annual report2012 [1370kb] - dainippon ink and chemicals, inc

DICYear ended March 31, 2012

Annual Report 2012

Disclaimer Regarding Forward-Looking StatementsStatements contained herein concerning plans and strategies, other expectations or projections about the future, and other statements except for historical statements are forward-looking statements. These forward-looking statements are subject to uncertainties that could cause actual results to differ from such statements. These uncertainties include, but are not limited to, general economic conditions, demand for and price of DIC’s products, DIC’s ability to continue to develop and market advanced products, and currency exchange rates. DIC disclaims any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise.

IC Corporation, one of the world’s leading diversifi ed chemicals companies, is also the core of the DIC Group, a multinational

organization with a network comprising more than 180 companies in 64 countries and territories worldwide. Established in 1908

as a manufacturer of printing inks, DIC has capitalized on its extensive technologies, know-how and experience in the years since

to transform itself into a global powerhouse in key fi elds of endeavor. Today, DIC and the companies of the DIC Group supply an

extensive lineup of products in four business segments: Printing Inks & Supplies, Neo-Graphic Arts Materials, Synthetic Resins and

Chemical Solution Materials.

Now in its second century in business, DIC is redoubling its efforts to develop and market innovative, high-performance products

that respond to market needs, in line with its “Color and Comfort by Chemistry” management vision. As a responsible corporate

citizen, DIC is also working to contribute to environmental and social sustainability.

D

The DIC WAY

• We shall hone our sensitivity to changes in society and be aware of our mis-sion to always be ahead of the times.

• We pledge to incorporate the concepts of social and environmental sustain-ability into our corporate activities.

• We vow to strive constantly to hone “The DIC SPIRIT.”• We shall respect the autonomy and initiative of each individual employee in

applying his or her talents to the pursuit of our values and the realization of our vision.

Through unceasing innovation, the DIC Group strives to create new value directed at sustainable development for its custom-ers, society and the environment.

Color and Comfort by Chemistry

Contents

1 — Consolidated Financial Highlights

2 — To Our Stakeholders

3 — An Interview with Yoshiyuki Nakanishi

5 — Topics

6 — Special Feature: Progress Under DIC 102

10 — At a Glance

11 — Review of Operations

14 — Research and Development

16 — Corporate Social Responsibility

18 — Corporate Governance

21 — Financial Section

60 — Major Subsidiaries and Affi liates

63 — Investor Information and Corporate Data

1 Consolidated Financial HighlightsDIC Corporation and Consolidated SubsidiariesYears ended March 31

1,077.9

932.3

757.8 779.0 734.3

978.3

738.5 749.9703.8 675.135.0

48.4

25.427.8

37.2

20122008 2009 2010 2011 20122008 2009 2010 2011 20122008 2009 2010 2011

(Billions of yen) (Billions of yen) (Billions of yen)Net Sales Operating Income Total Assets

600.0

900.0

300.0

0.0

1,200.0

0.0

600.0

900.0

300.0

1,200.0

30.0

0.0

60.0

15.0

45.0

Millions of yen

2012 2011 2010

Net sales ¥734,276 ¥778,964 ¥757,849

Operating income 34,960 37,152 27,814

Income before income taxes and minority interests 27,079 26,303 8,044

Net income 18,158 15,761 2,540

Total property, plant and equipment 202,825 220,631 252,397

Total net assets 124,496 130,379 122,829

Total assets 675,067 703,760 749,866

Yen

Earnings per share (Note 2):

Basic ¥19.79 ¥17.60 ¥3.21

Diluted — — —

Cash dividends per share applicable to the period (Note 3) 4.00 4.00 4.00

Thousands ofU.S. dollars (Note 1)

2012 2011 2010

Net sales $8,954,585 $9,499,561 $9,242,061

Operating income 426,341 453,073 339,195

Income before income taxes and minority interests 330,232 320,768 98,098

Net income 221,439 192,207 30,976

Total property, plant and equipment 2,473,476 2,690,622 3,078,012

Total net assets 1,518,244 1,589,988 1,497,915

Total assets 8,232,524 8,582,439 9,144,707

U.S. dollars (Note 1)

Earnings per share (Note 2):

Basic $0.241 $0.215 $0.039

Diluted — — —

Cash dividends per share applicable to the period (Note 3) 0.049 0.049 0.049

Notes: 1. Yen amounts have been translated, for readers’ convenience only, at the rate of ¥82 to US$1, the approximate rate of exchange at March 31, 2012. 2. The computation of earnings per share of common stock has been based on the weighted-average number of shares issued and outstanding during each

fi scal year. 3. Cash dividends per share have been presented on an accrual basis to correspond to the related earnings.

2 To Our Stakeholders

T he fi scal year ended March 31, 2012, was the second under our current medium-term management plan, DIC 102, formulated to

refl ect our basic management policy, which is to shift from a product-specifi c to a market-focused management approach. Guided by

the plan, we continued to implement concrete measures aimed at realizing our Color and Comfort by Chemistry management vision

and restoring DIC to a fi nancial position that inspires investor confi dence.

Results for the Period

D espite the positive impact of special procurement demand related to the Great East Japan Earthquake on our fi rst-quarter results,

harsh operating conditions persisted. This was primarily attributable to a market reversal that began in the second quarter, as well

as to the global economic slowdown provoked by the European sovereign debt crisis, fl agging economic

growth in Asia, among others, all of which combined to push down demand in Japan and overseas.

In this environment, falling shipments of printing inks and products for the electrical and electronics indus-

tries in Japan and overseas were among several factors that countered the positive impact of a substantial

increase in shipments of thin-fi lm transistor liquid crystals (TFT LCs). As a consequence, we reported consoli-

dated net sales of ¥734.3 billion, a decline of 5.7%. Operating income fell 5.9%, to ¥35.0 billion, owing to

lower sales, as well as to such factors as the deterioration of our product mix. Ordinary income slipped 2.8%,

to ¥30.8 billion, despite such factors as an increase in equity in earnings of affi liates. Net income rose

15.2%, to ¥18.2 billion, owing to a decrease in loss on disposal of non-current assets, among others.

Looking Ahead

W hile signs of improvement have emerged in certain sectors of the U.S. economy, the European

sovereign debt crisis, together with fl agging economic growth in the People’s Republic of China

(PRC), sluggish personal consumption in Japan and other factors, make it diffi cult to predict a

robust recovery in global economic conditions. Owing to this situation, as well as to the persistent

instability of, among others, raw materials prices and exchange rates, we expect our operating

environment to remain harsh.

In this environment, we will press ahead with the implementation of measures outlined in

DIC 102, under which we will adopt a management style designed to maximize the collective

capabilities of the DIC Group. At the same time, we will work to further expand sales of

high-value-added products and achieve greater cost reductions.

Having paid an interim cash dividend of ¥2.00 per share, we also declared a year-end dividend for

the fi scal year ended March 31, 2012, of ¥2.00 per share, bringing our total dividend payment for the

period to ¥4.00. Although the year is likely to be challenging, we currently forecast an increase in oper-

ating and net income in the fi scal year ending March 31, 2013. Accordingly, having made a careful

assessment to ensure a balance between our fi nancial position and returns to shareholders, we plan to

increase both our interim and year-end dividend to ¥3.00 per share, for a total dividend payment of ¥6.00

per share for the period.

It is our basic belief that we have a dual responsibility to ensure stable management fundamentals

and to enhance returns to shareholders. In addition to working tirelessly to improve internal reserves,

we endeavor to maximize those reserves to further reinforce our fi nancial soundness, thereby positioning

us to bolster future returns to shareholders.

In these and all our efforts, we appreciate the continued support and guidance of our many stakeholders.

Yoshiyuki Nakanishi

Representative Director, President and CEO

DIC Corporation

3

What positions did you hold prior to taking the helm as president of DIC in April?

I joined the Company in 1978. The majority of my career

has been in sales in the synthetic resins business. I spent a few

years in Indonesia on temporary assignment, which gave me the

opportunity to experience working in a culture different from

Japan’s. I was made an executive offi cer and placed in charge

of the Corporate Strategy Division in 2010, so I had two years’

experience in senior management before my appointment, dur-

ing which time I benefi ted immensely from discussing issues

and exchanging opinions with other executives, including my

predecessor, Kazuo Sugie.

Can you tell us your plans for managing DIC in the years ahead?

The fi scal year ending March 31, 2013, is the fi nal year of

our current medium-term management plan, DIC 102. Accord-

ingly, for the time being we will proceed without any major

adjustments to the plan’s strategies. However, in my role as

president and CEO I will emphasize three key priorities. One is

“mieruka,” a Japanese term meaning to elucidate something or

render it clearly visible. By promoting the “mieruka” of manage-

ment, we will strive to ensure awareness of management chal-

lenges across the entire DIC Group. Another is “speed.” We will

enhance our ability to act swiftly and decisively—an ability that

I feel is lacking today, more so than in the past. The remaining

concept is “globalization.” DIC may appear to be a global enter-

prise, but in actual fact we are far from it. We will thus step up

efforts to achieve true globalization, including working with Sun

Chemical to facilitate the unifi ed management of the DIC

Group’s printing inks business.

How do you evaluate DIC’s performance in the fi scal year ended March 31, 2012?

In the fi rst quarter, we benefi ted from special procurement

demand in the wake of the Great East Japan Earthquake. How-

ever, conditions were harsh for the rest of the period as demand

dwindled in Japan and overseas, owing to such factors as a mar-

ket reversal that began in the second quarter, combined with

the global economic slowdown provoked by the European sov-

ereign debt crisis and fl agging economic growth in the PRC. In

this environment, the impact of falling shipments to the electri-

cal and electronics industries was signifi cant, but our operating

results were shored up by the robust performance of our

TFT LCs, annual sales of which have reached approximately

¥17.0 billion. In Japan, efforts to revise sales prices upward for

offset inks used in print media met with enough success to posi-

tively impact results for printing inks—a watershed achievement.

Looking ahead, we recognize the need to undertake a similar

initiative in North America and Europe.

Your TFT LCs business is growing rapidly. What is your outlook for this business? What other businesses do you see as particularly promising?

Our TFT LCs have earned high marks from customers for

long-term reliability and other superb performance features. We

will continue taking steps to expand our customer base with the

aim of more than doubling our annual sales of these products,

An Interview with Yoshiyuki Nakanishi

Profi le of Yoshiyuki NakanishiYoshiyuki Nakanishi joined Dainippon Ink and Chemicals, Incorporated (now DIC Corporation) in 1978. In 2008, he was named general manager of the Func-

tional Polymers Division and in 2010 was made an executive offi cer and placed in charge of the Corporate Strategy Division and the Kawamura Memorial

Museum of Art (now the Kawamura Memorial DIC Museum of Art). Effective April 1, 2012, he was appointed executive offi cer, president and CEO.

Q :

Q :

Q :

A :

I will emphasize three key priorities:

“Mieruka,” meaning to elucidate something

or render it clearly visible; “speed,” namely,

the ability to act swiftly and decisively; and

“globalization.”

Q :

A :

A :

A :

4

to ¥40.0 billion-plus, over the next three to four years. Our

share of the global market for green pigments for color fi lters

used in liquid crystal displays (LCDs) is currently close to 70%.

These are unique pigments that deliver exceptional brightness

and contrast. Looking ahead, we will leverage our success in

green pigments to secure a signifi cant global market share for

blue pigments.

Display materials for digital equipment is not the only prod-

uct category to show remarkable progress. Another encourag-

ing area is polyphenylene sulfi de (PPS) compounds. One of the

world’s top engineering plastics, PPS compounds are light and

boast outstanding heat resistance, features which are attracting

increasing demand for use as an alternative to metal in automo-

tive engine components. With hybrid vehicles using two to three

times the volume of PPS compounds used per unit as regular

gasoline-powered vehicles, demand for PPS compounds is

rising rapidly, driven by the growing popularity of environment-

friendly vehicles. We are currently the world’s leading manufac-

turer of PPS compounds in terms of market share and are in the

process of enhancing our capabilities in this business through

a major global project, investment in which is estimated at

¥10.0 billion.

Demand for printing inks is on a downtrend, particularly in developed economies, owing to a variety of factors, including falling birthrates and advances in IT. Do you plan to implement any sort of drastic measures in response to this situation?

Demand for printing inks for print media applications is

indeed declining, particularly in developed economies. Given this

situation, we believe it is necessary to pursue overall structural

reforms, that is, reforms that encompass all industry partici-

pants, including printing companies. To this end, we are pro-

moting measures—including, for example, the development of

quick-drying inks and other products—designed to bolster the

productivity of printing companies. This is the sort of change

that will help us build win–win relationships with printing

companies.

In contrast, demand for printing inks for packaging applica-

tions is rising steadily in developed economies and soaring in

emerging economies. With the expansion of production capacity

at our packaging inks plants in Russia, Chile and the PRC, we

will take timely steps to respond to increased demand. We will

also listen carefully to the needs of such leading global brand

owners as Nestlé S.A. and The Procter & Gamble Company with

the aim of providing inks, synthetic resins and other products

that help facilitate innovations in packaging.

Your forecasts call for an increase in your annual dividend in the fi scal year ending March 31, 2013. What is the reasoning behind this?

Our basic policy has always been to maintain stable

dividend payments. Since the failure of Lehman Brothers and

the subsequent economic crisis, we have maintained our annual

dividend at ¥4.00 per share. However, we are already seeing

improvements in both our profi t levels and our cash fl ow situa-

tion and are confi dent that our results will continue to increase

steadily. Accordingly, we expect to raise this ¥2.00, to ¥6.00 per

share, in the fi scal year ending March 31, 2013. Of course, our

decision will take into account the need to balance dividends

with plans for investments and the repayment of interest-bearing

debt. We will also continue working to reinforce profi tability to

ensure our ability to maintain annual dividends at this level for

the foreseeable future.

Can you tell us about the basic concepts that will inspire your next medium-term management plan?

As we embarked on the fi nal year of DIC 102, it was

obvious to us that we were not likely to meet some of the plan’s

quantitative targets. However, we did make signifi cant progress

on the qualitative front, in efforts to set a clear direction for

future reforms, through selectivity and concentration, among

others. We will draw on these successes in formulating our next

medium-term management plan, in which we will demonstrate

clear, concrete objectives for key businesses and products fi ve

or six years in the future, as well as set forth strategies that will

comprise the fi rst step in our drive to achieve those objectives.

The new plan will maintain the basic policies of DIC 102, which

are to shift from a product-specifi c to a market-focused man-

agement approach that capitalizes on our core organic pigments

and synthetic resins businesses—our biggest assets—and to

restore DIC to a sound fi nancial position, while fostering further

growth and advancement.

In closing, is there anything you would like to say to stakeholders?

By implementing decisive measures, including those

outlined above, we will continue working to realize our Color

and Comfort by Chemistry management vision and in so doing

transform DIC into an organization that creates value and

contributes to both its customers and society. In these and all

our efforts, I look forward to the ongoing support and guidance

of stakeholders.

Q :

Q :

Q :

A :

A :

A :

An Interview with Yoshiyuki Nakanishi

Q :

A :

5 Topics

Biofuels produced from algae are attracting considerable attention

as a promising clean energy source. DIC has produced Spirulina, a

type of algae used primarily in health foods, for approximately 35

years. Wholly owned California-based subsidiary Earthrise Nutrition-

als, LLC., boasts a 180,000m2 Spirulina farm—the world’s largest

outdoor Spirulina production facility—and is recognized as the only

company in the continental United States that has succeeded in the

highly effi cient mass cultivation of algae in outdoor raceway ponds.

Expertise in the outdoor mass cultivation of algae is crucial to the

commercial viability of algae-derived biofuels. In past years, we col-

laborated with Tsukuba University in Japan to secure the know-how

necessary to mass produce algae for use in biofuels. Tsukuba Univer-

sity researchers, in collaboration with Earthrise Nutritionals, are working to grow two varieties of botryococcus microalgae in

the laboratory and in a small outdoor raceway pond, which will pave the way for the realization of commercially viable

algae-derived biofuels.

In 2012, Earthrise Nutritionals entered into a licensing agreement with Sapphire Energy, Inc., a leading biofuel development

fi rm located in California, whereby it will provide Sapphire Energy with technologies used in the mass cultivation of Spirulina*.

Confi dent in the potential of algae as the base of crude fuel that can be refi ned into diesel and jet fuel, Sapphire Energy expects

this agreement to improve the effi ciency of biofuel production, a key challenge in achieving commercialization.

* The licensing agreement is a three-way arrangement involving DIC, Earthrise Nutritionals and Sapphire Energy

and is nonexclusive.

New Corporate Organization Introduced

Effective April 1, 2012, we revamped our corporate organization. With the aim of facilitating concentrated efforts to grow our

strong core products and the market-focused expansion of our operations, we abolished our previous business operation-led

organization, replacing it with an organization structured around seven product area-based divisions and three market-based

sales administrative divisions. The new matrix-like organization positions product area-based divisions along the vertical axis

and market-based sales administrative divisions, together with our existing Technical Administrative Division and Production

Administrative Division, along the horizontal axis, a format we believe will help to enhance agility, improve the internal

sharing of information and facilitate ongoing efforts to provide total solutions in our various businesses, in line with our basic

policy of shifting from a product-specifi c to a market-focused management approach. The new organization does not affect our

reporting segments, which have not changed.

Promoting Efforts to Help Achieve the Commercialization of Algae-Derived Biofuels

Index of sales of TFT LCs

Index: 2008 = 100

201120092008 2010

200

100

300

6 Special Feature: Progress Under DIC 102

TFT LCs espite generally sluggish shipments for LC materials, our share

of the global LC market increased steadily in the fi scal year ended

March 31, 2012, as a leading LCD manufacturer began adopting

our products in the third quarter of the previous fi scal year, as a

result of which sales of TFT LCs were 2.2 times higher than in the

previous fi scal year. Production of TFT LCs demands sophisticated

technologies, including those for molecular design, synthesis, mix-

ing and the removal of minute impurities. At present, DIC is one

of only three companies in the world capable of manufacturing

TFT LCs. Our products, which boast outstanding long-term stabil-

ity, enjoy a solid reputation among customers. In the fi scal year

under review, we doubled the production capacity for TFT LCs at

our plant in Saitama, Japan, and we anticipate another twofold-

plus increase in sales within three to four years.

D

From Providing Products to Creating Value:

TFT LCs and Green Pigments for Color Filters

Owing to a variety of factors, including advances in IT, demand for printing inks for books, leafl ets

and other printed publications is declining, particularly in developed economies. As a consequence,

while the role of printing inks in conveying color and information has not changed, the stage on

which this role is played out is shifting from print to digital media. Concurrently, we are shifting our

focus from printing inks to products that fulfi ll a similar role in digital media applications. These

efforts are spearheaded by our Neo-Graphic Arts Materials business. In the fi scal year ended March

31, 2012, operating income in the Neo-Graphic Arts Materials segment was 4.2 times higher than

in the previous fi scal year. This increase was driven by robust sales of TFT LCs and of green

pigments for color fi lters. We currently enjoy a global market share for green pigments of

approximately 70%.

DIC's sales of green pigments for LCD color filters

Market for green pigments for LCD color filters

Index of DIC's sales of green pigments for LCD color filters and market sizeIndex: 2008 = 100

201120092008 2010

400

250

100

550

7 Special Feature: Progress Under DIC 102

Green pigments for color fi lters e manufacture green pigments for use in the formation of

pixels in color fi lters for LCDs. Our innovative green pigments fea-

ture a molecular structure that is radically different from conven-

tional products, achieving a marked increase in brightness and

contrast. High brightness ensures excellent picture quality even

when light emitted from the backlight is minimal. As a conse-

quence, demand continues to expand, particularly for use in

energy-effi cient televisions. At present, our share of the global

market for green pigments for color fi lters is approximately 70%.

