ANNUALREPORT2 0 1 5For the year ended March 31, 2015

C O N T E N T S

13C R E A T I N GC O R P O R A T E

02

14
15
17
20

02

PROFILE

03

BUSINESS OUTLINE

04

CONSOLIDATED FINANCIAL HIGHLIGHTS

05
07

TO OUR SHAREHOLDERS

11

SPECIAL FEATUREPETROCHEMICAL PRODUCTS BUSINESSFINE CHEMICALS AND OTHER PRODUCTS BUSINESS

R&D POLICY AND ORGANIZATIONC R E A T I N GS U S T A I N A B L E

O U R
S T R A T E G Y
JSR’S VISION

AT A GLANCE

17 SEMICONDUCTOR MATERIALS
18 DISPLAY MATERIALS
19 STRATEGIC BUSINESSESO V E R V I E W

06

V A L U E

23
24
26
33

CORPORATE MISSION AND CSR

3435

JSR GLOBAL NETWORK

22

V A L U E

CORPORATE SOCIAL RESPONSIBILITYCORPORATE GOVERNANCE SYSTEMDIRECTORS, AUDIT & SUPERVISORY BOARD MEMBERS,AND OFFICERSCORPORATE DATAF I N A N C I A LS E C T I O N(SUPPLEMENTARY VOLUME)

Forward-Looking Statements
Statements regarding the Company’s future plans, strategies, projected performance andoutlook are based on information available at the time of writing. Readers are cautioned that
economic trends in JSR’s target markets and other risks, and factors beyond the Company’scontrol could cause actual results to differ materially from those projected by management.

JSR CORPORATION

01

ANNUAL REPORT 2015

O V E R V I E W
PROFILEJSR Corporation (formerly Japan Synthetic Rubber Co., Ltd.) was established in
December 1957 under the Special Measures Law for the Synthetic Rubber
Manufacturing Industry with the aim of pioneering synthetic rubber production in
Japan. Since that time, the Company has remained among Japan’s market
share leaders in synthetic rubber and other petrochemical materials. We also
apply our polymer technologies in the field of fine chemicals to produce semiconductor materials, display materials, and other products, which command
among the highest market shares in the industry.
JSR aims to leverage its stable core businesses of petrochemical products
and fine chemical materials, to pursue sustained growth through strategic development of two new businesses: life sciences and lithium ion capacitors (LICs).

CORPORATE MISSION

Materials Innovation
We create value through materials to enrichsociety, people and the environment
JSR CORPORATION

02

ANNUAL REPORT 2015

O V E R V I E WBusiness Outline
The JSR Group aims to create new value through materials and to help in solving social problems.

1960s
SocialPriorities

Production of
Synthetic Rubber
in Japan

1980s

Petrochemicals played a vital role as industrial raw materials
during Japan’s postwar recovery and reconstruction phase.
There was an urgent need to establish synthetic rubber
manufacturing in Japan because reliance on imports left
Japan vulnerable to a tight supply-demand environment.

Changesin the Industrial
Structure

Social Priorities
for the Future

2000s

Electronic materials were vital to the emergence of the newcomputer industry and the creation of products such as
electronically controlled appliances with embedded microchips, and digital communications devices.

Fine Chemicals and Other Products Business

Awareness of environmental problems is reflected in theneed to create environmentally responsible living
spaces. Another major social priority in Japan, which isleading the global trend toward super-aged societies, isthe development of medical services.

Strategic Businesses
Life Sciences
Business

Use for polymer and precision
processing technology

Lithium Ion
Capacitor
Business• In Vitro Diagnostics and Life
Science Research• Bioprocess Materials• Lithium Ion Capacitors

Fine Chemicals Business

Our
Businesses• Lithography Materials• Process Materials• Device Integration Materials•	Chemical Mechanical Planarization Materials (CMPs)• Packaging Materials

Semiconductor
Materials
Business

Use for polymer
technology

Display
Materials
Business• LCD Materials• New FPD Materials

Petrochemical Products Business
Elastomers
Business• General-Purpose Synthetic Rubbers• Thermoplastic Elastomers• Special-Purpose Synthetic Rubbers• Emulsions

JSR CORPORATION

03

Plastics
Business

ANNUAL REPORT 2015

• Wide Range of ABS Resins and ABS Alloys

O V E R V I E WConsolidated Financial Highlights
In the year ended March 2015, strong performance by the Fine Chemicals
and Other Products Business offset a downturn in the Petrochemical Products
Business, allowing us to achieve growth in sales and income.
Note: Fiscal year means year ended March 31¥

404.1 billion(+2.5%) ¥364.7 billion¥

394.3 billion(+8.1%) ¥337.3 billion¥

38.1 billion(+5.6%) ¥36.1 billion

Operating Income
Net Sales

Net Assets

Income from the Petrochemical Products Business was

Despite a marginal decline in petrochemical products

Net assets were higher primarily because of an ¥11.3

significantly lower because of deteriorating market

because of deteriorating market prices, revenues werebillion year-on-year increase in shareholders’ equity, and a

prices, but operating income was higher year on year

higher thanks to strong sales of advanced semiconductor¥15.7 billion year-on-year increase in cumulative compre-

thanks to a firm trend in income from the Fine Chemicals

materials and a firm trend in sales of display materials.

hensive income. The equity ratio was 67.0%.

and Other Products Business.

10%(+– 0.0%)

(%)

14

8.7%

13
13

10%

10

(+0.8%)

10

(%)

10.8

10.3
8.7

9.7

7.9%

7.9

ROIC
ROIC remained even despite higher growth

ROE

investment. Contributing factors included an

Income growth helped to produce a moder-

18.9% year-on-year increase in net income,which reached ¥29.9 billion.

(FY) 2011

2012

2013

2014

ate increase in ROE, which we regard as a2015

JSR CORPORATION

key financial indicator.

04

ANNUAL REPORT 2015

(FY) 2011

2012

2013

2014

2015

O U RS T R A T E G Y

Policies Focusing on
the Realization of Our Goals
In the year ended March 2015, growth in the Fine
Chemicals and Other Products Business allowed us toachieve results that were moderately higher than our
initial targets, despite a slower trend in the Petrochemical Products Business. We provide maximal effort to
the realization of our goals that reflect environmental
MITSUNOBU (Nobu) KOSHIBA

changes over the past year and progress in each busi-

Representative Director and President

ness segment.
JSR CORPORATION

05

ANNUAL REPORT 2015

O U R

Vision for 2020

S T R A T E G Y

The JSR Vision

l Establish a corporate structure
resistant to changes.

The trends toward diversification and the formationl Build up competitiveness that enables
us to achieve sustainable growth.

of a multipolar world are expected to accelerate.

l Develop a third pillar of business.

Post JSR20i6

We see these environmental changes asopportunities to expand our corporate

Sustained Growthvalue through initiatives based on
our business philosophy.

Development of strategic businesses
as third core source of earnings
Emergence as a company capableof stable, sustainable growth

JSR20i6* The “i” in “JSR20i6” (twenty-sixteen) emphasizes
the “Innovation” to realize Materials Innovation,
which is the heart of our corporate mission.

Phase II

Following Our
Path to Growth
JSR20i3
Phase I

Activation
toward GrowthConcentration on key businessareas and products capable ofdriving sustainable growth

Become an esteemed company with
¥1 trillion market capitalization

Phase III

Sustained efforts to link priority
measures implemented under
JSR20i3 to earnings
Core business areas (Solution
Polymerization SBR (S-SBR), advanced
lithography materials, etc.) as
growth drivers

Net Sales

Operating Income(Billions of yen)

500.0

350.0

371.5

394.3

404.0

(FY) 2012

2013

2014

2015

420.0

(Billions of yen)

50.0

36.0

35.2

36.1

(FY) 2012

2013

2014

38.1

41.0

Investment, business infrastructuredevelopment, improvement ofcompetitiveness in corebusiness areas

JSR20i3

2016

2017

(Initial plan) (Initial plan)
JSR20i6n Petrochemical Products Business2015

JSR20i3

2016

2017

(Initial plan) (Initial plan)
JSR20i6n Fine Chemical and Other Products BusinessNote: Fiscal year means year ended March 31

JSR CORPORATION

06

ANNUAL REPORT 2015

O U RS T R A T E G Y

To Our Shareholders
How would you describe the market environment
in the year ended March 2015?
Question

The Petrochemical Products Business wasaffected by stagnating conditions, but we recorded
excellent performance trends in the Fine Chemicals
and Other Products Business.
The market environment in the year ended March 2015, drasticallyin the previous year, in part because of price adjustments implemented inchanged in the second half of the period; raw material prices fell along withthe first half of the year to reflect higher raw material prices.

the prices of finished products due to a plunge in crude oil prices. The yen

On the other hand, buoyant market trends helped to expand sales of

rapidly weakened against major currencies. Meanwhile, the environment

semiconductor materials and display materials. Our withdrawal from thefor our major customer industries was generally stable. There was a global

precision materials and processing business, which had become unprofit-

increase in production by automotive tire and motor vehicle manufactur-

able, also contributed to a substantial year-on-year increase in net sales

ers, and the production of semiconductors was steady due to strong

and operating income from the Fine Chemicals and Other Products Busi-demand, especially for use in smartphones, tablets and other mobile

ness. This offset the downturn in the Petrochemicals Product Business.

devices. Trends in production of flat panel displays (FPDs) for large-screen

As a result, consolidated net sales in the year ended March 2015 were2.5% higher year on year at ¥404.1 billion, while operating income rose by

TVs were also strong.
The impact on the elastomer business was particularly severe. Despite

5.6% to ¥38.1 billion, and net income by 18.9% to ¥29.9 billion.

global growth in demand, market prices fell due to a worsening supplydemand balance caused by an over-supply situation, especially in East
Asia. The result was reduced spreads between the prices of key raw
materials and the prices of our products. Despite stagnating markets, net
sales from the Petrochemical Products Business were about the same as

JSR CORPORATION

07

ANNUAL REPORT 2015

O U RS T R A T E G Y

To Our Shareholders
What were your priority initiatives
in the year ended March 2015?
Question

We established JBE to provide production capacity for
Solution Polymerization SBR (S-SBR), and we made preparations
to put our Strategic businesses activities on a growth track.
Our main priority for the Petrochemical Products Business was the start-

venture, JSR Micro (Changshu) Co., Ltd., to expand sales in the Chinese

up of the first phase of S-SBR production facilities for our Thai joint ven-market, which is expected to show rapid growth.

ture, JSR BST Elastomer Co., Ltd. (JBE). The project fell behind schedule

In the Strategic business category, we concentrated our resources inbecause of delays in obtaining customer approvals, but the plant is fully

the areas of life sciences and lithium ion capacitors (LICs). In the life

operational in now. We are also proceeding with a second phase of plantsciences area, we made significant progress toward the establishment ofconstruction at JBE in order to double the plant’s production capacity instructures to support non-organic growth. In the LIC area, we steadily

anticipation of demand growth in the medium- to long-term future.

increased the number of companies using our products, and while thisIn the Semiconductor Materials business, major customers started

business is still small, there was a significant increase in sales. We also

full-scale production of leading-edge 20nm-generation products in which

completed a new plant for the mass production of miniaturized products

we holds large market share. Because of our high market share in thiswith the aim of expanding our sales.

area and our capability of supplying high quality product consistently, thisAs a result of these efforts, JSR was able to achieve the revenue targets
set down at the beginning of fiscal 2015, which was the first year underresulted in higher sales.
We were able to enhance the competitiveness of the Display Materials

JSR20i6. However, new strategies will be needed in the petrochemicalbusiness through in-depth localized operations by our South Korean andproducts area because of the effects of a chronic over-supply situation andTaiwanese group companies, and through the establishment of a technicalmarket stagnation. I intend to work tenaciously toward the achievement ofservice organization. In addition, we decided to establish a Chinese joint

our operating income target of ¥50 billion in the final year of JSR20i6.

JSR CORPORATION08

ANNUAL REPORT 2015

O U RS T R A T E G Y

To Our Shareholders

What is your growth scenario going forward?
Question

We aim to strengthen our structure in the Petrochemical
Products Business in anticipation of worsening profitability,
while working toward non-organic growth in the new Life Sciencebusiness, which we have positioned as a new core segment.
There are two major changes in our strategies. First, we will strengthen thewith MEDICAL & BIOLOGICAL LABORATORIES CO., LTD. (MBL), a

structure of our Petrochemical Product business. The breakeven point for

pioneering Japanese manufacturer of antibodies, and jointly acquired KBI

the Petrochemical Products Business has improved by 20 points com-

Biopharma, Inc. (KBI), a contract developer and manufacturers of biophar-pared with the position before the Lehman shock, but profitability ismaceuticals in the United States. These moves will allow us to go beyond

expected to deteriorate over the next few years because of harsh trends inthe expansion of our existing group business activities, and to expand into

demand and market prices. By seizing opportunity now that financial

other business areas, including not only raw materials but also the devel-resources are being generated by breakeven point improvement, we will

opment of reagents and reagent manufacturing processes, and contract

invest ¥30-40 billion over the next four or five years in initiatives to bring

manufacturing of reagents. For example, we could use the knowledge andfacilities, some of which were built around 40 years ago, up to date andsales channels of MBL in the area of reagents, and contract biopharma-

ensure safety. By doing so, we will make them more robust and moreceutical manufacturing capabilities of KBI in area of bioprocess materials.

sustainable, so that they will still be usable 20 or 30 years from now. In

From a business portfolio perspective, the life sciences field is less vulner-

addition to this facility improvement, we will also prepare for medium andable to raw material prices or economic trends than other business seg-long-term growth by restructuring our product portfolios.

ments and offers opportunities to apply the strengths of JSR. We aim to

In the Life Science business area, we have focused on collaborationachieve net sales of ¥30 billion in the year ending March 2017.

with other companies. For example, we have strengthened our relationship

JSR CORPORATION

09

ANNUAL REPORT 2015

O U RS T R A T E G Y

To Our Shareholders

What is your thinking on capital strategy?
Question

While giving priority to investment in growth,
we will also work to improve ROE and maintaina flexible approach to shareholder returns.
Apart from the period affected by the Lehman shock, long-term trends in

In addition to our commitment to shareholder returns, this change

our operating cash flows have generally remained stable despite fluctua-

was also motivated by our desire to achieve a double-digit ROE. We

tions in earnings. During the period covered by mid-term management

aim to increase ROE from its present level of 8.7% to over 10% in theplan JSR20i6, we expect to generate cumulative cash flows amounting

near future.
We have made decisions about a number of targets for growth

to around ¥160 billion.
Our capital allocation policy calls for growth investment of around¥100 billion, including organic investment in existing business activities
and inorganic investment, such as the acquisition of shareholdings inother companies, as typified by our investments in MBL and KBI. We
intend to use our remaining cash flows and other cash reserves toinvestment, including the expansion of overseas business sites, and
M&A activities.
The dividend for the year ended March 2015 was ¥40. The dividend
ratio was 31.2%, and the gross payout ratio was 64.6%.
We will continue to give priority to growth investment in the allocation

maintain a gross payout ratio, including dividends, share buy-backs andof resources. We will also implement shareholder return policies that

other shareholder returns, of 50% or higher during the period of JS-

target further improvement in ROE, while also taking into account pre-R20i6. This represents a change in policy on shareholder returns, which

vailing economic conditions and our financial position.

previously called for a payout ratio of 30%. Going forward, our policy onshareholder returns will be to combine stability with flexibility.

JSR CORPORATION

10ANNUAL REPORT 2015

O U RS T R A T E G Y

Special Feature
Life Sciences Business—
Contributing to Sustainable Society where people can enjoy health and longevity
istration of pharmaceuticals to carry out prior diagnoses anddetermine whether or not particular drugs and therapies will
be effective. They are used to identify patients who are likely
to suffer side-effects. One of the most important measurement methods used involves diagnosis through the detectionof disease-related substances adhering to antibodies attached to beads. Diagnostics designed to react to a wide
range of antigens can be created by combining the JSRGroup’s beads technology with antibodies developed by
MEDICAL & BIOLOGICAL LABORATORIES CO., LTD.
The extension of healthy lifespans and the reduction of health-ing its related activities, especially in the areas of advanced

Biopharmaceuticals

care expenditure are priorities in developed countries. Efforts

diagnostics and the development and manufacture ofBiopharmaceuticals include antibody drugs, which are used

to achieve these goals are reflected in a trend toward individu-

biopharmaceuticals.

in the treatment of cancer and other serious diseases. There

alized medicine, and in a shift in emphasis from cure to pre-China is working toward the domestic production ofhas been a rapid increase in the development of these drugs

vention. Individualized medicine enhances the effectivenessdiagnostics for hepatitis, influenza and other infectious

in the past few years as they are highly effective and produceof therapies by matching treatment methods more precisely

diseases. The JSR Group is collaborating with Chinese

minimal side-effects. The JSR Group is contributing to theto the condition of each individual patient. To achieve this,companies in the development, manufacture and sale ofdevelopment of production processes for these biopharma-

doctors can use biopharmaceuticals, which cause fewer

these diagnostics. Our aim is to achieve in-house production

ceuticals. Antibody drugs are extremely large biomolecules.

side-effects, and advanced, personalized diagnostics toin China using JSR raw materials.

They are cultured using microorganisms and animal cells,

identify conditions and determine which drugs will be theIn addition to our work in these advanced fields, ourmost effective for a specific patient. The shift in emphasis

strategy also includes the utilization of existing products andpharmaceutical products. Biopharmaceuticals minimize

from cure to prevention is helping to reduce the healthcaretechnologies in emerging countries.

side-effects by using biological and cytological functions thatburden by preventing diseases from occurring, or by discov-and the antibodies are then separated and refined to create

affect only disease sites, such as cancerous cells. At present

ering them earlier when they do occur. The keys to thisAdvanced Diagnostics

the development and manufacture of biopharmaceuticals

approach are the ability to diagnose the potential for dis-Companion diagnostics are used to optimize treatment

involves complex and expensive processes. The JSR Groupeases, and day-to-day health monitoring.

methods for individualized medicine. Designed for external

is working to overcome these problems so that biopharma-use, they are employed in conjunction with the clinical admin-

ceuticals can become more widely available.

The JSR Group will respond to these trends by expand-

JSR CORPORATION

11

ANNUAL REPORT 2015

O U RS T R A T E G Y

Special Feature
Further expanding our business domains by increasing strategic partners
not only in our group, but also linking raw material technologies with end users.
In the area of diagnostics, we have increased our sharehold-We also plan to commence joint research with Keioacquisition of KBI has given us access to a company withing, and strengthened our collaboration, with MBL, which

University, which has its own hospital. This will allow us to

the ability to develop manufacturing processes and carrypossesses expertise relating to the use of antigens as bio-

foster collaboration with hospitals and medical professionals.

out actual manufacturing if a pharmaceutical company
discovers a substance with medicinal effects. The establish-

pharmaceuticals. We are also acquiring shareholdings in other

Our priority for the Life Sciences business was to linkcompanies, such as KBI Biopharma, a developer of biophar-functional materials manufactured by the JSR Group withment of this cooperative relationship was the final step in

maceutical production processes and a contract developer

value chains leading to end users. Even if we create usefulthe creation of a value chain linking our functional materials

and manufacturer of biopharmaceuticals in the United States.

raw materials, they are unlikely to be adopted by pharma-

with product development, approval, sales channels andThese investments support our efforts to create new value

ceutical manufacturers unless there are also effective manu-

pharmaceutical companies.

across all stages of biopharmaceutical manufacturing.

facturing processes for those materials. Our recent joint*1 IVD: In Vitro Diagnostics*2 JSR•mblVC LifeScience Investment Limited Partnership

Business Areas
Seeds

IVD*1

Functional Materials

Product
Development

Authorities’
Approval

Sales Channels

Market Needs

IVD Intermediate Business (China)

Conventional
Venture Fund (JMLF*2)

MEDICAL & BIOLOGICAL LABORATORIESAdvanced
Research
Reagents

Applying antibody technologies

Materials and Device Development for purification

Bioprocess

Process Development/Contract Manufacturing

Membrane Chromatography(Antibody Drugs)
Continuous Chromatography System= JSR/JSR Life Sciences/JSR Micro, Inc./JSR Micro NV

CMIC JSR Biologics
Obtain technical seeds and required infrastructure and functions through M&A, alliance, strategic partnership, etc.

