Disclaimer: This document is a translation of the Japanese original. The Japanese original has been disclosed in Japan inaccordance with Japanese accounting standards and the Financial Instruments and Exchange Act. This document does notcontain or constitute any guarantee and the Company will not compensate any losses and/or damage stemming fromactions taken based on this document. In the case that there is any discrepancy between the Japanese original and thisdocument, the Japanese original is assumed to be correct.

Annual Securities Report

Fiscal year

From March 1, 2023

(The 66th)

to February 29, 2024

MORESCO Corporation―1―

Table of Contents
Page
The 66th Term Annual Securities Report【Cover Page】 ....................................................................................................................................................................... 3
Part I. Company Information ............................................................................................................................................. 4
I. Company Overview ...................................................................................................................................................... 4
1.Key Financial Data and Trends ............................................................................................................................. 4
2.Corporate History.................................................................................................................................................. 6
3.Business Line ........................................................................................................................................................ 8
4.Information on Subsidiaries and Affiliates .......................................................................................................... 10
5.Employees........................................................................................................................................................... 13
II. Business Overview .................................................................................................................................................... 15
1.Management Policy, Business Environment, Issues to Be Addressed, etc. ....................................................... 15
2. Sustainability Approaches and Initiatives .......................................................................................................... 17
3.Business and Other Risks .................................................................................................................................... 23
4.Analysis of Financial Position, Operating Results, and Cash Flows by Management ........................................ 25
5.Material Business Agreements, etc. .................................................................................................................... 28
6.Research and Development Activities................................................................................................................. 29
III. Equipment and Facilities.......................................................................................................................................... 32
1. Capital Expenditures .......................................................................................................................................... 32
2.Major Equipment and Facilities .......................................................................................................................... 32
3.Plans for Additions and Disposals of Facilities ................................................................................................... 34
IV. Information on the Reporting Company................................................................................................................... 35
1.Information on the Company’s Shares, etc. ........................................................................................................ 35
2.Information on Acquisition of Treasury Shares, etc. .............................................................................................38
3.Dividend Policy .................................................................................................................................................. 39
4.Corporate Governance, etc. ................................................................................................................................. 40
V. Financial Information ................................................................................................................................................ 62
1.Consolidated Financial Statements, etc. ................................................................................................................63
2.Application of equity method.............................................................................................................................. 70
VI. Outline of Share-related Administration of Reporting Company ........................................................................... 125
VII. Reference Information of Reporting Company .................................................................................................... 126
1.Information on parent company, etc. of the reporting company ........................................................................ 126
2.Other reference information .............................................................................................................................. 126
Part II Information on the Reporting Company’s Guarantor, etc. .................................................................................... 127
Audit Report
Internal Control Report
Confirmation Notes―2―

[Cover Page][Document Filed]Annual Securities Report (“Yukashoken Hokokusho”)[Applicable Law]

Article 24, Paragraph 1 of the Financial Instruments and Exchange Act ofJapan[Submit to]

Director, Kinki Local Finance Bureau[Reporting Date]

May 30, 2024

[Fiscal Year]The 66th Term (from March 1, 2023 to February 29, 2024)[Company Name]

MORESCO Corporation[Company Name in English]

MORESCO Corporation[Title and Name of Representative]

Motohisa Morozumi, CEO, Representative Director, President[Address of Registered Office]5-5-3 Minatojimaminamimachi, Chuo-ku, Kobe City

[Phone Number]+81-78-303-9010[Contact Person]

Hirofumi Fujimoto, Director, Senior Executive Officer[Contact Address]

5-5-3 Minatojimaminamimachi, Chuo-ku, Kobe City

[Phone Number]+81-78-303-9220[Contact Person]

Hirofumi Fujimoto, Director, Senior Executive Officer[Place Where Available for Public Inspection]

MORESCO Corporation Tokyo Branch(1-8-1 Nishi-shimbashi, Minato-ku, Tokyo)
MORESCO Corporation Osaka Branch(3-2-15 Bingo-machi, Chuo-ku, Osaka City)
Tokyo Stock Exchange, Inc.
(2-1 Nihonbashi Kabuto-cho, Chuo-ku, Tokyo)―3―

Part I. Company Information

I. Company Overview
1.

Key Financial Data and Trends(1) Consolidated Management Indicators
Fiscal year

62nd

63rd

64th

65th

66th

Year end

February 2020

February 2021

February 2022

February 2023

February 2024

27,06424,47927,30030,33331,886

1,568

1,030

2,011

1,046

1,826

776

518

1,808

615

1,283

953

683

2,848

1,353

2,265

18,20918,163

20,551

21,24023,122

28,12927,70729,00832,01737,053(Millionsof yen)(Millions
Ordinary profit
of yen)Profitattributableto (Millions
owners of parentof yen)(Millions
Comprehensive incomeof yen)(Millions
Net assetsof yen)(Millions
Total assetsof yen)Net sales

Net assets per share(Yen)

1,659.74

1,695.81

1,914.94

2,008.49

2,179.85

Earnings per share

(Yen)

80.91

54.09

192.7666.19

139.01

Diluted earnings per share

(Yen)

－

－

－

－

－

Capital adequacy ratio

(%)

56.6

57.4

61.9

57.9

54.3

Rate of return on equity

(%)

4.9

3.3

10.7

3.4

6.6

(Times)

13.7

20.9

5.8

17.4

9.9

1,771

2,088

2,333

515

2,934

(1,589)

(660)

603

(1,172)(4,250)78(1,019)(2,937)

1,227

2,819

3,213

3,675

3,654

4,186

5,566

777

791

787

784

821

Price-earnings ratio

Cash flows from operating (Millions
activities
of yen)Cash flows from investing (Millions
activities
of yen)Cash flows from financing (Millions
activities
of yen)Cash and cash equivalents (Millions
at the end of periodof yen)Number of employees
Notes: 1.
2.

(Persons)

Diluted earnings per share are not stated as there are no dilutive shares.
Starting from the beginning of the 65th term, the Company has adopted the Accounting Standard for Revenue
Recognition (ASBJ Statement No. 29, March 31, 2020), etc. Therefore, the major management indicators of the 65thterm and thereafter are the figures after the said accounting standard has been applied.

―4―

(2) Non-consolidated Management Indicators
Fiscal year

62nd

63rd

64th

65th

66th

Year end

February 2020

February 2021

February 2022

February 2023

February 2024

16,874

14,961

16,28817,162

17,575

961

642

1,284

1,004

980

719

(63)

1,650

856

541

2,118

2,118

2,118

2,118

2,118

9,697

9,697

9,697

9,697

9,697

11,578

10,904

12,13812,474

12,694

19,666

18,614

17,95520,20023,0671,206.19

1,163.00

1,294.05

1,351.83

1,374.85

50.00

40.00

40.00

40.00

45.00

(25.00)(15.00)(20.00)(20.00)(20.00)(Millionsof yen)(Millions
Ordinary profit
of yen)(Millions
Profit (loss)of yen)(Millions
Capital stockof yen)Total number of issued (Thousands
sharesof shares)(Millions
Net assetsof yen)(Millions
Total assetsof yen)Net sales

Net assets per share(Yen)

Dividend per share(Interim dividend pershare)(Yen)

Earnings (loss) per share

(Yen)

74.95

(6.63)

175.92

92.15

58.63

Diluted earnings per share

(Yen)

－

－

－

－

－

Capital adequacy ratio

(%)

58.9

58.6

67.6

61.8

55.0

Rate of return on equity

(%)

6.3

―

14.3

7.0

4.3

(Times)

14.7

―

6.3

12.5

23.5

(%)

66.7

―

22.7

43.4

76.8

(Persons)

377

391

384

381

387

Total shareholder return(Comparison: Dividendincluded TOPIX)

(%)

74.6

78.8

80.3

85.2

103.0

(%)

(96.4)(121.8)(125.9)(136.6)(188.0)Highest share price

(Yen)

1,557

1,271

1,282

1,279

1,516

Lowest share price

(Yen)

1,102

730

1,050

1,021

1,111

Price-earnings ratio
Payout ratio
Number of employees

Notes: 1.
2.
3.
4.
5.
6.

Diluted earnings per share are not stated as there are no dilutive shares.
Rate of return on equity of the 63rd term is not stated because a net loss was recorded for the year.
Price-earnings ratio and payout ratio for the 63rd term are not stated because net loss per share was recorded for theyear.
Highest and lowest share prices are those on the Tokyo Stock Exchange (First Section) on and before April 3, 2022,
those on the Tokyo Stock Exchange (Prime Market) from April 4, 2022, and those on the Tokyo Stock Exchange(Standard Market) from October 20, 2023.
Starting from the beginning of the 65th term, the Company has adopted the Accounting Standard for Revenue
Recognition (ASBJ Statement No. 29, March 31, 2020), etc. Therefore, the major management indicators of the 65thterm and thereafter are the figures after the said accounting standard has been applied.
Dividend per share for the 66th term includes a commemorative dividend (the 65th anniversary of the Company) of 5
yen.

―5―

2.

Corporate History
Date

November 1995
October 1958
December 1959
March 1962
December 1965

Event
Research laboratory (origin of the Company) established in the Shinkawa Plant of Matsumura Oil
Corporation.
The research laboratory separated from Matsumura Oil Corporation to establish the Company.
Head Office and Nishinomiya Plant constructed in Nishinomiya City, Hyogo, to develop and manufacture
special lubricants, such as high vacuum pump oil, and synthetic lubricants
Developed water glycol fire-resistant hydraulic fluid HYDOL H-200 and 300

March 1971

Chiba Plant built in Ichihara City, Chiba, to start mass production of liquid paraffin and petroleum
sulfonatesTokyo Sales Office opened in Chuo-ku, Tokyo

March 1973

MATSUKEN CO., LTD. (currently consolidated subsidiary) established

November 1980

Nagoya Sales Office opened in Higashi-ku, Nagoya City

September 1986

Akoh Plant built in Akoh City, Hyogo, to start mass production of hot melt adhesives

November 1990

Akoh Plant second construction: lubricating oil production line completed

March 1992

MORESCO TECHNO CO., LTD. (now consolidated subsidiary) establishedMarch 1994

MORESCO SERVICE Co., Ltd. established

June 1995

MORESCO (THAILAND) CO., LTD. (now consolidated subsidiary) established in Chonburi, Thailand

September 1998

Acquired ISO 9001 international quality standard certification

January 2001

Head Office and Research Center relocated to Chuo-ku, Kobe

March 2001

November 2001

Akoh Plant third construction: lubricant distillation equipment and other facilities transferred from
Nishinomiya Plant (Nishinomiya plant site was sold due to expropriation)
Wuxi MoreTex Technology Co., Ltd. (now consolidated subsidiary) established in Wuxi City, China, as a
joint venture with a Taiwanese firm
MORESCO Hommachi Bldg. built in Chuo-ku, Osaka, to which Osaka Branch relocatedMarch 2001

February 2003

MORESCO (THAILAND) CO., LTD. (now consolidated subsidiary) established in Chonburi, Thailand

November 2003

Stock registered with the Japan Securities Dealers Association

December 2004
September 2005

Cancelled over-the-counter registration with the Japan Securities Dealers Association, and listed on
JASDAQ market
Nagoya Sales Office relocated to Naka-ku, Nagoya City

February 2006

Acquired ISO 14001 international environmental standard certification

May 2006

MORESCO USA Inc. (now consolidated subsidiary) established in Michigan, USA

July 2008

Listed on the Tokyo Stock Exchange Second Section

May 2009

Moresco Cn. Trustexporter. Com. established in Wuxi City, China

August 2009

Acquired business related to manufacturing and sales of die casting lubricants from HANANO Corporation

September 2009

Changed trade name from Matsumura Oil Research Corp. to MORESCO Corporation

September 2009

March 2010

Succeeded the lubricant business of MATSUKEN CO., LTD. (now consolidated subsidiary) through anabsorption-type company split
Made MORESCO HANANO DIE-CASTING COATING (SHANGHAI）CO., LTD. (now consolidated
subsidiary) in Shanghai, China, a consolidated subsidiary
Made Ethylene Chemical Co., Ltd. (now consolidated subsidiary) an equity method affiliate

February 2011

Listed on the Tokyo Stock Exchange First Section

February 2010

June 2011
September 2011
January 2012
August 2013

PT. MORESCO INDONESIA (now consolidated subsidiary) established in Karawang, Indonesia
Made Ethylene Chemical Co., Ltd. (now consolidated subsidiary) a consolidated subsidiary from an equity
method affiliate
PT. MORESCO MACRO ADHESIVE (now consolidated subsidiary) established in Jakarta, Indonesia

August 2015

Acquired business related to manufacturing and sales of die casting fluids and lubricants for hot forging
from NICCA Chemical Co., Ltd.
TIANJIN MORESCO TECHNOLOGY CO., LTD. (now consolidated subsidiary) established in Tianjin,
China
Tokyo Branch relocated to Minato-ku, Tokyo

October 2015

Second R&D building constructed at the Head Office Research Center site

November 2015

Changed trade name of Moresco. Cn. Trustexporter. Com. to WUXI MORESCO TRADING CO., LTD.
(now consolidated subsidiary)
MORESCO HM&LUB INDIA PRIVATE LIMITED (now consolidated subsidiary) established in

March 2014

February 2017

―6―

Date

Event
Ahmedabad, Gujarat, India

September 2017

Absorbed MORESCO SERVICE Co., Ltd., a consolidated subsidiary

November 2017

Nagoya Sales Office relocated to Naka-ku, Nagoya CityMay 2020

Became a company with an audit and supervisory committee

April 2021

Sold MORESCO Hommachi Bldg.

May 2021

Tokyo Branch relocated to Minato-ku, Tokyo

March 2022

MORESCO (ZHEJIANG) FUNCTION MATERIAL CO., LTD. (now consolidated subsidiary) establishedin Haining, China
Listed on the Tokyo Stock Exchange Prime Market

April 2022
November 2022
September 2023
October 2023
October 2023

MORESCO TRADING (ZHEJIANG) CO., LTD. (now consolidated subsidiary) established in Haining,
China
Acquired all of the equity of Wuxi MoreTex Technology Co., Ltd., an equity method affiliate, and made ita consolidated subsidiary
Moved to the Tokyo Stock Exchange Standard Market
Acquired all businesses of Cross Technologies Group, Inc. and established Cross Technologies N.A. Inc.
(now consolidated subsidiary) in Michigan, USA

―7―

3.

Business Line
The MORESCO Group consists of the Company (MORESCO Corporation), 16 consolidated subsidiaries, and an equity method
affiliate. The main business is manufacture and sales of chemical products (special lubricants, synthetic lubricants, liquid paraffin& sulfonates, hot melt adhesives, energy device materials), and the major products are as follows:[Special Lubricants]
High vacuum pump oil, fire-resistant hydraulic fluid, die casting fluids, lubricant for hot forging, cutting fluids, brake fluids
and antifreeze for automobiles, heat transfer medium, lubricants for polyurethane and composites industries[Synthetic Lubricants]
High temperature lubricating oil, hard disk surface lubricant, radiation resistant lubricating oil[Liquid Paraffin & Sulfonates]
Liquid paraffin, sulfonate[Hot melt adhesives]
Hot melt adhesives[Energy device materials]
Organic EL sealant, gas & water vapor transmittance measurement device
The Group consists of four reportable segments organized by region, based on manufacturing and sales structures: Japan, China,
Southeast/South Asia, and North America.
In Japan, the Company is engaged in manufacture and sales of major products. Ethylene Chemical Co., Ltd. is engaged in
manufacture and sales of brake fluids and antifreeze for automobiles.
In China, Wuxi MoreTex Technology Co., Ltd., MORESCO HANANO DIE-CASTING COATING (SHANGHAI）CO.,
LTD., and MORESCO (ZHEJIANG) FUNCTIONAL MATERIAL CO., LTD. manufacture special lubricants, and WUXIMORESCO TRADING CO., LTD. and MORESCO TRADING (ZHEJIANG) CO., LTD. sell them. TIANJIN MORESCOTECHNOLOGY CO., LTD. manufactures and sells hot melt adhesives.
In Southeast/South Asia, MORESCO (THAILAND) CO., LTD. manufactures and sells special lubricants and imports and sells
hot melt adhesives. In Indonesia, PT. MORESCO INDONESIA manufactures and sells special lubricants, and PT. MORESCO
MACRO ADHESIVE manufactures and sells hot melt adhesives. In India, MORESCO HM&LUB INDIA PRIVATE LIMITED
manufactures and sells special lubricants and hot melt adhesives.
In North America, MORESCO USA Inc. and Cross Technologies N.A. Inc. manufacture and sell special lubricants in the
United States.

―8―

[Business organization diagram]
The business organization diagram below shows the Group’s businesses described above.
Manufacturing/sales
Products ●Ethylene ChemicalcompanyCO., LTD.
・Automotive chemical products
Manufacturingcontract

Japan
Sales company

Service company●MATSUKEN CO., LTD.
・Wastewater treatment equipment●MORESCO TECHNO CO., LTD・Analysis and testing service

Products

Products

Related party (major corporate shareholder)
Matsumura Oil Corporation

Raw materials

Service contract

Products

MORESCO Corporation(Manufacturing and sale of chemical products)
Raw materials

Products

China
Manufacturing/sales company

Products

Raw materials

Southeast/South Asia
Manufacturing/sales company●WUXI MORESCO TRADING CO., LTD.
・Lubricants (sales company)

・Lubricants, adhesives● MORESCO HANANO DIE-CASTING COATING (SHANGHAI)
CO., LTD.
・Lubricants (manufacturing company)

・Lubricants●MORESCO TRADING (ZHEJIANG) CO., LTD.
・Lubricants (sales company)

・Adhesives●MORESCO (ZHEJIANG) FUNCTION MATERIAL CO., LTD.
・Lubricants (manufacturing and sales company)●TIANJIN MORESCO TECHNOLOGY CO., LTD.
・Adhesives (manufacturing and sales company)

Raw materials

Rawmaterials

Products

North America
Manufacturing/sales company
・Lubricants・Lubricants, adhesives* Holding company in Thailand●Wuxi MoreTex Technology Co., Ltd.
・Lubricants (manufacturing and sales company)

Legend●Consolidated subsidiary■Equity method affiliate●Zhangjiagang TEEC Automotive Chemicals Co., Ltd.
・Automotive chemicals (manufacturing and sales company)

―9―

4.

Information on Subsidiaries and Affiliates
Name

Address

Ownership ofvoting rights(%)

Capital stock

Main business

100.0

Relationship(Consolidated
subsidiaries)
MATSUKEN CO., LTD.

Chuo-ku, Osaka

20 million yen

Sales and export ofwastewater treatment
equipment and agents

MORESCO TECHNO
CO., LTD

Chuo-ku, Kobe

10 million yen

Analysis and testing

100.0

90 million yen

Manufacture, sales,and export of heattransfer media andautomotive chemical
products

60.9

Ethylene Chemical Co.,Ltd.

Ichihara, Chiba

Wuxi MoreTex
Technology Co., Ltd.
(Notes 2, 3)

China
Wuxi, Jiangsu
Province

WUXI MORESCO
TRADING CO., LTD.

China
Wuxi, Jiangsu
Province

MORESCO HANANO
DIE-CASTINGCOATING(SHANGHAI）CO.,
LTD.

China
Shanghai

TIANJIN MORESCOTECHNOLOGY CO.,LTD.

3 million
USD

Manufacture of
lubricants

100.0

100 million yen

Sales and
import/export oflubricants, andimport/export ofmaterials for the
products

100.0

1 million
USD

Manufacture of die
casting fluids

China
Tianjin10 million
USD

Manufacture, sales,
and import/export ofhot melt adhesives

China
Haining

6 million
USD

Development,
manufacture, sales,
and import/export oflubricants and sealants
Sales and
import/export oflubricants andsealants, andimport/export ofmaterials for the
products
Manufacture, sales,
and import/export oflubricants, and importand sales of hot melt
adhesives

MORESCO TRADING(ZHEJIANG) CO., LTD.
(Note 5)China
Haining―

MORESCO(THAILAND) CO.,LTD.

Thailand
Chonburi17.5 million
Thai baht

MORESCO Holding(Thailand) Co., Ltd.

Thailand
Chonburi

2 million
Thai baht

Investment

PT. MORESCO
INDONESIA(Note 2)Indonesia
Karawang

3.5 million
USD

Manufacture, sales,
and import/export oflubricants

PT. MORESCO
MACRO ADHESIVE(Note 2)Indonesia
Jakarta

3 million
USD

Manufacture, sales,
and import/export ofhot melt adhesives―10―

Producing the Company’s heat transfer
media and lubricants for hot forging
Concurrent officers
None
Engaging in licensed production andsales of the Company’s lubricants andhot melt adhesives
Concurrent officers
Officers of the Company: 2
Employees of the Company: 1
Engaging in sales of the Company’s
lubricants under license by
MORESCO HANANO DIECASTING COATING (SHANGHAI）
CO., LTD. and Wuxi MoreTex
Technology Co., Ltd.
Concurrent officers
Employees of the Company: 4

78.0

Engaging in licensed production of theCompany’s die casting fluids
Concurrent officers
Employees of the Company: 4

100.0

Engaging in licensed production andsales of the Company’s hot melt
adhesives
Concurrent officers
Officers of the Company: 1
Employees of the Company: 2

100.0

Engaging in licensed production andsales of lubricants of the Company
Concurrent officers
Employees of the Company: 3(Note 2)MORESCO(ZHEJIANG)
FUNCTION
MATERIAL CO., LTD.
(Notes 2, 4)

Selling the wastewater treatment
agents manufactured by the Company.
Concurrent officers
Officers of the Company: 2
Renting the office.
Conducting lubricant control (testing
and analysis) of fluids manufactured
and sold by the Company
Concurrent officers
Officers of the Company: 1
Employees of the Company: 2
Renting a part of the office andanalytical equipment

Engaging in sales of the Company’s
lubricants under license by MORESCO
HANANO DIE-CASTING COATING
100.0 (SHANGHAI) CO., LTD. and Wuxi
MoreTex Technology Co., Ltd.
Concurrent officers
Employees of the Company: 4
Engaging in licensed production and99.2 sales of the Company’s lubricants(51.2) Concurrent officers(Note 1) Officers of the Company: 1
Employees of the Company: 2
Holding company in Thailand
90.6
Concurrent officers(9.2)
Officers of the Company: 1(Note 1)
Employees of the Company: 2
Engaging in licensed production andsales of the Company’s lubricants
51.0
Concurrent officers
Officers of the Company: 2
Engaging in licensed production andsales of the Company’s hot melt
adhesives
51.0
Concurrent officers
Officers of the Company: 1
Employees of the Company: 1Name

Address

MORESCO HM&LUB
INDIA PRIVATELIMITED(Note 2)India
Ahmedabad,
Gujarat

MORESCO USA Inc.
(Note 6)

United States
Fountain
Inn,
South Carolina

Cross Technologies N.A.
Inc. (Note 6)

United States
Westland,Michigan(Equity method
affiliates)
Zhangjiagang TEEC
Automotive Chemicals
Co., Ltd.

(Notes)

1.
2.
3.
4.
5.
6.

China
Zhangjiagang,
Jiangsu Province

Capital stock

800 million
Indian rupee

Main business

Manufacture, sales,
and import/export ofhot melt adhesives
and lubricants

Ownership ofvoting rights(%)

Relationship

Engaging in licensed production andsales of the Company’s lubricants and100.0
hot melt adhesives(7.5)
Concurrent officers(Note 1)
Officers of the Company: 1
Employees of the Company: 1
Engaging in licensed production andsales of the Company’s lubricants
100.0 Concurrent officers
Officers of the Company: 1
Employees of the Company: 1

10
USD

Manufacture, sales,
and import/export oflubricants―

Manufacture and salesof lubricants

100.0％(100.0％)(Note 1)Engaging in licensed production andsales of the Company’s lubricants
Concurrent officers
Employees of the Company: 1

5 million
USD

Manufacture and salesof automotive
chemical products

25.0(25.0)(Note 1)―Figures in brackets represent the percentage of indirect ownership included in Ownership of voting rights.
Indicates companies classified as specified subsidiaries.
Effective September 28, 2023, the Company acquired all of the equity in investment of Wuxi MoreTex Technology
Co., Ltd., which was an equity method affiliate of the Company, and made it a wholly owned subsidiary of theCompany.
The figure presented for capital stock of MORESCO (ZHEJIANG) FUNCTIONAL MATERIAL CO., LTD. is theamount of paid-up capital as of February 29, 2024, and the amount of its registered capital is USD 12 million.
Although MORESCO TRADING (ZHEJIANG) CO., LTD. had no paid-up capital as of February 29, 2024, its
registered capital is 10 million Chinese yuan.
MORESCO USA Inc. acquired all of the business operations of Cross Technologies Group, Inc. on October 20,
2023.

―11―

5.

Employees(1) Consolidated companies
As of February 29, 2024
Segment

Number of employees (persons)

Japan

470

China

118

Southeast/South Asia

201

North America

32

Total

821

(Notes)1.

The number of employees represents the number of full-time employees.

(2) Information on the reporting company
As of February 29, 2024
Number of employees (persons)Average age (years old)

387
(Notes)1.
2.
3.

Average length of service(years)

43.9

Average annual salary (yen)14.3

6,745,190

The number of employees represents the number of full-time employees.
Average annual salary includes bonuses and non-standard wages.
All of the above employees belong to the Japan segment.

(3) Labor unions
The MORESCO Group’s labor unions in Japan are MORESCO Labor Union and MATSUKEN Labor Union. Employees of
MORESCO Corporation (including those seconded to subsidiaries or affiliates) belong to MORESCO Labor Union, andemployees of MATSUKEN CO., LTD. belong to MATSUKEN Labor Union. MORESCO Labor Union has branches at all
business locations, and the union’s headquarters is located at the Head Office of the Company. As of February 29, 2024,
MORESCO Labor Union had 266 members and MATSUKEN Labor Union had 18 members. None of the MORESCO
Group’s labor unions are members of any superior body. Some of the overseas consolidated companies have labor unions.
The labor-management relationship is stable and there are no special matters to be noted.
(4) Percentage of female workers in management positions, percentage of male workers taking childcare leave, and differences inwages between male and female workers(i) Reporting company
Fiscal year under review
Percentage of female
Percentage of male
Differences in wages between male and female workers (%)*1
workers in management workers taking childcare
positions (%)
leave (%)
Part-time/
All workers
Regular employees
fixed-term workers
*1
*2
9.5
(Notes) 1.
2.

63.6

78.8

82.8

67.4

Calculated in accordance with the provisions of the Act on Promotion of Women’s Active Engagement in ProfessionalLife (Act No. 64 of 2015)
Based on the provisions of the Act on Childcare Leave, Caregiver Leave, and Other Measures for the Welfare ofWorkers Caring for Children or Other Family Members (Act No. 76 of 1991), the rate of childcare leave, etc. taken was
calculated in accordance with Article 71-4, Item 1 of the Ordinance for Enforcement of the Act on Childcare Leave,
Caregiver Leave, and Other Measures for the Welfare of Workers Caring for Children or Other Family Members(Ordinance of the Ministry of Labor No. 25 of 1991).

―12―

(ii) Reporting company and its consolidated subsidiaries
Fiscal year under review
Percentage of female
Percentage of male
Differences in wages between male and female workers (%)*5
workers in management workers taking childcare
positions (%)
leave (%)
Part-time/fixed-term
All workers
Regular employees
workers*1,*3*2, *420.8(Notes) 1.
2.

3.
4.
5.

66.7

－

－

－

Calculated in accordance with the provisions of the Act on the Promotion of Women’s Active Engagement inProfessional Life (Act No. 64 of 2015)
Based on the provisions of the Act on Childcare Leave, Caregiver Leave, and Other Measures for the Welfare ofWorkers Caring for Children or Other Family Members (Act No. 76 of 1991), the rate of childcare leave, etc. taken was
calculated in accordance with Article 71-4, Item 1 of the Ordinance for Enforcement of the Act on Childcare Leave,
Caregiver Leave, and Other Measures for the Welfare of Workers Caring for Children or Other Family Members(Ordinance of the Ministry of Labor No. 25 of 1991).
Calculated for the reporting company and its consolidated subsidiaries both in Japan and overseas
Calculated only for the reporting company and its consolidated subsidiaries in Japan
Differences in wages between male and female workers are calculated in accordance with the provisions of the Act on
Promotion of Women’s Active Engagement in Professional Life (Act No. 64 of 2015) and the Act on Childcare Leave,
Caregiver Leave, and Other Measures for the Welfare of Workers Caring for Children or Other Family Members (ActNo. 76 of 1991) only for the subject reporting company. Therefore, the figures are omitted and presented with “-”.

―13―

II. Business Overview
1.

Management Policy, Business Environment, Issues to Be Addressed, etc.
Matters discussed in relation to the future reflect the judgment of the MORESCO Group as of the end of the consolidated fiscal
year under review.
(1) Management policy
Under the management philosophy of “R&D for users,” the MORESCO Group has contributed to our society by satisfying
customer needs in the field of interface science (friction, abrasion, etc. that occurs at contact points between things). The
current Medium-Term Management Plan (FY2024 to FY2026) upholds the five Medium-Term Corporate Policies below:
1) Promotion of sustainability management
2) Enhancement of our product portfolio
3) Creation of next-generation businesses
4) Innovation of business processes5) Improvement of the return on capital(2) Business environment, management strategy, and priority business and financial issues to be addressed
In the environment surrounding the MORESCO Group, the long-standing deflationary economy in Japan is beginning todissipate and a gradual economic recovery is expected. However, there are concerns about the impact of increased labor andlogistics costs. Overseas, the outlook is expected to remain uncertain due to factors such as the slowdown in the Chinese
economy, the risk of an economic downturn due to continued monetary tightening in various countries, and concerns about
rising resource prices due to the prolonged war in Ukraine and the intensification of tensions in the Middle East.
Furthermore, to achieve sustainable growth, it is necessary to implement management strategies that address social issues
such as growing awareness of environmental problems and labor shortages due to the declining birthrate and aging population.
In this business environment, we have launched the 10th Medium-Term Management Plan, covering the three-year period
from FY2024 to FY2026 with the theme of achieving both “realization of a sustainable society” and “increasing added valueof business.”
Under the basic policies of 1) Promotion of sustainability management, 2) Enhancement of our product portfolio, 3) Creationof next-generation businesses, 4) Innovation of business processes, and 5) Improvement of the return on capital, we will strive
to increase corporate value through the following specific initiatives.
■ Basic policies and major initiatives of the 10th Medium-Term Management Plan
1) Promotion of sustainability management
Promotion of initiatives toward carbon neutrality; increasing the sales ratio of MORESCO Green SX products*; andacceleration of efforts to reduce environmental impact, such as CO2 and waste* MORESCO certifies the products that may significantly contribute to the seven issues of materiality, based on
evaluation of the entire product cycle, from procurement of raw materials to disposal, as MORESCO Green SX
products.
2) Enhancement of our product portfolio
Sales expansion of high-value-added products, mainly special lubricants and hot melt adhesives; capturing demand fromthe new energy vehicle market, which is expected to grow in the field of die casting fluids; development and sales offluorine alternative lubricants for semiconductor manufacturing (front-end process) and inspection equipment, etc.; andresponse to the circular economy by providing products subject to recycling systems that collect and recycle usedproducts
3) Creation of next-generation businesses
Promotion of “Project MOLGADC,” a company-wide research and development system in collaboration with industry,
government, and academia; expanding the adoption of nanoemulsion technology, which improves the absorption
efficiency of functional ingredients, by major cosmetics companies; development of technology to create nonpetrochemical materials (production of bio formic acid as a raw material for polymers); and development of sealants forperovskite solar cells and electronic paper
4) Innovation of business processes
Improving sulfonate production efficiency by introducing new chemical processing methods; and data-driven approachfor faster and more efficient product development and improvement
5) Improvement of the return on capital
Promotion of price correction and optimization of production efficiency through product consolidation; implementationof a dividend policy aimed at a consolidated dividend payout ratio of 30% or more, positioning shareholder returns as a
key management issue; promotion of human capital management linked to management strategy; and strengthening IR
activities■ Overseas strategies of the 10th Medium-Term Management Plan
・ In China, improve profitability through early stabilization of new plant operations and prompt response to needs of local
customers
・ In Southeast/South Asia, strengthen R&D functions and accelerate the launch of new products that meet local needs
・ In North America, establish a stable product supply system by securing a production base through business acquisition;
reduce costs through in-house procurement of main materials (silicone); and expand sales channels to U.S. component
manufacturers■ Business targets for FY2026 under the 10th Medium-Term Management Plan
・ Net sales: 38.0 billion yen, operating profit: 2.7 billion yen, ordinary profit: 3.0 billion yen
・ ROE: 8% level, consolidated payout ratio: 30% or more, sales ratio of MGS products: 40%―14―

(3) Objective indicators for determining achievement status of management goals
In the 10th Medium-Term Management Plan (FY2024 to FY2026), under the above management policies and strategies, thetargets have been set as follows.
FY2023
FY2024FY2026(Result)(Plan)(Plan)Net sales (millions of yen)

31,88634,00038,000Operating profit (millions of yen)

1,225

1,500

2,700

Ordinary profit (millions of yen)

1,826

1,850

3,000

Profit attributable to owners of parent (millions of yen)

1,283

1,050

―

Ordinary profit margin (%)

5.7％

5.4％

7.9％

―15―

2. Sustainability Approaches and Initiatives
Matters discussed in relation to the future reflect the judgment of the MORESCO Group as of the end of the consolidated fiscal
year under review.
Basic policy on sustainability management
Facing the growing importance of sustainability management, the MORESCO Group’s mission is to contribute to society as innovative
companies that pioneer a new society and future in order to “deliver sustainable one-of-a-kind products to the world.” We, together
with our stakeholders, aim to increase our corporate value over the medium to long term by maximizing our strengths as R&D-oriented
group companies, creating economic value through our business, and at the same time, contributing to solving environmental andsocial issues related to sustainability. In March 2022, the MORESCO Group established the MORESCO Group Sustainability Policy
as the core policy for its sustainability management.
MORESCO Group Sustainability Policy
The MORESCO Group, as a specialist in the interface science stated in its management philosophy, will actively promotesustainability activities to further contribute to solving social and environmental issues. We strive to raise the trust of
stakeholders by balancing the "realization of a sustainable society" and the "improvement of corporate value throughout
the medium and long term" while conducting business.
Date

Actions2021

November

2022

March

2022

November

2023

May

2023 September
2024

February

Identification of issues of materiality related to sustainability
Establishment of the Sustainability Committee, establishment of the Corporate Sustainability
Department, formulation of the MORESCO Group Sustainability Policy
Endorsement of the TCFD recommendations and disclosure of climate-related financial information
based on the recommendations
Formulation of the MORESCO Group Human Rights Policy, commencement of development andenhancement of the human rights due diligence system, establishment of the policies for humanresources development and in-house environment development, formulation of the human resources
strategy
Commencement of selecting the MORESCO Green SX (MGS) products, which contributesignificantly to the realization of issues of materiality
The 10th Medium-Term Management Plan set targets for the MGS product sales ratio to be 40% in
FY2026 and 50% in FY2030 (result in FY2022 was 28.9%).

