Nisshinbo Industries, Inc.

Nisshinbo Industries, Inc.
Annual Report 2008

2-31-11, Ningyo-cho, Nihonbashi, Chuo-ku, Tokyo 103-8650, Japan
Tel: 03-5695-8833 / Fax: 03-5695-8970
URL: http://www.nisshinbo.co.jp/english/

Creating
New Value
for the Future
Annual Report 2008
Fiscal year ended March 31, 2008

Nisshinbo embraces
green solutions
Nisshinbo Industries, Inc. was established in 1907 as a manufacturer of cotton yarn
and thread. Over the past century, we have tackled the challenges of creating value
to meet the demands of society and have evolved into a company offering products
and services in six areas: textiles, automobile brakes, paper products, mechatronics,
chemicals, and electronics.
But Nisshinbo’s evolution has not stopped. Preservation of the global environmentis essential for achieving sustainable development in human society, and our company iscommitted to meeting this new challenge. Nisshinbo is becoming a company thatwill use its accumulated technological capabilities to provide optimal solutions toenvironmental problems—a pro-environment company whose business activities will
make significant contributions to the future of human society.

April 2009
Nisshinbo enters
a new phase

Contents
Interview with the President .................................... 2

Financial Section ........................................................ 25

Feature: Nisshinbo’s Environmental Business ........... 8

Board of Directors ...................................................... 50

CSR Activities ............................................................... 12

Organization Chart .................................................... 51

Financial Highlights ................................................... 17

Nisshinbo History ....................................................... 52

Overview of Nisshinbo Group Business ............. 18

Corporate Data/Nisshinbo Group ....................... 53
1

A group that contributes to preservation of the global environment.
Spinning off divisions to enhance
the strengths of each.
Synthetic
Organic
Chemistry

Nisshinbo will
undergo a corporate
division in April 2009

High Polymer
Chemistry
Weaving/knitting/dyeing/
FinishingTechnology
TextileEngineering

Spinning
Engineering

Nisshinbo will adopt a holding company
structure and spin off each division as anindependent company.
Each company will reinforce growth areasand promote environmentally friendly business in the pursuit of becoming a company
committed to the environment.

BrakingEngineering
MechanicalEngineering
Electronic
Engineering

Paper
MakingFrom textile engineering to a wide range oftechnologies.
Nisshinbo has been accumulating technologicalcapabilities and management assets for morethan a century.

Surface
Processing
Technology

A wide range of business fields generated fromdiverse technological capabilities.
Amidst those capabilities, the seeds of futureenvironmental businesses are starting to germinate.

Interview with the President

Nisshinbo continues to increase
sales revenue and income despitedifficult economic conditions.
A year for building the foundations
for our next century.

What is the status of progress under the Three-Year Management Plan 2008?
The business organization reforms implemented pursuant to apolicy of selection and concentration are producing results.
Comprehensive business organization reforms are being implemented
under the Three-Year Management Plan 2008 to select core businesses
and concentrate our efforts on them. During the fiscal year ended March
2007, which was the first year of the three-year plan, we closed the

The fiscal year ended March 2008 was the 101st year since

Toyama Plant in the textile business and withdrew from unprofitable

the foundation of Nisshinbo Industries, Inc. This marked thesectors of the former chemical products business.

first year of our next century and for building the foundations
for the future.
I feel that we have achieved a good response to the

In the fiscal year ended March 2008, the second year, we closed
the Harisaki Plant and implemented a further consolidation of production
facilities in the textile business. Also, we conducted a review of the textile business itself,business structure reforms implemented under the Three-reorganized unprofitable business sectors including the mail-order business, adjusted

Year Management Plan 2008, our medium-term business

excess inventories of obsolete products, and implemented other reforms. In the chemi-plan. We are reorganizing unprofitable existing businesses
and adjusting excess inventories as orders increase in new
fields such as photovoltaic module manufacturing lines. I

cal business, we continue to improve production management structures including
adjustments of excess inventories continued from last year.
As a result of these reforms, liquidation of negative legacies, an important factor
hindering the company’s growth, has proceeded substantially. At the same time, we arehave high hopes that new environment-related businesses

concentrating management resources on new, environment-related businesses. These

will become a major driver of Nisshinbo’s future growth.

include new plant facilities for photovoltaic module manufacturing lines, an area in which

To achieve even greater growth in the future,orders are increasing rapidly, and the introduction of mass-production facilities for electric

Nisshinbo will adopt a holding company system and implement dynamic management by spinning off its major busi-

double-layer capacitors. We are working to develop and strengthen these businesses.
The fiscal year ending March 2009 will be the final year of the three-year plan asness divisions in April 2009. The fiscal year ending Marchwell as a year for preparing for corporate division the following April. During this year, we2009 will be a year of preparation for these changes. I ask

will ensure that the structural reforms in existing business areas are carried out

for your continued support in the coming year.

The new photovoltaic
module manufacturing
line plant in Okazaki City,
Aichi Prefecture(scheduled for completionin March 2009)

effectively, and will make even greater efforts to strengthen new businesses. The next
three-year plan, which will start at the same time as the corporate division, provides
a view of Nisshinbo’s new stance of reforming profit structures while growing.

Takashi Iwashita, President
Nisshinbo Industries, Inc.

The Three-Year Management Plan 2008
Nisshinbo is currently in the final year of its Three-Year Management Plan 2008. The core management
policies of the plan are as follows:

1 Continue to bring to market unique products withhigh added value to serve as the foundation forstrong quality competitiveness.

2 Reduce lead times and thoroughly emphasize aprompt “customer first” response.

3 Promote collaboration with other companies.

2

4 Pursue overseas expansion and accelerate localization of production and marketing.

5 Promote amicable M&As.
6 Reorganize and withdraw from businesses withno prospects for profitability.

3During this fiscal year, we experienced a problem concerning the mislabeling of theWhat is the outlook for the fiscal year ending March 2009 in light ofrecent changes in markets?

percentage of recycled pulp in products, resulting in substantial inconvenience to our customers, business partners, and other stakeholders. I deeply regret that a problem that

By using our flexible business structures to respond to changes in thebusiness environment, we aim to achieve sustainable growth.

contravenes our fundamental management principle that companies are public institutions occurred. And we have taken measures to prevent the recurrence of such an inci-

Unstable factors in global markets such as the subprime loan crisis,

dent, conducted employee compliance training, and created additional audit structures tothe rapid appreciation of the yen and the depreciation of the dollar,

reinforce our internal governance systems based on the principles of CSR.

and unprecedented high prices for oil are likely to continue for sometime. The Nisshinbo Group, however, has flexible business structures

Recycled Pulp Percentage Mislabeling Incident

and reduces risks by combining businesses with different attributes.

It was discovered that the percentages of recycled pulp included in certain Nisshinbo products differed fromthe indicated percentages. The facts revealed by internal audits were announced publicly, and production waspromptly suspended. To prevent a reoccurrence, we have adopted systems for independent confirmations byother parties, including the quality assurance division and the audit division. We review management systems
on an on-going basis and take other measures to prevent the recurrence of similar incidents.

The appreciation of the yen is a negative factor for automobile brakeand electronics businesses, which rely heavily on exports, but it is apositive factor for textiles and paper businesses that import large volumes of materials such as cotton and pulp. In addition, we are working to respond to changes through production in the best locations,such as making up for the downturn in the American automobile
market by responding to strong demand in emerging markets.
Taking these conditions into account, as of the end of the first quarter, we

You have stated that Nisshinbo seeks to be a company committed to theenvironment. What type of company is Nisshinbo trying to become?

foresee sales of ¥322 billion (down 0.1% from the previous year), operating income

Nisshinbo will become a company that proposes optimal
solutions to global environmental problems.

of ¥12.0 billion (down 0.3%), ordinary income of ¥19.0 billion (up 0.4%), and net
income of ¥13.0 billion (up 5.8%). This forecast is almost on a par with our results
for the fiscal year ending March 2008, but promising growth businesses, such as solar

Environmental issues are the greatest problems that humankind

cell manufacturing equipment, Carbodilite, a high-performance chemical product, andcurrently faces, and Nisshinbo will become a company that will use

our bipolar plates for fuel cells are now expanding rapidly. Therefore, I believe that we

its technological capabilities as a manufacturer to propose solutions

can put our company firmly on a growth track in fiscal 2009, when corporate division

for achieving a low-carbon society. This is the kind of company thatwill begin.

Nisshinbo seeks to become.
Based on this idea, Nisshinbo has been developing photovoltaic
module manufacturing equipment as a part of its mechatronics business

There has been particular emphasis on corporate social responsibility(CSR) and compliance-related issues of late. What is the positioning of
CSR within Nisshinbo’s corporate governance?
CSR is an integral part of Nisshinbo’s management and is thehighest conduct guideline.
Nisshinbo has observed two principles for more than 100 years since its foundation. Firstis the management principle that companies are public organs whose mission iscontributing to human society through business activities. Second is our corporate creedof consistent integrity, which emphasizes good faith in all business activities. These principles are in accord with the concepts of CSR, and CSR serves as the highest conduct
guideline for Nisshinbo employees.
4for about 10 years. We are receiving orders from Japan and other counAn electric doublelayer capacitor
module (left) anda single cell

tries faster than we can produce the equipment. We are also conducting research using
original technologies and expertise in the chemical business to develop and market products
such as electric double-layer capacitors, Carbodilite, and bipolar plates for fuel cells. Additional
information on these initiatives can be found in the feature on pages 8 through 11.

The Seeds of Environment-related Businesses
Nisshinbo is also developing environmentally friendly products and technologies in sectors otherthan the precision instrument and machinery business and chemical business. The textiles business, for example, developed “banana fibers” made from banana stems that in the past had to bediscarded, and the paper business marketed paper certified under the Forest Stewardship Council(FSC), an international program for forestry certification. Nisshinbo hopes that both of theseprojects will become businesses that support it as an environmental company in the future.

5

All of these new businesses can contribute to the prevention ofserve to increase profitability, enhance governance, and raise

global warming. They hold the potential for tremendous growth in the

Carbodilite, a highperformance chemical
product

employee motivation.

future. I strongly believe that if we respond to societal demands andAs a group company responsible for promoting new busi-

engage in businesses that provide optimal solutions to environmental

ness in the future, the holding company will perform functions

problems, our business will grow no matter what complications and obsta-

for developing and nurturing new businesses such as capacitors.

cles it faces. The seeds of environment-related businesses in a variety ofIn addition, it will retain the highly profitable real estate leasing

business fields other than those introduced in this report are also starting

business as a source of capital for this purpose. Nisshinbo

to germinate. I am confident that growing as an environmental company

intends to judiciously cultivate promising new businesses, just as

and contributing to human society is precisely the stance that we should maintain in

it nurtures new personnel who hold great potential.

accordance with our principle that companies should act like public organs.

The transformation to a holding company is a route for Nisshinbo to increase its
corporate value as an environmental company. By dividing into independent companies,
each company will create environmentally friendly products and technologies. The hold-In April 2009, Nisshinbo will shift to a holding company system. What
are the objectives and intended results of this change?

ing company will support the development and nurturing of new businesses, transforming the Nisshinbo Group into an environmental company.

By dividing Nisshinbo into separate companies, we will increase
the pace of management and create new growth businesses.
To make our next major step forward, the final stage of the Three-Year Management
Plan 2008 is to transform Nisshinbo into a holding company that owns five new compa-

What is Nisshinbo’s policy concerning the return of profits to shareholders?
Also, what is your final message to shareholders and investors?

nies established from the textiles, automobile brakes, paper, mechatronics, and chemi-

Our basic annual dividend is ¥15 per share, and we are working
to increase dividends by raising income.

cal business divisions as well as New Japan Radio Co., Ltd. Each of our businessdivisions has a high degree of autonomy, and under the current organizational structure,
it is as if a single large ship were trying to head in different directions. Following the

In the fiscal year ended March 2008, we paid an interim dividend of ¥7.5 per share andtransformation to a holding company system, each company will be granted manage-a year-end dividend of ¥7.5 per share for a total annual dividend of ¥15. Nisshinbo isment authority so it can act with flexibility and increase its competitiveness.

also increasing shareholder value by purchasing and retiring its own shares. In the fiscal

Splitting up the company will clarify where responsibility lies, which we hope will

year ended March 2008, we purchased 9.41 million shares at a cost of ¥14,680 million

Organizational Structure of the Holding Company
The division of Nisshinbo into independent companies will reinforce multifaceted management. Raising the valueof each business will maximize the corporate value of the Nisshinbo group as a whole.

Annual dividend per shareand retirement of shares

GeneralShareholders
Meeting
Board ofDirectors
Chairman

From April 1, 2009

(yen)

50,00015

Dividends
Cumulative total ofshares retired

40,00012

Business Support Center

Nisshinbo Textile Inc.

Business Development Division
Property Management
Department

30,0009Nisshinbo Brake Inc.
20,000Brake Company
Paper Products Company
Precision Instrument &Machinery Company
Chemical Company

Nisshinbo Paper Products Inc.
To business subsidiaries

10,000Nisshinbo Chemical Inc.

5,000

New Japan Radio Co., Ltd.

6

0

3

on new business. We are pressing forward with our development as a company that can reward all stakeholders including

2000 ’01 ’02 ’03 ’04 ’05 ’06 ’07 ’08(Fiscal years ended March 31)

6

Nisshinbo is currently implementing dynamic reforms andis starting to achieve results in new growth areas with a focus

15,000Nisshinbo Mechatronics Inc.

ing our own shares to raising returns by investing in growthareas and continue our efforts to increase corporate value.

25,000

Textile Companyof value to shareholders. We will monitor carefully the timing toshift our emphasis from increasing return on equity by purchas-

35,000President

rate was 143%.
I feel that we are at a turning point regarding the return

Nisshinbo Holdings Inc.

Corporate Strategy Centerand the purchase of our own shares, total value returned toshareholders was ¥17.58 billion, and our shareholder return(thousandsof shares)

45,000and retired 3 million shares. Through the payment of dividends

0shareholders, and accordingly, I ask for your continued support
and guidance from a long-term perspective.
7

Feature: Nisshinbo’s Environmental Business

New plant to be completed in
March 2009.
Nisshinbo is aiming for a 30%
share of the global market.

