Delivering "ST Value" 💕 S.T.CORPORATION ST Value
Since 1946, S.T. CORPORATION has worked under a credo of Service and Trust to create markets that anticipate customer needs. An area in which we particularly excel is specialty niche markets, where we offer mothproofing agents, deodorizers, air fresheners and other products necessary to customers' daily comfort. In Japan, automatic deodorizers and air fresheners, products we have been developing since 2001, are enjoying growing popular recognition and becoming the new growth drivers of market expansion. In sum, S.T. CORPORATION develops Unparalleled  products that are the CUSTOMERS'  ChoiCe and creates new value. CONTENTS

Our Road Map
Basic Strategies
A strong, agile company
Further strengthening S.T. CORPORATION as a compact though muscular company in order to achieve sustainable, profitable growth Forward-Looking Statements This annual report contains forward-looking statements regarding S.T. CORPORATION's future plans, strategies and performance. Such forward-looking statements are based on information available as of the issuance of this annual report. Please note that forward-looking statements may differ greatly from the Company's astual performance que to the economic situation, busi- ness environment, market demand and foreign currency exchange rate fluctuations in the future. Note: Years in graphs and charts are based on S.T. CORPORATION's fiscal year ending March 31 unless otherwise designated. e 1 Market Leaders Note: Information is based on data of S.T. CORPORATION (tallied for the period from January to December. Only disposable warmers are tallied for the period from April to Mar 2
Financial Highlights
S.T. CORPORATION and consolidated subsidiaries
(millions of yen) 3 Staying True to Core Values Aiming to Enhance Our Presence
S.T. CORPORATION's performance was on the upswing in the first half of the fiscal year ended March 31, 2010. The annual results, however, did not show sufficient recovery due to sluggish sales in the second half of the year. Undaunted, we approached the situation as a good opportunity, setting up new strategies that garnered an enthusiastic response. Under a "design revolution" growth strategy, we began with the revamp- ing of the design of Shoshu-Plug, our flag- ship brand of automatic electrically powered deodorizers and air fresheners. These efforts made significant contributions to our overall performance while changing the mind-set of our employees. In the fiscal year ending March 31, 2011, we will kick off a “fragrance revolution” and “business innovation” in addition to the design revolution. Aiming for sustainable, profitable growth, we will make across-the- board efforts. We sincerely ask for your con¬ tinued understanding and support. President and Chief Executive Officer Chairman of the Board
What is your assessment of this past year's performance?
Despite the lack of recovery in monetary terms, I am encouraged by the positive feedback to our design revolution growth strategy. After I resumed the position of president on April 1, 2009, we put all our spirit into implementing this new strategy. As a result, consolidated net income for the fis- cal year ended March 31, 2010, rose 4.0% year on year to ¥1,119 million. However, although both ROE and ROA showed slight upturns, S.T. CORPORATION did not make a full recovery, recording year- on-year decreases in consolidated net sales of 3.0% to ¥43,546 million and oper- ating income of 9.9% to ¥2,246 million. This was mainly attributable to the spread of the new influenza virus as well as unusu- al weather. Meanwhile, in terms of strategy, we received positive feedback on our design revolution efforts. The implementation of this latest strategy brought with it a good opportunity for us to review business oper- ations as we pursued the primary mission of the strategy—enhancing brand value through the development of products that customers really want—and we were able to reinvigorate the working environment and accelerate business management.
Please tell us about the design revolution growth strategy.
A refinement of the basic strategy of "development of unparalleled products," the design revolution growth strategy aims to shift our focus from competition based on price to that based on value. When I resumed the position of president, l set the target of S.T. CORPORATION becoming a strong, agile company and implemented the basic strategies of “select and focus,” “development of unparalleled products" and "agile management." These strategies them- selves spring from our fundamental policy of becoming a "compact though muscular company." We believe that underlying the ongo- ing weak business conditions is not cus- tomer aversion to high prices but a lack of products that customers really want. Therefore, we set out to develop prod- ucts customers really want through the implementation of the design revolution strategy, differentiating our products with enhanced value to win market competi- tion. Specifically, we revamped product designs while keeping an eye on such considerations as shape, user friendliness, quality and price. As a result, total Shoshu-Plug brand shipments in the year under review surged 50% year on year. Compact though Muscular Company Striving to become a strong com¬ pany producing a minimum of waste by applying select and focus as well as pursuing the develop- ment of unparalleled products Aiming to be stronger and more agile company by applying flexible management to ongoing select and focus efforts and developing unpar- alleled products 5 What are S.T. CORPORATION’s objectives for the fiscal year ending March 31, 2011? While making ongoing efforts to implement our fiscal 2010 strategies, we will step up our focus on bringing about a fragrance revolution and a business innovation with the aim of growing revenues. In the fiscal year ending March 31, 2011, we will continue to carry out the design revolution while pushing forward the fra- grance and business innovation. In the domestic deodorizers and air fresheners market, there is increasing demand for refined scents in addition to the conventional deodorant functions. In response, we have embarked on a fra- grance revolution led mainly by our new female executive officer and Group com- pany Japan Aroma Laboratory Co., Ltd. Our aim is to offer higher quality fra- grances that, by providing sophistication in design and scent, will differentiate our products. The business innovation, on the other hand, is aimed at implementing business restructuring based on a review of our development structure that we conducted in the previous fiscal year. The focus of this innovation is to create added value to meet customer needs, generating syner- gies from the combination of product development and business capabilities. Please tell us about your medium- to long-term management strategies. Even though Japan is generally considered to be a mature market, I consider it a goldmine. Our aim here is principally to expand our Air Care business. Overseas, our focus will be on expanding our market presence in Southeast Asia. Taking a medium- to long-term perspec- tive, our approach to the three basic strat- egies that we have had in place since the previous fiscal year remains unchanged. Generally, the Japanese market for daily necessities is said to be mature, but l believe it is a goldmine. In Japan, women are in charge of household budgets; there- fore, there is room for market growth if we concentrate on developing fresh new products that appeal to women. To this end, we need to (1) develop products through the design revolution that custom- ers feel an urge to buy (value competition); (2) nurture the promising market of auto- matic electrically powered deodorizers and air fresheners; and (3) cultivate new business fields in pursuit of making strong products even stronger. Overseas, we will strive to expand existing businesses to achieve an overseas sales ratio of 10%. To this end, we will introduce products appro- priate to individual countries and regions while aggressively forming strategic alli- ances with companies that are familiar with the local markets. What do you envision as the ideal future for
Aiming to become the “No. 1 Company in Global Niche Markets," we will strive to realize sustainable, profitable growth. Since its founding, S.T. CORPORATION has been introducing new products based on the basic strategies of developing unparalleled products and creating new markets. As a result, a number of our products—notably, Mushuda mothproof- ing agents, Drypet dehumidifiers and Dashu-Tan refrigerator deodorizers—have become leading products in global niche markets. Many of our other mainstay prod- ucts also command dominant shares in the Japanese market. Supported by these strengths, S.T. CORPORATION will make across-the- board efforts to become the No. 1 compa- ny in every one of its product categories in the global market and thereby ensure sus- tainable, profitable growth. Finally, do you have a message for your shareholders and investors? Enhancing corporate value through sustainable, profitable growth, we will return value to shareholders and investors. S.T. CORPORATION considers it impor- tant to return corporate value enhanced through sustainable, profitable growth to shareholders and investors. Therefore, we will continue to strive toward proactive shareholder returns. While securing stable dividend distribution, we will implement a performance-based dividend policy. For the fiscal year ending March 31, 2011, we intend to set the annual dividend at ¥22 per share (for a consolidated payout ratio of 42.5%), on par with the fiscal year under review. S.T. CORPORATION adheres to a cor- porate slogan of “refreshing the air.” In other words, we are committed to doing things that no other company in the world does and, through these revolutionary activities, to enhancing our presence as a company that is refreshing the air amid a society in the midst of upheaval. We sin- cerely ask for your continued understand- ing and support. 7
S.T. CORPORATION believes that underlying the ongoing weak business conditions is not customer aversion to high prices but a lack of products that customers really want. Our solution to this situation has been to establish a "design revolution" growth strategy focusing on expanding our market by developing products with strong customer appeal. In this special feature, S.T. CORPORATION introduces three ways it is achieving value under the design revolution strategy as well as how the Company has evolved in the last year under the guidance of its president Mr. Takashi Suzuki, who resumed the position after having stepped down in 2007. Developing “Must Have” Products Sales Promotion Activities Aimed at Invigorating In-Store Operations Global Business Development through Select and Focus Topics Entering into an Alliance with FUMAKILLA LIMITED
With an emphasis on design revolution, our focus is on raising our prod- ucts from the utilitarian to the interior décor level. To this end, we invited the globally renowned designer and president of nendo inc., Mr. Oki Sato, to revamp our product designs.
■ Creating Products That Enhance Interiors
In pursuit of developing unique products that seize people’s imagination not only when they hear about them but when they see and use them, S.T. CORPORATION introduced products that have come to boast dominant shares in niche markets. In 2007, we changed our corporate name from S.T. Chemical Co., Ltd. to S.T. CORPORATION and took up the challenge of offering flexible ideas—ideas that are not limited to "chemicals." In 2009, when Mr. Suzuki resumed the position of president after having stepped down in 2007, we set in motion the design revolution growth strategy emphasizing stylish products that customers will welcome into their homes as complementary to their interior décor.
■ Design Value Gives an Edge
Round one of the design revolution spotlighted Shoshu- Plug, automatic electrically powered deodorizers and air fresheners with the highest growth potential among all our products. Such deodorizers and air fresheners account for around half of European and U.S. markets and we expect the Japanese market, having grown  10% in 2009, to expand further. Prompted by the popularity and market potential of these deodorizers and air fresh- eners, we revamped product designs while keeping an eye on such considerations as user friendliness and pric- ing. For Shoshu-Plug, the resulting design is simple and invites touch while being less expensive to produce. The success of the new design is evidenced by the 50% surge in total Shoshu-Plug brand shipments in the year under review.
Making Strong Products Even Stronger—
Full Model Changes for Existing Core Products
Round two of the design revolution involved the popu- lar redesign of Shoshu-Riki, the Company's mega brand. We also launched the highly successful new Virus Attacker ion generator. In 2010, S.T. CORPORATION will instigate a fragrance revolution aspiring toward more refined scent offerings, with the aim of furthering business growth. S.T. CORPORATION's Product Development
In addition to efficient TV sales promotions, S.T. CORPORATION held such events to introduce new products as “Design Museum” with the aim of cultivating new users and communication methods with consumers. Invigorating In-Store Operations Through Unique Sales Promotion Activities Aiming to invigorate in-store operations, S.T. CORPORATION carries out sales promotion activi- ties through a combination of unique TV commer- cials, in-store staff, the supply of sales promotion tools and various other PR and Internet activities. For example, we held an event to introduce new products as part of the design revolution to culti- vate new users and communication methods, receiv- ing significant feedback. On the earnings front, we are also optimizing marketing costs, including advertising and sales expansion costs. Introducing New Products to Cultivate New Users and Communication Methods In round one of the design revolution, S.T. CORPORATION invited media to its "Design Museum" in September 2009 to promote communi- cations with users who have an affinity with design. In the Design Museum, the Company set up a booth for users to experience a new perspective on the new products. In round two, the Company held a press conference and event for bloggers in Tokyo's trendy Aoyama district in March 2010 in pursuit of word-of-mouth marketing through their weblogs. Both events received positive feedback. 10
Global Business Development
through Select and Focus
S.T. CORPORATION pursues business expansion through alliances in the United States and Europe while striving to boost its market presence in the deodorizer and air freshener markets of Southeast Asia.
■ Global Business Development
Since establishing its first subsidiary in Thailand in 1988, S.T. CORPORATION has been setting up production bases throughout Southeast Asia. In 2006, the Company began selling unique products that previously were not available in the United States. The following year, the Company estab- lished a joint venture in South Korea to sell its mainstay products. At present, sales are sluggish due to the impact of the 2008 financial crisis. Renewing our commitment to a select and focus basic strategy emphasizing specific markets, S.T. CORPORATION is planning to concentrate on Southeast Asian markets.
Entering into an Alliance
with FUMAKILLA LIMITED
In May 2010, S.T. CORPORATION entered into a capi- tal and business alliance agreement with FUMAKILLA LIMITED intended to enhance business and profitability while securing a better partnership.
