidated subsidiaries and work to further expand sales bystrengthening the technical service to customers.

(3) Tasks to be Addressed by the Company
Our Group promotes the following as the tasks to be addressed in order to ensure accelerated and thoroughimplementation of the aforesaid management strategies.
- Exhaustive review of manufacturing technologies and materials selection in order to realize more competitive
cost structure- Thorough cost reduction by means of improving management techniques (centering on the Arisawa
Production System) and proprietary technologies as well as enhancing professional competence of individual
employees- Promotion of enhanced cooperation among the manufacturing, sales and technical divisions in pursuit of more
efficient business operations(4) Basic Policy for the Control of Kabushiki-Kaisha
1) Contents of the basic policy
The Company, ever since its initiation in 1909, has been working on technological innovations andproduct development to build up unique technologies that integrate the “weaving, coating and molding”
elements of its expertise while consistently fulfilling users’ needs, thereby increasing its corporate value
under favorable labor-management climate. The Company’s Board of Directors believes that the Company
is obligated to adhere to such time-honored principle of nurturing technological accumulation and also tounderstand, foster and enhance the said corporate value in the long run.
In light of the above, our Group stands on a management policy centering on the motto “Creation,
Innovation and Challenge” as we aim to create corporate value and enhance shareholder value of theCompany by means of enhancing customer satisfaction.
2) Efforts to prevent inappropriate persons from controlling the Company’s financial and business
policymaking
The Company decided not to continue the protective measures (Takeover defensive measures) as ofthe end of the 71st Ordinary General Meeting of Shareholders held on June 27, 2019. However, if any-9-acquisition of large block shares of the Company is made, we will strive to gather necessary and sufficient
information which may enable the shareholders to make an appropriate judgement on the pros and consof such acquisition of large block shares, and seek to secure time and information required for theshareholders' considering by disclosing opinions of the Board of Directors, etc.

2. Business Risks, etc.
Among the matters related to the status of business and the status of accounting, etc., which are stated in the
Financial Report, the following matters are included, as of the date of submission of the Financial Report, in thematters that may substantially affect investors’ judgment.
The matters stated concerning the future in the text are based on judgments made by our Group as of the end of
the current consolidated fiscal year.

(1) Fluctuations in Demand for Products
Major users of the products manufactured and sold by our Group are consumer electronic appliancemanufacturers, electronic component manufacturers, industrial electronic device manufacturers, etc., andfluctuations in demand for consumer electronic appliances affect the results of operations of our Group.

(2) Dependence on Particular Products
Net sales of our Group depend largely on the electronic materials segment. A sales decline in this segment may
affect the results of operations of our Group.

(3) Development of New Businesses
Our Group is making efforts to launch several new businesses, and the status of progress in such efforts may
affect the results of operations of our Group.

(4) Procurement of Raw Materials
If purchase prices of the raw materials purchased by our Group rise sharply due to escalating price of crude oiland copper, such rise may affect the results of operations of our Group.

(5) Impact of Disasters
The vast majority of our Group’s production bases are located in Joetsu-shi, Niigata, Japan. In the event of anearthquake or other disaster, the resultant disruption or interruption of production activities, etc. may affect theresults of operations of our Group.

(6) Environmental Regulations
Businesses of our Group are subject to various legal regulations, including, but not limited to, those applicable
to environmental protection. If any significant liability or obligation accrues to our Group in connection withcompliance with any such environmental or other kind of regulation, such liability or obligation may affect theresults of operations of our Group.

3. Analyses of Consolidated Financial Position, Business Results and Cash Flows by the Corporate
Managers(1) Overview of Operating Results, etc.
Analysis of financial conditions, results of operations and status of cash flows of the current consolidated fiscal year
is as follows.
i) Financial Position and Operating Results
The Japanese economy in the current consolidated fiscal year remained on a moderate overall recovery track
due to the improvement of corporate earnings and employment situation, etc. Meanwhile, a sense of uncertainty
regarding the economic outlook is growing further due to concern over the trade conflicts caused by US trade
policy and its monetary policy, the slowdown in the Chinese economy, and the UK leaving the European Union(Brexit), etc.
Under such circumstances, our corporate group (the Company, its consolidated subsidiaries and the affiliatedcompanies accounted for under the equity method; hereinafter referred to as either “our Group” or the “Group”,
as the case may be) saw a year-on-year decline, as compared with the previous fiscal year, in the sales in the- 10 -

electronic materials segment (for use primarily in multifunctional mobile terminals) and the industrial application
structural materials segment.
As a result, the business results of our Group for the current consolidated fiscal year showed net sales of 44,728
million yen (representing a 9.3% increase as compared with the previous consolidated fiscal year), an operating
income of 3,119 million yen (representing a 14.0% decrease as compared with the previous consolidated fiscal
year), an ordinary income of 4,297 million yen (representing a 6.3% increase as compared with the previous
consolidated fiscal year) and a profit attributable to owners of the parent of 2,861 million yen (representing a
17.2% decrease as compared with the previous consolidated fiscal year).
Business results with respect to each segment are as follows.
Electronic materials
In the electronic materials segment, net sales were 28,770 million yen, representing a 7.5% increase ascompared with the previous consolidated fiscal year and consisting mainly of the sales of our mainstay product,i.e. materials for flexible printed circuit boards for multi-functional cellular phones (the amount of orders
received increased by 1.2% to 17,013 million yen, and the production output decreased by 4.5%, as comparedwith the previous consolidated fiscal year on a non-consolidated basis of the Submitting Company), while thesegment income or loss recorded an income of 2,620 million yen (representing a 15.8% decrease as comparedwith the previous consolidated fiscal year).
Industrial application structural materials
In the industrial application structural materials segment, net sales (consisting mainly of the sales of filament
winding molded products, honeycomb panels and prepregs for aircraft, and water treatment pressure vessels)
were 8,395 million yen, representing a 16.3% increase as compared with the previous consolidated fiscal year,
while the segment income or loss recorded an income of 1,393 million yen (representing a 25.5% increase ascompared with the previous consolidated fiscal year).
Electrical insulating materials
In the electrical insulating materials segment, due to a decrease in infrastructure business, net sales were 3,127
million yen, representing a 3.1% decrease as compared with the previous consolidated fiscal year, while thesegment income or loss recorded an income of 430 million yen (representing a 29.2% decrease as comparedwith the previous consolidated fiscal year).
Display materials
In the display materials segment, 3D materials etc. being increasingly used for medical purposes, net sales
were 3,699 million yen, representing a 23.8% increase as compared with the previous consolidated fiscal year,
while the segment income or loss recorded an income of 114 million yen (representing a segment loss of 55
million yen for the previous consolidated fiscal year).
Other (other businesses)
In other businesses, net sales were 735 million yen, representing a 3.1% increase as compared with theprevious consolidated fiscal year, while the segment income or loss recorded an income of 192 million yen(representing a 19.9% decrease as compared with the previous consolidated fiscal year).
The amounts of net sales, orders received, etc. stated in this section do not include consumption tax, etc.
ii) Cash Flows
Cash and cash equivalents (hereinafter referred to as the “Funds”) as of the end of the current consolidated
fiscal year were 7,718 million yen, representing a year-on-year decrease of 1,111 million yen, or 12.6%.
The following is the status of each cash flow category during the current consolidated fiscal year and the key
factors of such status.
(Cash flows from operating activities)
Funds earned from operating activities were 2,893 million yen, representing a 32.6% increase as comparedwith the previous consolidated fiscal year. This was due largely to an increase in the Funds comprising 4,215
million yen in income before income taxes and 1,901 million yen in depreciation, etc. as well as a decrease in
the Funds comprising 1,460 million yen in Income taxes paid, etc.

- 11 -(Cash flows from investing activities)
Funds disbursed for investing activities were 3,304 million yen, representing a 600.8% increase as comparedwith the previous consolidated fiscal year. This was due largely to an increase in the Funds comprising theproceeds of 1,476 million yen from sales of investment securities, etc. as well as a decrease in the Funds
comprising the expenditure of 2,758 million yen for purchases of property, plant and equipment and theexpenditure of 1,929 million yen for purchases of investment securities, etc.
(Cash flows from financing activities)
Funds disbursed from financing activities were 576 million yen, representing an 872.7% increase as comparedwith the previous consolidated fiscal year. This was due largely to an increase in the Funds comprising theproceeds of 1,295 million yen from net increase in short-term loans payable and 917 million yen from longterm loans payable, etc. as well as a decrease in the Funds comprising the expenditure of 1,341 million yen for
repayments of long-term loans payable and 1,221 million yen in cash dividends paid, etc.
iii) Status of Production, Receipt of Orders and Sales
1) Production Results and Status of Receipt of Orders
Our Group (the Company and its consolidated subsidiaries; the same shall apply hereinafter) manufacturesand sells such an extensive and varied range of products that even the products of the same type are notnecessarily uniform in capacity, construction, form or other respects. Also, quite a few of our products are not
manufactured on a made-to-order basis. Such being the case, we do not indicate any segmentalized production
volume and order volume in monetary amounts or quantities.
For this reason, we indicate the status of production, receipt of orders and sales in a correlation with thebusiness results with respect to each of the segments shown in “(1) Overview of Operating Results, etc. - i)
Financial Position and Operating Results”
2) Sales Results
Net sales for the current consolidated fiscal year with respect to each reportable segment are as follows.

Segment nameCurrent consolidated fiscal year
(From April 1, 2018 to March 31,
2019)(Millions of yen)Comparison with the previous
consolidated fiscal year (%)

Electronic materials

28,7707.5

Industrial application structural
materials

8,395

16.3

Electrical insulating materials

3,127

△3.1

Display materials

3,699

23.8

43,992

9.4

Other

735

3.1

Total

44,728

9.3

Total of reportable segments

Note: 1. Inter-segment transactions are eliminated by setoff.
2. Sales results with respect to each major customer and their respective ratios to the total sales amount for the last two
consolidated fiscal years are as follows.

Customer name

Previous consolidated fiscal year
(From April 1, 2017 to March 31, 2018)

Current consolidated fiscal year
(From April 1, 2018 to March 31, 2019)

Amount(Millions of yen)Amount(Millions of yen)

Ratio (%)

Sumitomo Shoji Chemicals

6,185
15.1
Co., Ltd.
3. The amounts stated above do not include consumption tax, etc.

- 12 -

5,664

Ratio (%)
12.7

(2) Details of analysis and study regarding the conditions of operating results etc. from the viewpoint ofcorporate managers.
Details of perception, analysis and study regarding the conditions of operating results etc. of our Group from theviewpoint of corporate managers are as followings.
The matters regarding future in the following sentences were judged as of end of the current consolidated fiscal
year.
i) Critical Accounting Policies and Estimates
The consolidated financial statements of our Group are made based upon the corporate accounting standards
which are generally accepted in Japan. In preparing this consolidated financial statements, the management are
required to estimate for accounting. With respect to such estimates, the management comprehensively considers
and reasonably judges past results, present circumstances, etc.; nevertheless, actual results may become different
from the said estimates due to uncertainty peculiar to estimating.
The critical accounting policies adopted for the preparation of financial statements are described in "Important
Matters Underlying Preparation of Consolidated Financial Statements" of "V. Status of Accounting: 1.
Consolidated Financial Statements, etc.", among which the following critical accounting policies are considered
to have a profound effect on the important judging and estimating in course of preparing consolidated financial
statements.
1) Allowance for doubtful accounts
In our Group, as a reserve for potential loan losses, an estimated uncollectible amount is recorded based on
the historical loan-loss ratio in the case of general accounts receivable, and in light of the collectability in each
instance in the case of some specific accounts receivable, e.g. doubtful receivables. When a financial conditionof customers gets worse and their solvency declines, an additional allowance may need recording.
2) Assessment of recoverability of deferred tax assets
When applying tax effect accounting, our Group reasonably estimates recoverability of deferred tax assets
and records such assets after deduction of valuation allowance. Recoverability of deferred tax assets depends on
the possibility of future untaxable depreciation of taxable items and on the future taxable income estimated on
the basis of future profitability; therefore, if such estimated amount vary, a profit may fluctuate due to reversal
or additional recording of the deferred tax assets.
3) Impairment of securities and investment securities
Our Group holds securities and investment securities; we use, as valuation methods, the market method on
securities with market value and use the cost method on securities without market value. We conduct treatments
for impairment on our owned securities according to reasonable standards, because we bear the risk of pricefluctuation in the stock market (if such securities have market value) and investees' business results etc. mayworsen (if such securities have no market value).
Our Group has conducted necessary treatments for impairment on securities and investment securities.
Additionally, if any loss which is not reflected on the current book value occurs or any book value becomes
uncollectible due to deteriorating market conditions, worsening business results of investees, etc. in the future,
further treatments for impairment may be required according to the said standards.
4) Impairment of non-current assets
Our Group applies Accounting Standard for Impairment of Fixed Assets, and is grouping non-current assets
on the basis of business unit which generates cash flow independently. When the recoverable amount of an asset
group falls below book amount, such different amount is perceived as an impairment loss. When the recoverable
amount of an asset group further goes down in the future, further recording of an impairment loss may berequired.
5) Impairment of goodwill
Our Group uses amortization for goodwill by the straight-line method over a five (5)-year period. Its asset
value is reviewed based on results of operations and business plans of the subsidiaries, etc. If the original income
estimate, etc. is no longer viable and necessity of impairment is recognized in the future, goodwill in the relevant
consolidated fiscal year could be written down due to impairment.
ii) Details of Perception, Analysis and Study regarding the Conditions of Operating Results etc. of the Current
Consolidated Fiscal Year
1) Details of perception, analysis and study regarding the conditions of operating results etc.
In the current consolidated fiscal year, we worked, anticipating the changing market, for the continuous
growth of existing business by developing new products and differentiation-products. At the same time, we
continued an aggressive effort for the market expansion and the growth of our Group by developing new- 13 -

products in each segment. Electronic materials, as the core products of our Group, increased in orders (including
our subsidiary, "ThinFlex Corporation") for multifunctional mobile devices and supported the whole Group.
Regarding industrial application structural materials and electrical insulating materials, we look forward tofurther growth and we will continue to develop new products and to increase profitability. With respect todisplay materials, we achieved a surplus for the current fiscal year. We will develop new markets and enhance
our profitability.
Analysis of operating results etc. of our Group in the current fiscal year is as followings.

Analysis of Results of Operations(Net sales)
Net sales for the current consolidated fiscal year were 44,728 million yen (40,909million yen for the previous
consolidated fiscal year), representing a year-on-year increase of 3,818 million yen, or 9.3%. Cost of sales was
36,607 million yen (32,730 million yen for the previous consolidated fiscal year), representing a year-on-yearincrease of 3,876 million yen and signifying a 1.8 percentage point deterioration in the ratio of cost of sales to
81.8% our thoroughgoing efforts to cut costs.
As a result, gross profit was 8,121 million yen (8,178 million yen for the previous consolidated fiscal year),representing a year-on-year decrease of 57 million yen and signifying a 1.8 percentage point decrease in theratio of gross profit to 18.2%.
(Operating income or loss)
Total selling, general and administrative expenses for the current consolidated fiscal year were 5,001 million
yen (4,551 million yen for the previous consolidated fiscal year), representing a year-on-year increase of 450
million yen and signifying a 0.1 percentage point increase in the ratio of selling, general and administrative
expenses to 11.2% in our thoroughgoing efforts to cut costs.
As a result, operating income was 3,119 million yen (3,627 million yen for the previous consolidated fiscal
year), representing a year-on-year decrease of 507 million yen and signifying a 1.9 percentage point decreasein the ratio of operating profit to 7.0%.
.
(Ordinary income or loss)
Total non-operating income for the current consolidated fiscal year was 1,508 million yen (1,203 million yen
for the previous consolidated fiscal year), representing a year-on-year increase of 305 million yen. This wasdue largely to the posting of 160 million yen in foreign exchange gains. Total non-operating expenses were
330 million yen (786 million yen for the previous consolidated fiscal year), representing a year-on-year
decrease of 455 million yen. This was due largely to the posting in the previous consolidated fiscal year of 311
million yen in Provision of allowance for doubtful accounts and 170 million yen in foreign exchange losses.
As a result, ordinary income was 4,297 million yen (4,044 million yen for the previous consolidated fiscal
year), representing a year-on-year increase of 253 million yen and signifying a 0.3 percentage point decreasein the ratio of ordinary profit to 9.6%.
(Income or loss before income taxes)
Total extraordinary income for the current consolidated fiscal year was 113 million yen (851million yen forthe previous consolidated fiscal year), representing a year-on-year decrease of 738 million yen. This was due
largely to a decrease of 678 million yen in gain on sales of investment securities. Total extraordinary losses
were 194 million yen (150 million yen for the previous consolidated fiscal year), representing a year-on-yearincrease of 44 million yen. This was due largely to an increase of 70 million yen in impairment loss.
As a result, income before income taxes was 4,215 million yen (4,745 million yen for the previous
consolidated fiscal year), representing a year-on-year decrease of 529 million yen and signifying a 2.2
percentage point decrease in the ratio of profit before income taxes to 9.4%.
(Profit or loss attributable to owners of the parent)
Total income taxes for the current consolidated fiscal year were 1,066 million yen (994million yen for theprevious consolidated fiscal year), representing a year-on-year increase of 72 million yen. As the bottom line,
profit attributable to owners of the parent for the current consolidated fiscal year was 2,861 million yen(3,453million yen for the previous consolidated fiscal year), representing a year-on-year decrease of 592
million yen and signifying a 2.0 percentage point decrease in the ratio of profit attributable to owners of theparent to 6.4%.

- 14 -

Analysis of Financial Conditions(Assets)
Total assets as of the end of the current consolidated fiscal year were 73,096 million yen (72,382 million yen
as of the end of the previous consolidated fiscal year), representing a year-on-year increase of 713 million yen,or 1.0%.
Balance of total current assets as of the end of the current consolidated fiscal year was 35,577 million yen(35,782 million yen as of the end of the previous consolidated fiscal year), representing a year-on-year decreaseof 204 million yen, or 0.6%. This was due largely to an increase of 427 million yen in raw materials and supplies,
an increase of 221 million yen in securities, a decrease of 930 million yen in cash and deposits.
Balance of total non-current assets as of the end of the current consolidated fiscal year was 37,518 million
yen (36,599 million yen as of the end of the previous consolidated fiscal year), representing a year-on-yearincrease of 918 million yen, or 2.5%. This was due largely to an increase of 611 million yen in investments andother assets, an increase of 362 million yen in investment securities.
(Liabilities)
Total liabilities as of the end of the current consolidated fiscal year were 19,633 million yen (19,888 million
yen as of the end of the previous consolidated fiscal year), representing a year-on-year decrease of 254 million
yen, or 1.3%.
Balance of total current liabilities as of the end of the current consolidated fiscal year was 16,172 million yen(15,982 million yen as of the end of the previous consolidated fiscal year), representing a year-on-year increaseof 190 million yen, or 1.2%. This was due largely to an increase of 1,067 million yen in short-term loans payable(including current portion of long-term loans payable), a decrease of 689 million yen in notes and accounts
payable-trade and a decrease of 629 million yen in income taxes payable.
Balance of total non-current liabilities as of the end of the current consolidated fiscal year was 3,461 million
yen (3,906 million yen as of the end of the previous consolidated fiscal year), representing a year-on-year
decrease of 445 million yen, or 11.4%. This was due largely to a decrease of 377 million yen in long-term loans
payable.
(Net assets)
Total net assets as of the end of the current consolidated fiscal year were 53,462 million yen (52,493 million
yen as of the end of the previous consolidated fiscal year), representing a year-on-year increase of 968 million
yen, or 1.8%. This was due largely to an increase of 1,636 million yen in retained earnings, a decrease of 469
million yen in valuation difference on available-for-sale securities, a decrease of 374 million yen in foreign currencytranslation adjustment.

Analysis of Cash Flows
Status of each cash flow category during the current consolidated fiscal year and the factors behind such status
are stated in II. Status of Business - 3. Analyses of Consolidated Financial Position, Business Results and Cash
Flows by the Corporate Managers - (1) Overview of Operating Results, etc. - ii) Cash Flows.
(Cash flow indicators)
Previous consolidated fiscal year
(As of March 31, 2018)

Current consolidated fiscal year
(As of March 31, 2019)

Equity ratio (%)

68.6

69.3

Equity ratio on a mark-to-market basis (%)

49.1

39.3

Ratio of interest-bearing liabilities to cash flows(Years)3.3

2.7

Interest coverage ratio (Times)

25.8

34.2

Note:

Equity ratio: Total shareholders’ equity / Total assets
Equity ratio on a mark-to-market basis: Total market capitalization / Total assets
Ratio of interest-bearing liabilities to cash flows: Interest-bearing liabilities / Operating cash flows
Interest coverage ratio: Operating cash flows / Interest paid
1. All indicators above are calculated on the basis of the consolidated financial results.
2. Total market capitalization is calculated by multiplying the number of shares issued and outstanding at the end of theperiod (excluding treasury stock) by the closing price per share at the end of the period.
3. Interest-bearing liabilities represent all those liabilities (stated in the consolidated balance sheets) on which interest is
paid.
- 15 -

4. For operating cash flows, the amount of “Net cash provided by (used in) operating activities” stated in the consolidated
statements of cash flows is used. For the interest paid, the amount of “Interest expenses paid” stated in the consolidated
statements of cash flows is used.

Factors that May Give Material Impact to Operating Results of Our Group
Factors that may give material impact to operating results of our Group are described in "II. Status of Business
2. Business Risks, etc."
2) Financial resources for capital and liquidity of funds

Our Group makes it our basic policy to stably secure the liquidity of funds and the resources of capital requiredfor business operations. Though we basically use our own capital for short-term working capital, we hold acontract for overdraft with main financing banks so as to procure temporary working capital efficiently in time ofinsufficiency. Regarding the capital relating to capital formation such as business investments, we basicallyprocure our own capital and long-term borrowings from financial institutions in view of financing cost and risk
diversification. Additionally, for the purpose of efficient fund management, reducing of financial risk and savingof interest expenses, our Group started "Group Finance".
3) Objective Indicators etc. for Judgement on the Status of Achievement of Management Policy, Management
Strategies and Managerial goals
Our Group aims to enhance shareholder value of the companies by strengthening of profit structure andimproving of asset efficiency, and also makes "Operating Income Margin" and "Return on Assets (ROA)" ascritical indicators. In the current consolidated fiscal year, the Operating Income Margin is 7.0% (representing a 1.9
point deterioration as compared with the previous year) and the Return on Assets is 3.9% (representing a 0.9%
point deterioration as compared with the previous year). We intend to continue further improvement of such
indicators.
4) Details of Perception, Analysis and Study regarding Financial Position and Conditions of Operating Results ofeach Segment
Details of Perception, Analysis and Study regarding the financial position and conditions of operating results ofeach segment in the consolidated fiscal year are described in "(1) Overview of Operating Results, etc.; i) Financial
Position and Operating Results" and "(2) Details of analysis and study regarding the conditions of operating
results etc. from the viewpoint of corporate managers; ii) Details of Perception, Analysis and Study regarding theConditions of Operating Results etc. of the Current Consolidated Fiscal Year; 1) Details of perception, analysis
and study regarding the conditions of operating results etc."

4. Agreements with Managerial Implications, etc.
No applicable matter.

- 16 -

5. Research and Development Activities
Major research and development activities of our Group are conducted by the Submitting Company as well as
ThinFlex Corporation, Satosen Co., Ltd. and ColorLink Japan, Ltd., consolidated subsidiaries of the Submitting
Company, and these companies are also disseminating technologies to other consolidated subsidiaries.
As a technology-oriented corporate group, we adopt a flexible organization as a basis for our research anddevelopment activities in order to match the increasingly diversified and sophisticated needs of the users. Centering on
our core business fields, i.e. the electronic materials field, the industrial structural materials field, the electricalinsulating material field and the display materials field, we vigorously pursue research and development of newtechnologies and new products, aiming at launching new products to the market, nurturing of next generation products,
forward-looking promotion of technologies and expansion of fundamental technologies.
Examples of electronic materials include glass cloth for printed circuit boards, prepregs for special printed circuitboards and materials for FPCs (flexible printed circuit boards), etc. Examples of industrial structural materials include
materials for use in water treatment equipment, materials for use in superconductivity applications, materials foraircraft interiors. Examples of electrical insulating materials include prepregs for use in electrical insulating andvarious molded products, etc. Examples of display materials include 3D-filters, optical molded products, etc.
As of the end of the current consolidated fiscal year, we had 173 employees involved in research and development
activities, and our total research and development expenses incurred in the current consolidated fiscal year amounted
to 2,001 million yen.
Research and development achievements and the amount of research and development expenses incurred withrespect to each field during the current consolidated fiscal year were as follows.
(1) Electronic Materials Field- Materials for flexible printed circuit boards
In the field of mobile devices, the next-generation 5G telecommunication is said to partly start in the current fiscal
year. Electronic components used for such high-speed telecommunication require more reduction of signaltransmission loss. In order to deal with this challenge, the Company has developed, by means of our originaltechnology for resin composition, low-dielectric FPC circuit materials, adhesive sheets and coverlays which have lesssignal transmission loss. Now the evaluation of them is being conducted by our customers. The Company has also
developed, by using new materials, new FPC circuit materials with further improved dielectric properties. Now theevaluation of them is being conducted by our customers not only for mobile applications but also for automotive
sensor applications.
- Semiconductor-related materials
While the trend of IoT is proceeding further, there is a growing demand for thinner and downsized semiconductor
packages. The Company is promoting the development of a protection adhesive tape which may be used in suchproduction process. This adhesive tape requires a balance between adhesive property and stripping performance, as
well as non-contaminative characteristics for products. The Company has developed adhesives which satisfy suchrequired properties by means of our original technology for resin composition. Now the evaluation of them forcertification is being conducted by our customers.
- Heat dissipation materials
Electronic components for automobiles require stronger heat cycle resistance properties in adapting to the trend ofdownsizing. Heat dissipation adhesive sheets developed by the Company have passed such heat cycle test and obtained
certifications of automobile manufacturers. Future expansion of the adoption can be expected. In addition, we also
work on development of new heat dissipation adhesive sheets with more improved heat dissipation property.
(2) Industrial Application Structural Materials Field and Electrical Insulating Materials Field- Interior materials for aircrafts
Interior materials for aircraft require high flame-retardancy and involve a high degree of technical difficulty. The
Company has delivered sandwich panels for use of galley units and lavatories as interior materials for aircraft. The
company is also promoting, with this flame-retardation technology, the development of carbon prepregs for materials
of seat body in aircraft. In the fiscal year of 2018, a new type of carbon prepreg was completed and started to bedelivered. Our carbon prepregs are used for business-class seats to contribute to the weight reduction of airframe. We
will continue to develop a wide variety of interior materials using the flame-retardation technology. .
-Cryostats for medical use
The Company has developed and manufactured cryostats (FRP vessels which can store liquid helium) for- 17 -

Magnetoencephalography (magnetic field measurement of brains) used for diagnosis of epilepsy and Alzheimer
dementia. We made a great advance in the development of cryostats for Magnetospinography (magnetic fieldmeasurement of spinal cords) in the fiscal year of 2018. Magnetospinography is a device which is said to be effectivein diagnosis of many diseases such as paralysis and numbness of limbs. We will work hard to place it on the market
soon.
Research and development expenses incurred with respect to composite materials amounted to 397 million yen.
(3) Display Materials Field- 3D display materials
The 3D display systems incorporating the Company’s “Xpol®” patterned retardation layer have been used for a large
variety of purposes mainly in the healthcare sector, among others, due largely to their high quality reliability andexcellent stereoscopic imaging properties. Formerly they were used mainly for endoscopic surgery but now they are
increasingly adopted for the use of ophthalmology and brain surgery. In response to the customer requests for largesized screens, we completed the development of 55 inch-Xpol in the fiscal year of 2018. We hope that they will be
used for more kinds of usages in the future.
Research and development expenses incurred with respect to display materials amounted to 296 million yen.

- 18 -

III. Status of Facilities
1. Outline of Capital Investment
Our Group concentrates its capital investment in the expansive and growing fields in order to keep pace with therapid technological innovation and the tough sales competition and made capital expenditures totalling 2,500 million
yen in the current consolidated fiscal year.
The principal component of our capital investment in the current consolidated fiscal year was 1,940 million yen
for production equipment related to electronic materials centering on materials for flexible printed circuit boards.
In this regard, no retirement or sale, etc. of facilities or equipment that may significantly affect our Group’s
production capacity was conducted in the current consolidated fiscal year.

2. Status of Major Facilities(1) Submitting Company
As of March 31, 2019
Book value
Name ofbusiness place(Location)

Segment nameNature of facilities

Electronic materials
manufacturing facilities,
Electronic materials,
Industrial application
Minami-honcho Industrial application
structural materials
Factory
structural materials,
manufacturing facilities,(Joetsu-shi,
Electrical insulating
Electrical insulating
Niigata)materials,
materials manufacturing
facilities,

Buildings Machinery,
Land
Lease
Number ofandequipment
Other
Total
(Thousands assets
structures and vehicles(Thousands (Thousands employeesof yen) (Thousands(Thousands (Thousandsof yen)of yen)(Area m2)of yen)of yen)of yen)424,095

83,634

Nakadahara
Factory(Joetsu-shi,
Niigata)Electronic materials
manufacturing facilities,
Electronic materials, Industrial application
Industrial application structural materials
structural materials,
manufacturing facilities,
Electrical insulating Electrical insulating
materials,
materials manufacturing
Display materials
facilities,
Display materials
manufacturing facilities

2,342,746

1,327,237

NakadaharaNishi Factory(Joetsu-shi,
Niigata)

Industrial application
Industrial application
structural materials,
structural materials,
Display materials
Display materials
manufacturing facilities

196,161

604,725

Head Office(Joetsu-shi,
Niigata)

Head office(Common)

Other facilities

642,415

5,853

Tokyo Branch
Office(Taito-ku,
Tokyo)

Electronic materials,
Industrial application
structural materials,
Electrical insulating
materials,
Other facilities
Display materials,
Other,
Head office(Common)124,513

4,958- 19 -

55,202（18,240）

292,445（114,611）

361,602（34,638）

103,697（29,209）297,516
（577）

－

8,936

571,868

56
(13)

－

154,824

4,117,253

427
(92)

－

11,806

1,174,295

44
(6)

－

69,346

821,312

34
(7)

2,202

2,276

431,46539(1)

(2) Domestic Subsidiaries
As of March 31, 2019
Book value
Company
nameName ofbusiness
place(Location)

Segment nameNature of facilities

SatosenCo., Ltd.