■PV Module Manufacturing Equipment
Playing a key role in clean energy

Driving new growth with solutions for
global environmental problems
Environmental business is a great source of future growth potential for

Photovoltaic (PV) modules provide clean energy that does not emit carbon dioxide. The
solar cell manufacturing process comprises front-end processes for making PV cells andback-end processes for assembling the completed cells into panels (modules).
Nisshinbo’s Precision Instrument & Machinery Company supplies core equipment
needed for back-end processing. Our share of the domestic market for solar simulators
tops 90%, and we have more than 60% of the domestic market for PV module laminators. We provide PV module manufacturing lines, which incorporate both simulators andlaminators, to manufacturers in Japan, Europe, and Asia. We have the highest market
share in Japan and a 10% share of the global market. In addition, we are developing
original technologies for EL cell inspection equipment used to detect cracks that occur inpanels during manufacturing. The reliability and comprehensive capabilities of thisequipment have received considerable praise around the world.

As interest in clean energy rises, themarket for PV module manufacturinglines is expanding. It is expected to grow
10-fold between 2010 and 2022.
Forecast of the
PV module manufacturing
line market in 2010

Forecast of the
PV module manufacturing
line market in 2022

Back-end processes:¥40 billion
Front-end processes(film formation):¥280 billion

Back-end processes:¥405 billion
Front-end processes(film formation):¥2,835 billion

Nisshinbo. By using the knowledge base we have developed over thelast century, we are developing new technologies and products aimed
at solving the major environmental issues, such as global warming, thatface the world today. Some of the core activities in our environmental
business are discussed below.

PV module
laminator
The laminator sandwiches PV cells tocreate modules.

Nisshinbo’s PV module manufacturing line business is growing rapidly, with a noted increase in orders since the 2007 G8
summit in Germany held amid intensifying concerns about global
warming. Sales were approximately 2.5 billion yen in fiscal 2007
but are expected to increase to 6 billion yen in fiscal 2008 and toreach 10 billion yen in fiscal 2009. A new plant will be completed
at the Miai Machinery Plant site in Okazaki City, Aichi Prefecture, inMarch 2009. We are also considering the construction of additional new facilities
depending on order volumes and expect the PV module
manufacturing equipment business to enter a period ofsignificant returns.
We control a prominent position at the top of thedomestic market, and our next challenge is expanding ourglobal market share. We established business sites inShanghai in 2006 and Taiwan in July 2008, and in September 2008 we plan toopen a marketing service center in Europe, a region where demand is brisk. Our
target is to secure a 30% share of the global market for PV module manufacturing
back-end processes by 2022.

Solar simulator
The simulator is used tomeasure the output
characteristics of PV cells.

Providing complete solutions for PV module manufacturing to companies worldwide
We began developing PV module manufacturing lines about 10 years ago. Realizingthat environmental business would be the next area of growth, we used the mechatronics technologies that we accumulated as a maker of various customized machines tolaunch manufacturing devices needed for back-end processes of PV module production. This business has grown to the extent that we are now able to provide total solutions for making PV modules. The back-end processes require an extensive range oftechnologies, including comprehensive system design, manufacturing, inspection, andmaintenance technologies. We provide consulting services in all of these areas, and theability to support companies that are starting out in PV module manufacturing is one of
our strengths. We will continue our expansion in global markets, using such technologies as our EL cell inspection equipment, which have been well received. I hope that
we can play a significant role in accelerating Nisshinbo’s future growth.

8

Yoshihiro Sakaki, Director,
Executive Managing Officer
Chief of the Precision Instrument & Machinery Company

9

Feature: Nisshinbo’s Environmental Business

Nisshinbo has developed numerous environment-friendly products, including Carbodilite,

an area in which development isbipolar plates for fuel cells, and electric double-layer capacitors using such materials as

advancing, will be completed in fiscal

carbodiimide and carbon, in addition to our unique chemical technologies. All of these

2008, and sales will be deregulated

products can play an important role in addressing global warming by reducing CO2 emissions.

starting in fiscal 2009. Nisshinbo

These promising products can become new core businesses for the Nisshinbo Group.

continues to conduct research anddevelopment of automobile fuel cellbipolar plates and is establishing theconditions necessary for rapid growth.

Cell
Bipolar plates

Hydrogen

Stack

Air

Hydrogen terminal(catalyst)
Electrical membrane
Air terminal(catalyst)

Bipolar plates■Carbodilite
Structure of a Fuel Cell Stack

A high-performance resin material essential for bio-mass plastics
Bio-mass plastics made from such plant-derived materials as corn are■Electric Double-Layer Capacitors

attracting attention. They are environmentally friendly, recyclable mate-

Demand expected to grow rapidly in the automobile fieldrials that have the ability to limit the generation of carbon dioxide andhazardous materials during a product’s lifecycle. We developed
Carbodilite as a high-performance resin that can improve durability
while maintaining safety when added to bio-mass plastics, such as
polylactic acid. By securing intellectual property rights for Carbodilite,
we are dominating global markets for bio-mass plastic additives.
Spurred by the global move to reduce CO2 emissions, sales in fiscal
2008 are expected to double from the previous year to more than
2 billion yen. In addition, sales are expected to grow by 30% or more annually,
starting in fiscal 2009, when bio-mass plastics are expected to take off.

The electric double-layer capacitor stores electricity and canrapidly discharge large amounts of power. Nisshinbo’s electric
double-layer capacitors boast world-leading performance andfunctionality for their high voltage capacity, low internal resistance,and safety. They are being used in a wide range of industrial
equipment, and we are working toward full-scale entry in theautomobile sector with the development of capacitors specifically tailored to automobile applications.
These include hybrid vehicle energy recovery systems that convert the energy generated during deceleration into
electricity and capacitors for distributed power systems (peak assist)compatible with automobile electronics. It is expected that electric
double-layer capacitors will be used in automobiles on a large scale■Bipolar Plates for Fuel Cells

from around 2010.

Nisshinbo controls largest share of global market for carbon bipolar plates
Fuel cells, which use hydrogen and oxygen to generate

Collaborating with customers to open new markets

electricity, are clean energy sources that do not produce
carbon dioxide or other harmful emissions. They also produce virtually no noise or vibration. Consequently, they canbe used in a wide variety of applications, such as in homes
and automobiles. Large volumes of thin, sheet-like components known as bipolar plates are used in key units of fuelcells. Nisshinbo entered the field of carbon bipolar plates at
an early stage, and with our superior manufacturing technologies, we have captured the largest share of the global market in terms of both
quality and volume. Our carbon bipolar plates have been praised for their strength,
thinness, flexibility, and other properties. Nationwide trials of household fuel cells,

10

Masaaki Isobe, Director, Executive Managing Officer
Chief of Chemical Company,
General Manager of Business Development Division

Nisshinbo uses its extensive knowledge of chemical substances to develop uniqueproducts that only our company can produce. By developing new markets in collaboration with customers, we strive to create clean energy sources and advance theconcept of a low-carbon society. We have established leading positions worldwide
with Carbodilite, bipolar plates for fuel cells, and electric double-layer capacitors. Our
R&D staff of some 50 professionals continually produces new results, with research
aimed at developing high value-added products. As an example, in the field of fuelcells, the development of a carbon catalyst to replace the conventional platinum
catalyst is achieving significant results. As well of course as becoming a big businessin the future, it is hoped that the carbon catalyst will enable a substantial reductionin the cost of fuel cells, the diffusion of which will contribute immensely to therealization of a low-carbon society. Nisshinbo is intent on creating environmental
value and is developing businesses that contribute to society.

11

CSR Activities

Nisshinbo conducts wide-ranging CSR
activities based on group philosophy

Corporate Governance Structure
Nisshinbo has adopted the following corporate governance structure with the aim ofincreasing shareholder benefit:• Corporate format: Corporation with internal auditors

Corporate Philosophy and CSR• Number of directors: 11 (including 3 outside directors)• Term of office of directors: 1 year

Nisshinbo’s fundamental approach to corporate social responsibility (CSR) is• Number of statutory auditors: 4 (including 2 outside auditors)

incorporated into our group corporate philosophy:• Incentives: Stock option plan

• We shall contribute broadly toward enhancing the comfortable lifestyles and cultures of people
around the world.
• We aim to achieve harmony with society and the global environment and conduct businessactivities with honesty and integrity based on the belief that companies are public organs.
• We aim to raise corporate value and become a corporate group with a strong presence in the
21st century.

Nisshinbo’s fundamental stance is one of honesty and integrity toward all corporate stakeholders from the perspective of a public organ. We have adopted this approach in our CSR
activities as well, taking measures to achieve transparency in management, strengthen
accountability, and ensure proper corporate ethics in all areas. We are working to improve
corporate value through prompt and effective management decision making.

(As of June 30, 2008)

Nisshinbo’s governance structure, which is centered on the Board of Directors, is a
simple one, based on thorough deliberations and prompt and appropriate management
decision making. We believe that it functions effectively.
The Board of Directors meets monthly to deliberate on key matters and investigate
the execution of the company’s business. The Board also holds extraordinary meetings
when needed. In addition, Nisshinbo has introduced a managing officer system to speed
up business activities by separating management decision making and business executionfunctions.
The three outside directors attend Board of Directors’ meetings and present wellinformed opinions and proposals. The four statutory auditors also attend Board of
Directors’ meetings to present opinions in a timely manner, as well as to monitor andNisshinbo’s CSR Structure

gain a better understanding of business operations. In addition, the auditors collaborate
with the company’s certified public accountants and the Internal Audit Department to

Corporate
Philosophy

Corporate Code of Conduct
Human Rights Charter
Environment Charter
Product Safety Charter
Personal Information
Protection Charterenhance auditing functions through internal auditing and the monitoring of subsidiaries.
Compliance Guidelines

Nisshinbo’s Corporate Governance Structures
General Shareholders Meeting
Appoint to andremove from office

Reports

Appoint to andremove from office

Reports

Board of Directors

Structures for Implementing CSR Activities

Board of Auditors

within the Corporate Strategy Center to bolster CSR activities and internal controls
throughout the Nisshinbo Group (see the organizational chart on page 51).
The purpose of this structure is to centralize environment and safety-related matterswithin the CSR Department. This will allow us to conduct CSR activities consistently

Financial Auditors

Approve appointment andre-appointment, removal from office
Determines suitability of financial auditors

In conjunction with a reorganization implemented in April 2008, the CSR Department,
Corporate Governance Department, and Internal Audit Department were establishedAppoint to andremove from office

Representative Directors
Executive Officers Conference
Deliberation on and decision making
concerning business operations

Internal Audit Office, Corporate Strategy Center
AuditsAuditsManaging Officers, Business Divisions, Group Companies

throughout the company and to create a new, permanent organization to monitor andassess the status of corporate governance. The Internal Audit Department has beenplaced outside the ordinary chain of command so that it can conduct appropriate andreasonable auditing work.
12

13

CSR Activities

Comprehensive Groupwide Compliance

Active Promotion of Investor Relations Activities

After discovering in Jonuary 2008 that the percentage of recycled pulp in some products

The Investor Relations and Public Relations Group is responsible for disclosing company

had been mislabeled, we conducted a thorough investigation and have expanded mea-

information, including notices about regular general shareholders meetings and proposedsures to make compliance with our standards of corporate ethics an even higher-priority

resolutions, financial statements, business reports, securities reports, and annual reports.

management issue throughout the group.

Additional information can be found on Nisshinbo’s Website.

The Corporate Ethics Committee was established as an internal governance organization to address compliance issues. The president reports on key ethics-related mattersto the Board of Directors. An employee handbook that includes information on compliance structures and conduct guidelines was distributed to all employees, including thoseworking overseas, and corporate ethics training is conducted periodically. In addition,a Corporate Ethics Reporting System was established. This serves as a hotline for consultations and reports on internal and external corporate ethics matters for the prevention
and early detection of violations of laws and internal regulations.

Nisshinbo’s securities report

Nisshinbo’s Website
http://www.nisshinbo.co.jp/english/

President Heads Risk Management System
The risk management system operates with the Nisshinbo president as its highest officer

Environmental Management Activities

to manage business risks and raise corporate value from a groupwide perspective. Since

Nisshinbo operates a groupwide environmental management system

the beginning of fiscal 2007, Nisshinbo has made legal risk countermeasures a priority

based on the Environment Charter, which was amended in 2007. In thein risk management and has continuously performed checks at its headquarters andfiscal year ended March 2008, Nisshinbo’s environmental management

group companies of compliance with laws and regulations that have a material impact

activities focused on increasing sales of environment-friendly

on management and business activities.

products, conserving energy, and reducing carbon dioxide
emissions. Various business divisions increased sales ofenvironment-friendly products including new products. For

Anti-takeover Measuresinstance, the Nisshinbo Osaka Branch is promoting energy-conservation mea-

Local cleanup
activities

sures and has registered with the system for promoting the construction of
The Nisshinbo General Shareholders Meeting adopted a resolution for the introductionof so-called poison-pill anti-takeover measures in June 2006. The Board of Directors
approved the introduction of such measures on the same day. If a large volume ofcompany shares is acquired, the measures require the acquiring party and the Boardof Directors to provide sufficient information for the shareholders to make a decision.
Please refer to Nisshinbo's Website for further information.

energy-saving buildings established by the Building Energy Managers Association
The Nisshinbo Annex was
designed with environmental considerations inmind (right; to the left is
the current Nisshinbo
head office building;scheduled for completionin March 2009)of Japan. Local offices also conducted community-based environmental activities, suchas cleanup programs and environmental education at elementary schools. As of March
2008, 31 Nisshinbo Group business sites have acquired ISO 14001 certification.
Nisshinbo also initiated a program to commend employees who make significant
contributions to the prevention of global warming. The company incorporated various
green features, including energy-conservation measures and a green roof, when it began
construction of the Nisshinbo Annex, a new extension at the head office.
Details of Nisshinbo’s environmental activities are introduced in its CSR reportissued in August 2008.

14

15

CSR Activities

Financial Highlights(Years ended March 31)

Human Rights Education
Consolidated:

To clarify its stance on human rights, a core aspect of CSR activities, Nisshinbo adopted
2004

the Human Rights Charter in April 2007. Other human rights activities include the creationof a human rights educational organization and implementation of human rights educa-(millions of
US dollars)(millions of yen)

Net Sales¥

2005

226,883¥

243,4212006¥

278,617

2008

2007
¥

312,825¥

322,412

2008
$

3,224

Textiles

68,40382,16482,87982,24378,816788

Automobile Brakes

52,07654,306

58,13061,764

66,397

664

services regarding workplace harassment, and activities designed to prevent and respond

Papers29,01028,58528,612

29,90833,547336

to work-related problems. Nisshinbo actively promotes the employment of senior andChemicals

32,09834,19936,00737,671

38,528385

physically challenged persons, adopted a Next-Generation Cultivation Plan, implements

Electronics

16,176

16,84345,85876,06876,475765

Real Estate Leasing

4,941

4,945

4,781

4,788

5,446

54

Other Businesses

24,17922,37922,35020,38323,203232

Operating Income

8,496

9,651

10,524

11,551

12,034120

Net Income

3,919

8,199

11,183

15,107

12,290123

214,132

222,771

266,434

282,015

245,9092,459

tion for all group employees, including overseas employees, the provision of consultation

mental health initiatives, and takes other measures to fulfill its social responsibilities as
a company and support the health of its employees.