JSR CORPORATION

12ANNUAL REPORT 2015

Academia(R&D, Clinical)
Keio University

Pharmaceutical
Companies

Doctors
Hospitals

Revenue Breakdown by Business Segment

Fine Chemicals andOther Products Business

37.1%

Elastomers

49.2%
Plastics

13.7%

Petrochemical
Products Business

Creating Corporate Value
The three strategic domains for the JSR Groupare Petrochemical Products, Fine Chemicals,and Strategic Businesses. In each of these areas,
we are developing business activities based on
medium- and long-term perspectives.

JSR CORPORATION

13

ANNUAL REPORT 2015

C R E A T I N GC O R P O R A T E

V A L U E

At a Glance
Segment Sales
2013

195,7972014

203,478

2015

198,958

51,759Elastomers Business
Plastics Business
Fine chemicals &other products Business

123,931

57,764133,067

55,161

149,954(Fiscal year)

0

50,000100,000

150,000

200,000

250,000

300,000

350,000

400,000

450,000(Millions of yen)

* Note: Fiscal year means year ended March 31

Petrochemical Products Business

Elastomers

General-Purpose Synthetic Rubbers
	Solution Polymerization Styrene-Butadiene
Rubber (S-SBR), Emulsion polymerization
Styrene-Butadiene Rubber (E-SBR),
Polybutadiene Rubber (BR)Special-Purpose Synthetic Rubbers
Nitride Rubber (NBR), Butyl Rubber (IIR)
Ethylene-Propylene Rubber (EPM/EPDM)
Thermoplastic Elastomers (TPEs)
Syndiotactic 1, 2-Polybutadiene “JSR RB™”
Hydrogenated Polymer “JSR DYNARON™”
Styrene-Butadiene Thermoplastic
Elastomers “JSR TR™”
Styrene-Isoprene Thermoplastic
Elastomers “JSR SISTM,” etc.
Emulsion Products
Paper Coating Latex, SB Latex,
Acrylic Emulsions, etc.
Performance Chemicals
High-Functional Dispersant “DYNAFLOW™”
	Organic/Inorganic Hybrid Coating Materials“GLASCA™”
Battery Materials
Thermal Management Materials

Fine Chemicals and Other Products Business

Plastics

Fine Chemicals

Styrenic Resins
Acrylonitrile-Butadiene-Styrene (ABS) Plastic
	Acrylonitrile-Ethylene-Propylene-Styrene (AES)
Plastic

Strategic Businesses

Semiconductor Materials

Display Materials

Life Sciences Materials

Lithography Materials
Photoresists, multilayer materials, etc.
CMP (Chemical Mechanical Planarization)
Materials
CMP slurries and pads
Packaging Materials
Thick-film photoresists, photosensitive
insulation materials, etc.

LCD Materials
Alignment films, protective coatings, color
pigment dispersed resists, photosensitive
spacers, etc.
New FPD Materials
Optical Coatings, OLED, etc.

In-vitro Diagnostic and Research Reagents
Beads for Clinical Diagnostics
Research Reagents
Magnetic Beads
Size Standard Beads
Bioprocess Materials
Protein A affinity material
Ion-exchange material

Optical Materials

Lithium Ion Capacitors

Precision Materials and Processing BusinessHeat-Resistant Transparent Resin “ARTON™”
ARTONTM Optical Films, etc.
Optical Materials
UV Curing Optical Fiber Coatings, etc.

JSR CORPORATION14

ANNUAL REPORT 2015

Cells
Laminate Cell
Prismatic Cell
Modules
Laminate Cell Module
Prismatic Cell Module

C R E A T I N GC O R P O R A T E

V A L U E

Petrochemical Products Business
Elastomers
Performance Overview¥

199.0 billion -2.2%

10.7 billion -38.1%¥

Operating Income

Net Salesl Moderate year-on-year decline in total elastomer sales volumes
l Decrease in operating income from recurring expenses including the cost of regular maintenanceUsing Our Technological Advantage
in Solution Polymerization SBR (S-SBR)
JSR has targeted demand for high-performance S-SBR, especially thel Major decline in profit, mainly because of shrinking margins
caused by a worsening supply-demand balancehigh-end and middle-high markets. In the year ended March 2015, we
responded to deteriorating market conditions by restructuring our productportfolio and bringing forward the introduction of products for the high-end
market. These products have been well-received in South Korea, Europe
and Japan and have allowed us to gain a lead over our competitors
through differentiation based on superior technology.
We also worked to expand our presence in the middle-end market byincreasing supplies of products based on our exclusive technology in the

Plastics
Performance Overview

year ended March 2015. We have not previously targeted this market
because of the large number of competitors. However, we expect to¥achieve growth in this area by using our original technology to develop
products that allow us to achieve high productivity and cost-competitiveness. The predicted shift toward electric vehicles is expected to result in
an increase in use of high-torque vehicles. We will respond to this trend by
supplying products with enhanced wear characteristics.

55.2 billion -4.5
Net Sales%¥

2.8 billion -27.5%

Operating Income

l Sales decline due to decreasing domestic production of motor
vehicles and industrial materials, including building materials
and miscellaneous goodsl A weaker yen and price adjustments in the first half of theperiod to reflect rising raw material costs not sufficient to offset
reduced sales volumes, net sales downl Operating income significantly affected by reduced sales
volumes, despite current improvement in profit margins

Note: Fiscal year means year ended March 31

JSR CORPORATION

15

ANNUAL REPORT 2015

C R E A T I N GC O R P O R A T E

V A L U E

S-SBR Business Strategy
JSR aims to be number one in terms of its share of the global market for
Solution Polymerization SBR (S-SBR). We have three strategies for achieving this goal.
First, we will prepare predicted growth in demand over the medium- to

Butadiene supplies are expected to fall short of demand in the future, andlong-term future by expanding the total supply capacity of the JSR Group.

we aim to establish a structure that will allow us to source this material at

This strategy calls for the creation of a global network of production sites

competitive prices.

located close to user markets through the completion of a second phase

Third, we will differentiate our products and establish a technologicalof construction at the facilities of JBE in Thailand, and the planned con-advantage by introducing products into the high-end market ahead of ourstruction of a plant in Hungary.

competitors. We will maintain a dominant share of expanding demand in

Second, we will strengthen our cost-competitiveness. Both JBE andthe high-end market through continual performance and quality-based

the production operation in Hungary are joint ventures with local manufac-

differentiation. We will also introduce products based on our original

turers. We will be able to ensure the constant supply of raw materials.

technology into the large middle-end market.
We aim to achieve sustained growth by steadily implementing thesethree strategies.

Change in butadiene and naphtha prices(Unit: $/ton)

The change in raw material prices

4,000

Since butadiene is produced from naphtha, the cost of naphtha production closely approximates our raw material cost. Because butadiene is themain raw material, its price is linked to the price of butadiene-based

3,000

synthetic rubber, so the price spread between naphtha and butadiene is
the key to higher profits.
From 2013, the supply-demand balance for butadiene has gone frombad to worse, and the price spread between naphtha and butadiene has

2,000

shrunk. In particular, the year ended March 2015, the benchmark butadiene price in the fourth quarter was $700/t, dramatically reducing the pricen Spread(Butadiene-Naphtha)

spread with naphtha. As a result, for year ended March 2015, profit was a

1,000

key concern in the Petrochemical Products Business. Earnings will improve with a rise in the butadiene price or a drop in the price of naphtha,

Butadiene price
Naphtha pricebut since we forecast a continuation of the butadiene oversupply situation

0

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

in the next fiscal year, the market doldrums are expected to continue. We
anticipate that it will take about two years to fully eliminate the glut.

Source: JSR prepared the chart based on statistics of Platts and JSR, etc.

JSR CORPORATION16

ANNUAL REPORT 2015

C R E A T I N GC O R P O R A T E

V A L U E

Fine Chemicals and Other Products Business
Performance Overview¥

150.0 billion +12.7%

24.5 billion +65.3%¥

Operating Income

Net Salesl Year-on-year growth in both net sales and operating income
from the Fine Chemicals and Other Products Business

Semiconductor Materials: Yokkaichi Centralization Strategy
In the year ended March 2015, growth in the net sales of the Semiconductor Materials Business outpaced market growth. This reflects the start ofl Increased net sales of semiconductor materials and display
materials thanks to strong trends in the semiconductor and
FPD markets
l Major progress toward the development of a structure to
support future business development

full-scale high-volume manufacturing of leading-edge 20nm-generation
products, an area in which JSR has a large market share, by major customers and other users. Emerging trends, such as Big Data and theInternet of Things (IoT) are expected to drive continuing growth in the

Semiconductor Materials
Performance Overview¥

semiconductor market. We aim to maintain our high market share whenthe 20nm generation is superseded by the 14nm generation and beyond,by developing new products and expanding sales. We will also focus on
the development of products for the 10nm and later generations, especially through the development of EUV technology.
In 2014, we responded to this environment by changing our strategy

64.3 billion +26.9%

Net Salesl Firm trend in semiconductor demandl Start of full-scale high-volume manufacturing of leading-edge
20nm generation products by major customer—large market
share for JSR

for the Semiconductor Materials business. That strategy now calls forconcentrated investment at Yokkaichi, which is a key base for the JSRGroup’s R&D and manufacturing operations. The aim of this investment is
to create the best possible environment for product development and

Display Materials
Performance Overview¥

quality assurance. By centralizing the development and production ofamong raw material manufacturers, the R&D organization and our manufacturing operations. Most of our key products, including new resists andmultilayer materials, are shipped from Yokkaichi.

JSR CORPORATION

17%

Net Salesmaterials, we will speed up development while optimizing cost efficiency.
We are working to optimize performance and quality through collaboration

68.5 billion +10.3

l Firm trend in demand for FPDs for large-screen TVs and multifunctional mobile devices
l Market growth driven by shift to larger TV screens especiallysignificant for year-on-year growth in net sales

ANNUAL REPORT 2015

C R E A T I N GC O R P O R A T E

V A L U E

Fine Chemicals and Other Products Business
Semiconductor Materials:
Preparing for the EUV Generation

Display Materials:
Business Development in Asian-countries

The establishment of Extreme Ultraviolet (EUV) lithography technology isTrends toward higher-definition televisions and large screens are reflectedseen as essential to the economic viability of semiconductor fabrication.

in predictions of continuing growth in the market for display materials. JSR

EUV is one of the key technologies that will take semiconductors forward

anticipates a sustained contribution to earnings from this area. A key trend

to the sub-10nm generation. JSR is preparing for high-volume manufac-

in this market is Asian-countries. China in particular is expected to becometuring of chemically and non-chemically amplified resists developed using

a major market by 2020 because of its government’s policy of establishingits global network. In 2015, we are collaborating with the Belgian organiza-

a domestic manufacturing industry. JSR has established a Taiwanese jointtion imec, a leading research institute specializing in nano-electronic

venture, JSR Micro (Changshu) Co., Ltd., to manufacture display materials

technology, to provide manufacturing and quality management services forin China. Our future activities in this area will center on China, and we plan

EUV lithography materials, and there are plans for the establishment of

to relocate grade development and customer support operations to bases

joint venture.

in South Korea and Taiwan.

Extended EUV Collaboration

Display Materials: Future Business Development
Market trend

Material technology trend

UHD TV(4K)• High color reproducibility resists• Photo-alignment films

Materials for the next-generation TVs,
such as 4K2K, CURVED

Manufacturing joint venture
between JSR and imec

High definition panels
for mobile equipment

Main material
technology Useof synergy

Fivemain LCD
materials•	High resolution spacer Low-K(Interlayer Di-electric materials)

Materials for high definition panels
for mobile equipment
Manufacturing
Technologies(Production and QA/QC)

CriticalEquipment(Exposure / testing, etc.)

Improvement of productivity forpanel production Reduction of
costs for panel production
Display with high flexibility

JSR CORPORATION

18• High-flatness protective coatings• Di-electric films• OLED color pigment resists• OLED Di-electric films• OLED bank materials• Desiccant

ANNUAL REPORT 2015

Cope with thenext generationand high functional
materials

New
FPD
materials

C R E A T I N GC O R P O R A T E

V A L U E

Fine Chemicals and Other Products Businessmarketing perspective, we will be able to integrate our organizations andStrategic Businesses

strengthen sales channels in the United States. Manufacturing operations

Performance Overview

17.1 billion -15.5%¥

Net Sales

will also be integrated.
Increasing pharmaceutical development costs and other factors haveled us to adopt a business model based on outsourcing of manufacturingl Building a stronger relationship with Japanese antibody manufacturing pioneer Medical & Biological Laboratories Co., Ltd. (MBL)l Joint acquisition of KBI Biopharma, a contract developer andmanufacturers of biopharmaceuticals in the United Statesl Start of commercial production at Lithium Ion Capacitor (LIC) plantwith capacity for 3 million cells

process development as well as actual manufacturing. A company thatprovides these services is known as a contract development & manufacturing organization (CDMO). In March 2015, in a joint acquisition, JSR acquired KBI Biopharma, Inc., a CDMO in the United States. KBI has advanced analysis method development technology, which it uses in business
operations that center primarily on the European and North American
market. It provides pharmaceutical manufacturers and other companies

Life Sciences: Creating Synergies

with integrated manufacturing technology development and manufacturing

We further strengthened our Life Sciences business by increasing ourservices that range from the initial development of biopharmaceuticals toshareholding in MBL, an equity method subsidiary. From a development

clinical trials and commercial production. By using these services, pharma-

perspective, synergies achieved through closer collaboration with MBL will

ceutical manufacturers are able to focus their efforts on the discovery ofallow us to speed up development and create added value by combining

pharmaceuticals while reducing their drug development costs. This ap-

JSR Group’s particle technology with MBL’s antibody technology. From a

proach will ultimately contribute to the increased use of biopharmaceuticals.

Lithium Ion Capacitors (LICs):
Start of Production at New Plant

Lithium Ion Capacitors: Track Record

The JSR Group has completed a new mass-production plant for flat prismatic can lithium ion capacitors. Products are already being shipped fromthe new plant, which is the only facility in the world with the capacity to
produce three million cells per year. Over 10 companies have started to use
the products. We plan to use the new facility to win orders from small-lot
customers. Despite the overwhelming performance advantage provided by
LICs manufactured by the JSR Group, sales have not yet started to expand
rapidly, and our most important priority will be creation of a value chain. Our
business model for LICs is based on the transformation of materials andparts into cells and modules, and cells and modules into systems for end
Automatic Guided Vehicles

Hybrid Excavators

Hybrid BusesRadiographic Cassettes

users. We aim to strengthen the value chain for LICs of the business going
forward, much like the one build for the Life Sciences business.

(AGV)

JSR CORPORATION

19

ANNUAL REPORT 2015

C R E A T I N GC O R P O R A T E

V A L U E

R&D Policy and Organization
new high-performance materials based on our original technologies. JSR’s
involvement in the petrochemical field began with elastomer technology.
We have since developed our activities globally by creating highly competitive materials and technologies for a wide range of technology fields,
including the seemingly disconnected area of IT. We have accumulated arecord of continual effort to expand business areas behind our main
business. That is, not only to deepen our knowledge of our core polymer
technology, but also to develop ways of combining it with other technicalfields such as optics, inorganic chemistry, and precision processing
technology. We continue to challenge ourselves to develop new fields thatR&D Policy

offer major growth potential, such as next-generation electronics, life

We will use accumulated technologies toopen up new fields of technology

Integrating R&D with business activities

We see our R&D achievements as keys that will unlock the future for JSR.

need to link those seeds to actual business activities. JSR has created

We have built an extensive R&D organization, which has created manyan organizational structure that ensures rapid decision-making in thissciences, environment and energy.

After discovering seeds of innovation through our R&D activities, wearea by giving senior R&D executives management roles in strategic
business divisions to ensure close collaboration. Another example of theN u m b e ro f

accelerating integration of R&D and business activities is the identifica-

P a t e n t stion of needs through direct interaction between our researchers andcustomers. The priority countries and regions for cutting-edge research

The number of patents held by JSR is steadily increasing in Japan and overseas,
mainly in the Fine Chemicals and Other Products Business.

vary according to every field such as elastomers, semiconductor materi-

As of March 31

2009

2010

2011

2012

2013

2014

2015

als, display materials, life sciences, environment and energy. By locating

Petrochemical Products
Fine Chemicals and Other Products
OthersSubtotal
Overseas Petrochemical Products
Fine Chemicals and Other Products
OthersSubtotal
Total

428
1,269
73
1,770
512
1,955
34
2,501
4,271

374
1,465
75
1,914
492
2,164
39
2,695
4,609

377
1,685
67
2,129
489
2,365
36
2,890
5,019

387
1,972
79
2,438
507
2,516
33
3,056
5,494

358
2,331
89
2,778
523
2,741
34
3,298
6,076

334
2,633
104
3,071
516
2,957
33
3,506
6,577

308
2,717
99
3,124
531
2,810
29
3,370
6,494

our R&D and business sites in the most advanced areas, we are building

20

ANNUAL REPORT 2015

Japan

JSR CORPORATIONa structure that will allow us to respond quickly to new trends. We also
make extensive use of strategic investments and business partnerships
to secure rapid access to the advanced specialist technologies andknowledge, and connect our businesses that we need for our strategic
business activities. We are evolving a structure that can provide newvalue to society by flexibly integrating R&D with business activities within
the JSR Group and beyond.

C R E A T I N GC O R P O R A T E

V A L U E

R&D Policy and Organization
Creating materials for the future through materials innovation
R&D Structure
Petrochemical
Products
Business

Fine
Chemicals
BusinessCore Business

R&D Organization:
A global approach to technology innovation
centering on four R&D facilities in Japan

Life Sciences/Environment and Energy

Strategic Businesses

JSR currently has R&D facilities in Yokkaichi and Tsukuba in Japan. These
Next Generation

R&D facilities support existing business activities while also helping tocreate new businesses. They therefore participate in highly innovative andexploratory research initiatives with customers, domestic and international
universities, and research institutes. For example, in existing businesses,
JSR Micro Korea and JSR Micro Taiwan have both built R&D facilities with

Support Research

Next Generation
Technology Researchclean rooms, allowing them to set up local integrated systems for Display

Seed Researchmaterials, which serves not only the local production of products but also
supports consistent development and innovation of technologies.

•	Performance Polymer
Research Laboratories

Business
Division•	JSR Functional Materials
Research Center

This capability allows them to promote their business by giving timely
support to customers in South Korea and Taiwan.

•	Display Materials
Research Laboratories
Collaboration•	Fine Electronic Materials
Research Laboratories•	Advanced Materials
Research Laboratories

Customer andMarket Needs•	Precision Processing
Technology Group,
Precision Processing Lab.
•	Tsukuba ResearchLaboratories

Market Needs

Collaboration

Collaboration

Proposal on
Technology Seeds
Consignment
Research

Universities

Consortia

Research
Institutes

Joint Research

External Projects
institutions

Technology Seeds
CVC Activities(Corporate Venture Capital)

JSR CORPORATION

21

ANNUAL REPORT 2015

Creating
Sustainable Value
JSR aims to become a corporate group that is essential
to a wide range of stakeholders because of its ability tocreate useful new value through its business activities.
We will achieve this by integrating management basedon our business philosophy with CSR as an indicator of
the appropriateness of our business activities.

JSR CORPORATION

22

ANNUAL REPORT 2015

C O R P O R A T E

M I S S I O N

A N D

C S R

By integrating business management with CSR, we will generate income
for society and JSR and contribute to the creation of a sustainable society.
Proactive CSR

Corporate Mission

We aim to respond to society’s needs through our business activities.

Materials Innovation
We create value through materials to enrichsociety, people and the environment
Management Policies—Fundamental Pillars of Managementl Continuous creation of businesses
l Enhancement of corporate culture
l Increase in corporate value
Management Policies—Responsibility to our Stakeholders
l Responsibility to our customers /business partnersl Responsibility to our employeesl Responsibility to societyl Responsibility to shareholders
Course of Action (4Cs)
Challenge
Communication
Collaboration
Cultivation

Petrochemical Products BusinessBusiness
Strategy

We will globally market products that offer new value in response to the needs of society
and markets, such as Solution Polymerization SBR (S-SBR).
We will base our business activities
on specific priorities leading to therealization of our vision for 2020.

