Financial Report · 2019. 9. 9. · Contact Person: Hiroshi Hayatsu, General Affairs Department...

FINANCIAL REPORT (Report under Article 24, paragraph 1 of Financial Instruments and Exchange Law)

Business Year (The 64th Term)

From April 1, 2011 to March 31, 2012

ARISAWA MFG. CO., LTD.

E01152

TABLE OF CONTENTS Page Number

Cover Page PART I. INFORMATION ABOUT THE BUSINESS I. General Conditions of Business ............................................................................................. 1

1. Changes in Principal Business Indicators, etc. ................................................................... 1 2. History ................................................................................................................................ 3 3. Details of Business ............................................................................................................. 4 4. Status of Affiliated Companies........................................................................................... 6 5. Status of Employees ........................................................................................................... 8

II. Status of Business.................................................................................................................. 9 1. Outline of Business Performance, etc................................................................................. 9 2. Production, Status of Receipt of Orders and Sales ........................................................... 11 3. Tasks to be Tackled .......................................................................................................... 11 4. Business Risk, etc. ............................................................................................................ 14 5. Important Agreements for Operation, etc. ........................................................................ 14 6. Research and Development Activities.............................................................................. 15 7. Analysis of Financial Conditions, Business Results, and Status of Cash Flow................ 17

III. Status of Facilities.............................................................................................................. 19 1. Outline of Capital Investment........................................................................................... 19 2. Status of Major Facilities.................................................................................................. 19 3. Plan of New Installation and Retirement, etc., of Facilities ............................................. 21

IV. Status of the Submitting Company .................................................................................... 22 1. Status of Shares, etc.......................................................................................................... 22 (1) Total Number of Shares, etc.......................................................................................... 22 (2) Status of New Share Subscription Rights, etc............................................................... 23 (3) Status of Exercise of Bonds with New Share Subscription Rights, Exercise Price

Adjustment Clause attached.......................................................................................... 33 (4) Details of Rights Plan.................................................................................................... 33 (5) Changes in Total Number of Shares Issued, Capital, etc. ............................................. 33 (6) Status by Owner ............................................................................................................ 33 (7) Status of Major Shareholders ........................................................................................ 34 (8) Status of Voting Rights ................................................................................................. 35 (9) Details of Stock Option Scheme ................................................................................... 36

2. Status of Acquisition of Treasury Stocks, etc................................................................... 44 3. Dividend Policy ................................................................................................................ 45 4. Share Price Movement...................................................................................................... 45 5. Status of Officers .............................................................................................................. 46 6. Status of Corporate Governance, etc. ............................................................................... 49

V. Status of Accounting........................................................................................................... 57 1. Consolidated Financial Statements, etc. ........................................................................... 58 (1) Consolidated Financial Statements ............................................................................... 58 (2) Other............................................................................................................................ 105

2. Financial Statements, etc. ............................................................................................... 106 (1) Financial Statements ................................................................................................... 106 (2) Details of Major Assets and Liabilities ....................................................................... 127 (3) Other............................................................................................................................ 131

VI. Outline of Share Handling of the Submitting Company.................................................. 132

VII. Reference Information on the Submitting Company...................................................... 133 1. Information of Parent of Submitting Company ............................................................ 133 2. Other References .......................................................................................................... 133

PART II. INFORMATION ON GUARANTY COMPANIES OF THE SUBMITTING COMPANY, ETC. ....................................................................... 134

[Audit Report]

Cover Page

Type of Submitted Document: Financial Report

Authoritative Text: Financial Instruments and Exchange Law, Article 24, paragraph 1

Submitted to: Chief of Kanto Financial Affairs Bureau

Date of Submission: June 29, 2012

Business Year: The 64th Term (from April 1, 2011 to March 31, 2012)

Name of Company: Kabushiki Kaisha Arisawa Seisakusho

English Translation of Company Name: Arisawa Mfg. Co., Ltd.

Name and Title of Representative: Sanji Arisawa, President and Chief Executive Officer

Location of Principal Office: 5-5, Minami Honcho 1-chome, Joetsu City, Niigata Prefecture

Telephone Number: (025) 524-5124

Contact Person: Hiroshi Hayatsu, General Affairs Department Manager

Nearest Liaison Office: 5-5, Minami Honcho 1-chome, Joetsu City, Niigata Prefecture

Telephone Number: (025) 524-5124

Contact Person: Hiroshi Hayatsu, General Affairs Department Manager

Places where Copies of This Report Are

Available for Public Inspection:

Arisawa Mfg. Co., Ltd., Tokyo Branch Office

12-5, Yanagibashi 2-chome, Taito-ku, Tokyo

Arisawa Mfg. Co., Ltd., Osaka Branch Office

Konishi Nissei Building 11th Floor, 12-12, Minami Senba 4-chome,

Chuo-ku, Osaka

Tokyo Stock Exchange

2-1, Nihonbashi Kabuto-cho, Chuo-ku, Tokyo

- 1 -

PART I. INFORMATION ABOUT THE BUSINESS

I. General Conditions of Business

1. Changes in Principal Business Indicators, etc.

(1) Consolidated Business Indicators, etc.

Term 60th term 61st term 62nd term 63rd term 64th term

Closing Year and Month March 2008 March 2009 March 2010 March 2011 March 2012

Sales (¥ millions) 40,697 29,511 29,717 36,957 27,825

Ordinary profit or loss ()

(¥ millions) 2,827 1,139 1,328 61 447

Net profit or loss ()

(¥ millions) 1,119 2,758 3,104 1,862 586

Comprehensive income

(¥ millions) --- --- --- 1,160 642

Net assets (¥ millions) 42,847 39,360 37,324 36,015 35,041

Total assets (¥ millions) 55,248 47,771 52,304 50,600 46,666

Net asset per share (¥) 1,221.91 1,120.37 1,032.36 987.74 959.14


per share (¥) 31.98 78.84 88.72 53.22 16.75

Fully diluted net profit per

share (¥) 31.95 --- --- --- 16.74

Net worth ratio (%) 77.4 82.1 69.1 68.3 71.9

Return on equity (%) 2.6 6.7 8.2 5.3 1.7

Price earnings ratio (times) 24.2 --- --- --- 19.8

Cash flows from operating

activities (¥ millions) 5,074 2,245 3,222 66 829

Cash flows from investing

activities (¥ millions) 3,165 5,777 616 2,113 1,917

Cash flows from financing

activities (¥ millions) 1,009 2,287 146 42 835

Cash and cash equivalents

at end of year (¥ millions) 4,856 3,609 6,270 4,112 6,038

Number of employees (Except average number of temporary employees)

992 959 1,101 1,225

(238)

1,255

(120)

Note: 1. Consumption tax not included in sales amounts. 2. “Fully diluted net profit per share” for the 61st term, 62nd term, and 63rd term is not stated as there was a net loss

per share although residual shares existed. 3. Price earnings ratio for the 61st term, 62nd term, and 63rd term is not stated as a net loss was recorded.

- 2 -

(2) Business Indicators of the Submitting Company


Closing Year and Month March 2008 March 2009 March 2010 March 2011 March 2012

Sales (¥ millions) 37,717 26,495 25,194 25,389 19,932

Ordinary profit or loss ()

(¥ millions) 1,961 953 1,430 1,485 861


(¥ millions) 565 2,746 1,093 3,443 46

Capital stock (¥ millions) 7,117 7,117 7,117 7,117 7,117

Total number of shares issued

and outstanding (1,000 Shares) 36,549 34,994 34,994 34,997 34,997

Net assets (¥ millions) 32,341 28,746 29,836 26,960 25,872

Total assets (¥ millions) 43,289 35,934 41,056 36,544 33,925

Net asset per share (¥) 921.69 817.46 847.17 763.41 732.73

Dividend per share (¥)

(Of these, interim dividend per

share)

18.00

(---)

8.00

(---)

8.00

(---)

6.00

(---)

5.00

(---)


per share (¥) 16.17 78.47 31.25 98.41 1.32

Fully diluted net profit per share

(¥) 16.15 --- 31.22 --- ---

Net worth ratio (%) 74.5 79.6 72.2 73.1 75.6

Return on Equity (%) 1.8 9.0 3.8 12.2 0.2

Price earnings ratio (times) 47.9 --- 21.3 --- ---

Dividend payout ratio (%) 111.3 --- 25.6 --- ---

Number of employees (Except average number of temporary employees)

717 694 671 672

(149)

633

(76)

Note: 1. Consumption tax not included in sales amounts. 2. “Fully diluted net profit per share” for the 61st term, 63rd term, and 64th term is not stated as there was a net loss per

share although residual shares existed. 3. Price earnings ratio and dividend payout ratio for the 61st term, 63rd term, and 64th term are not stated as a net loss

was recorded.

- 3 -

2. History

July 1949 ▪ Arisawa Mfg. Co., Ltd. incorporated by succeeding the businesses of “Arisawa Manufacturing,”

which was established in 1909 and manufactured Batten lace, narrow woven fabric, electric insulation

tapes and glass fiber fabric, etc.

April 1954 ▪ Established resin processing division

June 1954 ▪ Relocated the Head Office from Ohmachi, Takada City (currently Joetsu City), Niigata Prefecture to

Minami-Honcho Takada City.

May 1959 ▪ Established Tokyo Satellite Office, and Osaka Satellite Office

September 1960 ▪ Began OTC trading for the stock at Tokyo Security Dealers’ Association

October 1961 ▪ Listed on the 2nd Section Market of Tokyo Stock Exchange

December 1966 ▪ Incorporated Arisawa Jushi Kogyo Co., Ltd. (currently a consolidated subsidiary), which is engaged

in forming and processing of resin products related to industrial application structural materials.

June 1968 ▪ Established a factory in Oaza-Nakadahara, Takada City (currently Joetsu City), Niigata Prefecture and

also established resin processing facilities.

August 1973 ▪ Incorporated Eagle Co., Ltd. (currently a consolidated subsidiary), which is engaged in operation of

driving ranges.

March 1974 ▪ Incorporated Myoko Shinko Co., Ltd., which is engaged in processing of resin products related to

electric insulation materials.

June 1974 ▪ Merged with Arisawa Shoji Co., Ltd. and reorganized sales department into Tokyo Branch and Osaka

Branch.

April 1976 ▪ Incorporated Yuai Sangyo Ltd., which manufactures glass and special fiber fabric products related to

electric insulation materials.

May 1987 ▪ Incorporated Arisawa Logistics, Ltd., which operates warehouse management and logistics.

October 1989 ▪ Incorporated Arisawa Kenpan Co., Ltd. (currently a consolidated subsidiary), which carries out sales

and purchases of related goods.

July 1991 ▪ Incorporated Polatechno Co., Ltd., which manufactures liquid crystal display polarizing plates by joint

investment with Nippon Kayaku Co., Ltd.

December 1994 ▪ Established a technical development center in Nakadahara Factory

October 1996 ▪ Incorporated Arisawa Polywork Co., Ltd., which conducts molding and processing of resin products

related to industrial application structural materials through investment of Arisawa Logistics, Ltd.

July 1999 ▪ Established a factory in Oaza-Nakadahara (current Nakadahara Factory west side), Joetsu City,

Niigata Prefecture and newly established resin processing facilities.

July 2000 ▪ Incorporated Arisawa Fiberglass Co., Ltd. (currently a consolidated subsidiary) and spun off glass

cloth fabrication department of the Submitting Company, related to electronic materials and electric

insulation materials and consigned manufacture to Arisawa Fiberglass.

September 2002 ▪ The Company was designated on the 1st Section Market of Tokyo Stock Exchange

April 2003 ▪ Myoko Shinko Co., Ltd. merged with Arisawa Polywork Co., Ltd., Yuai Sangyo, Ltd. and Arisawa

Logistics, Ltd. and the company name was changed to Arisawa Sogyo Co., Ltd. (currently a

consolidated subsidiary).

March 2006 ▪ Polatechno Co., Ltd. (currently equity method applied affiliate) was listed on the JASDAQ Stock

Exchange.

October 2009 ▪ Acquired shares of ThinFlex Corporation (currently a consolidated subsidiary).

December 2010 ▪ Howa Sangyo Ltd., a subsidiary, was changed to Protec International Holdings Co., Ltd. (currently a

consolidated subsidiary) and the company acquired the shares of Protec Arisawa Europe, S.A. and

Protec Arisawa America, Inc. (both currently consolidated subsidiaries).

April 2011 ▪ Incorporated Protec Arisawa Japan Co., Ltd. (currently a consolidated subsidiary), which is engaged

in sales of FW molded products related to industrial application structural materials.

July 2011 ▪ Arisawa Sogyo Co., Ltd. absorbed Eagle Co., Ltd.

- 4 -

3. Details of Business

Our Group, comprised of the Company and 16 subsidiaries and 7 affiliates, manufactures and sells electronic

materials, display materials, electric insulation materials and industrial application structural materials. In

addition, it is developing operational activities such as sales of goods related to each operation, logistics and

other services.

Business lines of our Group and the positioning of the Company and the affiliated companies in relation to

the business are as follows.

(1) Electronic Materials

The Company manufactures and sells base materials for flexible and rigid printed circuit boards, etc.,

to be used as electronic materials and Arisawa Fiber Glass Co., Ltd., a subsidiary, manufactures glass

cloth for printed circuit boards. ThinFlex Corporation, a subsidiary, and TAIFLEX Scientific Co., Ltd.,

an affiliate, also manufacture and sell materials for flexible printed circuit boards.

(2) Display Materials

The Company manufactures and sells anti-reflection films and 3D display filters, etc., used as display

materials, Color Link Japan, Co., Ltd., a subsidiary, manufactures and sells special optical films,

ARISAWA MANUFACTURING (DALIAN) CO., LTD. carries out their post-process operations.

Asuna Co., Ltd. sells 3D display equipment and Quality Experience Design Co., Ltd. makes and

produces 3D image content. Polatechno Co., Ltd., an affiliate, manufactures and sells polarizing plates

for liquid crystal displays, etc., DDD Group plc develops and sells 3D content and hardware, Innovision

FlexTech Corporation manufactures and sells plastic LCDs and screens, etc., and Toppan Arisawa

Optical Technology Co., Ltd. develops and sells films for 3D display panels.

(3) Electric Insulation Materials

Arisawa Fiber Glass Co., Ltd., a subsidiary, manufactures glass cloth tapes used as electric insulation

materials and the Company sells these while another subsidiary, Arisawa Sogyo Co., Ltd., manufactures

these products.

The Company manufactures and sells prepregs for electric insulation and Arisawa Jushi Kogyo Co.,

Ltd., a subsidiary, also manufactures these products.

(4) Industrial application structural materials

The Company and Protec Arisawa Japan Co., Ltd., Protec Arisawa Europe, S.A. and Protec Arisawa

America, Inc. manufacture and sell FW molded products used as industrial application structural

materials, the Company manufactures and sells honeycomb panels and prepregs, etc., for aircraft and

Arisawa Sogyo Co., Ltd., a subsidiary, manufactures and sells pultrusion products and FRP ski sheets,

etc.

Protec International Holdings Co., Ltd. carries out business management of each company as the

holding company of subsidiaries engaged in the water treatment business by FW molded products.

(5) Related goods sales

Goods related to (3) and (4) above are sold by the Company and also by Arisawa Kenpan Co., Ltd., a

subsidiary.

(6) Other businesses

Arisawa Sogyo Co., Ltd., a subsidiary, operates a logistics business and a driving range.

The above matters are shown in the following Business Activities Diagram.

- 5 -

(Business Activities Diagram)

Ari

saw

a M

fg. C

o., L

td. (

Man

ufac

ture

and

sal

es)

TAIFLEX Scientific Co., Ltd.

T h i n F l e x C o r p o r a t i o n

Arisawa Fiber Glass Co., Ltd.

A r i s a w a S o g y o C o . , L t d .

Arisawa Jushi Kogyo Co., Ltd.

Ele

ctro

nic

m

ater

ials

E

lect

ric

insu

lati

on m

ater

ials

Indu

stri

al a

pplic

atio

n st

ruct

ural

mat

eria

ls

Affiliate to which equity method is applied

Non-consolidated su bsidiary

Consolidated subsidiary

Other transactions

P o l a t e c h n o C o . , L t d .

A R I S A W A M A N U F A C T U R I N G ( D A L I A N ) C O . , L T D .

A r i s a w a K e n p a n C o . , L t d .

D D D G r o u p p l c

Dis

pla

y

ma

teri

als

R

elat

ed

go

od

s sa

les

A s u n a C o . , L t d .

C o l o r l i n k J a p a n C o . , L t d .

Quality Experience Design Co., Ltd.

Innovision F lexTech Corporation

T o p F l e x C o r p o r a t i o n

Transactions of products, etc.

Protec International H oldings, C o., Ltd.

Protec A r isawa E urope, S .A .

Protec Arisawa Am erica, In c.

Protec Arisawa Japan Co., Ltd.

Toppan Arisawa Optical Technology Co., Ltd.

(Note) Arisawa Sogyo, Co., Ltd. is engaged in other businesses in addition to electric insulation materials and

industrial application structural materials.

- 6 -

4. Status of Affiliated Companies

Name Address Capital

(thousand yen) Details of major

operations

Ownership ratio of

voting rights (%)

Pertinent details

(Consolidated Subsidiaries)

Colorlink Japan Co., Ltd.

Joetsu City, Niigata

198,201 Display materials 97.2

Lease of building and machinery and equipment, supply of raw materials Holding office of directorate concurrently



100,000 Electronic materials Electric insulation materials

100.0

Consigned manufacture of glass fiber fabric products related to electronic materials and electric insulation materials Lease of building and manufacturing equipment and financial assistance Holding office of directorate concurrently

Arisawa Sogyo Co., Ltd. (Note 6)


30,950

Electric insulation materials Industrial application structural materials Other businesses

100.0

Consigned manufacture of resin products related to electric insulation materials and industrial application structural materials and consignment of warehouse and logistics operationsLease of building and machinery and equipment

Arisawa Kenpan Co., Ltd.

Chuo-ku, Osaka

30,000 Related goods sales 100.0

Purchase of raw materials related to manufacture and sales of industrial materials, sales of products, debt guarantees Holding office of directorate concurrently



10,000 Electric insulation materials

100.0

Consigned manufacture of resin products related to electric insulation materials Lease of land and building Holding office of directorate concurrently

ThinFlex Corporation (Note 2)

Kaohsiung, Taiwan

NT$1,623,643 thousand

Electronic materials 52.3

Supply of raw materials related to electronic materials, sales of productsHolding office of directorate concurrently

TopFlex Corporation (Note 2)

Kunshan, China

US$15,000 thousand

Electronic materials 90.0(90.0)

Sales of electronic material products

ThinFlex Technology Corporation (B.V.I.) (Note 2)

British Virgin Islands

US$13,710 thousand

Electronic materials 98.5(98.5)

---

Protec International Holdings Co., Ltd.


101,830 Industrial application structural materials

100.0Financial assistance Holding office of directorate concurrently

Protec Arisawa Europe, S.A.

Munguia, Spain

4,014 thousand Euro

Industrial application structural materials

100.0(100.0)

Financial assistance Holding office of directorate concurrently

Protec Arisawa America, Inc.

California, U.S.A.

US$3,200 thousand


100.0(100.0)

Financial assistance Holding office of directorate concurrently

- 7 -

Name Address Capital

(thousand yen) Details of major

operations

Ownership ratio of

voting rights (%)

Pertinent details

Protec Arisawa Japan Co., Ltd.

Taito-ku, Tokyo

10,000 Industrial application structural materials

100.0(100.0)

Sales of industrial application structural materials Holding office of directorate concurrently

(Affiliates to which Equity Method is Applied)

TAIFLEX Scientific Co., Ltd.

Kaohsiung, Taiwan

NT$2,019,444 thousand

Electronic materials 20.3 Sales of electronic material products

Polatechno Co., Ltd. (Note 4)


3,095,125 Display materials 22.3

Sales and purchases of products related to display materials Lease of land and building Holding office of directorate concurrently

DDD Group plc London,

UK US$12,427

thousand Display materials 22.2

Business alliance in 3D business Holding office of directorate concurrently

Innovision FlexTech Corporation

Kaohsiung, Taiwan

NT$388,000 thousand

Display materials 23.2(3.9)

Sales and purchases of products related to display materials Holding office of directorate concurrently

Toppan Arisawa Optical Technology Co., Ltd.

Taito-ku, Tokyo

490,000 Display materials 50.0

Supply of raw materials related to display materials Lease of land and building Holding office of directorate concurrently

Note: 1. Segment name is entered in the column “Details of major operations.” 2. The company falls under specified subsidiary. 3. Figures in ( ) in ownership ratio of voting rights indicate indirect ownership ratio included in the total. 4. A company submitting financial reports. 5. As for all consolidated subsidiaries, the ratio of net sales (excluding inter-company sales between consolidated

companies) in the consolidated sales is less than 10/100 respectively. 6. Arisawa Sogyo Co., Ltd. absorbed Eagle Co., Ltd., a consolidated subsidiary, as of July 1, 2011.

- 8 -

5. Status of Employees

(1) Status of Consolidated Companies (As of March 31, 2012)

Segment name Number of employees

Electronic materials 583 (53)

Display materials 154 (27)

Electric insulation materials 130 (12)

Industrial application structural materials 296 (22)

Related goods sales 3 (1)

Total of reportable segments 1,166 (115)

Other 46 (---)

Entire company (common) 43 (5)

Total 1,255 (120)

Note: 1. The number of employees indicates full-time employees (excluding persons who were transferred to companies other than our Group and including persons who were transferred to our Group) and for the number of temporary employees (including part-timers, employees dispatched by staffing companies and seasonal workers), the average number during the year is described in ( ).

2. Number of employees of the entire company (common) is the number of employees who belong to administrative department.

(2) Status of the Submitting Company

(As of March 31, 2012)

Number of employees Average age (years old) Average years of service (years) Average annual salary (thousand yen)

633（76） 40.3 17.0 5,034

Segment name Number of employees

Electronic materials 340 (52)

Display materials 89 (2)

Electric insulation materials 68 (12)

Industrial application structural materials 93 (5)

Total of reportable segments 590 (71)

Entire company (common) 43 (5)

Total 633 (76)

Note: 1. The number of employees indicates full-time employees (excluding persons who were transferred to other companies from the Company and including persons who were transferred to the Company from other companies) and for the number of temporary employees (including part-timers, employees dispatched by staffing companies and seasonal workers), the average number during the year is described in ( ).

2. Average annual salary includes bonuses and extra wages. 3. Number of employees of the entire company (common) is the number of employees who belong to administrative

department.

(3) Status of Labor Union Labor union of the Submitting Company belongs to Local Division of the Japanese Federation of Textile, Chemical, Food, Commercial, Service and General Workers’ Unions and has wholesomely developed since its establishment in 1946. The relationship of Labor and management is harmonious and efforts are made in the development of corporate business through mutual cooperation. The number of union members as of March 31, 2012 is 564.

- 9 -

II. Status of Business

1. Outline of Business Performance, etc.

(1) Performance The Japanese economy in the current consolidated fiscal year has remained in a severe condition due to

the rapid appreciation of the yen following the second quarter although some sectors of the economy showed signs of recovery from the impact of the Great East Japan Earthquake. Overseas, due to concerns about the economic slowdown in emerging countries, including China, affected by the banking and financial crisis in Europe and due to the impact of flooding in Thailand that occurred in the third quarter, etc., there was an increased sense of uncertainty about future economic conditions.

Under such circumstances, our Group (the Company, its consolidated subsidiaries and affiliates to which the equity method is applied) was severely affected by the appreciation of the yen and the flooding in Thailand, and performance deteriorated in spite of taking measures to reduce costs.

As a result, for business results for the current consolidated fiscal year, net sales were ¥27,825 million (a decrease of 24.7% as compared with the same period in the previous year) due to a significant decrease in sales from the electronic materials field and display materials field.

For income, although we strived to take measures to reduce costs, including reducing the burden of depreciation, due to a worsening operating rate etc., operating loss was ¥1,315 million (operating loss of ¥355 million for the same period in the previous year) and ordinary loss was ¥447 million (ordinary profit of ¥61 million for the same period in the previous year).

For net income, we recorded net profit of ¥586 million (net loss of ¥1,862 million for the same period in the previous year) due to profit on the sale of investment securities etc.

Business results by segment are as follows. In this regard, categories of reportable segments were changed in the current consolidated fiscal year and

for the following comparison with the same period in the previous year, comparison was made with figures for the same period in the previous year reclassified into the segmentation after the change. 1) Electronic materials

In the electronic materials field, net sales were ¥13,273 million, a decrease of 22.8% as compared with the previous consolidated fiscal year, mainly from flexible printed circuit board materials, our core product (orders received were ¥9,419 million, a decrease of 33.1%, production output decreased by 30.9% as compared with the previous consolidated fiscal year, on a non-consolidated basis of the Submitting Company) and segment profit or loss recorded a profit of ¥64 million.

2) Display materials In the display materials field, net sales were ¥4,536 million, a decrease of 58.7% as compared with the

previous consolidated fiscal year due to a decrease in sales of 3D-related materials and segment profit or loss recorded a loss of ¥406 million.

3) Electric insulation materials In the electric insulation materials field, net sales were ¥3,226 million, an increase of 7.6% as

compared with the previous consolidated fiscal year, mainly from glass cloth, nonflammable sheets and glass tapes and segment profit or loss recorded a profit of ¥227 million.

4) Industrial application structural materials In the industrial application structural materials field, net sales were ¥5,065 million, an increase of

54.6% as compared with the previous consolidated fiscal year, mainly from FW molded products and honeycomb panels and prepregs for aircraft, pultrusion products and FRP ski sheets, but segment profit or loss recorded a loss of ¥5 million.

5) Related goods sales For sales of related goods, net sales were ¥1,506 million, a decrease of 33.4% as compared with the

previous consolidated fiscal year, but segment profit or loss recorded a profit of ¥59 million. 6) Other (other business fields)

In other fields, net sales were ¥216 million, a decrease of 7.7% as compared with the previous consolidated fiscal year, but segment profit or loss recorded a profit of ¥92 million.

It should also be noted that the amounts of sales, orders received and the like stated in this section do not include the amount for consumption tax, etc.

- 10 -

(2) Cash Flows Cash and cash equivalents (hereinafter referred to as the “Funds”) during the current consolidated fiscal

year increased by ¥1,925 million (an increase of 46.8% as compared with the same period in the previous year) from the previous consolidated fiscal year and recorded ¥6,038 million.

The following is the status of each of the cash flow categories and their factors in the current consolidated fiscal year.

(Cash Flow from Operating Activities) Funds earned from operating activities were ¥829 million, an increase of ¥763 million as compared

with the same period in the previous year (earnings of ¥66 million in the same period in the previous year). Major factors for the fund increase were a depreciation expense of ¥1,583 million and a decrease in accounts receivable of ¥1,386 million, etc., and major factors for the fund decrease were a decrease in purchase debt of ¥1,548 million and profit on the sale of investment securities of ¥1,492 million, etc. (Cash Flow from Investing Activities)

Funds earned from investing activities were ¥1,917 million, an increase of ¥4,030 million as compared with the same period in the previous year (disbursements of ¥2,113 million in the same period in the previous year). Major fund earnings were revenues of ¥2,840 million from the sale of investment securities, revenues of ¥2,150 million from the sale of securities, and revenues of ¥1,813 million from refund of term deposits, etc., and major fund disbursements were expenditures of ¥1,998 million for acquisition of securities, expenditures of ¥1,888 million for acquisition of investment securities, and expenditures of ¥1,118 million for acquisition of tangible fixed assets, etc. (Cash Flow from Financing Activities)

Funds disbursed for financing activities were ¥835 million, a decrease of ¥793 million as compared with the same period in the previous year (disbursements of ¥42 million in the same period in the previous year). Major fund disbursements were expenditures of ¥1,762 million for repayment of lease liabilities and expenditures of ¥925 million for repayment of long-term borrowings, and major fund earnings were revenues of ¥1,925 million from long-term borrowings, etc.

- 11 -

2. Production, Status of Receipt of Orders and Sales

(1) Production Results and Status of Receipt of Orders Our Group (the Company and its consolidated subsidiaries. The same shall apply hereinafter.) manufactures

and sells many different categories of products, across a wide range of areas, and even products of the same type are not necessarily the same in volume, construction, form or other elements. There are also many products which are not manufactured on a made-to-order basis, and we do not indicate production volume or order volume in monetary amounts or quantities for each segment.

For this reason we have indicated production, the status of receipt of orders and sales in relation to business results by segment in “1. Outline of Business Performance, etc.”

(2) Sales Results

Sales results for the current consolidated fiscal year by segment are as follows.

Segment name Current consolidated fiscal year

(From April 1, 2011 to March 31, 2012)

As compared with the same period in the previous year (%)

Electronic materials (million yen) 13,273 22.8

Display materials (million yen) 4,536 58.7

Electric insulation materials (million yen) 3,226 7.6

Industrial application structural materials (million yen)

5,065 54.6

Related goods sales (million yen) 1,506 33.4

Total of reportable segments (million yen)

27,609 24.8

Other (million yen) 216 7.7

Total (million yen) 27,825 24.7

Note: 1. Intersegment transactions are eliminated by setoff. 2. Sales results by major customer and its percentage of total sales results during the last two consolidated fiscal years

are as follows.