EquityPer Share:(yen)

Net Income¥

Shareholders’ Equity
Cash Dividends

Research and Development Structures

Development of innovative technologies in environmental
fields creates global competitiveness

17.86

¥

39.03

¥

53.21

(dollars)

¥

74.19

¥

63.34

$

0.63

1,030.98

1,072.54

1,283.21

1,301.14

1,179.43

11.79

7.00

10.00

10.00

15.00

15.00

0.15

Key Ratio:（%）

Return on Assets（ROA）

1.2

2.2

2.6

3.1

2.8

Return on Equity（ROE）

2.0

3.8

4.6

5.7

5.1

Each Nisshinbo business division and affiliate conducts independent research and development
based on the vision of Nisshinbo as a company committed to the environment. Nisshinbo seeks
to establish a unique and leading position in environmental fields. Intellectual
property created through innovative research and development is increasing year
by year and is a source of Nisshinbo’s global strength.
Number of patent applications
as of March 31, 2008(non-consolidated basis)(non-consolidated basis)

Overseas203
392

Domestic
Overseas

Net Sales Composition by Segment in Fiscal 2008

(billions of yen)

(%)

3,500

Other Businesses

Textiles

7.2%

24.4%

3,000

Number of registered patents
as of March 31, 2008

Domestic

Consolidated Net Sales by Segment

429
326

2,500

Real Estate
Leasing

2,000

1.7%

Central Laboratory
The laboratory nurtures new businesscompanywide and performs development
functions for the chemical division.

1,500Electronics
1,000

Automobile Brakes

23.7%

20.6%

Chemicals

Papers

500

0

’04

’05

■ Textiles■ Automobile Brakes■ Papers■ Chemicals

Automobile Brake Business: Brake Research andDevelopment Division (Tatebayashi Plant,
Gunma Prefecture)
The division is developing “green” friction materials that
do not incorporate hazardous substances.

16

New Business: Gaiacot Group(Miai Plant, Aichi Prefecture)

Paper Products Business: Product Development
Department (Fuji Plant, Shizuoka Prefecture)

The division conducts research in the medical, industrial, andagricultural fields and developed Gaiacot, a highly functional
material that has anti-bacterial and deodorizing functions.

The department conducts research and development
relating to the creation of a speciality paper business anda business for films made from plant-based resins.

’06

’07

’08

■ Electronics■ Real Estate Leasing■ Other Businesses

12.0%

10.4%

Note: The United States dollar amounts in this report are given for convenience only and represent translations of Japanese yen at the rate of ¥100 = US$1.
Note: Previously, new business such as high-performance chemical products and synthetic chemical products were included in other businesses, but in fiscal 2008 they were consolidated
to create the chemical products business. Figures for fiscal 2007 and 2008 are stated according to the revised categories, but figures for 2006 and earlier have not been revised.

17

Net sales by industry segment

Overview of Nisshinbo Group Business¥ 78,816 million

TextilesNet sales by industry segment

Overview of Nisshinbo Group Business¥ 66,397 million

Automobile
BrakesSluggish sales in subsidiaries and rising costs bring a decline
in net sales and income.

Increases in automobile production and the ability to absorb
higher material costs result in higher net sales and income.

Overview of the Textile Business

Overview of the Automobile Brake Business

Nisshinbo’s textile business employs superior technologies and quality control capabilities to produce many high value-added products, with a focus on cotton materials,
that lead the Japanese textile industry. Since the mid-1990s, our overseas businessNet sales

Nisshinbo supplies brake friction materials, brake systems, anti-lock brake systems

Operating loss

4.2%

¥1,655 million(billions of yen)(billions of yen)

has expanded amidst the globalization of production and sales, and we are reorganizing our domestic business. By focusing on profitable businesses, the shirt and denim
fabrics divisions have experienced considerable growth as core businesses, and wehave strengthened our profit bases by withdrawing from unprofitable sectors. In addition, the Harisaki Plant was closed to further consolidate production. Through thesereforms, we are seeking to make a comeback starting in fiscal 2009, when we will
also begin the process of spinning off divisions.

Both net sales and income fell as a result of sluggish sales by the subsidiary

100

3
2

80

ing. Although overseas subsidiaries each posted higher sales, Indonesia-based P.T.
Nikawa Textile Industry experienced a major downturn because of higher costs for
raw materials and fuel, resulting in higher net sales but lower income. As a result,

7.5%

customer first and making a commitment to companywide improvement. By developshowing concern for the environment but also preparing for compliance with the new

26.6%(billions of yen)

EU REACH chemical regulation. Competitiveness will improve by developing global

160(billions of yen)

10

80

production structures, increasing development support by overseas subsidiaries, andpromoting collaborations to reduce costs. The transfer of the ABS business to

860

Continental Automotive Corporation,* which is subject to the equity method, is ongoing. Business will expand, with increased processing of precision parts for Continental

640

Automotive and entry into new areas.

40
-1

4

*Continental Automotive changed its name from Continental Teves in August 2008.
20

20

-2

Summary of Financial Results for the Fiscal Year Ended March 2008-3

Higher net sales in the brake business resulted from an increase in vehicles built in

CHOYA Corp., a slump in sales of denim material during the second half, andwithdrawal from the mail-order business in conjunction with business restructur-

Operating income

ing “green” friction materials without hazardous substances, Nisshinbo is not only0

Summary of Financial Results for the Fiscal Year Ended March 2008

Net sales(ABS), and mass production parts to leading automobile manufacturers, putting the

0
05

06

07

08

0

2

0
05

06

07

08

Japan for export. Overseas, consolidated subsidiaries received more orders despite
Net sales

Operating income

the difficult business environment in the second half. Although there were negative

Net sales

Operating income

effects from higher depreciation costs in conjunction with revisions to the domestic

the textile business as a whole recorded lower net sales and income, with net sales

tax system and rising materials costs, costs fell with the completion of the shift to theof ¥78,816 million (down 4.2% from the previous fiscal year) and an operating

Toyota Plant, and our U.S. subsidiary improved profitability, resulting in an overallloss of ¥1,216 million (a deterioration of ¥1,655 million).

increase in income. In the ABS business, precision component
machining is expanding. As a result, the brake business reported
higher net sales and income, with net sales of ¥66,397 million(up 7.5% from the previous year) and operating income of¥8,872 million (up 26.6% from the previous year).

Non Care18

An energy-saving shirt that feels
cool in the summer(ECOSYS 28˚C)

Denim products

Brake products such as
disk pads

The Toyota Plant

19

Net sales by industry segment

Overview of Nisshinbo Group Business¥ 33,547 million

Papers

Net sales by industry segment

Overview of Nisshinbo Group Business¥ 38,528 million

Chemicals

Sales of distinctive products remain strong, but
increasing costs of materials and fuel drive income lower.

Sales and income up thanks to restructuring of existing businesses
and good performance of new environment-related businesses.

Overview of the Paper Business

Overview of the Chemical Business

Nisshinbo manufactures household paper products, such as tissue and toilet paper,and speciality paper products, such as high-quality printing papers, plastic card products, and telegraph-related products. Nisshinbo is focusing on distinctive products,

Net sales

Operating income

12.2%

management resources on highly profitable products in the fields of heat insulation

7.0%

materials, elastomer, and carbon products. In addition, NIPPON KOHBUNSHI Group issuch as toilet paper for bidets and Vent Nouveau high-quality printing paper. The company is promoting its business for environmentally friendly products by expanding
and improving FSC-certified products and developing the business for film made from(billions of yen)

40

2.5

2.0
30
1.5
20
1.0

Summary of Financial Results for the Fiscal Year Ended March 2008

0.5

As a result of efforts to increase sales of distinctive products, such as toilet paper
0

0
05

06

07

08

fine printing paper, speciality paper reported higher net sales, but increasing costs

the high-performance resin additive Carbodilite, and electric double-layer capacitors.
cultivated as new core business fields of the Nisshinbo Group.

Summary of Financial Results for the Fiscal Year Ended March 2008

elastomers and carbon products. Overseas subsidiaries did well with molded plastic

Net sales

Operating income

Carbodilite increased, and mass production facilities have been introduced torespond to higher demand for electric double-layer capacitors. Also, Nisshinbo isdeveloping mass production technologies for bipolar plates for fuel cells in responseof ¥38,528 million (up 2.3% from the previous year) and an operating loss of¥1,162 million (down 7.0% from the previous year).

¥789 million (an improvement of ¥202 million from the previous year).

20(billions of yen)

3

40

2

0

20

The profitability of heat insulation materials improved as a result of the withdrawal ofof ¥33,547 million (up 12.2% from the previous year) and operating income of

Products of Daiwa Shiko(billions of yen)30

to market liberalization. As a result, the chemical business as a whole had net sales

The Vent Nouveau series ofhigh-quality printing papers¥202 million

These environmentally friendly products with tremendous future potential are being

business as a whole reported higher net sales and lower income, with net sales

Various household
paper products

2.3%

-1
10
-2

products, reporting higher net sales and income. In new business fields, sales offor bidets, and to review retail prices, household paper posted higher net sales

for raw materials and fuel caused a decline in income. As a result, the paper

conditioners. Nisshinbo is working to develop business for bipolar plates for fuel cells,

unprofitable products, but income declined because of the disposal of inventories of

10

and income. With the acquisition of Daiwa Shiko and strong sales of high-quality

Operating loss

1

collaboration by the speciality paper division with Tokushu Tokai Holdings Co., Ltd.,and acquisition of Daiwa Shiko Co., Ltd.

Net salesdeveloping the plastic molding and processing business with a focus on fans for air(billions of yen)plant-based resins. Nisshinbo is reinforcing its business foundations, including integration of Tokai Seishi Co., Ltd.’s marketing division into the household paper division,

Nisshinbo is accelerating the streamlining of existing businesses and focusing its

Cross-flow fans

Carbon products

0

-3
05

Net sales

06

07

08

Operating income

Figures for 2005 and 2006
have not been revised.
(See note on P.17.)

Elastomer (sold under the
Mobilon brand name)21Net sales by industry segment

Overview of Nisshinbo Group Business¥ 76,475 million

Electronics

Net sales by industry segment

Overview of Nisshinbo Group Business¥ 5,446 million

Real Estate
Leasing

Strengths in analog and wireless communications
technologies bring positive results.

Net sales and income increase as leasing of a commercial
complex on the site of the former Tokyo Plant begins.

Overview of the Electronics Business

Overview of the Real Estate Leasing Business

Nisshinbo’s electronics business, with New Japan Radio Co., Ltd. as the central player,

Net sales

includes the manufacture and sale of semiconductors and electronic devices, as well

Operating income

0.5%

as activities in the telecommunications sector. By using its superior position withincluding idle properties. The group is operating office buildings on the site of its

6.1%

former head office and elsewhere in Tokyo, leasing land and buildings for large shop-

analog technologies in the semiconductor field and microwave-related technologies
in telecommunications sectors, Nisshinbo is developing products with a focus onaudiovisual devices, industrial equipment, and the automotive and telecommuni-

Net sales

Operating income

13.7%

4.3%

ping centers and idle land and buildings for various uses. When putting idle land to(billions of yen)(billions of yen)

2.0

80

cations markets. Sales are expanding in Asian and Chinese markets, with emphasison the Singapore and Shanghai bases.

The Nisshinbo Group is increasing corporate value by effectively using its assets,

use, Nisshinbo develops properties from the perspectives of users and specificlocales. On the commercial complex that opened in November 2007 on the site of(billions of yen)(billions of yen)

8

4

6

3

4

2

2

1

the former Tokyo Plant, for instance, barrier-free legal certification* was obtained.
1.5

60

Future projects include increasing the floor area of the existing commercial facility on
the site of the former Hamamatsu Plant, scheduled to be reopened as one of theSummary of Financial Results for the Fiscal Year Ended March 2008
Although New Japan Radio had strong sales in the semiconductor segment with

40

1.0

20

0.5

microwave application product segment saw a decline in demand for satellite com0

05

06

07

08

0

Japan Radio Co., Ltd., however, recorded robust sales of marine radios and otherproducts, posting higher net sales and income. As a result, the electronics business as

rapidly redevelop the sites of the former Nagoya and Harisaki Plants, undertake othersmall- and medium-scale development projects, and reinforce the management of

products for flat-screen televisions and microwave devices for mobile phones, themunications components, resulting in flat sales and a decrease in income. Ueda

largest shopping centers in the Hamamatsu area by the end of 2008. Nisshinbo will

Net sales

Operating income

existing lease properties.
*A public certification system for commercial facilities with features designed for senior citizens
and physically challenged persons.

0

0
05

Summary of Financial Results for the Fiscal Year Ended March 2008

a whole had higher net sales and income, with net sales of ¥76,475 million (upNet sales increased substantially, with the commencement of leasing at the commer-

0.5% from the previous year) and operating income of ¥1,104 million (up 6.1%

cial complex on the site of the former Tokyo Plant, the addition of land at the site offrom the previous year).

the former Hamamatsu Plant to leasing operations, the start of operations of a rental

Net sales

06

07

08

Operating income

office building constructed by subsidiary Nisshinbo
Urban Development Co., Ltd., and additional real estatereferrals. However, income increased only slightly as aresult of higher temporary expenses in conjunction withthe opening of commercial facilities. As a result, the realestate leasing business had net sales of ¥5,446 million(up 13.7% from the previous year) and operating incomeof ¥2,723 million (up 4.3% from the previous year).
The NJU26040V
digital signal processor

22

The NJM2729E
single-circuit, high-precision
operational amplifier

Semiconductors formobile phones

Diagram of the planned development in Hamamatsu

A sports facility

23

Financial Section
Net sales by industry segment

Overview of Nisshinbo Group Business¥ 23,203 million

Other
Businesses

Growing demand for photovoltaic module manufacturinglines boosts sales and income.
Overview of Other Businesses
The core of this segment is the mechatronics business, which manufactures photovoltaic module manufacturing lines and customized machines. Nisshinbo will takeadvantage of the opportunities presented by increasing demand for photovoltaic

Net sales

Operating income

13.8%

53.1%

module manufacturing lines by raising product competitiveness and expanding business through the establishment of business sites in Asia and Europe. Nisshinbo isalso expanding its business to include machine tools for the aircraft and automobile(billions of yen)(billions of yen)

30

Contents
Management Discussion and Analysis .............................................. 26
Six Year Summary ........................................................................................ 34

3

Consolidated Financial Statements ..................................................... 36

industries with a focus on environmentally friendly products.

