Creating Corporate Value Report 2014
Financial Section
Year ended March 31, 2014

Refreshing the Air

Management's Discussion and Analysis■ Sales Overview■ Cost of Sales, SG&A Expenses, and Operating Income

In the fiscal year ended March 31, 2014, the Japanese economy saw

While raw materials costs rose, we made efforts to lower

a depreciation of the yen and increased stock prices due tomanufacturing costs, and as a result the cost of sales decreased 2.7%

government economic and financial policies. Coupled with theyear on year, to ¥26,980 million. By making efficient marketing

increase in demand at the end of the fiscal year before consumption

investments and cutting other costs, selling, general and administrative

taxes increased, there were signs of recovery in corporate

expenses increased 2.7%, to ¥17,881 million. As a result, operating

performance and consumer spending. While the U.S. economy isincome increased 18.4% to ¥2,131 million.

gradually recovering, there are still uncertain factors in the global■ Other Income (Expenses), Pretax and Net Income

economy, such as the future of developing economies.
Within these circumstances the S.T. CORPORATION GroupIn other income and expenses, due to decreased loss on equity offollowed its theme of “3G (Growth, Global, Group)” and worked toaffiliates and posting gain on sales of investment securities, income

establish a high-yielding system and roll out the “S.T. Reformation”

before income taxes and minority interests increased 48.1% to ¥1,637

program for management reform.

million, and net income increased 118.4% to ¥1,234 million.

As a result, net sales increased 0.1% year on year, to ¥46,993

Accordingly, net income per share rose to ¥56.74, a significant

million, due to significant increased demand for moth-repellent before

increase from the previous fiscal year's ¥26.01. The net income

the increase in consumption taxes and favorable growth for the coremargin increased from 1.2% to 2.6%, and return on equity (ROE)brand “Shoshu-Riki”, which has popular commercials. Regarding

increased from 2.9% to 6.1%.

individual segments, in the Mothproofing and Hygiene-Related
Products segment, sales in the Cloth Care category increased 4.5%,■ Financial Position

sales in the Hand Care category increased 2.5%, and sales in the

Total assets as of March 31, 2014 stood at ¥32,370 million, up

Thermal Care category fell 12.5%. In the Household Environment-¥2,294 million compared to the previous year-end. Total current

Related Products segment, sales in the Air Care category fell 0.1%,

assets increased by ¥3,423 million, to ¥18,956 million, due to ansales in the Humidity Care category increased 8.0%, and sales in theincrease in cash and time deposits. On the other hand, non-current

Home Care category increased 5.7%.

assets decreased by ¥1,129 million, to ¥13,414 million, due to adecrease in investment securities.

Operating income /Operating income margin
Operating income (millions of yen)

Net income margin (%)

2.6

2.6

1.8

3.8

1.2
1,234
76

565

786

1,751

0.2
2,114

2,246

46,993

46,94446,354

43,580Net income (millions of yen)

4.5

4.9
3.8

43,546

Operating income margin (%)

1,119

5.2

Net income /Net income margin

2,131(millions of yen)

1,800

Net sales

10

1

11

12

13

14

10

11

12

13

14

10

11

12

13

14

minority shareholders.

Total liabilities increased by ¥1,421 million, to ¥11,284 million

As a result, cash and cash equivalents at the end of year stood atcompared to the previous year-end, largely due to an increase in¥6,728 million, a year on year increase of ¥2,259 million.

notes payables and trade payables. On the other hand, total net
assets increased by ¥873 million, to ¥21,087 million compared to the■ Dividends and Return to Shareholders

previous year-end, primarily due to an increase in retained earnings.

Taking into consideration such factors as net income and the need to

As a result of the above, total net assets per share increased from¥905.84 to ¥936.06. Equity ratio is a high 63.2%, near the same level

realize shareholder returns, we have decided to distribute a fiscal

as 65.4% of the previous fiscal year, and we continued to maintain ayear-end dividend of ¥11.0 (¥22.0 for the full year, including thesound financial position.

interim dividend), on par with the previous fiscal year, making for a
consolidated dividend payout ratio of 38.8%. The Company will

■ Capital Expenditures and Depreciation and Amortization

continue to place importance on returns to shareholders.

Capital expenditures of this fiscal year decreased from the previous
fiscal year's ¥2,061 million to ¥942 million. Depreciation and■ Business and Operational Risks

amortization increased from ¥830 million to ¥894 million.

Factors that could possibly impact the Group's operating results,financial position or stock prices include the following: (1) an■ Cash Flows

escalation in raw materials prices; (2) the impact on manufacturing

Net cash provided by operating activities was ¥2,110 million, a year

operations from natural disasters and changes in international politicalon year increase of ¥1,130 million. This was primarily due to anor other conditions; (3) sales fluctuations due to unseasonal weather;increase in income before income taxes and minority interests and(4) and the failure of initiatives to raise new businesses. Forward-

depreciation and amortization. Net cash provided by investing

looking statements in this annual report are based on certain

activities was ¥514 million, a year on year increase of ¥2,439 million,

assumptions made by the Group as of the end of this fiscal year.

primarily attributable to an increase in income from sales of affiliate
shares. Net cash used in financing activities was ¥465 million, a year
on year decrease of ¥92 million. This was primarily due to an increasein short-term borrowings and income from receiving payments from

Dividends per share /Payout ratio

ROA / ROE

Dividends per share (yen)

2.9
2.7

22.0

22.0

4.0

4.0
4.0

Payout ratio (%)

632.2
22.0

830

894

942

2,061

ROE (%)

6.1

5.9

931

992
1,007

922
662

673

ROA (%)

22.0

Capital expenditures (millions of yen)
Depreciation and amortization (millions of yen)

22.0

Capital expenditures /Depreciation and amortization

84.6

1.9

61.1
38.8

42.9
0.4

10

11

12

13

14

10

11

0.3

12

13

14

10

11

12

13

14

2

Consolidated Balance Sheets
S.T.CORPORATION and consolidated subsidiaries
March 31, 2014 and 2013

thousands of
U.S. dollars (Note 2)

millions of yen

Assets

2014

2013

2014

¥ 6,765¥ 4,693$ 65,735—85—

Trade notes and accounts receivable (Note 6)

5,150

4,792

50,043Merchandise and finished goods

5,086

4,632

49,419Work in process

219

165

2,125

Raw materials and supplies

648

396

6,301

Deferred tax assets (Note 12)

386

363

3,747

Other current assets

717

423

6,971

Less - allowance for doubtful accounts

(16)

(15)

(159)

18,956

15,533

184,182

Land (Note 9)

3,289

3,254

31,958

Buildings and structures

6,702

6,737

65,114

Machinery, equipment and vehicles

7,628

7,630

74,121Tools, furniture and fixtures

3,557

3,648

34,559Construction in progress

14

90

136

Leased assets (Note 18)

381

138

3,698

(14,016)(13,973)(136,182)

Property, plant and equipment, net

7,555

7,524

73,404

Intangible assets, net of accumulated amortization

192

167

1,870

192

167

1,870

751

3,402

7,299

3,008

1,802

29,224Long-term loans

38

49

374

Deferred tax assets other than unrealized revaluation loss on land (Note 12)

412

132

3,999

1,458

1,468

14,169

5,667

6,853

55,065¥ 32,370¥ 30,076$ 314,521

Current assets:
Cash and time deposits (Notes 6, 10 and 17)
Marketable securities (Notes 6 and 8)

Total current assets

Property, plant and equipment, at costLess - accumulated depreciation

Total intangible assets

Investments and other assets:
Investments in non-consolidated subsidiaries and affiliates
Investment securities (Notes 6 and 8)

Other assets
Total investments and other assets
Total assets

3thousands of
U.S. dollars (Note 2)

millions of yen

Liabilities and net assets

2014

2013

2014

¥ 2,050¥ 4,626$ 19,921

3,384—

32,882

Short-term loans payable

38

—

373

Lease obligations

75

32

732

Current liabilities:
Trade payables (Note 6)
Electronically recorded obligations-operating

2,316

2,383

22,503

Accrued expenses

Other payables (Note 6)

590

506

5,737

Electronically recorded obligations-non-operating

43

—

419

Income taxes payable

196

283

1,901

Consumption taxes payable

88

49

853

Allowance for sales returns

117

106

1,136

Other current liabilities

67

72

654

8,966

8,058

87,112

275

80

2,676

Employees' retirement and severance benefits (Notes 1, 3 and 13)

—

1,266

—

Directors' retirement and severance benefits

156

138

1,515

1,565

—

15,202

321

321

3,121

Total current liabilities
Long-term liabilities:
Lease obligations

Net defined benefit liability
Deferred tax liabilities - unrealized revaluation profit on land (Note 9)
Other liabilities-not current liabilities
Total long-term liabilities

1

—

12

2,318

1,805

22,526

7,066

7,066

68,650

7,068

7,068

68,673

Contingent liabilities (Note 11)
Net assets (Note 14):
Shareholders' equity:
Common stock:
Authorized - 96,817,000 shares in 2014 and 2013
Issued and outstanding - 23,000,000 shares in 2014 and 2013
Capital surplus
Retained earnings

8,837

7,662

85,865

Treasury stock, at cost

(1,652)(1,787)(16,048)

Total shareholders' equity

21,31920,008207,140

Accumulated other comprehensive loss
Unrealized holding gain on other securities, net of taxes

145

648

1,411

Unrealized revaluation loss on land, net of taxes (Note 9)

(524)

(524)

(5,093)

Translation adjustments

(335)

(461)

(3,259)Remeasurements of defined benefit plans

(149)

—

(1,450)Total accumulated other comprehensive loss

(8,391)

(864)

(337)

Subscription rights

95

109

924

Minority interests in consolidated subsidiaries

536

434

5,210

21,087

20,213204,883¥ 32,370¥ 30,076$ 314,521

Total net assets
Total liabilities and net assets
See notes to consolidated financial statements.

