A Bright Future Ahead
Annual Report 2016
Fiscal Year Ended March 2016

Nisshinbo Holdings Inc.
2-31-11, Ningyo-cho, Nihonbashi,
Chuo-ku, Tokyo 103-8650, JAPANTEL +81-3-5695-8833 FAX +81-3-5695-8970

www.nisshinbo.co.jp/english/

Printed in JapanAs an “Environmental and Energy Company” group working to create a sustainable society, Nisshinbo
Holdings Inc. is targeting net sales of ¥1 trillion and ROE of more than 12% in the fiscal year ending
March 2026, under its long-term strategic plan.
Our management policy for the fiscal year ending March 2017 is unchanged. We will continue to“Drive Productivity and Performance, Inspire Creativity and Innovation.” We will step up cash flow
management and implement initiatives to achieve those objectives. We have identified four strategic
business fields: wireless communications and electronics, automotive parts and devices, lifestyle andmaterials, and new energy and smart society. Focusing on those fields, the Nisshinbo Group willdraw on the strengths of its diversity to generate further growth as an “Environmental and Energy
Company” group.

Providing solutions to global society
as an “Environmental and Energy Company” group

FUTURE DEVELOPMENT
Long-term Strategic Planfor the fiscal year ending
March 2026

Net Sales
ROE inexcess of¥1trillion
12%

New energy and smart society
Organic growth

Wireless Communications
and Electronics

Automotive Parts
and Devices

Leveraging information and communications
technology and microelectronics, the Nisshinbo
Group is contributing to the building of a safer
and securer society and the realization of acomfortable living environment in the field of
wireless communication equipment.

The Nisshinbo Group supplies various automotive
products, including brake friction materials,
precision parts and electronic components.
As a global supplier, we are striving to makemajor technological themes a reality, such as
improvements in the safety, comfort, reliability andenvironmental friendliness of automobiles.

Related Business:

Related Businesses:

Electronics

Electronics / Automobile Brakes /Precision Instruments / Chemicals

Lifestyleand Materials

New Energy
and Smart Society

Through our textile, paper product andchemical product businesses, the Nisshinbo
Group endeavors to develop products that canboth add color to our lives and contribute toenvironmental preservation.

The Nisshinbo Group is contributing to thedevelopment of clean energy through the supplyof products such as bipolar plates for fuel cells.
We are also doing our part to create a smart
society.

Related Businesses:

Related Businesses:

Textiles / Papers / Chemicals

Electronics / Precision Instruments /ChemicalsValue creation
Security

SafetyComfortDisaster prevention
Convenience

HealthSmartStrategic Business Domains

GLOBAL DEVELOPMENT

24
144
countries companies

Creation of
new business

M&A

PURSUING INNOVATION IN FOUR AREAS

Wireless
Communications Automotive
Parts
and Electronics
and Devices

CORPORATE VISIONNew Energy
andSmart Society

LifestyleandMaterials

Nisshinbo Group Corporate Philosophy
Business Conduct Guidelines of the Nisshinbo Group(region)Electronics

Precision
Instruments

New Business
R&D

PapersBusiness
Segments

Automobile
BrakesChemicals

TextilesCompliance

Environment

Human Rights

Workplace

Product Safety

Procurement

Real Estate

Corporate Governance Policy

Nisshinbo GroupCSR Procurement Basic Policy

Corporate Philosophy
Public Entity
Consistent Integrity
Innovation

Contents
Editing Policy
In addition to the usual financial data and information about businessstrategies, Nisshinbo’s Annual Report 2016 includes an in-depth section
about the Group’s environmental, social and governance (ESG) activities
to provide readers with a more detailed picture of the Group’s businessactivities. This information highlights how the Nisshinbo Group is striving

to increase corporate value in areas such as personnel training and consideration for the environment, complementing efforts to increase value
through earnings growth.
Effective from the fiscal year ending March 2016, the Group haschanged the order in which it presents segment information.

2 Nisshinbo Group: A History ofCreating Value
4 Highlights
5 To Our Shareholders
10 Feature
12 At a Glance

14 Overview of Business Segments
14 Electronics
16 Automobile Brakes
18 Precision Instruments
20 Chemicals
22 Textiles
24 Papers
26 Real Estate

27 The Nisshinbo Group’s
Management Framework
27 Corporate Vision
28 Interview with Outside Director
31 Corporate Governance
32 Our Response to Japan’s
Corporate Governance Code34 Risk Management
35 Compliance

36 The Nisshinbo Group’s Management Capital
38 Human Capital and Diversity
39 Interview with Managing Officer
40 Intellectual Capital and R&D
41 Protecting the Environment
42 Board of Directors
43 Financial Section
67 History
68 Corporate Data

1

Nisshinbo Group: A History of Creating Value

2010-present

2000s

1990s

1940s-1960s

Net Sales of Nisshinbo Group(billions of yen)
600

1907
Nisshin Cotton Spinning Co., Ltd.
(present Nisshinbo Holdings Inc.)
was founded by 76 sponsors,
including prominent figures infinancial circles, for the mass
production of high-grade cotton
thread. The introduction ofstate-of-the-art spinning machinery on a scale paralleling thelargest companies in the industry
signified that the new company
intended to compete head-on
with high-quality cotton threadfrom overseas.

500

400

300

Amid the current of postwar
reconstruction followed by higheconomic growth, the Company
expanded into non-textile
segments, such as automobile
brakes, papers and chemicals.
In 1960, non-textile segments
accounted for more than 10%
of total sales. The Company
positioned the expansion anddevelopment of new businesses
in non-textile segments and thenurturing of related businesses
as its basic policy and accelerated
business diversification in a fullfledged manner.

1960s–1980s
Riding the wave of motorizationin Japan, the Company rapidly
expanded the automobile brakes
business, and in 1988 sales of
the automobile brakes businessaccounted for more than 10% of
total sales. The Company actively
invested in other non-textile
segments as well, such as theprecision instruments business andchemicals business.

The value of the yen continued toappreciate after the Plaza Accord
in 1985, causing a shift in the
textile industry from exports toimports. Furthermore, this overlapped with a slump in demandfor clothing due to the recession,
which forced the Company torestructure its operations.
Active efforts to promotefurther business diversificationand develop new businesses
overseas reinvigorated our textile
and non-textile segments. In thefiscal year ended March 1991,
the share of non-textile segments
in total sales exceeded 50% for
the first time.

This was the start of a new era
when every industry conductedbusiness from a global perspective
while keeping an eye on changes
in society and the living environment. With the aim of enhancing
corporate value, the Company also
accelerated the transfer of production to overseas sites. At the sametime, recognizing that electronics
would become one of the Group’s
strategic core businesses due to theemerging information society,we acquired New Japan Radio
Co., Ltd. through a tender offer
in 2006. As a result, non-textile
segments accounted for more than
three-quarters of total sales in thefiscal year ended March 2008.

After the acquisition of Japan
Radio Co., Ltd. and Nagano Japan
Radio Co., Ltd., the electronics
business accounted for around
40% of total sales. Electronics
had truly become a core businessof the Group. And following theacquisition of European firm TMD
Friction Group S.A. through an
M&A deal in 2011, we became
into a top-class global supplier offriction materials in the automobile brakes business as well, withthis segment now accounting for
more than 30% of total sales.

2016¥533.9billion

1991
2001

Electronics
Automobile Brakes

1981¥269.0billion¥233.5billion¥162.9billion

1961
200

A Changing
Business Portfolio
Electronics
Papers100

Automobile Brakes¥22.9

Precision InstrumentsbillionChemicals

TextilesReal Estate

Others

0

1907

1950

1960

1970

1980

1990

2000

2010

2016
Years ended March 31

2

3

Highlights

To Our Shareholders

For the years ended March 31(millions of yen)(thousands of
US dollars)

2012

2013

2014

2015

2016

2016

¥379,340¥450,693¥494,350¥523,758¥533,989$4,643,383

Electronics

169,907

175,308

187,743

209,116

205,368

1,785,809

Automobile Brakes

47,450118,849

148,699

161,887

165,037

1,435,104

Precision Instruments

25,191

24,52028,65528,60829,525

256,739

Chemicals

8,258

8,150

8,810

8,138

8,285

72,044

Textiles

60,96450,77351,34948,16657,504500,035

Papers30,22030,524

31,686

31,28032,585283,348

Real Estate

9,082

15,367

10,567

9,246

8,358

72,678Other Businesses

28,26827,202

26,841

27,31727,327

237,626

Operating Income

4,170

13,394

13,175

13,744

12,617

109,713Net Income Attributable to Nisshinbo Holdings Inc.

9,416

6,418

9,012

13,694

10,776

93,704

Total Assets¥534,584¥551,933¥611,311¥678,486¥651,793$5,667,765

Equity213,751

242,623

276,865

306,938

284,472

2,473,670

Net Cash Provided by Operating Activities¥12,974¥34,095¥26,075¥37,120¥39,566$344,052

Net Cash Used in Investing Activities(57,861)(10,973)(19,862)(21,271)(22,793)(198,200)

Net Cash Provided by (Used in) Financing Activities

16,835(24,073)(2,321)(6,238)(9,044)(78,643)(yen)(dollars)

Operating Results
Net Sales

Financial Position

Cash FlowsPer Share
Net Income Attributable to Nisshinbo Holdings Inc.
Shareholders’ Equity
Cash Dividends¥53.83¥36.74¥51.60¥80.33¥67.93$0.59

1,063.19

1,198.67

1,369.78

1,634.07

1,472.26

12.80

15.00

15.00

15.00

15.00

30.00

0.26

A Bright Future Ahead(%)

Key Ratios
Return on Assets (ROA)

1.9

1.2

1.5

2.1

1.6

Return on Equity (ROE)

5.1

3.2

4.0

5.5

4.4

Number of Employees

22,30422,08322,052

21,387

23,055

Number of Patents Approved

1,986

2,293

2,448

2,410

2,441

Greenhouse Gas Emissions per Unit of Sales (t-CO2/million yen)

1.66

1.62

1.48

1.43

1.37

ESG Indicators

Note: 1. The U.S. dollar amounts in this report are given for convenience only and represent translations of Japanese yen at the rate of ¥115 = US$1.

The Nisshinbo Group has set a number of medium- and long-term goals: net salesof ¥600 billion and ROE of 9% in the fiscal year ending March 2018 and net sales of¥1 trillion and ROE of 12% in the fiscal year ending March 2026. In the fiscal year
ended March 2016, we rolled out a number of initiatives to realize those goals.
We also worked to ensure our Corporate Philosophy takes root in operations
worldwide and stepped up efforts to drive growth by taking bold steps in strategic
fields such as automotive parts and devices.

2. In the fiscal year ended March 2016, the elastomer business was transferred from the chemicals business segment to the textiles business segment. Figures for the previous
fiscal year have been adjusted to reflect this change.

45

Financial Results for the Fiscal Year
Ended March 2016
In the fiscal year ended March 2016, net sales
increased 2.0% year on year to ¥533,989 million,
operating income dropped 8.2% to ¥12,617 million
and net income attributable to Nisshinbo Holdings Inc.
declined 21.3% to ¥10,776 million. The main factor
driving sales was the consolidation of new subsidiary
TOKYO SHIRTS CO., LTD., while the main drag on
profits was weakness in the solutions field and thecommunications equipment field in the electronics
business segment.
We are focusing on four strategic business fields todrive growth: wireless communications and electronics, automotive parts and devices, lifestyle and materials, and new energy and smart society. We are actively
overhauling our businesses and forming tie-ups withpartners in all four fields.
Another key area for us is corporate governance.
As our operations become more global, we are working
to create an organization that is more transparent andfair and that allows us to make rapid, bold decisions.

Ltd., and Ueda Japan Radio Co., Ltd. Excluding
New Japan Radio, which is focused on semiconductor
devices, the three remaining companies mainly supply
wireless and communications products. We have taken
steps to integrate their operations in order to harness
business synergies. For example, we transferred Japan
Radio’s main base of operations from Mitaka in Tokyo
to Nagano. The new site is already home to Japan
Radio’s Advanced Technology Center, which is sharedwith Nagano Japan Radio. Nagano Japan Radio also
expanded its manufacturing site in China, which Japan
Radio uses to make its marine equipment.
The reorganization of the electronics businesssegment was completed in March 2016, when
Nagano Japan Radio and Ueda Japan Radio became
wholly owned subsidiaries of Japan Radio through ashare swap. Wireless communications operations havenow been fully integrated under Japan Radio, which
will work with semiconductor device maker New
Japan Radio to grow the Group’s electronic businesssegment worldwide in fields such as automotive partsand devices, and new energy and smart society.

Working towards Targets in Our
Long-term Strategic Planof production sites. Our aim is to rapidly expand ourplastics parts business by integrating Nanbu Plastics’operations into the Group.
Another important step in the automotive field was
our investment in Canadian fuel cell manufacturer
Ballard Power Systems Inc. Ballard was the first company in the world to launch fuel cells and is now oneof the leaders in the field due to its advanced technologies and expertise. The Nisshinbo Group makes andsells bipolar plates for fuel cells and we are also focusing on the development of carbon alloy catalysts as apotential replacement for expensive platinum catalysts
for fuel cells. We see a major opportunity to expand
our fuel cell business from 2020 onwards, when theuse of fuel cell vehicles is projected to take off. The
investment in Ballard builds on our already friendly
relationship with the company and we hope the evencloser ties will help to boost the performance of our
products and speed up development.

The Nisshinbo Group has formulated a long-term
strategic plan targeting net sales of ¥1 trillion and ROEof 12% in the fiscal year ending March 2026. We plan
to boost sales by ¥200 billion by actively targeting
M&A opportunities and increase sales by a further¥200 billion by reinforcing existing businesses andleveraging the results of research and development.
The Group is working as a single unit to increase
corporate value, guided by our slogan announced lastyear, “Drive Productivity and Performance, Inspire
Creativity and Innovation.”
To achieve our ROE target, we will work to improve the return on invested capital. Shareholder
returns also remain key. We are targeting stable andconsistent dividends based on a consolidated payout
ratio target of around 30%. When we have sufficientinternal reserves to fund growth strategies, we plan toManagement Policy
Stepping up Initiatives in the
Automotive Field

The Nisshinbo Group’s electronics business segment
is made up of four companies: Japan Radio Co., Ltd.,New Japan Radio Co., Ltd., Nagano Japan Radio Co.,

The main highlight of the fiscal year was our acquisition of Nanbu Plastics Co., Ltd.
Automotive parts and devices is one of our strategic fields. We already have the top market share inautomobile brakes worldwide and the automotive
sector is an increasingly important client industry forour precision parts processing and semiconductorbusinesses.
Nanbu Plastics has a strong position in connectors
for automotive wire harnesses and plastic molded
parts for headlamp assemblies. Until our acquisition of
the company, the Nisshinbo Group mainly produced
plastic parts for air conditioners and other home electronics products. Consequently, there is little overlap
between Nisshinbo and Nanbu Plastics in terms of customers and technologies and there is no duplication

CSR

Quality Enhancement

6

Restructuring the Electronics
Business Segment

Corporate GovernanceCompliancee

Safety and Quality
Communication

u
Val
e
at

Synergies from
Quality Enhancement andPerformance Improvement
based on our
Corporate Philosophy andBusiness Conduct
Guidelines

orDiverse Human Resources

ing

c
han

rp
Co

En

Corporate
Philosophy
Business Conduct
Guidelines

Focus on Shareholder
Value and Returns

Allocation ofManagement Resources

Emphasis on ROE (+ROA)

M&A

Technical Strengths and Development Capabilities

Performance Improvement

7

actively return profits to shareholders through sharebuybacks and other means after taking into accountfactors such as financial stability. Over time, we plan
to dissolve our cross-shareholdings based on rational
assessments of their usefulness over the medium- andlong-term, in line with our Corporate Governance
Policy.
I believe investment and management reforms
are vital to realizing our long-term strategic plan. As
part of our management reforms, we are improving
governance in a number of areas, which I would liketo talk about next.

Promoting our Corporate Philosophy
We need to fundamentally change the way we dobusiness in order to achieve the targets in our longterm strategic plan. But one thing will remain thesame: our Corporate Philosophy. The main principlesof the philosophy are Public Entity, Consistent Integrity and Innovation. This philosophy is universal
across the Nisshinbo Group, regardless of country or
region, and sits at the very heart of who we are as
an organization. It is also the basis for our “Made by
Nisshinbo” high-quality products and services, andunderscores our commitment to generating returns
for shareholders.
When I visit our business sites in Japan andoverseas, I always stress the importance of our Corporate Philosophy and Business Conduct Guidelines
directly to employees. Each organization in the Groupalso works hard to ensure every single employee
understands the principles of the philosophy. These
activities will never end, because as long as Nisshinbo
continues to grow, we will always welcome newpeople into the Group. To realize Innovation, one ofthe principles of our Corporate Philosophy, we haveto accelerate efforts to create an innovative corporate
culture underpinned by a diverse workforce. Supported by that corporate culture, we will work to deliverglobal growth while also harnessing our strengths as
a Group to improve governance. This will be crucial
to increasing corporate value.

8

Corporate Governance
We have formulated a new Corporate Governance
Policy to make our business more transparent andfair and support rapid, bold decision-making. We
will strengthen proactive corporate governance tosupport our growth strategies, while also carefully
weighing up risks, in order to generate sustained
growth and increase corporate value.
After securing approval at the General Shareholders’ Meeting in June, we have reduced the number of
directors from 13 (four outside directors) to 10, withno change in the number of outside directors. This
increase in the proportion of outside appointments
will improve decision-making. Since introducing amanaging officer system in 2006, we have worked toclarify business oversight and executive functions andbuild a dynamic and highly transparent decision-making framework. This latest move to reduce the number of directors is the next key step in that process.
At the same time, effective from the fiscal year
ending March 2017, we have voluntarily establisheda Nomination Committee and a Remuneration Committee. Some of the committee members are outside
appointments, which will help to improve management transparency related to decisions on director
appointments and pay.

Diversity
Using our diverse workforce effectively will be increasingly important as our business becomes morediversified, global and complex. We have to harness
the strengths of diversity to generate new ideas andinnovations. That is why we established a Diversity
Development Department in 2015. Led by thisdepartment, we are working to achieve targets forthe number of female managers and the number of
new female graduates for office positions as part ofa broader range of measures to promote the active
participation of women in the workplace. Utilizing ouroverseas employees and senior staff is also an area
we want to strengthen, and we are putting in place

the necessary structures to support the promotion ofdiverse human resources and improve compensation
packages. We are rolling out these initiatives acrossthe Group in order to build a truly global corporategroup where all employees can maximize their value.

Initiatives for the Fiscal Year Ending
March 2017
One of the main issues we have been working on
recently is improving profitability in the automobile
brakes business, particularly TMD. We aim to reinforce
our position as the market share leader and delivera clear improvement in profitability by continuously
fine-tuning TMD’s global supply framework and byharnessing the Group’s technological capabilities inareas such as new regulations on copper content infriction materials*.
In the electronics business segment, Japan Radioplans to establish a business site in Fujimino, Saitama
Prefecture after opening a new site in Nagano in
2014. The Fujimino site, which is scheduled to open in
the fiscal year ending March 2017, will conduct basic
research and focus on system engineering solutions
for local governments in areas such as communicationand disaster prevention systems.
Along with this investment in existing businesses,
we plan to combine our expertise in wireless technologies and electronic device manufacturing to move into
advanced driving assistance systems (ADAS) as part ofour long-term growth strategy.
We will also optimize all the Group’s operations,from development and production through to distribution and sales. By stepping up our efforts to “Drive
Productivity and Performance, Inspire Creativity andInnovation” and accelerating efforts to improve cash
flow management, we aim to expand our businesswhile staying focused on profit margins and capitalefficiency.
Exciting new technologies are emerging, such as theinternet of things (IoT) and artificial intelligence (AI).