System to promote sustainability management and governanceFacing the growing importance of sustainability management, the MORESCO Group established the "Sustainability Committee"
in April 2022 in order to operate our business based on both the "realization of a sustainable society" and "improvement of corporate
value in the medium to long term." In addition, we established the Corporate Sustainability Department, a dedicated department tooversee the Group's promotion of sustainability. The Sustainability Committee, which is chaired by the Representative Director andPresident and consists of members such as the executive directors, Audit and Supervisory Committee members, and executive
officers, examines and formulates basic policies and strategies related to sustainability management. The director in charge ofsustainability reports on the contents of the deliberations of the Sustainability Committee to the Board of Directors, which oversees
the Committee. The Committee meets at least once a quarter to discuss a wide range of issues related to sustainability and reflect
them in business strategies and policies in a timely manner.
Board of Directors
Supervision

Reporting

Sustainability
Committee
Chair: Representative
Director and President
Executive Directors, Audit
and Supervisory Committee
members, Executive Officers,
etc.
SurveyCompliance and Risk
Management Committee
Cooperation

Chair: Representative Director
and President
Executive Directors, Audit andSupervisory Committee members,
Executive Officers, etc.

Management Committee
Chair: COO, Director and Senior
Managing Executive Officer
Executive Directors, Audit andSupervisory Committee members,
Executive Officers, etc.

Reporting

Divisions, Departments, and Affiliated Companies
Risk management system
In order to address the various risks inherent in and related to management issues, the MORESCO Group has established theCompliance and Risk Management Committee and the Sustainability Committee and is working to enhance its risk management.
Regarding risks and opportunities related to sustainability issues, seven issues of materiality have been identified under the―16―

initiative of the Sustainability Committee, based on issues found and classified through interviews with internal and external
stakeholders and discussions with divisions and related departments. For the issues of materiality, the Corporate Sustainability
Department takes the lead in identifying key risks and opportunities in collaboration with relevant divisions, departments, andaffiliated companies. The identified risks and opportunities are reported to the Sustainability Committee for discussion, alongwith the formulation of response policies, measures, and targets. Details of the discussion are reported to the Board of Directors,
under whose supervision the final decision is made.
Sustainability issues of high financial importanceOf the MORESCO Group’s seven issues of materiality, those that are expected to have a significant and immediate financial
impact are as follows: “Reduce environmental impact” (addressing climate change as the top priority), “Develop innovative
products and services,” “Create new value and improve productivity through technological innovation,” “Strengthen humancapital by developing and promoting diverse human resources,” and “Realize a work style that is fulfilling both physically andmentally and that respects human rights.” The Sustainability Committee has summarized the “strategies” for addressing theseissues and the “metrics and targets” that we aim to achieve as follows.
(1) Addressing climate change
As part of its efforts to address climate change issues, in November 2022, the MORESCO Group expressed its endorsementof the TCFD recommendations to strengthen its climate change efforts and disclosures.
(i)

Governance
Please refer to “System to promote sustainability management and governance” in this Report.

(ii) Risk management
Please refer to “Risk management system” in this Report.
(iii) Strategy
The MORESCO Group manufactures and sells chemical and petroleum products to be used as raw materials and fuels(including fossil fuels) and recognizes that climate change is an extremely important issue that brings both risks andopportunities.
Regarding climate change, various scenarios can be considered depending on trends in global warming countermeasurestaken by major countries. Assuming two typical scenarios, (1) Transition Risk Scenario (1.5°C or lower scenario) and (2)Physical Risk Scenario (4.0°C scenario), the Group examined risks and opportunities for its core businesses, namely,
Special Lubricants, Synthetic Lubricants, Liquid Paraffin & Sulfonates, Hot Melt Adhesives, and other new businesses,
primarily for the period until the 2030s. In identifying and selecting risks and opportunities, the Corporate Sustainability
Department took the lead in conducting study sessions in each business division based on the results of awareness surveys
conducted in major business divisions and making decisions based on the opinions of external experts.
In the Transition Risk Scenario, the financial impact that is expected to be particularly large is the rising raw material
procurement costs caused by carbon pricing (the introduction of a carbon tax) in the upstream supply chain. At present,
the rise in raw material prices can be passed on to almost all products. However, the emergence of alternative products
may become a major threat in the medium term. Downstream in the supply chain, in the automotive sector, which accounts
for 40% of our net sales, the ratio of battery electric vehicles may expand at a faster pace and wider range than we anticipate,
which may result in increased investment expenditures, etc. in response.
In the Physical Risk Scenario, disruption of plant operations and logistics networks due to storm surges caused by large
typhoons (acute risk) or sea level rise due to temperature rise (chronic risk) is expected to have a large financial impact.
Both risks are associated with concerns about damage to production facilities, suspension of operations, and disruption of
the supply chain at the Akoh Plant and the Chiba Plant, our main production bases in Japan.
The issues we recognize as major risks and opportunities are as follows:
Risks
1.5°C Scenario

4.0°C Scenario

Expected events
Rising carbon prices

Expected time
to becomeevident

Medium term ・Increased costs in response to carbon neutrality policies

Soaring raw material and fuelShort toprices and procurement
medium term
difficulties
Changes in the competitive
Short toenvironment
medium term
Changesincustomer
Short term
behavior
Responding to the circular
Short toeconomymedium term
Changes in awareness ofinvestors
andfinancial Short term
institutions
Short to long
Rising average temperature
term
Intensifying extreme weather
Rising sea level

Material risks

Countermeasures
・Promotion of energy conservation by improving productivity,
utilization of renewable energy, utilization of petrochemicalmaterials

・Decline in cost competitiveness due to soaring raw material・Global procurement and sustainable procurement
and fuel prices
・Development of high-value-added products, etc. by・Development and sales of high-value-added products (MGS)
competitors
・Fundamental changes in the competitive environment and ・Research and development of environmentally friendly
industrial structure
products (MGS)・Strengthened legislation related to resource recycling and・Utilization of recycled and reused materials
waste management and treatment both in Japan and overseas
・Possible investment withdrawal by investors and financial ・Proactive and continuous disclosure of initiatives to reduce
institutions and deterioration of loan conditions
environmental impact

・Deterioration of working environment and decline in ・Improvement of production and working environment
productivity due to rising average temperature
through automation
Short to long ・Supply chain disruption due to damage to suppliers and・Strengthening the supply chain network
term
logistics networks
Short to long・Flood damage countermeasures at production bases,
・Risk of damage to production sites due to storm surges, etc.
term
dispersion of inventories and production bases

Water resources, resource
recycling, wastewater andShort to・Strengthened legislation related to resource recycling and ・Development of alternative raw materials, utilization ofwaste management
medium term
waste management and treatment
recycled and reused materials―17―Opportunities
1.5°C Scenario

4.0°C Scenario

Expected time
to becomeevident

Expected events

Material opportunities

Countermeasures

・Possibility of promoting substitution to energy-saving
Medium term・Development of recycled oil and high-value-added products
product groups

Rising carbon prices

Soaring raw material and fuelShort to・Increased competitiveness of factories close to demand areas
prices and procurement
medium term
and companies and factories with excellent BCP capabilities
difficulties
Changes in the competitive
Short to・Growing demand for high-value-added products
environment
medium term
・Increased demand for products with lower environmental
Changesincustomer
Short term
impact and products utilizing production processes to reducebehavior
GHG emissions
Responding to the circular
Short to・Growing need for lubricant recycling, extending service life,
economymedium term
etc.
Changes in awareness of・Adoption of ESG-related stock indices, increasing
investors
andfinancial Short termshareholding by long-term investors and improving
institutions
reputation
Short to long
Rising average temperature
・Growing demand for products with excellent heat resistanceterm
Short to long ・Stable operation and supply, increasing customer and investor
Intensifying extreme weather
termsatisfaction and trust

・Stable procurement through diversification of raw material
sources・Development and sales of environmentally friendly products(MGS) and strengthening price competitiveness・Research and development of environmentally friendly
products (MGS)・Development and sales of environmentally friendly products(MGS), utilization of recycled and reused materials
・Proactive and continuous disclosure of initiatives to reduce
environmental impact
・Product development to meet new demands
・Strengthening the supply chain network

Short to long ・Improving reliability by building factories and supply
・Hazard analysis and formulation of disaster response BCP
termsystems resistant to floods and other disasters

Rising sea level

Water resources, resource
Short to・Expanding customer base by recycling products and using ・Development of alternative raw materials, utilization ofrecycling, wastewater andmedium term
recycled materials
recycled and reused materials
waste management(iv) Metrics and targets
Regarding greenhouse gas (GHG) emissions, which are an important risk related to environmental impact, based on thestandards of the GHG Protocol, we are promoting quantitative measurements of (1) direct emissions from the use of heavy
oil, gas, and other fuels in our manufacturing processes and business activities (Scope 1), (2) indirect emissions from thepurchase of electricity and heat energy from other companies (Scope 2), and (3) indirect emissions other than thosedefined in Scope 1 and Scope 2 (emissions from the supply chains related to the Group's activities). For Scope 1 and 2,
we aim to reduce emissions by 46% by FY2030 compared to FY2013 levels, and for Scope 1, 2 and 3, we aim to achievecarbon neutrality by FY2050.
Item
Goal 1

Scope 1+2 emissions

Goal 2

Scope 1+2+3 emissions

Boundary
Consolidated
MORESCOcompanies in Japan
Consolidated
MORESCOcompanies in Japan

Target year
Group
Group

Level

FY203046% reduction

FY2050Carbon neutrality(2) MORESCO Green SX
The MORESCO Group certifies the products that may significantly contribute to the initiatives for our seven issues ofmateriality, based on evaluation of the entire product cycle, from procurement of raw materials to disposal, as MORESCO
Green SX (MGS) products.
(i)

Governance
The MORESCO Green SX Internal Review Board meets twice a year, in March and September, to ascertain the sales of
MGS products and the MGS sales ratio of the entire MORESCO Group. At the same time, the Board members andexternal experts discuss and certify new MGS product candidates. The results of the meetings are reported to the
Sustainability Committee for necessary deliberation, and then they are reported to the Board of Directors.

(ii) Risk management
Please refer to “Risk management system” in this Report.
(iii) Strategy
Increasing the ratio of MGS products in total sales is one of the main measures for “promotion of sustainability
management,” one of the five pillars of the 10th Medium-Term Management Plan. It is also one of the measures that will
drive “enhancement of our product portfolio,” another one of the five pillars.
(iv) Metrics and targets
The MORESCO Group has adopted the sales ratio of MGS products (28.9% in FY2022) as an indicator for thedevelopment and sales of MGS and set targets of 40% for FY2026 and 50% for FY2030.

―18―

(3) Human capital and diversity
In order to balance "realization of a sustainable society” and “improvement of corporate value in the medium to long term" asstated in the MORESCO Group Sustainability Policy, it is important to support the growth of all employees so that they can
maximize their capabilities and motivation and to create an environment in which all human resources can play an active role.
Under this idea, we established the human resources development policy and the in-house environment development policy in
May 2023. Based on these two policies, in line with the formulation of the 10th Medium-Term Management Plan, we haveformulated the human resources strategy, which summarizes specific initiatives toward achieving our materiality targets.
(i)

Governance
Please refer to “System to promote sustainability management and governance” in this Report.

(ii) Risk management
Please refer to “Risk management system” in this Report.
(iii) Strategy
Human resources development policy
Based on its Management Philosophy and the Sustainability Policy, the MORESCO Group established a basic approach
for its human resources policy in May 2023. In accordance with this basic approach, we have set four mindsets we seekin our human resources: “professionalism,” “freewheeling thinking,” “ability to empathize with and involve others,” and“willingness to continue to take on challenges.”

Basic approach
The MORESCO Group declares as part of its Management Philosophy that it will create new value by fostering a working environment that respects an individual
and a freewheeling thinking. As a research and development-oriented company, the MORESCO Group is committed to providing manufacturing and services thatwill make people around the world happy.
To this end, in an environment where people with diverse backgrounds can play active roles, we will develop human resources who can broaden the framework of
their common sense, create new value through freewheeling thinking, contribute to research and development, which is the source of our competitiveness, and link
the results of R&D to “contributing to a sustainable society” and “improving corporate value.”■ Professionalism

The mindsets we seek inour human resources■ Freewheeling thinking

We seek “professional human resources” who continuously hone theirexpertise to create value that will make people around the world happy.

New value can be created through “freewheeling thinking” enabled byexpanding the framework of your common sense without being bound by
precedent or common sense.

■ Ability to empathize with and involve others■ Willingness to continue to take on challenges

In order to build a human network in business, it is necessary to have the“ability to empathize” with and understand diverse values and the “ability to
involve” the members around you by demonstrating leadership.

As a specialist in interface science, for the creation of new value, it is necessary
to view changes as opportunities to transform yourself and continue to take onchallenges.

In-house environment development policy
At the same time of the establishment of the human resources development policy, the MORESCO Group also established a basic
approach for the policy to improve its in-house environment. To maximize the capabilities of the Group as an organization, it isimportant to have an organizational culture that not only helps each employee improve his or her skills but also allows all employees
to exercise their abilities to the fullest. The most important element for human resources of MORESCO, a research anddevelopment-oriented company, is the willingness to broaden the framework of their own common sense. And we believe thatdiversity, inclusion, and fairness are the key elements in helping each employee broaden the framework of common sense.

Basic approach
The MORESCO Group declares as part of its Management Philosophy that it will create new value by fostering a working environment that respects an individual
and a freewheeling thinking. To foster a working environment that respects an individual, we believe it is important for each employee to accept different values
and broaden his/her framework of common sense.
And to enable each employee to broaden the framework of common sense, it is important to develop a working environment that value diversity, fairness, andinclusion.

―19―

(iv) Metrics and targets
To promote a human resources strategy that is linked to our management strategy, in line with the formulation of the 10th
Medium-Term Management Plan, we have formulated a human resources strategy as a specific policy toward achieving
our materiality targets. Specifically, we have set strategic target 1, "Creation of an environment where all human resources
can play an active role," and strategic target 2, "Enhancement of human resources needed to execute our management
strategy." KPIs are set for individual targets, and we will promote and supervise efforts to achieve them.

Human resources strategy
Goal:

Strengthen human capital to achieve both “realization of a sustainable society” and “improvement ofcorporate value in the medium to long term”
Target: Human capital is optimally allocated in accordance with the management strategy.

Strategic target 1

Creation of an environment where all human resources can play an active role
● Foster a corporate culture that emphasizes diversity, inclusion, and fairness● Develop grading/evaluation/compensation systems and recruitment/training systems withno discrimination based on attributes● Create an environment where members can work autonomously with high motivation

Strategic target 2

Enhancement of human resources needed to execute management strategy● Familiarize all Group employees with corporate philosophy and management strategy● Develop and secure the human resources needed to expand business, strengthen thefoundation, and create the future● Allocate human resources based on talent portfolio analysis

MORESCO Corporation
Indicator

FY2021

FY2022

FY2023

Target (FY2024)

Ratio of female managers

5.6%

9.2%

9.5%

10%

Ratio of male employees taking childcare leave

27.3%

71.4%

63.6%

50%

All workers

75.5%

78.0%

78.8%

－%

Regular employees

79.2%

83.0%

82.8%

－%

Part-time/fixed-term workers

62.2%

61.5%

67.4%

－%

Wage
difference
between men andwomen
MORESCO Group
Indicator

Ratio of female managers (in Japan and overseas)

FY202114.7%

FY202218.0%

FY2023
20.8%

Ratio of male employees taking childcare leave (in
27.3%
62.5%
66.7%
Japan only)
For the basis of calculation, please refer to Part I., 1. Company Overview, Employees of this Report.

―20―

Target (FY2024)－%－%

(4) Human rights-respecting management
In conjunction with rebuilding of its human resources strategy, the MORESCO Group is also working to enhance humanrights-respecting management. As the first initiative, we established the MORESCO Group Human Rights Policy in May 2023
in accordance with the Guiding Principles on Business and Human Rights adopted by the United Nations Human Rights
Council. To explain the content of the Policy and the background of its establishment, we conducted training for all Group
employees in Japan from December 2023 to January 2024 and asked all employees to comply with the Policy.
(i)Governance
Please refer to “System to promote sustainability management and governance” in this Report.

(ii) Risk management
Please refer to “Risk management system” in this Report.
(iii) Strategy
Building and strengthening of a human rights due diligence system
The MORESCO Group promotes building of a human rights due diligence system. In FY2023, we examined the humanrights risks that are important to the Group by referring to various relevant guidelines both in Japan and overseas,awareness surveys targeting directors and executives, and opinions of external experts. Based also on the results of the
FY2023 employee engagement survey, we plan to identify material human rights risks. For the identified human rights
risks, we plan to strengthen and promote countermeasures and disclose relevant information on our corporate website andother media. Going forward, we will build and strengthen our human rights due diligence system, including human rights
risk assessment throughout the supply chain.
Building and strengthening of a remedy mechanism
To build a remedy mechanism, the MORESCO Group has started with checking the relevant internal systems andregulations applicable to the employees of MORESCO Corporation. We are also strengthening the guidance andsupervision of our Group companies, based on the results of an employee engagement survey targeting all Group
employees, etc. Taking into consideration the severity of the identified human rights risks, we intend to gradually build
and strengthen a remedy mechanism that meets the requirements of the UN Guiding Principles on Business and Human
Rights.
(iv) Metrics and targets
To strengthen the Group’s human rights-respecting management, we have set a target of holding human rights training
every year for all Group companies with a 100% participation rate.

―21―

3.

Business and Other Risks
Of the matters concerning the business overview and accounting condition, etc. stated in the Annual Securities Report, the mattersthat the management recognizes as major risks that may have a significant impact on the financial position, operating results, andcash flows of consolidated companies are as follows:
Matters discussed in relation to the future reflect the judgment of the MORESCO Group as of the end of the consolidated fiscal
year under review.
(1) Business expansion in overseas market
The MORESCO Group has established overseas subsidiaries in China, Thailand, Indonesia, the United States, and India as
production and sales bases to promote overseas businesses. The Group’s overseas sales, mainly from the Asian region, such as
China and Southeast Asia, are 11,492 million yen in fiscal year ended February 2023 and 12,947 million yen in fiscal year
ended February 2024, with a ratio to the consolidated net sales of 37.9% and 40.6%, respectively. Fluctuations in the economic
condition and the value of currencies, changes in political situations, occurrence of disasters and infectious diseases, changes
in laws and regulations, and other variable factors in these overseas markets may have an impact on the business performanceand financial position of the Group.
(2) Climate change
The MORESCO Group sees climate change as an important issue in management and recognizes that the risks andopportunities associated with climate change have a significant impact on its business strategies.
Regarding climate-related risks, we recognize the transition risks, such as the rise in costs and changes in market, andthe physical risks, such as supply chain-related risk, as the risks with a high degree of materiality and probability.
Meanwhile, the Group also sees climate change not only as a risk but also as an opportunity. We will operate ourbusinesses while balancing the “realization of a sustainable society” and the “improvement of our corporate value in themedium to long term,” and we will further contribute to solving social issues and environmental issues, thereby proactively
tackling the sustainability issues.
(3)

Risks related to manufacturing of productsi) Risks associated with natural disasters, pandemics, accidents, etc.
The MORESCO Group has production sites both inside and outside Japan and is therefore greatly responsible for ensuring
stable supply. If a large-scale natural disaster, a pandemic, or an accident occurs and makes it difficult for these sites tosupply products, it may affect the Group’s business performance and financial condition.
ii)

Concentration on specific production sites[Synthetic Lubricants]
The Company owns the synthesis equipment for production of high-temperature lubricating oils at the Akoh Plant andthe equipment for production of hard disk surface lubricants at the Head Office and Research Center. If a serious trouble
occurs at the plant or the Head Office and then the operation of the equipment is suspended for a long period of time, it
may temporarily stop the supply of products. The amount of stock is for about 1.0 months.
(Liquid Paraffin & Sulfonates)
The Company produces liquid paraffin and its joint product sulfonate by the sulfuric acid refining method. The advantageof the sulfuric acid refining method is that sulfonate can be produced as a joint product, while the disadvantage is thatwaste sulfuric acid is generated in the production process. The Company has established an integrated production line
(closed system) covering all processes, including disposal of waste sulfuric acid, in which the plant is directly connectedby a pipeline to an adjacent waste sulfuric acid recycling company. However, since disposal of waste sulfuric acid isperformed with equipment of another company, any change in the plant of the said company, such as transfer ordownsizing of the plant or modification of equipment, may have an impact on the production capacity of our Liquid
Paraffin & Sulfonates division.
In addition, the Company produces liquid paraffin and sulfonate only at the Chiba Plant. If a serious problem occurs
at the plant and then the plant’s operation is suspended for a long period of time, the supply of products may temporarily
stop. The amount of stock at the plant is for about 1.0 months.
In response to these risks related to manufacturing of products, the MORESCO Group has taken initiatives to avoid
the occurrence of the risks and minimize the damage if they occur, such as formulating a business continuity plan for eachsite, carrying out periodic maintenance and inspection of equipment, and conducting disaster drills.

(4) Product quality
The MORESCO Group strives to maintain and improve the quality and reliability of its products in accordance with strict
internal quality assurance criteria, including acquisition of ISO 9001 certification. However, it is impossible to completely
eliminate all the risks related to quality defects, and there is a risk of a lawsuit, etc. if an unexpected defect arises. In theevent that a quality assurance problem arises with a product of the Group, it will generate costs for compensation andundermine the reliability of the product, leading to a loss of customers, which may eventually affect the businessperformance of the Group. Although the MORESCO Group has insurance against product liability claims, there is no
guarantee that the final amount of compensation to be paid will be completely covered. Therefore, product defects may affectthe business performance and financial position of the Group.
(5) Risks associated with purchase of raw materials
The MORESCO Group’s products are mainly made from lubricants, petrochemicals, and chemical products. These materials
are affected by fluctuations in prices of crude oil and naphtha. The crude oil and naphtha prices may continue to significantly
fluctuate due to the supply-demand trends in Japan or overseas. In the Great East Japan Earthquake, the manufacturing plantsof the raw materials were damaged, which affected our production. Similarly, there is a possibility in the future that a disasteror an accident resulting in supply disruption or consolidation/elimination of businesses on the supplier side may interrupt our―22―procurement of raw materials.
The Group has responded to the impact of fluctuations of raw material prices by revising prices of the products linked
to crude oil and naphtha prices through negotiations with the major customers of special lubricants. We will continue toreflect the price rises in the product prices while also working to reduce costs and promote a shift to high value-added
products. To secure necessary raw materials, we will take measures such as securing suppliers on a global level anddiversifying the materials we use. However, if these measures do not sufficiently work, it may affect the businessperformance of the Group.
(6) Risks related to research and development
The MORESCO Group believes that the development of new products contribute to the improvement of profitability and thefuture growth of the Group, under which we have been investing a large amount of our resources in new product development.
Under the 10th Medium-Term Management Plan, which started in FY2024, we are promoting Project MOLGADC, a companywide, cross-divisional development system that collaborates with industry, government, and academia, to engage in researchand development.
Under these policies, the R&D department and sales divisions keep close contact with each other and work to properly
identify the market needs and achieve research results as soon as possible by using internal and external networks (people,
technologies, etc.). However, if we fail to obtain appropriate profits in return for the investment made, it may affect thebusiness performance and financial position of the Group.
(7) Patent application
Our basic policy is to apply for patents for all new technologies that the Group has developed. However, for patents related
to a production method, etc. of which infringement is difficult to find or patents related to special lubricants, etc. of which
blending know-how may be leaked to competitors if the composition is disclosed in patents, we may refrain from filing anapplication to protect confidentiality. This means that if a competitor applies for a patent on any of the matters above, thepatent may be granted. In preparation for such a situation, the Company has decided to keep records of the implementationof such matters within the company so that we will be able to claim a non-exclusive license based on the right of prior use.
(8) Environmental regulations
We strive to comply with environmental laws and regulations. However, in response to social demands for environmental
conservation, environmental laws and regulations may be newly established or revised, resulting in the need for capital
investment or reorganization of relevant businesses, which may affect the business performance and the financial position of
the Group.

―23―

(9) Risks related to compliance
The MORESCO Group has established the Compliance Policy, aiming to ensure that all the employees and executives
engage in corporate activities in accordance with the Management Philosophy and the MORESCO Corporate Behavior
Charter and thereby become a company supported by its stakeholders. Based on this Policy, systems to ensure compliance
have been developed and promoted. We also work to maintain and improve the compliance systems by conducting internal
audits on our Group companies.
If a serious violation of a law or regulation occurs despite these efforts, it may deteriorate our social credibility, etc. andaffect the business performance and financial position of the Group(10) Information security
In recent years, many cases of leakage of information owned by companies have occurred due to cyber attacks, unauthorizedaccess, computer virus infection, etc. The Company is working to prevent the leakage by implementing measures such as
establishing the Information Security Policy and related regulations, introducing products with information security
measures applied, and providing information security education programs for both executives and regular employees.
However, if leakage of information occurs due to an unexpected situation, it may deteriorate our social credibility, etc.
and affect the business performance and financial position of the Group.
(11) Risks related to valuation of inventories
The Company applies the Accounting Standard for Measurement of Inventories. If we determine that our profitability has
declined due to a rapid change in the market environment or other reason and record a valuation loss on the inventories wehold, it may affect the business performance and financial position of the Group.
(12) Risks related to impairment loss on fixed assets
The Company applies the Accounting Standard for Impairment of Fixed Assets. If an impairment loss is recorded on our
fixed assets due to a decline in profitability as a result of significant deterioration of the business environment or a fall ofmarket prices, etc., it may affect the business performance and the financial position of the Group.
4.

Analysis of Financial Position, Operating Results, and Cash Flows by Management(1) Overview of operation results
The overview of the financial position, operating results, and cash flows (hereinafter, “the operating results, etc.”) of the
MORESCO GROUP (the Company and its consolidated subsidiaries and equity method affiliates) of the consolidated fiscal
year under review is as follows:i)

Financial position and operating results
During the consolidated fiscal year under review, the Japanese economy was mostly on a recovery trend despite sluggish
personal consumption due to rising prices and the slowdown of overseas economies, which were headwinds for exports. In
the world economy, while inflation was slowing, the effect of the tightening policy in the U.S. economy was becoming
apparent. In China, despite the implementation of economic stimulus measures, there was still uncertainty about the future.
Exchange rates were affected by the monetary policies of Japan and the U.S. and showed significant fluctuations.
Under these circumstances, our financial position and operating results of the fiscal year under review are as follows.
a.

Financial position
Total assets as of the end of the fiscal year under review were 37,053 million yen, an increase of 5,036 million yen from theend of the previous consolidated fiscal year. This was mainly due to increases of 1,380 million yen in cash and deposits, 346
million yen in trade receivables, 381 million yen in inventories, 693 million yen in investments and other assets, 1,530 million
yen in property, plant and equipment, and 639 million yen in intangible assets.
Liabilities increased by 3,153 million yen from the end of the previous consolidated fiscal year to 13,931 million yen. Thiswas mainly due to increases of 659 million yen in short-term borrowings and 2,593 million yen in long-term borrowings.
Net assets increased by 1,883 million yen from the end of the previous consolidated fiscal year to 23,122 million yen. Thiswas mainly due to increases of 914 million yen in retained earnings, 322 million yen in foreign currency translation
adjustment, 304 million yen in remeasurements of defined benefit plans, and 290 million yen in non-controlling interests.

b. Operating results
Net sales of the consolidated fiscal year under review were 31,886 million yen, a 5.1% increase year on year, due to higher
selling prices and increased sales volume overseas. Operating profit increased significantly to 1,225 million yen (up 134.2%
year on year). In addition, due to foreign exchange gains and increased investment income from the acquisition of an equity
method affiliate in China as a subsidiary, ordinary profit increased 74.6% year on year to 1,826 million yen, and profit
attributable to owners of parent increased 108.8% year on year to 1,283 million yen mainly due to gain on a bargain purchaserecorded as extraordinary income.
Operating results by segment are as follows.
Japan
In the Special Lubricants sector, although sales volume of cutting fluids, fire-resistant hydraulic fluids, and heat transfer
medium decreased, sales volume of die casting fluids and lubricants for hot forging, our mainstay products, increased fromthe previous year, resulting in an increase in sales volume for the entire sector from the previous fiscal year. In the Hot Melt
Adhesive sector, sales volume increased due to favorable performance of products for hygiene materials. However, in the
Liquid Paraffin & Sulfonates and Synthetic Lubricants sectors, sales volume declined due to a decrease in demand frommajor customers. Overall, sales volume in this segment exceeded that of the previous fiscal year, and product priceadjustments resulted in an increase in revenue.
As a result, net sales to external customers of this segment were 20,229 million yen (up 3.0% year on year) with segment―24―

profit of 586 million yen (up 1,704.1% year on year).
China
Amid a situation where real estate issues and restrained consumption due to delayed employment recovery were weighing
on domestic demand recovery, sales of both Special Lubricants and Hot Melt Adhesive decreased due to the impact of thedecline in the capacity utilization rates of Japanese auto parts manufacturers and a decrease in shipments for use for air
purifier filters, respectively.
As a result, net sales to external customers of this segment were 3,536 million yen (down 7.3% year on year) with segment
profit of 118 million yen (down 62.1% year on year).
Southeast/South Asia
Sales of Special Lubricants increased due to an increase in sales volume and product price adjustments resulting from anincrease in automobile production in India and Indonesia. Sales of Hot Melt Adhesive also increased due to sales expansion
in the same region.
As a result, net sales to external customers of this segment were 6,737 million yen (up 14.8% year on year) with segment
profit of 309 million yen (up 151.7% year on year).
North America
Sales of Special Lubricants increased significantly due to the increased volume resulting from an increase in automobile
production. In particular, shipments of high-value-added products such as minimum-quantity spray-type lubricants steadily
increased.
As a result, net sales to external customers of this segment were 1,384 million yen (up 36.9% year on year) with segment
profit of 181 million yen (up 107.7% year on year).
ii)

Cash flows
Cash and cash equivalents at the end of the consolidated fiscal year under review increased by 1,380 million yen from theend of the previous consolidated fiscal year to 5,566 million yen. Cash flow conditions are as follows.
Net cash provided by operating activities was 2,934 million yen (net cash provided of 515 million yen in the previousyear). This is mainly due to profit before income taxes.
Net cash used in investing activities was 4,250 million yen (net cash used of 1,172 million yen in the previous year). Thisis mainly due to purchase of property, plant and equipment.
Net cash provided by financing activities was 2,819 million yen (net cash used of 1,227 million yen in the previous year).
This is mainly due to proceeds from long-term loans payable.

―25―iii) Production, orders, and sales resultsa. Production results
Production results for the consolidated fiscal year under review by segment are as follows:
Consolidated fiscal year under review(From March 1, 2023 to February 29,
2024)

Year-on-year change(%)

Japan (millions of yen)

19,429105.8

China (millions of yen)

3,092

112.3

Southeast/South Asia (millions of yen)

7,102

103.4

546

201.1

30,169106.8

Segment

North America (millions of yen)
Total (millions of yen)
(Note) Amounts are calculated based on selling prices.
b.

Order results
Since the MORESCO Group’s chemicals business is mainly make-to-stock production, order results are not stated.

c.

Sales results
Sales results for the consolidated fiscal year under review by segment are as follows:
Consolidated fiscal year under review(From March 1, 2023 to February 29,
2024)

Year-on-year change(%)

Japan (millions of yen)

20,229103.0

China (millions of yen)

3,536

92.7

Southeast/South Asia (millions of yen)

6,737

114.8

North America (millions of yen)

1,384

136.9

31,886105.1

Segment

Total (millions of yen)

(Notes) Sales results by our major customer and their ratio to total sales results in the previous consolidated fiscal year and theconsolidated fiscal year under review are as follows.

Major customer

Matsumura Oil Corporation

Previous consolidated fiscal year
(From March 1, 2022 to February 28,
2023)
Value (millions ofRatio (%)
yen)
4,809

―26―

15.9

Consolidated fiscal year under review(From March 1, 2023 to February 29,
2024)
Value (millions ofRatio (%)
yen)
5,124

16.1

(2) Analysis and discussion on operating results by management
The following is a summary of the MORESCO Group’s awareness, analysis, and discussion on its operating results from the
management’s perspective.
Matters discussed in relation to the future reflect the judgment as of the end of the consolidated fiscal year under review.
i)

Awareness, analysis, and discussion on financial position and operating results
Regarding the Group’s operating results for the consolidated fiscal year under review, net sales were 31,886 million yen(up 5.1% year on year). This was due to a rise in selling prices and an increase in sales volume overseas. In terms of profit,
due to adjustment of product prices, operating profit increased 134.2% from the previous year to 1,225 million yen andordinary profit increased 74.6% from the previous year to 1,826 million yen. In addition, due to foreign exchange gains andincreased investment income from the acquisition of an equity method affiliate in China as a subsidiary, profit attributableto owners of parent increased 108.8% year on year to 1,283 million yen.
Analysis on the financial position is as described in “II Business Overview 4. Analysis of Financial Position, Operating
Results, and Cash Flows by Management (1) Overview of operation results i) Financial position and operating results a.
Financial position.”

ii)

Analysis and discussion on cash flows and information on capital resources and liquidity of funds
During the consolidated fiscal year under review, we purchased property, plant and equipment using the income obtained
from operating activities and financial activities as the financial resources. Details are stated in “II Business Overview 4.
Analysis of Financial Position, Operating Results, and Cash Flows by Management (1) Overview of operation results ii)
Cash flows.”
Regarding the Group’s capital resources and liquidity of funds, necessary funds are secured with funds on hand andborrowings from financial institutions. Regarding funds on hand, in addition to acquiring cash continuously and stably fromoperating activities, we work to promote efficient fund management by consolidating funds of the Group companies. As forborrowings from financial institutions, we have concluded overdraft agreements with major partner financial institutions toensure the liquidity of funds.

iii)

Significant accounting estimates and assumptions used therein
The significant accounting estimates and assumptions used therein that we used in preparing the consolidated financial
statements are as stated in “V. Financial Information, 1. Consolidated Financial Statements, etc., (1) Notes to the consolidated
financial statements (Significant accounting estimates).”iv)

Management policy, management strategy, and objective indicators for determining achievement status of management goals
The consolidated fiscal year under review was the third year of the 9th Medium-Term Management Plan (FY2021 to
FY2023). The achievement status of the consolidated fiscal year under review for the target figures at the beginning of thePlan is as follows.
FY ended February 2024 FY ended February 2024
Achievement rate
(Target)(Result)

Net sales (millions of yen)

29,80031,886107.0％

Operating profit (millions of yen)

2,260

1,225

54.2％

Ordinary profit (millions of yen)

2,500

1,826

73.1％

Profit attributable to owners of parent (millions of yen)

1,450

1,283

88.5％

Ordinary profit margin

8.4％

5.7％

―

(Note) Targets are the figures released on February 22, 2021.
The target figures for FY2024 are as stated in “II Business Overview, 1. Management Policy, Business Environment, Issues tobe Addressed, etc., (3) Objective indicators for determining achievement status of management goals,” and the issues to beaddressed for their achievement are as stated in “II Business Overview, 1. Management Policy, Business Environment, Issues tobe Addressed, etc., (2) Business environment, management strategy, and priority business and financial issues to be addressed.”5.