With energy-effi cient televisions gaining in popularity, we expect

to see steady increases in both sales and market share in the years

ahead. We are also leveraging our success in green pigments for

color fi lters to develop blue pigments for this application.

W

PPS compounds production facility at DIC Compounds (Malaysia) Sdn. Bhd. Printing inks production facility belonging to Nantong DIC Color

8

¥10.0 billion global project to expand PPS production capacity alued for its outstanding heat and chemical resistance, as well

as its excellent dimensional stability, PPS polymer is one of the

world’s top engineering plastics. PPS polymer is generally rein-

forced with glass fi bers or inorganic fi llers and supplied in the

form of PPS compounds. Having established integrated produc-

tion capabilities for PPS compounds encompassing all steps from

polymer production through to custom compounding, we are

currently the world’s leading producer, with a market share of

approximately 30%. In recent years, demand has risen sharply

for automotive, electrical and electronics and household equip-

ment applications, particularly for use as an alternative to metal

materials.

A key driving force behind increasing demand for PPS com-

pounds has been the growing popularity of hybrid vehicles,

which use two to three times the volume of PPS compounds per

unit as gasoline-powered vehicles. Global demand for PPS com-

pounds is currently estimated at 73,000 tons*. Our sales of PPS

compounds have risen by more than 8% annually for the past

10 years and are expected to continue expanding. With demand

for PPS compounds expected to continue swelling, we have initi-

ated a project to expand our global PPS production capacity and

to solidify our leading market position. Investment in this project

is estimated at approximately ¥10.0 billion.

V

Mother plant for environment-friendly packaging inks in Nantong, PRC n the fi scal year ended March 31, 2012, we began construc-

tion of a new mother plant for environment-friendly packaging

inks in Nantong, Jiangsu Province, in the PRC. Total investment

in the new plant is estimated at approximately Rmb 107.0 million

(¥1.4 billion). The new plant is located on the site of wholly

owned subsidiary Nantong DIC Color Co., Ltd., which manufac-

tures organic pigments and offset inks. Demand remains fi rm for

packaging inks, which are used for printing on packaging for

food and beverages and are relatively impervious to economic

fl uctuations. Latent demand for packaging inks is estimated to

be signifi cant in the PRC, with its population of 1.3 billion. The

new plant will bolster our production capacity for toluene-free

packaging inks, an important consideration given increasing

awareness of environmental and safety issues worldwide.

The new plant is scheduled to commence operation in Decem-

ber 2012, after which we will gradually expand production

toward a fi nal goal of 45,000 tons annually, bringing our produc-

tion capacity for packaging inks in the PRC to 70,000 tons, from

the current 25,000 tons, and boosting our share of the market

for packaging inks in the PRC to 20%, from 10% at the moment.

I

Outline of new plant

Plant operator Nantong DIC Color Co., Ltd.

Location Nantong Economic & Technological Development Area, Nantong, Jiangsu Province, PRC

Total investment Approximately Rmb 107.0 million (¥1.4 billion)

Start of operations December 2012 (Estimate)

Principal products Environment-friendly inks for packaging applications

Annual capacity 45,000 tons (Target)

Special Feature: Progress Under DIC 102

Expanding Production Capacity for Key Products

Strategic Investments

* DIC estimate

DIC Zhangjiagang Chemicals’ synthetic resins production facility

9

Expansion of capacity at synthetic resins production facility in Zhangjiagang, PRC e recently resolved to expand the production capacity of

wholly owned subsidiary DIC Zhangjiagang Chemicals Co., Ltd.,

our synthetic resins manufacturing facility in Zhangjiagang,

Jiangsu Province, in the PRC. This initiative, total investment in

which is estimated at approximately Rmb 63.0 million (¥820

million), is aimed at positioning us to respond swiftly to rising

demand for synthetic resins in the eastern and northern parts

of the PRC.

Construction will begin in September 2012 and new lines are

to commence operation in September 2013. This is expected

to add 12,000 tons to the facility’s annual production capacity,

with new lines producing mainly acrylic resins, polyurethane

resins and metal carboxylates. Acrylic resins will be shipped to

manufacturers in the electronics materials and optical materials

industries for use in surface coatings for, among others, note-

book and tablet computers and mobile phones. Polyurethane

resins will be supplied to a new packaging inks plant currently

under construction on the site of wholly owned subsidiary Nan-

tong DIC Color, while metal carboxylates, used in tires, will

be shipped to various tire manufacturers. The expansion of

W

Outline of new facilities

Plant operator DIC Zhangjiagang Chemicals Co., Ltd.

Location Zhangjiagang, Jiangsu Province, PRC

Total investment Approximately Rmb 63.0 million (¥820 million)

Start of operations September 2013 (Estimate)

Principal products Acrylic resins, polyurethane resins and metal carboxylates

Annual capacity 12,000 tons (Target)

production capacity at this facility will position DIC Zhangjiagang

Chemicals to respond promptly to demand in the PRC for all

three products, which continues to rise on the strength of eco-

nomic growth. The company will also strive to bolster its prod-

uct lineup by introducing strategic new products from Japan

into the local market.

Sound Financial Position

Measures Contributing to a Rapid Improvement in Financial Balance

estoring DIC to a fi nancial position that inspires investor

confi dence is another key theme under our DIC 102 medium-

term management plan. To this end, we are promoting decisive

efforts to pull out of businesses that offer little scope for us to

maximize our core technologies. Since announcing the plan, we

have divested a subsidiary and sold several businesses. The steady

progress of these efforts, together with an increase in operating

income, enabled us to reduce interest-bearing debt to ¥328.5

billion as of March 31, 2012, below our target of ¥330.0 billion

under DIC 102—evidence of a signifi cant improvement in our

fi nancial position. Having set a new target for interest-bearing

R debt of ¥320.0 billion, we will continue taking steps to further

improve our fi nancial balance.

Special Feature: Progress Under DIC 102

(Billions of yen)

Interest-Bearing Debt Target under DIC 102

201320092008 2010 2011 2012

350

400

300

0 (Forecast)

10

Printinnngg IInnnkkss && SSuuppppplllliiieeeess

Printing Inks

Offset inks

Gravure inks

Flexo inks

Can coatings

News inks

Packaging adhesives

Principal Products

Principal Products

Principal Products

Principal Products

Neooo-GGrraaphic Arts Matteeerrriiiaalls

Synthetic Resssiiinnnnsss

Chemiicaall Soluuttiioonn MMateerriials

Operating Income Operating Margin(Billions of yen)

Net Sales(Billions of yen) (%)







500.0

250.0

375.0

125.0

0.0

20.0

10.0

15.0

5.0

6.0

3.0

4.5

1.5

12.0

6.0

9.0

3.0

12.0

6.0

9.0

3.0

6.0

3.0

4.5

1.5

120.0

60.0

90.0

30.0

160.0

80.0

120.0

40.0

16.0

8.0

12.0

4.0

2010 2011 2012 2010 2011 2012

2010 2011 2012 2010 2011 2012

2010 2011 2012 2010 2011 2012

2010 2011 2012 2010 2011 2012

0.0 0.0

0.0

0.0

0.0

0.0

0.0

0.0

10.0

0.0

20.0

5.0

15.0

100.0

0.0

200.0

50.0

150.0

5.0

0.0

10.0

2.5

7.5

Synthetic Resins

Resins for coatings

Polyurethane resins

Epoxy resins

Phenolic resins

Unsaturated polyester resins

Special Compounds and Colorants

High-performance optical materials

High-performance compounds

Plastic colorants

Fiber and textile colorants

Pressure-Sensitive Adhesive Materials

Industrial adhesive tapes

Labels

Stickers

Label stock for printing

Building Materials

Decorative boards

Interior housing products

Packaging Materials

Polystyrene

Coextruded multilayer fi lms

Plastic Molded Products

Plastic pallets

Containers

Helmets

Engineering Plastics

Polyphenylene sulfi de (PPS) compounds

Hollow-Fiber Membranes

Hollow-fi ber membranes

Modules

Color and Comfort

Bathtubs and bath units

Synthetic marble

Sheet molding compounds (SMCs)

Health Foods

Dietary supplements

Food additives

Printing Supplies

Presensitized (PS) plates

Printing supplies

Printing-related equipment

Additives and Chemicals

Fluorochemicals

Metal carboxylates

Sulphur chemicals (lubricant additives)

Plasticizers

Alkylphenols

At a Glance

Note: Net sales include intersegment sales and foreign exchange fl uctuations.

Organic Pigments

Organic pigments for printing inks

Organic pigments for coatings and plastics

High-performance organic pigments

Imaging and Reprographic Products

Ultraviolet (UV)-curable coatings and bonding adhesives for optical discs

Specialty magnetic foils

Toners

Jet inks

Liquid Crystal Materials

Thin-fi lm transistor liquid crystals (TFT LCs)

Supertwisted nematic liquid crystals (STN LCs)

11

Japan

ales in Japan declined. Sales of gravure inks were level, bene-

fi ting from special procurement demand for fl exible packaging

applications, notably beverage containers and food packaging,

in the wake of the Great East Japan Earthquake—although initial

sales were hampered by the impact of diffi culties in procuring

certain raw materials on production—and from fi rm demand in

subsequent months. Sales of offset inks and news inks remained

on a downtrend, with conditions exacerbated following the

earthquake by paper shortages and the impact of procurement

diffi culties for certain raw materials on production. Despite lower

sales, operating income increased as efforts to revise sales prices

upward to refl ect rising raw materials prices met with a certain

degree of success.

The Americas and Europe

ales were down in both North America and Europe, as shrink-

ing print runs for magazines and newspapers and other factors

pushed sales of publishing inks and news inks down signifi cantly,

countering a slight increase for packaging inks. In contrast, sales

S

S

Printing Inks & Supplies

In the fi scal year ended March 31, 2012, we reported consolidated net sales of ¥734.3

billion, a decline of 5.7%. This result refl ected falling shipments of printing inks and

products for the electrical and electronics industries in Japan and overseas, which

countered the positive impact of a substantial increase in shipments of TFT LCs.

Operating income decreased 5.9%, to ¥35.0 billion, owing principally to lower sales.

The Printing Inks & Supplies segment centers on DIC’s mainstay

printing inks business. A leading player in the global printing

inks market, DIC has built a business that is unrivalled in both

scale and diversity.

(Billions of yen)

1,000.0

600.0

800.0

400.0

200.0

0.0 2010 2011

(Billions of yen)

0.0 2010 2011

Net Sales

404.4415.4

97.6

143.6

141.1

3.3 4.0

110.1

157.0

151.0

372.0

2.4

108.8

149.0

143.9

2012

2012


Neo-Graphic Arts Materials

Synthetic Resins

Chemical Solution MaterialsOthers



Synthetic Resins

Chemical Solution MaterialsOthers

48.0%

14.0%

19.2%

18.5%0.3%

50.0

30.0

40.0

20.0

10.0

Operating Income

Share of Sales 2012

Share of Operating Income 2012

15.4

1.3

11.3

4.30.7

16.1

0.8

2.9

14.7

6.8

12.6

0.3

12.0

10.6

3.5

32.3%

30.8%

27.2%

9.0% 0.7%

Review of Operations

Note: Net sales and operating income as used here include intersegment transac-tions. For this reason, and because of the existence of transactions that are not attributable to reportable segments, these fi gures differ from the net sales and operating income fi gures presented in the Consolidated Financial Highlights on page 1.

For the fi scal year ended March 31, 2012Percentage

change

Percentage change excluding

the impact of foreign currency

fl uctuations

Net sales ¥372.0 billion (8.0)% (3.3)%

Operating income ¥ 12.6 billion (21.4)% (17.1)%

12


egment sales increased in local currency terms, but were

down after translation as a result of the appreciation of the yen.

Despite robust sales for use in color fi lters in Japan and in coat-

ings and plastics in the Americas and Europe, sales of organic

pigments declined, with sales for use in inks struggling in both

the domestic and overseas markets. Shrinking demand drove

down sales of UV-curable coatings and bonding adhesives for

optical discs and specialty magnetic foils. In contrast, sales of

TFT LCs for use in LCD televisions rose substantially. Higher sales

of TFT LCs and of organic pigments for use in

coatings and plastics in the Americas and

Europe contributed to a strong increase

in operating income, as did such factors

as an improved product mix.

S

in Central and South America were level, bolstered by brisk sales

of mainstay packaging inks, although sales of offset inks strug-

gled. Operating income also fell, despite cost reductions achieved

through rationalization efforts, owing to the decline in overall

segment sales, coupled with such factors as higher raw materials

prices.

Asia and Oceania

ales in Asia and Oceania advanced in local currency terms, but

declined after translation as a result of the appreciation of the

yen. This result occurred despite a decline in sales in the PRC, a

consequence of fl agging economic growth, which weakened

sales of offset inks and gravure inks, offsetting expanded sales of

news inks, particularly colored inks, and was attributable to solid

results in Southeast Asia, Oceania and India. Sales in Southeast

Asia edged up, bolstered by healthy sales of gravure inks,

although demand for offset inks and news inks slipped, while

sales in Oceania were level, thanks to fi rm sales of gravure inks

and other products, which countered a decrease in sales of news

inks. Sales in India rose, supported by robust sales of offset inks.

Operating income declined, a result primarily of diffi culties in

revising sales prices upward to refl ect rising raw materials prices,

particularly in the PRC.

S

Products in the Neo-Graphic Arts Materials segment include

organic pigments, which are used to create colors; LC materi-

als, used in digital equipment to display colors; and jet inks.

The segment also includes coating materials and adhesives

for optical discs and other products that augur the future

of printing inks.


Index: 2011 = 100 2012 2011

Index of Sales of Principal Products

Organic pigments 92 100LC materials 170 100Jet inks 100 100UV-curable coatings and bonding adhesives for optical discs 77 100Specialty magnetic foils 85 100


change



fl uctuations

Net sales ¥108.8 billion (1.2)% 4.1%

Operating income ¥ 12.0 billion 4.2 times 4.2 times

13

oth sales and operating income were down. Weakened

demand from the electrical and electronics industries deterred

sales of resins for coatings and epoxy resins in Japan, although

demand for automotive applications recovered. In the PRC and

Southeast Asia, sales increased in local currency terms, bolstered

by expanded demand, but were down after translation, owing

to the appreciation of the yen. The decrease in operating

income was due to lower sales, as well as such factors as the

deterioration of our product mix.

B

ales decreased, owing to a decline in sales of high-

performance optical materials and plastic pallets, the former

a consequence of falling demand and the latter refl ecting the

transfer of certain commercial rights. Sales of PPS compounds

were solid, as demand for automotive applications rallied. The

decline in sales combined with the deterioration of our product

mix and other factors to push down operating income.

S

Synthetic Resins Chemical Solution MaterialsThe Chemical Solution Materials segment includes a variety

of composite products and solutions that integrate the DIC

Group’s core materials—notably synthetic resins and organic

pigments—and related technologies. These products are pro-

vided to customers in the electrical and electronics, automobile

manufacturing, housing, construction and civil engineering

industries, contributing to peace of mind, safety and pleasant

lifestyles.

The Synthetic Resins segment encompasses a wide selection

of synthetic resins, resin-related products, functional polymers

and additives. These products are used internally and supplied

to manufacturers of, among others, coatings, building materi-

als, automobiles, electrical and electronics equipment, and

textiles.


change



fl uctuations




Index: 2011 = 100 2012 2011


Resins for coatings 97 100Polyurethane resins 97 100Epoxy resins 98 100Unsaturated polyester resins 115 100Plasticizers 95 100

Index: 2011 = 100 2012 2011


Polystyrene 120 100PPS compounds and polymers 105 100Plastic colorants 100 100Plastic pallets, Containers 73 100Industrial adhesive tapes 99 100Coextruded multilayer fi lms 93 100High-performance optical materials 79 100Decorative boards 79 100


change



fl uctuations



14

ith the aim of realizing our Color and Comfort by Chemistry

management vision, we are actively promoting the development

of next-generation products and new technologies that will sup-

port sustainable growth. To this end, we are capitalizing on our

core materials, namely, synthetic resins and organic pigments,

and leveraging our core technologies—notably in polymer design,

rheology, dispersions, adhesion, fi lm forming, and coloring and

decoration—to build a portfolio of products that offer signifi cant

added value. As well as selling independent products, we are

developing equipment and processes with the aim of offering

total solutions that respond to the needs of our customers.

Our R&D organization, which centers on the Technical

Administrative Division and the Corporate R&D Division, works

with DIC Graphics Corporation and other domestic Group com-

panies, as well as the Sun Chemical Group’s research centers

in the United States, the United Kingdom and Germany and

Qingdao DIC Finechemicals Co., Ltd., a corporate research facil-

ity in the PRC, to maximize our global R&D resources, thereby

accelerating and ensuring the effi ciency of our R&D activities.

In the fi scal year ended March 31, 2011, we repositioned

technical departments, formerly attached to each respective

business department, under the direction of the general man-

ager of the Technical Administrative Division. This move, which

shifted the Technical Administrative Division’s focus to essential

technologies, and the division’s efforts to promote resource

integration and collaboration Companywide have yielded

positive results in the development of high-performance

products that make use of multiple technologies.

The Corporate R&D Division is tasked with the development

of next-generation products and technologies. The division

emphasizes the development of distinctive and highly competi-

tive new technologies and products in such areas as new

W materials, advanced functional materials, display materials,

electronics materials and materials for next-generation energy-

and life sciences-related applications. The division places a high

priority on cooperation with operational divisions at all stages

of the development process, beginning with the establishment

of research themes, with the aim of facilitating the rapid

transformation of technologies into viable commercial products.

Recent Achievements


n the fi scal year ended March 31, 2012, efforts to integrate

our resin engineering, pigment surface processing, ink blending

and other technologies yielded web-offset inks that achieve sig-

nifi cantly improved suitability to a variety of printing processes.

Developed after the integration of our domestic printing inks

business with that of The Inctec Inc., these products combine

the best technologies of the two companies. In the area of

gravure inks, we developed a new polyurethane resin-based ink

for use in printing on packaging for bread and other food

products that boasts a high-gloss fi nish and superb adhesive

properties, while in adhesives for food packaging we devised

an environment-friendly hybrid adhesive and a solvent-free

adhesive for use in low-temperature processes, both for

customers in the Indian market. In addition, we began providing

a new version of our DIC Digital COLOR GUIDE software

application for Android™-based smartphones, which joins our

existing version for Apple Inc.’s iOS mobile operating system.

Overseas, Sun Chemical developed a number of notable new

sheetfed inks and oxygen barrier coatings, primarily for use in

printing on food packaging. For paperboard packaging, Sun

Chemical launched an attractive set combining a primer that

I

DIC’s Central Research Laboratories in Sakura, Chiba, Japan

Research and Development

Researcher in the PRC uses vacuum distillation equipment to purify functional monomers

15

elicits a fi nish comparable to foil stamping with a silver printing

ink. For customers in the electronics industry, Sun Chemical

began expanding its lineup of etching resist solutions for use

in the manufacture of photovoltaics.


n organic pigments, we continued to focus on research

aimed at further enhancing the performance of our existing

pigments for LCD color fi lters, as well as on the development of

new pigments for this application. In the area of TFT LCs, sales

of which expanded signifi cantly for use in displays for large-

screen LCD televisions, we completed work aimed at doubling

our production capacity for customers in Japan and overseas.

We also proceeded with efforts to develop new LCs for next-

generation devices. R&D in the area of jet inks was directed

toward water-based pigmented products. Sun Chemical

succeeded in developing a UV-curable jet ink suitable for

high-speed printheads.

Synthetic Resins

n R&D in the area of synthetic resins, our emphasis continues

to be on environment-friendly UV-curable and waterborne prod-

ucts, while in the area of high-performance coatings we contin-

ued to market Multi-Function Glass Resin, which boasts superb

resistance to weathering and staining, for use in materials for

photovoltaics, among others. These efforts were rewarded

when Multi-Function Glass Resin was adopted for use by a lead-

ing company in the fi eld. We also succeeded in developing a

nanoimprint antirefl ective material that substantially improves

the conversion effi ciency of photovoltaics.