Previous consolidated fiscal year (From April 1, 2010 to March 31, 2011)

Current consolidated fiscal year (From April 1, 2011 to March 31, 2012) Customer

Amount (thousand yen) Ratio (%) Amount (thousand yen) Ratio (%)

Sumitomo Shoji Chemicals

Co., Ltd 7,264 19.7 4,204 15.1

3. The amounts in the above table do not include consumption tax.

3. Tasks to be Tackled

(1) Corporate Basic Policy Our Group has implemented the following corporate policies, based on the philosophy of “Creation,

Innovation and Challenge.” I. Create and develop new businesses. II. Build up a global management structure to secure overseas markets and enhance profitability. III. Ensure consolidated management, and review the business structure. Under this corporate policy, the Company aims to create corporate value and increase shareholder value

through improvements in customer satisfaction levels, increased speed in new product development and enhancement of profitability by thorough cost reductions. We have set mid and long-term business targets for business indicators as follows: new product sales ratio will exceed 50%, operating profit ratio will exceed 8% and ROA will exceed 5%.

(2) Mid and Long-Term Corporate Strategy We will strive to raise profit levels by strengthening the competitiveness of existing products as well as

address the development of new products for building the foundations of new businesses. - In the electronic materials field, we will concentrate business resources and reduce costs to aim at

- 12 -

stronger competitiveness and share increase. - In the display materials field, we will seek promotion and cost reduction of 3D materials and make

efforts for quickly releasing new products on the market, focusing on optical films. - For industrial application structural materials and electric insulation materials, we will promote sales

expansion mainly in the fields of aircraft, water treatment and heavy electric machinery and seek to maintain sound profitability.

(3) Tasks to be Tackled by the Company Our Group is promoting the following as our tasks to be tackled in order to achieve the aforementioned

corporate strategy earlier and more securely. - In order to realize a competitive cost structure, we will thoroughly review manufacturing techniques

and material selection. - We will seek to reduce costs thoroughly by improving management techniques and inherent

technologies mainly through the Arisawa Production System for improvements in productivity and improvement in individual abilities.

- We will promote strengthening of cooperation among manufacturing, sales and technology departments and seek efficient business operations.

(4) Basic Policy for Control of Kabushiki Kaisha 1) Effective use of the contents of the basic policy and the assets of the Company and formulation of

appropriate corporate group as well as the efforts for realization of other basic policies. The Company since its incorporation in 1909, has made efforts at technological innovation and

product development while consistently responding to user needs as well as addressing improvements in corporate value by developing unique technologies integrating weaving, coating and molding under an environment of favorable labor relations. The Company’s Board of Directors believes that the company is always obligated to continue to develop along its historical path of accumulating technologies as well as understanding such corporate value and fostering improvement of this corporate value over the long run.

Based on the above, our Group aims at enhancing profitability by creating new businesses and markets, prioritizing safety and quality as our objectives under the corporate policies based on the philosophy of “Creation, Innovation and Challenge.”

2) Efforts for preventing control by inappropriate persons of decisions on financing and corporate policies of the Company

We have witnessed such takeover methods across stock markets recently, through forceful acquisition of large block share buyouts without sufficient explanation or consultation with shareholders of a targeted company or its top management. Not a few of these buyouts can be regarded as leading to loss of corporate value, forced sale of large block shares or violation of shareholder interests.

We have determined that it is necessary to secure the disclosure of necessary and sufficient information and a period for examination and consideration of a takeover bid by presenting rules and procedures to be complied with by a bidder or proposer who seeks a takeover (hereinafter collectively referred to as a “Takeover Bidder”) through Company developed countermeasures for acquisition of large block shares of the Company (hereinafter referred to as the “Rules”) under the Articles of Incorporation of the Company, and obtained approval for the Rules at the 63rd ordinary general meeting of shareholders held on June 29, 2011.

Under the Rules, in the event that implementation of countermeasures has been approved at the general meeting of shareholders, etc., to confirm the will of shareholders, and that a Takeover Bidder does not comply with the Rules or that it is clear a large block acquisition of shares of the Company and similar acts or proposals (hereinafter collectively referred to as a “Takeover”) will destroy corporate value, countermeasures shall be implemented in accordance with the Rules. (For the details of the Rules, please refer to the website of the Company at http://www.arisawa.co.jp/)

3) That the said efforts in accordance with the basic policy do not encroach on the corporate value of the Company and the common interest of shareholders and that they do not aim at maintaining the status of officers.

The Board of Directors of the Company believes that while the Company’s shares have been listed on the stock exchange and investors can freely trade shares of the Company, a large block acquisition of shares of the Company against the will of the Board of Directors of the Company or a takeover bid accompanying the transfer of control of the Company should not be denied if such actions contribute to the interest of all shareholders through an improvement in corporate value, and a final judgment should

- 13 -

be made by all shareholders of the Company. If such Takeover is made, in order for shareholders to make an appropriate judgment, we think it is

best to have the Takeover Bidder provide detailed information and disclose sufficient information to shareholders as well as having the Board of Directors of the Company express its opinions which will in turn allow the shareholders to directly express their opinions at the general meeting of shareholders, etc., on which proposal is best suited to securing and improving corporate value and the common interest of the shareholders, and the Rules provide for as follows. a. Judgment by direct resolution of shareholders

The Rules are to confirm directly the will of shareholders on approval or disapproval of a takeover bid by a Takeover Bidder except for noncompliance of the Rules by the Takeover Bidder, etc. In confirmation of the will of shareholders, it is almost impossible for the Directors to make individual solicitation for the protection of their own interests and there is no room for arbitrary intention of the Directors.

b. Restrictions on implementation of countermeasures by the judgment of the board of directors It is restricted to the cases where the violation of the Rules or destruction of corporate value and the

common interest of shareholders are clear that a countermeasure can be implemented by the Board of Directors of the Company without confirming the will of shareholders, and so-called “Sunset-clause,” which limits the term of the Rules to two (2) years, is also attached. Therefore, the Board of Directors of the Company believes that the “Basic Policy for Control of the

Company” is the efforts for securing the corporate value of the Company and the common interest of shareholders and that it shall not impair the common interest of shareholders.

- 14 -

4. Business Risk, etc.

Among the matters related to the conditions of business and the status of accounting, etc., which have been stated in the Financial Report, the following matters may be listed as of the submitting date of the Financial Report, as matters that may substantially affect the judgment of investors.

The matters related to the future in the text were determined by our Group as of the end of the current consolidated fiscal year.

(1) Fluctuations in demand for products Major users of the products manufactured and sold by our Group are consumer electronic appliance

manufacturers, electronic components manufacturers and industrial electronic appliance manufacturers and fluctuations in demand for consumer electronic appliances affect the business results of our Group.

(2) Dependence on particular products Net sales of the Company largely depend on the field of electronic materials. If sales in this field

decrease, it might affect the business results of our Group.

(3) Development of New Business Our Group intends to start up several new businesses, but this might affect business results depending on

the progress.

(4) Procurement of raw materials If purchase prices rise considerably due to soaring crude oil prices, etc., for raw materials our Group

purchases, it might aversely affect our performance.

(5) Impact of disasters Many of our production bases are concentrated in Joetsu City, Niigata Prefecture. In the event of an

earthquake or power failure and other disasters, it might affect the business results of our Group due to interruption of production activities, etc.

(6) Environmental regulations Businesses of our Group are conducted under various legal regulations, including environmental

protection and other regulations. If significant liabilities or obligations arise in connection with environmental protection and other regulatory compliance matters, they might affect business results of our Group.

5. Important Agreements for Operation, etc.

No applicable matter.

- 15 -

6. Research and Development Activities

Major research and development of our Group has been conducted by the Submitting Company and ThinFlex Corporation and Colorlink Japan Co., Ltd., consolidated subsidiaries, to disseminate technologies to other consolidated subsidiaries.

For research and development, as a technology development oriented company, a flexible organization is basically adopted in order to meet the needs of users, which have undergone diversification and advancement. Mainly in our core segments, that is, the electronic materials field, display materials field, and compound materials field, including electric insulation materials and industrial application structural materials, etc., we constantly pursue research and development of new technologies and products, aiming at the launch of new products, incubation of next generation products and promotion of technologies and expansion of basic technologies taking into consideration the future.

Examples of electronic materials include glass cloth for printed circuit boards, prepregs for special printed circuit boards, and FPC (flexible printed circuit board) materials. Examples of display materials include optical functional films and materials related to 3D (three-dimensional display); while for compound materials examples include materials related to water treatment, materials related to super-conductivity, materials for aircraft interiors, electrical insulation materials and materials related to electronic devices.

As of the end of the current consolidated fiscal year we had 188 personnel involved in research and development activities, and our research and development expenses during this year amounted to ¥2,073 million.

Research achievements and research and development expenses by segment during the current consolidated fiscal year were as follows.

(1) Electronic Materials Field - Halogen-free bonding sheets for multilayer FPCs

While smart phones and tablet terminals continue impressive growth, thinner and higher functional electronic devices have made advancements and for flexible printed circuit boards (FPC), demand for multilayer FPCs capable of accommodating high density wiring has been increasing.

The Company believes welding properties for mounting will be important if multilayer FPCs make further advancements in the future and has developed multilayer FPC bonding sheets having excellent thermal welding heat resistance. Plans have already been put into place for adoption with approval from a large user.

We will also promote sales of the product as a material that can be applied as a replacement not only for interlayer adhesion but for an inner layer coverlay as well.

- High-reflection white color coverlay for LED backlights In recent years, demand for LEDs has been increasing for LCD backlights and lighting and in order to

realize high brightness with less power, white color products having a higher degree of reflection are required for wiring materials.

The Company developed in 2010 a white color coverlay with an 86% degree of reflection, which was adopted for backlights for electronic books and mass production was launched.

On the other hand, for lighting, there is demand for a higher degree of reflection and we developed a white color coverlay with a 90% degree of reflection without impairing discoloration resistance, bendability and flame resistance of conventional products, which was approved as a material by a large user.

With two types of white color coverlays comprising our lineup, deployment across a wide range of applications, including lighting and electric components is expected.

- UV hardening-type bonding sheets Demand for touch panels has increased rapidly for smart phones, tablet terminals and portable game

consoles, etc. For touch panels, transparent conductive members and glass substrates are bonded by clear optical adhesives called OCA (Optical Clear Adhesive). OCA requires excellent optical properties and high adhesive reliability and recently demand for anticorrosive and reworking properties has also grown.

The Company has developed and marketed UV hardening-type bonding sheets, targeting use for OCA. Comparing our product with sticky OCA and liquid OCA, which are currently the mainstream for touch panels, our product is superior in adhesive reliability and reworking properties and by eliminating acid components, it has excellent anticorrosive properties. In addition to use for touch panels, we are considering use as a sealing material for organic LED display light emitting devices, and we expect to expand sales in the future.

Research and development expenses for electronic materials were ¥939 million.

- 16 -

(2) Display Materials Field - New models of Xpol and response to new customers

3D displays have been used for a variety of purposes and the performance of the Company’s 3D glass Xpol is highly valued by users and opportunities for adoption are increasing mainly for industrial use.

In 2011, three new users adopted our Xpol for medical use and we are considering development for horizontal deployment other than 3D use. Our Xpol was adopted by two new users for optical devices of blue-ray players and projectors. The products will be marketed in the future and we expect to expand sales.

- Development of hard coating films Demand for hard coating films, which offer better functionality than existing products, has increased in the

markets for smart phones and tablet terminals, which continue their remarkable growth. The company developed hard coating films of a resistance film type which improved light resistance and

sliding properties and an electrostatic capacity type which improved light resistance and fingerprint resistance, and started full-scale production. These are highly valued for icons (design) and scatter prevention and we expect more models will adopt our products.

We commercialized antistatic hard coating films included with light resistance and our products were adopted for PDP. We aim to develop products with higher added value to increase our market share in optical functional films.

Research and development expenses for display materials were ¥831 million.

(3) Compound Materials Field - Development of insulation coating materials for ITER TF coils

The ITER (International Thermonuclear Experimental Reactor) plan is a large-scale international project to realize the world’s first thermonuclear experimental reactor in order to demonstrate that nuclear fusion energy for peaceful purposes is feasible in terms of science and technology, which has been promoted by Japan, the EU, Russia, the United States, South Korea, China and India, aiming to start operations in 2019.

The Company developed insulation coating materials for superconducting toroidal field coils (TF coil) to integrate plasma in a reactor into doughnut shapes and these are expected to be applied to nine units scheduled to be manufactured in Japan (the other nine units to be manufactured in the EU). Insulation coating materials have a composition of adhesion of polyimide film and S-glass cloth from a small quantity of resin, which are processed into tape shape and used by being wound on superconducting coil wire materials. Polyimide film and S-glass cloth are materials having excellent anti-radiation performance. Anti-radiation performance and ease in handling for the winding process are also required of resin for adhesion and we use our own independently developed resin.

Insulation coating materials developed were tested for anti-radiation performance at the Japan Atomic Energy Agency and ITER Organization and in December 2011, it was approved as a material by the ITER Organization. We expect mass production of insulation coating materials in the autumn of 2012.

- Development and receipt of orders for pressure vessels for reverse osmosis membrane (RO Vessel) made by filament winding

“11-inch and 8-inch RO Vessels for plants of 500,000 t/day in the Middle East, which is the largest water production volume in the world,” which we reported last year, was adopted for the project and we started delivery. The amount of orders received was 6,000 for 11-inch and 1,400 for 8-inch, which was the largest order since the incorporation of Protec Arisawa America (PAA) and Protec Arisawa Europe (PAE).

For the 11-inch and 8-inch RO Vessels, we significantly improved quality by reflecting the design concepts and manufacturing know-how of the Company and using our commonly known “winding helical,” our patented filament winding technology, we improved the waterproof capacity and pressure-proof capacity.

Vessels on which the technology is reflected observe international standards for pressure vessels, ASME Section X. In March, it passed all inspections in the presence of the customer and the high quality of the product was highly valued.

“Winding helical” has a structure in which the bearing plates at both ends of the vessel (member corresponding to the cover of the pipe open at both ends) are held in a grasping manner by winding filament. The winding helical requires not only filament winding design technology but also manufacturing technology capable of filament winding molding as designed, which is high quality technology that can only be achieved by combining these technologies.

We will continue to focus on improvements in quality and deploy our filament winding technology to both companies, PAE and PAA, to supply RO Vessels with increasingly higher quality.

Research and development expenses for compound materials were ¥302 million.

- 17 -

7. Analysis of Financial Conditions, Business Results, and Status of Cash Flow

Analyses of financial conditions and business results of the current consolidated fiscal year are as follows.

(1) Analysis of Financial Conditions (Assets) Total assets as of the end of the current consolidated fiscal year were ¥46,666 million (¥50,600 million

as of the end of the previous consolidated fiscal year), a decrease of ¥3,933 million, 7.8%. Balance of current assets as of the end of the current consolidated fiscal year was ¥23,044 million

(¥26,307 million as of the end of the previous consolidated fiscal year), a decrease of ¥3,262 million, 12.4%. By major breakdown, notes and accounts receivable decreased by ¥1,579 million and deposits paid decreased by ¥1,359 million, etc.

Balance of fixed assets as of the end of the current consolidated fiscal year was ¥23,621 million (¥24,293 million as of the end of the previous consolidated fiscal year), a decrease of ¥671 million, 2.8%. By major breakdown, tangible and intangible fixed assets decreased by ¥866 million by depreciation.

(Liabilities) Total liabilities as of the end of the current consolidated fiscal year were ¥11,625 million (¥14,585

million as of the end of the previous consolidated fiscal year), a decrease of ¥2,960 million, 20.3%. Balance of current liabilities as of the end of the current consolidated fiscal year was ¥8,781 million

(¥10,442 million as of the end of the previous consolidated fiscal year), a decrease of ¥1,660 million, 15.9%. By major breakdown, notes and accounts payable decreased by ¥1,585 million.

Balance of fixed liabilities as of the end of the current consolidated fiscal year was ¥2,843 million (¥4,143 million as of the end of the previous consolidated fiscal year), a decrease of ¥1,299 million, 31.4%. By major breakdown, lease liabilities decreased by ¥1,293 million.

(Net Assets) Total net assets as of the end of the current consolidated fiscal year were ¥35,041 million (¥36,015

million as of the end of the previous consolidated fiscal year), a decrease of ¥973 million, 2.7%. By major breakdown, valuation difference on other securities decreased by ¥816 million.

(2) Analysis of Cash Flows Status of each cash flow in the current consolidated fiscal year and their factors are stated in “II. Status of

Business, 1. Outline of Business Performance, etc., (2) Cash Flows.” (Cash Flow Index)

Previous consolidated fiscal year(As of March 31, 2011)

Current consolidated fiscal year (As of March 31, 2012)

Net worth ratio (%) 68.3 71.9

Net worth ratio on a basis of market price (%) 30.9 24.9

Ratio of cash flow to interest bearing debt (year) 74.2 5.3

Interest coverage ratio (times) 0.6 8.3

Note: Net worth ratio: Net worth / Total assets Net worth ratio on a basis of market price: Total market value of shares / Total assets Ratio of cash flow to interest bearing debt: Interest bearing debts / Cash flow Interest coverage ratio: Cash flow / Interest paid

* Each index is calculated by the financial statements on a consolidated basis. * Total market value of shares is calculated by final share price at the end of year × total number of outstanding

shares at the end of year (after deducting treasury stock). * Interest bearing debts cover all the debts that paid interest out of debts appropriated on the consolidated balance

sheet. * As for cash flow and interest paid, “Cash flows from operating activities” and “Interest paid” posted in the

consolidated cash flow statement are used.

- 18 -

(3) Analysis of Business Results (Sales) Due to the impact of the appreciation of the yen and the flood damage in Thailand, sales for the current

consolidated fiscal year were ¥27,825 million (¥36,957 million for the previous consolidated fiscal year), a decrease of ¥9,132 million, 24.7%. Cost of goods sold was ¥25,276 million (¥33,202 million for the previous consolidated fiscal year), a decrease of ¥7,926 million, 23.9%.

As a result, gross profit on sales was ¥2,549 million (¥3,754 million for the previous consolidated fiscal year), a decrease of ¥1,205 million, 32.1%.

(Operating Profit and Loss) Selling, general and administrative expenses for the current consolidated fiscal year were ¥3,864 million

(¥4,110 million for the previous consolidated fiscal year), a decrease of ¥245 million, 6.0% as a result of a decrease in transportation and packaging expenses, etc., due to the decrease in sales amount.

As a result, operating loss was ¥1,315 million (operating loss of ¥355 million for the previous consolidated fiscal year), a loss increase of ¥959 million.

(Ordinary Profit and Loss) Non-operating income for the current consolidated fiscal year was ¥1,169 million (¥1,157 million for the

previous consolidated fiscal year), an increase of ¥12 million, 1.1%. Non-operating expenses were ¥301 million (¥740 million for the previous consolidated fiscal year), a decrease of ¥439 million, 59.3%. By major breakdown, exchange loss decreased by ¥250 million. As a result, ordinary loss was ¥447 million (ordinary profit of ¥61 million for the previous consolidated fiscal year), a decrease of ¥508 million.

(Net Profit and Loss before Taxes, etc.) Extraordinary profits for the current consolidated fiscal year were ¥1,627 million (¥1,850 million for the

previous consolidated fiscal year), a decrease of ¥223 million, 12.1%. By major breakdown for the current year, profit on the sale of investment securities of ¥1,492 million was recorded. Extraordinary losses were ¥416 million (¥3,544 million for the previous consolidated fiscal year), a decrease of ¥3,127 million, 88.2%. By major breakdown for the current year, special additional benefit for voluntary retirement was recorded. As a result, net profit before taxes, etc., was ¥763 million (net loss before taxes, etc., of ¥1,632 million for the previous consolidated fiscal year), an increase of ¥2,396 million.

(Net Profit and Loss) Corporate income tax, etc., for the current consolidated fiscal year was ¥56 million (¥118 million for the

previous consolidated fiscal year), a decrease of ¥61 million, 52.0%. As a result, net profit was ¥586 million (net loss of ¥1,862 million for the previous consolidated fiscal year), an increase of ¥2,448 million.

- 19 -

III. Status of Facilities

1. Outline of Capital Investment

Our Group concentrates its capital investment in development and growth fields in order to respond to rapid technological innovation and sales competition. In the current consolidated fiscal year, we made capital investment of ¥1,129 million.

Major capital investment in the current consolidated fiscal year was ¥467 million for production facilities related to electronic materials mainly for base materials for flexible printed circuit boards, ¥226 million for production facilities related to electric insulation materials mainly for prepregs for electric insulation, and ¥173 million for production facilities related to industrial application structural materials mainly for FW molded products.

2. Status of Major Facilities

(1) Submitting Company As of March 31, 2012

Book value

Name of offices (location)

Segment name Nature of facilities Buildings

and structures (¥1,000)

Machinery, equipment

and delivery equipment (¥1,000)

Land (¥1,000) (area m2)

Lease asset (¥1,000)

Other (¥1,000)

Total (¥1,000)

Number of

employees (persons)

Minami-Honcho Factory

(Joetsu City, Niigata)

Electronic materialsDisplay materials Electric insulation materials Industrial application structural materials

Electronic materials manufacturing facilitiesDisplay materials manufacturing facilitiesElectric insulation materials manufacturing facilities Industrial application structural materials manufacturing facilities

655,711 375,82175,839

(25,058)2,199 38,030 1,147,601

108(11)

Nakadahara Factory

(Joetsu City, Niigata)

Electronic materialsDisplay materials Electric insulation materials Industrial application structural materials

Electronic materials manufacturing facilitiesDisplay materials manufacturing facilitiesElectric insulation materials manufacturing facilities Industrial application structural materials manufacturing facilities

3,223,618 1,109,405291,825

(115,013)1,634 67,212 4,693,696

381(55)

Nakadahara-Nishi Factory (Joetsu City,

Niigata)

Display materials Display materials manufacturing facilities

248,603 175,807464,909(34,704)

698 11,844 901,86463(2)

Head Office (Joetsu City,

Niigata)

Head office (common)

Other facilities 418,039 10,58098,006

(25,947)4,224 9,287 540,138

43(5)

Tokyo Branch (Taito-ku,

Tokyo)

Electronic materialsDisplay materials Electric insulation materials Industrial application structural materials Other Head office (common)

Other facilities 154,620 2,264173,086

(478)1,579 1,811 333,361

33(1)

Osaka Branch (Chuo-ku, Osaka city)

Electronic materialsDisplay materials Electric insulation materials Industrial application structural materials Other

Other facilities 1,107 --- --- --- 307 1,41511(3)

- 20 -

(2) Domestic Subsidiaries As of March 31, 2012

Book value

Company name

Name of offices

(location) Segment name Nature of facilities

Buildings and

structures (¥1,000)



Land (¥1,000)(area m2)


Other (¥1,000)

Total (¥1,000)

Number of employees (persons)

Colorlink Japan Co., Ltd.

--- (Joetsu City,

Niigata)

Display materials

Display materials manufacturing facilities

135,954 108,35762,907(4,438)

--- 14,609 321,82965

(25)


--- (Joetsu City,

Niigata)

Electronic materials Electric insulation materials

Electronic materials manufacturing facilities Electric insulation materials manufacturing facilities

390,847 247,551106,016(31,012)

--- 1,281 745,69779(1)

Arisawa Sogyo Co., Ltd.

--- (Joetsu City,

Niigata)

Industrial application structural materials Electric insulation materials

Industrial application structural materials manufacturing facilities Electric insulation materials manufacturing facilities

252,509 69,866231,083(34,638)

--- 5,769 559,228 117


--- (Kawaguchi

City, Saitama)


Industrial application structural materials manufacturing facilities

28,149 12,53529,064(2,372)

--- 865 70,615 16

- 21 -

(3) Overseas Subsidiaries As of March 31, 2012

Book value

Company name

Name of offices

(location) Segment name Nature of facilities

Buildings and

structures (¥1,000)



Land (¥1,000)(area m2)


Other (¥1,000)

Total (¥1,000)

Number of employees (persons)

ThinFlex Corporation

--- (Kaohsiung,

Taiwan)

Electronic materials

Electronic materials manufacturing facilities

441,034 365,170 --- 130,127 56,900 993,233 105

TopFlex Corporation

--- (Kunshan,

China)


Electronic materials manufacturing facilities

272,993 243,21939,533(44,086)

--- 11,807 567,553 89

Protec Arisawa Europe, S.A.

--- (Munguia,

Spain)



28,607 175,8783,272(8,300)

--- 3,281 211,03982(5)

Protec Arisawa America, Inc.

--- (California,

U.S.A.)



3,411 90,013 --- --- 23,469 116,89463

(12)

Note: 1. Among book values, “Other” is the total of tools, furniture and fixtures and construction in progress. The amount does not include consumption taxes, etc.

2. Major facilities loaned to domestic subsidiaries by the Submitting Company are included in the facilities of the pertinent subsidiary.

3. Number of employees of Arisawa Kenpan Co., Ltd. is included in the number of employees of the Osaka Branch, and number of employees of Protec International Holdings Co., Ltd. and Protec Arisawa Japan Co., Ltd. is included in the number of employees of the Tokyo Branch.

4. The land of TopFlex Corporation is recorded in “Other” of intangible fixed assets in the balance of land-use right. 5. ( ) in the number of employees indicates the number of temporary employees not included in the total. 6. Facilities loaned to affiliates and non-consolidated subsidiaries are included in the facilities of Nakadahara Factory, Head Office

and Tokyo Branch of the Submitting Company, major items of which are as follows.

Land Buildings and structures Machinery, equipment and delivery equipment

Name of affiliated companies

Area (m2) Amount

(thousand yen) Amount

(thousand yen) Amount

(thousand yen)

Polatechno Co., Ltd. 7,777 19,733 86,614 127

NB Optic, Co., Ltd. 108 39,203 --- ---

Ryoyu Industry Co., Ltd. 703 25,797 9,299 ---

Toppan Arisawa Optical Technology Co., Ltd. 3,999 10,922 214,621 314

Total 12,588 95,655 310,534 441

3. Plan of New Installation and Retirement, etc., of Facilities

A capital investment plan for our Group has been developed, generally taking into consideration industry trends, forecasts for receipt of orders and investment efficiency, etc. While a facility plan is generally developed by each consolidated subsidiary, in development, the Submitting Company provides guidance. Plans for establishment and refurbishing of material facilities are as follows.

(1) Establishment of Material Facilities There is no pertinent plan.

(2) Refurbishing of Material Facilities There is no pertinent plan.

- 22 -

IV. Status of the Submitting Company

1. Status of Shares, etc.

(1) Total Number of Shares, etc.

1) Total number of shares

Class Authorized number of shares to be issued

Common Stock 130,000,000

Total 130,000,000

2) Shares issued

Class

Number of shares issued and outstanding at the end of the

business year (As of March 31, 2012)

Number of shares issued and outstanding as of the date

submitted (As of June 29, 2012)

Name of financial instruments exchange where listed or the

name of registered and authorized financial

instruments firms association

Contents

Common Stock 34,997,824 34,997,824 Tokyo Stock Exchange (First Section Market)

Number of Shares per

Trading Unit: 100 shares

Total 34,997,824 34,997,824 --- ---

Note: In the column “Number of shares issued and outstanding as of the date submitted,” the number of shares issued by the exercise of new share subscription rights during the period from June 1, 2012 through the submitting date of this Financial Report is not included.

- 23 -

(2) Status of New Share Subscription Rights, etc.

New share subscription rights issued under the former Commercial Code were as follows.

Resolution at the Ordinary General Meeting of Shareholders as of June 29, 2005

At the end of the business year


At the end of the previous month of the submission date

(As of May 31, 2012)

Number of new share subscription rights 314 Same as on the left.

Number of treasury new share subscription rights out of new share subscription rights (unit)

--- ---

Class of shares to be subject to new share subscription rights Common Stock Same as on the left.

Number of shares to be subject to new share subscription rights

31,400 Same as on the left.

Amount to be paid-in upon exercise of the new share subscription rights (yen)

1 Same as on the left.

Exercise period of the new share subscription rights August 1, 2005 through

July 31, 2025 Same as on the left.

Issue price and paid-in capital amount per share to be issued upon exercise of the new share subscription rights (yen)

Issue Price 1Paid-in Capital Amount 1

Same as on the left.

Terms and conditions to exercise the new share subscription rights

(1) Eligible persons may exercise the new share subscription rights only at the time of their retirement from office of directors of the Company; provided, however, that the eligible persons may exercise the new share subscription rights during the period between the following day of the date of retirement (hereinafter referred to as the “Commencement Date of Exercising Right”) and the date elapsing ten (10) days from the Commencement Date of Exercising Right. (2) In the event that the eligible person has died, among his/her heirs, only the spouse, children and direct ancestors of the first degree may exercise the new share subscription rights; provided, however, that heirs may exercise the new share subscription rights during the period between following day of the retirement of the eligible person by death and the date elapsing three (3) months from that date.


Provisions concerning the transfer of the new share subscription rights

Transfer of the new share subscription rights must be approved by the Board of Directors.


Matters concerning substitute payment --- ---

Matters concerning issue of new share subscription rights in connection with reorganization

--- ---

Note: It was granted in lieu of payment of money to the directors of the Company whose termination of the retirement bonuses was approved at the 56th ordinary general meeting of shareholders (June 29, 2004).

- 24 -

New share subscription rights issued under the Corporation Law were as follows.

1) Resolution at the Ordinary General Meeting of Shareholders as of June 28, 2007




(As of May 31, 2012)

Number of new share subscription rights 1,613 1,146


--- ---



161,300 114,600



Exercise period of the new share subscription rights July 1, 2009 through

June 30, 2012 Same as on the left.


Issue Price 1,480Paid-in Capital Amount 740



Being an officer or an employee of the Company or a director or an employee of a subsidiary of the Company at the time of exercising the rights.







In the event that a merger contract in which the Company is a defunct company has been approved, or that a proposal for approval of a stock swap agreement in which the Company becomes a wholly owned subsidiary or a proposal for a transfer of stocks has been approved at a general meeting of shareholders, except as the surviving company or the wholly owning parent succeeds the obligation to grant new share subscription rights, the Company may acquire the New Share Subscription Rights without consideration.


- 25 -





(As of May 31, 2012)



--- ---












Being a director of the Company at the time of exercising the rights.