Material Business Agreements, etc.
(Business combination through acquisition)
On August 28, 2023, the Company made a decision to acquire all of the equity interests in Wuxi MoreTex Technology Co., Ltd.
(Wuxi, Jiangsu Province, China), an equity method affiliate of the Company, to make it a subsidiary, and it acquired the equity
interests on September 28, 2023. For details of the business combination through acquisition, please refer to Part I Company
Information, V. Financial Information, (1) Consolidated Financial Statements, Notes (Business combinations, etc.).
(Business acquisition)
MORESCO USA Inc. (South Carolina, USA, hereinafter “MUSA”), a consolidated subsidiary of the Company, entered into abusiness transfer agreement on August 22, 2023 to acquire all the businesses of Cross Technologies Group, Inc. (Michigan, USA,
hereinafter “Cross”), and it acquired the businesses on October 20, 2023. For details of the business acquisition, please refer to Part
I Company Information, V. Financial Information, (1) Consolidated Financial Statements, Notes (Business combinations, etc.).

―27―

6.

Research and Development Activities
The MORESCO Group actively engages in research and development activities in order to respond to the increasingly
diversifying customer needs and contribute to the realization of a sustainable society, as well as to create businesses in new fields.
Based on the technologies to add advanced functions through refining, synthesis, modification, and blending of raw materials andto evaluate product characteristics that satisfy customer requirements, the Group is promoting research and development in eachfield of special lubricants, synthetic lubricants, hot melt adhesives, and new business development with a view to a carbon neutral
society. Our R&D bases are placed in Japan. Engineers are sent from Japan to China, Southeast Asia, and the U.S. to conduct localbased product development while encouraging collaborations between segments. We have established a system that promotes
improvement of local development capabilities and enables prompt development at each site.
Mainly at our Head Office Research Center, we have an R&D Department related to each business division and the Corporate
R&D Department in charge of new business development, and we promote development of new materials, new technologies, andnew products and improvement development for existing products in each of the fields of environment, information and electronics,
energy device, and life science. We have 113 research and development staff members, which account for 13.8% of all employees.
The main themes, results, and expenses for research and development of each segment for the consolidated fiscal year underreview are as follows. The total amount spent for research and development for the consolidated fiscal year under review was 1,321
million yen.
(1) Japan[Special Lubricants]
Mainly in the development section of each field placed within the Functional Fluids Division, research and development isconducted on die casting fluids, fire-resistant hydraulic fluids, lubricants for hot forging, metal working fluids, etc.
Efforts are focused on development of new products that can contribute to reducing environmental impact, resources saving
and recycling toward realizing a sustainable society, establishment of basic technologies using IoT/AI and sensors, and thedevelopment of peripheral equipment capable of extending life or reducing the amount of use of fluids.
The introduction of laboratory automation and materials informatics is also being considered to improve development
efficiency.
For die casting fluids, we have completed the development of products that can be used with minimum-quantity spray to
improve the environment in plants and can improve quality and productivity. In the future, we will promote the developmentof new products of the minimum-quantity spray type, which can contribute to a shift to EVs and weight reduction of automobile
manufacturers. We will also advance the development of technology to easily visualize the coating state in order to realize andsupport efficient minimum-quantity spray.
In the field of fire-resistant hydraulic fluids, as the top manufacturer of water-glycol hydraulic fluids in Japan, we areaccelerating initiatives to protect the environment. In addition to brushing up the recycling system for collecting main elementsfrom deteriorated hydraulic fluids and reusing them, we are promoting the development of an automatic monitoring system toextend the life of hydraulic fluids to reduce waste, thereby contributing to the reduction of environmental impact.
In the field of lubricants for hot forging, we promote the development of white-type lubricants, which can replace graphite
and contribute to a cleaner working environment in factories. In line with the recent move of automakers toward EVs andweight reduction, aluminum forging, which is expected to be stronger and lighter, is increasingly employed in the
manufacturing process for suspension parts. Therefore, we are focusing not only on iron forging but also on the field ofaluminum forging.
For metal working fluids, we are working to sophisticate the core technologies for water soluble cutting fluids, which cancontribute to raising environment-friendliness and improving productivity. At the same time, we are proactively making useof reused materials and containers and working on the development of an automatic monitoring system to realize long-lifeworking fluids, with the aim of stabilizing the metal working performance and contributing to reducing waste and then to
reducing environmental impact.
[Synthetic Lubricants]
In the R&D Department, Synthetic Lubricants, we conduct research and development on hard disk surface lubricants, grease
base oils for hard disk drive internal parts, specialty fluids for semiconductor manufacturing equipment, etc. With our uniquemolecular structure design and synthesis/refining know-how, we focus on developing one-of-a-kind products.
In the field of hard disk surface lubricants, major disk manufacturers are introducing new chemical compounds that canachieve a lower floating level (smaller gap) between the magnetic head and hard disk, which is necessary to further increase
the recording density. While working to enhance the basic manufacturing technologies to stabilize the quality, we are also
focusing efforts on molecular design of new compounds that satisfy the required characteristics of the next-generation harddisk. Specifically, we are continuing the development of lubricants with new structures that have excellent durability and heat
resistance required for microwave-assisted magnetic recording (MAMR) and heat-assisted magnetic recording (HAMR),
which are expected to be high-capacity magnetic recording media.
For special fluids for hard disk drive internal parts and semiconductor manufacturing equipment, we are working on thedevelopment of highly refined fluids by thoroughly eliminating low-volatility components, which are disliked as the cause ofoutgassing, and their market evaluation is now advancing.
In addition, aiming to build new businesses, we have ventured to the field of material development, using biomass materials
and alternative materials under the PFAS (PerFluoro Alkyl Substances) regulations. We will develop highly unique, highperformance additives in line with the market trends and requirements, such as lubricity and conductivity, contributing to asustainable society. At the same time, we will continue to focus efforts on the design of new raw materials and additives anddevelopment of new products, which have functions different from commercially available materials, through collaboration
with other divisions and Group companies using synthesis technologies.
[Hot Melt Adhesive]
The R&D Department placed within the Hot Melt Adhesive Division conducts development of low-odor adhesives with novolatile organic compounds (VOC), which are friendly to the environment and human health, as well as the development of―28―

new products, such as low-temperature coating-type adhesives that can realize energy saving and reactive-type hot-meltadhesives that may overcome the lack of heat resistance, a weak point of hot melt adhesives.
For the hygiene products industry, one of our major markets, along with our customers’ business expansion overseas, we
promote the development of new products using locally procurable materials while continuing to provide technical support for
local production sites. We are also focusing on the development of new products to meet the diverse needs of the market,
including the development of low-quantity application-type hot-melt adhesives, which can have sufficient adhesion with asmall amount of application, by using adhesive interface analysis technology, as well as new products with additional functions
other than adhesion.
In response to the growing global awareness of environmental issues in recent years, we are working to enhance our lineupof biomass hot melt adhesives and hot melt adhesives made from 100% naturally derived ingredients, aiming for carbon
neutrality and effective use of resources. We have also succeeded in improving the performance of reactive-type hot-meltadhesives for automobile interiors, which have been increasingly adopted by our new customer automobile manufacturers.
Hot-melt adhesives do not contain organic solvents and are friendly to human health and the environment. In addition tothat, we will enhance our product lineup that achieves both functionality and environmental friendliness by utilizing M-ZeroTM
technology, which can remove even trace amounts of residual solvents from the raw materials.
[New Business Development]
Focusing on the environment, information and electronics, energy devices, and life science as keywords, we continue to
conduct various kinds of research and development with the aim of creating new businesses.
In the energy device field, in particular, we develop and sell products centering on organic EL device sealants. We are also
promoting the development of sealants for flexible-type devices, micro LEDs, and perovskite solar cells, which are expected
to be next-generation organic devices, and they are undergoing customer evaluation. In addition, we continue to be engaged insales and contract analysis of gas & vapor transmittance measurement devices for films, etc. used for flexible-type devices,and we have increased achievements mainly in Japan. Furthermore, with a view to a hydrogen society, we released a new
device specializing in hydrogen transmittance at the end of the previous fiscal year. Regarding organic photovoltaics (OPV),
through cooperation with overseas manufacturers on products or materials, we have started sales, taking advantage of roll-toroll processing that enables our own trial production. Using our own roll-to-roll facility, we are able to undertake contract
manufacturing of perovskite solar cells, as well as OPV.
In the life science sector, in cooperation with multiple universities and research institutions, we are advancing drug discovery
research targeting autophagy. Autophagy is a homeostatic function inside cells, which is known to decline with age. Autophagy
is considered to have a close relationship with various lifestyle-related diseases, and drugs that activate autophagy are expected
to contribute to promoting healthy life expectancy. In February 2024, we filed the first patent application for the developed
compound. After this, we will proceed with the expansion of safety and pharmacokinetic data in preparation for out-licensing
to major pharmaceutical companies while clarifying the mechanism of action of the developed compound, with the aim ofearly commercialization. Moreover, we have applied nanoemulsion technology, which can significantly increase absorbabilityof various types of drugs, to cosmetics ingredients, and two domestic brand holders are now considering adopting them. As
for development of other new businesses, we are advancing development for manufacturing of non-petroleum/coal-derived
oils from biogas, based on a long-term management plan. We have already started operating a pilot plant to demonstrate thetechnical concept and to identify tasks for further expansion. In addition, we are introducing DX throughout our R&D sector
to improve the efficiency and speed of research and development.
The amount spent for research and development related to the Japan segment is 1,243 million yen.

―29―

(2) China, Southeast/South Asia, and North America
Mainly regarding die casting fluids and metal working fluids, we are focusing efforts on development of products that meet
local needs. Our R&D staff members are stationed to help enhance the local development systems. For die casting fluids, we
promote sharing of our development know-how of a leading company and advance product development tailored to local needs
in a timely manner, with the aim of increasing market share, including local users. For metal working fluids, we promotesharing of our core technologies we have cultivated in Japan in the development of water-soluble cutting fluids, thereby
advancing the development of new products that meet local needs.
The amount spent for research and development related to the China, Southeast/South Asia, and North America segments is
78 million yen.

―30―

III. Equipment and Facilities
1.

Capital Expenditures
The MORESCO Group makes capital investment mainly for the purpose of streamlining and maintenance of production
equipment and enhancing research and development capacity. We are also building a plant in Haining, China. As a result, capital
expenditures (including property, plant and equipment, and intangible assets) in the consolidated fiscal year under review totaled
3,226 million yen.
Major capital expenditures of the MORESCO Group are as follows:China
At MORESCO (ZHEJIANG) FUNCTION MATERIAL CO., LTD., 1,495 million yen was spent for the construction of a plant for
production of special lubricants.

2.

Major Equipment and Facilities
Major equipment and facilities of the MORESCO Group (the Company and its consolidated subsidiaries) are as follows.
(1) The Company (reporting company)
As of February 29, 2024
Book value (millions of yen)
Business site
(Location)

Segment

Type of
Machinery,equipment/facility Buildings and equipment
structuresand vehicles

Land(Area m2)

Leased assets

Other

Number of
employees(Persons)

Total

Head Office andResearch Center(Chuo-ku, Kobe)

Japan

R&D equipment
Office equipment

943

6

252
(5,000.03)

7

183

1,392

164

Chiba Plant(Ichihara, Chiba)

Japan

Production
equipment

441

227

297
(28,492.20)

－

44

1,010

51

Akoh Plant(Akoh, Hyogo)

Japan

Production
equipment

424

348

779
(39,863.38)

－

26

1,578

101

(Note) Book value for “Other” represents the total amount of tools, furniture and fixtures; construction in progress; and software,etc.
(2) Subsidiaries in Japan
As of February 29, 2024
Book value (millions of yen)Company
nameBusiness site
(Location)

Ethylene
ChemicalCo., Ltd.

Head Office
Plant(Ichihara,
Chiba)

Segment

Japan

Type of
Machinery,equipment/facility Buildings and equipment
structuresand vehicles

Land(Area m2)

Production
equipment

470(22,733.15)

723

286

Leased assets

Other

56

(Note) Book value for “Other” represents the total amount of tools, furniture and fixtures; and software, etc.

―31―

39

Total

1,575

Number of
employees(Persons)48

(3) Subsidiaries outside Japan
As of February 29, 2024
Book value (millions of yen)
Business site
(Location)

Company name

Segment

Type ofequipment/
facility

Buildings Machinery,andequipment
structures and vehicles

Land
Area
(㎡)

Value

Leasedassets

Other

Total

Number of
employees(Persons)

MORESCO(THAILAND)
CO., LTD.

Head Office
Plant(Chonburi,
Thailand)Southeast/ Production
South Asia equipment

185

85

8,700

65

53

52

440

82

PT. MORESCO
INDONESIAHead Office
Plant(Karawang,Indonesia)

Southeast/ Production
South Asia equipment

92

63

11,000

48

－

5

208

47

PT. MORESCO
MACROADHESIVE

Plant(Serang,Indonesia)

Southeast/ Production
South Asia equipment

2

120

－
［5,000］

－

－

23

146

41

TIANJIN
MORESCOTECHNOLOGYCO., LTD.
MORESCO(ZHEJIANG)
FUNCTIONAL
MATERIAL CO.,LTD.

Head Office
Plant(Tianjin,
China)

China

Production
equipment

501

238

－
［25,012］

－

2

186

927

33

Head Office
Plant(Haining,
China)

China

Production
equipment

1,205

452

－
［23,334］

－

－

291

1,948

43

MORESCOHM&LUBINDIA PRIVATELIMITED

Head Office
PlantSoutheast/ Production(Ahmedabad, South Asia equipment
Gujarat, India)

443

329

－
［25,651］

－

－

204

976

31

MORESCO USA
Inc.

Cross
Technologies
N.A. Inc.

(Notes) 1.
2.

Head Office(Fountain
Inn, South
Carolina,
UnitedStates,)Head Office
Plant(Westland,Michigan,
UnitedStates)North
America

Office－5

14,164

284

6

6

300

6

North
America

Production
equipment

0

166

－

－

4

27

197

26

Book value for “Other” represents the total amount of tools, furniture and fixtures; construction in progress; software;and leasehold rights.
Figures in brackets [ ] indicate the areas leased from lenders other than consolidated companies.

―32―

3.

Plans for Additions and Disposals of Facilities
Plans for building, etc. of important equipment and facilities as of the end of the consolidated fiscal year under review are as
follows.
There are no plans for disposal of important equipment and facilities.
Scheduled start andcompletion

Planned investment amount
Name ofcompany/businesssite
MORESCO
Corporation
Head Office andResearch Center
MORESCO
Corporation
Chiba Plant

MORESCO
Corporation
Akoh Plant

Location

Chuo-ku,
Kobe

Ichihara,
Chiba

Akoh, Hyogo

Segment

Japan

Japan

Japan

Type ofequipment/facility

Total(Millions of
yen)

Start

Capacity to be
added uponcompletion
Completion
(%)

82

―

Funds onhand

March 2024

February
2025

―

124

12

Funds onhand

April 2023

May 2025

―

389

―

Funds onhand

March 2024 October 2025

―

168

―

Funds onhand

March 2024―

R&D equipment
Streamlining,
maintenance andrenewal of
production
equipment for
liquid paraffin andsulfonate
Streamlining,
maintenance andrenewal of hot
melt adhesive
production
equipment
Streamlining,
maintenance andrenewal of
lubricantproduction
equipment

AmountFunding method
already paid
(Millions of
yen)

―33―

May 2025

IV. Information on the Reporting Company
1.

Information on the Company’s Shares, etc.
(1) Total number of shares, etc.
i) Total number of shares
Type

Total number of shares authorized to be issued

Common shares

20,000,000
Total

ii)

20,000,000

Issued shares
Number of issued
sharesas of the end of fiscal
year(February 29, 2024)

Type

Number of issued
sharesas of the reporting
date(May 30, 2024)

Common shares

9,696,500

9,696,500

Total

9,696,500

9,696,500

Stock exchange on which theCompany is listed or financial
instruments association where theCompany is licensed

Tokyo Stock ExchangeStandard Market

Description

Number of sharesconstituting one unit of
stock
100

―

―

(2) Information on share acquisition rights, etc.
i) Details of stock option program
Not applicable.
ii)

Details of rights plan
Not applicable.

iii) Information on other share acquisition rights, etc.
Not applicable.
(3) Information on exercise of moving strike convertible bonds with share acquisition rights
Not applicable.
(4) Changes in the total number of issued shares, capital stock, etc.

Date

Increase/decrease in total Shares issued
number ofand outstanding
issued shares(shares)(shares)

Increase/decrease incapital stock(Millions ofyen)

Increase/
Balance ofBalance of legal
decrease in legal
capital stock
capital surplus
capital surplus(Millions of(Millions of(Millions of
yen)
yen)
yen)

June 28, 2018
20,7009,696,50020
2,118(Note)(Note) Third-party allocation as restricted stock-based compensation
Allocation to: Six Directors (excluding Outside Directors)
Issue price: 1,928 yen
Capital incorporation: 964 yen
Total paid-in amount: 40 million yen (contribution in kind of monetary compensation claim)

―34―

20

1,906

(5) Composition of issued shares by type of shareholder
As of February 29, 2024
Status of shares (one unit of stock: 100 shares)
Category

Financial
institutions

Financial
instruments
business
operators

Other
corporations

－

10

16

－

9,014

－

9.31

Governments
andmunicipalities

Number ofshareholders
Shares held
(units)Percentage ofshares held(%)

Foreign corporations, etc.

Less-than-oneunit shares(shares)

Individuals
and others

Total

15

13,302

13,505

－

2,124

81

55,06796,866

9,900

2.19

0.08

56.85

100.00－Nonindividuals

Individuals

112

50

559

30,021

0.58

30.99

(Note) 463,720 shares of treasury stock are included in the listings of 4,637 units in “Individuals and others” and 20 shares in “Lessthan-one-unit shares.”(6) Major shareholders

Name

Address

As of February 29, 2024
Percentage ofshares held to the
Shares held
total number of(Thousands ofissued sharesshares)(excluding
treasury shares)(%)

Matsumura Oil Corporation

2-8-5 Nishitenma, Kita-ku, Osaka

1,067

11.5

COSMO Oil Lubricants Co., Ltd.

1-1-1 Shibaura, Minato-ku, Tokyo

503

5.4

MORESCO Employee Stock
Ownership Plan

5-5-3 Minatojimaminamimachi, Chuo-ku, Kobe

412

4.4

Nippon Soda Co., Ltd.

2-2-1 Otemachi, Chiyoda-ku, Tokyo

365

3.9

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

Akasaka Intercity AIR, 1-8-1 Akasaka, Minato-ku,
Tokyo

351

3.8

STARLITE Co., Ltd.

4-23-7 Ohmiya, Asahi-ku, Osaka

326

3.5

Mizuho Bank, Ltd.
(Standing proxy: Custody Bank ofJapan, Ltd.)

1-5-5 Otemachi, Chiyoda-ku, Tokyo
(1-8-12 Harumi, Chuo-ku, Tokyo)

250

2.7

MUFG Bank, Ltd.

2-7-1 Marunouchi, Chiyoda-ku, Tokyo

250

2.7

Osaka Small and Medium Business
Investment & Consultation Co., Ltd.

3-3-23 Nakanoshima, Kita-ku, Osaka

209

2.2

Shima Trading Co., Ltd.

2-12-14 Ginza, Chuo-ku, Tokyo

165

1.7

3,898

42.2

Total

―

(Note) Of the number of shares held by The Master Trust Bank of Japan, Ltd. (trust account) above, 394,000 shares are related totrust business.

―35―

(7) Information on voting rightsi) Issued shares
As of February 29, 2024
Category

Number of shares

Shares without voting rights
Shares with restricted voting rights(treasury shares, etc.)
Shares with restricted voting rights(others)
Shares with full voting rights(treasury shares, etc.)
Shares with full voting rights(others)
Less-than-one-unit shares

Number of voting rights

Description

―

―

―

―

―

―

―

―

―

Common463,700
sharesCommon shares
9,222,900
Common shares
9,900

―

―

92,229―――9,696,500――

Total number of issued shares

Total number of voting rights held―
92,229―by all shareholders(Note) Common shares of “Less-than-one-unit shares” include 20 shares of treasury stock held by the Company.
ii)

Treasury shares, etc.
As of February 29, 2024
Percentage of
Number ofshares held toshares held Total number of
the total
under anothershares heldnumber ofname(shares)issued shares(shares)(%)

Shareholder nameShareholder address

Number ofshares held
under own
name(shares)

MORESCO Corporation

5-5-3
Minatojimaminamimachi,
Chuo-ku, Kobe

463,700―

463,700

4.7―

463,700―

463,700

4.7

Total

―36―

2.

Information on Acquisition of Treasury Shares, etc.
Type of shares

Acquisition of common stock under Article 155, Item 3 of the Companies Act(1) Acquisition by resolution of General Meeting of Shareholders
Not applicable.
(2) Acquisition by resolution of Board of Directors
Acquisition of treasury shares in accordance with the provision of the Articles of Incorporation under Article 459, Paragraph
1 of the Companies Act
Category

Number of shares

Status of resolution at the Board of Directors meeting(February 21, 2024)(Acquisition period: March 1, 2024 to April 30, 2024)
Treasury shares acquired before the fiscal year underreview
Treasury shares acquired during the fiscal year underreview

Total price (yen)80,000100,000,000

―

―

―

―

Total number and price of remaining resolved shares――

Unexercised ratio as of the end of the fiscal year underreview (%)――

71,60099,894,600

10.5

0.1

Treasury shares acquired during the current period
Unexercised ratio as of the reporting date (%)(3) Acquisition not based on resolution of the General Meeting of Shareholders or of the Board of Directors
Not applicable.
(4) Status of the disposition and holding of acquired treasury sharesFiscal year under review
Category
Number of shares
Acquired treasury shares for which
subscribers were solicited
Acquired treasury shares that were
disposed ofAcquired treasury shares transferred
due to merger, share exchange, sharedelivery or split

Current period

Total amountdisposed(Yen)

Number of shares

Total amountdisposed
(Yen)

－

－

－

－

－

－

－

－

－

－

－

－

Other
(disposal of treasury shares as
restricted stock-based compensation)

5,250

6,032,250－－

Total number of treasury shares held

463,720－535,320－(Note) The number of treasury shares held during the current period does not include less-than-one-unit shares purchased from May
1, 2024 to the reporting date of this Annual Securities Report.

―37―

3.

Dividend Policy
The Company positions shareholder returns as its key management issue. It is therefore the Company’s basic policy to return profits
to its shareholders in light of business performance, etc. while securing the internal reserves required for future business expansion
and the enhancement of the management structure.
In principle, the Company pays dividends from surplus twice a year: interim dividend and year-end dividend.
The decision-making bodies for these dividends from surplus are the General Meeting of Shareholders for the year-end
dividend and the Board of Directors for the interim dividend.
The Articles of Incorporation stipulate that the Company may pay dividends from surplus by resolution of the Board of
Directors in accordance with the provision of Article 459, Paragraph 1 of the Companies Act.
Based on the above policy, and with the addition of a commemorative dividend of 5 yen (commemorating the 65th anniversary),
we have decided to pay a dividend per share of 45.00 yen (including 20 yen for an interim dividend) for the fiscal year under review.
As a result, dividends from surplus for the fiscal year under review amounted to 415 million yen.
Internal reserves will be used for responding to changes in the economic environment and market, capital investment toenhance cost competitiveness, reinforcing technology and production structures to respond to market needs, launching overseas
strategies, and active promotion of research and development.
Dividends from surplus for the fiscal year under review are as follows.
Date of resolution

Total dividend amount(Millions of yen)

October 12, 2024
Resolution of the Board of Directors
May 30, 2024
Resolution of the Ordinary General
Meeting of Shareholders―38―

Dividend per share
(Yen)
185

20

231

25

4.

Corporate Governance, etc.
(1) Overview of corporate governancei)
Basic policy on corporate governanceI. The Company will always pursue the best corporate governance and make continuous efforts for the enhancement thereof.
II. The Company believes that the basis of corporate governance is that communication in all directions within the Company
is in a good condition and/or active. In other words, corporate governance functions effectively when policies, strategies,
plans, instructions, etc. are communicated accurately, properly, and smoothly, while results and the implementation status
are reported correctly. Based on this belief, the MORESCO Group recognizes the strengthening of corporate governance as
an important management issue. By developing and enhancing the systems therefor, we will ensure the soundness andtransparency of management while making decisions in a prompt and dynamic manner in response to changes in theenvironment. We believe this is the key to our corporate governance and will work to enhance corporate governance in linewith the basic policy below.
i. We respect the rights of shareholders and ensure their equality.
ii. We consider the interests of not only our shareholders but also the Company’s employees, customers, business
partners, creditors, local communities, and various other stakeholders, and we work in cooperation with thesestakeholders in an appropriate manner.
iii. We properly disclose information of the company and ensure transparency in the company’s decision making.
iv. We have constructive dialogue with shareholders who have investment policies consistent with the interests ofshareholders over the medium to long term.
ii)

Overview of the current corporate governance structure and reasons for adopting the current structure
A. Overview of corporate governance structure
The Company adopts the system of a company with an Audit and Supervisory Committee and appointed six directors (total
includes one Outside Director; directors on the Audit and Supervisory Committee are excluded) and four directors who are
Audit and Supervisory Committee members (total includes three outside directors).
The Board of Directors meets once a month in principle, and in addition to monitoring and supervising the execution ofbusiness by the company, it also makes decisions on important matters related to management of the company. Regarding
analysis of differences between monthly budgets and actual results, the Board of Directors gives instructions and guidance
based on reports toward achieving planned goals.
The Executive Committee, consisting of executive directors, meets once a month in principle. The committee discusses
the decisions of the President and Representative Director in order to facilitate the smooth execution of business while avoiding
excessive concentration of authority.
Additionally, the Company has established a Nomination and Compensation Committee as an advisory body to the Boardof Directors and has established a system to further strengthen corporate governance. Specifically, the appointment of director
candidates and the allocation of remuneration are determined by resolution of the Board of Directors after deliberation andreporting by the Nomination and Compensation Committee, which includes all independent Outside Directors.
Furthermore, the Company has introduced an executive officer system with the purpose of realizing more efficientmanagement and swifter decision-making. Management Committee meetings with executive directors, full-time Audit andSupervisory Committee members, executive officers, etc. are held once a month in principle. These meetings are held to reporton and discuss important matters relating to corporate management and to promote mutual understanding of the current stateof corporate management. The contents of these meetings are disclosed and communicated to all employees.
The Compliance and Risk Management Committee is composed of executive directors, full-time Audit and Supervisory
Committee members, executive officers, etc., and meets when meetings of the Management Committee are held in order toestablish systems for compliance and risk management and check progress in this regard.
In April 2022, we established the “Sustainability Committee” in order to operate our business based on the “realizationof a sustainable society” and “improvement of corporate value in the medium to long term.” In addition, we established theSustainability Promotion Office as a dedicated department to oversee the Group’s promotion of sustainability. The
Sustainability Committee is chaired by the Representative Director and President and consists of members such as the
Executive Directors, Audit and Supervisory Committee members, and Executive Officers. The Committee meets once a quarterto discuss a wide range of risks and opportunities, including social and environmental issues related to sustainability, andreflect them in business strategies and policies in a timely manner.

―39―

The structure of each institution and committee is as follows. (◎: Chairperson)
Nomination
Compliance
Executive
andManagement
and RiskCommittee Compensation Committee Management
Committee
Committee

Name

Representative
Director, President
CEO
Director
Senior Management
Executive Officer
COO
Director
Managing Executive
Officer
CTO
Director
Senior Executive
OfficerCFO
in charge ofsustainability
Director
Executive Officer
in charge of global
operations

Motohisa
Morozumi◎◎

Nobuhiro
Sewaki○Yasuo Sakane

Director(Full-time Audit andSupervisory
Committee Member)
Director(Audit andSupervisory
Committee Member)
Director(Audit andSupervisory
Committee Member)
Director(Audit andSupervisory
Committee Member)

Sustainability
Committee

○

◎

◎

○

◎

○

○

○

○

○

○

○

Hirofumi
Fujimoto

○

○

○

○

○

Jiro Hosomi

○

○

○

○

○

○

○

○

Hiroko Fuji

Director

OutsideBoard ofDirectors

Title

○

Mikio Honda

○

◎

○

○

Kazuo
Machigaki○○○

Mikio Nakajo

○

○

○

Hidetoshi
Nakatsuka○○○

B. Reasons for adopting the current structure
The Company has adopted the Company with Audit Committee System for the following reasons.
・ In order to establish a structure that is capable of properly responding to expectations of our stakeholders both insideand outside Japan, the Audit and Supervisory Committee, the majority of whose members are Outside Directors, is
responsible for auditing and supervising the legality and appropriateness of business execution, while the Nomination
and Compensation Committee is formed to ensure higher transparency in management.
・ In order to make prompt and decisive decisions, the authority of the Board of Directors to make business decisions shallbe delegated to the directors, thereby speeding up management decision-making and execution under the appropriate
supervision of the Board of Directors and creating a system that allows the Board of Directors to focus on discussionsof corporate strategy and other issues.
The MORESCO Group’s corporate governance structure is as illustrated below.

―40―

MORESCO Group Corporate Governance Structure
General Meeting of Shareholders
Appointment/Dismissal
Accounting
AuditorAppointment/Dismissal

Appointment/Dismissal

Auditing/
Supervision

Advisory

Audit and Supervisory
Committee
Directors on the Audit and Supervisory Committee

Directors

Cooperation

ReportingSelection/Dismissal/
Supervision

Advisory

CEO, President andRepresentative
Director
Cooperation

Nomination andCompensation
Committee

Board of Directors

Cooperation

Executive Committee
Reporting

COO, Director andSenior Management
Executive Officer

Internal Audit Department

Auditing

Management
Committee
Executive Directors,
Audit and Supervisory
Committee members,
Executive Officers, etc.

Compliance and Risk
Management
Committee

Sustainability
Committee

Executive Directors,
Audit and Supervisory
Committee members,
Executive Officers, etc.

Executive Directors,
Audit and Supervisory
Committee members,
Executive Officers, etc.

Divisions, Departments, and Affiliated Companies

―41―

iii)
Other matters related to corporate governance
A. Status of establishment of internal control system
The Company has resolved the Basic Policy Regarding Establishment of Internal Control Systems below by the Board of
Directors. According to this policy, the Company has been establishing the systems, and the after-mentioned Compliance andRisk Management Committee Secretariat is responsible for progress management thereof.
a) System to ensure that execution of duties by directors and employees complies with laws, regulations, and the Company’s
articles of incorporationa. We will establish the MORESCO Corporate Behavior Charter as the basis of our compliance systems and will continue
to ensure that responding to social requirements, including legal compliance, is the basis of all corporate activities.
b. We will establish a Compliance and Risk Management Committee (chaired by the President and Representative
Director and composed of executive directors, full-time Audit and Supervisory Committee members, executive officers,etc.) to oversee overall compliance and promote the establishment of compliance systems.
c. In order to promote compliance, we will provide training and other guidance so that directors and employees can eachperceive compliance as a personal responsibility and conduct business operations accordingly.
d. The Audit and Supervisory Committee and the Internal Audit Department will work together to examine compliancesystems, identify any problems with laws and regulations, the company’s articles of incorporation, and/or internal
regulations, and report to the Compliance and Risk Management Committee. The Compliance and Risk Management
Committee will regularly review compliance systems and will endeavor to identify problems and make improvements.
e. An internal reporting system has been established, with “Internal Reporting System Regulations” that clearly state that
employees of the Company or its subsidiaries will not be treated unfairly if they become aware of and report an act thatis suspected to be improper under laws, regulations, the Company’s articles of incorporation, or internal regulations.
Employees, etc. who treat such reporters unfavorably will be handled in accordance with the Employment Regulations.
Additionally, the presence or absence of any such reports will be reported to the Compliance and Risk Management
Committee.
b) System for storing and managing information related to execution of duties by Directors
a. We will appropriately store and manage the following documents (including electromagnetic records) related to
execution of duties by directors in accordance with laws and regulations and the Regulations for Management ofImportant Documents.
i.
Minutes of General Meetings of Stockholders and related materials
ii.
Minutes of meetings of the Board of Directors and related materials
iii. Minutes of Management Committee meetings and related materials
iv.
Other important documents related to execution of duties by directors
b. Information management will be handled in accordance with the Information Security Policy, Regulations forManagement of Confidential Information, and Basic Policy on Protection of Personal Information.
c) Regulations and other systems for managing the risk of loss
a. We will promote the establishment of systems based on the Risk Management Policy, with the aforementioned
Compliance and Risk Management Committee as the primary promoting body, identify risks concerning the Company
and its subsidiaries, and take appropriate risk countermeasures.
b. To prepare for risks that may seriously affect the management of the Company, we will establish an emergency response
headquarters under the direction of the President and Representative Director, in accordance with the Crisis
Management Regulations, and take the necessary measures to minimize losses due to the occurrence of such risks.
d) System to ensure efficient execution of duties by directors
a. Regular meetings of the Board of Directors will take place once a month in principle, with the purpose of making
decisions on important matters and supervising the execution of business by directors.
b. In order to further strengthen the functions of the Board of Directors and improve the efficiency of management, we
will introduce a system of executive officers responsible for business execution functions, with Management
Committee meetings held once a month in principle. These meetings will be attended by executive directors, full-time
Audit and Supervisory Committee members, executive officers, etc., who will discuss basic matters and importantmatters regarding execution of business.
c. Regarding business operations, we will formulate Medium-Term Management Plans and plans for each fiscal year
based on the future business environment outlook, and we will set company-wide goals. In each business division, we
will formulate and execute concrete plans to achieve these goals.
e) System to ensure proper business operations in the corporate group, i.e. the Company and its subsidiaries
a. Management items outlined by periodic reports and prior consultations on important projects will be defined by theManagement Regulations for Affiliated Companies, and departments with jurisdiction over management of subsidiarycompanies will exercise overall management of these companies.
b. The Company’s executive directors, executive officers, and members of the Audit and Supervisory Committee, etc.
will be dispatched as directors or auditors of subsidiary companies. Directors will monitor and supervise the executionof duties by the directors of subsidiaries. Members of the Audit and Supervisory Committee will audit the businessexecution of subsidiaries. Additionally, the Internal Audit Department will conduct regular audits of subsidiaries.
c. As a fundamental rule, subsidiaries will autonomously establish internal control systems based on the size, businesscharacteristics, institutional specifications, and other company characteristics or distinguishing features, while also
maintaining cooperation and information sharing with the Company.
d. The directors of subsidiaries will, regularly or as needed, report monthly and quarterly business results and otherinformation about business execution at the Company’s Management Committee meetings.
f) System concerning directors and employees who should assist with the duties of the Audit and Supervisory Committee,
and matters regarding independence from other directors for such directors and employees
a. If the Audit and Supervisory Committee requests the placement of employees to assist the Committee with its duties,
this shall be arranged within reason following consultation with the Committee. No directors to assist the Audit andSupervisory Committee will be placed.

