Hokuetsu Kishu Paper Group

Corporate Report
2017The Hokuetsu Kishu Paper Group
Corporate Report 2017 Editorial Policy
The objective of this Corporate Report is to deepen communication with all of
our stakeholders by providing an integrated report that summarizes not only
financial information, such as our business results, business outlook and progressof our Medium-Term Management Plan but also non-financial information, suchas environment information, social information, and governance information.
It is our hope that this Corporate Report will deepen understanding by our
stakeholders of the Hokuetsu Kishu Paper Group, which is striving to increase
corporate value through our core business of paper-making. We have also
published even further detailed information on our company website and we
encourage you to refer to this resource as well.

Companies covered by this report:
Hokuetsu Kishu Paper Group (main affiliated subsidiaries, etc.)
Period covered by the Report:
April 1, 2016 - March 31, 2017
(Some activities that took place after the end of this term are also reported.)

CONTENTS
Message to our Stakeholders

4

Start of the V-DRIVE Medium-Term Management Plan

8

The Business Segments of the Hokuetsu Kishu Paper Groupand Our Future Prospects

12

Business Overview (1): Paper Business

14

Business Overview (2): White Paperboard Business

16

Business Overview (3): Specialty Paper Business18

Business Overview (4): Paper Processing Business

20

Business Overview (5): Pulp Business

22

Research and Development Initiatives

24

Product Safety and Quality Control Initiatives

25

Environmental Preservation Initiatives

26

Issued:December 2017

Environment-Related Data

28

Action Guidelines for Procurement of Raw Materials

30

Publisher:
Sekio Kishimoto
President and CEO, Hokuetsu Kishu Paper Co., Ltd.

Corporate Governance34

CSR Activities

36

Compliance System

37

Group Management

38

Group Company Profile

39

HR Management40

Coexistence with Local Communities

41

Executive Officers

42

Financial Information

43

For further information, contact:
General Affairs Department
Hokuetsu Kishu Paper Co., Ltd.
3-2-2, Nihonbashihongoku-cho, Chuo-ku, Tokyo 103-0021 Japan
Telephone +81-3-3245-4500
Facsimile +81-3-3245-4511
Website http://www.hokuetsu-kishu.jp/en/

Consolidated Financial Highlights

44

Managementʼs Discussion and Analysis

46

Consolidated Financial Statements:

The Hokuetsu Kishu Paper Corporate Philosophy

To contribute to society as a superior paper company
and earn the trust of our stakeholders.
1. We will work to further earn the trust of our customers, stockholders, trading
partners, and the local communities we operate in by upholding the law andpursuing transparent business activities.
2. We will provide attractive products and services to meet customer needs.
3. Through a relationship of mutual trust between labor and management, we will
create a bright and vigorous corporate culture that nurtures creativity and a thirstfor challenge.
4. Through commitment to environmentally conscious management, we will strive
for sustainable growth.

Consolidated Balance Sheets48

Consolidated Statements of Income

50

Consolidated Statements of Comprehensive Income

50

Consolidated Statements of Cash Flows

51

Consolidated Statements of Changes in Net Assets

52

Notes to Consolidated Financial Statements

54

Independent Auditorʼs Report81

Affiliated Group Companies

82

Equity Data

83

Corporate Data

84

(Created April 1, 2003; revised October 1, 2009)

Nagano profit-sharing tree farm (Nagano Prefecture), Hokuetsu Kishu Paper

Cover Photo: Hokuetsu Kishu Paper Nagano profit-sharing tree farm and “Reverse Rainbow (circumhorizontal arc)”

3

Message to our Stakeholders

The start of the V-DRIVE plan aiming for consolidated
net sales of ¥300 billion

Sekio Kishimoto
President and CEO

Looking back on FY2016
The Japanese economy in the previous fiscal year from April 2016 to March 2017 continued to improvewith stronger corporate earnings and employment. The implementation of various policies has also put
the Japanese economy on a gradual recovery, but the business environment is increasingly harsh due tothe uncertain impact on the global economy from the economic policies of the new administration in the
United States and the issue of the UK withdrawing from the EU.
Although Hokuetsu Kishu Paper Group sales in Japan decreased, sales of Alberta-Pacific Forest Industries
Inc. (“Al-Pac”) in Canada are added for the full year, resulting in consolidated net sales reaching a record
high of ¥262.3 billion, an increase of ¥15.5 billion (6.3% increase) from the previous year. Operating
income was ¥12.9 billion, up ¥ 3.6 billion (39.7% increase) from the previous year, due to the contributionof Al-Pacʼs profits and improvement in operating efficiency at Jiangmen Xinghui Paper Mill Co., Ltd. in
China.
Ordinary income was ¥14.0 billion, an increase of ¥3.4 billion (32.8% increase), and net income for this year
belonging to shareholders of the parent company minus corporate tax was ¥10.3 billion, up ¥ 2.9 billion(38.8% increase) from the previous year.
Our group aims to achieve the goal of an overseas sales ratio of 25% set forth in the “Vision 2020”
Long-Term Management Plan ahead of schedule, while using our manufacturing bases in China, France,
and Canada as a foothold to transform our “product portfolio” and global “regional portfolio”
simultaneously. As a result, the overseas sales ratio of our group increased significantly from 9% to 28% in
the six years from the end of the fiscal year in March 2011.

Goals of the “C-next” Medium-Term Management Plan achievedachieving consolidated net sales of over ¥300 billion and an overseas sales ratio of 25%. To reach this goal,

Commemorating our 110th anniversary and the startof the “V-DRIVE” medium-term management plan

we have been working under the medium-term management plans of “G-1st,” from April 2011 to March

We were founded in 1907 and celebrated our 110th anniversary in April this year. At the same time, as a final step

2014, and “C-next,” from April 2014, over the past six years.

toward achieving “Vision 2020,” we began a new three-year medium-term management plan, “V-DRIVE.”

Our efforts have been based on the three basic strategies of the "C-next" plan, which are “create new

The plan is named after the three Vs of “Variation” in advancing the creation of new business fields and businessbusiness fields,” “reform business structure,” and “strengthen our profit base.”structure reform, the “Value” of improving our corporate value, and the “Victory” of achieving the goals of “Vision

Outside Japan, we established Jiangmen Xinghui Paper Mill Co., Ltd. in China in 2011, built a white

2020,” combined with the “Drive” that accelerates business activities toward achieving the three Vs.

paperboard mill from undeveloped land, and acquired French company Bernard Dumas S.A.S. (“Dumas”)

Under the planʼs basic policies of “expanding overseas business,” “reinforcing the competitiveness of our mills,”

in 2012 to become the second largest specialty glass fiber sheet manufacturer in the world.

and “strengthening the base of our consolidated management system," we have set the following targets for the

Furthermore, we acquired Canadian pulp manufacturing and sales companies Alpac Forest Products Inc.

fiscal year ending March 2020.

Our group formulated the Long-Term Management Plan “Vision 2020” in April 2011 with the goal ofand Al-Pac Pulp Sales Inc. in 2015 (and merged into Alberta-Pacific Forest Industries Inc. on July 1, 2016).
This brought the Group to a position where it covers all stages of the paper pulp business value chain fromupstream to downstream sectors.

Consolidated net sales: ¥300 billion

Net sales operating income ratio: 5.0%

EBITDA:

Operating income:ROE:

Net debt-equity ratio: Below 0.6¥ 15 billion

6.0%¥40 billion

In Japan, we strengthened our paper processing business by merging Hokuetsu Package Co., Ltd. with BF

4Co., Ltd., into BF & Package Co., Ltd.

To achieve the “V-DRIVE” plan, we are planning a total of ¥90 billion in investments; ¥50 billion in new

As a result of carrying out these basic strategies, our groupʼs consolidated sales for this year reached ainvestments for mergers and acquisitions and in strategic investment for research and development, and ¥40

record high, and we achieved virtually all of the goals set forth in the “C-next” plan.

billion in capital investments in Japan (¥30 billion) and abroad (¥10 billion) to strengthen our competitiveness.
5Message to our Stakeholders
Proactive development of overseas businessAccelerate R&D and commercialization of CNF/CNC

We have been actively investing abroad, and have established production bases in China, France, and Canada.

Our group has been actively and continuously engaged in the practical application and commercialization of

Jiangmen Xinghui Paper Mill Co., Ltd. in China started commercial production in 2015. The company saw a strong

functional specialty materials and other materials without limiting itself to traditional paper and paperboard

increase in sales mainly in Guangdong province by offering products that meet the needs of customers combined

frameworks. To speed up the development of new functional materials in the entire Group, the “Novel Materials

with a stronger sales strategy through intensive marketing, which led to improved income in FY2016. We are now

Development Office” was established in April 2017.

considering building a second paper machine in the mill to further expand the growth of the white paperboard

We have great expectations for cellulose nanofibers (CNF). CNF is a light and durable material refined to a nano levelbusiness in China.

that uses plant fiber from wood pulp and other materials. Our group is advancing R&D of CNF to further develop the

Shanghai Toh Tech, Co. Ltd. dramatically increases the production and sale of chip carrier tape base paper foraccumulated technology with air purification filters using glass fiber. Specifically, we succeeded in developing atransporting electronic components due to the sharp increase in demand for electronics components created bysuper high-performance air filter media that uses a spider web of CNF in the gaps between the glass fibers and athe spread of smartphones and the rapid digitization of automobiles. We will further expand sales in Chinese

super low density, high specific surface area porous aerogel.

market where growth is expected in the future.

Through these efforts, in addition to receiving the President Award at the 33rd Annual Technical Meeting on Air

Dumas in France is going strong in the production and sales of automotive battery separators, and working to

Cleaning and Contamination Control sponsored by the Japan Air Cleaning Association, we were also awarded theincrease demand and establish a supply system for the global market. We will continue to consider establishing

Japan TAPPI Award by the Japan Technical Association of the Pulp and Paper Industry.

new production bases abroad while reinforcing the production capabilities of existing facilities.

In addition, since 2010, Al-Pac in Canada has undertaken joint research on cellulose nanocrystals (CNC) with Alberta

Since acquiring Al-Pac of Canada in 2015, the company has made a significant contribution to the growth of sales

research institution, InnoTech Alberta. CNC is a new manufactured material produced by chemically treating pulp

and income of our group. Our group will position the pulp manufacturing and sales business as our “fifth corefibers to fragment the fibers to their crystals. Last year, together with Al-Pac, we reached an agreement with thebusiness,” adding it to our existing paper, white paperboard, specialty paper, and paper processing businesses,

Alberta provincial government in a partnership to further develop commercial CNC materials.

and we will continue to strengthen our competitiveness by making use of knowledge of Al-Pac in North America.

Contribute to society and sustainable growth

Continue industry-leading environmental measures
Our group has made “minimum impact” a basic policy aiming for harmony between nature and humanity by
reducing any adverse environmental
impact to the least amount possible atevery stage, from raw materials to end
products. As a result of aggressively
promoting environmental measuresahead of the industry, our CO2 emission
intensity is about half the paper pulp
industry average, and is the best in theindustry.

From April 2017, we have started to expand support for employees who are raising children by the existing “householdallowance” to a “child support allowance,” revising the allowance payment standard including to change and extend
the period of shortened work hours for childcare (to the end of the academic year for children in Grade 1) and thechildcare leave period (until the age of one and a half or the end of the fiscal year in which a child turns one year old).
Also, as society ages, we are planning to extend the age of retirement to 65 years old from April 2018 to prepare a work
environment where employees can enthusiastically work throughout their lives.
Since its establishment in 1907, our group has contributed to society by devoting itself to paper-making.
We will maintain an unwavering spirit, and ask for your continued support, guidance, and encouragement.
(Hokuetsu Kishu Paper FSC License Code: FSC-C005497)

See p.8-p.9 for an outline of the “V-DRIVE” Medium-Term Management Plan

The Niigata Mill is striving to reduce CO2
emissions and improve its energy
efficiency by introducing gas

Initiatives toward accomplishing Vision 2020

cogeneration equipment and black liquor

Changes in Consolidated net sales/Operating income

Changes in Overseas sales/Overseas sales ratio

concentration equipment. In the 20th(hundred millions of yen)(hundred millions of yen)
900
27.6%

29.5%

800

827

“Environmental Management Survey”
conducted by the Nikkei in 2016, we
ranked 31st out of 1,733 manufacturing
companies, making us the top-ranked
company in the paper pulp industry.
We are also providing environmentallyfriendly products and actively promote
environmental management by
expanding FSC® certified paper for the

6.00%

3,500

3,000

3,000

3,000

4.9%
2,623

2,500

2,468

5.00%

2,800

5.0%

4.00%

Jiangmen Xinghui Paper Mill Co., Ltd. in
China.
6

25.00%

20.00%

19.1%
15.00%

471

300

10.00%

200

2.7%

5.00%
100

Tokyo Olympics and Paralympics in 2020
and acquiring ISO14001 certification for

500
400

3.7%
3.00%

1,500

750

724

600

4.2%

2,284
2,000

700

30.00%

0

Results for Results for Results for Forecast foryear ended year ended year ended year ending V-DRIVE
March 2015 March 2016 March 2017 March 2018

Consolidated net sales

Vision2020

Operating income

0.00%

0

Results foryear ended
March 2016

Results foryear ended
March 2017

Overseas sales

Forecast foryear ending
March 2018

Vision2020

0.00%

Overseas sales ratio

7

Start of the V-DRIVE Medium-Term Management Plan

The start of “V-DRIVE” with the aim of achieving“Vision 2020”

Basic policy and strategy

The Hokuetsu Kishu Paper Group formulated and announced its long-term management plan,“Vision 2020,” in April 2011. Based on this plan, as a company that provides attractive products
while promoting environmental management, we have continued to challenge ourselves toreach a target of more than ¥300 billion in net sales. The new medium-term management plan
“V-DRIVE” is the final step towards achieving “Vision 2020.” Going forward, we will strive toimprove our corporate value.

● Expand the overseas business

Vision 2020: Hokuetsu Kishu Paper Group’s Corporate Vision for 2020
(announced April 2011)● Be environmentally conscious in all corporate activities and promote environmental management● Offer attractive products with excellent quality and competitiveness using advanced technology● Work with passion and seek steady growth and ever greater challenges● Sales target: ¥300 billion or above (overseas sales ratio: 25%)

Strategy
Expand overseas businessIn addition to reviewing various new investments overseas from upstream to downstream sectors, we will also
apply this development horizontally by utilizing our existing businesses in our overseas subsidiaries, including
Alberta-Pacific Forest Industries Inc. (Canada), Bernard Dumas S.A.S. (France), and Jiangmen Xinghui Paper Mill
Co., Ltd. (China).
Reinforce the competitiveness of our mills
We will deepen and strengthen our environmental management efforts, and put effort into strengthening ourcompetitiveness by striving to build an optimal production system in the paper business and reducing costs invarious ways including logistics costs.

Paper business● Maintain sales of coated paper, wood-free paper and colored wood-free paper, and the paper export scale of
300,000 tons a year.

Vision 2020

● Promote the development of specialty paper and increase sales of processing base paper.
● Fully enforce optimum production and cost reduction at both Niigata Mill and Kishu Mill.
● Strengthen the price maintenance function by building a sales system coupled with Hokuetsu Kishu Sales co.,Ltd.

White paperboard business● Develop new products and increase customer satisfaction by rapidly responding to customer needs for quality.
● Capture growth in demand for primary containers.

V-DRIVE

Period of the Plan
From April 1, 2017, throughMarch 31, 2020 (three years)

Variation● Strengthen the base of the consolidated management system

Strategic policy for our four core businesses

Overview of V-DRIVE management plan

Consolidated management indicators
Net sales: ¥300 billion
Operating income: ¥15 billion
Net sales operating income ratio:5.0% or above
ROE: 6.0% or above
EBITDA: ¥40 billion
Net debt-equity ratio: 0.6 or less

● Refortify the competitiveness of mills

Strengthen the base of our consolidated management system
We will put in place thorough compliance management in group companies within and outside Japan whilestrengthening corporate governance, and also strengthen the base of our consolidated management system
as a truly global company.

V-DRIVE Medium-Term Management Plan
Variation : Promote the creation of new fields andthe reform of business structure
Value: Enhance the corporate value
Victory : Ride to victory by achieving Vision 2020
DRIVE
: Accelerate corporate activities forthese three “V”s

Basic policy

Variation
Value
Victory

Specialty paper business● Further enhance domestic sales and actively promote business development on a global scale in cooperation

with subsidiaries in Japan and overseas.
Paper processing businessC-nextChange Challenge Create

G -1stGreen

GlobalValue

GrowUpGlowing

Victory● Enhance business development in the paper processing field, which is expected to grow, by demonstrating

strength based on the integrated production of the Group ranging from the development of processed paper
and materials for paper ware to processed products.

Our business around the world
CanadaAlberta-Pacific Forest Industries Inc.
FranceBernard Dumas S.A.S.

China
Shanghai Toh Tech, Co. Ltd.
HK PAPER (USA), Inc.
China
Jiangmen Xinghui Paper Mill Co., Ltd.

V- DRIVE
89

Manufacture at the Niigata Mill, Hokuetsu Kishu Paper Co., Ltd. (No.9 Paper Machine)

The Business Segments of the Hokuetsu Kishu Paper Group and Our Future Prospects

Accelerating our global competitiveness and globalization
by establishing a new core business as a foothold
Since its founding, the Hokuetsu Kishu Paper Group has consistently developed its business forover 110 years with a devotion to paper making. Our four core businesses are paper, white
paperboard, specialty paper, and paper processing. We have garnered the support of ourcustomers by providing them with various products that meet the needs of the market and withhigh quality, low environmental impact products at just the right time, which has allowed us tosecure a high market share in each industry.
Today, we have added a fifth business to our existing portfolio with the acquisition in 2015 of
Canadian company Alberta-Pacific Forest Industries Inc., which operates the largest pulp mill in
North America, making the market pulp business a new core business.
We will pursue further strengthening of our competitiveness for the future in our domestic
business in Japan, and will actively advance expansion strategies and incorporate overseas demand
into our Group with our overseas bases in China, France, and Canada for our business overseas.

Paper Business → See Pages 14 -15.

Specialty Paper Business → See Pages 18 -19.

Printing paper and communication paper is ourprimary business. Our products have a widely variedline-up and excellent suitability for the printing
process. Among these products, our coated printing
paper holds a high domestic market share.

Our strength is a product line-up that can meet ourhighly diverse customer needs. In addition to basepaper for abrasive coated paper and forpress-bonded postcards, we are also focusing on
battery separators made of glass fiber.

Our main production and business bases operated globally

Alberta-Pacific Forest Industries Inc.
Bernard Dumas S.A.S.
HK PAPER（USA）, Inc.

Shanghai Toh Tech, Co. Ltd.
Jiangmen Xinghui Paper Mill Co., Ltd.

Paper BusinessWhite Paperboard Business → See Pages 16 -17.

Paper Processing Business → See Pages 20 -21.

We offer white paperboard in a wide range of
grades for all types of uses, such as publishingpaper and commercial printing paper for
catalogues, postcards, etc., as well as a huge rangeof packages.

In addition to the paper processing field, such as liquid package
cartons, paper ware, and processed paper, we are also carryingout developments in the business form field. In the field ofgable-top type of liquid package cartons as for milk (roof-type
carton), we hold a top-ranking share in the Japanese market.

Niigata Mill: Japan
Kishu Mill: Japan

Niigata Mill
Nagaoka MillBF & Package Co., Ltd. (Katsuta)
Kanto Mill (Katsuta)
Kanto Mill (Ichikawa)
BF & Package Co., Ltd. (Tokorozawa)
Osaka Mill

Nagoya Office Hokuetsu Toyo Fibre Co., Ltd.

Osaka Branch
Fukuoka Office

Headquarters

Kishu MillWhite Paperboard Business
Kanto Mill (Ichikawa, Katsuta): Japan
Jiangmen Xinghui Paper Mill Co., Ltd.
: ChinaSpecialty Paper BusinessNagaoka Mill: Japan
Osaka Mill: Japan
Hokuetsu Toyo Fibre Co., Ltd.: Japan
Shanghai Toh Tech, Co. Ltd.: China
Bernard Dumas S.A.S.: France
HK PAPER (USA), Inc.: America

Paper Processing Business

Pulp Business → See Pages 22 -23.
Pulp is a new core business of the Hokuetsu Kishu
Paper Group. Canadian subsidiary Alberta-Pacific
Forest Industries Inc., manages 6.4 million hectares offorest commissioned by the provincial government ofAlberta for use as raw material for pulp.

12

BF & Package Co., Ltd.
Kanto Mill (Katsuta, Tokorozawa): JapanPulp Businesses
Alberta Pacific Forest Industries Inc.
: Canada

13

Business Overview (1): Paper BusinessPushing forward with strategies underthe banner of V-DRIVE

Business Topics

Business Overview

Future Issues and Initiatives

The main product of the paper business is printing
and communication paper used for books, magazines,
catalogs, and brochures. Within the product line-up,
coated paper is our key product, and its production
volume in 2016 had the second highest share in thedomestic industry. Furthermore, our sales of coloredwood-free paper have continued for more than 60
years, and with its rich product line-up, we havemaintained a share of over 65% of the domestic
market, which shows our brand is favored by a wide
range of customers.

With the start of the V-DRIVE Medium-Term Management
Plan in the final step of the long-term management plan of
Vision 2020, as a core business segment of the Hokuetsu
Kishu Paper Group, the Paper Business Division will ensure
the Niigata Mill, Kishu Mill, and the Sales Department arealigned in the same direction working together, andengaged in full-fledged efforts to enhance ourcompetitiveness. We are responding to rapid changes inthe external environment and building a production
framework that can compete in the global market. In termsof sales, we will maintain our product value by selling withgreat care and increase our share of the domestic market.
Concerning exports, we will aim to increase our sales
volume and advance the business strategy of the Paper
Business Division as detailed in V-DRIVE. Specifically, we will
focus on the following:

Performance Highlights
Total domestic shipments for printing andcommunication paper manufacturers in 2016 fell
below the level of the previous year. The demand for
paper continues to decline due to the continuing
digitalization of media from the spread ofsmartphones and tablets, lower budgets foradvertising on paper media, and the progressing low
birthrate. However, we will work to recover demandby combining the respective benefits of paper anddigital mediums, and taking advantage of thefunctionality of paper that cannot be replaced
digitally.
In this market environment, we will work to secure
our share of the domestic market and maintainproduction levels of the previous year by making
individual efforts with end users. At the Niigata andKishu mills, we continue to make capital investments
to strengthen our competitiveness in some areas suchas cost, quality, and efficiency. We will continue tomaintain our price, further pursue optimum
production and efficiency improvements, and stably
provide high quality products.
We exported 240,000 metric tons of paper in 2016.
Most of our exports are for Asia. Our largest market is
Taiwan where we annually ship over 30,000 metrictons of A3 grade coated paper and wood-free paper.
We also increased exports by exporting more than80,000 metric tons of coated paper for flyers,calendars, and study books to South Korea, Vietnam,and Hong Kong. In 2017, we will strive to further
expand exports, strengthen our competitiveness inoverseas markets as domestic demand declines, anddevelop new customers.

A logistics strategy that takes advantage
of geographical conditions

Launch of the Publication Department

Production(1) Thoroughly pursue optimum production and lower
costs at the Niigata and Kishu mills, while ensuring
stable operations and supply.
(2) Improve the reliability of quality and strengthen therelationships of trust we have with our users.
(3) Reduce the environmental impact of our production
operations through the effective use of resources.
Sales(1) Improve sales share through development ofcompetitive new products based on our coated andwood-free paper, and further advance new uses forcolored wood-free paper.
(2) Conduct regular visits of our users by staff at our mills tostrengthen relationships and ensure reliable quality andsales.
(3) Accurately grasp overseas market trends, maintain andstrengthen relationships with existing customers whilefurther strengthening export sales.

Although demand for publishing paper is declining, welaunched the Publication Department in April 2017 withthe aim of improving the sales share of our publishingdivisions. As this division is the first to be established fora business segment, we will aim to increase orders andsales more effectively for user needs through the total
coordination of all products while cooperating with theWhite Paperboard Business Division and the Specialty
Paper Business Division.
We will endeavor to strengthen relationships withpublishers by combining market research with periodic
sales visits to strengthen relationships, and increase theexposure of the Publication Department and its
awareness in the industry.

The Paper Business Division at the Niigata Mill boasts
the largest production volume of printing andcommunication paper in Japan, and has the added
benefit of being located close to the huge Kanto
consumption market. We will strive to strengthen the
direct delivery system to the Kanto area by taking
advantage of this geographical condition. In addition,
we will also proceed with a logistics strategy thatconsiders the needs and convenience of our customers
by pursuing optimal warehouse locations and efficientdelivery, including the positioning of warehouses in
the consumption area. We will further strive for amodal shift that reduces the impact on theenvironment and work to integrate it with our sales.

