ASAHI KASEI CORP Annual Report 2015

Plain-text annual report

A s a h i K a s e i R e p o r t 2 0 1 5 Asahi Kasei Report 2015 Creating for Tomorrow 2015旭化成e_c_1029初修正.indd 2 2015旭化成e_c_1029初修正.indd 2 2015/11/06 10:53 2015/11/06 10:53 Group Mission We, the Asahi Kasei Group, contribute to life and living for people around the world. Group Vision Providing new value to society by enabling “living in health and comfort” and “harmony with the natural environment.” Group Values Sincerity—Being sincere with everyone. Challenge—Boldly taking challenges, continuously seeking change. Creativity—Creating new value through unity and synergy. Group Slogan Creating for Tomorrow Contents 2 3 4 10 12 14 15 20 To Our Stakeholders Research & Development Return to Shareholders and Share Information Feature: The Asahi Kasei Heritage of Diversiﬁ cation History of Providing Solutions for the Challenges of Society Financial and Non-Financial Highlights Asahi Kasei Group Management and CSR Interview with the President CFO Interview 38 40 CSR 42 44 52 54 R&D at the Asahi Kasei Group R&D in Three Fields of Focus and Main Sites for R&D CSR Dialogue Responsible Care Respect for Employee Individuality Corporate Citizenship Corporate Governance Financial Section 22 Directors, Corporate Auditors, Executive Ofﬁ cers 24 Outside Directors 26 Corporate Governance Operating Segments 30 32 34 36 Chemicals & Fibers Homes & Construction Materials Electronics Health Care 57 58 Financial Section Consolidated Eleven-Year Summary 60 Management’s Discussion and Analysis 66 68 Risk Analysis Consolidated Financial Statements Corporate Information 100 Major Subsidiaries and Afﬁ liates 102 103 Company Information Investors Information Editorial policy Organizational scope For greater ease of understanding among our stakeholders, since ﬁ scal 2014 we are integrating information regarding our business strategy and ﬁ nancial performance, which had been published in our Annual Report, with information regarding our CSR activities, which had been published in our CSR Report, in a single Asahi Kasei Report. We hope that the Asahi Kasei Report will help you gain a clear per- ception of the Asahi Kasei Group’s efforts toward sustain- ability in society in addition to our management strategy, business conditions, and management conﬁ guration. Period under review The period under review is ﬁ scal 2014 (April 2014 to March 2015). Some qualitative information pertaining to April to July 2015 has also been included. The scope of the report is Asahi Kasei Corp. and its consoli- dated subsidiaries, except with respect to Responsible Care, in which case the scope is operations in Japan that imple- ment the Asahi Kasei Group’s Responsible Care program. Asahi Kasei’s four operating segments are Chemicals & Fibers, Homes & Construction Materials, Electronics, and Health Care. Unless otherwise speciﬁ ed, the titles and posi- tions of corporate ofﬁ cers and other personnel as shown in this report are current as of August 2015. Guidelines consulted The Global Reporting Initiative’s Sustainability Reporting Guidelines 3.1, ISO 26000, and other guidelines were con- sulted during the preparation of this report. Disclaimer The forecasts and estimates shown in this report are dependent on a variety of assumptions and economic conditions. Plans and ﬁ gures depicting the future do not imply a guarantee of actual outcome. Asahi Kasei Report 2015 1 To Our Stakeholders Thank you for reading the Asahi Kasei Report 2015. In 2014 ahead throughout all operations to achieve our targets. we integrated the description of ﬁ nancial information, which With the start of a new management initiative from ﬁ scal had been published in our Annual Report, with the 2016, we will adopt a new corporate conﬁ guration with the description of our CSR activities, which had been published in three business sectors of Material, Homes, and Health Care, our CSR Report, in a single Asahi Kasei Report for greater and concurrently the holding company Asahi Kasei Corp. will ease of understanding by our various stakeholders. We hope become an operating holding company. We believe that that the Asahi Kasei Report will enhance your understanding these changes will foster greater synergies among our of the Asahi Kasei Group’s management strategy, business different sectors, enabling us accelerate innovation. We are operations, and ﬁ nancial performance, as well as our focused on increasing corporate value through the contribution to the sustainability of society. continuous growth of operations with strategic and efﬁ cient The Asahi Kasei Group is now executing “For Tomorrow management across the Asahi Kasei Group. 2015,” a ﬁ ve-year strategic management initiative ending in Throughout these efforts, we will maintain proactive ﬁ scal 2015. In accordance with our Group Mission of communication with our stakeholders to ensure transparency contributing to life and living for people around the world, through appropriate information disclosure. I would like to and our Group Vision of enabling living in health and comfort thank you for your continuous support. and harmony with the natural environment, we are expanding world-leading businesses and creating new value August 2015 for society. In ﬁ scal 2014 we reached record highs for the second consecutive year in net sales, operating income, ordinary income, and net income, as investments for growth that we made over the past few years bore fruit. Also, in the ﬁ eld of the Environment & Energy we decided to acquire the US-based Polypore International, Inc. to strategically expand our battery separator business. As we complete our “For Tomorrow 2015” initiative in ﬁ scal 2015, we will press ﬁ rmly 2 Asahi Kasei Report 2015 Toshio Asano President Return to Shareholders and Share Information We strive to continuously increase dividends through continuous earnings growth, with a payout ratio of 30% as our basic standard. Our basic policy is to strive to continuously increase dividends with a payout ratio of 30% of net income as our basic standard, through continuous earnings growth while maintaining an appropriate cash reserve based on consolidated ﬁ nancial results. Our cash reserve will be used as a source of funds required to achieve future earnings growth by expanding operations, both through investments in established businesses and through strategic investments, including M&A, and new business development expenditures in the environment & energy, residential living, and health care as ﬁ elds of strategic focus. In accordance with this policy, the annual dividend for ﬁ scal 2014 was increased by ¥2 per share from the previous year to ¥19 per share. We plan to increase the dividend for ﬁ scal 2015 to ¥20 per share reﬂ ecting forecasted consolidated ﬁ nancial results. We will continue to strive for greater corporate value, and provide appropriate returns to our shareholders. Comparison between stock price and TOPIX (April 2011 = 1) (¥) 20 15 10 5 0 Dividends per share, payout ratio 20 (%) 40 19 35.1 36.4 17 14 14 25.5 11 26.4 25.1 23.5 ’10 ’11 ’12 ’13 ’14 ’15 plan Dividends per share (left scale) Payout ratio (right scale) Average stock price in FY2011: ¥501 Average stock price in FY2012: ¥469 Average stock price in FY2013: ¥712 Average stock price in FY2014: ¥924 2.5 2.0 1.5 1.0 0.5. April 2011 April 2012 April 2013 April 2014 Asahi Kasei stock price (left scale) TOPIX (left scale) Monthly total turnover (right scale) Number of shareholders (at ﬁ scal year end) Shareholder distribution (at ﬁ scal year end) 116,237 114,772 109,298 97,906 85,482 120,000 100,000 80,000 60,000 40,000 20,000 0 ’10 ’11 ’12 ’13 ’14 FY (FY) ’10 ’11 ’12 ’13 ’14 Treasury stock 0.3% Japanese securities companies 1.4% Other Japanese companies 4.4% Japanese individuals and groups 22.5% Japanese financial institutions 46.9% Foreign investors 24.5% 41.1% 36.2% 16.7% 3.9% 1.7% 0.4% Asahi Kasei Report 2015 3 30 20 10 0 FY (1,000 shares) 240,000 180,000 120,000 60,000 0 Feature The Asahi Kasei Heritage of Diversiﬁ cation Since its founding in 1922, Asahi Kasei has proactively transformed its business portfolio to meet the changing needs of the times. We showcase three examples that highlight our heritage of taking on challenges and creating value by diversifying operations. 1 Non-linear growth through strategic M&A In 2012 we acquired ZOLL Medical Corporation, a global leader in medical devices for acute critical care, for US$2.2 billion (¥180 billion). While we had operated pharmaceutical and medical device businesses, this acquisition marked our strategic entry into the ﬁ eld of critical care. Since that time ZOLL’s business growth—led by the LifeVest™ wearable deﬁ brillator and expansion of the Core deﬁ brillator business—has remained strong, and in ﬁ scal 2014 our consolidated operating income in this business category turned positive even after amortization of goodwill and other intangible assets. The LifeVest™ was launched in Japan in April 2014, and further global growth is anticipated. 4 Asahi Kasei Report 2015 Richard A. Packer, CEO of ZOLL Accelerating ZOLL’s growth The third pillar of Health Care operations LifeVest™ wearable deﬁ brillator Strategic entry into critical care (cid:129) Will ZOLL, and particularly the Toward greater growth Under the “For Tomorrow 2015” stra- tegic management initiative ending in ﬁ scal 2015, our main business strate- gies are the expansion of world-leading businesses and the creation of new value for society in three ﬁ elds of focus, one of which is Health Care. The initiative also provided for strategic investment of ¥1 trillion over the 5-year period, including investment in existing businesses, new businesses, and M&A. The acquisition of ZOLL was our ﬁ rst large-scale investment. This acquisition enabled us to reinforce our earnings base in health care, an area with clear prospects for growth and less susceptible to ﬂ uctuations in the operating climate than the chemi- cals or electronics businesses. When our management was contemplating M&A in health care, the search was soon narrowed down to the ﬁ eld of acute critical care, and ZOLL was con- sidered the best choice. As this was the largest acquisition in our history, the Board of Directors, including the Outside Directors, thor- oughly examined the acquisition from every angle. LifeVest™ product line, continue to grow? (cid:129) What synergies will there be with our existing Health Care businesses? (cid:129) Is the acquisition price fair? (cid:129) Can we retain ZOLL’s talent? (cid:129) Is there compatibility with our cor- porate culture and our people? Such deliberations led to the conclu- sion that there was a need to expand in new areas to enhance the compa- ny’s ability to withstand increasingly dramatic changes in the operating cli- mate, and not just rely on the growth of existing businesses alone. With the growth of LifeVest™ foreseeable for at least another four to ﬁ ve years, and prospects for further expansion as other products enter a growth phase, it was decided to proceed with the acquisition. ZOLL’s mission of saving people’s lives is also a close ﬁ t with our Group Mission of contributing to life and liv- ing for people around the world, and nearly all of the senior leadership of ZOLL have stayed with us and continue to drive the global growth of LifeVest™ and the other products. We are also impressed with ZOLL’s strong track record of clinical develop- ment not only in the US but also in countries around the world, and its excellent capability in regulatory affairs to obtain both product approval and insurance reimbursement in the US and other countries. We can quickly establish a global platform for the Health Care sector that utilizes ZOLL’s know-how to obtain synergy with our own established pharmaceutical and medical device business, enabling even further growth. At various turning points throughout our history, we expanded operations and built foundations for further growth by venturing into new ﬁ elds of business or licensing technology from overseas. The Asahi Kasei heritage is to repeatedly create new value through sincerity, challenge, and creativity. Diversiﬁ cation has enabled us to achieve record-high results, and as we continue to grow we will maintain ﬂ exibility in our business portfolio, cre- ating new value for tomorrow. Outside Director’s Perspective Staying on the offensive With the acquisition of ZOLL, Asahi Kasei contributes even more to life and living for people all around the world. Discussions at Board of Directors meetings initially focused on whether the acquisition price was fair, but considering the rising needs for acute critical care devices in the US and Europe, and considering that the CEO Mr. Packer and other key management per- sonnel agreed to continue to manage the company, we concluded that the acquisition price was fair. ZOLL has grown beyond our expectations. In ﬁ scal 2014, three years after the acqui- sition, consolidated operating income after amortization of goodwill and other intangible assets turned positive. In a time of dramatic change, sitting on the fence is the riskiest thing to do. I think it will continue to be necessary to aggressively seek new challenges. Norio Ichino Outside Director Asahi Kasei Report 2015 5 Feature The Asahi Kasei Heritage of Diversiﬁ cation 2 Continuously evolving tradition In June 2014 we began commercial operation of a new production facility for Bemberg™ cupro ﬁ ber in Nobeoka, Miyazaki, Japan. The key factor behind the decision to build this facility—an investment of some ¥3 billion in Japan’s ﬁ rst new ﬁ ber production facility in 27 years—was strong demand growth for use in Indian saris and other traditional garments. This would not have been possible without the untiring effort of many employees, including engineers who worked on technology and applications development, and marketing personnel who broke free from the conventions of simply selling yarn to create new demand by working in close concert with the customers. The birth and evolution of Bemberg™ Beauty and functionality in saris and innerwear Tradition and innovation Bemberg™ was always used mainly in applications that made the most of its superior comfort, such Japanese kimo- nos, undergarments, and linings. With the spread of low-cost synthetics, however, demand for Bemberg™ lin- ing fabric began declining in the 1990s. Indian saris and functional innerwear were identiﬁ ed as potential ﬁ elds of growing demand. The ﬁ eld of Indian saris was seen as a geographic extension for material similar to that sold for traditional garments in Japan, while the ﬁ eld of functional innerwear was seen as one requiring innovative application development in line with evolving market needs. Nevertheless, the requirements for moving into these two ﬁ elds were similar. In both cases there was a need to move beyond the conventional business model of simply selling yarn; products would have to be made in close concert with weav- ing, dyeing, and processing compa- nies, with technical guidance and support in order to successfully devel- op new markets. Developing the sari market When we began researching the mar- ket for traditional garments, there was some feeling that the westernization of fashion might mean the market prospects would be poor. Further research revealed, however, that although western casual clothing had become popular among the youth, a high proportion of Indian women rou- tinely wear saris after marrying. In addition, in the middle class and above, it is not uncommon for people to own twenty or thirty saris to wear at weddings and other special occa- sions. Such information, which would not have been ascertained under the conventional yarn-selling model, enabled us to branch out into the sari market with conﬁ dence. In 2015, India’s economic growth is adding fur- ther impetus to the market for Bemberg™ used in saris. 6 Asahi Kasei Report 2015 Bemberg™ lining materials The key to success Long gone are the days when one could succeed by simply selling yarn. We believe it is essential to be proac- tively involved in the processing and ﬁ nishing processes to fully understand customers’ needs; our job is to provide solutions to them through our prod- ucts. Bemberg™ is our oldest business, so its evolution is especially symbolic for us. We are also enjoying success in the ﬁ eld of functional innerwear that emphasizes comfort, feeling cool in the summer and warm in the winter. Asahi Kasei has been an industry lead- er in developing differentiated prod- ucts with functionality and originality; not just Bemberg™ but throughout our product lineup. Our record-high operating income in ﬁ scal 2014 bears out this strategy. We will continue on our path of evolution, advancing the creation of new value for society. A sari made with Bemberg™ Outside Director’s Perspective Building a presence by innovating together with customers For a ﬁ ber manufacturer to build a global presence, It is necessary to be able to develop products and technologies that competitors cannot match. I think one important way is to innovate together with customers. That means cooperating with one another in a joint effort to create new value. It is also important to have a technology platform that enables the creation of high value-added products, to avoid being trapped in price competition with commodity products. Both of these require close communication with customers. In order to offer new materials and new functions, you ﬁ rst need to have a clear understand- ing of the customers’ strategies and market trends. Kenyu Adachi Outside Director Asahi Kasei Report 2015 7 Feature The Asahi Kasei Heritage of Diversiﬁ cation new value3 Creating The ﬁ rst Hebel Haus™ (Kamata model home park) In ﬁ scal 2014 our homes business recorded sales of ¥551.8 billion, some 30% of the total for the Asahi Kasei Group, and operating income of ¥59.2 billion, some 40% of the total. From its start in unit homes only, the business has now expanded to include multi-dwelling homes, remodeling, rental management, and real estate development. The business began as an endeavor into uncharted territory, without know-how or experience, using construction materials that we developed as one of our three new businesses in the 1960s. Hebel Haus™ to change lifestyles Proposing a new kind of urban home Lifestyle proposals When we began our homes business in 1972, there were already many compa- nies selling manufactured housing in Japan. As a latecomer to the market, we had to carefully study Japan’s hous- ing situation and the characteristics of the housing industry. In 1973 we began developing the “two-generation home” as the ﬁ rst step along our path of differ- entiation from the competition. The two-generation home incorporated many design features to accommodate the different rhythms of life among fam- ily members. For the ﬁ rst time, we were not simply selling homes based on their physical characteristics, but offering intangible value through lifestyle propos- als that enhance customer satisfaction. In 1982 we began selling the Hebel Haus™ Cubic™ featuring a clean-cut eave-free design