Household Environment-Related Products Accounting for 45% of net sales, the Air Care business is S.T. CORPORATION's mainstay business and possesses considerable growth potential. Major products include deodorizers and air fresheners designed to eliminate odors in the living room, toilet and closets as well as deodorizers for refrigerators. Overview: Despite the stagnant market, S.T. CORPORATION is confident due to the strength of its innovative product lineups, encompassing the mega brand Shoshu-Riki (Air Wash-Liquid overseas); Shoshu-Plug, which realizes high deodorizing capability driven by electric power; Shoshu-Pot (Air Wash-Gel overseas), a decorative gel-type deodorizer; and Dashu-Tan, a powerful refrigerator deodorizer that uses charcoal. During fiscal 2010, sales of Shoshu-Plug, Shoshu-Riki and Dashu-Tan grew, but sales of other existing products remained weak. As a result, sales in this core category declined 1.1% year on year to ¥19,573 million. Future Strategy: Focusing on automatic electrically powered deodorizers and air fresheners, we will offer "more refined" fra- grances and new product applications with the aim of cultivating new demand. Mothproofing and Hygiene-Related Products Overview: The mothproofing agent market remained stable during the fiscal year under review. In this market, mothproofing agents under our flagship Mushuda and Neopara Ace brands boast a dominant share. During the fiscal year under review, overall sales were weak, reflecting store shelf space being taken up by products related to germ control, such as surgical masks, due to the spread of the new influenza virus. In addi- S.T. CORPORATION has conducted business in the Cloth Care category since its founda- tion, and this category serves as a major revenue source. Japan has four distinct seasons and this has given rise to the habit of changing over wardrobes with the transition of the seasons. Mothproofing agents thus remain key products as they protect clothes in storage. tion, unpredictable weather interfered with the usual timing of the seasonal wardrobe changeover for many. As a result, sales in this core category fell 5.0% year on year to ¥9,413 million. Future Strategy: With the aim of cultivat- ing and expanding new demand, we will propose new ideas for products for the younger generation, who tend not to use mothproofing agents. Household Environment-Related Products As the pioneer of the Humidity Care market, S.T. CORPORATION has taken a leading role since 1981. Our air dehumidification products—a uniquely Japanese product category— address the problems posed by extreme humidity, a major issue in Japan. We offer a wide variety of items, many with such value - added features as a deodorizing effect. Overview: Market conditions remained flat. Our extensive lineup in this business includes our top-brand Drypet dehumidifier and Bincho-Tan Drypet boasting deodorant effects on top of its dehumidifying func- tions. We also provide an extensive range of products, including eco-friendly refill- type items and sheet-type products. During the fiscal year under review, sales of our Drypet Skit disposable dehumidifier were brisk. However, sales of other existing prod- ucts were sluggish and, accordingly, sales in this category edged down 0.7% year on year to ¥2,930 million. Future Strategy: We will cultivate new demand by proposing new product applica- tions. For example, we will expand the sales of refill-type Drypet Compact dehumidifiers in pursuit of customer retention. Mothproofing and Hygiene-Related Products Overview: Sales in this segment edged up due to the spread of the new influenza virus in 2009 despite the flat market. We offer the Family series of household gloves as well as industrial-use gloves with such value-added features as strengthened fin- gertips and impregnation with skin-sooth- ing agents. During fiscal 2010, domestic sales of nitrile rubber industrial-use gloves were sluggish due to the deterioration in corporate earnings. However, sales of medi- um-weight vinyl gloves for overseas mar- kets and lightweight household rubber gloves for the  domestic market were brisk. As a result, sales in this category rose 3.2% year on year to ¥3,311 million. Future Strategy: We will strive to strength- en and develop product brands while culti- vating and expanding new demand. Net Sales (millions of yen) 4,000 ..... The Home Care category provides niche cleaning products and a range of unique new items, including cleaners for machine washing tubs, baths and dishwashers, an insect repel- lent for rice storage use and new products to eliminate viruses and odors. Overview: S.T. CORPORATION's flagship Home Care products encompass such niche cleaning products as Ultra-Powers Washing Tub Cleaner; Kome-Touban, which protects stored rice from insect infestation; and the new Virus Attacker ion generator, which eliminates airborne viruses and odors. Sales of Nexcare brand surgical masks were termi- nated in June 30, 2009, countering the posi- tive effects of steady sales of Kome-Touban insect repellent on performance. As a result, sales in this category dropped 16.3% year on year to ¥3,040 million. Future Strategy: Aiming for further growth, we will make continuing efforts to proac- tively cultivate new business areas. Net Sales (millions of yen) Although sold exclusively as items for winter use, products in the Thermal Care category play a role in maintaining retail shelf space in conjunction with mothproofing agents purchased mainly in spring and autumn. Main products include disposable pocket and shoe warmers. Overview: The market for Thermal Care products is vulnerable to fluctuations in weather and highly competitive as it is diffi- cult to differentiate among competing prod- ucts. Since July 2003, we have been marketing products produced through alli- ances, such as disposable warmers sold under Mycoal Co., Ltd.’s Onpacks brand, tak- ing pride in the quality and lineup of our products, particularly those for warming the feet. During the fiscal year under review, sales in this category decreased 2.0% year on year to ¥5,279 million due to a mild winter. Future Strategy: We will strive to further strengthen and develop product brands while cultivating and expanding new demand.
Guaranteeing Value
S.T. CORPORATION gives top priority to implementing corporate governance that achieves fair and stable organizational operations to increase shareholder value. Also, the Company considers it important to improve corporate value by maintaining harmonious relations with the Group's various stakeholders. To ensure the accurate implementation of these basic principles, the Company adopted the Company- with-Committees system, thereby making steady progress in the improvement of management quality.
■ Corporate Governance
In 2004, S.T. CORPORATION shifted from the company with corporate auditors system to the current committee-based system, establishing Nomination, Audit and Compensation Committees within the Board of Directors. The Board of Directors is the principal decision-making body and nominates execu- tive officers to undertake actual business execution. The term of office for both directors and executive officers is one year, and directors are elected at the General Meeting of Shareholders every year. This system allows the Board of Directors to concentrate on decision-making and supervisory functions by delegating much business execution authority to executive officers and separating the management super- vision and business execution functions. This ensures agile decision making and flexible business execution. Structure for Management Supervision and Business Execution S.T. CORPORATION's Board of Directors, comprising three cor- porate directors and five outside directors, holds regular meet- ings on a quarterly basis, with extraordinary Board of Directors' Meetings convened as necessary. Of the nine executive officers, three, including the president, are concurrently directors. In principle, Executive Officer Meetings are held biweekly to expedite the decision-making process and to achieve flexible business execution. S.T. CORPORATION's directors monitor executive officers' business execution through Board of Directors' Meetings and Audit Committee activities. Outside directors constitute the majority of the Nomination and Compensation committees, which have five and three members, respectively. All four of the Audit Committee's members are outside directors as are the chairs of all three committees. All members of the three committees hold concurrent positions in other committees. Outside directors are chosen for knowledge and experience in such fields as corporate management, finance, tax accountan- cy, the law and marketing, and they play an appropriate role in strengthening monitoring and supervisory functions as well as in enhancing the objectivity, transparency and fairness of cor- porate management. Corporate Governance Structure
Audit by Audit Committee and
Internal Audit Division
The Audit Committee participates in Board of Directors' and other important meetings, receives business execution reports from executive officers, examines financial reports and other documents, and conducts audits on a project-by-project basis. To ensure audit effectiveness, the Audit Committee visits opera- tional sites with the staff of the division responsible for internal audits, and shares timely opinions with the chief executive offi- cer and accounting auditors. The Internal Audit Group is under the direct control of the chief executive officer, is responsible for internal audits and implements annual internal audits. Also, on an as necessary basis, the Audit Group conducts special audits as requested by the Board of Directors, Audit Committee or the chief executive officer. Currently, S.T. CORPORATION's accounting auditor is Ernst & Young ShinNihon LLC, a member firm of Ernst & Young Global Limited, an independent auditor that conducts accounting audits and internal control audits.
■ Internal Control System
S.T. CORPORATION considers the establishment and develop- ment of a solid internal control system to be the core of its cor- porate governance. Accordingly, the Company has been striving to refine the Group's overall internal control system in recent years by focusing on compliance and risk management systems as well as internal control over financial reporting, which oper- ates in line with the requirements of the Corporation Law and Financial Instruments and Exchange Law. Regarding compliance, S.T. CORPORATION has established a code of conduct for all members of the Group, appointed a compliance officer at each Group company, and set up Groupwide compliance rules to ensure a unified approach. In the area of risk management as well, internal regulations have been stipulated, a Groupwide Risk Management Committee has been established, and a set of rules has been laid down to prepare against the sudden outbreak of risk. In 2006, S.T. CORPORATION began building an internal con- trol system over financial reporting — carried out mainly by the Accounting Group and Internal Audit Group under an executive officer in the Corporate Staff Division—in line with the Financial Instruments and Exchange Law. Within the Law, which came into effect from September of 2007, the portion concerning the internal control report system became effective from April, 2008. The project enabled management to assess and confirm the effectiveness of the system, which was verified by the accounting auditors as valid, for the years ended March 31, 2009 and 2010.
Directors and Executive Officers (As of June 18, 2010)
Board of Directors Takashi Suzuki ★ The Chairman of the Board of Directors Teruyuki Maehara *●◆ Outside Director Certified Tax Accountant, Yaesu Sogo Jimusho (tax and accounting office) Mitsuko Miyagawa ★◆ Outside Director Partner, TMI Associates (law office) Osamu Mizorogi ●◆ Outside Director Kanichi Suzuki ★ Outside Director Naoto Onzo ◆ Outside Director Dean, School of Commerce, Waseda University Kanzo Kobayashi ★ Director Hirohide Shimada ● Director ★ Member of Nomination Committee ● Member of Compensation Committee ◆ Member of Audit Committee Red symbol indicates committee chair
Executive Officers
Takashi Suzuki Representative Executive Officer President, Chief Executive Officer Kanzo Kobayashi Senior Executive Vice President In charge of Manufacturing Division, overseas business strategy, and International Business Division Hirohide Shimada Senior Executive Officer In charge of Corporate Staff Division Takahiko Kato Senior Executive Officer Senior General Manager of Sales Division Noriaki Kageura Senior Executive Officer In charge of Group business strategy Masakazu Kinoto Executive Officer Deputy General Manager of Sales Division Kumiko Ishikawa Executive Officer In charge of CSR promotion and Legal Group Yo Kozuki Executive Officer In charge of Marketing Division Takako Suzuki Executive Officer In charge of Customer Service Division, fragrance design and new businesses
Valuing the Community
S.T. CORPORATION strives for growth with sustainable long-term earnings achieved by providing comfort and excitement to homes through its products and services. The Company also places top management priority on satisfying all stakeholders, including shareholders, customers, business partners, local commu- nities and employees, while increasing its corporate value.
■ Corporate Philosophy
The mission statement of S.T. CORPORATION is "Sincerity." All our business activities enshrine the basic concepts of our management philosophy. Based on these concepts, we are building an optimum and fair business management system and enhancing our corporate governance. ■ Reducing Environmental Burdens In 2008, S.T. CORPORATION was accredited with the Eco-Ship Mark by the Maritime Bureau of Japan's Ministry of Land, Infrastructure, Transport and Tourism. Aiming to raise public awareness of modal shift, the Eco-Ship Mark System facilitates a modal shift to marine transport by granting this certification to cargo own- ers and distributors who have met or surpassed a minimum ■ Living Together with Local Communities With the aim of using resources efficiently and communicating with and contributing to local commu- nities, the S.T. CORPORATION plants at Honjo in Saitama Prefecture, Iwaki in Fukushima Prefecture and Kita-Kyushu in Fukuoka Prefecture held bar- gain sales of products discontinued due to design changes for the benefit of local residents and donated part of the proceeds to the social welfare councils of the three cities. ■ Campaign to Support Musicals The Company proactively supports cultural activities, such as musicals and stage plays. Since 1998, the Company has sponsored a cam- paign to stage invitation-only pro- ductions of musicals. In 2009, the cumulative total of invited guests surpassed 170,000 people. In 2010, S.T. CORPORATION plans to present the musical Anne of Green Gables in eight major cities nationwide in its "Heartbeat of 20,000 People Tour." ■ Toward Sustainable Growth To achieve sustained growth, the Company considers it important to nurture the minds and bodies of personnel. S.T. CORPORATION is implementing various initiatives to improve workplace environments, thereby enabling personnel to acquire the capabilities to both develop groundbreaking ideas and also become the next gen- level of environment-friendly marine transport utilization. eration of managers. These initiatives include reassessing busi- ness practices to remove the need to work overtime, expanding the availability of shortened working hours for childcare providers, improving the rate of annual paid holiday usage, providing continued support for our round-the-world staff-training team and promoting the use of young managers. S.T. CORPORATION received the first commendation of this with the aim of reducing environmental burdens. certification in 2008 as a company that contributes to envi- ronment preservation activities. Spurred by this achieve- ment, S.T. CORPORATION will further promote modal shift,
CONTENTS