Working toward export sales of
300,000 tons
Since 2008, we have continued to supply printing andcommunication paper with the aim of increasing exports
regardless of fluctuations in exchange rates. In 2016, werecorded our highest export volume (240,000 tons) byreliably supplying our largest users.
We are now seeking to increase the number ofcustomers who understand the quality of Hokuetsu
Kishu Paper.
Our goal is to expand our sales market and aim forannual sales of 300,000 tons.

Change in Niigata Mill export sales

240,078t

Central and South America, Africa

223,239t

EuropeOceania

207,770t

North America

219,043t

212,432t

Asia

163,912t

Capital investment at Niigata and Kishu mills(hundred millions of yen)

80
70

75,784t

60
50
40
30
20
10
0

14

2012/3

2013/3

2014/3

2015/3

2016/3

2008

2011

2012

2013

2014

2015

2016
15

Business Overview (2): White Paperboard BusinessContinuing aggressive production and sales
efforts to capture new demand in growth fields

Business Overview

Future Issues and Initiatives

The main types of our products are premium white
paperboard, special white paperboard, coated duplex
board (with gray-back), etc. We feature a wide range of
products in order to meet our customersʼ diverse
needs. The major usages for our products are thecovers of publications and commercial printing items
such as many kinds of packages, catalogs, POPadvertising, and postcards, and so on. Our products areused in a wide range of fields.
Hokuetsu Kishu Paper has cultivated technical strength
for a long time, and has focused on top quality, highefficiency and a low environmental burden. We will
work to further strengthen our profit base by sellingthese attractive products created at our domestic
production bases of the Niigata Mill and the Kanto
Mills (Ichikawa and Katsuta), and also at our overseas
production base in Jiangmen City, Guangdong
Province, China, which started production in 2015.

Slogan:Challenge, Consider, Responsibility, Communication

Performance Highlights
The domestic shipment of white paperboard
manufacturers in 2016 was approximately 1,330,000
tons. It increased by 1.8% compared to the previous
year. In the second half of the year there was aresurgence due to the effect of inbound demand.
Domestic production of white paperboard of Hokuetsu
Kishu Paper was approximately 280,000 tons. It
increased by 0.9% year on year.
Domestic demand for white paperboard is facing a
gradual decline not only due to structural factors
accompanying the population decrease with its low
birthrate and aging population, but also fromcost-cutting measures by customers that havecontinued to result in less packaging.
On the other hand, manufacturers of daily
commodities tend to increase using the paper
medium. So demand for POP applications is expected
to follow a brisk trend. Although inbound demand hasgone through a cycle, daily goods and cosmetics are
expected to continue to see solid shipments. With theshift to generic pharmaceuticals, demand for paper
containers of pharmaceuticals is also expected toincrease. Convenience stores continue to diversify theirmenus for over-the-counter cooked products, which is
expected to increase demand for primary containers.
We will continue to actively advance our sales activities
in these fields, seeking to respond to and acquire
market share in new needs.

Subtitle:
Be thorough about reporting, contacting, andconsultation● With the start of the V-DRIVE Medium-Term
Management Plan, all of our employees in the White
Paperboard Business Division, including the Jiangmen
Xinghui Paper Mill Co., Ltd. in China, are working together
to ensure profits we have budgeted.
● Strive to rebuild a stronger business profit base andincrease customer satisfaction based on management thatputs safety first and practices compliance management.

Important Issues(1) Continue environmental management and adherence
to compliance, and work together with affiliatedcompanies to realize an accident-free workplace byraising awareness of safety first and putting it into
practice.
(2) Develop new products, enhance the relationship withusers and optimize all processes.
(3) Achieve stable operations by implementing preventive
measures for operational problems and increasing
overall technical capabilities through employee
training.
(4) Unite the White Paperboard Business Division withwhite paperboard operations in China and aim to
improve profits through redesigning our sales strategy
and lowering costs at mills.
(5) Strengthen cooperation with the Paper Processing
Business Division to enhance overall Group
competitiveness.

Business conditions are improved by pricerevision. Launch of sales of blister
specialty paper

FSC® and ISO 14001 certified in China asawareness of environmental protection
growsThis year is the third year for Jiangmen Xinghui Paper
Mill Co., Ltd. which started production in January 2015.
Compared to 2015, both production and sales in 2016
have increased, and the mill is now capable ofproducing 300,000 tons per year.
While they struggled under sluggish prices after
starting, the market price in 2016 for white paperboard
dramatically rose due to a sharp increase in raw material
and fuel prices coupled with the rapid increase in costby devaluation of the renminbi. These developmentsallowed them to pass on costs in price, improving theirbusiness situation.
In October 2016, we invited seven major customers in
China and Hong Kong to our headquarters and the
Niigata Mill and were able to deepen our relationships.
With the prospect of developing new products suitablefor blister pack applications, we held a productintroduction seminar at a hotel in Humen Town,
Dongguan, Guangdong province in December 2016,
and began sales of blister specialty paper from February
2017. We are aiming to expand sales by securing regularcustomers and developing new products.

Environmental awareness is increasing among Chinese
citizens as environmental problems, such as waterpollution and air pollution accompanying the rapid
development of the economy and industry in China,
have become serious in recent years. The Chinese
government has responded by taking action tostrengthen environmental protection regulations.
Jiangmen Xinghui Paper Mill Co., Ltd. acquired FSC
certification in January 2016, and in September thatyear, it also acquired ISO 14001 certification. The entire
company is currently working to acquire Cleaner
Production certification, a program being advanced by
Chinaʼs Ministry of Environmental Protection.
(Jiangmen Xinghui Paper Mill FSC license code: FSC-C128479)

White paperboard production by type
(Thousands of tons)

550
500
450

Technical exchanges with the Kanto Milland official participation in SG event

400
350
300
250
200
150
100
50
0

2012

2013

2014

2015

White paperboard
Coated duplex board
Jiangmen (coated duplex board)

16

Business Topics

2016

Continuing their participation in 2015 and 2016,
employees from Jiangmen Xinghui Paper Mill Co., Ltd.
will take part in the Group-wide SG event* which will
be held at the Kanto Mill (Ichikawa ProductDepartment) in the second half of FY2017. In addition
to the SG event, they will also participate in a technicalexchange with the Kanto Mill to further deepen theircooperative relationship.
*The SG event is a presentation event by small groups aboutautonomous management activities.

17

Business Overview (3): Specialty Paper Business

Developing new growth products and expanding
into global markets

Business Overview

Future Issues and Initiatives

The main product types of the specialty paper businessdivision are premium printing paper, “fancy paper,”paper for industrial use, communication paper,
specialty processed products, specialty fiber boards,
functional paper, and more. Among these, products
such as abrasive-coated base paper, adhesive postcard
base paper, and chip carrier tape boast a large share of
the domestic market. Going forward, we will further
solidify our domestic base while strengthening ourcompetitiveness and revenue-earning capability in the
global market.

In the first year of the new Medium-Term Management
plan, V-DRIVE, we are striving to develop new productsthat always anticipate and reflect needs in a rapidlychanging market environment. We will establish afoundation through stable operation and cost reductions
while building a high-efficiency production system acrossthe Group to further improve profitability and strengthen
competitiveness.
(1) Unite business divisions by strengthening cooperation
with each strategic business and subsidiary, and aim forsustainable global growth with a sense of speed.
(2) Break from past approaches to cost reduction andimplement new measures.
(3) Unite development, production, and sales under asales strategy to improve profits that continues tointroduce product lines that meet customer needs.
(4) Implement safe operation by thoroughly
investigating the cause of problems and create
corrective measures and promptly carrying out
preventive maintenance.

Performance Highlights
Total shipments by the Specialty Paper Business
Division in 2016 totaled 105% of shipments for theprevious year. Although sales of fancy and high-quality
printing paper were lacking due to few large spotorders, we actively expanded sales promotion
activities. Shipments in the packaging and foodproducts sector were brisk. We were also able toincrease the number of new additions in thecommunication paper sector with items such as
notification applications, and exceeded our sales forthe previous year.
Shipments in the functional paper sector exceeded theprevious yearʼ s totals. Shipments of carrier tape
(HOCTO) also increased due to the higher number ofcapacitors per unit due to greater demand forsmartphones and mobile communication devices, andadvances in automated driving and the digitization of
automobiles.
Sales in the export business were flat, but volume
increased to 106% compared to the previous year. Thiswas due to the continued strong sales of newproceeded paper for Shanghai Toh Tech, Co., Ltd. in
China. We plan to further increase sales in the future
and aim to expand our size in the global market.

Production of specialty paper by product type
(Thousands of tons)

100
80
60
40
20
0

2012

2013

2014

Miscellaneous types of paper for industrial use

18

2015

2016

Other specialty printing paper

Specialty Paper and Communication Paper
Although the market size of the printing and publishingindustry is contracting due to the diffusion andpenetration of IT and the internet, we are introducing
new products to meet needs and maintain the scale of
our Fancy & Media Paper business. Even with the impactof the internet on adhesive postcard paper, the main
product of the Osaka Mill, we will proceed with technicaldevelopment and establish quality together with ourcustomers.
Functional Paper
Performance Materials Paper is dominated bymanufacturing and industrial applications, and is a field
where the Group specializes in offering unique productsthat are truly unique or have a top share of the market.
We will strengthen cooperation with each strategic
business and subsidiary, and aim for global growth under
the following initiatives.
・Establish a production system to increase theproduction of carrier tape.
・Establish a production base in the United States for glass
fiber air filters and battery separators. Also establish an
optimal production system for global markets fromproduction bases in Japan, Europe, and United States.
・Develop RO membrane backing business for the field ofwater treatment, which supplies safe water for growing
populations and developing economies in emerging
countries.
・Collaborate with laboratories to commercialize cellulose
nanofiber (CNF) technology for use in air filters andother products.

Business Topics
Fancy & Media Paper Sales Dept.
In the field of specialty paper, we are working to develop
and expand sales of new products, mainly in FSC® certified
paper, packaging and food products. In addition, we arealso continuing to broadly convey the merits of paper aspart of our PR activities aimed at designers and othercreative people. Our solo sponsorship of the Japan Book
Design Award held by the Takashi Akiyama Poster Art
Museum Nagaoka is one example. In addition to this, we arealso working to raise the awareness of our products by
exhibiting at exhibitions held by our users and sponsoringthem.
(Hokuetsu Kishu Paper FSC license code: FSC-C005497)

Japan Book Design Award 2016

The field of communication paper has been focusing on
expanding sales of adhesive postcard paper for widely-usedadhesive postcards in confidential mail, and strengtheningof development of processed paper for each type ofcommunication paper. We are working with hardware
manufactures to further improve the quality of inkjet
adhesive postcards for new printers while strengthening
our PR activities to expand sales. In addition, we areproposing applications for areas other than adhesive
postcards. We are also working on developing applications
for processed paper using the dimensional stability ofcommunication papers and its high degree of suitability forprocessing.

Performance Materials Paper Sales Dept.
Expanding the sale of HOCTO carrier tape base paper
and RO membrane backings are big topics in the
Performance Materials Paper Sales Department. Carrier
tape is a paper used by chip manufacturers to transport
electrical components, such as resistors and capacitor
chips from the production line to mounting
manufacturers. The paper carries chips that are loaded
into the cavities (holes) on the paper.
The carrier tape market is expanding as the number ofparts has increased due to high functionality forsmartphones and other devices. Also, advances in
automated driving and the digitization of automobiles,
plus the increase in the number of components forsensors has spurred market expansion.
The Hokuetsu Kishu Paper Group has accumulated
know-how in its transactions with Japanese electronics
manufacturers, and holds the top share in Japan. We
have a wide range of product lineups, and in 2016
shipments saw year on year growth of more than 10%.
RO membranes, or reverse osmosis membranes, filter out
impurities in water, such as ions and salts. They are usedin plants that produce freshwater from sea water, andJapanese manufacturers have long had a strong market
presence. The market for these membranes is growing as
demand is increasing due to population growth andeconomic development in emerging countries, andshortages of water resources brought on by drought
caused by global warming and industrialization.
We are working on a backing to protect RO membranes
from water pressure. In 2010, we introduced a test plant,
and in April 2017, established a thermal pressure
processing section in the Nagaoka Mill, and began
full-scale production. Worldwide demand for water is
expected to grow in the future. We have started afull-scale foray that will focus on the development,
production and expansion of RO membrane backings.

Photo: Totec Co.,Ltd.Totec Corporation

Adhesive postcard paper

Carrier tape products

19

Business Overview (4): Paper Processing Business

Improving our total packaging service withproducts that offer safety and security

Business Overview
The Hokuetsu Kishu Paper Groupʼs Paper Processing
Business is handled by our consolidated subsidiary BF andPackage Co., Ltd. The business division works incollaboration with three other business divisions to createa group synergy effect and develop businesses that makefull use of their strength in integrated production from theproduction of base paper to end products.
The Katsuta Production Department of BF and Package,adjacent to the Katsuta Engineering Department of the
Kanto Mill, produces from milk and drink cartons toprimary food containers, packaging, and processed paper
products. As this work requires that we respond to thegrowing needs for food safety, we acquired FSSC 22000
Food Safety System Certification, the international foodsafety management standard, at the end of 2016. As acompany in the food supply chain that manufactures andsells packaging and containers, we will continue toimprove our safety and health quality control levels.
The Tokorozawa Production Department, the othermanufacturing base, manufactures printing andcommunication-related products that require advanced
technology and security management from adhesive
postcard paper for invoices to computer-scored answer
sheets and wireless communication labels.

Performance Highlights
There is a strong demand in the paper processing field
due to increasing needs for decoration and variation inprocessing. Sales in FY2016 saw a slight year-on-yearincrease from intense competition in the packaging field
due to the diversification of needs from demand forconvenience store product materials, such as theshortening of product life cycle and the change in the
shape of beverage containers, while the printing andinformation media field continued to see a tough businessenvironment as a result of lower structural demand due tothe digitization of paper media and the shift to in-houseproduction.
These changes in demand structure, fluctuations in
exchange rates, and the cost of raw materials are
expected to continue in the future. The Paper Processing
Business Division will continue to pursue high-quality,
high-efficiency production through internal efforts
essentially, while expanding the range of potential risks tofurther cope with these external factor changes, and aim
to achieve our goals by uniting production, sales, andmanagement.

Future Issues and Initiatives
The Paper Processing Business Division will steadily
implement the V-DRIVE Medium-Term Management Plan20

in line with the milestones and targets for measures tostrengthen the competitiveness of each division.
Specifically, we will proceed according to the following
basic policy.
(1) Safety as a top priority
Build a bright, healthy, accident-free, and injury-freeworkplace by making safety a priority in everything we
do by having all employees carefully and deliberately
think and then act.
(2) Strengthen governance and compliance system
Strengthen corporate governance by robustly
conducting risk assessments of internal governancetogether with thorough compliance.
(3) Pursue high quality
Pursue even higher quality in all business processes
according to environment, quality, food safety, andpersonal information management systems.
(4) Respond appropriately to change· Respond to changes in the market and strengthen sales
activities according to sales strategies for users.
· Reduce exchange risk, promote favorable purchasing,and reduce logistics costs.
· Improve productivity by promoting cross-training
through personnel exchanges between our two
production departments, strengthening humanresource development, and thorough cost control toachieve further reductions.
(5) Introduce new equipment to enhance competitiveness
Further strengthen our integrated production systemthrough capital expenditure in growth fields and exploit
group synergies.
(6) Promote new business
Promote the planning of new business with a sense of
speed to develop new containers for drinks and expand
business fields.
Sales Ratio by Divisions in FY2016 (%)
RFID 0.6%
OthersDPS 3.8%
7.4%

Net sales:¥19.3 billion

Paper ware
15.3%

Meeting food safety needs with FSSC
22000 certification

Future action plan

BF and Package Co., Ltd. acquired FSSC 22000 (Food
Safety System Certification 22000), the international
food safety management systems standard, in
December 2016.
FSSC 22000 is an approved standard as one of the foodsafety certification schemes by the Global Food Safety
Initiative (GFSI). This standard is required to manage
food safety at a higher level than ISO 22000 establishedby the International Organization for Standardization.
By acquiring FSSC 22000 certification, we haveestablished a mechanism and system to respond to
customersʼ needs according to food safety trends.

Paper processing and packaging field(Katsuta Production Department)
The Katsuta Production Department aims to expand
sales of functional paper, such as extrusion laminatedpaper and decorative paper. We are also striving tofurther expand sales channels in milk and drink cartonsand primary food containers that take advantage of ourcultivated experience and increased level of food safety.

Thorough inspection of food packaging and containers for consumers
ensures quality control and health and safety management.

Printing and communication media field(Tokorozawa Production Department)
The Tokorozawa Production Department is working todevelop sales by expanding sales channels to local
governments and other priority users.

Certification overview· Registered organization: BF and Package Co., Ltd.
Production Engineering Division, Katsuta Production
Department, Kanto Mill/Sales Division· Registration number: JSAF 046· Examining and registering agency: Japan Standards
Association

We use our proprietary security system to perform print out processing
and enclosing/sealing processing.

Total packaging service backed by quality
The color of each segment corresponds to the pie chart on the left.

Form printing
8.9%
Processed
paper
11.5%

Business Topics

Liquidpaper
containers
52.5%

Printing &fabrication
Optimum printing
and advanced
fabrication

Paper processing
Pursues thepossibilities of paper
by addingdecorativeness andfunctionality topaper media

DPS*
Data editing,printing, adhesion,
enclosing/sealing,shipping*Data Processing Service

Design & planning
Designing andplanning according
to the application byexperienced
professional staff

Quality management& environmental
preservation
Acquisition of ISO 9001/ISO
14001/FSSC 22000 certification.
Takes all possible measures for
quality management andpreservation of theenvironment.

21

Business Overview (5): Pulp Business

The challenge of cost competitiveness and new
fields based on sustainable forest management

Business Overview

Future challenges and Initiatives

Canadian subsidiary Alberta-Pacific Forest Industries Inc.

Under the basic policy of the new V-DRIVE Medium-TermBusiness Plan, from FY2017, Al-Pac is the core entity
responsible for the strategy of expanding our overseas
business. Growing and strengthening their core business iscritical to our growth. It is not enough to settle on extremely
high standards for safety and corporate governance; wemust also continue to produce high-quality pulp while
nurturing new growth seeds. Some specific examples of ourchallenges are as follows.

(Al-Pac) is responsible for the upstream sector of the
Hokuetsu Kishu Paper Group, and is the heart of our pulp
business. Al-Pac operates the largest pulp mill in North
America, boasting an annual output of 540,000 tons ofleaf bleached kraft pulp (LBKP) and 100,000 tons ofneedle bleached kraft pulp (NBKP).
Al-Pac is entrusted with managing 6.4 million hectares offorest land (an area that is larger than Kyushu andShikoku combined) from the government of Alberta, anduses this resource as raw pulp material.
Al-Pac produces and sells high quality pulp with highpurity and a high uniformity of fiber which comes fromthe forest resources managed by Al-Pac and the
production technology of the mill. Thanks to the praise
for their high quality and environmental measures, wehave secured a stable customer base in North America,
China, Japan, and South Korea.

Performance Highlights
Since acquiring Al-Pacʼs pulp business in October 2015, it
has contributed to the consolidated results of the Groupfor the first time as of the fiscal year ended March 2017,and became the main driver of increased sales. The world
pulp market continued to decline due to the impact of
new large pulp mills in South America and Indonesia.
However, in addition to Al-Pacʼs aggressive sales
expansion, it worked to reduce various indirect costs,
including integrating its sales company, and, as a result,achieved the goals of its initial plan and made asignificant contribution to the profits of the entire Group.

(1) Power export
Al-Pac has a black liquor recovery boiler that uses the black liquor
produced in the pulping process as fuel, and a biomass boiler thatuses bark generated in the process of chipping wood as a main
fuel. The power generation capacity using these boilers as a heatsource can generate a maximum of about twice the amount ofelectricity consumed on-site, and the amount of electricity is
adjusted according to the fluctuating price of electricity, and soldas power.
Biomass power generation that uses sources such as black liquor
and bark is a carbon neutral, renewable energy source sinceforests absorb CO2 as they grow. Canada is active in taking steps
to reduce CO2 at the federal and provincial levels, and Al-Pacʼsbiomass power generation is regarded as an important source of
renewable energy. It is energy that will have increasing social andeconomic value in the future.
(2) Chemicals by rail projectAs a new project for 2017, construction has started on a pulping
chemical freight car receiving/chemical mixing facility with anadditional rail spur that is slated to begin operation in January
2018.
This strategic investment will make it possible to transport
powdered chemicals by freight car instead of the usual method oftransporting liquids by truck. In addition to drastically reducing
transportation costs, it also expands the selection of suppliers,
allowing us to purchase chemicals on favorable terms. This projectis expected to be eligible for tax benefits from the province ofAlberta and is expected to have a positive effect on employment
by strengthening Al-Pacʼs cost competitiveness.
(3) Cellulose Nano Crystals (CNC)
CNC is a nano-level extraction of the crystalline parts (crystals)
from fiber by using an acid hydrolysis treatment of the pulp.
Research into CNC has been active in Canada for a long time and
Al-Pac assigns employees to a provincial research facility inAlberta, which owns the pilot plant, to conduct joint research.
CNC is a light yet strong material that is expected to be used in awide range of applications by mixing it with various othermaterials. As the Hokuetsu Kishu Paper Group develops CNC
manufacturing technology through Al-Pac, we will also strive todevelop demand for CNC as a new material, and create markets
and work to nurture it as a new business field of the pulp business.

22

Business Topics
Management of vast FSC® certified forests

Strong awareness of ensuring workplace safety

The Forest Stewardship Council® (FSC) is an international
nonprofit organization founded with the aim of spreading
responsible forest management around the world. In
addition to forest management, it also creates and carries
out inspections of a mechanism to support theidentification of the chain of custody of produced timberand its products. Al-Pac acquired FSC forest management
certification in 2005. This means that the pulp produced
from the trees harvested from Al-Pacʼs forests is
considered to come from well-managed forests and cancarry the FSC trademark, FSC-certified pulp has beengarnering attention as a raw material for paper products
for the Tokyo Olympic Games.
Maintaining FSC certification means not only respecting
the natural environment, but also continuing to operate ina way that is in the public interest and is economicallysustainable. We will continue practicing responsible forest
management that seeks to make continuous
improvements while engaging in dialogue with the FSC.

Al-Pacʼs safety initiatives and consciousness are very high, somuch so that it has been frequently selected for theprestigious “Safest Mill in Canada” award, which Pulp & Paper
Canada magazine started in 1926. Al-Pac last received thisaward in 2015 and continues to work with all employees inorder to further raise awareness of working safely.
Since 2008, Al-Pac has been the proud recipient of Media Corp
Inc.ʼs Canada Top 100 Employer project. The Canadaʼs Top 100
Employer project aims to profile exceptional employers in arange of industries from regions across Canada. Al-Pac has
been praised for its workplace environment, health andwelfare system, and training program, among others.
To ensure a proper work-life balance and the efficiency of ouremployees, we have adopted a system where those on day
shift work four days a week (10 hours/day), while shift workers
use a four-team two-shift system. We are a company that isclose to the local communities, insome cases employing three
generations of employees fromthe same family, so we arecommitted to connecting with ourcommunities on a daily basis whileconstantly seeking to improve theworkplace environment.

Forest land entrusted to Al-Pac fromthe Alberta provincial government(6.4 million hectares)

Coexistence in harmony with indigenous
peoples is indispensable for sustainablegrowthYukon
Territory
Northwest
Territories

Nunavut

CANADA
BritishColumbia

Sales Office
Vancouver

Alberta

Alberta-Pacific Forest Industries Inc.
Manitoba

Edmonton

Saskatchewan
Ontario

There are many indigenous peoples in Canada, such as First
Nations (the general term to describe hundreds of indigenous
communities), Metis (people who can trace their descent toFirst Nations peoples and European settlers), and the Inuit.
Through dialogue with indigenous peoples, Al-Pac on occasion
cooperates with indigenous peoples to conduct forest
management activities including tree cutting. In addition, we
actively support opportunities to study the culture and history
of indigenous peoples, and are building cooperative
relationships by making coexistence and mutual prosperity
with indigenous people
a basic policy of our business
Newfoundland
management. These initiatives have led to successes such as
FSC certification and gold level Progressive Aboriginal
QuebecRelationsCertification (an award evaluated by indigenous
PrinceEdwardpeople for thelevelof contribution in support of indigenous
IslandSaint Pierre
peoples), which we have been
and awarded
Miquelonevery year since 2006.
New(FRANCE)(Alberta-Pacific Forest
Industries FSC license code: FSC-C022642)
Brunswick
Nova Scotia

23

Research and Development Initiatives

Product Safety and Quality Control Initiatives

Active and ongoing efforts to develop
new functional materials

Providing the correct information through strict
quality control

The research and development department of the Hokuetsu Kishu Paper Group has been actively
working on the practical application and commercialization of new materials that go beyond
traditional paper and paperboard frameworks. We established a new research and development
organization that spans the entire Group, and have started an advanced initiative to develop thepractical application of cellulose nanofibers (CNF), which are expected to have multiple applications,
under the key words of “function,” “feeling,” and “environment.”