We will face this era head on, seeking to harness advances in technology to create businesses that support
the super smart society of the future, where anybody
will be able to access high-quality services anywhere in
the world and lead active and comfortable lives.
By combining a broad range of technologies and skills,
we aim to continue contributing to society as an “Environmental and Energy Company” group.
I hope we can count on your continued support as
we work towards those goals.
* US environmental regulations, effective from 2021, prohibit the sale of new friction
materials or vehicles fitted with friction materials that have a copper content of morethan 5%. From 2025, the limit on copper content will be reduced to less than 0.5%.

June 2016

Masaya Kawata
President

9Feature
New Developments

Targeting Sustained Growthin the Automotive Field

Sales in fiscal year
ended March 2016

The Nisshinbo Group’s automobile brakes business has captured the¥533.9 billion

leading share worldwide for friction materials used in automobile
brakes. Targeting further growth in the automotive field, we are
expanding our automotive-related operations and building a global

Automobile brakes¥165.0 billion
Automotive
products otherthan brakes

Nisshinbo Mechatronics has grown its plastic parts business by

consolidated subsidiary. The company mainly supplies connectors

focusing on components for home electronics products, such as

for wire harnesses and headlamp covers. By bringing Nanbu

Approximately

fans for air conditioners. Leveraging that expertise, the company

Plastics into the Nisshinbo Group, we have strengthened ourhas also developed products for the automotive field, such as fanspresence in plastic parts for the automotive industry. We aim tofor car air conditioners and radiators. Targeting further growthtransform plastic parts into another growth driver to complementin the automotive field, Nisshinbo acquired plastic automotive

precision parts processing.

¥50.0 billion

network, including in the precision instruments and electronics
business segments.

Plastic parts maker Nanbu Plastics becomesa consolidated subsidiaryparts maker Nanbu Plastics Co., Ltd. in October 2015, making it a

Existing Products

Precision parts processing: Key components
for electronic brake systems

Automotive headlamp parts

Nisshinbo Mechatronics Inc. provides reliable supplies of important

supplying these components to automotive component companies

automotive components, such as precision processed parts

worldwide. By supplying these parts for EBS, which automakers

used in electronic brake systems (EBS), which control brakes toare adopting more widely, Nisshinbo

improve vehicle safety. One of the key EBS parts we supply is valve

is helping to improve vehicle safety.

blocks, which ensure braking force is optimally distributed to thewheels of the vehicle. We have steadily built up a track record of

EBS valve block

Supplying automotive ICs

R&D

Moving into the ADAS field

Advanced driving assistance systems (ADAS) are a suite

businesses in the ADAS field. Japan Radio Co., Ltd. has aof technologies set to deliver further improvements instrong position in wireless communication technologies,

automated driving. We see significant potential for rapid

while New Japan Radio has built up technical expertise in

growth in the ADAS field. These systems are being devel-

electronic device manufacturing. We plan to combine theoped for a range of areas, such as emergency braking,strengths of the two companies to support our move into

autonomous cruise control (ACC), lane departure warn-

ADAS. Our goal is to help drive the development of ADAS

ing systems and automatic parking. The Nisshinbo Groupby supplying components such as high-precision radars

already has the personnel and technologies to supportand sensors.

Electronic device maker New Japan Radio Co., Ltd. is focusing on
the development of automotive ICs. As electronic control systems
used in engine management and other automotive systems

Power control unit

become more numerous and advanced, these systems require a

Battery

growing number of ICs, which also have to be more compact.
New Japan Radio supplies high-quality semiconductor
devices that are used in a wide range of automotive products,from car navigation systems and electronic toll system devices toelectronic units that control driving, cornering and braking. The
company is also poised to launch semiconductor packages that use
significantly less space on printed circuit boards. In these and otherways, New Japan Radio is playing a key role in improving vehicle
safety by supporting advances in electronic vehicle control.
Car navigation system

10

LED headlamps

11

CHEMICALSAt a Glance

Main Business Areas
Net Sales

The Nisshinbo Group comprises seven businesses: electronics, automobile brakes,(billions of yen)precision instruments, chemicals, textiles, papers and real estate. Leveraging the manufacturing209.1

205.4

161.9

165.0

28.6

29.5

8.3

8.1

technologies and assets of our original spinning business, we have diversified into other business

16.3

15.3

— Bipolar plates for fuel cells

15.3

16.3

15.3

TEXTILES— Rigid urethane foam
— Fine carbon products

16.3

16.3

15.3

Main Business Areas(billions of yen)

209.1

205.4

Involved in wireless communications equipment and electronic parts; in wireless communications equipment, supplies solutions such as disaster prevention systems, as well as
marine electronics
and communications
equipment; in8.3
electronic parts, aims
to 57.5
209.1
165.0 equipment
165.0
29.5
161.9
161.9
8.1 205.4
28.6
grow the electronic devices business with a focus on microelectronics technologies.

16.3

15.3

16.3

15.3

16.3

Mainstay business is products made from natural cotton; supplies high-quality “Madeby Nisshinbo” dress shirts, denim, uniforms and other products to markets worldwide

Net Sales(billions of yen)

28.631.3 29.532.6

8.1 9.2

8.3

8.4

57.5
48.2

— Marine electronics equipment: Inmarsat satellite ship earth stations

32.6

9.2

— Denim: Jeans and denim fabric

10.8%— Communications equipment: GPS receivers

31.3— Shirts: Dress shirts, casual shirts 8.4
and fabric— Textiles: Uniform fabric and casual fabricSegment
Share— Solutions and specialized equipment: Disaster prevention systems

38.5%

15.3

Main Business Areas

48.2

Segment
Share

8.4— Carbodilite high-performance chemical additive

Segment
Share

1.6%

Net Sales

31.3

48.2

fields, where we supply high value-added products to satisfy a range of customer needs.

ELECTRONICS

Manufactures a range of highly promising products in the environmental and energy
fields, such as Carbodilite, a modifier used in bio-plastic manufacturing, and bipolar
plates for fuel32.6
57.5cells
9.2— Others— Electronic devices: Semiconductor devices and SAW filters

AUTOMOBILE BRAKES

16.3

15.3

15.3

16.3

15.3

16.3

15.3 15.3 16.3 16.3

15.3 15.3 16.3 16.3

15.3 15.3 16.3 16.3

15.3 15.3 16.3 16.3

PAPERS

16.3

15.3

Main Business Areas
Net Sales(billions of yen)

209.1

205.4

161.9

165.0

Segment
Share

30.9%

15.3

16.3

15.3

16.3

Main Business Areas

The Nisshinbo Group is the world’s leading maker of brake friction materials by market
share; acquired TMD Friction Group S.A., Europe’s largest manufacturer of brakefriction materials,
expanding presence as a165.0
true 57.5
global supplier, with29.532.6
209.1now
29.5 in 2011;
161.9
8.1 205.48.3
28.6
28.631.3
manufacturing bases in North America, South Korea, Southeast Asia, China, Europe,
48.2
South America, and South Africa.

Net Sales(billions of yen)

8.1 9.2

8.3

8.4

57.5

31.3

32.6

48.2

recycled pulp) and kitchen-related products

6.1%— Assembly products: Drum brake products

8.4—	Household paper products: Toilet tissue, facial tissue (made with virgin andSegment
Share— Friction materials: Disc pads and brake linings

Makes high value-added products for everyday use such as toilet tissue and otherhousehold paper products, specialty paper used in pamphlets and other materials andprocessed
paper products such as telegram paper
9.2— Specialty paper: Fine paper and synthetic paper— Processed paper products: Telegram-related paper,
high-end packaging and other products

15.3

16.3

PRECISION INSTRUMENTS

16.3

15.3

15.3

16.3

15.3 15.3 16.3 16.3

15.3 15.3 16.3 16.3

15.3 15.3 16.3 16.3

15.3 15.3 16.3 16.3

REAL ESTATE

15.3

16.3

15.3

16.3

Main Business Areas
Net Sales(billions of yen)

209.1

205.4

161.9

165.0

28.6

29.5

161.9

28.631.3

48.2

5.5%

15.3

16.3
12

15.3

8.1

16.3

15.3

16.3

(billions of yen)

8.4

57.5

31.3
Segment
Share— Customized production equipment

1.6%

15.3 15.3 16.3 16.3

15.3 15.3 16.3 16.3

15.3 15.3 16.3 16.3

32.6

9.2

48.2

— Plastic molding and processing

15.3 15.3 16.3 16.3

Procures funds to support the Nisshinbo Group’s growth strategy by effectively utilizing
idle plant sites and other real estate assets arising from business restructuring

Net Sales— Precision parts processing including parts for electronic brake systems (EBS)

Segment
Share

16.3

Main Business Areas

Leverages advanced mechatronics technologies in a wide range of business fields,such as customized machine tools, air conditioner fans and processed precision
automotive 8.3
parts.
209.1
9.2 8.3
165.057.5
29.532.6
8.1 205.4

15.3

15.3

16.3

15.3

8.4

— Sales: Housing lots
— Leasing: ARIO Nishi Arai and other properties

16.3

15.3

16.3
13

Overview of Business Segments
ELECTRONICS
Japan Radio Co., Ltd. / New Japan Radio Co., Ltd.
This segment is Nisshinbo’s largest and is centered on leading communications equipment company
Japan Radio Co., Ltd. Other major subsidiaries in the segment include New Japan Radio Co., Ltd.,
Nagano Japan Radio Co., Ltd. and Ueda Japan Radio Co., Ltd., which operate businesses
in the electronic equipment, communications, and semiconductor fields. In March 2016, Nagano
Japan Radio and Ueda Japan Radio became wholly owned consolidated subsidiaries of Japan Radio.

Segment Income

15,000(millions of yen)

10,0005,000

Segment Income
Breakdown(millions of yen)

14

0

14.3

15.3

16.3

Japan Radio

7,281

7,713

3,183

New Japan Radio

2,276

2,918

3,127

Nagano Japan Radio(1,813)

217

586

Ueda Japan Radio

437

974

743

Eliminations

1,170

881

679

Total

9,352

12,704

8,318

Summary of Financial Results
for the Fiscal Year Ended March 2016
In the fiscal year ended March 2016, the electronics
business reported net sales of ¥205,368 million, down
1.8% year on year, and operating income of ¥8,318
million, down 34.5%.
In the marine equipment field, Japan Radio Co.,
Ltd. recorded solid sales of equipment for new vessels,
merchant shipping and the retrofit market. Sales
also rose strongly at Alphatron Marine Beheer B.V.,
supporting earnings. However, in the communications
equipment field, sales of professional mobile radio
equipment and PHS terminals declined. Sales also
declined in the solutions and specialized equipment
field, mainly due to a drop in orders and postponeddeliveries for disaster prevention systems and waterand river management systems in the public sector.
New Japan Radio Co., Ltd. reported strong results.
Sales of MEMS devices*1 were solid on the back ofefforts to attract new customers, and output at afoundry making SAW filters*2 was steady after investment to boost production capacity.
Nagano Japan Radio Co., Ltd. reported higher sales
year on year, supported by firm demand for products
such as photocopiers and routers.
In March 2016, Nagano Japan Radio and Ueda Japan Radio Co., Ltd. became wholly owned subsidiaries

of Japan Radio. This step was taken to integrate business operations and strengthen corporate governance.
Japan Radio will now build an operating structure toenable each company to cooperate more closely on
growth strategies and implement those strategies
more rapidly, aiming to realize further growth in theautomotive sector and other fields.
*1	Micro-electro-mechanical system devices: small devices made using semiconductor
fabrication technology*2

Surface acoustic wave filters: used in smartphones and other communication devices

Business Strategies
for the Fiscal Year Ending March 2017
In the electronics business, we are building a stronger
operating framework for Group companies, centeredon Japan Radio, in order to maximize synergies. We
will also channel management resources into growthfields, such as businesses related to safety, security
and environmental protection, and position overseas
and private-sector markets as growth areas. Targeting
those areas, we will focus on developing new markets
and cultivating new businesses.
In the marine equipment field, Japan Radio will
work to grow its business further in the retrofit market
for large commercial vessels and in the market forsmall and medium class vessels, two areas where
demand is likely to be stable. The company will also
reinforce its information services business amid pros-

pects for growth in demand. In the communications
equipment field, we will target resources on nextgeneration transport infrastructure systems, aiming togrow our business in automotive areas such as invehicle radar. In the solutions and specialized equipment field, we will focus on securing public-sector
orders for water and river management systems androad information systems, while also aiming to increase sales in promising growth areas such as harbor
surveillance systems and weather radar systems inemerging markets.
In the fiscal year ending March 2017, we plan tobuild a new facility in Fujimino, Saitama Prefecture.
The facility will be responsible for some projects in thesolutions field and for companywide basic research.
In the solutions field, the facility will use its prime
location near Tokyo to develop proposals and provide
support for local governments in areas such as control
systems for dams and rivers and wireless systems thatrelay crucial information from local governments tothe public during disasters.

15

Overview of Business Segments
AUTOMOBILE BRAKES
Nisshinbo Brake Inc. / TMD Friction Group S.A.
Nisshinbo is a global supplier with world-class development capabilities in the field offriction materials, which are key components in automobile brake systems. The automobile
brakes business also includes Luxembourg-based TMD Friction Group S.A., making
Nisshinbo one of the world’s leading manufacturers of friction materials. As a global leader
in the friction materials industry, we are working to address global automaker needsfor optimum parts procurement.

Segment Income

6,000(millions of yen)
4,000

2,000

0

-2,000

Segment Income
Breakdown-4,000(millions of yen)

-6,000

14.3

15.3

16.3

NISB* —Domestic

1,836

1,950

1,142

NISB

4,824

5,267

5,722

718

1,013

1,725

TMD acquisition costs,
etc.

(9,192)(10,298)(9,475)

Total(1,814)(2,069)(887)—Overseas

TMD* Nisshinbo Brake Inc.

16

Summary of Financial Results
for the Fiscal Year Ended March 2016
In the fiscal year ended March 2016, the automobile
brakes business reported net sales of ¥165,037 million, up 1.9% year on year, and operating income
before goodwill amortization of ¥5,689 million, up
17.4% year on year. The automobile brakes business booked goodwill amortization costs related tothe acquisition of TMD of ¥6,576 million, resulting
in an operating loss of ¥887 million, an improvement of ¥1,181 million from the previous fiscal year.
Sales and profits declined in Japan due to a dropin new car sales after the light vehicle tax was raisedin April 2015. Overseas, profits declined in the US
due to changes in the product mix, but profits rosein China and Thailand on the back of cost reduction. Profits also increased in South Korea, supported by changes in the product mix and lower raw
material costs. Sales rose at TMD amid a recovery inmarket conditions in Europe. A project to improve
productivity at all TMD plants also helped to narrowlosses at the company. However, goodwill amortization costs and other expenses related to businessacquisitions increased due to the weaker yen.

Progress was made with integrating the operations of TMD and Nisshinbo Brake Inc., but in orderto further leverage the combined strengths of companies in the automobile brakes business, we createdpermanent positions for TMD and Saeron Automotive Corporation employees at Nisshinbo Brake head
office. The employees of all three companies worked
together to optimize the business portfolio.
Business Strategies
for the Fiscal Year Ending March 2017
In the fiscal year ending March 2017, we forecast a
downward trend in domestic new car sales in Japan.
However, overseas, we expect car sales in the US toremain at a high level, spurred by falling gasoline
prices and replacement demand due to a rise in the
average age of vehicles on the road. In China, growthis likely to lose momentum due to a slowdown in thewider economy, but there is still significant potential
demand in the car market. We forecast an ongoingrecovery in the European market.
Against this backdrop, the automobile brakes
business aims to increase sales by enhancing its
ability to provide technical services, develop operations globally and provide solutions for customers.
The business will continue to optimize its produc-tion activities through the consolidation of plantsin Germany and the transfer of production to a
new site in Brazil, as well as upgrade facilities at
each manufacturing site to create a more efficientand cost-competitive production framework.
TMD has already started volume productionof low-steel friction materials in response to new
regulations on copper content*1. A number ofJapanese automakers will also adopt Nisshinbo
Brake’s NAO* 2 materials from 2017.
*1	US environmental regulations, effective from 2021, prohibit the sale of new
friction materials or vehicles fitted with friction materials that have a copper
content of more than 5%. From 2025, the limit on copper content will be
reduced to less than 0.5%.
*2

Non-Asbestos Organic

Disc pads

17

Overview of Business Segments
PRECISION INSTRUMENTS
Nisshinbo Mechatronics Inc.
Utilizing know-how accumulated over roughly 70 years as a machine tool maker supporting
various manufacturing industries, Nisshinbo is focusing on precision parts processing,
mainly metal processing for the automotive sector, and plastic molding and processing for theelectronics and automotive sectors. We are developing these businesses globally, centeredon Asia. This segment also makes customized production equipment, such as manufacturing
equipment for photovoltaic modules.

Segment Income

1,200(millions of yen)

800

400

Segment Income
Breakdown(millions of yen)

14.3

15.3

16.3

Mechatronics

218

(509)

(88)

Plastic molding

949

853

448

Eliminations

(92)

(81)

(42)

1,075

264

318

Total

18

0

Summary of Financial Results
for the Fiscal Year Ended March 2016
In the fiscal year ended March 2016, the precision
instruments business reported net sales of ¥29,525
million, up 3.2% year on year, and operating income of ¥318 million, up 20.6%.
In precision parts processing, sales and profits
both rose year on year, partly reflecting the start ofvolume production at Nisshinbo-Continental Precision Machining (Yangzhou) Co., Ltd., a joint venture
formed with Continental Automotive Holding Co.,
Ltd. in the previous fiscal year.
In plastic molding and processing, sales rose on
the back of forex factors and the consolidation of
an affiliated company in India, but profits fell due todeteriorating productivity and the impact of intensifying price competition.
In customized production equipment, thephotovoltaic module market remained weak andthere was a drop in large orders for various types ofcustomized production equipment, leading to lower
sales. However, profitability improved year on year.
In October 2015, the Nisshinbo Group acquired
all outstanding shares in Nanbu Plastics Co., Ltd.,
which has a strong position in plastic parts for automotive applications, making the company aconsolidated subsidiary. As a result of this acquisition,
the automotive sector now accounts for roughly 40%
of sales in the plastic molding and processing business. The year-end balance sheets of Nanbu Plastics
Co., Ltd. and its nine subsidiaries have been includedin the Company’s balance sheet for the fiscal year
ended March 2016. However, the earnings impact of
the acquisition and related goodwill amortization will
be reflected in the consolidated financial statementsfrom the fiscal year ending March 2017.
Business Strategies
for the Fiscal Year Ending March 2017
We aim to expand the precision instruments businessby focusing on the automotive sector.
The Nisshinbo Group now operates joint venturesin Japan and China with German company Continental AG, one of the world’s leading Tier 1 auto parts
suppliers. Our precision parts, particularly those forelectronic brake systems (EBS), have a high reputation at our German business partner. Going forward,
we plan to enhance cooperation with Continental
AG by adding more production capacity at Chinese
joint venture Nisshinbo-Continental Precision Machining (Yangzhou) Co., Ltd. and by expanding our lineup
of precision parts.

In plastic molding and processing, our businesshas been focused on fans for air conditioners, but
the acquisition of Nanbu Plastics Co., Ltd. has given
us a broader lineup of plastic parts for headlamps,
connectors and other products for the automotive
sector. We see significant scope for synergies with
Nanbu Plastics Co., Ltd., as there is minimal overlap
in production sites, customers and technologies. We
plan to increase our presence in automotive parts,
where demand is projected to expand, and step up
global business development.
In customized production equipment, we haveformulated a new strategy to focus on high value-added customized production equipment for the
automotive sector.