O 19
| Sales Overview
In the fiscal year ended March 31, 2010, the Japanese economy saw a gradual recovery on the back of an increase in exports and production due to progress in inventory adjustments both in Japan and overseas. Although corporate earnings dropped substantially in the first half of the fiscal year under review, there were signs of improvement in the second half of the year, reflecting a recovery in exports and the effects of cost reduction efforts on raw material and personnel expenses. An upswing in corporate business confidence thus began to emerge mainly in the manufacturing industry. However, personal consumption remained stagnant amid a severe employment and income environment, and the future of the economy remains uncertain as concerns about deflation rise. Under such circumstances, S.T. CORPORATION made "select and focus," "development of unparalleled products" and "agile management" its three basic strategies with the aim of strengthening its mainstay brands. In addition, the Company launched the design revolution growth strategy as a part of its initiative to switch from price competition to value competition, releasing new innovative products with more sophisticated designs under the Shoshu-Plug brand while pursuing sales pro- motion activities. As a result, the Company's strategic products enjoyed increased market shares. On the performance front, however, sales in the Cloth Care and Home Care categories were weak due to stagnant personal consumption, unseasonable weather and the loss of store shelf space due to the spread of the new influenza virus. Consolidated net sales thus fell 3.0% year on year to ¥43,546 million. By business segment, the Mothproofing and Hygiene-Related Products saw sales in the Cloth Care category down 5.0% year on year, sales in the Hand Care category rise 3.2% and sales in the Thermal Care category decline 2.0%. In the Household Environment-Related Products, sales in the Air Care category were down 1.1% year on year, sales in the Humidity Care category edged down 0.7% and sales in Home Care cate- gory dropped 16.3%. (For details, please see the "At a Glance" section on pages 13 through 15 of this report.) ■■ Cost of Sales, SG&A Expenses and Operating Income The cost of sales decreased 4.3% compared with the previous fiscal year to ¥25,151 million due to the manufacturing division's efforts to cut manufacturing costs. The cost of sales ratio edged down 0.8 of a percentage point from the previous fiscal year to 57.8%. Despite efforts to reduce overall expenses, selling, general and administrative expenses edged up 0.3% to ¥16,149 million due to the aggressive spending related to marketing. As a result, operating income fell 9.9% year on year to ¥2,246 million. ■ Other Income & Expenses, Pretax and Net Income Compared with the previous fiscal year, there was a slight improvement in other income and expenses that mainly reflect- ed an increase in net financial income (interest and dividends received less interest expense), equity in profit of affiliates and a decrease in loss on sales of property, plant and equipment. As a result, income before income taxes and minority interests decreased only 1.3% year on year to ¥1,943 million, and net income grew 4.0% to ¥1,119 million. Basic net income per share stood at ¥51.25, up from ¥49.32 in the previous fiscal year (diluted net income per share increased to ¥51.24 from ¥49.28 in the previous fiscal year). The net income margin improved from 2.4% in the previous fiscal year to 2.6%, while ROE also improved, edging up from 5.8% to 5.9%.
■ Financial Position
Total assets as of March 31, 2010 stood at ¥29,029 million, up ¥1,413 million compared with a year earlier. Current assets rose ¥1,549 million to ¥17,667 million, while non-current assets declined ¥136 million to ¥11,363 million. The increase in current assets was mainly attributable to an increase in cash and time deposits. Total liabilities grew ¥476 million compared with a year earlier to ¥9,064 million due mainly to an increase in trade payables. It should be noted that the Company holds no interest-bearing debt, maintaining a healthy financial standing. Total net assets also grew, increasing ¥936 million from the previous fiscal year-end to ¥19,966 million, primarily due to an increase in retained earnings and an unrealized holding gain on other securities, net of taxes. The equity ratio* was down from 67.5% in the previous fiscal year-end to 67.2%. However, net assets per share increased, ris- ing from ¥853.81 to ¥892.46. * For the purposes of calculation, equity is the sum of total shareholders' equity and total valuation, translation adjustments and other. ■■ Capital Expenditures and Depreciation and Amortization Capital expenditures for the fiscal year under review contracted from ¥716 million in the previous fiscal year to ¥673 million. The Company continued to focus over 80% of such expenditures on the Household Environment-Related Products segment. Depreciation and amortization, including that related to intangible assets, rose from ¥858 million in the previous fiscal year to ¥922 million.
■ Cash Flows
Net cash provided by operating activities totaled ¥2,263 mil- lion, up ¥715 million year on year. This primarily reflected the increase in depreciation and amortization, a decrease in trade notes and accounts receivable and an increase in trade pay- ables and accrued expenses. Net cash used in investing activi- ties was ¥126 million, down ¥477 million from the previous fiscal year, mainly due to a decrease in payments into deposits (more than three months). Net cash used in financing activities amounted to ¥499 million, down ¥31 million year on year mainly due to a decrease in payments of dividends to minority share- holders. As a result, cash and cash equivalents as of March 31, 2010 stood at ¥7,170 million, reflecting the net increase of ¥1,649 million from the previous fiscal year-end.
■ Dividends, Return to Shareholders
Taking into consideration net income and the realization of shareholder profit, the Company has decided to distribute a fis- cal year-end dividend of ¥11 (¥22 for the full year), on par with the previous fiscal year's payment. The annual dividend payout ratio was thus 42.9% on a consolidated basis. Thanks to the acquisition of its own shares, the Company now possesses treasury stock totaling 7,647,667 shares (25.9% of total shares issued). S.T. CORPORATION will continue to place emphasis on returns to shareholders.
 Business and Operational Risks
Factors that could possibly impact the Group's operating results, financial position and stock prices include: an escalation in raw material prices; the impact on manufacturing operations of natural disasters and changes in international political or other conditions; sales fluctuations due to unseasonable weath- er; and the failure of initiative to raise new businesses. Forward- looking statements in this annual report are based on assumptions made by the Company as of March 31, 2010.
nolidated subsidia or the years ended March 31, 2010 and 2009