Based on the following Basic Principles related to the Quality Control of Products, Hokuetsu Kishu
Paper is careful to ensure the safety of products and at the same time we make efforts to supply
attractive products that fulfill the needs of our customers.

Basic Principles Related to the Quality Control of Products

New Functional Materials Development Office established to advance the development ofporous CNF materials

1. In order to provide attractive products, we promote product improvement and new productdevelopment based on customersʼ requests.

The New Functional Materials Development Office is a
new organization established within the Technical &Development Division in April 2017. The Office is a
specialized research unit dedicated to development work,
and is comprised of members from the Technical &Development Department, Sales Department, as well as
staff from around the Group companies, in across-department support framework.
The New Functional Materials Development Office plays
an important role in promptly proposing new products
and new development projects to management. We areworking to develop new materials while making full use
of our management resources including pulp, paper, andpaper processing. One such example is the application
development of CNF.
We succeeded in stretching a spider web of CNF in thespaces between glass fibers, and demonstrated for the
first time in the world that a high-performance air filter
media can be made with CNF. The amount of CNF used isonly about 0.1% of the glass fiber. This small amountgreatly improves the filter performance, allowing for an

2. We manufacture products with stable quality that are safe and that customers can use withconfidence, while obeying all relevant laws and regulations.

unprecedented savings in energy and the ability to trap
ultrafine particles.
We also succeeded in soaking the CNF in water andremoved it in virtually its original state. It has athree-dimensional network structure, making it an aerogel,a porous sponge-like material with ultra-low density andhigh specificsurface area.
Aerogels are
expected to be
used for catalyst
carriers, insulationmaterials, cell
culture substrates,
and absorbents.
Moreover, we also
succeeded increating a water
repellent aerogelthat resists waterand moisture.
Ultra-low density porous aerogel

3. In order to improve our cost competitiveness and moreover in order to maintain our relative
superiority in relation to other companies, we promote control of intellectual property.
4. We respond sincerely to any complaints about our products and strive to provide a speedy
and appropriate response in such cases. Further, through implementing measures to prevent
recurrence, we promote quality improvement and obtain the trust of our customers.

Quality Supervision

Management of Intellectual Property

Our internal quality auditor carries out regular checks on
the safety of raw materials, the compliance with in-housestandards of products to be used as food containers andwrapping, the proportion of recycled paper included inpulp, the regulatory compliance of each production
department, etc. An independent body (quality
management office) has been created within the Technical& Development Division to carry out the auditing.

The Basic Principles related to the Quality Control of
Products sets forth our fundamental corporate
regulations, and the management of intellectual
property is one of the most important items therein.
In line with these Basic Principles, we are steadily
patenting the fruits of our research. As our corporate
activities become global, patent applications overseas
are increasing.
Number of Patent Rights

450

The intersection of vulcanized fiber and the nano world
Hokuetsu Kishu Paper is trying to make materials that takeadvantage of the merits of cellulose. One material that has
recently attracted attention is vulcanized fiber (VF), a uniquereinforcing material that is made of fused cellulose. The
Hokuetsu Kishu Paper Group began producing VF over 80
years ago in 1935, and first started producing industrially inJapan. Today, we are one of the three major companies inthis global market.
In addition to its excellent rigidity, VF also resists
compression and abrasion, and has electrical insulation
properties, while having paper properties.
What makes VF so strong? During the manufacturing

400

process, the base paper is immersed in a zinc chloride
solution, where the cellulose fibers react and arepartially dissolved. Here, the cellulose fibers arenanoized, and recent research has shown that this iswhat gives VF its hardness. In the process of partiallydissolving and washing the base paper, the nanoizedcellulose fibers are fused tightly together to create astrong sheet.
We will continue to aggressively develop technologies
to further strengthen the functionality of VF through afusion of cutting-edge CNF technology based on thetechnology cultivated from traditional VF.

350
300
250
200
150
100
50
0

(Fiscal year)

We confirm the safety of the chemical
products being used and provide thisinformation to our customers

Base paper before processing

24

Enlarged photo of reactive
intermediate (the formation ofcellulose nanofibers can be seen)

A tightly fused VF sheet

A trunk made from vulcanized fiberʻ02 ʻ03 ʻ04 ʻ05 ʻ06 ʻ07 ʻ08 ʻ09 ʻ10 ʻ11 ʻ12 ʻ13 ʻ14 ʻ15 ʻ16
Trends in the Number of Patent Rights Heldby the Hokuetsu Kishu Paper

In order to secure product safety, we ensure the safetyof all new chemical products before use, and also makeefforts to continually confirm data related to thechemical products that we are already using. Moreover,
we also provide information in response to all kinds ofproduct-related questions from our customers.
25

Environmental Preservation Initiatives

Environmental initiatives are carried out in a systemicGroup-wide manner in line with the Environmental Charter
We carry out a wide variety of different Group-wide environmental preservation initiatives, based on
the Hokuetsu Kishu Paper Environmental Charter established in 1993.

Hokuetsu Kishu Paper Environmental Charter
Hokuetsu Kishu Paper declares its commitment to realizing the fundamental principles of the Charteras the core of its corporate activities through the concerted efforts of labor and management.

Fundamental Principles
To pursue environment-friendly corporate activities in order to become a corporate group of goodstanding, and contribute to the realization of a society capable of sustainable growth, thereby
contributing toward preserving a rich global environment.

Fundamental Policies

Action Guidelines- Protection and nurturing of forest
resources● Protection and nurturing of forest resources- Minimizing the environmental
impact of our business activities● Promotion of energy saving- Promoting efficient utilization of
resources and energy saving● Enhancement of environment-friendly production technology● Promotion of reuse and recycling of used paper● Reduction and effective utilization of waste materials● Societal contribution and in-house education● Appropriate response in emergencies

The Environmental Policy Committee is at the center of our environmental initiatives
The environmental preservation promotion structure is centered on the Environmental Policy Committee with support fromenvironmental policy committees and the ISO promotion committee at each mill. Important environment-related matters are
confirmed and voted on at Environmental Policy Committee meetings held at half-yearly intervals. The role of committee chair istaken by a chief environmental officer, and the role of deputy chair is taken by the president of the labor union. Environment-related
management issues are checked from the perspective of both labor and management and proposals are made.

Structure for Promoting Environmental Management
President andCEO

General Supervisor
for theEnvironment(ChiefEnvironmental
Officer)

Environmental Policy
Committee Chair:Chief Environmental Officer
Deputy Chair: President of thelabor union
Environmental Management
Department

Environment Subcommittee
Energy Subcommittee
Environmental policy
committees at each mill
ISO 14001 promotion
committees at each mill

● Environmental Management Department

The Environmental Management Department coordinates Group-wide environmental activities. In addition to informing theenvironmental management office at each mill and each company about revisions to environmental laws and related trends, thedepartment aims at enhancing the entire Groupʼs response to environmental issues by ascertaining local conditions and providing
guidance through environmental auditing.

● Environmental Subcommittee and Energy Subcommittee

The Environmental Subcommittee and the Energy Subcommittee have been created as a subordinate body to the Groupʼsenvironmental policy committee. The members of the subcommittees are relevant employees from each mill, who work using across-functional bottom-up approach to exchange practical information and provide advice to each other. An expanded
Environmental Subcommittee meeting including members from Group companies is held whenever it is necessary to share
information Group-wide about significant revisions to environment-related legislation, etc.
In order to further enhance environmental preservation activities at mills, environmental policy committee meetings are held every
month to confirm atmosphere- and water quality-related measurements and to deliberate on environmental issues.
Each mill has an environmental management office or a safety and environment management office, which carry out work relating
to environmental preservation. Work relating to the environment is based on an ISO14001 with implementation of a PDCA cycle.

26

1. Implementation of environmental auditing
Environmental auditing of Hokuetsu Kishu Paper Group
companies is implemented by the Environmental
Management Department and members of theenvironmental subcommittees. The auditing was carried out
at all mills and research laboratories of Hokuetsu Kishu Paperand 12 Group companies in FY2016.
Environmental auditing entails checking compliance withenvironment-related laws, but we also see it as a precious
opportunity to observe actual onsite conditions and provide
advice to relevant staff members. In particular, it provides agood opportunity to engage in communication withenvironment-related staff members at Group companies, andcontributes to the creation of a Group management systemthat provides a sense of unity.

2. Promotion of environmental education
The Environmental Management Department and theEnvironmental Subcommittee are taking the lead in
conducting environmental positioning training sessions thatbring together different mills. For FY2016, we discussed the
problems that occurred at the mills for managers in charge of
waste water treatment divisions, and invited an external
lecturer to offer advice and exchange opinions withmanagers from other mills.

Every six months, we also conduct the waste disposal law
and practical training for the staff engaged in waste
disposal at Group companies. In FY2016, we invited an
external lecturer to the mill for the first time, and held
lectures for managers from all workplaces on theimportance of waste management, risks, andcountermeasures.

3. Environmental preservation efforts at overseas Group companies
Jiangmen Xinghui Paper Mill Co., Ltd. acquired ISO 14001
certification, which is an environmental management system.
With environmental regulation increasingly stricter in China,
we are promoting efficient environmental measures throughthe operation of the PDCA cycle based on ISO 14001.

Alberta-Pacific Forest Industries Inc., has received FSC®
forest management certification, which is a worldwide
forest certification system, for the forests it possesses, andis using part of them as a sustainable raw material toproduce pulp.

Voices from leaders
Jiangmen Xinghui Paper Mill Co., Ltd.

Each Organization and their Initiatives● Environmental policy committees at each mill and the environmental management officeHokuetsu Kishu Paper Group’s environmental preservation topics

Jiangmen Xinghui Paper Mill Co., Ltd. founded its Environment Management Center in
September 2015 and received ISO 14001 certification in September 2016.
Environmental Protection is a basic national policy of China, so acquiring ISO 14001 wasessential as environmental legislation and enforcement of the law is becoming stricter
day by day. We are promoting the ISO 14001 environmental management system while
practicing energy conservation and high efficiency production, and becoming a “green
company” (one that is environmentally friendly) will be a key point in competing in astrict market.
The challenge going forward is to be even more exacting in preventing the purchase of
raw materials that can cause environmental problems based on the environmental
evaluation results for raw material suppliers. We will continue to accumulate andpublicize knowledge about the law and environment, and deepen our environmental
management according to the Groupʼs environmental policy.

Chen Zhimin, environment manager
Alberta-Pacific Forest Industries Inc.

The forests managed by Alberta-Pacific Forest Industries Inc. acquired FSC certificationin 2005, and are the largest in the world today.
Being in charge of the forest environment, I cooperate with external researchorganizations and ecologists, and in addition to investigating the impact of activities ofthe forest industry on biodiversity, I act as a liaison between our forestry divisions andthe research institutes. I am very involved in the FSC organization, and in 2010 I helped
draft guidance on national standards concerning the protection of endangered species
such as caribou. In 2016, I was elected member of the Board of Directors of FSC Canada
and about half of my work relates to FSC. I want to continue to contribute toresponsible forest management for the future.

Elston Dzus, Business Unit Leader, Environmental Science(Alberta-Pacific Forest Industries FSC license code: FSC-C022642)

27

Environment-Related Data
Hokuetsu Kishu Paper Group employs a minimum environmental impact policy at all of our
production bases as a participant in the global challenge of reducing CO2 emissions.
Our per-unit emission level is one of the best in the industry, through use of CO2 zero-count natural
gas with competitively low emissions.

Greenhouse Gas Emissions Across the Corporate Value-Chain

Hokuetsu Kishu Paperʼsenergy composition ratio (results for FY2016)

Estimates of greenhouse gas emissions across the entire corporate value-chain of the Hokuetsu Kishu Paper Group(results for FY2016)

Hokuetsu Kishu Paperʼs
per-unit CO2 emission trend

Purchased electricity,
etc.: 4.9%

Waste plastic fuel,etc.:3.5%

F os

1,200

fu

en

Scope 2:

733
629

600

y : 30 %CO2 zeGas: 16.6%

e rg

Heavy oil:
8.5%

800

632

431

400

ro-

Black liquor: 51.7%

441

437

392

387

405

380

Category 1
Purchased goods and services
33.0％

200

u

erg

0

y: 70 %

Scope1+
Scope2Category 4
Upstream transportationand distribution
16.9％

targetcoenDirect emissions

Category 10
Processing of sold products
13.6％

1,000

el

Wood-derived
fuels/
Paper sludge/
etc.: 13.6%

silScope 1:

Other
6.3％

(CO2 kg/ton of paper)

Coal: 1.2％

nt

We believe it is important to ascertain and manage greenhouse gas emission levels across the entire product lifecycle, from raw
materials procurement to product usage and disposal. We estimate the indirect greenhouse gas emissions across the entire
corporate value-chain (Scope 3 emissions), not just during our own production stages, as part of efforts to effectively reducegreenhouse gas emissions.

Scope3(Fiscal year)

Pulp and paper industry average

Category

Composition (1) Pollution control costa. Air pollution

Scope: Hokuetsu Kishu Paperʼs results for FY2016

b. Water pollution

Input

c. Noise, vibration, and odor

OutputFossil energy input

11,192,000 GJ(2) Global environmental preservation cost

CO2 *1670 千ｔWastewater BOD *2

356 t
791ｔ
456 t

Non-fossil energy input

24,648,000 GJ

SOx

349ｔ

Wastewater COD *2

Input of water resources

94,920,000 m3

NOx

2,251tWastewater SS

Soot and dust

105 t

Industrial waste generated

Raw material Wood chips
1,854,000 t
consumption
Purchased pulp
83,000 t
Used paper

258,000 t

Chemical substances
Discharge 2.4 t
subject to the PRTR law
Transported 0 t

a. Prevention of global warming
b. Energy preservationc. Tree farms in Japand. Aﬀorestation activity overseas

278,000 t

Industrial waste final disposal volume(3) Resource circulation costa. Eﬃcient utilization of resources

9,000 tPaper/paperboard production volume 1,656,000 t

b. Reduction, recycling, treatment, disposal, etc., of industrial waste
2. Upstream/downstream costs: Environmental preservation costs to control
environmental impact that results from key business operations upstream and downstream
Composition (1) Purchase of materials, etc., with smaller environmental impact(2) Recycling and collection of containers and packaging

Changes in Environmental Performance
Unit

3. Administrative costs: Environmental preservation costs stemming from administrative activities
Composition (1) Environmental training of employees, etc.

FY2012FY2013

FY2014FY2015(3) Monitoring and measuring environmental impact

Global warming

CO2 *1kg/ton of paper

437

441

392

387

405

380

Air

SOx

kg/ton of paper

0.20

0.18

0.13

0.14

0.21

0.18

4. R&D costs: Environmental preservation costs stemming from R&D activities

NOx

kg/ton of paper

1.49

1.34

1.28

1.32

1.36

1.39

Composition (1) R&D to develop products that contribute to environmental preservation

Soot and dust

kg/ton of paper

0.07

0.08

0.07

0.07

0.06

0.07

Water consumption

m3/ton of paper

56.4

53.1

55.4

56.4

57.3

56.9

Wastewater BOD *2

kg/ton of paper

0.40

0.29

0.25

0.28

0.25

0.30

(2) Support, etc., of environmental preservation activities by the local community

Wastewater COD *2

kg/ton of paper

5.83

5.16

5.55

3.97

3.33

4.83

(3) Support for environmental groups

Wastewater SS

kg/ton of paper

0.54

0.41

0.41

0.35

0.28

0.41

Chemical substances

Volume of chemicals subject to the
PRTR law discharged/transported

g/ton of paper

1.64

1.36

2.49

1.73

1.45

1.78

Industrial waste

Final disposal

kg/ton of paper

9.4

5.2

5.2

4.1

5.7

3.6

Water quality*1 Provisional figures for August 2017 used for energy input and CO2 emissions.
*2 Mills that discharge wastewater to rivers use BOD, while mills that discharge wastewater to the sea use COD to management wastewater quality.

28(2) Building, implementation, and obtaining certiﬁcation for an environmental management system

FY2016 FY2017 target

69.9%

Major activities and their results

1. Business area costs: Environmental preservation costs to control
environmental impact that results from key business operations within the business area

Material Balance

Emissions from internal corporate
value-chain and sources other than
Scope 1 and 2

Scope of calculations: Hokuetsu Kishu Paper Co., Ltd.
Target period: April 1, 2016 - March 31, 2017
Monetary unit: Millions of yen

Environmental Preservation Cost

*Provisional ﬁgures for August 2017 used.

30.1%

Scope 3:1990 2000 2005 2010 2012 2013 2014 2015 2016 2017

Hokuetsu Kishu Paper

Energy-derived indirect emissions(4) Running costs for an environmental preservation system, etc.

(2) R&D and planning to curtail environmental impact at the manufacturing stage, etc.
5. Social activity costs: Environmental preservation costs stemming from social activities
Composition (1) Planting of greenery, beautiﬁcation, etc.

(4) Disclosure of environmental information and related advertisements
6. Environmental remediation costs: Costs incurred from dealing with environmental degradation

Total

Examples of Environmental Conservation Benefits
Classiﬁcation by relationship with business activities

Examples of beneﬁts

Environmental preservation beneﬁt related to resources input into business activities

Energy-saving effectInvestment

Cost

2,161

5,701

233
11
140
81
712
609
26
75
1,215
348
867

2,738
490
2,138
109
923
912
(Included in manufacturing cost)

6
4
2,039
(Included in manufacturing cost)

2,039

-

540

2,161

24
516
233
3
8
72
148
169
52
117
62
32
1
13
14
94
6,802

Monetary unit (millions of yen)

Performance

122

29

Action Guidelines for Procurement of Raw Materials

We survey stringent checks on the legality andsustainability of wood materials, based on
fundamental policy for raw materials procurement
In accordance with “Fundamental Policy for Raw Materials Procurement” established in 2005, we
promote legal woodchip procurement at our Niigata and Kishu Mills so that we are able toprovide products to customers that they can feel confident using.

Procurement of Wood Chips in FY2016
Japan Satoyama (Managed coppice)

Vietnam

Akita Pref.
Yamagata Pref.
Miyagi Pref.
Fukushima Pref.
Ibaraki Pref.

Vung Ang, Hà Tĩnh Province
Phú Mỹ, Bà Rịa-Vũng Tàu Province
Cai Lan, Quảng Ninh Province

AcaciaOak

Tochigi Pref.
Gunma Pref.
Saitama Pref.
Niigata Pref.
Kyoto

BrazilMie Pref.
Wakayama Pref.

Rio Grande do Sul
Rio Grande

Acaciaetc.

Hokuetsu Kishu Paperʼs “Fundamental Policy for Raw Materials Procurement”
Hokuetsu Kishu Paper pursues raw material procurement in which value is placed on partnerships with
suppliers based on the fundamental philosophy of the Hokuetsu Kishu Paper Environmental Charter toprovide products that customers can use with assurance.

1. Prioritize the environment● With the Environmental Charter of Hokuetsu Kishu Paper as the basis for raw materials procurement, we willpurchase raw materials that our customers can use with a sense of reassurance.
● Our woodchips are supplied by timber farms located overseas. We are also proceeding with the expansion of ourtimber farming business overseas to procure raw material from our own resource. Regarding domestic
woodchip procurement, we promote the afforestation of the coppice forest “Satoyama” through the effective
use of unused timber.
● We promote the procurement of wood materials in consideration of biodiversity preservation and worker healthand safety.

2. Open and fair trade● We open our doors to all suppliers and engage in fair and open trade.

3. Legal compliance and disclosure of information● We procure raw materials that are in compliance with relevant laws.
● We take steps to confirm that the wood materials procured from overseas suppliers are produced at

appropriately managed forests through overseas investment in the timber farming business and direct tradingwith suppliers, and we disclose information regarding our woodchip sources.

South Africa

KwaZulu-NatalRichards Bay / Durban

Acacia4. Mutual trust and prosperity

Eucalyptus

Australia

Chile

Eucalyptus

Eucalyptus

Concepcion, VIII Region
Puerto Montt, X Region

Western Australia
Bunbury / Albany● We build history and trust with business partners, and pursue the best procurement practices in consideration of

the environment, safety, quality, and cost dimensions under a spirit of co-existence and co-prosperity.
Country

Only Properly-Managed Wood Used
96% of the woodchips we utilize as raw materials are
sourced from overseas timber farms, with theremaining 4% being sourced domestically from
Satoyama. From the perspectives of legality, forest
sustainability and biodiversity preservation, we procure
only wood materials that originate from properly
managed forests as is our obligation as a company thatenjoys the blessings of nature. We pay meticulous care

to all our woodchips to determine whether they are
made from timber grown in properly managed forests,
and to ensure the legality of related transactions.
Specifically, the Group defines woodchips that do not
originate from the following five sources as woodchips
obtained through legal methods, and only procures
woodchips of said nature.

1. Illegally harvested wood
2. Wood harvested in violation of traditional and civil rights
3. Wood harvested in forests where high preservation values are threatened by management activities
4. Wood harvested in forests being converted to afforestation or non-forest use
5. Wood from forests in which genetically modified trees are planted
30

Tree species

BrazilAcaciaChile

Eucalyptus

South Africa

Forest type
Afforestation Managed
coppiceMeans of verifying legality
Traceability
reportDeclaration on
legality of timber

Forestcertification
System

Acacia
Eucalyptus

Australia

Eucalyptus

Vietnam

AcaciaJapan

Oak, etc.

( )

*

Total

Overseas / Domestic
wood chips
Percentage
Quantity procured(1,000 BDt)

1,773

96%

81

4%

1,854

100%

*We carried out a risk assessment of domestically produced chips based on Japanʼs National Risk Assessment (NRA), approved in August 2014; and we
subsequently received approval to handle the chips as controlled woodchips.

31

Action Guidelines for Procurement of Raw Materials
Strict Checks Based on Third-Party Audits and Internal Auditing
We consume woodchips in Niigata Mill and Kishu Mill:(1) FSC® certified woodchips and (2) Controlled
woodchips. FSC-certified woodchips originate fromtimber grown in FSC-certified forests and meet avariety of criteria including legality, sustainability, andbiodiversity preservation.
“Controlled woodchips” originate from timber that has
been approved as properly managed timber based ona risk assessment to determine if the timber meets FSC
Controlled Wood standards and after undergoingaudits conducted by third-party organizations. These
woodchips are permitted to mix with FSC-certified
woodchips.

We have also established our own traceability system*and periodically verify information relating towoodchips consumed at the two mills. In addition, we
also submit our procurement activities to external
audits conducted by the Japan Paper Association, an
industry organization, and other third-party
organizations as part of our efforts to enhance theverification accuracy of this system.
(Hokuetsu Kishu Paper FSC license code: FSC-C005497)* Traceability system: A method of tracking information related
to production and distribution history. It could be described asa system for keeping tabs on production and distribution
information.

Total area of company owned forestsand profit-sharing tree farms

12,262ha
Tree farms:
Company owned forests that are developed under
the ownership of Hokuetsu Kishu Paper Group.

Profit-sharing tree farms:
Afforested areas where the Group invests in afforestation.
We receive a share of profits when trees are harvested.

Status of Audits on FY2016 Traceability Report of Imported Woodchips
Regarding theimported woodchips,
we procured in
FY2016, SGS Japan
Inc., a third party
certificationcompany, verified
that we obtained
traceability reports
from suppliers
properly and inaccordance with ourwood material
procurement
procedure, as well asverified thatmentioned contents
to be proved legality.
They also verified
domestic woodchips
and pulp products
we procured.

Akita Pref.

Niigata Pref.

[Tree farms]
Kaifu (324 ha)
Kanamaru (106 ha)
Miyamoto (52 ha)
Owned nursery (4 ha)

Ishikawa Pref.

[Tree farms]
Anamizu (880 ha)
Ushitsu (171 ha)

Tottori Pref.

Sodegawa
Numakunai
Oga Marusenji

Nabekura
HikimeYabukawa

Kaifu[Tree farms]
Hino (1,745 ha)
Ushitsu

Shimane Pref.

Kanamaru
Owned nursery

Anamizu[Profit-sharing
tree farms]
Arranged by
Shimane Pref.
(17 ha)Miyamoto

Wasedani[Tree farms]
Oga (138 ha)

Iwate Pref.

[Tree farms]
Nabekura (139 ha)
Sodegawa (2,088 ha)
Yabukawa (489 ha)Marusenji (291 ha)
Numakunai (36 ha)
Hikime (15 ha)

Fukushima Pref.
[Tree farms]
Wasedani (71 ha)

Arranged by Nagano Pref.

Arranged by Shimane Pref. Hino

KounoseIbi

Nagano Pref.

Kotochi, etc.
Naihara, etc.
Uramukai,etc.

Yanoko, etc.

TaishoKochi Pref.

[Tree farms]
Taisho (76 ha)

Tokushima Pref.