Progress was also seen in the development of a variety of other

products, including adhesives for photovoltaic backsheets that

I

I

deliver excellent resistance to heat and moisture, resins for use in

electronic insulators and unique UV-curable monomers that are

expected to fi nd application in a broad range of optical materials.

In fl uorochemicals, we began developing a leveling agent suitable

for use in the precision coating of semiconductor wafers.

Chemical Solution Materials

n the area of industrial adhesive tapes, we developed a ther-

moconductive double-sided adhesive tape, which was adopted

for use as a heat release material in light-emitting diodes (LEDs).

In building materials, development efforts yielded a new decora-

tive woodgrain-fi nish noncombustible

adhesive sheet for use on doors and curved

surfaces, thus creating a new subcategory

of products in our DIC FUNEN line of wood-

grain-fi nish noncombustible decorative

boards. At our Tokyo Plant, we opened a

showroom featuring standing exhibits of

our DIC 200 line of building materials and a

variety of interior decorating materials. Visi-

tors to the showroom can obtain printed

information on DIC 200 products, as well

as see examples of their application.

I

Research and Development

DIC Group researchers from Japan, Germany and the PRC confer on research results

Kindergartners in Miyagi Prefecture participate in Making the Cherry Trees Blossom with Love workshop

1616

DIC’s Approach to CSR

o guide our efforts to promote CSR as an integral part of our

business activities, we formulate annual Groupwide CSR poli-

cies. In accordance with these policies, individual sales adminis-

trative divisions, product divisions, sites and domestic and

overseas subsidiaries are charged with pursuing effective CSR

programs by formulating their own CSR policies and ensuring

such policies permeate their organizations and labor forces,

as well as by linking their CSR policies to business targets and

promoting meticulous policy administration.

As a framework for implementing our CSR program in the fi s-

cal year ending March 31, 2013, we developed 10 CSR themes

and introduced a system whereby these are categorized as basic

themes, including compliance and business continuity manage-

ment (BCM); themes that demonstrate distinctive capabilities,

such as business models that increase customer satisfaction and

new technology development and value building; and themes

that combine elements of the previous two classifi cations, nota-

bly environment, safety and health (ESH) and quality and human

resources management.

System for Promoting CSR

Our system for promoting CSR centers on the Corporate Social

Responsibility Committee, which answers directly to the presi-

dent and CEO and is tasked with reporting on the status of

CSR themes, as well as with proposing policies and programs

for advancing CSR and deliberating matters related to CSR as a

vital component of corporate management. (The Sun Chemical

Group has an independent system for promoting CSR.)

Highlights of the Fiscal Year Ended March 31, 2012

Color Education Project for Children Launched in Iwate

and Miyagi Prefectures

ith the aim of helping provide peace of mind to the many

children affected by the Great East Japan Earthquake, in March

2012 DIC launched an earthquake relief and color education

project dubbed Making the Cherry Trees Blossom with Love.

T

W

The project involved dispatching sets comprising 150 heart-

shaped stickers (similar to cherry blossom petals) and a large

(1m × 1.8m) piece of pasteboard bearing a painted cherry tree

trunk and branches to 34 nursery schools and kindergartens in

Iwate and Miyagi prefectures. The heart-shaped stickers were

featured in 12 exquisite colors selected from the DIC Color

Guide’s Traditional Japanese Colors collection. Each set also

included an easy-to-understand printout describing the colors

and their derivations. The idea of the project was to have chil-

dren affi x the blossom petal stickers to the tree branches to

make their cherry tree burst into bloom. Workshops were held

at the receiving nursery schools and kindergartens with the

assistance of DIC employees. Each participating child was asked

to choose a sticker in the color he or she liked best and then to

write a message or draw a picture on the sticker before affi xing

it to one of the branches to make the tree burst into bloom.

Kashima Plant Installs Anaerobic Wastewater Treatment

System

ur Kashima Plant is promoting efforts to increase its waste-

water treatment capacity and conserve energy. With the aim of

O

Corporate Social Responsibility

Themes that demonstrate distinctive capabilities (A)

Themes that combine elements of (A) and (B)

Basic themes (B)

Business models that increase customer satisfaction

ESH and quality

Compliance

New technology development and value buildingHarmony with nature and contributions to societyCommunication with stakeholders

Human resources managementSupply chain development

BCMInformation security

DIC CSR Framework

Employees of DIC (Malaysia) help with mangrove planting

17

enlarging its wastewater treatment facilities, the plant recently

installed a BIOIMPACT® expanded granular sludge bed (EGSB)

anaerobic wastewater treatment system. This system is manufac-

tured by Sumitomo Heavy Industries Environment Co., Ltd.

In aerobic wastewater treatment systems, the most common

chemical process for treating wastewater, activated sludge* is

used to break down organic matter in wastewater into CO2

and water. In contrast, the BIOIMPACT® system uses EGSB, a

newly commercialized anaerobic process whereby wastewater

is fl owed into a tank containing a highly concentrated bed of

sludge granules (aggregates of anaerobic microorganisms),

which rapidly break down organic matter into methane and CO2.

This innovative system, which also facilitates the reuse of meth-

ane produced for plant operation, is attracting considerable

attention for its various

performance features,

which include superb effi -

ciency and minimal space

and energy requirements.

The Kashima Plant expects

the new system to reduce

its annual emissions of

CO2 by 720 tons, as well

as to signifi cantly lower

its operating costs.

* Activated sludge is biomass

comprised primarily of

artifi cially cultured

aerobic microorganisms.

Hokuriku Plant Wins Energy Conservation Grand Prize

he Hokuriku Plant was awarded the Chairman’s Prize at

the 2011 Energy Conservation Awards, which are sponsored

by Japan’s Energy Conservation Center (ECCJ), in cooperation

with the Ministry of Economy, Trade and Industry. The honor

was given in recognition of the plant’s system for reducing

energy consumption, which employs visual representation to

clarify energy consumption.

The Hokuriku Plant employs visual representation aimed at,

among others, clarifying energy use by application, reducing the

amount of energy used per unit of production and rationalizing

energy costs. Of particular note, the plant has implemented

an energy management system that seeks to create a detailed

visual representation of energy use in each production process

through four steps: the development of infrastructure to facili-

tate visual representation, visual representation of energy data

for steam lines up to the production fl oor entrance, visual repre-

sentation of product-specifi c energy use per unit of production

and visual representation of production data. The system

enabled the plant to achieve a 220-kiloliter reduction in annual

energy consumption, calculated in tons of crude oil.

T

DIC (Malaysia) Participates in Mangrove Planting Project

n May 8, 2011, DIC (Malaysia) Sdn. Bhd., a DIC Group com-

pany engaged primarily in the manufacture and sale of printing

inks and the sale of synthetic resins, participated in a mangrove

planting project in Telok Gong, Pelabuhan Klang, Selangor,

Malaysia. The project was sponsored by the Selangor Red Cres-

cent Society. DIC (Malaysia) donated money to the society to

fund the project, which sought to use mangrove planting as a

way to demonstrate ways of addressing environmental issues

to the local community and project participants and to promote

environmental conservation. Ten employee volunteers from

DIC (Malaysia) also took part on the day, with instruction in

mangrove planting provided by experts.

Dialogue with Stakeholders

ith the aim of gaining a better understanding of society’s

needs and to incorporate this understanding into our corporate

activities, in the fi scal year ended March 31, 2012, we staged a

number of events designed for facilitating dialogue with stake-

holders. The fi rst such event focused on our efforts to promote

human rights and labor practices in a manner that befi ts a

global enterprise and featured a number of invited experts,

which encouraged a lively debate on the relationship between

CSR and globalization.

Five years have passed since we recognized CSR as a central

component of management. Our efforts in the period under

review to promote dialogue with stakeholders served to

enhance our recognition of the need to address basic human

rights and respect for diversity as crucial aspects of our CSR

program. Accord-

ingly, we have

stepped up initia-

tives in both

of these areas.

O

W

Corporate Social Responsibility

18

n line with its management vision, “Color and Comfort by

Chemistry,” DIC strives to leverage its core businesses to fulfi ll

its responsibility as a corporate citizen, as well as to bolster the

trust of stakeholders. Accordingly, DIC approaches enhancing

corporate governance as a key management priority. To ensure

transparent, sound management, DIC is striving to reinforce

decision making, execution and oversight by refi ning its internal

control systems.

Basic Policy

IC identifi es the purpose of corporate governance as being to

ensure effective decision making pertaining to its management

policy of achieving sustainable corporate growth and expansion

through sound and effi cient management, while at the same

time guaranteeing the appropriate monitoring and assessment

of and motivation for management’s execution of business

activities.

Overall Structure

o promote sound and effi cient management, in July 2003

DIC introduced a risk management structure—a system of inter-

nal controls designed to enhance its compliance program and

facilitate the integration of risk management and compliance

functions.

With the aim of achieving a higher level of trust on the part

of shareholders, customers and other stakeholders and enhanc-

ing corporate value, in April 2007 DIC established the Corporate

Social Responsibility Committee, which is under the direct

I

D

T

supervision of the president, thereby creating a structure to

guide related activities.

Having initially included two attorneys as outside auditors

on its Board of Auditors, in June 2008 DIC sought to further

strengthen its internal control system by appointing two outside

directors to its Board of Directors, thereby ensuring the effec-

tiveness of auditing functions and reinforcing confi dence in its

ability as a company with a Board of Auditors to respond to the

expectations of shareholders.

In June 2009, DIC established the Nomination Committee

and the Remuneration Committee as internal committees of the

Board of Directors, with the aim of enhancing objectivity in the

nomination and selection of, and determining remuneration for,

directors and executive offi cers. Each of these committees com-

prises four directors, of which two are outside directors.

Other Important Corporate Governance-Related Matters

IC has two publicly listed subsidiaries: SEIKO PMC CORPORA-

TION in Japan, and DIC India Ltd. Management decisions for

these companies are approved by their respective boards of

directors and annual meetings of shareholders. As a share-

holder, DIC exercises its voting rights at the annual meetings of

shareholders of each of the companies. DIC also receives infor-

mation on the internal controls of each of the companies,

enabling it to make proper evaluations. Hiring procedures for

the two companies are independent of DIC’s and with the

exception of certain directors there are no exchanges of person-

nel between the companies and DIC.

D

* The Nomination Committee is responsible for the nomination of directors, corporate auditors and executive offi cers.† The Remuneration Committee is responsible for determining remuneration for directors and executive offi cers.

Corporate Governance

Corporate Governance Organization

Annual General Meeting of Shareholders

Board of Directors (8 members, of which two are outside)

President and CEO

Board of Auditors (Four members, of which two are outside)Audit

Independent auditors (Deloitte Touche Tohmatsu)Independent

audit

Internal audit

Internal Auditing DepartmentSales administrative divisions, product divisions, Production Administrative Division,

Technical Administrative Division, Corporate R&D Division, headquarters´ administrative divisions, branches

Group companies

Corporate Social Responsibility Committee

Executive Committee

Nomination Committee*

Remuneration Committee†

19

Corporate Governance Organization

Board of Directors

To accelerate decision making and reinforce corporate gover-

nance, the number of directors on the Board has been set at

eight. Of the eight, two are outside directors.

The Board of Directors is responsible for making decisions on

matters stipulated in Japan’s Corporate Law, and in DIC’s own

regulations, as requiring Board-level approval, as well as for

monitoring the execution of business activities as reported by

the executive offi cers.

Executive Committee

The Executive Committee deliberates and resolves issues related

to the execution of business activities. In principle, the Executive

Committee meets twice monthly. These meetings are also

attended by corporate auditors as part of their auditing process.

Details of deliberations and resolutions are reported to the

Board of Directors.

Corporate Social Responsibility Committee

The Corporate Social Responsibility Committee is under the

direct supervision of the president and CEO and functions as an

advisory body. As such, the committee meets an average of four

times annually to formulate Group CSR targets and policies to

guide the CSR activities of Group companies, as well as to evalu-

ate and supervise specifi c initiatives. Committee members

include directors designated by the Board of Directors. The Cor-

porate Communications Department serves as the committee’s

secretariat. An internal organization has also been established

to oversee CSR within individual divisions, departments, sites

and Group companies.

Board of Auditors

The Board of Auditors comprises four members, including two

outside auditors. In principle, the Board of Auditors meets once

monthly. Audit activities consist of attending important meet-

ings, including those of the Board of Directors and the Executive

Committee, exchanging opinions with representative directors

and collecting business reports from directors, executive offi cers

and other pertinent individuals.

Internal Auditing Department

The Internal Auditing Department is charged with monitoring

the effectiveness of internal control systems at DIC and domestic

DIC Group companies. For DIC Group companies outside Japan,

internal auditing—including monitoring—is the responsibility of

internal auditing teams in regional holding companies. For the

Sun Chemical Group, this responsibility is shouldered by internal

auditing departments.

Independent Auditors

DIC has engaged Deloitte Touche Tohmatsu as its independent

auditors. DIC strives to ensure an environment that facilitates

the accurate disclosure of information and fair auditing. In the

fi scal year ended March 31, 2012, DIC was audited by Yuji

Itagaki, partner, and Takaya Otake, partner. Messrs Itagaki

and Otake were assisted by approximately 30 qualifi ed public

accountants.

Internal Control Systems

In line with Japan’s Corporate Law, which calls for the establish-

ment of effective internal control systems, in July 2003 DIC

established a risk management structure designed to ensure the

appropriate management of risks—including those related to

compliance—encountered in the course of its operations. This

structure was further refi ned in April 2007 with the establish-

ment of the Corporate Social Responsibility Committee, which

replaced the Risk Management Committee and is charged with

overseeing CSR, including internal controls. With the aim of

reinforcing its internal control systems, in June 2008 DIC

appointed two outside directors.

At present, DIC’s internal control systems encompass:

Systems to ensure the execution of duties by directors and

employees complies with laws, regulations and DIC’s Articles

of Incorporation

• To raise directors’, executive offi cers’ and employees’ awareness

of compliance, DIC has established, and shall disseminate and

observe The DIC WAY Code of Business Conduct.

• DIC shall monitor the status of preparation and improvement

of its system of internal controls and report its fi ndings to the

president.


Board of Directors and Corporate Auditors(As of June 24, 2012)

Chairman of the Board Kazuo Sugie

Representative Directors Yoshiyuki Nakanishi Masayuki Saito

Directors Yoshihisa Kawamura Akira Konishi Tetsuro AgawaMineo Ono* Eiko Kono*

Corporate Auditors Jiro Mizutani Yoshiyuki Mase

Kenichi Nakano* Junji Tomita* * Outside

20

• DIC shall establish an internal reporting system for compliance-

related issues with a reporting channel that is independent of

channels for communicating information on the execution of

business.

Systems to preserve and manage information pertaining to the

execution of duties by directors

• DIC shall establish and observe regulations for document manage-

ment to preserve and manage information pertaining to directors’

execution of their duties. Information on matters that require

the approval of directors, in accordance with regulations govern-

ing matters for approval, shall be recorded and stored on electro-

magnetic media.

• In accordance with its Basic Policy on Information Security, DIC

shall establish an information security management system.

Regulations and other systems related to risk management

• To facilitate risk management, the Corporate Social Responsibility

Committee shall identify and evaluate risks that may have a signif-

icant adverse impact on DIC’s management. As well, each Decem-

ber the Corporate Social Responsibility Committee shall formulate

Companywide risk management policies for the subsequent year,

based upon which the president determines his management poli-

cies and issues instructions.

• DIC shall set forth a management system that includes contin-

gency measures for ensuring the continuance of operations in the

event of an accident, natural disaster or other occurrence.

• The Internal Auditing Department and the Corporate Communications

Department shall monitor the status of risk management.

Systems to ensure the effi cient execution of duties by directors

• DIC formulates organization-, division of duties-, authority-,

accounting- and approval-related regulations to ensure the appro-

priate and effi cient execution of duties by directors.

• DIC formulates management plans in line with its basic manage-

ment polices and management strategies. Based on these

medium-term management plans, DIC shall set fi scal year budgets

for each business and clarify practical measures for implementa-

tion. Reports shall be made to the Board of Directors on the status

of budgets and progress in achieving targets.

Systems to ensure the propriety of operations conducted by the

corporate group comprising DIC and its subsidiaries

• DIC and its subsidiaries shall establish a common Code of Business

Conduct. Directors, executive offi cers and employees of DIC

and its subsidiaries shall work together to raise awareness of

compliance.

• DIC shall dispatch directors and auditors to serve concurrently

on the Boards of DIC Group companies to oversee and monitor

operations-level decision making at such companies. Certain

important matters pertaining to Group companies have been

designated as requiring the approval of DIC as a shareholder

or warranting reporting.

• Directors, executive offi cers and employees of DIC and its subsid-

iaries shall use the internal reporting system to report compliance-

related matters to the president, the director in charge of CSR,

auditors and/or legal advisors.

Matters related to auditors in cases where corporate auditors

request the assignment of employees to assist with his/her duties

DIC has established an offi ce of corporate auditors. In addition to

assisting corporate auditors with their duties, the offi ce shall assign

dedicated personnel to support the work of the Board of Auditors.

Matters related to the independence of employees from directors

in the preceding item

The staff of the offi ce of corporate auditors is obliged only to obey

the orders of the corporate auditors. Personnel changes, evaluations

and disciplinary actions shall require the prior consent of the Board

of Auditors.

Systems for directors and employees to report to corporate

auditors and other systems related to reporting to corporate

auditors

• Corporate auditors shall attend meetings of the Board of Direc-

tors. As well, an auditor appointed by the Board of Auditors shall

attend other important meetings, including those of the Executive

Committee and the Corporate Social Responsibility Committee.

• The Company’s directors shall report to the Board of Auditors

on the following matters:

– Facts that are likely to cause signifi cant damage to the Company

– Matters that the Board of Auditors have discussed and

determined warrant reporting

• Corporate auditors shall have access to the electronic approval

system and be able to peruse information on matters submitted

for approval at any time.

Other systems to ensure effective audits by corporate auditors

DIC’s representative directors and corporate auditors shall meet

in principle once every three months to exchange information and

opinions.

Basic policy toward eliminating demands by antisocial elements

The Company’s basic policy, as outlined in The DIC WAY Code of

Business Conduct, is to stand fi rmly against antisocial elements and

in no way to acquiesce to demands presented by such elements.

The General Affairs and HR Department is responsible for

coordinating efforts to respond to extortion or other demands

presented by antisocial elements, while individuals have been put

in charge of efforts at each site and within each Group company.

These individuals work in close collaboration with lawyers and the

police to ensure the Company’s responses are resolute. They have

also prepared and distributed a manual on appropriate responses to

such demands, with the aim of raising awareness among employees.