2
20

1

Notes to Consolidated Financial Statements ................................. 41

0

Summary of Financial Results for the Fiscal Year Ended March 2008

10

-1

The mechatronics business reported higher sales as the photovoltaic market contin-2

ues to grow by more than 30% annually and demand for photovoltaic module
manufacturing equipment increases. Sales of automobile production line equipment
and aircraft manufacturing equipment were also strong. As a result, other businesses

0

-3
05

06

07

08

as a whole reported substantial increases in both net sales and income, with net
sales of ¥23,203 million (up 13.8% from the previous year) and operating incomeof ¥562 million (up 53.1% from the previous year).

Manufacture of customized
machines

24

A component processing line

Net sales

Operating income

Figures for 2005 and 2006
have not been revised.
(See note on P.17.)

A solar simulator

25

Financial Section

Management Discussion and Analysis

Gain on sale of property, plant and equipment was up ¥1,419 million from theOperating Results
Overview

previous year to ¥2,250 million (US$23 million). Gain on sale of securities was down

During the fiscal year under review, despite a moderate expansion spurred by growth in¥6,990 million to ¥3,678 million (US$37 million). Also, Nisshinbo posted a loss ofprivate capital investment and other factors in the first half, the Japanese economy took

¥2,320 million (US$23 million) in amortization of goodwill in conjunction with a one-a rapid turn for the worse in the second half because of high prices for raw materials,

time writeoff of goodwill relating to New Japan Radio Co., Ltd.
As a result, income before income taxes and minority interests fell ¥3,200 million

sluggish growth in the American economy following the subprime mortgage crisis, rapid

to ¥19,885 million (US$199 million). After deducting income taxes of ¥6,526 million

depreciation of the dollar and appreciation of the yen, and falling share prices.

(US$65 million) and minority interests in net income of ¥1,069 million (US$11 million),

Under this business environment, the Nisshinbo Group actively streamlined operations pursuant to its fundamental policy of “selection and concentration” in accordancenet income declined 18.7% to ¥12,290 million (US$123 million). Net income perwith the Three-Year Management Plan 2008, the current medium-term management

share was ¥63.34 (US$0.63), down ¥10.85 per share from the previous year, andplan. Nisshinbo continued to withdraw from unprofitable business sectors and estab-

return on equity (ROE) fell 0.6% from the previous year to 5.1%.

lished the Chemical Division by consolidating the Business Development Division and
the Chemical Products Division in April 2007. We also focused management resources

Cash Dividends

on environment-related new businesses such as photovoltaic module manufacturing

Cash dividends per share for the fiscal year were ¥15.0 (US$0.15), and total cash

equipment, electric double-layer capacitors, bipolar plates for fuel cells, and Carbodilite

dividends paid in the fiscal year were ¥3,479 million (US$35 million). Nisshinbo will

and are working to develop and strengthen business in these sectors.

continue its basic policy of a ¥15 per share ordinary dividend while working to increase
the distribution of profits to shareholders by increasing cash dividends in conjunction
with higher income and by taking other measures.

Results of Operations in Fiscal 2008 Compared with Fiscal 2007
Net sales increased in fiscal 2008 primarily as a result of strong sales in the automobile
brake business by overseas subsidiaries and an increase in domestic automobile production for export of CBUs to emerging markets and oil-producing countries, higher
sales of distinctive products in the paper business, such as toilet paper for bidets, andNet Sales

the acquisition of Daiwa Shiko Co., Ltd. as a consolidated subsidiary. Nisshinbo broke350

the record for all-time high net sales set in fiscal 2007 (the prior fiscal year) with net

300

sales of ¥322,412 million (US$3,224 million), up 3.1% from the previous year. Cost of
sales increased 3.2% from the previous year to ¥266,026 million (US$2,660 million),

Operating Income(billions of yen)

Cash Dividends per Share(billions of yen)

(yen)

15

15

12
250
10
9

200

and the ratio of cost of sales to net sales increased 0.1% to 82.5%. Selling, general andadministrative expenses rose 1.7% to ¥44,352 million (US$444 million), and costs andexpenses increased 3.0% to ¥310,378 million (US$3,104 million). As a result, operat-

150

6
5

100
3

ing income was ¥12,034 million (US$120 million), up 4.2% from the previous year.

50

Interest and dividend income increased ¥574 million to ¥3,319 million

0

’03

’04

’05

’06

’07

’08

0

0
’03

’04

’05

’06

’07

’08

’03

’04

’05

’06

’07

’08

(US$33 million) as a result of improved corporate earnings in conjunction with thecontinued recovery of the Japanese economy.

26

27

Financial Section

Financial Position

Cash Flows

Total assets at the end of fiscal 2008 amounted to ¥424,706 million (US$4,247 mil-Cash Flows from Operating Activitieslion), down ¥47,964 million from the end of the previous fiscal year. Total current

Cash flows from operating activities were ¥24,779 million (US$248 million), an increase

assets were down ¥5,596 million to ¥163,288 million (US$1,633). Land and buildingsof ¥5,427 million from the previous fiscal year. Factors that contributed to negative cash

and structures increased, while machinery, equipment and tools, and construction inflows included a decrease in income before income taxes and minority interests andprogress accounts decreased, resulting in a net increase in tangible fixed assets of

payment of accounts payable, while factors contributing to positive flows included an¥5,291 million to ¥127,196 million (US$1,272 million). Investments and other assets

increase in recovery of receivables and a decrease in inventories.

were down ¥47,659 million to ¥134,222 million (US$1,342 million), largely as a resultof a decline in valuation of investment securities because of falling market prices.

Cash Flows from Investing Activities

Although payables and current portion of long-term debt in less than one year

Cash flows used in investing activities were ¥19,147 million (US$191 million), down

decreased, current liabilities increased ¥4,345 million to ¥109,474 million (US$1,095 mil-

¥9,038 million from the previous year. The main factors were a decrease in proceedslion) because of the issuance of commercial paper. Also, accrued severance benefits

from sale of investment securities and investments and an increase in payment forincreased, but long-term liabilities decreased ¥16,203 million to ¥69,323 million

purchase of property, plant and equipment.

(US$693 million) as a result of a decline in long-term debt and deferred tax liabilities.
Total liabilities were down ¥11,858 million to ¥178,797 million (US$1,788 million).
As a result of a decrease in the net unrealized gain on available-for-sale securities

Cash Flows from Financing Activities
Cash flows used in financing activities were ¥8,829 million (US$88 million), up

because of falling securities prices and the acquisition of shares in treasury, equity was¥4,402 million from the previous year. This was mainly because of the issuance ofdown ¥36,106 million from the end of the previous fiscal year to ¥245,909 million

commercial paper, while payment for purchase of treasury stock increased.

(US$2,459 million). The shareholders’ equity ratio was 53.0%, down 2.3 points, andshareholders’ equity per share was ¥1,179.43 (US$11.79), a decrease of ¥121.71.

Total Assets

As a result of the above activities, cash and cash equivalents at the end of the year were
down ¥2,503 million to ¥23,261 million (US$233 million).

Equity(billions of yen)(billions of yen)
300

500

250

400

200
300
150
200
100
100

0

28

50

’03

’04

’05

’06

’07

’08

0

’03

’04

’05

’06

’07

’08

29

Financial Section

Production Results

Capital Expenditures

Production results in each segment for the fiscal year under review are as follows:

During the fiscal year under review, capital expenditures amounted to ¥24,280 million(US$243 million). Capital expenditures in the automobile brake business totaled

Amount(millions of yen)Amount(millions of U.S. dollars)

Change from theprevious year (%)

Textiles

66,290663–1.4

Automobile Brakes

52,974530–2.1

Papers26,159261+13.7(US$65 million), mainly for construction of a shopping center at the site of the former

Chemicals

27,475275+0.1Tokyo Plant. In the electronics business, capital expenditures amounted to ¥4,847 million

Electronics

75,690757+2.8(US$48 million) and were used mainly for semiconductor manufacturing equipment by

Other Businesses

5,974

60

+13.8

254,562

2,546

+1.6

Industry Segment

Total

Notes:
1. Amounts are computed based on manufacturing costs.
2. The real estate leasing business does not engage in manufacturing, and therefore, the above table contains no figures for this segment.
3. The above amounts do not include consumption taxes.

¥5,221 million (US$52 million) and were used mainly for friction material production
facilities at the Tatebayashi Plant and Saeron Automotive Corporation, a consolidated
subsidiary. Capital expenditures in the real estate leasing business were ¥6,547 million

New Japan Radio Co., Ltd., a consolidated subsidiary.
Capital Expenditures(billions of yen)

Depreciation and Amortization(billions of yen)
18

25

15

20

12

Geographical Segment Information
Net Sales byGeographical Segment

Sales to customers in Japan were flat at ¥260,088 million (US$2,601 million),

15
9
10
6

but operating income was down 11.2% from the previous year to ¥5,938 mil5

Overseas
19.3%

3

lion (US$59 million) as a result of sluggish sales by CHOYA Corp., a consoliOther
Regions
5.5%

dated subsidiary, and in the textiles segment.

Asia
13.8%

0

’03

’04

’05

’06

’07

’08

0

’03

’04

’05

’06

’07

’08

In Asia, sales to customers were up 21.9% to ¥44,626 million (US$446
million) and operating income rose 37.0% to ¥4,555 million (US$ 46 million)
Domestic
80.7%

thanks to strong sales in the chemical segment by Kohbunshi (Thailand) Ltd.

Risk Informationand in the automobile brake segment by Nisshinbo Somboon Automotive Co.,

New Business Risks

Ltd. and Saeron Automotive Corporation.

New businesses entail numerous uncertainties including the inability to develop appeal-

Sales to customers in other regions rose 7.5% to ¥17,698 million (US$177 million)
as a result of higher net sales by Nisshinbo Do Brasil Industria Textil Ltda. in the textiles
segment and by Nisshinbo Automotive Corporation, an automobile brakes subsidiary inNorth America. Operating income was up 15.2% to ¥1,961 million (US$20 million)
due to the strong performance of Nisshinbo Automotive Corporation and other factors.

ing new products and the failure to create new markets as anticipated, which could
result in delays or the inability to recover prior investments.

Risk of Fluctuations in the Value of Investment Securities
Investment securities held by Nisshinbo are marked to market in accordance withaccounting standards for financial products, and the Company implements impairment
accounting based on even more stringent internal standards for a portion of these securities. Under current legal provisions, the Company’s overall securities acquisition costs
are low, and although there is little probability of an impairment having an impact on30

31

Financial Section

statements of income, a future change in accounting standards requiring the effects offluctuations in market prices easily influence sale prices for textiles and paper products

such a change to be reflected in the statements of income could cause a significant

and have an impact on the procurement of raw cotton, pulp, and steel and other mate-increase or decrease in profits for the fiscal year.

rials. Also, raw cotton and pulp are imported materials, and therefore, the effects ofNisshinbo implements a policy of selling investment securities to coverinvestments for mergers and acquisitions, investments for overseas business development, and capital investment to curtail increases in interest-bearing debt. However,there is a risk of unforeseen scenarios resulting from a misalignment in timing between
selling and investment.
Nisshinbo made a trust contribution of ¥14.7 billion in response to losses resulting
from a change in accounting standards regarding the employee’s retirement plans in
2000. In fiscal 2008, the Company realized a valuation loss of ¥300 million on the contributed portion. Although the effects of market valuation of trust securities are reflectedin statements of income, the Company amortizes retirement benefits evenly over an
average of 15 years of employment service, and therefore, retirement benefits expenses
affected by fluctuations in stock prices could have an impact on profits for the fiscal

exchange rate fluctuations are unavoidable.

Risks Associated with the Electronics Products Business
The core business of New Japan Radio Co., Ltd., which is a consolidated subsidiary, isanalog semiconductors, and as a result, its business is stable, but there are risks of fluctuations in earnings resulting from demand from customers to lower prices and changes
in semiconductor market conditions. New Japan Radio Co., Ltd. generates approximately
50% of its consolidated sales overseas, and consequently, exchange rate fluctuations
have an impact on its business results.
Also, the burden of investing for the benefit of future earnings opportunities,
mainly for strengthening the Group’s advance into automobile electronics fields, could
temporarily constrain profits.

year, but it is believed that the impact would not be significant.

Risks Associated with the Utilization of Idle Land
To reform its business structures, Nisshinbo is actively promoting the use of certain
closed business sites and land following the closure of business sites. Redevelopment
makes significant contributions to higher net sales.
In carrying out the redevelopment of land, there are risks that the Company
will incur expenses for cleanup of the land and that revisions to laws could impede
redevelopment.

Corporate Separation
At a meeting held on May 13, 2008, the Nisshinbo Board of Directors adopted a resolution to switch to a holding company system by spinning off the textile business, automobile brake business, paper business, mechatronic business, and chemical businessand establishing them as independent companies effective April 1, 2009. This change
was approved by the 165th regular general meeting of shareholders on June 27, 2008.
In conjunction with this change, on April 1, 2009, all of Nisshinbo’s rights andduties in its textile business, automobile brake business, paper business, mechatronic

Product Quality Risks

business, and chemical business will be transferred to Nisshinbo Textile Inc., Nisshinbo

Most of the Nisshinbo Group’s products are manufactured in accordance with interna-

Brake Inc., Nisshinbo Paper Products Inc., Nisshinbo Mechatronics Inc., and Nisshinbo

tional quality control standards, but there is no guarantee that quality-related problems

Chemical Inc., respectively, through the spin-off of these divisions and their establish-

will not occur in the future. The Company has product liability insurance, but the occur-

ment as separate companies. At the same time, the shares of domestic subsidiaries inrence of a large liability could have an adverse impact on the Company’s businesseach of these business sectors that Nisshinbo owns will be transferred to the respective

results.

new companies. Also, when the corporate split takes effect, Nisshinbo will change its

Risks Associated with Market Shifts Relating to Product Sale Prices
and Raw Materials Procurement

name to Nisshinbo Holdings Inc. and will change its corporate objectives in line with its
business activities following these changes.