Plastic moldings

19Overview of Business Segments
CHEMICALS
Nisshinbo Chemical Inc.
This segment is pushing ahead with the development of environment-related products
on a global basis, drawing on a broad base of expertise and intellectual property in thechemical field. Our environment- and energy-related products include bipolar plates for fuelcells and Carbodilite, which is a high-performance plastic material that increases the durabilityof bio-plastics. We are investing management resources in these promising growth areas
as a matter of priority.

Segment Income*800(millions of yen)

600

400

200

Segment Income
Breakdown*(millions of yen)

0

14.3

15.3

16.3

Environmental &Energy Business

(120)

457

636

Others

184

(102)

18

Subsidiaries

40

41

97

Eliminations

1

0

1

106

396

753

Total

* ‌In the fiscal year ended March 2016, the elastomer business was transferred fromthe chemicals business segment to the textiles business segment. Figures for theprevious fiscal year have been adjusted to reflect this change.

20

Summary of Financial Results
for the Fiscal Year Ended March 2016
In the fiscal year ended March 2016, the chemicals
business reported net sales of ¥8,285 million, up
1.8% year on year, and operating income of ¥753
million, up 89.9% year on year.
In thermal insulation products, we started
shipments of refrigeration panels for liquefied
natural gas (LNG) carriers in February 2016, andwe secured steady orders for insulation materials
used in areas related to LNG storage tanks. In biocarriers for wastewater treatment, we stepped up
efforts to win business in Southeast Asia, building
on our delivery track record in the Philippines. In thelarge Chinese market, we are fielding inquiries for anumber of large-scale projects, including publicsector wastewater treatment facilities.
Sales of carbon products and fuel cell bipolar
plates for residential fuel cell systems and fixed
fuel cells declined in Japan, but we secured orders
for newly developed fuel cell bipolar plates. In the
Carbodilite business, we were just short of ourtargets for sales and operating income, supported
by efforts to cultivate demand from users of existingproducts. We also received firm orders for a newgrade of waterborne cross-linking agent launched in
the fiscal year ended March 2016.

Also during the fiscal year ended March 2016,
we invested US$5 million in Canadian fuel cell manufacturer Ballard Power Systems Inc. We will work toensure our fuel cell separators are adopted for future
Ballard fuel cells and we plan to cooperate with thecompany in the development of automotive fuel cells.
Business Strategies
for the Fiscal Year Ending March 2017
The chemicals business will target new applications
for its LNG carrier insulation products, bio-carriers
for wastewater treatment and Carbodilite, as well as
push ahead with the development of fuel cell-related
products.
The market for LNG carrier insulation products
is firm, so we plan to upgrade our production
framework to increase supplies further, aiming to
win business from other shipbuilders and promote
the use of our insulation products for other types ofmarine refrigeration systems.
In bio-carriers for wastewater treatment, we plan
to join forces with makers of treatment systems inorder to accelerate our move into the Chinese andSoutheast Asian markets.
In the Carbodilite business, we see significant potential for the product as a waterborne cross-linking
agent and as a powder-type modifier in areas such as

paint, ink, polyester and biodegradable plastics. We
plan to strengthen Carbodilite development, production and sales and promote the Carbodilite business.
We will also look for opportunities to work closelywith customers in development and consider potential tie-ups or M&A deals with other companies.
In fuel cell bipolar plates, the market for residential fuel cell systems is spreading from detachedhomes to shared housing. Taking advantage of thistrend, we aim to retain our position as the leading
supplier of fuel cell bipolar plates. Also, targeting
new applications in the automotive sector, we will
strengthen our links with Ballard Power Systems,
Japanese automakers and other partners in orderto step up research and development. In fuel cells,
the Business Development Division at Nisshinbo
Holdings is focusing on the development of carbon
alloy catalysts as a potential platinum substitute forfuel cells.

21

Overview of Business Segments
TEXTILES
Nisshinbo Textile Inc.
Since its founding in 1907, Nisshinbo has led the Japanese textile industry with its
state-of-the-art technologies and high quality. Nisshinbo subsequently expanded its businessglobally in the fields of spinning, weaving, processing and sewing and today possesses someof the world’s most advanced technologies in product development and production.
Nisshinbo is currently working to increase global sales of the APOLLOCOT brand by mobilizing
its sophisticated textile processing technologies.

Segment Income*

2,000(millions of yen)

1,500

1,000

500

0

Segment Income
Breakdown*(millions of yen)

-500

14.3

15.3

16.3

Domestic

(41)

(968)

1,766

Overseas

689

606

423

Eliminations

(96)

5

(317)

Total

552

(357)

1,873

* ‌In the fiscal year ended March 2016, the elastomer business was transferred fromthe chemicals business segment to the textiles business segment. Figures for theprevious fiscal year have been adjusted to reflect this change.

22

Summary of Financial Results
for the Fiscal Year Ended March 2016
In the fiscal year ended March 2016, the textiles
business reported net sales of ¥57,504 million,
up 19.4% year on year, and operating income of¥1,873 million, an improvement of ¥2,230 million
year on year.
In the domestic market, sales of shirt fabric anduniform fabric were lower than forecast, but salesof spandex fiber, elastomers and non-woven fabricwere firm. Solid sales for those products and theconsolidation of TOKYO SHIRTS CO., LTD. in May
2015 lifted domestic sales and profits year on year.
In product development, we launched a numberof new products, including non-iron shirt fabric
SPANO, which has better wrinkle-free performance
than other chief value cotton (CVC) shirt fabric.
Overseas, our subsidiaries in Indonesia reported
weak sales to Japan, Europe and the US, as well as tothe local market, and operations in Brazil were affected by the slowdown in the local economy. As a result,overseas sales and profits declined year on year.

Business Strategies
for the Fiscal Year Ending March 2017
In order to “Drive Productivity and Performance,
Inspire Creativity and Innovation,” the textiles business is working to achieve three management goals:(1) create overseas markets and generate moredemand in the domestic market, (2) build a highly
profitable operating structure by continuing todevelop and launch new products, and (3) enhancecompetitiveness through restructuring and the useof diverse human resources.
In product development, we are pushing ahead
with the development of next-generation APOLLOCOT fabric, which will be even thinner than existing
fabric. We also plan to increase the number of
products in our mainstay APOLLOCOT range andexpand sales channels.
In addition to our existing mainstay businessof shirts and textiles, we will grow our developedmaterial business, which covers spandex fiber,elastomers and non-woven fabric. We are working
closely with cosmetics companies to develop moisture retention face masks made from non-woven
fabric, and we are creating new products using ourspandex fiber thermal adhesive technology. Goingforward, we plan to strengthen product development capabilities and expand sales channels for

newly developed products.
The acquisition of TOKYO SHIRTS CO., LTD. hastransformed our business model, giving us a vertically integrated business with a presence in materials, products and retailing. We plan to reinforce thisstructure further.
The outlook overseas remains unclear due to a
slowdown in China and other emerging markets.
Despite this backdrop, we aim to grow sales overseas by increasing shipments of products madeoverseas to customers in third countries using ourglobal network, including through cooperation withbusiness partners.

APOLLOCOT

23

Overview of Business Segments
PAPERS
Nisshinbo Paper Products Inc.
This business supplies high value-added paper products tailored to market needs in various
fields, from facial tissue and toilet tissue in the household paper products field, to fine paperand synthetic paper products in the commercial printing and business communication paper
field, telegram-related products, luxury packaging and other products in the processed paper
products field, and products for the industrial label and printer field.

Segment Income

800(millions of yen)

600

400

200

Segment Income
Breakdown(millions of yen)

24

0

14.3

15.3

16.3

Household

(118)

365

809

Fine Papers

159

44

(28)

Eliminations

1

16

(39)

Total

42

425

742

Summary of Financial Results
for the Fiscal Year Ended March 2016
In the fiscal year ended March 2016, the paper
products business reported net sales of ¥32,585 million, up 4.2% year on year, and operating incomeof ¥742 million, an increase of 74.6%. Sales andprofit growth were driven by three main factors:
sales recovered from the previous fiscal year, when
demand fell back after a spike ahead of the increasein consumption tax, prices were raised to passon the higher cost of raw materials and imported
products due to the weaker yen, and sales ofhigh-margin products increased. Performance ineach business category was as follows.
In household paper products, sales and profitsrose year on year. The higher cost of pulp and otherraw materials caused by the weaker yen was offset
by firm sales prices for key products such as toilet
tissue for use with bidets and toilet tissue madefrom recycled paper, and by cost reduction.
Sales and profits also increased in specialty
paper. Firm sales of high-margin fine paper andsynthetic paper products and spot orders* for colored fine paper cancelled out the higher cost of pulp
and other raw materials caused by the weaker yen.
Sales of processed paper products rose on
the back of solid demand for mainstay packaging

products, but deteriorating margins on products
imported from China, due to the weaker yen, led tolosses in this category.
In label systems, sales and profits rose year
on year, supported by firm sales of printer-related
products.
*	Nisshinbo paper was used to publish several novels, including one that won the
Akutagawa Prize, a Japanese literary award.

Business Strategies
for the Fiscal Year Ending March 2017
We forecast firm demand for household paper
products and paper for packaging applications, but
the market is likely to remain challenging amid rapidchanges in the operating environment.
Against this backdrop, we will work to grow ourbusiness in four categories – household paper products, specialty paper, processed paper products, andlabel systems – aiming to build a unique presence inthe paper sector by using our inherent strengths tosatisfy the needs of customers.
In household paper products, we aim to grow ourbusiness by strengthening alliances with partners inJapan and overseas, creating a distinctive lineup withproducts such as toilet tissue for use with bidets, andlaunching products with higher margins. We will also
reinforce the earnings structure by reducing costs andmaintaining prices at a sustainable level.
In specialty paper, we aim to secure profits
by expanding sales of existing products, such ascolored fine paper, and by strengthening our Vent
Nouveau high-grade printing paper brand and ourKI•HOU•SHI packaging paper brand in the fine paper
category. We will also work to win more orders anddevelop new applications by working more closelywith other manufacturers in the synthetic paper
category. In addition, we will lay the groundwork tomove into new paper categories.
In processed paper products, we will step up
efforts to return the business to profit, such as
working to win more business from major users inJapan and overseas and overhauling manufacturing
sites for telegram-related products. We will also
reinforce internal controls and inventory and business systems, including at overseas subsidiaries.
In label systems, we aim to provide proposal,
sales and technical services that address user needs.
We will also work to enhance our competitivenessin the labeling sector and boost earnings by developing unique products and ensuring a high level ofquality assurance.

25

Overview of Business Segments
REAL ESTATEThe Nisshinbo Group’s Management Framework
CORPORATE VISION
The Nisshinbo Group believes strongly that its companies are public entities. While pursuing profit on thebasis of fair competition, we consider it our mission to contribute to society at large through our corporate

Nisshinbo Holdings Inc.
Summary of Financial Results
for the Fiscal Year Ended March 2016
In the fiscal year ended March 2016, the real estatebusiness reported net sales of ¥8,358 million, down
9.6% year on year, and operating income of ¥5,795
million, down 13.1%.
In the property leasing business, demand was firm
for land, office and commercial property leasing, butrevenues declined year on year due to a change in theusage of some land at the former Kawagoe Plant site
(Saitama) from leasing to lots for housing sales.
In the housing lot sales business, sales of lots
at former plant sites in Harisaki (Aichi), Kawagoe(Saitama) and Nagoya (Aichi) were in line with
forecasts, but revenues declined year on year. The
sale of lots at the former Harisaki Plant site wascompleted in the fiscal year under review.

Nisshinbo’s real estate business is
active in the redevelopment ofbusiness property that has become
idle as a result of business changes byGroup companies. It is also involved in
the leasing of office and commercial
facilities and the sale of housing lots.
Income from those activities is used ascapital to launch new businesses anddevelop the Group’s global operations.
Many Group properties and facilities
located throughout Japan have highasset values and have been used fora wide range of purposes, including
shopping centers and offices.

Segment Income

10,000(millions of yen)

5,000

0

15.3

16.3

Total lots

Alreadysold

Scheduled
for sale

Kawagoe (Saitama)

256

165

42

Nagoya (Aichi)

72

46

26

Okazaki (Aichi)

4

0

4

14.3
Scheduled building lot sales
in the fiscal year ending March 201726

Business Strategies
for the Fiscal Year Ending March 2017
The real estate business will continue to fulfill its
role as a source of funds to help Nisshinbo attain its
management targets by effectively utilizing the realestate assets of the whole Group.
In the property leasing business, we forecast
another stable performance in the fiscal year ending
March 2017, supported by efforts to attract tenantssuited to the specific locations of the Group’s properties. These efforts are helping us create a morediverse tenant base.
In the housing lot sales business, we will continue to sell lots at former plant sites in Kawagoe (256
total lots) and in Nagoya (72 total lots). We are also
starting sales in Okazaki (4 total lots). Looking further ahead, we plan to offer retail sites and roughly
330 residential lots at the former Miai Plant site,with sales set to begin in around 2020.

activities. To achieve further growth in global society by utilizing the organizational culture we have cultivated, we have formulated our Corporate Philosophy and Business Conduct Guidelines to reflect the values andstandards of behavior that all of our employees throughout the world share and respect.

Nisshinbo Group Corporate Philosophy

Business Conduct Guidelines of the Nisshinbo Group
Compliance

Environment

Human Rights

Workplace

Product Safety

Procurement

Nisshinbo Group Corporate Philosophy
Our corporate philosophy expresses the values we share as members of the Nisshinbo Group.
PUBLIC ENTITYCONSISTENT INTEGRITYINNOVATION

Believing that our companies are public

Respecting the diverse cultures andMaintaining our spirit of response toentities, we shall aim to realize a sus-

customs of the world, as well as bi-change and unceasing challenge, wetainable society*1 by proposing solu-

odiversity, we shall conduct fair andshall create an affluent future together

tions to global environmental problems.

sincere business activities with pride aswith our stakeholders*2 .

a corporate citizen.
 e remember at all times and in all ourWactivities that the ultimate goal of ourGroup is to contribute to society.

 e fulfill our social responsibilities as aW
corporate citizen by acting in good faithand with fairness at all times.

 e work toward the creation of anWaffluent society by constantly creating
new and original value.

 e offer products and services that helpW
solve global environmental issues, withan eye to developing a society where all
people can enjoy comfortable lifestyles
long into the future.

 e respect the diverse cultures and cusW
toms of countries and regions throughout
the world and uphold the laws andregulations of each.

 e satisfy stakeholder expectations byWsensitively anticipating changes in thetimes and the environment and boldly
taking on new challenges.

 e conduct our business activities withW
full recognition that the global environment depends on the maintenance of adelicate harmony among all living things
and that we are part of that diverse
harmony.

 e build ties of trust with stakeholders
Wand work together with them in ourbusiness activities.

*1 A sustainable society is a society whereenvironmental preservation and effective resource
use are balanced with economic rationality andwhere, as a result, all people can enjoy comfortable
lifestyles long into the future.

*2 A stakeholder is any person or organization involvedin or affected by our corporate activities, including
customers, shareholders, employees, business
partners, community residents, and governmentalorganizations.

27

INTERVIEW WITH OUTSIDE DIRECTOR

on agenda points.
A common view among my acquaintances is that

Nisshinbo Group, so drawing on my inherent curiosity,
I ask as many direct questions as possible.

Board of Directors meetings at major companies are

Specifically, I want to know what kind of company

formal and lack input, with new members like myself

Nisshinbo aims to be and what it wants to achieve, how

given little opportunity to take part in any dialogue.

it plans to create value, what problems it faces and how

That’s not the case at Nisshinbo. I’m as actively involved in

it intends to tackle them. Also, I look for the directors to

discussions as all the other directors.

explain complex problems clearly and address areas that

Nevertheless, I still need to learn more about theI think are contradictory or seem out of place.

Q3 As a director, what issues do you focus
on in particular?
I always put paramount importance on building trust,young researchers through discussion in small multidisci-

Shinobu Fujino

which comes from my background as a career counselor.

plinary groups. These groups discuss topics not necessarily

Outside Director
Nisshinbo Holdings Inc.

Without trust, all dialog is superficial. I try to use that

related to everyday work and the researchers are encour-approach myself by entering into every conversation withaged to talk openly about themes such as their vision for

an open mind.

society, the kind of value they can provide, and the role of

The Nisshinbo Group holds Management Policy Meetings

For this year’s annual report, we interviewed Shinobu Fujino, who has been an
outside director since 2015. Ms. Fujino is the Nisshinbo Group’s first female

businesses attend the meetings to discuss managementlevel of motivation among Japan Radio employees.

strategy for the whole Group. I use the gathering to deepen
communication with Nisshinbo’s top business managers,

unique insights as a career counselor.*1

which also leads to more opportunities to visit business sites.

Q1 You’ve been in your post

for a year now. What are your impressions so far?
When I was appointed, I was initially a bit apprehensive

woman to fill the role.

I recently visited Japan Radio’s Advanced Technology
Center in Nagano Prefecture to see the World Café*2
event, which is designed to promote fresh thinking among

Q4 What are the main

I’ve visited many other Nisshinbo Group business sites
and all of them have been open and welcoming.

My main role is to always posequestions about Nisshinbo,
rather than state my views about
the company.

characteristics of the Nisshinbo Group?
As an outside director, I think my main role is to always

away from making bold decisions, such as bringing Japanpose questions about Nisshinbo, rather than state myRadio into the Group and incorporating it into our corpo-

views about the company.

rate culture, even though it operates in a different sector,

about the challenges that lay ahead, as it was my first

My background is career counseling, so in my workrole as an outside director. However, my concerns were

I always start off by finding out about the person sitting

unfounded. Nisshinbo’s outside director system has been

opposite me. I have applied exactly the same thinking tooperating smoothly for many years and I was accepted

my role as outside director, using my first year to learn

ing real estate. All six businesses affect people’s lives in

sector but bigger than our brakes business. Nisshinbo’s

quickly by my colleagues, even though I was the firstabout the Nisshinbo Group.

some way, meaning that the products and services they

President, Masaya Kawata, has a mild and calm person-

supply to society have to be reliable and safe. The fact

ality, but he also has a clear vision for the Group and isthat Nisshinbo has been doing this successfully for nearlyfirmly committed to investing in the Group’s future. There

110 years underscores the strength of the Group.

have been senior managers of his caliber in the past,

Q2 What are Board of Directors meetings
like at Nisshinbo?

28

I took part in the discussions and saw for myself the highdirector. Her goal is to help create new value for the Group by drawing on her
I have applied exactly the same
thinking to my role as outside
director, using my first year tolearn about the Nisshinbo Group.

Japan Radio. It was a valuable exercise for me as well, as

twice a year. Roughly 80 managers from across Nisshinbo’s

The Nisshinbo Group has six main businesses, exclud-

Another feature of Nisshinbo is decisiveness, evenwhen the business is doing well. Nisshinbo has not shiedor acquiring TMD, a company in the same automotive

which speaks volumes about the underlying strengths of
the Nisshinbo Group.

Discussions are detailed and exhaustive. Outside directors

many cases, meetings are longer than scheduled, illustrat-

are actively involved, providing candid advice based on

ing how the board puts priority on rigorous debate. One*1 Career counselors provide advice to people in companies, public agencies and educational institutions by accurately identifying their abilities and values to help them choose their best
career path and develop as individuals.

their respective areas of expertise and backgrounds. In

feature of discussions is that directors do not compromise*2 World Café is an event designed to promote new ideas and fresh thinking by encouraging topic-based discussion among small, fluid groups of four to five people in a relaxed café setting.

29

CORPORATE GOVERNANCE
One of my goals is to encourage
the Company to think and do more
about investing in intangible assets.