―42―

b.

Independence from directors when making decisions on matters concerning personnel rights, such as appointments ortransfers of such employees, will be ensured by obtaining the prior consent of the Audit and Supervisory Committee.
g) System for directors and employees to report to the Audit and Supervisory Committee, system for other reports to the Audit
and Supervisory Committee, and other systems to ensure that audits by the Audit and Supervisory Committee areconducted effectively
a. Directors, employees, subsidiary directors/employees, and those who receive reports from them must immediately
report any important matters that affect the business or performance of the Company to the Audit and Supervisory
Committee. In accordance with the Internal Reporting System Regulations, employees who make such reports mustnot be treated unfavorably on the grounds of having made such reports.
b. In order for full-time Audit and Supervisory Committee members to fully understand important decision-making
processes and the status of business execution outside of meetings of the Board of Directors, these committee members
are permitted to attend other important meetings, such as Management Committee meetings and meetings of theCompliance and Risk Management Committee, view key approval documents, contracts, and other important
documents related to execution of business, and ask directors and/or employees for explanations of these as necessary.
c. Under the independence and authority asserted through the “Audit and Supervisory Committee Regulations” and“Auditing/Supervision Standards of the Audit and Supervisory Committee,” the Audit and Supervisory Committee will
work to achieve audit results in close cooperation with the Internal Audit Department and accounting auditors while
also ensuring the effectiveness of audits.
d. If the Audit and Supervisory Committee or a member of the Committee requests advance payment or redemption of
expenses necessary to perform audits, directors, etc. will comply unless the contents of the audit and/or funds required
are unreasonable.
e. The Company will establish other necessary systems to ensure the effectiveness of audits by the Audit and Supervisory
Committee.
h) System for ensuring the reliability of financial reports
a. The Company will establish and operate internal control systems under the direction of the President and Director andestablish relevant regulations to ensure the reliability of financial reports and effectively and appropriately submit
internal control reports as stipulated by the Financial Instruments and Exchange Act.
b. The Company will ensure compliance with the Financial Instruments and Exchange Act and related laws andregulations through continuous evaluation of the proper functioning of internal control systems and making ofnecessary improvements.
i) Basic systems for eliminating antisocial forces
a. Under the MORESCO Corporate Behavior Charter, the basic policy of the Company is to have no relationships of any
kind with antisocial forces or groups that threaten the order and safety of civil society. The Company aims to spreadawareness of this basic policy among all directors and employees via the internal network, etc.
b. We will respond resolutely to unreasonable demands and efforts by antisocial forces and groups in line with theRegulations for Countermeasures Against Antisocial Forces.
c. The General Affairs Department will be the department responsible for responses to antisocial forces and groups. Any
unreasonable demands or efforts by antisocial forces and groups will be immediately reported to this department, withorganizational measures taken to centralize the response.
d. The above department will maintain close cooperation with the police and other such bodies and will promptly contact
them in the event of any unreasonable demands or efforts by antisocial forces and groups in order to request appropriate
guidance and support in a timely manner.

―43―

B. Status of establishment of risk management system
The Company has established a Compliance and Risk Management Committee that consists of members including executive
directors, full-time Audit and Supervisory Committee members, and executive officers, with the General Affairs Department
and Legal Department serving as the secretariat. In this system, initiatives to enhance risk management and compliance arepromoted.
a) Risk management
Regarding the 17 risk items that should be addressed by the Company, which were extracted from the total 235 risk items
listed up at all business sites, each of the four function-specific meetings, namely, the sales meeting, production engineering
meeting, R&D meeting, and Head Office division meeting, identifies the risk items that each function should address. We
are working to establish and review the systems for checking and management to prevent such risks from emerging and toenhance the operation thereof. In case of a risk arising, we promote the preparation of an emergency countermeasuresmanual for each risk in accordance with the Crisis Management Regulations.
Deliberations and progress at each function-specific meeting are monitored by the secretariat and reported to theCompliance and Risk Management Committee to be properly managed.
As the initiatives to prevent leakage of confidential information, in accordance with laws and regulations and theInformation Security Policy, we have established the Regulations for Management of Confidential Information and theElectronic Information Management Guidelines and promote operation management to prevent leakage of both written andelectronic information through such measures as controlling viewing authority, ID/password management, and restricting
data transfer to external memory media or external cloud services. In addition, we work to ensure that employees are awareof the importance of information management through internal training and other opportunities. During the fiscal year underreview, as a measure to prevent the leakage of trade secrets, we required employees to submit a written pledge ofconfidentiality.
b) Compliance system
Regarding compliance, we have established the Compliance Regulations, Compliance Promotion Guidelines, and Internal
Reporting System Regulations.
Each organization formulates a list of laws and regulations that it should observe, and the status of compliance withthe listed laws and regulations are checked twice a year. The results are gathered by the secretariat and reported to theCompliance and Risk Management Committee. If any problem is found regarding the compliance status, the relevantbusiness site shall prepare an improvement plan and report it to the Compliance and Risk Management Committee.
Discussions and conclusions at the Compliance and Risk Management Committee meeting are reported at the Board of
Directors meeting held in the same month, where Outside Directors give advice as necessary. To prepare for noncompliance with laws and regulations if found, an internal reporting system has been established and operated in which
the company lawyer, full-time Audit and Supervisory Committee members, and General Manager of the Internal Audit
Department will accept reports. Employees are familiarized with the system.
In promoting compliance, we believe that the employees’ awareness of compliance with laws and regulations is crucial.
We therefore provide various education programs, including an e-learning program to achieve proper labor management,
training by external instructors or e-learning on insider trading, training on practical operations for contracts, training
programs based on job ranks, such as new employees, mid-career employees, and management, and training programs basedon job functions, such as sales, production, and R&D. We also conduct awareness-raising activities through company
newsletters. Compliance awareness surveys for all employees are also conducted on a regular basis to grasp the Group’s
status of compliance. During the fiscal year under review, we revised the MORESCO Corporate Behavior Charter in theaim of preventing bribery and corruption. Furthermore, as part of the efforts toward realizing a sustainable society, weformulated the MORESCO Group Human Rights Policy and held meetings to explain the policy. As part of our human rights
due diligence, we also held explanatory meetings for employees, etc. on prevention of harassment and conducted LGBTQ
training for officers and managers, with the aim of raising the compliance awareness of the Group’s employees.
Regarding the protection of personal information, including Specific Personal Information (My Number), we haveestablished a management system under the Basic Policy on Protection of Personal Information and the Basic Policy on
Proper Handling of Personal Numbers and Specific Personal Information, and we promote its operation by conducting
training, etc. on the Act on the Protection of Personal Information for all employees.
C. Overview of content of limited liability contracts
Pursuant to the provisions of the Articles of Incorporation, the Company has entered into a limited liability contract with theOutside Directors and the Audit and Supervisory Committee members in accordance with the provision of Article 427,
Paragraph 1 of the Companies Act to limit their liability for indemnity under Article 423, Paragraph 1 of the Act to the
maximum amount stipulated in Article 425, Paragraph 1 of the Act.

―44―

D. Overview of the content of the directors and officers liability insurance contract
The Company has entered into a directors and officers liability insurance (D&O Insurance) contract prescribed in Article
430-3, Paragraph 1 of the Companies Act with an insurance company. The scope of the insured parties of the insurance contract
is directors, corporate auditors, executive officers, and employees in managerial or supervisory positions. The insurance
premiums are not paid by the insured. The insurance contract will cover any damage that may be incurred in association withany liability that directors of the insured bear with regard to the execution of their duties or any claim filed with regard to suchliability. However, in order to ensure that the appropriateness of the execution of duties by the insured is not impaired, damage
attributable to any act conducted with awareness that it is violating any law or regulation will not be covered.
E. Director membership
The Company’s Articles of Incorporation stipulate that the number of Directors (excluding Directors on the Audit andSupervisory Committee) shall be no more than eight, and the number of Directors on the Audit and Supervisory Committee
shall be no more than five.
F.

Requirements for director appointment
The Company’s Articles of Incorporation stipulate that resolutions for the appointment of directors shall be approved by amajority of the voting rights of shareholders present at the meeting with attendance of shareholders holding at least one-thirdof eligible voting rights.
The Articles of Incorporation also stipulate that cumulative voting shall not be used in the appointment of directors.

G. Matters for resolution of the General Meeting of Shareholders that may be resolved by the Board of Directorsa) Decision-making body for distribution of surplus, etc.
The Company’s Articles of Incorporation stipulate that, unless otherwise stipulated in laws and regulations, distribution of
surplus and other matters specified in the items of Article 459, Paragraph 1 of the Companies Act may be decided byresolution of the Board of Directors instead of resolution of the General Meeting of Shareholders. The purpose of this is
to allow flexible return of profits to shareholders. However, year-end dividends shall be decided by resolution of theGeneral Meeting of Shareholders.
b) Exemption of directors from liability
The Company’s Articles of Incorporation stipulate that pursuant to the provision of Article 426, Paragraph 1 of theCompanies Act, liability of directors (including former directors) as stipulated in Article 423, Paragraph 1 of the Act may
be exempted within the legal limit. The purpose of this is to enable directors to fully perform their expected roles.
H. Requirements for special resolution of the General Meeting of Shareholders
The Company’s Articles of Incorporation stipulate that special resolutions as provided for in Article 309, Paragraph 2 of theCompanies Act shall be approved by two-thirds of the voting rights of shareholders present at the meeting with attendance ofshareholders holding at least one-third of eligible voting rights. This is intended to facilitate the smooth operation of the General
Meeting of Shareholders by relaxing the quorum for special resolutions of the General Meeting of Shareholders.
I.

Activities of the Board of Directors
During the fiscal year under review, the Company’s Board of Directors met 17 times, and the status of attendance of eachdirector is as follows:
Name

Number of meetings held

Number of meetings attended (%)

Motohisa Morozumi

17

17（100％）Nobuhiro Sewaki

17

17（100％）

Yasuo Sakane17

17（100％）Hirofumi Fujimoto

17

17（100％）

Hiroko Fuji

17

17（100％）

Mikio Honda

17

17（100％）Kazuo Machigaki

17

17（100％）

Mikio Nakajo

17

17（100％）Hidetoshi Nakatsuka

17

17（100％）

―45―

J.

Specific matters, etc. discussed by the Board of Directors
Specific matters, etc. discussed by the Board of Directors are as follows.
・Statutory matters to be resolved
・Formulation of the 10th Medium-Term Management Plan
・Revision of the MORESCO Corporate Behavior Charter・Establishment of the MORESCO Group Human Rights Policy
・Revision of the Basic Policy on Corporate Governance・Establishment or absorption of overseas subsidiaries
・Results of the Board of Directors evaluation and responses thereto・Contents of quarterly reports
・Details of monthly financial difference analysis
・Details of deliberations by the Compliance and Risk Management Committee
・Details of deliberations by the Sustainability Committee

K. Activities of the Nomination and Compensation Committee
During the fiscal year under review, the Company’s Nomination and Compensation Committee met four times, and thestatus of attendance of each director is as follows:
Name

Number of meetings held

Number of meetings attended (%)

Motohisa Morozumi

４４（100％）

Hiroko Fuji

４

４（100％）

Kazuo Machigaki

４

４（100％）

Mikio Nakajo

４

４（100％）

Hidetoshi Nakatsuka

４

４（100％）

L. Specific matters, etc. discussed by the Nomination and Compensation Committee
Specific matters, etc. discussed by the Nomination and Compensation Committee are as follows.
・Whether or not to review policies and procedures regarding nomination and compensation
・Review of the Regulations on the Nomination and Compensation Committee
・Director candidates
・Compensation system
・Revision of compensation amounts
・Amounts of compensation for individual directors―46―

(2) Officersi) List of officers
Male: 9, Female: 1 (Female officers accounting for 10.0%)
Title

Name

Date of birth

Career summary
April 1987
March 1999
March 2007
May 2008
March 2011

May 2011
Representative Director
President
CEO

Motohisa Morozumi

April 23, 1962
January 2012
May 2014

March 2015
May 2017

May 2018
May 2021
April 1982
March 2008
May 2010
March 2015
May 2015
Director
Senior Managing Executive
Officer, COO

Nobuhiro Sewaki

March 23, 1964

May 2016
February 2017
May 2017
May 2018
November 2020
May 2021
October 2003
March 2004
April 2006
October 2007
March 2016
March 2016

Director
Managing Executive Officer,
CTO

Yasuo Sakane

June 7, 1958
June 2016
May 2018

March 2021
May 2021
March 2022

―47―

Joined HBF Japan (currently Sekisui Fuller
Company, Ltd.)
Joined the Company. Section Manager, Tokyo
Sales, Sales Department III
General Manager, Sales Department, Hot Melt
Adhesive of the Company
Executive Officer General Manager, Sales
Department, Hot Melt Adhesive of theCompany
Executive Officer Division Manager, Hot
Melt Adhesive and General Manager, Sales
Department, Hot Melt Adhesive of theCompany
Director and Executive Officer Division
Manager, Hot Melt Adhesive and General
Manager, Sales Department, Hot Melt
Adhesive of the Company
Representative Director, President of
PT.MORESCO MACRO ADHESIVE
Director and Managing Executive Officer
Division Manager, Hot Melt Adhesive andGeneral Manager, Sales Department, Hot Melt
Adhesive of the Company
Director and Executive Officer Division
Manager, Hot Melt Adhesive of the Company
Director and Senior Managing Executive
Officer Division Manager, Hot Melt
Adhesive and Division Manager, Metal
Working Fluids of the Company
Representative Director, President andExecutive Officer, COO
Representative Director, President, CEO of theCompany (current position)
Joined the Company
General Manager, Sales Department,
Functional Fluids Division of the Company
Executive Officer General Manager, Sales
Department, Functional Fluids Division of theCompany
Representative Director, President of
MORESCO (THAILAND) CO., LTD.
Executive Officer in charge of Southeast Asiaof the Company
Senior Executive Officer in charge ofSoutheast Asia of the Company
Representative Director, President of
MORESCO HM&LUB INDIA PRIVATELIMITED
Director, Senior Executive Officer in chargeof Southeast Asia of the Company
Director, Senior Executive Officer in chargeof overseas of the Company
Chairman, Wuxi MoreTex Technology Co.,Ltd.
Director, Senior Managing Executive Officer,
COO (current position)
Joined the Company, Special Manager, SSGroup, Corporate R&D Department of theCompany
General Manager, Corporate R&D
Department of the Company
Komag, Inc.TechnicalDirector
Western Digital MediaOperations (currently Western Digital
Corporation) Technologist
Rejoined the Company. Executive Officer
Division Manager, Synthetic Lubricants of theCompany
Executive Officer Division Manager,
Synthetic Lubricants and General Manager,
R&D Department, Synthetic Lubricants of theCompany
Executive Officer Division Manager,
Synthetic Lubricants of the Company
Director and Senior Executive Officer, CTO
Division Manager, Synthetic Lubricants andGeneral Manager, Corporate R&D
Department of the Company
Director and Senior Executive Officer, CTO
General Manager, Life Science R&D
Department of the Company
Director and Managing Executive Officer,
CTO General Manager, Life Science R&D
Department of the Company
Director and Managing Executive Officer,
CTO (current position) of the Company

Term ofofficeShares held
(shares)(Note 2)

34,488(Note 2)

19,523(Note 2)

10,150TitleName

Date of birth

Career summary
April 2010
July 2012
April 2015
May 2017
March 2019

Director
Senior Executive Officer, CFO
in charge of sustainability

Hirofumi Fujimoto

July 14, 1966

March 2020
January 2021
March 2021
May 2021
March 2022
April 2024
April 1996
March 2014

May 2022

General Manager, Sales Department, Metal
Working Fluids of the Company
Division Manager, Metal Working Fluids andGeneral Manager, Sales Department, Metal
Working Fluids of the Company
Executive Officer Division Manager, Metal
Working Fluids and General Manager, Sales
Department, Metal Working Fluids of theCompany
President and Representative Director,
MORESCO TECHNO CO., LTD. (current
position)
Executive Officer Division Manager, Functional
Fluids of the Company
Director, Executive Officer in charge of Global
Operations of the Company (current position)
Joined Daimaru Co., Ltd. (currently, Daimaru
Matsuzakaya Department Stores Co., Ltd.)
Executive Officer and General Manager, MD
Promotion Department 2, MD Strategy Promotion
Office, Daimaru Matsuzakaya Department StoresCo., Ltd.
Executive Officer and General Manager, MD
Strategy Promotion Office, Independent Business
Unit, Daimaru Matsuzakaya Department StoresCo., Ltd.
Executive Officer and Store Manager, Daimaru
Osaka Umeda, Daimaru Matsuzakaya Department
Stores, Co., Ltd.
Executive Officer and Store Manager, Daimaru
Kobe, Daimaru Matsuzakaya Department Stores,
Co., Ltd.
Executive Officer and Store Manager, Daimaru
Sapporo, Daimaru Matsuzakaya Department
Stores, Co., Ltd.
Executive Officer in charge of Special
Assignments from President, Daimaru
Matsuzakaya Department Stores, Co., Ltd.
General Manager, Ad Tele-support Division, AD
DAISEN Co., Ltd.
Director of the Company (current position)

April 1986

Joined the Company

March 2007

Section Manager of General Affairs, General
Affairs Department of the Company
Section Manager of Human Resources, Human
Resources Department, Administration Divisionof the Company
Section Manager of Operations, Akoh Plant of theCompany
General Manager, General Affairs Department of
the Company
Director of the Company (Audit and Supervisory
Committee Member) (current position)
Manager of Tokyo Plant, Tocalo Co., Ltd.

May 2018

Director
Executive Officer,
in charge of global operations

May 2019
Jiro Hosomi

June 9, 1972
May 2021
March 2023
May 2024
April 1981
May 2011

September 2011

April 2013
Director

Hiroko Fuji

September 27, 1960

January 2017
January 2020
January 2021
June 2021

March 2010
Director(Full-time Audit and Supervisory
Committee Member)

Mikio Honda

June 21, 1962

March 2012
March 2017
May 2022
July 1995
September 1999
April 2005
June 2005

Director(Audit and Supervisory
Committee Member)

Kazuo Machigaki

May 11, 1951

Syndication Promotion Manager, Products
Distribution Department, Mizuho Corporate Bank,
Ltd. (currently, Mizuho Bank, Ltd.)
Deputy General Manager, Shinjuku Corporate
Banking Department, Mizuho Corporate Bank,
Ltd.
General Manager, Investors Service Department,
Trust & Custody Services Bank, Ltd. (currently,
Custody Bank of Japan, Ltd.)
Senior Manager, Internal Audit Department,
Mizuho Bank, Ltd.
Joined the Company. Deputy General Manager,
Strategy Planning Department
General Manager, Overseas Sales Department,
Hot Melt Adhesive of the Company
Executive Officer in charge of Administrative
Division, CFO of the Company
Executive Officer in charge of Administrative
Division and Safety, CFO of the Company
CFO
Director and Senior Executive Officer, CFO incharge of Administrative Division and Safety of
the Company
Director and Senior Executive Officer, CFO of theCompany
Director and Senior Executive Officer, CFO incharge of sustainability of the Company (current
position)
Joined the Company

June 2007
April 2013
June 2013
June 2019
May 2020―48―

Term ofofficeShares held
(shares)(Note 2)

6,679

(Note 2)

6,554

(Note 2)2,284

(Note 3)

4,468

(Note 3)

5,778Manager of Akashi Plant, Tocalo Co., Ltd.
General Manager of Manufacturing Division,
Tocalo Co., Ltd.
Director, Deputy General Manager of
Manufacturing Division, Tocalo Co., Ltd.
Representative Director and President, Tocalo Co.,Ltd.
President, Tocalo & Han Tai TW Co., Ltd.
Representative Director and Chairman, Tocalo
Co., Ltd.
Advisor, Tocalo Co., Ltd.
Director of the Company (Audit and Supervisory
Committee Member) (current position)

TitleName

Date of birth

Career summary
April 1998

June 2010

Registered as attorney, joined the Sawada andKikui Law Office (now Sawada, Nakajo and Mori
Law Office)Partner attorney, Sawada and Nakajo Law Office(now Sawada, Nakajo and Mori Law Office)External auditor, Nishishiba Electric, Co., Ltd.

June 2011

External auditor, Glory Ltd.

May 2019

April 2022

Representative attorney, Sawada, Nakajo andMori Law Office (current position)
External auditor, Yamato Kogyo Co., Ltd. (current
position)
Director of the Company (Audit and Supervisory
Committee Member) (current position)
President, Hyogo Bar Association

April 1983

Hired by the Osaka Regional Taxation Bureau

July 2000

Company Split PT (in charge of notification oforganizational restructuring taxation systems),
Corporation Taxation Division, Taxation
Department, and Large Enterprise
Examination Division, Large Enterprise
Examination and Criminal Investigation
Department, National Tax Agency
Corporate Planning Office, Tax Bureau,
Ministry of Finance (in charge of consolidated
taxation laws) and Large Enterprise
Examination Division, Large Enterprise
Examination and Criminal Investigation
Department, National Tax Agency
International Investigation Director,
Examination Division, First Examination
Department, Osaka Regional Taxation Bureau
Assistant Director, Comprehensive
Investigation Division, First Examination
Department, Osaka Regional Taxation Bureau
Registered as tax accountant, opened
Hidetoshi Nakatsuka Tax Accountant Office,representative (current position)
Special Professor, Graduate School andFaculty of Law, Himeji Dokkyo University
External auditor, Tiger Corporation (current
position)
Director of the Company (Audit andSupervisory Committee Member) (current
position)

April 2005

Director(Audit and Supervisory
Committee Member)

Mikio Nakajo

March 19, 1963

June 2019
May 2020

January 2002

Director(Audit and Supervisory
Committee Member)

July 2009
Hidetoshi Nakatsuka

October 26, 1964
July 2012
August 2013
April 2014
December 2018
May 2020
June 2023

1.
2.
3.
4.

Shares held
(shares)(Note 3)―(Note 3)

2,284

Outside Director, Kaji Technology Corporation(current position)

92,208

Total(Notes)Term ofofficeDirectors Hiroko Fuji, Kazuo Machigaki, Mikio Nakajo and Hidetoshi Nakatsuka are Outside Directors.
The term of office is until the conclusion of the General Meeting of Shareholders for the last fiscal year that ends
within a year after the appointment on May 30, 2024.
The term of office is until the conclusion of the General Meeting of Shareholders for the last fiscal year that ends
within two years after the appointment on May 30, 2024.
As an initiative to enhance corporate governance, the Company has introduced the executive officer system since
May 30, 2006 for the purpose of expediting decision making and strengthening the functions of the Board of
Directors.
Currently, the Company has 13 executive officers.
Senior Managing Executive Officer, COO: Nobuhiro Sewaki
Managing Executive Officer, CTO: Yasuo Sakane
Senior Executive Officer, CFO, in charge of sustainability: Hirofumi Fujimoto
Senior Executive Officer, President of MATSUKEN CO., LTD.: Eijiro Oda
Executive Officer in charge of North America, Division Manager, Special Lubricants and President of MORESCO
USA Inc.: Hidenori Amaki
Executive Officer in charge of Southeast/South Asia President of MORESCO (THAILAND) CO., LTD. andPresident of PT.MORESCO MACRO ADHESIVE: Keiichi Matsutani
Executive Officer General Manager, Corporate R&D Department: Katsuhito Fukuda
Executive Officer in charge of China
President of Wuxi MoreTex Technology Co., Ltd., President of WUXI MORESCO TRADING CO.,LTD., President of MORESCO HANANO DIE-CASTING COATING (SHANGHAI) CO., LTD.,
President of MORESCO (ZHEJIANG) FUNCTIONAL MATERIAL CO., LTD. and President of
MORESCO TRADING (ZHEJIANG) CO., LTD.:
Liu Yingjin
Executive Officer in charge of global operations and President of MORESCO TECHNO CO., LTD.: Jiro Hosomi
Executive Officer Division Manager, Hot Melt Adhesive: Kazuyoshi Fujita
Executive Officer, Division Manager, Liquid Paraffin & Sulfonates and Division Manager, Device Materials andGeneral Manager, R&D Department, Device Materials: Yasushi Hosooka
Executive Officer in charge of Circular Products: Naohiro Kanematsu
Executive Officer in charge of production and safety, General Manager, Process & Production Technology―49―

Department: Hiroki Iwaseii) Outside Officers
A. Relationship with Outside Directors
The Company has four Outside Directors (including three Outside Directors who are Audit and Supervisory Committee
members). All of these Outside Directors are independent officers as defined in the Securities Listing Regulations of theTokyo Stock Exchange.
Outside Director Hiroko Fuji served as an executive officer for 10 years at a major department store which is a groupcompany of a listed corporation and was deeply involved in management of the company through working as the store
manager of several flagship stores of the department store. She thus has abundant experience and knowledge with regard to
management. By making use of this experience and knowledge, she has provided us with guidance and advice onmanagement of the Company and the career development of female employees and female managers of the Company, andshe has contributed to improving employee engagement and human resource development through dialogue with employeesof corporate administration segments. She used to be an executive officer of Daimaru Matsuzakaya Department Stores Co.,
Ltd. in the past, but there is no relationship that should be disclosed between the Company and Daimaru Matsuzakaya
Department Stores Co., Ltd.
Kazuo Machigaki, Outside Director who is an Audit and Supervisory Committee Member, has served for many years
as Representative Director, President and Representative Director, Chairman of Tokalo Co., Ltd., a top manufacturer in thefield of surface modification, and possesses abundant experience and extensive knowledge as a manager. By making use of
his experience and knowledge, he has properly performed auditing and supervision. He is from Tokalo Co., Ltd., and theCompany has a relationship with Tokalo Co., Ltd. of jointly conducting research and development.
Mikio Nakajo, Outside Director who is an Audit and Supervisory Committee Member, has professional knowledge andextensive experience gained over many years as an attorney. By making use of his experience and knowledge, he has
properly performed auditing and supervision. He is the representative attorney of the Sawada, Nakajo and Mori Law Office
and also serves as an external auditor of Yamato Kogyo Co., Ltd. However, there is no relationship that should be disclosed
between the Company and the Law Office or Yamato Kogyo Co., Ltd.
Hidetoshi Nakatsuka, Outside Director who is an Audit and Supervisory Committee Member, has experience of being
involved in tax administration for many years. He is also familiar with corporate taxation as a tax accountant and thus has
acquired professional knowledge about finance, accounting and taxation. By making use of his experience and knowledge,
he has properly performed auditing and supervision. He is a representative of the Hidetoshi Nakatsuka Tax Accountant
Office and also serves as an external auditor of Tiger Corporation and an outside director of Kaji Technology Corporation.
However, there is no relationship that should be disclosed between the Company and the Office or either of the twocompanies.
As stated above, there are no personal, capital, trading or any other relationships between the Company and its Outside
Directors that may cause conflicts of interest with general shareholders
B. Policy on independence of Outside Directors
In appointing Outside Directors, the Company has not established any particular criteria or policy concerning their
independence. However, when appointing an Outside Director, we determine for each candidate, based on his/her career history
and relationship with Company, whether sufficient independence can be ensured so that the candidate will be able to perform
his/her duties as an Outside Director in a standpoint independent from management of the Company.
iii) Mutual cooperation between supervision or audits by Outside Directors and internal audits, audits by Audit andSupervisory Committee Members and accounting audits, and relationship with internal control department
All of the Outside Directors of the Company supervise or audit business management from a standpoint independent
from the Company’s management. They receive reports on the status of development and operation of internal control
systems, including compliance and risk management, and express opinions as appropriate.
The Audit and Supervisory Committee, of which a majority of members are Outside Directors, exchange opinions
and information with directors in charge of internal control whenever necessary, and work to improve effectiveness ofsupervision and auditing in cooperation with the internal control department, accounting auditors, etc. Through thesemeasures, the Company strives to ensure the soundness and appropriateness of its business management.

―50―

(3) Status of Auditsi) Status of audits by the Audit and Supervisory Committee
A. Organization and personnel of the Audit and Supervisory Committee
The Audit and Supervisory Committee consists of four members, including three independent Outside Directors, and one ofthem has been appointed as a full-time Audit and Supervisory Committee Member.
The Outside Director who is an Audit and Supervisory Committee Member has abundant experience and extensive
knowledge in management, legal affairs, taxation, etc. and is responsible for performing the audit function from an independent
third-party perspective. Director Hidetoshi Nakatsuka, who is an Audit and Supervisory Committee Member, has experienceof being involved in tax administration and is also familiar with corporate taxation as a tax accountant, thus having professional
knowledge about finance, accounting and taxation.
The Audit and Supervisory Committee conducts systematic audits and gives opinions based on reports it receives
from the Internal Audit Department and through other internal control systems. The Internal Audit Department andaccounting auditors keep close contact through reporting to each other on audit plans and the status of implementation,
results, etc. on a regular basis and exchanging opinions, with the aim of improving the effectiveness of audits.
The Audit and Supervisory Committee meetings
The Audit and Supervisory Committee meetings are held in conjunction with the Board of Directors’ meetings and also on
a quarterly basis. During the fiscal year under review, 18 meetings were held. The meeting time was about 1.5 hours for regularmeetings and about two hours for quarterly meetings.
The status of attendance of the Audit and Supervisory Committee Members is as follows.
Number of meetings Number of meetings
Name
held
attended (%)
B.

Mikio Honda

18

18(100％)Kazuo Machigaki

18

18(100％)

Mikio Nakajo

18

18(100％)Hidetoshi
Nakatsuka

18

18(100％)C.

Specific matters, etc. discussed by the Audit and Supervisory Committee
Specific matters, etc. discussed by the Audit and Supervisory Committee are as follows.
・ Statutory matters to be resolved
・ Revision of the regulations, etc. for Audit and Supervisory Committee
・ Audit policy and audit plan of the Audit and Supervisory Committee
・ Evaluation of the committee activities for the Audit and Supervisory Committee audit reports
・ Exchange of information with the accounting auditor on the status of audits and various consultations regarding KAM
・ Evaluation of accounting auditors
・ Formation of opinions on nomination and remuneration of directors who are not a member of the Audit andSupervisory Committee
・ Exchange of opinions with directors, including Representative Directors
・ Individual interviews with executive officers, etc.
・ Exchange of opinions with General Manager, Internal Audit Department
・ Exchange of opinions with the Compliance and Risk Management Committee secretariat
・ Status of compliance with the Corporate Governance CodeD.

Major activities of full-time Audit and Supervisory Committee Members
Major activities of the full-time Audit and Supervisory Committee Members are as follows.
・ Attendance at important meetings, such as the meetings of the Management Committee, Compliance and Risk
Management Committee, and Sustainability Committee
・ Viewing approval documents, contracts, and minutes of meetings
・ Regular meetings with the Internal Audit Department
・ Investigation on the status of operations and property of business sites in Japan・ Auditing of overseas subsidiaries on-site and using online meetings
・ Monitoring the status of deliberations of the Nomination and Compensation Committee

―51―

ii)
A

Status of internal audits
Internal audits
The Company has an internal audit system in which the Internal Audit Department, established as an organization under
direct control of the President and consisting of three members, checks and provides guidance for all departments, including
subsidiaries, regarding compliance with laws and regulations, the effectiveness of internal control, etc. on a regular basis.
The Internal Audit Department conducts internal control audits over financial reporting, accounting audits, operational
audits, and special audits assigned by the Director and President to check whether the business activities in each department
are appropriate and effective and in compliance with laws and regulations, the Articles of Incorporation, and other company
regulations and standards, thereby contributing to improving management efficiency and proper business management of theCompany.

B. Mutual cooperation between internal audits, audits by Audit and Supervisory Committee, and accounting audits, andrelationship between these audits and the internal control department
At the Company, the Internal Audit Department and the full-time Audit and Supervisory Committee Members hold regularmonthly meetings, where the Internal Audit Department reports on audit plans and the status of internal audit activities andopinions are exchanged. They have a system of mutual cooperation on a daily basis, such as conducting joint audits ofsubsidiaries, including those overseas, from the perspective of improving audit efficiency. The full-time Audit and Supervisory
Committee Members report on the regular meetings with the Internal Audit Department at the monthly meetings of the Audit
and Supervisory Committee. They also receive reports from the Internal Audit Department at the quarterly meetings of the
Audit and Supervisory Committee to exchange opinions.
For accounting audits, the Internal Audit Department collaborates with the accounting auditor as needed regarding internal
control audits over financial reporting, etc. In addition, the Internal Audit Department, along with the Audit and Supervisory
Committee, attend the audit plan briefings and quarterly audit report meetings by the accounting auditor to exchange opinions
and ensure close cooperation.
C. Initiatives to ensure the effectiveness of internal audits
The Internal Audit Department is positioned as the core of the internal control function that the executive sector, centeredaround the Director and President, is forming. While receiving specific instructions from the Director and President at monthly
reporting meetings, it reports to and exchange opinions with the Audit and Supervisory Committee on audit plans and results
on a regular basis.
The Audit and Supervisory Committee, when it deems necessary, may request the Internal Audit Department to conduct aninvestigation or give specific instructions regarding the execution of its duties, thereby ensuring the effectiveness of audits.
The Internal Audit Department does not have a system in place to report audit results directly to the Board of Directors.
However, it reports overall audit results twice a year at the Compliance and Risk Management Committee meetings attended
by executive directors and full-time Audit and Supervisory Committee Members, and the results are also reported to the Boardof Directors in the month in which the report is made.
iii)
Status of accounting audits
A. Name of auditing firm
Grant Thornton Taiyo LLC
B. Continuous audit period
5 years
C. Certified public accountants performing audit work
Kenji Furuta
Tatsuya Yoshinaga
D. Composition of assistants involved in audit work
Assistants who are involved in the accounting audit work of the Company are 9 certified public accountants and 16 others.