to enable maximum utilization of small urban plots of land, and in 1986 we branched into 3-story homes with the Hebel Haus™ Frex™ 3. Business extended into the ﬁ eld of multi- dwelling homes with the 1983 launch of the Hebel Maison™ series of high-quali- ty urban apartment buildings. It was during this period that we solidiﬁ ed our strategy of focusing on products speciﬁ - cally tailored to urban markets. Hebel Haus™ Frex the Residence™ 8 Asahi Kasei Report 2015 Hebel Maison™ Boriki™ for residents raising small children Changing customer expectations of 60 years of comfortable residency with the home’s basic functions intact. Meeting society’s challenges While focusing on urban homes, we promoted the Long Life Home product concept of enabling long-term residence with lasting comfort. While homes in the West typically last for 70–80 years, sometimes even 100 years or more, the average service life of homes in Japan at that time was only 27 years with wear- and-tear exacerbated by wide ﬂ uctua- tions in temperature and humidity. By combining excellent physical durability for urban settings, including ﬁ re resis- tance and earthquake resistance, with a systematic program of inspection and maintenance, we achieved a service life In the years following, we expanded product development to include a wide variety of additional functions. These include unit homes with features to facil- itate living with dogs and cats, apart- ment buildings focused on residents raising small children, apartment build- ings with enhanced security features for single women living alone, and apart- ment buildings for seniors. We continue to advance the development of products that meet various customer needs for enhanced security and comfort. The housing business in advanced coun- tries faces new challenges with the declining and aging population together with increasing concentration on urban areas. We believe this presents new opportunities to develop products that embody innovative lifestyle proposals that meet these challenges. While fur- ther heightening the physical and struc- tural performance of our homes, we will focus on security and comfort features that correspond to emerging changes, and contribute to solutions to society’s challenges. Outside Director’s Perspective Homes that provide new value to society I think today’s society makes it hard for young people to raise children. Especially in urban areas, the trend is toward nuclear families. Community connections have become more sparse, and personal relationships looser than in the past. It is said that social isolation is one factor in child abuse. Given this background, I ﬁ nd it fascinating that Asahi Kasei has devel- oped an apartment building that engenders interaction among residents raising young chil- dren. By providing a venue for people sharing the same lifestyle and common challenges of parenthood to live adjacently, this apartment building naturally fosters a feeling of connect- edness and shared responsibility. This building is more than just a physical structure, it is truly a solution that adds value to society. Masumi Shiraishi Outside Director Asahi Kasei Report 2015 9 History of Providing Solutions for the Challenges of Society The Asahi Kasei Group has consistently grown through the proactive transformation of its business portfolio to meet the evolving needs of every age. We have constantly provided products and services that form solutions to various environmental and social challenges. As society undergoes further changes, we will continue to contribute to life and living for people around the world by Creating for Tomorrow. 1922–2015 From 1970 From 1950 In 1957 we began production of polystyrene, and in 1959 entered the synthetic ﬁ ber business. These were followed by the three new businesses of nylon ﬁ ber, synthetic rubber, and construction materials. In 1968 we began construction of a petrochemical complex in the Mizushima area of Kurashiki, Okayama, Japan, paving the way for our full-scale development of petrochemical operations. Our products during this period supported improvements in the quality of life during Japan’s high-growth period. From 1922 Shitagau Noguchi Shitagau Noguchi, the founder of Asahi Kasei, succeeded in Japan’s ﬁ rst industrial production of ammonia by chemical synthesis in Nobeoka, Miyazaki, in 1923 using technology licensed from Italy. The ammonia was used in the production of Bemberg™ regenerated cellulose ﬁ ber, part of a diverse range of business operations that included chemical fertilizer and viscose rayon. As industry modernized and the economy of Japan achieved self-sustainable growth, our operations made important contributions to the stability of people’s lives. In 1972 we entered the homes business with the launch of the Hebel Haus™, and in 1974 we entered the medical device business with hollow-ﬁ ber membrane artiﬁ cial kidneys. Our entry into the electronics business began with our launch of Hall elements (magnetic sensors) in 1980 and start of LSI manufacture in 1987. Our products continued to help make life more comfortable and convenient as society’s needs diversiﬁ ed. The ﬁ rst Hebel Haus™ (Kamata model home park) Saran Wrap™ launched in Japan in 1960 Part of the ammonia plant completed in 1923 (Nobeoka, Miyazaki, Japan) Hollow-ﬁ ber membrane artiﬁ cial kidneys LSIs The Bemberg™ plant which started operation in 1931 (Nobeoka, Miyazaki, Japan) Portfolio transformation Fiscal 1940 Net sales ¥56 million Naphtha cracker (Kurashiki, Okayama, Japan) Fiscal 1960 Net sales ¥44.9 billion Fibers Chemicals Foods Fiscal 1980 Net sales ¥800.1 billion Fibers Chemicals Homes Construction Materials Foods and Fermentation Chemistry Establishing the basis for modern life Sufﬁ ciency of daily necessities, improvement in quality of homes, development of public infrastructure (cid:129) Development of chemical industry and (cid:129) Post-war recovery and modernization of industry (cid:129) Stable economic growth modern agriculture (cid:129) Interbellum economic downturn and World War II 10 Asahi Kasei Report 2015 (cid:129) Period of high economic growth (cid:129) Economic bubble From 2010 In 2011 we launched our “For Tomorrow 2015” management initiative focused on the two business strategies of expanding world-leading businesses and creating new value for society. In 2012 we entered the acute critical care business by acquiring ZOLL Medical Corporation. We continue to proactively expand and develop operations. From 1990 In 1992 we acquired Toyo Jozo Co., Ltd. to reinforce pharmaceutical operations. From 1999, we executed a program to heighten selectivity and focus in operations, divesting our food business and closing some ﬁ ber businesses, achieving selective diversiﬁ cation. From 2000 onward, we also established many overseas operations, mainly in Asia, laying the foundation for global management. We are Creating for Tomorrow, providing new value to society by enabling living in health and comfort and harmony with the natural environment Propane-process acrylonitrile (AN) plant in Thailand Pharmaceutical products after the Toyo Jozo merger The LifeVest™ wearable deﬁ brillator Asahi Kasei Electronics Materials (Suzhou) Co., Ltd., a major manufacturing base for photosensitive dry ﬁ lm Fiscal 2014 Net sales ¥1,986.4 billion Fiscal 2000 Net sales ¥1,269.4 billion Fibers Chemicals Homes Construction Materials Fibers Chemicals Homes Construction Materials Electronics Health Care Others Electronics Health Care Critical Care Others Increased comfort and convenience Heightened environmental consciousness (cid:129) Two decades of meager growth after collapse of bubble (cid:129) Changing values after the Great East Japan Earthquake (cid:129) Effect of global economic crisis (cid:129) Emergence from period of slow economic growth Asahi Kasei Report 2015 11 Financial and Non-Financial Highlights Asahi Kasei Corporation and consolidated subsidiaries Net sales1, 2 (¥ billion) 2,000 1,897.8 1,986.4 1,555.9 1,573.2 1,666.6 1,500 1,000 500 0 Operating income1 (¥ billion) 143.3 157.9 122.9 104.3 92.0 200 150 100 50 0 (50) ’10 ’11 ’12 ’13 ’14 FY ’10 ’11 ’12 ’13 ’14 FY Chemicals Fibers Homes Construction Materials Electronics Health Care Critical Care3 Others Chemicals Health Care Fibers Critical Care3 Homes Construction Materials Electronics Others Corporate expenses and eliminations, etc. Note: Amortization of goodwill, etc. related to acquisition of ZOLL is excluded from Health Care and included in “Corporate expenses and eliminations, etc.” Net income, ROE (¥ billion) 120 Total assets, ROA (%) 24 (¥ billion) 2,500 100 80 60 40 20 0 101.3 105.7 60.3 9.3 55.8 8.1 53.7 7.1 11.7 10.6 20 16 12 8 4 0 2,000 1,500 1,000 500 0 1,425.9 1,410.6 4.3 3.9 1,800.2 3.3 1,915.1 2,014.5 5.5 5.4 (%) 10 8 6 4 2 0 ’10 ’11 ’12 ’13 ’14 FY ’10 ’11 ’12 ’13 Net income (left scale) ROE (right scale) Total assets (left scale) ROA (right scale) ’14 FY (end) Net worth,4 net worth/total assets Interest-bearing debt, D/E ratio 46.5 50.1 663.6 706.8 45.1 812.1 47.7 912.7 53.7 1,082.7 (¥ billion) 1,800 1,500 1,200 900 600 300 0 (%) 60 (¥ billion) 400 381.4 50 40 30 20 10 0 253.9 0.38 300 200 100 0 303.9 269.0 184.1 0.47 0.26 0.33 0.25 ’10 ’11 ’12 ’13 Net worth (left scale) Net worth/total assets (right scale) ’14 FY (end) ’10 ’11 ’12 ’13 ’14 Interest-bearing debt (left scale) D/E ratio (right scale) (%) 0.8 0.6 0.4 0.2 0 FY (end) Free cash ﬂ ows (¥ billion) 150 69.3 51.8 100 50 0 (50) (100) (150) (200) (152.5) 140.4 37.1 Net income per share 72.48 75.62 43.11 39.89 38.43 (¥) 80 60 40 20 0 ’10 ’11 ’12 ’13 ’14 FY ’10 ’11 ’12 ’13 ’14 FY 1 Beginning with ﬁ scal 2014, the former Chemicals segment and the former Fibers segment are combined as a new Chemicals & Fibers segment, the former Homes segment and the former Construction Materials segment are combined as a new Homes & Construction Materials segment, and the former Health Care segment and the former Critical Care segment are combined as a new Health Care segment. For consistency, ﬁ scal 2014 results are shown by business category classiﬁ cation which corresponds to the former segment classiﬁ cation. 2 Beginning with ﬁ scal 2011, the accounting policy for naphtha resale in the Chemicals segment was changed. This change is applied retroactively to net sales for ﬁ scal 2010. 3 The Critical Care segment, in which results of ZOLL Medical Corporation are reported, was added in ﬁ scal 2012. Critical Care segment results were included beginning on April 27, 2012. 12 Asahi Kasei Report 2015 Overseas sales and overseas sales percentage Domestic and overseas employees (¥ billion) 800 600 400 200 0 449.3 28.9 421.5 26.8 485.2 29.1 673.3 608.7 32.1 33.9 ’10 ’11 ’12 ’13 ’14 (%) 80 60 40 20 0 FY 35,000 30,000 25,000 20,000 15,000 10,000 5,000 0 25,016 25,409 28,363 29,127 30,313 ’10 ’11 ’12 ’13 ’14 FY (end) Overseas sales (left scale) Overseas sales percentage (right scale) Overseas employees Domestic employees Capital expenditure (¥ billion) 120 113.8 R&D expenses1 (¥ billion) 80 85.1 66.0 92.4 89.1 100 80 60 40 20 0 62.3 66.3 60 40 20 0 71.1 71.1 75.5 ’10 ’11 ’12 ’13 ’14 FY ’10 ’11 ’12 ’13 ’14 FY Chemicals Health Care Fibers Critical Care3 Homes Construction Materials Electronics Others Corporate expenses and eliminations Environmental and safety investment Greenhouse gas emissions from production processes (¥ billion) (million tons CO2 equivalent) 5.59 5.20 4.26 3.80 3.90 6 5 4 3 2 1 0 6 5 4 3 2 1 0 5.26 5.05 4.11 4.17 4.06 ’10 ’11 ’12 ’13 ’14 FY ’10 ’11 ’12 ’13 ’14 FY Safety investment Environmental investment Carbon dioxide Nitrous oxide Methane HFCs PFCs Sulfur hexafluoride Number of women as managers5 Employees using parental leave6 410 370 454 317 344 500 400 300 200 100 0 500 400 300 200 100 0 405 430 454 468 457 ’10 ’11 ’12 ’13 ’14 FY ’10 ’11 ’12 ’13 ’14 FY Women Men 4 Net assets less minority interests. 5 Results as of June 30 each year for personnel employed by Asahi Kasei Corp., Asahi Kasei Chemicals Corp., Asahi Kasei Fibers Corp., Asahi Kasei Homes Corp., Asahi Kasei Construction Materials Corp., Asahi Kasei Microdevices Corp., Asahi Kasei E-materials Corp., Asahi Kasei Pharma Corp., and Asahi Kasei Medical Co., Ltd. 6 Results for personnel employed by Asahi Kasei Corp., Asahi Kasei Chemicals Corp., Asahi Kasei Fibers Corp., Asahi Kasei Homes Corp., Asahi Kasei Construction Materials Corp., Asahi Kasei Microdevices Corp., Asahi Kasei E-materials Corp., Asahi Kasei Pharma Corp., and Asahi Kasei Medical Co., Ltd. Asahi Kasei Report 2015 13 Asahi Kasei Group Management and CSR We believe that corporate social responsibility (CSR) is achieved by addressing a wide range of social challenges through the advancement of our diversiﬁ ed businesses based on our Group Mission of contributing to life and living for people around the world. Under our “For Tomorrow 2015” management initiative, we are now expanding operations that provide new value to society by enabling living in health and comfort and harmony with the natural environment in accordance with our Group Vision. Living in health and comfort Creating for Tomorrow The community Community outreach The employee Employee fulfillment The environment Environmental protection The customer Customer satisfaction Sustainable Increase in Corporate Value The supplier Fair business dealings The local economy Local economic participation The shareholder Shareholder returns Business operations Expansion of world-leading businesses “For Tomorrow 2015” strategic management initiative CSR in Action Creation of new value for society CSR Fundamentals Compliance, Responsible Care, Corporate Citizenship, Respect for Employee Individuality Group Mission Contributing to life and living for people around the world Harmony with the natural environment CSR Fundamentals Based on a clear understanding of the effects of our operations on the global environment and local communities, our efforts and actions related to CSR are focused on four CSR Fundamentals: Compliance, Responsible Care, Corporate Citizenship, and Respect for Employee Individuality. CSR in Action We believe that CSR is achieved by raising corporate value for our various stakeholders through our business operations in accordance with our Group Mission of contributing to life and living for people around the world. Structure and organization for CSR In order to promote separate important activities regarding CSR more efﬁ ciently and decisively, we have ﬁ ve committees under the direct supervision of the holding company President as follows: President of holding company Corporate Ethics Committee (cid:115) (cid:48)(cid:82)(cid:69)(cid:80)(cid:65)(cid:82)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78) (cid:79)(cid:70) (cid:34)(cid:65)(cid:83)(cid:73)(cid:67) (cid:48)(cid:79)(cid:76)(cid:73)(cid:67)(cid:89) (cid:65)(cid:78)(cid:68) (cid:35)(cid:79)(cid:68)(cid:69) (cid:79)(cid:70) (cid:35)(cid:79)(cid:78)(cid:68)(cid:85)(cid:67)(cid:84) (cid:70)(cid:79)(cid:82) (cid:67)(cid:79)(cid:82)(cid:80)(cid:79)(cid:82)(cid:65)(cid:84)(cid:69) (cid:69)(cid:84)(cid:72)(cid:73)(cid:67)(cid:83) (cid:115) (cid:33)(cid:68)(cid:86)(cid:65)(cid:78)(cid:67)(cid:69)(cid:77)(cid:69)(cid:78)(cid:84) (cid:79)(cid:70) (cid:69)(cid:84)(cid:72)(cid:73)(cid:67)(cid:83) (cid:69)(cid:68)(cid:85)(cid:67)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78) (cid:65)(cid:78)(cid:68) (cid:79)(cid:80)(cid:69)(cid:82)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78) (cid:79)(cid:70) (cid:67)(cid:79)(cid:77)(cid:80)(cid:76)(cid:73)(cid:65)(cid:78)(cid:67)(cid:69) (cid:72)(cid:79)(cid:84)(cid:76)(cid:73)(cid:78)(cid:69) Responsible Care Committee (cid:115) (cid:36)(cid:69)(cid:76)(cid:73)(cid:66)(cid:69)(cid:82)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78) (cid:79)(cid:70) (cid:80)(cid:76)(cid:65)(cid:78)(cid:83) (cid:65)(cid:78)(cid:68) (cid:82)(cid:69)(cid:83)(cid:85)(cid:76)(cid:84)(cid:83) (cid:73)(cid:78) (cid:82)(cid:69)(cid:71)(cid:65)(cid:82)(cid:68) (cid:84)(cid:79) (cid:69)(cid:78)(cid:86)(cid:73)(cid:82)(cid:79)(cid:78)(cid:77)(cid:69)(cid:78)(cid:84)(cid:65)(cid:76) (cid:80)(cid:82)(cid:79)(cid:84)(cid:69)(cid:67)(cid:84)(cid:73)(cid:79)(cid:78)(cid:12) (cid:80)(cid:82)(cid:79)(cid:68)(cid:85)(cid:67)(cid:84) (cid:83)(cid:65)(cid:70)(cid:69)(cid:84)(cid:89)(cid:12) (cid:79)(cid:80)(cid:69)(cid:82)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:65)(cid:76) (cid:83)(cid:65)(cid:70)(cid:69)(cid:84)(cid:89)(cid:12) (cid:69)(cid:84)(cid:67)(cid:14) Global Environment Committee (cid:115) (cid:36)(cid:69)(cid:76)(cid:73)(cid:66)(cid:69)(cid:82)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78) (cid:65)(cid:78)(cid:68) (cid:65)(cid:68)(cid:79)(cid:80)(cid:84)(cid:73)(cid:79)(cid:78) (cid:79)(cid:70) (cid:71)(cid:82)(cid:79)(cid:85)(cid:80)(cid:13)(cid:87)(cid:73)(cid:68)(cid:69) (cid:77)(cid:69)(cid:65)(cid:83)(cid:85)(cid:82)(cid:69)(cid:83) (cid:84)(cid:79) (cid:67)(cid:79)(cid:85)(cid:78)(cid:84)(cid:69)(cid:82) (cid:71)(cid:76)(cid:79)(cid:66)(cid:65)(cid:76) (cid:87)(cid:65)(cid:82)(cid:77)(cid:73)(cid:78)(cid:71) Risk Management Committee (cid:115) (cid:38)(cid:79)(cid:82)(cid:77)(cid:85)(cid:76)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78) (cid:79)(cid:70) (cid:80)(cid:76)(cid:65)(cid:78)(cid:83) (cid:65)(cid:78)(cid:68) (cid:77)(cid:69)(cid:65)(cid:83)(cid:85)(cid:82)(cid:69)(cid:83) (cid:84)(cid:79) (cid:82)(cid:69)(cid:83)(cid:80)(cid:79)(cid:78)(cid:68) (cid:84)(cid:79) (cid:65)(cid:67)(cid:84)(cid:85)(cid:65)(cid:76) (cid:79)(cid:82) (cid:80)(cid:79)(cid:84)(cid:69)(cid:78)(cid:84)(cid:73)(cid:65)(cid:76) (cid:67)(cid:82)(cid:73)(cid:83)(cid:69)(cid:83) Community Fellowship Committee (cid:115) (cid:38)(cid:79)(cid:82)(cid:77)(cid:85)(cid:76)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78) (cid:79)(cid:70) (cid:80)(cid:79)(cid:76)(cid:73)(cid:67)(cid:89)(cid:12) (cid:80)(cid:76)(cid:65)(cid:78)(cid:83)(cid:12) (cid:65)(cid:78)(cid:68) (cid:67)(cid:79)(cid:85)(cid:82)(cid:83)(cid:69)(cid:83) (cid:79)(cid:70) (cid:65)(cid:67)(cid:84)(cid:73)(cid:79)(cid:78) (cid:73)(cid:78) (cid:82)(cid:69)(cid:71)(cid:65)(cid:82)(cid:68) (cid:84)(cid:79) (cid:67)(cid:79)(cid:77)(cid:77)(cid:85)(cid:78)(cid:73)(cid:84)(cid:89) (cid:70)(cid:69)(cid:76)(cid:76)(cid:79)(cid:87)(cid:83)(cid:72)(cid:73)(cid:80) (cid:65)(cid:67)(cid:84)(cid:73)(cid:86)(cid:73)(cid:84)(cid:73)(cid:69)(cid:83) (as of July 1, 2015) 14 Asahi Kasei Report 2015 Interview with the President In ﬁ scal 2014 we achieved record-breaking consolidated operating results for the second consecutive year. We’re now on track to achieve our medium-term targets in ﬁ scal 2015. Our business activities and investments for growth which we made over the past few years blossomed in ﬁ scal 2014, resulting in our best operating perfor- mance ever. In ﬁ scal 2015, with “For Tomorrow 2015” in its ﬁ nal year, we are focused on achieving our targets of ¥2 trillion in net sales and ¥160 billion in operating income as we formulate our next medium-term management plan. Toshio Asano President Q1 Could you describe your operating results in ﬁ scal 2014 and outlook for ﬁ scal 2015? Q2 How is progress under your “For Tomorrow 2015” medium-term management initiative? Q3 Please tell us about the Polypore acquisition. Q4 What will the next medium-term management initiative look like? Asahi Kasei Report 2015 15 Q1 Could you describe your operating results in ﬁ scal 2014 and outlook for ﬁ scal 2015? A1 We achieved our highest- ever consolidated operating results in ﬁ scal 2014 for the second year in a row, and are on track to achieve new record ﬁ gures in ﬁ scal 2015. Although the US economy continued to recover and there were signs of improvement in Europe during ﬁ scal 2014, slower growth was seen in China, and the global economy was still affected by some uncertainties. As for the Japanese economy, in the latter part of the ﬁ scal year Japanese economy con- tinued on a path of gradual recovery with the weaker yen and lower oil prices leading to improved corporate performance. Due to the effect of the consumption tax increase, construction materials operations and pharmaceuticals operations had lower volumes, but terms of trade in chemicals operations improved as an effect of the continuing weaker yen and lower oil prices. Performance in ﬁ bers operations was ﬁ rm with oper- ating income exceeding ¥10 billion for the ﬁ rst time. Performance in critical care operations was strong with net sales exceeding ¥100 billion and consoli- dated operating income turning positive even after amortization of goodwill and other intangible assets. In sum, consolidated ﬁ nancial results for ﬁ scal 2014 increased from a year ago as we achieved record ﬁ gures for the second consecutive year in net sales, operating income, and net income. Speaking of the outlook for ﬁ scal 2015, consolidated operating results are expected to increase from ﬁ scal 2014. Though selling, general and administra- tive expenses will increase with higher construction costs and material costs in homes operations, and increased R&D expenses in pharmaceuticals operations, we anticipate strong sales in electronic devices operations and critical care operations. We expect to achieve record ﬁ gures again in net sales, operating income, and net income in ﬁ scal 2015. 