Fine Chemicals Business
By taking JSR’s advanced technologies global, we will help support the further growth ofdigital industries while contributing to the quality of the IT society and social convenience.

To respond to social priorities throughbusiness activities based on our corporate philosophy, management policies
and medium-term management plan
(April 2014–March 2017)

Strategic Business
The environment and aging are both major areas of social concern. By combining its
materials and technologies to create solutions for these problems, JSR aims to contribute to the creation of a society in which people can enjoy healthy, fulfilling lives while
using energy in environmentally responsible ways.

E2
Initiative™
Keeping them
foremost inmind to qualify
our products
for environmental labeling

Supply Chain Management
We work to improve value across entire supply chains by establishing standards for
CSR initiatives and other actions by suppliers, as part of our efforts to ensure that ourcustomers are reliably supplied with quality products.

Business
Base

Voluntary Environmental, Health and Safety Activities (Responsible Care)
Initiatives by chemical manufacturers to protect the environment and the safety and health of all stakeholders

A business base is essential to therealization of our strategies and corporate management.

Compliance
We will maintain our status as a trusted company by complying with rules and moral standards.

Key Social Priorities and Issues

Governance

Energy, resources, water, food,

The aim of our management policies is to maintain the value of JSR for society and a wide spectrum of
stakeholders.

biodiversity, disaster prevention and

Human Rights

safety, climate change, human rights,

Defensive CSR

U.N. Global Compact

A foundation for sustainable business activities

JSR CORPORATION23

As a company with a presence in society, we will always consider and respect the individuality of all
stakeholders.

ANNUAL REPORT 2015

C R E A T I N GS U S T A I N A B L E

V A L U E

Contributing to Society through Materials Innovation
The JSR Group practices a unique brand of CSR. For us, CSR is aboutbecoming a company that continuously grows while contributing to society
through the provision of essential materials and a company that discharges
its responsibilities to stakeholders in accordance with the Corporate Mission.
CSR Management

concerning laws and regulations to be observed and distributed it to all

CSR Advancement Structure

employees in Japan.

JSR promotes CSR through a system of committees and a CSR Department established to reinforce CSR-related initiatives. There are four

Risk Management

committees that function under the supervision of the CSR Committee: theThe JSR Group considers preventing major crises from occurring andCorporate Ethics Committee, which implements corporate ethics stan-

minimizing the effects of crises on business activities an important man-dards and works to prevent improper actions throughout the Group; theagement priority and engages in risk management activities. Using an

Responsible Care Committee, which works to realize a sustainable society

independently developed system, each division and Group company eachthrough the implementation of initiatives that safeguard the environment,

year periodically identifies, assesses, and formulates countermeasures

health, and safety; the Risk Management Committee, which seeks toagainst a wide range of risks, including explosion, fire, major earthquake,further strengthen the Group’s risk management system; and the Socialand pandemic outbreak. We designate particularly serious risks as “major

Contribution Committee, which devises and promotes activities to help thecompany-wide risks,” and the Risk Management Committee and the CSRGroup make a contribution to society.

Committee manage improvement in risk management. In October 2013
we conducted the first-ever business continuity management (BCM) drill at

Compliance

JSR headquarters as a means of final confirmation and verification of the

The JSR Group’s concept of legal compliance is grounded in the principle

JSR BCM system. We will work to perfect the system in preparation for aof ethical action based on compliance with the law. The Corporate Ethics

group-wide rollout in fiscal March 2015.

Committee promotes activities to encourage employees to maintain highethical standards and act with fairness and integrity. We conduct a

Responsibility to Our Stakeholders

Corporate Ethics Awareness Survey at business sites in Japan and

The JSR’s Group’s Essential Elements include values to be shared among

overseas to ascertain the state of awareness of corporate ethics among

all JSR employees to enable them to act responsibly and with confidence

employees and identify issues and we prepare a follow-up plan to ad-

towards all stakeholders. For JSR, the term “stakeholder” refers to all

dress any issues identified in the survey. To strengthen compliance, incustomers and business partners, employees, society, and shareholders.

April 2013 we prepared the Compliance Handbook containing key points

JSR CORPORATION24

ANNUAL REPORT 2015

C R E A T I N GS U S T A I N A B L E

V A L U E

Contributing to Society through Materials Innovation
Responsibility to Customers and Business Partners

institutional investors and analysts, and technical seminars (JSR Tech

We believe that the JSR Group’s most important role is to offer innovative

Seminars) and promote wide-ranging two-way communication.

materials and excellent products that meet customer needs and contributeto a better society. We devote effort to initiatives to ensure the quality and

Aiming to increase corporate value by creating business opportunities

safety of our products so that our customers can use them with peace ofthrough materials

mind. These efforts are recognized and appreciated, and we have re-l Constantly enhancing its management efficiencies

ceived top-rank supplier awards from global customers.

l Inspiring trust by being highly transparent and conducting soundcorporate management practices

Responsibility to Our Employees
The JSR Group develops mechanisms and fosters a corporate culture

l In April 2009, the JSR Group became a participant in the United Nations

that enables all employees to accurately recognize and solve issues andGlobal Compact. Amid growing calls for corporate social responsibility,that maintains and enhances organizational capabilities. We have put in

the Global Compact enables companies that operate on a worldwide

place the JSR Group global personnel system and engage in personnel

level to declare their commitment to observing the Compact’s ten

development and management at the Group and global levels. Through-principles. The principles include human rights, labor, the environment,out the JSR Group, synergies are generated through the contributions ofand anti-corruption. Having declared its participation in the Global

a diverse workforce.

Compact and its commitment to act responsibly as a member of theinternational community, the JSR Group will work even harder to actively
fulfill its social responsibilities.

Responsibility to Society
The JSR Group engages in responsible care management by means
including the creation of highly trustworthy business sites and initiatives toreduce environmental impacts. We also engage in activities that contributeto development of a sustainable society, such as the promotion of biodiversity conservation and socially beneficial activities.
Responsibility to Shareholders
Through investor relations activities, we strive to promptly and accurately
communicate to shareholders and investors information about the business situation and corporate policies. We hold the Ordinary General
Meeting of Shareholders at an early date, promptly send the notice ofconvocation to shareholders, enable the exercise of voting rights via theInternet, and take other measures to ensure smooth exercise of voting
rights by shareholders. We hold quarterly results briefings, seminars for

JSR CORPORATION

25

ANNUAL REPORT 2015

C R E A T I N GS U S T A I N A B L E

V A L U E

Contributing to Society through Materials Innovation
JSR Recognized Internationally for Socially Responsible Investment
JSR has been selected for inclusion in three international indices and one

Our selection proves that our corporate activities are highly valued aroundinvestment universe for socially responsible investment (SRI).

the world, and guarantees our value.

In Japan, few companies are selected for inclusion in three indices.

JSR has also been selected for inclusion in the Global Compact 100.

Recognition for Ethical Investment

MS-SRI (Japan) *(January 5, 2015)
We have been selected as a member ofthe Morningstar Socially Responsible
Investment Index, Japan’s major SRI index,
since 2009.

EURONEXT Vigeo
World 120 (France)
We were selected as one of 120
companies worldwide (including 17
Japanese companies) listed in theEuronext Vigeo World 120 Index inJune 2014.

FTSE4Good (U.K.)
We have been listed in the FTSE4Good
Index Series since 2003.

ETHIBEL PIONEER &EXCELLENCE
Investment Registers(Belgium)
We have been reconfirmed for inclusion in
the Ethibel Pioneer & Excellence Investment
Registers since June 2015.

*	The Morningstar Socially Responsible Investment Index comprises 150 companies selected from among listed companies in Japan by assessing their social responsibility. This index does not guarantee future
performance, accuracy, completeness, etc. Morningstar Japan K.K. and Morningstar, Inc. shall not bear any responsibility for damage that might result from use of the index. Copyright and all other rights rest with
Morningstar Japan K.K. and Morningstar, Inc. Copies, reproductions, and citations without permission are prohibited.

JSR CORPORATION

26

ANNUAL REPORT 2015

C R E A T I N GS U S T A I N A B L E

V A L U E

Corporate Governance System
Aiming to Maintain a Trusted, Appealing Corporate Constitution
JSR is constantly improving its system of corporate governance with the aim of obtaining the trust of shareholders
and all other stakeholders and building an appealing corporate constitution. We will strengthen and enhance ourcorporate governance to ensure that management processes are implemented fairly, transparently and promptly, byimplementing initiatives targeting each of the items required under our newly formulated corporate governance code.

(As of June 17, 2015)

Overview of the Corporate Governance System
Organizational structure:
Company that employs the Audit & Supervisory Board member system under which theBoard of Directors and Audit & Supervisory
Board members are monitoring the executionof the businesses of the Company.

Shareholders’ Meeting

Audit & Supervisory Board:
Consisting of 3 Audit & Supervisory Board
members including 2 independent outside
members who have highly professional
careers either as lawyers or certified public
accountants

Appointment/
Dismissal

Appointment/
Dismissal

Report

Audit &
Supervisory
Board

Board of Directors
Report2005
l Introduction of the officer systeml Discontinuation of the retirement bonus
system for directors and audit & supervisory board members

2011
l Invitation of 2 independent outside directors to its Board of Directors consisting of
6 directors

Independent
Auditors

Appointment/
Dismissal

Remuneration
Advisory Committee

ReportOversight/
Supervision

Cooperation

Strengthening Corporate Governancel Term of office of directors reduced from 2
years to 1 year

Financial
AuditsAuditsBoard of Directors:
Consisting of 7 directors, including 3
independent outside members

2004

Appointment/
Dismissal

ReportRepresentative
Directorand President

Report2012

Cooperationl Establishment of the Remuneration
Advisory Committee, with participation byoutside directors

2014
l Appointment of 3 independent outside
directors to its Board of Directors consisting of 7 directors and appointment of
2 independent outside Audit & Supervisory Board members to its Audit &Supervisory Board consisting of 3 members

JSR CORPORATIONInternal Audit
Department

27

Appointment/
Dismissal
ReportOversight/
Supervision

Report

Executive
Committee

Corporate Ethics
CommitteeBusiness Issues
Committee

Responsible Care
Committee

Officers
Committee

Risk Management
Committee

Social Contribution
Committee

Internal
Audits

ANNUAL REPORT 2015



CSR
Committee

Officers
Business Operations

C R E A T I N GS U S T A I N A B L E

V A L U E

Corporate Governance System
Directors and Corporate Auditors

n Audit System

Representative Director and President

Enhancement of the management monitoring function and assurance of

Mitsunobu Koshibatransparency
Under the Company’s audit system, business execution audits and ac-

Representative Director

count audits make significant contributions to fair, transparent, and timely

Hozumi Satomanagement. Business audits cover the execution of duties by directors,

Director

and account audits cover financial statements submitted at Ordinary

Hayato Hirano

General Meetings of Shareholders. In order to further enhance monitoring
and checking functions of its audit & supervisory board, the Company

Standing Audit & Supervisory
Board Member

appoints independent attorney and certified public accountant as outside

Shoichi Kataoka

audit & supervisory board member.

Outside Directorn Internal Control System

Takuya Goto

Efforts to ensure the effectiveness of and improve internal controls

Outside Director

Michio Kariya

In accordance with The Companies Act of Japan, the JSR Group has

Outside Director

by this policy, the Company works to strengthen and augment its

established a basic policy governing its internal control system. Guided

Kazunori Yagi

internal controls. The Internal Audit Department systematically audits
business execution and compliance systems in each division and Group

Outside Audit & Supervisory Board
Membercompany, and confirms that rigorous legal compliance is observed

Hiroichi Uekusa

throughout the Group.

Outside Audit & Supervisory Board
Membera Board of Directors

Hisako KatoManagement decisions that reflect outside opinions(As of March 31, 2015)

The Board of directors discusses and makes decisions on importantbusiness matters, and also supervises directors and officers’ execution ofn Officer Systembusiness duties. The Board holds meetings monthly, in principle. It also

Clear segregation of the management and business execution functions

includes three outside directors who, together with three audit & supervi-

JSR has introduced an officer system to separate Company-wide man-sory board members (including two outside ones) engage in robust ex-agement monitoring by directors and business execution by officers. Thechanges of opinions at Board meetings. By introducing independent andsystem accelerates decision-making from the functions of businessneutral outside directors with extensive business experience, we seek to

execution by directors and officers, respectively, and also strengthens thereinforce the appropriateness of judgments made by management andsupervisory function of directors and clarifies roles and responsibilities.

monitor the legality of their execution of duties.

JSR CORPORATION

28

ANNUAL REPORT 2015

C R E A T I N GS U S T A I N A B L E

V A L U E

Corporate Governance System
Outside Directors

Michio Kariya

The Company has appointed three outside directors in order to further

Michio Kariya served as president, CEO and COO ofreinforce the monitoring function of the Board of Directors. By welcoming

Nikon Corporation and is currently a executive

outside directors with extensive experience and highly impartial, neutral

advisor. Mr. Kariya has extensive experience in theperspectives, we will ensure more appropriate management decision-

management of Nikon, a globally renowned opticalmaking and reinforce our ability to monitor the legality of business execution.

equipment company. He has helped strengthen
corporate governance by deploying this experience
to ensure reasonable judgments by management from external, indepen-

Takuya Goto

dent and neutral perspectives, as well as management transparency andTakuya Goto served as Representative Director andsoundness. For this reason, Mr. Kariya has been named an outside direc-

President, and Chairman, Board of Directors of Kao

tor, as he was in the previous year.

Corporation. Mr. Goto has extensive experience inthe management of Kao, a prominent international

Major activities in the year under review

consumer products and chemical company. He has

Mr. Kariya participated in all 17 meetings of the Board of Directors held

helped strengthen corporate governance by deploy-during the year under review, at which he contributed amply to fair anding this experience to ensure reasonable judgments by management fromreasonable management decisions and transparent and sound management

external, independent and neutral perspectives, as well as managementby addressing the Board as appropriate concerning matters under discus-transparency and soundness. For this reason, Mr. Goto has been namedsion. Mr. Kariya brought to the Board an independent outside perspective

an outside director, as he was in the previous year.

based on his extensive experience in the management of a company that
operates an international business in optical machinery and equipment.

Major activities in the year under review
Mr. Goto participated in all 17 meetings of the Board of Directors held
during the year under review, at which he contributed amply to fair andKazunori Yagi

reasonable management decisions and transparent and sound manage-

Kazunori Yagi is a corporate advisor for Yokogawa

ment by addressing the Board as appropriate concerning matters underElectric Corporation. Mr. Yagi has extensive experi-

discussion. Mr. Goto brought to the Board an independent outside per-ence in the management of Yokogawa Electric, aspective based on his extensive experience in the management of a

globally renowned producer of control systems andcompany that operates an international business in consumer products

measurement instruments. JSR anticipates that Mr.

and industrial-use chemicals.

Yagi will help strengthen corporate governance bydeploying this experience to ensure reasonable judgments by management from external, independent and neutral perspectives, as well as
management transparency and soundness. For this reason, Mr. Yagi has
been named an outside director as he was in the previous year.

JSR CORPORATION

29

ANNUAL REPORT 2015

C R E A T I N GS U S T A I N A B L E

V A L U E

Corporate Governance System
Major activities in the year under review

also shares information to ensure a common understanding of such

Mr. Yagi participated in all 17 meetings of the Board of Directors held

matters and discusses company directions. Its findings are reflected induring the year under review, at which he contributed amply to fair anddeliberations of the Board of Directors and the Executive Committee.

reasonable management decisions and transparent and sound manage-

The Business Issues Committee, which meets once a week, consists ofment by addressing the Board as appropriate concerning matters under

the president, officers with directorship status, and officers appointed bydiscussion. Mr. Yagi brought to the Board an independent outside per-the president.

spective based on his extensive experience in the management of acompany that operates an international business in control systems andd Officers Committee

measurement instruments.

Sharing of information on business conditions and issues
This committee is held in order to share information from all departments
concerning the execution of business activities, to ensure members’

b Executive Committee

thorough understanding of important business matters and to enhance

Rapid response to changes in the business environment

their communications. This committee consists of the president, senior

The Executive Committee holds extensive discussions on items con-officers, officers and a standing audit & supervisory board member, except

cerning fundamental management initiatives, management policies, andoverseas representatives. As a rule, this committee meets twice a month

management plans, along with important matters concerning theand is chaired by the president.

execution of business activities at each department. The committee
thus gives direction concerning these issues. As required, certain items

e Audit & Supervisory Board

submitted to this committee are passed on to the Board of Directors

Auditing by specialists in an independent position

for further discussion.

This board meets every month as stipulated in the regulations governingThis committee is made up of the president, officers with directorshipstatus, and officers appointed by the president, and responds to important

this body. The audit & supervisory board receive reports on importantmatters, hold discussions, and make decisions.

business execution with the aim to expedite decision-making and improve

In accordance with standards for audits by audit & supervisory

the efficiency of such operations. As a rule, this committee meets once aboard members of the Company, the audit & supervisory board mem-

week, and is chaired by the president. The standing audit & supervisory

bers attend meetings of the Board of Directors, and the standing corpo-

board member also attends these committee meetings.

rate auditor attends Executive Committee and other important committee meetings to monitor how important decisions are reached andc Business Issues Committee

business activities are executed. The audit & supervisory board mem-

Review of policies and strategies for individual projects

bers also receive reports from the independent auditors, directors, and

The Business Issues Committee engages in broad-ranging debate aboutothers. Through these activities, the Audit & Supervisory Board holds

items related to fundamental management strategies and policies, basic

deliberations in order to form auditing opinions.

policies behind specific projects, and changes to business strategies. It

JSR CORPORATION

30

ANNUAL REPORT 2015

C R E A T I N GS U S T A I N A B L E

V A L U E

Corporate Governance System
Outside Audit & Supervisory Board Members

Hisako Kato (New appointee)

To ensure the fairness and transparency of management, the Company

Ms. Kato will greatly contribute to further enhance its corporate gover-appoints one standing audit & supervisory board members, as well as twonance by providing fair and reasonable judgment for, and accountable andoutside audit & supervisory board member. The outside audit & supervi-

sound management of, the businesses of the Company through utilization

sory board members have no personal, financial, or business interests inof her range of professional knowledge and vast experience on counting

the Company. They are called upon to ensure the sound governance ofand tax matters as a Certified Public Accountant both in Japan and US

the Company while drawing on their respective careers.

and as a Certified Tax Accountant, as well as neutral and independentview point as an independent outsider.

Hiroichi Uekusa

Major activities in the year under review

Hiroichi Uekusa does not concurrently hold theMs. Kato attended all 13 meetings of the Board of

position of director in another company. Mr. Uekusa

Directors and all 12 meetings of the Audit & Supervi-

contributes to ensuring reasonable judgments bysory Board held since assume Audit & Supervisory

management, as well as management transparency

Board Members. He contributed amply to the auditing

and soundness by auditing the Company from aof the Company and to fair and reasonable manage-

position of independence while drawing on thement decisions and transparent and sound manage-extensive knowledge and experience in legal matters he possesses as anment by addressing the Board of Directors and Audit & Supervisory Board

attorney.

as appropriate concerning matters under discussion. Ms. Kato brought toboth boards an independent outside perspective based on his extensive

Major activities in the year under review

experience as a certified public accountant, certified public tax accountant

Mr. Uekusa attended 16 of the 17 meetings of the Board of Directors andand his expert knowledge in a broad range of finance and accounting.

16 of the 17 meetings of the Audit & Supervisory Board held during theyear under review. He contributed amply to the auditing of the Company
and to fair and reasonable management decisions and transparent andf CSR Committee

sound management by addressing the Board of Directors and Audit &Implementation of CSR activities and rigorous compliance

Supervisory Board as appropriate concerning matters under discussion.

The CSR Committee was established to ensure that JSR fulfills its respon-

Mr. Uekusa brought to both boards an independent outside perspective

sibilities to society and complies with laws and regulations. Under the CSR

based on his extensive experience as an attorney at law and his expert

Committee, four committees were established: the Corporate Ethics

knowledge in a broad range of legal matters.