- 26 -





(As of May 31, 2012)



--- ---



186,700 134,200


















- 27 -

4) Resolution at the Board of Directors’ Meeting as of June 26, 2009




(As of May 31, 2012)



--- ---












Being an officer of the Company or an advisor or a counselor provided for in Article 28 of the Articles of Incorporation of the Company at the time of exercising the rights.









- 28 -





(As of May 31, 2012)



--- ---



265,500 190,400


















- 29 -





(As of May 31, 2012)



--- ---





















- 30 -





(As of May 31, 2012)



--- ---



218,200 164,100









Being an officer, an advisor or an employee of the Company or a director, an advisor or an employee of a subsidiary of the Company at the time of exercising the rights.









- 31 -





(As of May 31, 2012)



--- ---





















- 32 -





(As of May 31, 2012)



--- ---



225,900 193,200









Being an officer, an advisor or an employee of the Company or a director, an advisor or an employee of a subsidiary of the Company at the time of exercising the rights.









- 33 -

(3) Status of Exercise of Bonds with New Share Subscription Rights, Exercise Price Adjustment Clause attached


(4) Details of Rights Plan No applicable matter.

(5) Changes in Total Number of Shares Issued, Capital, etc.

Number of shares issued and outstanding

Capital (thousand yen)

Capital reserves (thousand yen) Date

Change Balance Change Balance Change Balance

March 31, 2008 *1 2,600 36,549,629 2 7,117,253 --- 6,229,282

June 27, 2008 *2 1,557,505 34,992,124 --- 7,117,253 --- 6,229,282

March 31, 2009 *3 2,300 34,994,424 2 7,117,256 --- 6,229,282

March 31, 2011 *4 3,400 34,997,824 3 7,117,259 --- 6,229,282

Note: *1. Increase is due to the exercise of new share subscription rights in this business year. *2. Decrease is due to the retirement of treasury stock. *3. Increase is due to the exercise of new share subscription rights in this business year. *4. Increase is due to the exercise of new share subscription rights in this business year.

(6) Status by Owner As of March 31, 2012

Status of Shares (number of one unit: 100 shares)

Foreign corporations, etc.Category Government and local

governments

Financial institutions

Financial instruments

firms

Other corporations Other than

individualsIndividuals

Individuals and others

Total

Status of odd stocks

(shares)

Number of shareholders (person)

--- 35 32 139 88 3 14,278 14,575 ---

Number of shares owned (unit)

--- 93,705 5,237 40,484 30,426 32 178,812 348,696 128,224

Ratio of shares owned (%)

--- 26.87 1.50 11.61 8.73 0.01 51.28 100.00 ---

Note: 1. Out of 3,116 shares of treasury stock, 31 units are stated in “Individuals and others” and 16 shares are stated in “Status of odd stocks.”

2. In the columns “Other corporations” and “Status of odd stocks,” stocks in the name of Japan Securities Depository Center, Inc. are included by 5 units and 19 shares, respectively.

- 34 -

(7) Status of Major Shareholders As of March 31, 2012

Full name or corporate name

Address Number of shares held

Ratio of shares held to total number of shares issued and outstanding (%)

Japan Trustee Services Bank, Ltd. (Trust account)

8-11 Harumi 1-chome, Chuo-ku, Tokyo

1,722,200 4.92

Mitsubishi Gas Chemical Co., Ltd. *1

5-2 Marunouchi 2-chome, Chiyoda-ku, Tokyo

1,472,166 4.20

Hachijuni Bank, Ltd.

(Standing Agent: The Master Trust Bank of Japan, Ltd.)

178-8 Nakagosho Okada Nagano City, Nagano Prefecture

(11-3 Hamamatsu-cho 2-chome, Minato-ku, Tokyo)

1,000,930 2.85

Arisawa Kenko Ltd. 11-44 Nishishiro-cho 3-chome, Joetsu City, Niigata Prefecture

824,238 2.35

CBNY DFA INTL SMALL CAP VALUE PORTFOLIO

(Standing Agent: Citibank Japan Ltd.)

388 GREENWICH STREET, NY, NY 10013, USA

(3-14 Higashi-Shinagawa 2-chome, Shinagawa-ku, Tokyo)

738,282 2.10

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

11-3 Hamamatsu-cho 2-chome, Minato-ku, Tokyo

691,000 1.97

Eiichi Arisawa Joetsu City, Niigata Prefecture 687,746 1.96

The Daishi Bank, Ltd.

(Standing Agent: The Master Trust Bank of Japan, Ltd.)

1071-1 7-bancho, Higashiborimaedori, Chuo-ku, Niigata City, Niigata Prefecture

(11-3 Hamamatsu-cho 2-chome, Minato-ku, Tokyo)

628,903 1.79

The Master Trust Bank of Japan, Ltd. (Employee retirement funds account and Mitsubishi Electric Corporation’s Account)

11-3 Hamamatsu-cho 2-chome, Minato-ku, Tokyo

530,536 1.51

Nippon Life Insurance Company 6-6 Marunouchi 1-chome Chiyoda-ku, Tokyo

485,922 1.38

Total --- 8,781,923 25.09

Note: *1. Number of shares held by Mitsubishi Gas Chemical Co., Ltd. includes 966,306 shares that have been contributed as the trust property of employee retirement funds by Mitsubishi Gas Chemical Co., Ltd. (Name in the registry of shareholders is “The Master Trust Bank of Japan, Ltd. (Employee retirement funds account and Mitsubishi Gas Chemical Company’s Account).”

- 35 -

(8) Status of Voting Rights

1) Shares issued and outstanding As of March 31, 2012

Category Number of Shares Number of Rights Remarks

Shares without voting rights --- --- ---

Shares with restricted voting rights (treasury stock, etc.)

--- --- ---

Shares with restricted voting rights (other) --- --- ---

Shares with full voting rights (treasury stock, etc.)

Common Stock 3,100 --- ---

Shares with full voting rights (other) Common Stock 34,866,500 348,665 ---

Odd stocks Common Stock 128,224 --- ---

Total number of shares issued and outstanding

34,997,824 --- ---

Total number of voting rights of shareholders

--- 348,665 ---

Note: 500 shares and 5 rights held in the name of Japan Securities Depository Center, Inc. are included in “Number of Shares” and “Number of Rights” of “Shares with full voting rights (other),” respectively.

2) Treasury Stocks, etc. As of March 31, 2012

Full name or corporate name, etc., of holder Number of shares held

Full name or corporate name

Address In own nameIn other’s

name Total

Ratio of shares held to total number of shares issued and outstanding

(%)

Arisawa Mfg. Co., Ltd. 5-5 Minami Honcho 1-chome, Joetsu City, Niigata Prefecture

3,100 --- 3,100 0.01

Total --- 3,100 --- 3,100 0.01

- 36 -

(9) Details of Stock Option Scheme

The Company has adopted stock option scheme. The scheme is carried out by issuing new share subscription rights under the former Commercial Code and the Corporation Law.

The details of the scheme are as follows.


Under the provisions of Article 280-20 and Article 280-21 of the former Commercial Code, a resolution was adopted at the 57th ordinary general meeting of shareholders held on June 29, 2005 that new share subscription rights shall be issued with particularly favorable conditions to the Directors of the Company whose termination of the retirement bonuses was approved at the 56th ordinary general meeting of shareholders.

Date of Resolution June 29, 2005

Category and number of persons granted option (persons) Directors of the Company whose termination of the retirement bonuses was approved at the 56th ordinary general meeting of shareholders 6 persons

Class of shares to be subject to new share subscription rights

Stated in “(2) Status of New Share Subscription Rights, etc.”

Number of shares (shares) 39,700 shares



Exercise period of the new share subscription rights The same as in the above


The same as in the above



Matters concerning substitute payment ---


---

2) Resolution at the Ordinary General Meeting of Shareholders as of June 28, 2007 Under the provisions of Articles 236, 238 and 239 of the Corporation Law, a resolution was adopted at

the 59th ordinary general meeting of shareholders held on June 28, 2007 that new share subscription rights shall be issued with particularly favorable conditions to the employees of the Company, and Directors and employees of subsidiaries of the Company.


Category and number of persons granted option (persons) Employees of the Company 217 personsDirectors and employees of subsidiaries of the Company 6 persons



Number of shares (shares) To the employees of the Company, 194,500 shares, to the Directors and employees of subsidiaries of the Company, 5,500 shares, total 200,000 shares.











- 37 -

3) Resolution at the Board of Directors’ Meeting as of June 27, 2008 Under the provisions of Articles 236, 238 and 240 of the Corporation Law, a resolution was adopted at

the Board of Directors’ meeting held on June 27, 2008 that new share subscription rights shall be issued to the Directors of the Company as stock options.


Category and number of persons granted option (persons) Directors of the Company 8 persons















the 60th ordinary general meeting of shareholders held on June 27, 2008 that new share subscription rights shall be issued with particularly favorable conditions to the employees of the Company, and Directors and employees of subsidiaries of the Company.
















- 38 -



















the 61st ordinary general meeting of shareholders held on June 26, 2009 that new share subscription rights shall be issued with particularly favorable conditions to the employees of the Company, and Directors and employees of subsidiaries of the Company.


Category and number of persons granted option (persons) Employees of the Company 224 personsDirectors and employees at managerial position of subsidiaries of the Company 5 persons



Number of shares (shares)

To the employees of the Company, 284,900 shares, to the Directors and employees at managerial position of subsidiaries of the Company, 3,000 shares, total 287,900 shares.











- 39 -



















the 62nd ordinary general meeting of shareholders held on June 29, 2010 that new share subscription rights shall be issued with particularly favorable conditions to the employees of the Company, and Directors and employees of subsidiaries of the Company.
















- 40 -



















the 63rd ordinary general meeting of shareholders held on June 29, 2011 that new share subscription rights shall be issued with particularly favorable conditions to the employees of the Company, and Directors and employees of subsidiaries of the Company.
















- 41 -




Category and number of persons granted option (persons) Persons who execute operations as CEO and Operating Officers out of the Directors of the Company 7 persons


Common stock

Number of shares (shares) Within the scope of between 7,000 shares and 10,000 shares per person up to 54,000 shares.


(Note)

Exercise period of the new share subscription rights From July 1, 2014 to June 30, 2017


Being a director of the Company or an advisor or a counselor provided for in Article 28 of the Articles of Incorporation of the Company at the time of exercising the rights.





In the event that a merger contract in which the Company is a defunct company has been approved, or that a proposal for approval of a stock swap agreement in which the Company becomes a wholly owned subsidiary or a proposal for a transfer of stocks has been approved at a general meeting of shareholders, except as the surviving company or the wholly owning parent succeeds the obligation to grant new share subscription rights, the New Share Subscription Rights may be acquired without consideration.

Note: Amount to be paid in at the exercise of new share subscription rights shall be the amount obtained by multiplying the

paid in amount per share determined at the date of allotment by the number of shares to be subject per one new share

subscription right. Paid in amount per share shall be the amount obtained by multiplying the simple average of the

final price of common stocks of the Company on the Tokyo Stock Exchange on the date of allotment and the final

price for the latest six days (if there is no final price on the date of allotment, the final price for the latest 7 days

where final price exists prior to that date), where final price exists prior to that date by 1.05. The amount below ¥1

shall be rounded up. Provided that if the amount is below the final price on the date of allotment (if there is no final

price on the date of allotment, then the final price on the latest day), the price shall be the final price on the date of

allotment (if there is no final price on the date of allotment, then the final price on the latest day).

In this connection, if the Company makes a stock split or reverse split after issuance of new share subscription rights,

the paid in amount shall be adjusted in accordance with the following formula and the amount below ¥1 shall be

rounded up. 1

Paid in amount after adjustment = paid in amount before adjustment ×

Ratio of split and reverse split

In the event that issuance of new shares is made at the price lower than market price (excluding the issuance of new

shares by exercise of the right of stock option) or that disposition of treasury stocks is made, the paid in amount shall

be adjusted in accordance with the following formula and the amount below ¥1 arising from adjustment shall be

rounded up. number of new shares issued × paid in amount per share

number of outstanding shares +

market price per share

Paid in amount after adjustment = paid in amount before adjustment ×number of outstanding shares + number of new shares issued

In this connection, if disposition of treasury stocks is made, the “number of new shares issued” shall read as the

“number of treasury stocks for disposition.”

- 42 -


the 64th ordinary general meeting of shareholders held on June 28, 2012 that new share subscription rights shall be issued with particularly favorable conditions to the advisors and employees of the Company, and Directors and employees of subsidiaries of the Company.


Category and number of persons granted option (persons)

Employees at managerial positions above assistant section manager provided for in Article 3 of Qualification Rules and those at the position above team leader and advisors 167 personsDirectors and employees at managerial position of subsidiaries of the Company 6 persons


Common stock

Number of shares (shares)

Employees at managerial positions above assistant section manager provided for in Article 3 of Qualification Rules and those at the position above team leader and advisors

Within the scope of between 100 shares and 7,000 shares per person up to 186,000 shares.

Directors and employees at managerial position of subsidiaries of the Company

Within the scope of between 1,000 shares and 7,000 shares per person up to 12,000 shares.


(Note)

Exercise period of the new share subscription rights From July 1, 2014 to June 30, 2017


Being a director, an advisor or an employee of the Company or a director, an advisor or an employee of a subsidiary of the Company at the time of exercising the rights.





In the event that a merger contract in which the Company is a defunct company has been approved, or that a proposal for approval of a stock swap agreement in which the Company becomes a wholly owned subsidiary or a proposal for a transfer of stocks has been approved at a general meeting of shareholders, except as the surviving company or the wholly owning parent succeeds the obligation to grant new share subscription rights, the New Share Subscription Rights may be acquired without consideration.

Note: Amount to be paid in at the exercise of new share subscription rights shall be the amount obtained by multiplying the

paid in amount per share determined at the date of allotment by the number of shares to be subject per one new share

subscription right. Paid in amount per share shall be the amount obtained by multiplying the simple average of the

final price of common stocks of the Company on the Tokyo Stock Exchange on the date of allotment and the final

price for the latest six days (if there is no final price on the date of allotment, the final price for the latest 7 days

where final price exists prior to that date), where final price exists prior to that date by 1.05. The amount below ¥1

shall be rounded up. Provided that if the amount is below the final price on the date of allotment (if there is no final

price on the date of allotment, then the final price on the latest day), the price shall be the final price on the date of

allotment (if there is no final price on the date of allotment, then the final price on the latest day).

In this connection, if the Company makes a stock split or reverse split after issuance of new share subscription rights,

the paid in amount shall be adjusted in accordance with the following formula and the amount below ¥1 shall be

rounded up. 1

Paid in amount after adjustment = paid in amount before adjustment ×

Ratio of split and reverse split

In the event that issuance of new shares is made at the price lower than market price (excluding the issuance of new

shares by exercise of the right of stock option) or that disposition of treasury stocks is made, the paid in amount shall

- 43 -

be adjusted in accordance with the following formula and the amount below ¥1 arising from adjustment shall be

rounded up. number of new shares issued × paid in amount per share

number of outstanding shares +

market price per share

Paid in amount after adjustment = paid in amount before adjustment ×number of outstanding shares + number of new shares issued

In this connection, if disposition of treasury stocks is made, the “number of new shares issued” shall read as the

“number of treasury stocks for disposition.”

- 44 -

2. Status of Acquisition of Treasury Stocks, etc.

[Type of Stock, etc.] Acquisition of common stocks falling under the provisions of Article 155, item 7 of the Corporation Law.

(1) Status of Acquisition by a Resolution of the General Meeting of Shareholders No applicable matter.

(2) Status of Acquisition by a Resolution of the Board of Directors No applicable matter.

(3) Details of Acquisition not authorized by Resolution of the General Meeting of Shareholders or Resolution of the Board of Directors

Category Number of shares (shares) Total amount (yen)

Treasury stocks acquired during the current business year 385 131,774

Treasury stocks acquired during the current period 108 33,264

Note: Treasury stocks acquired during the current period do not include the number of shares acquired by the purchase of

odd stocks from June 1, 2012 to the date of submitting the Financial Report.

(4) Status of Treatment and Holding of Acquired Treasury Stocks

Current Business Year Current Period

Category Number of shares

(shares)

Total disposed amount (yen)

Number of shares

(shares)

Total disposed amount (yen)

Acquired treasury stocks offered for acceptance --- --- --- ---

Acquired treasury stocks disposed by retirement --- --- --- ---

Acquired treasury stocks transferred in relation to

merger, exchange of stocks and spin off --- --- --- ---

Other --- --- --- ---

Number of treasury stocks held 3,116 --- 3,224 ---

Note: Number of treasury stocks held during the current period do not include the number of shares acquired by the

purchase of odd stocks from June 1, 2012 to the date of submitting the Financial Report.

- 45 -

3. Dividend Policy

The Company has placed return of profits to our shareholders as one of the most important management objectives. For profit distributions, we have continued a policy of conducting profit distribution in conjunction with consolidated business results and a dividend payout ratio of 25% or more with respect to consolidated net profit is set as an indicator, taking into consideration business results and future fund demands.

The Company has a basic policy of paying distribution of surpluses twice a year by interim and year-end dividends. The ratio of sales in the first half tends to be relatively higher for the full-year, however, the Company now pays dividend for the full-year in order to realize fair distribution in response to business results.

The organ to determine distribution of surpluses is the general meeting of shareholders for the year-end dividend and the Board of Directors for the interim dividend.

With respect to dividends for the current business year, we determined to pay a dividend of ¥5 per share based on the above policy. As a result, the dividend payout ratio with respect to consolidated net profit for the current business year was 29.8%.

We will appropriate internal reserves to research and development and capital investment for business expansion, etc., for increasing profits for our shareholders in the future.

The Company provides in its Articles of Incorporation, “The Company may make an interim dividend by a resolution of the Board of Directors, setting September 30 of every year as the record date.”

Distribution of surpluses for the current business year is as follows.

Date of Resolution Total amount of dividend

(thousand yen) Dividend amount per

share (yen)

Resolution at the Ordinary General Meeting of Shareholders as of June 28, 2012

174,973 5.00

4. Share Price Movement

(1) Highest and Lowest Share Prices in the Latest Five Years by Business Year


Closing Year and Month

March 2008 March 2009 March 2010 March 2011 March 2012

High (¥) 1,408 817 806 797 483

Low (¥) 692 276 348 288 277

Note: Highest and lowest share prices are those of Tokyo Stock Exchange (1st Section Market).

(2) Highest and Lowest Share Prices in the Latest Six Months

Month October 2011 November December January 2012 February March

High (¥) 374 352 325 298 354 349

Low (¥) 337 297 280 277 282 320

Note: Highest and lowest share prices are those of Tokyo Stock Exchange (1st Section Market).

- 46 -

5. Status of Officers

Title Position Name Date of Birth

Career Brief Term

Number of shares

held (shares)

President and Representative

Director

Chief Executive Officer (CEO)

Sanji Arisawa

July 7, 1942

April 1986 Joined the Company, Development Department Manager

July 1987 Director of the Company June 1989 Managing Director of the Company June 1992 Senior Managing Director of the Company June 1995 President and Representative Director of the

Company (current) June 2003 Chief Executive Officer (CEO) of the Company

(current) December 2010 Protec International Holdings Co., Ltd., President

and Representative Director (current) December 2010 Protec Arisawa Europe, S.A., Director and

Chairman (current)

Note 4 423,669

Director

Senior Managing Operating Officer Shared oversight of Manufacturing Dept.

Yuichi Watanabe

June 11, 1952

March 1973 Joined the Company July 2001 Operating Officer of the Company June 2003 Director & Senior Operating Officer of the

Company June 2005 Director & Senior Managing Operating Officer of

the Company (current)

Note 4 26,783

Director

Senior Managing Operating Officer Shared oversight of Sales Div.; and Tokyo and Osaka Branches

Yuta Arisawa

July 25, 1969

April 1992 Joined Mitsubishi Electric Corporation February 2002 Joined JPMorgan Securities Japan Co., Ltd. August 2003 Joined the Company April 2007 Manufacturing Dept., Assistant Manager of the

Company April 2009 Operating Officer of the Company June 2010 Director and Senior Operating Officer of the

Company June 2011 Director & Senior Managing Operating Officer of

the Company (current)

Note 4 51,996

Director

Senior Operating Officer Shared oversight of General Affairs Dept.; Manufacturing Engineering Dept.; Quality Assurance Dept.; and Procurement Dept.

Yukio Takashima

October 30, 1949

March 1972 Joined the Company July 1996 In charge of 1st Manufacturing Dept. of the

Company June 1998 Director of the Company June 2001 Managing Director of the Company June 2003 Managing Director & Senior Operating Officer of

the Company June 2003 Arisawa Fiber Glass Co., Ltd., President and

Representative Director (current) June 2005 Director & Senior Operating Officer of the

Company (current)

Note 4 38,487

Director

Senior Operating Officer Shared oversight of Research & Development Dept., Electronic Material Div.; Production Engineering Dept., Electronic Material Div.; and Research & Development Dept., Electrical Insulating & Composite Material Div.

Takashi Miwa

March 3, 1951

March 1973 Joined the Company April 2000 In charge of Research & Development Dept.

Electronics Material Div. of the Company July 2001 Operating Officer of the Company June 2003 Senior Operating Officer of the Company June 2004 Director & Senior Operating Officer of the

Company (current) Note 4 21,706

Director

Senior Operating Officer Shared oversight of Corporate Planning Dept; and Human Capital Dept.

Tetsuro Iizuka

March 23, 1949

March 1971 Joined the Company July 2000 In charge of Corporate Planning Dept. of the

Company June 2003 Operating Officer of the Company June 2005 Director & Senior Operating Officer of the

Company (current) May 2011 Arisawa Sogyo Co., Ltd., President and

Representative Director (current)

Note 4 18,845

- 47 -

Title Position Name Date of Birth

Career Brief Term

Number of shares

held (shares)

Director

Senior Operating Officer Shared oversight of Research & Development Dept., Display Material Div.; Research & Development Dept., 3D Material Div.; and Technological General Affairs Dept.

Yoshiyuki Nishida

June 22, 1952

April 1982 Joined Daicel Chemical Industries, Ltd. (now, Daicel Corporation)

July 2000 Chief Researcher of Research Headquarters, General Research Institute, Innovation Center and Chief Member of Planning and Development Headquarters, Business Planning Group of Daicel

April 2003 Chief Member of Research, Development and Planning Division, Business Planning Group of Daicel

September 2007 Joined the Company, Operating Officer of the Company

June 2008 Director and Senior Operating Officer of the Company (current)

Note 4 7,400

Director Katsuchika

Goto November 20, 1944

June 1972 Joined GA Saxton & Co., New York April 1987 SG Warburg Securities, Inc. (Tokyo), Senior

Analyst April 1994 Smith Barney, Inc., Managing Director, Research

Department Manager December 1998 The Government of Singapore Investment

Corporation, Pte Ltd., Senior Advisor March 2004 Representative Director of Unipulse Corporation December 2006 Resigned as Director of Unipulse Corporation June 2010 Director of the Company (current)

Note 4 ---

Director Etsujiro

Koge July 20,

1946

April 1969 Joined Mitsubishi Petrochemical Co., Ltd. (now, Mitsubishi Chemical Corporation)

April 2002 Executive Officer of Mitsubishi Petrochemical Co., Ltd.

August 2002 President and Director of Japan Polychem Corporation

April 2005 Managing Executive Officer of Mitsubishi Chemical Corporation

June 2007 Director of Mitsubishi Chemical Corporation Director and Managing Executive Officer of

Mitsubishi Chemical Holdings Corporation June 2009 Resigned as Director of Mitsubishi Chemical

Corporation June 2010 Resigned as Director of Mitsubishi Chemical

Holdings Corporation June 2012 Director of the Company (current)

Note 5 3,190

Full-time Auditor

Koji Ohta February 9, 1955

March 1973 Joined the Company July 2002 General Affairs Department Accounting Group

Leader of the Company July 2004 In charge of General Affairs Department of the

Company April 2012 Assigned under Full-time Auditor of the CompanyJune 2012 Full-time Auditor of the Company (current)

Note 6 121

Auditor Makoto

Takizawa February 15, 1955

April 1977 Joined The Hachijuni Bank, Ltd. June 2000 Minowa Branch Manager of the Bank February 2002 Manager of 1st Sales in Matsumoto Sales Unit of

the Bank June 2003 Financial Market Department Manager of the

Bank June 2006 Executive Officer and Ina Branch Manager of the

Bank April 2009 Executive Officer and Area Manager of Ina Area

Sales Office of the Bank June 2009 Executive Officer and Audit Department Manager

of the Bank June 2010 Full-time Auditor of the Bank (current) June 2012 Auditor of the Company (current)

Note 6 ---

Auditor Yasunori Kokuryo

March 23, 1954

April 1976 Joined The Daishi Bank, Ltd. June 1999 Ono Branch Manager of the Bank June 2003 Management Administration Department Manager

of the Bank June 2005 Minami-Niigata Branch Manager of the Bank April 2007 Executive Officer and Audit Department Manager

of the Bank April 2008 Executive Officer and Joetsu Sales Division

Manager & Takada Branch Manager of the Bank June 2009 Director & Executive Officer and Joetsu Sales

Division Manager & Takada Sales Department Manager of the Bank

June 2010 Full-time Auditor of the Bank (current) June 2010 Auditor of the Company (current)

Note 6 ---

Total 592,197

- 48 -

Note: 1. Director, Yuta Arisawa is the son of Sanji Arisawa, President and Representative Director. 2. Among Directors, Katsuchika Goto and Etsujiro Koge are the outside directors provided for in Article 2, item 15 of

the Corporation Law. 3. Auditors, Makoto Takizawa and Yasunori Kokuryo, are the outside auditors provided for in Article 2, item 16 of

the Corporation Law. 4. Two (2) years from the closing of the Ordinary General Meeting of Shareholders held on June 29, 2011. 5. One (1) year from the closing of the Ordinary General Meeting of Shareholders held on June 28, 2012. 6. Four (4) years from the closing of the Ordinary General Meeting of Shareholders held on June 28, 2012. 7. The Company introduced Operating Officer system for expeditious execution of the business determined by the

Board of Directors and development of highly transparent business strategies. There are eleven Operating Officers now, which are comprised of one CEO, two Senior Managing Operating Officers, four Senior Operating Officers and the following four Officers.

Operating Officer Yoshihiko Toda Manager of Tokyo Branch, in charge of 3D Material Sales Div., Circuit Material Sales Div., and Electrical Insulating & Composite Material Sales Div.

Operating Officer Yasunori Kihara In charge of Procurement Dept. Operating Officer Takeshi Masuda In charge or Corporate Planning Dept. Operating Officer Yutaka Hayakawa In charge of Electronic Material Sales Div.

8. The Company appointed substitute Auditors under the provision of Article 329, paragraph 2 of the Corporation Law in preparation of a shortage in the number of Auditors stipulated in the laws and regulations as follows: Hiroshi Fujisawa as a substitute of Full-time Auditor, Koji Ohta and Yukitomo Takahashi as a substitute of Outside Auditors, Makoto Takizawa and Yasunori Kokuryo. Career brief of each substitute Auditor is as follows.

Name Date of Birth Career Brief Term

Number of shares

held (shares)

Hiroshi FujisawaSeptember 26,

1943

March 1962 Joined the Company June 1995 Director of the Company June 1999 Director of Polatechno Co., Ltd. June 2002 Managing Director of Polatechno Co., Ltd. June 2005 Director and Senior Managing Operating Officer of

Polatechno Co., Ltd. June 2007 Resigned as Director of Polatechno Co., Ltd. June 2007 Resigned as Director of the Company

1 year 23,715

Yukitomo Takahashi

April 3, 1954

April 1989 Registered with the Bar Association of Nagano Prefecture

June 1992 Registered with the Bar Association of Niigata Prefecture

June 1992 Head of Takahashi Law Office (current)

1 year ---

- 49 -

6. Status of Corporate Governance, etc.

(1) Status of Corporate Governance 1) Corporate Governance System

a. Basic Concept of Corporate Governance The Company has established a corporate governance system for the improvement of corporate

value through sustainable development and acquiring social credibility and is making efforts for securing efficient and fair management and improvement of transparency by positive information disclosure.

In streamlining management, for collection of highly accurate information and timely decision-making and business operations, we aim at management by a selected few and restrict the number of Directors to a minimum number. We have introduced an operating officer system in order to perform speedy operation under decision making by the Board of Directors, where outside directors and outside auditors also attend.

As for fairness of management, in accordance with the basic policy of improvement of internal control system, we are making efforts at the improvement of organizations and systems for securing compliance. To improve transparency, we carry out communications with our shareholders and general investors through IR activities as well as conduct active and timely information disclosing activities as practical as possible.

b. Outline of Corporate Governance System In execution of operations, for speedy execution and management of management policy and

management plan determined at regular and extraordinary meetings of the Board of Directors, the Board of Operating Officers comprised of the CEO and ten (10) other Operating Officers, eleven (11) members in total, was established for making efforts to promote efficient and speedy management.

Each Operating Officer carries out development and promotion of responsible operations upon approval of the Board of Operating Officers held every month in addition to regular and extraordinary meetings of the Board of Directors and makes efforts for efficient and speedy execution of duties in accordance with the regulations for shared oversight of duties, etc.

c. Reasons for adopting Corporate Governance System As a company that has established a Board of Auditors, the meeting of the Board of Auditors is

generally held once a month under the Regulations for the Board of Auditors. Each Auditor attends meetings of the Board of Directors and Full-time Auditors attend meetings of the Board of Operating Officers, etc., and conduct a strict audit by making appropriate proposals and giving advice for the execution of duties by the Directors and the status of improvement and operation of internal control.