1 . SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
(a)  Basis of presentation
S.T. CORPORATION (the "Company") and its domestic subsidiaries maintain their books of account in conformity with accounting princi- ples generally accepted in Japan, and its overseas subsidiaries main- tain their books of account in conformity with those of their countries of domicile. Effective April 1, 2008, the Company adopted the "Practical Solution on Unification of Accounting Policies Applied to Foreign Subsidiaries for Consolidated Financial Statements" (PITF No. 18 issued by the ASBJ on May 17, 2006). In accordance with PITF No. 18, the accompanying consolidated financial statements for the years ended March 31, 2010 and 2009 have been prepared by using the accounts of foreign consolidated subsidiaries prepared in accordance with either International Financial Reporting Standards (IFRS) or accounting principles generally accepted in the United States as adjusted for certain items including those for goodwill, actuarial differences and capitalized development costs. See Note 3. The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accept- ed in Japan, which are different in certain respects as to the applica- tion and disclosure requirements of IFR$, and are compiled from the consolidated financial statements prepared by the Company as required by the Financial Instruments and Exchange Act of Japan. In preparing the accompanying consolidated financial statements, certain reclassifications have been made to the consolidated finan- cial statements issued domestically for readers outside Japan. The notes to the consolidated financial statements include information which is not required under accounting principles generally accept- ed in Japan but is presented herein as additional information. Furthermore, certain amounts in the prior year's financial statements have been reclassified to conform to the current year's presentation.
(b) Principles of consolidation and accounting for invest-
ments in unconsolidated subsidiaries and affiliates
The accompanying consolidated financial statements include the accounts of the Company and any significant companies controlled directly or indirectly by the Company. Companies over which the Company exercises significant influence in terms of their operating and financial policies have been accounted for by the equity meth- od. As of March 31, 2010, the number of consolidated subsidiaries and affiliates accounted for by the equity method were five and three (six and three in 2009), respectively. S.T. Mycoal Co., Ltd. was liquidated and accordingly, accounts of it were not included in con- solidation from the current fiscal year. All significant inter-company balances and transactions have been eliminated in consolidation. Investments in subsidiaries and affiliates which are not consolidat- ed or accounted for by the equity method are carried at cost or less. Where there has been a permanent decline in the value of such investments, the Company has written down the investments. Assets and liabilities of the consolidated subsidiaries acquired before April 1, 1999 were initially valued at cost at the time of acqui- sition. It is the Company's policy to value assets and liabilities of subsidiaries acquired on or after April 1, 1999 at fair value when the Company obtains control over such subsidiaries; however, the Company has not acquired any subsidiaries since April 1, 1999.
(c)   Accounting period
The accounting period of the Company begins on April 1 and ends on March 31 of the following year. The two overseas subsidiaries have fiscal years ending on December 31. The necessary adjust- ments for significant transactions, if any, during the intervening peri- od are made on consolidation.
(d) Translation of foreign currency transactions and
financial statements
Monetary assets and liabilities denominated in foreign currencies are translated into yen at the rates of exchange in effect at the bal- ance sheet date and the accounts of the overseas consolidated sub- sidiaries are translated into yen at the rates of exchange in effect at the balance sheet date. Foreign exchange gains and losses are credited or charged to income and translation adjustments are included in net assets.
(e)  Marketable securities and investment securities
Other securities with determinable market value are carried at mar- ket value with any changes in unrealized holding gain or loss, net of the related deferred income tax assets or liabilities, included in net assets. Other securities without determinable market value are stat- ed at cost determined principally by the moving-average method and the cost of other securities sold is principally computed based on the moving-average method. During the years ended March 31, 2010 and 2009, the Company and its consolidated subsidiaries did not have any trading securities.
(f)
Inventories
Until March 31, 2008, inventories of the Company and its domestic consolidated subsidiaries were stated at cost. Effective the fiscal year ended March 31, 2009, the Company and its domestic consoli- dated subsidiaries have changed the measurement method to the lower of cost or net selling value. Cost is determined by the average method. See Note 3. Inventories of overseas consolidated subsidiaries are stated at the lower of cost or market, cost being determined by the average cost method.
(g) Property, plant and equipment, except for leased
assets, and depreciation
Property, plant and equipment are stated at cost. Depreciation of property, plant and equipment of the Company and its domestic subsidiaries, except for buildings (excluding structures attached to the buildings) acquired on or after April 1, 1998, is computed by the declining-balance method in conformity with the Corporation Tax Law of Japan. Depreciation of property and equipment of overseas subsidiaries and buildings (excluding structures attached to the buildings) acquired on or after April 1, 1998 of the Company and domestic subsidiaries is computed by the straight-line method. The estimated useful lives of the major depreciable assets are as follows: Buildings and structures 3 to 56 years