16 Asahi Kasei Report 2015 Q2 How is progress under your “For Tomorrow 2015” medium-term management initiative? A2 Strategic investments for growth are contributing to increased earnings. We are determined to achieve our targets under the current medium-term initiative. We achieved record-high consolidated operating results in ﬁ scal 2014 with net sales of ¥1,986.4 billion and operating income of ¥157.9 billion. Under our “For Tomorrow 2015” medium-term management initiative, we set ﬁ nal numerical targets as ¥2 trillion in net sales and ¥160 billion in operating income. We are well on the path to achieve these targets as we are forecast- ing net sales of ¥2 trillion and operating income of ¥164 billion in ﬁ scal 2015. As laid down in the current initiative, we proactively carried out several capital investments in ﬁ scal 2014. In our existing businesses, we increased pro- duction capacity for spunbond nonwovens for hygienic applications and also for Roica™ spandex in Thailand. We are now constructing a plant for plastic compounds in the American South and a new manufacturing facility for the anticoagulant Recomodulin™ in Fuji, Shizuoka, Japan. Furthermore, we have decided to acquire the US-based Polypore International, Inc. to expand our battery separator business. In creating new value for society, last November we started commercial production of high-output UVC LEDs in Fuji, and launched the sale of Optan™ UVC LEDs for analytical and instrumentation applications such as drinking water quality inspection and control. It is anticipated that UVC LEDs will play a growing role in a variety of disinfection applications for water, food, and air. Meanwhile, in chemicals operations we have advanced plans to unify the naphtha cracker facilities in Mizushima (Okayama, Japan) with Mitsubishi Chemical, and carried out structural reforms to strengthen our petrochemical operations in Japan. We continue to enhance the earnings ability of our chem- icals operations by realigning our business portfolio, shifting the focus from commodity products to high-performance and high-value added products. In Fiscal 2015 we will not only reap the fruit of the investments for growth made thus far, while continuing to advance our streamlining project for improved proﬁ t structure, but also complete our initiatives under “For Tomorrow 2015” and lay the groundwork for the next medium-term strategy. Net sales under “For Tomorrow 2015” (¥ billion) 2,000 1,897.8 1,986.4 2,000.0 2,000.0 1,573.2 1,666.6 1,500 1,000 500 0 ’11 ’12 ’13 ’14 Operating income under “For Tomorrow 2015” (¥ billion) 200 ’15 latest forecast ’15 target FY 143.3 157.9 164.0 160.0 104.3 920 150 100 50 0 ’11 ’12 ’13 ’14 ’15 latest forecast ’15 target FY Asahi Kasei Report 2015 17 Q3 Please tell us about the Polypore acquisition. By combining both com- panies’ strengths, we will achieve a new growth strategy in battery sepa- rators. A3 In February 2015 we entered into a merger agreement to acquire battery sepa- rator manufacturer Polypore International, Inc. Polypore has sophisticated technology for polymer membranes, and an excellent global supply system for its lithium-ion battery (LIB) separator and lead-acid battery separator business- es, backed by outstanding R&D. Polypore’s two major product brands are Celgard™ LIB separator with high future growth potential, and Daramic™ lead-acid battery separator that is mainly for automotive and industrial applica- tions. Each business has an innovative portfolio of original products. Having groomed our Hipore™ LIB separator business as a mainstay in elec- tronic materials, we have outstanding opportunities to gain synergy among these businesses. By combining Hipore™, Celgard™, and Daramic™ into a single battery separator business, we can heighten our technological advan- tage and achieve greater growth over medium and long term. We will advance the development of new products based on the combined technology of our companies, and develop a new growth strategy for the bat- tery separator business to meet growing demand worldwide. Polypore Overview Battery Separator Business* Net sales: $450 million Operating income: $87 million (segment income before corporate expenses) Lithium-ion battery separator Lead-acid battery separator Net sales: $127 million Net sales: $323 million Applications (cid:115) Mobile electronics (cid:115) Power tools (cid:115) Eco-friendly vehicles (cid:115) Energy storage systems Applications (cid:115) Automobiles, trucks, and buses (cid:115) Forklifts (cid:115) Backup power * Polypore’s Energy Storage segment results in 2014. 18 Asahi Kasei Report 2015 Q4 What will the next medium-term management initiative look like? We will leverage our strength in diversity as we focus on the pursuit of growth and proﬁ tabili- ty, and the creation of new businesses. A4 In formulating the next medium-term management initiative, while we are considering where we want to be a decade hence, we are planning for the 3-year period from ﬁ scal 2016 through ﬁ scal 2018 to gain greater visibility. We will leverage our strength in diversity, focusing on the pursuit of growth and proﬁ tability and the creation of new businesses. Concurrently with the start of the new medium-term management plan in April 2016, we will reorganize our business sectors into the Material sector, the Homes sector, and the Health Care sector. This change will enhance our competitiveness through the advancement and integration of “knowledge and technology” and “human resources” within the Asahi Kasei Group, and fur- ther accelerate growth by facilitating the creation of new businesses, height- ening specialization, and enhancing efﬁ ciency. At the same time we will merge the current core operating companies of Asahi Kasei Chemicals, Asahi Kasei Fibers, and Asahi Kasei E-materials with the holding company Asahi Kasei Corp., which will become an operating holding company. Under the new plan, each business sector will have a basic strategic assign- ment. The assignment for the Material sector is increased proﬁ tability, aiming for an overall operating margin of over 8%. In the Homes sector, we want the business to continue its stable growth while maintaining an operating margin of over 10%. In the Health Care sector, the assignment is to aim for high growth through expansion of business scale. Also, the common assignment that applies across the whole Asahi Kasei Group is to deepen synergy among the sectors and enhance our ability to create new businesses. We will continue to emphasize the importance of compliance and safety as fundamental to everything we do, and proceed towards achieving growth through innovation, human resources development, and increased corporate value. Transformation of business sector and corporate conﬁ guration (from April 2016) Asahi Kasei Corp. — Operating holding company (4 companies combined) Operating function Holding company function Current Asahi Kasei Corp. Asahi Kasei Chemicals Asahi Kasei Fibers Asahi Kasei E-materials Asahi Kasei Microdevices Asahi Kasei Homes Asahi Kasei Construction Materials Asahi Kasei Pharma Asahi Kasei Medical ZOLL Medical Material Homes Health Care Asahi Kasei Report 2015 19 CFO Interview We are striving for greater corporate value with proactive investments for growth and a robust capital policy Hideki Kobori Representative Director Primary Executive Ofﬁ cer Q1 A1 What is your basic ﬁ nancial strategy under “For Tomorrow 2015”? We are focused on consistent generation of cash ﬂ ow, with an appropriate balance between investment for growth and shareholder returns. Under our “For Tomorrow 2015” medium-term management ini- tiative, we aim to consistently expand cash ﬂ ow in two basic ways. One is by enhancing proﬁ tability through greater cost competitiveness, enhanced product performance, and business structure improvement, and the other is by improving capital efﬁ - ciency through intragroup ﬁ nancing and appropriate control of inventory levels. To obtain stable and low-cost ﬁ nancing, we employ various fund-raising methods such as borrowing from banks, issuing bonds, and issuing commercial paper ﬂ exibly and dynamically in accordance with our ﬁ nancial circumstances. In addition, cash ﬂ ow generated through our medium-term initiative provides further resources to invest for growth as well as to return to shareholders as dividends. We are careful to main- tain an appropriate balance between the two. Our investment for growth is mainly directed toward the expansion of production facilities, R&D, and business alliances including M&A. We strive to continuously increase dividends through continuous earnings growth, with a payout of 30% as our basic standard. Investment for growth and shareholder returns Consistently generating cash flow Investment for growth Shareholder returns Investment for expansion R&D M&A and alliances Aiming at continuous dividends increase, with basic standard for payout ratio of 30% Q2 A2 What is the outlook for your “For Tomorrow 2015” ﬁ nancial targets? We are largely on track to achieve our main ﬁ nancial targets in ﬁ scal 2015. Our targets for ﬁ scal 2015 as the ﬁ nal year of our current medium-term management initiative are ¥2 trillion in net sales, ¥160 billion in operating income, return on equity (ROE) of at least 10%, and return on invested capital (ROIC) of at least 7%. We are forecasting the achievement of our targets for net sales and operating income, and as shown in the following table we expect to come very close to our targets for ROE and ROIC by the end of this ﬁ scal year. With regard to ROE, a metric that is recently in focus, we recorded 11.7% in ﬁ scal 2013 and 10.6% in ﬁ scal 2014, achieving over 10% two years in a row. The result in ﬁ scal 2013 is attributable to a temporary increase in net income as we recorded signiﬁ cant extraordinary income from compensation for damage in pharmaceutical-related litigation. On the other hand, the ROE of 10.6% in ﬁ scal 2014 was achieved without any special factors such as this, so we believe this indicates that our basic strategies under “For Tomorrow 2015” have been fruitful. 20 Asahi Kasei Report 2015 We originally forecasted that our debt/equity ratio (D/E ratio) would be 0.5 assuming the achievement of our net sales and operating income targets, and execution of ¥1 trillion in strategic investment as planned. Although we plan to achieve those targets and, with the acquisition of Polypore, reach ¥1 trillion in strategic investment, we currently forecast that the D/E ratio will be 0.4, lower than originally thought. We will continue to hold a sound ﬁ nancial position as an important management consideration. Primary ﬁ nancial metrics Dividends per share Payout ratio Net income per share (EPS) Net income per total assets (ROA) Net income per shareholders’ equity (ROE)* Net income per shareholders’ equity and interest-bearing debt (ROIC)* D/E ratio* FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 (planned) ¥14 35.1% ¥39.89 3.9% 8.1% 6.9% 0.26 ¥14 36.4% ¥38.43 3.3% 7.1% 5.7% 0.47 ¥17 23.5% ¥72.48 5.5% 11.7% 7.7% 0.33 ¥19 25.1% ¥75.62 5.4% 10.6% 7.5% 0.25 ¥20 26.4% — — 9.5% 6.5% 0.4 * Approximate ﬁ gures for FY 2015. (ROIC and D/E ratio including expected impact of interest-bearing debt related to acquisition of Polypore) Q3 What is your progress in investment for growth under “For Tomorrow 2015”? What will your basic approach to investment for growth and shareholder returns be under the next management plan? A3 We expect to complete our current investment plan on schedule, and we intend to further advance investment for growth and shareholder returns in our new management plan. Some of the approximately ¥630 billion of investment for growth made by ﬁ scal 2014, both in existing businesses and non-linear growth, are already steadily contributing to proﬁ ts. We plan to ﬁ nish ﬁ scal 2015 with some ¥110 billion of investment for growth in exist- ing businesses in addition to the ¥260 billion to acquire Polypore. We are planning on a 3-year term for our next medium-term management initiative. While we have yet to determine concrete Investment for growth under “For Tomorrow 2015” numerical targets, we intend to maintain an appropriate balance between further investment for growth and shareholder returns. As part of our discussion on the optimum capital structure, we also hope to ﬁ nd different ways of returning proﬁ ts to shareholders in addition to dividends. We will continue to strive for greater corporate value through proactive investments that will produce reliable returns. FY 2011–FY 2014 (cid:115) Acquisition of Crystal IS (cid:115) Acquisition of Crystal IS (cid:115) (cid:33)(cid:67)(cid:81)(cid:85)(cid:73)(cid:83)(cid:73)(cid:84)(cid:73)(cid:79)(cid:78) (cid:79)(cid:70) (cid:58)(cid:47)(cid:44)(cid:44) (cid:115) (cid:33)(cid:67)(cid:81)(cid:85)(cid:73)(cid:83)(cid:73)(cid:84)(cid:73)(cid:79)(cid:78) (cid:79)(cid:70) (cid:58)(cid:47)(cid:44)(cid:44) (cid:115) (cid:35)(cid:79)(cid:78)(cid:83)(cid:84)(cid:82)(cid:85)(cid:67)(cid:84)(cid:73)(cid:79)(cid:78) (cid:79)(cid:70) (cid:73)(cid:78)(cid:73)(cid:84)(cid:73)(cid:65)(cid:76) (cid:115) (cid:35)(cid:79)(cid:78)(cid:83)(cid:84)(cid:82)(cid:85)(cid:67)(cid:84)(cid:73)(cid:79)(cid:78) (cid:79)(cid:70) (cid:73)(cid:78)(cid:73)(cid:84)(cid:73)(cid:65)(cid:76) (cid:80)(cid:82)(cid:79)(cid:68)(cid:85)(cid:67)(cid:84)(cid:73)(cid:79)(cid:78) (cid:80)(cid:76)(cid:65)(cid:78)(cid:84) (cid:70)(cid:79)(cid:82) (cid:53)(cid:54)(cid:35) (cid:44)(cid:37)(cid:36)(cid:83) (cid:80)(cid:82)(cid:79)(cid:68)(cid:85)(cid:67)(cid:84)(cid:73)(cid:79)(cid:78) (cid:80)(cid:76)(cid:65)(cid:78)(cid:84) (cid:70)(cid:79)(cid:82) (cid:53)(cid:54)(cid:35) (cid:44)(cid:37)(cid:36)(cid:83) Total approx. ¥200 billion FY 2015 plan Acquisition of Polypore Approx. ¥260 billion Non-linear growth ¥460 billion Existing businesses ¥540 billion FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 plan FY 2015 budget Approx. ¥110 billion FY 2011 (cid:115) (cid:35)(cid:65)(cid:80)(cid:65)(cid:67)(cid:73)(cid:84)(cid:89) (cid:73)(cid:78)(cid:67)(cid:82)(cid:69)(cid:65)(cid:83)(cid:69) (cid:70)(cid:79)(cid:82) (cid:51)(cid:13)(cid:51)(cid:34)(cid:50) (cid:73)(cid:78) (cid:51)(cid:73)(cid:78)(cid:71)(cid:65)(cid:80)(cid:79)(cid:82)(cid:69) (cid:115) (cid:35)(cid:65)(cid:80)(cid:65)(cid:67)(cid:73)(cid:84)(cid:89) (cid:73)(cid:78)(cid:67)(cid:82)(cid:69)(cid:65)(cid:83)(cid:69) (cid:70)(cid:79)(cid:82) (cid:65)(cid:67)(cid:69)(cid:84)(cid:79)(cid:78)(cid:73)(cid:84)(cid:82)(cid:73)(cid:76)(cid:69) (cid:73)(cid:78) (cid:43)(cid:79)(cid:82)(cid:69)(cid:65) (cid:115) (cid:35)(cid:65)(cid:80)(cid:65)(cid:67)(cid:73)(cid:84)(cid:89) (cid:73)(cid:78)(cid:67)(cid:82)(cid:69)(cid:65)(cid:83)(cid:69) (cid:70)(cid:79)(cid:82) (cid:73)(cid:78)(cid:83)(cid:85)(cid:76)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78) (cid:80)(cid:65)(cid:78)(cid:69)(cid:76)(cid:83) (cid:115) (cid:50)(cid:69)(cid:83)(cid:69)(cid:65)(cid:82)(cid:67)(cid:72) (cid:67)(cid:79)(cid:77)(cid:80)(cid:76)(cid:69)(cid:88) (cid:70)(cid:79)(cid:82) (cid:80)(cid:72)(cid:65)(cid:82)(cid:77)(cid:65)(cid:67)(cid:69)(cid:85)(cid:84)(cid:73)(cid:67)(cid:65)(cid:76)(cid:83) FY 2012 (cid:115) (cid:33)(cid:67)(cid:81)(cid:85)(cid:73)(cid:83)(cid:73)(cid:84)(cid:73)(cid:79)(cid:78) (cid:79)(cid:70) (cid:83)(cid:65)(cid:76)(cid:69)(cid:83) (cid:82)(cid:73)(cid:71)(cid:72)(cid:84)(cid:83) (cid:70)(cid:79)(cid:82) (cid:79)(cid:86)(cid:69)(cid:82)(cid:65)(cid:67)(cid:84)(cid:73)(cid:86)(cid:69) (cid:66)(cid:76)(cid:65)(cid:68)(cid:68)(cid:69)(cid:82) (cid:84)(cid:72)(cid:69)(cid:82)(cid:65)(cid:80)(cid:69)(cid:85)(cid:84)(cid:73)(cid:67) (cid:68)(cid:82)(cid:85)(cid:71) (cid:115) (cid:35)(cid:65)(cid:80)(cid:65)(cid:67)(cid:73)(cid:84)(cid:89) (cid:73)(cid:78)(cid:67)(cid:82)(cid:69)(cid:65)(cid:83)(cid:69) (cid:70)(cid:79)(cid:82) (cid:34)(cid:69)(cid:77)(cid:66)(cid:69)(cid:82)(cid:71) (cid:115) (cid:47)(cid:86)(cid:69)(cid:82)(cid:83)(cid:69)(cid:65)(cid:83) (cid:69)(cid:88)(cid:80)(cid:65)(cid:78)(cid:83)(cid:73)(cid:79)(cid:78) (cid:79)(cid:70) (cid:40)(cid:73)(cid:80)(cid:79)(cid:82)(cid:69) FY 2013 (cid:115) (cid:33)(cid:67)(cid:81)(cid:85)(cid:73)(cid:83)(cid:73)(cid:84)(cid:73)(cid:79)(cid:78) (cid:79)(cid:70) (cid:70)(cid:85)(cid:76)(cid:76) (cid:79)(cid:87)(cid:78)(cid:69)(cid:82)(cid:83)(cid:72)(cid:73)(cid:80) (cid:79)(cid:70) (cid:52)(cid:69)(cid:78)(cid:65)(cid:67) (cid:42)(cid:54) (cid:73)(cid:78) (cid:35)(cid:72)(cid:73)(cid:78)(cid:65) (cid:115) (cid:35)(cid:65)(cid:80)(cid:65)(cid:67)(cid:73)(cid:84)(cid:89) (cid:73)(cid:78)(cid:67)(cid:82)(cid:69)(cid:65)(cid:83)(cid:69) (cid:70)(cid:79)(cid:82) (cid:80)(cid:79)(cid:76)(cid:89)(cid:67)(cid:65)(cid:82)(cid:66)(cid:79)(cid:78)(cid:65)(cid:84)(cid:69) (cid:68)(cid:73)(cid:79)(cid:76) (cid:8)(cid:78)(cid:69)(cid:87) (cid:80)(cid:76)(cid:65)(cid:78)(cid:84) (cid:73)(cid:78) (cid:35)(cid:72)(cid:73)(cid:78)(cid:65)(cid:9) (cid:115) (cid:47)(cid:86)(cid:69)(cid:82)(cid:83)(cid:69)(cid:65)(cid:83) (cid:69)(cid:88)(cid:80)(cid:65)(cid:78)(cid:83)(cid:73)(cid:79)(cid:78) (cid:79)(cid:70) (cid:40)(cid:73)(cid:80)(cid:79)(cid:82)(cid:69) FY 