Two Outside Auditors and two Outside Directors are appointed in terms of external control, each of them serves a role in management monitoring of laws and regulations, finance, accounting and corporate governance from a neutral and objective perspective and we believe the corporate governance system works sufficiently.

d. Status of Internal Control System and Improvement of Risk Management System The Company has adopted a resolution at the Board of Directors on “Basic Policy for Preparation of

Internal Control System” as follows. (a) System to secure that execution of duties of Directors shall comply with the laws and regulations

and the Articles of Incorporation Directors shall provide for the code of conduct as the basic principle for corporate governance

and corporate ethics, etc., in order for improving corporate values and assuming social responsibilities and comply with the laws and regulations and the Articles of Incorporation and internal regulations.

(b) System for preservation and management of information concerning execution of duties of Directors

For preservation and management of information concerning execution of duties of Directors, documents, etc., shall be preserved and managed pursuant to the provisions of the laws and regulations and the Articles of Incorporation and also the regulations for document management to carry out appropriate retention and management shall be provided.

(c) Regulations for management of risk of loss and other systems For Regulations for management of risk of loss and other systems, review of the management

regulations shall be made depending on each risk and General Affairs Department shall respond to

- 50 -

cross-organization risks and risks for the entire Company. Risk management incidental to the business responsible for each division shall be made by each division for recognition and management of risks.

(d) System to secure that execution of duties of Directors shall be made efficiently For speedy execution and management of management policy and management plan determined

by the Board of Directors, the Board of Operating Officers shall be established under CEO for making efforts to promote efficient and speedy management. Efficient and speedy execution of duties shall be made in accordance with the regulations for shared oversight of duties and the regulations for authorities.

(e) System to secure that execution of duties of employees shall comply with the laws and regulations and the Articles of Incorporation

The Company will prepare the compliance regulations, etc., and comply with the laws and regulations and the Articles of Incorporation as well as prepare and make efforts for appropriate operation of the internal reporting system for the purpose of prevention of violation of laws and regulations and other compliance regulations and early response to occurrences.

(f) System to secure appropriate operations of the corporate group, consisting of the Company and consolidated subsidiaries, etc.

In order to secure appropriate operations of the corporate group, mainly consisting of consolidated subsidiaries, etc., the regulations for management of affiliated companies and basic regulations for related business administration divisions shall be prepared and through reporting to and consultations with the Company on material management matters, the Company shall carry out appropriate business management of consolidated subsidiaries, etc.

(g) System to secure reliability of financial reporting In order to secure reliability of financial reporting, continuous evaluation of the status of

improvement and operation of the internal control system for financial reporting shall be made and if there is any defect, necessary correction shall be made to maintain the system in which internal control functions effectively and properly.

(h) Matters concerning employees who are assigned to assist duties of Auditors and the matters concerning independence of the employees from Directors

Employees who are assigned to assist duties of Auditors are not assigned full-time, but employees to be assigned to assist Auditors shall be designated at the request of the Auditors, taking into consideration the knowledge and experience, etc., required for the purpose of an audit. In order to secure independence of the employees from the Directors, personnel relocation and evaluation, etc., of the designated employees shall be conducted, respecting the opinions of the Auditors.

(i) System concerning report of Directors and employees to Auditors and system to secure that the audit of Auditors shall be conducted effectively - Directors and employees shall make reports necessary for execution of duties of Auditors

pursuant to the Standards for Audit by Auditors provided by the Board of Auditors. - Auditors shall regularly exchange opinions with Representative Director. - Auditors shall carry out audit in collaboration with accounting auditors and the internal audit

division. Our Group provides for in the Compliance Manual as the guidelines and code of conduct that

the Group shall be resolute in its stance against antisocial groups and sever any relations with them, which would pose a threat to civil society and disturb economic activities, in accordance with the establishment of the system to secure proper operation as well as preclude antisocial groups by preparing an internal reporting system and strengthening its internal audit system to prevent violation of the regulations in accordance with the internal control system.

Corporate governance system of the Company is as shown below.

- 51 -

2) Status of Internal Audit and Audit by Auditors

- As the internal audit division, two full-time employees are assigned to the Internal Auditing Department as an independent organization not being subordinated to any other organization, which conducts scheduled audits and unscheduled audits as appropriate. Regarding scheduled audits, an audit plan is developed for each term under the internal regulations and audits are conducted after obtaining the final decision of the CEO. Audit results are notified to the relevant departments and specific advice and recommendations are given, and reporting to and exchange of opinions with Auditors are also conducted.

- Auditors conduct regular audits by the Auditors and the meeting of the Board of Auditors is generally held once a month under the Regulations for the Board of Auditors and Auditors make from time to time necessary proposals for execution of duties by the Directors and the status of improvement and operation of internal control.

- Audit results by the internal audit division are reported to the Board of Auditors and audit functions are reinforced by sharing the recognition of audit operations by Auditors.

3) Outside Directors and Outside Auditors

a. Outline of personal, capital and transaction relationships and other interests between Outside Directors and Outside Auditors and the Submitting Company

- There is no capital relationship or transaction relationship and any other interests between Katsuchika Goto, an Outside Director, and the Company and we judged that as an Outside Director, there would be no possibility of conflict of interest with general shareholders.

- Etsujiro Koge, an Outside Director comes from Mitsubishi Chemical Corporation, but as the company is not our major business partner and Mr. Koge already retired from management of the company, we judged that as an Outside Director, there would be no possibility of conflict of interest with general shareholders.

- Makoto Takizawa, an Outside Auditor, is a full-time auditor of The Hachijuni Bank, Ltd., which holds 2.85% of the outstanding shares of the Company and the Bank is one of our bankers, but we judged that there was no problem regarding the independence of Mr. Takizawa.

- Yasunori Kokuryo, an Outside Auditor, is a full-time auditor of The Daishi Bank, Ltd., which holds

Accounting Auditors

Internal Auditing

Department

General Meeting of Shareholders

Board of Directors

Directors

9 Directors (2 Outside Directors)

Board of Auditors

Appointment, Dismissal

Audit

Board of Operating Officers

Appointment, Dismissal, Instruction, Supervision

Instruction, Supervision

Each Division, Subsidiaries, etc.

(Bus

ines

s op

erat

ions

sys

tem

)

(Aud

it c

olla

bora

tion

)

Internal Audit

Accounting Audit

*Note: Board of Operating Officers is comprised of CEO, Senior Managing Operating Officers, Senior Operating Officers and Operating Officers and posts of CEO and two Senior Managing Operating Officers and four Senior Operating Officers are concurrently assumed by Directors.

Operating Officers

President (CEO)

11 Officers *

3 Auditors (2 Outside Auditors)



Auditors

- 52 -

1.79% of the outstanding shares of the Company and the Bank is one of our bankers, but we judged that there was no problem regarding the independence of Mr. Kokuryo.

b. Status of appointment of Outside Directors and Outside Auditors and functions and roles served in corporate governance

The Company appointed two Outside Directors and two Outside Auditors in terms of external control, and each of them serves a role in management monitoring of laws and regulations, finance, accounting and corporate governance from a neutral and objective perspective and we believe the management monitoring functions work sufficiently. We filed the names of Katsuchika Goto and Etsujiro Koge, Outside Directors, who have voting rights on the Board of Directors, with Tokyo Stock Exchange as independent officers of the Company.

c. Contents of the standards or policy for independence from the Submitting Company to appoint Outside Directors or Outside Auditors and the idea of the Submitting Company about the status of appointment

The Company has not determined the standards or policy for independence from the Submitting Company to appoint Outside Directors or Outside Auditors, but in appointing Outside Directors and Outside Auditors, we judge the independence of the candidates in terms of personal, capital and transaction relationships and any other interests and also comprehensively judge experience and knowledge of corporate governance, internal control, financial reporting, etc.

d. Mutual collaboration between supervision or audit by Outside Directors and Outside Auditors and internal audit, audit by Auditors and accounting audit, etc.

Outside Auditors shall attend the Board of Directors’ meetings and Board of Auditors’ meetings and through the Full-time Auditor or directly receive various reports on the status of internal audit and accounting audit, etc., and conduct an audit of the legality of business operations by the Board of Directors and validity of corporate governance based on their rich experience and expertise.

Outside Directors receive reports, etc., at the Board of Directors’ meetings, etc., on internal audit based on the request of the Board of Auditors and audit by Auditors and audit by accounting auditors and maintain mutual collaboration, including exchange of opinions as appropriate.

4) Officer Compensation, etc.

a. Total amount of compensation, etc., by category of Officers, total amount of compensation, etc., by type and number of Officers covered

Total amount of compensation, etc. by type (thousand yen)

Category of Officers Total amount of

compensation, etc.(thousand yen) Basic

compensation Stock option

Number of Officers covered

Directors (except for Outside Directors)

172,935 158,422 14,513 8

Auditors (except for Outside Auditors)

12,160 12,160 --- 1

Outside Officers 9,142 9,142 --- 4

b. Contents of the policy and determination method for the amount of compensation, etc., for Officers or calculation method

The Company has not determined the policy for the amount of compensation, etc., for Officers and determination of the calculation method. Compensation for Officers is paid by annual salary scheme and fixed price compensation is determined within the total amount by resolution at the general meeting of shareholders by partly reflecting the annual results and contribution, etc., of each Director to the results based on the internal rules with reference to the position of Officers, etc.

5) Status of Shareholding

a. Names of shares the purpose of holding of which is other than pure investment and the total amount shown on the balance sheet among investment shares

28 Names ¥1,706,006 thousand

- 53 -

b. Classification of holding, names, number of investment shares the purpose of holding of which is other than pure investment and the amount shown on the balance sheet and the purpose of holding

Previous business year Specified Investment Shares

Name

Number of

shares

(shares)

Amount shown on

Balance Sheet

(thousand yen)

Purpose of holding

RealD Inc. 596,875 1,178,219For maintaining and strengthening transaction relationship

Mitsubishi Gas Chemical Co., Ltd. 666,000 395,271For maintaining and strengthening transaction relationship

JSR Corporation 179,800 299,465For maintaining and strengthening transaction relationship

The Hachijuni Bank, Ltd. 581,113 281,154For maintaining and strengthening financial transaction relationship

Mitsubishi Electric Corp. 275,000 258,238For maintaining and strengthening transaction relationship

NOK Corporation 132,700 191,099For maintaining and strengthening transaction relationship

The Daishi Bank, Ltd. 450,809 122,804For maintaining and strengthening financial transaction relationship

Kaneka Corporation 150,000 85,179For maintaining and strengthening transaction relationship

TOSHIBA Corporation 75,960 33,236For maintaining and strengthening transaction relationship

Mitsubishi UFJ Financial Group, Inc. 62,420 25,657

For maintaining and strengthening financial transaction relationship

The Hokuetsu Bank, Ltd. 97,649 18,029For maintaining and strengthening financial transaction relationship

Sumitomo Corporation 6,655 7,739For maintaining and strengthening transaction relationship

Mizuho Securities Co., Ltd. 12,354 2,846For maintaining and strengthening transaction relationship

Nishishiba Electric Co., Ltd. 17,600 2,669For maintaining and strengthening transaction relationship

Kobe Steel, Ltd. 5,150 1,080For maintaining and strengthening transaction relationship

Broadcasting System of Niigata Inc. 1,800 604

For strengthening relationship with regional companies

Tohoku Electric Power Co., Inc. 104 170For maintaining and strengthening transaction relationship

Deemed Holding Shares No applicable matter.

- 54 -

Current business year Specified Investment Shares

Name

Number of

shares

(shares)

Amount shown on

Balance Sheet

(thousand yen)

Purpose of holding

Mitsubishi Gas Chemical Co., Ltd. 666,000 354,185For maintaining and strengthening transaction relationship

JSR Corporation 179,800 305,386For maintaining and strengthening transaction relationship

The Hachijuni Bank, Ltd. 581,113 282,502For maintaining and strengthening financial transaction relationship

NOK Corporation 132,700 229,267For maintaining and strengthening transaction relationship

Mitsubishi Electric Corp. 275,000 197,697For maintaining and strengthening transaction relationship

The Daishi Bank, Ltd. 450,809 131,248For maintaining and strengthening financial transaction relationship

Kaneka Corporation 150,000 74,743For maintaining and strengthening transaction relationship

TOSHIBA Corporation 80,655 29,155For maintaining and strengthening transaction relationship


For maintaining and strengthening financial transaction relationship

The Hokuetsu Bank, Ltd. 97,649 17,218For maintaining and strengthening financial transaction relationship

Sumitomo Corporation 6,655 8,167For maintaining and strengthening transaction relationship

Nishishiba Electric Co., Ltd. 17,600 2,647For maintaining and strengthening transaction relationship

Mizuho Financial Group, Inc. 18,283 2,534For maintaining and strengthening transaction relationship

Kobe Steel, Ltd. 5,150 698For maintaining and strengthening transaction relationship

Broadcasting System of Niigata Inc. 1,800 632

For strengthening relationship with regional companies

Tohoku Electric Power Co., Inc. 104 101For maintaining and strengthening transaction relationship

Deemed Holding Shares No applicable matter.

6) Status of Accounting Audit

- Certified Public Accountants who conducted the audit engagement were as follows.

Names of CPA who conducted Engagement Affiliated Audit

Corporation Continuous

Years of Audit

Designated Limited Partner and Operating Partner Issei Tsukada Ernst & Young ShinNihon LLC

Two years

Designated Limited Partner and Operating Partner Shinichi OshimaErnst & Young ShinNihon LLC

Three years

Note: The Audit Corporation voluntarily introduced a rotation system of operating partners prior to the commencement of regulation under the Certified Public Accountants Law and implementation of self regulation by the Japanese Institute of Certified Public Accountants. Composition of assistants of audit engagement shall be determined in accordance with the selection standards of the Audit Corporation and specifically, they are composed of nine certified public accountants and other nine persons.

7) Upper Limit of Number of Directors The Company provides in its Articles of Incorporation that the number of Directors of the Company

shall be not more than fifteen (15).

8) Requirements for Appointment of Directors The Company provides in its Articles of Incorporation that resolution of appointing Directors shall be

adopted by a majority of the voting rights of the shareholders who hold over 1/3 of all voting rights and may exercise voting rights and are present at the meeting.

- 55 -

It is also provided for in the Articles of Incorporation that resolution of appointing Directors shall not be by cumulative voting.

9) Outline of the Contents of Liability Limitation Agreement

The Company provides in its Articles of Incorporation under the provision of Article 427, paragraph 1 of the Corporation Law that the Company may enter into the liability limitation agreement with Outside Directors and Outside Auditors so that the Company may invite competent persons as the Outside Directors and Outside Auditors and the Outside Directors and Outside Auditors may fully play expected roles. Outline of the contents of the liability limitation agreement entered into between the Company and the Outside Directors and Outside Auditors is as follows.

Outside Directors and Outside Auditors shall, with respect to the liability for damages under Article 423, paragraph 1 of the Corporation Law, assume the liabilities for damages up to the minimum liability amount provided for in the laws and regulations as long as they perform their duties in good faith and without committing any act of gross negligence.

10) Matters Subject to Resolutions at the General Meeting of Shareholders which may be Adopted by the Board of Directors

The Company provides in its Articles of Incorporation that the Company may adopt resolutions on the following matters by the Board of Directors instead of resolutions at the General Meeting of Shareholders

a. Organ to determine acquisition of treasury stocks The Company provides in its Articles of Incorporation that the Company may acquire treasury

stocks through market transactions by a resolution of the Board of Directors instead of a resolution of the General Meeting of Shareholders under the provisions of Article 165, paragraph 2 of the Corporation Law. This is intended to enable flexible capital policy by delegating the authority for acquisition of treasury stocks to the Board of Directors.

b. Organ to determine interim dividend of surpluses The Company provides in its Articles of Incorporation that the Company may pay an interim

dividend, setting September 30 of every year as the record date by a resolution of the Board of Directors instead of a resolution of the General Meeting of Shareholders under the provisions of Article 454, paragraph 5 of the Corporation Law. This is intended to make a flexible return of profits to shareholders by delegating the authority for paying an interim dividend from surpluses to the Board of Directors.

11) Requirements for Special Resolution of the General Meeting of Shareholders

The Company provides in its Articles of Incorporation that, regarding requirements for special resolution of the General Meeting of Shareholders provided for in Article 309, paragraph 2 of the Corporation Law, a special resolution shall be adopted by 2/3 majority of the voting rights of the shareholders who hold over 1/3 of all voting rights and may exercise voting rights and are present at the meeting. This is intended to carry out smooth operation of the General Meeting of Shareholders by relaxing the quorum of special resolutions at the General Meeting of Shareholders.

(2) Details of Audit Compensation, etc. 1) Details of Compensation for Auditing CPA, etc. (Unit: thousand yen)

Previous consolidated fiscal year Current consolidated fiscal year

Category Compensation based on audit

certification work

Compensation based on non-audit

work

Compensation based on audit

certification work

Compensation based on non-audit

work

Submitting Company 27,900 1,000 27,900 ---

Consolidated Subsidiaries --- --- --- ---

Total 27,900 1,000 27,900 ---

2) Details of Other Significant Compensation No applicable matter.

- 56 -

3) Details of Non-audit Work for the Submitting Company by the Auditing CPA, etc. (Previous consolidated fiscal year)

For comprehension of the degree of impact of application of IFRS, the Company receives advice from Ernst & Young ShinNihon LLC.

4) Policy for Determination of Audit Compensation The Company has not provided a particular policy for determination of audit compensation for the auditing CPA of the Company, etc.

- 57 -

V. Status of Accounting

1. Method of Preparation of Consolidated Financial Statements and Financial Statements

(1) The consolidated financial statements of the Company are prepared in compliance with the “Regulations Concerning Terms, Forms and Preparation Method of Consolidated Financial Statements” (Ministerial Ordinance No. 28 of the Ministry of Finance of 1976).

(2) The financial statements of the Company are prepared in compliance with the “Regulations Concerning

Terms, Forms and Preparation Method of Financial Statements” (Ministerial Ordinance No. 59 of the Ministry of Finance of 1963).

2. Certification of Auditing

The Company received an audit of consolidated financial statements of the consolidated fiscal year (from April 1, 2011 to March 31, 2012) and financial statements of the business year (from April 1, 2011 to March 31, 2012) by Ernst & Young ShinNihon LLC under the provision of Article 193-2, paragraph 1 of the Financial Instruments and Exchange Law.

3. Special Efforts to Secure Appropriateness of Consolidated Financial Statements, etc.

The Company has made special efforts to secure appropriateness of consolidated financial statements, etc. Specifically, we make efforts to improve our system by subscription to professional magazines for the purpose of precisely grasping the changes in the accounting standards and membership in Financial Accounting Standards Foundation, etc., for the purpose of properly grasping the contents of the accounting standards and responding.

- 58 -

1. Consolidated Financial Statements, etc.

(1) Consolidated Financial Statements

1) Consolidated Balance Sheet

(Unit: thousand yen)



Assets Current Assets

Cash and deposits *2 6,890,332 *2 7,412,220Notes and accounts receivable 10,111,114 *5 8,532,084Securities 651,012 701,639Merchandise and finished goods 2,854,774 2,760,965Work-in-progress 1,832,783 1,297,582Raw materials and stores 1,672,922 1,781,127Deferred tax assets 215,576 125,069Deposits paid 1,359,798 ---Other 852,491 608,632Allowance for doubtful accounts 133,671 174,357

Total Current Assets 26,307,134 23,044,965

Fixed Assets Tangible fixed assets

Buildings and structures 16,884,650 17,289,658Accumulated depreciation 10,515,424 11,034,450

Buildings and structures (net) *2 6,369,226 *2 6,255,207

Machinery, equipment and delivery equipment 23,786,048 25,447,725Accumulated depreciation 20,413,300 22,461,251

Machinery, equipment and delivery equipment (net)

*2 3,372,748 *2 2,986,473

Tools, furniture and fixtures 1,757,236 1,771,273Accumulated depreciation 1,581,973 1,629,755

Tools, furniture and fixtures (net) *2 175,262 *2 141,517

Land *2 1,536,245 *2 1,536,011Lease assets 1,109,944 158,306

Accumulated depreciation 1,095,279 17,841

Lease assets (net) 14,664 140,464

Construction in progress 512,890 104,961

Total tangible fixed assets 11,981,037 11,164,637

Intangible fixed assets Goodwill 86,894 52,655Lease assets 34,143 25,889Other *2 125,949 *2 118,733

Total intangible fixed assets 246,987 197,277

Investments and other assets Investment securities *1 11,433,624 *1 11,581,343Long-term loans 375,755 329,767Deferred tax assets 364,868 402,822Other *2 237,875 *2 325,017Allowance for doubtful accounts 346,620 379,070

Total investments and other assets 12,065,503 12,259,880

Total Fixed Assets 24,293,528 23,621,795

Total Assets 50,600,663 46,666,761

- 59 -




Liabilities Current Liabilities

Notes and accounts payable 5,575,287 *5 3,990,176Short-term borrowings *2, *4 867,863 *2, *4 1,133,165Current portion of long-term borrowings *2 642,989 *2 1,015,912Lease liabilities 291,713 24,267Unpaid amount 883,036 983,914Corporate income tax, etc., payable 455,513 61,708Deferred tax liabilities 87,576 31,092Reserve for bonuses 540,684 446,252Reserve for officers’ bonuses 3,093 2,480Provision for product warranties 324,215 126,319Current portion of bonds 97,456 ---Other 672,722 *5 966,524

Total Current Liabilities 10,442,153 8,781,814

Fixed Liabilities Bonds payable 80,168 ---Long-term borrowings *2 1,503,760 *2 2,068,007Lease liabilities 1,431,512 137,635Deferred tax liabilities 875,554 419,535Reserve for retirement allowance 31,196 34,212Asset retirement obligations 64,965 63,607Negative goodwill 129,115 92,199Other 26,950 28,154

Total Fixed Liabilities 4,143,223 2,843,350

Total Liabilities 14,585,376 11,625,165

Net Assets Shareholders’ equity

Capital 7,117,259 7,117,259Capital surplus 6,229,282 6,229,282Earned surplus 20,578,297 20,848,841Treasury stock 1,523 1,655

Total shareholders’ equity 33,923,315 34,193,727

Accumulated other comprehensive income Valuation difference on other securities 1,188,674 371,836Foreign currency translation adjustments 546,000 1,000,912

Total accumulated other comprehensive income 642,673 629,076

New share subscription rights 245,329 230,542Minority interests 1,203,967 1,246,402

Total Net Assets 36,015,286 35,041,595

Total Liabilities and Net Assets 50,600,663 46,666,761

- 60 -

2) Consolidated Profit and Loss Statement and Consolidated Statement of Comprehensive Income

[Consolidated Profit and Loss Statement] (Unit: thousand yen)

Previous consolidated fiscal year(From April 1, 2010 to March 31, 2011)

Current consolidated fiscal year (From April 1, 2011 to March 31, 2012)

Sales 36,957,338 27,825,192Cost of Goods Sold *1, *2 33,202,765 *1, *2 25,276,085

Gross Profit on Sales 3,754,572 2,549,107

Selling, General and Administrative Expenses Freight and packaging expenses 625,037 499,403Wages and allowances 1,064,935 1,088,245Transfer to reserve for bonuses 42,340 89,611Transfer to reserve for officers’ bonuses 3,093 2,480Transfer to reserve for retirement allowance 62,694 65,013Transfer to allowance for doubtful accounts 11,436 111,406Transfer to provision for product warranties 75,592 ---Other 2,225,361 2,008,594

Total Selling, General and Administrative Expenses

*1 4,110,490 *1 3,864,754

Operating Loss () 355,917 1,315,647

Non-operating Income Interest income 29,263 51,162Dividend income 24,369 43,584Investment profit by equity method 850,453 497,064Amortization of negative goodwill 36,915 36,915Royalty income --- 143,302Other 216,595 397,800

Total Non-operating Income 1,157,597 1,169,831

Non-operating Expenses Interest expenses 109,244 102,074Transfer to allowance for doubtful accounts --- 7,837Rent expenses 24,922 51,155Transfer to provision for product warranties 204,974 ---Other 401,387 140,305

Total Non-operating Expenses 740,528 301,372

Ordinary Profit or Loss () 61,152 447,188

Extraordinary Profits Profit on sale of fixed assets *3 3,185 *3 62,338Profit on sale of investment securities 1,342,240 1,492,836Profit on negative goodwill 332,171 ---Other 172,854 72,180

Total Extraordinary Profits 1,850,452 1,627,355

- 61 -




Extraordinary Losses Loss on sale of fixed assets *4 31 *4 15Loss on impairment *5 3,458,603 ---Special retirement expenses --- 317,165Loss on cancellation of lease contracts --- 65,244Other 85,632 34,357

Total Extraordinary Losses 3,544,268 416,783

Net profit or loss () before taxes, etc. 1,632,663 763,383

Corporate income tax, resident tax and business tax payable

234,678 112,860

Adjustment of corporate income tax, etc. 115,990 55,925

Total corporate income tax, etc. 118,687 56,934

Net profit or loss () before minority interests 1,751,351 706,448

Minority interests in profit 111,218 120,208

Net Profit or Loss () 1,862,570 586,240

- 62 -

[Consolidated Statement of Comprehensive Income] (Unit: thousand yen)



Net profit or loss () before minority interests 1,751,351 706,448Other comprehensive income

Valuation difference on other securities 792,504 816,838Foreign currency translation adjustments 158,918 226,848Share of other comprehensive income of companies to which equity method is applied

42,415 304,907

Total other comprehensive income 591,170 * 1,348,594

Comprehensive income 1,160,180 642,145

(Breakdown) Comprehensive income attributable to owners of the parent

1,271,399 685,509

Comprehensive income attributable to minority interests

111,218 43,364

- 63 -

3) Consolidated Statements of Changes in Shareholders’ Equity and Other Net Assets (Unit: thousand yen)



Shareholders’ equity Capital

Balance at the beginning of year 7,117,256 7,117,259Changes during the year

Issue of new shares 3 ---

Total changes during the year 3 ---

Balance at the end of year 7,117,259 7,117,259

Capital surplus Balance at the beginning of year 6,229,282 6,229,282Changes during the year

Total changes during the year --- ---


Earned surplus Balance at the beginning of year 22,727,863 20,578,297Changes during the year

Dividend of surplus 280,525 213,389Net profit or loss () 1,862,570 586,240Change in scope of consolidation 6,470 ---Change in scope of equity method --- 102,306

Total changes during the year 2,149,566 270,543


Treasury stock Balance at the beginning of year 1,210 1,523Changes during the year

Acquisition of treasury stock 313 131

Total changes during the year 313 131

Balance at the end of year 1,523 1,655

Total shareholders’ equity Balance at the beginning of year 36,073,191 33,923,315Changes during the year

Issue of new shares 3 ---Dividend of surplus 280,525 213,389Net profit or loss () 1,862,570 586,240Acquisition of treasury stock 313 131Change in scope of consolidation 6,470 ---Change in scope of equity method --- 102,306



Accumulated other comprehensive income Valuation difference on other securities

Balance at the beginning of year 438,585 1,188,674Changes during the year

Changes in items other than shareholders’ equity during the year (net)

750,089 816,838

Total changes during the year 750,089 816,838

Balance at the end of year 1,188,674 371,836

- 64 -




Foreign currency translation adjustments Balance at the beginning of year 387,082 546,000Changes during the year


158,918 454,911


Balance at the end of year 546,000 1,000,912

Total accumulated other comprehensive income Balance at the beginning of year 51,502 642,673Changes during the year


591,170 1,271,749

Total changes during the year 591,170 1,271,749


New share subscription rights Balance at the beginning of year 192,367 245,329Changes during the year


52,962 14,787



Minority interests Balance at the beginning of year 1,007,196 1,203,967Changes during the year


196,770 42,434



Total net assets Balance at the beginning of year 37,324,258 36,015,286Changes during the year

Issue of new shares 3 ---Dividend of surplus 280,525 213,389Net profit or loss () 1,862,570 586,240Acquisition of treasury stock 313 131Change in scope of consolidation 6,470 ---Change in scope of equity method --- 102,306Changes in items other than shareholders’ equity during the year (net)

840,903 1,244,102



- 65 -

4) Consolidated Cash Flow Statement (Unit: thousand yen)



Cash flow from operating activities Net profit or loss () before taxes, etc. 1,632,663 763,383Depreciation expense 2,613,705 1,583,350Loss on impairment 3,458,603 ---Amortization of goodwill 18,981 30,281Amortization of negative goodwill 36,915 36,915Profit on negative goodwill 332,171 ---Loss on adjustment for changes in accounting standard for asset retirement obligations

39,883 ---

Stock compensation expenses 68,994 57,392Investment profit/loss by equity method (: profit) 850,453 497,064Profit/loss on changes in equity (: profit) 119,901 16,752Profit on reversal of new share subscription rights 16,032 72,180Profit/loss on sale of investment securities (: profit)

1,342,240 1,492,836

Profit/loss on sale of fixed assets (: profit) 3,153 62,323Loss on retirement of tangible fixed assets 31,505 12,025Valuation profit/loss on investment securities (: profit)

21,861 4,254

Profit on redemption of bonds 1,747 1,381Loss on cancellation of lease contracts --- 65,244Special retirement expenses --- 317,165Exchange profit/loss (: profit) 109,666 86,852Increase/decrease in reserve for bonuses (: decrease)

87,286 94,431

Increase/decrease in reserve for officers’ bonuses (: decrease)

34 613

Increase/decrease in reserve for retirement allowance (: decrease)

5,812 3,819

Increase/decrease in provision for product warranties (: decrease)

124,737 197,896

Increase/decrease in allowance for doubtful accounts (: decrease)

24,810 83,812

Interest and dividend income 53,633 94,747Interest expenses 109,244 102,074Increase/decrease in accounts receivable (: increase)

1,609,161 1,386,908

Increase/decrease in inventories (: increase) 114,826 449,152Increase/decrease in trades payable (: decrease) 368,557 1,548,849Increase/decrease in consumption tax, etc., payable (: decrease)

167,715 109,982

Increase/decrease in other assets (: increase) 18,352 196,739Increase/decrease in other liabilities (: decrease) 42,262 150,862

Subtotal 55,905 1,019,091

Interest and dividends received 196,691 395,798Interest paid 108,717 99,902Other expenditures --- 6,420Corporate income tax, etc., paid or refund (: paid) 34,165 478,880

Cash flow from operating activities 66,234 829,687

- 66 -




Cash flow from investing activities Expenditure for placement in term deposits 240,000 531,098Revenue from refund of term deposits 1,413,456 1,813,892Expenditure for acquisition of securities 5,147,150 1,998,712Revenue from sale of securities 5,100,000 2,150,000Expenditure for acquisition of tangible fixed assets 1,107,270 1,118,796Revenue from sale of tangible fixed assets 11,179 536,417Expenditure for acquisition of intangible fixed assets

16,783 25,318

Revenue from sale of intangible fixed assets 135,833Expenditure for acquisition of investment securities 889,346 1,888,477Revenue from sale of investment securities 344,057 2,840,700Expenditure for acquisition of shares of a subsidiary accompanying the change in scope of consolidation

611,124 ---

Expenditure for lending 1,027,147 6,000Revenue from collection of loans 56,468 8,612

Cash flow from investing activities 2,113,661 1,917,050

Cash flow from financing activities Net increase/decrease in short-term borrowings (: decrease)

986,760 312,394

Revenue from long-term borrowings 238,092 1,925,476Expenditure for repayment of long-term borrowings

701,070 925,902

Expenditure for redemption of bonds 76,153 172,409Expenditure for repayment of lease liabilities 286,786 1,762,724Expenditure for acquisition of treasury stock 313 131Dividends paid 279,025 209,244Dividends paid to minority shareholders 587 3,419Proceeds from payments by minority shareholders 76,563 ---Other 3 ---

Cash flow from financing activities 42,516 835,960

Translation differences in cash and cash equivalents 125,714 15,078

Increase/decrease in cash and cash equivalents (: decrease)

2,215,657 1,925,856

Cash and cash equivalents at beginning of year 6,270,266 4,112,839Increase/decrease in cash and cash equivalents accompanying the change in scope of consolidation (: decrease)

58,230 ---

Cash and cash equivalents at end of year * 4,112,839 * 6,038,695

- 67 -

[Substantial Underlying Matters for Preparation of Consolidated Financial Statements]

1. Matters concerning scope of consolidation (1) Number of consolidated subsidiaries: 12

Name of important consolidated subsidiaries: Colorlink Japan Co., Ltd., Arisawa Fiber Glass Co., Ltd., Arisawa Jushi Kogyo Co., Ltd., Arisawa Sogyo Co., Ltd., Arisawa Kenpan Co., Ltd., ThinFlex Corporation, TopFlex Corporation, ThinFlex Technology Corporation (B.V.I.), Protec International Holdings, Co., Ltd., Protec Arisawa Japan Co., Ltd., Protec Arisawa Europe, S.A., Protec Arisawa America, Inc.