4Consolidated Statements of Income
S.T.CORPORATION and consolidated subsidiaries
For the years ended March 31, 2014 and 2013

thousands of
U.S. dollars (Note 2)

millions of yen

Net sales
Cost of sales (Notes 16 and 21)
Gross profit before reversal of allowance for sales returns
Reversal of allowance for sales returns
Gross profit
Selling, general and administrative expenses (Note 16)
Operating income
Non-operating income (expenses):
Interest and dividends received
Interest expense
Purchase discounts
Sales discounts
Loss on equity of affiliates
Other, net
Total non-operating income (expenses)
Ordinary income
Special gains (losses), net:
Loss on disposition of property, plant and equipment, net
State subsidy
Gain on reversal of subscription rights to shares
Loss on valuation of investment securities
Gain on sales of investment securities, net
Loss on sales of stocks of subsidiaries and affiliates
Loss on valuation of stocks of subsidiaries and affiliates
Loss on disaster
Total special gains (losses), net
Income before income taxes and minority interests
Income taxes (Note 12):Current
Deferred
Total income taxes
Income before minority interests
Minority interests
Net income

2014

2013

2014

¥ 46,993
26,97020,023(11)
20,013
17,881
2,131¥ 46,944
27,74019,2042
19,206
17,4061,800$ 456,596
262,045
194,552(104)
194,448
173,741
20,707

49
(1)
172
(857)
(110)
113
(634)
1,497

44
(0)
186
(872)
(191)
176
(658)
1,141

474
(11)
1,668
(8,328)(1,068)
1,101(6,165)
14,542

(25)
—
25
(5)
265
(29)
(31)
(60)
140
1,637

(31)
2
—
—
(7)
—
—
—
(36)
1,105

(240)
—
243
(52)
2,575
(278)
(298)
(585)
1,365
15,907

370
(6)
364
1,273
39
¥ 1,234

514
(4)
510
595
30
565

3,596
(60)
3,536
12,371382$ 11,989¥

See notes to consolidated financial statements.

Consolidated Statements of Comprehensive Income
S.T.CORPORATION and consolidated subsidiaries
For the years ended March 31, 2014 and 2013
thousands of
U.S. dollars (Note 2)

millions of yen

2014

2014

Income before minority interests¥ 1,273¥595$ 12,371

Other comprehensive income (loss) (Note 5)
Unrealized holding gain (loss) on other securities, net of taxes
Translation adjustments
Other comprehensive income (loss) on equity method companies
Total other comprehensive income (loss)
Comprehensive income

(399)
177
(83)
(305)
¥ 969

203
118
110
431
¥ 1,026(3,873)
1,719(806)(2,959)$ 9,412

857
112

942
84

8,322
1,089

Total comprehensive income attributable to:Shareholders of S.T. CORPORATION
Minority interests in consolidated subsidiaries
See notes to consolidated financial statements.

5

2013

Consolidated Statements of Changes in Net Assets
S.T.CORPORATION and consolidated subsidiaries
For the years ended March 31, 2014 and 2013

millions of yen
Number of sharesof common stock(Thousands)

Balance at April 1, 2013
Cash dividends paid by distribution of retained earnings
Net income
Purchases of treasury stock
Change of scope of consolidation
Change of scope of equity method
Net changes in items other than those in shareholders' equity
Balance at March 31, 2014

23,000CapitalsurplusRetainedearnings¥ 7,066¥ 7,068¥ 7,662
(478)
1,234

Treasury stock,at cost¥ (1,787)

23,000¥ 7,066¥ 7,068

Translation
adjustments

millions of yen
Remeasurements Total accumulatedof
other
defined benefit
comprehensive
plans
loss

Total
shareholders'equity

49
371

138

¥ 20,008
(478)
1,234
(2)
49
508

¥ 8,837¥ (1,652)¥ 21,319

Subscription
rightsMinority
interests inconsolidated
subsidiaries

Total net
assets(2)

Unrealized
Unrealized
holding gain on revaluation loss onother securities, land, net of taxes
net of taxes(Note 9)Balance at April 1, 2013
Cash dividends paid by distribution of retained earnings
Net income
Purchases of treasury stock
Change of scope of consolidation
Change of scope of equity method
Net changes in items other than those in shareholders' equity
Balance at March 31, 2014

Common
stock

¥ 648

¥ (524)¥ (461)—¥ (337)

¥ 109

¥ 434

(503)
¥ 145

—
¥ (524)125¥ (335)(149)¥ (149)(527)¥ (864)

(13)
¥ 95

102
¥ 536

¥ 20,213
(478)
1,234
(2)
49
508
(438)
¥ 21,087

Treasury stock,at costTotal
shareholders'equitymillions of yen
Number of sharesof common stock(Thousands)

Balance at April 1, 2012
Cash dividends paid by distribution of retained earnings
Net income
Purchases of treasury stockReversal of unrealized revaluation loss on land, net of taxes
Net changes in items other than those in shareholders' equity
Balance at March 31, 2013

23,000CapitalsurplusRetainedearnings¥ 7,066¥ 7,068¥ 7,552(478)565¥ (1,785)(2)
22

Unrealized
Unrealized
holding gain on revaluation loss onother securities, land, net of taxes
net of taxes(Note 9)Balance at April 1, 2012
Cash dividends paid by distribution of retained earnings
Net income
Purchases of treasury stockReversal of unrealized revaluation loss on land, net of taxes
Net changes in items other than those in shareholders' equity
Balance at March 31, 2013

Commonstock

23,000¥ 7,066¥ 7,068

Translation
adjustments

millions of yen
Remeasurements Total accumulatedof
other
definedcomprehensive
benefit plansloss¥ 19,901
(478)
565
(2)
22

¥ 7,662¥ (1,787)¥ 20,008

Subscription
rightsMinority
interests inconsolidated
subsidiaries

Total net
assets¥ 356¥ (502)¥ (546)—¥ (692)

¥ 99

¥ 394

292
¥ 648

(22)
¥ (524)85¥ (461)—355¥ (337)

10
¥ 109

40
¥ 434

¥ 19,701
(478)
565
(2)
22
405
¥ 20,213

Total
shareholders'equitythousands of U.S. dollars (Note 2)
Number of sharesof common stock(Thousands)

Balance at April 1, 2013
Cash dividends paid by distribution of retained earnings
Net income
Purchases of treasury stock
Change of scope of consolidation
Change of scope of equity method
Net changes in items other than those in shareholders' equity
Balance at March 31, 2014

23,000CapitalsurplusRetainedearnings

Treasury stock,at cost$ 68,650$ 68,673$ 74,443(4,642)
11,989$ (17,362)

472
3,603

1,336

$ 194,405(4,642)
11,989
(23)
472
4,940

$ 85,865$ (16,048)$ 207,140

Subscription
rightsMinority
interests inconsolidated
subsidiaries

Total net
assets(23)

Unrealized
Unrealized
holding gain on revaluation loss onother securities, land, net of taxes
net of taxes(Note 9)Balance at April 1, 2013
Cash dividends paid by distribution of retained earnings
Net income
Purchases of treasury stock
Change of scope of consolidation
Change of scope of equity method
Net changes in items other than those in shareholders' equity
Balance at March 31, 2014

Commonstock

23,000$ 68,650$ 68,673

Translation
adjustments

thousands of U.S. dollars (Note 2)
Remeasurements Total accumulatedof
other
defined benefit
comprehensive
plans
loss

$ 6,294$ (5,093)$ (4,475)—$ (3,275)$ 1,054$ 4,215(4,883)$ 1,411—$ (5,093)

1,217$ (3,259)(1,450)$ (1,450)(5,116)$ (8,391)

(131)
$ 924

995
$ 5,210$ 196,399(4,642)
11,989
(23)
472
4,940
(4,252)$ 204,883

See notes to consolidated financial statements.