Committee, the Responsible Care Committee, the Risk Management
Committee, and the Social Contribution Committee. The CSR Committee
integrates and guides the activities of the above four committees andmeets four times each year along with special meetings as necessary tofurther strengthen the Company’s CSR efforts.

JSR CORPORATION

31

ANNUAL REPORT 2015

C R E A T I N GS U S T A I N A B L E

V A L U E

Corporate Governance System
The CSR Committee is chaired by the officer responsible for CSR andand upgrade JSR’s programs to eliminate accidents, reduce environ-consists of officers, senior officers, and officers. Bureaus of the four

mental impact, manage chemical substances, and ensure safety ofcommittees listed above also attend meetings of the CSR Committee. The

products. Details and results of Responsible Care activities are disclosed

Committee clarifies the Company’s stance toward CSR and works tothrough the CSR Report and Responsible Care Reports prepared bystrengthen CSR efforts at JSR.

individual plants.
The CSR Report is audited by a third party to improve the reliability

g Corporate Ethics Committee

and transparency of the data. Through these activities, the committee is

Promotion of ethical business activities group-wide

dedicated to winning greater trust from customers and addressing any

The Corporate Ethics Committee, chaired by the officer in charge ofconcerns among residents in the neighborhoods of JSR’s facilities.

general affairs, was established under the CSR Committee to implement
corporate ethics standards and prevent improper actions throughout the

To make the information widely available, the CSR Report is posted on
the JSR website (http://www.jsr.co.jp/jsr_e/csr/index.shtml).

JSR Group. The JSR Group Principles of Corporate Ethics have been
prepared to provide a code of conduct for executives and employees. It is

i Risk Management Committee

also prepared in Traditional Chinese, Thai, and Korean, in addition toFurther strengthening risk management systems

English and Simplified Chinese, so that Group employees all over the

JSR places strong management priority on preventing serious crises fromworld can become better acquainted with the Principles. As for the report-

occurring and on minimizing the impact of crises that do occur on its

ing system, along with the internal hotline linked to the Corporate Ethics

business activities. To this end, the Company established the Risk Man-

Committee and the external hotline linked to an external attorney, JSR

agement Committee under the CSR Committee, with the officer respon-

introduced a hotline that is linked to a specialized external agency and issible for Corporate Planning as chair. The Committee decides policies andalso available in English, Chinese, Korean and Thai.

plans in response to crises, both present and potential, and promotes
continuous improvement.

h Responsible Care Committee
Working to enhance safety, the environment, and quality

j Social Contribution Committee

JSR conducts a Responsible Care program to fulfill its obligations to

Examining and promoting socially beneficial activities

achieve sustainable development. The Responsible Care Committee was

The Social Contribution Committee was established under the CSR Com-established under the CSR Committee to ensure that Responsible Caremittee and is chaired by the officer responsible for Corporate Communica-

activities are conducted effectively across the entire company. The

tions. JSR has been involved in many activities that contribute to society at

committee is chaired by the managing officer for safety and environmen-

the local level. JSR will expand its activities to cover the whole society andtal affairs, demonstrating Responsible Care position as a core compo-

provide more active approaches. The Social Contribution Committee studies

nent of JSR’s management. This committee approves Responsible Carethe formulation of new programs and pursues initiatives according to its

plans, evaluates and verifies results of activities, and helps to maintain“Basic Approach to Social Contribution,” published in January 2009.

JSR CORPORATION32

ANNUAL REPORT 2015

C R E A T I N GS U S T A I N A B L E

V A L U E

Corporate Governance System
Status of Internal Audit, Audits by Audit & Supervisory Board Members

sory Board members are paid a basic fixed salary that is not perfor-and Financial Audits

mance-based. In fiscal 2015, total salaries paid to Audit & Supervisory

Management oversight from various perspectives

Board members amounted to ¥37 million, including ¥27 million paid to

JSR has adopted the audit & supervisory board member system. Thereinternal Audit & Supervisory Board members and ¥10 million to outside

are three audit & supervisory board members, including two from outside

corporate auditors.

the JSR Group. These auditors are staffed by one individual. Audits are

The Company recently established the Remuneration Advisory Com-

performed as described in the section concerning the Audit & Supervi-

mittee, which deliberates about matters such as the basic remuneration

sory Board.

policies, the remuneration system, and the annual bonus scheme and

The audit & supervisory board members work closely with the inde-

reports to the Board of Directors.

pendent auditors. The audit & supervisory board members receive reportson the financial accountant’s audit plan and audit results. Furthermore,
the audit & supervisory board members and financial accountants exchange information and opinions as necessary in the course of each fiscal
year. The internal audit has been conducted by the Internal Audit Department as a specialized internal auditing unit. The audit & supervisory board
members receive reports on the audit plan and audit results from theInternal Audit Department regularly, exchange opinions, and enhance theauditing system.
Remuneration
Advice on remuneration for corporate officers fromthe Remuneration Advisory Committee
The remuneration of the Company’s directors consists of a basic salary, abonus based on consolidated performance for the year, and stock
options that serve as a long-term incentive. The level of remuneration iscommensurate with the Company’s business results and is comparedwith those of other companies in the same industry and of similar size.
The total limit for monthly salaries is decided by resolution at the Ordinary
General Meeting of Shareholders. Performance-based bonuses and stock
options are also approved by resolution at the Ordinary General Meetingof Shareholders. Total remuneration paid in fiscal 2015, ended March 31,
2015, was ¥188 million, paid to eight directors, including three outside
directors and a director who retired during fiscal 2015. Audit & Supervi-

JSR CORPORATION

33

ANNUAL REPORT 2015

C R E A T I N GS U S T A I N A B L E

V A L U E

Directors, Audit & Supervisory Board Members, and Officers (As of June 17, 2015)
Directors and Audit & Supervisory Board Members
Representative Director
and President

Mitsunobu Koshiba

Representative Director

Director

Director

Hozumi Sato

Hisao Hasegawa

Hayato Hirano

Standing Audit &Supervisory Board
Member

Shoichi Kataoka

Outside Director

Outside Director

Outside Director

Michio Kariya

Kazunori Yagi

Yuzuru Matsuda

Outside Audit &Supervisory
Board Member

Outside Audit &Supervisory
Board Member

Hiroichi Uekusa

Hisako Kato

Officers (*Directors)
Executive Vice President

Senior Officer

Senior Officer

Hozumi Sato*

Atsushi Kumano

Takatoshi Nagatomo

Officer

Officer

Strategic Businesses, Director of MEDICAL &BIOLOGICAL LABORATORIES CO., LTD.,
Executive Officer of JSR Life Sciences
Limited Liability Company

President of JSR Micro Korea Co., Ltd.

President of JSR MOL Synthetic Rubber Ltd.

Kazumasa Yamawaki

Yoichi Mizuno

Senior Officer

Senior Officer

Optical Materials Business, General Manager
of Optical Materials DivisionNobuo Kawahashi

Takeshi Sugimoto

Petrochemical Products Sector (deputy),
General Manager of Business Planning Dept.
Petrochemical Products

Research & Development, General Manager of
R&D Department

Electronic Materials Business, General
Manager of Electronic Materials Division

Officer

Senior Officer

Senior Officer

Kazuyoshi Nakazawa

Eric Johnson

Yokkaichi Plant, Yokkaichi Plant Manager

President of JSR Micro, Inc.

Senior Officer

Senior Officer

Makoto Doi

Hayato Hirano*

Takao Shimizu

Accounting and Finance, Corporate Communications, Group Companies Coordination,
Human Resources, General Manager of Group
Companies Coordination Department

Corporate Planning, Office of the President,
CSR, General Manager of Office of
the President

Legal, General Affairs, General Manager ofLegal Department

Executive Managing Officer

Koichi Kawasaki
Petrochemical Products Sector (including
Plastics), General Manager of Petrochemical
Products Div., President of Japan Butyl Co.,
Ltd., Vice President of KRATON JSR
ELASTOMERS K.K.
Managing Officer

Hisao Hasegawa*
Procurement, Logistics, Manufacturing andTechnology, Product Safety & Quality
Assurance, IT Strategy, General Manager of
Manufacturing and Technology GroupManaging Officer

Yasuhisa Nagahiro
Safety and Environment Affairs

Business Planning and Business Development,
Fine Chemicals Business, General Manager ofBusiness Planning, Fine Chemicals Business

China Business, Chairman of JSR (Shanghai)Co., Ltd.

JSR CORPORATION

34

Kiichiro Kamiya
Strategic Businesses (deputy), President of
JSR Life Sciences Corporation, Director of
MEDICAL & BOLOGICAL LABORATORIESCO., LTD.

Officer

Tsuyoshi Watanabe

Katsuya Inoue

Eiichi Kobayashi
Strategic Businesses (deputy), President of
JM Energy Corporation

Officer
Senior Officer

Officer

Officer

Hiroaki Nemoto
Display Materials Business, General Manager
of Display Materials Division, Chairman of
JSR Micro (Changshu) Co., Ltd.

ANNUAL REPORT 2015

OfficerMika Nakayama
Diversity Development, General Manager ofCorporate Planning Dept. and Diversity
Development Office
Officer

Yoshikazu Yamaguchi
General Manager of Business Development
for Fine Chemical BusinessJ S RG L O B A L

N E T W O R K

JAPANHEAD OFFICEJSR Corporation
1-9-2, Higashi-Shinbashi, Minato-ku, Tokyo
105-8640, Japan
BRANCH OFFICES
Nagoya Branch
A Wallisellen Branch (Switzerland)
B Taiwan Branch
C Singapore Branch
PLANTS
Yokkaichi Plant
100 Kawajiri-cho Yokkaichi,
Mie 510-8552, Japan
Chiba Plant
5, Chigusakaigan, Ichihara,
Chiba 229-0108, Japan
Kashima Plant
34-1, Tohwada, Kamisu,
Ibaraki 314-0102, JapanOVERSEAS

Elastomers Business
ELASTOMIX CO., LTD.
Compounding of crude rubber and sales ofcompounded products.

MEDICAL & BIOLOGICAL LABORATORIESCO., LTD.
Research, development, manufacturing, andsales of diagnostic and research reagents.

Elastomers Business
Kumho Polychem Co., Ltd.(*)
Production and sales of ethylene-propylene
rubber (EPR).

Techno Polymer Shanghai TechnicalDevelopment Co., Ltd.
Production and processing of plastics andtechnical services related to plastics in China.

Japan Butyl Co., Ltd.
Production, processing, and sales of butyl
rubber.

SCIVAX Life Sciences, Inc.
Sales of three-dimensional (3D) cell culture
plates, technology development, commissioned
business, and consulting related to 3D cell
culture.

ELASTOMIX (THAILAND) CO., LTD.
Compounding of crude rubber and sales ofcompounded products.

Techno Polymer Guangzhou Co., Ltd.
Sales and technical services of synthetic resin in
Guangzhou and neighboring regions.

PT.ELASTOMIX INDONESIA
Compounding of crude rubber and sales ofcompounded products.

TECHNO POLYMER AMERICA, INC.
Sales of plastics and technical services related toplastics in North America.

KRATON JSR ELASTOMERS K. K.
Production, purchase, and sales of thermoplastic
rubber.
Emulsion Technology, Co., Ltd.
Production and sale of acrylic emulsions, latex
processed products including CL, adhesives,and cement admixture.
Plastics BusinessTechno Polymer Co., Ltd.
Production, sales, and R&D of synthetic resin.

Business in Other Fields
JSR Trading Co., Ltd.
Export, import, purchase, and sales of thefollowing: various chemicals, machinery,equipment, physical distribution materials,
living necessaries, foodstuffs, beverages, andnon-life insurance.
JEY-TRANS CO., LTD.
Freight forwarding, warehousing, and delivery
management.

JAPAN COLORING CO., LTD.
Coloring of synthetic resin and sales of coloredproducts.
Fine Chemicals and Other Products Business
D-MEC LTD.
Commissioned generation of 3D models, sales ofsolid modeling systems, and optically-hardened
resins, and commissioned analysis by CAE.
JSR Micro Kyushu Co., Ltd.
Production of photoresist, semiconductors, andmaterials for displays.
JSR Optech Tsukuba Co., Ltd.
Production of UV curing type optical fiber coating
materials.
JAPAN FINE COATINGS Co., Ltd.
Sales of coating materials for fiber-optic cables
reinforced by ultraviolet or electron radiation andfor other apparatus.

JSR Logistics & Customer Center Co., Ltd.
Customer service agent andlogistics management.
JSR ENGINEERING CO., LTD.
Engineering and consultation for chemicalengineering equipment.
JSR Business Services Co., Ltd.
Undertaking of general affairs, accounting,payroll calculation, and welfare.
JN System Partners Co., Ltd.
Computer system design, programming andsystem operation, and maintenance.
CMIC JSR Biologics Co., Ltd.
Developing design and manufacturing processes
for next-generation antibodies

JM Energy Corporation
Development, manufacturing, and sales oflithium ion capacitors and modules.

ELASTOMIX (FOSHAN) CO., LTD.
Compounding of crude rubber and sales ofcompounded products.
Tianjin Kuo Cheng Rubber Industry
Co., Ltd.
Compounding of crude rubber and sales ofcompounded products.
JSR BST Elastomer Co., Ltd.
Sales and manufacturing of S-SBR (Solution
Polymerization Styrene-Butadiene Rubber).
JSR Trading, Inc.
Purchases and sales of synthetic rubber.
JSR Trading (Shanghai) Co., Ltd.
Export, import, and purchases of industrial-use
chemical products.
JSR MOL Synthetic Rubber, Ltd.
Sales and manufacturing of Solution Polymerization Styrene-Butadiene Rubber (S-SBR).
JSR Elastomer Korea Co., Ltd.
Sales agency of products such as synthetic
rubbers.
Plastics Business
TECHNO POLYMER HONG KONG
CO., LTD.
Sales and technical services of synthetic resinin Hong Kong and neighboring regions.
Techno Polymer (Thailand) Co., Ltd.
Sales and technical services of synthetic resin
in ASEAN region.

Tri Chemical Laboratories Inc.
Production and sales of semiconductormaterials and other materials for compound
semiconductors.

Techno Europe N.V.
Sales and technical services of synthetic resinin Europe.

JSR Life Sciences Corporation
Production and sales of life science relatedmaterials.

Techno Polymer (Shanghai) Co., Ltd.
Sales and technical services of synthetic resin
in China.

JSR CORPORATION

35

ANNUAL REPORT 2015

Fine Chemicals and Other Products Business
JSR Micro N.V.
Production and sales of semiconductor materials.
JSR Micro, Inc.
Production and sales of semiconductor materials.
JSR Micro Korea Co., Ltd.
Production, development, and sales of display
materials and semiconductor materials.
JSR Micro Taiwan Co., Ltd.
Production, development, and sales of display
materials.
JSR (Shanghai) Co., Ltd.
Sales agency of products such as synthetic
rubber, semiconductor materials, liquid crystal
display materials, and performance chemicals.
J&W Beijing Biotech Co., Ltd.
R&D of intermediate diagnostics, wholesale ofintermediate diagnostics, processed goods,
electronic products, and hardware. Import andexport of cargo, commission agency services(exclude auction), assignment of technologies,
consulting, and services.
JSR Electronic Materials Korea Co., Ltd.
Sales agent for semiconductor materials.
JSR Micro (Changshu) Co., Ltd.
Production of display materials.
JSR Trading Co., Ltd. Korea BranchExports, imports and sales of various chemicals.
JSR Trading Bangkok Co., Ltd.
Exports and imports, purchase and sales ofchemicals and testing machinery.
KBI Biopharma, Inc.
Biopharmaceutical contract development andmanufacturing services.

C O R P O R A T E

D A T A(As of March 31, 2015)

JSR Corporation

Composition of Shareholders

Established
December 10, 1957

Individuals and others

Capital (Common Stock)¥23,320 million
Employees
5,990
Closing date
JSR books are closed on March 31, each year.

16,482

70,627486

95,388Other domestic corporations

243

46,199FY2006

Financial institutions

77

22,545

Securities companies

48

3,215

17,336

237,973

Number of Shares Issued
237,973,205 shares

Financial
institutions
31.03%
Percentageof shares
held (%)

Number ofshares held
(thousands)

14.02

32,266FY2012FY2014

By Number of Shares Held
Less than 1
trading unit
0.02%

1 tradingunit or more
3.66%
50 trading
units or more
3.81%

4.05

9,337

Japan Trustee Services Bank, Ltd.
(Trust Account)

3.84

8,851

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

3.77

8,680

Mizuho Bank, Ltd.

1.83

4,225

Ordinary General Meeting of Shareholders

Nippon Life Insurance Company

1.61

3,717

The annual general meeting of shareholders is held in June

Meiji Yasuda Life Insurance Company

1.57

3,631

each year. The 2015 annual general meeting was held on

THE BANK OF NEW YORK MELLON SA/NV 10

1.44

3,316

June 17, 2015.

Japan Trustee Services Bank, Ltd.
(Trust Account 9)

1.34

3,103

STATE STREET BANK AND TRUST COMPANY
505001

1.13

2,611

FY2015

High
Low
High
Low
High
Low
High
Low
High
Low
High
Low
High
Low
High
Low
High
Low
High
Low
High
Low

1st Q

2nd Q

3rd Q

4th Q

2,520
1,892
2,395
2,000
3,710
2,535
2,985
2,540
2,460
2,000
1,687
1,162
1,999
1,436
1,724
1,413
1,695
1,255
2,360
1,748
1,933
1,622

2,180
1,655
2,635
2,175
2,930
2,280
3,120
2,445
2,180
1,246
1,960
1,561
1,666
1,201
1,655
1,221
1,455
1,274
2,073
1,713
1,975
1,681

2,265
1,790
3,150
2,370
3,170
2,505
3,020
2,465
1,397
795
1,959
1,545
1,543
1,341
1,582
1,218
1,644
1,224
2,049
1,663
2,229
1,711

2,255
2,040
2,810
3,040
3,240
2,530
2,875
1,886
1,312
990
1,974
1,714
1,875
1,183
1,790
1,408
1,994
1,670
2,085
1,694
2,171
1,893

(Yen)
2,500

500 trading
units or more
2.11%

1,000 trading
units or more
90.40%

2,000

1,500

1,000

Transfer Agent and Register
The Chuo Mitsui Trust and Banking Co., Ltd.

500

0

Auditors
KPMG AZSA & Co.

JSR CORPORATIONFY2011FY2013

STATE STREET BANK AND TRUST COMPANY
505223* 7,861,771 shares of treasury stock held by the Company are not included in theabove breakdown of major shareholders.

FY2008FY2010Foreigncorporations
and individuals
40.08%

Other domestic
corporations
19.41%

Number of Shareholders
17,336

FY2007

FY2009By Type of Shareholders
Individuals/others
9.48%

Major Shareholders(Yen/share: Tokyo Stock Exchange)

Foreign corporations and individuals

Stock Listing
Tokyo Stock Exchange

Bridgestone Corporation

Shares held
(thousands)

FY2005

Total

Shareholders Information (As of March 31, 2015)

Common stock price range
Shareholders

36

ANNUAL REPORT 2015

’11/3

’11/9

’12/3

’12/9

’13/3

’13/9

’14/3

’14/9

’15/3

FINANCIAL
SECTION
20

CONTENTS
01 TEN-YEAR SUMMARY
03 MANAGEMENT’S DISCUSSION AND ANALYSIS
05 RISK INFORMATION
07 CONSOLIDATED FINANCIAL STATEMENTS:
07 CONSOLIDATED BALANCE SHEETS
09 CONSOLIDATED STATEMENTS OF INCOME
10 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
11 CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS
12 CONSOLIDATED STATEMENTS OF CASH FLOWS

13 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
32 INDEPENDENT AUDITORS’ REPORT

1

5

<<

01

>>

JSR CORPORATIONANNUAL REPORT 2015

> FINANCIAL SECTION

TEN-YEAR SUMMARY
Fiscal year means year ended March 31

FY2006

FY2007

FY2008FY2009Net sales¥338,160¥365,831¥406,968¥352,503

Costs and expenses

284,803

310,588346,958

322,155

Operating income

53,35755,24360,01030,348

635

1,030

1,309

1,230

For the fiscal year

Interest and dividend income
Interest expenses

(420)

(399)

(256)

(271)

Income before income taxes and minority interests

49,03853,44054,86720,803

Net income

30,55533,65536,994

13,981

Capital expenditures

23,36122,09429,076

19,081

Depreciation

16,20618,133

21,18024,833381,097

408,949

416,951

339,498

1,607

2,745

1,525

1,500

Total liabilities

164,389

168,963

159,288

97,512Equity212,751

235,186

252,539

240,896

Current ratio (times)

1.7

1.8

1.9

2.5

Return on assets (%)

8.7

8.2

8.9

4.1

Return on equity (%)

15.5

15.0

15.2

5.7

Equity ratio (%)

55.8

57.5

60.6

71.0

119.63133.10147.2656.36

At fiscal year-end
Total assets
Long-term debt due after one year

Per share of common stock (Yen and U.S. dollars)
Net income
Cash dividends

20.00

24.00

32.00

32.00

Equity836.31935.47

1,009.27

986.33

Note: U.S. dollar amounts are translated from yen, for convenience only, at a rate of $1=¥120.17; the exchange rate prevailing at March 31, 2015.

