Business
Reportfor the 126th Term2010.4.1−2011.3.31

To Our Shareholders
To our shareholders we extend our sincere appreciation for your continued support and patronage.
Also, we would like to take a moment to express our deepest sympathy to all those affected by theGreat East Japan Earthquake.
We are pleased to present our Annual Report for 2011. As you well know, during this period, theeconomy in Japan was slowly recovering, however, due to the effects of the Great East Japan
Earthquake in March this year, the economy subsequently deteriorated significantly.
Against such a backdrop, the Parker Group focused our efforts on strengthening our overseas
business and research and development with a view to the future, as well as actively engaging in costsaving measures, strengthening our corporate structure and improving profitability.

As a result, wewere able to achieve the business results which you will find listed in this report.
Regarding the end of term dividend for this term, in consideration of the importance of stability
and continuity, the dividend will be ten yen per share which is the same as for the interim dividend.
We anticipate that the environment which the Parker Group must face will continue to bechallenging due the effects of the recent disaster and concerns regarding rises in resource prices
among other factors however, we will put our utmost effort into promoting the development of newtechnology as well as expanding our overseas business to improve our business achievements andmeet the expectations of our shareholders.
We look forward to the continued support and patronage of our Shareholders. Thank you verymuch.
June, 2011

Chairman & C.E.O .

President & C.O.O.

Shun ONO

Kazuichi SATOMIParker Group Outlook
Business progress and achievements
Overall in the global economy during this period growth was steady, with China and India
maintaining high growth rates, Asian economies also remaining firm and Europe and North
America gradually showing increasing signs of recovery.

However, in Japan, while theeconomy grew slowly in fits and starts, economic activity was adversely affected as a result of
the Great East Japan Earthquake which struck on the 11th of March, and the economy cooledsignificantly after the disaster.
In the business environment faced by our Parker Group, domestic production fell in theautomotive industry, which is our main customer, and also in the steel industry we did not see
any significant growth in exports.

Furthermore, oil and other resource prices continued to rise,creating a severe business environment.
In such a challenging economic environment, in order to ensure that we capture the increasing
demand in expanding overseas markets, the Parker Group is working to strengthen our overseas
operations by gaining new customers and supplying new technology, as well as pouring effort
into research and development to create new technologies with a view to the future.

Inaddition to this, we also actively sought to improve efficiency of raw materials supply andreduce costs. Also, as our Sendai factory was affected by the Great East Japan Earthquake,with tsunami damage to the building, facilities and commissioned work, we have done ourutmost to restore the factory.
As a result of our efforts, our consolidated business results for the period were as follows.
Net sales were 80,483 million yen (up 16% on previous period) and operating income was
12,327 million yen (up 63.1%).

Ordinary profit was 13,649 million yen (up 50.7%) and net

profit for the period was 7,454 million yen (up 80.4%).
Progress and achievements for each business segment are as follows.
(Chemicals Business)
Net sales were 36,601 million yen (up 13.9% on the previous period) while operating profit
was 9,594 million yen (up 30.5%).

The Chemicals Business Division focuses on themanufacture and sale of chemicals which increase the added value of substrates through theformation of conversion coatings which are designed to improve the corrosion resistance, wear
resistance, lubricity and other functions of the surfaces of metals and other materials.

Netsales for this period remained at the same level throughout the year and recovered to-1-approximately 85% of the pre-global financial crisis level.

While domestic sales increased by

10.2%, sales in Asia grew 28.5%.
(Equipment Business)
Net sales were 9,911 million yen (up 16.5% on the previous period), while operating profit
was 421 million (up 58.0%). The Engineering Division manufactures and sells pre-treatment
equipment, painting equipment and powder coating equipment primarily to the automotiveindustry.

While domestic orders for pre-treatment equipment remained sluggish, overseas

demand, mainly in Asia, picked up in the latter half of the period and profitability also improved,resulting in increases in income and profit.
(Jobbing Business)
Net sales were 30,943 million yen (up 20.3% on the previous period), and operating profit
was 6,240 million yen (up 73.8%). The Jobbing Division supplies surface treatment jobbing
services such as heat treatment, rust proofing and plating processing.

Demand for heat

treatment jobbing, the recovery of which had been lagging, improved as demand picked up forautomotive parts and machine parts, resulting in increases in income and profit.

Furthermore,as with the chemicals business, while domestic sales in the jobbing business rose 14.5%, sales
in Asia rose by a high 43.6%.
(Other Business)
Net sales were almost the same as for the previous period, at 3,027 million yen, while
operating profit was 408 million yen (up 36.4%).

This division manages our building

maintenance business, real estate lease business, lease business and transport business.

Realestate lease income fell slightly however profitability of the building maintenance business andtransport business improved resulting in increased profit.

-2-

Sales by Business (Consolidated)(JPY Million)(Fiscal Year)

Status of Capital Expenditure
Equipment investment in this period totaled 3,324 million yen, with the main investments foreach business segment as follows.
Main facilities completed in this period:
Jobbing Business:
Thai Parkerizing Co., Ltd.:
Construction of building for rust proofing and heat treatment jobbing, installation of new
equipment and expansion of facilities.

-3-Issues to face
In addition to the direct damage of the Great East Japan Earthquake, interruptions in supply
chains, electricity supply shortages and the nuclear disaster all adversely affected corporate
manufacturing activities, and the domestic economic environment deteriorated sharply
subsequent to the disaster. The route to solutions to the various problems remains unclear, andthe situation remains unpredictable.