2014 (cid:115) (cid:35)(cid:65)(cid:80)(cid:65)(cid:67)(cid:73)(cid:84)(cid:89) (cid:73)(cid:78)(cid:67)(cid:82)(cid:69)(cid:65)(cid:83)(cid:69) (cid:70)(cid:79)(cid:82) (cid:83)(cid:80)(cid:85)(cid:78)(cid:66)(cid:79)(cid:78)(cid:68) (cid:73)(cid:78) (cid:52)(cid:72)(cid:65)(cid:73)(cid:76)(cid:65)(cid:78)(cid:68) (cid:115) (cid:35)(cid:65)(cid:80)(cid:65)(cid:67)(cid:73)(cid:84)(cid:89) (cid:73)(cid:78)(cid:67)(cid:82)(cid:69)(cid:65)(cid:83)(cid:69) (cid:70)(cid:79)(cid:82) (cid:50)(cid:79)(cid:73)(cid:67)(cid:65) (cid:73)(cid:78) (cid:52)(cid:72)(cid:65)(cid:73)(cid:76)(cid:65)(cid:78)(cid:68) (cid:115) (cid:46)(cid:69)(cid:87) (cid:80)(cid:76)(cid:65)(cid:83)(cid:84)(cid:73)(cid:67) (cid:67)(cid:79)(cid:77)(cid:80)(cid:79)(cid:85)(cid:78)(cid:68) (cid:80)(cid:76)(cid:65)(cid:78)(cid:84) (cid:73)(cid:78) (cid:53)(cid:51) (cid:115) (cid:46)(cid:69)(cid:87) (cid:80)(cid:82)(cid:79)(cid:68)(cid:85)(cid:67)(cid:84)(cid:73)(cid:79)(cid:78) (cid:70)(cid:65)(cid:67)(cid:73)(cid:76)(cid:73)(cid:84)(cid:89) (cid:70)(cid:79)(cid:82) (cid:84)(cid:72)(cid:69) (cid:65)(cid:67)(cid:84)(cid:73)(cid:86)(cid:69) (cid:73)(cid:78)(cid:71)(cid:82)(cid:69)(cid:68)(cid:73)(cid:69)(cid:78)(cid:84) (cid:79)(cid:70) (cid:50)(cid:69)(cid:67)(cid:79)(cid:77)(cid:79)(cid:68)(cid:85)(cid:76)(cid:73)(cid:78) Asahi Kasei Report 2015 21 Directors, Corporate Auditors, Executive Ofﬁ cers (As of June 26, 2015) The Board of Directors Directors From left (seated) Ichiro Itoh Chairman & Director From left (standing) Masumi Shiraishi Outside Director Hideki Kobori Representative Director Primary Executive Ofﬁ cer Yuji Kobayashi Representative Director Primary Executive Ofﬁ cer Corporate Auditors and Executive Ofﬁ cers Hajime Nagahara Corporate Auditor Shinsuke Kido Corporate Auditor Koji Kobayashi Outside Corporate Auditor Akio Makabe Outside Corporate Auditor Tetsuo Ito Outside Corporate Auditor Katsuhiko Yamazoe Senior Executive Ofﬁ cer Masafumi Nakao Senior Executive Ofﬁ cer 22 Asahi Kasei Report 2015 Toshio Asano President & Representative Director Presidential Executive Ofﬁ cer Masahito Hirai Hiroshi Kobayashi Representative Director Vice-Presidential Executive Ofﬁ cer Director Senior Executive Ofﬁ cer Norio Ichino Outside Director Kenyu Adachi Outside Director Shinichiro Nei Lead Executive Ofﬁ cer Yoshihiro Wada Lead Executive Ofﬁ cer Shuichi Sakamoto Lead Executive Ofﬁ cer Naoki Okada Executive Ofﬁ cer Atsushi Nakamura Executive Ofﬁ cer Yasushi Asano Lead Executive Ofﬁ cer Nobuyuki Kakizawa Executive Ofﬁ cer Takeshi Himeno Executive Ofﬁ cer Asahi Kasei Report 2015 23 Outside Directors 24 Asahi Kasei Report 2015 A 90-year history of taking challenges Norio Ichino 1964: Joined Tokyo Gas Co., Ltd. 2003: President and Representative Director, Tokyo Gas Co., Ltd. 2007: Director and Chairman of the Board, Tokyo Gas Co., Ltd. 2010: Director and Executive Advisor, Tokyo Gas Co., Ltd. 2014: Special Advisor, Tokyo Gas Co., Ltd. Valuing diversity to engender growth Masumi Shiraishi 1989: Joined NLI Research Institute 2001: Head Researcher, NLI Research Institute 2006: Professor, Department of Economics, Toyo University 2007: Professor, Faculty of Policy Studies, Kansai University Dialog with investors for strategy of growth Kenyu Adachi 1977: Joined Ministry of International Trade and Industry 2007: Director-General, Trade and Economic Cooperation Bureau 2008: Deputy Vice-Minister of Economy, Trade and Industry 2010: Director-General, Economic and Industrial Policy Bureau 2011: Vice-Minister of Economy, Trade and Industry 2013: Retired from Ministry of Economy, Trade and Industry Asahi Kasei’s extension from its roots in ﬁ bers and chemicals into the ﬁ elds of housing, electronics, and health care is the result of the company’s 90-year history of taking challenges. Asahi Kasei has always tackled new ﬁ elds of business in line with the changing needs of the times, using its technology to overcome risks. The company has made many bold decisions since I became an Outside Director, including the acquisition of ZOLL, the uniﬁ cation of naphtha crackers in Mizushima, and the acquisition of Polypore. It is said that only those who adapt will survive. I think Asahi Kasei exempliﬁ es that. This company has repeatedly transformed itself to match changes in the environment. The current medium-term management initiative “For Tomorrow 2015” provided for ¥1 trillion in strategic invest- ment for growth. The ZOLL acquisition is an illustrative exam- ple of such strategic investment. The ﬁ eld of acute critical care is one in which growth is forecasted, notably in the US and Europe, while Asahi Kasei’s own established businesses in pharmaceuticals and medical devices have some relation- ship with the ﬁ eld of critical care. This is characteristic of how Asahi Kasei expands into a new ﬁ eld. There is a conscious effort to gain synergy through afﬁ nity with established busi- ness. Having such a broad range of operations requires the company to focus on human resources development. To enable Asahi Kasei to continue to succeed in its diverse oper- ations, I will offer advice and counsel on the development of management personnel who will be the company’s future leaders. I am impressed with Asahi Kasei’s bright and positive company atmosphere, with everyone called “san” from the Chairman all the way down to newly hired employees. This is partly due to the company’s emphasis on valuing employee individuality, but I think also because the company understands the need for a diverse workforce to engender further business growth. I sense that Asahi Kasei seeks to maintain an environment where peo- ple with different backgrounds can apply their abilities to the fullest. When only people with similar backgrounds gather together, it becomes hard to ﬂ exibly adapt to changes. I believe that valuing the diversity of the workforce directly leads to greater success in the management of a diverse range of oper- ations, enhancing the company’s ability to adapt to changes in the environment. Asahi Kasei has long been a leader in giving women opportunities to advance their careers, establishing an Equal Opportunity Ofﬁ ce (now Diversity Promotion Group) in 1993. For women to get ahead in today’s society, simply having vari- ous provisions for support is not enough. It also requires women themselves to raise their ambitions. I hope that while Asahi Kasei continues to enhance various provisions to enable women to continue working long-term, more and more women will aim for major achievements in their work while utilizing these provisions. Men will also increasingly need to change their way of working, for instance by taking a more active role in raising children. I hope to help both men and women gain a better appreciation for one another’s ways of balancing work and private life, creating a workplace where all personnel ﬁ nd it easier to continue working for a long time. The purpose of dialog with shareholders and investors is to enhance the company’s ability to achieve sustainable growth and to heighten corporate value over the medium to long term. In essence that is what Japan’s Corporate Governance Code, which applies from June 2015, is aiming for. That is why dialog with investors should focus on how the company is going to earn proﬁ ts over the medium to long term, and how the company will use those proﬁ ts to enable further growth through innovation. ROE is an important concept for creating proﬁ ts. Since different standards apply to different ﬁ elds of business, it may be difﬁ cult to set a single uniform ROE target. Even so, I feel that increasing ROE leads to higher share prices, so it is important for the company to consciously work to raise ROE. The company’s proﬁ ts also provide the resources for inno- vation that leads to future growth. After providing appropri- ate dividends, the company needs to retain sufﬁ cient resources for capital expenditure and R&D that will enable further growth. In any case the discussion would be about the company’s growth strategy, and this is where Asahi Kasei should focus its dialog. In various communications with both individual shareholders and institutional investors, the focus should not only be on the company’s short-term results and ﬁ nancial condition. The company should present non-ﬁ nancial information and material that enables investors to understand the process through which future value is created. If the com- pany makes this stance clear I think investors will appreciate it, leading to a positive cycle of long-term investment. Asahi Kasei Report 2015 25 Corporate Governance Basic concept for corporate governance We believe that constant effort to increase the efﬁ ciency and transparency of management is essential for the continuous enhancement of the corporate value of the Asahi Kasei Group. The Asahi Kasei Group has exercised corporate governance based on the following two principles. 1) Based on the structure of a holding company and core operating companies, the core operating companies are responsible for business execution and the holding company is responsible for oversight. 2) The Group Approval Authority Regulations are positioned as the highest ranking among the regulations governing the overall group for decision-making in executing business. Authority is distributed to each organ of the holding company and the core operating companies in accordance with the degree of inﬂ uence on management. We have further enhanced corporate governance through the successive implementation of various measures, including the election of multiple Outside Directors and the institutionalization of an Internal Audit Dept. We recognize that appropriate allocation of management resources and greater synergies among different sectors are essential for the further growth of the Asahi Kasei Group. At the start of the next medium-term management initiative from ﬁ scal 2016, we will combine Asahi Kasei Corp. with current consolidated subsidiaries of Asahi Kasei Chemicals, Asahi Kasei Fibers, and Asahi Kasei E-materials, forming an operating holding company. While the new operating holding company will have the function of overseeing the whole Asahi Kasei Group, transparency in management will be maintained with clear separation of management execution and oversight functions within the operating holding company. In order to achieve sustainable growth and increase corporate value over the mid- to long-term, the objective of Japan’s Corporate Governance Code, we will continue to pursue the optimum governance conﬁ guration in accordance with changes in the management environment. Structures related to management decision-making, execution, and oversight (as of June 26, 2015) Holding company Board of Corporate Auditors Shareholders Board of Directors Group Advisory Committee Chairman President Internal Audit Dept. Strategic Management Council Group staff functions (cid:115) (cid:51)(cid:84)(cid:82)(cid:65)(cid:84)(cid:69)(cid:71)(cid:73)(cid:67) (cid:80)(cid:76)(cid:65)(cid:78)(cid:78)(cid:73)(cid:78)(cid:71) (cid:6) (cid:65)(cid:78)(cid:65)(cid:76)(cid:89)(cid:83)(cid:73)(cid:83) (cid:115) (cid:35)(cid:79)(cid:77)(cid:80)(cid:76)(cid:73)(cid:65)(cid:78)(cid:67)(cid:69) (cid:6) (cid:82)(cid:73)(cid:83)(cid:75) (cid:77)(cid:65)(cid:78)(cid:65)(cid:71)(cid:69)(cid:77)(cid:69)(cid:78)(cid:84) (cid:115) (cid:50)(cid:69)(cid:83)(cid:79)(cid:85)(cid:82)(cid:67)(cid:69)(cid:83) (cid:65)(cid:68)(cid:77)(cid:73)(cid:78)(cid:73)(cid:83)(cid:84)(cid:82)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78) Corporate Research & Development Core operating companies Asahi Kasei Chemicals Asahi Kasei Fibers Asahi Kasei Homes Chemicals Fibers, textiles Housing Asahi Kasei Construction Materials Construction materials Asahi Kasei Microdevices Asahi Kasei E-materials Asahi Kasei Pharma Asahi Kasei Medical ZOLL Medical Electronic devices Electronic materials Pharmaceuticals Medical devices and systems Critical care devices and systems Chemicals & Fibers business sector Homes & Construction Materials business sector Electronics business sector Health Care business sector 26 Asahi Kasei Report 2015 Board of Directors Oversees group management, and deliberates and decides on basic group policy and strategy, and on substantive proposals by the Strategic Management Council. The Chairman of the holding company chairs meetings of the Board of Directors. Meets once or twice per month. Strategic Management Council Deliberates and decides on substantive matters relating to the operation of the holding company and of the group. Its decisions are made by the President of the holding company, who chairs meetings of the council, after deliberation by the attending constituent members. Meets twice per month. Group Advisory Committee The advisory body to the holding company’s Board of Directors. Meets twice per year. Board of Corporate Auditors Comprises ﬁ ve Corporate Auditors, three of whom are Outside Corporate governance system Corporate Auditors. Corporate Auditors exchange views, deliberate, and decide on substantive matters relating to auditing. Meets at least once per quarter. We employ an Executive Ofﬁ cer system, under which we have nine Directors, including three Outside Directors, and ﬁ fteen Executive Ofﬁ cers, including ﬁ ve who concurrently serve as Director, as well as a Corporate Auditor system, under which we have ﬁ ve Corporate Auditors, including three Outside Corporate Auditors (as of June 26, 2015). To help ensure that Directors and Corporate Auditors may perform their duties to the fullest extent, in accordance with Article 426 Paragraph 1 of the Corporation Law, our Articles of Incorporation provide for the indemniﬁ cation of Directors (including former Directors) and Corporate Auditors (including former Corporate Auditors) from liability stipulated in Article 423 Paragraph 1 of the Corporation Law, through resolution of the Board of Directors, within limitations set forth by law or ordinance. An outline of the corporate governance system of the Asahi Kasei Group is as follows. Asahi Kasei Corporation is a holding company and has elected to take the form of a company with a Board of Corporate Auditors. 1) Two Outside Directors were elected in June 2007 to enable oversight of the management of the Asahi Kasei Group based on their wealth of experience and broad range of insight, for the further strengthening of the management oversight function of the Board of Directors. Furthermore, an additional Outside Director was installed in June 2008 and the Company currently has three Outside Directors out of nine Directors. Of the ﬁ ve Corporate Auditors, three are Outside Corporate Auditors. 4) In accordance with the audit policy adopted by the Board of Corporate Auditors, each Corporate Auditor audits Directors in the discharge of their duties by attending Board of Directors’ meetings and examining business performance. Corporate Auditors of the Company and Corporate Auditors of the core operating companies exchange information on a regular basis. Our Corporate Auditors Ofﬁ ce has multiple dedicated personnel who, independently from Directors, support the Corporate Auditors in their duties. 5) PricewaterhouseCoopers Aarata performs ﬁ nancial audits of the Company and the core operating companies in accordance with the Corporation Law and the Financial Instruments and Exchange Act. 2) The company has a Group Advisory Committee as an advisory body to the Board of Directors, enabling the receipt of various advice and recommendations of knowledgeable persons from outside the Company for the beneﬁ t of the overall management of the Asahi Kasei Group. 3) The Internal Audit Dept. serves as the corporate organ for 6) Company standards stipulate that as a general rule a Director is not to concurrently serve as Director at four or more other companies whose shares are stock-market listed. 7) Remuneration of Directors is provided in accordance with a performance-linked remuneration system determined by the Board of Directors. internal audits of the execution of duties in the Asahi Kasei Group in accordance with basic corporate regulations for internal audits. Results of the internal audits conducted by each group staff function are also reported to the Internal Audit Dept., so that all information regarding results of internal audits in the Asahi Kasei Group are centralized at the Internal Audit Dept. Asahi Kasei Report 2015 27 Outside Directors and Corporate Auditors We have three Outside Directors and three Outside Corporate Auditors. The function of Outside Directors is to conﬁ rm that management decisions are made appropriately from an independent perspective based on their wealth of experience and broad range of insight. The function of Outside Corporate Auditors is to audit based on their wealth of experience, broad range of insight, and specialized knowledge of corporate law, ﬁ nance, and accounting. Although we do not have speciﬁ c standards for judging the independence of Outside Directors and Corporate Auditors, in the selection of candidates for election as Outside Director and Outside Corporate Auditor, we investigate their independence in accordance with the standards for “Independent Director/ Auditor” established by relevant ﬁ nancial instruments exchanges to conﬁ rm if they have ever been employed by the company, ever been an important counterparty, and ever been employed by an important counterparty, and furthermore if they have ever received a large amount of money or other property from the company. We then make a comprehensive judgment as to whether or not any conﬂ ict with the interests of ordinary shareholders would arise. The relevant ﬁ nancial instruments exchanges have been notiﬁ ed that all of our Outside Directors and Outside Corporate Auditors are designated as Independent Director/Auditor. Audits The Internal Audit Dept. (15 personnel as of March 31, 2015) is a corporate organ under the direct authority of the President of the holding company. Each year, the Internal Audit Dept. prepares plans for an internal audit in accordance with basic corporate regulations for internal audits, obtains the President’s approval for these plans, and then performs the internal audit. In accordance with the audit policy adopted by the Board of Corporate Auditors, each Corporate Auditor attends meetings of the Board of Directors and audits Directors in the discharge of their duties through examination of business performance. The Corporate Auditors Ofﬁ ce provides staff to support Corporate Auditors in their duties. PricewaterhouseCoopers Aarata is contracted as the Independent Auditors to perform ﬁ nancial audits in accordance with the Companies Act and Financial Instruments and Exchange Act. Partners of the Independent Auditors designated to perform the audit for ﬁ scal 2012 were Mr. Keiichi Ohtsuka, Mr. Takahiro Nakazawa, and Mr. Taisuke Shiino. The Independent Auditors form a team of assistants for performance of the audit in accordance with its audit plan. The team mainly comprises certiﬁ ed public accountants and junior accountants, and also includes certiﬁ ed information systems accountants and other specialist accountants. The Internal Audit Dept., the Board of Corporate Auditors, and the Corporate Auditors of core operating companies and other subsidiaries regularly meet to conﬁ rm the effectiveness of internal governance systems for legal compliance and risk management. The Board of Corporate Auditors provides counsel to the Independent Auditors with respect to its audit plan, and receives the results of the consolidated ﬁ nancial audit of Asahi Kasei each quarter and each ﬁ scal year. Compliance Corporate Ethics Our Corporate Ethics – Basic Policy and Code of Conduct is the standard and guide for ethical conduct throughout the day-to- day work of each and every member of the Asahi Kasei Group. It has been translated into English and Chinese, and it or an equivalent standard applies to all majority-held subsidiaries the world over. Protection of Personal Information Asahi Kasei is committed to the proper handling and use of personal information, in accordance with our basic policy. Education and training for all employees, including the distribution of an information security handbook which covers issues related to personal information protection, is monitored by the Corporate Ethics Committee. 