[Tree farms]
Kounose (1,142 ha)

Mie Pref.

[Tree farms]
Yanoko, etc. (132 ha)[Profit-sharing tree farms]
Arranged by Nagano Pref. (1,053 ha)

Gifu Pref.

[Tree farms]
Ibi (116 ha)

Nara Pref.

[Tree farms]
Naihara, Kotochi, etc. (2,597 ha)

Wakayama Pref.

[Tree farms]
Uramukai, etc. (580 ha)

Forest management that takes into account social, economic, and environmental perspectives
Hokuetsu Kishu Paper Group possesses 12,262 hectares offorest (our own tree farms and profit-sharing tree farms) inJapan.
The main objective of owning forests was to secure pulp
material when we began acquiring them in the decadefrom 1935 to 1945, but has transitioned into theestablishment of building materials with higher added
value due to changes in wood species as pulp material.
We have carried out sustainable forest management byorganizing appropriate afforestation and harvesting plansthat conform to the forest management plan systemestablished in Japan. As a result, we have been able tocontribute to the public good by preserving soil, nurturing
water sources, and conserving biodiversity. We also haveacquired forest certification that demonstrates“appropriate and sustainable forest management is being
32

confirmed” by third parties, and we are also implementing
forest management that takes into account social,economic, and environmental perspectives.
In Nagano and Shimane prefectures, where our company
was collecting pulp material during the ten years from1955 to 1965, we have participated profit-sharing tree
farm business promoted by the prefectures in which webore the costs that have contributed to afforestation,tree-planting, and job creation at the local level for over
50 years.
Going forward, opportunities to use the residual wood offorest lands will increase, but there is also a concern ofgrowing pest damage caused by global warming. We
foresee changes in the environment, and will thus
respond by continuing to advance the healthy forest
management that we have built up to now.
33

Corporate GovernancePursuing “aggressive governance” in accordancewith Japan’s Corporate Governance CodeThe Roles of the Board of Governors and theBoard of Corporate Auditors

The Basic Policy on Corporate Governance of Hokuetsu Kishu Paper Group is based on the
Hokuetsu Kishu Paper Corporate Philosophy to meet the expectations of all stakeholders.

Board of Directors
The board of directors strives to enhance the common interest of our shareholders and achieve appropriate
corporate governance, in order to enhance stable, long-term corporate value. Moreover, the board of
directors performs a supervisory function over all management, including the execution of the duties of thecorporate management team and decides importantmatters as prescribed by laws and regulations, our articles of incorporation, and our Rules for the Board of
Directors. Furthermore, it delegates the decision-making for business matters other than those listed above
to corporate management in order to enhance the mobility of the business and management vitality, while
also exercising oversight of the status of the execution by the corporate management.

Organizational Structure of Corporate Governance
Shareholdersʼ Meeting
Appointment Dismissal

Accounting Auditor

Cooperation

Appointment Dismissal

Appointment Dismissal

Board of Corporate Auditors
Corporate auditors
Outside corporate auditors

Audit

Audit
ReportOutside directors give advice from a neutral position independent from management for enhancing ourstable, long-term corporate value, and play a significant role in the decision-making for the importantmanagement issues of our company. They also supervise conflicts of interest between our company andmanagement.

Board of Directors
Directors
Outside directors

Cooperation(Management/Monitoring)(Execution of Business)
Selection Monitoring

Cooperation

Accounting

Group Governance
Administration
Department
Audit

ReportControl and support

Submission of Important matters

President and CEO
Management Execution Meeting

Audit

Business Divisions and Affiliated Companies

Our groupʼs basic policy on corporate governance is stipulated in Article 2 of the Basic Policy on Corporate Governance, as below.
This policy is also published on our website.

Article 2 (Basic Philosophy of Corporate Governance)
In order to achieve the most important goal of corporate management, which is the enhancement of stable, long-term
corporate value, we will build an appropriate institutional framework for corporate governance based on the following
basic concepts.
① We respect the rights of our shareholders and will strive to establish an environment in which shareholders can
exercise their rights appropriately and to secure equality between shareholders.
② We recognize the importance of corporate social responsibility and will strive to collaborate appropriately withshareholders and other stakeholders in order to develop a corporate culture in which business is conducted with
self-discipline in a sound manner.
③ We will ensure transparency and fairness in our decision-making by establishing an executory system for timely
disclosure and by conducting the timely and appropriate disclosure of non-financial information beyond
requirements mandated by laws and regulations.
④ We will strive to secure the effectiveness of the board of directors based on our fiduciary responsibilities andaccountability to our shareholders. We will also enhance the strategic, decision-making, and supervisory functions of
the board of directors through its analysis and assessment.
⑤ We will actively and constructively engage in dialogue with our shareholders based on a basic policy establishedseparately to support the enhancement of our stable, long-term corporate value.
2. The board of directors shall establish and disclose a code of ethics to be shared by all employees and executive
officers of our corporate group.

34

The board of directors establishes the institutional systems for internal discipline, and cooperates with therelevant departments to supervise and ensure that they are operating effectively.
The number of the members of the board of directors is 15 or fewer as prescribed by the articles ofincorporation. The directors have diverse backgrounds and various expertise.
The candidates for outside directors are determined on the basis of their independence and neutrality, andexpectations towards their contribution to the constructive deliberations by the board of directors pursuant
to the criteria for determining independence set forth by the financial instruments exchange.
In nominating a candidate for director, the president and CEO drafts the nomination proposal on the basis of
the evaluation of his/her capabilities for effective corporate governance and the enhancement of stable,
long-term corporate value, etc., and the board of directors makes the decision after receiving advice from theoutside directors.

Board of Corporate Auditors
Our corporate auditors and our board of corporate auditors conduct operational audits and accounting
audits from an independent and objective perspective on the basis of their fiduciary duties towards ourshareholders. Our corporate auditors also audit the execution of the duties of each director, and express theirappropriate opinions at board of directors meetings on the basis of their aforementioned fiduciary duties.
Our corporate auditors and our board of corporate auditors enhance their effectiveness by organicallycombining the robust independence of the outside corporate auditors and the high information gathering
capacity of the standing corporate auditors.
Our board of corporate auditors evaluates the outside accounting auditor on the basis of the duties of an
outside accounting auditor to shareholders and investors by confirming the independence and theinstitutional business operations for quality control required of an outside accounting auditor.
The number of members of our board of corporate auditors will be five or fewer as prescribed by our articles
of incorporation. Half or more of the members consist of outside corporate auditors in order to secure theindependence of our board of corporate auditors. The outside corporate auditors are decided according to
the criteria for determining independence set forth by the financial instruments exchange.
A candidate for standing corporate auditor is determined with the consent of the board of corporate auditorsfrom persons who have significant knowledge and experience in our business operations. At least one of thecorporate auditors has been assigned to our finance and accounting departments and is well-acquainted
with those affairs. A candidate for outside corporate auditor is determined with the consent of the board ofcorporate auditors from experts in finance and accounting management, corporate legal affairs,
management, etc.
35

CSR Activities

Compliance System

Promoting sustained and effective initiatives

Continuing to strengthen the compliance systemof the entire Group in Japan and overseas

As an upstanding member of society, our group conducts business that takes economic,
environmental and social aspects into consideration, and builds better relationships of trust withvarious stakeholders. We define these actions aimed at pursuing the sustainable development of ourgroup collectively as CSR (Corporate Social Responsibility).
To fulfill our social responsibilities as a better corporate group that can contribute to the realizationof a better society, our group promotes sustained and effective CSR activities.

Hokuetsu Kishu Paper Groupʼs compliance objective is to ensure that all executive officers andemployees comply with domestic and overseas laws and regulations, in line with our group-widecode of ethics, as well as to ensure that all our actions are fair and transparent, and based onsocial norms and conventional wisdom. Our group continually implements various measures inorder to build and strengthen a compliance system that is adhered to by all executives andemployees of our group.

System for Promoting CSR Activities

Inspections for FY2016 Targets

Conducting compliance training(1) Group governance and compliance system
We conducted training related to insider trading andtraining to prevent the abuse of authority (“power
harassment” ) in the workplace.

Our group conducts compliance training for all
executives and employees on a variety of themes andlevels. The content and timing of the training is not
limited to important events such as joining thecompany, being transferred, or being promoted, andis given on occasions when there are changes in thebusiness environment, such as the amendment oflaws and regulations or in the business trends of ourgroup. Depending on the purpose of the training, we
invite experts from external organizations and use our
in-house lawyer as an instructor to make the mosteffective training .
In 2017, our in-house lawyer visited our mills andaffiliated companies across Japan to give lectures oncompliance. Going forward, our group will continue to
conduct its training and education on importantcompliance issues in a timely fashion, and will strive tomaintain and improve the awareness of complianceamong executives and employees.

President and CEO

Hokuetsu Kishu Paper Group CSR Committee

CSR
Auditors(Members of the Management Execution Meeting,Consolidated Management and Governance
Meeting, outside corporate auditors, and presidentof the labor union)

CSR Working Group

Hokuetsu Kishu Paper Group CSR Secretariat Meeting(COO of each division, labor union representatives, GeneralManager of
Administrative Department, representatives from consolidated subsidiaries)

OfficeCSR Committee(Each division,
each office,each consolidated
subsidiary)

Secretariat

Secretariat

Existing
committees at
each office

Existing
companywide
committees(Compliance, environment,
information disclosure,product safety, social
contribution, etc.)

Secretariat

Employees of the Hokuetsu Kishu Paper Group(2) Elimination of occupational accidents
We established the Safety Management Department athead office on November 1, 2016, and a company-widesafety organization was reconstructed to strengthen
efforts to eradicate accidents.
(3) BCP (Business Continuity Plan)
We conducted BCP training at the Niigata Mill thatsimulated a major earthquake. We also preparedemergency contact networks with our customers.
(4) Environment
Our environmental initiatives are described on p. 26 ofthis report.
(5) Steady implementation of “C-next”
Details are described in the “Message from the President,”“Start of the V-DRIVE Medium-Term Management Plan,”and “Main Business Areas and Their Current Conditions.”(6) Society
Our offices continue to engage in various activities that
contribute to society, aiming to create a harmonious
coexistence with the local community. Niigata Mill held acommemorative lecture meeting and celebration of the100th anniversary of its operation, and an affiliatedcompany participated in “U/I turn single parent support
program” promoted by Niigata Prefecture.

President and CEO
Compliance Officer
Meeting
Chief Compliance Officer

Group Governance
Administration Department

Priority CSR Activity Implementation Target Initiatives for FY2017[Basic Target]
Hokuetsu Kishu Paper Group strengthens global competitiveness by further improving the relationship of trust withits diverse stakeholders and achieving sustainable growth hand-in-hand with society, based on the corporate
philosophy that is shared across the Group.

[Priority Activity Points]
1. To strengthen the Group governance system by conducting sustained training and education.
2. Eliminate serious industrial accidents such as being caught/trapped in a machine, falls, etc.
3. Maintain and improve trust from our customers and other stakeholder by continuing to implement BCP initiatives.
4. To comply strictly with environmental laws and regulations, strive to eradicate environmental claims, and takeproactive steps to disseminate information about our environment-oriented initiatives.
5. Take on the challenge of further growth by steadily implementing the new V-DRIVE Medium-Term
Management Plan.
6. To coexist with local communities through communication and social contribution activities.

36

Strengthening the compliance system of
consolidated subsidiaries
Management of consolidated subsidiaries is anextremely important business challenge, and we havetaken various measures to date on this important
issue. In recent years, however, even major
corporations representing Japan have had serious
scandals due to inadequate management of theiroverseas consolidated subsidiaries, including cases
where the survival of the company itself was in danger.
In light of these circumstances, we established theGroup Governance Department on April 1, 2017 withthe aim of strengthening the corporate management
system of domestic and overseas consolidated
subsidiaries.
The Group Governance Department is engaged invarious initiatives aimed at strengthening thecorporate management system of consolidated
subsidiaries in Japan and overseas, without being
constrained by the conventional framework. In
particular, strengthening the compliance system of
consolidated subsidiaries is an important factor instrengthening their corporate management system. As
part of a series of measures to achieve this goal, in
2017, our group undertook numerous measures, suchas establishing and revising internal regulations andguidelines at consolidated subsidiaries, for importantand urgent compliance issues at domestic andoverseas subsidiaries that included compliance withcompetition laws (the Antimonopoly Act in Japan),anti-bribery, and the management of signatures.

Compliance Officerof each division(each department, mill, andaffiliated company)

Report,consultation

Supervisor

Compliance Hotline
Internal(GroupGovernance
Administration
Department)

External(Lawyer)

Report,Report,Report,consultation consultation consultation

Hokuetsu Kishu Paper Group employee

Compliance training carried out in 2017 (at Niigata Mill)37

Group Management

Group Company Profile

Working to Strengthen Our Consolidated
Management Structure in Japan and Overseas

Hokuetsu Kishu Sales: Our Wholly Owned Sales
Agent in JapanOne of the major strategies of our group is to strengthen our consolidated management structure incollaboration with group companies in Japan and overseas. To acquire the strong competitivenessthat is befitting of a truly global company, the entire our group is working together to thoroughly
spread compliance management and strengthen corporate governance.

Hokuetsu Kishu Sales Co., Ltd. was founded in April 2011 as a wholly owned agent responsible forour domestic sales. We have integrated the main agencies of six historic companies, and aremaking full use of their combined power to fulfill our distribution function. The company handles
a wide range of products from mainstays such as packaging and industrial materials paper, with afocus on paper, white paperboard, and specialty paper, earning the trust of our customers.

Our Groupʼs Dramatic Expansion
169th Business Year

179th Business Year

PeriodApril 1, 2006 March 31, 2007

April 1, 2016 March 31, 2017

The division offers a broad lineup and rich inventory to meet the needs of paper wholesalers. It builds
a relationship of trust with its business partners through its stable supply.

Consolidated sales￥158,991 million￥262,398 million

Publishing Division

Number of employees(consolidated)

2,860

4,769

Subsidiaries andaffiliated companies

27

39

Overseas subsidiaries

1

5

New Group Governance Department
EstablishedAs our corporate group has expanded, we have built a
consolidated management system based on the
management regulations of affiliated companies.
However, our support for overseas subsidiaries inparticular was unsatisfactory.
For this reason, we established the Group Governance
Department on April 1, 2017 with the aim ofreconstructing and strengthening the consolidated
management system, including our overseas
subsidiaries. Strengthening the consolidated
management system is one of the important issues
for the “V-DRIVE” new Medium-Term Management
Plan and is also a critical element for our group toachieve its “Vision 2020” Long-Term Management
Plan. It is because that the high level ofcompetitiveness of our group stems from a strong
consolidated management system.

East Japan

Wholesale Division

The division makes proposals that satisfy publishers, and are adopted in magazines and books. It also
provides information on the latest trends in paper and products from other manufacturers.

Direct Demand Printing Division
The division is engaged in sales activities for printing companies and direct customers in a wide range
of industries. It makes optimum proposals for a wide range of printing applications, and has a systemthat can deliver quickly.

Functional Materials Division
The division provides unique products with truly unique functionality required by users of specialty
paper. It conducts detailed technical examinations with customers to develop customized products.

Three Tasks of the Master Plan
The Group Governance Department has prepared athree-year master plan (basic plan) after repeateddiscussions to identify issues that need to beaddressed and scheduling to solve issues. The masterplan focuses on the following three major tasks.
(1) Preparation of infrastructure for groupmanagement(2) Strengthen global compliance and risk
management of overseas business(3) Preparation of regulation system and its content
In particular, we are asking overseas subsidiaries fortheir prompt action to support the development ofregulations of anti-bribery and competition laws
which carry high risks especially in overseas.

Understanding International Standards andRespecting Fundamental Human Rights

West JapanAs shown in the table on theright, our group has expanded
dramatically in the last ten years
and has globalized its business.
In Japan, we merged andintegrated Kishu Paper andestablished Hokuetsu Kishu
Sales, while overseas, we built awhite paperboard mill in China,
and acquired production
subsidiaries in France andCanada.

Osaka Branch Office
The Osaka Branch Office provides reliable service through meticulous sales activities according to theneeds of a wide range of wholesalers, printing companies, and direct customers, primarily in the Kansai
region, which includes the Chugoku and Shikoku, the Kyushu and the Hokuriku region.

Nagoya Branch Office
Many of the Nagoya Branch Officeʼs oldest customers come from the Chubu region around Nagoya.
The office provides reliable sales by grasping the needs of customers and providing meticulous service.

Governance and Compliance Activities

Maintaining ISO 14001 Certification

As the main subsidiary of Hokuetsu Kishu Paper, weestablished the Internal Governance Administration
Department where dedicated staff conduct internal
audits of each division every month. Together with theGroup Governance Administration Department, we
also check that business is being conducted properly.
As a compliance activity, we educate new employees
about the Groupʼs Basic Code of Conduct. Additionally,
all employees participate in a biannual complianceseminar to ensure that compliance is understood.

We successfully completed our certification fortransition for the 2015 revision of ISO 14001 andcontinued to maintain our registration. We have added
additional registered sites in the FSC® certification
maintenance review as we have expanded the number
of FSC products we handle.
(Hokuetsu Kishu Sales FSC license code: FSC-C022598)

In a rapidly changing society with the globalization of the economy and increasing environmental
consciousness of consumers and customers, there are increasing opportunities to appeal to social
responsibility and public duties.
To develop our business activities globally, our basic code of conduct (Code of Ethics) states thatwe “foster relationships of trust with our various business partners based on fairness, impartiality,
and transparency, in a spirit of equality and reciprocity in our business activities.” Based on this,we will strive to understand various international standards relating to the laws, regulations, andhuman rights in each country and respect fundamental human rights.

38

39

HR Management

Coexistence with Local Communities

Toward a workplace where employees can enjoy
their work in safety and security

BCP training to ensure a structure that meets
customer demands

Hokuetsu Kishu Paper Group is working to develop a workplace where employees can work safely
and securely with purpose and vigor. In particular, the entire company is working to develop humanresources adapted to globalization and to provide a working environment that enables a diverse
range of human resources and to build a safe workplace.

As an appealing paper manufacturer, our group has actively engaged with local communities andresidents in order to contribute to society and earn its trust. Going forward, we will strive forsustainable growth with our various stakeholders in Japan and overseas.

New Safety Management Department to Oversee the Group

Following the Great East Japan Earthquake of 2011,
our group formulated a business continuity plan (BCP)
for the head office, its mills, and major affiliatedcompanies in order to strengthen its structure tosupply products to customers even in an emergency,
and has made preparations for emergencies.
In March 2017, we conducted BCP training at our
main Niigata Mill that assumed a major earthquake inorder to clarify our initial response and current issues.
On the day of the training, we learned the difference

Specifically, we are involved in efforts such as (1)developing and overseeing basic policies andcomprehensive measures relating to safety andhealth, (2) surveying and collecting information on
safety and health, and (3) providing advice andguidance on safety and health to group companies.
We also conduct safety audits of each mill andmanufacturing base throughout the year, aiming tobuild a safe workplace for the entire group.

We established the Safety Management Department inNovember 2016 to oversee our groupʼs safety andhealth and further strengthen our safety and healthinitiatives. In addition to activities at the Safety andEnvironmental Management Department of eachfactory and office to date, we are systematicallyorganizing and promoting safety and healthmanagement activities for the entire group, including
affiliated companies.

between conventional disaster prevention drills with
an emphasis on evacuation drills and BCP training,as well as reconfirmed our initial response to restore
operations so that we can meet customer demandsin the event of a major earthquake.
We will continue to strengthen our BCP to ensurethat we can reliably respond to customer requests
by establishing a resilient system that can stably
supply paper.

Safety Training Using VR Technology
To further improve the awareness andunderstanding of safety and health that
forms the basis of our frontline
capabilities, we are conducting safety
training with VR (virtual reality)
technology. To conduct the training tofeel the danger, which is difficult thoughjust a lecture, our program features thesafety simulator from electric equipment
maker Meidensha Corporation that lets
you see, feel, and experience the danger
around you realistically.
In the actual VR safety experience, you
can experience the sensations ofcrashes, falls, and burns through realistic
images of high places on scaffoldings,
workbenches, and grinders, displayedon an HMD (head mounted display).
Employees who participated in the
training said that they were able torenew their safety awareness while
being surprised at the realism of theimages.

VR technology reproduces accidents and injuries that are difficult to experience

BCP training and workshop

BCP for Earthquakes and Tsunamis
1. Basic policy
The basic policy of the business continuity plan of Hokuetsu Kishu Paper Co., Ltd. is to protect
human life and business assets in the event of a disaster, promptly restore business, minimize theimpact on stakeholders, and establish trust with business partners during normal times.

A recreation of a simulated fall from a grating bridge 63m above the groundRe-employment of Retirees and Employment of Persons with Disabilities
Changes in the number of re-employed retirees

Changes in the employment rate for persons with disabilities
(FY)

2012

40

2013

2014

2 015

2016

Number of
retiredemployees

34

Number ofre-employedretirees

24

15

31

52

47

Ratio ofre-employedretirees

70.6%

68.2%

59.6%

81.3%

82.5%

22

52

64

1.1 Main business to be protected by Hokuetsu Kishu Paper

57

3.00

2.00

（%）

2.38

2.00

1.2 Purpose of the BCP
2.23

2.21

2.15

2.01

2.00

2.00

2.00

2.00

1.00
Hokuetsu Kishu Paper

0

The main business to be protected in the event of unforeseen circumstances is the sales of paper.

2013

2014

2015

Legal employment rate

2016

The items to be observed in the event of unforeseen circumstances are as follows.
(1) Ensure the safety of employees and their families, and instill calm in a confused workplace.
(2) Maintain trust by fulfilling our responsibility of supplying products to our customers.
(3) Maintain confidence of the market through swift and sustained measures.
(4) Quickly stabilize operations and ensure employment of employees.