Q5 How do you want to contribute to Nisshinbo?
I’m only in my second year at the Company, so I still have a

The Nisshinbo Group is a civilized place to work, but

Nisshinbo believes it needs to increase corporate value over the medium and long term as an“Environmental and Energy Company” group based on global business management and cash flow management. To achieve this, we are promoting the Group’s Corporate Philosophy and improving the quality ofcorporate governance and other aspects of our organizational culture. In parallel, we are striving to deliver
quantitative growth in earnings and shareholder value, focusing on ROE to improve profitability and placing
importance on the share price in management decisions.
By making rapid and bold decisions based on risk-taking in line with our management principles, we are

lot more to learn. The Nisshinbo Group is part of the man-sometimes seems to lack a certain energy. By actively

ufacturing sector, and because of that, discussions about

encouraging greater contact between personnel in eachmanagement strategy tend to focus on investment in tangi-of the six businesses, I think we can create a steady

ble assets. So one of my goals is to encourage the Company

stream of new businesses. Companies often say that they

to think and do more about investing in intangible assets;

contribute to society through their businesses. I believe

in other words, training human resources. To achieve that,that developing personnel simply by doing business canCorporate Governance Policythat will support the Group’s sustained growth and enhancealso have an immeasurable positive impact on society.

We have formulated the Nisshinbo Corporate Governancecorporate value over the medium and long term.

we need to give employees the opportunities to grow anddevelop, and that means creating more businesses.

Q6 How has the Nisshinbo Group changed since the implementationof Japan’s Corporate Governance Code last year?
There has been an ongoing improvement in areas such

inside directors on Nisshinbo’s board and discussions wereas the provision of documents and other information to

mainly focused on operational matters. After the approval

directors, but the biggest change has been in the role ofof new appointments by the General Shareholders’

the Board of Directors itself. In the past, there were nine

Meeting in June 2016, the board is now made up of six

working to enhance management efficiency while ensuring transparency, improve accountability, act ethically and build a stronger corporate governance structure founded on the core principles of our Corporate Philosophy – Public Entity, Consistent Integrity and Innovation.

Policy, which clearly states our basic thinking on corporate

Nisshinbo has established an Audit & Supervisory Board. The

governance and related initiatives. By steadily implementing themembers of the Audit & Supervisory Board monitor the execu-

principles of the policy and revising and improving its content

tion of duties by directors in accordance with audit policy andas needed, we aim to improve the effectiveness of governanceplans determined by the board.

and create a framework for rapid and bold decision-making that

Nisshinbo has appointed several outside directors and out-

contributes to sustained growth and increased corporate value

side audit & supervisory members. These outside appointments

over the medium and long term.

also sit on the Company’s voluntarily established Nomination
Committee and Remuneration Committee.

Corporate Governance Structure

We have adopted this structure as we believe it ensures

Nisshinbo has separated decision-making and oversight fromoperations are conducted in an appropriate manner. Under thisbusiness execution and adopted a managing officer system to re-

structure, outside directors draw on their depth of experience

inforce those functions. By transferring responsibility for businessand expertise to monitor business management from an objec-

composition has moved the focus of board business away

execution to managing officers and strengthening oversight bytive and independent standpoint, while outside members andfrom decisions about individual businesses to discussions

the Board of Directors, we are improving management efficiency

internally appointed standing members of the Audit & Superviso-

with a wider perspective, while also strengthening over-and transparency and creating an effective governance structurery Board work closely with the Internal Audit Office.

inside directors and four outside directors. This change insight of the Group.
We have also voluntarily established a Remuneration
Committee and a Nomination Committee. These and oth-Corporate Governance Structure

er steps give me the impression that Nisshinbo is working

General Shareholders’ Meeting

to enhance management transparency and accountability,
given its position as a global company.

Board of Directors

Audit & Supervisory Board

10 Directors (including four outside directors)

Financial Auditors

Four Audit & Supervisory Board Members(including two outside audit & supervisory board members)

Q7 What message do you have for Nisshinbo shareholders?

Nomination Committee
Remuneration Committee
Internal Audit Office
Corporate Strategy Center

Representative Directors

The Nisshinbo Group began promoting diversity in 2015.

space of time. I believe Nisshinbo is a company that is

Training women to become managers is part of thatcommitted to that kind of continuous reform, helping itprocess. Given Nisshinbo’s bold track record of acquiring

adapt to changes in the operating environment. I hope tocompanies such as Japan Radio and TMD, and the rapid

see more exciting changes like this at the Nisshinbo Grouppace of reforms to the Board of Directors, I’m confident

in the near future.

we’ll be able to create a more diverse company in a short30

Board of Management
Managing Officers, Business Divisions, Group Companies

Representative Directors

Directors

Managing Officers

Representative directors are appointed by resolutions of
the Board of Directors. As of June 29, 2016, the president
and a senior executive managing officer were the Company’s two representative directors.

As of June 29, 2016, the Company had 10 directors,
including four outside directors. The Board of Directors is
responsible for making decisions on important management matters and for monitoring the execution of duties
by directors. Directors are appointed for one-year terms inorder to clarify management responsibility each fiscal year.

Nisshinbo has adopted a managing officer system tospeed up decision-making for business execution andclarify operational responsibilities. As of June 29, 2016,
the Company had 16 managing officers, including six
with dual roles as directors. Managing officers are also
appointed for one-year terms.

31

OUR RESPONSE TO JAPAN’S CORPORATE GOVERNANCE CODEThe Nisshinbo Group adheres to the intent and spirit of Japan’s Corporate Governance Code formulatedby the Tokyo Stock Exchange and intends to promote concrete measures to address provisions in the code’s
principles (general principles, principles and supplementary principles). In February 2016, the Group publishedNisshinbo’s Corporate Governance Policy. In this document, the Group sets out fundamental matters andinitiative guidelines on corporate governance.

GeneralPrinciple

1

Securing the Rights and Equal Treatment of Shareholders
Companies should take appropriate measures to fully secure shareholder rights and develop an environment in whichshareholders can exercise their rights appropriately and effectively. In addition, companies should secure effective
equal treatment of shareholders.

Our Initiatives

GeneralPrinciple

4

Responsibilities of the Board
In order to promote sustainable corporate growth and the increase of corporate value over the medium- to long-term,
the board should appropriately fulfill its roles and responsibilities.

Our Initiatives

Stance on Overall Balance, Diversity, and Sizeof the Board of Directors

Independence Standards and Concurrent Serving
Status of Independent Outside Directors

To promote the globalization of each Nisshinbo company along the lines ofenvironment and energy, the Board of Directors selects personnel who possess
extensive management and professional experience and high-level expertise andwho can enrich and ensure the diversity of the board.
The current Board of Directors is composed of 10 directors, of which four are
independent outside directors (including one woman). The number of directors is
set at 14 or less in the Company’s Articles of Incorporation.

The Board of Directors, taking into consideration the external requirements set
forth in the Companies Act and the independence standards set by securities
exchanges, shall obtain the consent of the person in question and appoint themafter carefully determining their eligibility as an independent director.
So that outside directors and outside Audit & Supervisory Board members areable to properly fulfill their roles and responsibilities, when nominating acandidate, the Company shall understand the status of officers who concurrently
serve in other listed companies or companies and organizations that correspond

Cross-Shareholdings

Transactions between Related Parties

to such, and verify that it will not interfere in their attendance of the Company’s

To the extent deemed necessary from the standpoint of raising corporate value,
the Company may hold shares of business partners with the goal of maintaining
and strengthening the business or alliance relationship. These cross-shareholdings
are regularly verified to determine the necessity of the holdings and the presenceor absence of economic rationality, and the advisability of continued ownership is
decided at the Board of Directors meeting based on those results.
The exercise of voting rights related to cross-shareholding shall be performed
after deciding in each individual case the purpose of the holdings from thestandpoint of raising the corporate value of the Company and the relevantbusiness partner.

In the case of transactions between directors and the Company, the Company
shall obtain the approval of the Board of Directors in accordance with conflict ofinterest regulations set forth in the Companies Act and report the results.

Board of Directors meetings, Audit & Supervisory Board meetings, or their work.

GeneralPrinciple

2

The Company has not introduced anti-takeover measures. If someone tries in the
future to implement a capital policy that could harm the shareholder interests, theCompany will ensure that it explains this to shareholders and implements appropriate
procedures after considering the necessity and rationality of such a move.

Appropriate Cooperation with Stakeholders Other Than Shareholders
Companies should fully recognize that the creation of corporate value is achieved as a result of the provision of resources
and contributions made by a range of stakeholders and companies should endeavor to cooperate with them appropriately.

Stock options

Bonus

Retirement
benefitDirectors(Excluding outside directors)

227

170

170

43

—

9

Audit and supervisory board members(Excluding outside audit and supervisory board members)

29

29

—

—

—

3

Outside directors and outside audit andsupervisory board members

49

49

—

—

—

6

Total numberof payees

Notes: 1. Total maximum compensation
		 Directors: ¥400 million per year		(Employee salaries of individuals simultaneously appointed as employee and director are not included in payments to directors. Directors are also eligible to receive
		 subscription rights to new shares as stock options, up to a maximum value of ¥40 million per year).
		 Audit & Supervisory Board members: ¥70 million per year

Independent Outside Directors at Nisshinbo Holdings Inc.

Code of Conduct

As values shared by all officers and employees that serve as the basis forcorporate governance initiatives, the Company has established the Nisshinbo
Group Corporate Philosophy.

The Company established the Business Conduct Guidelines of the Nisshinbo
Group to define standards of behavior expected of our executives and employees
in six areas: compliance, the environment, human rights, workplace safety,
product safety and procurement. Directors and managing officers take theinitiative to provide this guidance by themselves and constantly educate
employees on compliance with these guidelines and widely disseminate them.

Ensuring Appropriate Information Disclosure and Transparency
Companies should ensure appropriate disclosure of non-financial information disclosure in accordancewith the relevant laws and regulations, in addition to financial information disclosure.
Non-financial information includes business strategies and issues, risk, and governance.

Our Initiatives

Business Plans
As an “Environmental and Energy Company” group, Nisshinbo has contributed
to human society through business and believes its mission is to grow together
with society. To fulfill this mission, we have established the four strategic
business domains of “Wireless Communications and Electronics,” “Automotive
Parts and Devices,” “Lifestyle and Materials,” and “New Energy and Smart
Society” and will work for sustainable growth and to raise corporate value overthe medium to long term.

Appointment of the Senior Management
The Board of Directors, based on the recommendation of the president,
nominates candidates for director who can enrich and ensure the diversity of the

32

Basic
remuneration

Classification

2. The Company had 13 directors and four Audit & Supervisory Board members as of March 31, 2016.

Business Principles

3

Remuneration breakdown (Millions of yen)Total
remuneration(Millions of yen)Anti-takeover Measures

Our Initiatives

GeneralPrinciple

Remuneration for Directors and Auditors (Fiscal year ended March 2016)

Board and who possess extensive management and professional experience andhigh-level expertise. Out of representatives of subsidiaries and those in
responsible positions at Nisshinbo, we appoint executive officers from among
personnel who are highly ambitious and courageous and excel in management
talent and expertise. The appointment and dismissal of executive officers shall be
by resolution of the Board of Directors and determined through fair andtransparent deliberation in the Board of Directors.
Moreover, the Company shall establish a Nomination Committee thatindependent outside directors participate in and policies and related procedures
pertaining to the nomination and appointment of directors, Audit & Supervisory
Board members, and managing officers shall be discussed and reviewed in the
Nomination Committee.

Name

Reasons for appointment

Tomofumi Akiyama

Mr. Akiyama is Chairman of Fukoku Mutual Life Insurance Company. Drawing on his experience in business management, he provides oversight ofmanagement activities at the Nisshinbo Group.

Noboru Matsuda

Mr. Matsuda has worked as a public prosecutor in the Tokyo District Court and in the Supreme Public Prosecutors Office. Drawing on his specialist
expertise and experience as a public prosecutor and lawyer, as well as his extensive track record as an outside director for other companies, he provides
oversight of management activities at the Nisshinbo Group.

Yoshinori Shimizu

Mr. Shimizu has held various posts during his career, including professor at Hitotsubashi University Faculty of Commerce and Management, head of thefaculty and Vice Chancellor of the university. He has also served as President of the Japan Society of Monetary Economics. Drawing on this specialist
expertise in finance, he provides oversight of management activities at the Nisshinbo Group.

Shinobu Fujino

Drawing on her specialist expertise and knowledge from her background as a career counselor, Ms. Fujino provides oversight of management activities at
the Nisshinbo Group and contributes to the promotion of diversity management.

GeneralPrinciple

5

Dialogue with Shareholders
In order to contribute to growth over the medium- to long-term, companies should engage
in constructive dialogue with shareholders.

Our Initiatives

Policy for Constructive Dialogue with Shareholders
The IR Director, who oversees policies and measures communication withshareholders and investors, accurately and fairly disseminates information
outside the Company and proactively conducts IR activities. The IR Director also
strives to enhance the General Shareholders’ Meeting, where top management
can interact directly with shareholders, and the results briefings and briefings tooverseas investors. In addition, the Company plans and conducts individual
meetings with domestic and overseas investors throughout the year. If deemednecessary, the IR Director, Finance and Accounting Director, and other directors
and managing officers take part in responding to applications for interviews fromshareholders and investors.
The status of IR activities including measures and policies aboutcommunication with shareholders and investors is routinely reported to theBoard of Directors where it is reviewed.

33

RISK MANAGEMENTCOMPLIANCE

In order to fulfill its corporate social responsibility by contributing to society through ongoing business activ-

Based on two principles in its Corporate Philosophy – Public Entity and Consistent Integrity – the Nisshinbo

ities, the Nisshinbo Group has established systems to ensure stable operations by mitigating a range of risksGroup’s mission is to act with fairness and integrity in order to contribute to society through its business ac-that could have a serious impact on the smooth operation of the business.

tivities. We have formulated the Nisshinbo Group Business Conduct Guidelines in order to win trust from thepublic through fair and honest business activities.

Crisis Management System

drill based on the scenario of widespread damage caused by a

Corporate Ethics Committeemanner. In addition, the Corporate Ethics Committee works

and Disaster Rapid Response System

Nankai Trough earthquake. The training drill covered the period

Nisshinbo has established a Corporate Ethics Committee toto prevent any future violations of laws or corporate ethics by

Firefighting teams at each Group business site have access tofrom immediately after the earthquake until the point when ourhandle all compliance matters across the Group. The committee

providing information to all companies in the Group about its

compact water pumps, chemical protection suits, life-saving

business continuity plan (BCP) is activated. Our goal is to activate

answers directly to the president and is led by a director with a

response to the issue based on the results of the investigation.

equipment, chemical fire trucks and other equipment suitedthe plan within 72 hours of an earthquake. We used the drill todual role as a managing officer.

to the facilities and location of each site. As part of efforts tocheck the role of the Group Crisis Response Team and provide all

The Corporate Ethics Committee is responsible for (1)improve emergency response capabilities, business sites also

related personnel, including senior managers, an opportunity to

implementing corporate ethics systems and regulations, (2)In order to ensure fair and honest business practices, theconduct regular rapid response drills to increase readinessexperience the team’s activities in a real-world situation.

deciding the content and methods of corporate ethics training

Nisshinbo Group conducts compliance training for different

for employees, and (3) formulating and implementing investi-

employee levels and work sites and provides training to employ-

Initiatives to Protect Personal Information

gations, responses, procedures and remedial measures related

ees prior to overseas assignments.

The Nisshinbo Group recognizes that one of its key corporate

to consultations and reports received through the Company’s

drills, which are reviewed by managing officers, to ensure

responsibilities is to ensure important information related

Corporate Ethics Reporting System.

disaster prevention management activities remain at a high state

to customers, suppliers, employees and other individuals isof readiness.

protected appropriately. In order to fulfill this responsibility,

Corporate Ethics Reporting System

we handle personal information in accordance with an inter-

The Nisshinbo Group has established a Corporate Ethics Report-

Initiatives to Prevent Corruption

nal privacy policy. In addition, internal audits are conducteding System to rapidly identify and prevent any reoccurrence ofIn recent years, countries worldwide have been reinforcing reg-

based on Company regulations to ensure systems are working

potential or actual legal violations. Group employees and exter-

ulatory systems and stepping up efforts to prevent and expose

properly, and steps are taken to prevent information leaks andnal parties can submit reports to the system. Group employees

bribery and corruption. Nisshinbo is working to prevent any suchrealize ongoing improvements.

can use the system to communicate directly with the Corporate

illegal activity, in line with rules in the Nisshinbo Group Business

Ethics Committee or an outside corporate attorney. Every effort

Conduct Guidelines.

for early-stage fires, life-saving situations and other potential
emergencies such as gas or chemical leaks.
Major business sites also conduct comprehensive disaster

Also, with the start of Japan’s new national identity system

Compliance Education

Compliance managers at subsidiaries also receive practicaltraining about antimonopoly legislation and laws to protect
subcontractors.

in January 2016, we formulated new regulations governing

is made to protect those who have used the system from unfair

the handling of personally identifiable information and ensured

treatment.

Nisshinbo complies with Japan’s antimonopoly laws and is
now stepping up efforts to address antimonopoly legislation in

If the Corporate Ethics Committee receives a report via theoverseas jurisdictions. In the fiscal year ended March 2015, we

system, it launches an investigation and takes appropriate action

published a Corruption Prevention Guidebook specifically ad-

Initiatives to Ensure Information Security

where necessary. If the outside corporate attorney receives adressing overseas antimonopoly law. This guidebook is provided

Initiatives to Ensure Business Continuity

The Nisshinbo Group is constantly reinforcing information se-report, appropriate action is taken based on close cooperation

to all Group companies, including subsidiaries overseas.

As part of concrete measures to reinforce risk management,

curity measures to prevent leaks of personal information about

with the Corporate Ethics Committee. Serious matters are

we formulated the Nisshinbo Group Risk Management Rules incustomers and other sensitive information.

promptly reported to theDisaster drill at the Japan Radio Advanced
Technology Center

related personnel were familiar with the new rules.

January 2016. We have also adopted global risk classification

Nisshinbo widely uses anti-virus software and installs securi-

standards, which are the basis for identifying risks, introduced

ty update programs to ensure its IT devices and systems are fullyreceived from individuals who

a review process for risk mitigation measures and overhauledprotected against attack from computer viruses. We also use anhave provided their name andthe way risk reporting is conducted. Since the Great East Japan

information security management system to monitor access tocontact details, the Corporate

Earthquake in 2011, we have put priority on addressing risks

critical data and prevent unauthorized IT devices from accessing

Ethics Committee provides

associated with major earthquakes and other natural disasters.
In the fiscal year ended March 2016, we conducted a training

our network.

president. In the case of reports

Corporate Ethics Reporting System
Nisshinbo Holdings Inc.

Board of Directors
ReportPresident

information such as updates on

Division subject to investigation

the investigation and a sum-

Instructguidelines. To ensure continuous improvement in information

mary of its conclusions. Regular

Corporate Ethics Committee

security, we conduct regular internal IT audits of domestic

reports are also submitted to theInternal Contact Point

subsidiaries to confirm the guidelines are being followed.

Board of Directors and the Audit(Corporate Ethics Committee)

Group companies are required to follow information security

In addition, we are migrating the Company’s business servers

ReportInvestigate

External Contact Point
Coordinate(Corporate Attorney)

any information and concerns

business continuity in the event of a major natural disaster.

reported to the committee
are dealt with in an objective

Group companies
Promote Groupwide
understanding& Supervisory Board to ensurefrom an internal location to an external data center to ensure

Nisshinbo Group

Response(Disclosed whistleblower)

Report, consult(Disclosed / undisclosed whistleblower)

Stakeholders

Group Crisis Response Teamduring training drill

34

35

The Nisshinbo Group’s Management Capital
The Nisshinbo Group aims to create corporate value through positive outcomes from the use ofvarious capital in business processes such as research and development, material procurement, manufacturing and sales activities, rather than simply increasing financial capital through its operations.