--(Osaka-shi,
Osaka)

Electronicmaterials,

Electronicmaterials
manufacturing--(Joetsu-shi,
Niigata)Electronicmaterials,
Electricalinsulating
materials

Arisawa
Sogyo Co.,
Ltd.

--(Joetsu-shi,
Niigata)

Industrial
application
structural
materials,
Electricalinsulating
materials,
Other

Arisawa
Jushi
Kogyo
Co., Ltd.

--(Kawaguchi-shi,
Saitama)Electricalinsulating
materials

ColorLink
Japan, Ltd.

--(Joetsu-shi,
Niigata)

Arisawa
Fiber
Glass Co.,Ltd.

Displaymaterials

Electronicmaterials
manufacturing
facilities,
Electricalinsulating
materials
manufacturing
facilities
Industrial
application
structural
materials
manufacturing
facilities,
Electricalinsulating
materials
manufacturing
facilities
Electricalinsulating
materials
manufacturing
facilities
Display materials
manufacturing
facilities

Machinery,
Buildings
equipment
Land
Number ofandLease assets
Other
Total
and
(Thousands
structures(Thousands (Thousands (Thousands employees
vehiclesof yen)(Thousandsof yen)of yen)of yen)(Thousands (Area m2)of yen)of yen)198,667

245,107389,000（4,373）－22,546855,32193(79)

269,363247,292

117,197（34,706）－

3,803

637,65681(20)

254,962

34,249252,866（42,229）－8,825

550,902103(27)

50,242

6,944

31,561（2,407）－

5,739

94,48720(－)

97,421

85,24044,500（4,110）－11,813238,97678(25)(3) Overseas Subsidiaries
As of March 31, 2019
Book value
Company
nameName ofbusiness
place(Location)

Segment nameThinFlex
Corporation--(KaohsiungCounty,Taiwan)Electronicmaterials

Electronicmaterials
manufacturing
facilities

637,446

933,714-

119,339

70,364

1,760,865

218(－)

TopFlex
Corporation--(Kunshan
City,
P.R. China)

Electronicmaterials

Electronicmaterials
manufacturing
facilities

257,654

127,742

43,090（30,136）-

16,483444,971

134(－)

ProtecArisawa
Europe,S.A.

--(Munguia,
Spain)

Industrial
application
structural
materials

79,099151,806

4,126（8,000）-9,628

244,660

61(42)

ProtecArisawa
America,
Inc.

--(Vista, CA,
U.S.A.)

Industrial
application
structural
materials

7,766

57,013--32,72597,504

44
(1)

Note:

1.

Buildings Machinery,Land
Number ofandequipment
Lease assets
Other
Total
Nature of facilities(Thousands
structures and vehicles(Thousands (Thousands (Thousands employeesof yen)(Thousands (Thousandsof yen)of yen)of yen)2(Area m )of yen)of yen)Industrial
application
structural
materials
manufacturing
facilities
Industrial
application
structural
materials
manufacturing
facilities

Among the columns under “Book value”, “Other” indicates the total of tools, furniture and fixtures and construction in progress. The
amounts stated above do not include consumption tax, etc.

- 20 -

2.

Major facilities leased out by the Submitting Company to its domestic subsidiaries are included in the facilities of the pertinentsubsidiaries respectively.
Facilities and employees in Kansai office are included in Satosen Co., Ltd. and the number of employees of Protec International Holdings
Co., Ltd. combined is shown as part of the number of employees of the Tokyo Branch Office.
The value of the land of TopFlex Corporation represents the balance of the relevant land-use rights and is recorded as part of “Other” in“Investments and other assets”.
The parenthesized figures in the column “Number of employees” indicate the number of temporary employees not included in thepertinent total.

3.
4.
5.

3. Plans for Installation and Retirement, etc. of Facilities(1) Installation, etc. of Material Facilities
Name ofbusiness placeorcompany

Location

Segment
nameNature of facilities

Investment amount
Total amountAmountto behitherto
invested
disbursed(Thousands (Thousands ofof yen)yen)

Source offunds

Scheduled start andcompletion months

Start

Capacity
increase
uponcompletion

Completion

Electronicmaterials
December201
469,500
43,849 Own funds
December2019－
manufacturing
8
facilities
Note: 1. The amounts stated above do not include consumption tax, etc.
2. No amount or value is shown in the column “Capacity increase upon completion” as it is difficult to reasonably determine any pertinent
amount or value.
Arisawa Mfg.
Co., Ltd.

Joetsu-shi,
NiigataElectronicmaterials(2) Retirement, etc. of Material Facilities
There is no plan for retirement, etc. of material facilities.

- 21 -

IV. Status of the Submitting Company
1. Status of Shares, etc.
(1) Total Number of Shares, etc.
1) Total number of shares
Class

Total number of shares authorized to be issued

Common stock

130,000,000

Total

130,000,000

2) Shares issued and outstandingClass

Number of shares issued andoutstanding as of the end of
the business year
(As of March 31, 2019)

Number of shares issued andoutstanding as of the filingdate of the Financial Report(As of June 28, 2019)

Name of financial instruments
exchange where the shares arelisted or authorized financial
instruments firms association
where the shares are registered

Remarks

Common stock

36,226,224

36,231,024

Tokyo Stock Exchange(First Section)

Number ofsharesconstituting
one full unit:
100

Total

36,226,224

36,231,024

---

---

Note:

The number of shares issued through the exercise of stock acquisition rights in the period from June 1, 2019 to the filing dateof this Financial Report is not included in the column “Number of shares issued and outstanding as of the filing date of the
Financial Report”.

- 22 -

(2) Status of Stock Acquisition Rights, etc.
1) Details of Stock Option Scheme
Stock acquisition rights issued under the former Commercial Code were as follows.
Date of resolution

June 29, 2005

Category and number of persons to whom stock acquisition rights
shall be granted
Number of stock acquisition rights (Units)

6 directors of the Company whose retirement bonuses werediscontinued with approval of the shareholders at the 56th
Ordinary General Meeting of Shareholders※

271

Class, contents and number of shares subject to stock acquisitionrights ※Common stock

27,700

Amount to be paid per share at the time of exercising each stockacquisition right (Yen) ※Exercise period for stock acquisition rights

1
August 1, 2005 throughJuly 31, 2025※

Issuance price and amount credited to equity capital in the eventof share issuance through the exercise of stock acquisition rights(Yen) ※

Conditions for the exercise of stock acquisition rights※

Any transfer of stock acquisition rights shall be subject to theapproval of the Board of Directors.

Matters concerning the grant of stock acquisition rights inconnection with acts of reorganization ※※1

Amount credited to equity capital 1(1) Eligible person may exercise the stock acquisition rights
only on the occasion of his or her retirement from the post of
director of the Company; provided, however, that the eligible
person shall exercise the stock acquisition rights in the period
between the date immediately following the date of his or her
retirement (hereinafter referred to as the “Date of Commencing
Exercise of Right”) and the date elapsing ten (10) days fromthe Date of Commencing Exercise of Right (both dates
inclusive).
(2) In the event of the eligible person’s death, among his or her
heirs, only the spouse, children and lineal ascendants (first
degree) of the eligible person may exercise the stockacquisition rights; provided, however, that such heirs shall
exercise the stock acquisition rights in the period between thedate immediately following the date of retirement of theeligible person by death and the date elapsing three (3) months
from such date (both dates inclusive).

※

Matters concerning the transfer of stock acquisition rights

Issuance price---

The contents are described as of the end of the current business year (March 31, 2019). The description as of the end of the monthprevious to the filing is omitted, because there is no change in what should be described from the end of the current business year
to the end of the month previous to the filing (May 31, 2019).

Note:

The stock acquisition rights were granted in lieu of payment of money to the directors of the Company whose retirement
bonuses were discontinued with approval of the shareholders at the 56th Ordinary General Meeting of Shareholders (June 29,2004).

- 23 -

Stock acquisition rights issued under the Companies Act were as follows.
June 26, 2014

Date of resolution

6 directors of the Company,
5 directors of the Company,
163 employees of the Company, 176 employees of the Company,
and 10 directors and employees and 21 directors and employeesof subsidiaries of the Companyof subsidiaries of the Company

Category and number of persons to whom stockacquisition rights shall be granted
Number of stock acquisition rights (Units)※

Class, contents and number of shares subject to stockacquisition rights

941〔921〕2,074〔2,074〕

Common stock 94,100〔92,100〕

Common stock 207.400〔207.400〕

Amount to be paid per share at the time of exercising eachstock acquisition right (Yen) ※Exercise period for stock acquisition rights

741

867 (See Note 1)(See Note 1)

July 1, 2016 throughJune 30, 2019※

Issuance price and amount credited to equity capital in theevent of share issuance through the exercise of stockacquisition rights (Yen) ※Issuance price※2(See Note 2)

Conditions for the exercise of stock acquisition rights

June 26, 2015

July 1, 2017 throughJune 30, 2020
923 Issuance price

1,035

Amount credited to equity capital Amount credited to equity capital

461.5

518

Matters concerning the transfer of stock acquisition rights

Any transfer of stock acquisition rights shall be subject to theapproval of the Board of Directors.

Matters concerning the grant of stock acquisition rights inconnection with acts of reorganization(See Note 3)

Date of resolution

June 24, 2016

5 directors of the Company,
5 directors of the Company,
187 employees of the Company, 194 employees of the Company,
and 14 directors and employees and 10 directors and employeesof subsidiaries of the Company of subsidiaries of the Company

Category and number of persons to whom stockacquisition rights shall be granted
Number of stock acquisition rights (Units)※

Class, contents and number of shares subject to stockacquisition rights

2,286〔2,258〕

3,102〔3,101〕

Common stock 228,600〔225,800〕

Common stock 310,200〔310,100〕

Amount to be paid per share at the time of exercising eachstock acquisition right (Yen) ※Exercise period for stock acquisition rights

536

1,004

(See Note 1)

July 1, 2018 throughJune 30, 2021※

Issuance price and amount credited to equity capital in theevent of share issuance through the exercise of stockacquisition rights (Yen) ※Issuance price※2(See Note 2)

Conditions for the exercise of stock acquisition rights

June 28, 2017

(See Note 1)

July 1, 2019 throughJune 30, 2022
634 Issuance price

1,035

Amount credited to equity capital Amount credited to equity capital

317

518

Matters concerning the transfer of stock acquisition rights

Any transfer of stock acquisition rights shall be subject to theapproval of the Board of Directors.

Matters concerning the grant of stock acquisition rights inconnection with acts of reorganization(See Note 3)- 24 -

Date of resolution

June 28, 2018

5 directors of the Company,
4 directors of the Company,
211 employees of the Company, 208 employees of the Company,
and 11 directors and employees and 14 directors and employeesof subsidiaries of the Company of subsidiaries of the Company

Category and number of persons to whom stockacquisition rights shall be granted
Number of stock acquisition rights (Units)※

Class, contents and number of shares subject to stockacquisition rights

3,309〔3,299〕

3,260〔3,260〕

Common stock 330,900〔329,900〕

Common stock 326,000〔326,000〕

Amount to be paid per share at the time of exercising eachstock acquisition right (Yen) ※Exercise period for stock acquisition rights

1,104

Undecided (See Note 1 and 4)(See Note 1)

July 1, 2020 throughJune 30, 2023※

Issuance price and amount credited to equity capital in theevent of share issuance through the exercise of stockacquisition rights (Yen) ※Issuance price※2(See Note 2)

Conditions for the exercise of stock acquisition rights

June 27, 2019

July 1, 2021 throughJune 30, 2024

1,272
Undecided

Amount credited to equity capital

636

Matters concerning the transfer of stock acquisition rights

Any transfer of stock acquisition rights shall be subject to theapproval of the Board of Directors.

Matters concerning the grant of stock acquisition rights inconnection with acts of reorganization(See Note 3)※ The contents are described as of the end of the current business year (March 31, 2019). With respect to the items whichchanged during the period from the end of the current business year to the end of the month previous to the filing (May 31,2019), the contents thereof are described in [ ] as of the end of the month previous to the filing. No other contents changed
from the end of the current business year.
Note 1. If the Company conducts a stock split or a reverse stock split after the issuance of stock acquisition rights, the paid-in amountshall be adjusted in accordance with the following calculation formula, and any fraction less than 1 yen arising from suchadjustment shall be rounded up to the nearest integer value.
Paid-in amount after adjustment= Paid-in amount before adjustment ×

1
Ratio of stock split and reverse stock split

If the Company issues new shares (except in the case of the issuance of new shares through the exercise of stock options) or
disposes of shares of treasury stock at a price less than the current market price of the Company’s common stock, the paid-in
amount shall be adjusted in accordance with the following calculation formula, and any fraction less than 1 yen arising fromsuch adjustment shall be rounded up to the nearest integer value.
Number of shares issued &outstanding

Paid-in amount after adjustment = Paid-in amount before adjustment ×+

Number of new shares being issued × Paid-in
amount per share
Current market price per share

Number of shares issued & outstanding + Number of new shares being issued

If the Company disposes of shares of treasury stock, the “Number of new shares being issued” shall instead be read as the“Number of shares of treasury stock being disposed of”.

2.Being a director, an advisor or an employee of the Company or a director, an advisor or an employee of a subsidiary of theCompany at the time of exercising the rights.
3. In the event that a merger agreement in which the Company becomes a defunct company has been approved, or that a
proposal for approval of a stock swap agreement (or for a transfer of shares) in which the Company becomes a wholly
owned subsidiary has been approved at a general meeting of shareholders, except where the surviving company or theCompany’s wholly owning parent company succeeds to the obligation to grant stock acquisition rights, the Company shallbe able to acquire the stock acquisition rights without consideration.
4.Amount to be paid at the time of exercising each unit of stock acquisition right shall be the amount obtained by multiplying
the paid-in amount per share determined on the date of allotment by the number of shares subject to one unit of stockacquisition right. The said paid-in amount per share shall be the amount obtained by multiplying the simple mean value ofthe closing price of shares of common stock of the Company in regular trading at the Tokyo Stock Exchange on the date ofallotment and the closing prices for the nearest six (6) days where a closing price exists preceding the date of allotment (or- 25 -

the nearest seven (7) days where a closing price exists preceding the date of allotment, if there is no closing price on the dateof allotment) by 1.05. Any fraction less than 1 yen arising from this calculation shall be rounded up to the nearest integer
value. However, if the resulting amount is less than the closing price on the date of allotment (or the closing price on thenearest preceding day, if there is no closing price on the date of allotment), the closing price on the date of allotment (or theclosing price on the nearest preceding day, if there is no closing price on the date of allotment) shall be used instead.

2) Details of Rights Plan
No applicable matter.
3) Status of Other stock acquisition right
No applicable matter.

(3) Status of Exercise of Moving Strike Convertible Bonds, etc.
No applicable matter.

(4) Changes in the Number of Shares Issued and Outstanding, Capital Stock, etc.
PeriodNumber of shares issued andoutstanding
ChangeBalance

Capital stock(Thousands of yen)
ChangeBalance

Legal capital surplus(Thousands of yen)
ChangeBalance

From April 1, 2014
to March 31, 2015
(See Note)

354,800

35,485,824

108,867

7,262,490

108,867

6,374,513

From April 1, 2015
to March 31, 2016
(See Note)

125,300

35,611,124

31,857

7,294,347

31,853

6,406,366

From April 1, 2016
to March 31, 2017
(See Note)

68,50035,679,624

22,672

7,317,019

22,672

6,429,038

From April 1, 2017
to March 31, 2018
(See Note)

344,500

36,024,124

141,222

7,458,242

141,170

6,570,209

From April 1, 2018
to March 31, 2019
(See Note)

202,100

36,226,224

83,4507,541,693

83,406

6,653,615

Note 1.
2.

The increases are due to the exercise of stock acquisition rights.
In the period from April 1, 2019 to May 31, 2019, the number of shares issued and outstanding increased by 4,800 shares,
and the amount of capital stock and that of legal capital surplus increased by 1,810 thousand yen respectively, all throughthe exercise of stock acquisition rights.

- 26 -

(5) Status of Shareholder Categories
Status of Shares (Number of shares constituting one full unit: 100)
Category

Number ofshareholders
Number ofshares held
(Unitsexcept asotherwise
noted)
Ratio of thenumber ofshares held
(%)
Note:
1.
2.

Governments
Financialand local
institutions
governments

Financial
Foreign corporations, etc.
instruments
Otherbusiness corporations Other than
Individuals
operators
individuals

Individuals
and others

As of March 31, 2019
Status ofsharesconstituting
less thanTotal
one full
unit

－

28

40

111

88

14

11,917

12,198－－125,450

6,914

36,28456,255

142

136,406

361,451

81,124

－

34.71

1.91

10.04

15.56

0.04

37.74

100.00－Out of 7,378 shares of treasury stock, 73 units are included in the column “Individuals and others”, and 78 sharesare included in the column “Status of shares constituting less than one full unit”.
In the columns “Other corporations” and “Status of shares constituting less than one full unit”, shares held in thename of Japan Securities Depository Center, Inc. are included by 5 units and 19 shares, respectively.

- 27 -

(6) Status of Major Shareholders

Full name or
corporate name

Address

Number ofshares held

As of March 31, 2019
Ratio of the numberof shares held to thenumber of sharesissued andoutstanding(excluding treasury
stock) (%)

The Master Trust Bank of Japan,
Ltd. (Trust account)11-3, Hamamatsu-cho 2-chome,
Minato-ku, Tokyo

3,780,800

10.43Japan Trustee Services Bank, Ltd.
(Trust account)

8-11, Harumi 1-chome,
Chuo-ku, Tokyo

2,114,100

5.83

1,472,166

4.06

Mitsubishi Gas Chemical Company, 5-2, Marunouchi 2-chome,
Chiyoda-ku, Tokyo
Inc. (注１)
The Hachijuni Bank, Ltd.
(Standing Proxy: The Master Trust
Bank of Japan, Ltd.)

178-8, Nakagosho Okada,
Nagano-shi, Nagano(11-3, Hamamatsu-cho 2-chome,
Minato-ku, Tokyo)

1,000,930

2.76

Arisawa Kenko Ltd.

11-44, Nishishiro-cho 3-chome,
Joetsu-shi, Niigata

834,338

2.30

DFA INTL SMALL CAP VALUE
PORTFOLIO(Standing Proxy: Citibank, N.A.,
Tokyo Branch)

Palisades West 6300, Bee Cave Road, Building
One, Austin, TX 78746, U.S.A.
(27-30, Shinjuku 6-chome, Shinjuku-ku, Tokyo)

763,882

2.10

The Daishi Bank, Ltd.
(Standing Proxy: The Master Trust
Bank of Japan, Ltd.)1071-1, Higashiborimae-dori 7-bancho,
Chuo-ku, Niigata-shi, Niigata(11-3, Hamamatsu-cho 2-chome,
Minato-ku, Tokyo)

628,903

1.73

Japan Trustee Services Bank, Ltd.
(Trust account 5)

8-11, Harumi 1-chome,
Chuo-ku, Tokyo

622,200

1.71

NORTHERN TRUST CO. (AVFC)
50 BANK STREET CANARY WHARF
RE NVI01
LONDON E14 5NT, UK（Standing Proxy: The Hongkong(11-1, Nihonbashi 3-chome,and Shanghai Banking Corporation
Chuo-ku , Tokyo)Ltd., Tokyo Branch）

617,400

1.70

The Master Trust Bank of Japan,
Ltd. (Retirement benefit trust
account and Mitsubishi Electric
Corporation account)

530,536

1.46

12,365,255

34.14

Total

11-3, Hamamatsu-cho 2-chome,---

Note: 1. The number of shares held by Mitsubishi Gas Chemical Company, Inc. includes 966,306 shares that have been contributed by
Mitsubishi Gas Chemical Company, Inc. as the trust property of retirement benefit trust. The pertinent name in the Company’s
register of shareholders is “The Master Trust Bank of Japan, Ltd. (Retirement benefit trust account and Mitsubishi Gas Chemical
Company, Inc. account).”
2. Though it is described in the Change Report of the Report on Bulk Holding available for public inspection as of September 6,2018 that Sumitomo Mitsui Trust Bank, Limited and a joint holder thereof hold the shares described below as of August 31,
2018, the Company has confirmed no beneficial ownerships of the number of shares as of March 31, 2019. Therefore, such
number of shares is not included in above-mentioned Status of Major Shareholders. Details of the Change Report of the Reporton Bulk Holding are as follows:
Bulk Holders
Address: Sumitomo Mitsui Trust Bank, Limited and two joint holder thereof: 1-4-1, Marunouchi, Chiyoda-ku, Tokyo

Number of shareholdings etc.
: 1,488,200
Holding ratio of share certificates etc. : 4.12
3. Though it is described in the Change Report of the Report on Bulk Holding available for public inspection as of December
20, 2018 that BlackRock Japan Company, Limited and a joint holder thereof hold the shares described below as of December- 28 -

14, 2018, the Company has confirmed no beneficial ownerships of the number of shares as of March 31, 2019. Therefore, such
number of shares is not included in above-mentioned Status of Major Shareholders. Details of the Change Report of the Reporton Bulk Holding are as follows:
Bulk Holders
Address
Number of shareholdings etc.

: BlackRock Japan Company, Limited and one joint holder thereof: 1-8-3, Marunouchi, Chiyoda-ku, Tokyo: 1,259,700

Holding ratio of share certificates etc. : 3.48
4. Though it is described in the Change Report of the Report on Bulk Holding available for public inspection as of December 21,
2018 that Sumitomo Mitsui Asset Management Company, Limited hold the shares described below as of December 14, 2018,
the Company has confirmed no beneficial ownerships of the number of shares as of March 31, 2019. Therefore, such numberof shares is not included in above-mentioned Status of Major Shareholders. Details of the Change Report of the Report on
Bulk Holding are as follows:
Bulk Holders
Address: Sumitomo Mitsui Asset Management Company, Limited: 2-5-1 Atago, Minato-ku, Tokyo

Number of shareholdings etc.
: 1,090,300
Holding ratio of share certificates etc. : 3.01
5. Though it is described in the Change Report of the Report on Bulk Holding available for public inspection as of April 1, 2019that Nippon Value Investors KK hold the shares described below as of March 29, 2019, the Company has confirmed nobeneficial ownerships of the number of shares as of March 31, 2019. Therefore, such number of shares is not included inabove-mentioned Status of Major Shareholders. Details of the Change Report of the Report on Bulk Holding are as follows:
Bulk Holders
Address: Nippon Value Investors KK: 1-8-1 Marunouchi, Chiyoda-ku, Tokyo

Number of shareholdings etc.
: 2,438,400
Holding ratio of share certificates etc. : 6.73

- 29 -

(7) Status of Voting Rights
1) Shares issued and outstanding
As of March 31, 2019
Number of shares

Number of voting rights(Units)Remarks

Shares without voting rights

---

---

---

Shares with restricted voting rights(Treasury stock, etc.)

---

---

---

Shares with restricted voting rights(Other)

---

---

---

---

---

Category

Shares with full voting rights (Treasury
stock, etc.)

Common stock

Shares with full voting rights (Other)(See Note 1)

Common stock 36,137,800

361,378---

Shares constituting less than one full unit
(See Note 2)

Common stock

81,124------36,226,224

---

---

361,378---

Number of shares issued and outstanding
Total number of voting rights held byshareholders

7,300

---

Note: 1. 500 shares held in the name of Japan Securities Depository Center, Inc. are included in the row “Shares with full voting rights(Other)”. 5 units of voting rights pertaining to shares with full voting rights held in the name of Japan Securities Depository
Center, Inc. are included in the column “Number of voting rights”.
2. 78 shares of treasury stock are included in the row "Shares constituting less than one full unit".

2) Treasury Stock, etc.
As of March 31, 2019
Name and address of shareholder
Full name or
corporate name

Address

Arisawa Mfg. Co., Ltd.

5-5, Minami-honcho 1chome, Joetsu-shi,
Niigata---

Total

Number of shares held

Ratio of the number ofshares held to thenumber of sharesissued and outstanding(%)

Under thenames ofothers

Total

7,300

---

7,300

0.02

7,300

---

7,300

0.02

Under own
name- 30 -

2. Status of Acquisition of Treasury Stock, etc.
[Classes of Stock, etc.]
Acquisition of common stock under the provisions of Article 155, item 7 of the Companies Act.

(1) Status of Acquisition by Resolution of a General Meeting of Shareholders
No applicable matter.

(2) Status of Acquisition by Resolution of the Board of Directors
No applicable matter.

(3) Details of Acquisition not Authorized by Resolution of a General Meeting of Shareholders or
Resolution of the Board of Directors
Category

Number of shares

Total amount (Yen)Treasury stock acquired during the current business year294

296,958

Treasury stock acquired during the current period

72

63,564

Note: The row “Treasury stock acquired during the current period” does not include the shares acquired through the purchase ofshares constituting less than one full unit in the period from June 1, 2019 to the filing date of this Financial Report.

(4) Status of Disposal and Holding of Acquired Treasury Stock
Current Business Year
Category

Current Period

Numberof shares

Total disposal
amount (Yen)

Numberof shares

Total disposal
amount (Yen)

Acquired treasury stock offered for subscription

---

---

---

---

Acquired treasury stock disposed of through retirement

---

---

---

---

---

---

---

---

---

---

---

---

7,378

---

7,450

---

Acquired treasury stock transferred in relation to merger,
share exchange and company split
Other
Number of shares of treasury stock held
Note:

The “Number of shares of treasury stock held” in the “Current Period” does not include the shares acquired through thepurchase of shares constituting less than one full unit in the period from June 1, 2019 to the filing date of this Financial
Report.

- 31 -

3. Dividend Policy
The Company positions the distribution of profits to its shareholders as a priority management objective andintends to maintain its basic policy of profit distributions with the business results, taking into consideration thestrengthening of retained earnings for future business development and reinforcement of the corporate base. With
respect to the consolidated payout, the Company sets a target dividend payout ratio of 35% to the profit attributableto owners of the parent.
With respect to the frequency of dividend payments, the Company specifies in its articles of incorporation that
the Company can effect interim dividend payments. Currently, however, in view of the tendency for the net sales,
etc. for the first half of fiscal year to be higher than those for the second half in the ratio to the annual result, theCompany pays a year-end dividend once a year in order to ensure equitable distribution of dividends in light ofbusiness results.
Decisions with respect to dividends from surplus are made at a general meeting of shareholders for the year-end
dividend and by the Board of Directors for the interim dividend.
As for the annual dividend for the current business year, the Company decided to pay 30 yen per share based on
the said policy. As a result, the dividend payout ratio for the current consolidated fiscal year was 37.9%.
The Company plans to appropriate its internal reserves to research and development activities and capital
investment for business expansion, etc., aiming at enhancement of the shareholder value in future years.
The distribution of dividends from surplus for the current business year is as follows.