The Nisshinbo Group’s products are significantly affected by fluctuations in market prices
in conjunction with competition with other companies and market developments. The

32

33

Financial Section

Six Year Summary(millions of yen)

Net Sales
Operating Income

2003

2004

2005

2006

2007

2008

231,194

226,883

243,421278,617

312,825

322,412Net Sales(billions of yen)

8,496

9,651

10,524

11,551

12,034

777

3,919

8,199

11,183

15,107

12,290Equity186,028

214,132

222,771

266,434

282,015

245,909250

Total Assets

312,909368,444

370,168

491,230

472,670

424,706200

Shareholders’ Equity Ratio (%)

59.5

58.1

60.2

54.2

55.3

53.0

150

Return on Assets (%)

0.2

1.2

2.2

2.6

3.1

2.8

100

Return on Equity (%)

0.4

2.0

3.8

4.6

5.7

5.1

50

Payout Ratio (%)*

64.3

51.9

28.1

32.2

35.6

—

0

Net Income

Capital Expenditures

9,057

8,989

12,504

16,54818,30624,280Depreciation and Amortization

12,758

11,776

11,046

13,835

14,984

16,890Common Shares Issued

216,580,939

216,580,939

208,198,939

208,198,939

201,698,939

198,698,939(billions of yen)

350

5,989

Total Assets

Operating Income(billions of yen)

15

500

12

400

9

300

6

200

3

100

300

’03

’04

’05

’06

’07

’08

0

0
’03

Shareholders’ Equity Ratio

’04

’05

’06

’07

’08

Return on Assets

’03

’04

’05

’06

’07

’08

Return on Equity

(%)

(%)

(%)

80

5

6.0

4
60

Per Share (in yen):
Net Income
Shareholders’ Equity
Cash Dividends

4.0

3.18

17.86

39.03

53.21

74.19

63.34

860.52

1,030.98

1,072.54

1,283.21

1,301.14

1,179.43

7.00

7.00

10.00

10.00

15.00

15.00

3
40
2
2.0
20
1

Number of Employees

8,627

9,875

9,505

12,602

12,744

13,2530

0’03*Payout Ratio is on a non-consolidated basis.

’04

’05

’06

’07

’03

’08

Net Income per Share

’04

’05

’06

’07

’08

Shareholders’ Equity per Share

0.0
’03

’04

’05

’06

’07

’08

Common Shares Issued

(yen)

(yen)

(million)

80

1,500

220

1,000

210

500

200

60

40

20

0

0
’03

34

’04

’05

’06

’07

’08

190
’03

’04

’05

’06

’07

’08

’03

’04

’05

’06

’07

’08

35

Financial Section
Consolidated Balance Sheets(March 31, 2008 and 2007)ASSETS(thousands of
US dollars)(Note 1)(millions of yen)

2008

LIABILITIES AND EQUITY

2008

2007

Current assets:(thousands of
US dollars)(Note 1)(millions of yen)
2008

2008

2007

Current liabilities:
Cash and cash equivalents ....................................................................................................
Time deposits (Note 5) ..........................................................................................................

¥

Marketable securities (Note 4) ............................................................................................

232,610

Short-term borrowings (Note 5) .........................................................................................

2,505

1,916

25,050Current portion of long-term debt (Note 5) ...................................................................

1,858

1,727

18,580

Payables23,261¥

25,764$

Receivables
Notes receivable, trade......................................................................................................
Accounts receivable, trade ...............................................................................................
Unconsolidated subsidiaries and affiliates .................................................................
Other ........................................................................................................................................
Less allowance for doubtful accounts..........................................................................
Inventories (Note 3) ................................................................................................................
Deferred tax assets (Note 7) ................................................................................................
Other current assets .................................................................................................................
Total current assets ............................................................................................

11,063

13,241

110,630

58,922

59,638589,220

7,342

8,497

73,4201,344

492

13,44078,671

81,868(549)(1,497)

78,12280,371

52,1792,853¥

Notes and accounts payable, trade (Note 5) ...........................................................
Unconsolidated subsidiaries and affiliates .................................................................

32,52935,806325,290

1,118

1,029

11,180

Other ........................................................................................................................................

8,350

6,615

83,50041,99743,450419,970

242

255

2,420

7,648

8,106

76,480786,710

Accrued income taxes .............................................................................................................

2,546

3,545

25,460(5,490)1

34

10781,220

Deferred tax liabilities (Note 7) ...........................................................................................
Other current liabilities (Note 5) .........................................................................................

2,708

2,591

27,08053,779521,790

Total current liabilities ........................................................................................

109,474

105,129

1,094,740

2,790

28,530Long-term debt (Note 5) .......................................................................................................
Accrued severance benefits (Note 6) ...............................................................................

3,949

5,918

39,49028,573

27,791

285,730

20,03339,772200,330

16,76812,045

167,680

69,32385,526693,230

2,510

2,537

25,100168,884

1,632,880

Long-term liabilities:

26,987

26,950269,870

123,062

1,316,270

256,442

250,7672,564,420

Construction in progress.........................................................................................................

2,562

4,952

25,620417,618

405,731

4,176,180

Authorized — 371,755,000 shares(290,422)(283,826)(2,904,220)

Issued127,196

121,905

1,271,960

Investments and other assets:

Commitments and contingencies (Note 12)
Equity (Notes 10 and 13):
Common stock:2008 — 198,698,939 shares2007 — 201,698,939 shares ................................................................................

27,58827,588275,880

Capital surplus ............................................................................................................................
Stock acquisition rights ............................................................................................................

20,401

20,401

204,010

59

16

590

Retained earnings .....................................................................................................................
Net unrealized gain on available-for-sale securities .....................................................

153,746

149,507

1,537,460

30,14561,225

301,450(112)

68(1,120)

4,322

2,989

43,220Investment securities (Notes 4 and 5) .............................................................................
Investments in and advances to unconsolidated subsidiaries and affiliates .......

91,020144,534

910,200

32,97825,104

329,780

Deferred gain (loss) on derivatives under hedge accounting ..................................
Foreign currency translation adjustments ........................................................................

Deferred tax assets (Note 7) ................................................................................................
Goodwill .......................................................................................................................................

1,743

1,701

17,430Less shares in treasury

438

3,236

4,380

Other ..............................................................................................................................................

8,043

7,306

80,430134,222

181,881

1,342,220¥

514,520

Employees’ savings deposits ................................................................................................
Accrued expenses .....................................................................................................................

163,288424,706$

28,800131,627¥

43,174
3,974

Buildings and structures .........................................................................................................
Machinery, equipment and tools ........................................................................................

Less accumulated depreciation ...........................................................................................

¥

2,880

Deferred tax liabilities (Note 7) ...........................................................................................
Other long-term liabilities (Note 5) ....................................................................................
Property, plant and equipment (Note 5):
Land ...............................................................................................................................................

51,452472,670$

4,247,060

2008 — 7,771,654 shares2007 — 937,624 shares ..........................................................................................
Minority interests .......................................................................................................................
¥(10,904)(559)(109,040)

225,245

261,235

2,252,450

20,664

20,780206,640

245,909

282,015

2,459,090

424,706¥

472,670$

4,247,060

See Notes to Consolidated Financial Statements.

36

37

Financial Section
Consolidated Statements of Income

Consolidated Statements of Changes in Equity(Years ended March 31, 2008 and 2007)(Years ended March 31, 2008 and 2007)(thousands of
US dollars)(Note 1)(millions of yen)

2008

Net sales ...........................................................................................................................................................................

¥

322,412¥

312,825(millions of yen)

2008

2007

$

3,224,120

2008

266,026

257,665

2,660,260

Selling, general and administrative expenses .................................................................

44,35243,609443,520

310,378

301,274

3,103,780

12,034

11,551

120,340

Operating income ........................................................................................................................................................

2008

2007

Common stock:
Balance at beginning of year
(2008 — 201,698,939 shares; 2007 — 208,198,939 shares) ............................
Balance at end of year
(2008 — 198,698,939 shares; 2007 — 201,698,939 shares) ............................

Costs and expenses:
Cost of sales................................................................................................................................

(thousands of
US dollars)(Note 1)¥

27,588¥27,588$275,880¥

27,588¥27,588$275,880¥

20,401—
20,401¥

20,449(48)
20,401$

204,010—204,010

Capital surplus:
Balance at beginning of year ....................................................................................................
Loss on sale of treasury stock ..................................................................................................
Balance at end of year................................................................................................................

¥

¥

$

Other income (expenses):
Interest and dividend income...............................................................................................
Interest expenses ......................................................................................................................
Equity in earnings of affiliates ...............................................................................................
Other, net (Note 11) ...............................................................................................................

Income before income taxes and minority interests..................................................................................

3,319

2,745

33,190(1,255)(1,229)(12,550)

5,203

4,178

52,030

584

5,840

5,840

7,851

11,53478,51019,88523,085

198,850

Income taxes (Note 7):
Current ..........................................................................................................................................
Deferred .......................................................................................................................................

Income before minority interests .........................................................................................................................
Minority interests in net income...........................................................................................................................
Net income ......................................................................................................................................................................

¥

5,161

5,022

51,610

1,365

1,267

13,650

6,526

6,289

65,26013,35916,796

133,590(1,069)(1,689)(10,690)

12,290¥15,107$(yen)

122,900(US dollars)

Per share:
Net income..................................................................................................................................
Cash dividends ...........................................................................................................................

See Notes to Consolidated Financial Statements.

¥

63.34
15.00

¥

74.19
15.00

$

0.63

Stock acquisition rights:
Balance at beginning of year ....................................................................................................
Net changes ...................................................................................................................................
Balance at end of year................................................................................................................
Retained earnings:
Balance at beginning of year ....................................................................................................
Net income .....................................................................................................................................
Cash dividends ..............................................................................................................................
Directors’ and statutory auditors’ bonuses ..........................................................................
Retirement of treasury stock.....................................................................................................
Other .................................................................................................................................................
Balance at end of year................................................................................................................
Net unrealized gain on available-for-sale securities:
Balance at beginning of year ....................................................................................................
Net changes ...................................................................................................................................
Balance at end of year................................................................................................................
Deferred gain (loss) on derivatives under hedge accounting:
Balance at beginning of year ....................................................................................................
Net changes ...................................................................................................................................
Balance at end of year................................................................................................................

¥
¥

¥

¥

¥
¥

¥
¥

16
43
59

¥
¥

149,507
12,290(3,479)—(4,642)
70
153,746¥

61,225(31,080)
30,145

¥

68
(180)
(112)

¥

¥

¥
¥

—
16
16

144,086
15,107(2,055)(120)(7,520)9
149,507

74,994(13,769)
61,225

—
68
68

$
$

$

$

$
$

$
$

160
430
590

1,495,070
122,900(34,790)—(46,420)700
1,537,460

612,250(310,800)
301,450680(1,800)(1,120)0.15
Foreign currency translation adjustments:
Balance at beginning of year ....................................................................................................
Net changes ...................................................................................................................................
Balance at end of year................................................................................................................
Treasury stock at cost:
Balance at beginning of year ....................................................................................................
Add: acquired .................................................................................................................................
Add: increase in an affiliate accounted for by the equity method .............................
Add: increase in the Company’s share of the affiliate accounted for by the equity method .....
Deduct: sold and retirement ....................................................................................................
Balance at end of year................................................................................................................
Minority interests:
Balance at beginning of year ....................................................................................................
Reclassified balance as of March 31, 2006 .......................................................................
Net changes ...................................................................................................................................
Balance at end of year................................................................................................................

¥
¥

¥

¥

¥

¥

2,989
1,333
4,322

¥
¥

(559)
(14,832)
—
(166)
4,653
(10,904)¥

20,780—(116)
20,664

¥

¥

¥

(229)
3,218
2,989

$
$

(454)
(7,302)
(411)
—
7,608
(559)

$

—
21,144(364)
20,780$$$29,89013,33043,220(5,590)(148,320)—(1,660)46,530(109,040)

207,800—(1,160)206,640

See Notes to Consolidated Financial Statements.

38

39

Financial Section
Consolidated Statements of Cash Flows

Notes to Consolidated Financial Statements(Years ended March 31, 2008 and 2007)(thousands of
US dollars)(Note 1)(millions of yen)
2008

Cash flows from operating activities:
Income before income taxes and minority interests ...............................................................
Adjustments to reconcile net income to net cash provided
by operating activities:
Income taxes-paid.....................................................................................................................
Depreciation and amortization .............................................................................................
Impairment of long-lived assets...........................................................................................
Amortization of goodwill .........................................................................................................
Equity in earnings of affiliates ...............................................................................................
Provision for doubtful receivables .......................................................................................
Provision for accrued pension and severance benefits ..............................................
Payment of accrued pension and severance benefits ................................................
Directors’ and statutory auditors’ bonuses paid.............................................................
Gain on sale of property, plant and equipment ............................................................

¥

19,885

2007¥

23,085

2008$

198,850(6,126)
16,890155
3,212(5,203)36
3,145(2,530)—(2,250)(7,841)
14,984
1,328
686(4,178)589
2,415(3,631)
(136)
(831)

(61,260)
168,900
1,550
32,120(52,030)360
31,450(25,300)—(22,500)

Gain on sale of investment securities and investments inand advances to unconsolidated subsidiaries and affiliates ................................
Loss on plant closures.............................................................................................................
Other ..............................................................................................................................................

(3,678)
1,403
516(10,668)
2,649
(302)

(36,780)
14,0305,160

Changes in operating assets and liabilities:
Receivables..................................................................................................................................
Inventories ...................................................................................................................................
Payables........................................................................................................................................
Other ..............................................................................................................................................
Net cash provided by operating activities ..................................................

3,085
2,060
(4,383)(1,438)24,779

(773)
343
3,334
(1,701)
19,35230,85020,600(43,830)(14,380)
247,790

3,776

2,918

37,7608,014(21,331)

14,364(18,629)

80,140(213,310)

Cash flows from investing activities:
Proceeds from sale of property, plant and equipment ...........................................................
Proceeds from sale of investment securities and investments
in and advances to unconsolidated subsidiaries and affiliates .......................................
Payment for purchase of property, plant and equipment .....................................................

1. BASIS OF PRESENTING CONSOLIDATED FINANCIAL STATEMENTS
The accompanying consolidated financial statements have been prepared in accordance with the provisions set forth in the Japanese Securities 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 and disclosure requirements of International Financial Reporting Standards.
In addition, the accompanying footnotes include information which is not required under generally accepted accounting principles and practices in Japanbut is presented herein as additional information.
The United States dollar ($) amounts included herein are given solely for convenience and are stated, as a matter of arithmetical computation only, at therate of ¥100 = $1, the approximate exchange rate at March 31, 2008. The translations should not be construed as representations that the Japanese yenamounts have been, could have been, or could in the future be, converted into United States dollars.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(a) Consolidation
The consolidated financial statements include the accounts of Nisshinbo Industries, 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 unconsolidated subsidiaries and associated companies are accounted for by the equity method.
Investments in the remaining unconsolidated subsidiaries and associated companies are stated at cost. If the equity method of accounting had been
applied to the investments in these 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 fromtransactions within the Group is eliminated.
(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 atthe balance sheet date. The foreign exchange gains and losses from translation are recognized in the income statement to the extent that they are not hedged
by forward exchange contracts.
Investments in and advances to unconsolidated subsidiaries and affiliates in foreign currencies are translated at the historical rates effective at the dates oftransaction from which such accounts were originated.
(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.