6

Consolidated Statements of Cash Flows
S.T.CORPORATION and consolidated subsidiaries
For the years ended March 31, 2014 and 2013

thousands of
U.S. dollars (Note 2)

millions of yen

2014
Cash flows from operating activities:
Income before income taxes and minority interests
Adjustments to reconcile income before income taxes and minority
interests to net cash provided by operating activities:
Depreciation and amortization
Gain on reversal of subscription rights to shares
Loss on sales of property, plant and equipment
Loss (gain) on sales and valuation of investment securities
Loss on sales of stocks of subsidiaries and affiliates
Loss on valuation of stocks of subsidiaries and affiliates
Increase (decrease) in allowance for doubtful receivables
Increase (decrease) in employees' retirement and severance benefits
Increase (decrease) in net defined benefit liability
Increase (decrease) in directors' retirement and severance benefits
Increase (decrease) in allowance for sales returns
Interest and dividends received
Interest expense
Foreign exchange loss (gain)
Loss on disaster
Equity in loss of affiliates
State subsidy
Changes in operating assets and liabilities:
Receivables
Inventories
Payables and accrued expenses
Other, net
SubtotalInterest and dividends received
Interest paid
Payments for loss on disaster
Income taxes paid
Net cash provided by operating activities2014¥ 1,637¥ 1,105$ 15,907

894
(25)
25
(260)
29
31
1
(1,270)
1,565
18
11
(49)
1
(58)
60
110
—

830
—
31
7
—
—
1
(7)
—
21
(2)
(44)
0
(98)
—
191
(2)

8,687
(243)
240
(2,523)278
298
10(12,336)
15,202
176
104
(474)
11
(567)
585
1,068
—

(260)
(669)
519
133
2,443
101
(1)
(1)
(432)
2,110

(225)
265
(1,305)
413
1,182
80
(0)
—
(282)
980

(2,528)(6,500)5,045
1,293
23,733981(11)(9)(4,193)20,502

Cash flows from investing activities:
Payments into deposits (more than three months)
Proceeds from withdrawal of time deposits (more than three months)
Purchases of property, plant and equipment
Proceeds from sales of property, plant and equipment
Proceeds from state subsidy
Purchases of investment securities
Proceeds from sales of investment securities
Purchase of investments in subsidiaries
Proceeds from sales of stocks of subsidiaries and affiliates
Other investments, net
Net cash provided by (used in) investing activities

(0)
220
(903)
2
—
(667)
465
(36)
1,509
(76)
514

(0)
—
(1,945)
25
2
(29)
48
—
—
(26)
(1,924)(0)
2,138(8,776)23—(6,479)4,522(352)
14,661(740)
4,998

Cash flows from financing activities:
Net increase in short-term loans payable
Proceeds from stock issuance to minority shareholders
Purchases of treasury stock
Payments of dividends
Payments of dividends to minority shareholders
Other finance, net
Net cash used in financing activities

38
47
(2)
(478)
(23)
(48)
(465)

—
—
(2)
(478)
(44)
(33)
(557)

373
459
(23)
(4,642)(226)(462)(4,520)

74
2,233
4,469
26
¥ 6,72850(1,452)
5,921—¥ 4,469

716
21,69543,423251$ 65,369

Effect of exchange rate changes on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Increase in cash and cash equivalents from newly consolidated subsidiary
Cash and cash equivalents at end of year (Note 17)
See notes to consolidated financial statements.

7

2013

Notes to Consolidated Financial Statements
S.T.CORPORATION and Consolidated Subsidiaries
March 31, 2014

1 Summary of Significant Accounting Policies(a) Basis of presentation
S.T. CORPORATION (the “Company”) and its domestic subsidiaries
maintain their books of account in conformity with accounting principles
generally accepted in Japan, and its overseas subsidiaries maintain theirbooks of account in conformity with those of their countries of domicile.
Effective April 1, 2008, the Company adopted the “Practical Solution on
Unification of Accounting Policies Applied to Foreign Subsidiaries for
Consolidated Financial Statements” (PITF No. 18, issued by the ASBJ on
May 17, 2006). In accordance with PITF No. 18, the accompanying
consolidated financial statements for the years ended March 31, 2014 and2013 have been prepared by using the accounts of foreign consolidated
subsidiaries prepared in accordance with either International Financial
Reporting Standards (IFRS) or accounting principles generally accepted in
the United States as adjusted for certain items including those forgoodwill, actuarial differences and capitalized development costs.
The accompanying consolidated financial statements have been
prepared in accordance with accounting principles generally accepted inJapan, which are different in certain respects as to the application anddisclosure requirements of IFRS, and are compiled from the consolidated
financial statements prepared by the Company as required by the
Financial Instruments and Exchange Act of Japan.
In preparing the accompanying consolidated financial statements,
certain reclassifications have been made to the consolidated financial
statements issued domestically for readers outside Japan. The notes tothe consolidated financial statements include information which is not
required under accounting principles generally accepted in Japan but ispresented herein as additional information. Furthermore, certain amounts
in the prior year’s financial statements have been reclassified to conformto the current year’s presentation.

(c) Accounting period
The accounting period of the Company begins on April 1 and ends on
March 31 of the following year. The three overseas subsidiaries have fiscal
years ending on December 31. The necessary adjustments for significant
transactions, if any, during the intervening period are made on
consolidation.

(b) Principles of consolidation and accounting for investments inunconsolidated subsidiaries and affiliates
The accompanying consolidated financial statements include the accounts of
the Company and any significant companies controlled directly or indirectlyby the Company. Companies over which the Company exercises significant
influence in terms of their operating and financial policies have beenaccounted for by the equity method. As of March 31, 2014, the number ofconsolidated subsidiaries and affiliates accounted for by the equity method
were six and three (five and four in 2013), respectively. Since theownership ratio decreased by the partial sale of the shares of FUMAKILLA
LIMITED at the date 30 January 2014, FUMAKILLA LIMITED was excluded
from the scope of affiliates accounted for by the equity method. In addition,
S.T. KOREA CORPORATION, due to its increased materiality, has been
included in the scope of consolidation from the current fiscal year.
Investments in subsidiaries and affiliates which are not consolidated or
accounted for by the equity method are carried at cost or less. Where
there has been a permanent decline in the value of such investments, theCompany has written down the investments.
Assets and liabilities of the consolidated subsidiaries acquired before
April 1, 1999 were initially valued at cost at the time of acquisition. It is theCompany’s policy to value assets and liabilities of subsidiaries acquired on
or after April 1, 1999 at fair value when the Company obtains control oversuch subsidiaries; however, the Company has not acquired any
subsidiaries since April 1, 1999.

(g) Property, plant and equipment, except for leased assets, anddepreciation
Property, plant and equipment are stated at cost. Depreciation of property,
plant and equipment of the Company and its domestic subsidiaries,
except for buildings (excluding structures attached to the buildings)
acquired on or after April 1, 1998, is computed by the declining-balancemethod in conformity with the Corporation Tax Law of Japan. Depreciationof property and equipment of overseas subsidiaries and buildings(excluding structures attached to the buildings) acquired on or after April 1,
1998 of the Company and domestic subsidiaries is computed by thestraight-line method.
The estimated useful lives of the major depreciable assets are as follows:
Buildings and structures
3 to 50 years
Machinery, equipment and vehicles
2 to 17 years
Tools, furniture and fixtures
2 to 20 years(d) Translation of foreign currency transactions and financial
statements
Monetary assets and liabilities denominated in foreign currencies aretranslated into yen at the rates of exchange in effect at the balance sheet
date and the accounts of the overseas consolidated subsidiaries aretranslated into yen at the rates of exchange in effect at the balance sheet
date. Foreign exchange gains and losses are credited or charged toincome and translation adjustments are included in net assets.
(e) Marketable securities and investment securities
Other securities with determinable market value are carried at market value
with any changes in unrealized holding gain or loss, net of the related
deferred income tax assets or liabilities, included in net assets. Other
securities without determinable market value are stated at cost determinedby the moving-average method and the cost of other securities sold iscomputed based on the moving-average method. During the years ended
March 31, 2014 and 2013, the Company and its consolidated subsidiaries
did not have any trading securities.
(f) Inventories
Inventories are stated at the lower of cost or net selling value, cost being
determined by the average method.

(h) Intangible assets and long-term prepaid expenses
Intangible assets and long-term prepaid expenses, except for leased
assets, are amortized by the straight-line method. Cost of softwarepurchased for internal use is amortized by the straight-line method over a
period of five years, the useful life applicable to commercially available
software.

8

Notes to Consolidated Financial Statements(i) Leases
Non-cancelable lease transactions that transfer substantially all the risks
and rewards associated with the ownership of the leased assets areaccounted for as finance leases. All other lease transactions are accounted
for as operating leases and related payments are charged to income as
incurred.
Finance leases entered into before April 1, 2008 of the Company and its
domestic subsidiaries are accounted for as operating leases, except for
those which transfer ownership of the leased assets to the lessee.
Leased assets accounted for as finance leases are depreciated on thestraight-line method over the lease periods with no residual value.
(j) Allowance for doubtful receivables
The allowance for doubtful receivables is provided based on pastexperience for normal receivables and on an estimate of the collectabilityof receivables from companies in financial difficulty.
(k) Allowance for sales returns
The allowance for sales returns is provided for losses on sales returns
subsequent to the balance sheet date at an amount equivalent to that
calculated based on the actual percentage of returns in prior years.
(l) Employees’ retirement and severance benefits(1) Method of attributing expected benefit payments to the period
In a calculation retirement benefit obligation, a method of attributing
expected benefit payments to the period is based on straight-line
method.
(2) Method of expenses for actuarial gains/losses and Prior service cost
Prior service cost is amortized as incurred by the straight-line method

over a period of a certain number of years (5 years) which is shorter
than the average remaining years of service of the employees.
Actuarial gain or loss is amortized in the year following the year inwhich the gain or loss is recognized by the straight-line method over a
period of a certain number of years (5 years) which is shorter than the
average remaining years of service of the employees.
(3) Adoption of a simplified method in some consolidated subsidiaries
Some consolidated subsidiaries adopt the simplified method whichassumes retirement benefit obligation to be equal to the benefits
payable if all eligible employees voluntarily terminated their employment
at fiscal year end for the calculation of net defined benefit liability andretirement benefit expenses.
(m) Directors’ retirement and severance benefits
The Company has accrued directors’ retirement and severance benefits at
the amount which would be required to be paid if all directors resigned
from their positions and left the Company as of the balance sheet date inaccordance with its internal regulations.
(n) Consumption taxes
Transactions subject to consumption taxes are recorded at amounts
exclusive of consumption taxes.
(o) Cash and cash equivalents
Cash and cash equivalents in the accompanying consolidated statementsof cash flows consist of cash on hand, demand deposits and liquid
short-term investments with a maturity of three months or less from theirrespective dates of acquisition.