1

MATERIAL PROCUREMENTThe Nisshinbo Group is working with suppliers to implement concrete CSR initiatives in order tofulfill its social responsibilities across its supply chain.

Underpinning this approach is the Corporate Philosophy of the Nisshinbo Group (see page 27 for more

In 2015, the automobile brakes business issued the Nisshinbo Brake CSR Procurement

details). Based on this philosophy, the Business Conduct Guidelines of the Nisshinbo Group define standards

Guidelines to 160 suppliers. Also, in May 2015, New Japan Radio Co., Ltd. establishedof behavior expected of its executives and employees in six areas: compliance, the environment, humanguidelines to promote CSR in its supply chain. We intend to work closely with all our suppliers

rights, workplace safety, product safety and procurement. We have also formulated the Basic CSR Procure-

to promote CSR procurement.

ment Policy of the Nisshinbo Group, which covers seven areas: compliance, fair trade, information security,environmental preservation, human rights, safety and health, and quality and safety. Based on this policy,
we work with suppliers to implement concrete CSR initiatives across the entire supply chain.

Human Capital

2Intellectual Capital

Number of employees

Frequency of injuries
with lost work*

Number of patents
approved

1.2

20,0000.9

15,000

2,500

25

2,000

20

1,500

15

1,000

10

500

5

0

0

The Nisshinbo Group's production sites are distributed worldwide. All these sites are working
to protect the global environment in accordance with the Business Conduct Guidelines of the

Research anddevelopment expenses

Nisshinbo Group. In the automobile brakes business, we were one of the first in the industry
to begin the development of friction materials with reduced levels of copper, which can cause(billions of yen)
25,000MANUFACTURING

water pollution. Volume production of these new friction materials has already started.
Workplace safety is also a key theme for the Group, with all our sites worldwide taking
steps to reduce the rate of workplace accidents.

0.6
10,000
0.3

5,000

0

0

14.3

15.3

16.3

14.3

15.3

16.3

Average for Japanesemanufacturing industry

14.3

Japan

15.3

16.3

3
14.3

15.3

flow and warehouse locations have already been improved and the company is now turning its
attention to reducing logistics lead times. In the automobile brakes business, we are reducing thevolume of packaging materials that cannot be recycled. We are also improving the efficiency of* ‌Frequency of Injuries with lost work = (number of
employees injured with lost work ÷ aggregate numberof working hours x 1 million)

Nisshinbo Group (overseas)

The Nisshinbo Group is restructuring its logistics systems and improving distribution efficiency.
New Japan Radio has launched a new project to overhaul logistics for electronic devices. Logistics

16.3

Overseas

Nisshinbo Group (Japan)

DISTRIBUTION

pallet usage to reduce transportation load.

Natural CapitalGreenhouse gas emissions
per unit of sales

Water usage per unitof salesEnergy consumption perunit of sales(t-CO2 /million yen)(m3/million yen)

(GJ/million yen)

1.5

60

4

25

20
1.0

The Nisshinbo Group is working to enhance product safety and quality to increase customer
satisfaction. As a supplier of marine equipment, Japan Radio Co., Ltd. has to supply productsthat operate reliably for many years in the harsh marine environment. To ensure product40
15reliability, the company monitors usage and operating conditions in addition to testing productquality in the factory. Using this information, Japan Radio recommends regularly replacing

10
0.5

SALES

expendable parts before they fail and exchanging equipment as part of a preventative20

maintenance program. This is just one of the ways Nisshinbo works to ensure safety and give

5

users peace of mind.
0

14.3

36

0

0

15.3

16.3

14.3

15.3

16.3

14.3

15.3

16.3

37

Human Capital and Diversity
Interview with Managing Officer
The skills and strengths of individual employees are vital to the sustained prosperity of companies.

The Nisshinbo Group established a Diversity Development Department in July 2015. Promoting

At the Nisshinbo Group, we strive to create fulfilling workplaces by respecting human rights anddiversity is one of the Group’s most important management strategies, as it will play a key role inallocating human resources to optimal positions.

driving sustained growth and increasing corporate value across our operations worldwide.
We spoke to Managing Officer Makoto Sugiyama, Head of the Diversity Development Department,
about Nisshinbo’s strategy and outlook for diversity.

Basic Stance
The Nisshinbo Group emphasizes diversity in various areas, such

The Business Conduct Guidelines of the Nisshinbo Group

as human rights and recruitment, while also striving to improvedefine our standards for human rights and workplace safety.

work-life balance for employees. The Group is also working to

Based on those guidelines, we respect the diversity, character andeliminate workplace accidents through occupational health andindividuality of all employees and strive to create workplaces thatsafety initiatives.

promote the mental and physical health of our workforce.

Q 1 Why did Nisshinbo set up the Diversity
Development Department?

The Nisshinbo Group made a new start in April 2009 when
it moved to a holding company structure focused on six corebusinesses. This step was taken to increase the Group’s corpo-•W e respect the diversity, character, and individuality of each• We comply with regulations and standards in our home country

person and do not discriminate based on birth, nationality,

and overseas related to occupational safety and health andcreed, religion, gender, race, ethnicity, age, disability, healthplace top priority on safety in our business activities.

history, academic background, or social status.

• We implement systematic industrial accident prevention• We engage in nondiscriminatory practices regarding opportu-

activities throughout the entire Nisshinbo Group, promote thenity and treatment in employment, thereby creating a dynamic

mental and physical health maintenance of each employee, andworkplace environment where a diverse range of people cancreate a safe and pleasant workplace environment.

flourish.
• We do not engage in harassment, bullying, or any other actionthat violates human rights.
• We do not tolerate forced labor, child labor, or any otherinhumane treatment of any form whatsoever.

• We follow established work procedures and always pay meticulous attention to ensure that we do not cause accidents.
• When an accident or disaster occurs, we do our best to minimize damage while placing maximum priority on human life,

rate value. At the time, the Group employed roughly 13,000
people. Since then, our business has grown, and we now employ
23,000 people at business sites around the world. Roughly half
our workforce is not Japanese and our operations are morewide-ranging than ever before. To achieve our performancetargets and deliver sustained growth while tapping into thisTraining Human Resources

Managing Officer
Diversity Development
Department

diversity, we will have to make full use of our female, overseas
and senior employees. By promoting diversity management, we
aim to create a globally competitive company that leverages thefull potential of our diverse workforce.

and we endeavor to prevent recurrence.
An extract from the Business Conduct Guidelines of the Nisshinbo Group

Makoto Sugiyama

Q 2 What steps have you taken since

Q 3 What challenges do you need toovercome in diversity management
and what are your goals?

I am convinced that promoting diversity will have positive outcomes

the department was established?

for the Nisshinbo Group. But we have only just started, so a number

To ensure female employees take a more active role in theattitudes of male and female employees to the active promotion ofCompany, we have to gain the understanding of their immediate

women to management positions. At this stage, it is vital to buildof challenges need to be overcome. First, we need to change theBased on the idea that people are vital to the success of com-

online education and additional qualifications to encourage allbosses and senior managers, as well as women themselves. First,

support for this policy across the workforce. In the fiscal year ending

panies, the Nisshinbo Group devotes considerable time andemployees to develop their skill sets further.

to get a picture of the situation in the Group, we conducted a

March 2017, we will run training for younger female employees toresources to training human resources. Training starts as soon

Another area we are focusing on is cultivating human re-survey of women in middle management positions and their line

show them how the right candidates can access career paths thatas new graduates enter the Company. Our general training

sources that can handle the demands of international business.

managers to understand how they work and their attitudes towill eventually take them to management positions.

program is separated into streams that will eventually lead to

Before employees are sent overseas, we run courses to give thempromotion. Using the results of the survey, we held a presenta-

In Japan, diversity management tends to be focused on en-

promotion to mid-manager, section head and division head

the skills they need in areas such as communication in differenttion for executives and then conducted training for managers

couraging women to take a more active role, but in the Nisshinbo

positions. Employees also take courses for specific skills and learn

cultures, compliance and risk management. We also give employ-and female employees.

Group, we also focus on overseas employees and senior employees.

about safety, human rights and the environment. In our specialist

ees aged below 35 opportunities to gain experience overseas.

In April 2014, Keidanren, the Japan Business Federation,

Improving the language capabilities of our personnel is part

unveiled an Action Plan on Women’s Active Participation in

actively recruits people from other countries in Japan. We employ

business and job function, such as technology, accounting andof this process. Staff that are scheduled to be sent overseas are

the Workforce. In line with the goals of this plan, we haveas many nationalities as the number of countries we operate in.

intellectual property. These units and courses combine to form arequired to undergo training at language schools, while younger

established a number of targets that we aim to achieve by 2020:

Employee exchanges between business sites are also flourishing.

systemized training scheme. In the fiscal year ended March 2015,

employees receive 2-6 months of language training in the US and(1) promote women to director positions, (2) triple the number

We want to see our overseas employees develop and eventually

we began running a special program for personnel earmarked

China. We provide support through online English learning coursesof female managers compared with the present level, and (3)become leaders of our businesses.

to become senior managers. The program is designed to foster

and web-based language skill assessment tools. In the fiscal year

increase the recruitment ratio for new female graduates to 40%

Nisshinbo aims to maximize the capabilities of its senior

the approaches, knowledge and behavior they will need for theirended March 2016, we also launched English courses and businessfor clerical positions and to 20% for technical positions. We have

employees by establishing systems and positions that allow themsenior manager roles in the future.

Japanese courses in partnership with Group companies.

already made progress towards these goals, appointing a woman

to pass on their wealth of skills and experience. Another goal

to the Board of Directors in June 2015. In the 2016 graduate

is to create a working environment that enables people withrecruitment round, we achieved our target for clerical positions,disabilities to contribute to the Group.

training program, they acquire knowledge needed for each

We also provide financial support for external training courses,

The Nisshinbo Group hires local people overseas and also

but fell short of our target for technical positions. We intend to
step up our female recruitment initiatives next fiscal year.
38

39

Intellectual Capital and R&D

Protecting the Environment

The Nisshinbo Group is focusing on the environment and energy, two areas that are becoming

As an “Environmental and Energy Company” group, Nisshinbo is working to protect the environ-increasingly important to society. In these areas, we are channeling our efforts into developing

ment through its business activities. We have established Groupwide rules to promote environmen-

competitive high-performance, high-quality products and technologies.

tal management and we are implementing a plan–do–check–act (PDCA) process in our operations,aiming to contribute to the creation of a sustainable society.

R&D Framework

Reducing Environmental Impact: Results

The Group has set up research and development divisions at

developed technologies and products. The Group’s operating

the holding company and its operating companies. Nisshinbo

companies conduct R&D to increase the added value of products

Holdings is responsible for conducting R&D projects not related

in their respective business fields.

to existing businesses and projects that span different businessfields. The Company also leads efforts to commercialize newly

The Group has also set up a specialist division at the holding
company to manage intellectual property.

Reduced useof water resources by

15 %Reduced volumeof freight transport by4%

In the fiscal year ended March 2016, the Nisshinbo Group used 24.6

In the fiscal year ended March 2016, the Nisshinbo Group’s freight

million m3 of water, equating to a reduction of 15% year on year pertransport volume totaled 74.38 million tons, equating to a reduction ofunit of sales.

4% year on year per unit of sales.

R&D Themes by Business Segment
ELECTRONICS
Development of systems to improve the reliability
and usability of electronic equipment for ships,
devices for vehicle-vehicle and vehicle-road
communication* to realize safer, more intelligent
transport systems, weather radar systems for earlymonitoring of abnormal weather conditions, andelectronic devices for automotive and communication applications

Reduced emissionsof greenhouse gases by

CHEMICALS
Development of additives that support the uptakeof environmentally friendly products, and highperformance fuel cell bipolar plates that exploit thecharacteristics of carbon

Breakdown of R&D costs bybusiness segment

TEXTILES

OthersDevelopment of next-generation thin-weave APOLLOCOT shirts and new products that use spandex
fiber thermal adhesive technology

PRECISION INSTRUMENTS

industrial waste by

7%

In the fiscal year ended March 2016, greenhouse gas emissions by the

In the fiscal year ended March 2016, the Nisshinbo Group’s industrial

Nisshinbo Group totaled 730,600 tons (CO2), equating to a reduction ofwaste totaled 65,300 tons, equating to a reduction of 7% year on year

4% year on year per unit of sales.

per unit of sales. The recycling rate was 85.7%.

ending March 2019, compared with levels in the fiscal year ended March 2015.

Electronics

10,638

PAPERS
Development of new toilet tissue and tissue paper
products that stand out in the market and stimulate
demandTotal¥21,774 million

COMMON THEMES
Research and development activities related to carbon alloy catalysts and hydroponic plant cultivation

Development of plastic components for automotive
and other applications using forming and molding
technologies

ReducedMedium-term environmental target: Reduce emissions by 5% by the fiscal year

1,849

AUTOMOBILE BRAKES
Development of friction materials with reduced
environmental impact to address new rules on
copper content and products to reduce the weightof brake assemblies; cost reduction activities suchas reinforcing R&D support structures at overseas
subsidiaries

4%Long-term Environmental Targets(fiscal year ending March 2026)

1.	Increase the ratio of products that contribute to a sustainable society to 65% or more of total sales
2.	Reduce greenhouse gas emissions per unit of sales by 15% or more compared with fiscal year ended March 2015
3.	Improve the recycling ratio to 95% or more

Automobile Brakes

9,287* Vehicle-vehicle communication: Communication between cars.
Vehicle-road communication: Communication between vehicles and transport infrastructure such as traffic lights and road signs.

Carbon Bipolar Plates for Fuel Cells

Improve Product Packaging to Boost Logistics Efficiency
The papers business segment accounts for 55% of the Nisshinbo Group’s
logistics volume. We aim to boost logistics efficiency in the segment bylaunching new toilet tissue packaging that is one third smaller than existing
packaging without any change in product volume.

Reduction

40

41

Board of Directors (As of June 29, 2016)

Director,*1
President

Director,*1
Senior Executive Managing Officer

Director,
Senior Executive Managing Officer

Masaya Kawata

Masahiro Murakami

Takayoshi Tsuchida

Financial Section
P44 Management’s Discussion and Analysis
P49 Six-Year Summary
P50 Consolidated Balance Sheets
P52 Consolidated Statements of Income
P53 Consolidated Statements of Comprehensive Income (Loss)
Director,
Executive Managing Officer

Director,
Executive Managing Officer

Director,
Executive Managing Officer

Koji Nishihara

Ryo Ogura

Takayoshi Okugawa

P54 Consolidated Statements of Changes in Equity
P55 Consolidated Statements of Cash FlowsP56 Notes to Consolidated Financial Statements
P66 Independent Auditor’s Report

Director,*2

Director,*2

Director,*2

Director,*2

Tomofumi Akiyama

Noboru Matsuda

Yoshinori Shimizu

Shinobu Fujino*1 Representative director

Audit & Supervisory Board Members

Managing Officers(As of June 29, 2016)(As of June 29, 2016)

Yoichi Fujiwara
Takumi Ohmoto

Outside Audit &Supervisory Board Members

President

Executive Managing Officers

Managing Officers

Masaya Kawata*

Koji Nishihara*

Masahiro Kawamura

Ryo Ogura*Akihiro Yoshino

Senior Executive Managing Officers

Takayoshi Okugawa*

Hajime Sasaki

Masahiro Murakami*

Toshihiro Kijima

Kazuhiro Iwata

Takayoshi Tsuchida*

Kazunori Baba

Akihiro Ishizaka

Yo Kawakami
Toshihiko Tomita*2 Outside director

Makoto Sugiyama
Yasuji Ishii
Toshihiro Masuda* Concurrent board member

42

43Management’s Discussion and Analysis
CURRENT BUSINESS STRATEGIES AND FUTURE PROSPECTS

Highlights•S ales rose sharply in the textiles business, mainly due to the consolidationof TOKYO SHIRTS CO., LTD.
•A ll outstanding shares in Nanbu Plastics Co., Ltd. acquired in October 2015.
•F ull-year dividend raised to ¥30 per share, up from ¥15 in the previous fiscal year.

OPERATING RESULTS
Economic Environment
During the fiscal year ended March 2016, the employment
environment and capital investment improved in Japan, supported by firm corporate earnings. However, exports weakened amid slowing growth in emerging economies, consumer
spending was lackluster and the yen strengthened rapidly
from early 2016, leading to an increasingly uncertain outlook.
Overseas, the US economy continued to expand led bydomestic demand, supported by strong job creation. Europe
recovered at a moderate pace amid a pickup in consumer
spending. However, the Chinese economy continued to lose
momentum, weighed down by weak consumer spending.
The slowdown in other emerging economies also gatheredpace, partly due to weaker growth in China.
Results of Operations in the Current Term andComparison with the Previous Term
The Nisshinbo Group reported net sales of ¥533,989 million(US$4,643 million), an increase of 2.0% year on year, mainlyreflecting strong sales growth in the textiles business due tothe consolidation of TOKYO SHIRTS CO., LTD.
Operating income declined 8.2% year on year to ¥12,617
million (US$110 million). Profits rose in the textiles business,but the electronics business reported lower profits year on

Net Sales

Operating Income(billions of yen)(billions of yen)

600

20

500

15

400
300

10

200

5

100
0

0
11.3

44

year due to weakness in the solutions field and the communications equipment field at Japan Radio Co., Ltd. Operating
income before goodwill amortization declined 6.0% year on
year to ¥19,807 million (US$172 million).
Net income attributable to Nisshinbo Holdings Inc. declined 21.3% year on year to ¥10,776 million (US$94 million),reflecting the drop in operating income and declines in equity
in earnings of a nonconsolidated subsidiary and affiliates.
In October 2015, Nisshinbo acquired all outstanding
shares in Nanbu Plastics Co., Ltd., which mainly produces
plastic parts for automotive wire harnesses and headlamps.
The acquisition of Nanbu Plastics, which is now a wholly
owned subsidiary, is intended to strengthen the Group’s
plastic parts manufacturing operations, a key part of the precision instruments business. The financial position of Nanbu
Plastics and its nine subsidiaries was reflected in the Group’s
consolidated balance sheets as of March 31, 2016. Also, after
the valuation and allocation of assets and liabilities arisingfrom the business combination, Nisshinbo recorded goodwillof ¥5,895 million, which will be amortized over a period ofseven years. Goodwill amortization costs and the earnings ofNanbu Plastics will be reflected in Nisshinbo’s consolidated
statements of income from the first quarter of the fiscal year
ending March 2017.

12.3

13.3

14.3

15.3

16.3

11.3

12.3

13.3

14.3

15.3

16.3

As an “Environmental and Energy Company” group, theNisshinbo Group is targeting net sales of ¥600 billion andreturn on equity (ROE) of 9% in the fiscal year ending March2018. Nisshinbo is also working towards its Strategic Plan
targets of net sales of ¥1 trillion and ROE of at least 12% ten
years from now, in the fiscal year ending March 2026.
To achieve those targets, the Group is focusing on four
strategic business areas: wireless communications and electronics, automotive parts and devices, lifestyle and materials, and new energy and smart society. Specifically, we are
pursuing tireless innovation to reinforce existing businesses,
leveraging the results of R&D projects and actively seeking
M&A opportunities.
Going forward, we will implement our growth strategy by
first channeling management resources into businesses in theautomotive field and the super smart society field.
In the fiscal year ending March 2017, we will continue
to focus on the slogan “Drive Productivity and Performance,
Inspire Creativity and Innovation.” We will also accelerate efforts to improve cash flow management in order to achieve
our targets. In the electronics business, we will acceleratebusiness integration and complete our program of businessrestructuring based on the three-way merger between Japan
Radio Co., Ltd., Nagano Japan Radio Co., Ltd. and Ueda
Japan Radio Co., Ltd. In the automobile brakes business, weplan to further strengthen TMD’s earnings structure, and we
aim to expand the precision instruments business by integrating the operations of Nanbu Plastics Co., Ltd., which is now aconsolidated subsidiary. Our estimates are based on averageexchange rates for the fiscal year of ¥120/US$ and ¥130/€.