Date of resolution

Total amount of dividends(Thousands of yen)

Dividend pershare (Yen)

1,086,565

30.00

Resolution at the Ordinary General Meeting of
Shareholders of June 27, 2019

- 32 -

4. Status of Corporate Governance, etc.
(1) Outline of Corporate Governance1) Basic Concept of Corporate Governance
The Company has a corporate governance system in place to increase corporate value through sustainablegrowth and to maintain social credibility and is also making efforts to secure efficient and equitable
management and to enhance management transparency through proactive disclosure.
In terms of management efficiency, to ensure collection of highly accurate information and expeditious
decision making and executions, we aim at management by a selected few and restrict the number of Directors
to the requisite minimum. In this context, we employ the Operating Officer system to ensure speedy executionof operations under the decisions of the Board of Directors, where the Outside Directors and Outside
Corporate Auditors also attend.
In terms of equitable management, in line with the basic policy concerning improvement of the internal
control system, we improve organizations and systems for the purpose of ensuring legal compliance. In orderto enhance transparency, we promote communication with our shareholders and general investors through IR
activities, etc. and conduct disclosure practices in as active and timely a manner as possible.
2) Outline of Corporate Governance System

As for execution of operations, to ensure speedy execution and control of the management policy andmanagement plans determined at the regular/monthly or extraordinary meetings of the Board of Directors,
an eleven (11)-member Board of Operating Officers (comprising one (1) Chief Executive Officer and ten(10) Operating Officers) is in place in pursuit of management efficiency and speed.
Each Operating Officer plans and promotes operations under his or her supervision upon approval at theregular/monthly or extraordinary meetings of the Board of Directors as well as the monthly meeting of theBoard of Operating Officers and strives for efficient and speedy execution of duties pursuant to theRegulations for the Segregation of Duties, etc.
3) Reasons for Adopting Corporate Governance System

As a company employing the Board of Corporate Auditors system, we hold the meeting of the Board of
Corporate Auditors monthly (in principle) pursuant to the Regulations for the Board of Corporate Auditors.
The Corporate Auditors attend meetings of the Board of Directors, and the Full-time Corporate Auditor
attends meetings of the Board of Operating Officers, etc. The Corporate Auditors also offer appropriate
proposals and advice as to execution of Directors’ duties and the status of improvement and operation of theinternal control system, etc., thereby exercising strict oversight over the management.
We also appoint, in order to exercise external oversight, two (2) Outside Corporate Auditors and two (2)Outside Directors, each of whom bears a part in management oversight in terms of laws and regulations,finance, accounting and corporate governance respectively from a neutral and objective viewpoint,
contributing to what we believe is a fully functioning corporate governance system.
4) Status of Improvement of Internal Control System and Risk Management System

The Company adopted, by resolution of the Board of Directors, the “Systems to Ensure Proper Operations”
as shown below.
a. System to ensure that execution by Directors and employees of the Company and its subsidiaries of theirrespective duties complies with the applicable laws and regulations and the Articles of Incorporation
The Company and its subsidiaries shall lay down the “Arisawa Group Corporate Action Guidelines”
applicable throughout the Group, set specific internal regulations in line with the said guidelines, and thenobserve the said internal regulations, thereby establishing a system which ensures that execution by
Directors and employees of their respective duties complies with the applicable laws and regulations andthe Articles of Incorporation.
b. System concerning storage and management of information on execution of duties of Directors of theCompany
As for the storage and management of information on execution of duties of Directors, internal
regulations for document management shall be set in line with the provisions of the applicable laws andregulations and the Articles of Incorporation to construct a system which ensures proper storage and- 33 -

management of the relevant information.
c. System concerning reporting to the Company of the matters relating to execution of duties of Directors,
etc. of subsidiaries of the Company
Supervision over execution of duties of Directors, etc. of subsidiaries of the Company shall be
exercised through having Directors of the Company concurrently serve as Directors of subsidiaries of
the Company. Also, internal regulations for management of associated companies shall be set,
establishing a system which makes it mandatory for subsidiaries of the Company to submit theirrespective board minutes to the Company and also to report the relevant material facts to the Company,
both along the lines of the provisions of the said regulations.
d. Regulations and other systems concerning management of risk of loss for the Company and its subsidiaries
In order to comprehend and manage various risks surrounding the Group and its operations, internal
regulations managing and coping with each risk category shall be set. Observing the said regulations
establishes a system that helps reduce and mitigate business risks.
e. System to ensure efficient execution of duties of Directors of the Company and its subsidiaries
The Group shall improve internal regulations governing the segregation of duties and the scope of job
authorities to definitize each department’s duty assignment and job authorities and shall also introduce
a common accounting management system for the entire Group, etc., thereby establishing a system which
ensures efficient execution of duties of Directors of the Company and its subsidiaries.
f. Matters concerning employees assigned, upon request of Corporate Auditors of the Company, to assist with
duties of Corporate Auditors of the Company, the matters concerning independence of such employees from
Directors of the Company and the system to ensure effectiveness of instructions from Corporate Auditorsof the Company to such employees
Employees to assist with duties of a Corporate Auditor shall be appointed upon request of the
Corporate Auditor and in view of the expertise and experience, etc. required for the audit work. The
employees so appointed as assistant shall execute the relevant duties under the direction of the
Corporate Auditor and also be free from the dictates of any Director of the Company so as to ensure
the independence of such employees from Directors and the effectiveness of instructions from the
Corporate Auditor to such employees.
g. System to mandate reporting to Corporate Auditors of the Company by Directors and employees, etc. of
the Company as well as Directors, Corporate Auditors and employees, etc. of subsidiaries of the Company
and the system to ensure prevention of unfavorable treatment of those who have made such reporting on
account of the pertinent report having been madeInternal regulations stipulating the matters to be reported by Directors and employees, etc. of theCompany to Corporate Auditors shall be set so as to establish a system which mandates immediate
reporting to Corporate Auditors of all material facts with implications on the Group’s management andbusiness results. Also, the internal hotline system prohibiting unfavorable treatment of the whistleblower shall be maintained so that Corporate Auditors can directly receive the relevant reports from
employees, etc.
h. Matters concerning policies on the processing of costs incurred from execution of duties of Corporate
Auditors of the Company
Promptly upon receipt of a request, made by a Corporate Auditor under the provisions of Article 388of the Companies Act, for an advance payment, etc. of expenses to be incurred from execution of hisor her duties, the Company shall settle the pertinent expenses or liabilities. Also, if a Corporate Auditor
deems consultations, etc. with lawyers, chartered accountants and other specialists to be necessary forexecution of his or her duties, the Company shall allow the amount disbursed for enlisting suchconsultations, etc. as part of the necessary audit-related expenses.
i. Other systems to ensure execution of effective audits by Corporate Auditors of the Company
Corporate Auditors of the Company shall collect periodic reports from Directors of subsidiaries of
the Company, collect reports from Corporate Auditors of subsidiaries of the Company and also engage- 34 -

in other coordinated actions, as needed, so as to execute proper audits of the Group.
j. System to ensure credibility of financial reporting
To ensure credibility of financial reporting, the Group shall make continuous evaluation of the statusof improvement and operation of the internal control system for financial reporting and also remedy
any defect or flaw found in such system, thereby maintaining a system which allows the Group’s
internal control to function effectively and properly.
k. System to exclude anti-social forces
The Company and its subsidiaries shall expressly state in the “Arisawa Group Corporate Action
Guidelines” a policy to prevent and preclude any relationship with anti-social forces that pose a threat
to the order and safety of civil society. The Group shall also adopt and maintain a resolute attitude
toward anti-social forces in cooperation with law enforcement and other external specialized agencies.
The Company’s corporate governance system is abstracted in the following diagram.

General Meeting of Shareholders

Return6 Directors(incl. 2 Outside Directors)

Audit

Appointment, Dismissal,
Directions & Supervision
Board of
Operating
Officers
Report11 Operating Officers(CEO and other Operating
Officers)*

Directions

Accounting
Audit

Directions &Supervision
Each department, subsidiary, etc.

Internal Audit

Accounting Auditors (Ernst & Young ShinNihon LLC)

Board ofDirectors

Remuneration
Advisory Committee

Appointment& Dismissal

Appointment& Dismissal

Internal Audit Department

Board of Corporate Auditors

3 Corporate Auditors (incl. 2 Outside Corporate Auditors)

Appointment& Dismissal(Collaboration)*Note:The Board of Operating Officers consists of a total of eleven (11) Operating
Officers (including, but not limited to, the Chief Executive Officer), four (4) ofwhich are concurrently assumed by the relevant Directors.

5) Maximum Number of Directors
The Company’s Articles of Incorporation stipulate that the number of Directors of the Company shall not be
more than fifteen (15).
6) Requirements for Appointment of Directors
The Company’s Articles of Incorporation stipulate that a resolution on appointing Directors shall be adopted
by a majority vote of the voting rights of the shareholders who are present and also hold at least one-third (1/3)
of all voting rights of the shareholders entitled to exercise voting rights.
It is also stipulated in the said Articles of Incorporation that no cumulative voting shall be allowed for a
resolution on appointing Directors.
- 35 -

7) Summary of the Terms of Contracts for Limitation of Liability
The Company’s Articles of Incorporation stipulate that the Company may, under the provisions of Article
427, paragraph 1 of the Companies Act, enter into contracts for limitation of liability with its Outside Directors
and Outside Corporate Auditors so that the Company can recruit competent persons as Outside Directors andOutside Corporate Auditors and also that the recruited Outside Directors and Outside Corporate Auditors cansoundly fulfill their expected roles. The main purport of such contracts for limitation of liability (entered into
between the Company and the Outside Directors as well as Outside Corporate Auditors under the said
stipulation) is as follows.
The Outside Directors and Outside Corporate Auditors shall, with respect to the liability for damages under
Article 423, paragraph 1 of the Companies Act, assume such liability for damages to the extent of the statutory
minimum liability amount as long as they perform their respective duties in good faith without being grossly
negligent.
8) Matters Typically Requiring a Resolution of a General Meeting of Shareholders which may be Resolved by
the Board of Directors
The Company’s Articles of Incorporation stipulate that the Company may resolve on the following mattersby voting at a meeting of the Board of Directors instead of voting at a general meeting of shareholders.
a. Organ to determine acquisition of treasury stock
The Company’s Articles of Incorporation stipulate that the Company may, under the provisions of Article
165, paragraph 2 of the Companies Act, acquire shares of treasury stock through market transactions, etc.
upon a resolution of the Board of Directors instead of that of a general meeting of shareholders. This
stipulation aims to enable an agile capital policy by authorizing the Board of Directors to resolve on theacquisition of the Company’s treasury stock.
b. Organ to determine distribution of interim dividends from surplus
The Company’s Articles of Incorporation stipulate that the Company may, under the provisions of Article
454, paragraph 5 of the Companies Act, distribute interim dividends with the record date of September 30 ofevery year upon a resolution of the Board of Directors instead of that of a general meeting of shareholders.
This stipulation aims to expeditiously return profits to the Company’s shareholders by authorizing the Boardof Directors to resolve on the distribution of interim dividends from surplus.
9) Requirements for Special Resolutions of a General Meeting of Shareholders
The Company’s Articles of Incorporation stipulate that, with respect to the requirements for special
resolutions of a general meeting of shareholders provided for in Article 309, paragraph 2 of the Companies Act,a special resolution shall be adopted by a two-thirds (2/3) majority vote of the voting rights of the shareholders
who are present and also hold at least one-third (1/3) of all voting rights of the shareholders entitled to exercise
voting rights. This stipulation aims to ensure smooth operation of general meetings of shareholders by relaxing
the quorum requirement for special resolutions of a general meeting of shareholders.

- 36 -

(2) Status of Directors and Officers
1) Directors and Officers(Number of female directors and officers: 0)(Percentage of female directors and officers: Nil)
Title

Name

Date of birth

Career summary
April 1992
February 2002
August 2003
April 2007
April 2009
June 2010

Joined Mitsubishi Electric Corporation
Joined JPMorgan Securities Japan Co., Ltd.
Joined the Company
Assistant General Manager, Manufacturing Dept.
President
andOperating Officer of the Company
Representative
Director and Senior Operating Officer of the
Director
Yuta
July 25,Company
Arisawa
1969
June 2011
Director and Senior Managing Operating Officer
Chief Executiveof the Company
Officer (CEO)June 2014
President, Representative Director of the Company
June 2015
Chief Operating Officer (COO) of the Company
June 2017
Chief Executive Officer (CEO) of the Company(Current)
March 1981
Joined the Company
July 1996
General Manager, Tokyo Branch OfficeDirector
June 2008
President and Representative Director of Arisawa
Jushi Kogyo Co., Ltd. (Current)
Division Chief,
June 2008
Operating Officer of the Company
Electrical
Yoshihiko January 24,
June 2014
Director and Senior Operating Officer of theInsulating
&
Toda
1958
Company
Composite
May 2017
President and Representative Director of Arisawa
Materials
Fiber Glass Co., Ltd. (Current)
Business Div.
June 2017
Director and Senior Managing Operating Officerof the Company (Current)
April 1989
Joined Mitsui & Co., Ltd.
Director
May 2011
Department Manager, Solar Business Div.,
Functional Chemicals Business Unit of Mitsui &Senior OperatingCo., Ltd.
Officer
April 2013
Department Manager, Advanced Materials Div.,
supervising
Functional Chemicals Business Unit of Mitsui &Electronic
Osamu
June 5, 1965
Co., Ltd.
Materials Sales Nakajima
July 2014
Department Manager, Business Development Div.,
Dept.;
Basic Chemicals Business Unit of Mitsui & Co.,
Division Chief,
Ltd.
Electronic
October 2015
Joined the Company as Operating Officer
Materials
June 2016
Director and Senior Operating Officer of theBusiness Div.
Company (Current)
April 1983
Joined Toshiba Corporation
April 2000
Vice President of Toshiba America Business
Solutions, Inc.
April 2003
General Manager, MFP Business Division,
Document Processing & Telecommunication
Director
System Company of TOSHIBA TECCORPORATION
Senior Operating
April 2011
General Manager, Emerging Countries Division,
Officer
Global Solutions Business Group of TOSHIBA
supervising
TEC CORPORATION
Manufacturing
June 2012
Vice President, Chief Marketing Executive, Global
Dept.
and
Solutions Business Group of TOSHIBA TEC
Administration
Hidetaka
May 30,CORPORATION
Dept.;
Nonami
1958
April 2015
Vice President, Deputy Managing Director,
Division Chief,
Printing Solutions Business Group of TOSHIBA
Manufacturing
TEC CORPORATION
Engineering Div.,
July 2016
Audit & Supervisory Board Member of TOSHIBA
General Affairs
TEC CORPORATION
Div. and Human
September 2016 Joined the Company as Assistant Division Chief,
Resources Div.
Administration Division
September 2016 Operating Officer, Deputy Division Chief,
Administration Division; in charge of General
Affairs Dept., Manufacturing Engineering Dept.
and Quality Assurance Dept. of the Company
June 2017
Director and Senior Operating Officer of theCompany (Current)- 37 -

Term

Number ofshares of theCompany held

See
Note 475,026See
Note 4

49,846See
Note 4

13,731

See
Note 41,450

TitleName

Date of birth

Career summary

Number ofshares of theCompany held

See
Note 410,000See
Note 41,500

See
Note 5

1,921

See
Note 6---See
Note 6---

June 1972
April 1987
Director

Katsuchika
Goto

November
20, 1944

Director

YutakaTsukahara

December21, 1945

Full-time
Corporate
AuditorKoji Ohta

February 9,
1955

Corporate
AuditorKoichi
Sakai

January 31,
1961

Corporate
AuditorShinjiro
Kawai

May 19,1959

Joined GA Saxton & Co., New York
Senior Analyst of SG Warburg Securities, Inc.
(Tokyo)April 1994
Managing Director and General Manager(Research Dept.) of Smith Barney, Inc.
December 1998 Senior Advisor, the Government of Singapore
Investment Corporation Pte Ltd.
March 2004
Representative Director of Unipulse Corporation
June 2010
Director of the Company (Current)
April 1968
Joined Fuji Heavy Industries Ltd. (currently
Subaru Corporation)
June 1999
Vice President and Senior General Manager, Japan
Sales & Marketing Div. of Fuji Heavy Industries
Ltd.
June 2001
Senior Vice President and Chief General Manager,
Japan Region, Subaru Sales & Marketing Div. of
Fuji Heavy Industries Ltd.
June 2003
Senior Vice President and Chief General Manager,
Subaru Product & Portfolio Planning Div. of Fuji
Heavy Industries Ltd.
May 2005
President and Representative Director of Tokyo
Subaru Inc.
June 2017
Director of the Company (Current)
March 1973
Joined the Company
July 2002
Group Leader, Accounting Group, General Affairs
Dept.
July 2004
General Manager, General Affairs Dept.
June 2012
Full-time Corporate Auditor of the Company(Current)
June 2017
Corporate Auditor of Polatechno Co., Ltd.
(Current)
April 1984
Joined The Hachijuni Bank, Ltd.
February 2004 Hata Branch Manager of the Bank
June 2006
Tokyo Main Office Manager of the Bank
June 2008
Kenchonai Branch Manager of the Bank
June 2011
Suzaka Area-Suzaka Branch Manager of the Bank
June 2013
Ina Area-Ina Branch Manager of the Bank
June 2014
Executive Officer and Ina Area-Ina BranchManager of the Bank
June 2015
Executive Officer and Loan Control Dept.
Manager of the Bank
June 2016
Full-time Corporate Auditor of the Bank (Current)
June 2018
Corporate Auditor of the Company (Current)
April 1982
Joined The Daishi Bank, Ltd.
June 2006
Nagaoka Nishi Branch Manager of the Bank
April 2010
Credit Supervision Div. Deputy Manager of the
Bank
March 2011
Credit Supervision Div. Manager of the Bank
February 2014 General Affairs Div. Manager of the Bank
June 2014
Executive Officer and Shibata Branch Manager ofthe Bank
February 2016 Executive Officer and Audit and Inspection Div.
Manager of the Bank
June 2017
Director of the Bank (Audit & Supervisory
Committee Member) (Current)
June 2018
Corporate Auditor of the Company (Current)
October 2018
Director of Daishi Hokuetsu Financial Group, Inc.
（Audit & Supervisory Committee Member)）（Current）

Term

Total:
153,474

Note:

1.

2.

3.

4.

Figures stated in the column “Number of shares of the Company held” represent the number of shares beneficially owned
by each of the persons listed above, including their respective ownership interests under the Company’s stock ownershipplan for its directors and officers. Since the number of shares acquired in June 2019 through the said stock ownership planis yet to be confirmed as of the filing date of this Financial Report (June 28, 2019), the number of shares beneficiallyowned by each of the persons listed above as of May 31, 2019 is stated.
Among the Directors, Katsuchika Goto and Yutaka Tsukahara are Outside Directors (set forth in Article 2, item 15 of theCompanies Act) falling under the outside officers (set forth in Article 2, paragraph 3, item 5 of the Ordinance for
Enforcement of the Companies Act).
Among the Corporate Auditors, Koichi Sakai and Shinjiro Kawai are Outside Corporate Auditors (set forth in Article 2,
item 16 of the Companies Act) falling under the outside officers (set forth in Article 2, paragraph 3, item 5 of the Ordinancefor Enforcement of the Companies Act).
From the closing of the Ordinary General Meeting of Shareholders held on June 27, 2019 until the closing of the Ordinary
General Meeting of Shareholders for the fiscal year ending on March 31, 2021.
- 38 -

5.

From the closing of the Ordinary General Meeting of Shareholders held on June 24, 2016 until the closing of the Ordinary
General Meeting of Shareholders for the fiscal year ending on March 31, 2020.
6. From the closing of the Ordinary General Meeting of Shareholders held on June 28, 2018 until the closing of theOrdinary General Meeting of Shareholders for the fiscal year ending on March 31, 2020.
7. The Company employs the Operating Officer system to ensure expeditious execution of the operations determined by the
Board of Directors and formulation of highly transparent management strategies. The Company has a total of eleven (11)Operating Officers consisting of one (1) Chief Executive Officer, one (1) Senior Managing Operating Officer, two (2)Senior Operating Officers and the following seven (7) Operating Officers.
Yasunori Kihara
Operating Officer supervising Procurement Dept. and Quality Assurance Dept.; Deputy
Division Chief, Administration Div.
Takeshi Masuda
Operating Officer supervising Corporate Planning Dept. and Accounting Dept.; Deputy
Division Chief, Administration Div.
Makoto Tai
Operating Officer supervising Electrical Insulating & Composite Materials Engineering
Dept., Optical Materials Engineering Dept. and Electronic Materials Engineering
Dept.(sub-) ; Deputy Division Chief, Electrical Insulating & Composite Materials Business
Dept.
Takeshi Aizawa
Operating Officer supervising Manufacturing Dept.; Deputy Division Chief, Manufacturing
Div.
Eiichi Matsuya
Operating Officer supervising ColorLink Japan, Ltd.
Yoshifumi Ara
Operating Officer supervising Electrical Insulating & Composite Materials Sales Dept.;
Deputy Division Chief, Electrical Insulating & Composite Materials Business Dept.
Syuichi Fujita
Operating Officer supervising Electronic Materials Technical Administration Dept.
(principal) and Electronic Materials Manufacturing Engineering Dept.; Deputy Division
Chief, Electronic Materials Business Div.
8.

The Company appointed the substitute corporate auditors under the provisions of Article 329, paragraph 3 of the Companies
Act as a precaution against shortage in the number of corporate auditors required by the applicable laws and regulations
as follows: Takashi Miwa as a substitute for Koji Ohta, Full-time Corporate Auditor, and Hideyuki Baba as a substitutefor the Outside Corporate Auditors, i.e. Koichi Sakai and Shinjiro Kawai. The career summary of each of the said substitutecorporate auditors is shown below.

Name

Date of birth

Career summary

March 1973
April 2000

Takashi Miwa

March 3, 1951

July 2001
June 2003
June 2004
June 2014

Hideyuki Baba

March 29, 1964

June 2016
April 1998
April 2003

Term

Joined the Company
General Manager, Electronic Materials Div.,
Research & Development Dept.
Operating Officer of the Company
Senior Operating Officer of the Company
1 yearDirector and Senior Operating Officer of theCompany
Director and Senior Managing Operating Officer of
the Company
Advisor of the Company (Current)
Registered at Niigata Bar Association
Representative, Hideyuki Baba Law Office
1 year(Current)- 39 -

Numberof sharesof theCompany
held

12,206---

2) Status of Outside Directors and Officers
a. Summary of personal, capital and business relationships and other interests between Outside Directors andOutside Corporate Auditors and the Submitting Company- As described in "1) Directors and Officers", the number of the Company's shares owned by Katsuchika Goto,an Outside Director, is minimal. Therefore, there is no capital relationship, business relationship or any otherinterests existing between Katsuchika Goto, an Outside Director, and the Company, and we believe there isno possibility of conflict of interest between the said person as an Outside Director and the generalshareholders of the Company.
- While Yutaka Tsukahara, an Outside Director, is a former director of Subaru Corporation and Tokyo Subaru
Inc., the said company is not our major business partner, and the said person is no longer involved in executionof the said company’s business. As described in "1) Directors and Officers ", the number of the Company's
shares owned by Yutaka Tsukahara, an Outside Director, is minimal. In view of these facts, we believe there
is no possibility of conflict of interest between the said person as an Outside Director and the generalshareholders of the Company.
- Although Koichi Sakai, an Outside Corporate Auditor, is a full-time corporate auditor of The Hachijuni Bank,
Ltd., which holds 2.76% of the Company’s shares issued (excluding treasury stock) and outstanding, and thesaid bank is one of the Company’s partner banks, we believe there is no problem as to the independence ofthe said person.
- Shinjiro kawai, an Outside Corporate Auditor, is a director (Audit & Supervisory Committee Member) of
Daishi Hokuetsu Financial Group, Inc., whose subsidiaries (The Daishi Bank, Ltd. and The Hokuetsu Bank,Ltd.) hold respectively 1.73% and 0.31% of the Company’s shares issued (excluding treasury stock) andoutstanding. Although the said banks are partner banks of the Company, we believe there is no problem as tothe independence of the said person.
b. Status of appointment of Outside Directors and Outside Corporate Auditors and functions and roles served by
Outside Directors and Outside Corporate Auditors in corporate governance
The Company appoints, in order to exercise external oversight, two (2) Outside Directors and two (2)Outside Corporate Auditors, each of whom bears a part in management oversight in terms of laws andregulations, finance, accounting and corporate governance respectively from a neutral and objective viewpoint,
contributing to what the Company considers as fully functioning oversight of management. In this regard, thenames of the Outside Directors having voting rights on the Board of Directors, i.e. Katsuchika Goto and Yutaka
Tsukahara, are filed with Tokyo Stock Exchange as the independent officers of the Company.
c. Details of the standards or policy in terms of independence from the Submitting Company for appointment of
Outside Directors or Outside Corporate Auditors and the Submitting Company’s standpoint concerning thestatus of the relevant appointments
Although the Company has no specific standards or policy in force as to independence from the Submitting
Company applicable to appointment of Outside Directors or Outside Corporate Auditors, we judge, in making
any such appointment, the independence of each candidate in terms of his or her personal, capital and business
relationships and any other interests with the Company and also comprehensively judge each candidate’s
experience and knowledge of corporate governance, internal control and financial reporting, etc.
3) Mutual Collaboration between supervision or auditing by Outside Directors or Outside Corporate Auditors andinternal audit, accounting audit and auditing by Corporate Auditors, as well as Relationship between
supervision or auditing by Outside Directors or Outside Corporate Auditors and Internal Control Division.
The Outside Corporate Auditors, tapping into their wealth of experience and insight, audit the legality ofbusiness operations by the Board of Directors and the effectiveness of corporate governance, etc. throughattendance at meetings of the Board of Directors and of the Board of Corporate Auditors and also review ofvarious reports on the status of internal audit and accounting audit, etc. obtained directly or via the Full-time
Corporate Auditor.
The Outside Directors receive, at the Board of Directors’ meetings, etc., reports, etc. on the internal audits
conducted upon request of the Board of Corporate Auditors and the audits by the Corporate Auditors or theaccounting auditors and maintain mutual collaboration including, but not limited to, opinion exchanges asappropriate.
- 40 -

(3) Status of Audit
1) Status of Auditing by Corporate Auditors
The Board of Corporate Auditors of the Company is composed of three (3) members (one [1] full-time
Corporate Auditor and two [2] Outside Corporate Auditors). The Corporate Auditors conduct periodic audits,
attend the meeting of the Board of Corporate Auditors (held monthly in principle pursuant to the Regulations
for the Board of Corporate Auditors) and also raise issues, where appropriate, as to execution of Directors’
duties and the status of improvement and operation of the internal control system, etc.
Koji Ohta, a full-time Corporate Auditor, has substantial practical experience of financial and accounting
affairs in Accounting Department of the Company.
2) Status of Internal Audit
As the internal audit division, two (2) full-time employees are assigned to the Internal Audit Dept., whichis independent of other organizations of the Company and conducts scheduled audits and unscheduled audits
as appropriate. As for scheduled audits, an audit plan is made for each term pursuant to the relevant internal
regulations, and audits are conducted after the final decision by the Chief Executive Officer. Audit results arenotified to the relevant departments along with specific advice and recommendations, while reporting to, andopinion exchanges with, the Corporate Auditors are also made.
Results of auditing by the Internal Audit Dept. are reported to the Board of Corporate Auditors, and the
Corporate Auditors share in the recognition of such results in the course of their auditing to enhance theircollective audit function.
3)

Status of Accounting Audit
a. Name of Audit Corporation
Ernst & Young ShinNihon LLC
b. CPA who executed the audit work
Satoshi Ejima
Akira Igarashic. Composition of assistants involved in the audit work.
The composition of assistants involved in the accounting audit work of the Company is determined inaccordance with the criteria for selection of audit corporations and includes eight (8) certified public
accountants and nine (9) others.
d. Policy and reason for the selection of Audit Corporation
The said audit corporation has expertise, independence, quality control of auditing, system for integrated
auditing of global business activities of the Company, satisfactory support for auditing, etc., which are requiredof accounting auditors.
e. Evaluation of Audit Corporation by Corporate Auditors and Board of Corporate Auditors
Corporate Auditors and Board of Corporate Auditors of the Company evaluate the audit corporations inaccordance with "Practical Guidelines for Corporate Auditors, etc. regarding Evaluation of Accounting
Auditors and Setting of Selection Standards" (Japan Audit & Supervisory Board Members Association,
November 10, 2015). Board of Corporate Auditors checks on Audit Corporation with respect to the problemof quality control system, independence and expertise of the audit team, validity and efficiency of auditing,etc. by means of regular exchanging of opinions with the audit corporation, hearing of matters to be checked,
and report on the implementation of audit, etc., so we believe there is no problem.

- 41 -

4) Details, etc. of Remuneration of Accounting Auditors
Provisional measures are applied to the rules of Form No.2 'Notes for stating' (56)ｄ(f) i ~ iii of "Cabinet
Office Ordinance on the Disclosure of Corporate Affairs, etc.", which was amended by "Cabinet Office
Ordinance on the Partial Revision of Cabinet Office Ordinance on the Disclosure of Corporate Affairs, etc."(Cabinet Office Ordinance No. 3, January 31, 2019).
a. Remuneration of Auditing Certified Public Accountants, etc.

(Thousands of yen)Previous consolidated fiscal year
Category

Submitting Company
Consolidated subsidiaries
Total

Remuneration foraudit andattestation services

Current consolidated fiscal year

Remuneration for
non-audit services

Remuneration foraudit andattestation services

Remuneration for
non-audit services

34,100－35,100

－

－

－

－

－

34,100－35,100－b. Details of Other Significant Remuneration(Previous consolidated fiscal year)
Protec Arisawa Europe, S.A., a consolidated subsidiary of the Company, paid 3,347 thousand yen as
remuneration for audit and attestation services to Ernst & Young, S.L., which belongs to the same network as
the Company’s auditing certified public accountants, etc.
(Current consolidated fiscal year)
Protec Arisawa Europe, S.A., a consolidated subsidiary of the Company, paid 2,998 thousand yen as
remuneration for audit and attestation services to Ernst & Young, S.L., which belongs to the same network as
the Company’s auditing certified public accountants, etc.
c. Policy for Determination of Remuneration of Accounting Auditors
Remuneration of Auditing Certified Public Accountants, etc. of the Company is determined by considerationof scale and characteristics of the Company as well as the number of auditing days, etc., by consultation withthe audit corporation and by getting consent of Board of Corporate Auditors.
d. Reason for the consent of Board of Corporate Auditors to remuneration of accounting auditors
Board of Corporate Auditors decided to provide consent to the amount of remuneration of accounting auditors,
etc., after carefully examining the adequacy of performance of accounting auditors and such decision-making,
etc.

(4)

Remuneration, etc. of Directors and Corporate Auditors
1) Matters relating to Policy of Determination on Amount of Remuneration, etc. of Directors and Corporate
Auditors or Calculation Method thereof
Our fundamental policy is to establish a corporate governance system for the improvement of corporate value
through sustainable development and acquiring social credibility as well as to make efforts for securing efficientand fair management and improvement of transparency by positive information disclosure. We will further
reinforce our efforts to strengthen such corporate governance.
In implementing the following remuneration programs, the Company deliberates and decides the remuneration,etc. of directors and corporate auditors through development of remuneration governance.
a. Basic Guidelines for Remuneration System for Directors and Corporate Auditors
The Company established basic guidelines for the remuneration system for directors and corporate auditors as
below.
・ The system should encourage the management to improve their performance through associating theperformance with remuneration and to exercise their solid entrepreneurship for sustainable development of theCompany.
・The system should reflect not only financial performance but also appreciation for proactive initiative basedon the management philosophy of "CIC Better today than yesterday, better tomorrow than today" with theventure spirit of“Creation, Innovation and Challenge”.
・The system should attract excellent human resources for management who can contribute to sustainable- 42 -

development and enhancement of corporate value of the Company.
b. Structure of Remuneration System for Directors and Corporate Auditors
The remuneration for Directors except Outside Directors of the Company is monthly remuneration which isconstituted of fixed remuneration and performance-based remuneration. We calculate annual remuneration,according to their positions concerning the fixed portion and based on consolidated business results of theprevious fiscal year concerning the performance-based portion. And such remuneration is divided equally andpaid during the period of execution of duties thereof.
In the remuneration System for Directors and Corporate Auditors applied after the 71st Ordinary General
Meeting of Shareholders (held on June 27, 2019), the remuneration shall be constituted of basic fixed
remuneration, performance-based remuneration and stock option remuneration.
Key Performance Indicators (KPI) of performance-based remuneration is consolidated operating income in asingle year, and the performance targets as a basis has been set at 3.5 billion yen. The reasons for the selectionof consolidated operating income as Key Performance Indicators (KPI) are that it is a financial indicator that
represents the result of primary business activities and is used for the system of employee bonus, and that it isimportant to keep consistency between the both systems. Performance-based remuneration for inside directors
except President reflects the results of individual performance evaluation by President.
The percentage of a single-year basic amount (refer to Note) of performance-based remuneration to basic
fixed remuneration is 60% across all titles, and a rate of pay which is multiplied by a single-year basic amountwill range from 0% to 200% according to results of performance evaluation.
Regarding the stock option remuneration, a given number of stock acquisition rights are granted according totitles every fiscal year.
When determining a remuneration level of the Company and a rate of performance-based portion, we checkthe validity thereof through objective and multilateral benchmark analysis of remuneration which is based on"Management Remuneration Database" run by an outside remuneration consultant.
Regarding the remuneration of outside directors and corporate auditors, however, only fixed portion ofmonthly remuneration is paid in consideration of their roles.
(Note) 'A single-year basic amount' refers to the amount of performance-based remuneration in the case that
individual performance evaluation of certain title is equal to standard evaluation when consolidated operating
income is 3.5 billion yen.
c. Date of Resolution of a General Meeting of Shareholders regarding Remuneration of Directors and Corporate
Auditors
It was resolved at the 56th Ordinary General Meeting of Shareholders held on June 29, 2004 that total amountof remuneration for Directors should be no more than 30 million yen per month and total amount of remuneration
for Corporate Auditors should be no more than 3 million yen per month.
It was resolved at the 62th Ordinary General Meeting of Shareholders held on June 29, 2010 that stock
option remuneration for directors should be no more than 50 million yen (100,000 shares) per year.
The number of Directors and Corporate Auditors covered (as of the filing date: June 28, 2019) consists of 6
directors (4 inside directors and 2 outside directors) regarding monthly remuneration and 4 directors (only insidedirectors) regarding stock option remuneration. Regarding the remuneration of outside directors and corporate
auditors, only fixed portion of monthly remuneration is paid in consideration of their roles.
d. Remuneration Governance
The Company deliberates and determines, at the Board of Directors, Basic Guidelines for Remuneration
System for Directors and Corporate Auditors and Structure of Remuneration System for Directors and Corporate
Auditors, as well as total amount thereof, while individual payments are determined by President. In order toensure a high degree of independence, objectivity and transparency in the process of determining and managing
of Remuneration System for Directors and Corporate Auditors of the Company, the Remuneration Advisory
Committee was set up as an advisory body to the Board of Directors after the 71st Ordinary General Meeting of
Shareholders (held on June 27, 2019).
A chairman of the Remuneration Advisory Committee shall be selected from among independent outside
directors by resolution of the Board of Directors and majority of committee members shall consist of
independent outside directors.
After setting up of the Remuneration Advisory Committee, the Board of Directors will deliberate anddetermine, in accordance with the contents of return from the Remuneration Advisory Committee, Basic
Guidelines for Remuneration System for Directors and Corporate Auditors and Structure of Remuneration
System for Directors and Corporate Auditors, as well as individual amount of remuneration, etc. Regarding theperformance-based remuneration for inside directors except President in individual amount of remuneration,
only a single-year basic amount reflecting standard evaluation is determined by the Board of Directors, while
the amount of payment based on individual performance evaluation shall be determined by President.