2017

41

Executive Officers

Financial Information
Sekio Kishimoto

Hiroshi Suzuki

President and CEO

Yoshinori Kawashima

Managing Director

Managing Director

Morinobu Obata
Managing Director

Consolidated Financial Highlights

44

Managementʼs Discussion and Analysis

46

Consolidated Financial Statements:

Mitsushige Yamamoto
Director

Shuji Sekimoto

Kimio Uchiyama

Director

Director

Yasuyuki Kondo
Director

Consolidated Balance Sheets48

Consolidated Statements of Income

50

Consolidated Statements of Comprehensive Income

50

Consolidated Statements of Cash Flows

51

Consolidated Statements of Changes in Net Assets

52

Notes to Consolidated Financial Statements

54

Independent Auditorʼs Report

Shigeharu Tachibana

Director

Junichi Horikawa

Standing Corporate Auditor

Mitsuyasu Iwata

Kazuo Nakase

Director

Director(Outside Director)(Outside Director)

Kaoru Mashima

Jun Itoigawa

Standing Corporate Auditor

81

Corporate Auditor(Outside Corporate Auditor)

Keiji Watanabe

Corporate Auditor(Outside Corporate Auditor)

Corporate Officers

Kisao Taniguchi

Makoto Yanagisawa

Shinobu Ogata

Hiroyuki Otsuka

Osamu Terao

Haruichi Shimizu

Masayuki Kuribayashi

Shimpei Kusaka

Shoji Suzuki(As of June 28, 2017)4243

Consolidated Financial Highlights

Jump-100

Value up-10

G -1stC-nextMillions of yen

Financial data
Net sales

Thousands of
U.S. dollars (Note 1)

Year ending
March 31, 2007

Year ending
March 31, 2008

Year ending
March 31, 2009

Year ending
March 31, 2010

Year ending
March 31, 2011

Year ending
March 31, 2012

Year ending
March 31, 2013

Year ending
March 31, 2014

Year ending
March 31, 2015

Year ending
March 31, 2016

Year ending
March 31, 2017

Year ending
March 31, 2017

¥158,992¥172,709¥182,782¥193,952¥217,013¥230,570¥208,280¥223,865¥228,400¥246,849¥262,398$2,338,663

Operating income

9,050

8,330

8,122

9,888

8,742

10,823

3,658

3,308

6,140

9,236

12,900114,973

Ordinary income

9,220

7,891

6,593

9,436

10,14813,781

10,516

8,481

11,463

10,58814,056125,276

Net income attributable to owners of parent company

4,395

4,074

1,750

7,106

5,296

12,673

8,169

6,105

8,359

7,477

10,381

92,522

EBITDA (Note 3)

20,516

21,456

25,69531,58032,33635,28325,53826,97430,582

31,12533,938302,478

Capital expenditures

43,022

37,72531,376

6,286

8,635

7,977

12,16023,91911,128

9,425

12,751

113,645

Total assets

269,124

292,726

313,378

340,944322,233

332,979

343,114350,808

351,033

363,658

362,205

3,228,209

Net assets

143,439

140,184

135,029

138,173

137,870

150,628

158,794

158,824

168,573

169,529

181,035

1,613,503

Interest-bearing debt

77,291

101,025

137,060

136,640

121,157

117,144

129,137

136,387

123,724

129,586

116,754

1,040,588

Cash ﬂows from operating activities

14,907

12,2959,620

36,48425,71928,953

21,203

18,67627,85820,94428,918257,736

Cash ﬂows from investing activities

43,78035,411-34,804-10,637-6,209-9,565-25,127-22,805-16,261-3,628-13,649-121,649

Earnings per share (EPS)

22.75

19.19

8.25

33.75

25.55

62.09

40.08

30.54

44.39

39.69

55.09

0.49

Book value per share (BPS)

672.37656.96632.42658.61670.49727.66770.02

834.44888.16894.74956.63

8.53

Dividends per share

12.00

14.00

12.00

12.00

12.00

12.00

12.00

12.00

12.00

12.00

12.00

0.11

EBITDA/Net sales (%)

12.9%

12.4%

14.1%

16.3%

14.9%

15.3%

12.3%

12.0%

13.4%

12.6%

12.9%

Operating income ratio (%)

5.7%

4.8%

4.4%

5.1%

4.0%

4.7%

1.8%

1.5%

2.7%

3.7%

4.9%

Net income ratio (%)

2.8%

2.4%

1.0%

3.7%

2.4%

5.5%

3.9%

2.7%

3.7%

3.0%

4.0%

Equity ratio (%)

53.0%

47.6%

42.8%

40.3%

42.6%

44.7%

45.6%

44.8%

47.7%

46.4%

49.8%

ROA (%) (Note 4)

3.7%

2.8%

2.2%

2.9%

3.1%

4.2%

3.1%

2.4%

3.3%

3.0%

3.9%

ROE (%)

3.4%

2.9%

1.3%

5.2%

3.9%

8.9%

5.4%

3.9%

5.2%

4.5%

6.0%

Debt equity ratio (times)

0.54

0.72

1.02

0.99

0.88

0.79

0.82

0.87

0.74

0.77

0.65

Cash ﬂows

Per share data (Yen/U.S. dollars)

Key ratios

Notes
1. Amounts in US dollars were converted at ¥112.20 to one dollar, the currency exchange rate prevailing in the Tokyo Foreign Exchange Market as of March 31, 2017.
2. EBITDA = Ordinary income + interest expenses + depreciation and amortization costs + depreciation of goodwill - depreciation of negative goodwill
3. ROA = Ordinary income ÷ average total assets at the beginning and end of the fiscal year × 100

Operating Income /Operating Income Ratio

Net Sales / EBITDA(Millions of yen)
Net Sales(Millions of yen)
EBITDA

300,000

262,398

45,000(Millions of yen)
Operating Income

Total Assets / ROA（%）
Operating Income Ratio

15,000（%）
ROA

Millionsof yen30,000Millions of yen

4.9％
300,000
10,000

6.0

4.0

4.0

200,000

15,000100,000

8.0

362,205

400,000

Millions of yen

33,938200,000

6.0

12,900Millions of yen(Millions of yen)
Total Assets

3.9%

2.0

5,000

2.0

100,000

0

2013

Net sales

44

2014

2015

2016

2017

(Fiscal year ending March 31)

EBITDA

0

0

2013

2014

2015

2016

2017

0.0

(Fiscal year ending March 31)

Operating Income

Operating Income Ratio

0

2013

Total Assets

2014

2015

2016

2017

0.0

(Fiscal year ending March 31)

ROA

45

Management’s Discussion and Analysis
Business Environment and Results
During fiscal 2016, ending March 31, 2017, although
the Japanese economy is gradually recovering due toimprovements in corporate earnings and theemployment environment, accompanied by theeffects of various governmental policies, the situation
remained unpredictable due to uncertainty inoverseas economies resulting from factors such as theimpact on American economic policies deriving fromthe change of government and the UK leaving the EU.
For the Hokuetsu Kishu Paper Group, domestic sales
volume declined, but income and profits increased
due to the year-round contribution of Alberta-Pacific
Forest Industries Inc. and improvement of the
profitability of our overseas subsidiaries. The Groupʼs
results for this period were as follows.
Millions of yen
Net sales:
Operating income:Ordinary income:Net income
attributable toowners ofparent company:¥262,398¥12,900¥14,056¥10,381

Change+6.3%+39.7%+32.8%+38.8%

pamphlets, or calendars, continuing down-grading toordinary paper continues. And pressure on sales in thecommunication use paper area was harsh as, despite
the improvement over the previous year in sealed
postcard paper used for notifications, use of paper forledgers continued to decline and the transition toelectronic media continued.
In view of the above, the results in the Paper and Pulp
segment were as follows.
Millions of yen
Net sales:
Operating income:¥234,576¥10,321

Change+7.5%+41.0%

2. Packaging and Paper Processing Segment
In the Packaging and Paper Processing Segment,
orders for processed paper and liquid containers
increased, but the order environment was harsh inother fields, resulting in only a slight increase in sales.
Earnings increased due to the effect of various
cost-cutting measures.
In view of the above, the results for the Packaging andPaper Processing Segment were as follows.
Millions of yen
Net sales:
Operating income:¥20,146¥1,261

Change+0.1%+81.1%

Business Results by Segment
1. Paper and Pulp Segment
For the Paper and Pulp Segment, despite a decrease indomestic sales volume, income increased due to theyear-round contribution of Alberta-Pacific Forest
Industries Inc.
On the earnings front, improved profits by theoverseas consolidated subsidiaries resulted in higher
earnings.
Results by ProductPrinting Paper: The gentle economic recovery was aplus factor, but the impact of the transition to e-books
and other digital media, and the move away frompaper in publishing and advertising lowered sales.
White paperboard: Coated duplex board remainedsolid due to confectionary demand as products forfood packaging grew with the continued swing toeating-in.
High-quality white paper board was also strong due todemands for convenience store and supermarket POP
use and cosmetics related products. Specialty white
paperboard benefitted from steady growth in sales foruses such as packaging for sweets and forpharmaceutical product-related goods.
Specialty papers: In the functional paper area, sales ofchip carrier tape base paper used to transport
electronic components soared due to growing
demand for electronic components accompanying thepenetration of smartphones and rapid
computerization of automobiles, and its sales for use
as automobile use battery separators andair-conditioning system filters were strong.
In addition to falling demand for luxury printing
papers and fancy papers for use in catalogs,
46

3. Others
In the Others segment (encompassing wood products,
construction, transportation, warehousing and otherbusinesses), orders declined and income decreased inconstruction. On the earnings front, earnings rose dueto the effect of various cost-cutting measures.
In view of the above, the results in the Others segment
were as follows.
Millions of yen
Net sales:
Operating income:¥7,676¥623

Change-9.1%+13.1%

Financial Position
Total assets as of the end of fiscal 2016 (March 31,2017) decreased by ¥1,453 million to ¥362,205 million
from a year earlier. This decrease was mainly due toinvestment securities increasing by ¥7,129 million as aresult of the rise of our share price on one handaccompanied by a ¥8,013 million decrease of tangible
fixed assets due to depreciation expenses.
Total liabilities as of March 31, 2017 decreased by¥12,959 million to ¥181,170 million from a year ago.
The main reason was a decrease of ¥12,832 million ininterest-bearing debt.
Net assets as of March 31, 2017 increased by ¥11,505
million to ¥181,035 million from a year ago. The
increase in net assets was brought about mainly by anincrease in retained earnings from net profit
belonging to shareholders of the parent company etc.
of ¥ 8,081 million and an increase in other net
unrealized gains on securities of ¥3,091 million.

Cash FlowsThe balance of cash and cash equivalents as of March
31, 2017 increased by ¥394 million to ¥19,285 million
from a year earlier.
Cash flows from operating activities
Funds gained from operating activities totaled ¥28,918
million (38.1% increase year-on-year).
The main sources of cash were ¥12,515 million inincome before income taxes and minority interestsand ¥19,094 in depreciation and amortization. The
main components of cash used were returns frominvestment through the equity method of ¥3,019
million, an increase of receivables of ¥2,338 million,
and amount of corporate tax paid of ¥2,164 million.
Cash flows from investing activities
Net cash used in investing activities totaled ¥13,649
million (276.2% increase year-on-year).
The main components of cash used were ¥12,932
million for purchase of tangible fixed assets.
Cash flows from financing activities
Net cash used for financing activities totaled ¥14,447
million (17.4% increase year-on-year).
The main components of the cash used were ¥19,112
million for repayment of long-term loans, ¥10,000
million for redemption of corporate bonds, ¥2,273
million for payment of dividends, and ¥9,000 million
for reducing commercial paper. The main contributors
to cash were ¥20,000 million from the issuance ofcorporate bonds, ¥3,363 million proceeds fromlong-term loans, and ¥3,294 million from increase of
short-term loans.

Basic Policies Regarding Earnings
Distribution and Dividend Payments for
Fiscal 2016 and Fiscal 2017
In order to continue growth investment for the
improvement of long-term and stable corporate value,
Hokuetsu Kishu Paper Co., Ltd. implements capital
policy in light of a balance of financial soundness,
capital efficiency and returns to shareholders, andconsiders providing stable and continuous dividends
as its “fundamental policy regarding capital measures.”
The dividend is distributed twice a year with aninterim dividend and a year-end dividend, and thedecision-making bodies for the company with respect
to interim dividends and year-end dividends are, incompliance with the provisions of the Articles of
Association, the Board of Directors and the General
Meeting of Shareholders respectively.

Fiscal 2017 Outlook

The Japanese economy is gradually recovering and in
the next period, due to continuing improvements incorporate earnings and the employment environment,
it is expected to continue this gradual recovery.
However, there is fear of risk due to the impact of
uncertainty in overseas economies resulting fromfactors such as the impact on American economic
policies deriving from the change of government andthe UK leaving the EU.
Under these circumstances, the business environment
for the Pulp and Paper segment is expected to remain
uncertain going forward as a result of factors such as
decline in domestic demand for printing andcommunication paper and the rise in fuel prices. The
Group will announce revisions of our product prices inJapan, and endeavor to strengthen our earnings
structure and continue initiatives to exhaustively cut
costs.
Millions of yen
Net sales:
Operating income:Ordinary income:Net income
attributable toowners ofparent company:¥280,000¥12,000¥16,000

Change+6.7%-7.0%+13.8%¥11,000+6.0%

Major Business Risks
The Hokuetsu Kishu Paper Group currently considers
the following to be its principal areas of business risk.
・Fluctuations in product demand and prices
・Fluctuations in raw material and fuel market prices
・Foreign exchange rate fluctuations
・Overseas political and economic circumstances
・Interest rate fluctuations
・Legal regulations and litigation
・Natural and other disasters
・Capital investment
・Alliance-type contracts with other companies
・Mergers and acquisitions among other capitaltransactions

Based on this fundamental policy, the company
decided to distribute a year-end dividend of ¥6 pershare in fiscal 2016, ending March 31, 2017. Combinedwith the interim dividend of ¥6, the annual dividend
was maintained at ¥12 per share.
For fiscal 2017, ending March 31, 2018, the company
currently plans to maintain ¥6 per share for both theinterim and year-end dividends and the annual
dividend at ¥12 per share.
47

Consolidated Balance Sheets
Hokuetsu Kishu Paper Co., Ltd. and Consolidated Subsidiaries
As of March 31, 2017 and 2016

ASSETS

2017

Millions of yen

Thousands of
U.S. dollars(Note 1)

2016

2017

CURRENT ASSETS:
Cash and deposits (Notes 3, 4 & 8)

Unconsolidated subsidiaries and aﬃliates

2017

2016

2017

Short-term loans (Notes 4 & 9)

¥17,159¥13,987$152,932

Commercial paper (Note 4 & 9)

11,00020,00098,039Current maturities of long-term debt (Notes 4 & 9)

9,897

25,756

88,209Trade26,68526,947

237,834

Unconsolidated subsidiaries and aﬃliates

1,202

1,231

10,713

LIABILITIES AND NET ASSETSCURRENT LIABILITIES:¥19,494¥19,088$173,743

Notes and accounts receivable (Note 4)
TradeMillions of yen

Thousands of
U.S. dollars(Note 1)

67,201

65,463598,939

808

655

7,201

Notes and accounts payable (Note 4 & 8)

(48)

(46)

(428)

Inventories (Note 6)

44,88946,920400,080

Deferred income taxes (Note 12)

1,780

1,846

15,865

Income taxes payable (Note 12)

1,203

5,474

5,845

48,7891,335

11,898Prepaid expenses and otherAccrued expenses

9,085

139,771

1,244,189

79,439TOTAL CURRENT ASSETS

139,598

8,913

Other

7,373

8,204

65,71383,564

106,413744,777

Long-term debt (Notes 4 & 9), less current maturities

78,69869,844

701,408

Deferred income taxes (Note 12)

15,588

Allowance for doubtful accounts

TOTAL CURRENT LIABILITIESPROPERTY, PLANT AND EQUIPMENT:Land and timberland

26,36826,368235,009

Buildings and structures

80,36178,800716,230

Machinery and equipment

410,774

407,869

3,661,087

1,700

4,332

15,151

Leased assets
Construction in progress
Less accumulated depreciation
NET PROPERTY, PLANT AND EQUIPMENT

2,844

1,810

25,348522,047

519,179

4,652,825(377,665)(366,783)(3,365,998)

144,382

152,396

1,286,827

LONG-TERM LIABILITIES:
1,749

515

Accrued environmental expenditures

45

46

401

Provision for business structure improvement

275

279

2,451

Provision for reforestation

521

842

4,643

Liability for retirement beneﬁts (Note 17)

13,656

13,525

121,711

Asset retirement obligations (Note 18)

2,057

2,091

18,333

605

574

5,394

97,60687,716

869,929Other
TOTAL LONG-TERM LIABILITIESINVESTMENTS AND OTHER ASSETS:
Investments in securities (Notes 4 & 5 )30,56026,154

272,371

CONTINGENT LIABILITIES (Note 10)

Investments in and receivables from unconsolidated subsidiaries and aﬃliates

39,17036,533

349,109

Long-term loans receivable

14

21

125

NET ASSETS (Note 11)

Guarantee deposits

535

600

4,768

SHAREHOLDERSʼ EQUITY:

Asset for retirement beneﬁts (Note 17)

2,257

1,850

20,116

Common stock:

Deferred income taxes (Note 12)

1,459

1,585

13,004authorized

Other (Note 7)

6,690

7,218

59,625

̶500,000,000 shares in 2017 and 2016

Allowance for doubtful accounts (Note 7)(2,460)(2,470)(21,925)

issued and outstanding

78,22571,491

697,193¥362,205¥363,658$3,228,209

TOTAL INVESTMENTS AND OTHER ASSETSTOTAL ASSETS
The accompanying notes are an integral part of the consolidated ﬁnancial statements.

̶209,263,814 shares in 2017 and 2016

42,02142,021

374,519

Capital surplus

45,39745,401

404,608

Retained earnings

90,752

82,671

808,841

Treasury stock(10,160)(10,189)(90,553)

168,010

159,904

1,497,415

Unrealized holding gains on securities, net of taxes

10,535

6,633

93,895

Unrealized losses on hedging derivatives, net of taxes

(57)

(169)

(508)

1,596

1,891

14,224TOTAL SHAREHOLDERSʼ EQUITYACCUMULATED OTHER COMPREHENSIVE INCOME, NET OF TAXES

Foreign currency translation adjustment
Accumulated adjustments for retirement beneﬁt, net of taxes (Note 17)

211

319

1,881

TOTAL ACCUMULATED OTHER COMPREHENSIVE INCOME, NET OF TAXES

12,285

8,674

109,492

140

128

1,248

SHARE SUBSCRIPTION RIGHTSNON-CONTROLLING INTERESTSTOTAL NET ASSETSTOTAL LIABILITIES AND NET ASSETS

48

600

823

5,348

181,035

169,529

1,613,503¥362,205¥363,658$3,228,209

49

Consolidated Statements of Income

Consolidated Statements of Cash Flows

Hokuetsu Kishu Paper Co., Ltd. and Consolidated Subsidiaries
For the years ended March 31, 2017 and 2016

Millions of yen

NET SALES (Notes 19)
COST OF SALESGROSS PROFITSELLING, GENERAL AND ADMINISTRATIVE EXPENSES (Note 13)
OPERATING INCOME
OTHER INCOME(EXPENSES):Interest and dividend income
Interest expenses
Foreign exchange gains (losses)
Equity in income of affiliates
Gain on sales of investments in securities
Loss on sales of investments in securities
Loss on devaluation of investments in securities
Loss on sales or disposal on property, plant and equipment
Income from subsidies
Impairment loss on property, plant and equipment (Note 14)
Loss on reduction of property, plant and equipment
Costs in relation to suspending the operation of production equipment
Gain on abolishment of retirement benefit plan (Note 17)
Amortization of past service cost for retirement benefit accounting (Note 17)
Other, net
INCOME BEFORE INCOME TAXESINCOME TAXES (Note 12):Current
Deferred
NET INCOME
NET INCOME(LOSS) ATTRIBUTABLE TO NON-CONTROLLING INTERESTSNET INCOME ATTRIBUTABLE TO OWNERS OF PARENT COMPANYAMOUNTS PER SHARE OF COMMON STOCK (Note 2):
Net income
Diluted net income
Cash dividends applicable to the year

Thousands of
U.S. dollars(Note 1)

2017

2016

2017

¥262,398
209,628
52,77039,87012,900¥246,849
203,036
43,81334,577
9,236$2,338,663
1,868,342
470,321355,348
114,973890(655)(1,476)
3,019
28
(2)
(10)
(1,573)2
̶(2)(1,427)
̶
̶
821
(385)
12,515782(821)(2,838)
3,961
71
(0)
(8)
(886)
1
(46)
(2)
(637)
41
(108)
1,075
585
9,821

7,932
(5,838)(13,155)
26,907
250
(18)
(89)
(14,020)18
̶
(18)(12,718)
̶̶
7,318(3,431)
111,542

1,882
337
2,219
10,296(85)¥10,381

1,966
661
2,627
7,194
(283)
¥7,477

16,774
3,003
19,777
91,765(757)$92,522

Yen

U.S. dollars(Note 1)

2017

2016

2017

¥55.0952.99
12.00¥39.69
38.57
12.00

$0.49
0.47
0.11

The accompanying notes are an integral part of the consolidated ﬁnancial statements.

Hokuetsu Kishu Paper Co., Ltd. and Consolidated Subsidiaries
For the years ended March 31, 2017 and 2016

Millions of yen

Thousands of
U.S. dollars(Note 1)

2017

2016

2017

Income before income taxes¥12,515¥9,821$111,542

Depreciation and amortization

19,094

19,553

170,178

̶

46

̶

1,557

696

13,877

2

2

18

(890)

(782)

(7,932)

CASH FLOWS FROM OPERATING ACTIVITIES:

Impairment loss of property, plant and equipment
Loss (gain) on sales or disposal of property, plant and equipment
Loss on reduction of property, plant and equipment
Interest and dividend income
Interest expenses

655

821

5,838

(Increase) decrease in notes and accounts receivable(2,338)(1,388)(20,838)(Increase) decrease in inventories

1,663(4,114)

14,822

176

2,535

1,569

Increase (decrease) in notes and accounts payable
Increase (decrease) liability for retirement benefits
Equity in (earnings) losses of affiliates
Other, net

Hokuetsu Kishu Paper Co., Ltd. and Consolidated Subsidiaries
For the years ended March 31, 2017 and 2016

645

6,996

23,091

265,250

Interest and dividend income received

1,992

1,063

17,754

Interest paid

(671)

(857)

(5,980)(2,164)(2,353)(19,288)

28,91820,944

257,736

(281)

(298)

(2,504)

̶

5,381

̶
(115,258)

Income taxes paid
NET CASH PROVIDED BY OPERATING ACTIVITIESCASH FLOWS FROM INVESTING ACTIVITIES:Payments for purchases of investment securities
Proceeds from acquisition for shares of subsidiaries with changes in scope of consolidation
Payments for purchases of property, plant and equipment(12,932)(8,379)Proceeds from sales of property, plant and equipment

239

246

2,130

Other, net

(675)

(578)

(6,017)(13,649)(3,628)(121,649)

Increase (decrease) in short-term loans

3,295(7,095)29,367

Increase (decrease) in commercial paper(9,000)11,000(80,214)NET CASH USED IN INVESTING ACTIVITIESCASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from long-term loans

3,363

28,792

29,973

Repayments of long-term loans(19,112)(31,919)(170,339)

Proceeds from issuance of unsecured yen straight bonds

20,000̶

178,253

Redemption of unsecured yen straight bonds(10,000)(10,000)(89,127)

Dividends paid

(2,273)(2,272)(20,258)

(2)

(2)

(18)

(718)

(806)

(6,397)(14,447)(12,302)(128,760)

TRANSLATION (LOSS) GAIN ON CASH AND CASH EQUIVALENTS(428)(1,421)(3,815)NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

394

3,593

3,512

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR

18,891

15,298168,369

CASH AND CASH EQUIVALENTS AT END OF YEAR (Note 3)¥19,285¥18,891$171,881

NET INCOME
OTHER COMPREHENSIVE INCOME (Note 21)
Unrealized holding gains on securities, net of taxes
Unrealized gains on hedging derivatives, net of taxes
Foreign currency translation adjustment
Adjustments for retirement beneﬁt, net of taxes
Share of other comprehensive income of associates accounted for using equity method
TOTAL OTHER COMPREHENSIVE INCOME
COMPREHENSIVE INCOME
Comprehensive income attribute to owners of the parent company
Comprehensive income attribute to non-controlling interests

NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIESMillions of yen

2017

2016

2017

¥10,296¥7,194$91,765

3,070
112
(361)
(128)
851
3,544
¥13,840(1,385)
(100)
(688)
(663)
(1,112)(3,948)¥3,24627,362998(3,218)(1,141)
7,585
31,586$123,351

13,991
(151)

3,599
(353)

124,697(1,346)(3,913)(26,907)

785

Other, net

Thousands of
U.S. dollars(Note 1)(783)
(3,961)

29,761SUBTOTAL

Payments for purchases of treasury stock

Consolidated Statements of Comprehensive Income(439)(3,019)The accompanying notes are an integral part of the consolidated ﬁnancial statements.

The accompanying notes are an integral part of the consolidated ﬁnancial statements.

50

51

Consolidated Statements of Changes in Net Assets
Hokuetsu Kishu Paper Co., Ltd. and Consolidated Subsidiaries
For the Years ended March 31, 2017 and 2016

Millions of yen

Number of shares Common stock Capital surplus Retained earnings

Treasury stock

Unrealized holding
Total gains (losses) on
shareholdersʼsecurities,
equitynet of taxes

Unrealized gains(losses) on hedging Foreign currency
derivatives,translation
net of taxes
adjustment

Accumulated
adjustments for
retirement benefit,
net of taxes

Total accumulated
other
Share
comprehensive subscription
income, net of taxes
rights

Noncontrollinginterests

Total net assets

209,263,814¥42,021¥45,469¥77,455¥(10,225)¥154,720¥9,138¥(69)¥2,508¥975¥12,552¥123¥1,178¥168,573

Net income attributable to owners of parent company

̶

̶

̶

7,477

̶

7,477

̶

̶

̶

̶

̶

̶

̶

7,477

Cash dividends (¥12.00 per share)

̶

̶

̶

(2,261)

̶

(2, 261)

̶

̶

̶

̶

̶

̶

̶

(2,261)

Disposal of treasury stock

̶

̶

(9)

̶

39

30

̶

̶

̶

̶

̶

̶

̶

30

Purchases of treasury stock

̶

̶

̶

̶

(3)

(3)

̶

̶

̶

̶

̶

̶

̶

(3)

Capital increase of consolidated subsidiaries

̶

̶

(59)

̶

̶

(59)

̶

̶

̶

̶

̶

̶

̶

(59)

Net changes during the year

̶

̶

̶

̶

̶

̶

(2,505)

(100)

(617)

(656)

(3,878)5(355)(4,228)209,263,814¥42,021¥45,401¥82,671¥(10,189)¥159,904¥6,633¥(169)¥1,891¥319¥8,674¥128¥823¥169,529

Net income attributable to owners of parent company

̶

̶

̶

10,381

̶

10,381

̶

̶

̶

̶

̶

̶

̶

10,381

Cash dividends (¥12.00 per share)

̶

̶

̶

(2,262)

̶

(2, 262)

̶

̶

̶

̶

̶

̶

̶

(2,262)

Disposal of treasury stock

̶

̶

(4)

̶

31

27

̶

̶

̶

̶

̶

̶

̶

27

Purchases of treasury stock

̶

̶

̶

̶

(2)

(2)

̶

̶

̶

̶

̶

̶

̶

(2)

Change in scope of consolidated aﬃliates under equity method

̶

̶

̶

(38)

̶

(38)

̶

̶

̶

̶

̶

̶

̶

(38)

Balance at March 31, 2015

Balance at March 31, 2016

̶

̶

̶

̶

̶

̶

3,902

112

(295)

(108)

3,611

12

(223)

3,400

209,263,814¥42,021¥45,397¥90,752¥(10,160)¥168,010¥10,535¥(57)¥1,596¥211¥12,285

¥140

¥600

¥181,035

Unrealized gains(losses) on hedging Foreign currency
derivatives,translation
net of taxes
adjustment

Accumulated
adjustments for
retirement benefit,
net of taxes

Net changes during the year
Balance at March 31, 2017

Thousands of U.S. dollars (Note 1)

Number of shares Common stock Capital surplus Retained earnings

Noncontrollinginterests

Total net assets$1,510,954$59,118$(1,506)$16,854$2,843$77,309$1,141$7,335

̶

92,522

̶

̶

̶

̶

̶

̶

̶

92,522

̶(20,160)

̶

̶

̶

̶

̶

̶

̶

(20,160)

̶

276

241

̶

̶

̶

̶

̶

̶

̶

241

̶

̶

(18)

(18)

̶

̶

̶

̶

̶

̶

̶

(18)

̶

(339)

̶

(339)

̶

̶

̶

̶

̶

̶

̶

(339)

̶

̶

̶

̶

̶

34,777998(2,630)(962)

32,183107(1,987)30,303$374,519$404,608$808,841$(90,553)$1,497,415$93,895$(508)$14,224$1,881$109,492$1,248$5,348$1,613,503$374,519$404,643

Net income attributable to owners of parent company

̶̶

Cash dividends ($0.11 per share)̶̶

Disposal of treasury stock̶

Purchases of treasury stock
Change in scope of consolidated aﬃliates under equity method
Net changes during the year
Balance at March 31, 2017

Treasury stock

Total accumulated
other
Share
comprehensive subscription
income, net of taxes
rights$1,425,169

209,263,814

Balance at March 31, 2016

Unrealized holding
Total gains (losses) on
shareholdersʼsecurities,
equitynet of taxes$736,818$(90,811)

̶

92,522

̶(20,160)

̶

(35)

̶

̶

̶

̶

̶
209,263,814

The accompanying notes are an integral part of the consolidated ﬁnancial statements.