Net Sales (millions of yen)

Operating Income (Loss) (millions of yen)

Electronics

205,368

down 1.8%

8,318

down 34.5%

Automobile Brakes

165,037

up 1.9%(887)

an improvement of ¥1,181 million

Precision Instruments

29,525up 3.2%318

up 20.6%

Chemicals

8,285

up 1.8%753

up 89.9%

Textiles

57,504up 19.4%

1,873

Papers

32,585up 4.2%742

up 74.6%

Real Estate

8,358

down 9.6%

5,795

down 13.1%

Other Businesses

27,327

up 0.04%(217)

a deterioration of ¥107 million

an improvement of ¥2,230 million

Note: Changes in net sales and operating income (loss) are year-on-year figures; please refer to pages 14 to 26 for details on performance in individual segments.

DIVIDEND
The full-year dividend for the fiscal year ended March 2016 is¥30 per share, up from ¥15 per share in the previous fiscal year.
By focusing on ROE, Nisshinbo is aiming to deliver sustained increases in shareholder value through the distributionof profits and other means. We also intend to accelerate
investment in areas that drive growth, such as R&D, capital
expenditure and M&A, aiming to secure even greater support
and trust from the public, markets and stakeholders as an“Environmental and Energy Company” group.
In principle, we intend to pay an interim dividend and a
year-end dividend, targeting stable and consistent dividends
based on a consolidated payout ratio target of around 30%.
Also, when the Group holds sufficient internal reserves
to fund growth strategies, we plan to actively return profits
to shareholders through share buybacks and other means after considering factors such as financial stability. In principle,

Nisshinbo intends to retire treasury stock, but this stock may
be used in share swaps as part of M&A deals aimed at significantly increasing shareholder value.

Cash Dividends
(yen)

30

20

10

0
11.3

12.3

13.3

14.3

15.3

16.3

45

FINANCIAL POSITIONPRODUCTION RESULTS

Total assets at the end of the fiscal year stood at ¥651,793
million (US$5,668 million), a drop of ¥26,693 million fromthe end of the previous fiscal year. This mainly reflected a decrease of ¥8,775 million in receivables, an increase of ¥6,883
million in property, plant and equipment and a decrease of¥22,434 million in investment securities.
Total liabilities at the end of the fiscal year were ¥367,321
million (US$3,194 million), a drop of ¥4,227 million fromthe end of the previous fiscal year. This was mainly due toa decrease of ¥15,883 million in short-term bank loans, anincrease of ¥8,921 million in the current portion of long-term
debt, an increase of ¥11,193 million in long-term debt, an
increase of ¥4,648 million in liabilities for retirement benefits

and a decrease of ¥9,697 million in deferred tax liabilities(long-term liabilities).
Equity at the end of the fiscal year totaled ¥284,472
million (US$2,474 million), a decline of ¥22,466 million fromthe end of the previous fiscal year. This primarily reflected anincrease of ¥7,034 million in retained earnings, a decrease of¥14,779 million in net unrealized gain on available-for-salesecurities, a decrease of ¥10,787 million in foreign currencytranslation adjustments and a decrease of ¥4,089 million in
post-retirement liability adjustments. As a result of the above,the shareholders’ equity ratio declined 2.3 percentage points
year on year to 35.9%.

Production results in each segment for the fiscal year under review were as follows:
Industry Segment

Amount (millions of yen)

Year-on-Year Change (%)

Electronics

217,776-0.6

Automobile Brakes

132,210+0.7

Precision Instruments

28,310-1.7

Chemicals

5,787

-12.3

Textiles

38,354-9.7

Papers28,367

-1.4

552

+1.9

451,359-1.4

Other Businesses
Total
Notes:

CASH FLOWSCash Flows from Operating Activities
Cash flows provided by operating activities totaled ¥39,566
million (US$344 million), mainly reflecting cash provided of¥22,180 million from income before income taxes, ¥22,571
million from depreciation and amortization, and ¥13,531 million from receivables, against cash used of ¥6,297 million forpayables and ¥7,797 million for income taxes–paid.

Cash Flows from Financing Activities
Cash flows used in financing activities totaled ¥9,044 million(US$79 million), mainly reflecting cash provided of ¥27,214
million from proceeds from issuance of long-term debt,
against cash used of ¥20,485 million for repayment of shortterm debt, ¥10,304 million for repayment of long-term debt,
and ¥3,568 million for cash dividends paid.

Cash Flows from Investing Activities
Cash flows used in investing activities totaled ¥22,793 million (US$198 million), primarily reflecting cash provided of¥4,658 million from decrease in time deposits and ¥8,775
million from sale of investment securities, against cash usedof ¥24,727 million for purchase of property, plant and equipment, and ¥10,188 million for purchase of newly consolidated
subsidiaries.

As a result of the above, cash and cash equivalents at
the end of the fiscal year totaled ¥42,272 million (US$368
million), an increase of ¥5,566 million from the end of theprevious fiscal year.

1. Amounts are calculated based on manufacturing costs.
2.	The real estate business does not engage in manufacturing, and therefore the above table does not include any amounts from this segment.

CAPITAL EXPENDITURESThe Nisshinbo Group channels capital expenditures into
priority product fields that offer the potential for long-term
growth and into upgrading manufacturing equipment to raise
product quality. It also invests in environmental measures suchas the reduction of greenhouse gases and in manufacturing
facilities in China and Southeast Asia in response to risingdemand driven by market expansion.
As a result, in the fiscal year ended March 2016, capital
expenditures totaled ¥22,862 million. In the electronics business, Japan Radio Co., Ltd. invested ¥5,650 million, mainly
in a new Advanced Technology Center and for the transfer
of key manufacturing facilities, while New Japan Radio Co.,
Ltd. invested ¥3,449 million, primarily in new semiconductor
manufacturing and research facilities.

In the automobile brakes business, the Group invested¥4,987 million to increase friction material production capacity at TMD consolidated subsidiary TMD Friction GmbH.

Capital Expenditures(billions of yen)

40
30
20
10
0
11.3

12.3

13.3

14.3

15.3

16.3

RISK INFORMATION
Total Assets

Equity(billions of yen)(billions of yen)

700

350

600

300

500

250

400

200

300

150

200

100

100

50

0

0
11.3

46

Forward-looking statements in this report are based on information available to the Nisshinbo Group as of March 31, 2016.

12.3

13.3

14.3

15.3

16.3

Risks Associated with New Businesses
The Nisshinbo Group is actively developing new businesses
such as carbon catalysts in order to expand sales and profits.
However, uncertainties are inherent in new businesses andthe development of appealing new products and the formation of new markets may not proceed as anticipated. This
could delay or prevent the recovery of prior investments.

11.3

12.3

13.3

14.3

15.3

16.3

Risk of Fluctuation in the Value of Investment Securities
Investment securities held by Nisshinbo are marked to market
in accordance with accounting standards for financial products,

and the Company implements impairment accounting basedon even stricter internal standards for a portion of these securities. Based on current accounting standards and standards for
asset impairment, there is a limited possibility that impairment
losses will have an impact on net income, as the acquisition
cost of the investment securities was low. However, comprehensive income may fluctuate significantly owing to changes
in market value. Also, the Company plans to limit increases
in interest-bearing liabilities by selling investment securities toprocure capital needed for mergers and acquisitions, overseas
business development, and capital investment, but misalignment of the timing between sale and investment may give rise
to unforeseen circumstances.
47

Six-Year Summary
Risks Associated with Product Quality
The majority of the Nisshinbo Group manufactures products
in accordance with international quality control standards,
but there is no guarantee that quality-related problems will
not occur in the future. The Company has product liability
insurance, but the occurrence of a large liability could have an
adverse impact on the Group’s financial results.
Risks Associated with Market Shifts Relating to
Product Sales Prices and Raw Material Procurement
Some of the Nisshinbo Group’s products can be significantly
affected by fluctuations in market prices owing to market
developments and competition with other companies. Sales
prices for textile and paper products and raw materials procured by the Group such as cotton, pulp, steel and othermaterials are particularly susceptible to these market trends.
The New Japan Radio Group (New Japan Radio Co., Ltd. andits consolidated subsidiaries) generates more than 80% of its
consolidated sales from semiconductor devices. Significant
fluctuations in demand in the semiconductor market may
therefore have a large impact on the Nisshinbo Group’s financial results.
Risks Associated with Changes inCustomer Business Performance
The customers of the Nisshinbo Group’s automobile brakes
business are automobile manufacturers that conduct businessglobally. The cancellation of contracts or requests to sharply
reduce prices owing to changes in the business results of suchclient companies are factors outside the control of Nisshinbo,
and consequently may have an impact on the Group’s financial results.
The Japan Radio Group has a relatively high ratio of business with central and local governments, so sales tend to beconcentrated toward the end of the fiscal year. In addition,
trends in central and local government spending plans andcapital expenditure in the telecommunications sector may
affect the Group’s financial results.
Risks Associated with the Supply Chain
The Group may face difficulties in securing necessary components owing to changes in the economic environment. For
example, rapid developments in specific parts supply regions
and product fields may affect supply capacity at parts companies and lead to delivery delays. This in turn could impact theGroup’s shipment plans or lead to deterioration in margins
owing to sharp increases in the price of components.

48

Risks Associated with Fluctuations in Exchange Rates
Fluctuations in foreign exchange rates can have an impact on
the yen value of the Nisshinbo Group’s revenues, expenses,
receivables and payables arising from business transactions
that are denominated in foreign currencies and on foreign
currency translation adjustments in the financial statements
related to overseas consolidated subsidiaries, which prepare
their statements in foreign currencies. While the Group takes
steps to mitigate the risk of exchange rate fluctuations, not all
this risk can be avoided. Fluctuations in exchange rates may
therefore affect the Group’s financial results, with periods of
yen appreciation putting pressure on profits.
Risks Associated with Unforeseen Revisions
to Laws and Regulations
Products supplied by the Japan Radio Group (Japan Radio
Co., Ltd. and its consolidated subsidiaries) are subject to arange of laws and regulations governing areas such as national security. These laws include export restrictions, importregulations and environmental and recycling laws. The Japan
Radio Group has established clear internal regulations regarding compliance with these laws. However, unforeseen revisions to laws and regulations may limit the Group’s businessactivities and lead to an increase in costs.
Risks Associated with Overseas Business Development
The Nisshinbo Group owns many production bases overseas.
Risks inherent to this international presence include unforeseen changes in laws and regulations, unfavorable political or
economic factors and social turmoil.

For the years ended March 31(millions of yen)

2011

2012

2013

2014

2015

2016

Net Sales

325,555

379,340

450,693494,350

523,758

533,989

Operating Income

19,843

4,170

13,394

13,175

13,744

12,617Net Income Attributable to Nisshinbo Holdings Inc.

11,185

9,416

6,418

9,012

13,694

10,776Equity211,557

213,751

242,623

276,865

306,938

284,472

Total Assets

479,852

534,584

551,933

611,311

678,486

651,793

Shareholders’ Equity Ratio (%)

38.0

34.7

37.9

39.1

38.2

35.9

Return on Assets (%)

2.7

1.9

1.2

1.5

2.1

1.6

Return on Equity (%)

6.1

5.1

3.2

4.0

5.5

4.4

Payout Ratio (%)

23.7

27.9

40.8

29.1

18.7

44.2

Capital Expenditures

12,80015,705

20,12319,89636,90922,862

Depreciation and Amortization

13,15814,55018,96921,48623,111

22,571

Common Shares Issued

178,798,939 178,798,939 178,798,939 178,798,939 178,798,939 178,798,939

Per Share (in yen):
Net Income Attributable to Nisshinbo Holdings Inc.

63.32

53.83

36.74

51.60

80.33

67.93

1,036.80

1,063.19

1,198.67

1,369.78

1,634.07

1,472.26

Cash Dividends

15.00

15.00

15.00

15.00

15.00

30.00

Number of Employees

18,292

22,30422,08322,052

21,387

23,055

Shareholders’ Equity

Net Sales(billions of yen)

600
500

Risks Associated with Financial Covenants
Related to Capital Procurement
The Nisshinbo Group has secured funding from multiple
financial institutions. The Company and some consolidated
subsidiaries have entered into commitment line contracts andterm loan contracts. These companies are bound by certain
financial covenants.
Risks Associated with Disasters and Accidents
The Nisshinbo Group takes steps to manage risk related todisasters and accidents. However, a large earthquake or othermajor disaster or a sudden accident such as a fire may causesignificant damage to the Group’s manufacturing facilities,
leading to the suspension of production activities that causes
shipment delays. The Group may also incur considerable costs
to restore damaged buildings or facilities.
In addition, the outbreak and spread of a new infectious
disease may have an impact on the Group’s operations.

400
300
200
100
0
11.3

12.3

13.3

14.3

15.3

16.3

Net Income Attributable
to Nisshinbo Holdings Inc.

Net Income Attributable
to Nisshinbo Holdings Inc. per Share(billions of yen)

(yen)

15

100
80

10

60
40

5

20
0

0
11.3

12.3

13.3

14.3

15.3

16.3

11.3

12.3

13.3

14.3

15.3

16.3

49

Consolidated Balance Sheets(March 31, 2016 and 2015)(millions of yen)

ASSETS(thousands of
US dollars) (Note 1)

2016

2015

2016

¥42,272¥36,706$367,582

3,650

8,981

31,7391

4

9Current assets:
Cash and cash equivalents
Time deposits (Note 5)
Marketable securities (Note 4)(millions of yen)(thousands of
US dollars) (Note 1)

2016

2015

2016

Short-term bank loans (Note 5)¥55,398¥71,281$481,721

Commercial paper (Note 5)

30,00030,000260,870

Current portion of long-term debt (Note 5)

16,015

7,094

139,261

Notes and accounts payable, trade (Note 5)

72,17770,680627,626

Nonconsolidated subsidiaries and affiliates

36

197

313

LIABILITIES AND EQUITYCurrent liabilities:

PayablesReceivables
Notes receivable, trade
Accounts receivable, trade (Note 5)
Nonconsolidated subsidiaries and affiliates
Other

7,992

8,116

69,496138,227

143,792

1,201,974

1,050

1,155

9,130

2,803

5,784

24,374150,072

158,847

1,304,974

(831)

(943)

(7,226)

149,241

157,904

1,297,748

Inventories (Note 3)

96,801

94,074

841,748

Deferred tax assets (Note 7)

7,216

7,758

62,748Other current assets

5,215

5,043

45,348304,396

310,4702,646,922

Less allowance for doubtful receivables

Total current assets

12,671

14,573

110,183

84,88485,450738,122

Accrued expenses

16,66015,820144,869

Accrued income taxes

5,350

5,468

46,522

Other

0

17

0

Other current liabilities

11,463

11,04899,678

Total current liabilities

219,770

226,178

1,911,043

Long-term debt (Note 5)

50,146

38,953436,052

Liabilities for retirement benefits (Note 6)

47,181

42,533

410,270

Deferred tax liabilities (Note 7)

34,27543,972

298,043

Deferred tax liabilities (Note 7)Long-term liabilities:

Other long-term liabilities (Note 5)
Total long-term liabilities

15,94919,912

138,687

147,551

145,370

1,283,052

Commitments and contingencies (Note 10)
Equity:Property, plant and equipment (Note 5):Land47,67945,654

414,600

Shareholders’ equity:

Buildings and structures

175,956

171,969

1,530,052

Common stock:

Machinery, equipment and tools

323,688

310,818

2,814,679

7,346

4,490

63,878Construction in progress
Less accumulated depreciation
Property, plant and equipment, net

Authorized—371,755,000 shares
Issued 2016 and 2015—178,798,939 shares554,669

532,931

4,823,209

Capital surplus(362,901)(348,046)(3,155,661)

Retained earnings

1,667,548

Less treasury stock at cost

191,768

184,885

27,58827,588239,896

17,59920,401

153,035

168,825

161,791

1,468,043

2016—20,071,007 shares(23,156)—(201,357)

2015—20,354,072 shares—(23,478)—

Total shareholders’ equity

190,856

186,302

1,659,617

36,21950,998314,948

Accumulated other comprehensive income:Net unrealized gain on available-for-sale securities
Investments and other assets:

Deferred gain (loss) on derivatives under hedge accounting

Investment securities (Notes 4 and 5)

80,232

102,666

697,670

Foreign currency translation adjustments

Investments in and advances to nonconsolidated subsidiaries and affiliates

26,01725,032

226,235

Post-retirement liability adjustments

Deferred tax assets (Note 7)

12,162

9,526

105,756

Goodwill

14,607

16,013127,017

Stock acquisition rights (Note 11)

Other22,611

29,894

196,617

Noncontrolling interests

Total investments and other assets
Total assets

Total accumulated other comprehensive income

(56)

64

(487)

11,88722,674

103,365(5,216)(1,127)(45,356)

42,83472,609372,470

169

222

1,470

50,61347,805440,113

155,629

183,131

1,353,295

Total equity

284,472

306,938

2,473,670¥651,793¥678,486$5,667,765

Total liabilities and equity¥651,793¥678,486$5,667,765

See Notes to Consolidated Financial Statements.
50

51

Consolidated Statements of Income

Consolidated Statements of Comprehensive Income (Loss)(Years ended March 31, 2016 and 2015)(Years ended March 31, 2016 and 2015)(millions of yen)

Net sales(thousands of
US dollars) (Note 1)

2016

2015

2016

¥533,989¥523,758$4,643,383(millions of yen)(thousands of
US dollars) (Note 1)

2016

2015

2016

¥14,341¥20,806$124,704(15,061)

18,578(130,965)

(119)

106

(1,035)

Foreign currency translation adjustments(11,076)

8,185(96,313)

Post-retirement liability adjustments(5,179)3,345(45,035)

(544)

722

(4,730)Net income
Other comprehensive income (loss):

Costs and expenses:

Net unrealized gain (loss) on available-for-sale securities

Cost of sales

419,402415,608

3,646,974

Selling, general and administrative expenses

101,970

94,406886,696

521,372

510,0144,533,670

Deferred gain (loss) on derivatives under hedge accounting

Equity in earnings of a nonconsolidated subsidiary and affiliates
Operating income

12,617

13,744

109,713Comprehensive income (loss)(31,979)

30,936(278,078)¥(17,638)¥51,742$(153,374)

Other income (expenses):
3,124

2,745

Interest expenses(1,007)(1,024)(8,757)

Nisshinbo Holdings Inc.

¥(18,999)¥41,857$(165,209)

Equity in earnings of a nonconsolidated subsidiary and affiliates

2,874

3,280

24,991

Noncontrolling interests

1,361

9,885

11,835

Other, net (Note 9)

4,572

(786)

39,757

9,563

4,215

83,15622,18017,959

192,869

8,016

6,891

69,704

Income before income taxes

27,165Comprehensive income (loss) attributable to:Interest and dividend income

See Notes to Consolidated Financial Statements.

Income taxes (Note 7):
Current
Deferred

Net income(177)(9,738)(1,539)7,839(2,847)

68,165

14,34120,806

124,704

Net income attributable to noncontrolling interests

3,565

7,112

31,000Net income attributable to Nisshinbo Holdings Inc.

¥10,776¥13,694$93,704

See Notes to Consolidated Financial Statements.