Payment for purchase of investment securities and investments
in and advances to unconsolidated subsidiaries and affiliates .......................................
(Increase) decrease in time deposits ............................................................................................
Cash acquired from newly consolidated subsidiaries,
net of payment for purchase of companies ..........................................................................
Other, net .................................................................................................................................................
Net cash used in investing activities ............................................................

(7,669)(489)(9,497)
1,642(76,690)(4,890)

(792)
(656)
(19,147)—(907)(10,109)(7,920)(6,560)(191,470)

Cash flows from financing activities:
Proceeds from issuance of long-term debt .................................................................................
Repayment of long-term debt ..........................................................................................................
Increase (decrease) in short-term borrowings ...........................................................................
Cash dividends paid .............................................................................................................................
Payment for purchase of treasury stock .......................................................................................
Increase in other long-term liabilities .............................................................................................
Other .........................................................................................................................................................
Net cash used in investing activities ............................................................

1,859(3,972)
7,290(3,479)(14,832)
4,702
(397)
(8,829)1,072(4,369)(3,658)(2,055)(7,302)
3,476(395)(13,231)

18,590(39,720)
72,900(34,790)(148,320)
47,020(3,970)(88,290)( f ) Marketable securities and other investments
The Group classifies all of its marketable securities as available-for-sale which are reported at fair value, with unrealized gains and losses included in accumulated other comprehensive income (loss), net of taxes. Other investments without quoted market prices are stated at cost. Realized gains or losses on the saleof securities are based on the average cost of a particular security held at the time of sale.
Marketable securities and other investment securities are regularly reviewed for other-than-temporary declines in carrying amount based on criteria that
include the length of time and the extent to which the market value has been less than cost, the financial condition and near-term prospects of the issuer andthe Company’s intent and ability to retain marketable securities and investment 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.

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

693(2,504)1

1,049(2,939)—6,930(25,040)10(g) Property, plant and equipment
Property, plant and equipment is stated at cost. Depreciation is computed principally on the declining balance method over their estimated useful lives.
Contributions in aid of purchases of property, plant and equipment from national and local governments are deducted from the acquisition costs of related
assets in accordance with tax regulations.

Cash and cash equivalents at beginning of year ..........................................................................................
Cash and cash equivalents at end of year .......................................................................................................
See Notes to Consolidated Financial Statements.

40¥

25,76423,261¥

28,70325,764$

257,640
232,610(d) Cash and cash equivalents
Cash and cash equivalents include cash on hand, deposits placed with banks on demand and highly liquid investments with insignificant risk of changes invalue which have maturities of six months or less when purchased.
(e) Inventories
Inventories are stated principally at the lower of cost or market, cost being substantially determined by the average cost method.

(h) Goodwill
The difference between the cost and underlying fair value of the net equity of investments in subsidiaries at acquisition is included in goodwill or other longterm liabilities and amortized on a straight-line basis over five years.

41

Financial Section( 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 thecarrying amount of such asset 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 the asset. Fair value is determined primarily by using the anticipated cash flows discounted at a rate commensuratewith the risk involved. For assets held for sale, an impairment loss is further increased by costs to sell. Long-lived assets to be disposed of other than by sale areconsidered held and used until disposed of.
( j ) Retirement and pension plans
Under the employees’ retirement plans for the Company and certain consolidated subsidiaries, the annual provision for retirement benefits is calculated to state
the liability 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 which would be required if all directors and corporate auditors retired at
the balance sheet date.
(k) Stock options
On December 27, 2005, the Accounting Standards Board of Japan (the “ASBJ”) issued ASBJ Statement No.8, “Accounting Standard for Stock Options” andrelated guidance. The new standard and guidance are applicable to stock options newly granted on and after May 1, 2006. This standard requires companies torecognize compensation expense for employee stock options based on the fair value at the date of grant and over the vesting period as consideration forreceiving goods or services. The standard also requires companies to account for stock options granted to non-employees based on the fair value of either thestock option or the goods or services received. In the balance sheet, the stock option is presented as a stock acquisition right as a separate component of equity
until exercised. The standard covers equity-settled, share-based 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 changed to income as incurred.
(m) Accounting for certain lease transactions
Financial leases, which do not transfer titles to lessees, are accounted for in the same manner as operating leases under accounting principles generally
accepted in Japan.
(n) Bonuses to directors and corporate auditors
Prior to the fiscal year ended March 31, 2005, bonuses to directors and corporate auditors were accounted for as a reduction of retained earnings in the fiscal
year following approval at the general shareholders meeting. The ASBJ issued ASBJ Practical Issues Task Force (PITF) No.13, “Accounting treatment for bonuses
to directors and corporate auditors,” which encouraged companies to record bonuses to directors and corporate auditors on the accrual basis with a related
charge to income, but still permitted the direct reduction of such bonuses from retained earnings after approval of the appropriation of retained earnings.
The ASBJ replaced the above accounting pronouncement by issuing a new accounting standard for bonuses to directors and corporate auditors on
November 29, 2005. Under the new accounting standard, bonuses to directors and corporate auditors must be expensed and are no longer allowed to be
directly changed to retained earnings. This accounting standard is effective for fiscal years ending on or after May 1, 2006. The companies must accrue bonuses
to directors and corporate auditors at the year end to which such bonuses are attributable.
(o) 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 isused to recognize deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and thetax bases of assets and liabilities. Deferred taxes are measured by applying currently enacted tax laws to the temporary differences.
(p) Derivative financial instruments
The Group uses a variety of derivative financial instruments, including foreign currency forward 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.
The foreign currency forward contracts are utilized to hedge foreign currency exposures in procurement of raw materials from overseas suppliers. Trade
payables denominated in foreign currencies are translated at the contracted rates if the forward contracts qualify for hedge accounting.
Interest rate swaps are utilized to hedge interest rate exposures of long-term debt. These swaps which qualify for hedge accounting and meet specificmatching criteria are not remeasured at market value, but the differential paid or received under the swap agreements are recognized and included in interest
expense or income.

42

3. INVENTORIESInventories at March 31, 2008 and 2007 were as follows:(thousands of
US dollars)
2008(millions of yen)
2008
2007

Finished products ........................................................................................................................................................................ ¥Work in process ...........................................................................................................................................................................
Materials and supplies ...............................................................................................................................................................
¥

23,916
15,87912,38452,179¥¥26,45015,274
12,05553,779$$239,160
158,790
123,840
521,790

4. MARKETABLE AND INVESTMENT SECURITIESThe carrying amounts and aggregate fair values of securities available-for-sale included in marketable and investment securities at March 31, 2008 and 2007
were as follows:(thousands of
US dollars)
2008(millions of yen)
2008
2007

Cost .................................................................................................................................................................................................. ¥Unrealized gains ..........................................................................................................................................................................
Unrealized losses.........................................................................................................................................................................
Fair value ........................................................................................................................................................................................ ¥33,06156,039(3,554)85,546¥¥32,313
104,460(420)
136,353$$

330,610560,390(35,540)
855,460

Aggregate cost of non-marketable securities accounted for under the cost method totaled ¥6,812 million ($68,120 thousand) and ¥9,338 million at March 31,
2008 and 2007, respectively.

5. SHORT-TERM BORROWINGS AND LONG-TERM DEBT
The annual interest rates applicable to the short-term borrowings at March 31, 2008 and 2007 were 1.0% to 8.8%.
Long-term debt at March 31, 2008 and 2007 consisted of the following:(thousands of
US dollars)
2008(millions of yen)
2008
2007

Long-term debt with collateral:
Loans from banks maturing serially to 2019, ranging from 1.1% to 2.6% ..................................................... ¥709

Long-term debt without collateral:
Loans from banks maturing serially to 2012, ranging from 1.3% to 5.6% .....................................................

1,659

2,656

16,5904,461
6,829(2,880)
3,949

6,302
9,892
(3,974)
5,918

44,61068,290(28,800)
39,490Capital lease obligations, due through 2010 ...............................................................................................................
Less current portion....................................................................................................................................................................
¥

¥

¥

934

$

$

7,090

Annual maturities of long-term debt were as follows:Year ending March 31,(millions of yen) (thousands of US dollars)
2009 ................................................................................................................................................................................................ ¥2,880$
28,8002010 ................................................................................................................................................................................................
2,635
26,3502011 ................................................................................................................................................................................................
706
7,060
2012 ................................................................................................................................................................................................
58
580
2013 and thereafter...................................................................................................................................................................
550
5,500
¥
6,829
$
68,29043

Financial Section

The components of net periodic retirement benefit costs for the years ended March 31, 2008 and 2007 were as follows:

At March 31, 2008 and 2007, net book value of assets pledged as collateral for short-term bank loans and long-term debt were as follows:(thousands of
US dollars)
2008(millions of yen)
2008
2007

Property, plant and equipment .................................................................................................................................................. ¥

8,861

¥

9,688

$

88,610In addition, pledged assets as collateral for liabilities other than the above were as follows:
Assets pledged:(thousands of
US dollars)
2008(millions of yen)
2008
2007

Property, plant and equipment ..................................................................................................................................... ¥Investment securities ........................................................................................................................................................
Time deposits ......................................................................................................................................................................
¥

9,225
405
209
9,839

¥

¥

315
410
209
934

$

$

92,2504,050
2,090
98,390(thousands of
US dollars)
2008(millions of yen)
2008
2007

Service cost .................................................................................................................................................................................... ¥Interest cost ...................................................................................................................................................................................
Expected return on plan assets ..............................................................................................................................................
Amortization of prior service cost ..........................................................................................................................................
Recognized actuarial loss..........................................................................................................................................................
Amortization of transitional obligation .................................................................................................................................
Net periodic benefit costs ...................................................................................................................................................
Defined contribution pension cost .......................................................................................................................................
Retirement benefits paid due to restructuring of business operations ...................................................................
Total ............................................................................................................................................................................................. ¥

2,526
1,053
(460)
(242)
232
48
3,157
94
32
3,283

¥

¥

2,516
1,097
(332)
(1,236)
215
48
2,308
94
1,969
4,371

$

$

25,26010,530(4,600)(2,420)2,320
480
31,570940
320
32,830Assumptions used for the years ended March 31, 2008 and 2007 were set forth as follows:
Liabilities with collateral:(thousands of
US dollars)
2008(millions of yen)
2008
2007

Other long-term liabilities ................................................................................................................................................ ¥Notes and accounts payable, trade .............................................................................................................................
Other current liabilities .....................................................................................................................................................
¥

9,396
181
187
9,764

¥

¥

3,959
184
183
4,326

$

$

93,9601,810
1,870
97,640Under most circumstances, employees terminating their employment are entitled to retirement benefits determined based on the rate of pay at termination,
years of service and certain other factors.
The Company and certain domestic subsidiaries have basically two types of pension plans for employees: a non-contributory and a contributory funded
defined benefit pension plan. The plan also provides for lump-sum retirement benefits, payable upon earlier termination of employment. The Company has
established an employee retirement benefit trust.
The liability for retirement benefits for directors and corporate auditors at March 31, 2008 and 2007 were ¥455 million ($4,550 thousand) and ¥433 million.
The retirement benefits for directors and corporate auditors are paid subject to the approval of the shareholders.
The liability for employees’ retirement benefits at March 31, 2008 and 2007 consisted of the following:(thousands of
US dollars)
2008(millions of yen)
2008
2007

Unrecognized prior service cost .............................................................................................................................................
Unrecognized actuarial loss .....................................................................................................................................................
Unrecognized transitional obligation ....................................................................................................................................
Prepaid pension cost .................................................................................................................................................................
Net liability ............................................................................................................................................................................ ¥

2008

2007

2.0%–2.5%
1.4%–2.5%
10–15 years
10–15 years
10 years

2.0%–2.5%
1.0%–2.0%
10–15 years
10–15 years
10 years

7. INCOME TAXES

6. RETIREMENT AND PENSION PLANS

Projected benefit obligation..................................................................................................................................................... ¥Fair value of plan assets............................................................................................................................................................

Discount rate .................................................................................................................................................................................
Expected rate of return on plan assets................................................................................................................................
Amortization period of prior service cost ............................................................................................................................
Recognition period of actuarial gain / loss.........................................................................................................................
Amortization period of transitional obligation ...................................................................................................................

52,531(23,296)
29,235
2,492(6,644)(144)
24,9393,179
28,118¥¥50,965(29,290)
21,675
2,734
58
(191)
24,276
3,082
27,358$$525,310(232,960)
292,350
24,920(66,440)(1,440)249,390
31,790281,180

The tax effects of significant temporary differences and loss carryforwards which resulted in deferred tax assets and liabilities at March 31, 2008 and 2007 wereas follows:(thousands of
US dollars)
2008(millions of yen)
2008
2007

Deferred tax assets:
Inventories ....................................................................................................................................................................... ¥Tax loss carryforwards .................................................................................................................................................
Allowance for doubtful accounts.............................................................................................................................
Accrued employees’ bonuses ..................................................................................................................................
Accrued severance benefits ......................................................................................................................................
Impairment of long-lived assets and depreciation in excess of tax limitation ........................................
Other .................................................................................................................................................................................
Less valuation allowance ...........................................................................................................................................
¥
Deferred tax liabilities:
Unrealized gain on available-for-sale securities ................................................................................................. ¥Deferred gains on sale of property ........................................................................................................................
Other .................................................................................................................................................................................

509
6,644
264
1,773
11,602
1,420
1,761(9,949)14,024¥¥¥¥(21,326)(4,685)(3,451)(29,462)

Net deferred tax ........................................................................................................................................................................... ¥(15,438)

461
4,757
443
1,790
11,206
1,075
1,795(6,763)
14,764$$

5,090
66,4402,640
17,730116,020
14,20017,610(99,490)
140,240$¥(42,359)(4,163)(3,557)(50,079)$(213,260)(46,850)(34,510)(294,620)¥(35,315)$(154,380)

A reconciliation between the normal effective statutory tax rate for the years ended March 31, 2008 and 2007 and the actual effective tax rates
reflected in the accompanying consolidated statement of income was as follows:
Normal effective statutory tax rate ........................................................................................................................................
Equity in earnings of affiliates...................................................................................................................................
Lower income tax rates applicable to income in certain foreign countries .............................................
Tax credit for research and development costs and other ............................................................................
Amortization of goodwill ............................................................................................................................................
Intercompany dividends .............................................................................................................................................
Other .................................................................................................................................................................................
Actual effective tax rate .............................................................................................................................................................