21

Contents

Consolidated Six-Year Summary 22Management’s Discussion and Analysis 23Consolidated Balance Sheets 26Consolidated Statements of Income 28Consolidated Statements of Comprehensive Income 29Consolidated Statements of Changes in Net Assets 30Consolidated Statements of Cash Flows 31Notes to the Consolidated Financial Statements 32Management Report on Internal Control 57Independent Auditor’s Report 58

Financial Section

22

1,077.9

932.3

757.8 779.0 734.3

48.4

25.4 27.8

37.235.0

(Billions of yen) (Billions of yen)Net Sales Operating Income

600.0

900.0

300.0

30.0

20122008 2009 2010 20110.0 0.0

1,200.0 60.0

15.0

45.0

20122008 2009 2010 2011

31.0

2.6

15.818.2

2.5 3.35

17.6019.79

3.21

39.20

(Billions of yen)Net Income

0.0

20.0

30.0

10.0

40.0

(Yen)Earnings per Share

0.00

30.00

45.00

15.00

60.00

20122008 2009 2010 2011 20122008 2009 2010 2011

Consolidated Six-Year Summary

Millions of yen,except for per share information

2012 2011 2010 2009 2008 2007

Net sales ¥734,276 ¥778,964 ¥757,849 ¥932,334 ¥1,077,897 ¥1,015,664

Percent increase (decrease) (5.7)% 2.8% (18.7)% (13.5)% 6.1% 1.1%

Operating income 34,960 37,152 27,814 25,356 48,373 51,390

Net income 18,158 15,761 2,540 2,648 31,033 22,467

Equity (Note 3) 101,911 107,748 101,034 95,329 235,594 213,076

Total assets 675,067 703,760 749,866 738,460 978,299 991,780

Equity per share (Note 1) ¥111.08 ¥117.44 ¥127.72 ¥120.50 ¥297.75 ¥269.09

Earnings per share (Basic) (Note 2) 19.79 17.60 3.21 3.35 39.20 28.37

Equity ratio to total assets 15.1% 15.3% 13.5% 12.9% 24.1% 21.5%

ROE (Return on equity) 17.3% 15.1% 2.6% 1.6% 13.8% 11.2%

Number of employees 20,455 21,572 22,583 23,613 25,164 25,413

Notes: 1. The computation of equity per share of common stock has been based on the number of shares issued and outstanding as of the balance sheet date. 2. The computation of earnings per share of common stock has been based on the weighted-average number of shares issued and outstanding during each

fi scal year. 3. Equity comprises “Total shareholders’ equity” and “Total accumulated other comprehensive income.”

DIC Corporation and Consolidated SubsidiariesYears ended March 31

23

The fi scal years of DIC Corporation and its domestic subsidiaries, with the exception of one company, end on

March 31, while the fi scal years of its overseas subsidiaries end on December 31. Accordingly, this document

presents the accounts for the fi scal year ended March 31, 2012, of DIC Corporation and its domestic subsidiar-

ies and for the fi scal year ended December 31, 2011, of its overseas subsidiaries.

Notwithstanding special procurement demand in the fi rst quarter in the wake of the Great East Japan Earth-

quake, harsh operating conditions persisted, owing to a market reversal that began in the second quarter,

combined with the global economic slowdown provoked by the European sovereign debt crisis, fl agging eco-

nomic growth in Asia and other factors, causing demand in Japan and overseas to dwindle.

In this environment, such factors as falling shipments of printing inks and products for the electrical and

electronics industries in Japan and overseas countered the positive impact of a substantial increase in ship-

ments of TFT LCs. As a consequence, consolidated net sales for the period declined 5.7%, to ¥734.3 billion.

Operating income, at ¥35.0 billion, was down 5.9%, principally owing to lower sales. Ordinary income

decreased 2.8%, to ¥30.8 billion, despite an increase in equity in earnings of affi liates, among others. Net

income increased 15.2%, to ¥18.2 billion, refl ecting a decrease in loss on disposal of non-current assets,

among others.

Billions of yenChange (%)

Growth rate change calculated in local

currency (%)Years ended March 31 2012 2011Net sales ¥734.3 ¥779.0 (5.7)% (2.5)%Operating income 35.0 37.2 (5.9) (3.1)Ordinary income 30.8 31.7 (2.8) —Net income 18.2 15.8 15.2 —

YenYears ended March 31 2012 2011Average exchange rate (¥/US$) ¥79.77 ¥87.69

Operating Results

Management’s Discussion and Analysis

Segment Results

In the following presentation, fi gures for the Printing Inks & Supplies segment include interregional transac-

tions within the segment. Accordingly, the aggregates of regional net sales and operating income fi gures

below differ from the fi gures for the Printing Inks & Supplies segment presented in the Notes to the Consoli-

dated Financial Statements.


JapanDespite benefi ting from special procurement demand for fl exible packaging applications, notably beverage

containers and food packaging, in the wake of the Great East Japan Earthquake, sales of gravure inks were

hampered by the impact of diffi culties in procuring certain raw materials—also due to the earthquake—on

production, but fi nished level with the fi scal year ended March 31, 2011, thanks to fi rm demand in subsequent

months. Sales of offset inks and news inks declined, as an existing downward trend was exacerbated following

the earthquake by paper shortages and the impact on production of procurement diffi culties for certain raw

materials.

Operating income advanced, owing to a certain degree of success in revising sales prices upward to refl ect

rising raw materials prices, among others.

24

The Americas and EuropeSales fell in both North America and Europe, despite a slight increase in sales of packaging inks, as shrinking

print runs for magazines and newspapers and other factors pushed sales of publishing inks and news inks

down signifi cantly. Sales in Central and South America were on a par with the previous fi scal year, although

sales of offset inks struggled, as sales of mainstay packaging inks were brisk. As a result, overall sales in the

Americas and Europe decreased.

Operating income was also down, despite cost reductions achieved through rationalization efforts, refl ecting

the aforementioned sales results, coupled with such factors as higher raw materials prices.

Asia and OceaniaSales in the PRC fell, despite expanded sales of news inks, particularly colored inks, as fl agging economic

growth weakened sales of offset inks and gravure inks. In Southeast Asia, sales edged up, bolstered by healthy

sales of gravure inks, although demand for offset inks and news inks fell. Sales in Oceania remained level, re-

fl ecting fi rm sales of gravure inks, among others, despite a decrease in sales of news inks. In India, sales rose,

supported by robust sales of offset inks. Owing to these results, overall sales in Asia and Oceania advanced in

local currency terms, but were down after translation as a result of the appreciation of the yen.

Operating income declined, a result primarily attributable to diffi culties in revising sales prices upward to re-

fl ect rising raw materials prices, particularly in the PRC.

Billions of yen Growth rate (%)Growth rate calculated

in local currency (%)Japan Net sales ¥ 91.9 (5.7)% —

Operating income 3.6 14.5 —The Americas and Europe Net sales 227.7 (11.3) (4.9)%

Operating income 4.3 (43.2) (37.5)Asia and Oceania Net sales 60.6 (0.7) 4.8

Operating income 4.8 (15.5) (11.3)


Sales of organic pigments were down, despite robust sales for use in color fi lters in Japan and in coatings and

plastics in the Americas and Europe, as sales for use in inks struggled in both the domestic and overseas mar-

kets. Sales of UV-curable coatings and bonding adhesives for optical discs and specialty magnetic foils plunged,

a consequence of shrinking demand. In contrast, sales of TFT LCs for use in LCD televisions rose substantially.

These results contributed to an increase in overall sales in local currency terms, although sales were down after

translation, owing to the appreciation of the yen.

The segment reported higher operating income, owing to increased sales of TFT LCs and of organic pig-

ments for use in coatings and plastics in the Americas and Europe, as well as to an improved product mix,

among others.


in local currency (%)Net sales ¥108.8 (1.2)% 4.1%Operating income 12.0 4.2 times 4.2 times


25

Cash and cash equivalents as of March 31, 2012, totaled ¥29.6 billion, a decrease of ¥6.7 billion from the pre-

vious fi scal year-end.

Operating ActivitiesNet cash provided by operating activities amounted to ¥31.2 billion, up from ¥30.9 billion provided by such ac-

tivities in the fi scal year ended March 31, 2011. Income before income taxes and minority interests was ¥27.1

billion, while the adjustment for depreciation and amortization was ¥29.7 billion. An increase in working capi-

tal added ¥15.9 billion to cash provided by operating activities. Income taxes paid accounted for ¥6.1 billion of

cash applied to such activities.

Investing ActivitiesNet cash used in investing activities came to ¥17.6 billion, up from ¥12.3 billion used in such activities in the

previous fi scal year. Combined expenditures for the purchase of property, plant and equipment and the pur-

chase of intangible assets totaled ¥27.1 billion. Proceeds from sales of investments in subsidiaries resulting in

change in scope of consolidation provided ¥5.1 billion. Proceeds from recollection of long-term notes receiv-

able totaled ¥4.0 billion.

Financing ActivitiesNet cash used in fi nancing activities amounted to ¥7.1 billion, down from ¥26.3 billion in the previous fi scal

year. The net total of funds applied to the repayment of loans was ¥2.1 billion. Cash dividends paid totaled

¥3.7 billion.

Analysis of Cash Flows


Synthetic Resins

Sales in Japan declined, although demand for automotive applications recovered, as weakened demand from

the electrical and electronics industries deterred sales of resins for coatings and epoxy resins, among others. In

the PRC and Southeast Asia, sales increased, bolstered by expanded demand, but were down after translation,

owing to the appreciation of the yen.

Operating income fell, refl ecting the aforementioned sales results, as well as such factors as the deteriora-

tion of our product mix.


in local currency (%)Net sales ¥149.0 (5.1)% (4.0)%Operating income 10.6 (28.3) (27.9)

Chemical Solution Materials

Sales of PPS compounds were solid, as demand for automotive applications rallied. Sales of polystyrene also

advanced, bolstered by consigned production from a competitor. Sales of high-performance optical materials

declined, owing to falling demand for electrical and electronics industries, among others. The transfer of cer-

tain commercial rights pushed down sales of plastic pallets. As a consequence, overall sales decreased.

Operating income declined, owing to the aforementioned sales results and to the deterioration of our prod-

uct mix, among others.


in local currency (%)Net sales ¥143.9 (4.7)% (4.2)%Operating income 3.5 (48.7) (48.2)

26

Assets

Millions of yen2012 2011

Current assets:

Cash and deposits (Notes 5 and 18) ¥ 29,695 ¥ 22,957

Notes and accounts receivable—trade (Notes 10, 18 and 19) 173,599 185,391

Merchandise and fi nished goods (Note 10) 71,295 66,305

Work in process (Note 10) 8,694 8,708

Raw materials and supplies (Note 10) 44,196 47,238

Deferred tax assets (Note 15) 8,353 9,796

Other (Notes 18) 20,339 22,699

Allowance for doubtful accounts (7,492) (8,296)

Total current assets 348,679 354,798

Non-current assets:

Property, plant and equipment (Notes 8, 9 and 10)

Buildings and structures 80,971 87,466

Machinery, equipment and vehicles 57,921 65,540

Tools, furniture and fi xtures 7,024 7,744

Land 51,734 54,728

Construction in progress 5,175 5,153

Total property, plant and equipment 202,825 220,631

Intangible assets: (Note 9)

Goodwill 611 1,808

Other 11,192 10,509

Total intangible assets 11,803 12,317

Investments and other assets:

Investment securities (Notes 6, 7 and 18) 31,532 30,873

Long-term loans receivable (Notes 18 and 19) 540 571

Deferred tax assets (Note 15) 35,410 38,611

Other (Notes 6 and 18) 45,654 46,458

Allowance for doubtful accounts (Note 18) (1,376) (499)

Total investments and other assets 111,760 116,014

Total non-current assets 326,388 348,962

Total assets ¥675,067 ¥703,760

See notes to the consolidated fi nancial statements.

Consolidated Balance SheetsDIC Corporation and Consolidated Subsidiaries March 31

27

Liabilities and Net Assets


Current liabilities:

Notes and accounts payable—trade (Note 18) ¥109,754 ¥121,224

Short-term loans payable (Notes 10 and 18) 32,341 23,951

Current portion of long-term loans payable (Notes 10, 18 and 19) 36,426 42,506

Commercial papers (Notes 10 and 18) 11,000 —

Current portion of bonds (Notes 10, 18 and 19) 5,000 5,000

Lease obligations (Notes 10 and 18) 690 751

Accounts payable—other (Notes 3 and 18) 38,358 30,485

Income taxes payable (Notes 15 and 18) 5,746 3,539

Deferred tax liabilities (Note 15) 334 832

Provision for bonuses 2,797 2,815

Provision for loss on disaster 2,250 2,250

Other (Notes 3 and 18) 20,599 31,026

Total current liabilities 265,295 264,379

Non-current liabilities:

Bonds payable (Notes 10, 18 and 19) 36,000 36,000

Long-term loans payable (Notes 10, 18 and 19) 201,001 222,962

Lease obligations (Notes 10 and 18) 6,022 6,476

Deferred tax liabilities (Note 15) 1,056 6,930

Provision for retirement benefi ts (Note 11) 29,948 22,135

Asset retirement obligations 933 1,019

Other (Note 18) 10,316 13,480

Total non-current liabilities 285,276 309,002

Total liabilities 550,571 573,381

Net assets:

Shareholders’ equity (Notes 12 and 22):

Capital stock (Note 13) 91,154 91,154

Capital surplus 88,758 88,758

Retained earnings 53,963 39,475

Treasury stock (Note 14) (660) (657)

Total shareholders’ equity 233,215 218,730

Accumulated other comprehensive income:

Valuation difference on available-for-sale securities (422) (73)

Deferred gains or losses on hedges (568) (293)

Pension liabilities adjustments (Note 11) (24,373) (18,117)

Foreign currency translation adjustment (105,941) (92,499)

Total accumulated other comprehensive income (131,304) (110,982)

Minority interests 22,585 22,631

Total net assets 124,496 130,379

Total liabilities and net assets ¥ 675,067 ¥ 703,760

Consolidated Balance Sheets

28


Net sales ¥734,276 ¥778,964 Cost of sales 590,716 619,632 Gross profi t 143,560 159,332

Selling, general and administrative expenses (Note 16) 108,600 122,180 Operating income 34,960 37,152

Non-operating income: Interest income 1,920 1,153 Dividends income 250 245 Foreign exchange gains — 278 Equity in earnings of affi liates 2,504 1,999 Other 2,655 2,255 Total non-operating income 7,329 5,930

Non-operating expenses: Interest expenses 7,739 7,077 Foreign exchange losses 261 — Other 3,487 4,304 Total non-operating expenses 11,487 11,381

Ordinary income 30,802 31,701

Extraordinary income: Gain on sales of subsidiaries and affi liates’ stocks 2,984 2,570 Gain on sales of non-current assets 876 161 Gain on transfer of business — 1,459 Insurance income — 990 Total extraordinary income 3,860 5,180

Extraordinary loss: Loss on disposal of non-current assets 3,087 5,400 Severance costs 2,634 1,267 Provision of allowance for doubtful accounts 1,031 — Impairment loss (Note 9) 831 832 Provision for loss on disaster — 2,250 Loss on adjustment for changes of accounting standard for asset retirement

obligations— 692

Loss on disaster — 137 Total extraordinary losses 7,583 10,578

Income before income taxes and minority interests 27,079 26,303 Income taxes (Note 15): Income taxes—current 6,983 8,194 Income taxes—deferred 469 196 Total income taxes 7,452 8,390

Income before minority interests 19,627 17,913 Minority interests in income 1,469 2,152 Net income ¥ 18,158 ¥ 15,761

YenEarnings per share (Note 2): Basic ¥19.79 ¥17.60 Diluted — —Cash dividends per share applicable to the period (Note 2) 4.00 4.00


Consolidated Statements of IncomeDIC Corporation and Consolidated Subsidiaries Years ended March 31

29


Income before minority interests ¥ 19,627 ¥ 17,913

Other comprehensive income:

Valuation difference on available-for-sale securities (344) (379)

Deferred gains or losses on hedges (276) (75)

Pension liabilities adjustments (6,228) 3,919

Foreign currency translation adjustment (12,666) (26,583)

Share of other comprehensive income of associates accounted for using equity method (1,141) (399)

Total other comprehensive income (Note 21) ¥(20,655) ¥(23,517)

Comprehensive income ¥ (1,028) ¥ (5,604)

Comprehensive income attributable to:

Comprehensive income attributable to owners of the parent ¥ (2,164) ¥ (7,322)

Comprehensive income attributable to minority interests 1,136 1,718


Consolidated Statements of Comprehensive IncomeDIC Corporation and Consolidated SubsidiariesYears ended March 31

30

Millions of yen

Shareholders’ equity

Issuednumber of

common stock (thousands)

Capital stock

Capital surplus

Retained earnings

Treasury stock

Total shareholders’

equity

Balance at March 31, 2010 792,872 ¥82,423 ¥80,027 ¥27,131 ¥(648) ¥188,933

Issuance of new shares 126,500 8,731 8,731 17,462 Dividends from surplus, ¥4.00 per share (Note 12) (3,417) (3,417)

Net income 15,761 15,761 Purchase of treasury stock— 48,522 shares (9) (9)Net changes of items other than shareholders’ equity (Notes 7 and 12)

Balance at March 31, 2011 919,372 91,154 88,758 39,475 (657) 218,730 Dividends from surplus, ¥4.00 per share (Note 12) (3,670) (3,670)

Net income 18,158 18,158 Purchase of treasury stock— 21,322 shares (3) (3)Net changes of items other than shareholders’ equity (Notes 7 and 12)

Balance at March 31, 2012 919,372 ¥91,154 ¥88,758 ¥53,963 ¥(660) ¥233,215

Millions of yen

Accumulated other comprehensive income

Valuation difference on

available-for-sale securities

Deferred gains or losses on

hedges

Pension liabilities

adjustments

Foreign currency

translation adjustment

Total accumulated

other comprehensive

incomeMinority interests

Total net assets

Balance at March 31, 2010 ¥ 278 ¥(217) ¥(22,036) ¥(65,924) ¥(87,899) ¥21,795 ¥122,829

Issuance of new shares 17,462 Dividends from surplus, ¥4.00 per share (Note 12) (3,417)

Net income 15,761 Purchase of treasury stock— 48,522 shares (9)Net changes of items other than shareholders’ equity (Notes 7 and 12) (351) (76) 3,919 (26,575) (23,083) 836 (22,247)

Balance at March 31, 2011 (73) (293) (18,117) (92,499) (110,982) 22,631 130,379Dividends from surplus, ¥4.00 per share (Note 12) (3,670)

Net income 18,158 Purchase of treasury stock— 21,322 shares (3)Net changes of items other than shareholders’ equity (Notes 7 and 12) (349) (275) (6,256) (13,442) (20,322) (46) (20,368)

Balance at March 31, 2012 ¥(422) ¥(568) ¥(24,373) ¥(105,941) ¥(131,304) ¥22,585 ¥124,496


Consolidated Statements of Changes in Net AssetsDIC Corporation and Consolidated Subsidiaries Years ended March 31

31


Net cash provided by (used in) operating activities: Income before income taxes and minority interests ¥ 27,079 ¥ 26,303 Adjustments for: Depreciation and amortization 29,724 32,954 Amortization of goodwill 389 662 Increase (decrease) in allowance for doubtful accounts (560) 435 Increase (decrease) in provision for bonuses 11 (33) Interest and dividends income (2,170) (1,398) Equity in (earnings) losses of affi liates (2,504) (1,999) Interest expenses 7,739 7,077 Loss (gain) on sales and retirement of non-current assets 2,211 5,239 Impairment loss 831 832 Loss (gain) on sales of stocks of subsidiaries and affi liates (2,984) (2,570) Loss on adjustment for changes of accounting standard for asset retirement obligations — 692 Loss (gain) on transfer of business — (1,459) Decrease (increase) in notes and accounts receivable—trade 2,080 (13,408) Decrease (increase) in inventories (8,732) (8,133) Increase (decrease) in notes and accounts payable—trade (9,290) 6,377 Other, net (795) (5,358) Subtotal 43,029 46,213 Interest and dividends received 2,304 1,203 Interest expenses paid (7,960) (7,250) Income taxes paid (6,130) (9,256) Net cash provided by (used in) operating activities 31,243 30,910 Net cash provided by (used in) investing activities: Payments into time deposits (436) (77) Proceeds from withdrawal of time deposits 399 — Purchase of property, plant and equipment (23,752) (19,935) Proceeds from sales of property, plant and equipment 1,523 931 Purchase of intangible assets (3,321) (868) Proceeds from sales of intangible assets 20 41 Proceeds from sales of investments in subsidiaries resulting in change in scope of consolidation 5,082 3,107 Purchase of subsidiaries and affi liates securities (370) (255) Proceeds from sale of subsidiaries and affi liates securities 76 110 Purchase of investment securities (131) (1,280) Proceeds from sales and redemption of investment securities 102 113 Proceeds from transfer of business — 2,400 Payments for transfer of business (556) (1,218) Proceeds from recollection of long-term notes receivable 3,989 4,385 Other, net (218) 206 Net cash provided by (used in) investing activities (17,593) (12,340)Net cash provided by (used in) fi nancing activities: Net increase (decrease) in short-term loans payable 11,880 9,117 Increase (decrease) in commercial papers 11,000 (200) Proceeds from long-term loans payable 35,618 12,793 Repayment of long-term loans payable (60,636) (36,677) Proceeds from issuance of bonds 5,000 — Redemption of bonds (5,000) (25,000) Proceeds from issuance of common stock — 17,462 Cash dividends paid (3,670) (3,417) Cash dividends paid to minority shareholders (804) (556) Net decrease (increase) in treasury stock (3) (9) Other, net (529) 188 Net cash provided by (used in) fi nancing activities (7,144) (26,299)Effect of exchange rate change on cash and cash equivalents 202 1,064 Net increase (decrease) in cash and cash equivalents 6,708 (6,665)Cash and cash equivalents at beginning of period (Note 5) 22,884 29,549 Cash and cash equivalents at end of period (Note 5) ¥ 29,592 ¥ 22,884


Consolidated Statements of Cash FlowsDIC Corporation and Consolidated SubsidiariesYears ended March 31

32 Notes to the Consolidated Financial Statements

The accompanying consolidated fi nancial statements have been prepared in accordance with the provisions

set forth in the Japanese Financial Instruments and Exchange Act and its related accounting regulations, and in

conformity with accounting principles generally accepted in Japan (“Japanese GAAP”), which are different in

certain respects as to application and disclosure requirements of International Financial Reporting Standards.