―52―

E. Policy and reason for selecting accounting auditors
As a result of considering comprehensively the quality management system, independence, expertise, the system for auditing
activities, and the level of audit compensation in accordance with the Criteria for Selecting Accounting Auditor Candidates,
the Company has determined that Grant Thornton Taiyo LLC has a system to ensure that the Company’s accounting audit isconducted properly and adequately, and thus it appointed the firm as its accounting auditor.
If the accounting auditor is deemed to fall under any of the items of Article 340, Paragraph 1 of the Companies Act, theAudit and Supervisory Committee will dismiss the accounting auditor with the consent of all of the Audit and Supervisory
Committee Members. In such a case, an Audit and Supervisory Committee Member selected by the Committee will report thedismissal of the accounting auditor and the reason therefor at the first General Meeting of Shareholders convened after thedismissal.
In addition, the Audit and Supervisory Committee will determine whether it is appropriate to submit a proposal for dismissal
or refusal of reappointment of the accounting auditor for the General Meeting of Shareholders when:a) the accounting auditor has received disciplinary treatment or disposition by the supervisory authorities due to a serious
violation of the Certified Public Accountants Act or other important law or regulation, and the Committee has judgedthat there is no prospect of improvement thereto;b) as a result of comprehensive examination, the Committee has judged that the audit quality, quality management,
independence, efficiency, comprehensive abilities, etc., of the accounting auditor are insufficient;c) the continuous audit period of the accounting auditor exceeds 10 years in principle; ord) the Committee has judged that replacement of the accounting auditor will enable the Company to establish a more
appropriate audit system.
Grant Thornton Taiyo LLC received an order of suspension of operations from the Financial Services Agency on December
26, 2023, and a summary of the disciplinary action is as follows:a) Target of the disciplinary action
Grant Thornton Taiyo LLCb) Major contents of the disciplinary action
Suspension of operations related to the conclusion of new contracts for a period of three months from January 1, 2024 toMarch 31, 2024c) Reason for the disciplinary action
Two certified public accountants, who are partners of the audit firm, failed to exercise due care and certified financial
statements that contained material misrepresentations as not containing material misrepresentations.
The Audit and Supervisory Committee received several explanations from the audit firm regarding the contents of thedisciplinary action, as well as the business improvement plan submitted to the Financial Services Agency and the status of theimplementation of the plan. After examining the status of improvement, the Committee concluded that steady progress was
being made with the business improvement plan. Furthermore, the Committee also examined the evaluation items foraccounting auditors set by the Company and found no significant items to be pointed out. As a result, the Committee concluded
that there was no problem with appointing the said audit firm as the accounting auditor.
F.

Evaluation of the accounting auditor by the Audit and Supervisory Committee
The Company’s Audit and Supervisory Committee examined the evaluation items of the accounting auditor, including its
quality management system, details of the audit plan, audit operations (audit items, audit time, etc.), communication withmanagement and the Audit and Supervisory Committee, and response to the Group audits. As a result, no significant items to
be pointed out were found, and therefore the Committee has reappointed the accounting auditor.

iv)
Details of audit fees, etc.
A. Remuneration to auditing certified public accountants, etc.
Previous consolidated fiscal year
Category

Consolidated fiscal year under review

Fees for audit
Fees for audit
Fees for non-audit
Fees for non-audit
certification (millions ofcertification (millions ofservices (millions of yen)services (millions of yen)
yen)
yen)

The Company (reporting
company)

28

―

28

―

Consolidated subsidiaries

―

―

―

―

Total

28

―

28

―

―53―

B.

Remuneration to the network of the auditing certified public accountants, etc. (excluding remuneration from A.)
Previous consolidated fiscal year

Category

Consolidated fiscal year under review

Fees for audit
Fees for audit
Fees for non-audit
Fees for non-audit
certification (millions ofcertification (millions ofservices (millions of yen)services (millions of yen)
yen)
yen)

The Company (reporting
company)

―

―

―

―

Consolidated subsidiaries

2

0

2

0

Total

2

0

2

0

Non-audit services at consolidated subsidiaries are taxation-related services by GRANT THORNTON INDIA LLP for boththe previous consolidated fiscal year and the consolidated fiscal year under review.
C.

Policy for determining audit fees
The fees are determined properly by the Representative Director with consent of the Audit and Supervisory Committee inaccordance with the Articles of Incorporation, taking into consideration the audit plan, audit content, audit schedule, etc. of theaccounting auditor.

D.

Reasons for the Audit and Supervisory Committee’s consent to fees, etc. of the accounting auditor
The Audit and Supervisory Committee, based on the draft of the audit policy for the relevant fiscal year submitted by theaccounting auditor and the hearing of executive employees on their recognition and intention, examined the analysis/evaluationof audit results of the previous fiscal year, analysis on the difference between the audit plan and results, the appropriateness of
the audit time, staffing plan and the remuneration estimate, and the reasonable rate of audit remuneration, etc. As a result, no
problems were found with these matters, and the Committee judged the fees, etc. as appropriate and thus provided consent asprescribed in Article 399, Paragraph 1 of the Companies Act.

―54―

(4) Remuneration, etc. for officersi) Policies for determining the amount and calculation method of remuneration, etc. of officers
A. Policy for determining remuneration of Directors (excluding Directors who are Audit and Supervisory Committee Members)
The remuneration of the Company’s Directors is determined according to the Regulations for Remuneration of Directors,
etc., and the improvement (revision) of the regulations is determined by the Board of Directors after deliberation and reportingby the Nomination and Compensation Committee.
In determining remuneration of Directors, our policy is to consider the balance with business performance results, duties,
position, general level, and the employee salaries.
Remuneration of a director consists of base remuneration, which is fixed compensation calculated based on his/her positionand performance of the previous fiscal year, and restricted stock compensation, which is non-monetary compensation toprovide incentives for improving medium- to long-term corporate value. For Outside Directors, base remuneration calculated
based only on their positions are paid.
The amount of each type of remuneration is calculated as described below and paid at the time as indicated, though the ratioof each type of remuneration has not been determined.
a) Base remunerationi) Amount calculated according to positionii) Amount calculated according to performance of the previous year
The total amount of i) and ii) is paid in a fixed amount every month from June each year to May the following year.
b) Non-monetary remuneration (restricted stock compensation)
The number of shares equivalent to the amount calculated according to the position is paid in June each year.
When a director concurrently serves as an executive officer, no remuneration is paid for the duties of the executive officer.
At the 66th Ordinary General Meeting of Shareholders held on May 30, 2024, it was decided that remuneration of
Directors (excluding directors who are Audit and Supervisory Committee Members) should be not more than 250 million
yen annually (including an annual amount of not more than 20 million yen for Outside Directors) and remuneration of
Directors who are Audit and Supervisory Committee Members should be not more than 50 million yen annually. As of
the conclusion of the said General Meeting of Shareholders, the number of Directors (excluding Directors who are Audit
and Supervisory Committee Members) was six (including one Outside Director), and the number of Directors who are
Audit and Supervisory Committee Members was four (including three Outside Directors). As of the reporting date of theannual securities report, the Company had six Directors (excluding Directors who are Audit and Supervisory Committee
Members, including one Outside Director) and four Directors who are Audit and Supervisory Committee Members(including three Outside Directors) who were eligible for the remuneration. In addition, separately from the monetary
remuneration, it was also decided at the 62nd Ordinary General Meeting of Shareholders held on May 26, 2020 that theamount of restricted stock compensation for Directors (excluding Directors who are Audit and Supervisory Committee
Members, and Outside Directors) should be not more than 50 million yen annually and the total number of commonshares of the Company to be issued or disposed of should be not more than 40,000 shares annually. As of the conclusionof the said General Meeting of Shareholders, the number of Directors (excluding Directors who are Audit and Supervisory
Committee Members, and Outside Directors) was five. As of the reporting date of the annual securities report, theCompany had five Directors (excluding Directors who are Audit and Supervisory Committee Members, and Outside
Directors) who were eligible for the remuneration.
B.

Procedure for determining remuneration of Directors (excluding Directors who are Audit and Supervisory Committee
Members)
Remuneration of Directors is determined Public by the Board of Directors, within the limit for the amount of remuneration
decided at the General Meeting of Shareholders, after deliberation and reporting by the Nomination and Compensation
Committee.
The Nomination and Compensation Committee, upon consultation with the Board of Directors, discusses the baseremuneration and non-monetary remuneration, in comparison with executive compensation of Japanese listed companies ofthe same scale as the Company in terms of sales and the number of employees, using survey data of external organizations, inconsideration of the Company’s performance results, etc. (for base remuneration) and the degree of achievement of nonfinancial indicators (for non-monetary remuneration), and reports the total remuneration amount and the remuneration amountof each individual to the Board of Directors.
Remuneration of Directors who are Audit and Supervisory Committee Members is decided through deliberation by the Audit
and Supervisory Committee.

C.

Activities of the Nomination and Compensation Committee and the Board of Directors in the process of determining
remuneration of Directors (excluding Directors who are Audit and Supervisory Committee Members) during the fiscal year
under review
During the fiscal year under review, the Nomination and Compensation Committee met four times, on April 11 and May 30,
2023, and January 15 and February 14, 2024, to discuss mainly the matters related to the revision of the base remuneration foreach Director and matters related to the revision of the amount of remuneration for Directors.
In response to the report on the matters related to the revision of the base remuneration for each Director, the Board of
Directors discussed and resolved the matters at its meeting held on May 30, 2023.

―55―

ii)

Total remuneration by officer category, remuneration amount by type, and number of eligible officers
Total amount of remuneration, etc. by type (millions ofyen)
Officer category

Amount of
remuneration etc.
(Millions of yen)

Base remuneration
Restricted stockcompensation

Number of eligible
officers

Position-based
remuneration

Performancelinked
remuneration

147

118

23

6

4

13

13

―

―

1

Outside Directors

24

24

―

―

4

Total

184

155

23

6

9

Director(excluding Directors on Audit
and Supervisory Committee,
and Outside Directors)
Director(Audit and Supervisory
Committee Member)(excluding Outside
Directors))(Notes)1.

2.

Regarding remuneration, etc. of each individual for the fiscal year under review, the Board of Directors has
confirmed that the method of determining the content of remuneration, etc. and the content of the determined
remuneration, etc. are consistent with the above-mentioned policy and that reports from the Nomination andCompensation Committee are respected, and thus it judged that the remuneration etc. complies with the said policy.
The Audit and Supervisory Committee of the Company has expressed their opinion that remuneration etc., of
Directors (excluding Directors who are Audit and Supervisory Committee Members) has been determined by the
Board of Directors after deliberation and reporting by the Nomination and Compensation Committee and that theamount of individual remuneration and the process for determining the amount are appropriate.

―56―

(5) Information on shareholdingsi) Standards and approach toward classification of investment shares
The Company classifies its equity securities into investment shares held for pure investment, which are held purely forthe purpose of receiving profits from stock price fluctuations or stock dividends, and investment shares held for purposes
other than pure investment, which are deemed strategically necessary. In principle, our policy is not to hold investment
shares for pure investmentii)

investment shares held for purposes other than pure investment
A. Shareholding policy and method of verifying rationale of holding, and details of verification by Board of Directors,
etc. concerning holding of individual issues
The Company’s policy is to examine whether to hold or sell the investment shares each year at the Board of Directors’
meeting, based on awareness of the capital cost of the Company, as well as dividends, capital gains, and profits fromtransactions, also in consideration of the rationale of the purposes of holding, such as business partnerships, maintaining
or enhancing transactions, and stabilizing the shares.
In light of this policy, the Company regularly determines the necessity of holding at the Board of Directors’
meetings, based on the purpose of holding, status of transactions, benefits associated with the holding, etc.
B.

Number of issues and balance sheet amount
Number ofissuesTotal balance sheet amount(millions of yen)

Unlisted shares

5265

Shares other than unlisted
shares3

218(Issues whose number of shares increased during the fiscal year under review)
Total acquisition cost for
Number ofincreased shares (millions of Reason for increase in number of sharesissuesyen)
Unlisted shares―― ―Shares other than unlisted
shares―― ―(Issues whose number of shares decreased during the fiscal year under review)Not applicable.

―57―

C.

Information on number of shares and balance sheet amount of specified investment shares

Specified investment sharesFiscal year underreview

Issue

Previous fiscal year

Holding of
Purpose of holding, outline of businessthe
Number of shares partnership, quantitative effects of holding, andCompany’s
Balance sheet amount Balance sheet amount reason for the increase in the number of sharesshares(Millions of yen)
(Millions of yen)
Number of shares

The Company’s Chiba Plant has business
relationships with several consolidated
subsidiaries of this company for productNippon Soda Co.,
sales, purchase of subsidiary materials,
Yes
Ltd.
124
93 disposal of waste sulfuric acid, etc. The
shareholding is for the purpose of maintaining
and enhancing these business relationships.
23,60023,600 The shareholding is for the purpose ofmaintaining and enhancing the business
Mizuho Financial
relationships, mainly for fund procurement
Yes
Group, Inc.
66
50 both inside and outside Japan, with thiscompany as a major partner financial
institution.
18,40018,400 The shareholding is for the purpose ofmaintaining and enhancing the business
Mitsubishi UFJ
relationships, mainly for fund procurement
Yes
Financial Group, Inc.
28
18 both inside and outside Japan, with thiscompany as a major partner financial
institution.
(Note) Quantitative effects of holding are not stated as they are difficult to describe. The rationale of holding is verified by the Boardof Directors every year according to the method described in B. above.
20,152

20,152iii) Investment shares held for pure investment
Not applicable.

―58―

V. Financial Information
1.

Basis of preparation of consolidated and non-consolidated financial statements(1) The consolidated financial statements of the Company are prepared in accordance with the Regulation on Terminology, Forms,
and Preparation Methods of Consolidated Financial Statements (Ministry of Finance Order No. 28 of 1976).
(2) The non-consolidated financial statements of the Company are prepared in accordance with the Regulation on Terminology,
Forms, and Preparation Methods of Financial Statements (Ministry of Finance Order No. 59 of 1963, hereinafter referred to as
the “Financial Statement Regulations”).
As the Company qualifies as a company submitting non-consolidated financial statements prepared in accordance withspecial provisions, the Company prepares its non-consolidated financial statements pursuant to Article 127 of the Financial
Statements Regulations.

2.

Audit certification
Pursuant to the provisions of Article 193-2, Paragraph 1, of the Financial Instruments and Exchange Act, the Company’s
consolidated and non-consolidated financial statements for the fiscal year (March 1, 2023 to February 29, 2024) were audited by
Grant Thornton Taiyo LLC.

3.

Special efforts to ensure the appropriateness of consolidated financial statements, etc.
The Company makes special efforts to ensure the appropriateness of its consolidated financial statements, etc. Specifically, in orderto accurately ascertain the content of the accounting standards and appropriately address changes in these accounting standards, theCompany maintains membership in the Financial Accounting Standards Foundation and regularly participates in seminars held by
the Foundation.

―59―

1.

Consolidated Financial Statements, etc.
(1) Consolidated Financial Statementsi) Consolidated balance sheet
Previous consolidated fiscal year
(as of February 28, 2023)(Millions of yen)
Consolidated fiscal year underreview(February 29, 2024)

AssetsCurrent assets
Cash and deposits
Notes receivable - trade

4,256
1,235

5,636
1,324

Accounts receivable - trade
Merchandise and finished goods

6,360
3,276

6,618
3,693

Raw materials and supplies
Other

3,030
675

2,994
750

Allowance for doubtful accounts

(22)

(25)

18,81020,989Total current assets
Non-current assets
Property, plant and equipment
Buildings and structures
Accumulated depreciation

7,402

9,077

(3,516)(4,072)

Buildings and structures, net

3,886

5,005

Machinery, equipment and vehicles
Accumulated depreciation

10,793(8,978)

11,881(9,568)

1,815

2,313

1,963
230

2,255
262

(148)

(170)

82

92

Machinery, equipment and vehicles, net
Land
Leased assets
Accumulated depreciation
Leased assets, net
Construction in progress

491

Other
Accumulated depreciation

3,143(2,770)※３

Other, net※３

Total property, plant and equipment

373

33
3,356
(2,914)

※３

※３

442

8,610

10,140Goodwill
Leased assets

92
45

543
35

Other

452

650

Total intangible assets

589

1,228

Intangible assets

Investments and other assets
Investment securities※１

Investments in capital
Deferred tax assets
Net defined benefit asset
Other
Allowance for doubtful accounts

520

2,078
75

※２

※１

611

1,940
218

※２

1,160
168

1,700
228

(0)

(1)

Investment securities

4,002

4,695

Total non-current assets

13,202

16,063

6－

Deferred assets
Business commencement expenses
Total deferred assets
Total assets

―60―

6

－

32,01737,053

Previous consolidated fiscal year
(as of February 28, 2023)(Millions of yen)
Consolidated fiscal year underreview(February 29, 2024)

Liabilities
Current liabilities
Notes and accounts payable - trade
Contract liability

5,144
94

4,908
77

Short-term borrowings
Income taxes payable

2,381
183

3,040
268

Provision for bonuses
Other

464
1,334

500
1,066

Total current liabilities

9,599

9,860

Non-current liabilities
Long-term borrowings

472

3,065

498
208

543
463

Net defined benefit liability
Other
Total non-current liabilities
Total liabilities

1,179

4,071

10,77813,931

Net assets
Shareholders’ equity
Capital stock

2,118

2,118

Capital surplus
Retained earnings

1,976
13,7601,971
14,674

Treasury shares

(567)

(561)

Total shareholders’ equity

17,287

18,202

74

127

879

1,200

Accumulated other comprehensive income
Valuation difference on available-for-salesecurities
Foreign currency translation adjustment
Remeasurements of defined benefit plans
Total accumulated other comprehensive income

293

597

1,246

1,924

Non-controlling interests

2,706

2,996

Total net assets

21,24023,12232,01737,053

Total liabilities and net assets

―61―

ii)

Consolidated statement of income and consolidated statement of comprehensive income
Consolidated statement of income

Previous consolidated fiscal year
(From March 1, 2022
to February 28, 2023)
Net sales※１30,333

Cost of sales※２

22,204Gross profit(Millions of yen)
Consolidated fiscal year underreview(From March 1, 2023
to February 29, 2024)※１ 31,886
22,902※２

8,129

Selling, general and administrative expenses※３,※４

Operating profit

7,606

8,984
※３,※４

7,759

523

1,225

Interest income
Dividend income

21
19

25
22

Foreign exchange gains
Share of profit of entities accounted for using equity
method
Other

295

251

148

314

76

103

Total non-operating income

559

714

Interest expenses
Loss on retirement of non-current assets

13
5

12
7

Amortization of business commencement expenses
Other

－
18

67
27

Total non-operating expenses

36

113

1,046

1,826

Gain on bargain purchase－285

Total extraordinary income－

285

Non-operating income

Non-operating expenses

Ordinary profit
Extraordinary income

Extraordinary losses
Impairment loss－－

Loss on step acquisitions
Total extraordinary losses

31

※５

25

－

56

Profit before income taxes

1,046

2,055

Income taxes - current
Income taxes - deferred

587
(267)

534
72

Total income taxes

320

606

Profit726

1,449

Profit attributable to non-controlling interests

112

165

Profit attributable to owners of parent

615

1,283

―62―

Consolidated statement of comprehensive income

726(Millions of yen)
Consolidated fiscal year underreview(From March 1, 2023
to February 29, 2024)
1,449

Valuation difference on available-for-sale securities
Foreign currency translation adjustment

36
470

60
424

Remeasurements of defined benefit plans, net of tax
Share of other comprehensive income of entities
accounted for using equity method
Total other comprehensive income

103

301

17

31

Previous consolidated fiscal year
(From March 1, 2022
to February 28, 2023)
ProfitOther comprehensive income※１

Comprehensive income

627

※１

816

1,353

2,265

1,126
227

1,962
303

Comprehensive income attributable to
Owners of parent
Non-controlling interests

―63―

iii)

Consolidated statement of changes in equity
Previous consolidated fiscal year (from March 1, 2022 to February 28, 2023)(Millions of yen)
Shareholders’ equity
Capital stock

Balance at beginning of
period2,118

Capital surplus

Retained earnings

Treasury shares

Total shareholders’equity1,976

13,517(384)

17,227

Changes during period
Dividends of surplus
Profit attributable toowners of parent
Purchase of treasury
shares
Disposal of treasury
sharesNet changes in items
other than shareholders’equityTotal changes during
periodBalance at end of period

(372)

(372)

615

615

1

(194)

(194)

12

12

－

1

242

(183)

60

2,118

1,976

13,760(567)

17,287

Total accumulated
othercomprehensive
incomeNon-controllinginterests

Total net assets

735

2,589

20,551

Accumulated other comprehensive income
Valuation difference Foreign currency Remeasurements ofon available-for-saletranslation
defined benefit
securities
adjustment
plans
Balance at beginning of
period

38

505

191

Changes during period
Dividends of surplus
Profit attributable toowners of parent
Purchase of treasury
shares
Disposal of treasury
sharesNet changes in items
other than shareholders’equityTotal changes during
periodBalance at end of period

(372)
615
(194)
12
36

373

102

511

117

628

36

373

102

511

117

688

74

879

293

1,246

2,706

21,240―64―

Consolidated fiscal year under review (from March 1, 2023 to February 29, 2024)(Millions of yen)
Shareholders’ equity
Capital stock
Balance at beginning of
period2,118

Capital surplus

Retained earnings

Treasury shares

Total shareholders’equity1,976

13,760(567)

17,287

Changes during period
Dividends of surplus
Profit attributableowners of parent

(369)

(369)

1,283

1,283

to

Disposal of treasury
sharesCapital increase of
consolidated
subsidiaries
Net changes in items
other than shareholders’equityTotal changes during
periodBalance at end of period

6

(0)
(6)

6
(6)

－

(6)

914

6

914

2,118

1,971

14,674(561)

18,202

Total accumulated
othercomprehensive
incomeNon-controllinginterests

Total net assets

1,246

2,706

21,240

Accumulated other comprehensive income
Valuation difference Foreign currency Remeasurements ofon available-for-saletranslation
defined benefit
securities
adjustment
plans
Balance at beginning of
period

74

879

293

Changes during period
Dividends of surplus
Profit attributableowners of parent

(369)
to

Disposal of treasury
sharesCapital increase of
consolidated
subsidiaries
Net changes in items
other than shareholders’equityTotal changes during
periodBalance at end of period

1,283
6
(6)
53

322

304

678

290

968

53

322

304

678

290

1,883

127

1,200

597

1,924

2,996

23,122―65―iv) Consolidated statement of cash flows(Millions of yen)
Consolidated fiscal year underPrevious consolidated fiscal year
review(From March 1, 2022 to February(From March 1, 2023 to February
28, 2023)
29, 2024)
Cash flows from operating activities
Profit before income taxes
Depreciation
Impairment loss
Share of loss (profit) of entities accounted for using
equity method
Loss (gain) on sale of property, plant and equipment

1,046

2,055

1,236
－

1,188
31

(148)

(314)

(10)

(9)

Decrease (increase) in net defined benefit asset
Increase (decrease) in provision for bonuses

(225)
(66)

(502)
36

Increase (decrease) in allowance for doubtful accounts
Interest and dividend income

(4)
(40)

3
(47)

Interest expenses
Decrease (increase) in trade receivables

13
(570)

12
623

Decrease (increase) in inventories
Increase (decrease) in trade payables

(798)
727

44
(430)

－
81

(285)
1,133

Subtotal

1,242

3,538

Interest and dividends received
Interest paid

123
(13)

126
3

Income taxes paid

(837)

(733)

515

2,934

282
(1,283)10－(2,452)
41

(60)

(265)

(104)
－

(5)
※２ (1,300)

Gain on bargain purchase
Other

Cash flows from operating activities
Cash flows from investing activities
Net decrease (increase) in time deposits
Purchase of property, plant and equipment
Proceeds from sale of property, plant and equipment
Purchase of intangible assets
Purchase of investment securities
Payments for transfer of business
Purchase of shares of subsidiaries resulting in change
in scope of consolidation
Other

－

※３

(232)

(16)

(37)

(1,172)(4,250)Net increase (decrease) in short-term borrowings
Proceeds from long-term loans payable

1,884
500

271
3,536

Repayments of long-term borrowings
Purchase of treasury shares

(443)
(194)

(575)

Dividends paid
Dividends paid to non-controlling interests

(372)
(111)

－
(369)
(19)

Other

(36)

(25)

1,227

2,819

(38)

(123)

532

1,380

Cash flows from investing activities
Cash flows from financing activities

Cash flows from 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 period

3,654

Cash and cash equivalents at end of period

※１

―66―

4,186

4,186
※１

5,566

Notes(Important matters that are the basis for preparation of consolidated financial statements)
1. Scope of consolidation
Number of consolidated subsidiaries: 16
Names of consolidated subsidiaries
MATSUKEN CO., LTD.
MORESCO TECHNO CO., LTD
Ethylene Chemical Co., Ltd.
MORESCO (THAILAND) CO., LTD.
MORESCO Holding (Thailand) Co., Ltd.
PT. MORESCO INDONESIA
PT. MORESCO MACRO ADHESIVEMORESCO HM&LUB INDIA PRIVATE LIMITEDMORESCO USA Inc.
Cross Technologies N.A. Inc.
Of the above subsidiaries, during the consolidated fiscal year under review, Wuxi MoreTex Technology Co., Ltd., an equity method
affiliate, was made a subsidiary through additional acquisition of its equity in investment, and Cross Technologies N.A. Inc. wasnewly established. Therefore, these two companies are included in the scope of consolidation.
2. Application of equity method(1) Number of affiliates accounted for using equity method: 1
Names of affiliates
Zhangjiagang TEEC Automotive Chemicals Co., Ltd.
During the consolidated fiscal year under review, the Company acquired additional equity in investment of Wuxi MoreTex
Technology Co., Ltd., which was an equity method affiliate, to make it a subsidiary. Therefore, it is excluded from the scope of
application of the equity method.
(2) Zhangjiagang TEEC Automotive Chemicals Co., Ltd. settles its accounts on December 31. In preparing the consolidated financial
statements, non-consolidated financial statements as of the settlement date are used.

―67―

3.

4.

Fiscal years, etc. of consolidated subsidiaries
Among the consolidated subsidiaries,
Wuxi MoreTex Technology Co., Ltd.
WUXI MORESCO TRADING CO., LTD.
MORESCO HANANO DIE-CASTING COATING (SHANGHAI）CO., LTD.
TIANJIN MORESCO TECHNOLOGY CO., LTD.
MORESCO (ZHEJIANG) FUNCTION MATERIAL CO., LTD.
MORESCO TRADING (ZHEJIANG) CO., LTD.
MORESCO (THAILAND) CO., LTD.
MORESCO Holding (Thailand) Co., Ltd.
PT. MORESCO INDONESIA
PT. MORESCO MACRO ADHESIVEMORESCO HM&LUB INDIA PRIVATE LIMITEDMORESCO USA Inc.
Cross Technologies N.A. Inc.
settle their accounts on December 31,
In preparing the consolidated financial statements, non-consolidated financial statements as of their settlement date are used.
However, for important transactions that took place during the period from the settlement date to the consolidated settlement date,adjustments necessary for consolidated accounting have been made.
Information on accounting policies(1) Standards and methods for evaluating important assetsi) Securities
Available-for-sale securities
Securities other than shares without a market price
Fair value method (unrealized gain and loss, net of tax are recorded in net assets, and the moving average method
is used to calculate the cost of securities sold)Shares without a market priceMoving average cost methodii)

Derivatives
Fair value methodiii) Inventories
Mainly gross average cost method(The balance sheet values are calculated by writing down the book values in response to decreased profitability)(2) Depreciation methods for important depreciable assetsi) Property, plant and equipment (excluding leased assets)
The Company and its consolidated subsidiaries in Japan adopt mainly the declining-balance method and overseas
consolidated subsidiaries adopt the straight-line method.
However, the Company and its consolidated subsidiaries in Japan adopt the straight-line method for buildings(excluding facilities attached to buildings) acquired on or after April 1, 1998, and facilities attached to buildings
and structures acquired on or after April 1, 2016.
Major useful lives are as follows.
Buildings and structures: 3 to 60 years
Machinery, equipment and vehicles: 4 to 15 years
ii)

Intangible assets (excluding leased assets)
The straight-line method is adopted.
Useful life of software used in-house is based on the usable period inside the company (5 years).

iii) Leased assets
Leased assets relating to finance lease without transfer of ownership
The straight-line method is used with a useful life of the lease period and with a residual value of zero.

―68―(3) Accounting standards for important reserves and allowancesi) Allowance for doubtful accounts
In order to prepare for possible losses on uncollectible receivables held, estimated uncollectible amounts areposted: for general receivables, according to the historical percentage of uncollectibles, and for doubtfulreceivables, considering the probability of collection.
ii)

Provision for bonuses
In order to prepare for payment of bonuses to employees, a provision is made based on the estimated bonus
payments, which are attributable to the consolidated fiscal year under review.

(4) Accounting standards for important income and expenses
The main business of the MORESCO Group is manufacture and sale of chemical products (special lubricants, synthetic
lubricants, liquid paraffin & sulfonates, hot melt adhesives, and energy device materials). With regard to sale of such goods
and products, the Group determines that control of goods is transferred to customers at the time of delivery. As the period
between shipment and delivery is a normal period of time, the Group applies alternative treatment based on importance, etc.,
and recognizes revenue at the time of shipment of goods and products for inside Japan. For overseas, based on the terms oftrade stipulated by Incoterms, etc., the Group determines that control of goods and products is transferred to customers andits performance obligations are satisfied when risks are transferred to customers. Therefore, the Group recognizes revenue atthe time of shipment of goods and products in principle.
(5) Accounting treatment for retirement benefitsi) Method to attribute the estimated retirement benefits to the periods
To calculate retirement benefit obligations, the benefit formula method is adopted as a method to attribute theestimated retirement benefits to the periods up to the end of the consolidated fiscal year under review.
ii)

Method of amortization of actuarial gains and losses
The actuarial differences are recognized in the following consolidated fiscal year by the straight-line method overa certain period (mainly 14 years) that are not more than the average remaining service period of employees at thetime of the accrual of a difference.

(6) Standards for translation of important foreign currency-denominated assets or liabilities into Japanese yen
Foreign currency receivables/payables are translated into Japanese yen using the spot foreign exchange rate on the
consolidated closing date, and translation differences are treated as income or loss. The assets and liabilities of subsidiaries
overseas are translated into Japanese yen using the spot foreign exchange rate on the closing date; income and expenses aretranslated into yen using an average market rate during the period, and translation differences are included in “Foreign
currency translation adjustment” and “Noncontrolling interests” of the “Net assets”.
(7) Important hedge accounting methodsi) Hedge accounting method
Exceptional accounting is adopted for interest-rate swaps that meet the requirements for exceptional accounting.
ii)

Means of hedging and hedged items
Means of hedging: interest-rate swaps
Hedged items: borrowingsiii) Hedging policy
Hedging is conducted within the range of the target obligations for the purpose of reducing interest rate risks andimproving the financial account balance.
iv) Method for evaluating the effectiveness of hedges
The evaluation of hedge effectiveness is omitted for interest-rate swaps for which exceptional accounting is used.
(8) Method and period of amortization of goodwill
Goodwill is regularly amortized using the straight-line method over an effective period up to 20 years. However, minor
goodwill is entirely amortized all at once.
(9) Scope of cash and cash equivalents in consolidated statement of cash flows
Cash and cash equivalents consist of cash on hand, cash in banks which can be withdrawn at any time and short-term
investments with a maturity of three months or less when purchased which can easily be converted to cash and are subject tolittle risk of change in value.
(10) Other important matters that are the basis for preparation of consolidated financial statements
Treatment of deferred assets
Business commencement expenses
Amortized using the straight-line method over an effective period up to five years(11) Accounting principles and procedures that were adopted when relevant accounting standards, etc. were unclear
Restricted stock compensation system―69―Remuneration, etc. paid to directors of the Company based on the Company’s restricted stock compensation system is treatedas expenses over the applicable service period.

―70―

(Important accounting estimates)
1. Valuation of inventories(1) Amount recorded in the consolidated financial statements for the consolidated fiscal year under review(Millions of yen)Previous consolidated
Consolidated fiscal year
fiscal year
under review
Merchandise and finished goods
3,276
3,693
Raw materials and supplies

3,030

Cost of sales
38
For loss on valuation of inventories (reversal), net amount after reversal is stated.

2,994
(29)

(2) Information on the details of accounting estimatesi) Calculation method
The balance sheet values of merchandise and finished goods, and raw materials and supplies, are calculated bywriting down the book values in response to decreased profitability. If the net sales value or replacement cost ofmerchandise and finished goods, or raw materials and supplies, is lower than their book value, said net sales value
or replacement cost is stated as the carrying value of the consolidated balance sheet. For inventories that fall outof the normal operating cycle, those that have passed a certain period of time or have exceeded a certain turnover
period as of the end of the fiscal year are judged as slow-moving stock, excluding those judged to have the potential
to be sold as a result of individual examination in light of the future sales prospect based on past sales performance,
etc., and the fact of decreased profitability is reflected by using a regular write-down method of book values.
ii)

Major assumptions
Calculation of the net sales value or replacement cost of inventories is based on the actual result of sales orpurchases before the final date of the consolidated fiscal year. The net sales value or replacement cost of
inventories that have not been sold or purchased for a certain period of time is estimated considering past sales orpurchase records. The sales potential of slow-moving stock is examined individually in light of the future sales
prospect based on past sales performance, etc.

iii) Impact on the consolidated financial statements for the following consolidated fiscal year
If the net sales value or replacement cost significantly declines due to changes in the market environment, it may
have a serious impact on income of the following consolidated fiscal year.
2.

Impairment losses on non-current assets(1) Amount recorded in the consolidated financial statements for the consolidated fiscal year under review(Millions of yen)Previous consolidated
Consolidated fiscal year
fiscal year
under review
Property, plant and equipment
8,610
10,140Intangible assets

589

1,228

Impairment loss－

31(2) Information on the details of accounting estimatesi) Calculation method
The Company classified assets into the smallest cash-generating groups. For the asset groups that may be impaired, if thetotal amount of cash before discount that would be received from such asset groups is lower than their book value, thebook value is reduced to the recoverable amount, and the reduced amount is recorded as an impairment loss.
ii)

Major assumptions
The future cash to be generated from continuous use of asset groups are estimated based on the business plan approvedby the Board of Directors. Major assumption in these estimates is sales forecast, which is made based on the market trends,
recent business performance, etc.

―71―iii) Impact on the consolidated financial statements for the following consolidated fiscal year
If the estimated future cash flows significantly decline due to deterioration of the business environment, etc., it may havea serious impact on income of the following consolidated fiscal year.
(Changes in accounting policies)
Not applicable(Accounting standards not yet applied)・ Practical Solution on the Accounting for and Disclosure of the Issuance and Holding of Electronically Recorded Transferable
Rights That Must Be Indicated on Securities, etc. (ASBJ PITF No. 43, August 26, 2022, The Accounting Standards Board ofJapan)(1) Outline
Due to the Act for the Partial Revision of the Payment Services Act to Address the Diversification of Financial Transactions
based on Advances in Information Technology (Act No. 28, 2019) enacted in May 2019, the Financial Instruments andExchange Act was amended to make so-called investment-oriented ICOs (Initial Coin Offerings, a generic term for the act
by a company, etc. of raising funds from investors by issuing tokens [electronic records and symbols]) subject to the Financial
Instruments and Exchange Act, and various regulations were established. Accordingly, this Practical Solution was releasedby the Accounting Standards Board of Japan for the purpose of clarifying the accounting treatment of the issuance, holding,etc. of electronically recorded transferable rights to be indicated on securities, etc. under the Cabinet Office Order on
Financial Instruments Business.
(2) Scheduled date of application
To be applied from the beginning of the fiscal year ending February 2025.
(3) Impact of the application of the accounting standard, etc.
The amount of the impact on the consolidated financial statements of the application of the “Practical Solution on the
Accounting for and Disclosure of the Issuance and Holding of Electronically Recorded Transferable Rights That Must Be
Indicated on Securities, etc.” is currently being evaluated.
・ “Accounting Standard for Current Income Taxes, etc.” (ASBJ Statement No. 27, October 28, 2022, The Accounting Standards
Board of Japan)・ “Accounting Standard for Presentation of Comprehensive Income” (ASBJ Statement No. 25, October 28, 2022, The
Accounting Standards Board of Japan)・ “Implementation Guidance on Accounting Standard for Tax Effect Accounting” (ASBJ Guidance No. 28, October 28, 2022,
The Accounting Standards Board of Japan)(1) Outline
In February 2018, ASBJ Statement No. 28 “Partial Amendments to Accounting Standard for Tax Effect Accounting,” etc.
(hereinafter, “ASBJ Statement No. 28, etc.”) were released, with which the transfer of the practical guidance on tax effectaccounting from the Japanese Institute of Certified Public Accountants to the ASBJ was completed. In the course of thedeliberations, the following two issues, which were to be reconsidered after the release of ASBJ Statement No. 28, etc., werediscussed and released.
・ Accounting classification for tax expenses (tax on other comprehensive income)・ Tax effects related to the sales of shares in subsidiaries, etc. (shares of subsidiaries or affiliates) when a group taxation regime
is applied(2) Scheduled date of application
To be applied from the beginning of the fiscal year ending February 2026.
(3) Impact of the application of the accounting standard, etc.
The amount of the impact on the consolidated financial statements of the application of the “Accounting Standard for Current
Income Taxes, etc.” is currently being evaluated.