44

2008

2007

40.7 %(10.7)
(5.8)
(3.7)
6.6
6.6
(0.9)
32.8 %

40.7 %
(7.4)
(2.3)
(3.7)
1.2
2.0
(3.3)
27.2 %

45

Financial Section

The Corporate Law provides certain limitations on the amounts available for dividends or the purchase of treasury stock. The limitation is defined as theamount available for distribution to the shareholders.

8. LEASES
The Group leases certain machinery, computer equipment and other assets.
Total rental expenses for the years ended March 31, 2008 and 2007 were ¥431 million ($4,310 thousand) and ¥491 million, respectively, including¥419 million ($4,190 thousand) and ¥491 million of lease payments under finance leases.
Pro forma information of leased property such as acquisition cost, accumulated depreciation, obligation under finance lease, depreciation expense offinance leases that do not transfer ownership of the leased property to the lessee on an “as if capitalized” basis for the years ended March 31, 2008 and 2007
was as follows:(thousands of
US dollars)
2008(millions of yen)
2008
2007

Acquisition cost .............................................................................................................................................................. ¥Accumulated depreciation .........................................................................................................................................
Net leased property ..................................................................................................................................................... ¥2,050(1,152)
898

¥

2,240
(1,129)
1,111

¥

$

20,500(11,520)
8,980$

Obligations under finance leases:(thousands of
US dollars)
2008(millions of yen)
2008
2007

Due within one year .................................................................................................................................................... ¥Due after one year .......................................................................................................................................................
Total ................................................................................................................................................................................... ¥

347
551
898

¥

408
703
1,111

¥

$

3,470
5,510
8,980

$

(b) Increases/decreases and transfer of common stock, reserve and surplus
The Corporate Law requires that an amount equal to 10% of dividends must be appropriated as a legal reserve (a component of retained earnings) or as additional paid-in capital (a component of capital surplus) depending on the equity account charged upon the payment of such dividends until the total of aggregate amount of legal reserve and additional paid-in capital equals 25% of the common stock. Under the Corporate Law, the total amount of additional paid-in
capital and legal reserve may be reversed without limitation. The Corporate Law also provides that common stock, additional paid-in capital, other capital surplus,
legal reserve, and retained earnings can be transferred among the accounts under certain conditions upon resolution of the shareholders.
(c) Treasury stock and treasury stock acquisition rights
The Corporate Law also provides for companies to purchase treasury stock and cancel such treasury stock by resolution of the Board of Directors. The amountof treasury stock purchased cannot exceed the amount available for distribution to the shareholders which is determined by specific formula.
The Corporate Law provides that companies can purchase both treasury stock acquisition rights and treasury stock. Such treasury stock acquisition rights arepresented as a separate component of equity or deducted directly from stock acquisition rights.
The computation of net income per share is based on the weighted average number of shares of common stock outstanding during each fiscal year.

11. OTHER INCOME (EXPENSES) ― OTHER, NET
Other income (expenses) — Other, net consisted of the following:(thousands of
US dollars)
2008(millions of yen)
2008
2007

Depreciation expense ................................................................................................................................................. ¥

419

¥

491

$

4,190

Depreciation expense, which is not reflected in the accompanying statements of income, is computed by the straight-line method.

9. DERIVATIVESThe Group enters into foreign currency forward contracts to hedge exchange risk associated with certain assets and liabilities denominated in foreign
currencies. Foreign currency forward contracts which qualify for hedge accounting for the years ended March 31, 2008 and 2007 and such amounts which
are assigned to the associated assets and liabilities and are recorded on the balance sheets at March 31, 2008 and 2007, are excluded from disclosure ofmarket value information.
The Group also enters into interest rate swap contracts to manage its interest rate exposures on certain liabilities. Such contracts outstanding at March 31,
2008 and 2007 were as follows:(millions of yen)
2008

(thousands of US dollars)
2008

2007

Contract
amountFair
value

Unrealized
gain (loss)

Contract
amountFair
value

Unrealized
gain (loss)

Contract
amountFair
value

Unrealized
gain (loss)

Interest rate swaps:
Fixed rate payments, floating rate receipt ............ ¥6,879
Foreign currency forward contracts .......................................... ¥ 183

¥ 135
¥ 182

¥ 135
¥
(1)

¥6,007
¥ 457

¥ 342
¥ 456

¥ 342
¥
(1)

$ 68,790$ 1,830$ 1,350$ 1,820$ 1,350$ (10)

10. EQUITY
On and after May 1, 2006, Japanese companies are subject to a new corporate law of Japan (the “Corporate Law”), which reformed and replaced theCommercial Code of Japan (the “Code”) with various revisions that are, for the most part, applicable to events or transactions which occur on or after May 1,
2006 and for the fiscal years ending on or after May 1, 2006. The significant changes in the Corporate Law that affect financial and accounting matters are
summarized below:(a) Dividends
Under the Corporate Law, companies can pay dividends at any time during the fiscal year in addition to the year-end dividend upon resolution at the shareholders
meeting. For companies that meet certain criteria, such as (1) having the Board of Directors, (2) having independent auditors, (3) having the Board of Corporate
Auditors, and (4) having a term of one year for directors, the Board of Directors may declare dividends (expect for dividends in kind) at any time during the fiscal
year if the company has prescribed so in its articles of incorporation.

46(thousands of
US dollars)
2008(millions of yen)
2008
2007

Depreciation expense under finance leases:
Gain on sale of property, plant and equipment .............................................................................................................. ¥Gain on sale of securities .........................................................................................................................................................
Loss on inventory disposal.......................................................................................................................................................
Impairment of long-lived assets .............................................................................................................................................
Loss on plant closures ...............................................................................................................................................................
Retirement benefits paid due to restructuring of business operations ...................................................................
Amortization of goodwill ...........................................................................................................................................................
Other, net .......................................................................................................................................................................................
¥

2,250
3,678
(1,039)(155)(1,403)(32)(2,320)
(395)
584

¥

¥

831
10,668(401)(1,328)(2,649)(1,969)
—
688
5,840

$

$

22,50036,780(10,390)(1,550)(14,030)(320)(23,200)(3,950)5,840

12. COMMITMENTS AND CONTINGENCIES
Contingent liabilities at March 31, 2008 and 2007 for loans guaranteed amounted to ¥372 million ($3,720 thousand) and ¥1,999 million, respectively.
Commitments for capital expenditures outstanding at March 31, 2008 and 2007 were in the approximate amounts of ¥13,417 million ($134,170 thousand) and ¥13,169 million, respectively.

13. SUBSEQUENT EVENT(a) Year-end cash dividends
On May 13, 2008, Nisshinbo’s Board of Directors declared year-end cash dividends (¥7.5 per share) in the amounts of ¥1,441 million ($14,410 thousand).
(b) Acquisition of treasury stock
On March 27, 2008, the Board of Directors approved the Company to acquire treasury stock of the Company’s common stock.
Subsequent to the year ended March 31, 2008 through May 12, 2008, the Company acquired 10,000 thousand shares for ¥10,977 million ($109,770 thousand).
(c) Cancellation of treasury stock
On March 27, 2008, the Board of Directors approved the Company to cancel treasury stock of the Company’s common stock.
On April 23, 2008, the Company canceled 6,600 thousand shares of treasury stock of the Company’s common stock.
(d) Stock option
At the general shareholders meeting held on June 27, 2008, the Company’s shareholders approved a stock option plan to grant stock purchase rights up to
200 thousand shares of the Company’s common stock to directors and key employees in the period from August 1, 2010 to July 31, 2015.

47

Financial Section(b) Geographical segments
The geographical segments of the Company and its consolidated subsidiaries for the years ended March 31, 2008 and 2007 were as follows:

14. SEGMENT INFORMATION(a) Industry segments
Information about industry segments of the Company and its consolidated subsidiaries for the years ended March 31, 2008 and 2007 were as follows:(millions of yen)
2008

TextilesAutomobile
BrakesPapersChemicalsElectronics

Real Estate
Leasing

I. Sales and Operating Income
Sales to customers............................................ ¥ 78,816 ¥ 66,397 ¥ 33,547 ¥ 38,528 ¥ 76,475 ¥Intersegment sales ............................................
8
—
46
895
—
Total sales........................................................
78,824
66,39733,59339,42376,475
Operating expenses..........................................
80,04057,52532,431
40,21275,371
Operating income (loss)................................. ¥ (1,216) ¥ 8,872 ¥ 1,162 ¥(789) ¥ 1,104 ¥II. Total Assets, Depreciation and Amortization, Impairment of Long-lived Assets and Capital Expenditures
Total assets .......................................................... ¥ 67,841 ¥ 70,561 ¥ 23,308 ¥ 26,235 ¥ 93,715
Depreciation and amortization ..................... ¥ 2,979 ¥ 4,292 ¥ 1,303 ¥ 1,817 ¥ 4,938
Impairment of long-lived assets ................... ¥
155 ¥
— ¥
— ¥
— ¥
—
Capital expenditures ......................................... ¥ 2,117 ¥ 5,221 ¥ 2,746 ¥ 2,136 ¥ 4,847

Other
Eliminations/
Businesses
Corporate Consolidated

5,446 ¥ 23,203 ¥
— ¥
513
927
(2,389)5,959
24,130(2,389)3,236
23,568(2,005)2,723 ¥
562 ¥(384) ¥

¥ 27,971 ¥ 14,659 ¥ 100,416¥ 1,081 ¥
480 ¥
—
¥
— ¥
— ¥
—
¥ 6,547 ¥
396 ¥
270

¥
¥
¥
¥

322,412—322,412310,378
12,034
424,706
16,890155
24,280(millions of yen)
2007

TextilesAutomobile
BrakesPapersChemicalsElectronics

Real Estate
Leasing

I. Sales and Operating Income
Sales to customers............................................ ¥ 82,243 ¥ 61,764 ¥ 29,908 ¥ 37,671 ¥ 76,068 ¥Intersegment sales ............................................
5
—
16
788
0
Total sales........................................................
82,24861,76429,92438,45976,068Operating expenses..........................................
81,80954,75528,67439,45075,027
Operating income (loss)................................. ¥439 ¥ 7,009 ¥ 1,250 ¥(991) ¥ 1,041 ¥II. Total Assets, Depreciation and Amortization, Impairment of Long-lived Assets and Capital Expenditures
Total assets .......................................................... ¥ 77,712 ¥ 66,323 ¥ 20,205 ¥ 42,786 ¥ 89,097
Depreciation and amortization ..................... ¥ 2,682 ¥ 4,139 ¥ 1,302 ¥ 1,544 ¥ 4,044
Impairment of long-lived assets ................... ¥
292 ¥
— ¥
— ¥
49 ¥
—
Capital expenditures ......................................... ¥ 1,841 ¥ 4,568 ¥ 1,275 ¥ 1,009 ¥ 3,762

Other
Eliminations/
Businesses
Corporate Consolidated

4,788 ¥ 20,383 ¥
532
324
5,320
20,707
2,709
20,3402,611 ¥
367 ¥

¥ 21,347 ¥
¥
773 ¥
¥
— ¥
¥ 3,492 ¥

214
500
—
2,359

— ¥
(1,665)(1,665)(1,490)(175) ¥

¥ 154,986
¥
—
¥
987
¥
—

¥
¥
¥
¥

312,825—
312,825
301,274
11,551
472,670
14,984
1,328
18,306

Automobile
BrakesPapersChemicalsElectronics

Real Estate
Leasing

Japan

Asia

Sales to customers ................................. ¥Interarea transfer .....................................
Total sales.............................................
Operating expenses ...............................
Operating income (loss) ...................... ¥260,088 ¥
11,432
271,520
265,582
5,938 ¥

44,626 ¥13,94958,57554,0204,555 ¥

17,698 ¥54
17,752
15,791
1,961 ¥

— ¥(25,435)(25,435)(25,015)(420) ¥

322,412—322,412310,378
12,034¥ 259,752 ¥ 36,616 ¥ 16,457 ¥— ¥ 312,825
10,081
13,29896 (23,475)—
269,833
49,914
16,553 (23,475) 312,825
263,143
46,58814,851 (23,308) 301,274¥ 6,690 ¥ 3,326 ¥ 1,702 ¥ (167) ¥ 11,551

Total assets ................................................ ¥267,150 ¥

42,362 ¥20,160 ¥95,034 ¥424,706¥ 272,732 ¥ 32,406 ¥ 17,151 ¥ 150,381 ¥ 472,670

Japan(thousands of US dollars)
2008
Other
Eliminations/
Asia
Regions
Corporate

Consolidated

Japan

Consolidated

Sales to customers ................................ $ 2,600,880 $Interarea transfer .....................................
114,320
Total sales.............................................
2,715,200
Operating expenses ...............................
2,655,820
Operating income (loss) ...................... $59,380 $446,260 $
139,490585,750
540,200
45,550 $176,980 $— $ 3,224,120
540(254,350)—
177,520(254,350) 3,224,120
157,910(250,150) 3,103,780
19,610 $(4,200) $ 120,340

Total assets ................................................ $ 2,671,500 $

423,620 $201,600 $950,340 $ 4,247,060(c) Sales to foreign customers
Sales to foreign customers for the years ended March 31, 2008 and 2007 amounted to ¥93,827 million ($938,270 thousand) and ¥84,898 million, respectively.