- 43 -

2) The aggregate amount of remuneration, etc. of each category of Directors and Corporate Auditors, the breakdownof such aggregate amount by the type of remuneration, etc. and the number of Directors and Corporate Auditors
coveredCategory of Directors andCorporate Auditors

Aggregate amountof remuneration,
etc.
(Thousands ofyen)

Directors(excluding Outside Directors)
Corporate Auditors(excluding Outside Corporate
Auditors)
Outside Directors and Outside
Corporate Auditors

Breakdown by the type of
remuneration, etc.
(Thousands of yen)Monthly
Stock option
remuneration

Number of
Directors or
Corporate
Auditors
covered

203,547

191,067

12,480

5

10,944

10,944－

1

10,818

10,818－

6(Note) Performance-based portion included in monthly remuneration of the above is annual remuneration which
was calculated based on consolidated business results of the fiscal year of 2017. And the amounts whichwere paid evenly during the fiscal year of 2018 are stated above.
3) Targets and Results of Indicators (KPI) for performance-based remuneration of previous business year
Regarding the performance-based portion of previous business year, annual remuneration wascomprehensively calculated based on growth rates, etc., compared with the previous fiscal year, of consolidated
net sales, consolidated operating income, consolidated ordinary income and consolidated profit. Growth rate ofeach indicator compared with previous year is as below.
Consolidated net sales+9.3%
Consolidated operating income -14.0%
Consolidated ordinary income +6.3%
Consolidated profit-17.2%- 44 -

(5)Status of Shareholding

1) Criterion and attitude for segmentation of investment stock
Regarding segmentation of investment stock held for purposes of pure investment and held for purposes other thanpure investment, we separate purposes of making a profit through value change of stock or dividends on stock as"purposes of pure investment " from the other purposes as "purposes other than pure investment".
2) Investment stock held for purposes other than pure investment
a. Policy on holding, Method of verifying the reasonableness of holding, and Verified matters by the Board of
Directors, etc., regarding appropriateness of holding individual stock names(1) Policy on holding
Regarding investment stock held by the Company for purposes other than pure investment (hereinafter referred
to as “Cross-shareholdings”), shares, etc. of business partners, etc. may be acquired and held if it is judged thatsuch acquisition will contribute to the enhancement of corporate value of the Company over the mid-and-long-termin terms of facilitation and reinforcement, etc. of building stable and long-term business relations, businesscollaboration or cooperative business activities with the said business partners. We will verify effectiveness ofholding, etc. in terms of mid-and-long-term economic rationality as well as maintenance and strengthening ofcomprehensive relationship. And such validation will be reported to the Board of Directors. If any stock names are
judged, through the verification, to have no reasonableness of holding, we will sell off such stocks and reduce theshareholdings.
(2) Method of verifying the reasonableness of shareholding
Regarding all Cross-shareholdings held, the Board of Directors yearly gives comprehensive consideration toquantitative analysis of transaction performances and returns, etc. through shareholdings, qualitative analysis ofstatus of business relations based on the policy on shareholding, strategic background of acquisition, etc. , as wellas risk of shareholding, etc., and then verifies and evaluates the propriety of such shareholding.
Following items are verified through the quantitative analysis:
1) whether dividend earning rate is worth capital cost or not2) annual amount of transaction, amount of profits
3) profit or loss from valuation of stock- 45 -

(3) Verified matters by the Board of Directors, etc. regarding the propriety of holding individual stock names
At the Board of Directors held in March of 2019, the Company verified status of shareholding, risk returns,
importance of business and comprehensive meaning of shareholding, with respect to all shares (27 stock names)
held as Cross-shareholdings, and decided to sell off shares of two (2) stock names which were judged to have no
meaning of shareholding or poor meaning thereof.
b. Number of stock names and amount shown on balance sheets
Number ofstock names（Stocknames）
Unlisted stock
Stock other than unlisted
stock

Aggregate amount of theamount shown on balance
sheets(Thousands of yen)

11

52,21716

2,676,252（Stock names whose number of shares increased in the current business year)

Unlisted stock

Number ofstock names（Stocknames）

Aggregate amount ofacquisition price associatedwith increase in number ofshares (Thousands of yen)1

36,600Reason for increase in number of shares

To build stable and long-term business
relations, business collaboration, and to obtainmarket/technical information

Stock other than unlisted
stock

1

541,342(same as above)（Stock names whose number of shares decreased in the current business year)

Unlisted stock
Stock other than unlisted
stock

Number ofstock names（Stocknames）

Aggregate amount ofacquisition price associatedwith decrease in number ofshares (Thousands of yen)

1

－

－

－

- 46 -

c. Information regarding the number of shares for each stock name of Specified Investment Stock and Deemed
Shareholding, as well as the amount shown on balance sheets, etc.
Specified Investment Stock

Stock name

ViSCO Technologies
Corporation

Mitsubishi Gas Chemical
Company, Inc.

Mitsubishi Electric Corporation

Fujikura Ltd.

The Hachijuni Bank, Ltd.

NOK Corporation

Daishi Hokuetsu Financial
Group, Inc.

The Daishi Bank, Ltd.

Kaneka Corporation

Current business
year

Previous business
year

Number of shares
held

Number of shares
held

Amount shown onbalance sheets(Thousands ofyen)

Amount shown onbalance sheets(Thousands of yen)

297,400

322,400

551,379

1,194,492

333,000

333,000

525,807848,817275,000

275,000

391,187

467,912823,500－

343,399－

581,113581,113

266,730

331,234

132,700

132,700

228,642

274,158

49,962－

156,131－－45,080－211,876

30,000150,000

124,350

158,250- 47 -

Purpose of shareholding,quantitative effect ofshareholding, and reason forincrease in number of shares

Purpose of shareholding: Buildingof cooperative relationship
Quantitative effect ofshareholding：(Note)２
Purpose of shareholding:
Maintaining and strengthening
business relationship
Quantitative effect ofshareholding：(Note)２
Purpose of shareholding:
Maintaining and strengthening
business relationship
Quantitative effect ofshareholding：(Note)２
Purpose of shareholding:
Maintaining and strengthening
business relationship
Quantitative effect ofshareholding：(Note)２
Reason for increase in number ofshares：New acquisition forstrengthening cooperation ofbusiness
Purpose of shareholding:
Maintaining and strengtheningbanking relationship
Quantitative effect ofshareholding：(Note)２
Purpose of shareholding:
Maintaining and strengthening
business relationship
Quantitative effect ofshareholding：(Note)２
Purpose of shareholding:
Maintaining and strengtheningbanking relationship
Quantitative effect ofshareholding：(Note)２
Reason for increase in number ofshares：(Note) 3
Purpose of shareholding:
Maintaining and strengtheningbanking relationship
Quantitative effect ofshareholding：(Note)２
Purpose of shareholding:
Maintaining and strengthening
business relationship
Quantitative effect ofshareholding：(Note)２

Holding
shares oftheCompany

No

Yes

Yes

Yes

Yes

Yes

No
(Note)4

Yes

Yes

10,255

102,550

36,14831,58562,42062,420Toshiba Corporation

Mitsubishi UFJ Financial Group,Inc.

The Hokuetsu Bank, Ltd.

Sumitomo Corporation

Mizuho Financial Group, Inc.

Nishishiba Electric Co., Ltd.

Broadcasting System of Niigata
Inc.

Kobe Steel, Ltd.

Tohoku Electric Power Co., Inc.

34,331

43,506

－

9,764

－

22,652

6,655

6,655

10,188

11,91918,283

18,283

3,131

3,499

17,60017,600

2,305

3,027

1,800

1,800

1,944

1,656

515

515

427

548

104

104

146

147

Purpose of shareholding:
Maintaining and strengthening
business relationship
Quantitative effect ofshareholding：(Note)２
Purpose of shareholding:
Maintaining and strengtheningbanking relationship
Quantitative effect ofshareholding：(Note)２
Purpose of shareholding:
Maintaining and strengtheningbanking relationship
Quantitative effect ofshareholding：(Note)２
Purpose of shareholding:
Maintaining and strengthening
business relationship
Quantitative effect ofshareholding：(Note)２
Purpose of shareholding:
Maintaining and strengtheningbanking relationship
Quantitative effect ofshareholding：(Note)２
Purpose of shareholding:
Maintaining and strengthening
business relationship
Quantitative effect ofshareholding：(Note)２
Purpose of shareholding:Strengthening relationship with
regional companies
Quantitative effect ofshareholding：(Note)２
Purpose of shareholding:
Maintaining and strengthening
business relationship
Quantitative effect ofshareholding：(Note)２
Purpose of shareholding:
Maintaining and strengthening
business relationship
Quantitative effect ofshareholding：(Note)２（Note）1. "－" shows that there is no shareholding of the stock name
2. Because of the difficulty in stating quantitative effect of shareholding, method of verifying the reasonableness ofshareholding is stated. The method of verifying is as stated above in "(2) Method of verifying the reasonableness ofshareholding" of "a. Policy on holding, Method of verifying the reasonableness of holding, and Verified matters by the
Board of Directors, etc., regarding appropriateness of holding individual stock names".
3. The Daishi Bank, Ltd. and The Hokuetsu Bank, Ltd. established, as of October 1, 2018, Daishi Hokuetsu Financial
Group, Inc. as the joint holding company by means of a stock transfer. 1 share of common stock in the joint holding
company is issued for each 1 share of common stock in The Daishi Bank, Ltd. and 0.5 shares of common stock in the
joint holding company are issued for each 1 share of common stock in The Hokuetsu Bank, Ltd.
4. Daishi Hokuetsu Financial Group, Inc. holds no shares of the Company, while The Daishi Bank, Ltd. and The
Hokuetsu Bank, Ltd., group companies of the said Group, hold shares of the Company.
5. Mitsubishi UFJ Financial Group, Inc. holds no shares of the Company, while MUFG Bank, Ltd., a group company of
the said Group, holds shares of the Company.
6. Sumitomo Corporation holds no shares of the Company, while Sumitomo Shoji Chemicals Co., Ltd., a groupcompany of the said Corporation, holds shares of the Company.

Deemed Shareholding
No applicable matter.
- 48 -

No

No(Note)5

Yes

No(Note)6

No

No

No

No

No

3) Investment stock held for purposes of pure investment
Current business year
Category

Previous business year

Aggregate amount of theAggregate amount of the
Number of stock names amount shown on balance Number of stock names amount shown on balance(Stock name)sheets(Stock name)sheets(Thousands of yen)(Thousands of yen)

Unlisted stock

－

－

－

－

Stock other than unlisted
stock

－

－

－

－

Current business year
Category

Aggregate amount of
Dividends income(Thousands of yen)

Aggregate amount of loss Aggregate amount of loss
on saleson valuation(Thousands of yen)(Thousands of yen)

Unlisted stock

－

－

－

Stock other than unlisted
stock

－

－

－

- 49 -

V. Status of Accounting
1.

Method of Preparation of Consolidated Financial Statements and Financial Statements(1) The consolidated financial statements of the Company are prepared in compliance with the “Regulations
for Terminology, Forms and Preparation Methods of Consolidated Financial Statements” (Ministerial
Ordinance No. 28 of the Ministry of Finance, 1976).
Among comparison information contained in the consolidated financial statements of the current
consolidated fiscal year (from April 1, 2018 to March 31, 2019), the information relating to Article 15-5,
Paragraph 2-2 and Article 15, Paragraph 3 of the Regulations for Consolidated Financial Statements
amended by "Cabinet Office Ordinance on the Partial Revision of the Regulations for Terminology,
Forms and Preparation Methods of Consolidated Financial Statements " (Cabinet Office Ordinance No. 7,
March 23, 2018 ; hereinafter referred to as the " Revision Ordinance") is prepared, in accordance with
Article 3, Paragraph 2 of Supplementary Provisions of the Revision Ordinance, based on the Regulations
for Consolidated Financial Statements before amendment.
(2) The financial statements of the Company are prepared in compliance with the “Regulations for
Terminology, Forms and Preparation Methods of Financial Statements, etc.” (Ministerial Ordinance No.
59 of the Ministry of Finance, 1963; hereinafter referred to as the “Regulations for Financial Statements”).
The Company falls under the Special Financial Statement-Submitting Companies and prepares its financial
statements pursuant to the provisions of Article 127 of the Regulations for Financial Statements.

2.

Certification of Audit
The Company received a review of its consolidated financial statements for the current consolidated fiscal year
(From April 1, 2018 to March 31, 2019) and its financial statements for the current business year (From April 1,2018 to March 31, 2019) conducted by Ernst & Young ShinNihon LLC under the provisions of Article 193-2,
paragraph 1 of the Financial Instruments and Exchange Act.

3.

Special Efforts to Secure Appropriateness of Consolidated Financial Statements, etc.
The Company makes special efforts to secure appropriateness of its consolidated financial statements, etc.
Specifically, we make efforts to improve our systems by subscription to professional journals aiming to gain
correct understanding of the changes, etc. in the accounting standards and also affiliation with the Financial
Accounting Standards Foundation aiming to ensure precise understanding of and appropriate responses to thecontents of the accounting standards, etc.

- 50 -

1. Consolidated Financial Statements, etc.
(1) Consolidated Financial Statements
1) Consolidated Balance Sheets(Thousands of yen)Previous consolidated fiscal year
(As of March 31, 2018)
AssetsCurrent assets
Cash and deposits
Notes and accounts receivable-trade
Securities
Merchandise and finished goods
Work in process
Raw materials and supplies
Other
Allowance for doubtful accounts
Total current assets
Non-current assets
Property, plant and equipment
Buildings and structures
Accumulated depreciation
Buildings and structures, net
Machinery, equipment andvehiclesAccumulated depreciation
Machinery, equipment andvehicles, net
LandConstruction in progress
Other
Accumulated depreciation
Other, net
Total property, plant andequipment
Intangible assets
Goodwill
Other
Total intangible assets
Investments and other assets
Investment securities
Long-term loans receivable
Net defined benefit asset
Deferred tax assets
Other
Allowance for doubtful accounts
Total investments and other assets
Total non-current assets
Total assets*2*6

9,123,877
15,947,189
1,180,101
3,915,375
1,898,096
2,951,263
1,328,865△562,185
35,782,583

19,379,174△13,602,300
5,776,874*2

Current consolidated fiscal year
(As of March 31, 2019)

*2
*6

*2

8,193,697
16,127,374
1,401,188
4,012,943
1,941,748
3,378,698
1,190,214△668,052
35,577,813

19,427,835△13,845,280
5,582,555

28,849,087

29,125,791△25,353,015△25,210,271*2

3,496,072*2

3,915,519*2

1,836,200
95,9962,350,493△1,919,982
430,511*2

1,949,718
121,693
2,400,451△1,971,483
428,967*2*1

11,635,655

11,998,454

277,791
172,949
450,740

219,309
175,923395,233

23,365,824
218,734
11,731
491,956
602,142△176,835
24,513,554
36,599,950
72,382,533*2- 51 -*2*1*2

23,142,852
218,024
15,289535,679
1,356,575△143,823
25,124,598
37,518,286
73,096,100

(Thousands of yen)Previous consolidated fiscal year
(As of March 31, 2018)
Liabilities
Current liabilities
Notes and accounts payable-trade
Current portion of bonds
Short-term loans payable
Current portion of long-term loans
payableLease obligations
Income taxes payable
Provision for bonuses
Provision for directors’ bonuses
Other
Total current liabilities
Non-current liabilities
Bonds payable
Long-term loans payable
Lease obligations
Deferred tax liabilities
Net defined benefit liability
Asset retirement obligations
Other
Total non-current liabilities
Total liabilities
Net assets
Shareholders’ equity
Capital stock
Capital surplus
Retained earnings
Treasury stock
Total shareholders’ equity
Accumulated other comprehensive
incomeValuation difference on available-forsale securities
Deferred gains or losses on hedges
Foreign currency translation
adjustment
Remeasurements of defined benefit
plans
Total accumulated othercomprehensive income
Share acquisition rights
Non-controlling interests
Total net assets
Total liabilities and net assets*6

Current consolidated fiscal year
(As of March 31, 2019)*6*2, *5

6,794,393
36,8004,242,472*2, *5

6,105,195
36,8005,394,122*2

864,130*2779,820

18,230930,529598,261
5,956
2,491,726
15,982,499*6

164,800
1,642,485
33,691
1,011,591
603,556
92,837357,334
3,906,295
19,888,795*2- 52 -*6*2

17,535
300,788
510,407
3,957
3,024,295
16,172,921
128,000
1,265,465
13,201
1,074,271
626,885
92,502
260,723
3,461,049
19,633,971

7,458,242
6,570,209
33,493,564△4,46747,517,548

7,541,693
6,653,615
35,130,363△4,76449,320,907

1,214,473

745,120－443

1,081,810

707,571△176,694△147,916

2,119,588

1,305,219

127,640
2,728,960
52,493,738
72,382,533

144,419
2,691,582
53,462,129
73,096,100

2) Consolidated Statements of Income and Consolidated Statements of Comprehensive Income[Consolidated Statements of Income](Thousands of yen)

Net sales
Cost of sales
Gross profit
Selling, general and administrative expenses
Freightage and packing expenses
Salaries and allowances
Provision for bonuses
Provision for directors’ bonuses
Provision for retirement benefits
Provision of allowance for doubtful accounts
Other
Total selling, general and administrative
expenses
Operating income
Non-operating income
Interest income
Dividends income
Share of profit of entities accounted for using
equity method
Foreign exchange gains
Other
Total non-operating income
Non-operating expenses
Interest expenses
Loss on redemption of investment securities
Foreign exchange losses
Rent expenses
Provision of allowance for doubtful accounts
Other
Total non-operating expenses
Ordinary income
Extraordinary income
Gain on sales of non-current assets
Gain on sales of investment securities
Other
Total extraordinary income
Extraordinary losses
Impairment loss
Loss on retirement of non-current assets
Loss on sales of investment securities
Loss on valuation of investment securities
Other
Total extraordinary losses
Income before income taxes
Income taxes – current
Income taxes – deferred
Total income taxes
ProfitProfit attributable to non-controlling interests
Profit attributable to owners of the parent

Previous consolidated fiscal year
(From April 1, 2017
to March 31, 2018)
40,909,534*1, *2
32,730,617
8,178,916

Current consolidated fiscal year
(From April 1, 2018
to March 31, 2019)
44,728,243*1, *236,607,194
8,121,049

707,496
1,293,438
113,3885,956
55,16952,6072,323,315

713,508
1,407,937
104,273
3,957
69,002
61,3112,641,496*1

4,551,372*1

5,001,486

3,627,543

3,119,562

310,701
92,786

336,000
101,318

463,698

558,090－335,942
1,203,130

160,081353,494
1,508,984

76,46684,446
170,966
83,031
311,796
59,534786,241
4,044,433

81,88062,541－
63,473
48,68774,307
330,890
4,297,655

*3

3,268
743,019
105,523
851,812*3

33,71965,01014,374
113,104*4

26,028
13,57940,202
63,5957,307
150,712
4,745,532
1,199,341△205,044
994,296
3,751,236
297,508
3,453,727*4

96,72553,231－45,000－
194,956
4,215,803
862,516
204,008
1,066,525
3,149,278
287,899
2,861,378- 53 -

[Consolidated Statements of Comprehensive Income](Thousands of yen)

ProfitOther comprehensive income
Valuation difference on available-for-salesecurities
Deferred gains or losses on hedges
Foreign currency translation adjustment
Remeasurements of defined benefit plans, netof taxShare of other comprehensive income ofentities accounted for using equity method
Total other comprehensive income
Comprehensive income(Breakdown)Comprehensive income attributable to ownersof the parent
Comprehensive income attributable to noncontrolling interests

Previous consolidated fiscal year
(From April 1, 2017
to March 31, 20178
3,751,236

Current consolidated fiscal year
(From April 1, 2018
to March 31, 2019)
3,149,278

271,773△469,322△5,153491,053443△384,361

2,861

22,493△13,356△117,745*- 54 -

747,179
4,498,416*△948,493
2,200,785

4,004,414

2,047,009

494,001

153,776

3) Consolidated Statements of Changes in Shareholders’ Equity and Other Net Assets
Previous consolidated fiscal year (From April 1, 2017 to March 31, 2018)(Thousands of yen)
Shareholders’ equity
Capital stock
Balance at beginning of current
periodChanges of items during theperiodCapital surplus

7,317,019

6,429,038

141,222

141,170

Issuance of new shares
Dividends from surplus
Change of scope of
consolidation
Change of scope of equity
methodProfit attributable to ownersof the parent

Retained earnings

Treasury stock

30,740,318

Total shareholders’equity△3,891

44,482,485

282,393△713,461△713,461△4,320△4,32017,30017,3003,453,727

3,453,727

Purchase of treasury stock

△576

△576

Net changes of items otherthan shareholders' equity
Total changes of items during
the period
Balance at end of current
period141,222

141,170

2,753,245△576

3,035,062

7,458,242

6,570,209

33,493,564△4,46747,517,548

Accumulated other comprehensive income
Valuation Deferred gains
Total
Share
differenceor losses on
Foreignaccumulated
Remeasuremeacquisitionon
hedgescurrencyother
nts of definedrightsavailabletranslation
comprehensive
benefit plansfor-saleadjustment
incomesecurities
Balance at beginning of current
periodChanges of items during theperiod942,763

5,153

808,002△187,018

1,568,901

143,292

Noncontrollinginterests

Total net
assets2,356,620

48,551,300

Issuance of new shares

282,393

Dividends from surplus△713,461

Change of scope of
consolidation
Change of scope of equity
methodProfit attributable to ownersof the parent△4,320△17,300△17,300

03,453,727△576

Purchase of treasury stock
Net changes of items otherthan shareholders' equity
Total changes of items during
the period
Balance at end of current
period271,709△5,153291,107

10,324567,987△15,651

372,339924,675

271,709△5,153273,807

10,324550,686△15,651

372,339

3,942,437

1,214,473－

1,081,810△176,694

2,119,588

127,640

2,728,960

52,493,738- 55 -

Current consolidated fiscal year (From April 1, 2018 to March 31, 2019)(Thousands of yen)
Shareholders’ equity
Capital stock
Balance at beginning of current
periodChanges of items during theperiodCapital surplus

7,458,242

6,570,209

83,45083,406

Issuance of new shares
Dividends from surplus
Profit attributable to ownersof the parent

Retained earnings

Treasury stock

33,493,564

Total shareholders’equity△4,46747,517,548

166,857△1,224,579△1,224,579

2,861,378

2,861,378

Purchase of treasury stock

△296

△296

Net changes of items otherthan shareholders' equity
Total changes of items during
the period
Balance at end of current
period83,45083,406

1,636,799△296

1,803,359

7,541,693

6,653,615

35,130,363△4,76449,320,907

Valuationdifferenceonavailablefor-salesecurities
Balance at beginning of current
periodChanges of items during theperiod1,214,473

Accumulated other comprehensive income
Total
Share
DeferredForeignaccumulated
Remeasuremeacquisition
gains orcurrencyother
nts of definedrightslosses ontranslation
comprehensive
benefit planshedgesadjustment
income－1,081,810△176,694

2,119,588

127,640

Noncontrollinginterests

Total net
assets2,728,960

52,493,738

Issuance of new shares

166,857

Dividends from surplus△1,224,579

Profit attributable to ownersof the parent

2,861,378△296

Purchase of treasury stock
Net changes of items otherthan shareholders' equity△469,352

443△374,238

28,778△814,369

16,778△37,378△834,968

Total changes of items during
the period
Balance at end of current
period△469,352

443△374,238

28,778△814,369

16,778△37,378

968,390745,120443

707,571△147,916

1,305,219

144,419

2,691,582

53,462,129- 56 -

4) Consolidated Statements of Cash Flows(Thousands of yen)Previous consolidated fiscal
year(From April 1, 2017
to March 31, 2018)
Cash flows from operating activities
Income before income taxes
Depreciation
Impairment loss
Amortization of goodwill
Share-based compensation expenses
Increase (decrease) in provision for productwarranties
Increase (decrease) in provision for bonuses
Increase (decrease) in provision for directors'
bonuses
Increase (decrease) in allowance for doubtful
accounts
Increase (decrease) in net defined benefit
liability
Interest and dividends income
Interest expenses
Foreign exchange losses (gains)Share of (profit) loss of entities accounted forusing equity method
Loss (gain) on sales of investment securities
Loss on compensation for damage
Loss (gain) on valuation of investment
securities
Loss (gain) on redemption of investment
securities
Loss (gain) on sales of non-current assets
Loss on retirement of property, plant andequipment
Gain on reversal of share acquisition rights
Loss (gain) on change in equity
Other extraordinary loss (income)Decrease (increase) in notes and accounts
receivable-trade
Decrease (increase) in inventories
Increase (decrease) in notes and accounts
payable-trade
Increase (decrease) in accrued consumption
taxes
Decrease (increase) in other assets
Increase (decrease) in other liabilities
SubtotalInterest and dividends income received
Interest expenses paid
Income taxes (paid) refund
Proceeds from insurance income
Compensation for damage paid
Other revenue
Net cash provided by (used in) operating
activities- 57 -

Current consolidated fiscal year
(From April 1, 2018
to March 31, 2019)

4,745,532
1,715,300
26,028
14,62042,6364,215,803
1,901,582
96,72558,482
53,638△44△82

131,882△87,853

2,383△1,999352,842

109,999

36,012

55,693△403,488
76,466△81,697△437,318
81,880△21,172△463,698△558,090△702,816－△64,9873,876

63,59545,00042,556△12,096△3,268△33,719

7,299

20,107△2,054△46,229△49,932△7,341△7,033－△2,663,182△517,924△2,152,410△682,445

1,375,862△588,527△35,91136,33066,227
277,9312,372,440
562,878△84,476△726,094－－
57,240135,546
44,9883,839,063
603,579△84,622△1,460,756
87,807△91,683－

2,181,988

2,893,387

(Thousands of yen)Previous consolidated fiscal year
(From April 1, 2017
to March 31, 2018)
Cash flows from investing activities
Payments into time deposits
Proceeds from withdrawal of time
deposits
Purchase of property, plant andequipment
Proceeds from sales of property, plantand equipment
Purchase of intangible assets
Purchase of investment securities
Proceeds from sales of investment
securities
Proceeds from liquidation of subsidiaries
Payments of loans receivableCollection of loans receivable
Purchase of shares of subsidiaries
resulting in change in scope of
consolidation
Decrease (increase) in other investments
Net cash provided by (used in) investing
activities
Cash flows from financing activities
Net increase (decrease) in short-termloans payable
Proceeds from long-term loans payable
Repayments of long-term loans payable
Repayments of lease obligations
Payments for long-term accounts payable- other
Redemption of bonds
Proceeds from issuance of commonsharesPurchase of treasury stock
Cash dividends paid
Cash dividends paid to non-controllinginterests
Net cash provided by (used in) financing
activities
Effect of exchange rate change on cash andcash equivalents
Net increase (decrease) in cash and cash
equivalents
Cash and cash equivalents at beginning of
periodDecrease in cash and cash equivalents
resulting from exclusion of subsidiaries
from consolidation
Cash and cash equivalents at end of period*- 58 -

Current consolidated fiscal year
(From April 1, 2018
to March 31, 2019)－△100,000

226,918

3,000△1,700,551△2,758,365

6,392

38,574△29,580△1,418,992△43,057△1,929,842

2,987,494

1,476,584

31,096△172,342
156,772－△55,049
33,500△549,365－△9,302

30,463△471,462△3,304,192

911,107

1,295,491

690,400△913,848△22,156

917,500△1,341,230△20,968△116,665△115,173－△36,800

226,159

137,338△576△712,054△296△1,221,488△121,662△191,154△59,296△576,781

262,416△123,536

1,913,646△1,111,123

7,026,200

8,829,805△110,040－

8,829,805*

7,718,682

[Notes](Important Matters Underlying Preparation of Consolidated Financial Statements)
1. Matters concerning scope of consolidation(1) Number of consolidated subsidiaries: eleven (11)Names of major consolidated subsidiaries:
ThinFlex Corporation, ThinFlex Technology Corporation (B.V.I.), TopFlex Corporation, Satosen Co.,
Ltd., Arisawa Fiber Glass Co., Ltd., Protec International Holdings Co., Ltd., Protec Arisawa Europe,
S.A., Protec Arisawa America, Inc., Arisawa Sogyo Co., Ltd., Arisawa Jushi Kogyo Co., Ltd., ColorLink
Japan, Ltd.,
Protec Arisawa Japan Co., Ltd., which was a consolidated subsidiary in the previous consolidated fiscal
year, is excluded from the scope of consolidation because it was absorbed by the Company as of August 1,
2018.
(2) Names, etc. of major non-consolidated subsidiaries
Major non-consolidated subsidiaries:
Arisawa Manufacturing (Dalian) Co., Ltd., Kashiwa Seiki Co., Ltd.
(Reasons for excluding the above-mentioned non-consolidated subsidiaries from the scope of consolidation)
The non-consolidated subsidiaries are small in size, and their aggregate total assets, net sales, net income
or loss (Amount corresponding to the Company’s equity interest) and retained earnings (Amountcorresponding to the Company’s equity interest), etc. do not materially affect the consolidated financial
statements.
2. Matters concerning application of equity method(1) Number of affiliated companies accounted for under the equity method: two (2)Names of major affiliated companies:
Polatechno Co., Ltd., Innovision FlexTech Corporation(2) As the non-consolidated subsidiaries (Arisawa Manufacturing (Dalian) Co., Ltd. and three (3) othercompanies) and the affiliated companies (Ryoyu Industrial Corporation and one (1) other company) towhich the equity method is not applied have only slight effects on the consolidated financial statements interms of net income or loss (Amount corresponding to the Company’s equity interest) and retained earnings(Amount corresponding to the Company’s equity interest), etc. (even if they are excluded from the scopeof application of the equity method) and also bear no significance as a whole, these companies have been
excluded from the scope of application of the equity method.
(3) With respect to those companies accounted for under the equity method whose closing dates differ from theconsolidated closing date, the financial statements for the relevant business year of each such company havebeen used.
3. Matters concerning business year, etc. of consolidated subsidiaries
The closing date of ThinFlex Corporation, TopFlex Corporation, ThinFlex Technology Corporation (B.V.I.),
Protec Arisawa Europe, S.A. and Protec Arisawa America, Inc., all of which are consolidated subsidiaries, is
December 31 of each year.
In preparation of consolidated financial statements, financial statements as of the said closing date are used;provided, however, that for the important transactions conducted in the period from January 1 to March 31 (i.e.
the consolidated closing date), the adjustments necessary for consolidation purposes have been made.