As Protec International Holdings, Co., Ltd., a consolidated subsidiary of the Company, incorporated Protec Arisawa Japan Co., Ltd., it is included in the scope of consolidation from the current consolidated fiscal year.

In the current consolidated fiscal year, as Eagle Co., Ltd., a consolidated subsidiary of the Company, was absorbed by Arisawa Sogyo Co., Ltd., a consolidated subsidiary of the Company, as of July 1, 2011, it is excluded from the scope of consolidation.

(2) Name of important non-consolidated subsidiaries, etc. Important non-consolidated subsidiaries:

ARISAWA MANUFACTURING (DALIAN) CO., LTD., Quality Experience Design Co., Ltd. (Reason for excluding the non-consolidated subsidiaries above from consolidation)

Because the non-consolidated subsidiaries are small in size and any of total assets, sales, net profit or loss (amount corresponding to interest) and earned surplus (amount corresponding to interest), etc., does not materially affect the consolidated financial statements.

2. Matters concerning application of equity method

(1) Number of affiliates to which the equity method is applied: 5 Name of important affiliates:

TAIFLEX Scientific Co., Ltd., Polatechno Co., Ltd., DDD Group plc, Innovision FlexTech Corporation, Toppan Arisawa Optical Technology Co., Ltd.

As the importance of Innovision FlexTech Corporation increased, and Toppan Arisawa Optical Technology Co., Ltd. was incorporated in the current consolidated fiscal year, they are included in the scope of application of the equity method from the current consolidated fiscal year.

(2) Because non-consolidated subsidiaries (ARISAWA MANUFACTURING (DALIAN) CO., LTD. and other three companies) and affiliates (Ryoyu Kogyo Co., Ltd. and other one company), to which the equity method is not applied, have only a slight effect on the consolidated financial statements and have no significance as a whole in terms of net profit or loss (amount corresponding to interest) and earned surplus (amount corresponding to interest), etc., if it is possible to exclude from equity method application, they have been excluded from application of the equity method.

(3) The financial statements of the business year of the company in question have been used for those companies covered under the equity method whose closing dates differ from the closing date of the consolidated fiscal year.

3. Matters concerning business year items for consolidated subsidiaries

Out of the consolidated subsidiaries, closing date of ThinFlex Corporation, TopFlex Corporation, ThinFlex Technology Corporation (B.V.I.), Protec Arisawa Europe, S.A. and Protec Arisawa America, Inc. is December 31.

In preparation of consolidated financial statements, financial statements as of the closing date are used. Provided, however, that for the important transactions that accrued from January 1 through March 31, the closing date of the consolidated fiscal year, necessary adjustment was made to consolidation.

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4. Matters concerning accounting standards (1) Valuation standard and valuation method of important assets

1) Securities Other securities

Securities with fair value: Valued at fair value based on the market price on the closing day, etc. (All valuation differences

are transferred directly to net assets and sales cost is calculated by the gross average method.) Securities without fair value:

Valued at cost by the gross average method 2) Inventories

Merchandise, finished goods, semi-finished goods, and work-in-progress: The Company and domestic consolidated subsidiaries mainly adopt cost method by the FIFO

method (the amount on the balance sheet is calculated by devaluation of the book value based on a decline in profitability.). Overseas subsidiaries mainly adopt the lower-of-cost-or-market method based on the moving-average method. Raw materials and stores:

The Company and domestic consolidated subsidiaries mainly adopt cost method by the gross average method (the amount on the balance sheet is calculated by devaluation of the book value based on a decline in profitability.). Overseas subsidiaries mainly adopt the lower-of-cost-or-market method based on the moving-average method.

(2) Depreciation method for important depreciable assets 1) Tangible fixed assets (except for lease assets)

The Company and domestic consolidated subsidiaries adopt the declining balance method and the overseas subsidiaries adopt the straight line method. (Provided, however, that the Company and domestic consolidated subsidiaries adopt the straight line method for the buildings (except for annexed facilities) acquired after April 1, 1998.)

The useful life is as follows: Buildings & structures: 10 - 31 years Machinery, equipment and delivery equipment: 4 - 9 years

2) Intangible fixed assets (except for lease assets) The straight line method is adopted. For software for own use, it is based on the period of in-house useful life (5 years).

3) Lease assets The straight line method is adopted, where the period of a lease is set as the useful life and the salvage

value is set at zero. Part of machinery and equipment are recorded by transfer in lease assets due to sale and leaseback

transactions, to which the previous depreciation method (the declining balance method) has been continuously applied.

Among finance lease transactions in which ownership is not transferred, as for lease transactions commenced prior to March 31, 2008, an accounting method similar to that applied to ordinary lease transactions has been applied.

(3) Posting standards for important allowances 1) Allowance for doubtful accounts

In order to reserve for losses from defaults on claims, a write-down as non-collectible has been charged at the actual rate of default for normal claims, and has been charged on the basis of the expected amount of default in each instance for specified claims such as those which present concerns about default.

2) Reserve for bonuses The Company and some of the consolidated subsidiaries record the burden amount in the current

consolidated fiscal year of the expected amount of payment in order to appropriate to expenditures of bonuses to be paid to employees.

3) Reserve for officers’ bonuses Some of the consolidated subsidiaries made appropriation on the basis of the expected amount to be

paid in the current consolidated fiscal year in preparation for expenses of bonuses to officers.

- 69 -

4) Reserve for retirement allowance In order to reserve retirement benefits for employees, this has been booked on the basis of the

retirement benefit obligations as of the end of the current consolidated fiscal year, and the expected amount of pension assets.

Actuarial differences will be expensed from the following consolidated fiscal year, according to the straight line method over a certain number of years (five years) within the average period of remaining service of the employees at the time the difference occurred in each consolidated fiscal year.

In this connection, the Company has appropriated ¥83,455 thousand to prepaid pension cost since pension assets at the end of the current consolidated fiscal year exceeded the retirement benefit obligations.

5) Provision for product warranties In order to prepare for complaints about products delivered to customers, the amount which is

expected to accrue is reasonably estimated and provided. (4) Standards for translating important foreign currency denominated assets and liabilities into yen

Foreign currency denominated debts and credits are translated into Japanese yen at the spot exchange rate on the closing day of the consolidated fiscal year, and the difference in translation is entered as income or loss. Assets and liabilities of overseas subsidiaries, etc., are translated into Japanese yen at the spot exchange rate on the closing day of the consolidated fiscal year and income and expenses are translated into Japanese yen at the average exchange rate during the period and the difference in translation is included in the foreign currency translation adjustments and minority interests in net assets.

(5) Amortization method and period of goodwill and negative goodwill Goodwill and negative goodwill that accrued on or before March 31, 2010 are amortized by the

straight line method for five years. (6) Scope of funds in consolidated cash flow statement

Cash on hand, demand deposits that can be withdrawn at any time and short-term investments with a maturity date within 3 months of the date of acquisition which can easily be converted into cash and which carry only a small risk in price fluctuations are included.

(7) Other important matters for preparation of consolidated financial statements Accounting treatment of consumption tax, etc.:

For accounting treatment of consumption tax, etc., the tax-excluded method is adopted.

[Changes in Accounting Policy]

(Application of Accounting Standard for Earnings Per Share, etc.) From the current consolidated fiscal year, the “Accounting Standard for Earnings Per Share” (Accounting

Standards Board of Japan (ASBJ) Statement No. 2, June 30, 2010), the “Guidance on Accounting Standard for Earnings Per Share” (ASBJ Guidance No. 4, June 30, 2010) and the “Practical Solution on Accounting for Earnings Per Share” (ASBJ PITF No. 9, June 30, 2010) have been applied.

In calculation of the amount of fully diluted net profit per share, for a stock option the right of which is determined after service of a certain period, it was changed to include the portion for services provided to the company in the future in money received if it would be paid by exercising a right, out of the fair valuation amount of a stock option.

The impact from the change is stated in “Per Share Information.”

[Changes in Presentation]

(Consolidated Profit and Loss Statement) “Sales commission” in “Selling, General and Administrative Expenses,” which was separately stated in the

previous consolidated fiscal year, is included in “Other” from the current consolidated fiscal year because it decreased to less than 10/100 of the total amount of Selling, General and Administrative Expenses. In order to reflect the change in presentation, reclassification has been made in the consolidated financial statements for the previous consolidated fiscal year.

As a result, ¥530,140 thousand, which was presented in “Sales commission” in “Selling, General and Administrative Expenses” in the consolidated profit and loss statement for the previous consolidated fiscal year, has been reclassified as “Other.”

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“Rent expenses,” which was included in “Other” in “Non-operating Expenses” in the previous consolidated fiscal year, is separately stated from the current consolidated fiscal year because it exceeded 10/100 of the total amount of Non-operating Expenses. In order to reflect the change in presentation, reclassification has been made in the consolidated financial statements for the previous consolidated fiscal year.

As a result, ¥63,924 thousand, which was presented in “Other” in “Non-operating Expenses” in the consolidated profit and loss statement for the previous consolidated fiscal year, has been reclassified as “Rent expenses” of ¥24,922 thousand and “Other” of ¥39,002 thousand.

“Exchange loss” in “Non-operating Expenses,” which was separately stated in the previous consolidated

fiscal year, is included in “Other” from the current consolidated fiscal year because it decreased to less than 10/100 of the total amount of Non-operating Expenses. In order to reflect the change in presentation, reclassification has been made in the consolidated financial statements for the previous consolidated fiscal year.

As a result, ¥279,598 thousand, which was presented in “Exchange loss” in “Non-operating Expenses” in the consolidated profit and loss statement for the previous consolidated fiscal year, has been reclassified as “Other.”

“Compensation expenses” in “Non-operating Expenses,” which was separately stated in the previous

consolidated fiscal year, is included in “Other” from the current consolidated fiscal year because it decreased to less than 10/100 of the total amount of Non-operating Expenses. In order to reflect the change in presentation, reclassification has been made in the consolidated financial statements for the previous consolidated fiscal year.

As a result, ¥82,786 thousand, which was presented in “Compensation expenses” in “Non-operating Expenses” in the consolidated profit and loss statement for the previous consolidated fiscal year, has been reclassified as “Other.”

[Additional Information]

(Application of Accounting Standard for Accounting Changes and Error Corrections, etc.) For the changes in accounting and correction of the previous errors made after the beginning of the current

consolidated fiscal year, the “Accounting Standard for Accounting Changes and Error Corrections” (ASBJ Statement No. 24, December 4, 2009) and the “Guidance on Accounting Standard for Accounting Changes and Error Corrections” (ASBJ Guidance No.24, December 4, 2009) have been applied.

- 71 -

[Notes]

(Notes Related to Consolidated Balance Sheet) *1 Items related to non-consolidated subsidiaries and affiliates are as follows. (Unit: thousand yen)

Previous consolidated fiscal year

(As of March 31, 2011) Current consolidated fiscal year


Investment securities (stock) 7,536,253 7,943,902

*2 Assets for security and secured debt Assets provided as security are as follows. (Unit: thousand yen)




Cash and deposits 132,493 ( --- ) 365,297 ( --- )

Buildings and structures 4,651,615 ( 3,993,050) 4,216,928 ( 3,817,089)

Machinery, equipment and delivery equipment 1,961,716 ( 1,602,312) 1,889,677 ( 1,387,130)

Tools, furniture and fixtures 35,840 ( 35,840) 41,681 ( 41,681)

Land 258,342 ( 191,025) 267,806 ( 200,489)

Intangible fixed assets (Other) 40,185 ( --- ) 39,533 ( --- )

Investments and other assets (Other) 33,360 ( --- ) 50,133 ( --- )

Total 7,113,553 ( 5,822,228) 6,871,058 ( 5,446,391)

Secured debt is as follows. (Unit: thousand yen)




Short-term borrowings 27,109 ( --- ) 916,055 ( 400,000)

Current portion of long-term borrowings 596,678 ( 467,950) 969,647 ( 821,800)

Long-term borrowings 1,334,510 ( 779,990) 1,954,146 ( 1,451,390)

Total 1,958,298 ( 1,247,940) 3,839,849 ( 2,673,190)

The figures in the parentheses show mortgages of the Factory Foundation and its liabilities.

3 Contingent liabilities (1) Guarantee for liabilities

For the following affiliated company, the Company provides a guarantee for liabilities with respect to the purchase debt from clients. (Unit: thousand yen)

Previous consolidated fiscal year (As of March 31, 2011)


Asuna Co., Ltd. 3,357 ---

(2) Important litigation case Current consolidated fiscal year (From April 1, 2011 to March 31, 2012) A litigation claim for damages (the claim of ¥1,720 million) was brought as of February 9, 2012 against

Arisawa Kenpan Co., Ltd., a consolidated subsidiary, (hereinafter referred to as “Arisawa Kenpan”) by Okayama Daiken Corporation (hereinafter referred to as “Okayama Daiken”) as detachment of kitchen panels delivered by Arisawa Kenpan occurred after construction.

Arisawa Kenpan determines it is not liable for damages as the detachment was caused by the material designated by Okayama Daiken and is responding to the litigation through consultations with attorneys.

- 72 -

*4 The Submitting Company has executed an overdraft agreement with four correspondent banks for the purpose of efficient procurement of operating capital. The following are unused lines of credit based on these agreements as of the end of consolidated fiscal year. (Unit: thousand yen)




Total amount of current account overdrafts 4,600,000 4,800,000

Draw-downs 40,000 540,000

Net 4,560,000 4,260,000

*5 Notes to mature at the end of consolidated fiscal year For accounting treatment of notes to mature at the end of consolidated fiscal year, settlement as of the

clearance date of the notes is made. As the end of the current consolidated fiscal year falls on a bank holiday, the following notes to mature at the end of consolidated fiscal year are included in the balance at the end of consolidated fiscal year. (Unit: thousand yen)




Notes and accounts receivable --- 93,409

Notes and accounts payable --- 136,076

Current liabilities and others (Equipment notes

payable) --- 74,346

(Notes Related to Consolidated Profit and Loss Statement) *1 Total amount of research and development expenses included in general and administrative expenses and

current manufacturing expenses (Unit: thousand yen)



2,222,038 2,073,952

*2 Closing inventory is the amount after devaluation of the book value in connection with decline in profitability and the following valuation loss on inventories is included in the cost of goods sold. (Unit: thousand yen)



80,696 45,863

*3 Details of profit on sale of fixed assets are as follows. (Unit: thousand yen)



Machinery, equipment and delivery equipment 3,185 61,087

Tools, furniture and fixtures --- 1,251

Total 3,185 62,338

*4 Details of loss on sale of fixed assets are as follows. (Unit: thousand yen)



Tools, furniture and fixtures 31 15

- 73 -

*5 Loss on impairment Our Group recorded a loss on impairment for the following asset groups. Previous consolidated fiscal year (From April 1, 2010 to March 31, 2011)

Place Usage Type

Joetsu City, Niigata Prefecture Manufacturing facilities Land, buildings, structures, machinery and equipment, etc.

Myoko City, Niigata Prefecture Manufacturing facilities Buildings, machinery and equipment, etc.

Joetsu City, Niigata Prefecture Idle assets Buildings and structures, etc.

Our Group carries out grouping based on segment by business category and out of which, assets and assets for lease and idle assets on which decision was made to withdraw from business are grouped by each asset.

In the current consolidated fiscal year, the book value was reduced to the recoverable value for the manufacturing facilities whose demand largely decreased and the future recoverability is low. The book value of asset group of idle facilities whose market value significantly dropped was reduced to the recoverable value.

The reduced amount is recorded in extraordinary losses as loss on impairment (¥3,458,603 thousand) and the breakdown is the buildings of ¥1,646,203 thousand, structures of ¥30,136 thousand, machinery and equipment of ¥1,741,943 thousand and other of ¥40,319 thousand.

In this regard, the recoverable value of said assets is measured by net sales price and land is valued by the amount based on the fixed asset tax assessment, etc., and other fixed assets are valued by memorandum value.

Current consolidated fiscal year (From April 1, 2011 to March 31, 2012) No applicable matter.

(Notes Related to Consolidated Statement of Comprehensive Income) Current consolidated fiscal year (From April 1, 2011 to March 31, 2012) * Reclassification adjustments and tax effects relating to other comprehensive income

(Unit: thousand yen) Valuation difference on other securities:

Amount arising during the year 207,762 Reclassification adjustments 1,470,924

Before tax effect adjustment 1,263,162 Tax effects 446,324 Valuation difference on other securities 816,838

Foreign currency translation adjustments: Amount arising during the year 226,848

Share of other comprehensive income of companies to which equity method is applied:

Amount arising during the year 304,907 Total other comprehensive income 1,348,594

- 74 -

(Notes Related to Consolidated Statements of Changes in Shareholders’ Equity and Other Net Assets) Previous consolidated fiscal year (From April 1, 2010 to March 31, 2011) 1. Matters Concerning Types and Total Number of Outstanding Shares and Types and Number of Shares of

Treasury Stock

Number of shares at the beginning of the current consolidated fiscal year (shares)

Number of shares increased in the

current consolidated fiscal year (shares)

Number of shares decreased in the


Number of shares at the end of the current

consolidated fiscal year (shares)

Outstanding shares

Common stock 34,994,424 3,400 --- 34,997,824

Total 34,994,424 3,400 --- 34,997,824

Treasury stock

Common stock (Note) 2,204 527 --- 2,731

Total 2,204 527 --- 2,731 Note: 1. Increase in total number of outstanding shares of common stock of 3,400 shares is due to the exercise of new share

subscription rights. 2. Increase in number of shares of treasury stock of common stock of 527 shares is due to the purchase of odd stock.

2. Matters Concerning New Share Subscription Rights and Treasury New Share Subscription Rights

Number of shares to be subject to new share subscription rights (shares)

Classification Details of new share subscription rights

Class of shares to be subject to new share

subscription rights

At the beginning of the current

consolidated fiscal year

Increase in the current


Decrease in the current


At the end of the current


Balance at the end of the

current consolidated fiscal year

(thousand yen)

Submitting Company (Parent)

New share subscription rights as stock option

--- --- --- --- --- 245,329

Total --- --- --- --- --- 245,329

3. Matters Concerning Dividends

(1) Dividend Amount

Resolution Type of stock Total amount of dividends (thousand yen)

Dividend per share (yen) Record date Effective date

Ordinary general meeting of

shareholders held on June 29, 2010

Common stock 279,937 8.00 March 31, 2010 June 30, 2010

(2) Out of dividends whose record date belongs to the current consolidated fiscal year, those whose effective

date is the following consolidated fiscal year:

Resolution Type of stock Total amount of

dividends (thousand yen)

Underlying assets of dividends

Dividend per share (yen) Record date Effective date



Common stock 209,970 Earned surplus 6.00 March 31, 2011 June 30, 2011

- 75 -

Current consolidated fiscal year (From April 1, 2011 to March 31, 2012) 1. Matters Concerning Types and Total Number of Outstanding Shares and Types and Number of Shares of

Treasury Stock

Number of shares at the beginning of the current consolidated fiscal year (shares)





Number of shares at the end of the current

consolidated fiscal year (shares)

Outstanding shares

Common stock 34,997,824 --- --- 34,997,824

Total 34,997,824 --- --- 34,997,824

Treasury stock


Total 2,731 385 --- 3,116 Note: 1. Increase in number of shares of treasury stock of common stock of 385 shares is due to the purchase of odd stock.

2. Matters Concerning New Share Subscription Rights and Treasury New Share Subscription Rights

Number of shares to be subject to new share subscription rights (shares)

Classification Details of new share subscription rights

Class of shares to be subject to new share

subscription rights

At the beginning of the current


Increase in the current


Decrease in the current


At the end of the current


Balance at the end of the

current consolidated fiscal year

(thousand yen)

Submitting Company (Parent)

New share subscription rights as stock option

--- --- --- --- --- 230,542

Total --- --- --- --- --- 230,542

3. Matters Concerning Dividends

(1) Dividend Amount

Resolution Type of stock Total amount of dividends (thousand yen)

Dividend per share (yen)

Record date Effective date



Common stock 209,970 6.00 March 31, 2011 June 30, 2011

(2) Out of dividends whose record date belongs to the current consolidated fiscal year, those whose effective

date is the following consolidated fiscal year:

Resolution Type of stock Total amount of

dividends (thousand yen)

Underlying assets of dividends

Dividend per share (yen)

Record date Effective date



Common stock 174,973 Earned surplus 5.00 March 31, 2012 June 29, 2012

(Notes Related to Consolidated Cash Flow Statement)

* Relationship between cash and cash equivalents at end of the year and the amounts of items shown on the consolidated balance sheet (Unit: thousand yen)



Current consolidated fiscal year(From April 1, 2011 to March 31, 2012)

Cash and deposits 6,890,332 7,412,220

Fixed term deposits for a term longer than three months 2,777,493 1,373,525

Cash and cash equivalents 4,112,839 6,038,695

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(Notes Related to Lease Transaction) (Borrower) Finance lease transactions

Finance lease transactions in which ownership is not transferred 1) Contents of Lease Assets

(a) Tangible Fixed Assets Office equipment in sales operation of industrial materials (tools, furniture and fixtures)

(b) Intangible Fixed Assets Software

2) Method of Depreciation of Lease Assets As is stated in Substantial Underlying Matters for Preparation of Consolidated Financial Statements, “4.

Matters concerning accounting standards” (2) Depreciation method for important depreciable assets.” In this regard, among finance lease transactions in which ownership is not transferred, as for lease

transactions commenced prior to March 31, 2008, an accounting method similar to that applied to ordinary lease transactions has been applied and the details are as follows.

(1) Acquisition cost equivalent of leased items, accumulated depreciation equivalent, accumulated impairment

loss equivalent, and closing balance equivalent (Unit: thousand yen)

Previous consolidated fiscal year (As of March 31, 2011)

Acquisition cost equivalentAccumulated depreciation

equivalent Closing balance equivalent

Tools, furniture and fixtures 570 459 111

Intangible fixed assets 105,920 80,922 24,998

Total 106,491 81,382 25,109






Intangible fixed assets 78,212 69,491 8,720

Total 78,783 70,047 8,736

Note: The acquisition cost equivalent is calculated on an interest paid included basis because the closing balance of accrued lease payments makes up such a small portion of the closing balance of tangible fixed assets, etc.

(2) Closing balance equivalent of accrued lease payments, etc.




(As of March 31, 2012) Closing balance equivalent of accrued lease payments

Less than 1 year 16,373 6,857

Over 1 year 8,736 1,879

Total 25,109 8,736

Note: The closing balance equivalent of accrued lease payments is calculated on an interest paid included basis because the closing balance of accrued lease payments makes up such a small portion of the closing balance of tangible fixed assets, etc.

(3) Lease payments paid, reversal of lease asset impairment account, depreciation expense equivalent and

impairment loss (Unit: thousand yen)




Lease payments paid 32,077 16,373

Depreciation expense equivalent 32,077 16,373

- 77 -

(4) Method for calculating depreciation expense equivalent

The straight line method is adopted, where the period of lease is set as the useful life and the salvage value is set at zero.

(Impairment Loss)

There is no impairment loss allocated to lease assets.

(Notes Related to Financial Instruments) 1. Matters Concerning the Status of Financial Instruments

(1) Policy for Approaches to Financial Instruments Our Group finances funds required based on a business plan mainly by borrowings from banks and

manages surplus funds by financial assets with high liquidity. Our Group has a policy of not carrying out speculative transactions and derivative transactions are carried out only by forward exchange contract to the extent of the purpose of avoiding exchange fluctuation risks of foreign currency operating receivables and payables.

(2) Contents of Financial Instruments and Risks Related to Financial Instruments Notes and accounts receivable, operating receivables, have credit risks of customers and foreign

currency operating receivables have exchange fluctuation risks. Securities and investment securities are comprised of those mainly for the purpose of pure investments

and the shares of companies with which our Group has business relations and they have market price fluctuation risks.

Notes and accounts payable, operating payables, generally have to be paid within about 120 days and foreign currency operating payables have exchange fluctuation risks.

Borrowings, bonds and liabilities related to lease transactions mainly have the purpose of financing for capital investment and general redemption date is three (3) years from the closing day.

(3) Risk Management System of Financial Instruments 1) Management of credit risk (risks related to default of business partners, etc.)

For notes and accounts receivable, sales department sets the credit limit by business partner to manage the due date and the balance and also grasps the status of business partners to recognize early and reduce nonperforming receivables.

For securities and investment securities for the purpose of fund management, higher rate bonds are covered to reduce credit risks.

2) Management of market risks (risks of fluctuations of exchange rate and interest rate, etc.) For some foreign currency operating receivables and payables, forward exchange contract may be

entered into for the purpose of avoiding exchange fluctuation risks. For securities and investment securities, holding status is continuously reviewed, considering the market

conditions and transaction relationship. Execution and management of forward exchange contracts are carried out by the handling department

with the approval of the responsible person and the validity is confirmed as they are within the subject receivables and payables, etc.

3) Management of liquidity risk (risk that payment cannot be made as of the contract date) related to financing The Company has executed an overdraft agreement with financial institutions for flexible financing in

preparation for liquidity risk. In financing, the fund plan is prepared and renewed based on a business plan and capital investment plan

and the Company prepares for liquidity risk through maintaining liquidity on hand, etc. (4) Supplementary Explanation about Matters Concerning Fair Value, etc., of Financial Instruments

The fair value of financial instruments includes, in addition to the price based on the market price, the price reasonably calculated where no market price exists. In calculation of the value, as fluctuation factors are incorporated, the value might fluctuate by adopting different preconditions.

- 78 -

2. Matters Concerning Fair Value, etc., of Financial Instruments The amount shown on the consolidated balance sheet, the fair value and the differences are as follows.

Financial instruments whose fair value is deemed to be extremely difficult to recognize are not included (refer to Note 2).

Previous consolidated fiscal year (As of March 31, 2011) (Unit: thousand yen)

Amount shown on Consolidated Balance Sheet

Fair value Difference

(1) Cash and deposits 6,890,332 6,890,332 ---

(2) Notes and accounts receivable 10,111,114 10,111,114 ---

(3) Securities and investment securities 11,467,895 19,071,431 7,603,536

(4) Deposits paid 1,359,798 1,359,798 ---

(5) Long-term loans (*1) 375,755

Allowance for doubtful accounts (*2) 256,103

119,652 135,547 15,895

Total Assets 29,948,792 37,568,224 7,619,431

(1) Notes and accounts payable 5,575,287 5,575,287 ---

(2) Short-term borrowings 867,863 867,863 ---

(3) Corporate income tax, etc., payable 455,513 455,513 ---

(4) Corporate Bonds (*3) 177,625 174,204 3,421

(5) Long-term borrowings (*4) 2,146,749 2,164,888 18,138

(6) Lease liabilities (*5) 1,723,225 1,763,424 40,198

Total Liabilities 10,946,265 11,001,181 54,916

(*1) Current portion of long-term loans receivable are included. (*2) Allowance for doubtful accounts individually recorded in long-term loans is excluded. (*3) Current portion of corporate bonds are included. (*4) Current portion of long-term borrowings are included. (*5) Those recorded in current liabilities and fixed liabilities are combined.