2 Basis of Translation
The consolidated financial statements presented herein are expressed inyen and, solely for the convenience of the reader, have been translated
into U.S. dollars at ¥102.92 = U.S.$1.00, the approximate exchange rate
prevailing on the Tokyo Foreign Exchange Market on March 31, 2014. Thistranslation should not be construed as a representation that all amounts
shown could have been, or could in the future be, converted into U.S.
dollars at that or any other rate.

3 Change in Accounting Policies
The Company has adopted “Accounting Standard for Retirement Benefits”(ASBJ Statement No. 26, May 17, 2012) and “Guidance on Accountings
Standard for Retirement Benefits” (ASBJ Guidance No. 25, May 17, 2012)(except for certain provisions described in the main clause of Section 35 of
the standard and in the main clause of Section 67 of the guidance) as ofthe end of current fiscal Year. These accounting standards require entities
to apply a revised method for recording the retirement benefit obligation,
after deducting pension plan assets, as a liability for retirement benefits.
In addition, unrecognized actuarial differences are recorded as a liability
for retirement benefits.

9

Concerning the application of the accounting standard for retirement
benefits, etc., in the fiscal year, in accordance with clause 37 of theaccounting standard for retirement benefits, the effects of such changes in
the current fiscal year have been recorded in retirement benefits liability
adjustments through accumulated other comprehensive income.
As a result, at the end of the current fiscal year, the Company recorded
net defined benefit liability of ¥1,565 million (U.S.$15,202 thousand).
In addition, accumulated other comprehensive income will havedecreased by ¥149 million (U.S.$1,450 thousand).
Net assets per share have decreased by ¥6.82 (U.S.$0.07).

4 Unapplied Accounting Standards, etc.
“Accounting Standard for Retirement Benefits” (ASBJ Statement No. 26,
May 17, 2012) and “Guidance on Accountings Standard for Retirement
Benefits” (ASBJ Guidance No. 25, May 17, 2012)
1. Overview
The accounting for unrecognized actuarial difference and unrecognizedprior service costs, calculation of the retirement benefit obligation andservice costs, the expansion of information disclosures and etc. wererevised.
2. Scheduled date for adoption
The Company expects to apply the revision for the calculation method ofretirement benefit obligation and services costs from the beginning of the
fiscal year ended March 31, 2015.
The revise shall not be applied retroactively for consolidated financial
statements of a past period because the new accounting standards andrelevant regulations regulate transitional measures.
3. Effects of the adoption of the accounting standard and guidance
Effects of the adoption of the new accounting standards and relevant
regulations on consolidated financial statements are currently being
assessed.

5 Consolidated Statements of Comprehensive Income
The amount of recycling and amount of income tax effect associated with other comprehensive income for the years ended March 31, 2014 and 2013 wereas follows:
thousands of
U.S. dollars

millions of yen

2014
Unrealized holding gain on other securities, net of taxes
Amount recognized in the year

2013

2014

¥ (354)¥ 301$ (3,436)

(260)

—

(2,523)

Before income tax effect adjustment
Amount of income tax effect

(613)
215

301
(98)

(5,959)2,086

Unrealized holding gain on other securities, net of taxes

(399)

203

(3,873)

177

118

1,719

Amount recognized in the year

(82)

107

(794)

Reclassification adjustments included in the statement of income

(1)

3

(11)

(83)

110

(806)

(305)

431

(2,959)Reclassification adjustments included in the statement of income

Translation adjustments
Amount recognized in the year
Other comprehensive income on equity method companies

Other comprehensive income on equity method
Total other comprehensive income

6 Financial Instruments(1) Current status of financial instruments(a) Policy in relation to financial instruments
The Company and its consolidated subsidiaries (collectively, the “Group”)
raises necessary funds following capital investment plans for undertaking
the manufacturing-and-selling businesses. If surplus funds arise, theGroup manages only financial assets with high degrees of safety.
(b) Details of financial instruments and related risk
Trade receivables—trade notes and accounts receivable—are
exposed to credit risk in relation to customers. In addition, receivables
denominated in foreign currencies are exposed to foreign currency
exchange risk.

Investment securities, most of which are stocks of other companies
with which the Group has business relationships, are exposed tomarket price fluctuation risk.
Substantially all trade payables—notes and accounts payable-trade,electronically recorded obligations-operating and other payables—havepayment due dates within one year. In addition, payables denominatedin foreign currencies are exposed to foreign currency exchange risk.
(c) Risk management system for financial instruments(Credit risk management—the risk that customers or counterparties may
default)
The Company holds its management policy and put it into effect whereby

10Notes to Consolidated Financial Statements

the Company grasps trust conditions of its customers and monitors due
dates and outstanding balances regularly to identify and mitigate risks ofbad debts from customers who are having financial difficulties.
The consolidated subsidiaries perform equivalent management with
the Company.
(Market risk management—the risk arising from fluctuations in
exchange rates and interest rates)
The Company uses forward exchange contract transactions with theaim of avoiding risk related to fluctuation in future foreign exchange.
For investment securities, the Company periodically confirms themarket value of such financial instruments and reports to the director
in charge. The Company reviews the status of these investments on acontinuing basis.
(Liquidity risk management—the risk that the Group may not able tomeet its payment obligations on the schedule dates)
The Company manages liquidity risk by means of preparing monthly
financial plans.
(d) Supplementary explanation of items relating to the fair value of financial
instruments
The fair value of financial instruments is based on their quoted market
prices if available. If there are no market prices available, fair value isreasonably estimated. Because estimation of fair values incorporates
variable factors, adopting different assumptions can change the value.

(2) Estimated fair value of financial instruments
The carrying value of financial instruments recognized on the consolidated balance sheets as of March 31, 2014 and 2013, the estimated fair value of such items
and the differences between them are shown below. Financial instruments for which fair value is extremely difficult to estimate are not included in the following table.
millions of yen
Year ended March 31, 2014

Carrying value

Fair value

a Cash and time deposits
b Trade notes and accounts receivablec Investment securities
Assets¥ 6,765
5,150
2,943¥ 14,859¥ 6,765
5,150
2,943¥ 14,859————

a Trade payables
b Electronically recorded obligations-operatingc Other payables
Liabilities¥ 2,0503,384
2,316¥ 7,751¥ 2,0503,384
2,316¥ 7,751—

Year ended March 31, 2013

Carrying value

Fair value

a Cash and time deposits
b Trade notes and accounts receivablec Marketable securities and investment securities
Assets¥ 4,693
4,792
1,822¥ 11,306¥ 4,693
4,792
1,822¥ 11,306————

a Trade payablesb Other payables
Liabilities¥ 4,626
2,383¥ 7,009¥ 4,626
2,383¥ 7,009———

Year ended March 31, 2014

Carrying value

Fair value

a Cash and time deposits
b Trade notes and accounts receivablec Investment securities
Assets$ 65,735
50,04328,591$ 144,370$ 65,735
50,04328,591$ 144,370————

a Trade payables
b Electronically recorded obligations-operatingc Other payables
Liabilities$ 19,921
32,88222,503$ 75,307$ 19,921
32,88222,503$ 75,307—

Difference——

millions of yen
Difference

thousands of U.S. dollars
Difference——

Notes: 1. Method of estimating the fair value of financial instruments and other matters relating to marketable and investment securities
Assetsa. Cash and time deposits and b. Trade notes and accounts receivable
Because these items are settled over short terms, fair value and carrying values are nearly equivalent. Therefore, relevant carrying value is used.
c. Investment securities
Stocks are valued at the exchange trading price. Bonds are valued at the exchange trading price or at the price provided by the financial institutions offering these securities. For information on securities classified by purpose ofholding, please refer to the “Marketable Securities and Investment Securities” section of the notes to the financial statements.
Liabilities
a. Trade payables, b. Electronically recorded obligations-operating and c. Other payables
Because these items are settled over short terms, fair value and carrying value is nearly equivalent. Therefore, relevant carrying value is used.