In preparing these consolidated fi nancial statements, certain reclassifi cations and rearrangements have been

made to the consolidated fi nancial statements issued domestically in order to present them in a form which is

more familiar to readers outside Japan. The consolidated fi nancial statements are stated in Japanese yen, the

currency of the country in which DIC Corporation (the “Company”), is incorporated.

Note 1:

Basis of Presenting Financial Statements

Consolidated fi nancial statements:

Under the control or infl uence concept, those companies in which the Company, directly or indirectly, is able

to exercise control over operations are fully consolidated and those companies over which the Company has

the ability to exercise signifi cant infl uence are accounted for by the equity method.

The consolidated fi nancial statements include the accounts of the Company and its signifi cant subsidiaries:

Sun Chemical Group Coöperatief U.A., DIC (China) Co., Ltd., DIC Asia Pacifi c Pte Ltd, SEIKO PMC CORPO-

RATION, DIC Investments Japan, LLC., DIC Graphics Corporation and 151 other companies in 2012 (153 in

2011). Foreign consolidated subsidiaries are included on the basis of fi scal years ending on December 31. All

signifi cant intercompany balances and transactions have been eliminated in consolidation. All material unreal-

ized profi t included in assets resulting from transactions within the Company and its consolidated subsidiaries

is eliminated.

Investments in 29 affi liates in 2012 (30 in 2011) are accounted for by the equity method.

Cash and cash equivalents:

Cash and cash equivalents consist primarily of cash on hand, certifi cates of deposit and short-term investments

with original maturities of three months or less that are readily convertible to known amounts of cash and

have insignifi cant risk of changes in value.

Investment securities:

Investment securities are classifi ed and accounted for, depending on management’s intent, into available-for-

sale securities. Available-for-sale securities are carried at fair value as of the balance sheet date, with unreal-

ized gain and loss, net of applicable taxes, reported in a separate component of net assets. Available-for-sale

securities whose fair values are not readily available are carried at cost. The cost of securities sold is determined

based on the moving-average method.

Allowance for doubtful accounts:

Allowance for doubtful accounts of the Company and its domestic consolidated subsidiaries is provided based

on historical experience for normal receivables and on an estimate of collectibility of receivables from compa-

nies in fi nancial diffi culty.

Allowance for doubtful accounts of foreign consolidated subsidiaries is provided based on an estimate of

collectibility of receivables.

Inventories:

Inventories of the Company and its domestic consolidated subsidiaries are principally stated at cost, cost being

determined by the gross average method, which evaluates the amount of the inventories shown on the bal-

ance sheet by writing them down based on their decrease in profi tability.

Inventories of foreign consolidated subsidiaries are principally stated at the lower of cost or market, cost be-

ing determined by the fi rst-in, fi rst-out method.

Note 2:

Summary of Signifi cant Accounting Policies

DIC Corporation and Consolidated SubsidiariesYears ended March 31, 2012 and 2011


Property, plant and equipment:

Property, plant and equipment is carried at cost. Signifi cant renewals and additions are capitalized; mainte-

nance and repairs, and minor renewals and improvements, are charged to income as incurred.

Depreciation of buildings (other than fi xtures) of the Company and its domestic consolidated subsidiaries is

calculated principally by the straight-line method and other property, plant and equipment is calculated by the

declining-balance method.

Depreciation of property, plant and equipment of foreign consolidated subsidiaries is calculated principally

by the straight-line method. The range of useful lives is principally from 8 to 50 years for buildings and struc-

tures and from 3 to 11 years for machinery, equipment and vehicles.

Intangible assets:

Intangible assets are carried at cost less accumulated amortization, which are amortized by the straight-line

method. Goodwill is amortized by the straight-line method within a 20-year period.

Leased assets:

Under accounting standards generally accepted in Japan, leased assets related to fi nance leases that do not

transfer ownership of the leased property to the lessee are depreciated on a straight-line basis, with the lease

periods used as their useful lives and no residual value. The accounting treatment for fi nance leases that do

not transfer ownership of the leased property to the lessee which took place before March 31, 2008, contin-

ues to be accounted for in accordance with the method used for operating lease transactions.

Foreign consolidated subsidiaries account for lease transactions in accordance with either the generally ac-

cepted accounting principles in the United States or the International Financial Reporting Standards.

Provision for loss on disaster:

Provision for loss on disaster is provided based on the estimated future restoration expenses resulting from the

Great East Japan Earthquake which occurred on March 11, 2011.

Provision for retirement benefi ts:

Provision for employees’ and executive offi cers’ retirement benefi ts of the Company and its domestic consoli-

dated subsidiaries is provided based on the retirement benefi t obligations and the fair value of pension plan

assets as of the balance sheet date. Actuarial gain and loss is amortized in the succeeding year primarily by the

straight-line method over stated years that do not exceed the average remaining service period of the eligible

employees (14–16 years).

Provision for employees’ retirement benefi ts of foreign consolidated subsidiaries is accounted for in accor-

dance with either the generally accepted accounting principles in the United States or the International Finan-

cial Reporting Standards.

Asset retirement obligations:

The asset retirement obligation is recognized as the sum of the discounted cash fl ows required for the future

asset retirement and is recorded in the period in which the obligation is incurred if a reasonable estimate can

be made. If a reasonable estimate of the asset retirement obligation cannot be made in the period in which

the asset retirement obligation is incurred, the liability should be recognized when a reasonable estimate of

the asset retirement obligation can be made. Upon initial recognition of a liability for an asset retirement ob-

ligation, an asset retirement cost is capitalized by increasing the carrying amount of the related fi xed asset by

the amount of the liability. The asset retirement cost is subsequently allocated to expense through depreciation

over the remaining useful life of the asset. Over time, the liability is accreted to its present value each period.

Any subsequent revisions to the timing or the amount of the original estimate of undiscounted cash fl ows are

refl ected as an increase or a decrease in the carrying amount of the liability and the capitalized amount of the

related asset retirement cost.

Income taxes:

The provision for income taxes is computed based on the pretax income (loss) included in the consolidated

statements of income.

Deferred income taxes are recorded to refl ect the impact of temporary differences between assets and liabili-

ties recognized for fi nancial reporting purposes and such amounts recognized for tax purposes. These deferred

taxes are measured by applying currently enacted tax laws to the temporary differences.


(Additional Information)

Application of consolidated taxation system:

The Company and certain of its domestic subsidiaries have been approved by the Commissioner of the National

Tax Agency regarding the application of the consolidated taxation system from the year ending March 31,

2013. Therefore, effective the fi scal year ended March 31, 2012, related accounting procedures have been

based on the “Practical Solution on Tentative Treatment of Tax Effect Accounting under Consolidated Taxation

System (Part 1)” (PITF No.5 of March 18, 2011) and the “Practical Solution on Tentative Treatment of Tax Effect

Accounting under Consolidated Taxation System (Part 2)” (PITF No.7 of June 30, 2010).

Research and development costs:

Research and development costs are charged to income as incurred.

Basis of translation of fi nancial statements of foreign consolidated subsidiaries:

The fi nancial statements of foreign consolidated subsidiaries included in the consolidated fi nancial statements

are translated into Japanese yen based on the following procedures:

(1) Assets and liabilities of foreign consolidated subsidiaries are translated into Japanese yen at the exchange

rates as of the balance sheet date.

(2) Income and expenses are translated into Japanese yen at the average rate during the year.

The differences of translation are included in foreign currency translation adjustment and minority interests,

which are presented as separate components of net assets.

Translation of foreign currency accounts:

Receivables and payables denominated in foreign currencies are translated into Japanese yen at the exchange

rates as of the balance sheet date and any difference arising from the translation is recognized in the consoli-

dated statements of income if hedge accounting is not applied.

Derivatives and hedging activities:

To hedge risks associated with the fl uctuations of exchange rates, interest rates and commodity prices, the

Company and its consolidated subsidiaries use foreign currency forward contracts, currency options and

swaps, interest rate options and swaps, and commodity swaps. To hedge a part of the risks associated with

the fl uctuations of exchange rates for investments in foreign entities, the Company uses loans denominated in

foreign currencies. The Company and its consolidated subsidiaries do not enter into derivatives for trading or

speculative purposes.

Derivative fi nancial instruments and foreign currency transactions are classifi ed and accounted for as fol-

lows: 1) all derivatives are recognized as either assets or liabilities and measured at fair value, with gains or

losses recognized in the consolidated statements of income, and 2) for derivatives used for hedging purposes,

if derivatives qualify for hedge accounting because of high correlation and effectiveness between the hedg-

ing instruments and the hedged items, gains or losses on derivatives are deferred until maturity of the hedged

transactions.

Receivables and payables denominated in foreign currencies are translated at the contracted rates if the

forward contracts qualify for hedge accounting. Gains and losses related to qualifying hedges of fi rm commit-

ments or anticipated transactions are deferred and recognized in income when the hedged transaction occurs.

If interest rate swaps qualify for hedge accounting and meet certain specifi c matching criteria, they will not be

measured at market value, rather the differential paid or received under the swap agreements will be recog-

nized in interest expenses or interest income.

Per share information:

Basic earnings per share is computed by dividing net income available to common shareholders by the

weighted-average number of common shares outstanding for the period, retroactively adjusted for stock splits.

Diluted earnings per share refl ects the potential dilution that could occur if securities were exercised or

converted into common stock. Diluted earnings per share of common stock assumes full conversion of the

outstanding convertible notes and bonds at the beginning of the year (or at the time of issuance) with an

applicable adjustment for related interest expense, net of tax, and full exercise of outstanding warrants.

Cash dividends per share presented in the accompanying consolidated statements of income are dividends

applicable to the respective years, including dividends to be paid after the end of the year.

35

Prior to April 1, 2011, “Accounts payable–other” was included in “Other” among current liabilities on the

consolidated balance sheets. Since during this fi scal year ended March 31, 2012, the amount exceeded fi ve-

hundredths of the total amounts of liabilities and net assets on the consolidated balance sheets, such amount

was disclosed separately in current liabilities on the consolidated balance sheets as of March 31, 2012. Due to

the change in presentation, the consolidated balance sheets as of March 31, 2011 were reclassifi ed.

The amount included in “Other” as of March 31, 2011 that was ¥61,511 million, was separated into

¥30,485 million in “Accounts payable–other” and ¥31,026 million in “Other.”

Accounting changes and error corrections:

The Company has applied the “Accounting Standard for Accounting Changes and Error Corrections” (ASBJ

Statement No.24 of December 4, 2009) and the “Guidance on Accounting Standard for Accounting Changes

and Error Corrections” (ASBJ Guidance No.24 of December 4, 2009) to accounting changes and corrections of

prior errors which are made after the beginning of the fi scal year beginning on or after April 1, 2011.

Note 3:

Changes in Presentation

Note 4:

Additional Information

Cash and cash equivalents as of March 31, 2012 and 2011 include the following:Millions of yen

2012 2011

Cash and deposits ¥29,695 ¥22,957

Less: time deposits and short-term investments which mature over three months after the date of acquisition

(103) (73)

Cash and cash equivalents ¥29,592 ¥22,884

Note 5:

Cash and Cash Equivalents

Note 6:

Investments in Unconsolidated Subsidiaries and Affi liates

Investments in unconsolidated subsidiaries and affi liates as of March 31, 2012 and 2011 include the following:Millions of yen

2012 2011

Investments in stock of unconsolidated subsidiaries and affi liates ¥20,649 ¥19,417

Investments in equity of unconsolidated subsidiaries and affi liates 869 862

Total ¥21,518 ¥20,279

Notes to the Consolidated Financial Statements

The carrying amounts and aggregate fair values of available-for-sale securities at March 31, 2012 and 2011

are as follows:Millions of yen

2012

CostUnrealized

gainsUnrealized

losses Fair value

Available-for-sale securities:

Stocks ¥7,703 ¥1,061 ¥(1,630) ¥7,134

Total ¥7,703 ¥1,061 ¥(1,630) ¥7,134

Millions of yen2011

CostUnrealized

gainsUnrealized

losses Fair value

Available-for-sale securities:

Stocks ¥7,358 ¥1,533 ¥(1,590) ¥7,301

Total ¥7,358 ¥1,533 ¥(1,590) ¥7,301

Note 7:

Investment Securities

36

Accumulated depreciation on property, plant and equipment as of March 31, 2012 and 2011 is ¥474,580 mil-

lion and ¥496,923 million, respectively.

Note 8:

Property, Plant and Equipment


Impairment losses on long-lived assets for the years ended March 31, 2012 and 2011 for each asset group is

as follows:Millions of yen

2012Used status Category of assets Location Allocated impairment loss

Goodwill Goodwill Europe ¥493Factory assets in use Machineries, buildings and other China 293Others Machineries and other China and other 45Total ¥831

Millions of yen2011

Used status Category of assets Location Allocated impairment loss

Factory assets in use Machineries, buildings and other China ¥658

Idle assets Buildings, machineries and other Saitama, Japan 174

Total ¥832

All of the book value of goodwill has been recognized as impairment loss. The book values of factory assets

in use and others have been lowered to the recoverable amount.

Note 9:

Impairment of Long-Lived Assets

Information with respect to short-term loans payable at March 31, 2012 and 2011 is as follows:

The average interest rate for the years ended March 31, 2012 and 2011 is 1.40% and 1.48%, respectively,

for short-term loans payable, and 0.11% and 0.13%, respectively, for commercial papers.

Bonds payable, long-term loans payable and lease obligations at March 31, 2012 and 2011 comprise the

following:


1.14% Japanese yen notes due 2012 ¥ — ¥ 5,000

1.08% Japanese yen notes due 2013 5,000 5,000




0.81% Japanese yen notes due 2017 5,000 —


Loans due 2012–2025, with an average interest rate of 1.61% — 265,468

Loans due 2013–2025, with an average interest rate of 1.72% 237,427 —

Lease obligations 6,712 7,227

Subtotal 285,139 313,695

Less: current portion of long-term loans payable (36,426) (42,506)

Less: current portion of bonds (5,000) (5,000)

Less: lease obligations—current (690) (751)

Total ¥243,023 ¥265,438

Note 10:

Short-Term Loans Payable and Long-Term Loans Payable


The annual maturities of long-term loans payable, bonds payable and lease obligations for the years subse-

quent to March 31, 2012 are as follows:

Millions of yen

2013 ¥ 42,116

2014 50,053

2015 39,341

2016 55,063

2017 53,504

Thereafter 45,062

Total ¥285,139

The amounts of assets pledged as collateral and secured borrowings and loans at March 31, 2012 comprise

the following:

Millions of yen

Assets pledged as collateral:

Notes and accounts receivable—trade ¥2,645

Inventories 1,546

Property, plant and equipment 1,062

Total ¥5,253

Secured borrowings and loans:

Short-term loans payable ¥ 343

Current portion of long-term loans payable 166

Long-term loans payable 1,386

Total ¥1,895

The Company and a number of domestic consolidated subsidiaries have a cash balance-style pension plan and

defi ned benefi t pension and retirement plans. Some consolidated subsidiaries maintain defi ned benefi t pension

plans and defi ned contribution pension plans. The Company contributes certain available-for-sale securities to

the employee retirement benefi t trust.

The status of benefi t obligation, plan assets, unrecognized obligations and the amounts recognized in the

consolidated balance sheets as of March 31, 2012 and 2011 are as follows:

Millions of yen2012

Domestic plans Foreign plans

Projected benefi t obligation ¥(103,769) ¥(91,533)

Fair value of plan assets 90,762 62,936

Unfunded pension obligation (13,007) (28,597)

Unrecognized actuarial loss (Note) 26,535 36,217

Unrecognized prior service cost (Note) — 232

Additional minimum pension liabilities (Note) — (36,449)

Net accrued pension liabilities 13,528 (28,597)

Prepaid pension cost 14,858 21

Provision for retirement benefi ts ¥ (1,330) ¥(28,618)

Note 11:

Provision for Retirement Benefi ts


Millions of yen2011


Projected benefi t obligation ¥(107,733) ¥(84,447)

Fair value of plan assets 90,939 64,115

Unfunded pension obligation (16,794) (20,332)

Unrecognized actuarial loss (Note) 30,475 26,576

Unrecognized prior service cost (Note) — 343

Additional minimum pension liabilities (Note) — (26,919)

Net accrued pension liabilities 13,681 (20,332)

Prepaid pension cost 15,460 24

Provision for retirement benefi ts ¥ (1,779) ¥(20,356)

Note: Unrecognized actuarial loss and unrecognized prior service cost are recognized in net assets (accumulated other comprehensive income) with tax effect adjusted in accordance with U.S. GAAP.

The components of net periodic benefi t costs for the years ended March 31, 2012 and 2011 comprise the

following:Millions of yen

2012Domestic plans Foreign plans

Service cost ¥ 2,735 ¥ 526

Interest cost 2,341 4,413

Expected return on plan assets (2,595) (4,491)

Recognition of actuarial loss 3,712 771

Amortization of prior service cost — 71

Net periodic benefi t costs ¥ 6,193 ¥ 1,290

Millions of yen2011


Service cost ¥ 2,894 ¥ 615

Interest cost 2,465 4,799

Expected return on plan assets (2,654) (4,514)

Amortization of transitional obligation — 33

Recognition of actuarial loss 3,524 888

Amortization of prior service cost — 79

Net periodic benefi t costs ¥ 6,229 ¥ 1,900

Prior service cost, actuarial gain or loss, and transitional obligation are amortized or recognized over stated

years that do not exceed the average remaining service period of active employees expected to receive benefi ts

under the plan. Assumptions used for the years ended March 31, 2012 and 2011 are as follows:2012 2011

Domestic plans Foreign plans Domestic plans Foreign plans

Discount rate 2.1% 4.0%–5.9% 2.2% 4.3%–6.0%

Expected rate of return on plan assets 3.0% 3.3%–8.5% 3.0% 3.5%–8.5%

Amortization period of prior service cost 1 year 12–20 years 1 year 12–20 years

Recognition period of actuarial (gain) loss 14–16 years 11–21 years 14–16 years 11–21 years

Amortization period of transitional obligation 1 year 12–20 years 1 year 12–20 years


Japanese companies are subject to the Companies Act of Japan (the “Companies Act”). The signifi cant provi-

sions in the Companies Act that affect fi nancial and accounting matters are summarized below:

(a) Dividends

Under the Companies Act, companies can pay dividends at any time during the fi scal year in addition to the

year-end dividend upon resolution at the shareholders’ meeting. For companies that meet certain criteria such

as; (1) having the Board of Directors, (2) having independent auditors, (3) having the Board of Corporate Audi-

tors, and (4) the term of service of the directors is prescribed as one year rather than two years of normal term

by its articles of incorporation, the Board of Directors may declare dividends (except for dividends-in-kind) at

any time during the fi scal year if the Company has prescribed so in its articles of incorporation. The Company

meets all the above criteria.