- 79 -

Current consolidated fiscal year (As of March 31, 2012) (Unit: thousand yen) Amount shown on

Consolidated Balance SheetFair value Difference

(1) Cash and deposits 7,412,220 7,412,220 ---

(2) Notes and accounts receivable 8,532,084 8,532,084 ---

(3) Securities and investment securities 11,785,256 14,794,417 3,009,160

(5) Long-term loans (*1) 364,984

Allowance for doubtful accounts (*2) 252,742

112,242 125,389 13,147

Total Assets 27,841,805 30,864,112 3,022,307

(1) Notes and accounts payable 3,990,176 3,990,176 ---

(2) Short-term borrowings 1,133,165 1,133,165 ---

(5) Long-term borrowings (*3) 3,083,919 3,080,706 3,213

Total Liabilities 8,207,262 8,204,048 3,213

(*1) Current portion of long-term loans receivable are included. (*2) Allowance for doubtful accounts individually recorded in long-term loans is excluded. (*3) Current portion of long-term borrowings are included.

Note: 1. Calculation method of fair values of financial instruments and matters concerning securities

Assets (1) Cash and deposits, (2) Notes and accounts receivable, (4) Deposits paid

As these are settled within a short period of time and the fair values are similar to the book values, they are recorded at the book values.

(3) Securities and investment securities For the fair values of these, shares, etc., are determined by the prices at the exchange and bonds are

determined by the prices at the exchange or the price presented by the trading financial institutions. For matters concerning securities by purpose of holding, refer to “Notes Related to Securities.”

(5) Long-term loans The Company calculates fair values of long-term loans, upon classifying into a certain period and by

the category of credit risks in credit management, at the present value obtained by discounting the future cash flow by the interest rate, with such appropriate index as yield of government bonds and credit spread added. For nonperforming loans, as the estimated doubtful accounts are calculated based on the present discounted value of the estimated cash flow by the same discount rate or the amount expected to be recovered, etc., from the security and guarantee, the fair value is similar to the amount deducting the present estimated doubtful accounts from the amount on the consolidated balance sheet on the closing day of the consolidated fiscal year and the said value is shown as the fair value.

Liabilities (1) Notes and accounts payable, (2) Short-term borrowings, (3) Corporate income tax, etc., payable

As these are settled within a short period of time and the fair values are similar to the book values, they are recorded at the book values.

(4) Corporate Bonds The fair values are calculated at the present value obtained by discounting the total principal amount

at the interest rate, with the residual period of the bonds and credit risk added. (5) Long-term borrowings, (6) Lease liabilities

These fair values are calculated at the present value obtained by discounting the total principal amount at the interest rate expected for similar new borrowings or lease transactions.

- 80 -

2. Financial instruments whose fair value is deemed to be extremely difficult to recognize (Unit: thousand yen)

Category Previous consolidated fiscal year



Unlisted shares, etc. 616,742 497,726

As these have no market price and it is deemed to be extremely difficult to recognize fair values, they are not included in “(3) Securities and investment securities.”

3. Scheduled Redemption amount of monetary claims and securities having maturities after the closing day

of the consolidated fiscal year Previous consolidated fiscal year (As of March 31, 2011) (Unit: thousand yen)

Less than one

year

Over one year and less than

five years

Over five years and less than ten

years Over ten years

Deposits 6,883,492 --- --- ---

Notes and accounts receivable 10,111,114 --- --- ---

Securities and investment securities

Securities having maturities out of other securities

(1) Bonds (Corporate Bonds) 651,300 200,000 500,000 ---

(2) Others --- --- --- ---

Deposits paid 1,359,798 --- --- ---

Long-term loans (*) 8,280 77,745 34,280 ---

Total 19,013,985 277,745 534,280 ---

(*) Out of loans, the amount of ¥255,450 thousand is not included, which is not expected to be repaid, including the claims against the nonperforming loan holders.

Current consolidated fiscal year (As of March 31, 2012) (Unit: thousand yen)

Less than one

year


five years

Over five years and less than ten

years Over ten years

Deposits 7,404,913 --- --- ---

Notes and accounts receivable 8,532,084 --- --- ---

Securities and investment securities

Securities having maturities out of other securities

(1) Bonds (Corporate Bonds) 803,367 548,742 789,372 100,000

(2) Others --- --- --- ---

Long-term loans (*) 35,561 42,564 34,280 ---

Total 16,775,926 591,306 823,652 100,000

(*) Out of loans, the amount of ¥252,579 thousand is not included, which is not expected to be repaid, including the claims against the nonperforming loan holders.

4. Amount to be repaid of corporate bonds, long-term borrowings and lease liabilities after the closing day of

the consolidated fiscal year Refer to the “Schedule of Corporate Bonds” and the “Schedule of Borrowings, etc.” of Consolidated Schedules.

- 81 -

(Notes Related to Securities) 1. Other Securities

Previous consolidated fiscal year (As of March 31, 2011) (Unit: thousand yen)

Type Amount shown on

Consolidated Balance Sheet

Acquisition Cost Balance

(1) Equity Shares 2,601,532 669,775 1,931,757

(2) Bonds

1) Government bonds, local government bonds, etc.

--- --- ---

2) Corporate bonds 563,955 554,975 8,979

3) Other --- --- ---

(3) Other --- --- ---

Those whose fair value exceeds the amount shown on consolidated balance sheet

Subtotal 3,165,487 1,224,750 1,940,737

(1) Equity Shares 302,071 318,690 16,618

(2) Bonds


--- --- ---

2) Corporate bonds 804,647 804,820 172

3) Other --- --- ---

(3) Other 193,287 222,812 29,525

Those whose fair value does not exceed the amount shown on consolidated balance sheet

Subtotal 1,300,006 1,346,323 46,317

Total 4,465,493 2,571,073 1,894,419

Note: As unlisted shares, etc. (the amount shown on the consolidated balance sheet: ¥82,890 thousand) have no market price and it is deemed to be extremely difficult to recognize fair values, they are not included in “Other securities” in the Table above.

Current consolidated fiscal year (As of March 31, 2012) (Unit: thousand yen)

Type Amount shown on

Consolidated Balance Sheet

Acquisition Cost Balance

(1) Equity Shares 1,561,658 866,436 695,221

(2) Bonds


--- --- ---

2) Corporate bonds 1,282,511 1,249,455 33,056

3) Other --- --- ---

(3) Other --- --- ---

Those whose fair value exceeds the amount shown on consolidated balance sheet

Subtotal 2,844,170 2,115,892 728,278

(1) Equity Shares 101,224 123,722 22,497

(2) Bonds


152,943 184,828 31,884

2) Corporate bonds 970,729 987,999 17,270

3) Other --- --- ---

(3) Other 192,158 216,743 24,585

Those whose fair value does not exceed the amount shown on consolidated balance sheet

Subtotal 1,417,054 1,513,293 96,238

Total 4,261,225 3,629,186 632,039

Note: As unlisted shares, etc. (the amount shown on the consolidated balance sheet: ¥77,854 thousand) have no market price and it is deemed to be extremely difficult to recognize fair values, they are not included in “Other securities” in the Table above.

- 82 -

2. Other Securities Sold Previous consolidated fiscal year (From April 1, 2010 to March 31, 2011) (Unit: thousand yen)

Type Amount sold Total profit on sale Total loss on sale

(1) Equity Shares 1,337,083 1,333,662 ---

(2) Bonds 1) Government bonds,

local government bonds, etc.

--- --- ---

2) Corporate bonds --- --- ---

3) Other --- --- ---

(3) Other --- --- ---

Total 1,337,083 1,333,662 ---

Current consolidated fiscal year (From April 1, 2011 to March 31, 2012) (Unit: thousand yen)

Type Amount sold Total profit on sale Total loss on sale

(1) Equity Shares 1,505,864 1,491,407 ---

(2) Bonds 1) Government bonds,

local government bonds, etc.

--- --- ---

2) Corporate bonds --- --- ---

3) Other --- --- ---

(3) Other --- --- ---

Total 1,505,864 1,491,407 ---

3. Securities subject to Impairment

No applicable matter. (Notes Related to Derivative Transactions)

Previous consolidated fiscal year (From April 1, 2010 to March 31, 2011) No applicable matter.


- 83 -

(Notes Related to Retirement Benefit) 1. Outline of Retirement Benefit Plan adopted by the Group

The Company and some consolidated subsidiaries establish, as the defined benefit plan, defined benefit corporate pension plan and retirement lump-sum payment scheme. The Submitting Company shifted to a defined benefit corporate pension plan from a qualified retirement pension plan as of April 1, 2007. Some domestic consolidated subsidiaries join the Smaller Enterprise Retirement Allowance Mutual Aid Plan as the scheme of a defined contribution type. Some overseas consolidated subsidiaries establish a defined contribution retirement allowance plan.

2. Matters Concerning Retirement Benefit Obligations

(Unit: thousand yen) Previous consolidated fiscal year



(1) Retirement benefit obligations 3,958,488 3,887,933

(2) Pension assets 3,950,917 3,875,805

(3) Unreserved retirement benefit obligations (1)+(2) 7,571 12,128

(4) Unrecognized actuarial differences 193,147 61,371

(5) Unrecognized past service liabilities (reduction of liabilities)

--- ---

(6) Net amount appropriated on consolidated balance sheet (3)+(4)+(5) 185,576 49,243

(7) Prepaid pension cost 216,772 83,455

(8) Reserve for retirement allowance (6)-(7) 31,196 34,212

Note: Some consolidated subsidiaries adopted the simplified method for calculation of retirement benefit obligations.

3. Matters Concerning Retirement Allowance Cost (Unit: thousand yen)



Retirement allowance cost 341,937 357,234

(1) Service cost 225,849 227,916

(2) Interest cost 78,322 78,545

(3) Expected investment profit (subtraction) 39,463 39,509

(4) Appropriated amount of cost from actuarial differences

77,229 90,280

(5) Extra retirement allowance temporarily paid --- ---

Note: Retirement allowance cost of consolidated subsidiaries that have adopted the simplified method, contribution amount to the Smaller Enterprise Retirement Allowance Mutual Aid Plan and the retirement allowance cost of overseas subsidiaries that have adopted a defined contribution pension plan are appropriated in “(1) Service cost.”

4. Matters Concerning the Basis of Calculation of Retirement Benefit Obligations, etc. Previous consolidated fiscal year



(1) Discount rate (%) 2.00 Same as on the left.

(2) Expected investment profit rate (%) 1.00 Same as on the left.

(3) Distribution method of period for expected retirement pay

Fixed amount standard for the period Same as on the left.

(4) Years required for disposition of past service liabilities (years)

--- ---

(5) Years required for disposition of actuarial differences (years)


- 84 -

(Notes Related to Stock Option, etc.) 1. Amount of Expenses appropriated and Item concerning Stock Option




Stock compensation expenses in cost of goods sold, selling, general and administrative expenses 68,994 57,392

2. Amount appropriated as Profit due to Invalidation by Non-Exercise of Right




Profit on reversal of new share subscription rights 16,032 72,180

- 85 -

3. Details, Scale and Changes of Stock Option (1) Submitting Company

1) Details of Stock Option

Officers’ retirement bonuses

Stock option in 2005 Employees, etc.


Stock option in 2007

Classification and number of persons to be granted

Directors of the Company: 6 persons

Employees of the Company: 216 persons Directors and employees of subsidiaries of the Company: 5 persons


Number of stock options (Note)

Common stock: 39,700 shares Common stock: 199,000 shares Common stock: 200,000 shares

Granted date August 1, 2005 August 1, 2006 August 1, 2007

Condition for determination of rights

Condition for determination of rights is not attached, but the condition for exercising the right is as follows: (1) Eligible persons may exercise the

new share subscription rights only at the time of their retirement from office of directors of the Company; provided, however, that the eligible persons may exercise the new share subscription rights during the period between the following day of the date of retirement (hereinafter referred to as the “Commencement Date of Exercising Right”) and the date elapsing ten (10) days from the Commencement Date of Exercising Right.

(2) In the event that the eligible person has died, among his/her heirs, only the spouse, children and direct ancestors of the first degree may exercise the new share subscription rights; provided, however, that heirs may exercise the new share subscription rights during the period between following day of the retirement of the eligible person by death and the date elapsing three (3) months from that date.

Condition for determination of rights is not attached, but the condition for exercising the right is as follows: - To be an officer or an employee of

the Company or a director or an employee of a subsidiary of the Company at the time of exercising the rights.



Subject period of service Not determined. 1 year and 11 months

(From August 1, 2006 to June 30, 2008)

1 year and 11 months (From August 1, 2007 to June 30, 2009)

Period for exercising rights

From: August 1, 2005 To: July 31, 2025

From: July 1, 2008 To: June 30, 2011

From: July 1, 2009 To: June 30, 2012

- 86 -

Compensation to Directors


Stock option in 2008 Compensation to Directors










Condition for determination of rights is not attached, but the condition for exercising the right is as follows: - To be a director of the Company at

the time of exercising the rights.



Condition for determination of rights is not attached, but the condition for exercising the right is as follows: - To be an officer of the Company or

an advisor or a counselor provided for in Article 28 of the Articles of Incorporation of the Company at the time of exercising the rights.

Subject period of service 1 year and 11 months





From: July 1, 2010 To: June 30, 2013

From: July 1, 2010 To: June 30, 2013

From: July 1, 2011 To: June 30, 2014

Employees, etc.
















Condition for determination of rights is not attached, but the condition for exercising the right is as follows: - To be an officer, an advisor or an

employee of the Company or a director, an advisor or an employee of a subsidiary of the Company at the time of exercising the rights.






From: July 1, 2011 To: June 30, 2014

From: July 1, 2012 To: June 30, 2015

From: July 1, 2012 To: June 30, 2015

- 87 -








Common stock: 54,000 shares Common stock: 234,400 shares

Granted date August 12, 2011 August 12, 2011




Condition for determination of rights is not attached, but the condition for exercising the right is as follows: - To be an officer, an advisor or an

employee of the Company or a director, an advisor or an employee of a subsidiary of the Company at the time of exercising the rights.





From: July 1, 2013 To: June 30, 2016

From: July 1, 2013 To: June 30, 2016

Note: They are described by translating into the number of shares.

- 88 -

2) Scale and Changes of Stock Option Stock options existing during the current consolidated fiscal year (fiscal year ended March 31, 2012) were the subjects and the number of stock options are described by translating into the number of shares.

(a) Number of Stock Options

Officers’ retirement

bonuses Stock option in 2005

Employees, etc. Stock option in 2006


Before determination of rights (Shares)

At the end of the previous consolidated fiscal year

--- --- ---

Grant --- --- ---

Invalidation --- --- ---

Determination of rights --- --- ---

Undetermined balance --- --- ---

After determination of rights (Shares)


31,400 145,300 174,100

Determination of rights --- --- ---

Exercise of rights --- --- ---

Invalidation --- 145,300 12,800

Unexercised balance 31,400 --- 161,300







--- --- 49,700

Grant --- --- ---

Invalidation --- --- ---

Determination of rights --- --- 49,700

Undetermined balance --- --- ---



33,000 201,400 ---

Determination of rights --- --- 49,700


Invalidation --- 14,700 ---

Unexercised balance 33,000 186,700 49,700

- 89 -

Employees, etc.






278,800 95,000 218,200

Grant --- --- ---

Invalidation 100 --- ---

Determination of rights 278,700 --- ---

Undetermined balance --- 95,000 218,200



--- --- ---

Determination of rights 278,700 --- ---


Invalidation 13,200 --- ---

Unexercised balance 265,500 --- ---






--- ---

Grant 54,000 234,400

Invalidation --- 8,500

Determination of rights --- ---

Undetermined balance 54,000 225,900



--- ---

Determination of rights --- ---

Exercise of rights --- ---

Invalidation --- ---

Unexercised balance --- ---

- 90 -

(b) Unit Price Information

Officers’ retirement

bonuses Stock option in 2005



Right exercising price (yen) 1 1,810 1,187

Average stock price at the time of exercise

(yen) --- --- ---

Fair valuation unit price (grant date)

(yen) --- 433 293





Right exercising price (yen) 743 743 752


(yen) --- --- ---


(yen) 174 174 236

Employees, etc.




Right exercising price (yen) 752 649 649


(yen) --- --- ---


(yen) 236 213 213




Right exercising price (yen) 416 416


(yen) --- ---


(yen) 130 130

- 91 -

(2) Consolidated Subsidiaries 1) Details of Stock Option




Employees of ThinFlex Corporation: 53 persons


Common stock: 2,250,000 shares

Granted date March 18, 2006


That an employee has continuously worked from the granted date (March 18, 2006) to the date of determination of rights (March 17, 2008).

Subject period of service From: March 18, 2006 To: March 17, 2008


From: March 18, 2008 To: March 18, 2012

Note: They are described by translating into the number of shares.

2) Scale and Changes of Stock Option Stock options existing during the current consolidated fiscal year (fiscal year ended March 31, 2012) were the subjects and the number of stock options are described by translating into the number of shares.

(a) Number of Stock Options





---

Grant ---

Invalidation ---

Determination of rights ---

Undetermined balance ---



335,000

Determination of rights ---

Exercise of rights ---

Invalidation 40,000

Unexercised balance 295,000

- 92 -

(b) Unit Price Information



Right exercising price (NT$) 23.74


(NT$) ---


(NT$) ---

4. How to Estimate Fair Valuation Unit Price of Stock Option How to estimate fair valuation unit price of compensation to directors stock option in 2011 and employees, etc., stock option in 2011 granted in the current consolidated fiscal year is as follows.

1) Valuation Technique Used Black-Scholes Method 2) Major Fundamental Figures and Estimation Method




Stock price volatility (Note 1) 54.14％ 54.14％

Expected remaining period (Note 2) 3 years and 6 months 3 years and 6 months

Expected dividend (Note 3) ¥6.00/share ¥6.00/share

No-risk interest rate (Note 4) 0.25％ 0.25％

Note: 1. It is calculated based on the actual stock prices for 3 years and 6 months (from February 2008 to August 2011).

2. As there is not sufficient accumulation of data and reasonable estimation is difficult, it is estimated on presumption that it is exercised at the middle point of the period for exercising the right.

3. It is the actual dividend amount of the fiscal year ended March 31, 2011. 4. It is the interest rate of government bonds corresponding to the expected remaining period.

5. How to Estimate the Number of Determined Rights of Stock Options

Basically, as reasonable estimation of the number of invalidations in the future is difficult, the method is adopted, in which only the number of actual invalidations is reflected.

- 93 -

(Notes Related to Tax Effect Accounting) 1. Breakdown by cause of occurrence of deferred tax assets and deferred tax liabilities


Previous consolidated

fiscal year (As of March 31, 2011)

Current consolidated fiscal year


Deferred Tax Assets Taxation loss brought forward 1,399,957 1,547,238

Loss on impairment 1,509,936 1,071,275 Denial amount of valuation loss on investment securities

501,502 520,332

Transfer to allowance for doubtful accounts exceeding allowable amount

176,609 171,435

Denial amount of valuation loss on inventories 196,019 161,184

Denial amount of reserve for bonuses 206,374 151,324

Other 609,749 424,376

Subtotal of Deferred Tax Assets 4,600,149 4,047,167

Reserve for valuation 4,019,704 3,519,275

Total of Deferred Tax Assets 580,445 527,892

Deferred Tax Liabilities

Valuation difference on other securities 677,534 229,449

Retained earnings of overseas affiliated companies 175,760 135,338 Additional depreciation of overseas affiliated companies

--- 38,492

Prepaid pension cost 87,576 29,543

Other 22,259 17,804

Total of Deferred Tax Liabilities 963,130 450,627

Net amount of deferred tax assets (liabilities) 382,685 77,264 Note: Net amount of deferred tax assets in the previous consolidated fiscal year and the current consolidated fiscal year

is included in the following items of consolidated balance sheet.






Current Assets – Deferred tax assets 215,576 125,069

Fixed Assets – Deferred tax assets 364,868 402,822

Current Liabilities – Deferred tax liabilities 87,576 31,092

Fixed Liabilities – Deferred tax liabilities 875,554 419,535

- 94 -

2. Breakdown of major items that were the causes of the difference, where there was a significant difference between statutory effective tax rate and the burden rate of corporate tax, etc., after applying tax effect accounting.





Statutory effective tax rate 40.4% (Adjustment) Investment profit by equity method 26.3 Items permanently not includable in profits, such as dividend income

10.8

Reserve for valuation 5.8 Retained earnings of overseas subsidiaries 5.3 Tax rate differences of overseas subsidiaries 3.4 Amortization of negative goodwill or profit on negative goodwill

2.0

Dividend income eliminated in consolidation 24.5 Other 3.8 Burden rate of corporate tax, etc., after applying tax effect accounting

As net loss before taxes was recorded, the entry of the matter is omitted.

7.5

3. Adjustment of the amount of deferred tax assets and deferred tax liabilities due to changes in the tax rate of

corporate tax, etc. The “Law for Partial Revision of the Income Tax Law etc., for the Purpose of Creating Taxation System

Responding to Changes in Economic and Social Structures” (Law No. 114 of 2011) and the “Law on Special Measures for Securing Financial Resources Necessary to Implement Measures for Reconstruction Following the Great East Japan Earthquake” (Law No. 117 of 2011) were promulgated on December 2, 2011 and the corporate tax rate has been reduced and the Special Corporate Tax for Reconstruction has been levied in the consolidated fiscal year commencing on and after April 1, 2012. In conjunction with this, the statutory effective tax rate used for calculation of deferred tax assets and deferred tax liabilities, which had previously been 40.40%, will be 37.8% for a temporary difference which is expected to be resolved from the consolidated fiscal year commencing on April 1, 2012 up to the consolidated fiscal year commencing on April 1, 2014 and 35.4% for a temporary difference which is expected to be resolved after the consolidated fiscal year commencing on April 1, 2015.

Due to changes in the tax rate, the amount of deferred tax liabilities (the amount after deducting the amount of deferred tax assets) decreased by ¥28,788 thousand and the adjustment of the corporate income tax, etc., and valuation difference on other securities increased by ¥2,813 thousand and ¥31,601 thousand respectively.

- 95 -

(Notes Related to Asset Retirement Obligations) Out of asset retirement obligations, those which are shown on the consolidated balance sheet

(1) Outline of the asset retirement obligations Obligation to restore to the original conditions, etc., in connection with real estate lease agreement on certain factories and offices

(2) Calculation method of the amount of asset retirement obligations Expected useful life is estimated as 20 years and 31 years and the discount rate of 1.9 to 2.0% is applied to calculate the amount of asset retirement obligations.

(3) Increase/decrease in total amount of the asset retirement obligations





Balance at the beginning of year (Note) 49,602 64,965 Increase in connection with an increase in the number of consolidated subsidiaries

20,372 ---

Adjustment by the elapse of time 344 346 Decrease due to execution of asset retirement obligations

4,824 ---

Other increase/decrease (: decrease) 529 1,705

Balance at the end of year 64,965 63,607 Note: “Balance at the beginning of year” for the previous consolidated fiscal year is the balance at the beginning

of year by application of the “Accounting Standard for Asset Retirement Obligations” (ASBJ Statement No. 18, March 31, 2008) and the “Guidance on Accounting Standard for Asset Retirement Obligations” (ASBJ Guidance No. 21, March 31, 2008).

- 96 -

(Segment Information, etc.) [Segment Information]

1. Outline of reportable segments Reportable segments of the Company are those whose separate financial information is obtainable out of the

composition units of the Company and the subject of periodical review by the board of directors in order to determine distribution of business resources and evaluate performances.

The Company established the manufacturing and sales system by product and service at the head office and develops comprehensive strategies of the handling products and services for Japan and overseas and is developing business activities.

Therefore, the Company is composed of segments by product and service based on the manufacturing and sales system and adopts the five businesses of “electronic materials business,” “display materials business,” “electric insulation materials business,” “industrial application structural materials business” and “related goods sales business” as the reportable segments. “Electronic materials business” produces materials for flexible and rigid printed circuit boards, etc. “Display

materials business” produces 3D display filters, anti-reflection films, special optical films, etc. “Electric insulation materials business” produces glass cloth, glass tapes, prepregs for electric insulation, etc. “Industrial application structural materials business” produces FW molded products, honeycomb panels and prepregs for aircraft, pultrusion products, FRP ski sheets, etc. “Related goods sales business” purchases and sells goods such as industrial materials.

From the current consolidated fiscal year, as the quantitative importance of “related goods sales business,” which was included in “other,” increased, it is changed to the method of posting as a reportable segment.

In this regard, for segment information for the previous consolidated fiscal year, the information prepared based on the reportable segments for the current consolidated fiscal year is disclosed.

2. Method of calculation of the amount of sales, profit or loss, assets, liabilities and other items by reportable segment Accounting method of reported business segments is generally the same as the statement in “Substantial

Underlying Matters for Preparation of Consolidated Financial Statements.” Inventories are valued at the values before devaluation of the book value based on a decline in profitability. Profit in the reportable segments is based on operating profit or loss. Intersegment revenues and transfers are based on the actual market price.

3. Information about the amount of sales, profit or loss, assets, liabilities and other items by reportable segment Previous consolidated fiscal year (From April 1, 2010 to March 31, 2011)

(Unit: thousand yen) Reportable segment


Display materials

Electric insulation materials


Related goods sales

Total

Other (Note)

Total

Sales Sales to external customers 17,186,944 10,997,139 2,998,649 3,277,404 2,263,094 36,723,233 234,104 36,957,338

Intersegment sales or transfers --- --- --- --- --- --- 662,838 662,838

Total 17,186,944 10,997,139 2,998,649 3,277,404 2,263,094 36,723,233 896,943 37,620,177Segment profit or loss () 939,580 1,009,268 502,413 260,447 108,608 801,781 82,194 883,976

Segment assets 17,325,754 11,353,173 3,250,346 5,573,032 1,073,292 38,575,598 842,385 39,417,984

Other

Depreciation expense 977,056 1,161,746 250,337 131,357 --- 2,520,497 20,927 2,541,425Investment in companies to which the equity method is applied

2,721,991 4,280,410 --- --- --- 7,002,401 --- 7,002,401

Increase in tangible fixed assets and intangible fixed assets

283,527 670,536 43,683 41,760 --- 1,039,507 12,033 1,051,540

Note: The category “Other” means business segments which are not included in the reportable segments and includes other businesses, etc.

- 97 -


Reportable segment


Display materials



Related goods sales

Total

Other (Note)

Total

Sales Sales to external customers 13,273,626 4,536,711 3,226,750 5,065,964 1,506,103 27,609,155 216,036 27,825,192

Intersegment sales or transfers --- --- --- --- --- --- 628,279 628,279

Total 13,273,626 4,536,711 3,226,750 5,065,964 1,506,103 27,609,155 844,316 28,453,472Segment profit or loss () 64,945 406,131 227,476 5,893 59,458 60,144 92,046 31,902

Segment assets 16,834,813 9,495,792 3,666,257 5,815,716 477,822 36,290,402 1,000,927 37,291,330

Other

Depreciation expense 853,261 197,184 227,177 173,573 --- 1,451,196 23,733 1,474,929Investment in companies to which the equity method is applied

2,698,372 5,099,148 --- --- --- 7,797,521 --- 7,797,521


470,838 61,743 226,813 178,391 --- 937,786 27,805 965,591

Note: The category “Other” means business segments which are not included in the reportable segments and includes other businesses, etc.

4. Difference between the total amount of reportable segments and the amount shown in the consolidated financial statements and major details for the difference (matters concerning difference adjustment)


Sales Previous consolidated fiscal year Current consolidated fiscal year

Total of reportable segments 36,723,233 27,609,155

Sales in category “Other” 896,943 844,316

Elimination of intersegment transactions 662,838 628,279

Sales in consolidated financial statements 36,957,338 27,825,192


Profit Previous consolidated fiscal year Current consolidated fiscal year

Total of reportable segments 801,781 60,144

Profit in category “Other” 82,194 92,046

Elimination of intersegment transactions 58,593 57,355

Amortization of goodwill 18,981 30,281

Expenses of entire company (Note) 1,150,314 1,247,369

Adjustment of inventories 12,004 12,542

Operating profit in consolidated financial statements 355,917 1,315,647

Note: Expenses of the entire company are mainly general and administrative expenses not attributable to reportable segments.

- 98 -


Assets Previous consolidated fiscal year Current consolidated fiscal year

Total of reportable segments 38,575,598 36,290,402

Assets in category “Other” 842,385 1,000,927

Elimination by setoff of the claims to the administrative department of head office

109,681 230,984

Assets of entire company (Note) 11,304,365 9,618,957

Adjustment of inventories 12,004 12,542

Total assets in consolidated financial statements 50,600,663 46,666,761

Note: Assets of the entire company are mainly investment securities, etc., not attributable to reportable segments.


Total of reportable segments

Other Adjustment Amount shown in

consolidated financial statements Other item









Depreciation expense 2,520,497 1,451,196 20,927 23,733 81,505 108,421 2,622,930 1,583,350


1,039,507 937,786 12,033 27,805 127,330 184,343 1,178,871 1,149,935

Note: Adjustment of increase in tangible fixed assets and intangible fixed assets is the capital investments in the assets used for the common corporate purpose.

[Related Information] I Previous consolidated fiscal year (From April 1, 2010 to March 31, 2011) 1. Information by product and service



Display materials



Related goods sales

Other Total

Sales to external customers 17,186,944 10,997,139 2,998,649 3,277,404 2,263,094 234,104 36,957,338

2. Information by region

(1) Sales (Unit: thousand yen)

Japan China Other Region Total

19,762,869 6,499,290 10,695,178 36,957,338

Note: Sales are based on the location of customers and classified into a country or region.