112. Financial instruments for which fair value is extremely difficult to determine
Carrying value
thousands of
U.S. dollars

millions of yen

2014
¥ 65

Unlisted equity securities

2013
¥ 65

2014
$ 633

Because the fair value of these financial instruments is extremely difficult to determine, given that no quoted market price is available, they are not included in the above table.
3. Redemption schedule for receivables and other securities with maturity dates at March 31, 2014 and 2013 are summarized as follows:Year ended March 31, 2014

Time deposits
Trade notes and accounts receivable
Investment securities
Bond
Other
Total

Year ended March 31, 2013

Time deposits
Trade notes and accounts receivable
Marketable securities and investment securities
Bond
Other
Total

Year ended March 31, 2014

Time deposits
Trade notes and accounts receivable
Investment securities
Bond
Other
Total

One year or lessmillions of yen
More than 1 year andMore than 5 years andwithin 5 years
within 10 years

More than 10 years¥ 6,764
5,150

¥ —
—

—
—

—
—

—
—
¥ 11,915

100
100
¥ 200

—
—
—

—
—
—

One year or lessmillions of yen
More than 1 year andMore than 5 years andwithin 5 years
within 10 years

More than 10 years¥ 4,691
4,792

¥

—
—

—
—

—
—

—
100
¥ 9,583

100
—
¥ 100

—
—
—

—
—
—

One year or lessthousands of U.S. dollars
More than 1 year andMore than 5 years andwithin 5 years
within 10 years

More than 10 years$ 65,723
50,043

$

—
—

—
—

—
—

—
—
$ 115,766

972
972$ 1,943

—
—
—

—
—
—

7 Derivatives
The Company and its consolidated subsidiaries had no derivative instruments outstanding at March 31, 2014 and 2013.

8 Marketable Securities and Investment Securities(1) Other securities
The acquisition cost and related carrying value of other securities with a determinable market value at March 31, 2014 and 2013 are summarized as follows:
thousands of
U.S. dollars

millions of yen

Acquisition cost
Carrying value
Total unrealized gain
Total unrealized loss2014
¥ 2,748
2,943
709
514

2013
¥ 1,014
1,822
856
48

2014
$ 26,700
28,591
6,889
4,998

At March 31, 2014 and 2013, unlisted stocks (whose carrying value was ¥65 million (U.S.$633 thousand) and ¥65 million, respectively) are not included in
the above table because their fair value is extremely difficult to determine, given that no quoted market price is available.

12Notes to Consolidated Financial Statements(2) Sales of other securities(Year ended March 31, 2014)
millions of yen
Proceeds from sales

Gain on sales

Loss on sales

¥ 465

¥ 265

—

1. Government bonds

—

—

—

2. Corporate bonds

—

—

—

3. Others———(3) Other securities

—

—

—

¥ 465

¥ 265

—

(1) Stocks(2) Bonds

Total

thousands of U.S. dollars
Proceeds from sales

Gain on sales

Loss on sales$ 4,522$ 2,575—

1. Government bonds

—

—

—

2. Corporate bonds

—

—

—

3. Others———(3) Other securities

—

—

—

$ 4,522$ 2,575—(1) Stocks(2) Bonds

Total(Year ended March 31, 2013)
Not applicable.
(3) Change purpose of holding investment securities
Shares of FUMAKILLA LIMITED are changed classification other securities
from investment in affiliates because partial shares were sold.
As a result, other securities increased ¥1,030 million (U.S.$10,010
thousand), and unrealized holding gain on other securities, net of tax
decreased ¥270 million (U.S.$2,623 thousand).

(4) Impairment of investment securities
The Company recognized impairment loss on investment securities of ¥36
million (U.S.$349 thousand) for the years ended March 31, 2014.

9 Land Revaluation
In accordance with the Land Revaluation Law (Proclamation No. 34 dated
March 31, 1998), land used for business activities was revalued at March
31, 2002. The revaluation difference, net of taxes, is stated as “unrealized
revaluation loss on land, net of taxes” in net assets. Deferred tax liabilities
arising from this revaluation difference are presented separately fromdeferred tax liabilities for other temporary differences in the accompanying
consolidated balance sheets. The market value of the land as of March 31,
2014 and 2013 decreased by ¥579 million (U.S.$5,627 thousand) and¥610 million, respectively, after the revaluation.

10 Pledged Assets
Pledged assets for the years ended March 31, 2014 and 2013 are summarized as follows:
thousands of
U.S. dollars

millions of yen

2014Time deposits
Time deposits were pledged as collateral mainly for leased office space at March 31, 2014 and 2013.

13

¥1

2013
¥ 27

2014
$ 12

11 Commitments and Contingent Liabilities
The Company had the following contingent liabilities as of March 31, 2014 and 2013.
thousands of
U.S. dollars

millions of yen

2014
Loan guarantees for:
Shaldan (Thailand) Co., Ltd.

2013

¥2

2014

¥0

$ 21

At March 31, 2014 and 2013, trade notes discounted with banks in the ordinary course of business amounted to ¥90 million (U.S.$870 thousand) and ¥104
million, respectively.

12 Income Taxes
At March 31, 2014 and 2013, the tax effect of the temporary differences which gave rise to a significant portion of the deferred tax assets (excluding deferredtaxes on unrealized revaluation loss on land) was as follows:
thousands of
U.S. dollars

millions of yen

2014
Current assets:
Accrued employees’ bonuses

2013

2014

¥ 154

¥ 147

$ 1,492

Allowance for sales returns

41

40

398

Accrued business taxes

14

33

139

Other

186

143

1,810

395

363

3,838

(5)

—

(53)

390

363

3,785

Gross current deferred tax assets
Valuation allowance
Total current deferred tax assets
Current liabilities:
Deferred gain on sales of property

(1)

(1)

(5)

Enterprise tax receivable

(3)

—

(34)

Total current deferred tax liabilities
Net current deferred tax assets

(4)

(1)

(39)

¥ 386

¥ 363

$ 3,747¥$

Non-current assets:
Allowance for employees’ retirement and severance benefits

—

¥ 451

Net defined benefit liability

543

—

5,280

—

Allowance for directors’ retirement and severance benefits

55

48

530

Write-downs of securities

63

61

613

Impairment loss

8

8

80

Other

2

5

15

Gross non-current deferred tax assets

671

573

6,517

Valuation allowance

(126)

(122)

(1,223)

Total non-current deferred tax assets

545

452

5,294

Deferred gain on sales of property

(15)

(15)

(142)

Undistributed earnings of controlled foreign companies

(68)

(39)

(661)

Unrealized holding gain on other securities, net of taxes

(51)

(265)

(492)

Non-current liabilities:

Total non-current deferred tax liabilities

(133)

(319)

(1,296)

Net non-current deferred tax assets

¥ 412

¥ 132

$ 3,999

14

Notes to Consolidated Financial Statements

A reconciliation of the statutory tax rate to the Company’s effective tax rates for the years ended March 31, 2014 and 2013 is summarized as follows:
2014
Japanese statutory tax rate
Permanent differences such as entertainment expenses, etc.
Permanent differences such as dividend income
Tax credit
Undistributed earnings of controlled foreign companies
Equity in loss of affiliates
Downward adjustment of deferred tax assets at end of year due to tax rate change
Cancellation of temporary difference related to investments in affiliates accounted for by the equity method
Other
Effective tax rate
(Adjustment of deferred tax assets and liabilities pursuant to the change inthe corporate tax rates)
Following the promulgation on March 31, 2014 of the “Act for Partial
Revision of the Income Tax Act, Etc.,” (Act No. 10 of 2014), effective fromthe fiscal year beginning on or after April 1, 2014, a special temporary
recovery tax will not be imposed. In accordance with this reform, theeffective statutory tax rate, used to measure deferred tax assets and38.00%
2.10(11.97)(0.29)
1.79
2.55
2.24
(12.65)0.46
22.23%

2013
38.00%
2.94(0.50)(2.57)
0.01
6.58
—
—
1.70
46.16%

deferred tax liabilities, will be reduced from 38% to 35% for temporary
differences that are expected to be realized in the fiscal year beginning on
April 1, 2014.
As a result of this change, deferred tax assets (net of deferred tax
liabilities) on March 31, 2014 decreased by ¥37 million (U.S.$357
thousand), and income taxes-deferred for the year then ended increasedby ¥37 million (U.S.$357 thousand).

13 Employees’ Retirement and Severance Benefits(Year ended March 31, 2014)
The Company and its consolidated subsidiaries have either funded or
unfunded defined benefit plans for payments of employees’ retirement.
The Group pays a pension or lump sum based on length of service andsalary in the defined benefit corporate pension plan.
In unfunded retirement benefit plans, the Company pays a lump sum

based on length of service and salary as a retirement benefit.
Some consolidated subsidiaries adopt the simplified method whichassumes retirement benefit obligation to be equal to the benefits payable if
all eligible employees voluntarily terminated their employment at fiscal year
end for the calculation of net defined benefit liability and retirement benefit
expenses.