The Companies Act permits companies to distribute dividends-in-kind (non-cash assets) to shareholders sub-

ject to a certain limitation and additional requirements.

Semiannual interim dividends may also be paid once a year upon resolution by the Board of Directors if the

articles of incorporation of the company so stipulate. The Companies Act provides certain limitations on the

amounts available for dividends or the purchase of treasury stock. The limitation is defi ned as the amount

available for distribution to the shareholders, but the amount of net assets after dividends must be maintained

at no less than ¥3 million.

(b) Increases/decreases and transfer of common stock, reserve and surplus

The Companies Act requires that an amount equal to 10% of dividends must be appropriated as a legal re-

serve (a component of retained earnings) or as additional paid-in capital (a component of capital surplus) de-

pending on the equity account charged upon the payment of such dividends until the total of the aggregate

amount of legal reserve and additional paid-in capital equals 25% of the common stock. Under the Companies

Act, the total amount of additional paid-in capital and legal reserve may be reversed without limitation. The

Companies Act also provides that common stock, legal reserve, additional paid-in capital, other capital surplus

and retained earnings can be transferred among the accounts under certain conditions upon resolution of the

shareholders.

(c) Treasury stock and treasury stock acquisition rights

The Companies Act also provides for companies to purchase treasury stock and dispose of such treasury stock

by resolution of the Board of Directors. The amount of treasury stock purchased cannot exceed the amount

available for distribution to the shareholders which is determined by specifi c formula.

Under the Companies Act, stock acquisition rights, which were previously presented as a liability, are now

presented as a separate component of equity.

The Companies Act also provides that companies can purchase both treasury stock acquisition rights and

treasury stock. Such treasury stock acquisition rights are presented as a separate component of equity or de-

ducted directly from stock acquisition rights.

Note 12:

Net Assets

Total amount of capital stock authorized as of March 31, 2012 and 2011 is 1,500,000,000 shares.

Total amount of capital stock issued as of March 31, 2012 and 2011 is 919,372,048 shares.

Note 13:

Capital Stock

Treasury stock as of March 31, 2012 and 2011 amounted to 1,884,166 shares and 1,862,844 shares, respectively.

Note 14:

Treasury Stock

40

The differences between the normal effective statutory tax rate in Japan and the actual effective tax rate for

the years ended March 31, 2012 and 2011 are as follows:

2012 2011

Normal effective statutory tax rate in Japan 40.7% 40.7%

Adjustments:

Valuation allowance change 7.0% (2.4)%

Tax rate differences (9.3)% (9.6)%

Equity in earnings of affi liates (4.0)% (3.3)%

Tax on non-deductible expenses such as meals and entertainment 2.0% 2.8%

Elimination of intercompany dividend income 14.3% 15.7%

Non-taxable dividends from domestic companies (12.5)% (13.0)%

State, provincial, municipal and local taxes 1.1% 0.3%

Tax credit for R&D and others (3.4)% —

Adoption of FIN48 (4.6)% 0.9%

Exclusion of subsidiaries and affi liates from consolidation 1.0% 1.8%

Unrealized gain (1.0)% —

Other (3.8)% (2.0)%

Actual effective tax rate 27.5% 31.9%

The tax effects of signifi cant temporary differences and loss carryforwards, which resulted in deferred tax as-

sets and liabilities, as of March 31, 2012 and 2011 are as follows:


Deferred tax assets:

Inventories ¥ 3,922 ¥ 4,855

Property, plant and equipment 4,932 3,199

Allowance for doubtful accounts 1,137 1,105

Provision for retirement benefi ts 13,444 11,343

Restructuring and divestitures 1,671 2,298

Unrealized gain 1,244 902

Net operating loss carryforwards 26,144 26,885

Other 26,570 25,414

Subtotal 79,064 76,001

Less: valuation allowance (20,152) (18,113)

Total 58,912 57,888

Deferred tax liabilities:

Deferred income taxes related to gains from property, plant and equipment (4,437) (5,323)

Property, plant and equipment (7,817) (7,803)

Contribution of securities to retirement benefi t trust (1,966) (2,248)

Other (2,319) (1,869)

Total (16,539) (17,243)

Net deferred tax assets ¥ 42,373 ¥ 40,645

Infl uence from Changes in Corporation Tax Rate

The “Act for Partial Revision of the Income Tax Act etc. for the Purpose of Creating Taxation System Respond-

ing to Changes in Socio-Economic Structures” (Act No.114 of 2011) and the “Act on Special Measures for

Securing Financial Resources Necessary to Implement Measures for Reconstruction following the Great East Ja-

pan Earthquake” (Act No.117 of 2011) were promulgated on December 2, 2011. The Corporation tax rate will

be lowered from the fi scal year beginning April 1, 2012 and a special recovery tax will be implemented.

Accordingly, the effective tax rate for the calculation of deferred tax assets and deferred tax liabilities will be

lowered from 40.7% to 38.0% for temporary differences expected to be utilized up to the fi scal year ending

Note 15:

Income Taxes


41

March 31, 2015 and to 35.6% for fi scal years ending March 31, 2016 and onwards.

As a result of these changes, income taxes–deferred (debit) recognized in the fi scal year ended March 31,

2012 increased by ¥18 million, deferred tax assets as of March 31, 2012 decreased by ¥382 million, deferred

tax liabilities as of March 31, 2012 decreased by ¥315 million, valuation difference on available-for-sale securi-

ties (credit) decreased by ¥32 million and deferred gains or losses on hedges (credit) decreased by ¥17 million,

respectively.


Research and development costs charged to income for the years ended March 31, 2012 and 2011 are ¥9,100

million and ¥11,023 million, respectively.

Note 16:

Research and Development Costs

(1) Finance leases that do not transfer ownership of the leased property to the lessee

As described in Note 2, leased assets related to fi nance leases that do not transfer ownership of the leased

property to the lessee are depreciated on a straight-line basis, with the lease periods used as their useful lives

and no residual value. The accounting treatment for fi nance leases that do not transfer ownership of the

leased property to the lessee which took place before March 31, 2008 continues to be accounted for as op-

erating leases under the accounting standard in Japan. Lease payments under the above leases for the years

ended March 31, 2012 and 2011 are ¥612 million and ¥1,061 million, respectively.

Pro forma information for such fi nance leases for the years ended March 31, 2012 and 2011 is as follows:Millions of yen

2012Machinery,

equipment and vehicles

Tools, furniture and fi xtures Other Total

Balances at year-end:

Acquisition cost ¥ 2,317 ¥ 490 ¥ 53 ¥ 2,860

Accumulated depreciation (1,828) (421) (48) (2,297)

Net leased property ¥ 489 ¥ 69 ¥ 5 ¥ 563

Millions of yen2011

Machinery, equipment and

vehiclesTools, furniture

and fi xtures Other Total

Balances at year-end:

Acquisition cost ¥ 3,876 ¥1,102 ¥ 148 ¥ 5,126

Accumulated depreciation (2,729) (858) (129) (3,716)

Net leased property ¥ 1,147 ¥ 244 ¥ 19 ¥ 1,410

Note: In addition, there is an accumulated impairment loss of ¥134 million related to “Machinery, equipment and vehicles.”


Present value of future minimum lease payments:

Due within one year ¥370 ¥ 647

Due after one year 261 727

Total ¥631 ¥1,374

Note 17:

Leases



Present balance of allowance for impairment loss on leased property ¥82 ¥134


Depreciation expense ¥558 ¥974

Interest expense 27 56

Reversal of allowance for impairment loss on leased property 52 52

In estimating the above summarized pro forma lease information, depreciation is computed by the straight-

line method over the lease term, and interest expense is computed by the interest method.

(2) Operating leases

Future minimum rental payments under non-cancellable operating leases at March 31, 2012 and 2011 are as

follows:


Due within one year ¥1,789 ¥2,031 Due after one year 6,356 6,980 Total ¥8,145 ¥9,011

Note 18:

Financial Instruments

Group policy for fi nancial instruments

The Company and its consolidated subsidiaries are managing funds with safe and secure fi nancial assets.

Means of fi nancings include direct fi nancing such as the issuance of bonds and commercial papers and liquida-

tion of receivables, as well as indirect fi nancing such as short-term and long-term bank borrowings, the terms

of which are determined based on fi nancial market conditions and balance of account at the time.

Nature and extent of risks arising from fi nancial instruments

Receivables such as notes and accounts receivable–trade are exposed to customer credit risk. In addition, some

of such receivables are denominated in foreign currencies and are exposed to the market risk of fl uctuation

in foreign currency exchange rates. Investment securities, mainly the stocks of customers and suppliers, are

exposed to the risk of market price fl uctuations. Long-term loans receivable, mainly the loans receivable from

customers, are exposed to the credit risk arising from default of contract.

Payment terms of payables, such as notes and accounts payable–trade, are less than one year. In addition,

some of such payables for the import of raw materials, etc., are denominated in foreign currencies and are ex-

posed to the market risk of fl uctuation in foreign currency exchange rates.

Funds needed for operations are mainly procured as short-term loans payable, whereas funds needed for

capital expenditure and investment are mainly procured as long-term loans payable, bonds payable and lease

obligations with regard to fi nance lease transactions. A part of such bank loans, bonds and lease obligations

are exposed to market risks from changes in variable interest rates. Trade accounts payable and loans payable

of the Company are also exposed to liquidity risk that the Company cannot meet its contractual obligations in

full on maturity dates.

Risk management for fi nancial instruments

The Company manages its credit risk from trade notes and accounts receivable and long-term loans receivable

on the basis of internal guidelines, which include the monitoring of payment terms and balances of custom-

ers by sales and business administration department to identify the default risk of customers at an early stage.

As for the consolidated subsidiaries of the Company, they manage the exposure to credit risk on their own in

accordance with their internal guidelines. The Company and its consolidated subsidiaries also try to mitigate

liquidity risk by arranging lines of credit with fi nancial institutions, along with adequate fi nancial planning.


Fair value of fi nancial instruments

The following tables present the carrying amounts and the fair value of fi nancial instruments at March 31, 2012

and 2011. Financial instruments whose fair value is not reliably measured are excluded from the table below.Millions of yen

2012Carrying amount Fair value Difference

Assets:

Cash and deposits ¥ 29,695 ¥ 29,695 ¥ —

Notes and accounts receivable—trade 173,599 173,599 —

Investment securities

Stocks of subsidiaries and affi liates 4,440 4,600 160

Other 7,134 7,134 —

Long-term loans receivable 540

Allowance for doubtful accounts (Note 1) (110)

430 431 1

Total ¥215,298 ¥215,459 ¥161

Liabilities:

Notes and accounts payable—trade ¥109,754 ¥109,754 ¥ —

Short-term loans payable 32,341 32,341 —

Current portion of long-term loans payable 36,426 36,662 236

Commercial papers 11,000 11,000 —

Current portion of bonds 5,000 5,004 4

Lease obligations (current) 690 690 —

Accounts payable—other 38,358 38,358 —

Income taxes payable 5,746 5,746 —

Bonds payable 36,000 36,746 746

Long-term loans payable 201,001 203,742 2,741

Lease obligations (non-current) 6,022 6,081 59

Total ¥482,338 ¥486,124 ¥3,786

Derivative fi nancial instruments: (Note 2)

Hedge accounting—Not applied ¥ 594 ¥ 594 ¥—

Hedge accounting—Applied (832) (832) —

Total ¥(238) ¥(238) ¥—


Millions of yen2011

Carrying amount Fair value Difference

Assets:

Cash and deposits ¥ 22,957 ¥ 22,957 ¥ —

Notes and accounts receivable—trade 185,391 185,391 —


Stocks of subsidiaries and affi liates 4,185 2,958 (1,227)

Other 7,301 7,301 —

Long-term loans receivable 571

Allowance for doubtful accounts (Note 1) (122)

449 448 (1)

Total ¥220,283 ¥219,055 ¥(1,228)

Liabilities:

Notes and accounts payable—trade ¥121,224 ¥121,224 ¥ —

Short-term loans payable 23,951 23,951 —

Current portion of long-term loans payable 42,506 42,605 99

Current portion of bonds 5,000 5,031 31

Income taxes payable 3,539 3,539 —

Lease obligations (current) 751 751 —

Bonds payable 36,000 36,959 959

Long-term loans payable 222,962 225,883 2,921

Lease obligations (non-current) 6,476 6,476 —

Total ¥462,409 ¥466,419 ¥4,010

Derivative fi nancial instruments: (Note 2)

Hedge accounting—Not applied ¥ (87) ¥ (87) ¥—

Hedge accounting—Applied (469) (469) —

Total ¥(556) ¥(556) ¥—

Notes: 1. Allowance for doubtful accounts taken for long-term loans receivable is subtracted. 2. Figures are net of debts and credits that arise from derivative fi nancial instruments. Net debt amounts are indicated in parentheses.

The valuation techniques used to estimate the fair value of fi nancial instruments, and information of the

marketable securities and derivative fi nancial instruments are as follows:

Assets

Cash and deposits, and notes and accounts receivable–trade

The fair value of cash and deposits and notes and accounts receivable–trade approximates their carrying

amounts as these amounts are settled in a short period of time.


The fair value of investment securities is measured at the quoted market price on the stock exchange.

Long-term loans receivable

Long-term loans receivable mainly consists of the accounts receivable from customers. The fair value of long-

term loans receivable is determined by discounting the cash fl ows related to the loans. The discount rate ap-

plied for the calculation above is estimated by adding a credit risk spread to the appropriate risk-free rate, such

as the rate of return for government bonds.

Liabilities

Notes and accounts payable–trade, short-term loans payable, commercial papers, accounts

payable–other and income taxes payable

The fair value of these accounts approximates their carrying amounts as these amounts are settled in a short

period of time.


Current portion of long-term loans payable, and long-term loans payable

The fair value of long-term loans payable for which a fl oating interest rate is applied approximates its carry-

ing amount, due to the fact that the market rate of interest is quickly factored in while the credit status of the

Company remains unchanged. On the other hand, the fair value of long-term loans payable for which a fi xed

interest rate is applied is determined by discounting the cash fl ows related to the long-term loans payable. The

discount rate applied for the calculation above is the interest rate that may be currently available to the Group

for loans payable with similar terms and conditions.

Current portion of bonds, and bonds payable

As for bonds payable which has observable market prices, the fair value is measured using the quoted market

prices. For those with no market prices, the fair value is determined by discounting the cash fl ows related to

the bond or by using the quoted price obtained from the fi nancial institutions. The discount rate applied for

the calculation above is the interest rate that may be currently available to the Group for bonds payable with

similar terms and conditions.

Lease obligations (current), and lease obligations (non-current)

The fair value of these accounts is determined by discounting the cash fl ows related to the lease obligations.

The discount rate applied for the calculation above is the interest rate that may be currently available to the

Group for lease obligations with similar terms and conditions.

Derivative fi nancial instruments

Please see Note 19 “Derivative Financial Instruments” for more information.

Financial instruments whose fair value is not reliably measured

There are no market prices for non-listed stocks and others (carrying amount of ¥19,958 million) whose future

cash fl ows cannot be estimated. The fair value of such non-listed stocks and others is not reliably determinable

and thus is excluded from “Investment securities.”

Redemption schedule for fi nancial assets and securities

The redemption schedules for fi nancial assets and securities with contractual maturities as of March 31, 2012

and 2011 are summarized as follows:Millions of yen

2012

1 year or lessMore than 1 year

but less than 5 yearsMore than 5 years

but less than 10 yearsMore than

10 years

Notes and accounts receivable—trade ¥173,599 ¥ — ¥ — ¥ —


Investment securities with contractual maturities

Bonds (government bonds and local securities, etc.)

2 — — —

Long-term loans receivable — 419 15 106

Total ¥173,601 ¥419 ¥15 ¥106

Millions of yen2011




10 years

Notes and accounts receivable—trade ¥185,390 ¥ 1 ¥ — ¥ —


Investment securities with contractual maturities

Bonds (government bonds and local securities, etc.)

2 2 — —

Long-term loans receivable — 461 72 38

Total ¥185,392 ¥464 ¥72 ¥38


The Company and its consolidated subsidiaries have entered into various foreign currency forward contracts,

currency option and swap agreements, interest rate option and swap agreements, and commodity swap

agreements.

Foreign currency forward contracts and currency option and swap agreements are entered into to hedge

the effects of exchange rate changes on receivables and payables or anticipated transactions denominated in

foreign currencies. Interest rate option and swap agreements are entered into to hedge the effects of interest

rate changes and to reduce fi nancing cost. Commodity swap agreements are entered into to hedge the effects

of commodity price changes of fuel. Loans denominated in foreign currencies are entered into to hedge a part

of risks associated with the fl uctuations of exchange rate for investments to foreign entities.

The Company and its consolidated subsidiaries do not use derivative instruments for trading or speculative

purposes. Derivative transactions performed by the Company and its consolidated subsidiaries have risks due

to fl uctuations of exchange rates, interest rates and other factors.

Because these transactions are executed with creditworthy fi nancial institutions, the Company and its con-

solidated subsidiaries do not anticipate the likelihood of any losses resulting from default by the counterparties

to these agreements.

Internal regulation for managing derivative transactions has been established for the purpose of risk control

in the Company, and all derivative transactions are performed under this regulation.

The execution of derivative transactions is carried out by the Company’s Finance Department, and the man-

agement of risk is monitored by the Company’s Accounting Department. Transactions are periodically reported

to the Board of Directors by the Director who is in charge of the Company’s Accounting Department.

Consolidated subsidiaries execute transactions in accordance with their regulations for derivative manage-

ment and periodically report the results of those transactions to the Company.

Note 19:

Derivative Financial Instruments

Repayment schedule for bonds payable, long-term loans payable and other interest-bearing debt

The repayment schedules for bonds payable, long-term loans payable and other interest-bearing debt with

contractual maturities as of March 31, 2012 and 2011 are summarized as follows:Millions of yen

2012




10 years

Short-term loans payable ¥32,341 ¥ — ¥ — ¥ —

Current portion of long-term loans payable 36,426 — — —

Commercial papers 11,000 — — —

Current portion of bonds 5,000 — — —

Lease obligations (current) 690 — — —

Bonds payable — 16,000 — 20,000

Long-term loans payable — 179,885 21,114 2

Lease obligations (non-current) — 2,076 1,830 2,116

Total ¥85,457 ¥197,961 ¥22,944 ¥22,118

Millions of yen2011




10 years

Short-term loans payable ¥23,951 ¥ — ¥ — ¥ —

Current portion of long-term loans payable 42,506 — — —

Current portion of bonds 5,000 — — —

Lease obligations (current) 751 — — —

Long-term loans payable — 172,132 50,712 118

Bonds payable — 13,000 3,000 20,000

Lease obligations (non-current) — 2,255 1,847 2,374

Total ¥72,208 ¥187,387 ¥55,559 ¥22,492


Derivative transactions to which hedge accounting is not applied at March 31, 2012 and 2011.