(2) Tangible fixed assets (Unit: thousand yen)

Japan Taiwan Other Region Total

10,088,059 1,612,336 280,641 11,981,037

3. Information by major customer


Name of Customer Sales Related segment name

Sumitomo Shoji Chemicals Co., Ltd. 7,264,309 Electronic materials business

- 99 -

II Current consolidated fiscal year (From April 1, 2011 to March 31, 2012) 1. Information by product and service



Display materials



Related goods sales

Other Total

Sales to external customers 13,273,626 4,536,711 3,226,750 5,065,964 1,506,103 216,036 27,825,192

2. Information by region

(1) Sales (Unit: thousand yen)

Japan China Other Region Total

16,337,726 3,968,509 7,518,957 27,825,192

Note: Sales are based on the location of customers and classified into a country or region.

(2) Tangible fixed assets (Unit: thousand yen)

Japan Taiwan Other Region Total

9,319,410 1,517,293 327,934 11,164,637

3. Information by major customer


Name of Customer Sales Related segment name

Sumitomo Shoji Chemicals Co., Ltd. 4,204,723 Electronic materials business

[Information about loss on impairment of fixed assets by reportable segment] Previous consolidated fiscal year (From April 1, 2010 to March 31, 2011)



Display materials



Other Entire

company/ Elimination

Total

Loss on impairment

--- 3,421,137 --- --- --- 37,466 3,458,603


- 100 -

[Information about amortization of goodwill and unamortized balance by reportable segment] Previous consolidated fiscal year (From April 1, 2010 to March 31, 2011)



Display materials



Related goods sales

Other Entire


Total

Amortization --- 18,981 --- --- --- --- --- 18,981

Balance at the end of year

58,422 28,472 --- --- --- --- --- 86,894

In this regard, amortization of negative goodwill that accrued by business combination carried out prior to April 1, 2010 and the unamortized balance are as follows.



Display materials



Related goods sales

Other Entire


Total

Amortization 36,915 --- --- --- --- --- --- 36,915


129,115 --- --- --- --- --- --- 129,115



Display materials



Related goods sales

Other Entire


Total

Amortization 11,270 19,011 --- --- --- --- --- 30,281


42,594 10,060 --- --- --- --- --- 52,655

In this regard, amortization of negative goodwill that accrued by business combination carried out prior to April 1, 2010 and the unamortized balance are as follows.



Display materials



Related goods sales

Other Entire


Total

Amortization 36,915 --- --- --- --- --- --- 36,915


92,199 --- --- --- --- --- --- 92,199

[Information about profit on negative goodwill by reportable segment] Previous consolidated fiscal year (From April 1, 2010 to March 31, 2011)

In the current consolidated fiscal year, profit on negative goodwill of ¥332,171 thousand was recorded in the industrial application structural materials. This is due to the fact that net assets at fair value as of the date of business combination exceeded the acquisition cost as the Company acquired from Bekaert the two companies, Bekaert Progressive Composites, S.A. (now, Protec Arisawa Europe, S.A.) and Bekaert Progressive Composites LLC (now, Protec Arisawa America, Inc.), which was, as part of our global development strategy, carried out to strengthen our business in the market that is expected to expand further in the future due to increased water demand around the world by exploiting synergistic effects created by combining our technical strength with Bekaert’s sales force and manufacturing prowess.



- 101 -

[Information on Related Parties] 1. Transactions with Related Parties

Transactions between the company submitting the consolidated financial statements and related parties

Non-consolidated subsidiaries and affiliates of the company submitting the consolidated financial statements

Previous consolidated fiscal year (From April 1, 2010 to March 31, 2011) No applicable matter.


Type

Name of company, etc., or full

name

LocationCapital or

contributions (¥1,000)

Details of business or occupation

Ratio of voting rights

held (%)

Relationship with related

parties

Details of trade

Trading amount (¥1,000)

Item

Balance at the end of

year (¥1,000)

Licensing of intellectual property rights

135,833 --- ---

Sale of tangible fixed assets

Sale price 550,087 Receivable

s17,953

Affiliate

Toppan Arisawa Optical

Technology Co., Ltd.

Taito-ku, Tokyo

490,000

Development and

manufacture of special

optical films

(Ownership)Direct 50.0

Supply of raw materials Lease of building Holding office of directorate concurrently

Profit on sale 60,384

Note: 1. Out of the stated amounts, trading amount does not include consumption tax, etc., and the balance at the end of year includes consumption tax, etc.

2. Transaction terms and determination policy for transaction terms, etc. (1) For licensing of intellectual property rights, the price is determined, considering the market price and total

cost. (2) For sale of tangible fixed assets, the price is determined, with reference to the book value of tangible fixed

assets and general margin.

2. Notes to Parent or Important Affiliates

(1) Information on Parent No applicable matter.

(2) Condensed Financial Information on Important Affiliates Previous consolidated fiscal year (From April 1, 2010 to March 31, 2011) In the current consolidated fiscal year, the important affiliates are Polatechno Co., Ltd. and TAIFLEX

Scientific Co., Ltd. and the condensed consolidated financial statements are as follows.


Polatechno Co., Ltd. TAIFLEX Scientific Co., Ltd. Total current assets 14,391,083 17,613,640 Total fixed assets 8,381,148 4,976,719 Total current liabilities 5,469,865 7,048,031 Total fixed liabilities 1,177,183 2,722,081 Total net assets 16,125,183 12,820,248 Sales 20,159,895 19,138,105 Net profit before taxes, etc. 2,406,302 2,825,472 Net profit 1,570,392 2,175,893

- 102 -

Current consolidated fiscal year (From April 1, 2011 to March 31, 2012) In the current consolidated fiscal year, the important affiliates are Polatechno Co., Ltd. and TAIFLEX

Scientific Co., Ltd. and the condensed consolidated financial statements are as follows.


Polatechno Co., Ltd. TAIFLEX Scientific Co., Ltd. Total current assets 13,842,156 16,722,792 Total fixed assets 10,240,334 6,300,327 Total current liabilities 5,213,300 8,260,669 Total fixed liabilities 1,061,524 1,176,615 Total net assets 17,807,666 13,585,835 Sales 18,832,684 17,704,866 Net profit before taxes, etc. 3,027,116 2,116,176 Net profit 1,993,358 1,512,346

- 103 -

(Per Share Information)




Net asset per share ¥987.74 ¥959.14

Net profit or loss () per share ¥53.22 ¥16.75

Fully diluted net profit per share --- ¥16.74

Note: 1. “Fully diluted net profit per share” for the previous consolidated fiscal year is not stated as there was a net loss per share although residual shares existed.

(Changes in Accounting Policy)

From the current consolidated fiscal year, the “Accounting Standard for Earnings Per Share” (ASBJ Statement No. 2, June 30, 2010), the “Guidance on Accounting Standard for Earnings Per Share” (ASBJ Guidance No. 4, released on June 30, 2010) and the “Practical Solution on Accounting for Earnings Per Share” (ASBJ PITF No. 9, June 30, 2010) have been applied.

In calculation of the amount of fully diluted net profit per share, for a stock option the right of which is determined after service of a certain period, it was changed to include the portion for services provided to the company in the future in money received if it would be paid by exercising a right, out of the fair valuation amount of a stock option.

There is no impact from the change.

Note: 2. Net profit or loss per share and fully diluted net profit per share are calculated on the basis of the following:




Net profit per share

Net profit or loss () (thousand yen) 1,862,570 586,240

Amounts that are not attributable to common stockholders (thousand yen)

--- ---

Net profit or loss () for common stocks (thousand yen)

1,862,570 586,240

Average number of shares during the year (shares)

34,994,401 34,994,965

Fully diluted net profit per share

Adjustment of net profit (thousand yen) --- ---

Increase in number of common stocks (shares)

--- 31,314

(Of those, number of new share subscription rights (shares))

(---) (31,314)

The outline of potential shares not included in the calculation of fully diluted net profit per share due to the absence of dilutive effects

Eight types of new share subscription rights (1,195,500 shares). For details, refer to “IV. Status of the Submitting Company, 1. Status of Shares, etc., (2) Status of New Share Subscription Rights.”

Nine types of new share subscription rights (1,289,300 shares). For details, refer to “IV. Status of the Submitting Company, 1. Status of Shares, etc., (2) Status of New Share Subscription Rights.”

(Important Events after Closing the Accounts) No applicable matter.

- 104 -

5) Consolidated Schedules [Schedule of Corporate Bonds]

Company name

Name Issue date

Balance at the beginning of current year

(thousand yen)

Balance at the end of current year (thousand yen)

Interest rate (%)

Security Redemption

date


2nd Unsecured Corporate Bonds

October 4, 2006

177,625(97,456)

[NT$63,893 thousand]

------

[NT$---thousand]

0.0 None January 30,

2013

Total --- ---

177,625(97,456)

[NT$63,893 thousand]

------

[NT$---thousand]

--- --- ---

Note: 1. Description in ( ) is the expected amount of redemption within a year. Foreign currency amount is described in [ ].

2. Expected redemption amount for five years after the closing day of the consolidated fiscal year will be as follows. (Unit: thousand yen)

Less than one year


two years

Over two years and less than three years

Over three years and less than

four years

Over four years and less than

five years

--- --- --- --- ---

[Schedule of Borrowings, etc.]

Category

Balance at the beginning of current year

(thousand yen)


Average interest rate

(%) Due Date

Short-term borrowings 867,863 1,133,165 2.40 ---

Current portion of long-term borrowings 642,989 1,015,912 1.44 ---

Current portion of lease liabilities 291,713 24,267 2.25 ---

Long-term borrowings (excluding current portion) 1,503,760 2,068,007 1.44 Year 2013 to 2023

Lease liabilities (excluding current portion) 1,431,512 137,635 2.25 Year 2013 to 2022

Other interest bearing debts --- --- --- ---

Total 4,737,838 4,378,988 --- ---

Note: 1. Average interest rate is stated by weighted average interest rate to the balance at the end of year.

2. Expected amount of repayment of long-term borrowings and lease liabilities (excluding current portion) for five

years after the closing day of the consolidated fiscal year will be as follows. (Unit: thousand yen)

Over one year and less than two years

Over two years and less than three years

Over three years and less than four years

Over four years and less than five years

Long-term borrowings

819,904 453,505 387,693 215,521

Lease liabilities 23,382 21,951 15,414 11,436

- 105 -

[Schedule of Asset Retirement Obligations] As the amounts of asset retirement obligations as of the beginning of the current consolidated fiscal year and the

end of the current consolidated fiscal year are less than 1/100 of total liabilities and net assets as of the beginning of the current consolidated fiscal year and the end of the current consolidated fiscal year, indication is omitted under the provisions of Article 92-2 of the Regulations for Consolidated Financial Statements.

(2) Other

Quarterly Information in the Current Consolidated Fiscal Year, etc.

(Cumulative period) First Quarter Second Quarter Third Quarter Current Consolidated

Fiscal Year

Sales (thousand yen) 8,312,417 16,109,836 22,133,886 27,825,192

Net profit before taxes, etc. (thousand yen)

1,813,723 1,615,119 1,480,142 763,383

Net profit (thousand yen)

1,685,298 1,475,296 1,286,121 586,240

Net profit per share (yen)

48.16 42.16 36.75 16.75

(Accounting period) First Quarter Second Quarter Third Quarter Fourth Quarter

Net profit or loss () per share (yen)

48.16 6.00 5.41 20.00

- 106 -

2. Financial Statements, etc.

(1) Financial Statements

1) Balance Sheet


Previous business year (As of March 31, 2011)

Current business year (As of March 31, 2012)

Assets

Current Assets

Cash and deposits 3,254,968 3,993,136

Notes receivable *2 565,007 *2, *5 710,418

Accounts receivable *2 6,307,092 *2 5,482,132

Securities 151,105 200,420

Merchandise and finished goods 1,757,233 1,806,054

Work-in-progress 1,195,656 867,170

Raw materials and stores 829,330 793,420

Advance payment 114,240 799

Deposits paid 1,359,798 ---

Prepaid expenses 255,445 118,742

Short-term loans to affiliated companies 1,699,250 1,531,250

Receivables *3 178,096 246,574

Other 23,647 81,660

Allowance for doubtful accounts 112,388 118,913

Total Current Assets 17,578,483 15,712,865

Fixed Assets

Tangible fixed assets

Buildings 13,562,937 13,890,714

Accumulated depreciation 8,543,878 8,885,364

Buildings (net) *1 5,019,058 *1 5,005,350

Structures 1,156,458 1,189,896

Accumulated depreciation 889,243 931,323

Structures (net) *1 267,214 *1 258,573

Machinery and equipment 20,626,703 21,920,044


Machinery and equipment (net) *1 2,246,398 *1 1,925,906

Vehicles and delivery equipment 189,573 188,947

Accumulated depreciation 178,726 181,531

Vehicles and delivery equipment (net) 10,847 7,416

Tools, furniture and fixtures 1,392,986 1,407,191


Tools, furniture and fixtures (net) *1 100,956 *1 76,076

Land *1 1,372,431 *1 1,372,431

Lease assets 1,109,944 22,801

Accumulated depreciation 1,095,279 12,464

Lease assets (net) 14,664 10,336

Construction in progress 385,813 53,803

Total tangible fixed assets 9,417,384 8,709,893

- 107 -




Intangible fixed assets

Telephone subscription right 9,283 9,283

Patent license 42,964 30,338

Trademark right --- 427

Software 18,019 19,778

Lease assets 34,143 25,889

Other 530 1,166

Total intangible fixed assets 104,941 86,883

Investments and other assets

Investment securities 3,819,351 3,564,425

Stocks of affiliated companies 5,431,793 5,703,586

Long-term loans 375,395 329,099

Long-term loans to employees 360 668

Bankruptcy and rehabilitation claims, etc. --- 105,342

Long-term prepaid expenses 47,390 48,719

Investment real estate 747 747

Other 47,923 44,690

Allowance for doubtful accounts 279,688 381,687

Total investments and other assets 9,443,273 9,415,592

Total Fixed Assets 18,965,598 18,212,369

Total Assets 36,544,081 33,925,235

Liabilities

Current Liabilities

Notes payable *2 2,568,287 *2, *5 1,616,201

Accounts payable *2 1,820,333 *2 1,527,916

Short-term borrowings *4 40,000 *1, *4 540,000

Current portion of long-term borrowings *1 467,950 *1 821,800

Lease liabilities 291,713 12,555

Unpaid amount 438,333 *3 712,930

Accrued expenses 71,306 77,283

Corporate income tax, etc., payable 25,864 21,385

Deferred tax liabilities 87,576 31,092

Advances received 3,557 211,736

Deposits received 22,469 28,503

Reserve for bonuses 291,191 269,230

Provision for product warranties 242,291 106,795

Other 241,998 *5 295,126

Total Current Liabilities 6,612,874 6,272,557

Fixed Liabilities

Long-term borrowings *1 779,990 *1 1,451,390

Lease liabilities 1,431,512 25,007

Deferred tax liabilities 699,794 245,733

Asset retirement obligations 32,407 32,552

Other 26,599 25,730

Total Fixed Liabilities 2,970,304 1,780,413

Total Liabilities 9,583,178 8,052,971

- 108 -




Net Assets

Shareholders’ equity

Capital 7,117,259 7,117,259

Capital surplus

Capital reserve 6,229,282 6,229,282

Total capital surplus 6,229,282 6,229,282

Earned surplus

Earned surplus reserve 748,262 748,262

Other earned surplus

Reserve for advanced depreciation of fixed assets

29,662 28,532

Contingency reserve 13,920,000 10,920,000

Earned surplus carried forward 2,527,061 217,788

Total earned surplus 12,170,863 11,914,583

Treasury stock 1,523 1,655

Total shareholders’ equity 25,515,881 25,259,470

Valuation and translation differences, etc.

Valuation difference on other securities 1,199,692 382,251

Total valuation and translation differences, etc. 1,199,692 382,251

New share subscription rights 245,329 230,542

Total Net Assets 26,960,903 25,872,264

Total Liabilities and Net Assets 36,544,081 33,925,235

- 109 -

2) Profit and Loss Statement


Previous business year (From April 1, 2010 to March 31, 2011)

Current business year (From April 1, 2011 to March 31, 2012)

Sales

Sales of merchandise and finished goods *1 25,389,003 *1 19,932,539

Cost of Goods Sold

Opening inventory of merchandise and finished goods

2,192,599 1,757,233

Purchases of merchandise 3,331,504 2,867,007

Cost of manufactured goods *5 20,743,492 *5 16,396,825

Subtotal 26,267,596 21,021,066

Transfer to other accounts *2 11,661 *2 11,434

Closing inventory of merchandise and finished goods

*3 1,757,233 *3 1,806,054

Total Cost of Goods Sold 24,522,024 19,226,446

Gross Profit on Sales 866,978 706,092

Selling, General and Administrative Expenses

Freight and packaging expenses 582,160 494,738

Transfer to allowance for doubtful accounts 12,326 100,687

Officers’ compensation 179,199 179,725

Wages and allowances 567,333 537,936

Transfer to reserve for bonuses 20,645 33,788

Transfer to reserve for retirement allowance 56,295 57,751

Depreciation expense 71,450 65,466

Other 918,954 864,096

Total Selling, General and Administrative Expenses

*5 2,408,365 *5 2,334,190

Operating Loss () 1,541,387 1,628,097

Non-operating Income

Interest income 21,703 30,939

Interest on securities 12,213 28,973

Dividend income *4 238,976 *4 506,675

Rent income *4 290,471 *4 299,769

Royalty income --- *4 143,302

Other 128,198 170,804

Total Non-operating Income 691,564 1,180,464

Non-operating Expenses

Interest expenses 59,487 46,411

Rent expenses 205,495 215,161

Transfer to allowance for doubtful accounts --- 7,837

Transfer to provision for product warranties 204,974 ---

Exchange loss 61,147 67,958

Other 104,072 76,929

Total Non-operating Expenses 635,178 414,297

Ordinary Loss () 1,485,001 861,930

- 110 -




Extraordinary Profits

Profit on sale of fixed assets *6 5,294 *6 60,384

Profit on sale of investment securities 1,455,042 1,492,836

Other 54,089 72,180

Total Extraordinary Profits 1,514,426 1,625,400

Extraordinary Losses

Loss on impairment *7 3,458,603 ---

Valuation loss on stocks of affiliated companies --- 472,702

Special retirement expenses --- 317,165

Other 56,930 74,939

Total Extraordinary Losses 3,515,534 864,808

Net loss () before taxes 3,486,109 101,338

Corporate income tax, resident tax and business tax payable

7,430 7,430

Adjustment of corporate income tax, etc. 49,738 62,459

Total corporate income tax, etc. 42,308 55,029

Net loss () 3,443,801 46,308

- 111 -

[Statement of Cost of Manufactured Goods]



Category Note Amount

(thousand yen)

Com-position ratio (%)

Amount (thousand yen)

Com-position ratio (%)

I. Raw materials cost 12,223,590 58.2 9,045,855 56.3

II. Labor cost 3,549,185 16.9 3,431,661 21.4

III. Expenses 5,229,630 24.9 3,587,103 22.3

(Outsourced processing cost included above)

(941,208) (635,469)

(Depreciation expense included above)

(2,000,070) (925,700)

(Other expenses included above)

(2,288,350) (2,025,933)

Gross manufacturing expenses 21,002,406 100.0 16,064,619

Opening inventory of work-in-progress

947,464 1,195,656

Subtotal 21,949,870 17,260,276

Transfer to other accounts * 10,721 3,719

Closing inventory of work-in-progress

1,195,656 867,170

Cost of manufactured goods 20,743,492 16,396,825

Cost calculation method is in accordance with estimated unit price as relates to raw materials cost, and simple general cost calculation by product on the basis of allocation rate by unit, correcting the results of previous year, as relates to processing cost. Difference from the actual cost is adjusted at the end of year proportionately for delivered finished goods during the year and the finished goods at the end of year, and semi-finished goods and the balance of work-in-progress.

* It is transfer of the reduced book value to cost of goods sold in connection with decline in profitability.

- 112 -

3) Statements of Changes in Shareholders’ Equity and Other Net Assets




Shareholders’ equity

Capital

Balance at the beginning of year 7,117,256 7,117,259

Changes during the year


Total changes during the year 3 ---


Capital surplus

Capital reserve





Total capital surplus





Earned surplus

Earned surplus reserve

Balance at the beginning of year 748,262 748,262




Other earned surplus

Reserve for advanced depreciation of fixed assets



Provision of reserve for advanced depreciation of fixed assets

--- 1,987

Reversal of reserve for advanced depreciation of fixed assets

3,687 3,117



Contingency reserve



Reversal of contingency reserve --- 3,000,000

Total changes during the year --- 3,000,000


- 113 -




Earned surplus carried forward



Provision of reserve for advanced depreciation of fixed assets

--- 1,987

Reversal of reserve for advanced depreciation of fixed assets

3,687 3,117

Reversal of contingency reserve --- 3,000,000

Dividend of surplus 279,937 209,970

Net loss () 3,443,801 46,308

Total changes during the year 3,720,051 2,744,850


Total earned surplus




Net loss () 3,443,801 46,308



Treasury stock




Total changes during the year 313 131


Total shareholders’ equity





Net loss () 3,443,801 46,308




Valuation and translation differences, etc.

Valuation difference on other securities

Balance at the beginning of year 404,519 1,199,692



795,173 817,440



- 114 -




Total valuation and translation differences, etc.

Balance at the beginning of year 404,519 1,199,692



795,173 817,440



New share subscription rights




52,962 14,787



Total net assets





Net loss () 3,443,801 46,308



848,135 832,228

Total changes during the year 2,875,912 1,088,639


- 115 -

[Important Accounting Policy] 1. Valuation standards and method for securities

(1) Stocks of subsidiaries and affiliates Valued at cost by the gross average method.

(2) Other securities Securities with fair value:

Valued at fair value based on the market price on the closing day, etc. (All valuation differences are transferred directly to net assets and sales cost is calculated by the gross average method.) Securities without fair value:

Valued at cost by the gross average method. 2. Valuation standards and method for inventories

(1) Merchandise, finished goods, semi-finished goods, and work-in-progress Valued at cost by the FIFO method (the amount on the balance sheet is calculated by devaluation of the

book value based on a decline in profitability.) (2) Raw materials and stores

Valued at cost by the gross average method (the amount on the balance sheet is calculated by devaluation of the book value based on a decline in profitability.)

3. Depreciation method for fixed assets (1) Tangible fixed assets (except for lease assets)

The declining balance method is adopted. (Provided, however, that the straight line method has been applied to the buildings (except for annexed facilities) acquired after April 1, 1998.)

The useful life is as follows: Buildings: 15 - 31 years Machinery and equipment: 8 - 9 years

(2) Intangible fixed assets (except for lease assets) The straight line method is adopted. For software for own use, it is based on the period of in-house useful life (5 years).

(3) Lease assets The straight line method is adopted, where the period of a lease is set as the useful life and the salvage

value is set at zero. Part of machinery and equipment are recorded by transfer in lease assets due to sale and leaseback

transactions, to which the previous depreciation method (the declining balance method) has been continuously applied.

Among finance lease transactions in which ownership is not transferred, as for lease transactions commenced prior to March 31, 2008, an accounting method similar to that applied to ordinary lease transactions has been applied.

4. Standards for translating foreign currency denominated assets and liabilities into yen Foreign currency denominated debts and credits are translated into yen at the spot exchange rate on the date

of closing of accounts and the difference in translation is entered as income or loss. 5. Posting standards for allowances

(1) Allowance for doubtful accounts In order to reserve for losses from defaults on claims, a write-down as non-collectible has been charged at

the actual rate of default for normal claims, and has been charged on the basis of the expected amount of default in each instance for specified claims such as those which present concerns about default.

(2) Reserve for bonuses In order to prepare for payment of bonuses to employees, burden amount in the current year of expected

amount of payment for bonuses is appropriated. (3) Reserve for retirement allowance

In order to reserve retirement benefits for employees, this has been booked on the basis of retirement benefit obligations as of the end of the current business year, and the expected amount of pension assets.

Actuarial differences will be expensed from the following business year, according to the straight line method over a certain number of years (five years) within the average period of remaining service of the employees at the time the difference occurred in each business year.

In this connection, ¥83,455 thousand was appropriated as prepaid pension cost since the pension assets at the end of the current business year exceeded the retirement benefit obligations.

- 116 -

(4) Provision for product warranties In order to prepare for complaints about products delivered to customers, the amount which is expected to

accrue is reasonably estimated and provided. 6. Other important underlying matters for preparation of financial statements

Accounting treatment of consumption tax, etc.: For accounting treatment of consumption tax, etc., the tax-excluded method is adopted.

[Changes in Presentation]

(Profit and Loss Statement) “Compensation expenses” in “Non-operating Expenses,” which was separately stated in the previous business

year, is included in “Other” from the current business year because it decreased to less than 10/100 of the total amount of Non-operating Expenses. In order to reflect the change in presentation, reclassification has been made in the financial statements for the previous business year.

As a result, ¥78,072 thousand, which was presented in “Compensation expenses” in “Non-operating Expenses” in the profit and loss statement for the previous business year, has been reclassified as “Other.”

“Exchange loss,” which was included in “Other” in “Non-operating Expenses” in the previous business year,

is separately stated from the current business year because it exceeded 10/100 of the total amount of Non-operating Expenses. In order to reflect the change in presentation, reclassification has been made in the financial statements for the previous business year.

As a result, ¥87,147 thousand, which was presented in “Other” in “Non-operating Expenses” in the profit and loss statement for the previous business year, has been reclassified as “Exchange loss” of ¥61,147 thousand and “Other” of ¥26,000 thousand.

[Additional Information]

(Application of Accounting Standard for Accounting Changes and Error Corrections, etc.) For the changes in accounting and correction of the previous errors made after the beginning of the current

business year, the “Accounting Standard for Accounting Changes and Error Corrections” (ASBJ Statement No. 24, December 4, 2009) and the “Guidance on Accounting Standard for Accounting Changes and Error Corrections” (ASBJ Guidance No.24, December 4, 2009) have been applied.

- 117 -

[Notes]

(Notes Related to Balance Sheet) *1 Assets for security and secured debt

Assets provided as security are as follows. (Unit: thousand yen)



Buildings 3,816,968 ( 3,816,968) 3,668,538 ( 3,668,538)

Structures 176,082 ( 176,082) 148,551 ( 148,551)

Machinery and equipment 1,602,312 ( 1,602,312) 1,387,130 ( 1,387,130)

Tools, furniture and fixtures 35,840 ( 35,840) 41,681 ( 41,681)

Land 258,342 ( 191,025) 267,806 ( 200,489)

Total 5,889,545 ( 5,822,228) 5,513,708 ( 5,446,391)

Secured debt is as follows. (Unit: thousand yen)



Short-term borrowings --- ( --- ) 400,000 ( 400,000)

Current portion of long-term borrowings 467,950 ( 467,950) 821,800 ( 821,800)

Long-term borrowings 779,990 ( 779,990) 1,451,390 ( 1,451,390)

Total 1,247,940 ( 1,247,940) 2,673,190 ( 2,673,190)

The figures in the parentheses show mortgages of the Factory Foundation and its liabilities.

*2 Items for affiliated companies In the assets and liabilities for affiliated companies, the following exist in addition to those stated in each

item. (Unit: thousand yen)



Current Assets

Notes receivable 45,714 55,666

Accounts receivable 461,329 453,992

Current Liabilities

Notes payable 220,370 204,728

Accounts payable 413,974 291,765

3 Liabilities on guarantee For the following affiliated companies, the Company provides a guarantee for liabilities with respect to the

purchase debt from clients. Guarantee for liabilities (Unit: thousand yen)



Arisawa Kenpan Co., Ltd. 8,871 Arisawa Kenpan Co., Ltd. 5,461

Asuna Co., Ltd. 3,357

Total 12,229

*4 The Company has executed an overdraft agreement with four correspondent banks for the purpose of efficient procurement of operating capital. The following are unused lines of credit based on these agreements as of the end of business year. (Unit: thousand yen)



Total amount of current account overdrafts 4,600,000 4,800,000

Draw-downs 40,000 540,000

Net 4,560,000 4,260,000

- 118 -

*5 Notes to mature at the end of year For accounting treatment of notes to mature at the end of year, settlement as of the clearance date of the notes

is made. As the end of the current year falls on a bank holiday, the following notes to mature at the end of year are included in the balance at the end of year. (Unit: thousand yen)



Notes receivable --- 67,684

Notes payable --- 170,643

Current liabilities and others (Equipment notes

payable)

--- 74,346

(Notes Related to Profit and Loss Statement) *1 Classification of sales of finished goods and sales of merchandise

As it is difficult to classify the category of finished goods and merchandise in Sales, they are appropriated en bloc.

*2 Breakdown of transfer to other accounts is as follows. (Unit: thousand yen)



Transfer from raw materials and work-in-

progress 59,904

32,903

Transfer of own products to manufacturing

cost and others 48,242

21,468

Total 11,661 11,434

*3 Closing inventory is the amount after devaluation of the book value in connection with decline in profitability and the following valuation loss on inventories is included in the cost of goods sold. (Unit: thousand yen)



88,562 54,968

*4 Those related to transactions with affiliated companies are included as follows. (Unit: thousand yen)



Dividend income 214,853 463,234

Rent 271,797 273,696

Royalty income --- 135,833

*5 Total amount of research and development expenses included in general and administrative expenses and current manufacturing expenses (Unit: thousand yen)



2,087,702 1,868,111

- 119 -

*6 Details of profit on sale of fixed assets are as follows. (Unit: thousand yen)



Machinery and equipment 4,974 59,975

Vehicles and delivery equipment 250 ---

Tools, furniture and fixtures 69 408

Total 5,294 60,384

*7 Loss on impairment In the current business year, the Company recorded a loss on impairment for the following asset groups.