Net Sales/Net Income

Operating Income/Operating Income Margin(¥ billions)

Total Assets/ROA(¥ billions)

500

50

40

38.1

(%)

(¥ billions)

16

600

(%)
12

534.6
404.1

400

29.9

300

200

30

500

10

400

8

300

5.8 6

200

4

100

2

12

30

9.4
20

8

10

4

20

100

0

40

10

FY2011
Net sales
Net income

12

13

14

15

0

0

FY2011

12

Operating income
Operating income margin

13

14

15

0

0

FY2011
Total assets
ROA

12

13

14

15

0

<<

02

>>

JSR CORPORATIONANNUAL REPORT 2015

> FINANCIAL SECTION

Millions of yen

FY2010FY2011FY2012FY2013

FY2014FY2015FY2015¥310,184¥340,666¥349,947¥371,487¥394,309¥404,073$3,362,515

289,954

301,571

313,982

336,281358,247

366,005

3,045,727

20,23039,09535,96435,20636,06238,068316,788

568

626

634

809

916

1,390

11,570

(172)

(146)

(147)

(126)

(142)

(345)

(2,874)

19,45840,674

41,24542,84736,956

41,069341,755

13,64527,571

26,40730,27825,17329,919248,969

17,707

11,801

19,72827,60821,49935,157

292,562

22,38019,245

17,784

19,14518,096

17,407

144,851

373,566

390,591

430,693482,935

501,320534,592

4,448,633

1,500

1,028

500

6,626

11,06920,387

169,654

122,865

126,475

148,335

167,202

164,060

169,918

1,413,983

249,440

262,679

280,955

308,641

331,284

358,3032,981,633

2.3

2.4

2.3

2.3

2.5

2.5

2.5

3.7

7.1

6.4

6.6

5.1

5.8

5.8

5.6

10.8

9.7

10.3

7.9

8.7

8.7

66.8

67.3

65.2

63.9

66.1

67.0

67.0

55.87

113.07109.46126.13106.10128.19

1.07

26.00

32.00

32.00

34.00

38.00

40.00

0.33

1,021.31

1,088.87

1,164.63

1,299.77

1,409.06

1,557.08

12.96

Shareholders’ Equity/ROE

R&D Expenses/
Capital Expenditures

Shareholder Return/
Dividend Payout Ratio(¥ billions)(%)(¥ billions)(¥ billions)

400

20

40

20

358.3
15

30

200

10

20

22.5
8.7
100

FY2011

12

Shareholders’ equity
ROE

13

14

15

(%)

10.3

35.2

300

0

Thousands of U.S. dollars

16

40

12

31.2 30
9.3

8
5

10

0

0

12

R&D expenses
Capital expenditures

13

14

15

0

20

10

4

FY201150FY2011

12

Dividend
Share buyback
Dividend payout ratio

13

14

15

0

<<

03

>>

JSR CORPORATIONANNUAL REPORT 2015

> FINANCIAL SECTION

MANAGEMENT’S DISCUSSION AND ANALYSIS
Analysis of Operating Results
Overview of FY2015, ended March 31, 2015

Review of Operations

In the year under review, the JSR Group faced an environment inElastomers Business Segment

which raw material prices fell in conjunction with a sharp decline in oil

In the automobile tire industry, one of our chief sources of demand,

prices in the second half, and the market for our products worsened.

production in North America and China rose year on year, while Europe

In addition, the value of the yen fell substantially as we entered thehad only a small increase, and production in Japan remained constant.

second half. On the other hand, global output increased in the auto-

Under these conditions, sales of synthetic rubber products were

mobile tire and automobile industries, two of the main industries

affected by a brief delay in the startup of Solution Styrene-Butadiene

represented by our customers. Demand was also strong across the

Rubber (S-SBR) at a Thailand joint venture. This venture is now

board in semiconductors, especially demand related to multifunctional

steadily approaching full production. However, due to such factors as

mobile devices such as smartphones and tablet computers. Also,

the flat year-on-year production of automobile tires in Japan, theproduction of flat panel displays (FPD) was strong on demand foroverall sales volume for elastomers was down slightly. For the seg-large-screen TVs.

ment, net sales were roughly at the same level as the previous fiscal

Under these circumstances, the JSR Group achieved net sales atyear, as weak market conditions continued. These results were alsoroughly the same level as the previous fiscal year, while operating

affected by yen depreciation and the effect of price revisions in theincome fell substantially below its prior-year value. In the Petrochemi-

face of rising raw material prices in the first half. However, a global

cal Products Business, demand grew globally, with the main drivers indeterioration in the demand-supply balance for synthetic rubber andthe Elastomer Business segment. Spreads tightened and market

butadiene has caused spreads to erode as the synthetic rubber

conditions deteriorated in East Asia, in particular, as excess supply

market weakens, resulting in lower sales volume. These conditions,

made the demand-supply balance less favorable. In the Fine Chemi-

together with higher expenses for periodic maintenance, led to acals and Other Products Business, the Semiconductor Materials andsizable year-on-year fall in operating income.

Display Materials Business segments, rising sales were underpinned

As a result, the Elastomers Business segment had net sales ofby strong semiconductor and FPD markets. In addition, the JSR¥198,958 million (down 2.2% year on year) and operating income ofGroup’s withdrawal from the unprofitable precision materials and¥10,736 million (down 38.1%).

processing field helped boost earnings. Net sales rose over theprevious fiscal year while operating income was well over the previous

Plastics Business Segment

year’s performance, which helped offset underperformance in the

Automobile production, a major demand driver for the JSR Group’s

Petrochemicals Products Business. Ordinary income was also up

products, increased year on year in North America and China, but

versus the previous fiscal year, but deteriorating income at a petro-remained generally flat in Europe while in Japan it was affected by thechemicals equity affiliate detracted from net income.

revision to the consumption tax. On the whole, worldwide production

Financial results for FY2015 consist of net sales of ¥404,073

fell year on year.

million (up 2.5% year on year), operating income of ¥38,068 million (upUnder these circumstances, plastics sales volumes were below

5.6%), ordinary income of ¥41,609 million (up 5.0%), and net income

last year’s level, due to lower automobile production in Japan andof ¥29,919 million (up 18.9%).

decreased business in industrial materials, including those for construction and general applications. Sales by value were aided by yen

Segment Sales/Operating Income (¥ millions)
2011

2012

2013

2014

2015

Elastomers Business¥160,854¥180,835¥195,797¥203,478¥198,958

Operating income

14,73919,35817,923

17,33010,73652,297

51,23651,75957,76455,161Years ended March 31

Plastics Business
Operating income
Fine Chemicals and Other Products Business
Operating income
Net Sales
Operating income

2,563

2,138

2,962

3,919

2,842

127,515

117,876

123,931133,067

149,954

21,793

14,46814,321

14,81324,490340,666

349,947

371,487

394,309404,073¥ 39,095¥ 35,964¥ 35,206¥ 36,062¥ 38,068

<<

04

>>

JSR CORPORATIONANNUAL REPORT 2015

> FINANCIAL SECTION

depreciation and the effects of price revisions in conjunction withductors, we expect new demand to emerge for multifunctional mobile

rising material prices in the first half, but this was unable to make up

devices spurred by the active use of big data, and therefore ourfor the fall in volume; thus, net sales fell as a result. Operating income

favorable outlook remains in place. We also believe that the FPD

fell year on year due to the large impact of this sales decline, despite

market will show improved strength as the trend towards large-screen

the improving profit picture towards the end of the year.

TVs progresses along with the production of medium- to small-size

Owing to these factors, the Plastics Business segment had net
sales of ¥55,161 million (down 4.5% versus the previous fiscal year)
and operating income of ¥2,842 million (down 27.5%).

panels for multifunctional mobile devices.
In the Elastomers Business segment, global demand growth isexpected to expand, but due to the fall in crude oil prices and theslowness at which the supply-demand balance for synthetic rubber

Fine Chemicals and Other Products Business Segment

and butadiene is improving, we believe market conditions will con-

The Fine Chemicals and Other Products Business segment achieved

tinue to be soft. In this environment, steady increases can be expect-

net sales and operating income higher than the previous fiscal year’s.

ed in demand for S-SBR as the eco-tire market grows. Accordingly,

In semiconductor materials, net sales rose year on year, driven by

we plan to expand global sales through use of the new factory inrobust semiconductor demand in addition to the full-scale launch ofvolume production among major customers in leading edge 20nm

Thailand, which has now reached full production.
In the Fine Chemical and Other Products Business, we plan toprocessing, where JSR boasts a high market share. In display materi-expand sales of semiconductor materials focusing on greater sales ofals, steady demand for multifunctional mobile devices and large-screen

lithographic materials for 14nm processes, the successor to today’sTVs, particularly the market growth associated with the trend towards

leading-edge 20nm generation, as this new generation hits full steam.

larger TV screen, resulted in a year-on-year increase in net sales.

In the Display Materials Business segment, we have been responding

Key results in the segment were net sales of ¥149,954 million

to the movement towards large-screen TVs and ultra-precision LCD(up 12.7% year on year) and operating income of ¥24,490 million

panels. We are also moving ahead with business expansion in China,(up 65.3%).

where we expect to see future growth.

Business Outlook for FY2016

for FY2016 consists of net sales of ¥420 billion (3.9% year-on-year

JSR Group’s FY2016 outlook for its main customer industries is asincrease), operating income of ¥41 billion (7.7% increase), ordinary

follows. In the automobile tire and automobile industries, we do notincome of ¥42 billion (0.9% increase), and profit attributable to owners

expect major growth in Japan from last year’s level, but do expectof parent of ¥31 billion (3.6% increase). The assumptions behind thisstrong global growth especially in China and Southeast Asia, andforecast are an exchange rate of ¥115 JPY per U.S. dollar and aeven expect Europe and America to show some growth. In semicon-

naphtha price of ¥50,000 per kiloliter.

In consideration of the above, our consolidated earnings outlook

Analysis of Financial Position
Total assets at the fiscal year ended on March 31, 2015, amounted to¥534,592 million, up ¥33,272 million from a year earlier.
Current assets totaled ¥319,397 million, down ¥7,107 million, due
to increases in cash and deposits and decreases in and notes andaccounts receivable—trade and securities.

venture in Thailand.
Total liabilities amounted to ¥169,918 million, up ¥5,858 million
from a year earlier. Major factors include an increase in long-termloans payable and a decrease in notes and accounts payable—trade.
Net assets amounted to ¥324,321 million, including an ¥11,287

Noncurrent assets totaled ¥215,195 million, up ¥40,379 million.

million increase in shareholders’ equity. Accumulated other comprehen-

Major factors were an increase in investment securities as a result ofsive income was ¥33,981 million, up ¥15,731 million year on year. After

capital contributions in Japan and overseas and changes in thesubscription rights to shares and minority interests are also accounted

market value of certain securities in addition to an increase in plant,

for, total net assets come to ¥364,674 million, up ¥27,414 million.

property and equipment as a result of plant construction at a joint

Analysis of Cash Flows
Cash and cash equivalents (“funds”) on March 31, 2015, stood at¥51,481 million, up ¥16,005 million from a year earlier. Major factors¥77,906 million, down ¥13,208 million from a year earlier.

include income before income taxes and minority interests of ¥41,069

Net cash provided by operating activities was a net inflow ofmillion, depreciation of ¥17,407 million, decrease in notes and ac-

<<

05

>>

JSR CORPORATIONANNUAL REPORT 2015

> FINANCIAL SECTION

counts receivable—trade of ¥8,875 million, decrease in notes andsecurities, and ¥5,743 million for purchase of shares of subsidiaries

accounts payable—trade of ¥15,565, and income taxes paid ofresulting in change in scope of consolidation.

¥12,680 million.
Net cash from investing activities was a net outflow of ¥54,836

Net cash used in financing activities was a net outflow of ¥12,359
million, up ¥4,236 million from the previous year. Major factors include

million, an additional outflow of ¥63,057 million from the previous¥10,272 million for purchase of treasury shares, ¥9,136 million foryear. Major factors include expenditures of ¥32,542 million for the

cash dividends paid, and ¥9,102 million for proceeds from long-term

purchase of non-current assets, ¥11,300 million for investment

loans payable.

Profit Appropriation
The Company regards its most critical challenge as the long-termvalue while leading to new growth. In the period covered by theenhancement of business performance. To this end, we strive tomedium-term business plan, JSR20i6 (“JSR twenty-sixteen”), we aim

strengthen our research and development from a long-term stand-for a combined return to shareholders, including both share buybacks

point and intend to enhance our business competitiveness throughand cash dividends, of 50% or greater.

new business expansion.
In consideration of business earnings and long-term demand for

In accordance with this policy, we have decided to pay a yearend dividend of ¥20 per share as previously announced. This amountfinances, the JSR Group takes into account the balance between

is the same as the interim dividend, and the total annual dividend for

returning profits to shareholders and retaining earnings for futurefiscal year 2015, including the interim dividend already paid, will beCompany growth and will continue to pay a stable cash dividend.

¥40 per share.

Our policy with respect to returning profits to shareholders is to

For the next fiscal year (FY2016 ending on March 31, 2016), in

supplement the payment of cash dividends with the flexible execution

consideration of the business outlook, we plan to increase the cashof the purchase of Company shares, while taking into account thedividend to ¥50 per year, consisting of an interim dividend of ¥25 andmarket environment. Retained earnings shall be appropriated toa year-end dividend of ¥25.

various investments that contribute to the enhancement of corporate

Risk Information
The JSR Group is exposed to the following risks that may impact on(3) Fluctuation in Exchange Rates

operating results, financial position, cash flows and other aspects of

As the JSR Group undertakes product exports in foreign currencies

performance. Forward-looking statements in this discussion are

and imports goods such as raw materials, the Company takes

based on JSR’s judgments as of March 31, 2015. Risks at JSR

measures to reduce risks such as entering into forward exchange

include, but are not limited to, the following items:

contracts; however, fluctuation in exchange rates could give rise to
adverse outcomes. In addition, operating results of consolidated(1) Changes in Demand due to Economic Trends

subsidiaries and equity-method affiliates located overseas are con-

In the major industries where the JSR Group’s products are sold,verted into Japanese yen amounts for the purposes of preparing thesuch as automobiles and electronics, demand is influenced by the

consolidated financial statements. However, due to the yen’s appre-

economic climate in a country or region. An economic slowdown

ciation, the JSR Group’s business results could be adversely affected.

could reduce demand in an industry and adversely affect the JSRGroup’s operating results.

(4) Procurement of Raw Materials
The JSR Group works to ensure a stable supply of raw materials by(2) Fluctuation in Prices for Crude Oil, Naphtha andOther Major Raw Materials

procuring materials from a number of sources. However, an interruption to the supply of raw materials due to an accident, bankruptcy orHigher prices for crude oil and naphtha, or changes in the markets for

quality problem at a supplier could adversely affect production activi-

JSR’s major raw materials, could raise prices of raw materials andties and the JSR Group’s operating results.

adversely affect the JSR Group’s operating results, especially in the
petrochemical products sector of elastomers, emulsions and plastics.

(5) Development of New Products
Rapid technological progress is constantly taking place in the electronics industry, which is the primary source of demand for semicon-

<<

06

>>

JSR CORPORATIONANNUAL REPORT 2015

> FINANCIAL SECTION

ductor manufacturing materials, FPD materials and optical materials,(10) Environmental Issues

the major products of the JSR Group’s fine chemicals and other

Positioning environmental protection as an important element of its

products business. JSR is constantly working on developing state-of-operations, the JSR Group complies with all laws and regulations

the-art materials in line with this progress. However, unforeseen

concerning the environment. The Group also takes actions aimed atchanges in the industry or market could prevent the timely develop-

reducing its environmental impact, lowering and eliminating waste

ment of new products and adversely affect the JSR Group’s operat-materials, and cutting energy and resource consumption. The Grouping results.

has taken many actions to prevent the external release of all typesof chemicals.

(6) R&D Involving Next-Stage Growth Businesses

However, in the event that a spill occurs or that environmental

The JSR Group makes substantial investments in R&D to create

regulations become stricter, the Group’s business activities could benext-stage growth businesses. However, there is no guarantee that

restricted, the Group may have to pay compensation and otherthese R&D activities will always yield worthwhile results. Depending

expenses, or the Group may have to make substantial capital expen-

on R&D results, there could be an adverse effect on the JSR Group’s

ditures. Any of these events could adversely affect the JSR Group’s

operating results.

operating results.

(7) Protection of Intellectual Property(11) Overseas Operations

Protection of intellectual property is extremely important for the JSR

The JSR Group is aggressively expanding operations on a global

Group’s business activities. JSR has established a system for protect-scale, conducting manufacturing, sales and other activities in coun-ing its intellectual property and takes various actions as required.

tries and regions in the North America, Europe, Asia and other parts

However, a dispute about intellectual property with another companyof the world. Overseas operations are exposed to a number of risks

or an infringement on JSR’s intellectual property by another company

that include, but are not limited to, an unfavorable political environ-

could adversely affect the JSR Group’s operating results.

ment or economic trends; labor disputes and other problems due todifferences in labor laws and other working conditions; difficulty in(8) Product Quality Assurance and Product Liability

recruiting and retaining employees; an adverse impact on business

The JSR Group has a product quality assurance system and productactivities due to an inadequate social infrastructure; and the impact ofliability insurance. However, damage or injury caused by a productwars, terrorism and other social instability. Any of these events could

manufactured by the JSR Group could adversely affect the JSR

adversely affect the JSR Group’s operating results.

Group’s operating results.
(12) Laws and Regulations(9) Natural Disasters and Accidents

In the countries where it operates, the JSR Group is subject to various

To minimize the negative effect on its business activities of any disrup-

laws and regulations involving business and investment permits, export

tion to manufacturing activities, all JSR Group manufacturing facilities

and import activities, trade, labor relations, intellectual property, taxes,

have established countermeasures based on the identification of all

foreign exchange and other items. The Group has established a clear

potential sources of a crisis and conducts periodic inspections ofcompliance policy in order to ensure strict observance of laws andfacilities. The Group also works constantly on safety measures withregulations as well as ethical standards. In the event that a law orregard to earthquakes and other natural disasters. However, a major

regulation is violated, or a law or regulation becomes stricter or is signifi-

natural disaster or accident that damages a production facility or

cantly altered, there could be limitations to the Group’s businessdisrupts manufacturing could adversely affect the JSR Group’s

activities or additional compliance costs. Any of these events could

operating results.

adversely affect the JSR Group’s operating results.

JSR’s main production facility, the Yokkaichi Plant, houses private
power generation equipment, and the Kashima Plant is able to access(13) Litigationelectric power from shared power generation facilities when neces-

In conjunction with its business activities in Japan and overseas, thesary. In the event that electric power shortages become severe due to

JSR Group may be sued or be involved in other litigation concerning

natural disasters and the like, however, the JSR Group’s operatinga dispute with a supplier, customer or other external party. The

results could be affected.

outcome of significant litigation could adversely affect the JSRGroup’s operating results.