―72―

(Changes in presentation)(Tax effect accounting)(1. Major components of deferred tax assets and liabilities)“Retained profit,” which was included in “Other” under “Deferred tax liabilities” in the previous consolidated fiscal year, has beenpresented independently from the consolidated fiscal year under review as its materiality increased.
(Segment Information, etc.)(Related Information, 2. Information for each region)“Indonesia,” which was included in “Asia (excluding China) in the previous consolidated fiscal year, has been presented separatelyfrom the consolidated fiscal year under review as its materiality increased.
(Supplementary information)(Absorption-type merger between subsidiaries)
At the Board of Directors’ meeting held on October 12, 2023, the Company resolved to merge its consolidated subsidiaries
MORESCO (ZHEJIANG) FUNCTIONAL MATERIAL CO., LTD., Wuxi MoreTex Technology Co., Ltd., and MORESCO
HANANO DIE-CASTING COATING (SHANGHAI) CO., LTD., with MORESCO (ZHEJIANG) FUNCTIONAL MATERIAL
CO., LTD. as the surviving company.
(1) Outline of the business combination(i) Names and business lines of the companies involved in the combination
Combiner company: MORESCO (ZHEJIANG) FUNCTIONAL MATERIAL CO., LTD.
Business line: Development, manufacture, sales, and import/export of lubricants and sealants
Combined company: Wuxi MoreTex Technology Co., Ltd.
Business line: Manufacture of special lubricants
Combined company: MORESCO HANANO DIE-CASTING COATING (SHANGHAI) CO., LTD.
Business line: Manufacture of die casting fluids(ii) Date of business combination: June 2024 (scheduled)(iii) Legal form of business combination
Absorption-type merger with MORESCO (ZHEJIANG) FUNCTIONAL MATERIAL CO., LTD. as the surviving company
and Wuxi MoreTex Technology Co., Ltd. and MORESCO HANANO DIE-CASTING COATING (SHANGHAI) CO., LTD.
as the disappearing companies(iv) Other matters related to the outline of the transaction
Through this merger, the Company aims to expedite management decision-making in China, where further growth is expectedin various fields, improve production capacity and efficiency by consolidating production sites for special lubricants, andadvance efforts to improve work efficiency of the administrative divisions of its Chinese subsidiaries.
(2) Outline of accounting treatment
Based on the “Accounting Standard for Business Combinations” (ASBJ Statement No. 21, January 16, 2019) and the“Implementation Guidance on Accounting Standard for Business Combinations and Accounting Standard for Business
Divestitures” (ASBJ Guidance No. 10, January 16, 2019), the transaction will be accounted for as a transaction under common
control.

―73―

(Consolidated balance sheet)*1 Investments in unconsolidated subsidiaries are as follows.
Previous consolidated fiscal year
(as of February 28, 2023)
Investment securities (stocks)*2

3million yen

3million yen

Investments in affiliates are as follows.
Previous consolidated fiscal year
(as of February 28, 2023)
Investments in capital*3

Consolidated fiscal year under review(February 29, 2024)

2,077million yen

Consolidated fiscal year under review(February 29, 2024)
1,939million yen

Reduction entry
Total reduction entries due to acquisition of government subsidies, etc. for property, plant and equipment are as follows.
Previous consolidated fiscal year
(as of February 28, 2023)
Property, plant and equipment; Other

11million yen―74―

Consolidated fiscal year under review(February 29, 2024)
11million yen

(Consolidated statement of income)*1 Revenue arising from contracts with customers
With respect to net sales, the Company does not disaggregate revenue arising from contracts with customers and other revenues.
The amount of revenue arising from contracts with customers is presented in “Notes to consolidated Financial Statements (Revenue
recognition), 1. Information regarding disaggregated revenue arising from contracts with customers.”*2

The ending inventory is the amount after write-down in response to decreased profitability, and loss on valuation of inventories
below is included in cost of sales.
Previous consolidated fiscal year
(From March 1, 2022 to February 28, 2023)

Consolidated fiscal year under review(From March 1, 2023 to February 29, 2024)

38million yen*3(29million yen)

Major components of selling, general and administrative expenses and their amounts are as follows.
Previous consolidated fiscal year
Consolidated fiscal year under review(From March 1, 2022 to February 28, (From March 1, 2023 to February 29,
2023)
2024)
Salaries*42,097million yen
346

283

Retirement benefit expenses
Provision of allowance for doubtful
accounts
Depreciation

131

199

1

(3)

585

434

Freightage expenses

949

905

Research and development expenses included in general and administrative expenses
Previous consolidated fiscal year
(From March 1, 2022 to February 28, 2023)

Consolidated fiscal year under review(From March 1, 2023 to February 29, 2024)

1,246million yen*52,162million yen

Provision for bonuses

1,321million yen

Impairment loss
During the consolidated fiscal year under review, the Group recorded an impairment loss for the following asset group.
(i) Outline of the asset group for which impairment loss was recognized
Amount of the impairment
Location
Use
Type
loss
Buildings, tools, furniture
Head Office
R&D assets
31 million yen
and fixtures, and software(ii) Background leading to recognition of the impairment loss
With regard to R&D assets at the Head Office, an impairment loss was recognized for assets that are unlikely to be used andassets that are unlikely to be recovered in the future.
(iii) Method of asset grouping
The MORESCO Group generally classifies its assets into the smallest units that generate independent cash flows.
(iv) Calculation method of recoverable amountThe recoverable amount for measuring impairment losses is calculated based on the value in use, and the value in use iscalculated to be zero.
(v) Amount of impairment loss
The impairment loss of 31 million yen is recorded as an extraordinary loss, and the breakdown is as follows.
Buildings
3 million yen
Tools, furniture and fixtures
25 million yen
Software3 million yen
Total
31 million yen―75―

(Consolidated statement of comprehensive income)*1 Reclassification adjustments and tax effects relating to other comprehensive income
Previous consolidated fiscal year
(From March 1, 2022 to February
28, 2023)

Consolidated fiscal year underreview(From March 1, 2023 to February
29, 2024)

48million yen

86million yen

－

－

48

86

(12)

(25)

36

60

Amount arising during the period

470

424

Reclassification adjustments－－

Before tax-effect adjustment

470

424

Amount of tax effects－－

Foreign currency translation adjustment

470

424

Amount arising during the period

164

450

Reclassification adjustments

(15)

(15)

Valuation difference on available-for-salesecurities:
Amount arising during the period
Reclassification adjustments
Before tax-effect adjustment
Amount of tax effects
Valuation difference on available-forsale securities
Foreign currency translation adjustment:

Remeasurements of defined benefit plans:

Before tax-effect adjustment

149

435

Amount of tax effects
Remeasurements of defined benefit
plans, net of tax
Share of other comprehensive income ofentities accounted for using equity method:Amount arising during the period

(45)

(133)

103

301

17

31

Reclassification adjustments
Share of other comprehensive incomeof entities accounted for using equity
methodTotal other comprehensive income

－

－

17

31

627

816

―76―

(Consolidated statement of changes in equity)
Previous consolidated fiscal year (from March 1, 2022 to February 28, 2023)
1. Matters concerning the type and total number of issued shares and treasury shares
Shares at the beginningof period

Increase during period

Decrease during period

Shares at the end of
periodCommon shares

9,696,500－－

9,696,500

Total

9,696,500－－

9,696,500

Common shares(Notes) 1, 2

316,570

162,000

9,600

468,970

Total

316,570

162,000

9,600

468,970

Issued shares

Treasury shares(Notes)1. The increase of 162,000 common shares held as treasury shares is due to repurchase of treasury shares through offauction treasury share repurchase trading (ToSTNeT-3).
2. The decrease of 9,600 common shares held as treasury shares is due to disposal of treasury shares as restricted stockcompensation.

2.

Share acquisition rights and treasury share acquisition rights
Not applicable.

3.

Dividends(1) Amount of dividends paid
Resolution

Ordinary General
Meeting of
Shareholders on
May 27, 2022
Board of Directors
meeting on October
13, 2022

Types of shares

Total dividend
Dividend per shareamount(Yen)(Millions of yen)

Record date

Effective dateCommon shares

188

20.00

February 28, 2022

May 30, 2022

Common shares

185

20.00

August 31, 2022

November 11, 2022

(2) Dividend for which the record date falls in the consolidated fiscal year under review but the effective date comes after theend of that consolidated fiscal year
Resolution

Types ofshares

Source ofdividend

Ordinary General
Meeting of
Shareholders on
May 30, 2023

CommonsharesRetainedearnings

Total dividend
Dividend peramountshare (Yen)(Millions of yen)
185

―77―

20.00

Record date

Effective dateFebruary 28, 2023

May 31, 2023

Consolidated fiscal year under review (from March 1, 2023 to February 29, 2024)
1. Matters concerning the type and total number of issued shares and treasury shares
Shares at the beginningof period

Increase during period

Decrease during period

Shares at the end of
periodCommon shares

9,696,500－－

9,696,500

Total

9,696,500－－

9,696,500

Common shares(Note)

468,970－

5,250

463,720

Total

468,970－

5,250

463,720

Issued shares

Treasury shares(Note)The decrease of 5,250 common shares held as treasury shares is due to disposal of treasury shares as restricted stockcompensation.

2.

Share acquisition rights and treasury share acquisition rights
Not applicable.

3.

Dividends(1) Amount of dividends paid
Resolution

Ordinary General
Meeting of
Shareholders on
May 30, 2023
Board of Directors
meeting on October
12, 2023

Types of shares

Total dividend Dividend per shareamount(Yen)(Millions of yen)

Record date

Effective dateCommon shares

185

20.00

February 28, 2023

May 31, 2023

Common shares

185

20.00

August 31, 2023

November 11, 2023

(2) Dividend for which the record date falls in the consolidated fiscal year under review but the effective date comes after theend of that consolidated fiscal year
Resolution
Ordinary General
Meeting of
Shareholders on
May 30, 2024

Types ofshares

Source ofdividend

CommonsharesRetainedearnings

Total dividend
Dividend peramountshare (Yen)(Millions of yen)
231

―78―

25.00

Record date

Effective dateFebruary 29, 2024

May 31, 2024

(Consolidated statement of cash flows)*1 Reconciliation of cash and cash equivalents at end of period and the amount recorded in the consolidated balance sheet

Cash and deposits
Time deposits with maturities ofmore than three months

Previous consolidated fiscal year
Consolidated fiscal year under review(From March 1, 2022 to February 28, (From March 1, 2023 to February 29,
2023)
2024)
4,256million yen
5,636million yen

Cash and cash equivalents
*2

(70)

(70)

4,186

5,566

Major components of assets and liabilities related to transfer of business in exchange for cash and cash equivalents
Previous consolidated fiscal year (from March 1, 2022 to February 28, 2023)
Not applicable
Consolidated fiscal year under review (from March 1, 2023 to February 29, 2024)
In connection with the acquisition of business of Cross Technologies Group, Inc. by MORESCO USA Inc., a consolidated
subsidiary, the acquisition price of assets and liabilities and net payments for the business acquisition are as follows.
Current assets

410 million yen

Non-current assets

406

Goodwill

565

Current liabilities(81)

Business acquisition price

1,300

Cash and cash equivalents
Payments
business*3

fortransfer

－
of

1,300

Major components of assets and liabilities of companies that became new consolidated subsidiaries through the acquisition of equity
interests
Previous consolidated fiscal year (from March 1, 2022 to February 28, 2023)
Not applicable
Consolidated fiscal year under review (from March 1, 2023 to February 29, 2024)
Wuxi MoreTex Technology Co., Ltd. was newly consolidated due to the acquisition of equity interests. The breakdown ofassets and liabilities at the time of the consolidation and the relationship between the acquisition price and the net payments forthe acquisition are as follows.
Current assets

1,595 million yen

Current liabilities(314)

Non-current liabilities(72)

Gain on bargain purchase(285)

Acquisition price of equity
interests

925

Loss on step acquisitions

34

Acquisition cost until control
is obtained(497)

Cash and cash equivalents(231)

Payments
businessfortransfer

of

232

―79―

(Leases)(Borrower side)
1. Finance lease transactions
Finance lease transactions without transfer of ownership
i)
ii)

2.

Details of leased assets
Vehicles, tools, furniture and fixtures, and software
Depreciation method of leased assets
As described in “4. Information on accounting policies (2) Depreciation methods for important depreciable assets” under“Important matters that are the basis for preparation of consolidated financial statements.”
Operating lease transactions
Future minimum lease payments required under non-cancellable operating lease transactions(Millions of yen)
Consolidated fiscal year under review(February 29, 2024)

Previous consolidated fiscal year
(as of February 28, 2023)
Due within one year41

39

Due after one year

－

155

Total

41

194

―80―

(Financial instruments)
1. Overview of financial instruments(1)
Policy to manage financial instruments
The MORESCO Group’s policy is to limit its fund management to short-term deposits, etc. and to raise its funds mainly
through borrowings from banks. The Group uses derivative instruments to hedge the risks below and does not enter into any
speculative transactions.
(2)

Description of financial instruments, related risks, and risk management structure
Notes and accounts receivable - trade, which are operating receivables, are exposed to customers’ credit risks. For credit
risks, we have a system in which due dates and balances of operating receivables are managed for each business partner inaccordance with the credit management regulations, and the credit status of all business partners is reviewed once a year In
addition, the Company receives advances or guarantee deposits as necessary, with the aim of reducing credit risks. Moreover,due to the Group’s global business development, part of accounts receivable are exposed to exchange rate fluctuation risks.
However, these risks are hedged using forward exchange contracts as necessary.
Investment securities are mainly shares of companies with which the Company has business relationships and are
exposed to market price fluctuation risks. However, we regularly check the market price and financial position of eachissuing company and review the holding status.
All of the notes and accounts payable - trade, which are operating payables, are due within one year.
Among borrowings, short-term borrowings are mainly for operating transactions and long-term borrowings are mainly
for capital expenditures. Variable-rate borrowings are exposed to interest rate fluctuation risks. The Company uses fixed-rateborrowings for long-term borrowings in principle. For borrowings with variable interest rates, the Company uses derivativetransactions (interest rate swaps) for each individual contract as necessary to hedge the interest rate fluctuation risks and fix
the interest rates payable. The evaluation of hedge effectiveness is omitted as requirements for exceptional accounting ofinterest-rate swaps are met.
Derivative transactions are executed and managed in the Accounting Department in accordance with the internal
regulations that specify transaction responsibilities. In using derivatives, the Company uses only major financial institutions
with high social credibility.
Operating payables and borrowings are exposed to liquidity risks. However, the Group manages the liquidity risks bysuch measures as having each company prepare a monthly financing plan.

(3)

Supplemental explanation on the fair value, etc. of financial instruments
The fair value of financial instruments includes the value based on their market prices, or the value reasonably calculated if
market prices are not available. Since the calculation of fair value of financial instruments reflects variable factors, it issubject to change depending on different assumptions used.

―81―

2.

fair value, etc. of financial instruments
Amounts posted on the consolidated balance sheet, fair values, and the corresponding differences between the two are as follows.
Instruments that do not have market prices (see Note 1) are not included.

Previous consolidated fiscal year (as of February 28, 2023)
Balance sheet amount(*1)(Millions of yen)

Fair value (*1)(Millions of yen)i) Notes receivable - trade

1,235ii) Accounts receivable - trade

6,360

Allowance for doubtful accounts(*3)

Difference(Millions of yen)

(22)
7,573

7,573

－

252

252

－

iv) Long-term borrowings(including current portion)

(832)

(826)

(5)

v) Derivative transactions (*4)

(1)

(1)

－

iii) Investment securities
Available-for-sale securities

Consolidated fiscal year under review (as of February 29, 2024)
Balance sheet amount(*1)(Millions of yen)i) Notes receivable - trade

1,324ii) Accounts receivable - trade

6,618

Allowance for doubtful accounts(*3)

Fair value (*1)(Millions of yen)

Difference(Millions of yen)

(25)
7,917

7,917

－

343

343

－

iii) Investment securities
Available-for-sale securitiesiv) Long-term borrowings(3,795)(3,764)(31)(including current portion)(*1)
Items recorded as liabilities are presented in parentheses.
(*2)
Notes to cash and deposits, notes and accounts payable - trade, income taxes payable, contract liability, and short-termborrowings are omitted, as these are settled within a short time frame and therefore have a fair value almost equal to theirbook value.
(*3)
Allowance for doubtful accounts for notes and accounts receivable - trade is excluded.
(*4)
Net receivables and payables, which were derived from derivative transactions, are presented in net amounts.
(Note 1) The instruments below are not included as they do not have market prices.
Category(Millions of yen)
Consolidated fiscal year under review(February 29, 2024)

Previous consolidated fiscal year
(as of February 28, 2023)

Unlisted shares
Shares of affiliated companies
Investments in capital

265

265

3

3

2,078

1,940

These are not included in “iii) Investment securities” of the previous consolidated fiscal year and “iii) Investment
securities” of the consolidated fiscal year under review, as they do not have market prices.

―82―

(Note 2) Redemption schedule after the balance sheet date for monetary receivables
Previous consolidated fiscal year (as of February 28, 2023)
Due after 5
Due after 1
Due within 1
years but
year butyear
within 10
within 5 years(Millions ofyears(Millions ofyen)(Millions of
yen)
yen)

Due after 10
years(Millions ofyen)Cash and deposits

4,256

－

－

－

Notes receivable - trade

1,235

－

－

－

Accounts receivable - trade

6,360

－

－

－

11,851

－

－

－

Total

Consolidated fiscal year under review(February 29, 2024)
Due after 5
Due after 1
Due within 1
years but
Due after 10year butyear
within 10
years
within 5 years(Millions ofyears(Millions of(Millions ofyen)(Millions of
yen)
yen)
yen)
Cash and deposits

5,636

－

－

－

Notes receivable - trade

1,324

－

－

－

Accounts receivable - trade

6,618

－

－

－

13,577

－

－

－

Total
(Note 3) Redemption schedule after the balance sheet date for borrowings

Previous consolidated fiscal year (as of February 28, 2023)
Due after 1
Due after 2
Due after 3
Due after 4
Due within 1
Due after 5
year but
years but
years but
years but
year
years
within 2 years within 3 years within 4 years within 5 years(Millions of(Millions of(Millions of (Millions of (Millions of (Millions of
yen)
yen)
yen)
yen)
yen)
yen)
Short-term borrowings

2,021

－

－

－

－

－

Long-term borrowings

360

150

80

80

80

82

2,381

150

80

80

80

82

Total

Consolidated fiscal year under review(February 29, 2024)
Due after 1
Due after 2
Due after 3
Due after 4
Due within 1
Due after 5
year but
years but
years but
years but
year
years
within 2 years within 3 years within 4 years within 5 years(Millions of(Millions of(Millions of (Millions of (Millions of (Millions of
yen)
yen)
yen)
yen)
yen)
yen)
Short-term borrowings

2,310

－

－

－

－

－

Long-term borrowings

730

979

979

660

385

62

3,040

979

979

660

385

62

Total

―83―

3.

Matters relating to breakdown, etc. of fair values of financial instruments by level
fair values of financial instruments are classified into the following three levels based on the observability and materiality of inputs
used to calculate fair values.
Level 1 fair value:
Fair value calculated using observable inputs, i.e., quoted prices in active markets for assets or liabilities
that are the subject of the fair value measurement
Level 2 fair value:
Fair value calculated using observable inputs other than Level 1 inputs
Level 3 fair value:
Fair value calculated using unobservable inputs
When multiple inputs that have a significant impact on the calculation of fair value are used, the fair value is classified in
the level with the lowest priority in the calculation of fair value among the levels to which those inputs belong.

i)

Financial instruments recorded in the consolidated balance sheet at fair value
Previous consolidated fiscal year (as of February 28, 2023)
Category

Fair value (Millions of yen)
Level 1

Investment securities
Available-for-salesecurities

Level 2

Level 3

Total

252

－

－

252

Total assets

252

－

－

252

Derivative transactions
Currency-related

－

1

－

1

Total liabilities

－

1

－

1

Consolidated fiscal year under review (as of February 29, 2024)
Category
Investment securities
Available-for-salesecurities
Total assets

Fair value (Millions of yen)
Level 1

Level 2

Level 3

Total

343

－

－

343

343

－

－

343

―84―

ii)

Financial instruments other than those recorded in the consolidated balance sheet at fair value
Previous consolidated fiscal year (as of February 28, 2023)
Category

Fair value (Millions of yen)
Level 1

Notes receivable - trade

Level 2

Level 3

Total

－

1,235

－

1,235

－

6,360

－

6,360

－

(22)

－

(22)

Total assets

－

7,573

－

7,573

Long-term borrowings(including current
portion)

－

826

－

826

Total liabilities

－

826

－

826

Accounts receivable trade
Allowance for doubtful
accounts

Consolidated fiscal year under review (as of February 29, 2024)
Category
Notes receivable - trade

Fair value (Millions of yen)
Level 1

Level 2

Level 3

Total

－

1,324

－

1,324

－

6,618

－

6,618

－

(25)

－

(25)

Total assets

－

7,917

－

7,917

Long-term borrowings(including current
portion)

－

3,764

－

3,764

Total liabilities

－

3,764

－

3,764

Accounts receivable trade
Allowance for doubtful
accounts(Note) Valuation methods used for the measurement of fair value and a description of inputs
i)Notes and accounts receivable - trade
Since these are settled in a short period of time, their fair value reflects the credit risk by deducting the allowance for
doubtful accounts. It is classified as Level 2 fair value.
ii) Investment securities
For investment securities, listed shares are valued using quoted prices. Since listed shares are traded in active markets, theirfair value is classified as Level 1 fair value.
iii) Long-term borrowings
The fair value of long-term borrowings is calculated by discounting the total amount of principal and interest by the assumed
interest rate that would be applied when new borrowings are conducted. It is classified as Level 2 fair value.
iv) Derivative transactions
The fair value of derivative transactions are calculated based on the prices, etc. presented by relevant financial institutions,etc. It is classified as Level 2 fair value.

―85―

1.

(Securities)
Available-for-sale securities
Previous consolidated fiscal year (as of February 28, 2023)
Type

Balance sheet amount(Millions of yen)

(1) Stocks

Acquisition price(Millions of yen)

Difference(Millions of yen)

251

136

115

(2) Bonds
Securities whose
B/S amount exceeds
their acquisition
price

i)

National/local
government bonds

－

－

－

ii)

Corporate bonds

－

－

－

－

－

－

－

－

－

251

136

115

0

1

(0)

iii) Other(3) Other
Subtotal(1) Stocks(2) Bonds

Securities whose
B/S amount does notexceed theiracquisition pricei)

National/local
government bonds

－

－

－

ii)

Corporate bonds

－

－

－

－

－

－

－

－

－

0

1

(0)

252

137

115

iii) Other(3) Other
Subtotal
Total(Note) Unlisted shares (consolidated balance sheet amount: 265 million yen) are not included in the above table because they areshares without a market price.

―86―

Consolidated fiscal year under review (as of February 29, 2024)
Type

Balance sheet amount(Millions of yen)

(1) Stocks

Acquisition price(Millions of yen)

Difference(Millions of yen)

342

141

201

(2) Bonds
Securities whose
B/S amount exceeds
their acquisition
price

i)

National/local
government bonds

－

－

－

ii)

Corporate bonds

－

－

－

－

－

－

－

－

－

342

141

201

0

1

(0)

iii) Other(3) Other
Subtotal(1) Stocks(2) Bonds

Securities whose
B/S amount does notexceed theiracquisition pricei)

National/local
government bonds

－

－

－

ii)

Corporate bonds

－

－

－

－

－

－

－

－

－

0

1

(0)

343

142

201

iii) Other(3) Other
Subtotal
Total(Note) Unlisted shares (consolidated balance sheet amount: 265 million yen) are not included in the above table because they areshares without a market price.
2.

Available-for-sale securities sold
Previous consolidated fiscal year (From March 1, 2022 to February 28, 2023)
Description is omitted due to its low materiality.
Consolidated fiscal year under review (From March 1, 2023 to February 29, 2024)
Not applicable.

―87―

1.

(Derivative transactions)
Derivative transactions for which hedge accounting is not applied
Currency-related
Previous consolidated fiscal year (as of February 28, 2023)

Category

Transaction type

Notional amounts(Millions of yen)

Of notional amounts,
over 1 year (Millionsof yen)Fair value(Millions of yen)

Valuation gain or loss
(Millions of yen)

68

－

(1)

(1)

68

－

(1)

(1)

Forward foreignexchange contracts
Non-market
transactions

Sell:
USD
Total

Consolidated fiscal year under review (as of February 29, 2024)
Not applicable.
2.

Derivative transactions for which hedge accounting is applied
Not applicable.

―88―

1.

2.

(Retirement benefits)
Outline of adopted retirement benefit plans
The Company and some of its consolidated subsidiaries in Japan use both a retirement lump-sum plan and a defined benefit pension
plan as the defined benefit-type systems and a defined contribution pension plan as the defined contribution-type system. Someconsolidated subsidiaries in Japan use both a retirement lump-sum plan and the Smaller Enterprise Retirement Allowance Mutual
Aid Scheme, and some overseas consolidated subsidiaries adopt both the defined benefit-type and defined contribution-type plans.
Some consolidated subsidiaries apply the simplified method for calculation of net defined benefit liability and retirement benefit
expenses by treating the required amount of payment at the end of fiscal year relating to retirement benefits as retirement benefit
obligations.
Defined-benefit plan
(1) Adjustments between the beginning and ending balances of retirement benefit obligations (except for plans using a simplified
method presented in (3))
Previous consolidated fiscal year
(From March 1, 2021 to February 28,
2022)

Retirement benefit obligations at the
beginning of the period
Service cost

Consolidated fiscal year under review(From March 1, 2022 to February 28,
2023)

Previous consolidated fiscal year
Consolidated fiscal year under review(From March 1, 2022 to February 28, (From March 1, 2023 to February 29,
2023)
2024)
millionmillion
3,021
2,892
yen
yen
205
210

Interest cost
Actuarial gains and losses
generated
Retirement benefits paid
Retirement benefit obligations at theend of the period

15

33

(193)

(80)

(156)

(131)

2,892

2,924

(2) Adjustments between the beginning and ending balances of pension assets (except for plans using a simplified method
presented in (3))

Pension assets at the beginning of theperiodExpected return
Actuarial gains and losses
generated
Contribution from employers

Previous consolidated fiscal year
Consolidated fiscal year under review(From March 1, 2022 to February 28, (From March 1, 2023 to February 29,
2023)
2024)
millionmillion
3,584
3,665
yen
yen
90
92

Retirement benefits paid
Pension assets at the end of theperiod

(34)

394

159

158

(134)

(110)

3,665

4,198

(3) Adjustments between the beginning and ending balances of net defined benefit liability for plans using a simplified method

Net defined benefit liability at the
beginning of the period
Retirement benefit expenses

Previous consolidated fiscal year
Consolidated fiscal year under review(From March 1, 2022 to February 28, (From March 1, 2023 to February 29,
2023)
2024)
millionmillion
118
111
yen
yen
17
18

Retirement benefits paid
Net defined benefit liability at theend of the period

―89―

(25)

(12)

111

117

(4) Adjustments between the ending balances of retirement benefit obligations and pension assets and the net defined benefit
liability and net defined benefit asset reported on the consolidated balance sheet (including plans using a simplified method
presented in (3))

Retirement benefit obligations forfunded plans
Pension assets

Previous consolidated fiscal year
(as of February 28, 2023)
million
2,505
yen(3,665)(1,160)(1,700)

498

543

(662)

(1,157)Retirement benefit obligations forunfunded plans
Net defined liability and asset
reported on the consolidated balancesheet

Net defined benefit liability
Net defined benefit asset
Net defined liability and asset
reported on the consolidated balance
sheetConsolidated fiscal year under review(February 29, 2024)
million
2,498
yen(4,198)498

543(1,160)(1,700)(662)(1,157)(5) The amounts of components of retirement benefit expenses

Service cost
Interest cost

Previous consolidated fiscal year
Consolidated fiscal year under review(From March 1, 2022 to February 28, (From March 1, 2023 to February 29,
2023)
2024)
millionmillion
205
210
yen
yen
15
33

Expected return
Amortization of actuarial gains andlossesRetirement benefit expenses
calculated using the simplified
methodRetirement benefit expenses related
to defined benefit plan

(90)

(92)

(11)

(39)

17

18

137

131

(6) Remeasurements of defined benefit plans reported under “Other comprehensive income”
Remeasurements of defined benefit plans (reported under “Other comprehensive income” in the statements ofcomprehensive income) (before tax effects) are as follows:

Actuarial gains and losses

Previous consolidated fiscal year
Consolidated fiscal year under review(From March 1, 2022 to February 28, (From March 1, 2023 to February 29,
2023)
2024)
millionmillion
149
435
yen
yen

(7) Remeasurements of defined benefit plans reported under “Accumulated other comprehensive income”
Remeasurements of defined benefit plans (reported under “Accumulated other comprehensive income” in the net assets
section in the consolidated balance sheets) (before tax effects) are as follows:

Unrecognized actuarial gains andlossesPrevious consolidated fiscal year
(as of February 28, 2023)
million
423
yen

―90―

Consolidated fiscal year under review(February 29, 2024)
million858
yen

(8) Pension assetsi) Major components of pension assets
Ratio of each major component of pension assets is as follows:
Previous consolidated fiscal year
(as of February 28, 2023)

Consolidated fiscal year under review(February 29, 2024)

Bonds

61.2％

62.0％

Stocks

36.4

35.3

Other

2.4

2.7

Total

100.0

100.0

ii)

Method of setting the long-term expected return rate
To determine the long-term expected return rate on pension assets, we consider the current and expected allocation ofpension assets and the current and expected future long-term rates of return from the various assets that make up pension
assets.

(9) Actuarial assumptions used
Principal actuarial assumptions
Previous consolidated fiscal year
(as of February 28, 2023)
Discount rate

Mainly 1.1％

Long-term expected return rate
Expected salary increase rate
3.

Consolidated fiscal year under review(February 29, 2024)
Mainly 1.2％

2.5％

2.5％

Mainly 2.8％

Mainly 2.8％

Defined contribution plans
The required amounts of contribution to the defined contribution plans of the Company and its consolidated subsidiaries were 43
million yen for the previous fiscal year (from March 1, 2022 to February 28, 2023) and 43 million yen for the consolidated fiscal
year under review (from March 1, 2023 to February 29, 2024).
(Stock options)Not applicable.

―91―

1.

(Tax effect accounting)Major components of deferred tax assets and liabilities
Previous consolidated fiscal year
(as of February 28, 2023)

Consolidated fiscal year underreview(February 29, 2024)

Provision for bonuses

millionyen
137

million
167
yen
149

Net defined benefit liability

142

155

Tax loss carried forward (Note 1)

320

435

Enterprise tax payable

15

13

Other

59

49

Subtotal deferred tax assets
Valuation allowance for tax loss carried forward(Note 1)
Valuation allowance for the sum of deductible
temporary differences, etc.

673

967

(240)

(383)

(69)

(136)

Subtotal valuation allowance

(309)

(519)

365

449

Deferred tax assets
Asset adjustment account－Total deferred tax assets
Deferred tax liabilities
Reserve for reduction entry of replaced property

(6)

(6)

Net defined benefit asset

(224)

(255)

Retained profit

(110)

(241)

(32)

(84)

(372)

(587)

(8)

(138)

Other
Total deferred tax liabilities
Net deferred tax assets (liabilities)(Notes) 1. Valuation allowance increased by 210 million yen. This is mainly due to an increase in valuation allowance for tax loss
carried forward.
2. Amounts of tax losses carried forward and deferred tax assets by carry-forward period
Previous consolidated fiscal year (as of February 28, 2023)
Due after 1 Due after 2 Due after 3 Due after 4
Due within year but years but years but years but Due after 5
1 year
within 2 within 3 within 4 within 5
years
Total
(Millions
years
years
years
years
(Millions (Millions of yen)of yen) (Millions (Millions (Millions (Millions of yen)of yen)of yen)of yen)of yen)Tax loss carried forward
5
6
0
0
35
273
320
(*1)
Valuation allowance

(5)

(6)

0

(0)

(35)

(193)

(240)

Deferred tax assets

－

－

－

－

－

80

80

(*1) Tax loss carried forward represents the amount after being multiplied by the statutory tax rate.
(*2) For tax loss carried forward of 236 million yen (the amount after being multiplied by the statutory tax rate),
deferred tax assets of 80 million yen were recognized. Valuation allowance has not been recognized for the portionof the said deferred tax assets that is deemed to be recoverable, due to factors such as taxable income expected to begenerated in the future.

―92―

Consolidated fiscal year under review (as of February 29, 2024)
Due after 1 Due after 2 Due after 3 Due after 4
Due within year but years but years but years but Due after 5
1 year
within 2 within 3 within 4 within 5
years
Total
(Millions
years
years
years
years
(Millions (Millions of yen)of yen) (Millions (Millions (Millions (Millions of yen)of yen)of yen)of yen)of yen)Tax loss carried forward
6
0
0
37
104
287
435
(*3)
Valuation allowance

(6)

(0)

(0)

(37)

(79)

(260)

(383)

Deferred tax assets

－

－

－

－

25

27

52

(*3) Tax loss carried forward represents the amount after being multiplied by the statutory tax rate.

―93―

2.

The reconciliation of significant differences between the statutory tax rate and effective income tax rate after application of tax
effect accounting
Previous consolidated fiscal year
(as of February 28, 2023)
million
75
yen
(83)

Deferred tax assets - non-current assets
Other - non-current liabilities
2.