Place Usage Type

Joetsu City, Niigata Prefecture Manufacturing facilities Land, buildings, structures, machinery and equipment, etc.

Myoko City, Niigata Prefecture Manufacturing facilities Buildings, machinery and equipment, etc.

Joetsu City, Niigata Prefecture Idle assets Buildings and structures, etc.

The Company carries out grouping based on segment by business category and out of which, assets and assets for lease and idle assets on which decision was made to withdraw from business are grouped by each asset.

In the current business year, the book value was reduced to the recoverable value for the manufacturing facilities whose demand largely decreased and the future recoverability is low. The book value of asset group of idle facilities whose market value significantly dropped was reduced to the recoverable value.

The reduced amount is recorded in extraordinary losses as loss on impairment (¥3,458,603 thousand) and the breakdown is the buildings of ¥1,646,203 thousand, structures of ¥30,136 thousand, machinery and equipment of ¥1,741,943 thousand and other of ¥40,319 thousand.

In this regard, the recoverable value of said assets is measured by net sales price and land is valued by the amount based on the fixed asset tax assessment, etc., and other fixed assets are valued by memorandum value.

There is no applicable matter for the current business year.

(Notes Related to Statements of Changes in Shareholders’ Equity and Other Net Assets) Previous business year (From April 1, 2010 to March 31, 2011)

Matters Concerning Types and Number of Shares of Treasury Stock

Number of shares at the beginning of the current business year

(shares)


current business year (shares)



Number of shares at the end of the current business year (shares)


Total 2,204 527 --- 2,731

Note: Increase in number of shares of treasury stock of common stock of 527 shares is due to the purchase of odd stock.

Current business year (From April 1, 2011 to March 31, 2012) Matters Concerning Types and Number of Shares of Treasury Stock

Number of shares at the end of previous

business year (shares)





Number of shares at the end of the current business year (shares)


Total 2,731 385 --- 3,116

Note: Increase in number of shares of treasury stock of common stock of 385 shares is due to the purchase of odd stock.

- 120 -

(Notes Related to Lease Transaction) (Borrower) Finance lease transactions

Finance lease transactions in which ownership is not transferred 1) Contents of Lease Assets

(a) Tangible Fixed Assets Office equipment in sales operation of industrial materials (tools, furniture and fixtures)

(b) Intangible Fixed Assets Software

2) Method of Depreciation of Lease Assets As is stated in Important Accounting Policy “3. Depreciation method for fixed assets.” In this regard, among finance lease transactions in which ownership is not transferred, as for lease

transactions commenced prior to March 31, 2008, an accounting method similar to that applied to ordinary lease transactions has been applied and the details are as follows.

(1) Acquisition cost equivalent of leased items, accumulated depreciation equivalent, accumulated impairment

loss equivalent, and closing balance equivalent (Unit: thousand yen)





Software 92,002 70,483 21,518

Total 92,573 70,943 21,629






Software 64,294 56,733 7,560

Total 64,865 57,288 7,576

Note: The acquisition cost equivalent is calculated on an interest paid included basis because the closing balance of accrued lease payments makes up such a small portion of the closing balance of tangible fixed assets, etc.

(2) Closing balance equivalent of accrued lease payments, etc.




Closing balance equivalent of accrued lease payments

Less than 1 year 14,053 5,697

Over 1 year 7,576 1,879

Total 21,629 7,576

Note: The closing balance equivalent of accrued lease payments is calculated on an interest paid included basis because the closing balance of accrued lease payments makes up such a small portion of the closing balance of tangible fixed assets, etc.

(3) Lease payments paid, reversal of lease asset impairment account, depreciation expense equivalent and

impairment loss (Unit: thousand yen)



Lease payments paid 29,758 14,053

Depreciation expense equivalent 29,758 14,053

- 121 -

(4) Method for calculating depreciation expense equivalent The straight line method is adopted, where the period of lease is set as the useful life and the salvage value is set at zero.

(Impairment Loss)

There is no impairment loss allocated to lease assets. (Notes Related to Securities)

Stocks of subsidiaries and affiliates

Previous business year (As of March 31, 2011) (Unit: thousand yen)

Amount shown on

Balance Sheet Fair value Balance

Stocks of subsidiaries 1,116,334 3,793,095 2,676,761

Stocks of affiliates 3,077,901 14,605,937 11,528,036

Total 4,194,235 18,399,033 14,204,797

Current business year (As of March 31, 2012) (Unit: thousand yen)

Amount shown on

Balance Sheet Fair value Balance

Stocks of subsidiaries 1,116,334 3,210,504 2,094,170

Stocks of affiliates 3,233,237 10,533,191 7,299,954

Total 4,349,571 13,743,695 9,394,124

Note: Amount shown on the balance sheet for stocks of subsidiaries and affiliates whose fair value is deemed to be extremely difficult to recognize


Category Previous business year (As of March 31, 2011)


Stocks of subsidiaries 853,827 952,987

Stocks of affiliates 383,730 401,027

As these have no market price and it is deemed to be extremely difficult to recognize fair values, they are not included in the above Table, “Stocks of subsidiaries and affiliates.”

- 122 -

(Notes Related to Tax Effect Accounting) 1. Breakdown by cause of occurrence of deferred tax assets and deferred tax liabilities


Previous business year(As of March 31, 2011)


Deferred Tax Assets Taxation loss brought forward 957,672 1,086,448

Loss on impairment 1,429,968 996,513

Denial amount of valuation loss on investment securities

425,046 460,271

Denial amount of allowance for doubtful accounts 153,086 153,912

Denial amount of valuation loss on inventories 139,222 141,512

Denial amount of reserve for bonuses 117,641 95,307

Denial amount of provision for product warranties 104,505 37,805

Other 348,191 292,925

Subtotal of Deferred Tax Assets 3,675,334 3,264,696

Reserve for valuation 3,675,334 3,264,696

Total of Deferred Tax Assets --- ---

Deferred Tax Liabilities

Valuation difference on other securities 677,534 229,449

Prepaid pension cost 87,576 29,543

Reserve for advanced depreciation of fixed assets 20,106 16,006

Asset retirement obligations 2,153 1,826

Total of Deferred Tax Liabilities 787,370 276,825

Net amount of deferred tax liabilities 787,370 276,825 Note: Net amount of deferred tax assets in the previous business year and the current business year is included in the

following items of balance sheet.


Previous business year(As of March 31, 2011)


Current Assets – Deferred tax assets --- ---

Fixed Assets – Deferred tax assets --- ---

Current Liabilities – Deferred tax liabilities 87,576 31,092

Fixed Liabilities – Deferred tax liabilities 699,794 245,733

2. Breakdown of major items that were the causes of the difference between statutory effective tax rate and the

burden rate of corporate tax, etc., after applying tax effect accounting.



As net loss before taxes was recorded, the entry of the matter is omitted.

As net loss before taxes was recorded, the entry of

the matter is omitted.

3. Adjustment of the amount of deferred tax assets and deferred tax liabilities due to changes in the tax rate of

corporate tax, etc. The “Law for Partial Revision of the Income Tax Law etc., for the Purpose of Creating Taxation System

Responding to Changes in Economic and Social Structures” (Law No. 114 of 2011) and the “Law on Special Measures for Securing Financial Resources Necessary to Implement Measures for Reconstruction Following the Great East Japan Earthquake” (Law No. 117 of 2011) were promulgated on December 2, 2011 and corporate tax rate has been reduced and the Special Corporate Tax for Reconstruction has been levied in the business year commencing on and after April 1, 2012. In conjunction with this, the statutory effective tax rate used for calculation of deferred tax assets and deferred tax liabilities, which had previously been 40.4%, will be 37.8% for a temporary difference which is expected to be resolved from the business year commencing on April 1, 2012 up to the business year commencing on April 1, 2014 and 35.4% for a temporary difference which is expected to be resolved after the business year commencing on April 1, 2015.

- 123 -

Due to changes in the tax rate, the amount of deferred tax liabilities and the adjustment of the corporate income tax, etc., decreased by ¥38,808 thousand and ¥6,400 thousand respectively and valuation difference on other securities increased by ¥32, 408 thousand.

- 124 -

(Notes Related to Asset Retirement Obligations) Out of asset retirement obligations, those which are shown on the balance sheet

(1) Outline of the asset retirement obligations Obligation to restore to the original conditions, etc., in connection with real estate lease agreement on certain factories

(2) Calculation method of the amount of asset retirement obligations Expected useful life is estimated as 31 years from acquisition and the discount rate of 1.9% is applied to calculate the amount of asset retirement obligations.

(3) Increase/decrease in total amount of the asset retirement obligations




Balance at the beginning of year (Note) 32,266 32,407 Increase in connection with acquisition of tangible fixed assets

--- ---

Adjustment by the elapse of time 141 144 Decrease due to execution of asset retirement obligations

--- ---

Other increase/decrease (: decrease) --- ---

Balance at the end of year 32,407 32,552 Note: “Balance at the beginning of year” for the previous business year is the balance at the beginning of year by

application of the “Accounting Standard for Asset Retirement Obligations” (ASBJ Statement No. 18, March 31, 2008) and the “Guidance on Accounting Standard for Asset Retirement Obligations” (ASBJ Guidance No. 21, March 31, 2008).

(Per Share Information)



Net asset per share ¥763.41 ¥732.73

Net loss per share ¥98.41 ¥1.32

Note: 1. “Fully diluted net profit per share” is not stated as there was a net loss per share although residual shares existed. 2. Net loss per share is calculated on the basis of the following:

Previous business year



Net loss (thousand yen) 3,443,801 46,308

Amounts that are not attributable to common stockholders (thousand yen)

--- ---

Net loss for common stocks (thousand yen) 3,443,801 46,308

Average number of shares during the year (shares)

34,994,401 34,994,965

The outline of potential shares not included in the calculation of fully diluted net profit per share due to the absence of dilutive effects

Eight types of new share subscription rights (1,195,500 shares). For details, refer to “IV. Status of the Submitting Company, 1. Status of Shares, etc., (2) Status of New Share Subscription Rights.”

Nine types of new share subscription rights (1,289,300 shares). For details, refer to “IV. Status of the Submitting Company, 1. Status of Shares, etc., (2) Status of New Share Subscription Rights.”

(Important Events after Closing the Accounts) No applicable matter.

- 125 -

4) Schedules [Schedule of Securities]

[Shares]

Name Number of shares

(shares)

Amount shown on Balance Sheet (thousand yen)

Mitsubishi Gas Chemical Co., Ltd. 666,000 354,185

JSR Corporation 179,800 305,386

The Hachijuni Bank, Ltd. 581,113 282,502

NOK Corporation 132,700 229,267

Mitsubishi Electric Corp. 275,000 197,697

The Daishi Bank, Ltd. 450,809 131,248

Kaneka Corporation 150,000 74,743

TOSHIBA Corporation 80,655 29,155


The Hokuetsu Bank, Ltd. 97,649 17,218

Investment Securities

Other Securities

Other 18 names 1,352,640 58,120

Total 4,028,786 1,706,006

[Bonds]

Name Total face value (thousand yen)


Securities Other securities

ORIX Corporation 115th Unsecured Corporate Bonds

200,000 200,420

Sumitomo Mitsui Banking Corporation Euro-Yen Fixed-term Subordinated Bonds

500,000 512,100

Merrill Lynch S.A., bond in US$ US$5,730 thousand 448,718

Royal Bank of Scotland, bond in US$ US$3,000 thousand 241,318

Brazilian government bond R$ 3,100 thousand 152,943

Barclays Bank plc, Power Dual Bond in AU$ 100,000 93,010

Barclays Bank plc, Eurobond in US$ US$1,000 thousand 76,535

Investment securities

Other securities

Subtotal --- 1,524,624

Total --- 1,725,044

[Other]

Type and Name Number of invested accounts (accounts)


(Investment Trust Beneficiary Securities) Beneficiary securities of investment trust (two names)

127,164,836 119,358

(Preferred Securities) MUFG Capital Finance 1 Limited

2,200 179,919 Investment Securities

Other Securities

(Investment in Investment Partnership) IGNITE VENTURES III, L.P. OPPORTUNITY FUND

--- 34,515

Total 127,167,036 333,794

- 126 -

[Schedule of Tangible Fixed Assets] (Unit: thousand yen)

Type of Assets

Balance at the

beginning of current

year

Current increased amount

Current decreased amount


current year

Accumulated depreciation at

the end of current year or accumulated amortization

Current depreciation

amount


current year after

deduction

Tangible Fixed Assets

Buildings 13,562,937 358,047 30,270 13,890,714 8,885,364 368,881 5,005,350

Structures 1,156,458 33,438 --- 1,189,896 931,323 42,080 258,573

Machinery and equipment

20,626,703 1,435,956 142,615 21,920,044 19,994,137 666,163 1,925,906

Vehicles and delivery equipment

189,573 1,005 1,632 188,947 181,531 4,429 7,416

Tools, furniture and fixtures

1,392,986 36,164 21,959 1,407,191 1,331,115 58,586 76,076

Land 1,372,431 --- --- 1,372,431 --- --- 1,372,431

Lease assets 1,109,944 --- 1,087,142 22,801 12,464 4,328 10,336

Construction in progress

385,813 1,020,028 1,352,038 53,803 --- --- 53,803

Total of Tangible Fixed Assets

39,796,848 2,884,642 2,635,658 40,045,831 31,335,937 1,144,470 8,709,893

Intangible Fixed Assets

Telephone subscription right

--- --- --- 9,283 --- --- 9,283

Patent license --- --- --- 101,011 70,672 12,626 30,338

Trademark right --- --- --- 493 65 65 427

Software --- --- --- 31,167 11,388 5,194 19,778

Lease assets --- --- --- 44,761 18,872 8,253 25,889

Other --- --- --- 1,356 189 70 1,166

Total of Intangible Fixed Assets

--- --- --- 188,072 101,188 26,211 86,883

Long-term prepaid expense

47,390 7,548 6,219 48,719 --- --- 48,719

Deferred Assets

--- --- --- --- --- --- --- ---

Total of Deferred Assets

--- --- --- --- --- --- ---

Note: 1. Major details for the increase for the current year are as follows. (Unit: thousand yen) Buildings Electronic materials manufacturing facilities 102,772Machinery and equipment Display materials manufacturing facilities (Transfer from lease assets) 1,087,142Construction in progress Electronic materials manufacturing facilities 330,887 Industrial application structural materials manufacturing facilities 160,651

2. Major details for the decrease for the current year are as follows. (Unit: thousand yen) Lease assets Display materials manufacturing facilities (Transfer to machinery and

equipment) 1,087,142

3. As the amount of intangible fixed assets is less than 1% of the total assets, statement of “Balance at the beginning of current year,” “Current increased amount” and “Current decreased amount” is not included.

- 127 -

[Schedule of Reserve] (Unit: thousand yen)

Category Balance at the beginning of current year

Current increased amount


(for purposes)


(other)

Balance at the end of current

year

Allowance for doubtful accounts 392,077 500,601 --- 392,077 500,601

Reserve for bonuses 291,191 269,230 291,191 --- 269,230

Provision for product warranties 242,291 --- 109,147 26,348 106,795

Note: “Current decreased amount (other)” in Allowance for doubtful accounts and Provision for product warranties is reversal of allowance for doubtful accounts and reversal of provision for product warranties, respectively, by resetting.

(2) Details of Major Assets and Liabilities

1) Current Assets a. Cash and deposits

Category Amount (thousand yen)

Cash 2,783

Deposits

Current deposits 2,394,129

Ordinary deposits 1,504,033

Term deposits 92,190

Subtotal 3,990,353

Total 3,993,136

b. Notes receivable Breakdown by Customer

Customer Amount (thousand yen)

Kyoei Denshi Co., Ltd. 146,019

Shinden Shoji KK 105,813

SHINSEISHOJI CO., LTD. 95,850

Chukoh Chemical Industries, Ltd. 54,640

Arisawa Kenpan Co., Ltd. 53,256

Other 254,837

Total 710,418

- 128 -

Breakdown by Due Date

By Due Date Amount (thousand yen)

March 2012 67,684

April 151,441

May 142,966

June 178,267

July 113,730

August 56,327

After September －

Total 710,418

c. Accounts receivable

Breakdown by Customer


Sumitomo Shoji Chemicals Co., Ltd. 917,763

JAMCO Corporation 840,605

Ajinomoto Fine-Techno Co., Inc. 651,945

Electrotechno Co., Ltd. 260,315

Polatechno Co., Ltd. 259,785

Other 2,551,717

Total 5,482,132

Note: Electrotechno Co., Ltd. changed its company name to MGC Electrotechno Co., Ltd. as of April 1, 2012.

Status of Occurrence and Recovery and Holding of Accounts Receivable Balance at the beginning of current year

(thousand yen)

Amount of occurrence in the

current year (thousand yen)

Recovered amount in the current year

(thousand yen)


Recovery rate (%) Holding time (days)

(A) (B) (C) (D) (C)

────── (A) + (B)

(A) + (D) ──────

2 ───────

(B) ──────

366

6,307,092 20,854,138 21,679,098 5,482,132 79.8 103

Note: Amount of occurrence in the current year includes consumption tax, etc.

- 129 -

d. Merchandise and finished goods

Item Amount (thousand yen)

Merchandise

Related goods 332

Subtotal 332

Finished goods

Electronic materials 1,398,547

Industrial application structural materials 199,716

Display materials 161,286

Electric insulation materials 46,170

Subtotal 1,805,722

Total 1,806,054

e. Work-in-progress

Item Amount (thousand yen)

Electronic materials 368,355

Display materials 239,645

Industrial application structural materials 197,692

Electric insulation materials 61,477

Total 867,170

f. Raw materials and stores


Raw materials

Resin, drugs 120,568

Glass fiber, special fiber 3,203

Special film and others 622,285

Subtotal 746,057

Stores

Consumables 31,541

Other 15,821

Subtotal 47,362

Total 793,420

- 130 -

2) Fixed Assets a. Stocks of affiliated companies


TAIFLEX Scientific Co., Ltd. 2,710,291

ThinFlex Corporation 1,116,334

Colorlink Japan Co., Ltd. 475,132

DDD Group plc 289,040

Toppan Arisawa Optical Technology Co., Ltd. 265,466

Other 847,322

Total 5,703,586

3) Current Liabilities a. Notes payable

Breakdown by Customer


Mitsui & Co., Ltd. 399,506

Chugai Seichu Co., Ltd. 113,951

Arisawa Jushi Kogyo Co., Ltd. 108,902

Central Glass Co., Ltd. 66,114

Arisawa Fiber Glass Co., Ltd. 66,086

Other 1,149,514

Total 1,904,075

Note: Including Equipment notes payable of ¥287,874 thousand which is included in “Other.”

Breakdown by Due Date (Unit: thousand yen)

By Due Date General Equipment Amount

March 2012 96,296 74,346 170,643

April 407,420 58,112 465,532

May 364,376 53,543 417,919

June 275,738 68,108 343,846

July 284,076 16,428 300,505

August 188,293 17,334 205,627

Total 1,616,201 287,874 1,904,075

- 131 -

b. Accounts payable


JAMCO Corporation 311,884

Arisawa Fiberglass Co., Ltd. 149,874

TOHO TENAX Co., Ltd. 112,167

Ajinomoto Fine-Techno Co., Inc. 106,612

Mitsui & Co., Ltd. 88,988

Other 758,389

Total 1,527,916

(3) Other


- 132 -

VI. Outline of Share Handling of the Submitting Company

Business year From April 1 to March 31

Ordinary General Meeting of Shareholders

Within June

Record Date March 31

Record dates of distribution of surpluses

September 30 March 31

Number of shares per unit 100 shares

Purchase of odd stocks

Handling Agency (Special account) Mitsubishi UFJ Trust and Banking Corporation, Transfer Agent Department, 10-11 Higashisuna 7-chome, Koto-ku, Tokyo

Administrator of List of Shareholders

(Special account) Mitsubishi UFJ Trust and Banking Corporation, 4-5 Marunouchi 1-chome, Chiyoda-ku, Tokyo

Agent Offices ---

Purchase fees Amount calculated from the fees for sales consignment of one unit prescribed by Tokyo Stock Exchange in proportion to the number of odd stocks purchased.

Public notice method

Public notice shall be made by electronic method; provided, however, that if it is impossible to make public notice by electronic method due to unavoidable reasons, including accidents, public notice shall be made by publication in the Nikkei Shimbun. URL to make public notice: http://www.arisawa.co.jp/japanese/koukoku.html

Privilege to shareholders None

Note: According to the Articles of Incorporation of the Company, the shareholders of odd stocks may not exercise rights other than rights set forth in each item of Article 189, paragraph 2 of the Corporation Law, right to make a request under the provisions of Article 166, paragraph 1 of the Corporation Law, and rights to be allotted the offered shares and the rights to subscribe for new shares offered depending on the number of shares held by the shareholder.

- 133 -

VII. Reference Information on the Submitting Company

1. Information of Parent of Submitting Company The Company has no parent, etc., provided for in Article 24-7, paragraph 1 of the Financial Instruments and Exchange Law.

2. Other References The Company submitted the following documents between the commencement of current business year and the submission date of financial report.

(1) Financial Report, its attached documents and written confirmation

Business year (the 63rd term) (From April 1, 2010 to March 31, 2011) Submitted to the Chief of the Kanto Local Finance Bureau on June 30, 2011.

(2) Internal Control Report and its attached documents

Submitted to the Chief of the Kanto Local Finance Bureau on June 30, 2011. (3) Quarterly Report and written confirmation (First quarter of the 64th term) (From April 1, 2011 to June 30, 2011)

Submitted to the Chief of the Kanto Local Finance Bureau on August 12, 2011. (Second quarter of the 64th term) (From July 1, 2011 to September 30, 2011)

Submitted to the Chief of the Kanto Local Finance Bureau on November 14, 2011. (Third quarter of the 64th term) (From October 1, 2011 to December 31, 2011)

Submitted to the Chief of the Kanto Local Finance Bureau on February 14, 2012. (4) Extraordinary Report

Submitted to the Chief of the Kanto Local Finance Bureau on July 1, 2011. This is an Extraordinary Report under Article 19, paragraph 2, item 9-2 of Cabinet Office Ordinance on Disclosure of Corporate Information, etc. (results of exercise of voting rights at the general meeting of shareholders).

Submitted to the Chief of the Kanto Local Finance Bureau on June 28, 2012. This is an Extraordinary Report under Article 19, paragraph 2, item 2-2 of Cabinet Office Ordinance on Disclosure of Corporate Information, etc. (issue of new share subscription rights as a stock option).

- 134 -

PART II. INFORMATION ON GUARANTY COMPANIES OF THE SUBMITTING COMPANY, ETC.


Audit Report and Internal Control Audit Report of Independent Audit Corporation

June 28, 2012

To: Board of Directors Arisawa Mfg. Co., Ltd. Ernst & Young ShinNihon LLC Issei Tsukada [Seal] Designated Limited Partner and Operating Partner, Certified Public Accountant Shinichi Oshima [Seal] Designated Limited Partner and Operating Partner, Certified Public Accountant <Financial Statements Audit>

For the purposes of audit certification in compliance with the provision of Article 193-2, paragraph 1 of the Financial

Instruments and Exchange Law, we audited the consolidated financial statements of Arisawa Mfg. Co., Ltd. listed in the “Status

of Accounting” for the consolidated fiscal year from April 1, 2011 to March 31, 2012, consisting of a consolidated balance sheet,

consolidated profit and loss statement, consolidated statement of comprehensive income, consolidated statements of changes in

shareholders’ equity and other net assets, consolidated cash flow statement, substantial underlying matters for preparation of

consolidated financial statements, other notes and consolidated schedules.

Responsibility of Management for Consolidated Financial Statements

It is the responsibility of management to prepare and properly present consolidated financial statements in accordance with

the corporate accounting standards generally accepted in Japan. This includes improvement and operation of internal control

which was determined by management to be necessary for preparing and properly presenting consolidated financial statements

free of material misstatement by fraud or error.

Responsibility of Auditor

It is our responsibility to express our opinions regarding these consolidated financial statements from an independent position

based on the audit conducted by us. We audited in accordance with the audit standards generally accepted in Japan. The audit

standards expect us to develop an audit plan and conduct an audit based on the plan in order to obtain a reasonable assurance as

to whether material misstatement exists or not in the consolidated financial statements.

In the audit, procedures are carried out for obtaining audit evidence for the amount and disclosure of the consolidated

financial statements. Audit procedures are selected and applied based on the assessment of risk of material misstatement in the

consolidated financial statements by fraud or error. The objective of an audit of financial statements is not to express opinions on

the validity of internal control, but we review internal control related to preparation and proper presentation of consolidated

financial statements in order to develop appropriate audit procedures corresponding to the situations in conducting risk

assessment. The audit also includes a review of the presentation of consolidated financial statements as a whole, including the

assessment of the accounting policy adopted by management and the method of its application and estimate made by

management.

We believe we have obtained sufficient and appropriate audit evidence constituting a foundation for expressing our opinions.

Audit Opinions

We recognize and certify that the above consolidated financial statements fairly present in every material aspect, conforming

to the corporate accounting standards generally accepted in Japan, financial conditions of Arisawa Mfg. Co., Ltd. and

consolidated subsidiaries as of March 31, 2012, and the business results and status of cash flows in the consolidated fiscal year

ending on the same day.

<Internal Control Audit>


Instruments and Exchange Law, we audited the internal control report as of March 31, 2012 of Arisawa Mfg. Co., Ltd.

Responsibility of Management for Internal Control Report

It is the responsibility of management to improve and operate internal control over financial reporting and to prepare and

properly present the internal control report in accordance with the evaluation standards for internal control over financial

reporting generally accepted in Japan.

In this regard, there is a possibility that it is impossible to completely prevent or discover false statements in the financial

reports by internal control over financial reporting.


It is our responsibility to express our opinions regarding the internal control report from an independent position based on the

internal control audit conducted by us. We conducted an internal control audit in accordance with the audit standards for internal

control over financial reporting generally accepted in Japan. The audit standards for internal control over financial reporting

expect us to develop an audit plan and conduct an internal control audit based on the plan in order to obtain a reasonable

assurance as to whether material misstatement exists or not in the internal control report.

In the internal control audit, procedures are carried out for obtaining audit evidence for the evaluation results of internal

control over financial reporting in the internal control report. Audit procedures for an internal control audit are selected and

applied based on the importance of impact on the reliability of financial reporting according to the determination by us. The

internal control audit also includes a review of the presentation of the internal control report as a whole, including the statements

made by management, related to scope of evaluation of internal control over financial reporting, evaluation procedures and

evaluation results.


Audit Opinions

We recognize and certify that the above internal control report, which Arisawa Mfg. Co., Ltd. presents that internal control

over financial reporting is effective as of March 31, 2012, fairly presents in every material aspect, the evaluation results of

internal control over financial reporting, conforming to the evaluation standards for internal control over financial reporting

generally accepted in Japan.

Interest

There exists no special interest between the Company and this audit corporation or the operating partners to be stated under the

provisions of the Certified Public Accountants Law. Note: 1. All matters in the above are copied electronically from the matters recorded in the original Audit Report. The original Audit Report is kept

separately by the Company. 2. XBRL data is not included in the scope of consolidated financial statements.

Audit Report of Independent Audit Corporation

June 28, 2012

To: Board of Directors Arisawa Mfg. Co., Ltd. Ernst & Young ShinNihon LLC Issei Tsukada [Seal] Designated Limited Partner and Operating Partner, Certified Public Accountant Shinichi Oshima [Seal] Designated Limited Partner and Operating Partner, Certified Public Accountant


Instruments and Exchange Law, we audited the financial statements of Arisawa Mfg. Co., Ltd. listed in the “Status of

Accounting” for the 64th business year from April 1, 2011 to March 31, 2012, consisting of a balance sheet, profit and loss

statement, statements of changes in shareholders’ equity and other net assets, important accounting policy, other notes and

schedules.

Responsibility of Management for Financial Statements

It is the responsibility of management to prepare and properly present financial statements in accordance with the corporate

accounting standards generally accepted in Japan. This includes improvement and operation of internal control which was

determined by management to be necessary for preparing and properly presenting financial statements free of material

misstatement by fraud or error.


It is our responsibility to express our opinions regarding these financial statements from an independent position based on the

audit conducted by us. We audited in accordance with the audit standards generally accepted in Japan. The audit standards expect

us to develop an audit plan and conduct an audit based on the plan in order to obtain a reasonable assurance as to whether

material misstatement exists or not in the financial statements.

In the audit, procedures are carried out for obtaining audit evidence for the amount and disclosure of the financial statements.

Audit procedures are selected and applied based on the assessment of risk of material misstatement in the financial statements by

fraud or error. The objective of an audit of financial statements is not to express opinions on the validity of internal control, but

we review internal control related to preparation and proper presentation of financial statements in order to develop appropriate

audit procedures corresponding to the situations in conducting risk assessment. The audit also includes a review of the

presentation of financial statements as a whole, including the assessment of the accounting policy adopted by management and

the method of its application and estimate made by management.


Audit Opinions

We recognize and certify that the above financial statements fairly represent in every material aspect, conforming to the

corporate accounting standards generally accepted in Japan, financial conditions of Arisawa Mfg. Co., Ltd. as of March 31, 2012,

and the business results in the business year ended on the same day.

Interest

There exists no special interest between the Company and this audit corporation or the operating partners to be stated under the

provisions of the Certified Public Accountants Law. Note: 1. All matters in the above are copied electronically from the matters recorded in the original Audit Report. The original Audit Report is kept

separately by the Company. 2. XBRL data is not included in the scope of financial statements.

Financial Report · 2019. 9. 9. · Contact Person: Hiroshi Hayatsu, General Affairs Department...

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