<<

07

>>

JSR CORPORATIONANNUAL REPORT 2015

> FINANCIAL SECTIONCONSOLIDATED BALANCE SHEETSJSR Corporation and Consolidated Subsidiaries
As at March 31, 2014 and 2015
Thousands of
U.S. dollars(Note 1)Millions of yen

2014

2015

2015

¥ 33,391¥ 47,984$ 399,304

Notes and accounts receivable—trade, net (Notes 4, 5, 7 and 16)

87,614

83,122

691,707

Short-term investment securities (Notes 3, 5 and 6)

81,00567,997565,841

Inventories (Note 7)

78,69079,321

660,073

Other (Notes 3, 5, 7, 9, 13 and 16)

45,80440,973340,949

326,504

319,397

2,657,874

Buildings and structures, net (Note 7)

30,62336,897

307,039

Machinery, equipment and vehicles, net (Note 7)

37,267

41,582

346,022

Land (Note 7)

18,626

17,762

147,805

Construction in progress

4,697

14,056116,966

Other, net (Note 7)

4,417

5,616

46,744

95,630115,913964,576

664

6,480

53,923

6,586

7,819

65,0647,250

14,299118,987

Investment securities (Notes 5 and 6)

60,95274,510620,038

Other, net (Notes 4, 5, 7 and 9)

10,984

10,47387,15871,93684,983

707,196

ASSETS
Current assets (Note 17):Cash and deposits (Notes 3, 5 and 7)

Total current assets
Noncurrent assets (Note 17):Property, plant and equipment (Note 15):Total property, plant and equipment
Intangible assets
Goodwill (Notes 15 and 17)
Other (Note 7)
Total intangible assets
Investments and other assets

Total investments and other assets
Total noncurrent assets

174,816

215,195

1,790,759

Total assets (Note 15)¥501,320¥534,592$4,448,633

See accompanying notes.

<<

08

>>

JSR CORPORATIONANNUAL REPORT 2015

> FINANCIAL SECTION

Thousands of
U.S. dollars(Note 1)Millions of yen

2014

2015

2015

¥ 85,334¥ 72,442$ 602,826

Short-term loans payable (Notes 5 and 7)

15,57918,640155,113

Other (Notes 9 and 13)

31,52935,245

293,297

Total current liabilities

132,442

126,327

1,051,236

Long-term loans payable (Notes 5 and 7)

11,06920,387

169,654

Net defined benefit liability (Note 8)

15,243

13,746

114,387

Provision for environmental measures

1,734

1,308

10,888Deferred tax liabilities (Note 9)

2,721

6,700

55,758LIABILITIES AND NET ASSETS
Current liabilities (Note 17):Notes and accounts payable—trade (Notes 5 and 16)

Noncurrent liabilities (Note 17):Other (Note 13)

851

1,450

12,060Total noncurrent liabilities

31,61843,591

362,747

Total liabilities

164,060

169,918

1,413,983

23,32023,320

194,060

Contingent liabilities (Note 18)
Net assets (Note 11)
Shareholders’ equity
Common stock:
Authorized—696,061,000 shares
Issued—237,973,205 shares in 2014 and 2015
Capital surplus

25,18025,179209,532

Retained earnings

269,621291,151

2,422,829(5,087)(15,329)(127,567)

Treasury stock
2,862,706 shares in 2014 and 7,861,771 shares in 2015
Accumulated other comprehensive income
Unrealized gains on securities, net of taxes

11,467

19,257160,250

Foreign currency translation adjustment

6,972

14,576

121,290

Remeasurements of defined benefit plans (Note 8)

(189)

149

1,239

793

852

7,094

5,183

5,519

45,923

Subscription rights to shares (Note 12)
Minority interests
Total net assets

337,260

364,674

3,034,650

Total liabilities and net assets¥501,320¥534,592$4,448,633

See accompanying notes.

<<

09

>>

JSR CORPORATIONANNUAL REPORT 2015

> FINANCIAL SECTIONCONSOLIDATED STATEMENTS OF INCOMEJSR Corporation and Consolidated Subsidiaries
Years ended March 31, 2014 and 2015
Thousands of
U.S. dollars(Note 1)Millions of yen

2014

2015

2015

¥394,309¥404,073$3,362,515

Cost of sales

294,924

300,304

2,498,992

Selling, general and administrative expenses

63,32365,701

546,735

358,247

366,005

3,045,727

36,06238,068316,788

257

241

2,008

Dividends income

659

1,149

9,562

Interest expenses

(142)

(345)

(2,874)Foreign exchange gains

1,672

3,021

25,140Share of profit of entities accounted for using equity method

1,546

—

—

Share of loss of entities accounted for using equity method

—

(276)

(2,296)

Subsidy income

—

629

5,234

Net sales (Notes 15, 16 and 17)
Costs and expenses (Notes 14 and 16):Operating income (Note 15)
Other income (expenses):
Interest income

Taxes and dues

(8)

(313)

(2,604)Compensation income

—

1,895

15,769Gain on transfer from business divestitures

—

325

2,705

Loss on valuation of investment securities—(2,643)(21,991)

Restructuring loss

(2,410)——

Other, net (Note 6)

(680)

(682)

(5,686)

894

3,001

24,96736,956

41,069341,755

11,637

11,202

93,218

Income before income taxes and minority interests (Note 17)
Income taxes (Note 9):Current
DeferredIncome before minority interests
Minority interests in net income of consolidated subsidiaries
Net income (Note 17)

1,124

703

5,847

12,761

11,90599,06524,19529,164

242,690

(978)

(755)

(6,279)¥ 25,173¥ 29,919$ 248,969
U.S. dollars(Note 1)

Yen

2014

2015

2015

Per share of common stock:
Net income¥ 106.10¥ 128.19

Diluted net income

105.85127.87

1.06

Cash dividends applicable to the year

38.00

40.00

0.33

See accompanying notes.

$

1.07

<<

10

>>

JSR CORPORATIONANNUAL REPORT 2015

> FINANCIAL SECTIONCONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOMEJSR Corporation and Consolidated Subsidiaries
Years ended March 31, 2014 and 2015
Thousands of
U.S. dollars(Note 1)Millions of yen

2014

2015

2015

¥24,195¥29,164$242,690

Unrealized gains on securities, net of taxes

2,968

7,718

64,230Foreign currency translation adjustment

4,335

6,647

55,314

Income before minority interests
Other comprehensive income

Remeasurements of defined benefit plans, net of tax (Note 8)
Share of other comprehensive income of associates accounted for using equity method
Other comprehensive income (Note 10)
Comprehensive income

—

338

2,810

3,134

1,695

14,107

10,437

16,398

136,461¥34,632¥45,562$379,151¥35,548¥45,576$379,264

(916)

(14)

(113)

Comprehensive income attributable toComprehensive income attributable to owners of the parent
Comprehensive income attributable to minority interests
See accompanying notes.

<<

11

>>

JSR CORPORATIONANNUAL REPORT 2015

> FINANCIAL SECTIONCONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETSJSR Corporation and Consolidated Subsidiaries
Years ended March 31, 2014 and 2015
Millions of yen
Number ofshares ofcommon stock(thousands)

Balance at April 1, 2013

237,973

Commonstock

CapitalsurplusRetainedearnings

Treasurystock¥23,320¥25,179¥253,009¥(930)

Unrealized
gains onsecurities,
net of taxes¥ 8,470

Foreigncurrencytranslation
adjustments

¥

(407)

Remeasurementsof defined
benefit plans

Subscription
rightsto shares

¥ —

¥728

Minority
interests¥ 6,364

Changes of items during the period
Dividends of surplus

—

—

—

(8,549)

—

—

—

—

—

—

Net income

—

—

—

25,173

—

—

—

—

—

—

Purchase of treasury stock

—

—

—

—

(4,182)

—

—

—

—

—

Disposal of treasury stock

—

—

1

—

25

—

—

—

—

—

Change of scope of consolidation

—

—

—

(12)

—

—

—

—

—

—

Net changes of items other thanshareholders’ equity

—

—

—

—

—

2,997

7,379

(189)

65

(1,181)

Total changes of items during the period
Balance at March 31, 2014
Cumulative effects of changes
in accounting policies
Restated balance

—

—

1

16,612(4,157)

2,997

7,379

(189)

65

(1,181)

237,973¥23,320¥25,180¥269,621¥ (5,087)¥11,467¥ 6,972¥(189)¥793¥ 5,183

—

—

—

964

—

—

—

—

—

—

237,973

23,32025,180270,585(5,087)

11,467

6,972

(189)

793

5,183

Changes of items during the period
Dividends of surplus

—

—

—

(9,166)

—

—

—

—

—

—

Net income

—

—

—

29,919

—

—

—

—

—

—

Purchase of treasury stock

—

—

—

—

(10,271)

—

—

—

—

—

Disposal of treasury stock

—

—

(1)

(5)

29

—

—

—

—

—

Change of scope of consolidation

—

—

—

(182)

—

—

—

—

—

—

Net changes of items other thanshareholders’ equity

—

—

—

—

—

7,790

7,604

338

59

336

Total changes of items during the period
Balance at March 31, 2015

—

—

(1)

20,566(10,242)

7,790

7,604

338

59

336

237,973¥23,320¥25,179¥291,151¥(15,329)¥19,257¥14,576

¥ 149

¥852

¥ 5,519

Thousands of U.S. dollars (Note 1)
Number ofshares ofcommon stock(thousands)

Balance at April 1, 2014
Cumulative effects of changes
in accounting policies
Restated balance

Treasurystock

Unrealized
gains onsecurities,
net of taxes

Foreigncurrencytranslation
adjustments

Remeasurementsof defined
benefit plans

Subscription
rightsto shares$ (42,335)$ 95,425$ 58,017$(1,571)$6,596$43,132

8,025

—

—

—

—

—

—

2,251,687(42,335)

95,42558,017(1,571)

6,596

43,132

Commonstock

CapitalsurplusRetainedearnings

237,973$194,060$209,536 $2,243,662

—

—

—

237,973

194,060

209,536

Minority
interests

Changes of items during the period
Dividends of surplus

—

—

—

(76,279)

—

—

—

—

—

—

Net income

—

—

—

248,969

—

—

—

—

—

—

Purchase of treasury stock

—

—

—

—

(85,476)

—

—

—

—

—

Disposal of treasury stock

—

—

(4)

(42)

244

—

—

—

—

—

Change of scope of consolidation

—

—

—

(1,506)

—

—

—

—

—

—

Net changes of items other thanshareholders’ equity

—

—

—

—

—

64,82563,273

2,810

498

2,791

(4)

171,142(85,232)

64,82563,273

2,810

498

2,791

$209,532 $2,422,829$(127,567)$160,250$121,290$ 1,239$7,094$45,923

Total changes of items during the period
Balance at March 31, 2015
See accompanying notes.

——

237,973$194,060

<<

12

>>

JSR CORPORATIONANNUAL REPORT 2015

> FINANCIAL SECTIONCONSOLIDATED STATEMENTS OF CASH FLOWSJSR Corporation and Consolidated Subsidiaries
Years ended March 31, 2014 and 2015
Thousands of
U.S. dollars(Note 1)Millions of yen

Cash flows from operating activities:
Income before income taxes and minority interests
Adjustments to reconcile income before income taxes andminority interests to cash provided by operating activities:
Depreciation and amortization
Interest and dividends income
Interest expenses
Share of (profit) loss of entities accounted for using equity method
Compensation income
Loss (gain) on valuation of investment securities
Restructuring Loss
Changes in operating assets and liabilities—net:
Decrease (increase) in notes and accounts receivable—trade
Decrease (increase) in inventories
Increase (decrease) in notes and accounts payable—trade
Other, net
SubtotalInterest and dividends income received
Interest expenses paid
Proceeds from compensation
Income taxes paid
Net cash provided by operating activities
Cash flows from investing activities:
Decrease (increase) in time deposits
Net decrease (increase) in short-term investment securities
Purchase of noncurrent assets
Purchase of investment securities
Purchase of shares of subsidiaries resulting in change in scope of consolidation
Purchase of stocks of subsidiaries and affiliates
Payments for investments in capital of subsidiaries and associates
Payments of loans receivableCollection of loans receivable
Other, net
Net cash provided by (used in) investing activities
Cash flows from financing activities:
Net increase (decrease) in short-term loans payable
Repayment of long-term loans payable
Proceeds from long-term loans payable
Purchase of treasury stock
Cash dividends paid
Cash dividends paid to minority shareholders
Other, net
Net cash used in financing activities
Effect of exchange rate change on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Increase (decrease) in cash and cash equivalents resulting
from change of scope of consolidation
Cash and cash equivalents at end of year (Note 3)
See accompanying notes.

2014

2015

2015

¥ 36,956¥ 41,069$ 341,755

18,096(916)
142(1,546)——2,410

17,407(1,390)345
276(1,895)
2,643—

144,851(11,570)
2,874
2,296
(15,769)
21,991—6,050(2,262)(14,467)
1,234
45,697
1,751
(125)
—
(11,848)
35,475

8,875
2,662(15,565)
6,333
60,760
1,825
(319)
1,895
(12,680)
51,48173,85522,149(129,526)
52,708505,614
15,190(2,655)
15,769(105,518)
428,400

6,736
28,500(21,108)(1,003)—(1,036)(2,800)(3,226)
2,699
(541)
8,221

(2,248)(11,300)(32,542)(805)(5,743)(3,733)—(2,884)
3,071
1,348(54,836)(18,705)(94,033)(270,797)(6,698)(47,793)(31,061)—(23,998)
25,556
11,209(456,320)

144
—
4,538
(4,182)(8,464)(146)(12)(8,122)
1,723
37,29753,818470(2,481)
9,102(10,272)(9,136)(33)(9)(12,359)
2,007(13,707)
91,115

3,911(20,649)
75,743(85,475)(76,026)(271)(76)(102,843)
16,700(114,063)
758,216

—

498

4,147

¥ 91,115¥ 77,906$ 648,300

<<

13

>>

JSR CORPORATIONANNUAL REPORT 2015

> FINANCIAL SECTIONNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JSR Corporation and Consolidated Subsidiaries
Years ended March 31, 2014 and 2015

1. Basis of Consolidated Financial Statements

English (with some expanded descriptions) from the consolidated

The accompanying consolidated financial statements of JSR Corpo-

financial statements of the Company prepared in accordance withration (the “Company”) and its consolidated subsidiaries have been

Japanese GAAP and filed with the appropriate Local Finance Bureau

prepared in accordance with the provisions set forth in the Japaneseof the Ministry of Finance as required by the Japanese Financial

Financial Instruments and Exchange Law and its related accounting

Instruments and Exchange Law. Some supplementary information

regulations, and in conformity with accounting principles generally

included in the statutory Japanese language consolidated financial

accepted in Japan (“Japanese GAAP”), which are different in certain

statements, but not required for fair presentation, is not presented in

respects as to application and disclosure requirements of International

the accompanying consolidated financial statements.

Financial Reporting Standards.

The translations of the Japanese yen amounts into U.S. dollars

The accounts of the Company’s overseas subsidiaries andare included solely for the convenience of readers outside Japan,

affiliates are based on their accounting records maintained in confor-

using the prevailing exchange rate at March 31, 2015, which was

mity with generally accepted accounting principles prevailing in the¥120.17 to U.S.$1.00. The convenience translations should not be

respective countries of domicile and make necessary amendments forconstrued as representations that the Japanese yen amounts haveconsolidated financial statements required by Practical Issues Task

been, could have been, or could in the future be, converted into U.S.

Force No. 18 issued by ASBJ. The accompanying consolidated

dollars at this or any other rate of exchange.

financial statements have been restructured and translated into

2. Summary of Significant Accounting Policies(a) Consolidation—The accompanying consolidated financial state-company outside of the group companies for consolidation.
JSR Electronic Materials Korea Co., Ltd. established by incorpo-

ments include the accounts of the Company and its significant

ration-type company split on September 30, 2014 has been included

subsidiaries (28 and 33 subsidiaries in 2014 and 2015, respectively).

in the scope of the equity method from the current fiscal year after

All significant intercompany accounts and transactions have beentransferring 60% of its shares to a company outside of the groupeliminated in consolidation.

companies for consolidation.

Effective from the current consolidated fiscal year, the following

Medical & Biological Laboratories Co. and JN System Partners

companies have been included into the scope of consolidation; JSR

Co., Ltd. have been included in the scope of the equity method since(Shanghai) Co., Ltd., J & W Beijing Biotech Co., Ltd., and JSR Trad-

2014 due to the increase of materiality and establishment, respectively.

ing Bangkok Co., Ltd. due to increase in materiality, JSR Logistics &(c) Cash and cash equivalents—In preparing the consolidated state-

Customer Center Co., ltd. due to establishment on April 1, 2014

ments of cash flows, cash on hand, readily available deposits andthrough incorporation-type company split, KBI Biopharma, Inc. andshort-term highly liquid investments with maturities not exceeding

KBI Biopharma Boulder, LLC due to purchase of 51% share of KBI

three months at the time of purchase are considered to be cash andBiopharma Inc.

cash equivalents.

As the date for acquisition of KBI Biopharma, Inc. and KBI(d) Short-term securities and investment securities—The Com-

Biopharma Boulder, LLC is deemed to be March 31, 2015, only thepany and its consolidated subsidiaries (the “Companies”) had nobalance sheet is consolidated for the fiscal year ending on March

trading securities or held-to-maturity debt securities. Equity securities

31, 2015.

issued by subsidiaries and affiliated companies, which are not con-

JSR MICROTECH INC. and Nichigo Kogyo Co., Ltd. were ex-solidated or accounted for using the equity method, are stated atcluded from the scope of consolidation in the fiscal year ended March

moving-average cost. Available-for-sale securities with available fair

31, 2014 due to transfer of all shares thereof.

market values are stated at fair market value and unrealized gains and(b) Equity method—Investments in affiliated companies (all of thoselosses on these securities are reported, net of applicable income

20% to 50% owned and certain others 15% to 20% owned) weretaxes, as a separate component of net assets via the Consolidated

accounted for by the equity method (8 and 10 affiliated companies inStatements of Comprehensive income. Realized gains and losses on2014 and 2015, respectively). Unconsolidated subsidiaries and thesale of such securities are computed using moving-average cost.

other affiliated companies are stated at cost since their net income

Available-for-sale securities with no available fair market values are

and retained earnings in the aggregate are not material compared tostated at moving-average cost or amortized cost.

consolidated net income and retained earnings, respectively.

(e) Inventories—Inventories are stated at cost, which is determined

Effective from the current consolidated fiscal year, JSR LOGIS-

mainly based on the average method (for the value stated on the

TICS CO., LTD. (renamed to JEY-TRANS CO., LTD. on April 1, 2014)balance sheet, book value is written down to reflect the lower

has been exclude from the scope of consolidation and included in the

profitability).

scope of the equity method after transferring 60% of its shares to a(f) Property, plant and equipment, and depreciation—Property,

<<

14

>>

JSR CORPORATIONANNUAL REPORT 2015

> FINANCIAL SECTION

plant and equipment are stated at cost. Depreciation is calculated

treatment prescribed in Article 37 of the Accounting Standard,using the declining-balance method at rates based on their estimatedthe effects of the changes in the calculation methods ofuseful lives except for buildings acquired after March 31, 1998, which

retirement benefit obligations and current service costs haveare depreciated based on the straight-line method.

been recognized retained earnings at the beginning of the(g) Intangible assets—Goodwill is amortized by the straight-line
method over the estimated useful lives up to twenty years.
Software for its own use is amortized over the estimated useful life

current fiscal year.
			Consequently, net defined benefit liability decreased by¥1,498 million ($12,469 thousand) and retained earnings(five years) using the straight-line method.

increased by ¥964 million ($8,025 thousand) at the beginning(h) Leased assets—Assets of finance leases are depreciated over theof the current fiscal year. The effect of application of thelease term using the straight-line method that residual value is zero.

Accounting Standard on operating income or net income(i) Allowance for doubtful accounts—Allowance for doubtful

before income taxes and minority interests in the current fiscal

accounts is provided in amounts sufficient to cover possible losses onyear was immaterial.

collection. Allowance for doubtful accounts consists of the estimated(k) Provision for environmental measures—A provision for environ-

uncollectible amount with respect to specific items, and the amount

mental measures is provided based on estimated costs for the

calculated using the actual percentage of collection losses in the pastdisposal of polychlorinated biphenyl (PCB) as mandated by the Law

with respect to other items.