(Additional information)
Effective the fiscal year ended March 31, 2009, the Company and its domestic consolidated subsidiaries have changed the depreciable life of certain machinery and equipment according to the Corporation Tax Law as amended. As a result of the adoption of the new depreciable life, operating income and income before income taxes and minority interests for the year ended March 31, 2009 decreased by ¥16 million and ¥17 million, respectively. The effect on the business segment informa- tion was immaterial.
(h)  Intangible assets, and long-term prepaid expenses
Intangible assets and long-term prepaid expenses, except for leased assets, are amortized by the straight-line method. Cost of software purchased for internal use is amortized by the straight-line method over a period of five years, the useful life applicable to commercially available software.
(i)
Leases
Noncancelable lease transactions that transfer substantially all the risks and rewards associated with the ownership of the leased assets are accounted for as finance leases. All other lease transactions are accounted for as operating leases and related payments are charged to income as incurred. Finance leases entered into before April 1, 2008 of the Company and its domestic subsidiaries are accounted for as operating leases, except for those which transfer ownership of the leased assets to the lessee. Leased assets accounted for as finance leases are depreciated on the straight-line method over the lease periods with no residual value. (i)
Allowance for doubtful accounts
The allowance for doubtful accounts is provided based on past experience for normal receivables and on an estimate of the collect- ability of receivables from companies in financial difficulty.
(k)  Allowance for sales returns
The allowance for sales returns is generally provided for losses on sales returns subsequent to the balance sheet date at an amount equivalent to that calculated based on sales in conformity with the Corporation Tax Law of Japan. The allowance for sales returns of certain products is estimated based on the actual percentage of returns in prior years.
(1)
Employees' retirement and severance benefits
Accrued retirement and severance benefits have been recorded mainly at the amount calculated based on the retirement benefit obligation and the fair value of the pension plan assets as of bal- ance sheet date, as adjusted for unrecognized actuarial gain or loss and unrecognized prior service cost. Actuarial gain or loss is amortized in the year following the year in which the gain or loss is recognized primarily by the straight-line method over a period of five years, which is shorter than the aver- age remaining years of service of the employees. Prior service cost is amortized as incurred by the straight-line method over a period of five years, which is shorter than the aver- age remaining years of service of the employees. In addition, one overseas subsidiary provides an allowance for payments of employees' retirement and severance benefits at 100% of the voluntary termination payments.
(m) Directors' retirement and severance benefits
The Company has accrued directors' retirement and severance ben- efits at the amount which would be required to be paid if all direc- tors resigned from their positions and left the Company as of the balance sheet date in accordance with its internal regulations.
(n)  Consumption taxes
Transactions subject to consumption taxes are recorded at amounts exclusive of consumption taxes.
(o)  Cash and cash equivalents
Cash and cash equivalents in the accompanying consolidated state- ments of cash flows consist of cash on hand, demand deposits and liquid short-term investments with a maturity of three months or less from their respective dates of acquisition.
2. BASIS OF TRANSLATION
The consolidated financial statements presented herein are expressed in yen and, solely for the convenience of the reader, have been translated into U.S. dollars at ¥93.04 – U.S.$1.00, the approxi- mate exchange rate prevailing on the Tokyo Foreign Exchange Market on March 31, 2010. This translation should not be construed as a representation that all amounts shown could have been, or could in the future be, converted into U.S. dollars at that or any other rate.
3. CHANGES IN ACCOUNTING POLICIES
(Application of accounting standard for retirement and severance benefits) Effective the fiscal year ended March 31, 2010, the Company has applied ASBJ statement No. 19 for employees' retirement and sev- erance benefits. The impact on operating income, ordinary income and income before income taxes and minority interests was nil. (Application of accounting standard for measurement of inventories) Until March 31, 2008, inventories of the Company and its domestic consolidated subsidiaries were stated at cost. Effective the fiscal year ended March 31, 2009, the Company and domestic consolidat- ed subsidiaries have adopted the "Accounting Standard for Measurement of Inventories" (ASBJ Statement No. 9). This standard requires that inventories held for sale in the ordinary course of busi- ness be measured at the lower of cost or net selling value, which is defined as the selling price less additional estimated manufacturing costs and estimated direct selling expenses. The replacement cost may be used in place of the net selling value, if appropriate. As a result of the adoption of the new standard, operating income and income before income taxes and minority interests for the year ended March 31, 2009 decreased by ¥167 million and ¥27 million, respectively. The effect on the business segment information is described in Note 18, Segment Information.
(Application of accounting standard for leases)
Until March 31, 2008, noncancelable leases of the Company and its domestic consolidated subsidiaries were accounted for as operating leases (whether such leases were classified as operating or finance leases) except that lease agreements which stipulated the transfer of ownership of the leased assets to the lessee were accounted for as finance leases. Effective the fiscal year ended March 31, 2009, the Company and its domestic consolidated subsidiaries adopted a revised accounting standard for leases and related implementation guidance, the "Accounting Standard for Lease Transactions" (ASBJ Statement No. 13) and the "Guidance on Accounting Standard for Lease Transactions" (ASBJ Guidance No. 16). In accordance with the revised standard, lease transactions which have been entered into on and after April 1, 2008 have been accounted for as either finance or operating leases. The effect of this change was immaterial to the consolidated financial statements for the year ended March 31, 2009. (Application of practical solution on unification of accounting poli- cies applied to foreign subsidiaries) Effective the fiscal year ended March 31, 2009, the Company has applied PITF No. 18 for the preparation of consolidated financial statements. The impact on operating income and income before income taxes and minority interests was nil.
4. FINANCIAL INSTRUMENTS
Effective the fiscal year ended March 31, 2010, the Company has applied "Accounting Standard for Financial Instruments" (ASBJ Statement No. 10) and the "Implementation Guidance on Disclosures about Fair Value of Financial Instruments" (ASBJ Guidance No. 19).
(Year ended March 31, 2010)
(1) Current status of financial instruments
(a) Policy in relation to financial instruments
The Company and its consolidated subsidiaries (collectively, the "Group") raises necessary funds following capital investment plans for undertaking the manufacturing-and-selling businesses. If surplus funds arise, the Group manages only financial assets with high degrees of safety. (b) Details of financial instruments and related risk Trade receivables—trade notes and accounts receivable—are exposed to credit risk in relation to customers. In addition, receiv- ables denominated in foreign currencies are exposed to foreign currency exchange risk. Securities and investment securities, most of which are stocks of other companies with which the Group has business relation- ships, are exposed to market price fluctuation risk. Substantially all trade payables—notes and accounts pay- able—trade and other payables— have payment due dates with- in one year. In addition, payables denominated in foreign currencies are exposed to foreign currency exchange risk. (c) Risk management system for financial instruments (Credit risk management—the risk that customers or counterpar- ties may default) The Company holds its management policy and put it into effect whereby the Company grasps trust conditions of its customers and monitors due dates and outstanding balances regularly to identify and mitigate risks of bad debts from customers who are having financial difficulties. The consolidated subsidiaries perform equivalent management with the Company. (Market risk management—the risk arising from fluctuations in exchange rates and interest rates) The Company uses forward exchange contract transactions with the aim of avoiding risk related to fluctuation in future foreign exchange. For marketable and investment securities, the Company peri- odically confirms the market value of such financial instruments and reports to the director in charge. The Company reviews the status of these investments on a continuing basis. (Liquidity risk management—the risk that the Group may not able to meet its payment obligations on the schedule dates) The Company manages liquidity risk by means of preparing monthly financial plans.
(d) Supplementary explanation of items relating to the fair value of
financial instruments The fair value of financial instruments is based on their quoted market prices if available. If there are no market prices available, fair value is reasonably estimated. Because estimation of fair val- ues incorporates variable factors, adopting different assumptions can change the value.
(2) Estimated fair value of financial instruments
The carrying value of financial instruments recognized on the con- solidated balance sheet as of March 31, 2010, estimated fair value of such items, and the differences between them are shown below. Financial instruments for which fair value is extremely difficult to estimate are not included in the following table.
Notes: 1. Method of estimating the fair value of financial instruments and other mat- ters relating to marketable and investment securities Assets a. Cash and time deposits and b. Trade notes and accounts receivable Because these items are settled over short terms, fair value and carrying values are nearly equivalent. Therefore, relevant carrying value is used. c. Marketable securities and investment securities Stocks are valued at the exchange trading price. Bonds are valued at the exchange trading price or at the price provided by the financial institutions making markets in these securities. For information on securities classified by purpose of holding, please refer to the "Marketable Securities and Investment Securities" section of the notes to the financial statements. Liabilities a. Trade payables and b.Other payables Because these fare deposits are settled over short terms, fair value and car- rying value is nearly equivalent. Therefore, relevant carrying value is used. 2. Financial instruments for which fair value is extremely difficult to determine
Because the fair value of these financial instruments is extremely difficult to determine, given that no quoted market price is available, they are not included in the above table. 3.Redemption schedule for receivables and other securities with maturity dates at March 31, 2010