- 59 -

4. Matters concerning accounting policies(1) Valuation standards and valuation methods for important assets
1) Securities
Available-for-sale securities
Securities with available fair market values:
Stated at fair market value based on the market price as of the closing date, etc. (Valuation differences
are reported as a component of net assets, and the cost of securities sold is calculated using the average
cost method.)
Securities with no available fair market value:
Stated at average cost.
2) Derivative financial instruments
Stated at fair value method
3) Inventories
Merchandise, finished goods, semi-finished goods and work in process:
The Company and its domestic consolidated subsidiaries primarily adopt the cost method on a firstin, first-out basis (The amount shown on the balance sheets is calculated by writing inventories down
due to a decline in profitability.), and the overseas subsidiaries primarily adopt the lower-of-cost-ormarket method based on the moving average method.
Raw materials and supplies:
The Company and its domestic consolidated subsidiaries primarily adopt the cost method based on
the periodic average method (The amount shown on the balance sheets is calculated by writing
inventories down due to a decline in profitability.), and the overseas subsidiaries primarily adopt thelower-of-cost-or-market method based on the moving average method.
(2) Methods of depreciation and amortization of important depreciable assets
1) Property, plant and equipment (excluding lease assets)
The Company and its domestic consolidated subsidiaries adopt the declining-balance method, except forthe buildings (excluding accompanying facilities) acquired on or after April 1, 1998, and accompanying
facilities and structures acquired on or after April 1, 2016, which are depreciated using the straight-line
method. The overseas consolidated subsidiaries adopt the straight-line method.
The useful life mostly falls within the ranges shown below:
Buildings and structures: ten (10) years to thirty-one (31) years
Machinery, equipment and vehicles: four (4) years to nine (9) years
2) Intangible assets (excluding lease assets)
The straight-line method is adopted. Software used by the Company is amortized over an estimated inhouse usable period. (Currently five (5) years)
In addition, technology-related assets are amortized over the economic useful life (8 years).
3) Lease assets
Lease assets related to finance lease transactions that entail transfer of title
Depreciation and amortization is based on the same method as applied to self-owned non-current
assets.
Lease assets related to finance lease transactions that do not entail transfer of title
Depreciation and amortization is based on the straight-line method that takes the lease period as the usefullife and sets the residual value at zero (0).
(3) Standards for recording important allowances and provisions
1) Allowance for doubtful accounts
As a reserve for potential loan losses, an estimated uncollectible amount is allocated based on thehistorical loan-loss ratio in the case of general accounts receivable, and in light of the collectibility in each
instance in the case of some specific accounts receivable, e.g. doubtful receivables.
2) Provision for bonuses
The Company and some of its consolidated subsidiaries, in preparation for the payment of bonuses totheir respective employees, allocate such portion of the expected aggregate bonus amount that isrecognizable in the current consolidated fiscal year.
3) Provision for directors’ bonuses
Some of the Company’s consolidated subsidiaries, in preparation for the payment of bonuses to theirrespective directors and officers, make a relevant allocation based on the expected aggregate amount ofsuch bonus payment for the current consolidated fiscal year.

- 60 -

4) Provision for product warranties
As a reserve for warranty expenses potentially incurred with respect to the products delivered tocustomers, an amount reasonably expected to accrue in such expenses is estimated and appropriated.
(4) Accounting methods concerning retirement benefits
1) Method of inter-period attribution of expected retirement benefits
In calculating retirement benefit obligations, the benefit formula is employed as the method of attributing
the estimated amount of each employee’s retirement benefits to his or her service period up to the end of
the current consolidated fiscal year.
2) Method of recognizing actuarial differences as expenses
Actuarial differences are recognized as expenses, effective from the consolidated fiscal year immediately
following the year of occurrence of each such difference, in an amount prorated using the straight-line
method over a certain number of years (Currently five (5) years) within the average remaining service
period of the employees at the time of occurrence of the said difference in each consolidated fiscal year.
3) Adoption of simplified method by small-scale businesses, etc.
Some of the Company’s consolidated subsidiaries employ, in calculating their respective net defined
benefit liabilities and retirement benefit expenses, a simplified method which deems the size of retirement
benefit obligations to be equal to the aggregate amount of retirement benefits payable assuming thevoluntary retirement of all employees at the end of the current period.
(5) Standards for translating important foreign currency assets and liabilities into Japanese currency
Foreign currency monetary assets and liabilities are translated into Japanese yen at the spot exchange
rate as of the consolidated closing date, and the resulting translation differences are entered as income orloss, as the case may be. Assets and liabilities of overseas subsidiaries, etc. are translated into Japanese yenat the spot exchange rate as of the consolidated closing date, and their respective incomes and expenses
are translated into Japanese yen at the average exchange rate during the period, with the resulting
translation differences being recorded as part of “Foreign currency translation adjustment” and “Noncontrolling interests” in the “Net assets” section.
(6) Accounting method of significant hedge transactions
1) Method of hedge accounting
The Company adopts the deferred hedge accounting. With respect to the forward exchange contracts
that meet the requirements of hedge accounting, we adopt the designated hedge accounting.
2) Hedging instruments and hedged items
Hedging instruments: Forward exchange contracts
Hedged items: Monetary claims denominated in foreign currencies, Anticipated transactions in foreign
currencies
3) Hedging policy
Forward foreign exchange transactions are conducted within the scope of actual demand for the purposeof deterring risks involved in transactions denominated in foreign currencies from the fluctuations in theforeign exchange market. These transactions will never be entered for speculative purpose.
4) Method of assessing hedge effectiveness
The Company assesses the effectiveness of hedging based on the ratio of changes that is calculated bycomparing the cumulative total of the market fluctuations of hedged items with that of hedging instruments.
However, when the forward foreign exchange transactions are by designated hedge accounting, suchassessment of effectiveness is omitted.
(7) Method and period of amortization of goodwill
Goodwill is amortized using the straight-line method over a five (5)-year period.
(8) Scope of funds in the consolidated statements of cash flows
The funds consist of cash on hand, demand deposits that are immediately withdrawable and short-term
investments with a maturity of three (3) months or less from the date of acquisition which are readily
convertible to cash and carry only a negligible risk of value fluctuations.
(9) Other important matters concerning preparation of consolidated financial statements
Accounting methods concerning consumption tax, etc.
The consumption tax, etc. are accounted for using the tax exclusion method.
Accounting methods concerning deferred assets
Stock delivery expenses are fully charged to expenses when they are paid.

- 61 -

(Accounting Standards etc. not yet applied)- "Accounting Standard for Revenue Recognition" (Accounting Standards Board of Japan Statement No.29,
March 30, 2018)- "Implementation Guidance on Accounting Standard for Revenue Recognition" (Accounting Standards Board ofJapan Guidance No.30, March 30, 2018)(1) Overview
The International Accounting Standards Board (IASB) and US Financial Accounting Standards Board (FASB)
jointly developed comprehensive revenue recognition accounting standards and issued “Revenue from Contracts
with Customers” in May 2014 (IASB: IFRS 15, FASB: Topic 606). Considering that IFRS 15 will apply to fiscal
years beginning on or after January 1, 2018, and Topic 606 will apply to fiscal years beginning after December
15, 2017, the ASBJ developed a comprehensive accounting standard on revenue recognition and thus issued theaccounting standard together with the implementation guidance.
The ASBJ established the accounting standard on revenue recognition by adhering a basic policy in developing
it. This basic policy was to first, incorporate the core principles of IFRS 15 as the starting point from theperspective of facilitating comparability among financial statements, which is one of the benefits of ensuringconsistency with IFRS 15; and second, add alternative treatments, to the extent that they do not impair
comparability, where consideration should be given to conventional practices etc. in Japan.
(2) Scheduled date of application
The Accounting Standard and the Implementation Guidance mentioned above will be applied at the start of the
fiscal year beginning on April 1, 2021.
(3) Effect of application of the accounting standard, etc.
The effect of the application of the "Accounting Standard for Revenue Recognition", etc. on the consolidated
financial statements is currently under evaluation.
(Changes in Presentation)（Change associated with the application of " Partial Amendments to Accounting Standard for Tax EffectAccounting"）
Partial Amendments to Accounting Standard for Tax Effect Accounting (ASBJ Statement No. 28, February
16, 2018, hereinafter referred to as "Partial Amendments to Tax Effect Accounting Standard") has been applied
since the start of the current consolidated fiscal year. Accordingly, presentation method was changed, andtherefore, "Deferred tax assets" is presented in the category of "Investments and other assets" and "Deferred tax
liabilities" is presented in the category of "Non-current liabilities", as well as "Notes Related to Tax EffectAccounting" is changed.
Consequently, in the Consolidated Balance Sheets of the previous consolidated fiscal year, 584,907 thousand
yen of "Deferred tax assets" of "Current assets" is included in 491,956 thousand yen of "Deferred tax assets" of"Investments and other assets", and 85 thousand yen of "Deferred tax liabilities" of "Current liabilities" isincluded in 1,011,591 thousand yen of "Deferred tax liabilities" of "Non-Current liabilities" for presentation.
Deferred tax assets and deferred tax liabilities of same taxable entities are offset and presented; accordingly,
total assets decreased by 451,909 thousand yen as compared with those before the change.
Details stated in Annotation (Note 8) (except for the total amount of Valuation allowance) and (Note 9) of"Accounting Standard for Tax Effect Accounting" which are set forth in Section 3~5 of Partial Amendments toTax Effect Accounting Standard are added to "Notes Related to Tax Effect Accounting". Those of the saiddetails, however, which are related to the previous consolidated fiscal year, are not stated in accordance with thetransitional handling set forth in Section 7 of Partial Amendments to Tax Effect Accounting Standard.

- 62 -

<Consolidated Statements of Income>1.
“Rent income”, which was separately stated within “Non-operating income” in the previous
consolidated fiscal year, is presented as part of “Other” effective from the current consolidated fiscal
year due to a drop in percentage of the pertinent amount to ten hundredths (10/100) or less of theaggregate amount of non-operating income. In order to reflect such change in presentation, areclassification has been made in the consolidated financial statements for the previous consolidated
fiscal year.
As a result, 159,403 thousand yen of “Rent income”, listed within “Non-operating income” in the
consolidated statements of income for the previous consolidated fiscal year, has been reclassified as partof “Other”
2.

“Loss on retirement of non-current assets”, which was presented as part of “Other” in “Extraordinary
losses” in the previous consolidated fiscal year, is separately stated effective from the current
consolidated fiscal year due to a rise in percentage of the pertinent amount to more than ten hundredths(10/100) of the aggregate amount of Extraordinary losses. In order to reflect such change in presentation,a reclassification has been made in the consolidated financial statements for the previous consolidated
fiscal year.
As a result, 20,886 thousand yen of “Other”, listed within “Extraordinary losses” in the consolidated
statements of income for the previous consolidated fiscal year, has been reclassified into the combinationof 13,579 thousand yen of “Loss on retirement of non-current assets” and 7,307 thousand yen of “Other”.

(Notes Related to Consolidated Balance Sheets)*1 Items related to non-consolidated subsidiaries and affiliated companies are as follows.
(Thousands of yen)Previous consolidated fiscal year
(As of March 31, 2018)

Current consolidated fiscal year
(As of March 31, 2019)8,277,856

8,541,034

Investment securities (Stock)*2 Assets subject to a security interest and secured liabilities
Assets subject to a security interest are as follows.

(Thousands of yen)Previous consolidated fiscal year
(As of March 31, 2018)
Cash and deposits

Current consolidated fiscal year
(As of March 31, 2019)37,789(--- )14,440(--- )Buildings and structures
Machinery, equipment and vehicles

4,336,644
1,608,767((

3,190,575)
1,160,304)

4,030,250
1,151,387((

2,919,738)
823,701)

Property, plant and equipment (Other)Land

56,188500,923((

56,188)199,190)

34,726500,217((34,726)
199,190)

Investments and other assets (Other)

47,580(--- )43,090

(

--- )

(

5,774,111(

3,977,357)

Total

6,587,892
4,606,259)

Secured liabilities are as follows.

(Thousands of yen)Previous consolidated fiscal year
(As of March 31, 2018)

Short-term loans payable
Current portion of long-term loans payable
Long-term loans payable
Total

Current consolidated fiscal year
(As of March 31, 2019)

1,284,843
825,300((

300,000)
767,328)

1,112,202
779,820((200,000)
714,848)

927,485(

714,848

154,665(－)

3,037,628(

1,782,176)

2,046,687(

914,848)

The parenthesized figures represent factory foundation mortgages and the liabilities secured by such mortgages.

- 63 -

*3 Guarantee liabilities
The Company provides the following associated company with a guarantee of liabilities with respect to suchcompany’s accounts payable to trade creditors.
(1) Guarantee of liabilities(Thousands of yen)Previous consolidated fiscal year
(As of March 31, 2018)
Innovision FlexTech Corporation

Current consolidated fiscal year
(As of March 31, 2019)－

43,800*4 Balance of discounted notes and accounts receivable
Previous consolidated fiscal year
(As of March 31, 2018)
Discounted notes and accounts receivable

Current consolidated fiscal year
(As of March 31, 2019)－17,822*5 The Submitting Company has an overdraft agreement in effect with each of its six (6) partner banks to ensure
efficient procurement of operating funds. The following is the balance of unexecuted loans under such overdraft
agreements as of the end of the current and previous consolidated fiscal years.
(Thousands of yen)Previous consolidated fiscal year
(As of March 31, 2018)
Aggregate overdraft limit

Current consolidated fiscal year
(As of March 31, 2019)

6,300,000

Drawdowns
Balance of unexecuted loans

6,300,000

790,000

465,000

5,510,000

5,835,000*6 Notes, etc. maturing at the end of the consolidated fiscal year
For accounting treatment of notes, electronically recorded monetary claims and electronically recorded
obligations maturing at the end of the consolidated fiscal year, settlement is made as of the clearing date of eachnote or as of the settlement date of each electronically recorded monetary claim and electronically recorded
obligation, as the case may be. As the end of the current consolidated fiscal year falls on a bank holiday, thefollowing notes, electronically recorded monetary claims and electronically recorded obligations maturing at theend of the consolidated fiscal year are included in their respective balances as of the end of the consolidated
fiscal year.
Previous consolidated fiscal year
(As of March 31, 2018)(Thousands of yen)
Current consolidated fiscal year
(As of March 31, 2019)

Notes and accounts receivable-trade
Notes and accounts payable-trade

49,502
144,191

66,950130,679

Current liabilities and others (Notes payable-facilities,
Electronically recorded obligations-non-operating)40,343

51,206(Notes Related to Consolidated Statements of Income)*1 Total amount of research and development expenses included in manufacturing costs for the current
period and general and administrative expenses(Thousands of yen)Previous consolidated fiscal year
(From April 1, 2017
to March 31, 2018)

Current consolidated fiscal year
(From April 1, 2018
to March 31, 2019)
1,971,169

2,001,978- 64 -

*2 Closing inventories are stated in the amount after writing inventories down due to a decline inprofitability, and the following loss on valuation of inventories or gain on reversal of loss on valuation of
inventories () are included in the cost of sales.
(Thousands of yen)Previous consolidated fiscal year
(From April 1, 2017
to March 31, 2018)

Current consolidated fiscal year
(From April 1, 2018
to March 31, 2019)△79,106

71,661*3 Details of gain on sales of non-current assets are as follows.
(Thousands of yen)Previous consolidated fiscal year
(From April 1, 2017
to March 31, 2018)
Buildings and structures
Machinery, equipment and vehicles

Current consolidated fiscal year
(From April 1, 2018
to March 31, 2019)
－

1,591

3,268

32,127*4 Impairment loss
Previous consolidated fiscal year (From April 1, 2017 to March 31, 2018)
Our Group recorded an impairment loss with respect to the following asset group(s) in the previous
consolidated fiscal year.
Location
Joetsu-shi, Niigata

Usage
Display materials manufacturing facilities

Type
Buildings and structures; machinery,equipment and vehicles; land; etc.

Our Group conducts asset grouping grounded in its business segments and based primarily on productlines (each line representing a family of products), while each asset becomes the subject of asset grouping in
the cases of assets for rent and idle assets, etc.
Of the Group’s business assets, those asset groups whose profitability significantly declined due largely
to a fall in the market price of the relevant products, etc. have been written down to the recoverable amount,and the aggregate amount of such write-downs, 26,028 thousand yen, was recorded as an impairment loss in
extraordinary losses. The said aggregate amount consists of 15,125 thousand yen of buildings and structures,
7,988 thousand yen of machinery, equipment and vehicles, 2,772 thousand yen of land and 141 thousand
yen of others.
The recoverable amount of each relevant asset group is measured according to the net selling price, whilethe value of each real-estate property is fixed at the value assessed by a licensed real-estate appraiser.
Current consolidated fiscal year (From April 1, 2018 to March 31, 2019)
Our Group recorded an impairment loss with respect to the following asset group(s) in the current
consolidated fiscal year.
Location
Joetsu-shi, Niigata

Usage
Display materials manufacturing facilities

Type
Buildings and structures; machinery,equipment and vehicles; land; etc.

Our Group conducts asset grouping grounded in its business segments and based primarily on productlines (each line representing a family of products), while each asset becomes the subject of asset grouping in
the cases of assets for rent and idle assets, etc.
Of the Group’s business assets, those asset groups whose profitability significantly declined due largely
to a fall in the market price of the relevant products, etc. have been written down to the recoverable amount,and the aggregate amount of such write-downs, 96,725 thousand yen, was recorded as an impairment loss in
extraordinary losses. The said aggregate amount consists of 52,349 thousand yen of buildings and structures,
30,979 thousand yen of machinery, equipment and vehicles, 10,653 thousand yen of land and 2,742 thousand
yen of others.
The recoverable amount of each relevant asset group is measured according to the net selling price, whilethe value of each real-estate property is fixed at the value assessed by a licensed real-estate appraiser.

- 65 -

(Notes Related to Consolidated Statements of Comprehensive Income)*Reclassification adjustment and tax effects relating to other comprehensive income(Thousands of yen)Previous consolidated fiscal year
(From April 1, 2017
to March 31, 2018)
Valuation difference on available-for-sale securities:
Amount arising in the current fiscal year
Reclassification adjustment
Before tax effects
Tax effects
Valuation difference on available-for-sale securities

Current consolidated fiscal year
(From April 1, 2018
to March 31, 2019)

985,771△594,730△600,380

391,041△119,267△675,284

271,773△469,322－

668△74,903205,961

Deferred gains or losses on hedges:
Amount arising in the current fiscal year
Reclassification adjustment
Before tax effects△7,437－△7,437
2,283

668
△224

△5,153443

Amount arising in the current fiscal year

491,053△384,361

Remeasurements of defined benefit plans, net of tax:
Amount arising in the current fiscal year

△9,768△6,561

Reclassification adjustment

13,92638,925

4,158△1,29632,364△9,871

2,861

22,493△13,356△117,745

747,179△948,493

Tax effects
Deferred gains or losses on hedges
Foreign currency translation adjustment:

Before tax effects
Tax effects
Remeasurements of defined benefit plans, net of tax
Share of other comprehensive income of entities
accounted for using equity method:Amount arising in the current fiscal year
Total other comprehensive income- 66 -

(Notes Related to Consolidated Statements of Changes in Shareholders’ Equity and Other Net Assets)
Previous consolidated fiscal year (From April 1, 2017 to March 31, 2018)
1. Matters concerning class and number of shares issued and outstanding and of shares of treasury stock
Number of shares at the
beginning of theconsolidated fiscal year

Increase in the numberof shares during theconsolidated fiscal year

Decrease in the numberof shares during theconsolidated fiscal year

Number of shares at theend of the consolidated
fiscal year

Common stock (See Note 1)

35,679,624

344,500－

36,024,124

Total

35,679,624

344,500－

36,024,124

6,536

548

－

7,084

Shares issued and outstanding

Treasury stock
Common stock (See Note 2)
Total
Note: 1.
2.

－
6,536
548
7,084
The increase of 344,500 shares in the number of shares issued and outstanding (common stock) is due to an issuanceof new shares through the exercise of stock acquisition rights.
The increase of 548 shares in the number of shares of treasury stock (common stock) is due to a purchase of sharesconstituting less than one full unit.

2. Matters concerning stock acquisition rights and treasury stock acquisition rights

Details of stockacquisition rights

Stock acquisition rights
issued as stock options

---

---

---

---

---

127,640

---

---

---

---

---

127,640

Category

Submitting
Company(Parent
company)
Total

Number of shares subject to stock acquisition
Balance at therightsend of the
At theIncrease
DecreaseAt the end of consolidated
beginning offiscal year
during theduring thethethe
consolidated consolidated consolidated (Thousands ofconsolidatedyen)fiscal year
fiscal year
fiscal year
fiscal year

Class ofshares subject
to stockacquisitionrights3. Matters concerning dividends(1) Dividends paid
Resolution

Class of shares

Total amount of dividends(Thousands of yen)

Dividend pershare (Yen)

Ordinary General
Meeting ofCommon stock
713,461
20.00
Shareholders ofJune 28, 2017
Note:
The dividend per share of 35 yen includes a special dividend of 11 yen.

Record date

Effective date

March 31, 2017

June 29, 2017

(2) Dividends whose record date belongs to the current consolidated fiscal year but whose effective date belongs
to the next consolidated fiscal year
Resolution

Class of shares

Total amount ofdividends(Thousands of yen)

Source ofdividends

Ordinary General
Meeting of
Shareholders ofJune 28, 2018

Common stock

1,224,579

Retainedearnings- 67 -

Dividend pershare (Yen)Record date

34.00 March 31, 2018

Effective dateJune 29, 2018

Current consolidated fiscal year (From April 1, 2018 to March 31, 2019)
1. Matters concerning class and number of shares issued and outstanding and of shares of treasury stock
Number of shares at the
beginning of theconsolidated fiscal year

Increase in the numberof shares during theconsolidated fiscal year

Decrease in the numberof shares during theconsolidated fiscal year

Number of shares at theend of the consolidated
fiscal year

Common stock (See Note 1)

36,024,124

202,100－

36,226,224

Total

36,024,124

202,100－

36,226,224

7,084

294

－

7,378

Shares issued and outstanding

Treasury stock
Common stock (See Note 2)
Total
Note: 1.
2.

－
7,084
294
7,378
The increase of 202,100shares in the number of shares issued and outstanding (common stock) is due to an issuance of
new shares through the exercise of stock acquisition rights.
The increase of 294 shares in the number of shares of treasury stock (common stock) is due to a purchase of sharesconstituting less than one full unit.

2. Matters concerning stock acquisition rights and treasury stock acquisition rights

Details of stockacquisition rights

Stock acquisition rights
issued as stock options

---

---

---

---

---

144,419

---

---

---

---

---

144,419

Category

Submitting
Company(Parent
company)
Total

Number of shares subject to stock acquisition
Balance at therightsend of the
At theIncrease
DecreaseAt the end of consolidated
beginning offiscal year
during theduring thethethe
consolidated consolidated consolidated (Thousands ofconsolidatedyen)fiscal year
fiscal year
fiscal year
fiscal year

Class ofshares subject
to stockacquisitionrights3. Matters concerning dividends(1) Dividends paid
Resolution

Class of shares

Total amount of dividends(Thousands of yen)

Dividend pershare (Yen)

Ordinary General
Meeting of
Shareholders of June
28, 2018

Common stock

1,224,579

34.00

Record date

Effective date

March 31, 2018

June 29, 2018

(2) Dividends whose record date belongs to the current consolidated fiscal year but whose effective date belongs
to the next consolidated fiscal year
Resolution

Class of shares

Total amount ofdividends(Thousands of yen)

Source ofdividends

Ordinary General
Meeting of
Shareholders ofJune 27, 2019

Common stock

1,086,565

Retainedearnings- 68 -

Dividend pershare (Yen)Record date

30.00 March 31, 2019

Effective dateJune 28, 2019(Notes Related to Consolidated Statements of Cash Flows)* The correlation between the balance of cash and cash equivalents at the end of the current and previous consolidated
fiscal years and the amounts shown for the corresponding items on the relevant consolidated balance sheets(Thousands of yen)Previous consolidated fiscal year
(From April 1, 2017
to March 31, 2018)
Cash and deposits
Time deposits with a deposit term of more than three months
Securities (Money management fund)Cash and cash equivalents

Current consolidated fiscal year
(From April 1, 2018
to March 31, 2019)

9,123,877△538,000

8,193,697△635,000

243,927

159,9848,829,805

7,718,682(Notes Related to Lease Transactions)(As lessee)
Finance lease transactions
Finance lease transactions that do not entail transfer of title
1) Details of lease assets
Property, plant and equipment
Photovoltaic facility, mainly. (falling under “Machinery, equipment and vehicles” respectively)
2) Methods of depreciation and amortization of lease assets
As is stated in (Important Matters Underlying Preparation of Consolidated Financial Statements) - 4. Mattersconcerning accounting policies - (2) Methods of depreciation and amortization of important depreciable assets.

(Notes Related to Financial Instruments)
1. Matters concerning the status of financial instruments(1) Policies for financial instruments
Our Group obtains funds required in light of its financing plan and business plan (mainly through bankloans), and invest any temporary surplus funds in highly liquid financial instruments, and also obtains shortterm operating funds through bank loans. Our Group makes use of derivative transactions in order to avoid
the risks mentioned below and maintains a policy of eschewing speculative transactions.
(2) Description of financial instruments and risks associated with such financial instruments
Notes and accounts receivable, a type of operating receivables, are exposed to customer credit risk, andforeign currency operating receivables are also exposed to exchange rate fluctuation risk.
Securities and investment securities consist of those held primarily as pure investments and equity sharesin the Company’s business partners and are exposed to market price fluctuation risk.
Notes and accounts payable, a type of operating payables, are mostly due in approximately four (4) months.
The notes and accounts payable denominated in foreign currencies are exposed to exchange rate fluctuation
risk.
Loans payable are primarily aimed at obtaining funds required for capital investment. They are fixed rateloans and liabilities and therefore are not exposed to interest rate fluctuation risk.
Derivative transactions conducted by our Group are restricted to forward exchange contracts with the
purpose to hedge exchange fluctuation risk in respect of operating receivables denominated in foreign
currency. To learn about hedging instruments and hedged items with respect to hedge accounting, hedging
policy and method of assessing hedge effectiveness, etc., refer to "4. Matters concerning accounting
policies (6) Accounting method of significant hedge transactions" in [Notes] (Important Matters Underlying
Preparation of Consolidated Financial Statements) described above.

(3) Risk management system for financial instruments
1) Management of credit risk (Risks associated with default of contract by business partners, etc.)
As for notes and accounts receivable, the sales departments set a credit limit for each of the Company’s
regular customers, monitoring such customers’ respective payment schedules, remaining credit lines andoverall business conditions in an attempt to promptly recognize and reduce doubtful accounts.
As for securities and investment securities held for the purpose of fund management, higher-rated bonds
are selected to minimize credit risk.

- 69 -

2) Management of market risk (Risks associated with fluctuations in foreign exchange rates and interest
rates, etc.)
As for some foreign currency operating receivables and payables, forward exchange contracts may be
employed to avoid exchange rate fluctuation risk.
As for securities and investment securities, the Company continually reviews the holding status in lightof the relevant market conditions and business relations.
The execution and management of derivative transactions are conducted, pursuant to the management
rules that specify transaction authority and transaction amount limits, by the department in charge withthe approval of the person in charge of settlement.
3) Management of liquidity risk (Risk that payment cannot be made as and when due under contract) infinancing activities
The Company has entered into an overdraft agreement with its partner banks to ensure expeditious
financing and to minimize liquidity risk.
In financing activities, the Company prepares and updates a financial plan under its business plan andcapital investment plan and maintains liquidity on hand, etc. in an attempt to minimize liquidity risk.
(4) Supplementary explanations on matters concerning fair value, etc. of financial instruments
The fair value of financial instruments is based on either the quoted market price, if available, or areasonably estimated price where no market price is available. As variable factors are incorporated in thedetermination of the said reasonably estimated price, such price may vary depending on the choice among
different assumptions, etc.

- 70 -

2.