Concerning Special Measures Against PCB Waste.

(j) Net Defined Benefit Liability—Employees of the Companies are(l) Income taxes—The Companies provide for income taxes appli-

entitled, under most circumstances, to lump-sum severance pay-

cable to all items included in the consolidated statements of income

ments or pension payments upon reaching the mandatory retirement

regardless of when such taxes are payable. Income taxes based onage, or earlier in the case of voluntary or involuntary termination,

temporary differences between tax and financial reporting purposes

based on the compensation at the time of severance and years of

are reflected as deferred income taxes in the consolidated financial

service.

statements using the asset and liability method.

In order to prepare for retirement benefit for employees, net( i ) Application of consolidated corporate-tax return systemdefined benefit liability is provided by deducting projected fair value of		The consolidated corporate-tax return system is applied fromthe pension assets from the amount of retirement benefit obligation
recognized to have incurred at the end of the current fiscal year.
The benefit formula basis is applied as the method for attributing

the current fiscal year.
(m) Derivative and hedging activities—The Companies use derivative financial instruments to manage their exposures to fluctuations in

expected retirement benefit to the relevant periods ending at the end

foreign exchange and interest rates. Foreign exchange forwardof the current fiscal year.

contracts and interest rate swaps are utilized by the Companies to

Actuarial differences are recognized as expenses at once in thefollowing period.
Unrecognized actuarial gains or losses are, after tax effect adjustment, recorded as re-measurements of defined benefit plans underaccumulated other comprehensive income in the net assets section.
( i ) The Accounting Change		Effective from the fiscal year beginning April 1, 2014, theCompany has applied the Accounting Standard for Retirement

reduce foreign currency exchange and interest rate risks. The Companies do not enter into derivatives for trading purposes or speculative purposes. Derivative financial instruments and foreign currencytransactions are classified and accounted for as follows:( i )	All derivatives are recognized as either assets or liabilities andmeasured at fair value, and gains or losses on these derivativetransactions are recognized in the consolidated statements ofincome.

Benefits (ASBJ Statement No. 26, May 17, 2012; hereinafter(ii)	The interest rate swaps that qualify for hedge accounting andthe “Accounting Standard”) and Guidance on Accounting

meet specific matching criteria are not remeasured at market

Standard for Retirement Benefits (ASBJ Guidance No. 25,

value, but the differential paid or received under the swap

March 26, 2015; hereinafter the “Guidance”) with regard to theagreements is recognized and included in interest expense orprovisions prescribed in the main text of Article 35 of theincome as incurred.

Accounting Standard and Article 67 of the Guidance. As a(n) Foreign currency transactions—The Companies translate assets

result, the Company reviewed the calculation methods ofand liabilities denominated in foreign currencies into Japanese yen atretirement benefit obligations and current service costs,

exchange rates prevailing at the balance sheet dates. Resulting

applied the benefit formula basis for the method of attributing

exchange gains or losses are credited or charged to income as

expected retirement benefit to periods, and changed theincurred.

calculation method of discount rates.

(o) Translation of foreign currency financial statements—Financial

With regard to the application of the above Accounting

statements of overseas subsidiaries are translated into Japanese yen

Standard and Guidance, in accordance with the transitional

using the respective year-end rate for assets and liabilities, the aver-

			

<<

15

>>

JSR CORPORATIONANNUAL REPORT 2015

> FINANCIAL SECTION

age rate for revenues and expenses, and the historical rates for share-

No. 10 by ASBJ on Sep 13, 2013) and “Revised Guidance on Ac-

holders’ equity accounts. Foreign currency translation adjustments

counting Standard for Earnings Per Share” (Guidance No. 4 by ASBJ

are contained in accumulated other comprehensive income andon Sep 13, 2013) have been issued.

minority interests.

Major changes are as follows:(p) Amounts per share of common stock—The computation of net( i )	How the changes of the shares in subsidiaries, over which theincome per share of common stock is based on the average number

Company continues to control, should be treated by theCompany when additional stock of a subsidiary is acquired.

of shares outstanding during each fiscal year. Treasury stock has been
excluded in the calculation of amounts per share of common stock.
Cash dividends per share represent actual amounts applicable to(ii) Treatment of acquisition related costs(iii)	Presentation of current net income and the change of shareholder’s equity from minority interests to non-controlling

the respective years.

interests(q) Reclassifications—Certain prior year amounts have been reclassified and restated to conform to the current year presentation.

(iv) Provisional application of accounting treatments

These reclassifications and restatements had no effect on previously reported results of operations or retained earnings.

Effective Date(r) New Accounting Pronouncements—“Revised Accounting	Effective from the beginning of the fiscal year ending March 2016.

Standard for Business Combinations” (Statement No. 21 by ASBJ on

Provisional application of the accounting standards is scheduled

Sep 13, 2013), “Revised Accounting Standard for Consolidated

to begin for business combinations effective after the beginning of

Financial Statements” (Statement No. 22 by ASBJ on Sep 13, 2013),

the fiscal year ending March 2016.

“Revised Accounting Standard for Business Divestitures” (Statement

Effects of the application of the standards

No. 7 by ASBJ on Sep 13, 2013), “Revised Accounting Standard for	The Companies expected to apply the revised accounting stan-

Earnings Per Share” (Statement No. 2 by ASBJ on Sep 13, 2013),

dard from the fiscal year ending March 31, 2016, and is in the“Revised Guidance on Accounting Standard for Business Combina-

process of measuring the effects of applying the revised account-tions and Accounting Standard for Business Divestitures” (Guidanceing standard.

3. Cash and Cash Equivalents
Cash and cash equivalents at March 31, 2014 and 2015 consisted of the following:Thousands of
U.S. dollars

Millions of yen

2014

2015

2015

Cash and deposits
Short-term investment securities¥ 33,391
81,005¥ 47,984
67,997$ 399,304
565,841

Time deposits over three months
Current assets: Other(26,081)2,800(40,181)2,106(334,373)
17,528Cash and cash equivalents¥ 91,115¥ 77,906$ 648,300

4. Allowance for doubtful accounts
Allowance for doubtful accounts as of March 31, 2014 and 2015 were as follows:
Thousands of
U.S. dollars

Millions of yen

Allowance for doubtful accounts

2014

2015

2015

Current asset: Notes and accounts receivable—trade
Investments and other assets: Other¥(332)(152)¥(326)(140)$(2,715)(1,168)

<<

16

>>

JSR CORPORATIONANNUAL REPORT 2015

> FINANCIAL SECTION

5. Fair Value of Financial Instruments

financial instruments as of March 31, 2014 and 2015. Financial

The following is a summary of the amount on consolidated balance

instruments which fair value is extremely difficult to estimate is exclud-

sheet, fair value and the difference between these two items by majored from the following table.
Millions of yen

March 31, 2014:(1) Cash and deposits

Book value

Fair value

Difference¥ 33,391¥ 33,391(2) Notes and accounts receivable—trade87,94587,945—(3) Short-term investment securities and investment securities(4) Current assets—other (short-term loans receivable)

114,6152,800

113,819
2,800

(796)
—

¥238,751¥237,955¥(796)

85,334
14,794
11,85485,334
14,794
11,773——(81)¥111,982¥111,901¥ (81)

Total assets(5) Notes and accounts payable—trade(6) Short-term loans payable(7) Long-term loans payable (included repayment due within one year)
Total liabilities¥ —March 31, 2015:(1) Cash and deposits¥ 47,984¥ 47,984(2) Notes and accounts receivable—trade83,44983,449—(3) Short-term investment securities and investment securities(4) Current assets—other (short-term loans receivable)

115,232
2,106

116,511
2,106

1,279
—

¥248,771¥250,050¥1,27972,442
16,10722,92072,442
16,10722,599——(321)¥111,469¥111,148¥ (321)

Total assets(5) Notes and accounts payable—trade(6) Short-term loans payable(7) Long-term loans payable (included repayment due within one year)
Total liabilities¥—

Thousands of U.S. dollars
Book value

March 31, 2015:(1) Cash and deposits

Fair value

Difference$ 399,304$ 399,304(2) Notes and accounts receivable—trade694,422

694,422—(3) Short-term investment securities and investment securities(4) Current assets—other (short-term loans receivable)

958,904
17,528969,547
17,528

10,643—$2,070,158$2,080,801$10,643

602,826
134,039
190,729602,826
134,039
188,062——(2,667)$ 927,594$ 924,927$ (2,667)

Total assets(5) Notes and accounts payable—trade(6) Short-term loans payable(7) Long-term loans payable (included repayment due within one year)
Total liabilities

$

—

<<

17

>>

JSR CORPORATIONANNUAL REPORT 2015

> FINANCIAL SECTION(5) Notes and accounts payable—trade

1.	Method to determine the estimated fair values of financial instru-

		The carrying values of notes and accounts payable—tradements and other matters related to securities and derivative

approximate fair values because of their short maturities.

transactions(6) Short-term loans payable(1) Cash and cash equivalents, and time deposits				The carrying values of cash and cash equivalents, and time

Short-term loans payable approximate fair value.

(7) Long-term loans payabledeposits approximate fair value because of their short maturities.

		The fair value of long-term loans payable is measured at the(2) Notes and accounts receivable—trade		The carrying values of notes and accounts receivable—tradepresent value by discounting expected repayments of principal

approximate fair value because of their short maturities.

and interest in the remaining period using an assumed interest
rate on an equivalent new loan.

(3) Short-term investment securities and investment securities					The fair value of securities and investment securities are

The fair value of long-term loans payable subject to ameasured at the quoted market price of the stock exchange

special accounting method for interest rate swaps which

for the equity instruments. Negotiable deposit, commercial

qualify for hedge accounting meet specific matching criteria ispaper and cash in trust approximate fair value.

measured at the present value by discounting expected
repayments of principal and interest together with the interest(4) Current assets—other (short-term loans receivable)

rate swaps in the remaining period using an assumed interest		The carrying values of short-term loans receivable approximate

rate on an equivalent new loan.

fair value because of their short maturities.

2. Financial instruments for which it is extremely difficult to estimate the fair values were as follows:
Thousands of
U.S. dollars

Millions of yen

Non-listed equity securities
Investments in capital

2014

2015

2015

¥27,342
4,578¥27,276
3,948$226,975
32,853

3. Redemptions schedule of monetary claims and securities with fixed maturities were as follows:
Millions of yen
Due within
one yearMarch 31, 2014:(1) Cash and deposits¥

Due after one year
and within five years

Due after five years
and within ten years

Due overten years

Total

2,081

¥—

¥—

¥—

87,945———87,94581,057
2,800

—
—

—
—

—
—

81,0572,800¥173,883

¥—

¥—

¥—

¥173,883¥¥(2) Notes and accounts receivable—trade

¥

2,081

(3) Short-term investment securities and investment securities
Available-for-sale securities with fixed maturities
Other(4) Current assets—other (short-term loans receivable)
Total
March 31, 2015:(1) Cash and deposits(2) Notes and accounts receivable—trade

4,882

¥—

¥—

¥—

83,449———83,4494,882

67,997
2,106

—
—

—
—

—
—

67,9972,106¥158,434

¥—

¥—

¥—

¥158,434(3) Short-term investment securities and investment securities
Available-for-sale securities with fixed maturities
Other(4) Current assets—other (short-term loans receivable)
Total

<<

18

>>

JSR CORPORATIONANNUAL REPORT 2015

> FINANCIAL SECTION

Thousands of U.S. dollars
Due within
one yearMarch 31, 2015:(1) Cash and deposits(2) Notes and accounts receivable—trade

Due after one year
and within five years

Due after five years
and within ten years

40,623$—$—$—

694,422———

694,422565,841
17,528

—
—

—
—

—
—

565,841
17,528$1,318,414

$—

$—

$—

$1,318,414$

Due overten years

Total

$

40,623(3) Short-term investment securities and investment securities
Available-for-sale securities with fixed maturities
Other(4) Current assets—other (short-term loans receivable)
Total
4. See Note 7 for scheduled repayments of long term debt.

6. Short-term investment securities and Investment Securities(1)	The following tables summarize the acquisition cost and book value of available-for-sale securities with available fair value as of March 31,
2014 and 2015:(a) Securities with book value exceeding acquisition cost
Millions of yen

2014
Acquisition cost

Equity securities¥10,349

Book value¥27,785

Difference¥17,436

Millions of yen

2015
Acquisition cost

Equity securities¥12,481Book value¥40,476

Difference¥27,995

Thousands of U.S. dollars

2015
Acquisition cost

Equity securities$103,860Book value

Difference$336,826$232,966(b) Securities with book value not exceeding acquisition cost
Millions of yen

2014
Acquisition cost

Equity securities¥1,440Book value¥1,273Difference¥(167)

Millions of yen

2015
Acquisition cost

Equity securities¥2,647

Book value¥449

Difference¥(2,198)

Thousands of U.S. dollars

2015
Acquisition cost

Equity securities$22,030

Book value$3,736

Difference$(18,294)

<<

19

>>

JSR CORPORATIONANNUAL REPORT 2015

> FINANCIAL SECTION(2) Total sales of available-for-sale securities sold and the related gains and losses for the years ended March 31, 2014 and 2015 were as follows:
Thousands of
U.S. dollars

Millions of yen

Total sales
Gain
Loss

2014

2015

2015

¥62
22
(0)

¥103
1
—

$853
11
—

7. Short-term Loans Payable and Long-term Loans Payable
Short-term loans payable at March 31, 2014 and 2015 consisted of the following:Thousands of
U.S. dollars

Millions of yen

Short-term loans principally from banks with interest rates 0.7%
per annum (weighted average interest rate) at March 31, 2014 and 2015:
SecuredUnsecured

2014

2015

2015

—
14,794603
15,5045,016
129,023¥14,794¥16,107$134,039

Long-term loans payable (included repayment due within one year) at March 31, 2014 and 2015 consisted of the following:Thousands of
U.S. dollars

Millions of yen

2014

2015

2015

Loans principally from banks and insurance companies due through2021 with interest rates 2.0% and 2.2% per annum(weighted average interest rate) in 2014 and 2015, respectively:
SecuredUnsecured1
11,853773
22,147

6,429
184,300

Less amount due within one year

11,854785

22,9202,533

190,729
21,075¥11,069¥20,387$169,654

The following assets were pledged as collateral for secured loans at March 31.
Thousands of
U.S. dollars

Millions of yen

2014
Cash and deposits
Notes and accounts receivable—trade, net

¥

—
—

¥

2015

2015

408
1,508

$ 3,396
12,553Inventories

—

423

3,516

Current assets: Other

—

805

6,701

2,134

3,132

26,065

140

1,020

8,492

4,466

4,468

37,179Buildings and structures, net
Machinery, equipment and vehicles, net
Land
Property, plant and equipment: Other, net

—

59

490

Intangible assets: Other
Investments and other assets: Other, net

—
—

103
75

856
627

¥6,740¥12,001$99,875

Total

<<

20

>>

JSR CORPORATIONANNUAL REPORT 2015

> FINANCIAL SECTION

The annual maturities of long-term debt at March 31, 2015 were as follows:Year ending March 31,

Millions of yen

Thousands of
U.S. dollars

2016
2017

¥ 2,533
5,294$ 21,075
44,056

2018

4,471

37,207

2019

4,471

37,2072020
2021 and thereafter

3,553
2,598

29,564
21,620¥22,920$190,729

8. Employees’ Severance and Retirement Benefits
The Company and domestic consolidated subsidiaries have corporate pension fund plan and lump-sum payment plan as defined benefit plan.
Defined benefit plans
1. Movement in retirement benefit obligation
Thousands of
U.S. dollars

Millions of yen

2014

2015

2015

Balance at April 1
Cumulative effects of changes in accounting policies¥50,080—¥50,262(1,498)$418,257(12,469)

Restated balance

50,08048,764

405,788

2,061

2,389

19,884

727

376

3,127

Actuarial loss (gain)

1,080

1,097

9,132

Benefits paid
Other

(3,104)(582)(2,389)(40)(19,881)(333)

Balance at March 31¥50,262¥50,197$417,717

Current service cost
Interest cost

2. Movements in plan assets
Thousands of
U.S. dollars

Millions of yen

Balance at April 1
Expected return on plan assets
Actuarial loss (gain)

2014

2015

2015

¥35,310288¥35,019376$291,413
3,125

787

1,317

10,962Contributions paid by the employer

1,076

1,566

13,028Benefits paid
Other

(2,300)(142)(1,798)(29)(14,962)(236)

Balance at March 31¥35,019¥36,451$303,330

<<

21

>>

JSR CORPORATIONANNUAL REPORT 2015

> FINANCIAL SECTION

3. Reconciliation from retirement benefit obligation and plan assets to liability (assets) for retirement benefit
Thousands of
U.S. dollars

Millions of yen

2014

2015

2015

Funded retirement benefit obligation
Plan assets¥ 39,705(35,019)¥ 39,003(36,451)$ 324,564(303,330)

Unfunded retirement benefit obligation

4,686
10,557

2,552
11,194

21,234
93,153

Total Net liability (assets) for retirement benefit at March 31

15,243

13,746

114,387

Net defined benefit liability
Total Net liability (assets) for retirement benefit at March 31

15,243

13,746

114,387¥ 15,243¥ 13,746$ 114,387

4. Retirement benefit costs
Thousands of
U.S. dollars

Millions of yen

Current service cost
Interest cost
Expected return on plan assets
Net actuarial loss amortization
Total retirement benefit costs for the fiscal year ended March 31

2014

2015

2015

¥2,061727¥2,389376$19,884
3,127

(288)
(441)

(376)
293

(3,125)2,441¥2,059¥2,682$22,327

5. Other comprehensive income on remeasurements of defined benefit plans, before tax
Thousands of
U.S. dollars

Millions of yen

2014

2015

2015

—
¥—

513
¥513

4,272
$4,272

Actuarial gains and losses
Total balance at March 31
6. Accumulated other comprehensive income on remeasurements of defined benefit plans, before tax

Thousands of
U.S. dollars

Millions of yen

Unrecognized actuarial gains and losses
Total balance at March 31

2014

2015

2015

(293)
¥(293)

220
¥220

1,830
$1,8307. Plan assets(1) Plan assets comprise:
2014

2015

Bonds
Equity securities

80.3%
9.8

71.5%
8.0

Cash and cash equivalents
Other

0.9
9.0

0.7
19.8

100.0%

100.0%Total(2) Long-term expected rate of return	Current and target asset allocations, historical and expected returns on various categories of plan assets have been considered to determine
long-term expected rate of return.

<<

22

>>

JSR CORPORATIONANNUAL REPORT 2015

> FINANCIAL SECTION

8. Actuarial assumptions
Principal actuarial assumptions at March 31
Discount rate (mainly)
Long-term expected rate of return (mainly)

2014

2015

1.53%
0.55

0.64%
0.57

9. Income Taxes

tax assets and liabilities expected to be settled or realized in the

Income taxes in the accompanying consolidated statements ofperiod from April 1, 2015 to March 31, 2016 is 33.1% and for periods

income comprise corporation, enterprise and inhabitants’ taxes. The

subsequent to March 31, 2016 is 32.3%. As a result of this change,

statutory income tax rate was approximately 35.6%.

net deferred tax liabilities (after deducting deferred tax assets) de-

Amendments to the Japanese tax regulations were enacted into

creased by ¥212 million ($1,765 thousand). Income taxes—deferred,law on March 31, 2014. As a result of these amendments, the statu-

unrealized gains on securities and remeasurements of defined benefit

tory income tax rate will be reduced from 38.0% to 35.6% effectiveplans increased by ¥731 million ($6,084 thousand), ¥935 million

from the year beginning April 1, 2014, thereafter.

($7,788 thousand) and ¥7 million ($60 thousand) for the year ended

Also, amendments to the Japanese tax regulations were enacted
into law on March 31, 2015. As a result of these amendments, theMarch 31, 2015 respectively.
The following table summarizes the significant differences be-

statutory income tax rate will be reduced from 35.6% to 33.1%

tween the statutory income tax rate and the Companies’ effective tax

effective from the year beginning April 1, 2015, and to 32.3% effective

rates for financial statement purposes for the years ended March 31,

from the year beginning April 1, 2016, thereafter.