Furthermore, there are concerns surrounding theresurgence of the high yen and continued rises in resource prices, and we anticipate that thebusiness environment to be faced by our Parker Group will continue to be a challenging one.
In such a challenging economic environment, the Parker Group will, in accordance with ourslogan of “Back to the Basics”, promote the development of surface modification technology
which cannot be beaten in terms of innovation and creativity, as well as actively engaging inequipment and facilities investment overseas in order to strengthen our business in expanding
overseas markets.

In particular, establishment of our infrastructure in the market in India is anurgent priority, and we are focusing on the efficient injection of management resources.

Number of Employees
Consolidated:

3,110 persons

Nihon Parkerizing alone:

807 persons-4-Principal Shareholders
Number of Shares
Held

Name of Shareholders(Thousands ofshares)

Shareholding
Ratio
(%)

Nippon Life Insurance Company

3,596

5.66

Meiji Yasuda Life Insurance Company

2,789

4.39

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

2,705

4.26

2,664

4.19

The Chiba Bank, Ltd.

2,382

3.75

Yugen Co., Ltd.

2,354

3.71

The SATOMI Scholarship Foundation

2,316

3.65

Asahi Chiyoda Holding Co., Ltd.

2,292

3.61

Japan Trustee Services Bank, Ltd. (Trust account)1,873

2.95

1,780

2.80

Trust & Custody Services Bank, Ltd. as trustee for Nippon SteelCorporation Retirement Benefit Trust Account re-entrusted byMizuho Trust and Banking Co., Ltd.

The Chase Manhattan Bank, N.A. London S.L. Omnibus
Account-5-Financial Highlights (Consolidated)(JPY Million)
2003

2004

2005

2006

2007

2008

2009

2010

Net sales

70,18878,65384,73997,115 103,489

90,807

69,39380,483

Ordinary profit

7,226

10,483

12,705

14,247

15,464

9,828

9,055

13,649Net profit

3,091

5,341

6,816

6,983

8,088

4,439

4,131

7,454

Total assets

101,014 104,244 122,775 131,348 132,595 111,088 119,101 124,925(JPY Million)(Fiscal Year)(JPY Million)(Fiscal Year)-6-

(JPY Million)(Fiscal Year)(JPY Million)(Fiscal Year)-7-

Consolidated Balance Sheets
Fiscal year ended March 312011

2010(JPY Million)
AssetsCurrent assets

61,59055,909Cash and deposits

25,68323,496

Notes and accounts receivable-trade

25,035

24,621Inventories

6,726

5,596

Deferred tax assets

1,583

1,233

Others

2,670

1,011

Allowance for doubtful accounts△108△49

Fixed assets

63,33563,191

Tangible assets

35,304

36,142

Buildings and fixtures, net

11,904

12,178

Machinery, equipment and vehicles, net

6,331

6,677

Land

14,545

14,398Construction in progress

1,346

1,720

Other, net

1,177

1,168

Intangible assets

1,866

1,842

Goodwill

296

81

Others

1,570

1,760

Investments and other assets

26,16425,206

Investment in securities

18,231

18,54528

33

Deferred tax assets

2,851

2,379

Others

5,233

4,515

Allowance for doubtful accounts

△180

△267

124,925

119,101

Long-term loans receivable

Total assets-8-Liabilities
Current liabilities

28,821

28,894

Notes and accounts payable-trade

11,992

11,822

Short-term loans payable

3,268

5,488

556

2,603

Corporate income taxes payable

2,981

1,992

Provision for bonuses

2,316

2,018

238

―

Others

7,467

4,968

Fixed liabilities

14,80014,072Long-term loans payable

3,138

2,337

Provision for retirement benefits

9,538

9,358

941

877

Others

1,183

1,499

Total liabilities

43,62242,967

Shareholders' equity

70,36264,075Paid-in capital

4,560

4,560

Capital surplus

3,913

3,913

Retained earnings65,508

59,214

Treasury stock△3,619△3,611

Accumulated other comprehensive profit△1,929△170

Valuation difference on available-for-sale securities

2,163

2,680

Deferred gains or losses on hedges

△50

△25

Foreign currency translation adjustment△4,041△2,825

Minority interests

12,86912,227

Total net assets

81,30376,133

Total liabilities and net assets

124,925

119,101

Current portion of long-term loans payable

Provision for loss on disaster

Provision for directors' retirement benefits

Net assets-9-Consolidated Statements of income
Fiscal year ended March 31
2011

2010

(JPY Million)
Net sales

80,48369,393

Cost of sales

49,09444,252Gross profit

31,38925,141

Selling, general and administrative expenses

19,061

17,580Operating income

12,327

7,560

Non-operating profit

1,999

1,992

Interest income

7980

Dividends income

243

247

Rent income

320

325

Technical support fee

271

152

Equity in earnings of affiliates

724

462

Foreign exchange gains

―

159

Other

358

493

Non-operating expenses

677

426

Interest expenses

135

150

Foreign exchange losses

357

―

Other

184

276

13,6499,055

Extraordinary profit3444

Extraordinary loss

408

885

Income before income taxes and minority interests

13,275

8,215

Income taxes-current

4,906

3,132

Income taxes-deferred△42270

Income before minority interests

8,791

―

Minority interests in income

1,336

880

Net profit for the period

7,454

4,131

Ordinary profit- 10 -