Matters concerning fair value, etc. of financial instruments
The amount shown on the consolidated balance sheets, the fair value and the difference between the former
and the latter are as follows. Financial instruments whose fair value is deemed extremely difficult to reasonably
determine are not included (See Note 2).
Previous consolidated fiscal year (As of March 31, 2018)
Amount shown on
consolidated balance sheets(Thousands of yen)
Fair value

Difference(1) Cash and deposits

9,123,877

9,123,877－(2) Notes and accounts receivable–trade

15,947,189

15,947,189－(3) Securities and investment securities

24,023,638

25,379,821

1,356,182

49,094,705

50,450,888

1,356,182(1) Notes and accounts payable–trade

6,794,393

6,794,393－(2) Short-term loans payable

4,242,472

4,242,472－

930,529

930,529－2,506,615

2,502,645△3,96914,474,010

14,470,041△3,969Total assets(3) Income taxes payable(4) Long-term loans payable (*1)
Total liabilities(*1) The current portion of long-term loans payable is included.
Current consolidated fiscal year (As of March 31, 2019)
Amount shown on
consolidated balance sheets(Thousands of yen)
Fair value

Difference(1) Cash and deposits

8,193,697

8,193,697－(2) Notes and accounts receivable–trade16,127,374

16,127,374－(3) Securities and investment securities

23,937,888

20,929,013△3,008,874

48,258,961

45,250,086△3,008,874(1) Notes and accounts payable–trade

6,105,195

6,105,195－(2) Short-term loans payable

5,394,122

5,394,122－

300,788

300,788

－2,045,285

2,044,710△574

13,845,391

13,844,816△574

Total assets(3) Income taxes payable(4) Long-term loans payable (*1)
Total liabilities(*1) The current portion of long-term loans payable is included.
Note: 1. Methods of calculating fair value of financial instruments and matters concerning securities
Assets(1) Cash and deposits and (2) Notes and accounts receivable–trade
As the fair value of these items approximates their respective book values due to their short maturities,
they are recorded at the pertinent book value.
(3) Securities and investment securities
The fair value of stock, etc. is based on the quoted price in an active market (e.g. a stock exchange),
and the fair value of bonds is based on the said quoted price or the price presented by the relevant financial
institutions, etc. For matters concerning securities with respect to each purpose of holding, refer to (Notes
Related to Securities).
Liabilities(1) Notes and accounts payable-trade, (2) Short-term loans payable and (3) Income taxes payable
As the fair value of these items approximates their respective book values due to their short maturities,
they are recorded at the pertinent book value.
(4) Long-term loans payable
The fair value of these loans is calculated based on the present value obtained by discounting the sumof the principal and the interest accruing thereon at the rate that should apply if a similar borrowing is- 71 -

newly made.
2. Financial instruments whose fair value is deemed extremely difficult to reasonably determine
Category

Previous consolidated fiscal year
(As of March 31, 2018)(Thousands of yen)
Current consolidated fiscal year
(As of March 31, 2019)522,287

606,152

Unlisted stock, etc.

As these instruments have no quoted market price, and it is deemed extremely difficult to reasonably
determine their respective fair values, they are not included in “(3) Securities and investment securities”.
3. Scheduled amount of redemption after the consolidated closing date of monetary receivables and securities
with a maturity datePrevious consolidated fiscal year (As of March 31, 2018)(Thousands of yen)year

Due after one year
and within five years

9,111,499

3,000

－

－

15,947,189

－

－

－

－

106,240－－

958,489

3,743,230

4,343,086

958,819

13,280365,200

365,640－

26,030,458

4,217,670

4,708,726

958,819

Due within one
Deposits
Notes and accounts
receivable–trade
Securities andinvestment securities
Available-for-salesecurities with amaturity date(1) Government
bonds, local
government
bonds, etc.
(2) Corporatebonds(3) Other
Total

Due after five years
and within ten years

Current consolidated fiscal year (As of March 31, 2019)

Deposits
Notes and accounts
receivable–trade
Securities and investment
securities
Available-for-salesecurities with a maturity
date(1) Government bonds,
local government
bonds, etc.
(2) Corporate bonds(3) Other
Total

Due after ten
years(Thousands of yen)
Due after five
years andDue after ten
within ten
years
years

Due within one year

Due after one year
and within fiveyears

8,188,402－－－

16,127,374

－

－

－

－

110,990－－

1,227,014

3,923,792

3,947,170

1,326,149

13,873367,654379,890345,696

25,556,665

4,402,436

4,327,060

1,671,845- 72 -

4. Scheduled amount of repayment after the consolidated closing date of corporate bonds, long-term loans
payable, lease obligations and other interest-bearing liabilities
Previous consolidated fiscal year (As of March 31, 2018)(Thousands of yen)
Due after one
Due after two Due after three Due after four
Due within one
Due after five
year and within years and within years and within years and within
year
years
two years
three years
four years
five years
Short-term loans payable

4,242,472

－

－

－

－

－

Long-term loans payable

864,130

850,540

191,137

452,192

142,3126,304

5,106,602

850,540

191,137

452,192

142,312

6,304

Total

Current consolidated fiscal year (As of March 31, 2019)(Thousands of yen)

Due after one
Due after two Due after three Due after four
Due within one
Due after five
year and within years and within years and within years and within
year
years
two years
three years
four years
five years
Short-term loans payable

5,394,122

－

－

－

－

－

Long-term loans payable

779,820

417,657

49,392

792,1126,304－

6,173,942

417,657

49,392

792,112

6,304

－

Total

(Notes Related to Securities)
1. Available-for-sale securities
Previous consolidated fiscal year (As of March 31, 2018)(Thousands of yen)Type

Amount shown on
consolidated balance
sheetsAcquisition cost

(1) Equity Shares

3,605,283

852,9022,752,381－－－

4,387,051

4,155,214

231,837

364,581362,3712,209(3) Other562,862

553,440

9,421

Subtotal

8,919,779

5,923,929

2,995,850－－－

104,680

124,598△19,917

5,863,278

6,955,231△1,091,953

425,871504,505△78,633(3) Other786,211

840,159△53,947

Subtotal

7,180,041

8,424,494△1,244,452

Difference(2) Bonds
Those whose amountshown on consolidatedbalance sheets exceeds theacquisition cost1) Government bonds, local
government bonds, etc.
2) Corporate bonds3) Other(1) Equity Shares(2) Bonds
Those whose amountshown on consolidatedbalance sheets does notexceed the acquisition cost

Total
Note:

1) Government bonds, local
government bonds, etc.
2) Corporate bonds3) Other

16,099,821

14,348,423
1,751,397
As shares of unlisted stock, etc. (shown in the amount of 168,247 thousand yen on the consolidated balance sheets) haveno quoted market price, and it is deemed extremely difficult to reasonably determine their respective fair values, they
are not included in the table above.

- 73 -

Current consolidated fiscal year (As of March 31, 2019)(Thousands of yen)Type

Amount shown on
consolidated balance
sheetsAcquisition cost

(1) Equity Shares

2,298,522

813,727

1,484,794－－－

5,727,589

5,255,153

472,436

473,047

452,208

20,839(3) Other574,181551,790

22,391

Subtotal

9,073,340

7,072,879

2,000,461

377,730

575,829△198,098

110,367

124,416△14,048

5,168,251

5,790,808△622,557

347,163401,895△54,731(3) Other

720,319756,216△35,896

Subtotal

6,723,832

7,649,165△925,332

15,797,173

14,722,045

1,075,128

Difference(2) Bonds
Those whose amountshown on consolidatedbalance sheets exceeds theacquisition cost1) Government bonds, local
government bonds, etc.
2) Corporate bonds3) Other(1) Equity Shares(2) Bonds
Those whose amountshown on consolidatedbalance sheets does notexceed the acquisition cost1) Government bonds, local
government bonds, etc.
2) Corporate bonds3) Other

Total
Note:

As shares of unlisted stock, etc. (shown in the amount of 205,832 thousand yen on the consolidated balance sheets) haveno quoted market price, and it is deemed extremely difficult to reasonably determine their respective fair values, they are
not included in the table above.

2. Available-for-sale securities sold
Previous consolidated fiscal year (From April 1, 2017 to March 31, 2018)
Type

Amount sold(1) Equity Shares(Thousands of yen)

Total gain on sale

Total loss on sale

976,820734,374

21

－

－

－

2) Corporate bonds

702,085

29,55886,3803) Other

178,360

12,331－(3) Other

1,130,227

8,645

40,182

Total

2,987,494

784,909

126,584(2) Bonds
1) Government bonds,
local government
bonds, etc.

Current consolidated fiscal year (From April 1, 2018 to March 31, 2019)
Type(1) Equity Shares

Amount sold(Thousands of yen)

Total gain on sale

Total loss on sale

69,69765,0100－－－

1,388,342

71,877

63,823

14,635

1,861

－

1,728

－

22

1,474,403

138,748

63,845(2) Bonds
1) Government bonds,
local government
bonds, etc.
2) Corporate bonds3) Other(3) OtherTotal- 74 -

3. Securities subject to impairment
An impairment of available-for-sale securities totalling 63,595 thousand yen was made in the previous
consolidated fiscal year.
An impairment of available-for-sale securities totalling 45,000thousand yen was made in the current
consolidated fiscal year.
In this regard, an impairment of securities is made in full if the fair value at the end of the consolidated
fiscal year is 50% or less of the acquisition cost, and in such amount as deemed necessary in view of theprospects for a price rebound, etc. if the fair value at the end of the consolidated fiscal year falls within therange of 30% to 50% of the acquisition cost.
(Notes Related to Derivative Transactions)
1. Derivative transaction not subject to hedge accounting
No applicable matter.
2. Derivatives transactions subject to hedge accounting
Currency-related transactions
Previous consolidated fiscal year (As of March 31, 2018)
No applicable matter.
Current consolidated fiscal year (As of March 31, 2019)
Hedge accounting
methodDesignated hedge
accounting forforward foreignexchange, etc.

Type of transactions

Major hedged items

Contract amount(Thousands ofyen)Contract
amount due
after 1 yearperiod(Thousands ofyen)

Accounts receivable583,172－668

583,172－

668

Fair value(Thousandsof yen)Forward foreign exchangetransactions
Short open position
U.S. dollar
Total

Note: 1. The method of calculating the fair market value is based on the price presented by the counterparty financial institution.
2. Because it is calculated together with the accounts receivable considered as hedged item, the amount of fair value by
designated hedge accounting for forward foreign exchange contracts, etc. is included in the fair value of such accounts
receivable.

Current consolidated fiscal year (As of March 31, 2018)
No applicable matter.

- 75 -

(Notes Related to Retirement Benefits)
1. Outline of retirement benefit plans adopted by the GroupThe Company and some of its consolidated subsidiaries adopt, as a defined benefit scheme, the defined benefit
corporate pension plan and the retirement lump-sum distribution plan. The Submitting Company shifted to thedefined benefit corporate pension plan from the qualifying retirement pension plan as of April 1, 2007. Someof the Company’s domestic consolidated subsidiaries participate in the Smaller Enterprise Retirement
Allowance Mutual Aid System as a defined contribution scheme. Some of the Company’s overseas consolidated
subsidiaries adopt the defined contribution retirement allowance plan.
2.

Defined benefit scheme (including plans employing the simplified method)(1) Reconciliation between the beginning and ending balances of retirement benefit obligations
Previous consolidated fiscal year
(From April 1, 2017
to March 31, 2018)
Balance of retirement benefit obligations
at the beginning of year
Service cost
Interest cost
Actuarial differences generated
Retirement benefits paid
Increase resulting from acquisition of aconsolidated subsidiary
Balance of retirement benefit obligations
at the end of year

(Thousands of yen)
Current consolidated fiscal year
(From April 1, 2018
to March 31, 2019)

4,134,272

4,391,542

268,528
12,323

278,091
13,04946,431△83,603

34,675△223,937

13,590－4,391,542

4,493,421(2) Reconciliation between the beginning and ending balances of plan assets

Balance of plan assets at the beginning of year
Expected return on plan assets

Previous consolidated fiscal year
(From April 1, 2017
to March 31, 2018)
3,576,160
35,761(Thousands of yen)
Current consolidated fiscal year
(From April 1, 2018
to March 31, 2019)
3,787,985
37,879Retirement benefits paid

36,663223,004△83,603

28,114
226,635△214,079

Balance of plan assets at the end of year

3,787,985

3,866,535

Actuarial differences generated
Employer contributions(3) Reconciliation between the ending balance of retirement benefit obligations and plan assets combined
and the net defined benefit liability and net defined benefit asset shown on consolidated balance sheets
Previous consolidated fiscal year
(As of March 31, 2018)
4,349,942
Retirement benefit obligations under the funded plans△3,787,985
Plan assets(Thousands of yen)
Current consolidated fiscal year
(As of March 31, 2019)
4,458,088△3,866,535

561,956

591,552

Retirement benefit obligations under the unfundedplans

41,59935,333

Net amount of liability and asset shown on
consolidated balance sheets

603,556

626,885

Net defined benefit liability

603,556

626,885

603,556

626,885

Net amount of liability and asset shown on
consolidated balance sheets- 76 -

(4) Amount of retirement benefit expenses and components thereofService cost
Interest cost

Previous consolidated fiscal year
(From April 1, 2017
to March 31, 2018)
268,528
12,323(Thousands of yen)
Current consolidated fiscal year
(From April 1, 2018
to March 31, 2019)
278,091
13,049

Expected return on plan assets
Recognized actuarial loss

△35,761
13,926△37,879
38,925Retirement benefit expenses incurred under
defined benefit scheme

259,016

292,186(5) Remeasurements of defined benefit plans, net of tax
Remeasurements of defined benefit plans, net of tax (before tax effects) consist of the following.

Actuarial differences

Previous consolidated fiscal year
(From April 1, 2017
to March 31, 2018)△4,158(Thousands of yen)
Current consolidated fiscal year
(From April 1, 2018
to March 31, 2019)△32,364(6) Remeasurements of defined benefit plans
Remeasurements of defined benefit plans (before tax effects) consist of the following.

Unrecognized actuarial differences
Note:

Previous consolidated fiscal year
(As of March 31, 2018)△195,616(Thousands of yen)
Current consolidated fiscal year
(As of March 31, 2019)△163,252

The figures stated above only cover the Company and its consolidated subsidiaries, while the amount shown asremeasurements of defined benefit plans includes not only the figures stated above but also the unrecognizeditems attributable to the companies accounted for under the equity method (Amount corresponding to theCompany’s equity interest).

(7) Matters concerning plan assets
1) Rough breakdown of plan assets
The categorical distribution of the total plan assets held is as follows.
Previous consolidated fiscal year Current consolidated fiscal year
(As of March 31, 2018)(As of March 31, 2019)
Life insurance company general accounts
51%
50%
Trust bank special accounts
25%
25%Life insurance company special accounts
24%
25%
Total
100%
100%
Note: Each account comprises a diverse range of investment asset classes centering on domestic bonds, in areflection of the basic policy of securing stable returns.

2) Method of determining the expected long-term rate of return on plan assets
The current and expected future allocations of the plan assets as well as the current and anticipatedlong-term rates of return on the diverse range of asset classes comprising the plan assets are taken into
account in determining the expected long-term rate of return on plan assets.
(8) Matters concerning actuarial assumptions
Major actuarial assumptions
Previous consolidated fiscal year Current consolidated fiscal year
(As of March 31, 2018)(As of March 31, 2019)
Discount rate
0.3%
0.3%
Expected long-term rate of return on plan assets
1.0%
1.0%
1.0～2.8%
1.0～2.8%
Expected rates of salary increase- 77 -

3. Defined contribution scheme
The total amount required for contributions to the defined contribution plans of some of the Company’s
domestic consolidated subsidiaries and overseas consolidated subsidiaries was 60,334 thousand yen for theprevious consolidated fiscal year (From April 1, 2017 to March 31, 2018) and 72,407 thousand yen for thecurrent consolidated fiscal year (From April 1, 2018 to March 31, 2019).
(Notes Related to Stock Options, etc.)
1. Amount recorded as expenses and item of expenses associated with stock options(Thousands of yen)Previous consolidated fiscal year
(From April 1, 2017
to March 31, 2018)

Current consolidated fiscal year
(From April 1, 2018
to March 31, 2019)

42,636

53,638Previous consolidated fiscal year
(From April 1, 2017
to March 31, 2018

Current consolidated fiscal year
(From April 1, 2018
to March 31, 2019)

2,054

7,341

Share-based compensation expenses in cost of sales
and selling, general and administrative expenses

2. Amount recorded as income due to forfeiture by non-exercise of rights(Thousands of yen)

Gain on reversal of share acquisition rights- 78 -

3. Outline and scale of stock options and changes(1) Outline of stock options
Directors’ retirement bonuses
stock option in 2005

Employees, etc.
stock option in 2013

Directors’ remuneration
stock option in 2014

Category and number ofgrantees

6 directors of the Company

163 employees and advisors of theCompany, and 9 directors andemployees of subsidiaries of theCompany

6 directors of the Company

Number of stock options(See Note)

39,700 shares of common stock

203,100 shares of common stock

93,000 shares of common stock

Grant dateAugust 1, 2005

August 16, 2013

August 18, 2014

No condition for vesting is set, but
the condition for exercising the rights
is as follows:- Being a director or an employee of
the Company (including an advisor
and a counselor) or a director or an
employee of a subsidiary of theCompany (including an advisor) at
the time of exercising the rights.

No condition for vesting is set, but
the condition for exercising the rights
is as follows:- Being a director or an employee of
the Company (including an advisor
and a counselor) or a director or an
employee of a subsidiary of theCompany (including an advisor) at
the time of exercising the rights.

Conditions for vesting

No condition for vesting is set, but
the conditions for exercising therights are as follows:(1) Eligible person may exercise thestock acquisition rights only on theoccasion of his or her retirement fromthe post of director of the Company;
provided, however, that the eligible
person shall exercise the stockacquisition rights in the period
between the date immediately
following the date of his or her
retirement (hereinafter referred to as
the “Date of Commencing Exerciseof Right”) and the date elapsing ten(10) days from the Date ofCommencing Exercise of Right (bothdates inclusive).
(2) In the event of the eligible
person’s death, among his or her
heirs, only the spouse, children andlineal ascendants (first degree) of theeligible person may exercise thestock acquisition rights; provided,
however, that such heirs shall
exercise the stock acquisition rights
in the period between the date
immediately following the date ofretirement of the eligible person bydeath and the date elapsing three (3)months from such date (both dates
inclusive).

1 year and 11 months(August 16, 2013 through June30, 2015)

1 year and 11 months(August 18, 2014 through June30, 2016)

July 1, 2015 through June 30, 2018

July 1, 2016 through June 30, 2019

Requisite service period

Exercise period

N.A.
August 1, 2005 through July 31,
2025- 79 -

Directors’ remuneration
stock option in 2015

Employees, etc.
stock option in 2014

Employees, etc.
stock option in 2015

Category and number ofgrantees

163 employees and advisors of theCompany, and 10 directors andemployees of subsidiaries of theCompany

5 directors of the Company

176 employees and advisors of theCompany, and 20 directors andemployees of subsidiaries of theCompany

Number of stock options(See Note)

216,500 shares of common stock

78,000241,400 shares of common stock

Grant dateAugust 18, 2014

August 17, 2015

August 17, 2015

Conditions for vesting

No condition for vesting is set, but
the condition for exercising the rights
is as follows:- Being a director or an employee of
the Company (including an advisor
and a counselor) or a director or an
employee of a subsidiary of theCompany (including an advisor) at
the time of exercising the rights.

No condition for vesting is set, but
the condition for exercising the rights
is as follows:- Being a director or an employee of
the Company (including an advisor
and a counselor) or a director or an
employee of a subsidiary of theCompany (including an advisor) at
the time of exercising the rights.

No condition for vesting is set, but
the condition for exercising the rights
is as follows:- Being a director or an employee of
the Company (including an advisor
and a counselor) or a director or an
employee of a subsidiary of theCompany (including an advisor) at
the time of exercising the rights.

Requisite service period

1 year and 11 months(August 18, 2014 through June30, 2016)

1 year and 11 months(August 17, 2015 through June30, 2017)

1 year and 11 months(August 17, 2015 through June30, 2017)

Exercise period

July 1, 2016 through June 30, 2019

July 1, 2017 through June 30, 2020

July 1, 2017 through June 30, 2020

Directors’ remuneration
stock option in 2016

shares of common stock

Employees, etc.
stock option in 2016

Directors’ remuneration
stock option in 2017

Category and number ofgrantees

5 directors of the Company

187 employees and advisors of theCompany, and 14 directors andemployees of subsidiaries of theCompany

5 directors of the Company

Number of stock options(See Note)

73,000 shares of common stock

234,000 shares of common stock

75,000 shares of common stock

Grant dateAugust 16, 2016

August 16, 2016

August 16, 2017

Conditions for vesting

No condition for vesting is set, but
the condition for exercising the rights
is as follows:- Being a director or an employee of
the Company (including an advisor
and a counselor) or a director or an
employee of a subsidiary of theCompany (including an advisor) at
the time of exercising the rights.

No condition for vesting is set, but
the condition for exercising the rights
is as follows:- Being a director or an employee of
the Company (including an advisor
and a counselor) or a director or an
employee of a subsidiary of theCompany (including an advisor) at
the time of exercising the rights.

No condition for vesting is set, but
the condition for exercising the rights
is as follows:- Being a director or an employee of
the Company (including an advisor
and a counselor) or a director or an
employee of a subsidiary of theCompany (including an advisor) at
the time of exercising the rights.

Requisite service period

1 year and 11 months(August 16, 2016 through June30, 2018)

1 year and 11 months(August 176 2016 through June30, 2018)

1 year and 11 months(August 16, 2017 through June30, 2019)

Exercise period

July 1, 2018 through June 30, 2021

July 1, 2018 through June 30, 2021

July 1, 2019 through June 30, 2022

- 80 -

Directors’ remuneration
stock option in 2018

Employees, etc.
stock option in 2017

Employees, etc.
stock option in 2018
211 employees and advisors of theCompany, and 11 directors andemployees of subsidiaries of theCompany

Category and number ofgrantees

194 employees and advisors of theCompany, and 10 directors andemployees of subsidiaries of theCompany

5 directors of the Company

Number of stock options(See Note)

235,300 shares of common stock

75,000shares of common stock

257,300 shares of common stock

Grant dateAugust 16, 2017

August 16, 2018

August 16, 2018

No condition for vesting is set, but
the condition for exercising therights is as follows:- Being a director or an employee of
the Company (including an advisor
and a counselor) or a director or an
employee of a subsidiary of theCompany (including an advisor) at
the time of exercising the rights.

No condition for vesting is set, but
the condition for exercising therights is as follows:- Being a director or an employee of
the Company (including an advisor
and a counselor) or a director or an
employee of a subsidiary of theCompany (including an advisor) at
the time of exercising the rights.

No condition for vesting is set, but
the condition for exercising therights is as follows:- Being a director or an employee of
the Company (including anadvisor and a counselor) or adirector or an employee of a
subsidiary of the Company(including an advisor) at the timeof exercising the rights.

Requisite service period

1 year and 11 months(August 16, 2017 through June30, 2019)

1 year and 11 months(August 16, 2018 through June30, 2020)

1 year and 11 months(August 16, 2018 through June 30,
2020)

Exercise period

July 1, 2019 through June 30, 2022

July 1, 2020 through June 30, 2023

July 1, 2020 through June 30, 2023

Conditions for vesting

Note:

Stated in terms of shares of stock.

- 81 -

(2) Scale of stock options granted and changes
Stock options that existed during the current consolidated fiscal year (fiscal year ended March 31, 2019) arecovered, with the number of stock options stated in terms of shares of stock.
(a) Number of stock options
Directors’ retirement
bonuses
stock option in 2005

Employees, etc.
stock option in 2013

Directors’ remuneration
stock option in 2014

At the end of the previous
consolidated fiscal year

－

－

－

Granted－－－Forfeited－－－

Vested－－－Outstanding

－

－

－

27,10053,70047,400

Vested－－－Exercised－

16,10026,600Forfeited－

37,600－27,100－20,800

Employees, etc. stock
option in 2014

Directors’ remuneration
stock option in 2015

Employees, etc. stock
option in 2015

At the end of the previous
consolidated fiscal year

－

－

－

Granted－－－Forfeited－－－

Vested－－－Outstanding

－

－

－

115,100

61,000196,500－－－

Exercised

40,000－44,800Forfeited

1,800

－

5,300

Exercisable

73,30061,000146,400

Before vested

After vested(Shares)(Shares)At the end of the previous
consolidated fiscal year

Exercisable

Before vested

After vested
At the end of the previous
consolidated fiscal year

(Shares)(Shares)

Vested- 82 -

Directors’ remuneration
stock option in 2016

Employees, etc. stock
option in 2016

Directors’ remuneration
stock option in 2017

73,000231,900

75,000Granted－－－Forfeited－－－

73,000231,900－－－

75,000－－－

Vested73,000231,900－

Exercised

27,80046,800－Forfeited

－

1,700

－

45,200183,400－

Before vested(Shares)At the end of the previous
consolidated fiscal year

VestedOutstanding
After vested(Shares)At the end of the previous
consolidated fiscal year

Exercisable

Employees, etc. stock
option in 2017

Directors’ remuneration
stock option in 2018

235,200－

Granted－75,000257,300

Forfeited

－

－

1,400

Vested－－－235,200

75,000255,900

At the end of the previous
consolidated fiscal year

－

－

－

Vested－－－Exercised－－－

Forfeited－－－

Exercisable

－

－

－

Before vested(Shares)At the end of the previous
consolidated fiscal year

Outstanding
After vested

Employees, etc. stock
option in 2018

(Shares)- 83 -

(b) Unit price information
Directors’ retirement
bonuses
stock option in 2005

Employees, etc.
stock option in 2013

Directors’ remuneration
stock option in 2014

Exercise price

(Yen)

1

569

741

Average stock price at the timeof exercise

(Yen)

－

1,219

1,263

Fair value at the grant date

(Yen)

－

159

182

Employees, etc. stock
option in 2014

Directors’ remuneration
stock option in 2015

Employees, etc. stock
option in 2015

Exercise price

(Yen)

741

867

867

Average stock price at the timeof exercise

(Yen)

1,160

－

1,188

Fair value at the grant date

(Yen)

182

168

168

Directors’ remuneration
stock option in 2016

Employees, etc. stock
option in 2016

Directors’ remuneration
stock option in 2017

Exercise price

(Yen)

536

536

1,004

Average stock price at the timeof exercise

(Yen)

965

996

－

Fair value at the grant date

(Yen)

98

98

188

Employees, etc. stock
option in 2017

Directors’ remuneration
stock option in 2018

Employees, etc.
stock option in 2018
1,104

Exercise price

(Yen)

1,004

1,104

Average stock price at the timeof exercise

(Yen)

－

－

Fair value at the grant date

(Yen)

188

168

168

4. Method of estimating fair value of stock options
Method of estimating fair value of directors’ remuneration stock option in 2018 and employees, etc. stock
option in 2018 granted in the current consolidated fiscal year is as follows.
1) Valuation technique used
Black-Scholes model
2) Principal parameters and method of estimation
Directors’ remuneration
stock option in 2018

Employees, etc.
stock option in 2018

Stock price volatility(See Note 1)

37.42％

37.42％

Expected life

(See Note 2)

3 years and 6 months

3 years and 6 months

Expected dividends(See Note 3)

34.00 yen per share

34.00 yen per share

Risk-free interest rate

(See Note 4)

0.00％

0.00％

Note:

1.
2.
3.
4.

Calculated based on the actual stock prices during the three (3) years and six (6) months from February
2015 to August 2018.
As reasonable estimates are difficult to make due to a lack of sufficient accumulation of data, the expected
life is estimated on the presumption that the rights are exercised at the midpoint of the exercise period.
Based on the actual amount of dividends for the consolidated fiscal year ended March 31, 2018.
Japanese government bond yield for the period corresponding to the expected life.

- 84 -

5. Method of estimating the number of stock options vested
Only the actual number of forfeited stock options is reflected because it is basically difficult to reasonably
estimate the number of stock options that will be forfeited in the future.
(Notes Related to Tax Effect Accounting)
1. Breakdown by major occurrence factor of deferred tax assets and deferred tax liabilities(Thousands of yen)Previous consolidated
fiscal year
(As of March 31, 2018)

Current consolidated
fiscal year
(As of March 31, 2019)

Deferred tax assets
Impairment loss
Loss on valuation of investment securities

386,449

360,984

326,938
289,158

323,623
253,410

204,677
185,018

248,824
157,705

142,657
731,236

148,971
618,106

2,266,135

2,111,626－△228,827－△939,734△1,126,479△1,168,562

1,139,656

943,064Retained earnings of subsidiaries and associates
Valuation difference on available-for-sale securities△903,239△534,550△969,860△328,569

Reserve for advanced depreciation of non-current assets
Other△118,452△103,049△86,357△96,869

Tax loss carry-forward(See Note)

Allowance for doubtful accounts
Provision for bonuses
Loss on valuation of inventories
Other
Deferred tax assets subtotal
Valuation allowance related to Tax loss carry-forward(See Note)
Valuation allowance related to the total of deductible
temporary differences etc.
Valuation allowance subtotal
Deferred tax assets total
Deferred tax liabilities△1,659,290△1,481,656
Net amount of deferred tax assets (liabilities)△519,634△538,591
Note: Amount of Tax loss carry-forward and deferred tax assets thereof by maturity date of carryforward
Current consolidated fiscal year (As of March 31, 2019)(Thousands of yen)
Due after
Due after
Due after
Due after
Due within
one year
Due after five
two years
three year
four year
Total
one year
and within
years
and within
and within
and within
two years
three years
four years
five years
Deferred tax liabilities total

Tax loss carry-

－

－

－

17,338－236,072

253,410－－－△17,338－△211,489△228,827－－－－－
24,582
assets(※) "Tax loss carry-forward" indicates the amount multiplied by Normal effective statutory tax rate.