Consolidated fiscal year underreview(February 29, 2024)
million
218
yen
(356)

The reconciliation of significant differences between the statutory tax rate and effective income tax rate after application of tax
effect accounting
Previous consolidated fiscal year (as of February 28, 2023)
Description is omitted because the difference between the statutory tax rate and effective income tax rate after application of tax
effect accounting is 5/100 or lower.
Consolidated fiscal year under review (as of February 29, 2024)
Description is omitted because the difference between the statutory tax rate and effective income tax rate after application of tax
effect accounting is 5/100 or lower.
(Business combinations, etc.)(Business combination through acquisition)
On August 28, 2023, the Company made a decision to acquire all of the equity interests in Wuxi MoreTex Technology Co., Ltd.
(Wuxi, Jiangsu Province, China), an equity method affiliate of the Company, to make it a subsidiary, and it acquired the equity
interests on September 28, 2023.
(1) Outline of the business combinationi) Name of the acquired company and its business line
Acquired company: Wuxi MoreTex Technology Co., Ltd.
Business line: Manufacture of special lubricantsii) Major reason for the business combination
Wuxi MoreTex Technology Co., Ltd. is located in Xinwu District, Wuxi City, Jangsu Province, People’s Republic of China.
Its surrounding area has been undergoing urbanization and commercial land rezoning, and the Wuxi municipal government
has requested the company to vacate the current location by September 30, 2023. In addition, the company’s production of
special lubricants is scheduled to be gradually transferred to MORESCO (ZHEJIANG) FUNCTIONAL MATERIAL CO.,LTD. Under these circumstances, we have decided to make the company a wholly owned subsidiary as part of our businessrestructuring in China.
iii) Date of business combination
September 28, 2023 (date of equity acquisition)
September 30, 2023 (deemed acquisition date)iv) Legal form of business combination
Acquisition of equity in exchange for cashv) Name of the company after business combination
There is no change.
vi) Ratio of voting rights acquired
Voting rights held immediately before acquisition: 50.0%
Voting rights additionally acquired on the date of business combination: 50.0%
Ratio of voting rights after acquisition: 100.0%vii) Main basis for determining the acquiring company
This was due to the Company’s acquisition of equity interests in exchange for cash.
(2) Period of the acquired company’s performance results included in the consolidated statement of income
As September 30, 2023 is the deemed acquisition date, performance results from October 1, 2023 to December 31, 2023 areincluded.

―94―

(3) Acquisition cost of the acquired company and breakdown by type of consideration
Fair value on the date of business combination of the equity interests held
immediately before the date of business combination
Consideration for the equity interests additionally acquired on the date of businesscombination
Acquisition cost

463 million yen
463 million yen
925 million yen(4) Difference between the acquisition cost of the acquired company and the total acquisition cost for each transaction that led to theacquisition
Loss on step acquisitions: 25 million yen(5) Amount of gain on bargain purchase and the reason for occurrence of the gaini) Amount of gain on bargain purchase
285 million yenii) Reason for occurrence
Since the fair value of the net assets of the acquired company at the time of the business combination exceeded the acquisition
cost, the difference is recognized as gain on bargain purchase.
(6) Amounts of assets acquired and liabilities assumed on the date of business combination and their breakdown
millionCurrent assets
1,595
yen
millionNon-current assets－yenmillionTotal assets
1,595
yen
millionCurrent liabilities
314
yenmillionNon-current liabilities
72
yenmillionTotal liabilities
386
yen(7) Estimated amount and calculation method of the impact of the business combination on the consolidated financial statement ofincome for the consolidated fiscal year under review, assuming that the business combination was completed on the first day ofthe consolidated fiscal year under review
Net sales
Operating profit
Ordinary profit
Profit before income taxes
Profit attributable to owners ofparentmillionyen
million(105)
yenmillion674
yenmillion
674
yen
852

506

millionyen(Method of calculating the estimated amount)
The estimated impact is the amount of difference between the net sales and profit/loss information calculated, assuming thatthe business combination was completed on the first day of the consolidated fiscal year, and the net sales and profit/loss
information in the acquiring company’s consolidated statement of income.
Please note that audit certification has not been provided for the notes.

―95―

(Business acquisition)
MORESCO USA Inc. (South Carolina, USA, hereinafter “MUSA”), a consolidated subsidiary of the Company, entered into abusiness transfer agreement on August 22, 2023 to acquire all the businesses of Cross Technologies Group, Inc. (Michigan, USA,
hereinafter “Cross”), and it acquired the businesses on October 20, 2023.
(1) Outline of business acquisitioni) Name of the counterparty company and description of the acquired businessCounterparty company: Cross Technologies Group, Inc.
Description of the business to be acquired: Manufacture and sales related to lubricants and releasing agents, such as die
casting lubricantsii) Major reasons for business acquisition
Cross is a company engaged in manufacture and sales of die casting lubricants, metal working fluids, and lubricants forpolyurethane and composites industries. It possesses technical expertise in lubricants and has many customers in North
America, China, etc. On the other hand, MUSA purchased raw materials used in die casting lubricants, etc. from Cross.
This business acquisition is intended for us to ensure a new production base in the U.S., thereby striving to strengthen astable supply of products, realize in-house production and development of raw materials for lubricants, and manufacture andsell products with even higher performance.
iii) Date of business combination
October 20, 2023
iv) Legal form of business combination
Business acquisition in exchange for cashv) Name of the company after business combination
There is no change.
vi) Main basis for determining the acquiring company
The purpose is to acquire the business in exchange for cash.
(2) Period of the performance results of the acquired business included in the consolidated statement of income
Performance results from October 20, 2023 to December 31, 2023 are included.
(3) Acquisition cost of the acquired business and breakdown by type of consideration
Consideration forCash1,300 million yen(USD 8,666,000)
acquisition
Acquisition cost

1,300 million yen(USD 8,666,000)(4) Major acquisition-related expenses and their amount
Advisory fees, etc.: 48 million yen(5) The amount of goodwill that occurred, the cause for the occurrence, the amortization method, and the amortization periodi) Amount of goodwill that occurred
565 million yen
Please note that the above amount is a provisionally calculated amount because the period from the business combination to
the closing date is short and the identification and estimation of fair values of identifiable assets and liabilities have not been
completed, and therefore the allocation of acquisition costs has not been completed.
ii) Reason for occurrenceThis is primarily due to the excess earning power expected from future business development.
iii) Amortization method and amortization period
Straight-line amortization over a period of 12 years(6) Amounts of assets acquired and liabilities assumed on the date of business combination and their breakdown
Current assets

410 million yen

Non-current assets

406 million yen

Total assets

816 million yen

Current liabilities

81 million yen

Non-current liabilities
Total liabilities－

million yen

81 million yen(7) Estimated amount and calculation method of the impact of the business combination on the consolidated financial statement ofincome for the consolidated fiscal year under review, assuming that the business combination was completed on the first day ofthe consolidated fiscal year under review
The estimated amount of the impact is not stated as reasonable calculation is difficult.
(Asset retirement obligations)
Description is omitted due to its low materiality.
(Lease property)
Description is omitted due to its low materiality.
(Revenue recognition)
1. Information regarding disaggregated revenue arising from contracts with customers―96―Previous consolidated fiscal year (From March 1, 2022 to February 28, 2023)（Millions of yen）
Reported segment
Category
Japan

China

Total

Southeast/South
Asia

North America

Special Lubricants

8,706

2,919

2,746

733

15,105

Hot melt adhesives

4,228

759

2,617

59

7,664

Other

6,462

136

506

219

7,323

Revenue arising from contracts
with customers

19,396

3,814

5,870

1,011

30,092

241

－

－

－

241

19,637

3,814

5,870

1,011

30,333

Other revenue
Revenues from external customers(Note) “Other” includes Liquid Paraffin & Sulfonates, Synthetic Lubricants, Energy Device Materials, and equipment sales.
Consolidated fiscal year under review (From March 1, 2023 to February 29, 2024)（Millions of yen）
Reported segment
Category
Japan

China

Total

Southeast/South
Asia

North America

Special Lubricants

9,487

2,528

3,105

1,127

16,247

Hot melt adhesives

4,414

770

3,204

42

8,430

Other

6,063

238

429

215

6,945

Revenue arising from contracts
with customers

19,964

3,536

6,737

1,384

31,621

265

－

－

－

265

20,229

3,536

6,737

1,384

31,886

Other revenue
Revenues from external customers(Note) “Other” includes Liquid Paraffin & Sulfonates, Synthetic Lubricants, Energy Device Materials, and equipment sales.
2.

Useful information in understanding revenue
As described in “Important matters that are the basis for preparation of consolidated financial statements) 4. Information on
accounting policies, (4) Accounting standards for important income and expenses.”

―97―

3.

Relationship between satisfaction of performance obligations based on contracts with customers and cash flows arising fromsuch contracts, and information on the amount and timing of revenue arising from contracts with customers that exist at theend of the fiscal year under review, which is expected to be recognized in and after the following fiscal year.
Previous consolidated fiscal year (From March 1, 2022 to February 28, 2023)
i) Balance, etc. of contract liabilities（Millions of yen）
Consolidated fiscal year under review
Receivables arising from contracts with customers (balance atthe beginning of the year)
Receivables arising from contracts with customers (balance atthe end of the year)

6,844
7,595

Contract liabilities (balance at the beginning of the year)

4

Contract liabilities (balance at the end of the year)

94

Balance at the end of the year of contract assets is mainly related to advances received from customers with regard toequipment sales contracts, for which revenue is recognized at the time of delivery. Contract liabilities are reversed in linewith revenue recognition.
Of the amount of revenue recognized in the fiscal year under review, the amount included in the balance of contract
liabilities at the beginning of the fiscal year was 4 million yen.
The reason for the increase of 89 million yen in contract liabilities in the consolidated fiscal year under review is due
to an increase in advances received.
ii)

Transaction prices allocated to remaining performance obligations
Since the Group has no important transactions with expected term of more than one year, the practical expedient is appliedand description of information on remaining performance obligations is omitted.
There are no material transactions in consideration arising from contracts with customers that are not included in thetransaction price.

Consolidated fiscal year under review (From March 1, 2023 to February 29, 2024)i) Balance, etc. of contract liabilities（Millions of yen）
Consolidated fiscal year under review
Receivables arising from contracts with customers (balance atthe beginning of the year)
Receivables arising from contracts with customers (balance atthe end of the year)

7,595
7,942

Contract liabilities (balance at the beginning of the year)

94

Contract liabilities (balance at the end of the year)

77

Balance at the end of the year of contract assets is mainly related to advances received from customers with regard toequipment sales contracts, for which revenue is recognized at the time of delivery. Contract liabilities are reversed in linewith revenue recognition.
Of the amount of revenue recognized in the fiscal year under review, the amount included in the balance of contract
liabilities at the beginning of the fiscal year was 4 million yen.
The reason for the increase of 89 million yen in contract liabilities in the consolidated fiscal year under review is due
to an increase in advances received.
ii)

Transaction prices allocated to remaining performance obligations
Since the Group has no important transactions with expected term of more than one year, the practical expedient is appliedand description of information on remaining performance obligations is omitted.
There are no material transactions in consideration arising from contracts with customers that are not included in thetransaction price.

―98―

1.

(Segment Information, etc.)
Segment information
Outline of the reported segments
The Company’s reported segments are business units of the Company for which discrete financial information is available and forwhich the Board of Directors regularly conducts a review for the purpose of making decisions about management resources to beallocated to the segments and assessing the segment’s performance.
The Company manufactures and sells mainly chemical products (special lubricants, synthetic lubricants, liquid paraffin &sulfonates, hot melt adhesives). The Company is responsible for businesses in Japan, and local subsidiaries in China,
Southeast/South Asia, and North America are responsible for businesses in respective regions overseas. Overseas subsidiaries are
independent business management units, which formulate comprehensive strategies on products they deal with for their respective
areas and conduct business activities.
In view of this, the Company is comprised of four reportable segments organized by region based on manufacturing and sales
structures: Japan, China, Southeast/South Asia, and North America. The “Japan” segment is engaged in a rental building businessbesides the chemical products business.

2.

Explanation of measurements of sales, profit (loss), asset, liability, and other items for each reporting segment
The accounting method for the reported segments is mostly the same as described in “Important matters that are the basis for
preparation of consolidated financial statements.”
Profit figures of the reported segments are based on operating profit.
Intersegment sales or transfers are based on prevailing market prices.

3.

Disclosure of sales, profit (loss), asset, liability, and other items for each reporting segment
Previous consolidated fiscal year (from March 1, 2021 to February 28, 2022)
Previous consolidated fiscal year (From March 1, 2022 to February 28, 2023)(Millions of yen)
Reported segment
Japan

China

Southeast/South
Asia

North
America

Total

Adjustments(Notes) 1, 2

Consolidated
total(Note 3)

Net sales
Revenues from externalcustomers
Intersegment sales ortransfers

19,637

3,814

5,870

1,011

30,333－30,333

1,444

439

156

34

2,073

(2,073)－21,081

4,254

6,026

1,045

32,406(2,073)30,333

Segment profit

33

311

123

87

553

(30)

523

Segment assets

23,054

5,166

6,236

706

35,163(3,146)32,017

Depreciation

754

109

226

9

1,099

－

1,099

Amortization of goodwill

127

－

－

－

127

－

127

Total

Other items

Investment in equity
2,077
2,077
2,077
－
－
－
－
method affiliates
Increase in property, plantand equipment, and
757
478
84
0
1,318
1,318
－
intangible assets(Notes) 1. Adjustments to segment profit of -30 million yen include 1 million yen for elimination of intersegment transactions, 30 million yen for adjustment of inventories and - 1 million yen for adjustment of allowance for doubtful accounts.
2. Adjustments to segment assets of -3,146 million yen include -3,779 million yen for intersegment elimination and 633
million yen for company-wide assets. Company-wide assets refer to the Company’s financial assets (cash and deposits,
and investment securities) that do not belong to reporting segments.
3. Segment profit has been adjusted for alongside operating profit on the consolidated financial statements.

―99―

Consolidated fiscal year under review (From March 1, 2023 to February 29, 2024)(Millions of yen)
Reported segment
Japan

China

Southeast/South
Asia

North
America

Total

Adjustments(Notes) 1, 2

Consolidated
total(Note 3)

Net sales
Revenues from externalcustomers
Intersegment sales ortransfers

20,229

3,536

6,737

1,384

31,886－31,886

1,491

420

47

8

1,966

(1,966)－

21,720

3,956

6,784

1,392

33,852(1,966)31,886

Segment profit

586

118

309

181

1,194

31

1,225

Segment assets

23,817

7,340

6,788

2,522

40,466(3,414)37,053

Depreciation

686

142

230

23

1,080

－

1,080

Amortization of goodwill

76

－

－

7

83

－

83

Total

Other items

Investment in equity
1,939
－
－
－
1,939
－
1,939
method affiliates
Increase in property, plantand equipment, and
475
1,510
187
1,054
3,226
－
3,226
intangible assets(Notes) 1. Adjustments to segment profit of 31 million yen include 2 million yen for elimination of intersegment transactions, 28
million yen for adjustment of inventories and 0 million yen for adjustment of allowance for doubtful accounts.
2. Adjustments to segment assets of -3,414 million yen include -4,807 million yen for intersegment elimination and 1,393
million yen for company-wide assets. Company-wide assets refer to the Company’s financial assets (cash and deposits,
and investment securities) that do not belong to reporting segments.
3. Segment profit has been adjusted for alongside operating profit on the consolidated financial statements.
4. Information concerning impairment loss on non-current assets or goodwill, etc. for each reported segment(Significant impairment losses on non-current assets)
In the “Japan” segment, an impairment loss of 31 million yen is recorded for assets with no prospect of recovery in the
future.

―100―

Information associated with reported segments
Previous consolidated fiscal year (From March 1, 2022 to February 28, 2023)
1. Information for each product or service
Special
Lubricants

Synthetic
LubricantsLiquidParaffin &Sulfonates

15,105

1,703

3,793

Revenues
fromexternal customers
2.

Hot melt
adhesives

Energy devicematerials

7,664

209

(Millions of yen)OtherchemicalTotal
products
1,859

30,333

Information for each region(1) Net sales(Millions of yen)
Asia (excluding China)
Japan

China

18,841

North America

Indonesia

3,969

6,327

2,780

Other

1,026

Total
171

30,333(Note) Net sales are classified by country or region based on the geographic location of the customers.
(2) Property, plant and equipment(Millions of yen)
Japan

China

Asia (excluding China)

5,788
3.

1,285

North America

Total

1,523

14

8,610

Information for each of main customers(Millions of yen)Name

Net sales

Relevant segment

Matsumura Oil Corporation

1.

4,809

Consolidated fiscal year under review (From March 1, 2023 to February 29, 2024)
Information for each product or service
Special
Lubricants

Synthetic
LubricantsLiquidParaffin &Sulfonates

16,247

1,337

3,909

Revenues
fromexternal customers
2.

Japan

Hot melt
adhesives

Energy devicematerials

8,430

200

(Millions of yen)OtherchemicalTotal
products
1,764

31,886

Information for each region(1) Net sales(Millions of yen)
Asia (excluding China)
Japan

China

18,940

North America

Indonesia

3,646

7,512

3,418

Other

1,599

Total
189

31,886(Note) Net sales are classified by country or region based on the geographic location of the customers.
(2) Property, plant and equipment(Millions of yen)
Japan

China
5,566

3.

Asia (excluding China)
2,491

North America

1,590

Total
494

10,140Information for each of main customers(Millions of yen)Name

Net sales

Matsumura Oil Corporation

Relevant segment
5,124

―101―

Japan

Disclosure of impairment loss on non-current assets for each reported segment
Previous consolidated fiscal year (From March 1, 2022 to February 28, 2023)
Not applicable.
Consolidated fiscal year under review (From March 1, 2023 to February 29, 2024)(Millions of yen)Japan
Impairment loss

China
31

Southeast/South Asia－－

North America

Total
31

－

Amortization and unamortized balance of goodwill for each reported segment
Previous consolidated fiscal year (From March 1, 2022 to February 28, 2023)(Millions of yen)Japan
Amortization of
goodwill
Balance at end of
periodChina

Southeast/South Asia

North America

Total

127

－

－

－

127

92

－

－

－

92

Consolidated fiscal year under review (From March 1, 2023 to February 29, 2024)(Millions of yen)Japan
Amortization of
goodwill
Balance at end of
periodChina

Southeast/South Asia

North America

Total

76

－

－

7

83

16

－

－

527

543

Information about gain on bargain purchase for each reported segment
Previous consolidated fiscal year (From March 1, 2022 to February 28, 2023)
Not applicable.
Consolidated fiscal year under review (From March 1, 2023 to February 29, 2024)
In the “China” segment, gain on bargain purchase was recognized due to the Company’s acquisition of additional equity in investmentof Wuxi MoreTex Technology Co., Ltd., which was an equity method affiliate, to make it a subsidiary. The amount of gain on bargain
purchase recorded with respect to this matter is 285 million yen. Please note that gain on bargain purchase is not included in segment
profit as it is extraordinary income.

―102―

1.

Related parties
Transactions with related parties
Transactions of the Company with related parties
Parent company and major shareholders, etc. of the Company
Previous consolidated fiscal year (From March 1, 2022 to February 28, 2023)

Type

Name

Major
shareholder

Matsumura Oil
Corporation

Location

Kita-ku,
Osaka

Capital(Millions ofyen)

Business

Manufactureand sale of
70 industrial
lubricants,
etc.

Holding(held) ratioof votingrights (%)

Relation(Holding)
Direct2.1(Held)
Direct11.5

Sales of theCompany’s
products andpurchase ofmaterials

Transactions

Sales ofproducts(Note 1)

Amount(Millions ofyen)Account item

Accounts

4,645 receivable -Year-endbalance(Millions of
yen)

1,214

trade

(Note 1) Transaction terms and policies to determine them
The terms for sales of the Company’s products are determined in light of market prices, considering the economic
rationality, and in accordance with the basic sales agreement.
Consolidated fiscal year under review (From March 1, 2023 to February 29, 2024)

Type

Name

Location

Major
Matsumura Oil Kita-ku,
Osakashareholder Corporation

Capital(Millions ofyen)

Business

Manufactureand sale of
70 industrial
lubricants,
etc.

Holding(held) ratioof votingrights (%)

Relation(Holding)
Direct2.1(Held)
Direct11.5

Sales of theCompany’s
products andpurchase ofmaterials

Transactions

Sales ofproducts(Note 1)

Amount(Millions ofyen)Account item

Accounts

5,029 receivable -Year-endbalance(Millions of
yen)

1,309

trade

(Note 1) Transaction terms and policies to determine them
The terms for sales of the Company’s products are determined in light of market prices, considering the economic
rationality, and in accordance with the basic sales agreement.

―103―

(Per-share information)
Previous consolidated fiscal year
(From March 1, 2022 to February 28,
2023)

Consolidated fiscal year under review(From March 1, 2023 to February 29,
2024)

Net assets per share

2,008.49

2,179.85

Earnings per share

66.19

139.01

Not provided because there are no
dilutive shares.
(Note 1) Calculation basis of earnings per share is as follows.

Diluted earnings per share

Not provided because there are no
dilutive shares.

Previous consolidated fiscal
year(From March 1, 2022 toFebruary 28, 2023)

Consolidated fiscal year underreview(From March 1, 2023 to
February 29, 2024)

615

1,283

－

－

615

1,283

9,284,344

9,231,073

Previous consolidated fiscal
year(as of February 28, 2023)

Consolidated fiscal year underreview(February 29, 2024)

21,24023,122

2,706

2,996

(2,706)(2,996)

18,533

20,126

9,227,530

9,232,780

Profit attributable to owners of parent (millions ofyen)Amount not attributable to common shareholders(Millions of yen)
Profit attributable to owners of parent pertaining
to common stock (Millions of yen)
Average number of shares of common stock
outstanding during the period (Shares)(Note 2) Calculation basis of net assets per share is as follows.

Total net assets (Millions of yen)Amount deducted from total net assets(Millions of yen)
(Of which, non-controlling interests (Millionsof yen))Net assets at the end of the fiscal year related tocommon shares (Millions of yen)
The number of common shares at the end of the
fiscal year used to calculate net assets per share(Shares)―104―

(Significant subsequent events)(Purchase of treasury shares)
At the Board of Directors meeting held on February 21, 2024, the Company resolved and implemented matters related to purchaseof treasury shares in accordance with the provisions of Article 495, Paragraph 1 of the Companies Act and Article 44 of the Articles
of Incorporation of the Company.
(1) Reason for the purchase of treasury shares
The purpose is to enhance shareholder returns and improve capital efficiency through the execution of flexible capital policies
that respond to changes in the business environment.
(2) Details of the acquisitioni) Type of shares to be acquired: Common stock of the Companyii) Total number of shares to be acquired: 80,000 shares (maximum)(0.87% of total number of issued shares [excluding treasury shares))iii) Total amount of shares acquired: 100,000,000 yen (maximum)iv) Acquisition period: March 1, 2024 to April 30, 2024v) Method of acquisition: Market repurchase on the Tokyo Stock Exchange(3) Resultsi) Type of shares purchased: Common stock of the Companyii) Total number of shares acquired: 71,600 shares (maximum)(0.78% of total number of issued shares [excluding treasury shares))iii) Total amount of shares acquired: 99,894,600 yeniv) Acquisition period: March 1, 2024 to April 1, 2024v) Method of acquisition: Market repurchase on the Tokyo Stock Exchange

―105―

v)

Consolidated supplemental schedules
Detailed schedule of bonds payableNot applicable.
Detailed schedule of borrowings
Category

Short-term borrowings

Balance at beginning Balance at end of
Average interest rateof period
period(%)(Millions of yen)
(Millions of yen)

Maturity date

2,021

2,310

0.5

―

Current portion of long-termborrowings

360

730

0.8

―

Current portion of lease obligations

37

61

－

―

472

3,065

0.8

2025 - 2032

98

80

－

2025 - 2028

2,988

6,246

－

―

Long-term borrowings (excluding
current portion)
Lease obligations (excluding current
portion)
Total(Notes)

1.
2.
3.
4.

The average interest rate represents the weighted-average rate applicable to the year-end balance of borrowings.
Current portion of long-term borrowings is included in “Short-term borrowings” on the consolidated balance sheet.
The average interest rate of lease obligations is not provided because lease obligations are recorded on the
consolidated balance sheet before deducting the amount equivalent to interest included in the total lease payment.
The aggregate annual maturities of long-term borrowings and lease obligations (excluding the current portion)
within five years after the consolidated balance sheet date are as follows.
Due after 1 year but
within 2 years(Millions of yen)

Due after 2 years but Due after 3 years but Due after 4 years but
within 3 years
within 4 years
within 5 years(Millions of yen)
(Millions of yen)
(Millions of yen)

Long-term
borrowings

979

979

660

385

Leased obligations

35

28

16

2

Detailed schedule of asset retirement obligations
The amounts of asset retirement obligations at the beginning and the end of the current fiscal year are one percent or less ofthe total liabilities and net assets at the beginning and the end of the current fiscal year. Accordingly, the preparation of theschedules has been omitted pursuant to the provision of Article 92-2 of the Regulations on Consolidated Financial Statements.

―106―

(2) Other
Quarterly financial information and others for the fiscal year under review(Cumulative period)First quarter

Second quarter

Third quarter

Consolidated fiscal
year under review

Profit before income
taxes((Millionsof yen)(Millions ofyen)Profit attributable toowners of parent((Millionsof yen)

224

569

1,335

1,283

Earnings per share

(Yen)

24.24

61.68

144.66139.01

Net sales(Accounting period)
Earnings
share(loss)

per

(Yen)

7,596

15,38623,731

31,886

395

933

1,949

2,055

First quarter

Second quarter

24.24

37.44

―107―

Third quarter
82.97

Fourth quarter(5.65)

2.

Non-Consolidated Financial Statements, etc.
(1) Non-Consolidated Financial Statementsi) Non-consolidated balance sheet
Previous consolidated fiscal year
(as of February 28, 2023)(Millions of yen)
Consolidated fiscal year underreview(February 29, 2024)

AssetsCurrent assets
Cash and deposits
Notes receivable - trade

565
835

Accounts receivable - trade
Merchandise and finished goods

3,550
1,942

※１

Raw materials and supplies
Other

1,306
1,199

※１

Allowance for doubtful accounts

1,299
886
3,615
2,231

※１

1,126
1,300

※１

(9)

(9)

9,389

10,447

Property, plant and equipment
Buildings

1,845

1,794

Structures
Machinery and equipment

61
553

56
581

Total current assets
Non-current assets

VehiclesTools, Furniture and fixtures

※２

Land
Leased assets

0
206

※２

1,328
9

Construction in progress

1
180

1,328
7

44

21

4,046

3,967

Intangible assets
Goodwill

92

16

Software
Other

65
4

60
1

Total intangible assets

160

76

Investments and other assets
Investment securities

426

483

839

2,354

2,329

2,792

Total property, plant and equipment

Shares of affiliated companies
Investments in capital of subsidiaries andassociates
Deferred tax assets
Long-term loans receivable

73
2,137

※１

52
2,005

※１

Long-term prepaid expenses
Prepaid pension cost

8
696

2
793

Other
Allowance for doubtful accounts

96
－

97
(1)

Total investments and other assets

6,604

8,577

10,81012,62020,20023,067

Total non-current assets
Total assets―108―

Previous consolidated fiscal year
(as of February 28, 2023)(Millions of yen)
Consolidated fiscal year underreview(February 29, 2024)

Liabilities
Current liabilities
Notes payable - trade
Accounts payable - trade

572
2,724

※１
※１

Short-term borrowings
Leased obligations

2,080
2

Accounts payable - otherAccrued expenses※１

Income taxes payable
Provision for bonuses

552
90

472
2,611

※１
※１

2,850
2
※１

78
387

Other

※１

Total current liabilities

585

607
96
66
424

※１

596

7,071

7,724

Long-term borrowings
Leased obligations

310
8

2,285
6

Provision for retirement benefits
Other

333
5

355
3

Total non-current liabilities

655

2,649

7,726

10,374Non-current liabilities

Total liabilities
Net assets
Shareholders’ equity
Capital stock

2,118

2,118

Capital surplus
Legal capital surplus

1,906

1,906

Other capital surplus

68

67

Total capital surplus

1,974

1,974

75

75

14

13

6,050

6,500

2,752

2,474

8,891

9,063

Retained earnings
Legal retained earnings
Other retained earnings
Reserve for reduction entry of replaced
property
General reserve
Retained earnings brought forward
Total retained earnings
Treasury shares

(567)

(561)

Total shareholders’ equity

12,416

12,59458

100

Valuation and translation adjustments
Valuation difference on available-for-salesecurities
Total valuation and translation adjustments
Total net assets
Total liabilities and net assets

―109―

58

100

12,474

12,69420,20023,067

ii)

Non-consolidated statement of income

Net sales
Cost of sales(Millions of yen)
Consolidated fiscal year underPrevious consolidated fiscal year
review(From March 1, 2022 to February(From March 1, 2023 to February
28, 2023)
29, 2024)※２ 17,162※２ 17,575※２ 12,407※２ 12,544

Gross profit

4,756

Selling, general and administrative expenses

※１,※２

4,677

Operating profit

5,031
※１,※２

4,552

79

479

Non-operating income
Interest and dividend income
Foreign exchange gains

677
235

※２

Other

27

※２

Total non-operating income

352
141

※２

36

※２

938

Non-operating expenses
Interest expenses

10※２

Loss on retirement of non-current assets
Other

2
2

Total non-operating expenses
Ordinary profit
Extraordinary losses
Loss on valuation of shares of subsidiaries andassociates
Impairment loss
Total extraordinary losses

529
20

※２

6
1

13

27

1,004

980

－

198

－

31

－

229

1,004

751

Income taxes - current

296

204

Income taxes - deferred

(147)

6

Total income taxes

149

210

Profit856

541

Profit before income taxes

―110―

iii)

Non-consolidated statement of changes in equity
Previous fiscal year (from March 1, 2022 to February 28, 2023)(Millions of yen)
Shareholders’ equity
Capital surplus

Retained earnings
Other retained earnings

Balance at beginning of
periodCapital stock

Legal capitalsurplus

Other capitalsurplus

2,118

1,906

67

Reserve for
Total capital Legal retained Reserve for special accountreduction entry for advanced
surplusearningsof replaced depreciation ofproperty
non-current
assets
1,973

75

15

463

Changes during period
Reversal of reserve for
reduction entry of
replaced property
Reversal of reserve for
special account foradvanced depreciationof non-current assets
Provision for generalreserve－－－

Profit－Balance at end of period

(463)

－

Dividends of surplus

Purchase of treasury
shares
Disposal of treasury
sharesNet changes in items
other than shareholders’equityTotal changes during
period

(1)

－
1

1
－

－

－

1

1

－

(1)

(463)

2,118

1,906

68

1,974

75

14

－

Valuation and translation
adjustments

Shareholders’ equity
Retained earnings
Other retained earnings
Generalreserve
Balance at beginning of
period5,550

Retainedearnings
brought
forward

Total retained
earnings

TreasurysharesTotalshareholders’equity

2,305

8,407

1

－

－

－

463

－

－

－

(500)

－

－

－

(372)

(372)

(372)

(372)

856

856

856

856

(384)

12,115

Valuation
Total valuation Total net assets
difference onand translation
available-foradjustments
sale securities

23

23

12,138Changes during period
Reversal of reserve for
reduction entry of
replaced property
Reversal of reserve for
special account foradvanced depreciationof non-current assets
Provision for generalreserve

500

Dividends of surplus
ProfitPurchase of treasury
shares
Disposal of treasury
sharesNet changes in items
other than shareholders’equityTotal changes during
periodBalance at end of period

－

(194)

(194)

(194)

－

12

12

12

－

－

35

35

35

500

447

483

(183)

301

35

35

336

6,050

2,752

8,891

(567)

12,41658

58

12,474―111―

Fiscal year under review (from March 1, 2023 to February 29, 2024)(Millions of yen)
Shareholders’ equity
Capital surplus

Retained earnings
Other retained earnings

Balance at beginning of period

Capital stock

Legal capitalsurplus

Other capitalsurplus

2,118

1,906

68

Reserve for
Total capital Legal retained Reserve for special accountreduction entry for advanced
surplusearningsof replaced depreciation ofproperty
non-current
assets
1,974

75

14

－

Changes during period
Reversal of reserve for
reduction entry of replaced
property
Reversal of reserve for special
accountforadvanceddepreciation of non-current
assets－(1)－

Provision for general reserve－

Dividends of surplus－

Profit－Purchase of treasury shares－

Disposal of treasury shares(0)

Net changes in items other thanshareholders’ equity(0)－

Total changes during period

－

－

(0)

(0)

－

(1)

－

Balance at end of period

2,118

1,906

67

1,974

75

13

－

―112―

Valuation and translation
adjustments

Shareholders’ equity
Retained earnings
Other retained earnings
Generalreserve
Balance at beginning of
period6,050

Retainedearnings
brought
forward

Total retained
earnings

Total
shareholders’equityTreasuryshares(567)

12,416

Valuation
Total valuation Total net assets
difference onand translation
available-foradjustments
sale securities

2,752

8,891

58

58

12,474

1

－

－

－

－

－

－

(450)

－

－

－

(369)

(369)

(369)

(369)

541

541

541

541

－

－

－

6

6

Changes during period
Reversal of reserve for
reduction
entryofreplaced property
Reversal of reserve for
special account foradvanced depreciationof non-current assets
Provision for generalreserve

450

Dividends of surplus
ProfitPurchase of treasury
shares
Disposal of treasury
sharesNet changes in items
other than shareholders’equityTotal changes during
periodBalance at end of period

6

－
－

－

42

42

42

450

(277)

172

6

178

42

42

220

6,500

2,474

9,063

(561)

12,594100

100

12,694―113―

Notes(Significant accounting policies)
1.

Standards and methods for evaluating assets(1) Standards and methods for evaluating securities
Shares in subsidiaries and affiliates
Moving average cost method
Available-for-sale securities
Securities other than shares without a market price
Fair value method (unrealized gain and loss, net of tax are recorded in net assets, and the moving average method isused to calculate the cost of securities sold)Shares without a market priceMoving average cost method(2) Standards and methods for evaluating derivatives
Fair value method(3) Standards and methods for evaluating inventories
Mainly gross average cost method(The balance sheet values are calculated by writing down the book values in response to decreased profitability)2.

Depreciation method of non-current assets(1) Property, plant and equipment (excluding leased assets)
The declining-balance method is adopted. (However, the straight-line method is used for buildings (excluding facilities
attached to buildings) acquired on or after April 1, 1998, and facilities attached to buildings and structures acquired on orafter April 1, 2016.) Major useful lives are as follows.
Buildings: 3 to 50 years
Machinery and equipment: 4 to 15 years(2) Intangible assets
The straight-line method is adopted. For software used in-house, the straight-line method is adopted based on the usable
period inside the company (5 years).
(3) Leased assets
Leased assets relating to finance lease without transfer of ownership
The straight-line method is used with a useful life of the lease period and with a residual value of zero.

3.