(1) Currency-relatedMillions of yen

2012

Contract/Notional amount

Contract/Notional amount due after

one year Fair valueUnrealized

gain/loss

Currency options: (Note 1)

Selling

Euro ¥ 3,396 ¥— ¥202 ¥(207)

GB Pound 452 — 19 (20)

Buying

Euro 4,685 — 168 172

U.S.$ 4,464 — 153 157

Foreign currency forward contracts: (Note 2)

Selling

Canadian $ 1,867 — (31) 32

Other 771 — (5) 6

Buying

Euro 2,947 — 220 226

U.S.$ 685 — 22 22

Other 447 — 20 20

Total ¥19,714 ¥— ¥768 ¥ 408

Millions of yen2011



one year Fair valueUnrealized

gain/loss

Currency options: (Note 1)

Selling

Euro ¥10,723 ¥— ¥221 ¥(238)

GB Pound 1,327 — (32) 34

Buying

Euro 7,080 — 192 206

U.S.$ 4,208 — (2) (3)


Selling

Canadian $ 2,183 — (26) 28

Buying

Euro 832 — (58) (62)

U.S.$ 1,468 — (24) (24)

Other 492 — 55 60

Total ¥28,313 ¥— ¥326 ¥ 1

Notes: 1. The fair value of currency options is measured using the quoted price obtained from the fi nancial institutions. Currency options used are called collar options, which effectively limit the risk arising from the changes in exchange rates by the combination of buying call options and selling put options, or selling call options and buying put options.

2. The fair value of foreign currency forward contracts is measured using the forward quotation.


(2) Interest-relatedMillions of yen

2012


Contract/Notional amount due

after one year Fair valueUnrealized

gain/loss

Interest rate options: (Notes 1 and 2)

Buying ¥15,088 ¥— ¥(181) ¥219

Total ¥15,088 ¥— ¥(181) ¥219

Millions of yen2011


Contract/Notional amount due

after one year Fair valueUnrealized

gain/loss

Interest rate options: (Notes 1 and 2)

Buying ¥16,346 ¥16,346 ¥(413) ¥46

Total ¥16,346 ¥16,346 ¥(413) ¥46

Notes: 1. The fair value of interest rate options is measured using the quoted price obtained from the fi nancial institutions. 2. Interest rate options used are called collar options, which effectively limit the risk arising from the changes in interest rates by the

combination of buying call options and selling put options.

Derivative transactions to which hedge accounting is applied at March 31, 2012 and 2011.

(1) Currency-relatedMillions of yen

Hedged item

2012

Contract/Notionalamount


one year Fair value

Currency swaps: (Note 1)

(Payment in Singapore $ and receipt in U.S.$)

Long-term loans payable

¥1,302 ¥1,302 ¥(23)


Selling

U.S.$ Forecast transaction

4,018 — 60

Euro 133 — 6


Selling

U.S.$ Accounts receivable—trade

2,932 —

Euro 343 —

Total ¥8,728 ¥1,302 ¥ 43


Millions of yen

Hedged item

2011



one year Fair value

Currency swaps: (Note 1)

(Payment in Singapore $ and receipt in U.S.$)


¥1,394 ¥1,394 ¥ 1


Selling

U.S.$

Forecast transaction

3,208 — 35

Euro 135 — (3)

Buying

Euro 79 — 4


Selling

U.S.$ Accounts receivable—trade, loans receivable

4,454 —

Euro 376 —

Total ¥9,646 ¥1,394 ¥37

Notes: 1. The fair value of currency swaps and foreign currency forward contracts is measured using the quoted price obtained from the fi nancial institutions.

2. Exchange contracts appropriated to specifi c debts and credits are settled together with either accounts receivable–trade or loans re-ceivable subject to hedged transaction. Accordingly, the fair value of such exchange contracts is refl ected in the accounts receivable–trade or loans receivable.

(2) Interest-relatedMillions of yen

Hedged item

2012



one year Fair valueInterest rate swaps: (Note 1)

(Fixed rate payment, fl oating rate receipt)Bonds payable ¥ 20,000 ¥ 20,000 ¥(353)

Interest rate options: (Note 2) Buying


12,591 12,591 (377)

Interest rate swaps: (Note 3)

(Fixed rate payment, fl oating rate receipt)

(Floating rate payment, fl oating rate receipt)

Bonds payable, Long-term loans payable

84,210 8,500

70,210 8,500

Total ¥125,301 ¥111,301 ¥(730)

Millions of yen

Hedged item

2011



one year Fair valueInterest rate swaps: (Note 1)

(Fixed rate payment, fl oating rate receipt)Bonds payable ¥ 20,000 ¥ 20,000 ¥(345)

Interest rate options: (Note 2) Buying


8,118 8,118 (115)

Interest rate swaps: (Note 3)

(Fixed rate payment, fl oating rate receipt)

(Floating rate payment, fl oating rate receipt)

Bonds payable, Long-term loans payable

108,900

8,500

80,100

8,500 Total ¥145,518 ¥116,718 ¥(460)

Notes: 1. The fair value of interest rate swaps is measured using the quoted price obtained from the fi nancial institutions. 2. Interest rate options used are called collar options, which effectively limit the risk arising from the changes in interest rates by the

combination of buying call options and selling put options. 3. If interest rate swaps qualify for hedge accounting, and meet certain specifi c criteria, they are settled together with either bonds

payable or long-term loans payable subject to hedged transaction. Accordingly, the fair value of such interest rate swaps is refl ected in the account of bonds payable and long-term loans payable.

50

Contingent liabilities at March 31, 2012 are as follows:

Millions of yen2012

Trade notes discounted with banks ¥ 8

Trade notes endorsed 109

Liabilities for guarantee 1,126

Agreements which require the Company to submit guarantees to bank facilities 30

Total ¥1,273

In the opinion of management, the eventual settlement of pending lawsuits in which the Company or any of

its consolidated subsidiaries is the defendant will not have a material effect on the consolidated fi nancial posi-

tion or consolidated results of operations of the Company and its consolidated subsidiaries.

Note 20:

Commitments and Contingent Liabilities


(3) Commodity-relatedMillions of yen

Hedged item

2012



one year Fair valueCommodity swaps: (Note)

(Fixed price payment, fl oating price receipt)Fuel ¥161 ¥42 ¥(51)

Total ¥161 ¥42 ¥(51)

Millions of yen

Hedged item

2011



one year Fair valueCommodity swaps: (Note)

(Fixed price payment, fl oating price receipt)Fuel ¥254 ¥83 ¥(46)

Total ¥254 ¥83 ¥(46)

Note: The fair value of commodity swaps is measured using the quoted price obtained from the exchange.


(1) At the Company’s annual meeting of shareholders held on June 22, 2012, the shareholders approved the

following appropriations of retained earnings:

Millions of yen

Cash dividends, ¥2.00 per share ¥1,835

Total ¥1,835

(2) There were no important events to be reported subsequent to the year ended March 31, 2012.

Note 22:

Subsequent Events

(1) Segment information

Description of reportable segments

The reportable segments of the Group are components for which discrete fi nancial information is available and

whose operating results are regularly reviewed by the Board of Directors to evaluate their performance and de-

termine the allocation of management resources.

The Group has product-oriented business operations organized at its headquarters. Each business operation

develops comprehensive strategy and conducts business both in domestic and overseas markets.

Businesses of the Group are segmented into four reportable segments, namely “Printing Inks & Supplies,”

“Neo-Graphic Arts Materials,” “Synthetic Resins” and “Chemical Solution Materials,” based on the features of

products and services.

Note 23:

Segment Information

Each component of other comprehensive income and related tax effects (including those on minority interests)

for the year ended March 31, 2012 comprises the following:

Millions of yen2012

Valuation difference on available-for-sale securities:

Gains (losses) arising during the year ¥ (474)

Reclassifi cation adjustments to profi t or loss (38)

Amount before income tax effect (512)

Income tax effect 168

Total (344)

Deferred gains or losses on hedges:

Gains (losses) arising during the year (88)

Reclassifi cation adjustments to profi t or loss (275)

Amount before income tax effect (363)

Income tax effect 87

Total (276)

Pension liabilities adjustments:

Adjustments arising during the year (10,371)

Reclassifi cation adjustments to profi t or loss 841

Amount before income tax effect (9,530)

Income tax effect 3,302

Total (6,228)

Foreign currency translation adjustment:

Adjustments arising during the year (12,685)

Reclassifi cation adjustments to profi t or loss 19

Amount before income tax effect (12,666)

Income tax effect —

Total (12,666)

Share of other comprehensive income of associates accounted for using equity method

Gains (losses) arising during the year (1,141)

Total other comprehensive income ¥(20,655)

Note 21:

Other Comprehensive Income

52

“Printing Inks & Supplies” consists of printing inks and printing supplies. “Neo-Graphic Arts Materials” con-

sists of organic pigments, imaging and reprographic products, and liquid crystal materials. “Synthetic Resins”

consists of synthetic resins and additives and chemicals. “Chemical Solution Materials” consists of special com-

pounds and colorants, building materials, packaging materials, pressure-sensitive adhesive materials, plastic

molded products, engineering plastics, hollow-fi ber membranes and the Color & Comfort business.

Methods of measurement for the amounts of sales, profi t (loss), assets, liabilities and other items

for each reportable segment

The accounting policies of each reportable segment are consistent with those disclosed in Note 2, “Summary

of Signifi cant Accounting Policies.”

Segment profi ts are based on operating income.

Intersegment sales are mainly based on market price or cost of goods manufactured.

Information about sales, profi t (loss), assets, liabilities and other itemsMillions of yen

2012Reportable Segment

Others TotalPrinting Inks

& Supplies

Neo-Graphic Arts

MaterialsSynthetic

Resins

Chemical Solution

Materials Total

Sales:

Sales to customers ¥371,951 ¥75,269 ¥140,782 ¥143,826 ¥731,828 ¥ 2,448 ¥734,276

Intersegment sales 93 33,538 8,233 29 41,893 — 41,893

Total sales 372,044 108,807 149,015 143,855 773,721 2,448 776,169

Segment profi t 12,616 12,018 10,559 3,496 38,689 270 38,959

Segment assets ¥287,663 ¥84,232 ¥134,833 ¥114,134 ¥620,862 ¥28,619 ¥649,481

Others:

Depreciation and amortization 11,643 4,415 6,533 6,059 28,650 341 28,991

Amortization of goodwill 279 25 47 12 363 26 389

Investments in affi liates 1,985 431 10,307 4,069 16,792 4,726 21,518

Increase in property, plant and equipment and intangibles 8,458 4,411 7,122 6,217 26,208 378 26,586

Millions of yen2011

Reportable Segment

Others TotalPrinting Inks

& Supplies

Neo-Graphic Arts

MaterialsSynthetic

Resins

Chemical Solution

Materials Total

Sales:

Sales to customers ¥404,371 ¥ 73,458 ¥146,673 ¥150,452 ¥774,954 ¥ 4,010 ¥778,964

Intersegment sales 57 36,630 10,302 550 47,539 — 47,539

Total sales 404,428 110,088 156,975 151,002 822,493 4,010 826,503

Segment profi t 16,061 2,851 14,732 6,810 40,454 758 41,212

Segment assets ¥309,052 ¥ 82,935 ¥137,166 ¥119,651 ¥648,804 ¥30,627 ¥679,431

Others:

Depreciation and amortization 14,150 3,949 6,797 6,875 31,771 517 32,288

Amortization of goodwill 433 137 72 (2) 640 22 662

Investments in affi liates 2,245 441 9,301 3,823 15,810 4,469 20,279

Increase in property, plant and equipment and intangibles 9,382 2,342 4,077 3,800 19,601 468 20,069



Reconciliation between reportable segment total and amounts disclosed in consolidated fi nancial

statements


Sales: Reportable segment total ¥773,721 ¥822,493 Sales in “Others” 2,448 4,010 Elimination of intersegment transaction (41,893) (47,539) Sales in consolidated fi nancial statements ¥734,276 ¥778,964


Profi t: Reportable segment total ¥38,689 ¥40,454 Profi t in “Others” 270 758 Corporate expenses (3,999) (4,060) Operating income in consolidated fi nancial statements ¥34,960 ¥37,152

Note: Corporate expenses consist substantially of R&D expenses incurred by DIC Central Research Laboratories to develop new products.


Assets: Reportable segment total ¥620,862 ¥648,804 Assets in “Others” 28,619 30,627 Elimination between segments (27,299) (24,328) Corporate assets 52,885 48,657 Assets in consolidated fi nancial statements ¥675,067 ¥703,760

Note: Corporate assets consist of deferred tax assets, tangible assets of DIC Central Research Laboratories and Kawamura Memorial DIC Mu-seum of Art.

Other items are as follows:Millions of yen

2012 2011Reportable Segments Others Adjustments Consolidated

Reportable Segments Others Adjustments Consolidated

Depreciation and amortization ¥28,650 ¥ 341 ¥733 ¥29,724 ¥31,771 ¥ 517 ¥666 ¥32,954

Amortization of goodwill 363 26 — 389 640 22 — 662

Investments in affi liates 16,792 4,726 — 21,518 15,810 4,469 — 20,279

Increase in property, plant and equipment and intangibles 26,208 378 487 27,073 19,601 468 734 20,803

(2) Related information

Information about geographical areasMillions of yen

2012Japan USA Others Total

Net sales (Note) ¥306,860 ¥77,414 ¥350,002 ¥734,276

Property, plant and equipment 118,879 25,554 58,392 202,825

Millions of yen2011

Japan USA Others Total

Net sales (Note) ¥332,356 ¥93,399 ¥353,209 ¥778,964

Property, plant and equipment 130,550 27,369 62,712 220,631

Note: Net sales is based on a customer’s location and classifi ed by countries.


(3) Impairment loss of assets by reportable segmentMillions of yen

2012



SyntheticResins

Chemical Solution

Materials Others

Corporate and

eliminations Consolidated

Impairment loss ¥493 ¥— ¥303 ¥35 ¥— ¥— ¥831

Millions of yen2011



SyntheticResins

Chemical Solution

Materials Others

Corporate and


Impairment loss ¥658 ¥— ¥— ¥— ¥174 ¥— ¥832

(4) Amortization and unamortized balances of goodwill by reportable segmentMillions of yen

2012



SyntheticResins

Chemical Solution

Materials Others

Corporate and


Amortization ¥279 ¥25 ¥ 47 ¥12 ¥ 26 ¥— ¥389

Unamortized balances 257 20 111 50 173 — 611

Millions of yen2011



SyntheticResins

Chemical Solution

Materials Others

Corporate and


Amortization ¥ 433 ¥137 ¥ 72 ¥(2) ¥ 22 ¥— ¥ 662

Unamortized balances 1,394 33 178 — 203 — 1,808


(1) Related-party transactions with directors, corporate auditors, major individual shareholders and

others of the Company for the year ended March 31, 2012 are as follows:Millions of yen

Sort of related party Name Location

Capital or

invest-ment Principal business

Ownership of voting

rights

Relation with related

partiesContents of transaction

Amount of trans-action

(Note 1) Account

Balance at year-

end (Note 2)

Companies where directors and their close relatives owned majority of the shares (Note 3)

Nissei Real-Estate Co., Ltd.

Chuo-ku, Tokyo

10 Rental of properties and others, insurance agency business

Owned Direct 5.80% Indirect 8.07%

Rental of buildings, insurance agency business and others

Payment of rent for buildings and others (Note 4)

2,304 Security deposit

1,877

Payment for insurance fee (Note 5)

131 Prepaid expenses for insurance fee

195

Dainichi Can Co., Ltd.

Chiyoda-ku, Tokyo

10 Manufacture and sale of metallic containers

Owned Direct 4.65%

Purchase of metallic containers and others

Purchase of metallic containers and others (Note 6)

675 Trade notes and accounts payable

294

Lease payments (Note 7)

60 — —

Sales of merchandise and fi nished goods (Note 8)

100 Trade notes and accounts receivable

28

Nissin Trading Co., Ltd.

Chuo-ku, Tokyo

20 Sale, import and export of petrochemical-related products

Owned Direct 3.42%

Purchase of raw materials and others

Purchase of raw materials and others (Note 9)

6,608 Trade notes and accounts payable

879

Sales of merchandise and fi nished goods (Note 8)

3,512 Trade accounts receivable

1,106

Transfer of business (Note 10)

70 — —

Notes: 1. Excluding consumption taxes 2. Including consumption taxes 3. Yoshihisa Kawamura, who is a director of the Company, and his close relatives substantially own majority of the voting rights.

Dainichi Can Co., Ltd. and Nissin Trading Co., Ltd. are fully owned by Nissei Real-Estate Co., Ltd. 4. Rent of buildings and others is determined based on an arms-length transaction in the neighboring area. 5. Insurance fee is determined based on an arms-length transaction upon consultation with an insurance company. 6. Purchase price of metallic containers and others is determined based on an arms-length transaction. 7. Amount of lease payments is determined through negotiations on an arms-length transaction. 8. Sales price of merchandise and fi nished goods is determined on an arms-length transaction. 9. Purchase price of raw materials and others is determined on an arms-length transaction. 10. Transfer price is determined based on the present value of the business through negotiations.

Note 24:

Related-Party Transactions


(2) Related-party transactions with the consolidated subsidiaries

Related-party transactions with directors, corporate auditors, major individual shareholders and others of the

Company for the year ended March 31, 2012 are as follows:Millions of yen

Sort of related party Name Location

Capital or

invest-ment Principal business

Ownership of voting

rights

Relation with related

partiesContents of transaction

Amount of trans-action

(Note 1) Account

Balance at year-

end (Note 2)

Companies where directors and their close relatives owned majority of the shares (Note 3)

Nissei Real-Estate Co., Ltd.

Chuo-ku, Tokyo

10 Rental of properties and others, insurance agency business

Owned Indirect 13.87%

Rental of buildings, insurance agency business and others

Payment of rent for buildings and others (Note 4)

18 Security deposit

8

Payments for insurance fee (Note 5)

24 Prepaid expenses for insurance fee

74

Dainichi Can Co., Ltd.

Chiyoda-ku, Tokyo

10 Manufacture and sale of metallic containers


Purchase of metallic containers and others

Purchase of metallic containers and others (Note 6)

907 Trade notes, accounts payable and other accounts payable

397

Purchase of property, plant and equipment and others (Note 7)

34 Lease obligations

27

Lease payments (Note 8)

167 — —

Sales of merchandise and fi nished goods, and offering the service (Note 9)

110 Trade notes and accounts receivable

26

Nissin Trading Co., Ltd.

Chuo-ku, Tokyo

20 Sale, import and export of petrochemical-related products


Purchase of raw materials and others

Purchase of raw materials and others (Note 10)

1,129 Trade accounts payable

330

Sales of merchandise and fi nished goods, and offering the service (Note 9)

259 Trade and other accounts receivable

48

Notes: 1. Excluding consumption taxes 2. Including consumption taxes 3. Yoshihisa Kawamura, who is a director of the Company, and his close relatives substantially own majority of the voting rights.

Dainichi Can Co., Ltd. and Nissin Trading Co., Ltd. are fully owned by Nissei Real-Estate Co., Ltd. 4. Rent of buildings and others is determined based on an arms-length transaction in the neighboring area. 5. Insurance fee is determined based on an arms-length transaction upon consultation with an insurance company. 6. Purchase price of metallic containers and others is determined based on an arms-length transaction. 7. Purchase price of property, plant and equipment and others is determined based on an arms-length transaction. 8. Amount of lease payments is determined through negotiations on an arms-length transaction. 9. Sales price of merchandise, fi nished goods and offering the service is determined on an arms-length transaction. 10. Purchase price of raw materials and others is determined on an arms-length transaction.

57

1. Matters relating to the basic framework for internal control over fi nancial reporting

Yoshiyuki Nakanishi, Representative Director, President and CEO, and Masayuki Saito, Representative Director, Se-

nior Managing Executive Offi cer and CFO of DIC Corporation (the “Company”), are responsible for designing and

operating effective internal controls over the Company’s fi nancial reporting and have designed and operated internal

control over fi nancial reporting of the consolidated fi nancial statements in accordance with the basic framework for

internal control set forth in “On the Setting of the Standards and Practice Standards for Management Assessment

and Audit concerning Internal Control Over Financial Reporting (Council Opinions),” issued by the Business Account-

ing Council.