2014 and 2015:

Consequently, the statutory income tax rate utilized for deferred
2014

2015

Statutory income tax rate
Tax credit on research and development costs

38.0%
(4.8)

35.6%
(4.6)

Lower tax rates for foreign consolidated subsidiaries

(0.3)

(2.1)

Share of loss (profit) of entities accounted for using equity method

(1.6)

0.2

Effect of enacted changes in tax laws and rates on Japanese tax

0.5

1.8

Tax credit on productivity-enhancing equipment
Other

—
2.7

(0.7)
(1.2)

Effective tax rate

34.5%

29.0%

<<

23

>>

JSR CORPORATIONANNUAL REPORT 2015

> FINANCIAL SECTION

Significant components of the Companies’ deferred tax assets and liabilities as of March 31, 2014 and 2015 were as follows:
Thousands of
U.S. dollars

Millions of yen

2014

2015

2015

Deferred tax assets:
Net defined benefit liability¥ 5,300¥ 4,429$ 36,853

Loss carried forward

3,905

3,439

28,620

Unrealized gain on sale of inventories

1,330

1,550

12,899Accrued bonuses

1,415

1,372

11,420

971

959

7,984

Impairment loss

1,642

501

4,167

Provision for environmental measures
Other

617
2,806

423
3,050

3,517
25,381

Sub-total
Valuation allowance

17,986(4,910)15,723(4,330)130,841(36,034)

Total deferred tax assets

13,076

11,393

94,807

Unrealized gains on securities(6,352)(9,171)(76,320)

Deferred gain on sales of noncurrent assets
Other(2,988)(1,620)(2,736)(1,539)(22,764)(12,810)(10,960)¥ 2,116(13,446)¥ (2,053)(111,894)$ (17,087)

Unrealized gain on sale of noncurrent assets

Deferred tax liabilities:

Total deferred tax liabilities
Net deferred tax assets (liabilities)

<<

24

>>

JSR CORPORATIONANNUAL REPORT 2015

> FINANCIAL SECTION

10. Comprehensive income
Amounts reclassified to net income in the current period that were recognized in other comprehensive income in the current or previous periods
and tax effects for each component of other comprehensive income were as follows;
Thousands of
U.S. dollars

Millions of yen

2014

2015

2015

¥ 4,57830¥ 8,288
2,250$ 68,968
18,723¥ 4,608(1,640)¥10,538(2,820)$ 87,691(23,461)

2,968

7,718

64,230¥ 4,335¥ 6,647$ 55,314¥ 4,335¥ 6,647$ 55,314

Occurrence amount
Recycling

¥

—
—

¥

220
293

$

1,830
2,442

Before tax effectTax effect

¥

—
—

¥

513
(175)

$

4,272
(1,462)

Unrealized gains on securities:
Occurrence amount
Recycling
Before tax effectTax effectUnrealized gains on securities, net of tax
Foreign currency translation adjustments
Occurrence amountForeign currency translation adjustments
Remeasurements of defined benefit plans:Remeasurements of defined benefit plans, net of tax

—

338

2,810

Share of other comprehensive income of associates accounted for using equity method
Occurrence amount¥ 3,134¥ 1,695$ 14,107

Share of other comprehensive income of associates accounted for using equity method¥ 3,134¥ 1,695$ 14,107

Total other comprehensive income before tax¥12,077¥19,393$161,384

Tax effect¥ (1,640)¥ (2,995)$ (24,923)

Other comprehensive income, net of tax¥10,437¥16,398$136,461

11. Net Assets

Additional paid-in capital and all legal earnings reserve may be

Under the Japanese laws and regulations, the entire amount paid fortransferred to other capital surplus and retained earnings, respec-

new shares is required to be designated as common stock. However,tively, which are potentially available for dividends.

a company may, by a resolution of the Board of Directors, designate

The maximum amount that the Company can distribute as

an amount not exceeding one-half of the price of the new shares as

dividends is calculated based on the non-consolidated financial

additional paid-in capital, which is included in capital surplus.

statements of the Company in accordance with the Japanese laws

Under the Japanese Corporate Law (“the Law”), in the case where

and regulations.

a dividend distribution of surplus is made, the smaller of an amountAt the annual shareholders meeting held on June 17, 2015, theequal to 10% of the dividends or the excess, if any, of 25% of com-

shareholders resolved cash dividends amounting to ¥4,602 million

mon stock over the total of additional paid-in capital and legal earn-($38,298 thousand). Such appropriations have not been accrued inings reserve must be set aside as additional paid-in capital or legal

the consolidated financial statements as of March 31, 2015. Suchearnings reserve. Legal earnings reserve is included in retained

appropriations are recognized in the period in which they are resolved.

earnings in the accompanying consolidated balance sheets.

<<

25

>>

JSR CORPORATIONANNUAL REPORT 2015

> FINANCIAL SECTION

12. Stock Option Plans
The shareholders of the Company approved the issuance of stock options to the directors and the executive officers of the Company as follows:
Date of resolution of the general shareholders’ meeting
The maximum number of shares to be issued
Exercisable period of stock options

June 17, 2005

June 16, 2006

June 15, 2007

62,500 shares
From June 18, 2005

39,100 shares
From August 2, 2006

48,500 shares
From July 11, 2007

to June 17, 2025

to June 16, 2026

to July 10, 2027

32,700 shares

26,500 shares

36,900 shares

Stock subscription rights which have been vested
outstanding as of March 31, 2015
Exercise price per share

Date of resolution of the general shareholders’ meeting
The maximum number of shares to be issued
Exercisable period of stock options

¥1

¥1

¥1

$0.01

$0.01

$0.01

June 13, 2008

June 16, 2009

June 18, 2010

73,900 shares
From July 16, 2008

80,200 shares
From July 15, 2009

84,200 shares
From July 14, 2010

to July 15, 2028

to July 14, 2029

to July 13, 2030

59,500 shares

76,200 shares

84,200 shares

¥1

¥1

¥1

$0.01

$0.01

$0.01

June 17, 2011

June 15, 2012

June 21, 2013

81,000 shares
From July 13, 2011

95,200 shares
From July 11, 2012

50,100 shares
From July 17, 2013

to July 12, 2031

to July 10, 2032

to July 16, 2033

81,000 shares

95,200 shares

50,100 shares

¥1

¥1

¥1

$0.01

$0.01

$0.01

Stock subscription rights which have been vested
outstanding as of March 31, 2015
Exercise price per share

Date of resolution of the general shareholders’ meeting
The maximum number of shares to be issued
Exercisable period of stock options
Stock subscription rights which have been vested
outstanding as of March 31, 2015
Exercise price per share

Date of resolution of the general shareholders’ meeting
The maximum number of shares to be issued
Exercisable period of stock options

June 17, 2014
55,800 shares
From July 31, 2014
to July 30, 2034

Stock subscription rights which have been vested
outstanding as of March 31, 2015
Exercise price per share

54,000 shares
¥1
$0.01

The compensation cost recognized for these stock options for the years ended March 31, 2014 and 2015 was ¥91 million and ¥83 million ($694
thousand) respectively, and was included in selling, general and administrative expenses in the consolidated statements of income.

<<

26

>>

JSR CORPORATIONANNUAL REPORT 2015

> FINANCIAL SECTION

13. Derivative Transactions

same as those for the items hedged, the risks of which will likely(1) Qualitative disclosure about derivatives

continue to be hedged through hedge transactions.

The Companies enter into foreign exchange forward contracts andForeign exchange forward contracts that the Companies enteredinterest rate swap contracts as derivative financial instruments. The

have risks due to fluctuations in foreign exchange rates. Interest rate

Companies deal with foreign exchange forward transactions to hedge

swap contracts that the Companies entered have risks due to fluctua-

exchange rate risks of trade receivables and payables denominated intions in interest rates. Due to the fact that counterparties to theforeign currency. Interest rate swap transactions are made in order toCompanies represent major financial institutions that have highreduce interest rate risks on loans payable.

creditworthiness, the Companies believe that the overall credit risk

The Companies do not enter into derivatives for speculativetransaction purposes. Hedge accounting is used for interest rate

related to its financial instruments is insignificant.
Derivative transactions are executed and controlled based on theswaps in the case where there is a high degree of correlation between

Companies’ internal rules and are approved by the responsible

the hedging instruments and the hedged items.

officials. The balances of such transactions with counterparties are

Significant conditions surrounding hedging instruments are theperiodically confirmed.

(2) Quantitative disclosure about derivatives
The following contract amounts are only nominal or notional amounts of derivatives, and do not necessarily indicate the magnitude of market risk
associated with the derivative transactions.
Contract amounts, market values and recognized gains or losses on the derivative transactions, except those accounted for using hedge
accounting, at March 31, 2014 and 2015 were as follows:(a) Related to currencies
Millions of yen
Contract amountOver one year

Recognized
gains or losses

Market value

March 31, 2014:
Items not traded on exchanges
Foreign exchange forward contracts
Selling:
Buying:¥1,664

¥—

¥(10)

¥(10)

Euro

U.S. Dollars

907

—

(31)

(31)

U.S. Dollars

170

—

3

3

Euro

98

—

0

0

Swiss Francs

8

—

0

0

1
532

—
—

0
(1)

0
(1)

—

¥—

¥(39)

¥(39)

Australian Dollars
Japanese Yen
Total

¥

Millions of yen
Contract amountOver one year

Recognized
gains or losses

Market value

March 31, 2015:
Items not traded on exchanges
Foreign exchange forward contracts
Selling:
Buying:Total

U.S. Dollars¥1,812

¥—

¥(19)

¥(19)

Euro

1,010

—

60

60

U.S. Dollars

1,711

—

0

0

Euro

768

—

(18)

(18)

Swiss Francs

10

—

0

0

Australian Dollars
Japanese Yen

1
851

—
—

(0)
(6)

(0)
(6)

—

¥—

¥ 17

¥ 17

¥

<<

27

>>

JSR CORPORATIONANNUAL REPORT 2015

> FINANCIAL SECTION

Thousands of U.S. dollars
Contract amountOver one year

Recognized
gains or losses

Market value

March 31, 2015:
Items not traded on exchanges
Foreign exchange forward contracts
Selling:
Buying:U.S. Dollars$15,081$—$(160)$(160)

Euro

8,407

—

505

505

U.S. Dollars

14,240

—

0

0

Euro

6,390

—

(150)

(150)

83

—

4

4

10
7,085

—
—

(0)
(53)

(0)
(53)

—

$—

$ 146

$ 146

Swiss Francs
Australian Dollars
Japanese Yen
Total

$

Market values are calculated using foreign exchange forward rates.
(b) Related to interests
Millions of yen
Contract amountMarch 31, 2014:
Special treatment for interest rate swaps Interest rate swaps(paid fix / received floating) (Hedged item: Long-term loans payable)
Total

Over one year

Market value¥11,354¥10,569¥(31)¥11,354¥10,569¥(31)

Millions of yen
Contract amountMarch 31, 2015:
Special treatment for interest rate swaps Interest rate swaps(paid fix / received floating) (Hedged item: Long-term loans payable)
Total

Over one year

Market value¥21,437¥19,202¥(213)¥21,437¥19,202¥(213)

Thousands of U.S. dollars
Contract amountMarch 31, 2015:
Special treatment for interest rate swaps Interest rate swaps(paid fix / received floating) (Hedged item: Long-term loans payable)
Total

Over one year

Market value$178,392$159,789$(1,770)$178,392$159,789$(1,770)

14. Research and Development Expenses
Research and development expenses of the Companies for the years ended March 31, 2014 and 2015 were, ¥20,801 million and ¥22,253
million ($185,182 thousand), respectively, which are included in selling, general and administrative expenses or manufacturing costs.

<<

28

>>

JSR CORPORATIONANNUAL REPORT 2015

> FINANCIAL SECTION

15. Segment Information
The Companies’ business segments are classified into the following three business segments: (1) Elastomers business, (2) Plastics business, and(3) Fine chemicals and other products business.
A summary of net sales, costs and expenses, operating income, identifiable assets, depreciation, impairment loss and capital expenditures bysegment of business activities for the years ended March 31, 2014 and 2015 were as follows:
Millions of yen
Fine chemicals
and other products

Total

Elastomers

Plastics¥203,478
4,469¥57,764—¥133,067—¥394,309
4,469

Sales total
Operating income

207,947¥ 17,330

57,764¥ 3,919

133,067¥ 14,813

398,778¥ 36,062¥

Identifiable assets
Depreciation and amortization¥223,584
7,384¥38,943
1,105¥131,521
9,607

For 2014:
Sales to external customers
Inter-segment sales/transfers

Impairment loss
Capital expenditures

Reconciliation

Consolidated¥—(4,469)¥394,309—(4,469)—394,309¥ 36,062¥394,048
18,096¥107,272—¥501,320
18,096

—

—

645

645

—

645

10,800

1,086

9,613

21,499—21,499Amortization of goodwill

—

44

—

44

—

44

Goodwill

—

664

—

664

—

664

Reconciliation

Consolidated¥—(3,974)¥404,073—

Millions of yen
Fine chemicals
and other products

Total

Elastomers

Plastics¥198,958
3,974¥55,161—¥149,954—¥404,073
3,974

Sales total
Operating income

202,932¥ 10,736

55,161¥ 2,842

149,954¥ 24,490

408,047¥ 38,068¥(3,974)—

404,073¥ 38,068

Identifiable assets
Depreciation and amortization¥233,286
7,521¥35,108
1,114¥158,802
8,772¥427,196
17,407¥107,396—¥534,592
17,407

16,472

2,035

16,65035,157—35,157

For 2015:
Sales to external customers
Inter-segment sales/transfers

Capital expenditures
Amortization of goodwill

—

44

—

44

—

44

Goodwill

—

620

5,860

6,480

—

6,480

Reconciliation

Consolidated

Thousands of U.S. dollars
Elastomers

Plastics

Fine chemicals
and other products$1,655,638
33,071$459,029—$1,247,848—$3,362,515
33,071

Sales total
Operating income

1,688,709$ 89,337

459,029$ 23,646

1,247,848$ 203,805

3,395,586$ 316,788$

Identifiable assets
Depreciation and amortization$1,941,298
62,586$292,156
9,271$1,321,477
72,994

For 2015:
Sales to external customers
Inter-segment sales/transfers

Capital expenditures

Total

$

—
(33,071)$3,362,515—(33,071)—3,362,515$ 316,788$3,554,931
144,851$893,702—$4,448,633
144,851
292,562

137,076

16,932

138,554

292,562—

Amortization of goodwill

—

368

—

368

—

368

Goodwill—

5,158

48,76553,923—53,923

Assets in reconciliation are related mainly to Cash, Short-term investment securities and Investment securities of the Company.

<<

29

>>

JSR CORPORATIONANNUAL REPORT 2015

> FINANCIAL SECTION

Geographic segment information with respect to net sales for the years ended March 31, 2014 and 2015 were as follows:
Millions of yen
Japan

For 2014:
For 2015:¥196,824¥188,833

Korea

China

¥43,932¥47,544¥41,173¥45,229

OthersTotal¥112,380¥122,467¥394,309¥404,073

Thousands of U.S. dollars

For 2015:

Japan

Korea

China

OthersTotal$1,571,379$395,637$376,375$1,019,124$3,362,515

The geographical segments consist of Japan, Korea, China and Others. Japan, Korea and China have been divided as independent segments
considering the materiality of the sales. Main countries included in Others segment were as follows;
Taiwan, Thailand, United States, Belgium
Geographic segment information with respect to property, plant and equipment for the years ended March 31, 2014 and 2015 were as follows:
Millions of yen

For 2014:
For 2015:

Japan

Thailand

Others¥69,007¥76,654¥16,258¥25,623¥10,365¥13,636

Total

Japan

Thailand

OthersTotal$637,879$213,221$113,476$964,576¥ 95,630¥115,913

Thousands of U.S. dollars

For 2015:

The geographical segments consist of Japan, Thailand and Others. Japan and Thailand have been divided as independent segments considering
the materiality of the property, plant and equipment. Main countries included in Others segment were as follows;
Korea, China, Taiwan, United States, Belgium

<<

30

>>

JSR CORPORATIONANNUAL REPORT 2015

> FINANCIAL SECTION

16. Related Parties
Related party transactions
Significant transactions and balances with related parties as of and for the years ended March 31, 2014 and 2015 were as follows:
Thousands of
U.S. dollars

Millions of yen

2014

2015

2015

Bridgestone Corporation (a major shareholder):Net Sales¥37,383¥36,888$306,963

Notes and accounts receivable—trade, net

15,151

12,777

106,328

14,76917,892

148,888

Tobu Butadiene Co., Ltd. (an unconsolidated subsidiary company):
Purchases
Notes and accounts payable—trade

7,242

5,868

48,831

Supply of raw material gas

12,044

11,53896,012

Accounts receivable—other

6,033

4,917

40,915Purchases

12,008

10,53387,654

Notes and accounts payable—trade

4,851

4,683

38,967

Supply of raw material gas

5,688

4,883

40,638

Accounts receivable—other

2,565

2,538

21,122KRATON JSR Elastomers K.K. (an affiliated company):

17. Business Combinations
Acquisition of KBI Biopharma, Inc. and KBI Biopharma Boulder, LLC
1. Summary of business combination
The Companies purchased the 51.0% stake in KBI Biopharma, Inc. on March 12, 2015.
(1) Name and business of the acquired company
Name of the acquired company: KBI Biopharma, Inc. and KBI Biopharma Boulder, LLC
Business: Contract development and manufacturing of biopharmaceutical products(2) Major reason for business combination
	The acquisition of KBI will allow JSR to facilitate the acceleration of the company’s growth plans, with increased capacity as well as global
expansion, including additional customers in Japan and Asia.
(3) Date of business combination
March 12, 2015(4) Legal form of business combination
Acquisition of shares for cash consideration(5) Company name after business combination
KBI Biopharma, Inc. and KBI Biopharma Boulder, LLC(6) Percentage of acquired voting rights
51%(7) Basis for determining the acquiring company
The Company acquired 51% of the voting rights in exchange for cash.

<<

31

>>

JSR CORPORATIONANNUAL REPORT 2015

> FINANCIAL SECTION

2. Period of operating results of the acquired company included in the consolidated financial statements
As the Company deemed the acquisition date as March 31, 2015, operating results were not included in the consolidated financial statements.
3. Acquisition cost
Acquisition cost: $51,000 thousand
4. Amount of goodwill, reason for recognition, and amortization method and period(1) Amount of goodwill: $48,535 thousand(2)	Reason for recognition: ‌Goodwill was recognized as the excess of the acquisition cost over the net fair value of assets acquired andliabilities assumed.
(3) Amortization method and period: Straight-line method over 20 years
5. Details on assets acquired and liabilities assumed on the date of business combination
Current assets
Non-current assets$26,083 thousand$19,179 thousand

Total assets$45,262 thousand

Current liabilities
Non-current liabilities$31,346 thousand$ 9,083 thousand

Total liabilities$40,429 thousand

6. Effect on the consolidated statement of income assuming the business combination had been carried out on April 1, 2014
Net sales$64,150 thousand

Income before income taxes and minority interests$ (1,708) thousand

Net income$ (1,715) thousand

The above amounts represent the difference between the actual figures and the estimates of the figures calculated based on the assumption thatthe business combination was completed at the beginning of the fiscal year ended March 31, 2015.
The amortized amount of goodwill was calculated assuming that the goodwill recognized at the time of the business combination had arisen
at the beginning of the fiscal year ended March 31, 2015.
The above amounts are un-audited.

18. Contingent Liabilities
At March 31, 2015, the Companies were contingently liable as guarantors for loans of CMIC JSR Biologics Co., Ltd., JEY-TRANS CO., LTD.,
PT.ELASTOMIX INDONESIA and employees in the amount of ¥663 million ($5,525 thousand), ¥208 million ($1,731 thousand), ¥188 million($1,560 thousand) and ¥3 million ($26 thousand), respectively.

19. Subsequent Events
At the June 17, 2015 annual meeting, the Company’s shareholders approved the following appropriations of retained earnings: Payment of ayear-end cash dividend of ¥20.00 ($0.17) per share aggregating ¥4,602 million ($38,298 thousand).

<<

32

>>

JSR CORPORATIONANNUAL REPORT 2015

> FINANCIAL SECTION