Accounting standards for important reserves and allowances(1) Allowance for doubtful accounts
In order to prepare for possible losses on uncollectible receivables held, estimated uncollectible amounts are posted: forgeneral receivables, according to the historical percentage of uncollectibles, and for doubtful receivables, considering theprobability of collection.
(2) Provision for bonuses
In order to prepare for payment of bonuses to employees, a provision is made based on the estimated bonus payments, which
are attributable to the fiscal year under review.

―114―

(3) Provision for retirement benefits
In order to prepare for payment of retirement benefits to employees, a provision is made based on the estimated amounts ofretirement benefit obligations and pension assets at the end of the fiscal year under review.
i) Method to attribute the estimated retirement benefits to the periods
To calculate retirement benefit obligations, the benefit formula method is adopted as a method to attribute the estimatedretirement benefits to the periods up to the end of the fiscal year under review.
ii)

Method of amortization of actuarial gains and losses
The actuarial differences are recognized in the following fiscal year by the straight-line method over a certain period(mainly 14 years) that are not more than the average remaining service period of employees at the time of the accrual ofa difference.

4.

Accounting standards for important income and expenses
The main business of the Company is manufacture and sale of chemical products (special lubricants, synthetic lubricants, liquidparaffin & sulfonates, hot melt adhesives, and energy device materials). With regard to sale of such goods and products, the Group
determines that control of goods is transferred to customers at the time of delivery. As the period between shipment and delivery isa normal period of time, the Group applies alternative treatment based on importance, etc., and recognizes revenue at the time of
shipment of goods and products for inside Japan. For overseas, based on the terms of trade stipulated by Incoterms, etc., the Group
determines that control of goods and products is transferred to customers and its performance obligations are satisfied when risks
are transferred to customers. Therefore, the Group recognizes revenue at the time of shipment of goods and products in principle.

5.

Other important matters that are the basis for preparation of non-consolidated financial statements(1) Method and period of amortization of goodwill
Goodwill is regularly amortized using the straight-line method over an effective period up to 20 years. However, minor
goodwill is entirely amortized all at once.
(2) Accounting treatment for retirement benefits
The method of accounting treatment for unrecognized actuarial gains and losses on retirement benefits is different from themethod of accounting treatment used in the consolidated financial statements.
(3) Accounting principles and procedures that were adopted when relevant accounting standards, etc. were unclear
Restricted stock compensation system
Remuneration, etc. paid to directors of the Company based on the Company’s restricted stock compensation system istreated as expenses over the applicable service period.

―115―

1.

(Important accounting estimates)
Valuation of inventories(1) Amount recorded in the non-consolidated financial statements for the fiscal year under review(Millions of yen)Previous fiscal year
Fiscal year under review
Merchandise and finished goods

1,942

2,231

Raw materials and supplies

1,306

1,126

Cost of sales
34
For loss on valuation of inventories (reversal), net amount after reversal is stated.

(16)(2) Information on the details of accounting estimates
Notes are omitted because the same information is provided in “Notes (Important accounting estimates)”to consolidated
financial statements.
2.

Impairment losses on non-current assets(1) Amount recorded in the non-consolidated financial statements for the fiscal year under review(Millions of yen)Previous fiscal year
Fiscal year under review
Property, plant and equipment

4,046

3,967

Intangible assets

160

76

Impairment loss－

31(2) Information on the details of accounting estimates
Notes are omitted because the same information is provided in “Notes (Important accounting estimates)”to consolidated
financial statements.
(Changes in accounting policies)
Not applicable.
(Changes in presentation) (Tax effect accounting)“Increase (decrease) in valuation allowance,” which was included in “Other” in the previous consolidated fiscal year, has beenpresented independently from the consolidated fiscal year under review as its materiality increased.
(Supplementary information)
Not applicable.

―116―

*1

(Non-consolidated balance sheet)
Receivables from and payables to subsidiaries and associates
Previous consolidated fiscal year
(as of February 28, 2023)
Short-term receivables*2

1,399million yen
817

774

Long-term receivables

2,137

2,049

Reduction entry
Total reduction entries due to acquisition of government subsidies, etc. for property, plant and equipment are as follows.

Tools, Furniture and fixtures

11million yen

Consolidated fiscal year under review(February 29, 2024)
11million yen

Guarantee obligations
We provide guarantees on borrowings, etc. of subsidiaries and associates below.
Borrowings
Previous consolidated fiscal year
(as of February 28, 2023)
TIANJIN MORESCOTECHNOLOGY CO., LTD.
PT. MORESCO MACRO ADHESIVEMORESCO (ZHEJIANG)
FUNCTIONAL MATERIAL CO.,
LTD.

*1

1,572million yen

Short-term payables

Previous consolidated fiscal year
(as of February 28, 2023)

3.

Consolidated fiscal year under review(February 29, 2024)

Consolidated fiscal year under review(February 29, 2024)

170million yen

13million yen

95

30

－

804

(Non-consolidated statement of income)Selling expenses accounted for 35% in the previous fiscal year and account for 34% in the fiscal year under review. General andadministrative expenses accounted for 65% in the previous fiscal year and account for 66% in the fiscal year under review.
Major components and amounts are as follows.
Previous consolidated fiscal year
Consolidated fiscal year under review(From March 1, 2022 to February 28, (From March 1, 2023 to February 29,
2023)
2024)
Salaries*2

1,307million yen

1,305million yen

Provision for bonuses

286

293

Retirement benefit expenses
Provision of allowance for doubtful
accounts
Depreciation

96

83

0

1

341

262

Freightage expenses

561

534

Transactions with subsidiaries and associates
Previous consolidated fiscal year
Consolidated fiscal year under review(From March 1, 2022 to February 28, (From March 1, 2023 to February 29,
2023)
2024)
Net sales

1,550million yen

Purchase of goods
Selling, general and administrative
expensesNon-operating transactions

1,094

999

13

20

676

355

―117―

1,472million yen

(Securities)
Shares in subsidiaries (2,354 million yen recorded for fiscal year under review and 839 million yen recorded for previous fiscal
year on the balance sheet) are not presented because they are shares without a market price.
(Tax effect accounting)
1. Major components of deferred tax assets and liabilities
Previous consolidated fiscal year
(as of February 28, 2023)

Consolidated fiscal year underreview(February 29, 2024)

Provision for bonuses

118million yen

130million yen

Provision for retirement benefits

102

109

Loss on valuation of inventories
Loss on valuation of shares of subsidiaries andassociates
Other

42

33

28

89

76

89

Deferred tax assets

Subtotal deferred tax assets

365

449

Valuation allowance

(54)

(114)

Total deferred tax assets

311

335

(6)

(6)

Prepaid pension cost

(213)

(243)

Other

(19)

(35)

(238)

(284)

73

52

Deferred tax liabilities
Reserve for reduction entry of replaced property

Total deferred tax liabilities
Net deferred tax assets (liabilities)2.

The reconciliation of significant differences between the statutory tax rate and effective income tax rate after application of tax
effect accounting
Previous consolidated fiscal year
(as of February 28, 2023)

Consolidated fiscal year underreview(February 29, 2024)
30.6％

Statutory tax rate

30.6％

(Reconciliations)
Permanently non-deductible amount(entertainment expenses, etc.)
Permanently non-taxable amount (dividend
income, etc.)

1.3

1.9

(18.5)(10.4)

(7.6)

(6.5)

1.0

1.3

Increase (decrease) in valuation allowance
Withholding tax on dividends from foreignsubsidiaries
Amortization of goodwill

(0.1)

8.0

6.3

2.2

3.9

3.1

Other
Actual effective income tax rate after applicationof tax-effect accounting

(2.2)

(2.3)

14.8

27.9

Special deduction of income taxes
Per capita tax(Business combinations, etc.)(Business combination through acquisition)
Notes are omitted because the same information is provided in “Notes (Business combinations, etc.)” to consolidated financial
statements.
(Revenue recognition)
Note to useful information in understanding revenue arising from contracts with customers is omitted because the same information
is provided in “Notes (Revenue recognition)” to consolidated financial statements.
(Significant subsequent events)
Notes are omitted because the same information is provided in “Notes (Significant subsequent events)” to consolidated financial
statements.

―118―iv) Non-consolidated supplemental schedules
Detailed schedule of fixed assets(Millions of yen)
Category

Types of assets

Buildings

3,756

73

13
(3)

120

3,816

2,022

Structures

470

8

5

9

473

417

7,360

235

90

206

7,505

6,924

35

2

7

1

30

29

Tools, Furniture andfixtures

2,281

123

102
(25)

119

2,303

2,123

Land

1,328

－

－

－

1,328

－

Leased assets

34

－

15

2

20

13

Construction inprogress

44

455

478

－

21

－

Total

15,309

896

710
(28)

456

15,494

11,527

Goodwill

1,467

－

－

76

1,467

1,451

Software

714

26

7
(3)

28

733

674

Other

4

23

26

0

1

0

Machinery andequipment
VehiclesProperty, plantand equipment

Intangible
assetsBalance at Increase in Decrease in
Amortization Balance at Accumulated
beginning of the fiscal year the fiscal yearof goodwill end of period depreciation
periodunder review under review

33
103
2,202
2,125
(3)
(Notes) 1. Balance at beginning of period and balance at end of period are indicated by the acquisition prices.
2. Figures in parentheses for “Decrease in the fiscal year under review” are the amounts of impairment losses recorded.
3. Major components of the increase in the fiscal year under review are as follows.
(Millions of yen)
Types of assets
Site
Value
Machinery andChiba Plant
82
equipment
Machinery andAkoh Plant
152
equipment
Tools, furniture andKobe Head Office104
fixtures
Total

4.

2,185

49

Major components of the decrease in the fiscal year under review are as follows.
(Millions of yen)
Types of assets
Site
Value
Tools, furniture andKobe Head Office67
fixtures

Detailed schedule of allowances(Millions of yen)Account item

Balance at beginning of Increase in the fiscal
periodyear under review

Decrease in the fiscal
year under review

Balance at end of
periodAllowance for doubtful
accounts

9

10

9

10

Provision for bonuses

387

424

387

424

―119―

(2) Details of major assets and liabilities
This information is omitted because the Company prepares consolidated financial statements.
(3) Other
Not applicable.

―120―

VI. Outline of Share-related Administration of Reporting Company
Fiscal year

From March 1 to the end of February

Ordinary general meeting ofshareholders

May

Record date

Last day of February

Record dates for dividend of
surplusNumber of sharesconstituting one unit ofstock
Repurchase of less-thanone-unit shares

Last day of February
August 31

Place for repurchaseprocessing
Administrator ofshareholders’ register

100

Special account
Osaka Corporate Agency Division, Mitsubishi UFJ Trust and Banking Corporation
3-6-3 Fushimi-cho, Chuo-ku, Osaka
Special account
Mitsubishi UFJ Trust and Banking Corporation
1-4-5 Marunouchi, Chiyoda-ku, Tokyo

Contact place
Repurchase charge

Method of public noticeSpecial benefits forshareholders

─────
Free
Public notice by the Company shall be given by electronic means; provided, however, that in
the event an accident or any other unavoidable reason prevents public notice by electronicmeans, the notice can be given in the Nihon Keizai Shimbun.
URL for public notice:https://www.moresco.co.jp/
Number of shares held and continued holding
Details of benefit
period300 shares or more, and continued holding
Quo card 3,000 yen
period of less than 3 years
300 shares or more, and continued holding
Quo card 4,000 yen
period of 3 years or more
Eligible shareholders are those listed or recorded on the shareholders’ register as of the last
day of February each year and holding 300 shares or more of the Company’s stock.
*
Continued holding period of 3 years or more means that the same shareholder number islisted or recorded on the shareholders’ register as of the end of February and the end of
August for at least seven consecutive times.
*
If a shareholder holding less than 300 shares later purchases additional shares to hold 300
shares or more as of the end of February, the period of holding less than 300 shares is
included in the consecutive holding period.

―121―

VII. Reference Information of Reporting Company
1.

Information on parent company, etc. of the reporting company
The Company has no parent company, etc. as prescribed in Article 24-7, Paragraph 1 of the Financial Instruments and Exchange
Act.

2.

Other reference information
The Company filed the following documents between the beginning of the fiscal year under review and the date when this Annual
Securities Report (Yukashoken-Hokokusho) was filed.
(1) Annual securities report and attached documents, and confirmation note
Fiscal year (the 65th) (from March 1, 2022 to February 28, 2023)
Submitted to the director of the Kinki Local Finance Bureau on May 30, 2023
(2) Internal Control Report and its attached documents
Submitted to the director of the Kinki Local Finance Bureau on May 30, 2023
(3) Quarterly reports and confirmation notes(The 1st quarter of 66th term) (from March 1, 2023 to May 31, 2023)
Submitted to the director of the Kinki Local Finance Bureau on July 12, 2023
(The 2nd quarter of 66th term) (from June 1, 2023 to August 31, 2023)
Submitted to the director of the Kinki Local Finance Bureau on October 12, 2023
(The 3rd quarter of 66th term) (from September 1, 2023 to November 30, 2023)
Submitted to the director of the Kinki Local Finance Bureau on January 15, 2024
(4) Extraordinary Report
Submitted to the director of the Kinki Local Finance Bureau on June 1, 2023
An extraordinary report according to the provision of Article 19, Paragraph 2, Item 9-2 (Matters that require a resolution of ageneral meeting of shareholders) of the Cabinet Office Order on Disclosure of Corporate Affairs
Submitted to the director of the Kinki Local Finance Bureau on September 4, 2023
An extraordinary report according to the provision of Article 19, Paragraph 2, Item 3 (change to a specified subsidiarycompany) of the Cabinet Office Ordinance on Disclosure of Corporate Affairs
Submitted to the director of the Kinki Local Finance Bureau on October 12, 2023
An extraordinary report according to the provision of Article 19, Paragraph 2, Item 3 (change to a specified subsidiarycompany) of the Cabinet Office Ordinance on Disclosure of Corporate Affairs(5) Share Buyback Report
A share buyback report on purchase of treasury shares according to Article 24-6, Paragraph 1 of the Financial Instruments andExchange Act of Japan(Reporting period: from February 1, 2024 to February 29, 2024)
Submitted to the director of the Kinki Local Finance Bureau on March 13, 2024
A share buyback report on purchase of treasury shares according to Article 24-6, Paragraph 1 of the Financial Instruments andExchange Act of Japan(Reporting period: from March 1, 2024 to March 31, 2024)
Submitted to the director of the Kinki Local Finance Bureau on April 11, 2024
A share buyback report on purchase of treasury shares according to Article 24-6, Paragraph 1 of the Financial Instruments andExchange Act of Japan(Reporting period: from April 1, 2024 to April 30, 2024)
Submitted to the director of the Kinki Local Finance Bureau on May 13, 2024

―122―

Part II. Information on the Reporting Company’s Guarantor, etc.
Not applicable.

―123―Independent Auditors’ Audit Report and Internal Control Audit Report
May 30, 2024
MORESCO Corporation
The Board of Directors

Grant Thornton Taiyo
LLC
Osaka Office
Designated Limited
PartnerEngagement Partner

Certified Public
Kenji Furuta
Accountant

Seal

Designated Limited
PartnerEngagement Partner

Certified Public
Tatsuya Yosinaga
Accountant

Seal<Financial statements audit>
OpinionIn order to provide the audit certification in accordance with the provision of Article 193-2, Paragraph 1 of the Financial Instruments andExchange Act, we have audited the accompanying consolidated financial statements presented under “Financial Information” of
MORESCO Corporation for the period from March 1, 2023 to February 29, 2024, which comprise the consolidated balance sheet,consolidated statement of income, consolidated statement of comprehensive income, consolidated statement of changes in equity,
consolidated statement of cash flows, important matters that are the basis for preparation of consolidated financial statements, otherNotes, and consolidated supplemental schedules.
In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of MORESCO
Corporation and its consolidated subsidiaries as of February 29, 2024, and their financial performance and cash flows for the consolidated
fiscal year then ended in accordance with accounting principles generally accepted in Japan.
Basis of Opinion
We conducted our audit in accordance with the auditing standards generally accepted in Japan. Our responsibilities under those standards
are further described in the Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We
are independent of the Company and its consolidated subsidiaries in accordance with the ethical requirements that are relevant to our
audit of the consolidated financial statements in Japan, and we have fulfilled our other ethical responsibilities in accordance with theserequirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial
statements of the current period. These matters were addressed in the context of the audit of the consolidated financial statements as awhole, and in forming the auditor’s opinion thereon, and we do not provide a separate opinion on these matters.

―124―Valuation of inventories of MORESCO Corporation
Description of Key Audit Matters and the Reasons for the
Description

Auditor’s Response

In the consolidated balance sheet for the consolidated fiscal year In order to examine the adequacy of the valuation of inventories
ended February 29, 2024 of MORESCO Corporation,of MORESCO Corporation, we performed the following audit“Merchandise and finished goods” of 3,693 million yen andprocedures.
“Raw materials and supplies” of 2,994 million yen are reported. ・ Evaluated the effectiveness of the design and operation of
As described in Notes (Important accounting estimates), theinternal control related to the valuation of inventories. In
Company calculates the balance sheet values of inventories byparticular, we focused on internal control to conduct
writing down the book values in response to decreased
individual examination of future sales prospect of slowprofitability, and those that have passed a certain period of time ormoving stock.
have exceeded a certain turnover period as of the end of the fiscal ・ Discussed with management, etc. on whether the standards
year are judged as slow-moving stock, excluding those judged tofor evaluating inventories adopted by the Company arehave the potential to be sold as a result of individual examination
appropriate for the Company’s businesses and comply within light of the future sales prospect based on past sales
the Accounting Standard for Measurement of Inventories,”
performance, etc., and the fact of decreased profitability isand examined their rationality.
reflected by using a regular write-down method of book values. ・ Questioned management, etc. about the basis of a certain
Determination of a certain period of time or a certain turnover
period and a certain turnover period set by management andperiod, which is the basis of judgment of slow-moving stock,whether or not to review the valuation policy. Also analyzed
includes judgment by management. Also, individual examination
the trends in subsequent sales results of the slow-moving
in light of the future sales prospect is conducted using orderstock in the past and verified the rationality of the valuation
estimates based on past sales performance, etc., which ispolicy.
associated with a high degree of uncertainty because the order・ Checked the accuracy of the data of receipt/payment dates,
estimates may fluctuate due to factors beyond management’s
which is the basis of calculation of a certain period, bycontrol.
verifying the consistency with the dates on the daily
As such, we determined valuation of inventories held by
manufacturing report. Also, checked the accuracy of the
MORESCO Corporation as a Key Audit Matter.
quantity of inventories consumed during the current period,
which is the basis of calculation of a certain turnover period,by verifying the consistency with the output data of theinventory management system.
・ Checked the accuracy of sales results data of the preceding
fiscal year, which is the basis of calculation of future sales
prospect, by verifying the consistency with the output data of
the sales management system.
・ To confirm the rationality of the results of the individual
examination of sales prospect, questioned management, etc.
whether the future sales prospect calculated based on the
results, etc. of the preceding fiscal year involves any othermatters to be considered in estimation.
・ Confirmed that internal approval procedure was followed forthe individual examination of sales prospect.
Adequacy of the amount of gain on bargain purchase recorded in connection with the additional acquisition of equity interests in
Wuxi MoreTex Technology Co., Ltd.
Description of Key Audit Matters and the Reasons for the
Description

Auditor’s Response

As described in Notes (Business combinations, etc.), on In order to examine the adequacy of the recorded amount of gain
September 28, 2023, the Company acquired all of the equity in on bargain purchase in connection with the additional acquisition
investment of Wuxi MoreTex Technology Co., Ltd., an equity of the equity interests in Wuxi MoreTex Technology Co., Ltd., wemethod affiliate of the Company in which the Company previously performed mainly the following audit procedures.
held a part of the equity, and made it a consolidated subsidiary ・To understand the background of the Business Combination,(hereinafter referred to as the “Business Combination”).
asked questions to management. etc. and viewed the minutes of
The amounts of identifiable assets and liabilities accepted the Board of Directors’ meetings.
through the Business Combination were 1,595 million yen and 386 ・To examine the calculation method for the acquisition price of
million yen, respectively, and the amount of gain on bargain the additional equity interests acquired when the company
purchase is 285 million yen.
became a consolidated subsidiary, viewed the equity transfer
The Company treated the Business Combination as an agreement and documents related to the calculation of theacquisition transaction. In accordance with the “Implementation equity value. At the same time, questioned management andGuidance on Accounting Standard for Business Combinations and others about the calculation method for the acquisition price
Accounting Standard for Business Divestitures” (ASBJ Guidance adopted by the Company. Also, compared the documents with
No. 10), employing the purchase method, the Company recorded vouchers regarding the acquisition and payment.
the difference between the acquisition cost and the accepted ・With respect to the accepted identifiable assets and liabilities,
identifiable assets and liabilities as a gain on bargain purchase.
obtained valuation data prepared by the Company concerning
The “Accounting Standard for Business Combinations” (ASBJ the allocation of acquisition cost and examined theStatement No. 21) requires, when negative goodwill is expected to appropriateness of the allocation of acquisition cost.
occur, a review on whether all identifiable assets and liabilities are―125―

identified and whether their acquisition costs are allocated ・To verify that the accepted identifiable liabilities were
properly. Even after this review, if the acquisition cost is still lower comprehensively understood, examined whether the significant
than the net amount allocated to assets accepted and liabilities expense items that occurred after the date of the Businessreceived, resulting in the occurrence of negative goodwill, it will Combination were identifiable liabilities subject to allocation of
be treated as profit for the consolidated fiscal year in which the the acquisition cost, and also asked management, etc. questions.
negative goodwill occurred.
・Regarding the gain on bargain purchase, obtained the
The gain on bargain purchase that occurred from the Business calculation materials prepared by the Company and examined
Combination was significant in terms of amount, and the the accuracy of calculations.
allocation of the acquisition cost required careful consideration.
Therefore, we determined that the adequacy of the amount of thegain on bargain purchase recognized in connection with theadditional acquisition of equity interests in Wuxi MoreTex
Technology Co., Ltd. was a key audit matter.

―126―

Other Statements
Other statements comprise the information included in the Annual Securities Report other than the consolidated financial statements andnon-consolidated financial statements, as well as our auditor’s report thereon. Management is responsible for the preparation anddisclosure of other statements. The Audit and Supervisory Committee is responsible for monitoring the execution of the duties of
directors related to designing and operating the process of reporting other statements.
Other statements are not included in the scope of our audit opinion regarding the consolidated financial statements, and we do not
express our opinion on the other statements.
Our responsibility with regard to the audit of the consolidated financial statements is to read through other statements and consider
whether there are any material differences between the other statements and the consolidated financial statements or the knowledge wehave obtained through our audit. Furthermore, it is our responsibility to pay attention to whether or not there are signs of material errors
in other statements, in addition to such material differences.
When we determine that there are material errors in other statements through our audit work, we are required to report such fact.
We have found no matters to report regarding other statements.
Management’s and the Audit and Supervisory Committee’s Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance withaccounting principles for consolidated financial statements generally accepted in Japan, and for designing and operating such internal
control as management determines is necessary to enable the preparation and fair presentation of the consolidated financial statementsthat are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, management is responsible for assessing the Group’s ability to continue as agoing concern, disclosing, as applicable, matters related to going concern in accordance with accounting principles generally acceptedin Japan.
The Audit and Supervisory Committee is responsible for overseeing the directors’ performance of their duties, including the design,
implementation and maintenance of the Group’s financial reporting process.

―127―

Auditor’s Responsibility for the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material
misstatement, whether due to fraud or error, based on our audit and to issue an auditor’s report that includes our opinion from an
independent standpoint. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they
could reasonably be expected to influence the decisions of users taken on the basis of these consolidated financial statements.
As part of our audit in accordance with auditing standards generally accepted in Japan, we exercise professional judgment andmaintain professional skepticism throughout the audit. We also:・ Identify and assess the risks of material misstatement, whether due to fraud or error, design and perform audit procedures responsive
to those risks. The audit procedures are selected and performed depending on the auditor’s judgment. Also, obtain audit evidence
that is sufficient and appropriate to provide a basis for our opinion.
・ Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in thecircumstances, while the objective of the audit is not to express an opinion on the effectiveness of the Group’s internal control.
・ Evaluate the appropriateness of accounting policies and the method of their application, and the reasonableness of accounting
estimates and related disclosures made by management.
・ Conclude on the appropriateness of management’s use of the going concern basis of accounting and based on the audit evidence
obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability
to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’sreport to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to express our opinion
with exclusions in the consolidated financial statements. Our conclusions are based on the audit evidence obtained up to the date of
our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern.
・ Evaluate whether the presentation and disclosures in the consolidated financial statements are in accordance with accounting
standards generally accepted in Japan, the overall presentation, structure and content of the consolidated financial statements,
including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in amanner that achieves fair presentation.
・ Obtain sufficient appropriate audit evidence regarding the financial information of the Company and its consolidated subsidiaries toexpress an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of theaudit of the consolidated financial statements. We remain solely responsible for our audit opinion.
We communicate with the Audit and Supervisory Committee regarding the planned scope and timing of the audit, significant audit
findings, including any significant deficiencies in internal control that we identify during our audit, and other matters required by theaudit standards.
We also provide the Audit and Supervisory Committee with a statement that we have complied with relevant ethical requirements
regarding independence in Japan and report all relationships and other matters that may reasonably be thought to affect our independence,
and where applicable, related safeguards.
Of matters discussed with the Audit and Supervisory Committee, we determine the ones we judge to be of particular importance to
our audit of the consolidated financial statements for the fiscal year under review and identify them as Key Audit Matters. We describe
these matters in our auditor’s report unless laws or regulations prohibit public disclosure regarding the matters, or when, in extremelyrare circumstances, we determine that a matter should not be reported because disadvantages of doing so would reasonably be expected
to outweigh the public interests of such communication.
<Internal control audit>
OpinionWe have audited, pursuant to the provisions of Article 193-2, Paragraph 2 of the Financial Instruments and Exchange Act of Japan, theinternal control report as of February 29, 2024 of MORESCO Corporation.
In our opinion, the above internal control report, in which MORESCO Corporation indicated that internal control over financial
reporting as of February 29, 2024 was effective, fairly represents, in all material respects, evaluation results of internal control overfinancial reporting in accordance with evaluation standards for internal control over financial reporting generally accepted in Japan.
Basis of Opinion
We conducted our audit in accordance with auditing standards for internal control over financial reporting generally accepted in Japan.
Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Internal Control
Report section of our report. We are independent of the Company and its consolidated subsidiaries in accordance with the ethicalrequirements that are relevant to our audit of the consolidated financial statements in Japan, and we have fulfilled our other ethicalresponsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate
to provide a basis for our audit opinion.
Management’s and the Audit and Supervisory Committee’s Responsibility for the Internal Control ReportManagement is responsible for the design and operation of internal control over financial reporting and the preparation and fairpresentation of the internal control report in accordance with assessment standards for internal control over financial reporting generally
accepted in Japan.
The Audit and Supervisory Committee is responsible for overseeing and examining the design and operation of internal control
over financial reporting.
Internal control over financial reporting may not completely prevent or detect misstatements in financial reports.
Auditor’s Responsibility for the Internal Control Report
Our objectives are to obtain reasonable assurance about whether the internal control report is free from material misstatement based on
our audit of the internal control report and to issue an auditor’s report that includes our opinion from an independent standpoint.
As part of our audit in accordance with auditing standards for internal control over financial reporting generally accepted in Japan,
we exercise professional judgment and maintain professional skepticism throughout the audit. We also:・ Perform procedures to obtain audit evidence about the results of the assessments of internal control over financial reporting in theinternal control report. The procedures for the internal control audit are selected and performed, depending on the auditor’s judgment,―128―

based on the significance of effect on the reliability of financial reporting.
・ Evaluate the overall presentation of the internal control report, including the appropriateness of the scope, procedures and results of
the assessments of internal control over financial reporting that management presents.
・ Obtain sufficient appropriate audit evidence about the results of the assessments of internal control over financial reporting in theinternal control report. We are responsible for the direction, supervision and performance of the audit of the internal control report.
We remain solely responsible for our audit opinion.
We communicate with the Audit and Supervisory Committee regarding the planned scope and timing of our internal control audit,
the results thereof, material weaknesses in internal control identified that should be disclosed and those that were remediated, and othermatters required by the standards for internal control audit.
We also provide the Audit and Supervisory Committee with a statement that we have complied with relevant ethical requirements
regarding independence in Japan and report all relationships and other matters that may reasonably be thought to affect our independence,
and where applicable, related safeguards.
Conflicts of Interest
Our firm or its engagement partners have no interest in the Company and its consolidated subsidiaries which should be disclosed incompliance with the Certified Public Accountants Act.
(Notes)1. The document presented above is a digitized copy of the original version of the Independent Auditors’ Audit Reportand Internal Control Audit Report. The original report is kept separately by the Company (the reporting company of theAnnual Securities Report).
2. XBRL data is not included in the scope of the audit.

―129―

Independent Auditor’s Audit Report
May 30, 2024
MORESCO Corporation
The Board of Directors

Grant Thornton Taiyo
LLC
Osaka Office
Designated Limited
PartnerEngagement Partner

Certified Public
Kenji Furuta
Accountant

Seal

Designated Limited
PartnerEngagement Partner

Certified Public
Tatsuya Yosinaga
Accountant

Seal

OpinionIn order to provide the audit certification in accordance with the provision of Article 193-2, Paragraph 1 of the Financial Instruments andExchange Act, we have audited the accompanying non-consolidated financial statements presented under “Financial Information” of
MORESCO Corporation for the period from March 1, 2023 to February 29, 2024, which comprise the non-consolidated balance sheet,non-consolidated statement of income, non-consolidated statement of changes in equity, significant accounting policies and other Notes,
and the non-consolidated supplemental schedules.
In our opinion, the non-consolidated financial statements present fairly, in all material respects, the financial position of MORESCO
Corporation as at February 29, 2024, and its financial performance and cash flows for the fiscal year then ended in accordance withaccounting principles generally accepted in Japan.
Basis of Opinion
We conducted our audit in accordance with the auditing standards generally accepted in Japan. Our responsibilities under those standards
are further described in the Auditor’s Responsibilities for the Audit of the Non-Consolidated Financial Statements section of our report.
We are independent of the Company in accordance with the ethical requirements that are relevant to our audit in Japan, and we havefulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained issufficient and appropriate to provide a basis for our audit opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the non-consolidated
financial statements of the current period. These matters were addressed in the context of the audit of the non-consolidated financial
statements as a whole, and in forming the auditor’s opinion thereon, and we do not provide a separate opinion on these matters.

―130―

Valuation of inventories
Statement is omitted because it is the same information as the Key Audit Matters presented in the audit report of theconsolidated financial statements.
Other Statements
Other statements comprise the information included in the Annual Securities Report other than the consolidated financial statements andnon-consolidated financial statements, as well as our auditor’s report thereon. Management is responsible for the preparation anddisclosure of other statements. The Audit and Supervisory Committee is responsible for monitoring the execution of the duties of
directors related to designing and operating the process of reporting other statements.
Other statements are not included in the scope of our audit opinion regarding the non-consolidated financial statements, and we do
not express our opinion on the other statements.
Our responsibility with regard to the audit of the non-consolidated financial statements is to read through other statements andconsider whether there are any material differences between the other statements and the non-consolidated financial statements or theknowledge we have obtained through our audit. Furthermore, it is our responsibility to pay attention to whether or not there are signs ofmaterial errors in other statements, in addition to such material differences.
When we determine that there are material errors in other statements through our audit work, we are required to report such fact.
We have found no matters to report regarding other statements.
Management’s and the Audit and Supervisory Committee’s Responsibility for the Non-Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of the non-consolidated financial statements in accordance withaccounting principles for non-consolidated financial statements generally accepted in Japan, and for designing and operating suchinternal control as management determines is necessary to enable the preparation and fair presentation of the non-consolidated financial
statements that are free from material misstatement, whether due to fraud or error.
In preparing the non-consolidated financial statements, management is responsible for assessing the Company’s ability to continue
as a going concern, disclosing, as applicable, matters related to going concern in accordance with accounting principles generally
accepted in Japan.
The Audit and Supervisory Committee is responsible for overseeing the directors’ performance of their duties, including the design,
implementation and maintenance of the Group’s financial reporting process.

―131―

Auditor’s Responsibility for the Non-Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the non-consolidated financial statements as a whole are free frommaterial misstatement, whether due to fraud or error, based on our audit and to issue an auditor’s report that includes our opinion froman independent standpoint. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate,
they could reasonably be expected to influence the decisions of users taken on the basis of these non-consolidated financial statements.
As part of our audit in accordance with auditing standards generally accepted in Japan, we exercise professional judgment andmaintain professional skepticism throughout the audit. We also:・ Identify and assess the risks of material misstatement, whether due to fraud or error, design and perform audit procedures responsive
to those risks. The audit procedures are selected and performed depending on the auditor’s judgment. Also, obtain audit evidence
that is sufficient and appropriate to provide a basis for our opinion.
・ Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in thecircumstances, while the objective of the audit is not to express an opinion on the effectiveness of the Company’s internal control.
・ Evaluate the appropriateness of accounting policies and the method of their application, and the reasonableness of accounting
estimates and related disclosures made by management.
・ Conclude on the appropriateness of management’s use of the going concern basis of accounting and based on the audit evidence
obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s
ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our
auditor’s report to the related disclosures in the non-consolidated financial statements or, if such disclosures are inadequate, to express
our opinion with exclusions in the non-consolidated financial statements. Our conclusions are based on the audit evidence obtained
up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going
concern.
・ Evaluate whether the presentation and disclosures in the non-consolidated financial statements are in accordance with accounting
standards generally accepted in Japan, the overall presentation, structure and content of the non-consolidated financial statements,
including the disclosures, and whether the non-consolidated financial statements represent the underlying transactions and events ina manner that achieves fair presentation.
We communicate with the Audit and Supervisory Committee regarding the planned scope and timing of the audit, significant audit
findings, including any significant deficiencies in internal control that we identify during our audit, and other matters required by theaudit standards.
We also provide the Audit and Supervisory Committee with a statement that we have complied with relevant ethical requirements
regarding independence in Japan and report all relationships and other matters that may reasonably be thought to affect our independence,
and where applicable, related safeguards.
Of matters discussed with the Audit and Supervisory Committee, we determine the ones we judge to be of particular importance to
our audit of the non-consolidated financial statements for the fiscal year under review and identify them as Key Audit Matters. We
describe these matters in our auditor’s report unless laws or regulations prohibit public disclosure regarding the matters, or when, in
extremely rare circumstances, we determine that a matter should not be reported because disadvantages of doing so would reasonably
be expected to outweigh the public interests of such communication.
Conflicts of Interest
Our firm or its engagement partners have no interest in the Company which should be disclosed in compliance with the Certified Public
Accountants Act.

(Notes)1. The document presented above is a digitized copy of the original version of the Independent Auditors’ Audit Reportand Internal Control Audit Report. The original report is kept separately by the Company (the reporting company of theAnnual Securities Report).
2. XBRL data is not included in the scope of the audit.

―132―