The internal control is designed to provide reasonable assurance regarding the achievement of the Company’s ob-

jectives through the effective function and combination of its basic elements. Due to their inherent limitations, there

is a possibility that material misstatements may not be completely prevented or detected by internal controls over

fi nancial reporting.

2. Scope of assessment, the basis date of assessment and assessment proceduresThe assessment of internal controls over fi nancial reporting was performed as of March 31, 2012, which is the end

of this fi scal year. The assessment was performed in accordance with relevant standards generally accepted in Japan.

In conducting this assessment, we began by evaluating internal controls which may have a material effect on over-

all consolidated fi nancial reporting (“company-level controls”) and, based on the results of this assessment, selected

business processes to be assessed. We then analyzed these selected business processes to identify key controls there-

in that may have a material impact on the reliability of the Company’s fi nancial reporting, after which we examined

the design and operation of these controls. These procedures thus allowed us to accurately evaluate the effectiveness

of the Company’s internal controls.

We determined the required scope of assessment of internal controls over fi nancial reporting for the Company

and its consolidated subsidiaries and equity-method affi liated companies, from the perspective of materiality, or the

degree to which it may affect the reliability of fi nancial reporting. Materiality is determined based on potential quan-

titative and qualitative impact on fi nancial reporting. In light of the results of assessment of company-level controls

conducted for the Company and its consolidated subsidiaries, we reasonably determined the scope of assessment of

internal controls over business processes. Consolidated subsidiaries and equity-method affi liated companies that do

not have any material impact on the consolidated fi nancial statements are not included in the scope for assessment

of company-level controls.

Regarding signifi cant locations and business units to be tested, selection was based on the change in the scope

of consolidation during the year, as well as on net sales for the previous year, with locations and business units the

combined sales volume of which reached approximately two-thirds of consolidated net sales being defi ned as “sig-

nifi cant.” The scope of assessment at these locations and business units encompassed business processes relevant

to net sales, accounts receivable–trade, accounts payable–trade, inventories and manufacturing facilities included in

property, plant and equipment as signifi cant accounts that may have a material impact on the business objectives

of the Company. In addition, business processes relating to (i) greater likelihood of material misstatements, and/or

(ii) signifi cant accounts involving estimates and management’s judgment, were also identifi ed as business processes

having greater materiality, taking into account their impact on fi nancial reporting, and were included in the scope.

3. Results of the assessmentBased on the results of its assessment, we concluded that as of the end of the fi scal year ended March 31, 2012, the

internal controls of the Company over fi nancial reporting of the consolidated fi nancial statements were effectively

maintained.

Yoshiyuki Nakanishi

Representative Director,

President and CEO

DIC Corporation

Management Report on Internal Control

58 Independent Auditor’s Report

59 Independent Auditor’s Report

60

(As of March 31, 2012)


DomesticPercent of

Ownership

DIC Color Coating, Inc. 100%Manufacture and sale of varnish and other coating materials

DIC Graphics Corporation 66.6%Manufacture and sale of printing inks

DIC Machinery & Printer’s Supplies, Inc. 100%Sale of printing inks and supplies

Nihon Packaging Material Co., Ltd. 100%Gravure printing and processing of fl exible packaging materials

Topic Co., Ltd. 100%Manufacture and sale of precise photomask products and PCB pattern design

Overseas Country/RegionPercent of

Ownership

Deqing DIC Synthetic Resins, Ltd. PRC 100%Manufacture and sale of hard resins

DIC Australia Pty Ltd. Australia 100%Manufacture and sale of printing inks

DIC Coatings, S.L. Spain 100%Manufacture and sale of can coatings and metal-decorating inks

DIC Fine Chemicals Private Limited India 100%Manufacture of printing inks

DIC Graphics Chia Lung Corp. Taiwan 100%Manufacture and sale of printing inks

DIC Graphics (Guangzhou) Ltd. PRC 100%Manufacture and sale of printing inks

DIC Graphics (Hong Kong) Ltd. PRC 100%Manufacture and sale of printing inks

DIC Graphics (Shenzhen) Co., Ltd. PRC 100%Manufacture of printing inks

DIC Graphics Taiyuan Co., Ltd. PRC 51%Manufacture and sale of printing inks

DIC Graphics (Thailand) Co., Ltd. Thailand 96.3%Manufacture and sale of printing inks

DIC India Ltd. India 71.8%Manufacture and sale of printing inks

DIC International (Thailand) Co., Ltd. Thailand 80%Sale of printing inks and pigments

DIC Lanka (Private) Ltd. Sri Lanka 100%Manufacture and sale of printing inks

DIC (Malaysia) Sdn. Bhd. Malaysia 93.5%Manufacture and sale of printing inks, sale of synthetic resins and chemicals

DIC New Zealand Ltd. New 100%Manufacture and sale of printing inks Zealand

DIC Pakistan Ltd. Pakistan 45%Manufacture and sale of printing inks

DIC Philippines, Inc. Philippines 98.7%Manufacture and sale of printing inks

DIC (Vietnam) Co., Ltd. Vietnam 100%Manufacture and sale of printing inks

Nantong DIC Color Co., Ltd. PRC 100%Manufacture and sale of organic pigments, printing inks and ink intermediates

PT. DIC Graphics Indonesia 100%Manufacture and sale of printing inks

Shanghai DIC Ink Co., Ltd. PRC 65%Manufacture and sale of printing inks

Shenzhen DIC Chemicals Co., Ltd. PRC 51%Manufacture and sale of printing inks

Shenzhen-DIC Co., Ltd. PRC 90%Manufacture and sale of printing inks

Sun Chemical GroupManufacture and sale of printing inks and supplies and organic pigments

Country/RegionPercent of

Ownership

Coates Brothers (Caribbean) Ltd. Trinidad and Tobago

100%

Coates Brothers (East Africa) Ltd. Kenya 100%Coates Brothers (South Africa) Pty. Ltd. South Africa 100%Coates Brothers (West Africa) Ltd. Nigeria 59.9%Coates Brothers (Zambia) Ltd. Zambia 100%Coates Brothers (Zimbabwe) Pvt. Ltd. Zimbabwe 100%Coates Screen Inks GmbH Germany 100%Hartmann D.O.O. Slovenia 100%Hartmann Druckfarben GmbH Germany 100%Hartmann-Sun Chemical EOOD Bulgaria 100%Inmobiliaria Sunchem, S.A. de C.V. Mexico 100%IMS Concepts S.A./N.V. Belgium 100%Lorilleux Maroc S.A. Morocco 50%Parker Williams Design Ltd. U.K. 80%Sinclair de Centroamerica S.A. Costa Rica 100%Sinclair S.A. Colombia 50%Sun Branding Solutions Ltd. U.K. 100%Sun Chemical A/S Norway 100%Sun Chemical A/S Denmark 100%Sun Chemical AB Sweden 100%Sun Chemical AG Austria 100%Sun Chemical AG Switzerland 100%Sun Chemical Albania SHPK Albania 100%Sun Chemical B.V. Netherlands 100%Sun Chemical (Chile) S.A. Chile 100%Sun Chemical (Colores) S.A. de C.V. Mexico 100%Sun Chemical Corp. U.S. 100%Sun Chemical de Centro America, S.A. de C.V. El Salvador 50%Sun Chemical Delta B.V. Netherlands 51.0%Sun Chemical de Panama, S.A. Panama 100%

Africa 7

Europe 53

Central & South America 12Oceania 2

North America 15Japan 37Asia 61

Major Subsidiaries and Affi liates

Note: Percent of ownership indicates ownership by DIC Group companies.

Global NetworkThe DIC Group comprises more than 180 companies in 64 countries and territories.

61

Sun Chemical do Brasil Ltda. Brazil 100%Sun Chemical, d.o.o. Croatia 100%Sun Chemical, d.o.o.e.l. Macedonia 100%Sun Chemical Group Coöperatief U.A. Netherlands 100%Sun Chemical Group S.p.A. Italy 100%Sun Chemical Holding (Hong Kong) Ltd. PRC 100%Sun Chemical Inks A/S Denmark 100%Sun Chemical Inks Ltd. Ireland 100%Sun Chemical Inks S.A. Argentina 100%Sun Chemical Lasfelde GmbH Germany 100%Sun Chemical Ltd. Canada 100%Sun Chemical Ltd. U.K. 100%Sun Chemical Matbaa Mürekkepleri Ve Gereçleri Sanayii Ve Ticaret A.Ş.

Turkey 100%

Sun Chemical N.V./S.A. Belgium 100%Sun Chemical Nyomdafestek Kereskedelmi es Gyarto KFT

Hungary 100%

Sun Chemical Osterode Druckfarben GmbH Germany 100%Sun Chemical Oy Finland 100%Sun Chemical Pigments S.L. Spain 100%Sun Chemical Portugal-Tintas Grafi cas Unipes-soal Ltda.

Portugal 100%

Sun Chemical Printing Ink d.o.o. Serbia 100%Sun Chemical S.A. Spain 100%Sun Chemical S.A.S. France 100%Sun Chemical Sp. z.o.o. Poland 100%Sun Chemical s.r.l. Romania 100%Sun Chemical, s.r.o. Czech

Republic100%

Sun Chemical, s.r.o. Slovakia 100%Sun Chemical Ukraine Ltd. Ukraine 100%Sun Chemical ZAO Russia 100%Tintas S.A. Colombia 50%

Neo-Graphic Arts MaterialsDomestic

Percent ofOwnership

Japan Fine Coatings, Inc. 40%Manufacture and sale of coil coatings for metal

Japan Formalin Company, Inc. 50%Manufacture and sale of formalin


Ownership

DIC Alkylphenol Singapore Pte., Ltd. Singapore 100%Manufacture of alkylphenols

DIC korea liquid crystal Co., Ltd. Republic of Korea

55.0%

DIC (Nantong) Metallic Pigment Co., Ltd. PRC 60%

Manufacture and sale of aluminium pigment

Lianyungang DIC Color Co., Ltd. PRC 60%Manufacture and sale of organic pigments

Qingdao DIC Liquid Crystal Co., Ltd. PRC 100%Manufacture of base components for liquid crystal materials

Suzhou Lintong Chemical Science Corporation PRC 22.9%Manufacture and sale of intermediates for pigments and dyestuffs

Zhongshan DIC Colour Co., Ltd. PRC 100%Manufacture and sale of colorants for plastics, textiles and leather

Synthetic ResinsDomestic

Percent ofOwnership

DH Material Inc. 50%Manufacture and sale of unsaturated polyester resin

DIC Bayer Polymer Ltd. 50%Sales, marketing and manufacturing of thermoplastic polyurethane (TPU)

DIC Kitanihon Polymer Co., Ltd. 100%Manufacture of synthetic resins

DIC Kyushu Polymer Co., Ltd. 100%Manufacture of synthetic resins

Nippon Epoxy Resin Manufacturing Co., Ltd. 40%Manufacture of liquid-based basic epoxy resins

Oxirane Chemical Corp. 33.3%Manufacture and sale of plasticizers

SEIKO PMC CORPORATION 54.5%Manufacture and sale of chemicals for paper production

SUNDIC Inc. 50%Manufacture and sale of biaxially oriented polystyrene sheet


Ownership

Aekyung Chemical Co., Ltd. Republicof Korea

50%Manufacture and sale of synthetic reins

Bridgestone REI Komposit Sdn. Bhd. Malaysia 21%Manufacture and sale of SMC for paneled water tanks

Changzhou Huari New Material Co., Ltd. PRC 100%Manufacture and sale of synthetic reins

DIC Epoxy (Malaysia) Sdn. Bhd. Malaysia 100%Manufacture and sale of epoxy resins

DIC Performance Resins GmbH Austria 100%Manufacture and sale of synthetic resins

DIC Synthetic Resins (Zhongshan) Co., Ltd. PRC 100%Manufacture and sale of synthetic resins and metal carboxylates

DIC Zhangjiagang Chemicals Co., Ltd. PRC 100%Manufacture of synthetic resins, plastic compounds, fi ber and textile colorants

Kang Nam Chemical Co., Ltd. Republic of Korea

50%Manufacture and sale of synthetic resins

Lidye Chemical Co., Ltd. Taiwan 50%Manufacture and sale of synthetic resins

P.T. Pardic Jaya Chemicals Indonesia 96.4%Manufacture and sale of synthetic resins

Shanghai Showa Highpolymer Co., Ltd. PRC 20%Manufacture and sale of bulk molding compounds (BMCs) and vinyl ester resins

Siam Chemical Industry Co., Ltd. Thailand 77.2%Manufacture and sale of synthetic resins

TOA-DIC Zhangjiagang Chemical Co., Ltd. PRC 40%Manufacture and sale of UV-curable monomers and related products

Major Subsidiaries and Affi liates

62 Major Subsidiaries and Affi liates

Chemical Solution MaterialsDomestic

Percent ofOwnership

DIC Color Design, Inc. 100%Color consulting, color marketing, sales of color guide, product design, graphic design and packaging design

DIC Comfort Materials, Inc. 100%Manufacture and sale of decorative boards

DIC Decor, Inc. 83.3%Printing and sale of decorative sheets and plastic fi lms

DIC EP Corp. 100%Manufacture of PPS neat polymers

DIC Filtec, Inc. 100%Manufacture and sale of plastic fi lms

DIC Interior Co., Ltd. 100%Manufacture and sale of interior housing materials

DIC Kako, Inc. 100%Manufacture and sale of fi ber-reinforced plastic (FRP) molding compounds and molded products

DIC Lifetec Co., Ltd. 100%Manufacture and sale of Spirulina-related dietary supplements

DIC Molding, Inc. 100%Manufacture and sale of plastic helmets

DIC Plastics, Inc. 100%Manufacture and sale of plastic molded products

Fuji Label Co., Ltd. 100%Manufacture and sale of labels and automatic labelers

Techno Science, Inc. 50%Manufacture and sale of disposable fi lters

YD Plastics Co., Ltd. 50%Manufacture and sale of PET bottles


Ownership

DIC Color (Thailand) Co., Ltd. Thailand 100%Manufacture and sale of plastic colorants and compounds

DIC Colorants Taiwan Co., Ltd. Taiwan 100%Manufacture and sale of plastic colorants and compounds

DIC Compounds (Malaysia) Sdn. Bhd. Malaysia 100%Manufacture and sale of plastic colorants and compounds

DIC Imaging Products USA, LLC U.S. 100%Manufacture and sale of toner and UV-curable coatings

Earthrise Nutritionals, LLC. U.S. 100%Manufacture and sale of edible algae Spirulina

Hainan DIC Microalgae Co., Ltd. PRC 100%Manufacture and sale of edible algae Spirulina and blue colorants

PT DIC ASTRA Chemicals Indonesia 75%Manufacture and sale of plastic compounds and plastics, fi ber and textile colorants

Samling Housing Products Sdn. Bhd. Malaysia 29%Manufacture of decorative boards and interior housing products

Shanghai DIC Pressure-Sensitive Adhesive Materials Co., Ltd.

PRC 100%

Import, processing and sale of adhesive materials

OthersDomestic

Percent ofOwnership

DIC Capital Corp. 100%Financing for domestic DIC Group companies

DIC Estate Co., Ltd. 100%Purchase, sale, lease, brokerage, proprietorship and management of real estate

Renaissance, Inc. 47.7%Planning and operation of sports clubs and schools

Tsuruga Terminals Co. 46%Chemical storage tank operations


Ownership

DIC Asia Pacifi c Pte Ltd Singapore 100%Investment in related subsidiaries in Asia and Oceania, and manufacture and sale of DIC products

DIC (China) Co., Ltd. PRC 100%Administration of, investment in and provision of various management support services to subsidiaries in the PRCDIC Europe GmbH Germany 100%

Sale of DIC productsDIC (Guangzhou) Co., Ltd. PRC 100%

Sale of DIC productsDIC International (USA), LLC. U.S. 100%

Sale of DIC productsDIC KOREA Corp. Republic

of Korea79%

Sale of DIC productsDIC (Shanghai) Co., Ltd. PRC 100%

Sale of DIC products

DIC (Taiwan) Ltd. Taiwan 100%Sale of DIC products

DIC Trading (HK) Ltd. PRC 100%Sale of DIC products

Qingdao DIC Finechemicals Co., Ltd. PRC 100%Technical development in the fi eld of specialty chemicals

Tien Lee Hong Co., Ltd. PRC 100%Sale of synthetic resins, printing inks and supplies, and chemicals

Printed on recycled paper using Naturalith 100,DIC’s 100% vegetable oil-based ink

(As of March 31, 2012)

Investor Information and Corporate Data

Registered Address

35-58, Sakashita 3-chome, Itabashi-ku, Tokyo 174-8520, Japan

Corporate Headquarters

DIC Building, 7-20, Nihonbashi 3-chome, Chuo-ku, Tokyo 103-8233, Japan Tel.: (03) 3272-4511Fax: (03) 3278-8558http://www.dic-global.com/en/

Principal Domestic Offi ces, Plants and Laboratories (Nonconsolidated)

Number of Branch Offi ces: 2Number of Sales Offi ces: 8Number of Plants: 11Number of Laboratories: 1

Number of Employees

20,455

Date of Foundation

February 15, 1908

Date of Incorporation

March 15, 1937

Investor Information Corporate Data

Common Stock DIC common stock is listed and traded on the Tokyo stock exchanges. There were 47,757 shareholders of record on March 31, 2012. On the Tokyo Stock Exchange, the high and low prices for each quarter of the fi scal years ended March 31, 2012 and 2011, were as follows:

2012 2011High Low High Low

First quarter ¥210 ¥167 ¥224 ¥135Second quarter 194 134 156 134Third quarter 155 117 186 138Fourth quarter 178 136 226 123

Total Number of Shares Authorized 1,500,000,000 shares

Number of Unit Shares 1,000 shares

Paid-in Capital ¥91,154,452,787 (919,372,048 shares)

Independent Public Accountants Deloitte Touche TohmatsuDistribution of Shareholders

Major Shareholders

Transfer Agent Mitsubishi UFJ Trust and Banking Corporation10-11, Higashisuna 7-chome, Koto-ku, Tokyo 137-8081, Japan

Annual Meeting of Shareholders Our annual meeting of shareholders is held in June at the Corporate Headquarters.

For Further Information, Contact: Corporate Communications Dept.DIC CorporationDIC Building, 7-20, Nihonbashi 3-chome, Chuo-ku, Tokyo 103-8233, JapanTel.: (03) 5203-7838 E-mail: [email protected]

Number ofShares Owned

(Thousands)Percentage

of Total

Japan Trustee Services Bank, Ltd. (Trust Account) 86,216 9.37%The Master Trust Bank of Japan, Ltd. (Trust Account) 76,461 8.31Japan Trustee Services Bank, Ltd. (Trust Account 9) 55,015 5.98Nissei Real-Estate Co., Ltd. 53,104 5.77Dainichi Can Co., Ltd. 42,561 4.62Dai-ichi Mutual Life Insurance Company 35,000 3.80Nissin Trading Co., Ltd. 31,277 3.40Aioi Nissay Dowa Insurance Co., Ltd. 25,907 2.81Japan Trustee Services Bank, Ltd. (Trust Account 4) 21,153 2.30Nippon Life Insurance Company 19,000 2.06

445,694 48.47%

Financial instruments business operators: 0.88%

Japanese individual investors and others17.34%

Foreign corporations

13.51%

Other Japanese corporations

17.78%

Japanese fi nancial institutions

50.49%

63

DIC Building, 7-20, Nihonbashi 3-chome, Chuo-ku, Tokyo 103-8233, Japanhttp://www.dic-global.com/ Printed in Japan

annual report2012 [1370kb] - dainippon ink and chemicals, inc

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