52

53

Notes to Consolidated Financial Statements
Hokuetsu Kishu Paper Co., Ltd. and Consolidated Subsidiaries
Years ended March 31, 2017 and 2016

Note 1: Basis of Presenting Consolidated Financial Statements
The accompanying consolidated financial statements
have been prepared in accordance with the provisions
set forth in the Japanese Financial Instruments andExchange Law and its related accounting regulations
and in conformity with accounting principles generally
accepted in Japan (“Japanese GAAP” ), which are
different in certain respects as to application anddisclosure requirements of International Financial
Reporting Standards.
The accompanying consolidated financial
statements have been restructured and translated into
English from the consolidated financial statements of
HOKUETSU KISHU PAPER CO., LTD. (“the Company” )prepared in accordance with Japanese GAAP and filedwith the appropriate Local Finance Bureau of the
Ministry of Finance as required by the Financial

Instruments and Exchange Law. Certain
supplementary information included in the statutory
Japanese language consolidated financial statements,
but not required for fair presentation, is not presented
in the accompanying consolidated financial
statements.
The translation of the Japanese yen amounts into
U.S. dollars is included solely for the convenience ofreaders outside Japan, using the prevailing exchange
rate at March 31, 2017, which was ¥112.20 to U.S.
$1.00. The convenience translation should not be
construed as representations that the Japanese yenamounts have been, could have been, or could in the
future be, converted into U.S. dollars at this or any
other rate of exchange.

Note 2: Summary of Significant Accounting Policies(a) Consolidation
The consolidated financial statements include theaccounts of the Company and its significant
subsidiaries ( “the Companies” ). All significant
inter-company balances, transactions and unrealized
profits have been eliminated in consolidation.
In the elimination of investments in subsidiaries, theassets and liabilities of the subsidiaries are evaluatedusing the fair value at the time the Company acquired
control of the respective subsidiaries.
Goodwill, except for immaterial amounts, areamortized within twenty years from the day of theoccurrence of goodwill for the period when the effectexists.
Investments in all significant unconsolidated
subsidiaries and affiliates are accounted for by theequity method.
The number of consolidated subsidiaries andaffiliates accounted for by the equity method is asfollows:
Number of Companies
2017

2016

Consolidated subsidiaries

22

24

Affiliates accounted forby the equity method

55The consolidated financial statements are preparedusing their financial statements as of their accountclosing date. Significant transactions, which occurred
during the period between these fiscal year ends andMarch 31, are adjusted in the accompanying
consolidated financial statements.
(b) Consolidated statements of cash flows
In preparing the consolidated statements of cash
flows, cash on hand, readily-available deposits andshort-term highly liquid investments with maturities
not exceeding three months at the time of purchase54

are considered to be cash and cash equivalents, andwhich represent an insignificant risk of change invalue.
(c) Translation of foreign currencies
Monetary assets and liabilities denominated in foreign
currencies are translated into Japanese yen at the spot
exchange rates as of the account closing date, with thetranslation gains or losses reported in profit or loss.
Assets and liabilities of overseas subsidiaries aretranslated into Japanese yen at the spot exchange
rates as of the account closing date, and their income
and expenses are translated into Japanese yen at the
average exchange rates during the accounting period,
with the translation gains or losses included in foreign
currency translation adjustment and non-controllinginterests in the net assets section of the consolidatedbalance sheet.
(d) Securities
Under the Japanese accounting standard for financial
instruments, all companies are required to examine theintent of holding each security and classify thosesecurities as (a) securities held for trading purposes(“trading securities” ), (b) debt securities intended to beheld to maturity (“held-to-maturity debt securities” ),(c) equity securities issued by subsidiaries and affiliatesor (d) all other securities that are not classified in any of
the above categories (“available-for-sale securities” ).
The Companies did not have the securities defined as(a) and (b) above in the years ended March 31, 2017and 2016.
Equity securities issued by unconsolidated
subsidiaries and affiliates not accounted for by theequity method are stated at the moving-average cost.
If the market value of available-for-sale securities
declines significantly, such securities are stated at fairmarket value and the difference between fair market
value and the carrying amount is recognized as loss inthe period of the decline. If the fair market value ofequity securities, except for those accounted for by theequity method, is not readily available, such securities
should be written down to net asset value with acorresponding charge in the statement of income in theevent net asset value declines significantly. In thesecases, such fair market value or the net asset value willbe the carrying amount of the securities at the
beginning of the next year.
Available-for-sale securities are included ininvestments and other assets.
Available-for-sale securities with available fair market
values are stated at fair market value. Unrealized gain
and loss on these securities are reported, net of
applicable income taxes, as a separate component ofaccumulated other comprehensive income, net of tax innet assets section. Realized gain and loss on sale of suchsecurities are computed using the moving-average cost.
(e) Allowance for doubtful accounts
The Companies provide the allowance for doubtful
accounts in an amount sufficient to cover probablelosses on collection by estimating individuallyuncollectible amounts in addition to applying an actual
rate of bad debts incurred in the past.
(f) Inventories
Inventories held for sale in the ordinary course ofbusiness are stated at the lower of cost or net sales
value. Cost is primarily determined by the monthly
average method for raw materials, supplies andmerchandise and finished goods. Cost ofwork-in-process is primarily determined using the FIFO
(first-in, first-out) method. Cost of timber is primarily
determined using the specific identification method.
(g) Property, plant and equipment (excluding leased
assets)Property, plant and equipment are stated at cost.
Subsidies are deducted directly from the cost of therelated assets.
• Buildings, structures and machinery and equipment
Mainly straight-line method over the useful lives.
• Other tangible fixed assets
Mainly declining-balance method at rates
determined based on the useful lives.
Expenditures for new facilities and those that
substantially increase the useful lives of existing plantand equipment are capitalized. Maintenance, repair andminor renewals are charged to expenses as incurred.
(h) Finance leases
Finance leases, except for certain immaterial or
short-term finance leases which are accounted for as
operating leases, are capitalized.
Leased assets related to financial leases that transfer
ownership rights are depreciated by the samedepreciation method that is applied to fixed assets
owned by the Companies.
Leased assets related to finance leases withouttransferring ownership are depreciated over the lease

period as useful life using the straight-line method withno residual value.
As permitted, finance leases which commenced prior
to April 1, 2008 and have been accounted for as
operating leases, continue to be accounted for as
operating leases with disclosure of certain “as if
capitalized” information.
(i) Accrued environmental expenditures
Accrued environmental expenditures are provided at an
estimated amount to dispose of PCB (polychlorinatedbiphenyl) waste.
(j) Provision for reforestation
Based on an agreement with the state government, theCompanyʼs Canadian subsidiary is engaged in forest
harvesting for the purpose of procuring raw timber for
pulp materials and the anticipated costs arising fromforest planting (coniferous forest) have been
incorporated into accounts as liabilities.
(k) Provision for business structure improvement
A provision has been made for the amount of estimatedlosses incurred in connection with a review which was
implemented to improve business structure.
(l) Issuance costs of stocks and bonds
Issuance costs of stocks and bonds are expensed as
incurred.
(m) Derivatives and hedge accounting
The Companies state derivative financial instruments atfair value and recognize changes in the fair value as gainor loss unless derivative financial instruments are used forhedging purposes.
If derivative financial instruments are used as hedges
and meet certain hedging criteria, the Companies defer
recognition of gain or loss resulting from changes in fairvalue of derivative financial instruments until the related
loss or gain on the hedged items is recognized.
Special treatment has been adopted for interest rate
swaps that qualify for special treatment.
In addition, integrated treatment has been adopted forinterest rate and currency swaps that qualify for
integrated treatment (special treatment / appropriatedtreatment).
(n) Income taxes
The Companies recognize the tax effects of temporary
differences between the carrying amounts of assets andliabilities for tax and financial reporting. The provision forincome taxes is computed based on the pretax income
included in the consolidated statements of income. The
asset and liability approach is used to recognize deferred
tax assets and liabilities for the expected future tax
consequences of temporary differences.

55

Notes to Consolidated Financial Statements(o) Per share information
Net income per share is computed based upon the
average number of shares of common stock outstanding
during each year. The average number of common sharesused in the computation was 188,442,763 shares and
188,364,465 shares in 2017 and 2016, respectively. For theyear ended March 31, 2017, diluted net income per sharewas ¥52.99（$ 0.47）.
Cash dividends per share have been presented on an
accrual basis and include dividends to be approved after
the balance sheet date, but applicable to the year thenended.
(p) Reclassification and restatement
Certain prior year amounts have been reclassified toconform to the current year presentation.
These reclassifications had no impact on previously
reported results of operations or retained earnings.
(q) Accounting methods for retirement benefits(1) Attribution method for projected retirement benefits
This method is applied in calculating retirement
benefit obligations and involves attributing the
projected retirement benefits to the period up to theend of the current consolidated accounting period
based on benefit formula basis.
(2) Method of amortization relating to actuarial gain or
losses and past service cost.
Past service cost is expensed as incurred.
Actuarial gains or losses are amortized from thesubsequent financial year using the straight-line
method over 10 years, which is not longer than anestimated average remaining service period of theemployees when the gains or losses are incurred.
(3) Simplified method for small enterprises, etc.
When calculating retirement benefit obligations andretirement benefit costs, some consolidated
subsidiaries use the simplified method, in which theyear-end voluntary payments relating to retirement
benefits are treated as retirement benefit obligations.
(r) Change in accounting policy
Due to amendments to the Japanese Corporation Tax Act,
the Company and its domestic subsidiaries adopted“Practical Solution on a change in depreciation method
due to Tax Reform 2016” (Practice Issue Task Force No.32,
June 17, 2016 (hereinafter, “PITF No.32” )) from thecurrent fiscal year and changed the depreciation method
for buildings, facilities attached to buildings andstructures, which were acquired since April 1, 2016, fromthe declining balance method to the straight line method.
This change will have a minimal effect on profit/loss forthe current fiscal year.

56(s) Change in presentation method (Note 4)
The monetary amount of “Electronically recordedmonetary claims” included in “Notes and accounts
receivable” under “Total assets” in the previous fiscal
year has become more important.
As a result, the amount of 66,118 million yen
presented in “Notes and accounts receivable” on Note
4:Financial Instruments for the previous fiscal year has
been reclassified as 63,531 million yen of “Notes andaccounts receivable” and 2,587 million yen of“Electronically recorded monetary claims.”(t) Additional information
The Company and its domestic subsidiaries adopted“Revised Implementation Guidance on Recoverability ofDeferred Tax Assets” (ASBJ Guidance No. 26, March 28,
2016 (hereinafter, “Guidance No.26” )) from the current
fiscal year.

Note 3: Cash and Cash Equivalents
A reconciliation of cash and deposits shown in the consolidated balance sheets and cash and cash equivalents
shown in the consolidated statements of cash flows at March 31, 2017 and 2016 are as follows:
Millions of yen

Thousands of
U.S. dollars

2017

2016

2017

Cash and deposits¥19,494¥19,088$173,743

Restricted deposits

(209)

(197)

(1,862)¥19,285¥18,891$171,881

Cash and cash equivalents

Breakdown of major assets and liabilities of companies that newly became consolidated subsidiaries throughshare acquisition
Year ended March 31, 2016
Breakdown of assets and liabilities at the time of consolidation of Alpac Forest Products Inc., and Alpac Pulp Sales
Inc., which newly became consolidated subsidiaries through share acquisition, acquisition value of shares andproceeds from acquisition (net increase) are as follows:
Millions of yen

Current assets¥20,549

Property, plant and equipment

4,369

Current liabilities(4,400)Long-term liabilities(13,809)

Foreign currency translation adjustment

183

Acquisition value of shares

6,892

Cash and cash equivalents(12,273)

Proceeds from acquisition of shares of subsidiaries with changes in scope of consolidation¥5,381

Note 4: Financial Instruments
Information on financial instruments for the year ended March 31, 2017 and 2016 are as follows:
Status of Financial Instruments
The Companies raises necessary funds for investment
plans to conduct its business of manufacturing, saleand processing of paper mainly by bank loans or
issuance of bonds. Temporary cash surpluses areinvested in deposits and short-term working funds areraised by bank borrowings or issuance of commercial
paper. Derivatives are used, not for speculative
purposes, but to manage exposure to financial risks as
described below.
The Company manages and mitigates customer
credit risk from trade receivables in accordance with its
Debt Management Policy. Consolidated subsidiaries
also implement the same control in accordance with
the Companyʼs Debt Management Policy.
Investments in securities are exposed to the risk ofmarket price fluctuations. Those securities arecomposed of mainly stocks associated with businessand capital alliances with principal business partners.
The Companies check regularly to maintain awarenessof their fair value.
The Company uses interest rate swap contracts toavert their exposure to the risk of fluctuations ininterest costs related to debt, and interest rate andcurrency swaps to avert exposure to the risk offluctuations in principal and interest costs related toforeign currency-denominated debt.
The Company and certain consolidated subsidiaries
use forward exchange contracts to address the risk offluctuations in foreign exchange rates regarding
certain trade receivables and payables denominated inforeign currencies.
Fair Values of Financial Instruments
The book values, fair values and differences of thefinancial instruments as of March 31, 2017 and 2016
are as follows. Financial instruments with fair values
not readily determinable are excluded from thefollowing table (see (b)):

57

Notes to Consolidated Financial Statements

Millions of yen

2017Book value

Fair value

Diﬀerence(1) Cash and deposits¥19,494¥19,494¥̶(2) Notes and accounts receivable

64,15064,150̶(3) Electronically recorded monetary claims

3,859

3,859

̶

①Stocks of affiliates

34,35945,134

10,775②Available-for-sale securities

24,207

24,207

̶Total assets¥146,069¥156,844¥10,775(5) Notes and accounts payable¥20,149¥20,149¥̶(4) Investments in securities:(6) Electronically recorded obligations-operating

7,738

7,738

̶

(7) Short-term loans

17,15917,159̶(8) Commercial paper

11,00011,000̶(9) Bonds*1

30,00030,04949(10) Long-term loans payable*2

58,20658,012(194)¥144,252¥144,107¥(145)

¥(82)

¥(82)

¥̶

Total liabilities
Derivative transactions*3

Millions of yen

2016Book value

Fair value

Diﬀerence(1) Cash and deposits¥19,088¥19,088¥̶(2) Notes and accounts receivable

63,531

63,531̶(3) Electronically recorded monetary claims

2,587

2,587

̶

①Stocks of affiliates

30,97230,100(872)②Available-for-sale securities

20,01320,013

̶Total assets¥136,191¥135,319¥(872)(5) Notes and accounts payable¥21,663¥21,663¥̶(4) Investments in securities:(a) Calculation method of fair values of financial
instruments and securities and derivativetransactions are as follows:
Assets(1) Cash and deposits
With regard to deposits with indefinite maturity andtime deposits with maturities within one year, thecarrying values approximate fair value.
(2) Notes and accounts receivable and (3) Electronicallyrecorded monetary claims
The carrying values of assets mentioned above
approximate fair value because of their shortmaturities.
(4) Investments in securities
The fair value of marketable equity securities ismeasured at the quoted market price of the stock
exchange. Please see Note 5 regarding securities
categorized by holding purposes.
Liabilities(5) Notes and accounts payable (6) Electronicallyrecorded obligations-operating (7) Short-term loans,and (8) Commercial paper

The carrying values of liabilities mentioned above
approximate fair value because of their short maturities.
(9) Bonds
The fair value of bonds issued by the Company ismeasured at the quoted market price.
(10) Long-term loans payable
The fair values of long-term loans payable aredetermined by discounting the aggregated amountof the principal and interest using estimated interest
rate, assuming that the same type of borrowing was
newly made. The fair values of long term loans
payable which qualify for special treatment forinterest rate swaps and integrated treatment forinterest rate currency swaps are determined bydiscounting the aggregated amount of the principal
and interest that are included as part of the relevantinterest rate swap and interest rate currency swap at
the estimated interest rate, assuming that the same
type of borrowing was newly made.
Derivative Transaction
For details of derivative transactions, see Note 16.

(b) Unlisted equity securities have no market price and there is no way of estimating for future cash flows.
Determining fair value is therefore acknowledged to be extremely difficult and they are not included in(4) Investments in securities.
Thousands of
U.S. dollars

Millions of yen

Unlisted equity securities

2017

2016

2017

¥10,341¥10,791$92,166(6) Electronically recorded obligations-operating

6,515

6,515

̶

(7) Short-term loans

13,987

13,987̶(8) Commercial paper

20,00020,000̶(9) Bonds*1

20,00020,111

111(10) Long-term loans payable*2

74,55675,122566¥156,721¥157,398¥677¥(242)¥(242)

¥̶

2017

2016

2017

Thousands of U.S. dollars

Due inone year

Due after one
year throughtwo years

Due inone year

Due after one
year throughtwo years

Due inone year

Due after one
year throughtwo years

Cash and deposits¥19,494¥̶

¥19,088¥̶

$173,743$̶

Notes and accounts receivable

64,150̶

63,531

̶

571,747

̶Electronically recorded monetary claims

3,859

̶

2,587

̶

34,393

̶

¥87,503¥̶

¥85,206¥̶

$779,883$̶

Total liabilities
Derivative transactions*3

2017Book value

Fair value

Diﬀerence(1) Cash and deposits$173,743$173,743$̶(2) Notes and accounts receivable571,747

571,747

̶(3) Electronically recorded monetary claims

34,39334,393

̶①Stocks of affiliates

306,230

402,264

96,034②Available-for-sale securities

215,749

215,749̶

$1,301,862$1,397,896$96,034$179,581$179,581$̶(6) Electronically recorded obligations-operating

68,966

68,966

̶(7) Short-term loans

152,932

152,932

̶(c) Planned redemption of receivables after the balance sheet dateMillions of yen

Total

Thousands of U.S. dollars(4) Investments in securities:

Total assets(5) Notes and accounts payable(8) Commercial paper

98,03998,039̶(9) Bonds*1

267,380

267,816436(10) Long-term loans payable*2

518,770

517,042(1,728)$1,285,668$1,284,376$(1,292)$(731)$(731)$̶

Total liabilities
Derivative transactions*3(d) Repayment schedule of short-term bank loans, commercial paper, bonds and long-term loans payable
Millions of yen

2017
Due inone year

Due after one
year throughtwo years

Due after two
years throughthree years

Due after three
years throughfour years

Due after four
years throughfive years

Due overfive years

Short-term bank loans¥17,159

¥̶

¥̶

¥̶

¥̶

¥̶

Commercial paper

11,000

̶

̶

̶

̶

̶

̶

10,000̶̶

20,000̶

Bonds
Long-term loans payable*
Total

9,665

6,412

13,891

10,402

1,762

16,074¥37,824¥16,412¥13,891¥10,402¥21,762¥16,074*1 Bonds payable within a year are classified as “current maturities of long-term debt” on the consolidated balance sheets.
*2 Current portion of long-term loans payable is classified as “current maturities of long- term debt” on the consolidated balance sheets.
*3 Receivables and payables incurred by derivative transactions are presented in net. Net payables are presented in parenthesis.

5859Notes to Consolidated Financial Statements

Millions of yen

2016
Due inone year

Due after one
year throughtwo years

Due after two
years throughthree years

Due after three
years throughfour years

Due after four
years throughfive years

Due overfive years

Short-term bank loans¥13,987

¥̶

¥̶

¥̶

¥̶

¥̶

Commercial paper

20,000

̶

̶

̶

̶

̶

Bonds

10,000̶

10,000̶̶̶Long-term loans payable*

15,104

11,358

8,342

13,962

7,957

17,833

Total¥59,091¥11,358¥18,342¥13,962¥7,957¥17,833

Thousands of U.S. dollars

Note 6: Inventories
Inventories at March 31, 2017 and 2016 are as follows:

Short-term bank loans
Commercial paper
Bonds
Long-term loans payable*
Total

Due inone year

Due after two
years throughthree years

Due after three
years throughfour years

Due after four
years throughfive years

Due overfive years$152,932

$̶

$̶

$̶

$̶

$̶

98,039

̶

̶

̶

̶

̶

̶

89,127̶̶

178,254

̶

86,141

57,148123,806

92,70915,704

143,262$337,112$146,275$123,806$92,709$193,958$143,262

Thousands of
U.S. dollars

2017

2016

2017
$182,799¥20,510¥23,730

Work-in-process

1,976

2,094

17,611

Raw materials and supplies

22,40321,096

199,670¥44,889¥46,920$400,080

Merchandise and Finished goods

2017
Due after one
year throughtwo years

Millions of yen

Note 7: Amounts Relating to Fraudulent Activity for the year ended March 31, 2015
Balances relating to fraudulent activity at March 31, 2017 and 2016 are as follows:
Millions of yen

Thousands of
U.S. dollars

2017

2016

2017

Other in investments and other assets¥2,360¥2,360$21,034

Allowance for doubtful accounts in investments and other assets(2,360)(2,360)(21,034)

Millions of yen

Thousands of
U.S. dollars*Long-term loans payable include the current maturities of long-term loans payable.

Balances:

Note 5: Securities
The following tables summarize acquisition costs and book value of securities with available fair value at March
31, 2017 and 2016:
Available-for-sale securities:

Millions of yen

2017
Type

Acquisition cost

Book value

Diﬀerence¥12,299¥23,878¥11,579

374

329

(45)

¥12,673¥24,207¥11,534

Note 8: Assets Pledged and Secured Liability
Assets Pledged and Secured Liability at March 31, 2017 and 2016 are as follows:

Equity securities:
with book value (fair value) exceeding acquisition costswith book value (fair value) not exceeding acquisition costs

Cash and deposits

2017

2016

2017

¥209

¥197

$1,862Millions of yen

Thousands of
U.S. dollars

Millions of yen

2016
Type

Acquisition cost

Book value

Diﬀerence¥10,156¥17,628¥7,472

2,521

2,385

(136)

¥12,677¥20,013¥7,336

Notes and accounts payable

2017

2016

2017

¥212

¥731

$1,889Equity securities:
with book value (fair value) exceeding acquisition costswith book value (fair value) not exceeding acquisition costs

Thousands of U.S. dollars

2017
Type

Acquisition cost

Book value

Diﬀerence$109,617$212,816$103,199

Equity securities:
with book value (fair value) exceeding acquisition costswith book value (fair value) not exceeding acquisition costs

Total sales of available-for-sale securities sold in the year
ended March 31, 2017 amounted to ¥88 million ($784
thousand), the related gains amounted to ¥28 million($250 thousand) and the related losses amounted to ¥2
60

3,333

2,933

(400)

$112,950$215,749¥102,799

million ($18 thousand). Total sales of available-for-salesecurities sold in the year ended March 31, 2016
amounted to ¥106 million, the related gains amounted to¥71 million and the related losses amounted to ¥0 million.
61

Notes to Consolidated Financial Statements

Note 9: Short-Term Debt, Commercial Paper, and Long-Term Debt

Note 11: Net Assets(1) Short-term debt had weighted-average interest rates of 1.36% and 0.74% at March 31, 2017 and 2016,
respectively.
(2) The weighted-average interest rate on commercial paper were (0.00)% and 0.00% at March 31, 2017 and2016, respectively.
(3) Long-term debt at March 31, 2017 and 2016 are as follows:

Net assets comprise four subsections, which areshareholdersʼ equity, accumulated othercomprehensive income, net of tax, share subscription
rights and non-controlling interests.
Under the Japanese Corporate Law ( “the Law” )and regulations, the entire amount paid for new sharesis required to be designated as common stock.
However, a company may, by a resolution of the Boardof Directors, designate an amount not exceeding
one-half of the price of the new shares as additional
paid-in capital, which is included in capital surplus.
In cases where a dividend distribution of surplus ismade, the smaller of an amount equal to 10% of thedividend or the excess, if any, of 25% of common stockover the total of additional paid-in-capital and legal
earnings reserve must be set aside as additional
paid-in-capital or legal earnings reserve. Legal earnings
reserve is included in retained earnings in theaccompanying consolidated balance sheets.
Appropriations of legal earnings reserve andadditional paid-in capital generally require a resolutionof the shareholders' meeting.