28 Asahi Kasei Report 2015 Information Disclosure Policy The Asahi Kasei Group has established an Information Disclosure Policy, enhancing the management and disclosure of corporate information to obtain greater corporate value. Corporate regulations for information disclosure based on this policy were adopted on July 1, 2008. The basic principles of the Information Disclosure Policy are shown below. • With our Group Mission of “contributing to life and living for people around the world,” we hold “progressing in concert with society, and honoring the laws and standards of society as a good corporate citizen” as a Guiding Precept. “Ensuring transparency” is a fundamental element of our Corporate Ethics – Basic Policy. We proactively engage in information disclosure and communication based on these basic concepts. • Corporate information is disclosed fairly, impartially, accurately, and as swiftly as possible to stakeholders such as customers, suppliers, shareholders, investors, employees, and local communities, and to the general public. • In our communication with stakeholders and with the general public, we strive for dialog which fosters a relationship of trust, promoting greater understanding of the Asahi Kasei Group and its operations, to increase brand strength and heighten corporate value. Compliance monitoring by the Corporate Ethics Committee Monitoring of compliance and oversight of education and training for compliance throughout the Asahi Kasei Group are performed by the Corporate Ethics Committee, which was formed in July 1998. Where shortcomings are discovered, the committee formulates and implements measures for improvement. The committee discusses the training programs implemented at each group company, measures for prevention of sexual harassment, environmental countermeasures, the state of compliance with laws and regulations including personal information protection law, and operation of the Compliance Hotline. Risk management The Asahi Kasei Group has a Risk Management Committee to enhance the risk management system to prevent operational crises and to minimize the effects of any crisis which may occur. Our Basic Risk Management Regulations, which were established by the Board of Directors in March 2007 (effective April 1, 2007), provide clear guidelines to heighten the capability and effectiveness for risk management and emergency response throughout the Asahi Kasei Group. In ﬁ scal 2014, we reinforced familiarity with the emergency contact system to employ in the event of a disaster at each major operating location. We also held a series of internal meetings and interviews to conﬁ rm that the management of personal information is implemented properly to prevent any inappropriate disclosure. Additionally, in May 2015 we adopted a system to efﬁ ciently conﬁ rm the well-being of personnel stationed overseas and travelling on business overseas if an emergency situation should occur where they are located. Asahi Kasei Report 2015 29 Operating Segments Chemicals & Fibers The roots of our Chemicals & Fibers segment trace back to ammonia synthesis technology, and Bemberg™ regenerated cellulose ﬁ ber pro- duced using the ammonia. This segment has the longest history and largest scale within the Asahi Kasei Group. As we continue to globally expand various businesses in this segment, we are advancing a trans- formation to higher added value that meets the needs of the times. Sales composition Operating income composition 48.6% 37.4% Fiscal 2014 Fiscal 2014 Financial highlights Fiscal year Net sales Operating income *Not including corporate expenses and eliminations. (¥ billion) 2014 954.6 64.6 2013 912.5 47.4 Please refer to page 61 for segment performance information. Fibers business Yuji Kobayashi Representative Director, Primary Executive Ofﬁ cer Executive Ofﬁ cer for Chemicals & Fibers business sector Highlights Chemicals business Groundbreaking ceremony for the second plant for plastic compounds in the US In September 2014 Asahi Kasei Chemicals held a groundbreak- ing ceremony in Alabama for its second US plant for plastic compounds. The expansion of compounding operations is a crit- ical element in the strategic growth of its engineering plastics business, and construction of the new plant will enable the company to increase supply to meet customer needs in the Southern US, where demand growth is most notable. Asahi Kasei Chemicals will continue to develop high-quality and high- performance products in accordance with market needs, while studying ways to further expand its supply infrastructure. Completion of new production facility for Bemberg™ Asahi Kasei Fibers completed the addition of new production facility for Bemberg™ cupro ﬁ ber at its plant in Nobeoka, Miyazaki, Japan, and commercial operation of the new facility began in June 2014. With the completion of the new facility, production capacity for Bemberg™ increased by some 10%. Bemberg™ is widely used for the lining of high-quality suits, as well as a wide range of other applications such as outerwear, innerwear, bedding, and sportswear. Sales of Bemberg™ have increased notably in the ﬁ elds of functional innerwear and Indian traditional garments, and further demand growth is fore- casted in emerging markets. Asahi Kasei Chemicals President Yuji Kobayashi (right) receives the State Seal of Alabama New production facility for Bemberg™ 30 Asahi Kasei Report 2015 Asahi Kasei Chemicals Yuji Kobayashi President & Representative Director Asahi Kasei Chemicals Corp. Asahi Kasei Fibers Toshio Takanashi President & Representative Director Asahi Kasei Fibers Corp. Q A Please tell us about your plans for the future and solution-polymerized styrene-butadiene rubber (S-SBR) for high-performance fuel-efﬁ cient tires in particular. Sales of S-SBR are growing ﬁ rmly. We are now transforming our busi- ness to achieve a high-earnings operational structure. S-SBR is synthetic rubber used in the tire tread of high-performance fuel-efﬁ cient tires. The global market for tire rubber that enables better fuel-efﬁ ciency is grow- ing with tightening environmental regula- tions, and especially rapid growth is forecasted in Asia. Our domestic plants in Kawasaki and Oita continued full opera- tion during ﬁ scal 2014. The 1st line at our new plant in Singapore rose to full opera- tion in the second half of the year in line with increasing sales, and the 2nd line started up in May 2015. Our continuous polymerization process technology enables the production of S-SBR that provides both safety and fuel efﬁ ciency while main- taining high abrasion resistance. We will continue to meet expanding demand by developing products that further enhance performance. For our next increase in S-SBR production capacity, we are current- ly studying the construction of another overseas plant following Singapore. Asahi Kasei Chemicals is transforming itself into a high-earnings company by advancing structural reforms to strengthen our petrochemical operations in Japan and shifting our focus to high-performance and high value-added products. We will continue to proactively invest abroad in synthetic rubber and engineering resins for automotive applications, and globally expand our high value-added operations utilizing our original technologies in paint materials, water ﬁ ltration membranes, and ion-exchange membranes. S-SBR plant in Singapore Q A Please tell us about the situation of each product and your plans to invest for growth. We achieved record-high ﬁ nancial performance in ﬁ scal 2014. Aiming for further increased income, we will continue to invest for growth. currently have capacity expansions for both spunbond and Roica™ under construction in Thailand. We have also decided to increase capacity for Bemliese™ as demand growth continues in skincare applications such as facial masks, and to increase capac- ity for Leona™ nylon 66 ﬁ lament for auto- motive airbags. We achieved record-high operating income in ﬁ scal 2014 beneﬁ tting from a weaker yen and ﬁ rm sales of Bemliese™ continu- ous-ﬁ lament cellulose nonwoven fabric for facial masks, Lamous™ artiﬁ cial suede for automotive upholstery, and Roica™ elastic polyurethane ﬁ lament. While sales of Bemberg™ cupro ﬁ ber for ethnic garments increased, performance was impacted by increased depreciation expenses for a new production facility which started up in Nobeoka, Miyazaki, Japan, in June 2014. While we are forecasting increased operating income in ﬁ scal 2015, room for growth is limited as production and sales of each product are currently near full capaci- ty. To meet growing demand in hygienic applications such as disposable diapers, we Asahi Kasei Report 2015 31 Homes & Construction Materials Products and services in this segment, centered on Hebel Haus™ unit homes and their main material Hebel™ AAC panels, enable innovative lifestyles in urban settings as well as safety, security, and comfort. Housing-related operations include rental management, real estate, and remodeling. In construction materials, new applications are being developed for thermal insulation products. Sales composition Operating income composition 30.7% 36.5% Fiscal 2014 Fiscal 2014 Financial highlights Fiscal year Net sales Operating income *Not including corporate expenses and eliminations. (¥ billion) 2014 603.8 63.0 2013 589.4 68.5 Please refer to page 61 for segment performance information. Masahito Hirai Representative Director, Vice-Presidential Executive Ofﬁ cer Executive Ofﬁ cer for Homes & Construction Materials business sector Highlights Housing business SeiRReS™ seismic vibration control system Asahi Kasei Homes developed a new seismic vibration control system called SeiRReS™ for heavy-frame steel structures. Employing an oil damper device to provide excellent perfor- mance absorbing seismic vibration of both large and small mag- nitudes, the SeiRReS™ system has been included as standard equipment in Hebel Haus™ Frex™ three-story homes since May 2015. This not only provides safety for residents when a major earthquake occurs, but also prevents damage to the building from repeated aftershocks. First overseas plant of Asahi Kasei Homes In March 2015, a decision was made to establish a joint LLC in Vietnam among Asahi Kasei Jyuko Co., Ltd. (wholly owned sub- sidiary of Asahi Kasei Homes), Sun Steel Co., Ltd., and Daiwa Kouki Co., Ltd. The new company in Vietnam will construct a plant to manufacture various steel-frame members other than the main structural frame. The new plant will not only ensure stable supply of high-quality components of Hebel Haus™ and Hebel Maison™ buildings, but also enable further cost reduc- tions. Future expansion of the plant will also enable sale to external customers. Groundbreaking ceremony in Vietnam in May 2015 SeiRRes™ seismic damping system 32 Asahi Kasei Report 2015 Asahi Kasei Homes Q A How are your order-built homes business and other businesses performing? Due to increased costs for materials, etc., we are seeing increased sales with decreased operating income. Eisuke Ikeda President & Representative Director Asahi Kasei Homes Corp. Having received very strong orders in the previous ﬁ scal year, our order-built homes business made full use of its construction capability to increase deliveries in ﬁ scal 2014, especially of Hebel Maison™ apart- ment buildings, enabling sales growth. Operating income nevertheless decreased due to higher costs, including the cost of materials and construction costs. Efforts to maintain leadership in urban markets included the introduction of the new SeiRReS™ seismic damping system for Hebel Haus™ Frex™ heavy-frame three- story homes, and new orders for the year reached a new record high. In housing-related businesses, remod- eling faced a challenging market as demand for waterprooﬁ ng, repainting, and equipment installation declined in reaction to the surge in demand prior to the consumption tax increase. Real estate, however, performed well as the rental management business grew in line with increased deliveries of Hebel Maison™ apartment buildings. Hebel Haus™ Frex the Residence™ Asahi Kasei Construction Materials Q A Please describe your ﬁ scal 2014 results and ﬁ scal 2015 outlook. Business conditions remained difﬁ cult in ﬁ scal 2014 due to the dent in demand following the consumption tax increase, as well as increased depreciation expenses for a new production line. In ﬁ scal 2015 we are aiming for increased sales and operating income. Tomihiro Maeda President & Representative Director Asahi Kasei Construction Materials Corp. The impact of the April 2014 consumption tax increase was felt throughout Japan’s construction industry, with the total ﬂ oor space of building starts declining by 9%. We nevertheless recorded increased ship- ments of Hebel™ autoclaved aerated con- crete (AAC) panels by targeting large construction projects. Sales of Neoma™ high-performance phenolic form insulation panels decreased in reaction to the surge in demand prior to the consumption tax increase. Depreciation expenses increased with the start-up of a new production line for Neoma™ panels which will enable us to meet growing demand as an effect of gov- ernment policies to reduce energy con- sumption. Construction materials operations overall recorded decreased sales and decreased operating income as a result. While we do not expect the market to change substantially in ﬁ scal 2015, we plan to achieve growth in sales and operating income by enhancing the marketing of insulation materials, expanding applications for foundation systems, and enhancing the cost-competitiveness and stable supply of AAC panels. We are especially expanding new applications for Neoma™ panels. Neoma™ phenolic foam insulation panels Asahi Kasei Report 2015 33 Electronics Our Electronics segment includes high-function products for ﬁ elds ranging from consumer electronics to infrastructure, industrial, and automotive applications. The electronic devices business provides key components for mobile IT such as electronic compasses and other LSIs, and sensing devices such as magnetic sensors, current sensors, and infrared sensors. The electronic materials business provides lithium-ion battery (LIB) separators, photosensitive dry ﬁ lm for printed wiring boards, and many other products for the electronics industry. Sales composition Operating income composition 8.3% 7.7% Fiscal 2014 Fiscal 2014 Hideki Kobori Representative Director, Primary Executive Ofﬁ cer Executive Ofﬁ cer for Electronics business sector Financial highlights Fiscal year Net sales Operating income *Not including corporate expenses and eliminations. (¥ billion) 2014 150.4 14.3 2013 145.0 14.2 Please refer to page 61 for segment performance information. Highlights Electronic devices business Velvet Sound™ audio devices In May 2014, high-end audio equipment manufacturers began adopting audio devices with Velvet Sound™ technology from Asahi Kasei Microdevices. This original technology is used in next-generation audio LSIs to faithfully reproduce high- resolution audio sound sources with an ambiance and realism that cannot be obtained with audio CDs. Asahi Kasei Microdevices will continue to develop advanced Velvet Sound™ products for the high-end audio market based on its philosophy of enabling discerning customers to attain high-quality audio through innovative technology. 