Independent Auditors’ Report
To the Board of Directors of
Nisshinbo Industries, Inc.

the related consolidated statements of income, changes in equity, and cash flows for the years then ended, all expressed in Japanese yen. These consoliOther
Eliminations/
Businesses
Corporate Consolidated

I. Sales and Operating Income
Sales to customers............................................ $ 788,160 $ 663,970 $ 335,470 $ 385,280 $ 764,750 $ 54,460 $ 232,030 $— $ 3,224,120
80
—
460
8,950
—
5,130
9,270
(23,890)—
Intersegment sales ...............................................
Total sales........................................................
788,240
663,970
335,930
394,230
764,750
59,590241,300(23,890) 3,224,120
Operating expenses..........................................
800,400
575,250
324,310402,120753,71032,360235,680(20,050) 3,103,780
Operating income (loss)................................. $ (12,160) $ 88,720 $ 11,620 $ (7,890) $ 11,040 $ 27,230 $ 5,620 $ (3,840) $ 120,340
II. Total Assets, Depreciation and Amortization, Impairment of Long-lived Assets and Capital Expenditures
Total assets .......................................................... $ 678,410 $ 705,610 $ 233,080 $ 262,350 $ 937,150
Depreciation and amortization ..................... $ 29,790 $ 42,920 $ 13,030 $ 18,170 $ 49,380
Impairment of long-lived assets ................... $ 1,550 $
— $
— $
— $
—
Capital expenditures ......................................... $ 21,170 $ 52,210 $ 27,460 $ 21,360 $ 48,470

Eliminations/
Corporate(millions of yen)
2007
Other Eliminations/
Asia
Regions
Corporate Consolidated

We have audited the consolidated balance sheets of Nisshinbo Industries, Inc. and consolidated subsidiaries as of March 31, 2008 and 2007, and(thousands of US dollars)
2008

Textiles(millions of yen)
2008
Other
Regions

dated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with auditing standards, procedures and practices generally accepted and applied in Japan. Those standards
require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An
audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated
financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Nisshinbo$ 279,710$ 10,810$—$ 65,470$ 146,590$ 4,800$—$ 3,960$1,004,160$—$—$ 2,700$ 4,247,060$ 168,900$
1,550$ 242,800

Industries, Inc. and consolidated subsidiaries as of March 31, 2008 and 2007, and the results of their operations and their cash flows for the years thenended, in conformity with accounting principles and practices generally accepted in Japan.
The United States dollar amounts shown in the consolidated financial statements have been translated solely for convenience. We have reviewed
this translation and, in our opinion, the consolidated financial statements expressed in Japanese yen have been translated into US dollars on the basis
described in Note 1.

Etsuko Nagashima

Takeshi Takubo

Certified Public Accountant

Certified Public Accountant

June 27, 2008
Tokyo, Japan

48

49

Board of Directors

Organization Chart(As of June 27, 2008)(As of April 1, 2008)

GeneralShareholders
Meeting

Corporate Strategy Center

CSR Department

Human Rights Group
Environment Group
Quality Assurance Group
Health & Safety Group
Investor Relations & Public Relations Group
Corporate Secretariat Group

Corporate Governance Department

Corporate Governance Group
Export Control Group

Corporate Strategy Department

Business Planning Group
Finance & Accounting Group
Human Resources & Administration Group
Information Technology Group
Technology & Intellectual Property Group

Board ofDirectors

ChairmanPresident

Director, Chairman

Director *1, President

Director *1, Vice President

Yoshikazu Sashida

Takashi Iwashita

Kunihiro Toda

Board ofManagement

Internal Audit Department
Business Support Center

Board of
Statutory Auditors

Finance, Accounting & IT Service Department

Finance & Accounting Group
Information System Group

Human Resources &Administration Service Department

Human Resources GroupIntellectual Property Group
Legal Affairs Group
Purchase Group
Facility Group
Administration Group

Statutory
Auditors
Business Development Division

Administration Department
Business Development Department
Capacitor Department
Property Management Department

Director, Senior Executive
Managing Officer

Director,
Executive Managing Officer

Director,
Executive Managing Officer

Director,
Executive Managing Officer

Shizuka Uzawa

Yoshihito Onda

Yoshihiro Sakaki

Masaaki Isobe

Director, Managing Officer

Masaya Kawata

Textile Company

Administration Division

Administration Division
Global Operation Department

Business Division

Shirts Department
Denim Department
Textile Fabrics Department
Oikos Department
Mobilon Department
Textile Materials Department

Development & Production Division

Development & Technology Department
Spinning & Weaving Department
Dyeing & Finishing Department

Precision Instrument &Machinery Company*1 Representative director

Director *2

Director *2

Director *2

Tomofumi Akiyama

Toshiya Hanawa

Koji Kato

Brake Company

Business Administration Department
Machinery Manufacturing Department
Precision Manufacturing Department
Technology Department
Sales Department
Administration Division

Administration Department
Overseas Operation Department
Domestic Operation Department
Quality Assurance Department

R&D Division

Administration Department
R&D Department
R&D Support Department
Testing Department

Production Division

Friction Material Manufacturing Department
Brake Manufacturing Department*2 Outside director

Managing Officers and Auditors(As of April 1, 2008)
President

Executive Managing Officers

Senior Managing Officers

Managing Officers

Standing Statutory Auditors

Takashi Iwashita*

Yoshihito Onda*

Takeo Shimura

Masaya Kawata*

Shoichi Hayashi

Yoshihiro Sakaki*

Yoshio Ide

Akihiko Ishikawa

Masao Sazuka

Vice President

Kunihiro Toda*
Senior Executive Managing
Officer

Shizuka Uzawa**Board member as well

Masaaki Isobe*

Hitoshi ItoBusiness Administration Department
Heat Insulation Department
Carbon Department
Fuel Cell Department
Performance Chemical Department
Elastomer Department

Paper Products Company

Business Administration Department
Product Development Department

Statutory Auditors

Michihiro Ohga

Hiroshi Kawakami*3

Shigenori Mori

Toshihiko Tomita*3

Toshihiro Kijima
Koji Nishihara
Shuichi Fukuda
Masahiro Murakami

50Chemical Company*3 Outside auditor

Household Paper Division

Manufacturing Technology Department
Sales Department

Speciality Paper Division

Speciality Paper Department
Processed Products Department

51

History

Corporate Data
(As of March 31, 2008)

1907
1920

1924
1925

1937
1938
1940
1945
1947

1949

1950
1952
1958

1961
1962
1966
1972
1978
1981
1984
1985
1986

1987
1989
1992
1993

52

Nisshin Cotton Spinning Co., Ltd.
established.
Office opened in Nihonbashi, andthereafter became the head office ofNisshin Cotton Spinning.
Nisshin Cotton Spinning mergedwith Okazaki Boseki Co., Ltd.
Nisshin Cotton Spinning merged with Tokyo Boseki Co., Ltd.
Branch office opened in Nagoya (the present Nagoya
Branch).
Branch office opened in Osaka (the present Osaka Branch).
Nisshin Cotton Spinning acquired Kawagoe Boseki Co., Ltd.
(the present Kawagoe Plant).
Nisshin Cotton Spinning merged with Nisshin Rayon Co., Ltd.
(the present Miai Plant).
Toa Jitsugyo Co., Ltd. established (the company namechanged to Nisshin Toa Inc. in 1990).
Nisshin Cotton Spinning acquired the Meiji Plant of Nanshin
Seiki Co., Ltd. (the present Fuji Plant).
Non-textiles Division set up and thereafter expanded operations to include automobile brakes, chemical products, papers
and machine tools.
Nihon Postal Franker Co., Ltd. established (the company
name changed to Nisshinbo Postal Chemical Co., Ltd. in2006).
Nisshin Cotton Spinning listed on the Tokyo Stock Exchange.
Nitto Asbestos Co., Ltd. established (the company namechanged to Nisshinbo Brake Sales Co., Ltd. in 1987).
Ueda Japan Radio Co., Ltd. established.
Shimada Plant began operations.
Tokushima Plant began operations.
Nippon Kohbunshikan Co., Ltd. established (the company
name changed to NIPPON KOHBUNSHI CO., LTD. in 1986).
Nisshin Cotton Spinning listed on the first section of theTokyo Stock Exchange.
Nisshin Cotton Spinning’s English company name changed to
Nisshin Spinning Co., Ltd.
Fujieda Plant began operations.
Nisshinbo Do Brasil Industria Textil LTDA. (Brazil) established.
Nisshin Spinning acquired Tokai Seishi Kougyou Co., Ltd.
Tatebayashi Chemical Plant (the present Tatebayashi Plant)began operations.
Nisshin Spinning’s English company name changed to
Nisshinbo Industries, Inc.
Nisshinbo Industries acquired Nisshin Denim Inc.
The Machine Tools Department of the Miai Plant spun off tocreate the Miai Machinery Plant.
Anti-skid Brake System (now ABS) Division set up.
Hamakita Plant began operations.
Kohbunshi (Thailand) Ltd. established.
Chiba Plant began operations.
The head office relocated to its present
location in Ningyo-cho, Nihonbashi,
Chuo-ku, Tokyo.

1995
1996
1997

1998
1999

2000

2002

2003

2004

2005

2006

2007

Pudong Kohbunshi (Shanghai) Co., Ltd. (China) established.
Nisshinbo Automotive Corporation (U.S.A.) established.
Nisshinbo Urban Development Co., Ltd. established.
Nisshinbo Somboon Automotive Co., Ltd. (Thailand)established.
Nisshinbo Automotive Manufacturing Inc. (U.S.A.) establishedthrough complete financing from the subsidiary Nisshinbo
Automotive Corporation.
P.T. Gistex Nisshinbo Indonesia established as a joint venture.
Saeron Automotive Corporation(South Korea) established.
Research & Development Centerestablished.
P.T. Nikawa Textile Industry(Indonesia) established as a subsidiary through the additional
acquisition of shares.
Continental Teves Corporation
established as a joint venture(the company name changed toContinental Automotive
Corporation in 2007).
Ningbo Veken Textile Co., Ltd. (China) established as a joint
venture.
Nisshinbo Industries acquired all shares of Iwao & Co., Ltd.
NISSHINBO (SHANGHAI) CO., LTD. (China) began
operations.
Saeron Automotive Beijing Corporation (China) establishedthrough complete financing from the subsidiary Saeron
Automotive Corporation.
Continental Teves Corporation (Lian Yun Gang) Co., Ltd.
(China) established (the company name changed toContinental Automotive Corporation (LYG) Co., Ltd. in 2007).
Nisshinbo Industries acquired additional stock in Naigai ShirtsCo., Ltd. and CHOYA CORP.
Toyota Plant established.
Nisshinbo Urban Development Co., Ltd. absorbed Kansai
Nisshinbo Urban Development Co., Ltd. by merger.
Saeron Automotive Corporation listed on the Korea Stock
Exchange.
Nisshinbo Industries acquired additional stock in New Japan
Radio Co., Ltd. and ALOKA CO., LTD.
Nisshinbo Postal Chemical Co., Ltd. (currently consolidated
subsidiary) merged with Nisshinbo Engineering Co., Ltd.
Acquisition of additional shares of Japan Radio Co., Ltd. andNagano Japan Radio Co., Ltd.
Nisshinbo Industries acquired all shares of Daiwa Shiko Co.,
Ltd.

Founded:February 5, 1907

Employees:

Head Office:2-31-11, Ningyo-cho, Nihonbashi,
Chuo-ku, Tokyo 103-8650, Japan
Tel: 03-5695-8833 Fax: 03-5695-8970
URL: http://www.nisshinbo.co.jp/

Common Stock: Authorized
IssuedOsaka Branch:

2-4-2, Kitakyuhoji-machi, Chuo-ku,
Osaka 541-0057, Japan
Tel: 06-6267-5501 Fax: 06-6267-5529

Nagoya Branch: 5-2-38, Sakae, Naka-ku, Nagoya
460-0008, Japan
Tel: 052-261-6151 Fax: 052-263-9480

Parent Company 2,782
Subsidiaries 10,471
Total 13,253
371,755,000 shares
198,698,939 shares¥27,588 million ― US$234 million

Shareholders:

11,399

Listings:

Tokyo, Osaka, Nagoya, Fukuoka, and Sapporo

Transfer Agent:

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

Nisshinbo Group(As of March 31, 2008)

The Nisshinbo Group consists of Nisshinbo Industries, Inc., its 54 subsidiaries, and 42 affiliates.

Main Group Companies■ Consolidated Subsidiaries
Company

Location

CapitalBusiness

CHOYA CORP.
Nisshin Toa Inc.
Nisshinbo Yarn Dyed Co., Ltd.
Nisshin Denim Inc.
Nisshin Tex Co., Ltd.
Naigai Shirts Co., Ltd.
NISSHINBO (SHANGHAI) CO., LTD.
Nisshinbo Do Brasil Industria Textil LTDA.
P.T. Naigai Shirts Indonesia
Shanghai Choya Fashion Co., Ltd.
P.T. Nikawa Textile Industry
P.T. Gistex Nisshinbo Indonesia
Nisshinbo Brake Sales Co., Ltd.
Nisshinbo Automotive Corporation
Nisshinbo Automotive Manufacturing Inc.
Nisshinbo Somboon Automotive Co., Ltd.
Saeron Automotive Corporation
Tokai Seishi Co., Ltd.
Daiwa Shiko Co., Ltd.
Nisshinbo Postal Chemical Co., Ltd.
NIPPON KOHBUNSHI CO., LTD.
Kohbunshi (Thailand) Ltd.
Pudong Kohbunshi (Shanghai) Co., Ltd.

Tokyo, JapanTokyo, Japan
Aichi, Japan
Tokushima, Japan
Osaka, Japan
Osaka, Japan
China
BrazilIndonesia
China
Indonesia
Indonesia
Tokyo, Japan
U.S.A.
U.S.A.
ThailandSouth Korea
Shizuoka, JapanTokyo, JapanTokyo, Japan
Aichi, Japan
ThailandChina¥4,594 million¥450 million¥80 million¥200 million¥10 million¥300 million
RMB9,932 thousand
R$20.075 million
US$0.85 million
RMB34,063 thousand
US$75 million
US$10 million¥346 million
US$88 million
US$15.44 million
THB732.6 million
KRW9,600 million¥300 million¥100 million¥310 million¥310 million
THB100 million
US$7 million

Iwao & Co., Ltd.

Osaka, Japan¥250 million

New Japan Radio Co., Ltd.
Ueda Japan Radio Co., Ltd.
Nisshinbo Urban Development Co., Ltd.
Nisshinbo Europe B.V.

Tokyo, Japan
Nagano, JapanTokyo, JapanThe Netherlands¥5,220 million¥700 million¥480 million=C2.165 million

TextilesTextiles, Papers, Food Ingredients
TextilesTextilesTextilesTextilesTextilesTextilesTextilesTextilesTextilesTextilesAutomobile Brakes
Automobile Brakes
Automobile Brakes
Automobile Brakes
Automobile Brakes
PapersPapersPapers, Chemical Products
Plastic Molded Products
Plastic Molded Products
Plastic Molded Products
Textiles, Chemical Products,
Real Estate Leasing
Electronics
Electronics
Real Estate Leasing
Real Estate Leasing■ Subsidiary and Affiliates Accounted for by the Equity Method
Company

Location

CapitalBusiness

Continental Automotive Corporation
Continental Automotive Corporation (LYG) Co., Ltd.
ALOKA CO., LTD.
Japan Radio Co., Ltd.
Nagano Japan Radio Co., Ltd.

Kanagawa, Japan
China
Tokyo, JapanTokyo, Japan
Nagano, Japan¥5,000 million
US$3.68 million¥6,465 million¥14,704 million¥3,649 million

Automobile Brakes
Automobile Brakes
Medical Equipment
Electronics
Electronics

53