Millions of yen

Thousands of
U.S. dollars

2017

2016

2017

(Loans due with one year, weighted-average interest rate 0.56%)¥9,665¥15,104$86,141(Loans due after one year, weighted-average interest rate 0.46%)

432,629

Long-term loans from banks and other financial institutions
48,54159,4520.685% unsecured yen straight bonds due in 2016

̶

10,000̶

0.384% unsecured yen straight bonds due in 201910,00010,00089,1270.170% unsecured yen straight bonds due in 2021

10,000̶

89,1270.180% unsecured yen straight bonds due in 2021

10,000̶

89,127

232

652

2,068

Lease obligations(Loans due with one year)

157

392

1,398

88,59595,600789,617

Less current portion due with one year

(9,897)(25,756)(88,209)

Long-term debt

¥78,698¥69,844$701,408

Millions of yen

Thousands of
U.S. dollars¥9,897$88,2092019

16,462

146,720

2020

13,937124,2162021

10,43993,039(Loans due after one year)

Additional paid-in capital and legal earnings reserve
may not be distributed as dividends. However, byresolution of the shareholdersʼ meeting, all additional
paid-in-capital and all legal earnings reserve may betransferred to other capital surplus and retained
earnings, respectively, which are potentially available
for dividends. Other capital surplus and retained
earnings are included in capital surplus and retained
earnings, respectively.
The maximum amount that the Company can
distribute as dividends is calculated based on the
non-consolidated financial statements of the Company
in accordance with the Law and regulations.
At the annual shareholdersʼ meeting held on June
28, 2017, the shareholders approved cash dividends
amounting to ¥1,137 million ($10,134 thousand). Suchappropriations have not been accrued in the
consolidated financial statements at March 31, 2017.
Such appropriations are recognized in the period inwhich they are approved by the shareholders.

(4) The annual maturities of long-term debt at March 31, 2017 are as follows:Year ending March 31,

20182022 and thereafter

37,860337,433¥88,595$789,617

Note 12: Income Taxes
The Companies are subject to a number of taxes leviedon income, which, in the aggregate, resulted in normal
statutory income tax rates of approximately 30.7% and32.8% for the year ended March 31, 2017 and 2016,
respectively.

2017

2016

30.7％

32.8％

Non-deductible expenses

0.5

0.6

Dividends received not taxable

(0.4)

（0.5）

Per capita inhabitants taxes

0.4

0.5

Valuation allowance

(7.3)

2.4

Effect of multiple tax rates

(0.0)

(0.1)

Effect of change in tax rates

̶

1.7

Equity in income of affiliates(7.4)（13.2）

Other

1.2

2.5

17.7%

26.7%

Statutory tax rate

Note 10: Contingent Liabilities

62

Millions of yen

Thousands of
U.S. dollars

2017

2016

2017

Notes receivable discounted

¥ 41

̶

$365

Balance of notes receivable transferred by endorsement

¥ 149

¥113

$1,328The following table summarizes the significant
differences between the statutory tax rate and theCompaniesʼ effective tax rate for financial statement
purposes for the years ended March 31, 2017 and 2016:

Effective tax rate

63

Notes to Consolidated Financial Statements

Significant components of deferred income tax assets and liabilities at March 31, 2017 and 2016 are as follows:

Note 14: Impairment Loss on Property, plant and equipment

Millions of yen

Thousands of
U.S. dollars

2017

2016

2017

¥799

¥842

$7,121Use

Location

Type

Processed paper
production equipment

Suita-city, Osaka

Buildings and structures¥23

Idle assets

Kihou-cho,Minamimuro-gun, Mieand others

Land and others

23

In the year ended March 31, 2016, the Companies recorded impairment loss on property, plant and equipment
for the following group of assets:

Deferred income tax assets:

AmountAccrued bonuses
Unrealized gain from sales of inventories between the Companies
Asset for retirement benefit

291

319

2,594

4,557

4,517

40,615

25

29

223

Unrealized gain from sales of fixed assets between the Companies

1,030

1,079

9,180

Unrealized holding gain on fixed assets

3,210

3,658

28,610Depreciation and amortization

962

1,015

8,574

Impairment loss of fixed assets

542

658

4,831

Long-term accrued amount payable

1,052

1,051

9,376

Provision for business structure improvement

84

85

749

Accrued environmental expenditures

30

14

267

Asset retirement obligations

433

431

3,859

Net operating loss carry forwards

1,503

1,172

13,396

Allowance for doubtful accounts

834

836

7,433

Loss on devaluation of investments in securities

2,466

2,637

21,97817,81818,343

158,806(8,820)(9,138)(78,610)¥8,998¥9,205$80,196

Liability for retirement benefit¥(953)¥(836)$(8,494)

Reserve deductible for Japanese tax purpose

(105)

(126)

(936)

Reserve for deferred gain on sales of fixed assets for tax purpose

(810)

(825)

(7,219)Valuation difference on Property, plant and equipment(1,939)(1,938)(17,282)

Unrealized holding gain on securities

Other
Subtotal deferred income tax assets
Valuation allowance
Total deferred income tax assets

Total

The Companies classify property, plant and equipment
into groups based on the place of business and the
products with mutual supplementation. However, theCompanies classify real estate for rent and idle
properties, which are not expected to be used in the
future, individually.
(Process for Recognition of Impairment Loss on
Property, plant and equipment)
Due to a decision to consolidate production structuresin parts of the packaging/paper processing business,
the Companies reduced the book value of the relevant
paper processing and production facilities to theMillions of yen¥46

recoverable value, and recorded the reduction of said
amount under other expenses as an impairment loss onproperty, plant and equipment.
For idle assets with no planned future use, theCompanies reduced book value to recoverable value
and also recorded such reductions under otherexpenses as an impairment loss on property, plant andequipment.
The recoverable value is measured by the net salevalue, evaluated based on the rational estimates. The
recoverable value for the assets which have difficulty insale and other conversion is evaluated as zero.

Deferred income tax liabilities:(3,411)(2,284)(30,401)

Accumulated adjustments for retirement benefit

(140)

(189)

(1,248)

Other

(150)

(91)

(1,335)

Total deferred income tax liabilities¥(7,508)¥(6,289)$(66,915)

Net deferred income tax assets (liabilities)¥1,490¥2,916$13,281

Note 13: Research and Development Expenses
Research and development expenses are recognized in
the consolidated statements of income in the year
when they are incurred. Research and development
expenses included in selling, general and64

administrative expenses are ¥778 million ($6,934
thousand) and ¥710 million for the years ended March
31, 2017 and 2016, respectively.

65

Notes to Consolidated Financial Statements

Note 15: Lease Transactions

Note 16: Derivative Transactions

Lease transactions for the years ended March 31, 2017 and 2016 are as follows:

Derivative financial instruments currently utilized by
the Companies include mainly forward exchange
contracts, interest rate swap contracts, and interest
rate and currency swaps contracts, all of which are forhedging purposes.
The Companies use forward exchange contracts toavert exposure to market risks arising from changes inforeign exchange rates, interest rate swap contracts
to avert the Companiesʼ exposure to adverse
movements in interest rates and interest rate andcurrency swap contracts to avert the Companiesʼ
exposure to adverse movements in principal andinterest on foreign currency loans payable.
Forward exchange contracts, interest rate swap
contracts, and interest rate and currency swaps
contracts, are subject to risks of foreign exchange ratechanges and interest rate changes, respectively.

Finance lease transactions without ownership transfer to lessee, which commenced prior to April 1, 2008(a) Purchase price equivalent, accumulated depreciation equivalent, accumulated impairment loss
equivalent and book value equivalent:Millions of yen

Thousands of
U.S. dollars

2017

2016

2017

Purchase price equivalent¥̶¥1,161$̶Accumulated depreciation equivalent

̶

1,122

̶

Accumulated impairment loss equivalent

̶

̶

̶

Book value equivalent

̶

39

̶

Machinery, equipment and others

Purchase price equivalent is calculated using the inclusive-of-interest method.
(b) Lease commitments and the balance of impairment loss account on leased assets included in theoutstanding lease commitments:
Thousands of

Due within one year
Due after one year
Balance of impairment loss account on leased assets
included in the outstanding lease commitments

Millions of yen

U.S. dollars

2017

2016

2017

¥̶

¥39

$̶

̶

̶

̶

¥̶

¥39

$̶

¥̶

¥̶

$̶

Derivative transactions for which hedge accounting had not been applied at March 31, 2017 and 2016 are as follows:
Thousands of
U.S. dollars

Millions of yen

2016

2017
Contract amountContract amountOver
Total one year

Fair Valuation
value Gain (Loss)

Over
Total one year

U.S. Dollar

¥20

¥̶

¥(0 )

¥(0 )

¥10

¥̶

¥0

Canadian Dollar

¥̶

¥̶

¥̶

¥̶

¥86

¥̶

¥2

Type of derivativetransaction

2017
Contract amount

Fair Valuation
value Gain (Loss)

Over
Total one year

Fair Valuation
value Gain (Loss)

¥0

$178

$̶

$(0 )

$(0 )

¥2

$̶

$̶

$̶

$̶

Forward exchange
contracts
Buy contracts

Lease commitments are calculated using the inclusive-of-interest method.
(c) Lease payments, reversal of allowance for impairment loss on leased assets, depreciation equivalent:

Lease payments

The derivative transactions are executed by theCompanyʼs Corporate Planning Department andmanaged by the Companyʼs Accounting
Department in accordance with the establishedpolicies and within the specified limits on theamounts of derivative transactions allowed.
Information on derivative transactions is reported to
the Executive Management Meeting quarterly.
The Companies evaluate hedge effectiveness bycomparing the cumulative changes in cash flows or
the changes in fair value of hedged items and thecorresponding changes in fair value of the hedging
derivative instruments. If the percentage changes ofhedged items and hedging instruments, ranging
between approximately 80% to 125%, hedging
transactions are considered to be effective.

Millions of yen

Thousands of
U.S. dollars

2017

2016

2017

¥39

¥172

$348

Reversal of allowance for impairment loss on leased assets

̶

̶

̶

Depreciation equivalent

39

172

348

Derivative transactions for which hedge accounting had been applied at March 31, 2017 and 2016 are as follows:(1) Currency-related(d) Calculation method of depreciation equivalent:
Depreciation equivalent is computed on the straight-line method over the lease period without residual value.

Buy contracts
EUR

Lease commitments under non-cancelable operating leases at March 31, 2017 and 2016 are as follows:
Millions of yen

Thousands of
U.S. dollars

2017

2016

2017

¥238

¥141

$2,121Main hedged
items

Contract amount

Total

Over
one year

Fair
value

Total

¥3,836¥̶

¥(80)¥6,520

¥361

¥̶

¥(2)

¥153

Over
one year2017
Contract amount

Fair
value

Total

Over
one year

Fair
value

¥̶ ¥(245)$34,189$̶

$(713)¥0$3,217$̶$(18)

Forward exchange
contracts
U.S. Dollar

Operating lease transactions

2016

2017
Contract amountType of derivativetransaction

Thousands of
U.S. dollars

Millions of yen

Trade payables¥̶

Fair value on Forward exchange contracts is based on the price offered by the contracted financial institution.

（lessee）
Due within one year
Due after one year

606

162

5,401

¥844

¥303

$7,522

¥31

¥26

$276

（lessor）
Due within one year
Due after one year

66

48

38

428

¥79

¥64

$704
67

Notes to Consolidated Financial Statements(2) Interest ‒related

Note 17: Retirement Benefits

The following interest rate swap contracts are used ashedges and meet certain hedging criteria. The net
amount to be paid or received under the interest rate

swap contract is added to or deducted from theinterest on the assets or liabilities for which the swap
contract was executed.
Thousands of
U.S. dollars

Millions of yen

2016

2017
Contract amountType of derivativetransaction

Main hedged
items

Total

Contract amount

Over
Fair
one year value

Total

2017
Contract amount

Over
Fair
one year value

Total

Over
Fair
one year value

Interest rate swap
contracts
Receive floating,
Pay fixed

Long-termloans payable¥27,095 ¥20,435¥̶$182,130 $131,684

Contract amount
Over
Fair
one year value

Total

2016

2017
Contract amount

Over
Fair
one year value

Total

Over
Fair
one year value

Interest rate andcurrency swaps
contracts
Receive floating,Long-term
Pay fixed
loans payable
Receive U.S. dollar,¥12,646 ¥11,680
Pay Japanese Yen

Fair value on interest rate and currency swap contracts
is based on the price offered by the contracted
financial institution.
Market value of interest rate and currency swap isThousands of
U.S. dollars

2017

2016

2017
$162,629¥18,247¥18,909

Increase with acquisition of shares of new consolidated subsidiaries

̶

1,175

̶

Service cost

998

995

8,895

Interest cost

124

127

1,105

Actuarial loss (gain)

406

(175)

3,619

Balance at the beginning of the year

Thousands of
U.S. dollars

Contract amountMillions of yen(1) Movement in retirement benefit obligations

Millions of yen

2017
Total

$̶

rate swap is recorded as an adjustment to thecorresponding hedged long-term debt under the
special treatment.

(3) Interest and currency ‒related

Main hedged
items

established for a number of overseas consolidated
subsidiaries.
Under the corporate pension fund plan and the
lump-sum retirement payment plan of someconsolidated subsidiaries, retirement benefit
obligations and retirement benefit costs are calculatedusing the simplified method.

1. Defined benefit plans, except plan applied simplified method¥̶¥20,435 ¥14,775

Fair value on interest rate swap contracts is based on
the price offered by the contracted financial institution.
Market value of interest rate swap is included in thecorresponding hedged long-term debt as this interest

Type of derivativetransaction

The Company and its consolidated subsidiaries have inplace a corporate pension fund plan and a lump-sum
retirement payment plan as their defined benefit
pension plan, and some consolidated subsidiaries use
small‒to-medium enterprisesʼ retirement benefit mutual
aid schemes in conjunction therewith. In addition, theCompany has set up a retirement benefits trust. In
addition, a defined contribution pension plan has been

(1,583)(1,567)(14,109)

Increase due to revision of retirement benefit plan

̶

108

̶

Decrease due to partial abolition of retirement benefit plan̶

(1,260)

̶

Other

(9)

(65)

(80)

¥18,183¥18,247$162,059

Millions of yen

Thousands of
U.S. dollars

Benefits paid

Balance at the end of the year

(2) Movements in plan assets¥̶¥13,613 ¥12,646¥̶$112,709 $104,100$̶included in the corresponding hedged long-term debt
as this interest rate and currency swap is recorded as
an adjustment to the corresponding hedged
long-term debt under the special treatment.

2017

2016

2017

¥7,803¥9,079$69,545

Increase with acquisition of shares of new consolidated subsidiaries

̶

803

̶

Expected return on plan assets

93

87

829

Actuarial loss (gain)

367

(693)

3,271

Contributions paid by the employer

372

329

3,316

Benefits paid

(572)

(405)

(5,098)

̶

(1,380)̶Balance at the beginning of the year

Decrease due to partial abolition of retirement benefit plan
Other
Balance at the end of the year

(11)

(17)

(98)

¥8,052¥7,803$71,765(3) Reconciliation from retirement benefit obligations and plan assets to liability (asset) for retirement benefits
Millions of yen

68

Thousands of
U.S. dollars

2017

2016

2017

Funded retirement benefit obligations¥5,926¥6,070$52,817

Plan assets(8,052)(7,803)(71,765)(2,126)(1,733)(18,948)

Unfunded retirement benefit obligations

12,257

12,177109,242

Total Net liability (asset) for retirement benefits

10,131

10,44490,294

Liability for retirement benefits

12,363

12,294

110,187

Asset for retirement benefits(2,232)(1,850)(19,893)

Total Net liability (asset) for retirement benefits¥10,131¥10,444$90,29469

Notes to Consolidated Financial Statements(4) Retirement benefit costs
Service cost

Millions of yen

Thousands of
U.S. dollars

2017

2016

2017

¥998

¥995

$8,895Interest cost

124

127

1,105

Expected return on plan assets

(93)

(87)

(829)

Net actuarial loss amortization

(143)

(317)

(1,275)

3

(46)

27

¥889

¥672

$7,923Gain on abolishment of retirement benefit plan*

̶

(41)

̶

Amortization of past service cost for retirement benefit accounting*

̶

108

̶

Millions of yen

Thousands of
U.S. dollars

2017

2016

2017

¥(182)¥(834)$(1,622)

̶

(160)

̶

Other
Total retirement benefit costs

2. Defined benefit plan applying the simplified method(1) Movement in liability for retirement benefits

Millions of yen

Thousands of
U.S. dollars

2017

2016

2017

¥1,231¥1,196$10,971Retirement benefit costs

268

293

2,389

Benefits paid

(109)

(117)

(971)

Contributions paid by the employer

(121)

(141)

(1,078)

(1)

0

(10)

¥1,268¥1,231$11,301

Balance at the beginning of the year

Other
Balance at the end of the year

*These accounts are recorded in other income (expenses).

(5) Adjustments for retirement benefit
Actuarial gains and losses
Adjustment due to partial abolition of retirement benefit plans
Other
Total adjustments for retirement benefit

(1)

(3)

(9)

¥(183)¥(997)$(1,631)

Millions of yen

Thousands of
U.S. dollars

2017

2016

2017

¥(516)¥(699)$(4,599)(6) Accumulated adjustments for retirement benefit
Actuarial gains and losses that are yet to be recognized(7) Plan assets
1. Plan assets comprise:(2) Reconciliation from retirement benefit obligations and plan assets to liability (asset) for retirement benefits

2017

2016

Bonds

28.2％

26.2％

Equity securities

48.4％

47.9％

Cash and deposits

5.0%

6.2%

General account of life insurance companies

16.7％

17.6％

Other

1.7％

2.1％

Total*

100.0％

100.0％

Thousands of
U.S. dollars

2016

2017

Funded retirement benefit obligations

¥809

¥733

$7,210Plan assets

(765)

(678)

(6,818)

44

55

392

Unfunded retirement benefit obligations

1,223

1,176

10,900Total Net liability (asset) for retirement benefits

1,267

1,231

11,292

Liability for retirement benefits

1,293

1,231

11,524

Asset for retirement benefits
Total Net liability (asset) for retirement benefits

(26)

̶

(232)

¥1,267¥1,231$11,292

Millions of yen

Thousands of
U.S. dollars

2017

2016

2017

¥269

¥293

$2,398Millions of yen

Thousands of
U.S. dollars

2017

2016

2017

¥326

¥99

$2,906(3) Retirement benefit costs
2017

Millions of yen

Total retirement benefit costs based on the simplified method

3. Defined contribution pension plan
Required contributions provided to defined contribution pension plansat consolidated subsidiaries*Total pension assets include the pension benefits trust, established under the corporate pension system, which accounted for 11.3% ofassets in the previous fiscal year and 12.6% of assets in the current fiscal year.

2. Long-term expected rate of return
Current and target asset allocations, historical andexpected returns on various categories of plan assets

have been considered in determining the long-term
expected rate of return.

(8) Actuarial assumptions
The principal actuarial assumptions:

70

2017

2016

Discount rate

0.6% (mainly)

0.6% (mainly)

Long-term expected rate of return

1.0% (mainly)

1.0% (mainly)

Anticipated rate of increase

3.2% (mainly)

3.1% (mainly)71Notes to Consolidated Financial Statements

Note 18: Asset Retirement Obligations

3. Information regarding segment sales, segment income or loss, segment assets and other significant items:

1. Asset retirement obligations recorded on the consolidated balance sheets

Millions of yen

2017(1) Outline of the asset retirement obligations recorded:
The Company recorded asset retirement obligations
covering the expenses for the removal of asbestos to
be incurred at the time of removal from buildings andstructures owned by the Company, treatment

expenses stipulated by the Waste Management andPublic Cleansing Act, and expenses for the restoration
to their original state of properties leased byconsolidated subsidiaries.

(2) Basis for the calculation of the amount of the relevant asset retirement obligations:
The projected use period of each fixed asset isestimated to be 4 to 64 years based on the useful life ofeach, and the discount rate of 0.516% to 2.330% isused.

Millions of yen

Thousands of
U.S. dollars

2017

2016

2017

¥2,091¥1,418$18,636

̶

55

̶Adjustments over time

10

18

89

Increase (Decrease) due to change of estimates

22

1

196

Decrease in loss on disposal of property, plant and equipment

(13)

(17)

(116)

Increase from newly consolidated subsidiaries

̶

634

̶

Foreign currency translation adjustment

(4)

(18)

(35)

¥2,106¥2,091$18,770

2. Asset retirement obligations other than thoserecorded on the consolidated balance sheets
The Companies have obligations to restore land,buildings and other structures which the Companies
use under lease or rental contracts to their original state
when vacating them. However, because the use periodsof the leased properties related to such obligations areunclear, and also in view of the fact that theCompanies currently have no plan to exit from theseproperties, it is not possible to clearly estimate theamounts of asset retirement obligations. For thisreason, the asset retirement obligations that
correspond to these obligations are not recorded in
the accompanying consolidated financial statements.

Note 19: Segment Information

72

Others*1

Corporate or
elimination*2

Consolidated*3¥262,398

Sales:
Sales to outside customers¥234,576¥20,146¥254,722¥7,676

¥̶

2,644

98

2,742

34,392(37,134)

̶

Total

237,220

20,244257,464

42,068(37,134)

262,398

Operating income¥10,321¥1,261¥11,582

¥624

¥694

¥12,900

Identifiable assets¥339,201¥17,525¥356,726¥19,441¥(13,962)¥362,205¥18,254¥833¥19,087¥418¥(411)¥19,094

Intersegment sales or transfers

Depreciation and amortization

Increase from acquisition of property, plant and equipment

Balance at the end of the year

Total

Other items(3) Increase or decrease in the total amount of the relevant asset retirement obligations during the fiscal year
ended March 31, 2017 and 2016:

Balance at the beginning of the year

Packaging andPaper and Paper Processing
Business
Pulp Business

1. Overview of Reporting Segments
Reporting segments of the Company are subject toregular review so that the Board of Directors is able todecide on the best allocation of management
resources and evaluate results.
The Companies evaluate business results on an each
entity basis, and treat independent entity as a unit
functioning within each of its business segments. The
Company groups each unit into segments according tocommonality in economic characteristics, productmanufacturing methods and markets. Based on thisapproach, the Company maintains two reporting
segments: the “Paper and Pulp Business” and the“Packaging and Paper Processing Business.”
The Paper and Pulp Business consists of the
manufacture and sale of paper and pulp products,
while the Packaging and Paper Processing Businessconsists of the manufacture and sale of paper
containers and liquid package cartons, various printing
products, including business forms, and the dataprocessing service (DPS) business.

2.Basis for measurement of segment sales, segment
income or loss, segment assets and other significant
items:The basis of the accounting treatment for the reporting
segments is substantially the same as described in“Summary of Significant Accounting Policies” herein.
The segment income represents the operating
income-based amount. The intersegment revenues
and transfers are determined based on the prevailingmarket value.