34 Asahi Kasei Report 2015 Asahi Kasei Microdevices Satoru Tamura President & Representative Director Asahi Kasei Microdevices Corp. Q A In ﬁ scal 2014, your sales grew but operating income decreased. How are the electronic compass and other products performing? The business beneﬁ tted from the weaker yen, and sales of electronic devices for smartphones increased. Operating income decreased, how- ever, due to temporary factors related to structural reforms. Having both silicon semiconductor tech- nology and compound semiconductor technology enables us to develop original and unique devices. Under a changing market climate in ﬁ scal 2014 sales of crys- tal oscillator ICs decreased, but sales of other electronic devices for smartphones increased and business beneﬁ tted from a favorable exchange rate, resulting in increased sales. Although we have worked to reduce costs, operating income decreased as an effect of a devaluation of inventories in relation to structural improvement of the power management device business. In ﬁ scal 2015, we foresee a challeng- ing market for crystal oscillator ICs con- tinuing while the electronic compass market matures. We plan to increase sales and operating income by changing the product mix with a higher proportion of audio devices and camera modules for smartphones. In addition to our mainstay consumer electronics applications, we will achieve further growth over the medium- to-long term with greater focus on auto- motive, industrial equipment and infrastructure applications. LSIs Asahi Kasei E-materials Q A Although increased competition caused price declines, you achieved increased sales and operating income. How is each product performing? In addition to the positive impact of the weaker yen, sales of high-per- formance products grew. Shigeki Takayama President & Representative Director Asahi Kasei E-materials Corp. The market in ﬁ scal 2014 was mainly driv- en by smartphones, and demand for LIBs and semiconductor packaging maintained ﬁ rm growth. Our products for consumer electronics cover a wide range from com- modity to high-end products, and sales growth is centered on high-end products in each category. Although prices for Hipore™ LIB separators declined due to increased competition, we achieved overall growth in sales and operating income with the effect of the weaker yen and cost reduction efforts. We forecast industry-wide growth in ﬁ scal 2015 centered on consumer elec- tronics. While we expect that sales prices will continue to fall, we plan to increase sales and operating income through fur- ther volume growth in high-end products and additional cost reductions. Future Hipore™ demand will increasingly come from automotive applications such as elec- tric vehicles and hybrid-electric vehicles, together with energy storage applications. We are advancing technology and product development to enable business expansion in these ﬁ elds. Hipore™ LIB separator Asahi Kasei Report 2015 35 Health Care Toshio Asano President & Representative Director, Presidential Executive Ofﬁ cer Executive Ofﬁ cer for Health Care business sector Highlights We are focused on the ﬁ eld of orthopedics as our speciality in pharma- ceuticals, while our medical device business provides blood puriﬁ ca- tion, blood transfusion, and bioprocess products based on leading technology for membrane separation and selective adsorption. In 2012 these were joined by ZOLL’s business in acute critical care devices. By achieving synergies within the sector, we are expanding Health Care as a new major pillar of the Asahi Kasei Group. Sales composition Operating income composition 13.1% 17.8% Fiscal 2014 Fiscal 2014 Financial highlights Fiscal year Net sales Operating income *Not including corporate expenses and eliminations. (¥ billion) 2014 257.1 30.8 2013 232.4 26.7 Please refer to page 61 for segment performance information. Pharmaceuticals business Critical Care business New manufacturing facility for Recomodulin™ In May 2014 Asahi Kasei Pharma decided to construct a new manufacturing facility in Fuji, Shizuoka, Japan, for recombinant thrombomodulin alpha, the active ingredient of Recomodulin™ anticoagulant intravenous infusion. Developed by Asahi Kasei Pharma and marketed in Japan since 2008, Recomodulin™ is a thrombomodulin agent for the treatment of disseminated intra- vascular coagulation (DIC). It improves the symptoms of DIC with a new mechanism of controlling blood coagulation. Asahi Kasei Pharma currently produces the active ingredient of Recomodulin™ at its Fuji Pharmaceuticals Plant. The addition of the new manufacturing facility will enable the company to enhance its ability to assure reliable supply of the product. Expansion of product portfolio through M&A ZOLL made three business acquisitions in ﬁ scal 2014 to further build its product lineup in the ﬁ eld of acute critical care. In October an agreement was reached to acquire the respiratory care product business of US-based Impact Instrumentation, Inc., and in November an agreement was reached to acquire the InnerCool™ temperature management business of Netherlands- based Royal Philips. These were followed in December with an agreement to acquire US-based Advanced Circulatory Systems, Inc., which specializes in technology to non-invasively increase circulation during cardiopulmonary resuscitation. These acquisi- tions broaden ZOLL’s product offerings with additional technolo- gies designed to improve outcomes from cardiac arrest and other critical conditions, as part of its commitment to offer the most comprehensive portfolio of products for acute events where rapid medical intervention is needed. 36 Asahi Kasei Report 2015 New additions to the acute critical care portfolio Asahi Kasei Pharma Q Please tell us how the pharmaceuticals business is performing, especially sales of Teribone™ osteoporosis drug and Recomodulin™ anticoagulant. A Sales and operating income decreased in ﬁ scal 2014, mainly as an effect of reduced reimbursement prices and the consumption tax increase. In ﬁ scal 2014, pharmaceutical products excluding new drugs were impacted by reduced reimburse- ment prices. Teribone™ and Recomodulin™, which had maintained steady growth since their market launch, failed to reach their sales targets as they were impacted by a reaction to the surge in demand prior to the consumption tax increase. Sales of Flivas™ agent for treatment of benign prostatic hyperplasia are expected to decline in ﬁ scal 2015 due to competition from generics. We plan to increase sales of Teribone™ and Recomodulin™ by enhancing the business structure and reinforcing our marketing functions with greater focus on analysis of real-world clini- cal needs. We also anticipate the launch of sales of Xiaﬂ ex™ injection for Dupuytren’s contracture. R&D expenditures are expected to increase as we enrich our pipeline for new drugs. Teribone™ osteoporosis drug Asahi Kasei Medical Q In ﬁ scal 2014 you achieved growth in sales and operating income. How is each product performing? A While results were supported by the weaker yen, sales of Planova™ virus removal ﬁ lters and other products were ﬁ rm. In ﬁ scal 2014, sales of dialysis products in Japan were affected by decreased reimbursement pric- es, but sales in the US and China were ﬁ rm. Sales increased for Planova™ virus removal ﬁ lters, which are used to enhance safety in the produc- tion process for biotherapeutic products such as biopharmaceuticals and plasma derivatives. Business overall beneﬁ tted from the weaker yen which contributed to the sales and operating income increase. In March 2015 we decided to construct a new plant for the spinning of hollow- ﬁ ber membranes for Planova™ BioEX ﬁ lters in Oita, Japan, to meet growing demand as higher protein concentra- tions become more common in the manufacturing pro- cess of biothera- peutic products. Planova™ BioEX virus removal ﬁ lter Kazuyoshi Hori President & Representative Director Asahi Kasei Pharma Corp. Yutaka Shibata President & Representative Director Asahi Kasei Medical Co., Ltd. ZOLL Q A You continue to post strong growth. Can you describe your business situation? Led by growth of the Core deﬁ brillator business, and the LifeVest™ wearable deﬁ brillator, we are increasing both revenue and income. Richard A. Packer CEO ZOLL Medical Corporation We joined the Asahi Kasei Group in April 2012. We supply medical devices for acute critical care in the US and around the world. Our business achieved positive income on a consolidated basis after amortization of good- will and other intangible assets in only three years. Our growth is led by the LifeVest™ in the US, while our business in deﬁ brillators for use by medical professionals continues to grow worldwide as well. The LifeVest™ is a wearable deﬁ brillator for patients at high risk of sudden cardiac arrest. Service providing the LifeVest™ in Japan began in April 2014. We are proactively increasing SG&A in order to reinforce sales activity, and results have grown even faster than planned when we joined Asahi Kasei. We will continue to actively pursue M&A opportunities to aug- ment our portfolio with innovative products in the ﬁ eld of acute critical care that will enable us to grow further and help save even more lives world- wide. LifeVest™ wearable deﬁ brillator Asahi Kasei Report 2015 37 R&D at the Asahi Kasei Group Ever since our founding, Asahi Kasei has always met the world’s needs by creating businesses based on tech- nology. We will continue to create new businesses that contribute to life and living for people around the world. Interview with Asahi Kasei’s head of R&D Masafumi Nakao Senior Executive Ofﬁ cer General Manager Corporate Research & Development Q1 What are Asahi Kasei’s core technologies? Asahi Kasei’s strength is the manage- ment of a diverse group of businesses created with a wide range of technolo- gies. At the root is chemical technolo- gy, which gave rise to various other technological developments over the course of our history, resulting in our many core technologies today. For rials. Membrane technology and ﬁ bers technology are utilized to create high- value added products for water treat- ment and health care. The development of distinctive business in the ﬁ eld of thin- ﬁ lm semiconductors was enabled by many technologies related to materials. Such developments have fostered a pioneering spirit among our technical personnel, which is itself a technology asset and a key element of Asahi example, catalyst/process technology Kasei’s heritage. supports the production of many mate- Core technologies New businesses Chemicals Electronics Major core technologies Catalyst/process Polymer design/synthesis Fibers (polymerization/spinning) Membranes/phase separation Electrochemistry Organic synthesis/biology Computer science Compound semiconductors/ thin films Microfabrication/processing Mixed-signal circuit design Software algorithms Organic/inorganic materials Analysis/simulation Homes Fibers Health Care Construction Materials Q2 What is your R&D strategy? The economic climate and social fabric have been undergoing dramatic chang- es in recent years. While the shale gas revolution impacts issues of energy and the environment, information technolo- gy continues to advance, and Japan’s population continues to age and decline. It will be difﬁ cult to adapt if we simply continue along the same path. Our “For Tomorrow 2015” medium- term management initiative focuses on the two strategies of expanding world- leading businesses and creating new value for society. In the latter, we are concentrating on the three ﬁ elds of the Environment & Energy, Residential Living, and Health Care. An important mission for R&D is to draw together technologies and business platforms throughout the Asahi Kasei Group to create new businesses in these three ﬁ elds. While R&D directly related to estab- lished businesses is performed by each core operating company, an Energy & Environment R&D Center, Healthcare R&D Center, and Residential Synergy Initiative—established within Corporate 38 Asahi Kasei Report 2015 Research & Development—advance R&D from a medium-to-long term per- spective. In addition to in-house R&D, we are working in concert with outside organizations and seeking to acquire innovative new technologies. Q3 How about your IP strategy? The business strategy, intellectual prop- erty (IP) strategy, and R&D strategy for the creation of new business are inte- grated as one. IP activities for estab- lished businesses are advanced in direct connection with the management of Q4 Please tell about the UVC-LED, a fruit of “For Tomorrow 2015.” UVC is the shorter wavelength range of ultraviolet (UV) light. UVC light has a powerful disinfection and sterilization effect, and can also trigger chemical actions. Many companies are compet- ing to develop light-emitting diodes (LEDs) that emit light in the UVC range, but volume production of practical products has not been achieved yet. The UVC-LED developed by Asahi Kasei, based on an aluminum nitride (AlN) substrate, has gained attention with its world-leading output perfor- operations to gain business advantage mance and high reliability. focus—the environment and energy, residential living, and health care. Based on the know-how in com- pound semiconductors gained through our businesses in magnetic sensors and infrared sensors, we saw great poten- tial for UVC-LEDs based on AlN sub- strates. In 2010 we made an investment in US venture Crystal IS, Inc. (CIS) which had outstanding AlN tech- nology, and dispatched engineers to CIS to begin joint research. In 2011 we acquired full ownership of CIS and pro- ceeded with a close-knit joint develop- ment project with our engineers in Japan. In 2014 these efforts resulted in the market launch of the Optan™ UVC-LED for analytical and instrumen- by the steady acquisition of IP rights Mercury-vapor lamps are generally tation applications. from R&D results. The IP strategy for each operation is aligned with the relevant business characteristics. Equal emphasis placed used as UV light sources, but they are bulky, take time to warm up, have a short service life, and moreover pose environmental risks when disposed of. on both the quality and the quantity of UVC-LEDs not only overcome all of patents, and strategic licensing is per- formed to heighten the contribution of IP rights to our business operations. these shortcomings, but hold promise to enable transformational new appli- cations in all three of our ﬁ elds of We are now working to develop the global market for UVC-LEDs in water disinfection applications in both industrial and residential settings, with evaluation in progress by several equip- ment manufacturers. UVC-LED wavelength range Gamma rays X-rays Ultraviolet light Visible light Infrared light Radio waves Optan™ UVC-LED 0.01 100 400 780 106 (nm) UV-C UV-B UV-A 100 280 315 400 (nm) Asahi Kasei Report 2015 39 R&D in Three Fields of Focus and Main Sites for R&D We are working to create new value for society in the three ﬁ elds of the Environment & Energy, Residential Living, and Health Care with endeavors spanning across the Asahi Kasei Group. An overview of our efforts and our main sites for R&D are described here. Environment & Energy Demonstrating new technology for diversiﬁ cation of petrochemical feed- stocks, and environmentally friendly process technology E-ﬂ ex, BB-ﬂ ex, DRC process to produce diphenyl carbonate (DPC) Developing new materials that contribute to vehicle weight reduction and fuel saving Engineering resin with ultra-high heat resistance, high rigidity, and excellent moldability; solution-polymerized styrene-butadiene rubber (S-SBR) for next-generation high- performance fuel-efﬁ cient tires Developing light emitting devices with superior sterilization performance while reducing energy use Developing new battery materials and high-performance lithium-ion battery separators for consumer electronics and automotive applications Residential Living Making innovative urban lifestyle proposals; developing residential features for seniors “HH2015” demonstration house to create new businesses, Hebel Village™ apartment buildings for seniors Developing new ﬁ ber materials focusing on comfort (coolness, warmth, functionality, adaptability) and health A-cubic™, functional ﬁ bers, various nonwovens Note: A-cubic™ is the guiding vision of R&D at Asahi Kasei Fibers to apply innovative leading-edge technology to the science of comfort and health, developing inspiring new products. Health Care Addressing unmet needs in the orthopedic ﬁ eld, especially locomotive syndrome Pharmaceutical pipeline (as of July 31, 2015) Development stage Code name, form, generic name Classiﬁ cations Indication Remarks Origin Phase III AK-156, injection, zoledronic acid Bisphosphonate Osteoporosis New efﬁ cacy, new dose; once-yearly administration Licensed Phase II HC-58, injection, elcatonin Calcitonin Shoulder-hand syndrome Additional indication In-house Phase III (overseas) Phase II (overseas) ART-123, injection, recombinant thrombomodulin alpha Recombinant human thrombomodulin Severe sepsis with coagulopathy New biologic In-house HE-69, mizoribine Immunosuppressant Lupus nephritis, nephrotic syndrome Additional indication In-house AK106 Anti-inﬂ ammatory Rheumatoid arthritis New chemical entity In-house Researching leading-edge medical technologies including regenerative medicine using autotransfusion Developing new therapies, technologies, and solutions to enhance the quality of care for sudden cardiac arrest 40 Asahi Kasei Report 2015 Main sites for R&D Kawasaki Innovation Center (Kawasaki Works, Kanagawa, Japan) Technology development for chemical products completed in 2012 Developments include technology for catalysts, polymer design, interface control, and environmental systems, as well as next-generation S-SBR. New Integrated Research Complex (Asahi Kasei Fuji site, Shizuoka, Japan) R&D for new electronics businesses completed in 2009 R&D is performed in electronic and optical materials and in the ﬁ eld of the Environment & Energy, with an emphasis on the creation of new businesses. The approach to R&D emphasizes the combination of established core technologies with emerging technologies, yielding a high level synthesis of new technology, with results obtained more quickly, in direct contact with markets and users. Housing R&D Center (Asahi Kasei Fuji site, Shizuoka, Japan) Development of new housing products completed in 2007 R&D is focused on adding value by further heightening structural performance in accordance with the “Long Life Home” concept of high-value added homes. New technology is proactively adopted to meet emerging needs for harmony with the environment and resource circulation. Fibers Technology and R&D Center (Moriyama, Shiga, Japan) R&D for new ﬁ ber materials completed in 2008 The core polymer, manufacturing, textile, and evaluation technologies are advanced, new technologies are created. Within the Center, the R&D Lab for Applied Product develops products for functional apparel focusing on comfort and health functions, as well as new products that contribute to the environment, energy efﬁ ciency, and safety in the ﬁ elds of electronics, automobiles, and medical care. Research Complex (Pharmaceuticals Research Center, Ohito, Shizuoka, Japan) R&D for new drugs completed in 2012 Equipped with advanced experimental apparatus and facilities for greater functional- ity, the complex brings the synthetic and medicinal chemistry research group and pharmacology research group together in a single facility for closer coordination, and incorporates many design elements to facilitate interaction and communication among researchers, and raise the efﬁ ciency of research. Medical Material Laboratory (Nobeoka, Miyazaki, Japan) R&D for medical materials completed in 2011 All material-related research functions of Asahi Kasei Medical are consolidated in the laboratory, with shared technologies for phase separation, structure control, and chemical modiﬁ cation integrated and advanced. Next-generation dialysis membranes, adsorption media, and virus removal membranes are developed, and technology for biocompatibility evaluation, biological evaluation, and physicochemical evaluation are advanced, as well as analytical technology. ZOLL Medical Corporation (USA) R&D for acute critical care devices acquired in 2012 ZOLL’s acute critical care devices are developed with reliable operation and function in mind. Resuscitation products are also designed in accordance with the “Chain of Survival” guiding principles set forth by the American Heart Association. Product fea- tures include easy and essential recording of data throughout the course of treatment. Asahi Kasei Report 2015 41 CSR Dialogue Focusing on employee health as a key to growth Employees are important stakeholders for any company, and as such the health of employees is a key focus of management. Professor Koji Mori, M.D. (pictured right) of the University of Occupational and Environmental Health Japan discusses the Asahi Kasei Group’s effort for employee health with Asahi Kasei’s chief industrial physician Dr. Ichirou Oyama, M.D. (pictured left). A company-wide effort Oyama Asahi Kasei has an ongoing initia- tive for the health of employees as part of its Responsible Care (RC) program, a fun- damental element of Corporate Social Responsibility (CSR). Even before the con- cept of RC was introduced, the company had proactively focused on employee health at its production sites. Since the adoption of RC, there has been a company- wide effort led by Corporate ESH & QA. In recent years the effort centers on preventing lifestyle-related diseases, pre- venting falls with physical ﬁ tness tests and exercise guidance, and surveys of employ- ee stress and workplace stress with follow- up and improvements. Mori I see that the Asahi Kasei Group implements RC throughout all its diverse operations. You seem to have been provid- ing uniform health support services for employees for quite some time, and your network of industrial physicians seems advanced. Oyama We are now arranging an area- based system to provide care by industrial physicians to all employees in every part of Japan. We are also enhancing the health maintenance infrastructure to provide health guidance by videoconference, to electronically manage results of annual checkups and other health data, and to ensure that employee health records are seamlessly handed over when an employee is transferred to a different location. Exercising while seated At the Sepacell Plant of Asahi Kasei Medical MT Corp. in Oita, Japan, the manufacture of Sepacell™ leukocyte reduction ﬁ lters requires workers to spend long periods of time seated in the cleanroom to per- form evaluation, visual inspection, and control oper- ations. Although this led to many instances of stiff shoulders, eyestrain, etc., it was impractical to hold conventional exercise sessions in the cleanroom. In 2014, with the support of on-site health manage- ment staff, employees developed a small-group exercise routine that is done while seated. 