Defined benefit plans
Adjustments of beginning and ending balance of retirement benefit obligations

Beginning balance of retirement benefit obligations
Service cost
Interest cost
Actuarial loss
Payment of retirement benefits
Other
Ending balance of retirement benefit obligations

millions of yen

thousands of
U.S. dollars

2014

2014

¥ 3,736
185
30
74
(97)
4
¥ 3,931$ 36,296
1,801
289
716
(943)
38
$ 38,196

Adjustments of beginning and ending balance of plan assets
millions of yen

Beginning balance of plan assets
Expected return on plan assets
Actuarial loss
Employer’s contributions
Payment of retirement benefits
Ending balance of plan assets

15

thousands of
U.S. dollars

2014

2014

¥ 2,120
42
120
156
(72)
¥ 2,367$ 20,594
412
1,165
1,519
(696)
$ 22,994

Adjustments of ending balance of retirement benefit obligations and plan assets, and net defined benefit asset and liability on consolidated balance sheet
millions of yen

Funded retirement benefit obligations
Plan assets
Unfunded retirement benefit obligations
Net defined benefit asset and liability on consolidated balance sheet
Net defined benefit liability
Net defined benefit asset and liability on consolidated balance sheet

thousands of
U.S. dollars

2014

2014

¥ 2,784(2,367)
417
1,147
1,565
1,565
¥ 1,565$ 27,047(22,994)
4,053
11,14915,202
15,202$ 15,202

The following table summarizes the components of net retirement benefit expenses for the years ended March 31, 2014:

Service cost
Interest cost on benefit obligation
Expected return on plan assets
Amortization of actuarial loss
Amortization of past service cost
Extraordinary additional retirement payments
Net retirement benefit expenses
Remeasurements of defined benefit plans
Unrecognized actuarial gain (loss)

millions of yen

thousands of
U.S. dollars

2014

2014

¥ 185
30
(42)
75
(1)
20
¥ 267

$ 1,801
289
(412)
730
(6)
192
$ 2,594¥230 million (U.S.$2,230 thousand)Plan assets(1) Plan assets
The fair value of plan assets, by major category, as a percentage of total plan assets as of March 31, 2014 is as follows:
Domestic bonds
Domestic equity
Foreign bonds
Foreign equity
General account
Other
Total

14.1%
15.8
6.2
12.2
49.0
2.7
100.0%(2) Calculation method of expected long-term rate of return on plan assets
The expected return on assets has been estimated based on the anticipated allocation to each asset class and the expected long-term returns on assets
held in each category.
The assumptions used in the actuarial calculation
Mainly the assumptions used in the actuarial calculation for the year ended March 31, 2014
Discount rate
Expected rate of return on plan assets(Year ended March 31, 2013)
The Company and its domestic subsidiaries have defined benefit planscovering substantially all of their employees which are partially fundedthrough a qualified funded pension plan. Under these plans, employees
are entitled to lump-sum or pension retirement or severance benefits
determined by points accumulated monthly based on the employees’

0.8%
2.0%
contributions, length of service and the conditions under which termination
occurs. In addition, the Company and its domestic subsidiaries pay
meritorious service awards to employees in excess of the prescribed
formula, which are charged to income as paid as it is not practicable tocompute the liability for such future payments since the amounts varydepending on the circumstances.

16

Notes to Consolidated Financial Statements

The following table summarizes the funded status and amounts recognized in the accompanying consolidated balance sheets at March 31, 2013:
millions of yen

2013
Retirement and severance benefit obligation
Plan assets¥ (3,736)
2,120

Unfunded benefit obligation(1,616)

Unrecognized actuarial loss

351

Unrecognized past service cost(1)

Accrued benefit obligation¥ (1,266)

The following table summarizes the components of net retirement benefit expenses for the years ended March 31, 2013:
millions of yen

2013
Service cost
Interest cost on benefit obligation

¥ 159
64

Expected return on plan assets(38)

Amortization of actuarial loss

42

Amortization of past service cost

(1)

Extraordinary additional retirement payments

51

Net retirement benefit expenses¥ 278

The assumptions used in determining the pension benefit obligation are presented below:
2013
Method of periodic allocation of estimated retirement benefits

Straight-line
methodDiscount rate

0.8%

Expected rate of return on plan assets

2.0%

14 Net Assets
The Corporation Law of Japan (the “Law”), which superseded most of theprovisions of the Commercial Code of Japan, went into effect on May 1,
2006. The Law provides that an amount equal to 10% of the amount to be
disbursed as distributions of capital surplus (other than the capital reserve)
and retained earnings (other than the legal reserve) be transferred to thecapital reserve and the legal reserve, respectively, until the sum of thecapital reserve and the legal reserve equals 25% of the capital stock
account. Such distributions can be made at any time by resolution of theshareholders or by the Board of Directors if certain conditions are met.

Capital surplus and the legal reserve are not available for the distributionof dividends but may be used to reduce or eliminate a deficit or may betransferred to stated capital. At March 31, 2014, the legal reserve of theCompany included in retained earnings amounted to ¥550 million(U.S.$5,342 thousand).
The maximum amount which the Company can distribute as dividends
is calculated based on the non-consolidated financial statements of theCompany and in accordance with the Corporation Law of Japan.

15 Amounts per Share
Net assets per share as of March 31, 2014 and 2013 were ¥936.06(U.S.$9.10) and ¥905.84, respectively. Basic net income per share for theyears ended March 31, 2014 and 2013 were ¥56.74 (U.S.$0.55) and¥26.01, respectively.

17

Diluted net income per share for the year ended March 31, 2014 was¥56.73 (U.S.$0.55). Diluted net income per share for the year ended
March 31, 2013 is not presented because latent shares with dilutive effectdo not exist.

The basis for calculation of basic net income per share and diluted net income per share for the years ended March 31, 2014 and 2013 was as follows:
thousands of
U.S. dollars

millions of yen

2014
Basic net income per share:
Net income
Amount not attributable to shareholders of common stock
Amount attributable to shareholders of common stock
Weighted-average number of shares outstanding(millions of shares)
Diluted net income per share:
Adjustments to net income
Increase in number of shares outstanding(millions of shares)(Subscription rights to shares)
Shares resulting in an anti-dilutive effect(millions of shares)

2013

2014

¥ 1,234
—
1,234

¥ 565
—
565

$ 11,989—
11,989

22

22

—

—

—

—

0
(0)

—
—

—
—

1

1

—

The basis for calculation of total net assets per share as of March 31, 2014 and 2013 was as follows:
thousands of
U.S. dollars

millions of yen

Total net assets per share:
Total net assets
Deductions:
Subscription rights
Minority interests in consolidated subsidiaries
Amounts attributable to shareholders of common stock
Number of shares outstanding at year end(millions of shares)

2014

2013

2014

¥ 21,087
631
95
536
20,455¥ 20,213
542
109
434
19,671$ 204,883
6,133
924
5,210
198,74922

22—

16 Major Expenses
Major expenses included in selling, general and administrative expenses for the years ended March 31, 2014 and 2013 were as follows:
thousands of
U.S. dollars

millions of yen

Sales promotion expenses
Advertising costs
Salaries
Shipment and storage expenses
Provision for employees’ retirement and severance benefits
Provision for directors’ retirement and severance benefits2014¥ 6,133
2,678
1,986
1,284
219
22

2013
¥ 5,412
2,917
1,973
1,309
234
21

2014
$ 59,586
26,02019,294
12,4802,131213

Research and development expenses included in general and administrative expenses and cost of sales for the years ended March 31, 2014 and 2013
amounted to ¥564 million (U.S.$5,479 thousand) and ¥572 million, respectively.

17 Cash and Time Deposits
A reconciliation of cash and cash equivalents in the accompanying consolidated statements of cash flows to cash and time deposits in the accompanying
consolidated balance sheets at March 31, 2014 and 2013 is as follows:
thousands of
U.S. dollars

millions of yen

Cash and time deposits
Time deposits with a maturity in excess of three months
Cash and cash equivalents

2014¥ 6,765(38)¥ 6,7282013¥ 4,693(223)¥ 4,4692014$ 65,735(366)$ 65,369

18

Notes to Consolidated Financial Statements

18 Leases(Finance leases)
Leased assets included in property, plant and equipment are tools,
furniture and fixtures in the mothproofing and hygiene-related products
segment and the household environment-related products segment.
Leased assets included in intangible assets are software.

In accordance with the revised accounting standard effective the fiscal
year ended March 31, 2009, the Company and its domestic subsidiaries
account for finance leases as operating leases for those that were enteredinto before April 1, 2008 and if ownership of the leased property does nottransfer to the lessee. Information in relation to leased assets held underfinance leases but accounted for as operating leases is as follows:(1) A summary of the proforma amounts (inclusive of the related interest) of acquisition cost, accumulated depreciation and net book value at March 31, 2014
and 2013, primarily relating to tools, furniture and fixtures is as follows:
thousands of
U.S. dollars

millions of yen

2014

2013

2014

Acquisition cost
Accumulated depreciation

¥—
—

¥ 36
35

$—
—

Net book value

¥—

¥ 1

$—

(2) Future minimum lease payments, inclusive of the related interest, subsequent to March 31, 2014 and 2013 are summarized as follows:
thousands of
U.S. dollars

millions of yen

2014

2013

2014

Payable in one year or less
Payable after one year

¥—
—

¥ 1
—

$—
—

Total

¥—

¥ 1

$—

(3) Lease payments and proforma depreciation charges for the years ended March 31, 2014 and 2013 were ¥1 million (U.S.$9 thousand) and ¥7 million,
respectively.
(4) Depreciation is computed by the straight-line method over the respective lease terms assuming a nil residual value.
(Operating leases)
The Company and its consolidated subsidiaries had no significant operating leases at March 31, 2014 and 2013.

19 Segment Information(1) Summary of Reporting Segments
The reportable segments of the Group are components for which discrete
financial information is available and whose operating results are regularly
reviewed by the Board of Directors of the Company to make decisions
about resource allocation and to assess their performance.
The Company formulates comprehensive strategies for implementationin Japan and overseas of its head office and conducts business activities.
The Company has two reportable segments: Mothproofing and HygieneRelated Products and Household Environment-Related Products. The
business segments are classified according to the nature of theCompany’s products and their markets.
The Mothproofing and Hygiene-Related Products segment includes the
manufacture and sales of Cloth Care products, Hand Care products andThermal Care products. The Household Environment-Related Products
segment includes the manufacture and sales of Air Care products,
Humidity Care products and Home Care products.

19(2) Calculation method of sales, profits or losses, and other items byreportable segment
The accounting method for the reportable segments is the same as theprinciples and procedures set forth in Note 1, “Summary of Significant
Accounting Policies.” The segment income or losses are based on
operating income or loss.

(3) Information on the amounts of sales, income, and other items by reportable segments
millions of yen

Year ended March 31, 2014

Mothproofing andHygiene-Related
Products

HouseholdEnvironmentRelated Products

Total¥ 20,668¥ 26,325¥ 46,993———

20,66826,325

46,993

Sales
Sales to third parties
Intra-group sales and transfers
Net sales
Segment income¥822¥ 1,309¥ 2,131

Other items
Depreciation

¥

399

¥

¥

471

870

millions of yen

Year ended March 31, 2013

Mothproofing andHygiene-Related
Products

HouseholdEnvironmentRelated Products

Total¥ 20,971¥ 25,973¥ 46,944———

20,971

25,973

46,944

Sales
Sales to third parties
Intra-group sales and transfers
Net sales
Segment income

¥

932

¥

868

¥ 1,800

Other items
Depreciation

¥

354

¥

457

¥

810

thousands of U.S. dollars

Year ended March 31, 2014

Mothproofing andHygiene-Related
Products

HouseholdEnvironmentRelated Products

Total

Sales
Sales to third parties$ 200,817$ 255,780$ 456,596———

200,817

255,780

456,596

Intra-group sales and transfers
Net sales
Segment income

$

7,985

$ 12,722$ 20,707

Other items
Depreciation

$

3,877

$

$

4,578

8,455

Notes: 1. The total for segment income is the same as the operating income in the consolidated statements of income.
2. Assets and liabilities by reportable segment have not been described in the above tables because the Board of Directors of the Company does not regularly review them to make decisions about resource allocation and to assess
their performance.

(4) Related Information(a) Information by product and service
millions of yen
Year ended March 31, 2014

Cloth Care

Thermal Care

Air Care

Others

Total

Sales to third parties¥ 10,321¥ 6,011¥ 20,469¥ 10,192¥ 46,993

Year ended March 31, 2013

Cloth Care

Thermal Care

Air Care

Others

Total

Sales to third parties¥ 9,874¥ 6,866¥ 20,482¥ 9,721¥ 46,944

Year ended March 31, 2014

Cloth Care

Thermal Care

Air Care

Others

Total

Sales to third parties$ 100,284$ 58,400$ 198,880$ 99,032$ 456,596

millions of yen

thousands of U.S. dollars(b) Information by geographical segment(Sales)Geographical segment information is not presented as overseas sales
were less than 10% of consolidated net sales for the years ended
March 31, 2014 and 2013.

(Property, plant and equipment)
Geographical segment information is not presented as the amount ofproperty, plant and equipment in Japan exceeded 90% of the total ofproperty, plant and equipment at March 31, 2014 and 2013.

20

Notes to Consolidated Financial Statements(c) Information by major customers
Sales
thousands of
U.S. dollars

millions of yen

Customer's name

Related segment

2014

2013

2014

Paltac Corporation¥ 15,543¥ 15,998$ 151,016

Mothproofing and hygiene-related productsHousehold environment-related products

ARATA CORPORATION¥¥$ 96,823

Mothproofing and hygiene-related productsHousehold environment-related products

9,965

9,615

20 Related Party Transactions(Year ended March 31, 2014)(1) Dealings with related parties
FUMAKILLA LIMITED carried out a takeover bid. The Company applied the takeover bid and sold stocks of FUMAKILLA LIMITED. The proceeds from sale was¥1,509 million (U.S.$14,661 thousand), the loss on sales was ¥29 million (U.S.$278 thousand).
(Year ended March 31, 2013)(1) Dealings with related parties
There are no significant transactions with related parties to be reported.
(2) Notes about a parent company and important affiliated companies(Financial information on important affiliated companies)
The summary of financial information of FUMAKILLA LIMITED an important affiliated company, as of March 31, 2013, and for the year then ended is as follows:
millions of yen

2013
Total current assets
Total non-current assets¥ 12,125
9,981

Total deferred assets

1

Total current liabilities

11,834

Total long-term liabilities

3,101

Total net assets

7,172

Sales

14,965

Income (loss) before income taxes

79

Net income (loss)

22

21 Inventory Valuation Loss Included in Cost of Sales
Inventory valuation loss write-downs below cost to net selling value are included in cost of sales and amounted to ¥394 million (U.S.$3,825 thousand) and¥807 million for the years ended March 31, 2014 and 2013.

21

22 Note to Consolidated Statements of Changes in Net Assets
Shares in issue and outstanding and treasury stock at March 31, 2014 and 2013 were as follows:(Year ended March 31, 2014)
Number of shares in issue and outstanding:Common stock
Number of shares held in treasury:
Common stock

23,000 thousand
1,147 thousand

Note: Detail of the increase/decrease is as follows:
Increase due to purchase of shares less than standard unit:
Decrease due to changes in treasury stock held by equity method companies:

2 thousand
138 thousand

Subscription rights at March 31, 2014 were as follows:
Subscription rights for stock options¥95 million (U.S.$924 thousand)
Dividends paid from retained earnings for the year ended March 31,
2014 were as follows:
Total amount ofdividends(millions of yen)

Dividends
per share(yen)

Board of directors'
meeting held on
May 20, 2013

240

11

Board of directors’
meeting held on
October 30, 2013

240

11

Resolution

Resolution

Board of directors’
meeting held on
May 19, 2014240

Source ofdividends

Retainedearnings

11

2 thousand¥108 million

Dividends paid from retained earnings for the year ended March 31,
2013 were as follows:
Total amount ofdividends(millions of yen)

Dividends
per share(yen)

Board of directors'
meeting held on
May 21, 2012

240

11

Board of directors'
meeting held on
October 30, 2012

240

11

Resolution

March 31,2013

May 31,2013

Dividends
per share(yen)

1,284 thousand

Subscription rights at March 31, 2013 were as follows:
Subscription rights for stock options

Effective date

September 30, December 6,
2013
2013

23,000 thousand

Note: Details of the increase are as follows:
Increase due to purchase of shares less than standard unit:

Record date

Dividends for which the record date was in the year ended March 31,
2014 and the effective date is in the year ending March 31, 2015 were as
follows:
Total amount ofdividends(millions of yen)

(Year ended March 31, 2013)
Number of shares in issue and outstanding:Common stock
Number of shares held in treasury:
Common stock

Record date

Effective date

March 31,2012

June 1,2012

September 30, December 7,
2012
2012

Dividends for which the record date was in the year ended March 31,
2013 and the effective date was in the year ended March 31, 2014 wereas follows:

Record date

Effective date

Resolution

March 31,2014

June 2,
2014

Board of directors'
meeting held on
May 20, 2013

Total amount ofdividends(millions of yen)

240

Source ofdividends

Retainedearnings

Dividends
per share
(yen)

11

Record date

Effective date

March 31,2013

May 31,
2013

23 Stock Option Plans
At March 31, 2014, the Company had stock option plans, which were approved at the annual general meetings of the shareholders and by the Board of
Directors. Details of these stock option plans are summarized as follows:
Date of approval

Number of shares granted

Eligible participants

Exercisable period

June 14, 2006
June 15, 2007

75,000140,000

3 officers and 4 employees
4 officers and 14 employees

July 1, 2008 – June 30, 2013
Aug 1, 2009 – July 31, 2014

June 18, 2008

95,0003 officers and 12 employees

Aug 1, 2010 – July 31, 2015

June 18, 2009

20,0004 employees

Aug 4, 2011 – Aug 3, 2016

June 18, 2010

155,000

4 officers and 17 employees

Aug 3, 2012 – Aug 2, 2017

June 17, 2011

35,0007 employees

Aug 2, 2013 – Aug 1, 2018

June 15, 2012

130,000

3 officers and 8 employees

Aug 2, 2014 – Aug 1, 2019

June 15, 2013

130,000

2 officers and 10 employees

Aug 2, 2015 – Aug 1, 2020

The option price per share was determined on the date the options were granted based on an established formula for determining option prices. The
options are exercisable during the above periods provided that the recipients are still directors, officers or employees of the Company or its subsidiaries.
Cost related to the 2014 stock option plan amounting to ¥12 million (U.S.$112 thousand) were included in selling, general and administrative expenses.