52

53

Consolidated Statements of Changes in Equity

Consolidated Statements of Cash Flows(Years ended March 31, 2016 and 2015)(Years ended March 31, 2016 and 2015)(millions of yen)

Commonstock

CapitalsurplusRetainedearnings

Treasurystock
at costTotal
shareholders’equityNet
Deferred
unrealized gain (loss)
Foreign
Postgain (loss)onStockcurrency retirement
on derivatives
acquisitiontranslation
liability
availableunderrightsadjustments adjustments
for-salehedge
securities accounting

Balance at April 1, 2014
¥27,588 ¥20,404 ¥150,347 ¥(3,553) ¥194,786 ¥32,707
Cumulative effect of changes
388
388
in accounting policies
Restated balance¥27,588 ¥20,404 ¥150,735 ¥(3,553) ¥195,174 ¥32,707
at April 1, 2014
Cash dividends, ¥15.00(2,620)(2,620)per share
Net income attributable to13,694
13,694
Nisshinbo Holdings Inc.
Purchase of treasury stock(20,032) (20,032)
Disposal of treasury stock
Adjustment due to increasein consolidated subsidiaries
Net change in the year

(3)

107
(18)

¥(42) ¥15,265¥(3,485)(millions of yen)
Noncontrollinginterests¥264 ¥37,370 ¥276,865
101¥(42) ¥15,265¥(3,485)

Total
equity489¥264 ¥37,471 ¥277,354(2,620)13,694(20,032)

104

104

(18)

(18)
38,456

18,291

Balance at March 31, 2015
¥27,588 ¥20,401 ¥161,791 ¥(23,478) ¥186,302 ¥50,998
Cash dividends, ¥22.50(3,568)(3,568)per share
Net income attributable to10,776
10,776
Nisshinbo Holdings Inc.
Change due to stock
exchange transactions with
(2,489)(2,489)and within subsidiaries
Change in scope of
consolidation—transactions
(323)
(323)
with noncontrolling interests
Purchase of treasury stock
(26)
(26)
Disposal of treasury stock
10
348
358
Adjustment due to increase
(174)
(174)
in consolidated subsidiaries
Net change in the year
(14,779)
Balance at March 31, 2016 ¥27,588 ¥17,599 ¥168,825 ¥(23,156) ¥190,856 ¥36,219

7,409

2,358

(42) 10,334¥64 ¥22,674

106¥(1,127)¥222 ¥47,805 ¥306,938(3,568)
10,776(2,489)

(323)
(26)
358

(120) (10,787) (4,089)¥(56) ¥11,887 ¥(5,216)(174)(53) 2,808(27,020)¥169 ¥50,613 ¥284,472(thousands of US dollars) (Note 1)

Commonstock

CapitalsurplusRetainedearnings

Treasurystock
at costTotal
shareholders’equityNet
Deferred
unrealized gain (loss)
Foreign
Postgain (loss)onStockcurrency retirement
on derivatives
acquisitiontranslation
liability
availableunderrightsadjustments adjustments
for-salehedge
securities accounting

Balance at April 1, 2015
$239,896 $177,400 $1,406,878 $(204,157) $1,620,017 $443,461
Cash dividends, $0.20(31,026)(31,026)
per share
Net income attributable to93,70493,704
Nisshinbo Holdings Inc.
Change due to stock
exchange transactions with
(21,643)(21,643)
and within subsidiaries
Change in scope of
consolidation—transactions(2,809)(2,809)with noncontrolling interests
Purchase of treasury stock
(226)
(226)
87

Disposal of treasury stock
Adjustment due to increasein consolidated subsidiaries
Net change in the year
Balance at March 31, 2016
54

3,026
(1,513)Total
equity$(9,800) $1,931 $415,696 $2,669,026(31,026)
93,704(21,643)(2,809)
(226)

3,113

3,113

(1,513)(128,513)$239,896 $153,035 $1,468,043 $(201,357) $1,659,617 $314,948

See Notes to Consolidated Financial Statements.

$556 $197,165

Noncontrollinginterests(1,043)(93,800)(35,556)(461)

24,417(1,513)(234,956)$(487) $103,365 $(45,356) $1,470 $440,113 $2,473,670(thousands of
US dollars) (Note 1)

2016

2015

2016

¥22,180¥17,959$192,869(7,797)
22,571
7,189(2,874)(1,073)
5,385(4,420)(972)
414(4,408)
23,111
7,239(3,280)219
4,716(6,216)(3,313)
1,668(67,800)
196,270
62,513(24,991)(9,330)46,826(38,435)(8,452)
3,600(6,252)(1,539)(54,365)

249
1,915

132
4,233

2,165
16,652

13,531(969)(6,297)(3,214)39,566(7,870)(4,848)
4,934
4,383
37,120117,661(8,426)(54,757)(27,948)
344,052

2,312

12,282

20,104

8,775(24,727)

6,104(32,508)

76,304(215,017)(2,549)(552)(22,165)4,658(5,495)40,504(10,188)(1,074)(22,793)—(1,102)(21,271)(88,591)(9,339)(198,200)

Cash flows from financing activities:
Proceeds from issuance of long-term debt
Repayment of long-term debt
Increase in short-term bank loans
Cash dividends paid
Purchase of treasury stock
Proceeds from treasury stock sold of consolidated subsidiaries
Decrease in other long-term liabilities
Purchase of additional shares of consolidated subsidiaries
Other, net
Net cash used in financing activities

27,214(10,304)(20,485)(3,568)
(26)
284
(634)
(919)
(606)
(9,044)28,205(33,174)
22,032(2,620)(20,032)
—
(833)
—
184
(6,238)236,643(89,600)(178,130)(31,026)
(226)
2,470
(5,513)(7,991)(5,270)(78,643)

Effect of exchange rate changes on cash
Net increase in cash and cash equivalents
Cash and cash equivalents of newly consolidated subsidiaries
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year

(2,245)5,484
82
36,706¥42,272

1,606
11,217664
24,825¥36,706(19,522)47,687713
319,182$367,582

Cash flows from operating activities:
Income before income taxes
Adjustments to reconcile net income to net cash provided by operating activities:
Income taxes—paidDepreciation and amortization
Amortization of goodwill
Equity in earnings of a nonconsolidated susidiary and affiliates
Provision for (reversal of) doubtful receivables
Provision for accrued pension and retirement benefits
Payment of accrued pension and retirement benefits
Gain on sale of property, plant and equipment, net
Impairment of long-lived assets
Gain on sale of investment securities and investments in and advances
to nonconsolidated subsidiaries and affiliates, net
Loss on write-down of investment securities and investments in andadvances to nonconsolidated subsidiaries and affiliates
Other
Changes in operating assets and liabilities:
Receivables
Inventories
PayablesOther, net
Net cash provided by operating activities
Cash flows from investing activities:
Sale of property, plant and equipment
Sale of investment securities and investments in and advances
to nonconsolidated subsidiaries and affiliates
Purchase of property, plant and equipment
Purchase of investment securities and investments in and advances tononconsolidated subsidiaries and affiliates
Decrease (increase) in time deposits
Cash paid for newly consolidated subsidiaries, net of payment for purchaseof companies
Other, net
Net cash used in investing activities

See Notes to Consolidated Financial Statements.

55

Notes to Consolidated Financial Statements
1. Basis of Presenting Consolidated Financial Statements
The accompanying consolidated financial statements havebeen prepared in accordance with the provisions set forth in
the Japanese Financial Instruments and Exchange Law and its
related accounting regulations, and in conformity with accounting principles and practices generally accepted in Japan,
which are different in certain respects as to application anddisclosure requirements of International Financial ReportingStandards.
In addition, the accompanying notes include information
which is not required under generally accepted accounting

principles and practices in Japan but is presented herein as
additional information.
The United States dollar ($) amounts included herein are
given solely for convenience and are stated, as a matter ofarithmetical computation only, at the rate of ¥115=$1, theapproximate exchange rate at March 31, 2016. The translations should not be construed as representations that theJapanese yen amounts have been, could have been, or couldin the future be, converted into United States dollars.

2. Summary of Significant Accounting Policies

56(a) Consolidation
The consolidated financial statements include the accounts ofNisshinbo Holdings Inc. (hereinafter the “Company”) and its
significant subsidiaries (together, the “Group”).
Under the control or influence concept, those companies
in which the Parent, directly or indirectly, is able to exercise
control over operations are fully consolidated, and those companies over which the Group has the ability to exercise significant influence are accounted for by the equity method.
Investments in nonconsolidated subsidiaries and affiliatedcompanies are accounted for by the equity method.
Investments in the remaining nonconsolidated subsidiaries and affiliated companies are stated at cost. If the equity
method of accounting had been applied to the investments inthese companies, the effect on the accompanying consolidated financial statements would not be material.
All significant intercompany balances and transactions
have been eliminated in consolidation. All material unrealized
profit included in assets resulting from transactions within theGroup is eliminated.

(c) Foreign currency financial statements
The balance sheet accounts of the consolidated foreign subsidiaries are translated into Japanese yen at the current exchange rate. Revenue and expense accounts of consolidated
foreign subsidiaries are translated into yen at the average exchange rate.
Translation adjustments are presented under noncontrolling interests and foreign currency translation adjustments as
a component of equity.

(b) Foreign currency transactions
All short-term and long-term monetary receivables and payables denominated in foreign currencies are translated into
Japanese yen at the exchange rates at the balance sheet date.
The foreign exchange gains and losses from translation
are recognized in the income statement to the extent thatthey are not hedged by forward exchange contracts.
Investments in and advances to nonconsolidated subsidiaries and affiliates in foreign currencies are translated at thehistorical rates effective at the dates of transaction fromwhich such accounts were originated.

(f) Marketable and investment securities
The Group classifies all of its marketable and investment securities as available-for-sale, which are reported at fair value,with unrealized gains and losses included in equity as net unrealized gain on available-for-sale securities. Other investment
securities without quoted market prices are stated at cost.
Realized gains or losses on the sale of securities are based on
the average cost of a particular security held at the time ofsale.

(d) Cash and cash equivalents
Cash and cash equivalents include cash on hand, deposits
placed with banks on demand and highly liquid investmentswith insignificant risk of changes in value which have maturities of six months or less when purchased.
(e) Inventories
Inventories are measured principally at the lower of cost or
net realizable value, cost being substantially determined by
the actual cost method or the average cost method.

Marketable and investment securities are regularly reviewed for other-than-temporary declines in carrying amountbased on criteria that include the length of time and the extent to which the market value has been less than cost, thefinancial condition and near-term prospects of the issuer andthe Company’s intent and ability to retain securities for a period of time sufficient to allow for any anticipated recovery inmarket value.
When such a decline exists, the Company recognizes an
impairment loss to the extent of such decline.
(g) Property, plant and equipment
Property, plant and equipment are stated at cost. Depreciation is computed principally on the straight-line method overtheir estimated useful lives. Contributions in aid of purchasesof property, plant and equipment from national and local
governments are deducted from the acquisition costs of related assets in accordance with tax regulations.
(h) Goodwill
The difference between the cost and underlying fair value ofthe equity of investments in subsidiaries at acquisition is included in goodwill and amortized on a straight-line basis five
to seven years.
(i) Impairment of long-lived assets
Long-lived assets are evaluated for impairment using an estimate of undiscounted cash flows whenever events or changes
in circumstances indicate that the carrying amount of such
assets may not be recoverable. If the estimate of undiscounted
cash flow is less than the carrying amount of the asset, an
impairment loss is recorded based on the fair value of theasset. Fair value is determined primarily by using the anticipated cash flows discounted at a rate commensurate with therisk involved. For assets held for sale, an impairment loss isfurther increased by costs to sell. Long-lived assets to be disposed of other than by sale are considered held and used until
disposed of.
(j) Retirement benefits and pension plans
The Company, domestic consolidated subsidiaries and certain
foreign consolidated subsidiaries have defined benefit plansand defined contribution plans that cover substantially all employees. Under the defined benefit plans, the annual provision for retirement benefits is calculated to state the asset andliability for retirement benefits based on the projected benefit
obligations and plan assets at the balance sheet date.

Retirement benefits to directors and corporate auditors
are provided at the amount that would be required if all directors and corporate auditors retired at the balance sheet date.
(k) Stock options
The accounting standard for stock options requires companies to recognize compensation expense for employee stock
options based on the fair value at the date of grant and overthe vesting period as consideration for receiving goods or services. The standard also requires companies to account for
stock options granted to non-employees based on the fairvalue of either the stock option or the goods or services received. On the balance sheet, the stock option is presented asa stock acquisition right as a separate component of equity
until exercised. The standard covers equity-settled, sharebased payment transactions, but does not cover cash-settled,share-based payment transactions. In addition, the standard
allows unlisted companies to measure options at their intrinsic value if they cannot reliably estimate fair value.
(l) Research and development costs
Research and development costs are charged to income as
incurred.
(m) Income taxes
The provision for income 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 between the carrying
amounts and the tax bases of assets and liabilities. Deferredtaxes are measured by applying currently enacted tax laws to
the temporary differences.
(n) Derivative financial instruments
The Group uses a variety of derivative financial instruments,
including foreign currency forward contracts, commodity
swap contracts and interest rate swaps, as a means of hedging exposure to foreign currency and interest rate risks. The
Group does not enter into derivatives for trading or speculative purposes.
Derivative financial instruments are classified and accounted for as follows: (a) all derivatives are recognized aseither assets or liabilities and measured at fair value, and gains
or losses on derivative transactions are recognized in the­consolidated statements of income, and (b) for derivatives
used for hedging purposes if derivatives qualify for hedge

57accounting because of the high correlation and effectivenessbetween the hedging instruments and hedged items, gains orlosses on derivatives are deferred until maturity of the hedgedtransactions.
The interest rate swaps which qualify for hedge accounting and meet specific matching criteria are not remeasured atmarket value, but the differential paid or received under theswap agreements is recognized and included in interest
expense.
(o) Asset retirement obligation
The asset retirement obligation is defined as a legal obligation
imposed either by law or contract that results from the acquisition, construction, development and the normal operationof such tangible fixed assets under the Japanese accounting
standard.
The asset retirement obligation is recognized as the sumof the discounted cash flows required for the future asset retirement and is recorded in the period in which the obligation
is incurred if a reasonable estimate can be made.
The asset retirement cost is allocated to expense throughdepreciation over the remaining useful life of the assets.
(p) Changes in accounting policy
The “Accounting Standard for Business Combinations” (ASBJ
Statement No. 21 issued by the Accounting Standards Boardof Japan (ASBJ), in September 2013, hereinafter “Business
Combinations Accounting Standard”), “Accounting Standard for Consolidated Financial Statements” (ASBJ Statement
No. 22 issued in September 2013, hereinafter “Consolidation

Accounting Standard”) and “Accounting Standard for Business Divestitures” (ASBJ Statement No. 7 issued in September
2013, hereinafter “Business Divestitures Accounting Standard”) have been adopted from this fiscal year.
Under these accounting standards, the Company records
the difference caused by changes in the Company’s equity
shares in subsidiaries that it continues to control as capitalsurplus and records acquisition-related expenses as expenses
during the fiscal year in which the expenses were incurred.
With regard to business combinations conducted on or after
the beginning of the fiscal year ended March 31, 2016, theCompany has changed its accounting method to reflect therevised allocation of acquisition costs arising from settlement of provisional accounting treatment in the consolidated financial statements in which the business combination
occurs.
The Company has adopted these accounting standards
as of the beginning of the fiscal year ended March 31, 2016and has applied them thereafter in accordance with the transitional handling set forth in Article 58-2 (4) of the Business
Combinations Accounting Standard, Article 44-5 (4) of theConsolidation Accounting Standard and Article 57-4 (4) of
the Business Divestitures Accounting Standard.
As the effect of this revised accounting standard, operating income and income before income taxes for the fiscal
year have increased by ¥32 million ($278 thousand) and¥1,053 million ($9,157 thousand), respectively, and capitalsurplus at the end of the fiscal year has decreased by ¥2,812
million ($24,452 thousand).

4. Marketable and Investment Securities
The carrying amounts and aggregate fair values of available-for-sale securities included in marketable and investment securities
at March 31, 2016 and 2015 were as follows:(millions of yen)

2015

2016

Cost

¥24,475¥23,342$212,826

Unrealized gains

53,77577,097

467,609

Unrealized losses
Fair value

Long-term debt at March 31, 2016 and 2015 consisted of the following:(millions of yen)(thousands of US dollars)

2016

2015

2016

¥35,323¥10,078$307,157

28,11434,719244,469

2,724

1,250

23,687Long-term debt with collateral:
Loans from banks maturing serially to 2025, weighted average interest rates
		 1.0% in March 2016, 1.3% in March 2015
Long-term debt without collateral:

66,161

46,047575,313(16,015)(7,094)(139,261)¥50,146¥38,953$436,052(thousands of US dollars)

2016

2015

2016

Finished products¥39,003¥33,729$339,157

Work in process

36,78137,808319,835

Materials and supplies

21,01722,537

182,756¥96,801¥94,074$841,748

Annual maturities of long-term debt were as follows:(millions of yen)(thousands of US dollars)Year ending March 31,
2017¥7,267$63,191

2018

6,791

59,052

2019

5,944

51,687

2020

29,344

255,165

800

6,957

¥50,146$436,052

2021 and thereafter

58(4,365)$676,070

The weighted average interest rates applicable to the short-term bank loans at March 31, 2016 and 2015 were 0.6% to 0.7%,
respectively.
The weighted average interest rates applicable to the short-term debt of commercial paper at March 31, 2016 and 2015 were0.0% to 0.1%, respectively.

Less current portion(millions of yen)

(220)
¥100,219

5. Short-Term and Long-Term Debt

Capital lease obligations, due through 2025

Inventories at March 31, 2016 and 2015 were as follows:(502)¥77,748

Aggregate cost of non-marketable securities accounted for under the cost method totaled ¥2,485 million ($21,609 thousand)and ¥2,451 million at March 31, 2016 and 2015, respectively.

Loans from banks maturing serially to 2020, weighted average interest rates
		 0.5% in March 2016, 1.0% in March 2015

3. Inventories(thousands of US dollars)

2016

59

At March 31, 2016 and 2015, net book values of assets pledged as collateral for short-term bank loans and long-term debt wereas follows:

Changes of the liability for employees’ retirement benefits for the years ended March 31, 2016 and 2015 were as follows:(millions of yen)(millions of yen)(thousands of US dollars)(thousands of US dollars)

2016

2015

2016

¥101,611¥105,484$883,574

—

(438)

—

2016

2015

2016

Projected benefit obligation¥17,480¥14,310$152,000

Balance at beginning of year

Accounts receivable, trade

561

242

4,878

Investment securities

392

744

3,409

Service cost

5,111

5,310

44,443¥18,433¥15,296$160,287Interest cost

1,366

1,480

11,878

Recognized actuarial loss

5,894

1,420

51,252

Prior service cost

(337)

—

(2,930)Property, plant and equipment

At March 31, 2016 and 2015, in addition, pledged assets as collateral for liabilities other than the above were as follows:(millions of yen)

2016

2015

(thousands of US dollars)

2016

Assets pledged:
Property, plant and equipment
Investment securities
Time deposits¥7,125¥9,096$61,956

901

821

7,835

0

1

0

¥8,026¥9,918$69,791(millions of yen)

2016

2015

(thousands of US dollars)

2016

Liabilities with collateral:
Other long-term liabilities (Guarantee deposits)¥6,336¥6,901$55,096

Notes and accounts payable, trade

1,107

1,182

9,626

¥7,443¥8,083$64,722

Cumulative effect of changes in accounting policies

Actual payment of retirement benefits(4,926)(5,414)(42,835)

Exchange differences(1,382)

1,094(12,017)

Increase due to newly consolidated subsidiaries

1,674

—

14,557

Decrease due to transfer of benefit obligation to defined contribution
pension plan and other—(7,325)—¥109,011¥101,611$947,922

Balance at beginning of year

¥66,375¥64,057$577,174

Expected return on plan assets

1,595

1,616

13,869

Recognized actuarial (gain) loss

(2,493)

5,002(21,678)

Contributions to the defined pension plan

2,246

2,840

19,530

Payment

Balance at end of year
Fair value of plan assets(2,759)(2,881)(23,991)

Exchange differences

(595)

938

(5,174)

Increase due to newly consolidated subsidiaries

230

—

2,000

Decrease due to transfer of benefit obligation to defined contribution
pension plan
Balance at end of year—

(5,197)—¥64,599¥66,375$561,730

6. Retirement Benefits and Pension Plans
Under most circumstances, employees terminating their employment are entitled to retirement benefits determinedbased on the rate of pay at termination, years of service andcertain other factors.
The Group provides defined benefit plans and defined
contribution plans.