Impairment loss

¥̶

¥̶

¥̶

¥̶

¥̶

¥̶

Investment in affiliates¥36,272¥̶

¥36,272¥̶¥̶¥36,272

Increase in property, plant andequipment/intangible assets¥12,450¥367¥12,817¥300¥(366)¥12,751

Thousands of U.S. dollars

2017
Packaging andPaper and Paper Processing
Business
Pulp Business

Total

Others*1$2,090,695$179,555$2,270,250

23,565873

24,438

Corporate or
elimination*2

Consolidated*3$68,413$̶

$2,338,663

306,525(330,963)

̶
2,338,663

Sales:
Sales to outside customers
Intersegment sales or transfers
Total

2,114,260

180,428

2,294,688

374,938(330,963)

Operating income$91,988$11,238$103,226$5,562$ 6,185$114,973

Identifiable assets$3,023,182$156,194$3,179,376$173,271$(124,438)$3,228,209$162,692$7,424$170,116$3,725$(3,663)$170,178

$̶

$̶

$̶

$̶

$̶

$̶

Investment in affiliates$323,280$̶

$323,280$̶

$̶$323,280

Increase in property, plant andequipment/intangible assets$110,963$3,271$114,234$2,673$(3,262)$113,645

Other items
Depreciation and amortization
Impairment loss

*1 The “Others” category indicates business segments not included in the reporting segments, encompassing the wood products business, the construction business,sales of real estate, the transportation and warehousing business and the wastepaper wholesale business.
*2 Amounts of adjustments are as follows:(1) Adjustments in segment income in the amount of ¥694 million ($6,185 thousand) mainly represent eliminations of intersegment transactions.
(2) Adjustments in segment assets in the amount of ¥(13,962) million ($(124,438) thousand) include ¥(21,728) million ($(193,654) thousand) for eliminations ofintersegment debts and credits and ¥7,766 million ($69,215 thousand) for the corporate assets that are not allocated to each reportable segment.
(3) Adjustments in increases in property, plant and equipment and intangible fixed assets totaling ¥(366) million ($(3,262) thousand) represent eliminations ofintersegment unrealized gains on noncurrent assets.
*3 Segment income is adjusted to reflect operating income as recorded in the consolidated statements of income.

73

Notes to Consolidated Financial Statements

Millions of yen

2016
Packaging andPaper and Paper Processing
Business
Pulp Business3. Information by Major Customer

Millions of yen

Thousands of
U.S. dollars

2017

2017

¥37,328$332,692

Name of Customers

Total

Others*1

Corporate or
elimination*2

Consolidated*3

SHINSEI PULP & PAPER COMPANY LIMITED

Sales:¥218,277¥20,129¥238,406¥8,443¥̶¥246,849

2,401

59

2,460

29,071(31,531)̶

Total

220,678

20,188240,866

37,514(31,531)

246,849

Operating income¥7,320¥696¥8,016¥551¥669¥9,236

Identifiable assets¥342,297¥17,911¥360,208¥20,109¥(16,659)¥363,658¥18,653¥872¥19,525¥446¥(418)¥19,553

Sales to outside customers
Intersegment sales or transfers

Other items
Depreciation and amortization

¥20

¥23

¥43

¥3

¥̶

¥46

Investment in affiliates¥33,526¥̶¥33,526¥̶¥̶

¥33,526

Increase in property, plant andequipment/intangible assets¥9,059¥479¥9,538¥293¥(406)¥9,425

Impairment loss

Year ended March 31, 2016
1. Information by Product or Service
This information is omitted here as it is disclosed in the Segment Information section.

2. Information by Region(1) Net Sales

2016
Net Sales*1 The “Others” category indicates business segments not included in the reporting segments, encompassing the wood products business, the construction business,sales of real estate, the transportation and warehousing business and the wastepaper wholesale business.
*2 Amounts of adjustments are as follows:(1) Adjustments in segment income in the amount of ¥669 million mainly represent eliminations of intersegment transactions.
(2) Adjustments in segment assets in the amount of ¥(16,659) million include ¥(22,708) million for eliminations of intersegment debts and credits and ¥6,049 million
for the corporate assets that are not allocated to each reportable segment.
(3) Adjustments in increases in property, plant and equipment and intangible fixed assets totaling ¥(406) million represent eliminations of intersegment unrealized
gains on noncurrent assets.
*3 Segment income is adjusted to reflect operating income as recorded in the consolidated statements of income.

(Related information）
Year ended March 31, 2017
1. Information by Product or Service
This information is omitted here as it is disclosed in the Segment Information section.

Millions of yen
Japan

Asia

North America

OthersTotal¥199,731¥29,632¥9,664¥7,822¥246,849

Classification of net sales is determined by country or geographical location of customers.
Major countries and areas which belong to segments other than Japan are as follows:(1) Asia……China, South Korea, Hong Kong, Taiwan, Vietnam, Thailand(2) North America……United State of America, Canada(3) Other……Europe, Oceania, the Middle East

(2) Property, plant and equipment

Property, plant and equipment

3. Information by Major Customer

2. Information by Region

Name of Customers(1) Net Sales

Millions of yen

2017
Net Sales

Japan

Asia

North America

OthersTotal¥189,942¥38,410¥26,604¥7,442¥262,398

SHINSEI PULP & PAPER COMPANY LIMITED

Millions of yen

2016
Japan

China

OthersTotal¥131,787¥15,569¥5,040¥152,396

Millions of yen

2016¥39,672

Thousands of U.S. dollars

2017
Net Sales

Japan

Asia

North America

OthersTotal$1,692,888$342,335$237,112$66,328$2,338,663

Classification of net sales is determined by country or geographical location of customers.
Major countries and areas which belong to segments other than Japan are as follows:(1) Asia……China, South Korea, Vietnam, Taiwan, Hong Kong, Thailand(2) North America……United State of America, Canada(3) Other……Europe, the Middle East, Oceania(2) Property, plant and equipment

Millions of yen

2017
Property, plant and equipment

Japan

China

OthersTotal¥123,832¥13,755¥6,795¥144,382

Thousands of U.S. dollars

2017
Property, plant and equipment

74

Japan

China

OthersTotal$1,103,672$122,594$60,561$1,286,827

75

Notes to Consolidated Financial Statements(Information regarding the amounts of amortization and unamortized balance by reportable segment）
Year ended March 31, 2017

Note 20: Related Party Transactions

Millions of yen

2017
Packaging andPaper and Paper Processing
Business
Pulp Business

Total

OthersCorporate or
elimination

Consolidated（1) Transactions with related party
Year ended March 31, 2017
Parent company and principal stockholder, etc., of the Company

Goodwill:
Amortization of goodwill
Balance at end of year

¥134

¥̶

¥134

¥̶

¥̶

¥134

¥1,372¥̶¥1,372¥̶¥̶¥1,372Thousands of U.S. dollars

2017
Packaging andPaper and Paper Processing
Business
Pulp Business

Total

OthersCorporate or
elimination

Consolidated

Goodwill:

Attribute

Name

Location

Amount of The contents
Ownership ratio
capital or of a business(Parent company
investment operation orownership ratio)in capital an occupation of voting rights (%)

Principal
Mitsubishi Chiyoda- ¥204,447
stock- Corporation ku, Tokyo
million($1,822,166
holderthousand)$̶

$1,194$̶$̶

$1,194

Year ended March 31, 2016

Balance at end of year

$12,228$̶

$12,228$̶$̶$12,228

Parent company and principal stockholder, etc., of the Company(Note) The amounts of “Other” are those related to the construction business and the machinery manufacture, sales and maintenance operations.

Attribute

Name

Location

Principal
Mitsubishi Chiyodastock- Corporation ku, Tokyo
holder2016
Packaging andPaper and Paper Processing
Business
Pulp Business

Total

OthersCorporate or
elimination

Consolidated

Goodwill:
Amortization of goodwill

¥161

¥̶

¥161

¥3

¥̶

¥164

Balance at end of year

¥1,618¥̶

¥1,618¥̶¥̶

¥1,618

TradingamountBalance atthe end of
Account the fiscal year

¥17,582 Accountmillion receivabletrade($156,702
thousand)

Sales ofpaper

¥4,866
million($43,369
thousand)（Transaction terms and conditions, policy to decide such terms and conditions）
The sales price of paper is determined each time through negotiations, taking into account market prices.

$1,194

Millions of yen

Nature ofRelationship transaction

A general (Parent company Agency fortrading ownership ratio) the products
Direct 19.4of thecompany
Company

Amortization of goodwill

Year ended March 31, 20162017

Amount of The contents
Ownership ratio
capital or of a business(Parent company
investment operation orownership ratio)in capital an occupation of voting rights (%)¥204,447
million2016
Nature ofRelationship transaction

A general (Parent company Agency fortrading ownership ratio) the products
Direct 19.4of thecompany
Company

Sales ofpaper

Acquisitionof sharesofaﬃliates

TradingamountBalance atthe end of
Account the fiscal year

¥18,228 Accountmillion receivabletrade¥4,757
million̶

¥4,371
million̶（Transaction terms and conditions, policy to decide such terms and conditions）
The sales price of paper is determined each time through negotiations, taking into account market prices.
The acquisition price of shares of affiliates was decided through mutual consultation between the two parties, with reference to prices
calculated by third-party appraisers.

(Note) The amounts of “Others” are those related to the construction business and the machinery manufacture, sales and maintenance operations.

（2）Notes on parent company or significant affiliated company
For the year ended March 31, 2017 and 2016, the significant affiliated company is Daio Paper Corporation and itssummarized consolidated financial statement is as follows:
Millions of yen

76

Thousands of
U.S. dollars

2017

2016

2017

Total current assets¥257,048¥257,154$2,290,980

Total noncurrent assets

400,530

398,9853,569,786

Total current liabilities

196,288219,261

1,749,447

Total noncurrent liabilities

270,380

262,229

2,409,804

Total net assets

191,079

174,820

1,703,021

Net sales

477,140

474,077

4,252,585

Income before income taxes

18,11821,997

161,480

Net income attributable to owners of parent company

12,136

14,594

108,16477

Notes to Consolidated Financial Statements

Note 21: Comprehensive Income

Note 22: Stock Option

Amounts reclassified to net income in the current period that were recognized in other comprehensive incomein the current or previous periods and tax effects for each component of other comprehensive income were as
follows:

The Company has the compensation plan based on the stock option system for its directors other than outside
directors.

Millions of yen

Thousands of
U.S. dollars

2017

2016

2017

¥4,211¥(1,992)$37,531(1) The following shows the Companyʼs stock options as of March 31, 2017.

Unrealized holding gains (losses) on securities, net of taxes
Occurrence amount

Persons granted

Number of stock
options granted

Grant date

Exercise price

Exercise period

2011 Stock options

11 directors

117,000 shares

July 11, 2011

¥1

From July 12, 2011
to July 11, 2026

2012 Stock options

11 directors

153,500 shares

July 17, 2012

¥1

From July 18, 2012
to July 17, 2027

Stock options

(14)

(62)

(125)

Before tax effect

4,197(2,054)37,406

Tax effect(1,127)669(10,044)

Unrealized holding gains (losses) on securities, net of taxes¥3,070¥(1,385)$27,3622013 Stock options

9 directors

117,000 shares

July 12, 2013

¥1

From July 13, 2013
to July 12, 2028¥(549)¥(204)$(4,893)2014 Stock options

9 directors

80,000 shares

July 11, 2014

¥1

711

63

6,337

From July 12, 2014
to July 11, 2029

162

(141)

1,444

2015 Stock options

9 directors

62,000 shares

July 13, 2015

¥1

From July 14, 2015
to July 13, 2030

2016 Stock options

9 directors

58,500 shares

July 14, 2016

¥1 ($0.01)

From July 15, 2016
to July 14, 2031

Recycling

Unrealized holding gains (losses) on hedging derivatives, net of taxes
Occurrence amount
Recycling
Before tax effectTax effect

(50)

41

(446)

Unrealized holding gains (losses) on hedging derivatives, net of taxes¥112¥(100)$998¥(361)¥(688)$(3,218)

̶

̶

̶

(361)

(688)

(3,218)Foreign currency translation adjustment
Occurrence amount
Recycling
Before tax effectTax effectForeign currency translation adjustment

̶

̶

̶

¥(361)¥(688)$(3,218)

Adjustments for retirement benefit, net of taxes
Occurrence amount¥(40)¥(665)$(357)

Recycling

(143)

(332)

(1,274)

(183)

(997)

(1,631)

55

334

490

¥(128)¥(663)$(1,141)

Before tax effectTax effect
Adjustments for retirement benefit, net of taxes
Share of other comprehensive income of associates accounted for using equity method
Occurrence amount¥872¥(168)$7,772

Recycling

(21)

(944)

(187)

¥851

¥(1,112)$7,585¥3,544¥(3,948)$31,586

Share of other comprehensive income of associates accounted for using equity method
Total other comprehensive income(2) The following shows the number of stock options.
2011
Stock options(shares)2012
Stock options(shares)2013
Stock options(shares)

2014
Stock options(shares)

2015
Stock options(shares)

2016
Stock options(shares)

Outstanding at March 31, 2016

̶

̶

̶

̶

̶

̶

Granted

̶

̶

̶

̶

̶

58,500Forfeited

̶

̶

̶

̶

̶

̶

Vested

̶

̶

̶

̶

̶

58,500

Outstanding at March 31, 2017

̶

̶

̶

̶

̶

̶

42,00090,00078,00074,50062,000

̶

̶

̶

̶

̶

̶

58,50019,00010,00020,000̶

13,500̶

Non-vested stock option:

Vested stock option:
Outstanding at March 31, 2016
VestedExercised
Forfeited
Outstanding at March 31, 2017

̶

̶

̶

̶

̶

̶

23,00080,00058,00074,50048,50058,5002012
Stock options

2013
Stock options

2014
Stock options

2015
Stock options

2016
Stock options(3) The following shows the per share prices.
2011
Stock options

¥1

¥1

¥1

¥1

¥1

¥1($0.01)

Average stock price at exercise

¥706

¥691

¥643

̶

¥717

̶

Fair value price at grant date

¥428

¥314

¥359

¥354

Exercise price¥599 ¥657($5.86)(4) The following shows the estimate method for stock option price.
2011
Stock options

Estimate method
Expected volatility
Expected life
Expected dividend
Risk-free interest rate
78

2012
Stock options

2013
Stock options

2014
Stock options

2015
Stock options

2016
Stock options

Black-Scholes Black-Scholes Black-Scholes Black-Scholes Black-Scholes Black-Scholes
option-pricing option-pricing option-pricing option-pricing option-pricing option-pricing
modelsmodelsmodelsmodelsmodelssmodels33.120％33.243％35.972％37.089％37.064％37.117％

8 years

8 years

8 years

8 years

8 years

8 years¥12 / share¥12 / share¥12 / share¥12 / share¥12 / share¥12 / share($0.11/ share)

0.844％

0.502％

0.685％

0.356％

0.295％(0.352)％79

Independent Auditor’s Report

Notes to Consolidated Financial Statements

Note 23: Subsequent Events
Distribution of Retained Earnings
The following items were approved at the annual
shareholdersʼ meeting of the Company held on June
28, 2017:

80

Payment of a cash dividend of ¥6.00 ($0.05) per share,or a total of ¥1,137 million ($10,134 thousand), toshareholders on record as of March 31, 2017.

81

Affiliated Group Companies

Consolidated Subsidiaries
Hokuetsu Kishu Sales Co., Ltd.
Takebashi 3-3 Bldg., 3-3, Kanda Nishiki-cho, Chiyoda-ku, Tokyo 101-0054
Sales and distribution agent
Alberta Pacific Forest Industries Inc.
P.O. Box 8000, Boyle, Alberta, Canada T0A 0M0
Manufacturing and sale of pulp
Xing Hui Investment Holdings Co., Ltd.
Unit 01-12, 19/F, Metro Centre, No. 32 Lam Hing Street, Kowloon Bay,
Kowloon, Hong Kong, China
Management of a production and sales subsidiary
Jiangmen Xinghui Paper Mill Co., Ltd.
Complex Developing Area, Shuangshui Town, Xinghui District,
Jiangmen, Guangdong Province, China
Manufacturing and sale of white paperboard
Bernard Dumas S.A.S.
Le Bourg 2, Rue de la Papeterie 24100, Creysse, France
Manufacturing and sale of glass fiber sheets
Hokuetsu Toyo Fibre Co., Ltd.
888, Otsuka, Numazu City, Shizuoka Prefecture 410-0306
Manufacturing and sale of vulcanized fiber products and paper
Hokuetsu Kamiseisen Co., Ltd.
57, Enoki-cho, Higashi-ku, Niigata City, Niigata Prefecture 950-0881
Cutting, selecting, packing and loading/unloading of thecompanyʼs products
Kishu Kamiseisen Co., Ltd.
182, Udono, Kiho-cho, Minamimuro-gun, Mie Prefecture 519-5701
Cutting, selecting, packing and loading/unloading of thecompanyʼs products
Katsuta Kamiseisen Co., Ltd.
1760, Takaba, Hitachinaka City, Ibaraki Prefecture 312-0062
Cutting, selecting, packing and loading/unloading of thecompanyʼs productsTechno-Hokuetsu Co., Ltd.
57, Enoki-cho, Higashi-ku, Niigata City, Niigata Prefecture 950-0881
Paper and pulp manufacturing work, industrial wastewater
purification processing, waste disposal, etc.
MC Hokuetsu Energy Service Company
47, Enoki-cho, Higashi-ku, Niigata City, Niigata Prefecture 950-0081
Supply of steam and electric power
Kinan Sangyo Co., Ltd.
182, Udono, Kiho-cho, Minamimuro-gun, Mie Prefecture 519-5701
Contract work related to paper manufacturing
BF & Package Co., Ltd.
3-2-2, Nihonbashihongoku-cho, Chuo-ku, Tokyo 103-0021
Manufacturing and sale of paper containers including liquid package
cartons and packaging, and processed paper products such as
laminated paper and related materials
Supply of computer-related components and mailing business82

Equity Data

Hokuetsu Suiun Co., Ltd.
560-11, Shimokido, Higashi-ku, Niigata City, Niigata Prefecture 950-0885
Transportation of products
Hokuetsu Forest Co., Ltd.
1529, Aza-Shitadairayamako, Oaza-Sakamoto, Aizubange-machi,
Kawanuma-gun, Fukushima Prefecture 969-6586
Sale of raw fuel to paper mills, wood chips, and wood products
Hokuetsu Engineering Co., Ltd.
57, Enoki-cho, Higashi-ku, Niigata City, Niigata Prefecture 950-0881
Manufacturing and sale of industrial machinery, electric instrumentation
construction, design and construction of civil engineering and buildings

Stock Information (as of March 31, 2017)
Shareholder registry administrator

1-2-1, Yaesu, Chuo-ku, Tokyo
Number of shares authorized

500,000,000

Number of shares issued

209,263,814

Number of shareholders

11,419Major Shareholders (as of March 31, 2017)*

Number of shares held
(thousands of shares)

Percentage to total numberof shares in issue (%)

Mitsubishi Corporation

36,61917.50

The Master Trust Bank of Japan, Ltd. (Trust Account)

19,698

9.41

Japan Trustee Services Bank, Ltd. (Trust Account)

9,485

4.53

Hokuetsu Kishu Paper Stock Ownership Association

5,390

2.58

Sompo Japan Nipponkoa Insurance Inc.

4,499

2.15

The Daishi Bank, Ltd.

4,317

2.06

The Hokuetsu Bank, Ltd.

4,315

2.06

Daio Paper Corporation

4,286

2.05

Kawasaki-kami Unyu Co., Ltd.

4,286

2.05

Mizuho Bank, Ltd.

3,600

1.72

Hokuetsu Kishu Pallet Co., Ltd.
3-2-2, Nihonbashihongoku-cho, Chuo-ku, Tokyo 103-0021
Management of forests and wood products
Manufacturing, repair and sale of pallets, etc.

Name

Hokuetsu Trading Corporation
3-1-1, Zao, Nagaoka City, Niigata Prefecture 940-0028
Real estate and management of driving school
Keiyo Shigen Center Co., Ltd.
3-14-1, Shiohama, Ichikawa City, Chiba Prefecture 272-0127
Purchase and sale of used paper
Kishu Kohatsu Co., Ltd.
4-22-1, Minami-Suita, Suita City, Osaka 564-0043
Management of driving school and golf practice range

Affiliated Companies Accounted for
Under the Equity Method
Daio Paper Corporation
2-60, Mishimakamiya-cho, Shikoku Chuo City, Ehime Prefecture 799-0492
Manufacturing and sale of paper, paperboard, pulp, and secondary
products, and production, processing, and sale of everyday goods
Staff Saito Co., Ltd.
2-4-17, Zao, Nagaoka City, Niigata City, Niigata Prefecture 940-0028
In-house logistics, transportation of products, and environmental
maintenance

Mizuho Trust & Banking Co., Ltd.

*In addition to the above, the Company holds 19,813 shares (9.4%) of treasury stock.

Distribution of shares by shareholders (as of March 31, 2017)
Number of shareholders
Financial institutions 0.5％
Other Japanese corporations 3.2％

Nikkan Co., Ltd.
3-5-1, Nishizao, Nagaoka City, Niigata Prefecture 940-0027
Manufacturing and sale of paper, nonwoven fabric, and films

Treasury stock 0.0％

Total
11,419shareholders

Niigata GCC Co., Ltd.
35-1 Enoki-cho, Higashi-ku, Niigata Prefecture 950-0881
Manufacturing and sale of filler for papermaking
Niigata PCC Co., Ltd.
2-3, Kamiose-machi, Higashi-ku, Niigata Prefecture 950-0063
Manufacturing and sale of filler for papermaking

Securities companies 0.5％

Non-Japanese individuals/Corporations 1.6％

Individuals/Other 94.2％

Number of shares
Securities companies 2.7％
Non-Japanese individuals/Corporations 7.9％
Individuals/Other 8.8％

Shanghai Toh Tech Co., Ltd.
330-8, Xiya Road, Waigaoqiao Free Trade Zone, Shanghai-city, China
Sale of carrier tape for precision electronic parts, and processing and saleof punch goods

Treasury stock 9.5％

Hokuetsu Logistics Co., Ltd.
560-11, Shimokido, Higashi-ku, Niigata City, Niigata Prefecture 950-0885
Transportation and warehousing of products

Other Japanese corporations 31.1％

Total
209,263,814
sharesFinancial institutions 40.0％

83Corporate Data

Corporate Data (as of March 31, 2017)
Corporate Name: Hokuetsu Kishu Paper Co., Ltd.

Fiscal year ending: March 31

Established: April 27, 1907

Number of consolidated subsidiaries: 22

The registered head oﬃce:

Number of aﬃliated companies accounted for under the equity method: 53-5-1, Nishizao, Nagaoka, Niigata Prefecture

Number of employees: 4,769 (consolidated); 1,544 (non-consolidated)

Paid-in capital: 42,020,940,239 yen

Offices and Mills (as of March 31, 2017)
Head OfficeOsaka Branch

3-2-2 Nihonbashi hongoku-cho,
Chuo-ku, Tokyo 103-0021, Japan
Telephone +81-3-3245-4500

4-22-1 Minami-Suita, Suita,
Osaka 564-0043
Telephone +81-6-6339-5151

Nagoya Office

Fukuoka OfficeNiigata Office

1-7-28, Nishiki, Naka-ku, Nagoya,
Aichi Prefecture 460-0003(inside the TIG・ACTUS BUILDING)
Telephone +81-52-211-1272

2-2 Tsunaba-machi, Hakata-ku,
Fukuoka Prefecture 812-0024
Telephone +81-92-271-4982

57, Enoki-cho, Higashi-ku,
Niigata Prefecture 950-0881
Telephone +81-25-273-1141

Central Research Laboratory
3-5-1, Nishizao, Nagaoka,
Niigata Prefecture 940-0027
Telephone +81-258-24-0635

Niigata Mill

Kishu Mill

Kanto Mill Ichikawa

57, Enoki-cho, Higashi-ku,
Niigata Prefecture 950-0881
Telephone +81-25-273-1141

182, Udono, Kiho-cho, Minamimuro-gun,Mie Prefecture 519-5701
Telephone +81-735-32-1111

3-21-1, Ohsu, Ichikawa City,
Chiba Prefecture 272-0032
Telephone +81-47-378-0101

Kanto Mill Katsuta

Nagaoka Mill

Osaka Mill

1760, Takaba, Hitachinaka City,
Ibaraki Prefecture 312-0062
Telephone +81-29-275-5500

3-2-1, Zao, Nagaoka City,
Niigata Prefecture 940-0028
Telephone +81- 258-24-0630

4-20-1, Minami-Suita, Suita City,
Osaka 564-0043
Telephone +81-6-6385-3851

Hokuetsu Kishu Paper Group Corporate Report 2017
IssuedDecember 2017

Publisher

Sekio Kishimoto, President and CEO

Inquiries

Hokuetsu Kishu Paper Co., Ltd. General Aﬀairs Department
3-2-2, Nihonbashi hongoku-cho, Chuo-ku, Tokyo 103-0021, Japan
Telephone + 81-3-3245-4500 Facsimile + 81-3-3245-4511

Website84

http://www.hokuetsu-kishu.jp/en/

85

Hokuetsu Kishu Paper Group Corporate Report 2017
Published December 2017

HOKUETSU KISHU PAPER CO., LTD.
3-2-2, Nihonbashihongoku-cho, Chuo-ku,
Tokyo 103-0021 Japan
Telephone +81-3-3245-4500
Facsimile +81-3-3245-4511
http://www.hokuetsu-kishu.jp/en/

Produced using
Elemental
Chlorine-Free (ECF)pulp

Low CO2

Cover printed on Hokuetsu Kishu Paper’s High Apis NEO Max white, 174.5 g/m², inside pages on µ Matt EX, 128 g/m²,
and financial information on lavender colored wood-free paper KISHURAINBOW.