22Notes to Consolidated Financial Statements

Contents of stock options

GranteesType of stock
Number ofstock options
granted(*)
Grant dateConditionfor exercise

Working
periodExercisable
period2007
3 officers and4 employees
Common stock
75,0002008
4 officers and
14 employees
Common stock
140,0002009
3 officers and
12 employees
Common stock
95,000August 1, 2006

August 1, 2007

Working from
August 1, 2006
to June 30,
2008
August 1, 2006
to June 30,
2008
Within 5 years after
the vesting date(those retiring after
the vesting datecannot exercise
their stock options)

Working from
August 1, 2007
to July 31,
2009
August 1, 2007
to July 31,
2009
Within 5 years after
the vesting date(those retiring after
the vesting datecannot exercise
their stock options)2010
4 employees
Common stock
20,0002011
4 officers and
17 employees
Common stock
155,000

August 1, 2008

August 3, 2009

Working from
August 1, 2008
to July 31,
2010
August 1, 2008
to July 31,
2010
Within 5 years after
the vesting date(those retiring after
the vesting datecannot exercise
their stock options)

Working from
August 3, 2009
to August 3,
2011
August 3, 2009
to August 3,
2011
Within 5 years after
the vesting date(those retiring after
the vesting datecannot exercise
their stock options)2012
7 employees
Common stock
35,0002013
3 officers and
8 employees
Common stock
130,0002014
2 officers and
10 employees
Common stock
130,000

August 2, 2010

August 1, 2011

August 1, 2012

August 1, 2013

Working from
August 2, 2010
to August 2,
2012
August 2, 2010
to August 2,
2012
Within 5 years after
the vesting date(those retiring after
the vesting datecannot exercise
their stock options)

Working from
August 1, 2011
to August 1,
2013
August 1, 2011
to August 1,
2013
Within 5 years after
the vesting date(those retiring after
the vesting datecannot exercise
their stock options)

Working from
August 1, 2012
to August 1,
2014
August 1, 2012
to August 1,
2014
Within 5 years after
the vesting date(those retiring after
the vesting datecannot exercise
their stock options)

Working from
August 1, 2013
to August 1,
2015
August 1, 2013
to August 1,
2015
Within 5 years after
the vesting date(those retiring after
the vesting datecannot exercise
their stock options)(*) Number of stock options in the column “Number of stock options granted” has been converted into equivalent numbers of shares.

Stock option activity during the year ended March 31, 2014 was as follows:
Number of shares
2007
—
—
—
—
—
75,000——75,000—Non-vested Outstanding at beginning of year
Granted during the year
Forfeited during the year
Vested during the year
Outstanding at end of year
Vested Outstanding at beginning of year
Vested during the year
Exercised during the year
Forfeited during the year
Outstanding at end of year

2008
—
—
—
—
—
140,000———
140,000

2009
—
—
—
—
—
95,000——10,00085,000

2010
—
—
—
—
—
20,000———20,000

2011
—
—
—
—
—
145,000——
5,000
140,000

2012
35,000——35,000——35,000——35,0002013
70,000———70,000
—
—
—
—
—

2014
—
130,000——
130,000—————

Price of stock options
yen

Exercise price
Weighted-average market price
Fair value per option on grant date2007
¥ 1,727
—
¥ 292

2008
¥ 1,517
—
¥ 191

2009
¥ 1,264
—
¥ 220

2010
¥ 1,037—¥ 197

U.S. dollars

2011¥ 1,049
—
¥ 178

2012
¥ 976
—
¥ 194

2013
¥ 946
—
¥ 153

2014
¥ 1,066
—
¥ 117

2014
$ 10
—
$ 1

The fair value of each stock option grant was estimated at the grant date using the Black-Scholes option pricing model. The fair value per option for options
granted during the year ended March 31, 2014 was estimated based on the following assumptions:

Volatility
Option term
Expected dividend (per share)
Risk-free interest rate
Volatility was determined based on the actual stock price over the past
4 years and 6 months.
The option term was estimated under the assumption that the options
would be exercised in the middle of the exercisable period because of
insufficient data.
Expected dividend (per share) was based on the dividend amountapplicable to the 2013 fiscal year.

23

2014
21.8%
4 years and 6 months¥22 (U.S.$0.21)
0.24%
Risk-free interest rate was based on government bonds whose terms
corresponded with the terms of the above options.
Method of estimating exercised stock options
The Company estimated the number of exercised stock options based on
the actual number of forfeitures because it is difficult to estimate thenumber of stock options which will be forfeited in the future.

Report of Independent Auditors24

Five-Year Financial Summary
S.T. CORPORATION and consolidated subsidiaries
Years ended March 31

thousands of
U.S. dollars(except per sharedata and ratios)

millions of yen(except per share data and ratios)

2014

2013

2012

2011

2010

2014

For the Year:Net sales¥ 46,993¥ 46,944¥ 46,354¥ 43,580¥ 43,546$ 456,596

Cost of sales

26,98027,73827,34725,37025,151

262,149

Selling, general and administrative expenses

17,881

17,406

17,256

16,097

16,149173,741

Operating income

2,131

1,800

1,751

2,114

2,246

20,707

Income before income taxes and minority interests

1,637

1,105

596

1,343

1,943

15,907

Net income

1,234

565

76

786

1,119

11,989

Capital expenditures

942

2,061

1,007

662

673

9,156

Depreciation and amortization

894

830

931

992

922

8,687

R&D expenses

564

572

659

610

612

5,479
20,502

Cash flows from operating activities

2,110

980

1,560

2,704

2,263

Cash flows from investing activities

514(1,924)(787)(3,601)

(126)

4,998

Free cash flow

2,624

(944)

773

(897)

2,137

25,500Cash flows from financing activities

(465)

(557)

(549)

(521)

(499)

(4,520)At Year-End:Total current assets¥ 18,956¥ 15,533¥ 16,941¥ 16,523¥ 17,667$ 184,182

Property, plant and equipment, net

7,555

7,524

6,295

6,312

6,561

73,404

Total assets

32,37030,07630,28730,011

29,029314,521

Total current liabilities

8,966

8,058

8,778

8,286

7,313

87,112

Total long-term liabilities

2,318

1,805

1,807

1,753

1,751

22,526

Total net assets

21,087

20,213

19,701

19,972

19,966

204,883

Cash and cash equivalents

6,728

4,469

5,921

5,731

7,170

65,369Number of shares issued (thousand shares)

23,00023,00023,00023,00029,500Treasury stock (thousand shares)

1,147

1,284

1,282

1,214

7,648

760

663

647

630

611

Number of employees
Per Share (yen and U.S. dollars):
Net income¥ 56.74¥ 26.01

3.48¥ 36.03¥ 51.25

Dividends

22.00

22.00

22.00

22.00

22.00

0.21

Net assets

936.06905.84884.45893.74892.46

9.10

999

988

1,025

916

1,046

9.71

Operating income margin

4.54

3.83

3.78

4.85

5.16

Common stock price¥

Ratios (%):
Income before income taxes and minority interests/net sales

3.48

2.35

1.29

3.08

4.46

Net income margin

2.63

1.20

0.16

1.80

2.57

ROA

3.95

1.87

0.25

2.66

3.95

ROE

6.15

2.91

0.39

4.03

5.87

Equity ratio

63.19

65.40

63.42

64.88

67.18

Notes: 1. U.S. dollar amounts are translated from yen for convenience only, at the rate of ¥102.92 = U.S.$1.00, the approximate rate on the Tokyo Foreign Exchange Market on March 31, 2014.
2. The common stock prices listed are as of the end of the fiscal year ended in March.
3. ROA = Net income divided by average total assets for the fiscal year.
4. ROE = Net income divided by average total equity (total net assets minus subscription rights less minority interests in consolidated subsidiaries) for the fiscal year.

25

$

0.55

Investor Information
As of March 31, 2014

■ Group Companies■ Corporate Data
Company name

S.T. CORPORATION

Headquarters

4-10, Shimo-ochiai 1-chome,

S.T. TRADING CO., LTD.
S.T. AUTO CO., LTD.

Shinjuku-ku, Tokyo 161-8540,
Japan

S.T. BUSINESS SUPPORT CO., LTD.

Establishment

August 31, 1948

Common stock¥7,065,500,000

Fiscal year-end

March 31

Shares issued and outstanding

23,000,000

Listed stock exchangeTokyo Stock Exchange,

Shareholders

14,577

Registered transfer agent

Mizuho Trust & Banking Co., Ltd.

S.T. (THAILAND) CO., LTD.
FAMILY GLOVE CO., LTD. (TAIWAN)

First Section

S.T. KOREA CORPORATION (SOUTH KOREA)

Accounting auditors

Ernst & Young ShinNihon LLC

Annual shareholders’ meeting

Middle of June each year

Employees

760 (consolidated)

Contact

Kouichi Yoshizawa,

E-mailir@st-c.co.jp

Telephone+81-3-3367-6115

Facsimile+81-3-3367-6320

402 (non-consolidated)
Public Relations Department■ Major Shareholders
Thousands of shares% of total

Shaldan Co., Ltd.

5,537

24.1

Nippon Life Insurance Company

1,504

6.5

S.T. CORPORATION

1,147

5.0

TCSB (Mizuho Bank)

884

3.8

Individuals, etc. ..........................41.7%

Takashi Suzuki

682

3.0

Other Japanese corporations .....34.9%

FUMAKILLA LIMITED

541

2.4

Financial institutions .................. 19.8%

The Bank of Tokyo-Mitsubishi UFJ, Ltd.

524

2.3

Non-Japanese institutions ...........3.2%

Kanichi Suzuki

500

2.2

Securities fi rms ............................0.4%

Hiromu Fujii

441

1.9

Suzuki Kanichi Shouten

433

1.9

■ Stock Chart
Stock price (yen)Nikkei 225 (yen)

2,000

20,0001,500

15,0001,000

10,000500

Trading volume (shares) 5,000
1,000,000

011/6 78

9 10 11 12 12/1 2

3

4

5

6

7

8

9 10 11 12 13/1 2

3

4

5

6

7

8

9 10 11 12 14/1 2

3

4

5

6

0

26

4-10, Shimo-ochiai 1-chome, Shinjuku-ku, Tokyo 161-8540, Japan
http://www.st-c.co.jp/
Printed in Japan, July 2014