24,582

forward (※)
Valuation
allowance
Deferred tax- 85 -

2. Breakdown by item of major causes of any significant difference between the normal effective statutory tax rate
and the effective income tax rate after tax effect accounting
Previous consolidated
fiscal year
(As of March 31, 2018)
Normal effective statutory tax rate
(Adjustments)
Share of profit of entities accounted for using equity
methodItems permanently excluded from taxable income
Difference in tax rates with overseas subsidiaries
Valuation allowance
Special tax deductions
Dividends income eliminated in consolidation
Retained earnings of subsidiaries and associates
Items permanently excluded from tax-deductible
expenses
Other
Effective income tax rate after tax effect accounting

Current consolidated
fiscal year
(As of March 31, 2019)

30.5％

30.5％

△3.0％

△4.0％

△1.7％
△2.9％
△6.3％
△2.1％
2.1％
2.4％
0.7％

△2.4％
△2.0％
△1.4％
△1.3％
3.0％
1.6％
0.8％

1.3％
21.0％

0.5％
25.3％

(Business Combinations)1. Finalization of provisional accounting for business combinations
Provisional accounting was conducted in the previous consolidated fiscal year for the business combination
with Satosen Co., Ltd., which was effected on November 30, 2017. Such provisional accounting has been
finalized in this current consolidated fiscal year.
Due to such finalization of the provisional accounting, important revision of the initially allocated amount ofacquisition price is reflected on the comparative information described in Consolidated Financial Statements
for the current consolidated fiscal year.
As a result, the amount of goodwill which was calculated provisionally is revised, due to the said finalizationof accounting, from 355,527 thousand yen to 292,412 thousand yen, a decrease of 63,115 thousand yen. Suchdecrease of goodwill is due to the respective increases of 95,039 thousand yen in "Other" of "Intangible assets",and of 31,923 thousand yen in "Other" of "Non-current assets"
At the end of the previous consolidated fiscal year, goodwill decreased by 59,959 thousand yen, and "Other"of "Intangible assets" increased by 92,069 thousand yen , "Deferred tax liabilities" of "Non-current assets"
increased by 30,925 thousand yen, respectively.
Regarding the Consolidated Statements of Income of the previous consolidated fiscal year, "Operating
income", "Ordinary income" and "Income before income taxes" respectively increased by 185 thousand yen,while "Profit" and "Profit attributable to owners of the parent" respectively increased by 1,183 thousand yen.

(Notes Related to Asset Retirement Obligations)
Asset retirement obligations that are recorded in the consolidated balance sheets(1) Outline of asset retirement obligations
These are restoration obligations, etc. in connection with real estate rental agreements for certain factories
and offices.
(2) Method of calculating the amount of asset retirement obligations
An estimated useful life of thirty-one (31) years and a discount rate at 1.9% are used in calculating theamount of asset retirement obligations.
(3) Changes in the aggregate amount of asset retirement obligations(Thousands of yen)Previous consolidated fiscal year
(From April 1, 2017
to March 31, 2018)
Balance at the beginning of year
Adjustment due to lapse of time

57,448161- 86 -

Current consolidated fiscal year
(From April 1, 2018
to March 31, 2019)92,837164

－

Increase resulting from acquisition of aconsolidated subsidiary
Other increase or decrease (: decrease)36,100△872△500

Balance at the end of year

92,83792,502(Notes Related to Real Properties for Rent, etc.)
Statement is omitted as the aggregate value of the real properties for rent, etc. is not material.
(Segment Information, etc.)[Segment Information]
1. Outline of reportable segments
Reportable segments of the Company are those constituent units of the Company who make available
separate financial information and also are subject to periodic review by the board of directors aimed atdetermining the distribution of management resources and evaluating business results.
The Company has manufacturing and sales systems in place for each category of product and service at its
head office, etc. and conducts business activities based on the comprehensive strategies that the Company
develops for the domestic and overseas markets as to its products and services.
The Company’s business, therefore, consists of several segments that represent each category of product andservice and are based on the said manufacturing and sales systems. Such segments are the four (4) reportablesegments of the Company, i.e. “Electronic materials business”, “Industrial application structural materials
business”, “Electrical insulating materials business” and “Display materials business”.
“Electronic materials business” produces materials for flexible and rigid printed circuit boards, etc.
“Industrial application structural materials business” produces filament winding molded products, honeycomb
panels and prepregs for aircraft, pultrusion molded products and FRP ski sheets, etc. “Electrical insulating
materials business” produces glass cloth, glass tapes and prepregs for electrical insulation, etc. “Display
materials business” produces 3D display filters and special optical films, etc.
2.

Method of calculating the amount of net sales, income or loss, assets, liabilities and other items with respect toeach reportable segment
The accounting methods applied to the reported business segments are basically the same as those stated inthe (Important Matters Underlying Preparation of Consolidated Financial Statements).
The amount of income or loss recorded for each reportable segment is based on the operating income orloss (before amortization of goodwill).
Inter-segment revenues and transfers are based on the prevailing market price.
Segment Information of the previous consolidated fiscal year is based on the amounts reflecting important
review of initial allocated amount of the acquisition cost, due to completion of provisional accounting treatment
concerning the business combination.

- 87 -

3.

Information on the amount of net sales, income or loss, assets, liabilities and other items with respect to eachreportable segment
Previous consolidated fiscal year (From April 1, 2017 to March 31, 2018)(Thousands of yen)
Reportable segment

Net sales
Net sales to externalcustomers
Inter-segment sales
or transfers
Total
Segment income orloss ()Segment assets

Electronicmaterials

Industrial
application
structural
materials

Electricalinsulating
materials

Displaymaterials

Subtotal

26,758,514

7,220,625

3,228,116

2,988,521

40,195,778

713,755

40,909,534

－

－

－

－

－

843,096

843,096

26,758,514

7,220,625

3,228,116

2,988,521

40,195,778

1,556,851

41,752,630

3,113,123

1,109,805

608,213△55,614

4,775,528

240,672

5,016,201

27,026,311

7,974,210

3,413,591

10,924,722

49,338,835

1,454,461

50,793,297

1,198,412

175,801

78,369145,435

1,598,018

25,512

1,623,531－－－

7,713,250

7,713,250－

7,713,250

989,560

136,411

36,20149,642

1,211,815

11,103

1,222,918

Other(See Note)

Total

Other
Depreciation
Investment incompanies
accounted forunder the equity
methodIncrease inproperty, plant andequipment andintangible assets

Note: The column “Other” represents business operations that do not fall under any of the reportable segments and includes therelated goods sales, the logistics-related operations and other businesses, etc.

Current consolidated fiscal year (From April 1, 2018 to March 31, 2019)(Thousands of yen)
Reportable segment

Net sales
Net sales to externalcustomers
Inter-segment sales
or transfers
Total

Other
(See Note)

Electronicmaterials

Industrial
application
structural
materials

Electricalinsulating
materials

Displaymaterials

Subtotal

28,770,006

8,395,152

3,127,617

3,699,894

43,992,670

735,573

44,728,243

－

－

－

－

－

774,757

774,757

Total

28,770,006

8,395,152

3,127,617

3,699,894

43,992,670

1,510,331

45,503,001

Segment income

2,620,863

1,393,245

430,901

114,841

4,559,852

192,791

4,752,643

Segment assets

28,191,582

8,187,279

3,224,618

11,269,843

50,873,325

1,229,002

52,102,328

1,397,503

170,987

83,532130,836

1,782,860

21,9991,804,859－－－

8,021,428

8,021,428－

8,021,428

1,958,890

168,807

81,738144,156

2,353,593

6,703

2,360,296

Other
Depreciation
Investment incompanies
accounted for underthe equity method
Increase inproperty, plant andequipment andintangible assets

Note: The column “Other” represents business operations that do not fall under any of the reportable segments and includes therelated goods sales, the logistics-related operations and other businesses, etc.

- 88 -

4.

Difference between the total amount of reportable segments and the pertinent amount shown on the
consolidated financial statements as well as the key components of such difference (Matters concerning
difference adjustment)(Thousands of yen)
Net sales

Previous consolidated fiscal year

Current consolidated fiscal year

Total of reportable segments

40,195,778

43,992,670

Net sales in the category “Other”

1,556,851

1,510,331

Elimination of inter-segment transactions△843,096△774,757

Net sales shown on the consolidated financial
statements

40,909,534

44,728,243(Thousands of yen)

IncomePrevious consolidated fiscal year

Current consolidated fiscal year

Total of reportable segments

4,775,528

4,559,852

Income in the category “Other”

240,672

192,791

Elimination of inter-segment transactions△98,443△105,450

Amortization of goodwill△14,620△58,482△1,239,914△1,443,860△35,678△25,287

Unallocated corporate expenses (See Note)
Adjustment of inventories

Operating income shown on the consolidated
3,627,543
3,119,562
financial statements
Note: “Unallocated corporate expenses” are mostly general and administrative expenses that are not attributable to any of thereportable segments.
(Thousands of yen)
AssetsPrevious consolidated fiscal year

Current consolidated fiscal year

Total of reportable segments

49,338,835

50,873,325

Assets in the category “Other”
Elimination of claims to administrative departmentsof the head office
Unallocated corporate assets (See Note)

1,454,461

1,229,002△694,241△453,463

22,319,156

21,472,523△35,678△25,287

Adjustment of inventories

Total assets shown on the consolidated financial
72,382,533
73,096,100
statements
Note: “Unallocated corporate assets” are mostly investment securities, etc. that are not attributable to any of the reportablesegments.
(Thousands of yen)Amount shown on the
Total of reportable
Other
Adjustment
consolidated financial
segments
statements
Other item

Depreciation

Previous
consolidated
fiscal year

Current
consolidated
fiscal year

Previous
consolidated
fiscal year

Current
consolidated
fiscal year

Previous
consolidated
fiscal year

Current
consolidated
fiscal year

Previous
consolidated
fiscal year

Current
consolidated
fiscal year

1,598,018

1,782,860

25,512

21,99991,76896,722

1,715,300

1,901,582

Increase in property, plantand equipment and
1,211,815 2,353,593
11,103
6,703
95,706
183,553 1,318,625 2,543,849
intangible assets
Note: The adjustment to “Increase in property, plant and equipment and intangible assets” represents capital investment in theassets used for the common corporate purpose.

- 89 -

[Related Information]
I Previous consolidated fiscal year (From April 1, 2017 to March 31, 2018)
1. Information by product and service(Thousands of yen)

Net sales to externalcustomers

Electronicmaterials

Industrial
application
structural
materials

Electricalinsulating
materials

Displaymaterials

Other

Total

26,758,514

7,220,625

3,228,116

2,988,521

713,755

40,909,534

2. Information by region(1) Net sales(Thousands of yen)Japan

P.R. China

18,823,232

12,452,111

Other country or
regionTotal

9,634,189

40,909,534

Note: Net sales are categorized by country or region on the basis of customer locations.

(2) Property, plant and equipment(Thousands of yen)Japan

TaiwanOther country or
region9,104,933

1,759,963

770,758

Total
11,635,655

3. Information by major customer(Thousands of yen)
Customer name

Net sales

Relevant segment

Sumitomo Shoji Chemicals Co., Ltd.

6,185,199

Electronic materials business

II Current consolidated fiscal year (From April 1, 2018 to March 31, 2019)
1. Information by product and service(Thousands of yen)

Net sales to externalcustomers

Electronicmaterials

Industrial
application
structural
materials

Electricalinsulating
materials

Displaymaterials

Other

Total

28,770,006

8,395,152

3,127,617

3,699,894

735,573

44,728,243

2. Information by region(1) Net sales(Thousands of yen)Japan
20,775,148

P.R. China
13,236,723

Other country or
region10,716,371

Total
44,728,243

Note: Net sales are categorized by country or region on the basis of customer locations.

(2) Property, plant and equipment(Thousands of yen)Japan
9,495,215

Taiwan1,759,191

Other country or
region744,046- 90 -

Total
11,998,454

3. Information by major customer(Thousands of yen)
Customer name

Net sales

Sumitomo Shoji Chemicals Co., Ltd.

Relevant segment
5,664,735

Electronic materials business[Information on impairment loss on non-current assets with respect to each reportable segment]
Previous consolidated fiscal year (From April 1, 2017 to March 31, 2018)(Thousands of yen)

Impairment loss

Electronicmaterials

Industrial
application
structural
materials

Electricalinsulating
materials－－－

Displaymaterials

Unallocated/
Eliminated

Other

－

26,028

Total－

26,028Current consolidated fiscal year (From April 1, 2018 to March 31, 2019)(Thousands of yen)

Impairment loss

Electronicmaterials

Industrial
application
structural
materials

Electricalinsulating
materials－－－

Displaymaterials

Unallocated/
Eliminated

Other

－

96,725

Total－

96,725[Information on amortization of goodwill and unamortized balance with respect to each reportable segment]
Previous consolidated fiscal year (From April 1, 2017 to March 31, 2018)(Thousands of yen)Amortization in
the year
Balance at theend of year

Electronicmaterials

Industrial
application
structural
materials

Electricalinsulating
materials

14,620

－

－

－

－

－

14,620277,791

－

－

－

－

－

277,791

Displaymaterials

Unallocated/
Eliminated

Other

Total

Current consolidated fiscal year (From April 1, 2018 to March 31, 2019)(Thousands of yen)
Industrial
application
structural
materials

Electricalinsulating
materials

Displaymaterials

58,482

－

－

－

－

－

58,482

219,309

－

－

－

－

－

219,309

Electronicmaterials
Amortization in
the year
Balance at theend of year

Unallocated/
Eliminated

Other

Total

[Information on gain on bargain purchase with respect to each reportable segment]
No applicable matter.
(Information on Related Parties)
1. Transactions with related parties
Transactions between the company submitting the consolidated financial statements and related parties
Directors and major shareholders (individuals only), etc. of the company submitting the consolidated financial
statements- 91 -

Previous consolidated fiscal year (From April 1, 2017 to March 31, 2018)
Capital stock
Full name orType

corporate nameor investment
Locationin capital(Thousands ofRatio ofBusiness outline voting rightor occupation

Chairman,

Sanji Arisawaof the－－Representative
Director of theCompany

Relationship

Description

transactionof transaction (Thousands of(held), etc.

yen)
Directorholding

Balance at

Amount of

the end of
Item

yen)

1.30%
directly
heldyear(Thousandsof yen)Exercise of－

the right of

11,380－－20,465－－16,080－－stock option

Company
Representative

Director

Director andYuta Arisawaof the－－ Chief Executive

Company

Officer of the

0.24%
directly
held

Exercise of－

the right ofstock option

Company
Director andDirector

Yoshihikoof theToda

Company

Note:

－

－

0.10%

Exercise of

Senior Managing directly
Operating Officer

－

held

the right ofstock optionof the Company

Terms of transactions and the policy for determining the terms of transactions, etc.
The table above covers the exercises in the previous consolidated fiscal year of the rights of stock option granted undera resolution at the Board of Directors’ Meeting of the Company of June 27, 2013, the rights of stock option granted undera resolution at the Board of Directors’ Meeting of the Company of June 26, 2014 and the rights of stock option granted
under a resolution at the Board of Directors’ Meeting of the Company of June 26, 2015.
The column “Amount of transaction” indicates the amount obtained by multiplying the number of shares of stock
granted through the exercise in the previous consolidated fiscal year of the pertinent right of stock option by the paid-in
amount per share.

.
Current consolidated fiscal year (From April 1, 2017 to March 31, 2018)
Capital stock
Full name orType

corporate nameor investment
Locationin capital(Thousands ofRatio ofBusiness outline voting rightor occupation

Chairman,

Sanji Arisawaof the－Company

Note:－

Relationship

Description

Representative
Director of the

0.87%
directlyheldtransactionof transaction (Thousands of(held), etc.

yen)
Directorholding

Balance at

Amount of

the end of
Item

year
(Thousands

yen)of yen)Exercise of－

the right of

11,930－stock option

Company

Terms of transactions and the policy for determining the terms of transactions, etc.
The table above covers the exercises in the current consolidated fiscal year of the rights of stock option granted under aresolution at the Board of Directors’ Meeting of the Company of June 26, 2014.
The column “Amount of transaction” indicates the amount obtained by multiplying the number of shares of stock
granted through the exercise in the previous consolidated fiscal year of the pertinent right of stock option by the paid-in
amount per share.

2.

Notes with respect to parent or important affiliated companies(1) Information on parent
No applicable matter.
(2) Condensed financial information on important affiliated companies
In the current consolidated fiscal year, the important affiliated company was Polatechno Co., Ltd., andits condensed consolidated financial information for the previous and current consolidated fiscal years
was as shown below.

- 92 -－

(Thousands of yen)
Polatechno Co., Ltd.
Previous consolidated
Current consolidated
fiscal year
fiscal year
Total current assets

28,547,953
10,973,065

28,759,146
12,182,134

Total current liabilities
Total non-current liabilities

3,862,594

3,565,807

430,031557,454

Total net assets

35,228,393

36,818,019

Net sales

21,201,867
2,749,134

20,903,068
2,462,163

2,036,316

2,018,580

Total non-current assets

Income before income taxes
Profit attributable to owners of
the parent- 93 -

(Per Share Information)
Previous consolidated fiscal year
(From April 1, 2017
to March 31, 2018)

Current consolidated fiscal year
(From April 1, 2018
to March 31, 2019)

Net assets per share

1,378.16yen

1,397.78 yen

Net income per share

96.35 yen

79.15 yen

Fully diluted net income per share
95.51 yen
78.70 yen
Note: 1. Net assets per share, Net income per share and Fully diluted net income per share in the previous consolidated fiscal
year are calculated according to the monetary amount reflecting adjustments of the purchase price allocation following
the determination of the provisional accounting treatment related to business combinations.
2. The bases of calculation of net income per share and fully diluted net income per share are as follows.
Previous consolidated fiscal year
(From April 1, 2017
to March 31, 2018)

Current consolidated fiscal year
(From April 1, 2018
to March 31, 2019)

Net income per share
Profit attributable to owners of the parent(Thousands of yen)Amount not attributable to common
stockholders (Thousands of yen)
Profit attributable to owners of the parent
pertaining to common stock (Thousands ofyen)
Average number of shares of common stockduring the year

3,453,727

2,861,378

---

---

3,453,727

2,861,378

35,846,832

36,150,184

---

---

314,832

208,623（314,832）（208,623）

Fully diluted net income per share
Adjustment of profit attributable to ownersof the parent (Thousands of yen)
Increase in the number of shares of common
stock(Number of shares subject to stockacquisition rights included in the figure
above)
Outline of dilutive shares that were notincluded in the calculation of fully diluted net
income per share due to a lack of dilutive effectFour (4) types of stock acquisitionrights:Resolution at the Board of Directors’Meeting of June 26, 2015 (61,000
shares);Resolution at the Ordinary General
Meeting of Shareholders of June 26,2015 (196,500 shares);
Resolution at the Board of Directors’Meeting of June 28, 2017 (75,000
shares); andResolution at the Ordinary General
Meeting of Shareholders of June 28,2017 (235,200 shares).
For details, see IV. Status of theSubmitting Company - 1. Status of
Shares, etc. - (2) Status of Stock
Acquisition Rights, etc.

(Significant Subsequent Events)
No applicable matter.

- 94 -Six (6) types of stock acquisitionrights:Resolution at the Board of Directors’Meeting of June 26, 2015 (61,000
shares);Resolution at the Ordinary General
Meeting of Shareholders of June 26,2015 (146,400 shares);
Resolution at the Board of Directors’Meeting of June 28, 2017 (75,000
shares); andResolution at the Ordinary General
Meeting of Shareholders of June 28,2017 (235,200 shares).
Resolution at the Board of Directors’Meeting of June 28, 2018 (75,000
shares); andResolution at the Ordinary General
Meeting of Shareholders of June 28,2018 (255,900 shares).
For details, see IV. Status of theSubmitting Company - 1. Status of
Shares, etc. - (2) Status of Stock
Acquisition Rights, etc.

(Consolidated Supplementary Schedules)[Schedule of corporate bonds]
Company

Satosen Co.,Ltd.

Satosen Co.,
Ltd.

Total

Issue

First series
unsecuredbond (Private
placement
bond)
Second series
unsecuredbond (Private
placementbond)－Issue date

Balance atBalance at end
beginning ofof current
current period
period(Thousands of (Thousands of
yen)
yen)

Interest rate(%)

Collateral

Maturity date

March 31,2017

90,000(20,000)

70,000(20,000)

0.21

None

April 15,
2022

April 28,2017

111,600(16,800)

94,800(16,800)

0.25

None

May 24, 2024－

201,600(36,800)

164,800(36,800)－－－

Note: 1. The parenthesized figures represent the outstanding balance of redemptions due within 1 year.
2. Redemption amounts within five years of the consolidated closing date are shown below.
Within one year
(Thousands of yen)

1-2years(Thousands of yen)

36,8002-3years(Thousands of yen)

36,8003-4years(Thousands of yen)

36,8004-5years(Thousands of yen)

26,80016,800[Schedule of loans payable, etc.]
Category

Balance at theBalance at the end
Average
beginning of currentof current period interest rate Repayment period
period(Thousands of yen)(%)(Thousands of yen)
4,242,472

5,394,122

1.24

---

Current portion of long-term loans payable

864,130

779,820

0.17---

Current portion of lease obligations

18,23017,5352.19---

1,642,485

1,265,465

1.392020 to 2023

33,691

13,201

3.02

2020 to 2020

125,523

115,173

1.66---

270,328

155,155

1.63

2020 to 2023

7,196,861

7,740,472－

Short-term loans payable

Long-term loans payable (excluding the current portion)
Lease obligations (excluding the current portion)
Other interest-bearing liabilities
Current portion of long-term accounts payable - other
Other interest-bearing liabilities
Long-term accounts payable - other(excluding the current portion)
Total
Note:

---

1. The column “Average interest rate” indicates the weighted average interest rate to the balance of loans payable, etc. at
the end of the current period.

- 95 -

2. The scheduled amount of repayment of long-term loans payable (excluding the current portion) , lease obligations(excluding the current portion) and long-term accounts payable - other (excluding the current portion) over the five (5)years after the consolidated closing date is as follows.
(Thousands of yen)
Due after four years
Due after one year andDue after two years
Due after three years
and within five
within two years
and within three years
and within four years
years
Long-term loans payable

417,657

49,392

792,1126,304

Lease obligations

12,043

410

457

290

Long-term
accounts
payable - other99,17050,805

5,179－[Schedule of asset retirement obligations]
As the amount of asset retirement obligations as of the beginning of the current consolidated fiscal year and as ofthe end of the current consolidated fiscal year is not more than one hundredth (1/100) of the aggregate amount ofliabilities and net assets as of the beginning of the current consolidated fiscal year and as of the end of the current
consolidated fiscal year respectively, statement has been omitted under the provisions of Article 92-2 of theRegulations for Terminology, Forms and Preparation Methods of Consolidated Financial Statements.

- 96 -

(2) Other
Quarterly Information, etc. in the Current Consolidated Fiscal Year
(Cumulative period)
Net sales(Thousands of yen)
Income before income
taxes(Thousands of yen)
Profit attributable toowners of the parent(Thousands of yen)
Net income per share(Yen)(Accounting period)
Net income per share(Yen)First quarter

Second quarter

Third quarter

Current consolidated
fiscal year

10,961,088

22,707,154

34,696,479

44,728,243

1,308,454

2,661,748

3,616,478

4,215,803

858,291

1,775,233

2,411,146

2,861,378

23.80

49.16

66.73

79.15

First quarter

Second quarter

23.80

25.37

Third quarter
17.58

Fourth quarter
12.44

Note: Provisional accounting treatment concerning the business combination was completed during the third quarter
consolidated fiscal period, and therefore, quarterly information items relating to the first quarter and the second
quarter indicate numerical numbers that are reflecting important review of initial allocated amount of the acquisition
cost, due to such completion of provisional accounting treatment.

- 97 -

2. Financial Statements, etc.
(1) Financial Statements
1) Balance Sheets(Thousands of yen)Previous business year
(As of March 31, 2018)

Current business year
(As of March 31, 2019)

AssetsCurrent assets
Cash and deposits

4,393,050

Notes receivable-trade
Accounts receivable-trade
Electronically recorded monetary claimsoperating
Securities*2, *5*2*53,806,291

439,054*2, *5443,2888,756,848*2

8,662,769

131,959*5

76,272

1,080,611

1,300,765

Merchandise and finished goods

2,531,491

2,439,805

Work in process

1,052,474

1,079,682

Raw materials and supplies

1,044,991

1,323,743

Prepaid expenses

73,325*2

Accrued income
Short-term loans receivable from subsidiaries
and associates
Other

148,773

46,116*2

1,677,411*2614,555

151,078
1,476,197*2

547,912

Allowance for doubtful accounts△460,749△518,819

Total current assets

21,483,799

20,835,103

Non-current assets
Property, plant and equipment
Buildings*1

3,935,761*1

Structures*1

304,800*1

312,873

Machinery and equipment*1

1,656,081*1

2,202,800

Tools, furniture and fixtures*1

165,263*1

170,988Land*1

1,262,302*1

1,376,078

Vehicles

15,243

Lease assets
Construction in progress
Total property, plant and equipment- 98 -

3,799,000

18,025860

2,202

56,674

85,112

7,396,987

7,967,081

(Thousands of yen)Previous business year
(As of March 31, 2017)

Current business year
(As of March 31, 2018)

Intangible assets
Software27,87931,634Other

10,036

9,895

Total intangible assets

37,91541,530Investment securities

14,238,124

13,648,094

Shares of subsidiaries and associates

2,866,952

2,866,952

Long-term loans receivable

162,598

132,706

Long-term prepaid expenses

41,735

19,157

Deferred tax assets

53,813

237,010

Other

83,041

80,833

Allowance for doubtful accounts△169,864△139,603

Total investments and other assets

17,276,402

16,845,150

24,711,304

24,853,762

46,195,103

45,688,866

Investments and other assets

Total non-current assets
Total assets
Liabilities
Current liabilities
Notes payable-trade
Accounts payable-trade*2, *5

1,192,678*2, *5

223,893*22,543,243*2

3,161,070

Electronically recorded obligations-operating*2, *5

1,432,628*2, *5

1,507,061

Short-term loans payable*1, *4790,000*1, *4

965,000

Current portion of long-term loans payable*1

767,328*1

714,848

Accounts payable-other*2

600,491*2

629,354

Accrued expenses

101,516

89,864

Income taxes payable

675,358

118,157

Unearned revenue

1,596

1,596

Deposits received

23,31927,034

Provision for bonuses

415,000

345,792

Other*5

Total current liabilities

327,966
8,871,127- 99 -*5

781,936
8,565,608

(Thousands of yen)Previous business year
(As of March 31, 2017)

Current business year
(As of March 31, 2018)

Non-current liabilities
714,848－366,340428,299

272

1,527

Asset retirement obligations

28,48728,652

Other

75,394

92,961

1,185,342

551,441

10,056,469

9,117,050

7,458,242

7,541,693

Legal capital surplus

6,570,209

6,653,615

Total capital surplus

6,570,209

6,653,615

Legal retained earnings

748,262748,262

Other retained earnings
Reserve for advanced depreciation of noncurrent assets
General reserve

19,63318,324

17,020,000

18,020,000

2,981,528

2,705,677

20,769,424

21,492,264△4,467△4,76434,793,408

35,682,808

1,217,584

744,588

1,217,584

744,588

127,640

144,419

36,138,633

36,571,816

46,195,103

45,688,866

Long-term loans payable*1

Provision for retirement benefits
Lease obligations

Total non-current liabilities
Total liabilities
Net assets
Shareholders’ equity
Capital stock
Capital surplus

Retained earnings

Retained earnings brought forward
Total retained earnings
Treasury stock
Total shareholders’ equity
Valuation and translation adjustments
Valuation difference on available-for-salesecurities
Total valuation and translation adjustments
Share acquisition rights
Total net assets
Total liabilities and net assets- 100 -

2) Statements of Income(Thousands of yen)Previous business year
(From April 1, 2017
to March 31, 2018)

Current business year
(From April 1, 2018
to March 31, 2019)

Net sales*128,503,870*1

29,269,122

Cost of sales*1

24,016,541*1

25,092,404

Gross profit

4,487,328

Selling, general and administrative expenses*1,*2

Operating income

2,543,020

4,176,717*1,*2

1,944,308

2,643,712
1,533,005

Non-operating income
Interest and dividends income*1

724,446*1

Rent income*1

252,105*1

250,132

Other*1

135,949*1

164,081－

Foreign exchange gains

Total non-operating income

1,112,501

825,078
142,935

1,382,227

Non-operating expenses
Interest expenses

3,602

4,349

Loss on redemption of investment securities

84,44662,541

Foreign exchange losses

173,902－

Rent expenses

166,251

168,684

Provision of allowance for doubtful accounts

175,316

59,410

Other

1,845

17,274605,364

312,259

2,451,445

2,602,974

Gain on sales of investment securities

743,019

65,010Other59,294

15,910Total extraordinary income

802,31380,920Loss on retirement of non-current assets

9,428

55,886

Impairment loss

26,02896,72520－

Total non-operating expenses
Ordinary income
Extraordinary income

Extraordinary losses

Other
Total extraordinary losses

35,476

152,611

Income before income taxes

3,218,282

2,531,282

Income taxes-current

866,927

559,485

Income taxes-deferred△151,854

24,377

Total income taxes

715,073

583,8622,503,208

1,947,419

Net income- 101 -

3) Statements of Changes in Shareholders’ Equity and Other Net Assets
Previous business year (From April 1, 2017 to March 31, 2018)(Thousands of yen)
Shareholders’ equity
Capital surplus

Retained earnings
Other retained earnings

Capital stockReserve forLegal capital Total capital Legal retainedadvancedsurplussurplusearnings
depreciationof non-current
assetsTotal
retainedearnings

Generalreserve

Retainedearnings
brought
forward

14,020,000

4,190,417

18,979,677

1,364

－

Dividends from surplus△713,461△713,461

Net income (loss)

2,503,208

2,503,208

3,000,000 △3,000,000－

Balance at beginning of current period

7,317,019

6,429,038

6,429,038

141,222

141,170

141,170

748,262

20,997

Changes of items during the period
Issuance of new shares
Reversal of reserve for advanced
depreciation of non-current assets△1,364

Provision of general reserve
Purchase of treasury stock
Net changes of items other thanshareholders' equity
Total changes of items during theperiodBalance at end of current period

141,222

141,170

141,170－△1,3643,000,000 △1,208,888

1,789,747

7,458,242

6,570,209

6,570,209

748,262

19,63317,020,000

20,769,424

Shareholders’ equity
Treasurystock
Balance at beginning of current period△3,891

Valuation
Total
difference onshareholders’available-forequity
sale securities
32,721,843

981,974

Valuation and translation
adjustments
DeferredTotal
gains orvaluation andlosses ontranslation
hedgesadjustments
5,153

987,128

2,981,528

ShareacquisitionrightsTotal net
assets143,292

33,852,265

Changes of items during the period
Issuance of new shares

282,393282,393－－

Dividends from surplus△713,461△713,461

Net income (loss)

2,503,208

2,503,208

－

－

△576

△576

Reversal of reserve for advanced
depreciation of non-current assets

Provision of general reserve
Purchase of treasury stock
Net changes of items other thanshareholders' equity
Total changes of items during theperiodBalance at end of current period