5. DERIVATIVES
The Company and its consolidated subsidiaries had no derivative instruments outstanding at March 31, 2010.
(Year ended March 31, 2009)
The Company has entered into forward foreign exchange contracts to reduce its exposure to the risk of future adverse fluctuation in for- eign exchange rates related to its trade receivables and payables and loans denominated in foreign currencies. It is the Company's policy not to enter into any speculative derivatives transactions and its subsidiaries and associated companies do not enter into any for- ward foreign exchange contracts. Unrealized gain or loss on a hedging instrument is deferred until the Company recognizes gain or loss on the underlying hedged item. Assets or liabilities hedged by forward foreign exchange con- tracts are translated at the forward exchange contract rates. As the Company enters into such contracts only with domestic banks with high credit ratings, the Company does not anticipate any
risk of non-performance by these counterparties.
In addition, the execution of, and control over, derivatives transac- tions are carried out by the Administrative Division in accordance with internal control regulations which limit the nature of the transac- tions and individuals authorized to be in charge of such transactions.
6. MARKETABLE SECURITIES AND
INVESTMENT SECURITIES
The cost and related aggregate market value of other securities with a determinable market value at March 31, 2010 and 2009 are sum- marized as follows:
Because the fair value of unlisted stocks (¥48 million (U.S.$517 thousand)) is extremely difficult to determine, given that no quoted market price is available, they are not included in the above table at March 31, 2010. The Company recognized impairment losses on securities at the difference between market value and carrying value if the market value had declined by 30% or more from the book value. Impairment losses on securities for the years ended March 31, 2009 were ¥7 million. Securities at March 31, 2009 excluded from the above table are summarized at their respective carrying values as follows:
The Company recognized impairment losses on non-marketable securities if the net carrying value declined by 50% or more from the book value or if the issuers of the non-marketable securities went bankrupt or were substantially bankrupt. Sales of other securities for the years ended March 31, 2010 and 2009 are summarized as follows:
The redemption schedule of other securities with maturity dates at March 31, 2009 is summarized as follows:

7 • LAND REVALUATION
In accordance with the Land Revaluation Law (Proclamation No. 34 dated March 31, 1998), land used for business activities was reval- ued at March 31, 2002. The revaluation difference, net of taxes, is stated as "unrealized revaluation loss on land, net of taxes" in net assets. Deferred tax liabilities arising from this revaluation difference are presented separately from deferred tax liabilities for other tem- porary differences in the accompanying consolidated balance sheets. The market value of the land as of March 31, 2010 and 2009 decreased by ¥390 million (U.S.$4,193 thousand) and ¥217 million, respectively, after the revaluation.
8. PLEDGED ASSETS
At March 31, 2010 and 2009, the following assets were pledged as collateral for borrowing limits of ¥399 million (U.S.$4,288 thousand) and ¥386 million, respectively.