The liability for retirement benefits for directors and corporate auditors at March 31, 2016 and 2015 was ¥95 million($826 thousand) and ¥39 million, respectively. The retirement
benefits for directors and corporate auditors are paid subject
to the approval of the shareholders.

Reconciliation of ending balance of retirement benefit obligation and pension assets, and the book value of liabilities and assets
for retirement benefits for the years ended March 31, 2016 and 2015 were as follows:(millions of yen)

2015

2016

Funded retirement benefit obligation¥69,500¥66,371$604,348

Fair value of plan assets(64,599)(66,375)(561,730)

4,901

(4)

42,618

Unfunded retirement benefit obligation

39,51135,240343,574

Net amount of liabilities and assets in consolidated balance sheets¥44,412¥35,236$386,192

Liabilities for retirement benefits¥47,086¥42,494$409,444

Assets for retirement benefits(2,674)(7,258)(23,252)¥44,412¥35,236$386,192

Net amount of liabilities and assets in consolidated balance sheets

60(thousands of US dollars)

2016

61

The components of net periodic retirement benefit costs for the years ended March 31, 2016 and 2015 were as follows:(millions of yen)

2016

2015

A reconciliation between the normal effective statutory tax rate for the years ended March 31, 2016 and 2015 and the actual
effective tax rates reflected in the accompanying consolidated statements of income was as follows:(thousands of US dollars)

2016

Defined benefits plans:Service cost

¥5,111¥5,310$44,443

Interest cost

1,366

1,480

11,878

Expected return on plan assets(1,595)(1,616)(13,869)

Amortization of prior service cost

(290)

(296)

(2,522)

Recognized actuarial loss

782

811

6,800

¥5,374¥5,689$46,730Retirement benefits paid due to restructuring of business operations for the year ended March 31, 2015 was ¥241 million.

2016

2015

33.1%

35.6%

Net changes in valuation allowance(3.6)(43.9)

Amortization of goodwill

10.6

14.4

Loss of investment in subsidiary in liquidation(0.1)(14.1)

Lower income tax rates applicable to income in certain foreign countries

(3.5)

(7.2)

Normal effective statutory tax rate

Equity in earnings of a nonconsolidated subsidiary and affiliates

(4.2)

(6.5)

Additional taxes on retained earnings in foreign subsidiaries

(0.4)

4.8

Other

3.4

1.0

35.3%

(15.9)%

Actual effective tax rate

Assumptions used for the years ended March 31, 2016 and 2015 were set forth as follows:
2016

2015

△0.0%–0.9%

0.5%–1.0%

Expected rate of return on plan assets

1.5%–5.0%

0.0%–4.0%

Rate of expected salary increase

2.0%–9.0%

1.9%–8.3%

Discount rate

7. Income Taxes
The tax effects of significant temporary differences and loss carryforwards which resulted in deferred tax assets and liabilities at
March 31, 2016 and 2015 were as follows:(millions of yen)

2016

2015

8. Derivatives
The Group enters into foreign currency forward contracts
and commodity swap contracts to hedge exchange risk associated with certain assets and liabilities denominated in foreign currencies and also into interest rate swap contracts to2016

manage its interest rate exposures on certain liabilities. Suchcontracts outstanding at March 31, 2016 and 2015 were as
follows:(millions of yen)

2016

(thousands of US dollars)

Not hedged:

Contract
amount(thousands of US dollars)

2015

Fair value

Unrealized
gain (loss)

Contract
amount

¥34

¥(1)

¥(1)

¥3,573¥(319)

2016

Fair value

Unrealized
gain (loss)

Contract
amountFair value

Unrealized
gain (loss)

¥103

¥(3)

¥(3)

$296

$(9)

$(9)

¥(319) ¥2,926

¥(19)

¥(19)

$31,070

Interest rate swap:

Deferred tax assets:
Loss on devaluation of inventories¥1,584¥1,372$13,774

Tax loss carryforwards

14,90618,024

129,617

Fixed rate payments, floating rate receipt
Commodity swap:
Purchased raw materials$(2,774) $(2,774)

Unrealized gain caused by intercompany transactions

1,494

1,368

12,991

Accrued employees’ bonuses

1,884

2,046

16,383

Accrued severance benefits

11,89912,025

103,470

Sold¥1,150¥26¥26¥2,461

¥(27)

¥(27)

$10,000

$226

$226

Impairment of long-lived assets and depreciation in excess of tax limitation

1,563

1,780

13,591

Purchased¥2,572

¥27

¥27

¥806

¥6

¥6

$22,365

$235

$235

Devaluation of investment securities

2,488

788

21,635

Software costs

1,380

1,471

12,000Loss of investment in subsidiary in liquidation

2,377

2,531

20,670

Other

5,127

4,598

44,583(21,178)(23,992)(184,157)¥23,524¥22,011$204,557

Less valuation allowance

Unrealized gain on available-for-sale securities¥(16,569)¥(25,078)$(144,078)

Deferred gains on sale of property(6,060)(6,427)(52,696)

Assets recognized in business combination(9,319)(10,315)(81,035)

Other

Net deferred tax

Foreign currency forward contracts:(millions of yen)

2016
Hedged:(6,473)(6,896)(56,287)¥(38,421)¥(48,716)$(334,096)¥(14,897)¥(26,705)$(129,539)

Contract
amountContract
amountdue after
one year(thousands of US dollars)

2015

2016

Fair value

Contract
amountContract
amountdue after
one year

¥2

¥391

¥—

¥(1)

$617

$—

$17

¥(84) ¥1,798

¥—

¥96

$15,757$—$(730)

Fair value

Contract
Contract amount due
amountafter oneyear

Fair value

Foreign currency forward contracts:
Sold

Deferred tax liabilities:

62

As a result of changes in the corporate tax rate, the deferred tax assets using enacted tax rates in effect for the years in which
differences are expected to reverse at 30.9% for the year ending March 31, 2018 and at 30.6% for the years ending March 31,
2019 and thereafter.

Purchased¥71¥—¥1,812¥—63

9. Other Income (Expenses) — Other, Net

12. Segment Information

Other income (expenses) — Other, net consisted of the following:

Information about industry segments of the Company and its consolidated subsidiaries for the years ended March 31, 2016 and2015 was as follows:(millions of yen)

Gain on sale of property, plant and equipment, net(thousands of US dollars)

2016

2015

2016

¥972

¥3,313$8,452(millions of yen)

2016

Impairment of long-lived assets(414)(1,668)(3,600)Gain on sale of securities, net

6,252

1,539

54,365Business structure improvement expenses(684)(3,714)(5,947)

Sales to customers(1,554)(256)(13,513)Intersegment sales¥4,572¥(786)$39,757

Other, net

Electronics

Contingent liabilities at March 31, 2016 and 2015 for tradenotes discounted with banks amounted to ¥421 million($3,661 thousand) and ¥509 million, respectively.
Contingent liabilities at March 31, 2016 and 2015 forloans guaranteed amounted to ¥89 million ($774 thousand)and ¥100 million, respectively.

		Total sales

Segment assets:¥205,368 ¥165,037

PapersReal Estate¥29,525¥8,285¥57,504¥32,585¥8,358¥27,327

20

331

104

219

760

2,073

1,434

¥205,419 ¥165,057¥29,856¥8,389¥57,723¥33,345¥10,431¥28,761¥(887)¥318¥753¥1,873¥742¥5,795¥(217)¥218,040 ¥160,018¥72,294¥7,799¥60,789¥22,976¥43,280¥36,81451¥8,318¥— ¥533,989(4,992)—¥(4,992) ¥533,989¥(4,078)¥12,617¥29,783 ¥651,793

Other:

Commitments for capital expenditures outstanding at
March 31, 2016 and 2015 were in the approximate amountsof ¥1,189 million ($10,339 thousand) and ¥2,363 million,
respectively.

Depreciation and amortization¥4,742¥10,829¥1,884¥299¥1,663¥1,027¥1,571¥181¥375¥22,571

Increase in property, plant andequipment and intangible assets¥9,945¥8,519¥3,647

¥412

¥806

¥696

¥575

¥78

¥(1,816)¥22,862(millions of yen)

2015
Electronics

Automobile
Precision
Chemicals
Brakes Instruments

TextilesPapersReal Estate

Other Eliminations/
Consolidated
Businesses
Corporate

Sales and Segment Profit (loss):

11. Subsequent Events
Stock option plan
At the general shareholders meeting held on June 29, 2016,
the Company’s shareholders approved a stock option plan togrant stock purchase rights up to 200 thousand shares of the

TextilesOther Eliminations/
Consolidated
Businesses
Corporate

Sales and Segment Profit (loss):

Segment profit (loss)
		 [Operating income (loss)]

10. Commitments and Contingencies

Automobile
Precision
Chemicals
Brakes Instruments

Sales to customers
Intersegment sales

Company’s common stock to directors and key employees in
the period from August 1, 2018 to July 31, 2023.

		Total sales¥209,116 ¥161,887¥28,608¥8,138¥48,166¥31,280¥9,246¥27,317

24

670

120

314

742

2,266

2,723

¥209,239 ¥161,911¥29,278¥8,258¥48,480¥32,022¥11,512¥30,040

123

Segment profit (loss)
		 [Operating income (loss)]¥12,704¥(2,069)

¥264

¥397

¥(358)¥425¥6,669¥(110)

Segment assets:¥233,337 ¥177,473¥36,648¥7,455¥50,083¥22,587¥44,369¥37,285¥— ¥523,758(6,982)—¥(6,982) ¥523,758¥(4,178)¥13,744¥69,249 ¥678,486

Other:
Depreciation and amortization¥5,733¥10,542¥1,631¥387¥1,490¥1,009¥1,687¥276¥356¥23,111

Increase in property, plant andequipment and intangible assets¥17,997¥10,042¥5,588¥250¥3,220

¥504

¥506

¥37

¥(1,235)¥36,909(thousands of US dollars)

2016Electronics

Automobile
Precision
Chemicals
Brakes Instruments

TextilesPapersReal Estate$500,035$283,348$72,678

Other Eliminations/
Consolidated
Businesses
Corporate

Sales and Segment Profit (loss):
Sales to customers
Intersegment sales
		Total sales
Segment profit (loss)
		 [Operating income (loss)]
Segment assets:$1,785,809 $1,435,104
443

174

$1,786,252 $1,435,278$72,331$(7,713)$1,896,000 $1,391,461$256,739 $72,044
2,878$237,626

904

1,904

6,609

18,026

12,470$259,617 $72,948$501,939$289,957$90,704$250,096$2,765$— $4,643,383(43,408)—$(43,408) $4,643,383$6,548$16,287$6,452$50,391$(1,887)$(35,461)$628,643 $67,817$528,600$199,791$376,348$320,122$258,983 $5,667,765$109,713

Other:

64

Depreciation and amortization$41,235$94,165$16,383$2,600$14,461$8,930$13,661$1,574$3,261$196,270

Increase in property, plant andequipment and intangible assets$86,478$74,078$31,713$3,583$7,009$6,052$5,000$678$(15,791)$198,800

65

Independent Auditor’s Report

History
1907

Established Nisshin Cotton Spinning Co., Ltd.

1949

Established Nihon Postal Franker Co., Ltd. (name changed to Nisshinbo Postal Chemical Co., Ltd. in 2006)

1958

Established Nippon Kohbunshikan Co., Ltd. (name changed to Nippon Kohbunshi Co., Ltd. in 1986)(acquired by Nisshinbo Mechatronics Inc. in 2010)1972

Established Nisshinbo Do Brasil Industria Textil LTDA. (Brazil)

1985

Acquired Nisshin Denim Inc.

1989

Established Kohbunshi (Thailand) Ltd. (Thailand)(name changed to Nisshinbo Mechatronics (Thailand) Ltd. in 2011)

Management’s Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated ﬁnancial
statements in accordance with accounting principles generally accepted in Japan, and for designing andoperating such internal control as management determines is necessary to enable the preparation and fairpresentation of the consolidated ﬁnancial statements that are free from material misstatement, whether
due to fraud or error.

1993

Established Pudong Kohbunshi (Shanghai) Co., Ltd. (China)(name changed to Nisshinbo Mechatronics (Shanghai) Co., Ltd. in 2010)

1995

Established Nisshinbo Automotive Corporation (U.S.A.)

1996

Established Nisshinbo Somboon Automotive Co., Ltd. (Thailand)

Auditor’s Responsibility
Our responsibility is to express an opinion on these consolidated ﬁnancial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in Japan. Thosestandards require that we plan and perform the audit to obtain reasonable assurance about whether the
consolidated ﬁnancial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosuresin the consolidated ﬁnancial statements. The procedures selected depend on the auditor’s judgment,
including the assessment of the risks of material misstatement of the consolidated ﬁnancial statements,
whether due to fraud or error. The purpose of an audit of the consolidated financial statements is not to
express an opinion on the effectiveness of the entity’s internal control, but in making these risk assessments
the auditor considers internal controls relevant to the entity’s preparation and fair presentation of theconsolidated ﬁnancial statements in order to design audit procedures that are appropriate in thecircumstances. An audit also includes evaluating the appropriateness of accounting policies used and thereasonableness of accounting estimates made by management, as well as evaluating the overall
presentation of the consolidated financial statements. We believe that the audit evidence we haveobtained is sufﬁcient and appropriate to provide a basis for our audit opinion.

1997

Established Nisshinbo Automotive Manufacturing Inc. (U.S.A.)

1998

Established P.T. Gistex Nisshinbo Indonesia (Indonesia)(name changed to P.T. Nisshinbo Indonesia in 2010)

1999

Established Saeron Automotive Corporation (South Korea)

2000

Purchased additional shares of P.T. Nikawa Textile Industry (Indonesia)

To the Board of Directors of Nisshinbo Holdings Inc.
We have audited the accompanying consolidated ﬁnancial statements of Nisshinbo Holdings Inc. and its
consolidated subsidiaries, which comprise the consolidated balance sheet as at March 31, 2016, and theconsolidated statements of income, comprehensive income, changes in equity and cash ﬂows for the year
then ended, and a summary of signiﬁcant accounting policies and other explanatory information, allexpressed in Japanese yen.

OpinionIn our opinion, the consolidated ﬁnancial statements referred to above present fairly, in all material
respects, the ﬁnancial position of Nisshinbo Holdings Inc. and its consolidated subsidiaries as at March 31,
2016, and their ﬁnancial performance and cash ﬂows for the year then ended in conformity withaccounting principles generally accepted in Japan.
Convenience translations
We have reviewed the translation of these consolidated financial statements into U.S. dollars, presented
for the convenience of readers, and, in our opinion, the accompanying consolidated financial statements
have been properly translated on the basis described in Note 1 to the consolidated ﬁnancial statements.

Established Nisshinbo Urban Development Co., Ltd.

Established Continental Teves Co., Ltd. through merger with Continental Teves AG & Co. oHG(name changed to Continental Automotive Co., Ltd. in 2007)
2002

Established Nisshinbo (Shanghai) Co., Ltd. (China)
Acquired all shares of Iwao & Co., Ltd.

2003

Established Saeron Automotive Beijing Corporation (China)

2004

Established Continental Automotive Corporation (Lian Yun Gang) Co., Ltd. (China)

2005

Made tender offer for additional shares of New Japan Radio Co., Ltd.

2006

Acquired additional shares of Japan Radio Co., Ltd. and Nagano Japan Radio Co., Ltd.

2007

Acquired all shares of Daiwa Shiko Co., Ltd.

2008

Acquired all shares of Nisshinbo Brake Sales Co., Ltd. (acquired by Nisshinbo Brake Inc. in 2010)2009

Spun off five businesses — Textiles, Automobile Brakes, Papers, Precision Instruments, and Chemicals — andconverted to holding company; corporate name changed to Nisshinbo Holdings Inc.

2010

Established Nisshinbo-Yawei Precision Instruments & Machinery (Jiangsu) Co., Ltd. (China)(formerly Jiangsu Yawei Nisshinbo Precision Instruments & Machinery Co., Ltd.)
Acquired additional shares in Japan Radio Co., Ltd., making it a consolidated subsidiary
Nagano Japan Radio Co., Ltd. also became a consolidated subsidiary as a result

2011

Established Nisshinbo Saeron (Changshu) Automotive Co., Ltd. (China)
Established Nisshinbo Singapore Pte. Ltd. (Singapore)
Acquired all shares of TMD Friction Group S.A. (Luxembourg)

2012

Established Nisshinbo Business Management (Shanghai) Co., Ltd. (China)

2013

Established Nisshinbo Commercial Vehicle Brake Ltd. (Thailand)

VERITAS & Co.

2014

Established Nisshinbo-Continental Precision Machining (Yangzhou) Co., Ltd. (China)

June 29, 2016

2015

Acquired all outstanding shares in TOKYO SHIRTS CO., LTD.

Tokyo, Japan

Changed Company’s sector classification on stock markets from textile products to electrical equipment
Acquired all outstanding shares in Nanbu Plastics Co., Ltd.
2016

66

Nagano Japan Radio Co., Ltd. and Ueda Japan Radio Co., Ltd. became consolidated subsidiaries ofJapan Radio Co., Ltd.
67

Corporate Data
(As of March 31, 2016)

FoundedCommon StockFebruary 5, 1907

Authorized

371,755,000 shares

Issued178,798,939 shares

Head Office¥27,588 million (US$240 million)

2-31-11, Ningyo-cho, Nihonbashi, Chuo-ku,
Tokyo 103-8650, Japan

Shareholders

Tel: +81-3-5695-8833

13,335

Fax: +81-3-5695-8970

Composition of Shareholders
Osaka Branch
2-4-2, Kitakyuhouji-machi, Chuo-ku,

Securities
firms

Osaka 541-0057, Japan
Tel: +81-6-6267-5501

Treasury stock

11.2%

4.5%

Fax: +81-6-6267-5529

Japanese financial
institutions

35.4%

Japanese
individuals andothersNagoya Branch
5-2-38, Sakae, Naka-ku,

12.9%

Nagoya 460-0008, Japan
Tel: +81-52-261-6151

Other Japaneseinstitutions

Fax: +81-52-263-9480

Foreigninstitutions

16.6%

Employees
Parent Company

19.4%

197

Subsidiaries

22,858

Total

23,055

Listings
Tokyo, Nagoya, Fukuoka and Sapporo

Transfer Agent
Mitsubishi UFJ Trust and Banking Corporation
1-4-5, Marunouchi, Chiyoda-ku,
Tokyo 100-8212, Japan

Stock Price and Trading Volume(yen)(million shares)

Stock price (left)

1,800

35
30

1,500

25

1,200

20
900
15
600

10

Cover : VENT NOUVEAU V snow white 174.5gsm
P1-42 : VENT NOUVEAU V snow white 122.1gsm

Trading volume (right)

300

This Annual Report 2016 is printed on paper manufactured
by Nisshinbo Paper Products Inc.

5

P43-68 : ARAVEAL ultra white 81.4gsm
VENT NOUVEAU V: High-grade printing paper with a rich texture optimized for printing.

0

0

9/13

68

12/13

3/14

6/14

9/14

12/14

3/15

6/15

9/15

12/15

3/16

6/16

ARAVEAL: Printing paper with a smooth, delicate texture.