△576

△576
△4,4672,071,564
34,793,408

235,610△5,153

230,456△15,651

214,804

235,610△5,153

230,456△15,651

2,286,368

1,217,584－

1,217,584

127,640

36,138,633- 102 -

Current business year (From April 1, 2018 to March 31, 2019)(Thousands of yen)
Shareholders’ equity
Capital surplus

Retained earnings
Other retained earnings

Capital stock

Balance at beginning of current
periodLegal capital Total capital Legal retained
surplussurplusearnings

7,458,242

6,570,209

6,570,209

83,45083,406

83,406748,262

Reserve foradvanceddepreciationof non-current
assets
19,633Total
retainedearnings

Generalreserve

Retainedearnings
brought
forward

17,020,000

2,981,528

20,769,424

1,308

－

Changes of items during the period
Issuance of new shares
Reversal of reserve for advanced
depreciation of non-current assets△1,308△1,224,579 △1,224,579

Dividends from surplus
Net income (loss)
Provision of general reserve

1,947,419

1,947,419

1,000,000 △1,000,000－

Purchase of treasury stock
Net changes of items other thanshareholders' equity
Total changes of items during theperiod83,45083,406

83,406－△1,3081,000,000△275,851

722,840

Balance at end of current period

7,541,693

6,653,615

6,653,615

748,262

18,32418,020,000

2,705,677

21,492,264

ShareacquisitionrightsTotal net
assets127,640

36,138,633

Shareholders’ equity

Valuation and translation adjustments
Total

Treasurystock

Valuation
Total
Deferred gains valuationdifference onor losses on
andshareholder
available-forhedges
translations’ equity sale securities

adjustments

Balance at beginning of current
period△4,467

34,793,408

1,217,584－

1,217,584

Changes of items during the period
Issuance of new shares
Reversal of reserve for advanced
depreciation of non-current assets
Dividends from surplus
Net income (loss)
Provision of general reserve
Purchase of treasury stock△296

166,857

166,857－－△1,224,579△1,224,579

1,947,419

1,947,419

－

－

△296

△296

Net changes of items other thanshareholders' equity△472,996－△472,996

16,778△456,218

Total changes of items during theperiod△296

889,400△472,996－△472,996

16,778433,182

Balance at end of current period△4,76435,682,808

744,588－744,588

144,419

36,571,816- 103 -

[Notes](Important Accounting Policies)
1. Valuation standards and valuation methods for assets(1) Valuation standards and valuation methods for securities
1) Equity stakes in subsidiaries and affiliated companies
Stated at average cost.
2) Available-for-sale securities
Securities with available fair market values:
Stated at fair market value based on the market price as of the closing date, etc. (Valuation differences arereported as a component of net assets, and the cost of securities sold is calculated using the average cost
method.)Securities with no available fair market value:
Stated at average cost.
(2) Derivative financial instruments
Stated fair value method(3) Valuation standards and valuation methods for inventories
1) Merchandise, finished goods, semi-finished goods and work in process
The cost method on a first-in, first-out basis is adopted. (The amount shown on the balance sheets is
calculated by writing inventories down due to a decline in profitability.)
2) Raw materials and supplies
The cost method based on the periodic average method is adopted. (The amount shown on the balance
sheets is calculated by writing inventories down due to a decline in profitability.)
2. Methods of depreciation and amortization of non-current assets(1) Property, plant and equipment (excluding lease assets)
The declining-balance method is adopted, except for the buildings (excluding accompanying facilities)
acquired on or after April 1, 1998 and accompanying facilities and structures acquired on or after April 1,
2016, which are depreciated using the straight-line method.
The useful life mostly falls within the ranges shown below:
Buildings: fifteen (15) years to thirty-one (31) years
Machinery and equipment: eight (8) years to nine (9) years(2) Intangible assets (excluding lease assets)
The straight-line method is adopted. Software used by the Company is amortized over an estimated inhouse usable period. (Currently five (5) years)(3) Lease assets
Lease assets related to finance lease transactions that entail transfer of title
Depreciation and amortization is based on the same method as applied to self-owned non-current assets.
Lease assets related to finance lease transactions that do not entail transfer of title
Depreciation and amortization is based on the straight-line method that takes the lease period as the usefullife and sets the residual value at zero (0).
3. Standards for translating foreign currency assets and liabilities into Japanese currency
Foreign currency monetary assets and liabilities are translated into Japanese yen at the spot exchange rate asof the closing date, and the resulting translation differences are entered as income or loss, as the case may be.
4. Standards for recording allowances and provisions(1) Allowance for doubtful accounts
As a reserve for potential loan losses, an estimated uncollectible amount is allocated based on thehistorical loan-loss ratio in the case of general accounts receivable, and in light of the collectability in each
instance in the case of some specific accounts receivable, e.g. doubtful receivables.
(2) Provision for bonuses
In preparation for the payment of bonuses to its employees, the Company allocates an expected
aggregate amount of such payment.
(3) Provision for retirement benefits- 104 -

As a reserve for the payment of retirement benefits to employees, an amount is appropriated on the basisof the estimated amounts of retirement benefit obligations and plan assets as of the end of the current
business year.
1) Method of inter-period attribution of expected retirement benefits
In calculating retirement benefit obligations, the benefit formula is employed as the method of
attributing the estimated amount of each employee’s retirement benefits to his or her service period up
to the end of the current business year.
2) Method of recognizing actuarial differences as expenses
Actuarial differences are recognized as expenses, effective from the business year immediately
following the year of occurrence of each such difference, in an amount prorated using the straight-line
method over a certain number of years (Currently five (5) years) within the average remaining service
period of the employees at the time of occurrence of the said difference in each business year.
5. Accounting method of significant hedge transactions(1) Method of hedge accounting
The Company adopts the deferred hedge accounting. With respect to the forward exchange contracts
that meet the requirements of hedge accounting, we adopt the designated hedge accounting.
(2) Hedging instruments and hedged items
Hedging instruments : Forward exchange contracts
Hedged items: Monetary claims denominated in foreign currencies, Anticipated transactions
in foreign currencies(3) Hedging policy
Forward foreign exchange transactions are conducted within the scope of actual demand for the
purpose of deterring risks involved in transactions denominated in foreign currencies from thefluctuations in the foreign exchange market. These transactions will never be entered for speculative
purpose.
(4) Method of assessing hedge effectiveness
The Company assesses the effectiveness of hedging based on the ratio of changes that is calculated bycomparing the cumulative total of the market fluctuations of hedged items with that of hedging
instruments. However, when the forward foreign exchange transactions are by designated hedge
accounting, such assessment of effectiveness is omitted.

6. Other important matters underlying preparation of financial statements(1) Accounting methods concerning retirement benefits
The method of accounting for an unappropriated portion of unrecognized actuarial differences
concerning retirement benefits is different from the method of accounting applied to the same in the caseof the consolidated financial statements.
(2) Accounting methods concerning consumption tax, etc.
The consumption tax, etc. are accounted for using the tax exclusion method.
(3)Accounting methods concerning deferred assets
Stock delivery expenses are fully charged to expenses when they are paid.

- 105 -

(Changes in Presentation)（Change associated with the application of " Partial Amendments to Accounting Standard for Tax EffectAccounting"）
Partial Amendments to Accounting Standard for Tax Effect Accounting (ASBJ Statement No. 28, February 16,
2018, hereinafter referred to as "Partial Amendments to Tax Effect Accounting Standard") has been applied
since the start of the current business year. Accordingly, presentation method was changed, and therefore,"Deferred tax assets" is presented in the category of "Investments and other assets" and "Deferred tax liabilities"
is presented in the category of "Non-current liabilities".
Consequently, 354,759 thousand yen of "Deferred tax assets" of "Current assets" in the Balance Sheets of theprevious business year is shown as 53,813 thousand yen of "Deferred tax assets" of "Investments and otherassets", after offsetting against 300,945 thousand yen of "Deferred tax liabilities" of "Non-Current liabilities";
accordingly, total assets decreased by 300,945 thousand yen as compared with those before the change.
<Statements of Income>“Loss on redemption of investment securities”, which was presented as part of “Other” in “Non-operating
expenses” in the previous business year, is separately stated effective from the current business year due to arise in quantitative materiality. In order to reflect such change in presentation, a reclassification has been madein the financial statements for the previous business year. As a result, 86,292 thousand yen of “Other”, listed
within “Non-operating expenses” in the statements of income for the previous business year, has been
reclassified into the combination of 84,446 thousand yen of “P Loss on redemption of investment securities”
and 1,845 thousand yen of “Other”..
(Notes Related to Balance Sheets)*1 Assets subject to a security interest and secured liabilities corresponding thereto
Assets subject to a security interest(Thousands of yen)Previous business year
(As of March 31, 2018)

Current business year
(As of March 31, 2019)

Buildings
Structures

3,021,950
168,624(3,021,950)(168,624)

2,772,572
147,166(2,772,572(147,166)

Machinery and equipment
Tools, furniture and1,160,304(1,160,304)

823,701(823,701)

fixturesLand

56,188(56,188)

34,726(34,726)

266,508(199,190)

266,508(199,190)

Total

4,673,576(4,606,259)

4,044,674(3,977,357)

Secured liabilities(Thousands of yen)Previous business year
(As of March 31, 2018)

Current business year
(As of March 31, 2019)

Short-term loans payable

300,000(300,000)

200,000(200,000)

Current portion of long-termloans payable

767,328(767,328)

714,848(714,848)

Long-term loans payable
Total

714,848(714,848)－(－)

1,782,176(1,782,176)

914,848(914,848)

The parenthesized figures represent factory foundation mortgages and the liabilities secured by such mortgages.

- 106 -

*2

Monetary receivables and payables outstanding with associated companies (excluding those separately stated)(Thousands of yen)Previous business year
(As of March 31, 2018)

Short-term monetary receivables
Short-term monetary payables*3

Current business year
(As of March 31, 2019)842,283
581,185543,681
1,033,372

Guarantee liabilities
Accounts borrowed from financial institutions of associated companies and Guarantee liabilities for
performance guarantee(Thousands of yen)
Current business year
(As of March 31, 2019)

Previous business year
(As of March 31, 2018)
Satosen Co., Ltd.
(Loan guarantee)

799,368

870,000

Protec Arisawa Europe, S.A.
(Product warranty)

84,84562,438

Protec Arisawa America, Inc.
(Product warranty)

23,71035,977

Innovision FlexTech Corporation(Loan guarantee)

43,800－*4

The Company has an overdraft agreement in effect with each of its six (6) partner banks to ensure efficient
procurement of operating funds. The following is the balance of unexecuted loans under such overdraft
agreements as of the end of the current and previous business years.
(Thousands of yen)Previous business year
(As of March 31, 2018)

Aggregate overdraft limit
Drawdowns
Balance of unexecuted loans

Current business year
(As of March 31, 2019)

6,300,000

6,300,000

790,000

465,000

5,510,000

5,835,000*5 Notes, etc. maturing at the end of the business year
For accounting treatment of notes, electronically recorded monetary claims and electronically recorded
obligations maturing at the end of the business year, settlement is made as of the clearing date of each note oras of the settlement date of each electronically recorded monetary claim and electronically recorded obligation,
as the case may be. As the end of the current business year falls on a bank holiday, the following notes,
electronically recorded monetary claims and electronically recorded obligations maturing at the end of thebusiness year are included in their respective balances as of the end of the business year.
Previous business year
(As of March 31, 2018)(Thousands of yen)
Current business year
(As of March 31, 2019)

Notes receivable - trade22,321

38,712

Electronically recorded monetary claims - operating
Notes payable - trade

4,637
3,321

－
13,681

Electronically recorded obligations - operating
Current liabilities and others (Notes payable-facilities,

106,975

163,301

40,34350,789

Electronically recorded obligations-non-operating)- 107 -

(Notes Related to Statements of Income)*1 Volume of transactions with associated companies(Thousands of yen)
Current business year
(From April 1, 2018
to March 31, 2019)

Previous business year
(From April 1, 2017
to March 31, 2018)
Gross operating transaction volume
Net sales
Value of goods laid in
Gross non-operating transaction volume2,465,376

2,414,854

4,116,745
498,747

3,974,801
590,656*2 Approximately 49% of the amount of selling, general and administrative expenses recorded for the previous
business year falls under selling expenses, while the remaining 47% falls under general and administrative
expenses. Approximately 51% of the amount of selling, general and administrative expenses recorded for thecurrent business year falls under selling expenses, while the remaining 53% falls under general andadministrative expenses. The major items of selling, general and administrative expenses and their respective
amounts are as follows.
(Thousands of yen)
Current business year
(From April 1, 2018
to March 31, 2019)

Previous business year
(From April 1, 2017
to March 31, 2018)
Salaries and allowances

532,210565,347

Provision for bonuses
Retirement benefit expenses

78,933
45,63871,33656,159

Freightage and packing expenses
Depreciation

762,609
63,221

722,648
73,3681,060,407

1,154,850

Other(Notes Related to Securities)
Equity stakes in subsidiaries and affiliated companies
Previous business year (As of March 31, 2018)
Category(Thousands of yen)Amount shown onbalance sheets

Equity stakes in subsidiaries
Equity stakes in affiliated companies
Total

Fair value

1,116,334

4,745,144

3,628,810

233,905

9,280,000

9,046,094

1,350,239

14,025,144

12,674,905

Current business year (As of March 31, 2019)
Category
Equity stakes in subsidiaries
Equity stakes in affiliated companies
Total
Note:

Difference(Thousands of yen)Amount shown onbalance sheets

Fair value

Difference

1,116,334

5,324,372

4,208,038

233,905

5,131,840

4,897,934

1,350,239

10,456,212

9,105,973

Amount shown on the balance sheets for the equity stakes in subsidiaries and affiliated companies whose fair value isdeemed extremely difficult to reasonably determine(Thousands of yen)
Category

Previous business year
(As of March 31, 2018)

Current business year
(As of March 31, 2019)

Equity stakes in subsidiaries

1,295,582

1,295,582

Equity stakes in affiliatedcompanies

221,130

221,130

As these equity stakes have no quoted market price, and it is deemed extremely difficult to reasonably
determine their respective fair values, they are not included in the tables entitled “Equity stakes in subsidiaries
and affiliated companies” shown before.

- 108 -

(Notes Related to Tax Effect Accounting)
1. Breakdown by major occurrence factor of deferred tax assets and deferred tax liabilities(Thousands of yen)Previous business year
(As of March 31, 2018)

Current business year
(As of March 31, 2019)

Deferred tax assets
Impairment loss
Loss on valuation of investment securities

385,433
275,034

359,926
224,046

Allowance for doubtful accounts
Provision for retirement benefits

192,337
111,733

200,832
130,631

Provision for bonuses
Loss on valuation of inventories

126,575
61,020105,466
57,488Other279,253

232,230

Deferred tax assets subtotal
Valuation allowance

1,431,387△832,094

1,310,621△737,702

Deferred tax assets total
Deferred tax liabilities

599,292

572,919△534,335△326,761△8,616△1,170△8,041△1,105

Valuation difference on available-for-sale securities
Reserve for advanced depreciation of non-current assets
Asset retirement obligations
Other
Deferred tax liabilities total
Net amount of deferred tax liabilities

2.

△1,357－△545,479△335,909

53,813

237,010

Breakdown by item of major causes of any difference between the normal effective statutory tax rate and theeffective income tax rate after tax effect accounting
Previous business year
(As of March 31, 2017)

Current business year
(As of March 31, 2018)

30.5％

30.5％

Items permanently excluded from taxable income

△2.5％

△4.1％

Valuation allowance

△4.4％

△3.7％

Special tax deductions

△2.8％

△1.8％

0.8％

1.9％

Normal effective statutory tax rate
(Adjustments)

Items permanently excluded from tax-deductible
expenses
Other
Effective income tax rate after tax effect accounting

0.6％

0.3％

22.2％

23.1％

(Business combinations)
Notes to business combinations by acquisition
Notes hereof are omitted as the same details are shown in "[Notes] (Business Combinations)" of Consolidated
Financial Statements.

(Significant Subsequent Events)
No applicable matter.

- 109 -(Supplementary Schedules)[Schedule of property, plant and equipment, etc.](Thousands of yen)

Category

Type of assets

Property,plant andequipment

Balance at the
beginning ofcurrent period

Note:

1.
2.

Balance at theend of current
periodAccumulated
depreciationoraccumulated
amortization

199,907 67,427（50,881）

269,241

3,799,000

10,614,410

1,688（1,467）

36,008

312,873

1,142,997

1,154,466 31,071（30,484）

576,675

2,202,800

20,786,432

Amount ofincrease incurrent period

Buildings

3,935,761

Structures

304,800

Machineryandequipment

1,656,081

Vehicles

15,243

14,746

1,855（495）10,10918,025

186,750

Tools,
furnitureand fixtures

165,263

88,684

5,558（2,742）

77,401

170,988

1,408,879

124,430 10,653（10,653）－

1,376,078－

Land

Intangible
assetsAmount ofdecrease incurrent period

Amount ofdepreciationor
amortizationin current
period45,7701,262,302

Lease assets

860

2,005

－

663

2,202

2,838

Constructionin progress

56,674

1,807,124

1,778,686－

85,112－

Total property,
plant andequipment

7,396,987

3,437,134

1,896,941（96,725）

970,099

7,967,081

34,142,309

Software27,87917,421－

13,66531,634－Other

10,036

－

－

140

9,895

－

Total
intangible－
37,915
17,42113,806
41,530assetsThe parenthesized figures in the column “Amount of decrease in current period” indicate the amount of impairment
loss included in the pertinent total.
Key components of the increase in the current period are as follows.
(Thousands of yen)
Machinery andElectronic materials manufacturing facilities
976,298
equipment
Display materials manufacturing facilities
75,973
Electrical insulating materials manufacturing facilities
58,233
Construction in progress
Electronic materials manufacturing facilities
1,228,289
Unallocated corporate assets
356,597
Display materials manufacturing facilities
115,043[Schedule of allowances and provisions](Thousands of yen)
Balance at the
beginning of current
periodAmount of increasein current period

Allowance for doubtful accounts

630,613

658,422630,613

658,422

Provision for bonuses

415,000

345,792

415,000

345,792

Item

Amount of decrease Balance at the end of
in current period
current period(2) Details of Major Assets and Liabilities
Statement is omitted as the relevant information is stated in the consolidated financial statements.

(3) Other
No applicable matter.

- 110 -－

VI. Outline of Share Handling of the Submitting Company

Business year

From April 1 to March 31

Ordinary General Meeting of
Shareholders

To be held in June

Record date

March 31

Record dates of distribution ofdividends from surplus

September 30 and March 31

Number of shares per unit

100 shares

Purchase of shares constituting
less than one full unit
(Special account)
Stock Transfer Agency Dept.,
Handling place

Mitsubishi UFJ Trust and Banking Corporation
1-1 Nikko-cho, Fuchu-shi, Tokyo
Sumitomo Mitsui Trust Bank, Limited

Transfer agent

1-4-1, Marunouchi, Chiyoda-ku, Tokyo

Forwarding office

Purchase fees

Method of giving public notice

Privileges of shareholders
Note:--The amount obtained by prorating the consignment fee per unit (prescribed by
Tokyo Stock Exchange) according to the number of shares constituting lessthan one full unit purchased
Public notices of the Company shall be given by electronic means; provided,
however, that if an electronic public notice cannot be provided due to an
accident or any other unavoidable reason, the Company shall publish its public
notice in the Nikkei newspaper.
Electronic public notices URL:
http://www.arisawa.co.jp/japanese/koukoku.html
None

Pursuant to the provisions of the Articles of Incorporation of the Company, the shareholders of the Company’s sharesconstituting less than one full unit may not exercise any rights other than: (i) the rights set forth in each item of Article 189,
paragraph 2 of the Companies Act; (ii) the right to make requests under the provisions of Article 166, paragraph 1 of theCompanies Act; and (iii) the right to receive allotment of the shares offered and allotment of the stock acquisition rights
offered in proportion to the number of shares held by each such shareholder.

- 111 -

VII. Reference Information on the Submitting Company
1. Information on Parent Company, etc. of Submitting Company
The Company has no parent company, etc. provided for in Article 24-7, paragraph 1 of the Financial
Instruments and Exchange Act.

2. Other Reference Information
The Company submitted the following documents between the commencement date of the current businessyear and the date of submission of the Financial Report.
(1) Financial Report, documents attached thereto and Confirmation Letter
Business year from April 1, 2017 to March 31, 2018 (The 70th Term)
Submitted to the Director-General of the Kanto Local Finance Bureau on June 29, 2018.
(2) Internal Control Report and documents attached thereto
Submitted to the Director-General of the Kanto Local Finance Bureau on June 29, 2018.
(3) Quarterly Report and Confirmation Letter(The First Quarter of the 71th Term) (From April 1, 2018 to June 30, 2018)
Submitted to the Director-General of the Kanto Local Finance Bureau on August 10, 2018.
(The Second Quarter of the 71th Term) (From July 1, 2018 to September 30, 2018)
Submitted to the Director-General of the Kanto Local Finance Bureau on November 14, 2018.
(The Third Quarter of the 71th Term) (From October 1, 2018 to December 31, 2018)
Submitted to the Director-General of the Kanto Local Finance Bureau on February 14, 2019.
(4) Extraordinary Report
Submitted to the Director-General of the Kanto Local Finance Bureau on July 2, 2018.
This is an Extraordinary Report under the provisions of Article 19, paragraph 2, item 9-2 of the Cabinet
Office Ordinance on Disclosure of Corporate Affairs, etc. (Results of exercise of voting rights at thegeneral meeting of shareholders) .
Submitted to the Director-General of the Kanto Local Finance Bureau on June 28, 2018.
This is an Extraordinary Report under the provisions of Article 19, paragraph 2, item 2-2 of the Cabinet
Office Ordinance on Disclosure of Corporate Affairs, etc. (Issuance of stock acquisition rights asdirectors’ remuneration stock options).
Submitted to the Director-General of the Kanto Local Finance Bureau on June 28, 2018.
This is an Extraordinary Report under the provisions of Article 19, paragraph 2, item 2-2 of the Cabinet
Office Ordinance on Disclosure of Corporate Affairs, etc. (Issuance of stock acquisition rights as
employees, etc. stock options).
Submitted to the Director-General of the Kanto Local Finance Bureau on June 27, 2019.
This is an Extraordinary Report under the provisions of Article 19, paragraph 2, item 2-2 of the Cabinet
Office Ordinance on Disclosure of Corporate Affairs, etc. (Issuance of stock acquisition rights as
employees, etc. stock options).
(5) Amendment Report of Extraordinary Report
Submitted to the Director-General of the Kanto Local Finance Bureau on August 17, 2018.
This is an Amendment Report of Extraordinary Report related to the Extraordinary Report submitted onJune 28, 2018 (Issuance of stock acquisition rights as directors’ remuneration stock options).
Submitted to the Director-General of the Kanto Local Finance Bureau on August 17, 2018.
This is an Amendment Report of Extraordinary Report related to the Extraordinary Report submitted onJune 28, 2018 (Issuance of stock acquisition rights as employees, etc. stock options).

- 112 -

PART II. INFORMATION ON GUARANTY COMPANIES, ETC. OF THE
SUBMITTING COMPANY
No applicable matter.

- 113 -

Independent Auditors’ Reportconcerning consolidated financial statements and internal control report
June 26, 2019
To the Board of Directors of Arisawa Mfg. Co., Ltd.
Ernst & Young ShinNihon LLC
Satoshi Ejima[Seal]

Designated Limited Liability Partner and Engagement Partner,

Certified Public Accountant
Akira Igarashi[Seal]

Designated Limited Liability Partner and Engagement Partner,

Certified Public Accountant<Audit of Financial Statements>
For the purpose of granting audit certification under the provisions of Article 193-2, paragraph 1 of the Financial Instruments
and Exchange Act, we have audited the consolidated financial statements of Arisawa Mfg. Co., Ltd. listed in the “Status of
Accounting” for the consolidated fiscal year from April 1, 2018 to March 31, 2019, consisting of the consolidated balance sheets,
consolidated statements of income, consolidated statements of comprehensive income, consolidated statements of changes inshareholders’ equity and other net assets, consolidated statements of cash flows, important matters underlying preparation of
consolidated financial statements, other notes and consolidated supplementary schedules.
Responsibility of Management for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance withthe corporate accounting standards generally accepted in Japan. This includes improvement and operation of such internal control
as the management deems necessary for the preparation and fair presentation of consolidated financial statements free from material
misstatement, whether due to fraud or error.
Responsibility of Auditors
Our responsibility is to express an opinion on the consolidated financial statements from an independent standpoint based on
our audit. We conducted our audit in accordance with the auditing standards generally accepted in Japan. The said auditing
standards require that we develop an audit plan and conduct an audit based on such plan in order to obtain reasonable assurance
about whether the consolidated financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the reported amounts and disclosures in the
consolidated financial statements. Audit procedures are selected and applied at our own judgment, based on the assessment of therisks of material misstatement in the consolidated financial statements, whether due to fraud or error. In making such risk
assessments, we review internal control relevant to the entity’s preparation and fair presentation of the consolidated financial
statements in order to design audit procedures that are appropriate under the circumstances, while it is not the objective of an audit
of financial statements to express an opinion on the effectiveness of the entity’s internal control. Another element of an audit isevaluating the overall presentation of the consolidated financial statements, including assessment and evaluation of the accounting
policies adopted by the management and the methods of their application as well as of the accounting estimates made by the
management.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Audit Opinion
In our opinion, the above consolidated financial statements fairly present, in all material respects, the financial conditions ofArisawa Mfg. Co., Ltd. and its consolidated subsidiaries as of March 31, 2019 as well as the results of their operations and theirstatus of cash flows for the consolidated fiscal year ended March 31, 2019 in accordance with the corporate accounting standards
generally accepted in Japan.

<Audit of Internal Control>
For the purpose of granting audit certification under the provisions of Article 193-2, paragraph 2 of the Financial Instruments
and Exchange Act, we have audited the internal control report as of March 31, 2019 of Arisawa Mfg. Co., Ltd.
Responsibility of Management for the Internal Control ReportManagement is responsible for the improvement and operation of internal control over financial reporting as well as the
preparation and fair presentation of the internal control report in accordance with the evaluation standards for internal control overfinancial reporting generally accepted in Japan.
In this regard, there is a possibility that internal control over financial reporting cannot completely prevent or detect false
statements in financial reporting.
Responsibility of Auditors
Our responsibility is to express an opinion on the internal control report from an independent standpoint based on our internal
control audit. We conducted an internal control audit in accordance with the auditing standards for internal control over financial
reporting generally accepted in Japan. The auditing standards for internal control over financial reporting require that we develop
an audit plan and conduct an internal control audit based on such plan in order to obtain reasonable assurance about whether theinternal control report is free from material misstatement.
An internal control audit involves performing procedures to obtain audit evidence about the results of evaluating internal control
over financial reporting stated in the internal control report. Audit procedures for an internal control audit are selected and appliedat our own judgment, based on the gravity of the impact on the credibility of financial reporting. Another element of an internal
control audit is evaluating the overall presentation of the internal control report, including a review of the statements made by the
management with respect to the scope, procedures and results of the assessment of internal control over financial reporting.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Audit Opinion
In our opinion, the above internal control report, in which Arisawa Mfg. Co., Ltd. represents that its internal control overfinancial reporting is effective as of March 31, 2019, fairly presents, in all material respects, the evaluation results of its internal
control over financial reporting in accordance with the evaluation standards for internal control over financial reporting generally
accepted in Japan.
Interest
There exists no special interest between the Company and this audit corporation or its engagement partners which is required
to be stated pursuant to the provisions of the Certified Public Accountants Act.
Note:

1. All the matters stated above have been electronically copied from the matters stated in the original Audit Report. The original
Audit Report is separately archived by the Company.
2. XBRL data are not included in the subject of the audit.

Independent Auditors’ Report
June 26, 2019
To the Board of Directors of Arisawa Mfg. Co., Ltd.
Ernst & Young ShinNihon LLC
Satoshi Ejima[Seal]

Designated Limited Liability Partner and Engagement Partner,

Certified Public Accountant
Akira Igarashi[Seal]

Designated Limited Liability Partner and Engagement Partner,

Certified Public Accountant
For the purpose of granting audit certification under the provisions of Article 193-2, paragraph 1 of the Financial Instruments
and Exchange Act, we have audited the financial statements of Arisawa Mfg. Co., Ltd. listed in the “Status of Accounting” forthe 71h business year from April 1, 2018 to March 31, 2019, consisting of the balance sheets, statements of income, statements ofchanges in shareholders’ equity and other net assets, important accounting policies, other notes and supplementary schedules.
Responsibility of Management for the Financial Statements
Management is responsible for the preparation and fair presentation of the financial statements in accordance with the corporate
accounting standards generally accepted in Japan. This includes improvement and operation of such internal control as the
management deems necessary for the preparation and fair presentation of financial statements free from material misstatement,
whether due to fraud or error.
Responsibility of Auditors
Our responsibility is to express an opinion on the financial statements from an independent standpoint based on our audit. We
conducted our audit in accordance with the auditing standards generally accepted in Japan. The said auditing standards require that
we develop an audit plan and conduct an audit based on such plan in order to obtain reasonable assurance about whether thefinancial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the reported amounts and disclosures in the financial
statements. Audit procedures are selected and applied at our own judgment, based on the assessment of the risks of material
misstatement in the financial statements, whether due to fraud or error. In making such risk assessments, we review internal control
relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that areappropriate under the circumstances, while it is not the objective of an audit of financial statements to express an opinion on theeffectiveness of the entity’s internal control. Another element of an audit is evaluating the overall presentation of the financial
statements, including assessment and evaluation of the accounting policies adopted by the management and the methods of theirapplication as well as of the accounting estimates made by the management.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Audit Opinion
In our opinion, the above financial statements fairly present, in all material respects, the financial conditions of Arisawa Mfg.
Co., Ltd. as of March 31, 2019 and the results of its operations for the business year ended March 31, 2018 in accordance with thecorporate accounting standards generally accepted in Japan.
Interest
There exists no special interest between the Company and this audit corporation or its engagement partners which is required to
be stated pursuant to the provisions of the Certified Public Accountants Act.
Note:

1. All the matters stated above have been electronically copied from the matters stated in the original Audit Report. The original
Audit Report is separately archived by the Company.
2. XBRL data are not included in the subject of the audit.