• COMMITMENTS AND CONTINGENCIES
The Company had the following contingent liabilities as of March 31, 2010.

10. INCOME TAXES
At March 31, 2010 and 2009, the tax effect of the temporary differ- ences which gave rise to a significant portion of the deferred tax assets (excluding deferred taxes on unrealized revaluation loss on land) was as follows:
A reconciliation of the statutory tax rate to the Company's effec- tive tax rates for the years ended March 31, 2009 is summarized as follows:
No reconciliation has been presented for the year ended March 31, 2010 as the difference between the statutory tax rate and the effective tax rate was less than 5%.
11 . EMPLOYEES' RETIREMENT AND
SEVERANCE BENEFITS
The Company and its domestic subsidiaries have defined benefit plans covering substantially all of their employees which are partially funded through a qualified funded pension plan. Under these plans, employees are entitled to lump-sum or pension retirement or sever- ance benefits determined by points accumulated monthly based on the employees' contributions, length of service and the conditions under which termination occurs. In addition, the Company and its domestic subsidiaries pay meritorious service awards to employees in excess of the prescribed formula, which are charged to income as paid as it is not practicable to compute the liability for such future payments since the amounts vary depending on the circumstances. The following table summarizes the funded status and amounts recognized in the accompanying consolidated balance sheets at March 31, 2010 and 2009:
The following table summarizes the components of net retirement benefit expenses for the years ended March 31, 2010 and 2009:
The assumptions used in determining the pension benefit obliga- tion are presented below:

12. NET ASSETS
The Corporation Law of Japan (the "Law"), which superseded most of the provisions of the Commercial Code of Japan, went into effect on May 1, 2006. The Law provides that an amount equal to 10% of the amount to be disbursed as distributions of capital surplus (other than the capital reserve) and retained earnings (other than the legal reserve) be transferred to the capital reserve and the legal reserve, respectively, until the sum of the capital reserve and the legal reserve equals 25% of the capital stock account. Such distributions can be made at any time by resolution of the shareholders, or by the Board of Directors if certain conditions are met. Capital surplus and the legal reserve are not available for the dis- tribution of dividends but may be used to reduce or eliminate a def- icit or may be transferred to stated capital. At March 31, 2010, the legal reserve of the Company included in retained earnings amount- ed to ¥550 million (U.S.$5,907 thousand). The maximum amount which the Company can distribute as divi- dends is calculated based on the non-consolidated financial state- ments of the Company and in accordance with the Corporation Law of Japan.
13. AMOUNTS PER SHARE
Net assets per share as of March 31, 2010 and 2009 were ¥892.46 (U.S.$9.59) and ¥853.81, respectively. Basic net income per share for the years ended March 31, 2010 and 2009 was ¥51.25 (U.S.$0.55) and ¥49.32, respectively. Diluted net income per share for the years ended March 31, 2010 and 2009 was ¥51.24 (U.S.$0.55) and ¥49.28, respectively. The basis for calculation of basic net income per share and diluted net income per share for the years ended March 31, 2010 and 2009 was as follows:
The basis for the calculation of total net assets per share as of March 31, 2010 and 2009 was as follows:

14. MAJOR EXPENSES
Major expenses included in selling, general and administrative expenses for the years ended March 31, 2010 and 2009 were as follows:
Research and development expenses included in general and administrative expenses and cost of sales for the years ended March 31, 2010 and 2009 amounted to ¥612 million (U.S.$6,574 thousand) and ¥499 million, respectively.
15. CASH AND TIME DEPOSITS
Deposits pledged as collateral mainly for leased office space at March 31, 2010 and 2009 amounted to ¥23 million (U.S.$249 thou- sand) and ¥23 million, respectively. A reconciliation of cash and cash equivalents in the accompanying consolidated statements of cash flows to cash and time deposits in the accompanying consolidated balance sheets at March 31, 2010. and 2009 is as follows:

16. LEASES
(Finance leases) Leased assets included in property, plant and equipment are tools, furniture and fixtures in the mothproofing and hygiene-related prod- ucts segment and the household environment-related products seg- ment. Leased assets included in intangible assets are software. In accordance with the revised accounting standard effective the fiscal year ended March 31, 2009, the Company and its domestic subsidiaries account for finance leases as operating leases for those that were entered into before April 1, 2008 and if ownership of the leased property does not transfer to the lessee. Information in rela- tion to leased assets held under finance leases but accounted for as operating leases is below: (1) A summary of the pro forma amounts (inclusive of the related interest) of acquisition cost, accumulated depreciation and net book value at March 31, 2010 and 2009, primarily relating to tools, furniture and fixtures is as follows:
(2) Future minimum lease payments, inclusive of the related interest, subsequent to March 31, 2010 and 2009 are summarized as follows:
(3) Lease payments and pro forma depreciation charges for the years ended March 31, 2010 and 2009 were ¥53 million (U.S.$569 thousand) and ¥64 million, respectively. (4) Depreciation is computed by the straight-line method over the respective lease terms assuming a nil residual value. (Operating leases) The Company and its consolidated subsidiaries have no significant operating leases at March 31, 2010 and 2009.
• COMMITMENTS AND CONTINGENT LIABILITIES
At March 31, 2010 and 2009, trade notes discounted with banks in the ordinary course of business amounted to ¥92 million (U.S.$986 thousand) and ¥91 million, respectively.
18. SEGMENT INFORMATION
The Company and its consolidated subsidianes operate in two business segments and business segment information for the years ended March 31, 2010 and 2009 is summarized as follows:
The business segments are classified according to the nature of the Company's products and their markets. Categories in the Mothproofing and Hygiene-Related Products segment are Cloth Care, Hand Care and Thermal Care and those in the Household Environment-Related Products segment are Air Care, Humidity Care and Home Care. Major items included in eliminations or corporate assets in the above tables were cash and cash equivalents and short-term and long-term investments (investment securities) for the years ended March 31, 2010 and 2009. Corporate assets as of March 31, 2010 and 2009 were ¥8,146 million (U.S.$87,555 thousand) and ¥7,024 million, respectively.
(Year ended March 31, 2009)
Change in accounting policies Effective the fiscal year ended March 31, 2009, the Company and domestic consolidated subsidiaries have adopted "Accounting Standard for Measurement of Inventories" (ASBJ Statement No. 9). As a result of the adoption of the new standard, operating expenses of the Mothproofing and Hygiene-Related Products seg- ment and the Household Environment-Related Products segment increased by ¥12 million and ¥155 million, respectively. Operating income decreased by the same amounts in the Mothproofing and Hygiene-Related Products segment and the Household Environment-Related Products segment. Geographical segment information and overseas sales are not presented as net sales and total assets in Japan exceeded 90% of the totals in both segments and as overseas sales were less than 10% of consolidated net sales for the years ended March 31, 2010. and 2009.
19. INVENTORY VALUATION LOSS INCLUDED IN
COST OF SALES
Inventory valuation loss write-downs below cost to net selling value are included in cost of sales and amounted to ¥385 million (U.S.$4,141 thousand) and ¥525 million for the year ended March 31, 2010 and 2009.
20. CONSOLIDATED STATEMENTS OF CHANGES IN
NET ASSETS
Shares in issue and outstanding and treasury stock at March 31,
2010 and 2009 were as follows: (Year ended March 31, 2010)
Subscription rights at March 31, 2010 were as follows: Subscription rights for stock options ¥67 million (U.S.$724 thousand) Dividends paid from retained earnings for the year ended March 31, 2010 were as follows:
Dividends for which the record date was in the year ended March 31, 2010 and the effective date is in the year ending March 31, 2011 were as follows:

(Year ended March 31, 2009)

Subscription rights at March 31, 2009 were as follows: Subscription rights for stock options ¥51 million 31, 2009 were as follows:
Dividends for which the record date was in the year ended March 31, 2009 and the effective date is in the year ending March 31, 2010 were as follows:

21 . STOCK OPTION PLANS
At March 31, 2010, the Company had stock option plans, which were approved at the annual general meetings of the shareholders and by the Board of Directors. Details of these stock option plans are summarized as follows:
The option price per share was determined on the date the options were granted based on an established formula for determining option prices. The options are exercisable during the above periods provided that the recipients are still directors, officers or employees of the Company or its subsidiaries. (Year ended March 31, 2010) Costs related to the 2010 stock option plan amounting to ¥16 million (U.S.$174 thousand) were included in selling, general and administrative expenses.

Stock option activity during the year ended March 31, 2010 was as follows:

Price of stock options

The fair value of each stock option grant was estimated at the grant date using the Black-Scholes option pricing model. The fair value per option for options granted during the year ended March 31, 2010 was estimated based on the following assumptions:
Volatility was determined based on the actual stock price over the past four years and six months. The option term was estimated under the assumption that the options would be exercised in the middle of the exercisable period because of insufficient data. Expected dividends (per share) was based on the dividend amount applicable to the 2009 fiscal year. Risk free interest rate was based on government bonds whose terms corresponded with the terms of the above options.
Method of estimating exercised stock options
The Company estimated the number of exercised stock options based on the actual number of forfeitures because it is difficult to estimate the number of stock options which will be forfeited in the future.
(Year ended March 31, 2009)
Costs related to the 2009 stock option plan amounting to ¥23 million were included in selling, general and administrative expenses.
Stock option activity during the year ended March 31, 2009 was as follows:

Price of stock options

The fair value of each stock option grant was estimated at the grant date using the Black-Scholes option pricing model. The fair value per option for options granted during the year ended March 31, 2009 was estimated based on the following assumptions:
Volatility was determined based on the actual stock price over the past four years and six months. The option term was estimated under the assumption that the options would be exercised in the middle of the exercisable period because of insufficient data. Expected dividends (per share) was based on the dividend amount applicable to the 2008 fiscal year. Risk free interest rate was based on government bonds whose terms corresponded with the terms of the above options.
Method of estimating exercised stock options
The Company estimated the number of exercised stock options based on the actual number of forfeitures because it is difficult to estimate the number of stock options which will be forfeited in the future.
22. SUBSEQUENT EVENTS
As the meeting of executive officers held on May 13, 2010, the Company signed an agreement to form a capital and business alli- ance with FUMAKILLA LIMITED (listed in the second section of Tokyo Stock Exchange, exchange code 4998), a manufacturer of insecticides. The Company also decided to take up the allocation of new shares to a third party offered by FUMAKILLA and paid on June 4, 2010. The Company has worked to strengthen and expand the opera- tion of air freshener, etc. FUMAKILLA has worked to strengthen and expand the operation of insecticide, etc. The Group has aimed at the further expansion in fields, such as deodorizers and air fresheners, mothproofing agents, gloves, and dehumidifiers. On the other hand, FUMAKILLA is aiming at business expansion in fields, such as insecticides, household articles, garden supplies, and industrial-use articles. As a business partner, both companies have entrusted each other for years with manufacturing or sales promotion activities. Taking advantage of their business domains having a complementary relationship, this capital and business alliance is complementing and cooperating mutually, strives for their businesses developments, enhancement of profitability and improvement of customer satisfaction, and aims to strengthen their business activities, expertise and human resources at the further development of both companies. Details of the capital and business alliances are as follows: (1) Business alliance The business alliance includes the following corporative activities: • Partnership in operations, such as strengthening of shopfront support, and mutual practical use of a sales channel in and out- side the country • Tie-up in business development, such as joint research and development in which strengths of both companies are har- nessed, and cross-license of intellectual property • Tie-up in supply business, such as cost-cutting by sharing pro- duction facilities • Tie-up in physical distribution, such as joint use of physical dis- tribution infrastructure
(2) Capital alliance
The Company obtained the FUMAKILLA's new stocks by accept- ing an allocation of new shares to a third party. In addition, Company is planning one director's dispatch to FUMAKILLA. Outline of FUMAKILLA LIMITED is as follows:
Details of the new stock allocation to a third party are as follows:
2-2-3. Uchisarwai-cho Report of Independent Auditors The Board of Directors S.T.CORPORATION We have audited the accompanying consolidated balance sheets of S.T.CORPORATION and consolidated subsidiaries as of March 31, 2010 and 2009, and the related consolidated statements of income, changes in net assets, and cash flows for the years then ended, all expressed in yen. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in Japan. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial We believe that our audits provide a reasonable basis for our statement presentation. opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of S.T.CORPORATION and consolidated subsidiaries at March 31, 2010 and 2009, and the consolidated results of their operations and their cash flows for the years then ended in conformity with accounting principles generally accepted in Japan.
Supplemental Information
As described in Note 22 to the consolidated financial statements, the Company signed an agreement to form a capital and business alliance with FUMAKILLA Co., Ltd on May 13, 2010 as a result of the resolution of the meeting of executive officers held on the same day. The Company also decided to take up the allocation of new shares to a third party offered by FUMAKILLA and paid on June 4, 2010. The U.S. dollar amounts in the accompanying consolidated financial statements with respect to the year ended March 31, 2010 are presented solely for convenience. Our audit also included the translation of yen amounts into U.S. dollar amounts and, in our opinion, such translation has been made on the basis described in Note 2. June 18, 2010
ASBJ accounting standard for the presentation of net assets in the balance sheet, effective from the year ended March 31, 2007. 3. ROE = Net income divided by average total equity (the sum of total shareholders' equity and total valuation, translation adjustments and other) for the fiscal year 4. ROA = Net income divided by average total assets for the fiscal year.
■ Corporate Data
Company name Headquarters S.T. CORPORATION 4-10, Shimo-ochiai 1-chome, Shinjuku-ku, Tokyo 161-8540, Japan Establishment ¥7,065,500,000 Common stock Fiscal year-end March 31 Shares issued and outstanding  29,500,000 Listed stock exchange Tokyo Stock Exchange, August 31, 1948 Shareholders 9,206 Registered transfer agent Mizuho Trust & Banking Co., Ltd. Accounting auditor Ernst & Young ShinNihon LLC Annual shareholders' meeting   Middle of June each year Employees
First Section (June 18, 2010) 611 (Consolidated) 385 (Non-Consolidated) Hirohide Shimada, Public Relations Department ir@st-c.co.jp +81-3-5906-0734 +81-3-5906-0742 Consolidated subsidiaries S.T. Trading Co., Ltd. Sales of hand gloves and workplace supplies S.T. Auto Co., Ltd. Sales of chemical car care products S.T. Business Support Co., Ltd. Temporary staffing and contract work for S.T. Group Family Glove (Thailand) Co., Ltd. Manufacture and sales of hand gloves Family Glove (Taiwan) Co., Ltd. Manufacture and sales of hand gloves
Stock Price Chart Nikkoi 225 (yen)
 15,000 5,000 4-10, Shimo-ochiai 1-chome, Shinjuku-ku, Tokyo 161-8540, Japan http://www.st-c.co.jp/