42 Asahi Kasei Report 2015 Mori The health of employees has recently come to be seen as a critical factor in cor- porate management. It is recognized that productivity suffers unless employees are healthy and happy in their work. But the measures taken are often simplistic, such as installing a ﬁ tness room, which can give a temporary lift but fail to have a lasting effect. I feel that Asahi Kasei has built up a ﬁ rm foundation over time as part of its RC pro- gram, and does a good job of supporting employee health. You have even established a system to evaluate the health manage- ment activities at each site. I think this is an excellent way to heighten the motivation of the health maintenance personnel. Oyama I think that Asahi Kasei’s general culture of caring for its people is a big plus—this makes it easy for people to understand our health management efforts. While employees themselves gen- erally appreciate the importance of health maintenance, there is wide variation. We are working to raise overall awareness among employees of the need to look after their own health more responsibly. Mori Efforts to maintain employee health have come to be seen as a long-term investment for companies, with upper management taking a keen interest in employment and productivity of employ- ees. How is it at Asahi Kasei? Oyama The Asahi Kasei Group Vision includes the ideal of enabling living in health and comfort. We can hardly achieve this if our own employees are not healthy. I believe the management appreciates this, and is earnestly supporting our health management efforts. Tailoring the approach to suit different regions, work- places, and individuals Mori As a global enterprise with operations around the world, how does Asahi Kasei provide health maintenance services to employees overseas? Rather than extending the same system you have in Japan to other countries, I think you need to establish a system that suits the situation in each coun- try. That requires the expertise of on-site specialists. How do you deal with this? Oyama Our main focus so far has been on providing health management services to Japanese personnel stationed on overseas assignments. We have established locally tailored health management systems for national employees at some overseas sites, and are now studying how to expand this to more locations. Mori I think communication with the national personnel must be an important issue. You also need to give heed to the issue of diversity, and support maternal care. I feel that Asahi Kasei has very advanced systems in this regard. But as the population’s longevity increases you will need to support the long-term health of employees. You need an individual-focused approach that applies to both men and women at any age. Oyama We are working to bring greater individual focus to our health management system through direct personal support and counseling, while enhancing personnel provisions such as leave-of-absence. For example, we have a system to enable employees returning from a health-related absence to work only limited hours. They can gradually increase their working hours as they continue to recover. This is particu- larly effective in preventing recurrence of mental health–related problems. We also analyze both the stress level of individuals and the stress level at each workplace, enabling comprehensive mea- sures for improvement to be implemented. In concert with the employees’ health Supporting a healthy diet for Thai employees Asahikasei Plastics (Thailand) Co., Ltd. is proactively par- ticipating in a workplace health promotion program led by the Thai Health Promotion Foundation. They focused on the company cafeteria, where workers have at least two meals a day. After a survey of calorie intake, a mul- tifaceted program was launched including employee education and the development of menu items empha- sizing vegetables, with ﬂ avorings and seasonings screened to ensure that employees found them likeable. Results included not only decreased obesity among the workforce, but also reduced joint pain and other gener- al indications of improved overall health. insurance association we have begun ana- lyzing data for each workplace, combining information on accident and sickness ben- eﬁ ts, health insurance claims, results of annual checkups, and stress surveys. Mori That sounds interesting. You should be able to ﬁ nd positive examples from the data that you can replicate throughout the company. Koji Mori, M.D. Professor, Institute of Industrial Ecological Sciences Director, Occupational Health Training Center University of Occupational and Environmental Health Japan Having gained experience as an industrial physi- cian, Dr. Mori is now mainly involved in research related to industrial hygiene practices and the training of industrial physicians. Based on his broad range of insight, he provides advice and counsel on health-related issues to many com- panies. As a respected specialist in the ﬁ eld of industrial hygiene, Dr. Mori also serves on gov- ernment commissions and as an ofﬁ cer in many academic societies. Oyama The health management staff will have a big part to play in the sharing of information across different organizations, and the lateral extension of positive exam- ples. As we gain greater visibility of the data while increasing communication among health management staff at differ- ent locations, I think we will ﬁ nd many positive examples to share regarding haz- ardous operations, lifestyle-related diseas- es, antismoking campaigns, and workplace invigoration. Mori It sounds like Asahi Kasei’s health management effort is really moving in the right direction. In general, when a worker’s productivity is diminished due to poor health, a company discounts the lost pro- ductivity as an economic loss. We need to move beyond this way of thinking. Rather, we should consider resources directed toward employee health as a positive investment. This includes long-term invest- ments in ways such as preventing health problems from occurring or letting ill work- ers focus on their therapy, and short-term investments to deal with day-to-day health complaints. Health care measures used to be focused on each individual disease, with an emphasis on early diagnosis and treatment. Then we began paying more attention to prevention. Now we talk about elevating the overall level of healthiness. Oyama Asahi Kasei is also working from the perspective of prevention. As part of our effort to prevent falls we are providing exer- cise guidance throughout entire workplaces, not only for employees who are at high risk. Our mental health measures include analysis of the contributing causes, with results reﬂ ected in training materials. We also ana- lyze the stress level of workplaces, and implement improvements. The objective of our health manage- ment effort is to foster healthy workplaces and to enable healthy and fulﬁ lling working careers, ultimately contributing to produc- tive activity by reducing worker time lost due to health problems. To achieve this, the industrial health staff is working in close coordination with each workplace every day. Mori I expect you will be successful. Asahi Kasei Report 2015 43 Responsible Care Safety is a fundamental prerequisite for the continuation of operations as a corporate member of society. To ensure that every aspect of safety is maintained, the Asahi Kasei Group implements a Responsible Care (RC) program comprising the six pillars of operational safety, workplace safety and hygiene, environmental protection, health maintenance, product safety, and community outreach. Message from the Executive for RC The spirit of RC is autonomy, responsibility, and open disclosure. At the Asahi Kasei Group, we go beyond mere compliance with laws and regulations as we operate our businesses with due consideration for all matters related to the environment, health, and safety. In July 2014, we added a new RC principle: “Efforts are made to design and develop products which contribute to the sustainability of the global environment, and to disseminate such products worldwide.” With our Global Environment Action Committee, we are further deepening and expediting our efforts to achieve a low-carbon and recycling-oriented society, to protect water resources, and to coexist in harmony with nature. We are integrating global environmental measures together with business activities to fulﬁ ll our social responsibility in accordance with our Group Vision of enabling harmony with the natural environment. In addition, we advanced a wide range of RC efforts including training and education at all organizational levels. In certain areas where we can perform better, we are redoubling our efforts to raise results in line with our commitment to prevent accidents and disasters, maintain product safety, and promote employee health, for complete achievement of all RC objectives. Hiroshi Kobayashi Director Senior Executive Ofﬁ cer Asahi Kasei Corp. Responsible Care at Asahi Kasei RC represents the commitment and initiative to secure and improve safety and environmental protection at every step of the product life cycle through the individual determination and responsibility of each ﬁ rm producing and handling chemical products, together with measures to gain greater public trust through disclosure and communication. RC was conceived in Canada in 1985, and was strengthened on a global scale with the establishment of the International Council of Chemical Associations (ICCA) in 1990. In 1995, the chemical industry in Japan began implementing RC with the establishment of the Japan Responsible Care Council (JRCC*). Asahi Kasei was among the founding members of the JRCC, and played a leading role in the expansion and development of RC in Japan. RC at the Asahi Kasei Group is not limited to chemicals-related operations but encompasses operations in all ﬁ elds, including ﬁ bers, homes, construction materials, electronics, and health care. * JRCC: Operated as the Japan Chemical Industry Association’s RC Committee since April 2011. RC at the Asahi Kasei Group Asahi Kasei Group RC Principles Environmental Protection Community Outreach Fibers Chemicals Operational Safety Electronics Asahi Kasei Group Health Care Product Safety Construction Materials Homes Health Maintenance Workplace Safety and Hygiene Throughout the product life cycle from R&D to disposal, utmost consideration is given to environmental preservation, product safety, operational safety, and workplace hygiene and health as preeminent management tasks in all operations worldwide. (cid:129) Environmental preservation is achieved by ameliorating the environmental burden of operations while giving full consideration to the environment in the development of new technologies and products. (cid:129) Efforts are made to design and develop products which contribute to the sustainability of the global environment, and to disseminate such products worldwide. (cid:129) Product safety is ensured by evaluating the safety of products and providing safety information. (cid:129) The safety of personnel and members of the community is secured through endeavors to maintain stable operation and improve technologies for safety and disaster prevention. (cid:129) Workplace accidents are prevented through improvements to the workplace environment and plant modiﬁ cations to achieve inherent safety. (cid:129) Maintenance and promotion of employee health is supported by efforts to achieve a comfortable workplace environment. In addition to maintaining legal compliance, continuous improvement is pursued through attainment of self-imposed targets based on results of risk assessment. Public understanding and trust is gained through proactive communication and information disclosure. July 7, 2014 RC Management System The efﬁ ciency and effectiveness of Asahi Kasei Group RC is main- tained in accordance with our Group RC Management Guidelines and other internal standards, with the President of the holding com- pany serving as chair of our RC Committee. Continuous reevalua- tion and improvement are systematically pursued with “plan-do-check-act” (PDCA) cycles—for the Asahi Kasei Group as a whole, within each core operating company and Region,* and with- in individual plants and facilities. Certiﬁ ed compliance with internationally standardized manage- ment systems is obtained for the RC Management System of the Asahi Kasei Group. We have obtained ISO 14001 environmental management system certiﬁ cation for environmental protection and ISO 9001 quality management system certiﬁ cation for product safe- ty. An Occupational Health & Safety Management System (OHSMS) is adopted for workplace safety, hygiene, and health. * A site or group of sites consisting of several plants and facilities of various core operating companies. Each Region General Manager is responsible for the uniﬁ ed implementation of RC in the respective Region. 44 Asahi Kasei Report 2015 For more information, please refer to the Asahi Kasei Group CSR Website. http://www.asahi-kasei.co.jp/asahi/en/csr/ RC objectives and results FY 2014 RC Objectives FY 2014 Results Enhance RC compliance Improved Advance RC education and training Enhance RC at afﬁ liates Enhance dialog with the public Avoid all polluting accidents and minor incidents Promote recycling-oriented society: RC training course for section managers and assistant chiefs revised Supplement for assistant chiefs created Follow-up enhanced Expanded range of afﬁ liates implementing RC RC at afﬁ liated enhanced thought instructions and support by core operating companies RC reports of 3 core operating companies and 8 plant complex sites were used in community outreach No polluting accidents, 4 intermediate incidents • Final disposal of 0.3% or less of generated industrial waste Goal not reached with ﬁ nal disposal rate of 0.4% • Recycling rate of at least 87% Curtail greenhouse gas (GHG) emissions: Goal reached with recycling rate of 89% • Reduce CO2 emissions in Japan by 25% from FY 2005 level 23.6% reduction from FY 2005 level • Reduce CO2 emissions in Japan and overseas by 2% from FY 2010 level 11.8% reduction from FY 2010 level • Reduce GHG emissions in Japan by 30% from FY 2005 level 31.1% reduction from FY 2005 level ★★★Complete ★★Satisfactory ★Unsatisfactory FY 2015 RC Objectives Attainment ★★★ Review RC framework Enhance RC compliance ★★ Advance RC education and training ★★ Enhance RC at afﬁ liates ★★★ Enhance dialog with the public ★ ★★ Avoid all polluting accidents and minor incidents Promote recycling-oriented society: • Maintain rate of ﬁ nal disposal at 0.3% of generated industrial waste or less • Maintain recycling rate of at least 89% • Reduce CO2 emissions in Japan by 24.7% from FY 2005 level ★★★ • Reduce CO2 emissions in Japan and overseas by 5% from FY 2010 level • Reduce GHG emissions in Japan by 31.8% from FY 2005 level • LCA/CO2 contribution ratio1 of 7.5 Protect water resources: • Water resource contribution ratio2 of 6.8 Control emissions of chemical substances: • Control emissions of PRTR-speciﬁ ed substances • Control emissions of air and water pollutants Preserve biodiversity when procuring biological resources Advance CSR procurement Avoid all industrial accidents Monitor for hazards of ﬁ re, explosion, and leaks; implement remediation Prevent abnormal reactions, conﬁ rm interlock functions on-site LCA/CO2 contribution ratio of 7.5 • Achieve LCA/CO2 contribution ratio of 7.9 Water resource contribution ratio of 7.2 Release of PRTR-speciﬁ ed substances and emission of VOCs reduced by 91% and 87%, respectively, from FY 2000 level Investigated impact of our business activities on biodiversity, including use of new materials; no problem found Implemented CSR procurement No industrial accidents Review performed at time of on-site conﬁ rmation for preventing abnormal reactions; training of managers performed Conﬁ rmed progress in preparing technical documents for preventing abnormal reactions and securing interlock functions ★★★ ★★★ • Water resource contribution ratio of 7.5 Control emissions of chemical substances: • Control emissions of PRTR speciﬁ ed substances • Control emissions of air and water pollutants ★★★ Promote preservation of biodiversity at each site ★★★ Advance CSR procurement ★★★ Avoid all industrial accidents ★★★ Continuously monitor for hazards of ﬁ re, explosion, and leaks; perform training of managers ★★★ • Continue ongoing review to prevent abnormal reactions and conﬁ rm interlock functions Enhance emergency response systems Emergency drills performed in coordination between head ofﬁ ce and each site ★★★ Review earthquake response and enhance emergency response systems Conﬁ rm seismic resistance of high-pressure gas facilities and formulate plans Control changes to equipment and operating conditions Monitor for items in need of replacement and uninspected items, implement remediation: • Implement seismic retroﬁ tting for speciﬁ c buildings as planned for FY 2014 • Completion of the evaluation of seismic capacity for non-speciﬁ c buildings and implement retroﬁ tting as planned for FY 2014 Control conﬁ rmed at RC Audits, etc. Ongoing review with new perspectives Completed according to the plan Evaluation completed on schedule Avoid all workplace injuries: • Achieve frequency rate3 of 0.1 or less • Achieve severity rate4 of 0.005 or less Deepen utilization of OHSMS: • Reduce latent risks at workplaces • Enhance internal audits • Make the effects of OHSMS more visible • Ensure thorough compliance with safe working standards Avoid all accidents in “caught in/between” category: • No lost-workday injury due to “caught in/between” accidents 0.20 0.005 Review of risk assessment conﬁ rmed at audit Improvement conﬁ rmed at audit with reference to internal audit records Conﬁ rmed at audit with reference to risk level changes Compliance records conﬁ rmed at audit Zero lost-workday injuries (one in FY 2013); continued comprehensive equipment inspection at plants Satisfactory improvement conﬁ rmed in audit with reference to check sheets at each site Self-evaluation results and safety management guidance at each site conﬁ rmed at audit Conﬁ rmed issues at audit with reference to work management records Proportion of personnel health warning signs generally unchanged, BMI and ratio of employees who smoke gradually decreasing Physical ﬁ tness tests performed as part of fall prevention program, follow-up implemented Stress survey and follow-up implemented Enhance safety management guidance of on-site contractors: • Enhance safety management structure as the contracting manufacturer • Enhance safety management of on-site contractors Reinforce management of safety on equipment work: • Enhance implementation of safety management standards Promote health maintenance and improvement among personnel: • Promote the prevention of and countermeasures to lifestyle- related diseases • Prevent falls Promote countermeasures to mental health issues and enhance support system: • Implement company-wide stress survey, utilize its results, and perform follow-up Develop the health management system • Resolve critical tasks at each site with lateral extension • Establish the health management system at afﬁ liates and independent plants Avoid serious product safety incidents Enhance management of chemical substances: • Promote compliance with laws and regulations on management of chemical substances in Japan and overseas • Encourage JIPS activities • Promote JAMP tools Held internal meetings and interviews on health management activities Specialist industrial physicians supporting afﬁ liates and independent plants No product safety incidents ★★★ • Resolve critical tasks at each site with lateral extension • Establish the health management system at afﬁ liates and independent plants ★★★ Avoid serious product safety incidents Compliance maintained and system enhanced Continued risk assessment and public disclosure of safety documents. Provided and received information via MSDSplus and AIS, cooperated with dissemination of JAMP-IT ★★★ Enhance management of chemical substances: • Promote compliance with laws and regulations on management of chemical substances in Japan and overseas • Encourage JIPS activities • Promote JAMP tools Number of people our health care business contributed to: • 32% increase from FY 2010 level Number of residents in Hebel Haus™ homes: • 14% increase from FY 2010 level 24% increase from FY 2010 level 16% increase from FY 2010 level ★★ ★★★ Number of people our health care business contributed to: • 40% increase from FY 2010 level Number of residents in Hebel Haus™ homes: • 20% increase from FY 2010 level 1 LCA is used to determine the amount of reduction in CO2 emissions enabled by Asahi Kasei products and technologies in comparison with conventional products and technologies. The ratio is calculated by dividing this amount by the global CO2 emissions of the entire Asahi Kasei Group. 2 The water resource contribution ratio is calculated by adding up the total quantity of water clariﬁ ed and recycled using Asahi Kasei ﬁ ltration technology and dividing this by the quantity of the Asahi Kasei Group’s water intake. 3 Number of accidental deaths and injuries resulting in the loss of one or more workdays, per million man-hours worked. 4 Lost workdays, severity-weighted, per thousand man-hours worked. Asahi Kasei Report 2015 45 ★★★ Control changes to equipment and operating conditions ★★★ Monitor for items in need of replacement and uninspected items, implement remediation: ★★★ ★★★ ★★ • Advance seismic retroﬁ tting of speciﬁ c and non-speciﬁ c buildings Avoid all workplace injuries: • Achieve frequency rate of 0.1 or less • Achieve severity rate of 0.005 or less Deepen utilization of OHSMS: • Reduce latent risks at workplaces ★★★ • Enhance internal audits • Make the effects of OHSMS more visible • Ensure thorough compliance with safe working standards Avoid all accidents in “caught in/between” category: • No lost-workday injury due to “caught in/between” ★★★ accidents Avoid ﬁ re, explosion, chemical injury, poisoning, etc. related to chemical substances • Zero lost-workday injuries related to chemical substances Prevent injuries during working hours unrelated to operating procedures and during commuting • Prevent lost-workday injury related to stairways Enhance safety management guidance of on-site contractors: • Enhance safety management structure as the contracting manufacturer • Enhance safety management of on-site contractors Reinforce management of safety on equipment work: • Enhance implementation of safety management standards Promote health maintenance and improvement among personnel: • Promote the prevention of and countermeasures to lifestyle-related diseases Prevent falls • Implement company-wide stress survey, utilize its results, and perform follow-up ★★★ ★★★ ★★★ ★★★ e c n a i l p m o c C R n o i t c e t o r p l a t n e m n o r i v n E y t e f a s l a n o i t a r e p O i e n e g y h d n a y t e f a s l e c a p k r o W i e c n a n e t n a m h t l a e H d n a y t e f a s t c u d o r P f o t n e m e g a n a m s e c n a t s b u s l a c i m e h c n i g n i v i L d n a h t l a e h t r o f m o c Environmental protection The Asahi Kasei Group’s environmental protection measures include efforts for the achievement of a low-carbon society, the establishment of a recycling-oriented society, and the preservation of biodiversity. As our operations involve the use of large volumes of chemical substances, we implement measures under our ISO14001 environ- mental management system to prevent pollution-causing accidents. Overview of environmental impacts The diagram below describes the environmental impacts of business activities at Asahi Kasei Group plants. As in our Group Vision of “harmony with the natural environment,” the Asahi Kasei Group considers environmental preservation to be one of the most impor- tant tasks. Our major focuses are on 1) prevention of global warm- ing, 2) promotion of a recycling-oriented society, 3) management of chemical substances, and 4) preservation of biodiversity. For preven- tion of global warming, we have established new indexes and tar- gets to curtail greenhouse gas emissions to be achieved by ﬁ scal 2020. Regarding promotion of a recycling-oriented society, we achieved zero emissions of industrial wastes in ﬁ scal 2010 and are working to maintain this. Furthermore, as a chemical company, we are working to promote safe handling of chemical substances and actively provide safety information. We are also making efforts to reduce the impact of our business activities on biodiversity. Quantitative indicators and targets to curtail global warming In June 2012, we established our Global Environment Committee to oversee an expanded scope of activities related to global warming. At its second meeting, the Global Environment Committee formu- lated a policy on environmental initiatives that apply to the entire Asahi Kasei Group. Quantitative indicators and targets were revised in order to clearly visualize and conﬁ rm ongoing progress of these environmental initiatives. Asahi Kasei Group main environmental impacts (FY 2014) Water 272 million m3 Asahi Kasei Group plants Energy 5.4×1016 J Including hydroelectric power (converted in accordance with Japan’s Act on the Rational Use of Energy) INPUT Materials Including 4.21 million tons PRTR-specified substances OUTPUT Atmospheric emissions Release to soil SOx: NOx: Soot and dust: PRTR-specified substances: 5,700 tons 3,700 tons 180 tons 360 tons 1,300 tons Regulated VOCs: Greenhouse gas emissions: 4.06 million tons CO2 equivalent Effluent water Volume: COD of effluent: Nitrogen: Phosphorus: PRTR-specified substances: 210 million m3 810 tons 5,900 tons 32 tons 78 tons PRTR-specified substances: 0 tons Industrial waste Effluent waste: 388,000 tons Of which, landfilled: 1,500 tons Products The Asahi Kasei Group’s global environmental policy 1 Contributing to a low-carbon society 4 Achieving harmony with nature 2 Preserving water resources 3 Promoting a recycling- oriented society 5 Overseas locations (factories) 6 Supply chain Contributing to a low-carbon society As a participant in the Commitment to a Low Carbon Society launched in April 2013 by the Japan Chemical Industry Association and Nippon Keidanren, the Asahi Kasei Group is implementing activities in line with this commitment. We will also pursue activities under global indicators and targets set for our overseas manufactur- ing sites as well. The Asahi Kasei Group’s activities for building a low- carbon society 1. Reducing greenhouse gas (GHG) emissions of the Asahi Kasei Group (1) CO2 and GHG emissions in Japan (2) Global CO2 emissions (3) Scope 3 emissions* 2. Helping reduce CO2 emissions throughout the entire lifecycle of products 3. Making international contributions 4. Developing innovative new technologies * Scope 3 emissions: Greenhouse gases emitted indirectly by a company throughout its supply chain. 46 Asahi Kasei Report 2015 The Asahi Kasei Group’s environmental initiative framework Global Environment Committee This committee deliberates and adopts group-wide environmental measures. It is chaired by the holding company Executive for RC, vice- chaired by the General Manager of Corporate Research & Development, and has the Executives for the Environment of the core operating companies as members. It meets twice per year. Global Environment Action Committee This committee is chaired by the General Manager of Corporate ESH & QA, and has the RC Promoters of the core operating companies and Corporate Research & Development as members. Based on decisions of the Global Environment Committee, it develops concrete measures. It meets twice per year. LCA Committee This committee consists of the chair from the holding company and members from the core operating companies and from Corporate Research & Development. It promotes life cycle assessment (LCA) throughout the Asahi Kasei Group and performs LCA for the Group’s products and technologies, including those under development. It meets ﬁ ve to six times per year, and reports results of its activities to the Global Environment Committee. Reducing GHG emissions from production processes The Asahi Kasei Group’s GHG emissions from production processes in ﬁ scal 2014 were equivalent to 4.06 million tons of CO2, which repre- sents a reduction of 31% compared to the 5.92 million tons from our baseline year of ﬁ scal 2005. Signiﬁ cant factors that contributed to this reduction include the suspension of ammonia and benzene production, and the start of biomass power generation. Compared to the emissions level in 1990, the index year set under the Kyoto Protocol, we continue to maintain a reduction of GHG emissions by more than 50%, most notably through the development of technology for thermal decompo- sition of nitrous oxide (N2O) byproduct. Refer to “Financial and non-ﬁ nancial highlights” on page13. Scope 3 emissions The domestic Japanese portion of Scope 3 emissions over time has been calculated for all operations except Asahi Kasei Pharma, yielding data on 99% of such emissions for the entire Asahi Kasei Group. Life cycle assessment of reduced CO2 emission Although CO2 is generated during the manufacture of materials and intermediate products in the Asahi Kasei Group, there are also many examples of products which contribute to reduced CO2 emissions dur- ing use. LCA calculation takes such contribution into account and determines the amount of CO2 reduction achieved over the product life cycle. By expanding sales of such products and commercializing new products and technologies that enable signiﬁ cant reduction of CO2 emission based on LCA, we contribute to the overall reduction of greenhouse gas emission throughout the supply chain. Global warming conscious products In April 2012, we formulated guidelines on global warming con- scious products. Having formulated a similar set of guidelines in 2003 for eco-friendly products, the Asahi Kasei Group decided to formulate a new set of guidelines for global warming conscious products given recent demand both in Japan and overseas. In accordance with these guidelines, we have certiﬁ ed the prod- ucts in the following chart as global warming conscious products. Scope 3 emissions in Japan (Million tons CO2 equivalent) 8 7.20 7.22 7.00 6.82 6.90 6.70 6.03 5.91 5.63 5.67 21.4% 7 6 5 4 3 2 1 0 ’05 ’06 ’07 ’08 ’09 ’10 ’11 ’12 ’13 ’14 FY Purchased products and services Capital goods Fuel and energy related activities not included in Scope 1 or Scope 2 Upstream transport/distribution Waste emitted from businesses Business travel Employees’ commuting Upstream leased assets Use of sold products End-of-life disposal of sold products Our Scope 3 emissions have steadily declined from ﬁ scal 2005 to ﬁ s- cal 2014, with some ﬂ uctuation due to the global ﬁ nancial crisis, and in ﬁ scal 2014 they were some 21% lower than in ﬁ scal 2005. This reduction can be attributed to the launch and growing sales of Hebel Haus™ products with power generation, efﬁ ciency, and conservation functions which reduced Category 11 emissions (use of sold products), and to the reduced use of fossil resources and fossil fuels which reduced Category 12 emissions (end-of-life disposal of sold products). List of global warming conscious products Rank Product name A A A A A A B B B B B B B C C C Hall ICs and Hall elements for DC motors used in air conditioners Ion-exchange membrane electrolysis system for caustic soda Synthetic rubber for fuel-efﬁ cient tires Phosgene-free polycarbonate production process Fusion™ 3D knitted fabric for energy saving humidiﬁ er ﬁ lters Hebel Haus™ with power generating, efﬁ ciency, and conservation functions Hebel Haus™ with next-generation insulation Hipore™ lithium-ion battery separator for electric and hybrid electric vehicles Neoma™ phenolic foam insulation panels for homes Heat-absorbing stretch ﬁ ber for cool-feeling innerwear Sunfort™ photosensitive dry ﬁ lm Hebel Haus™ two-generation homes Asaclean™ plastic molding machine purging agent Renovation to add solar panels Polymer membrane for fuel cells Renovation to improve window insulation Rank A: LCA/CO2 reduction of at least 500,000 t-CO2/y Rank B: LCA/CO2 reduction of at least 100,000 t-CO2/y Rank C: LCA/CO2 reduction of at least 10,000 t-CO2/y Asahi Kasei Report 2015 47 Preservation of biodiversity Basic policy To ensure the sustainable utilization of living resources, due consid- eration is given to reducing the impact of our business activities on biodiversity, and we have established guidelines for the preservation of biodiversity. Based on these guidelines, the Asahi Kasei Group began examining the impact of our business activities on biodiver- sity. In order to promote business activity with due concern for bio- diversity, we are working to raise awareness among personnel by various means including our RC education program. Notable actions in ﬁ scal 2014 Through the examination of the impact of our business activities on biodiversity, we came to realize the extreme importance of biological resources and ecosystem services for our operations. In any case of ecosystem services being newly used or a change in use of biologi- cal resources, we conﬁ rm that no problem will be caused. Our plants and ofﬁ ces are undertaking a variety of initiatives to preserve biodiversity in each location. Promoting a recycling-oriented society The Asahi Kasei Group is working to reduce the amount of industrial waste for ﬁ nal disposal through the “3-Rs” of reduc- tion, reuse, and recycling in order to help build a recycling- oriented society. In ﬁ scal 2014, we adopted targets of a ﬁ nal disposal rate of 0.3% or less and a recycling rate of 87% or more of the total amount of industrial waste generated. Although we achieved a recycling rate of 89%, we missed our target ﬁ nal disposal rate by achieving 0.4%. We are working to gain further improvements through increased separation and greater selectivity in disposal contractors. Waste containing PCBs* is stored under strict control in stainless steel vessels. Plans for disposal are advancing, including for waste with minimal amounts of PCBs. We enhanced our management of off-site treatment of industrial waste by expanding the use of electronic manifests. We also performed periodic on-site inspections of consigned ﬁ rms to ensure that proper disposal is performed in accordance with sound systems of control. * PCBs (polychlorinated biphenyls) are persistent and pose a risk to the living environment and human health. Their manufacture and use is essentially prohibited in Japan. Flow of industrial waste, FY 2014* (thousand tons) On-site treatment Off-site treatment Waste generated 388.0 (100%) Recycling 115.0 (29.5%) Volume reduction by incineration, dehydration, etc 36.0 (9.3%) On-site landfill 0.0 (0.0%) Effluent waste 237.0 (61.1%) Recycling 232.0 (59.6%) Volume reduction by incineration, dehydration, etc 4.1 (1.1%) Final disposal 1.5 (0.4%) Reduction of chemical substances The Asahi Kasei Group makes an effort to reduce the release of chemical substances. These chemicals include substances speciﬁ ed in the PRTR* Law, and other substances which we have voluntarily designated for reduction. Priority for reduction is based on the degree of hazardousness and amount of release. * Excluding industrial waste generated at the construction sites of Asahi Kasei Homes. * PRTR: Pollutant release and transfer register. Under the PRTR Law, releases to the environment and off-site transfers of speciﬁ c hazardous chemical substances must be monitored and recorded for each production facility and operating site. Results are reported to the government, which publishes aggregate results. Releases of PRTR-speciﬁ ed substances Atmospheric emissions of VOCs* （Tons） 5,000 4,890 1,000 500 0 680 680 480 490 440 （Tons） 12,000 10,000 10,400 8,000 6,000 4,000 2,000 0 2,800 2,500 1,300 1,300 1,300 ‘00 ‘10 ‘11 ‘12 ‘13 ‘14 FY ‘00 ‘10 ‘11 ‘12 ‘13 ‘14 FY to the atmosphere to water Note: • No release to soil • The number of PRTR-speciﬁ ed substances was changed due to a regulatory revision in FY2010. * VOC: Volatile organic compound. Although the term generally applies to any organic compound which is in gaseous state at the time of release, regulations for the control of their release exclude methane and some ﬂ uorocarbons which do not form oxidants. 48 Asahi Kasei Report 2015 Operational safety To achieve safe operations, it is essential to build highly safe plants based on process hazard assessment prior to con- struction, to perform sound plant maintenance, and to operate facilities in a stable and safe manner. The Asahi Kasei Group avoids industrial accidents through risk assessments prior to the construction of new plants, periodic inspec- tions of existing plants performed by auditors specialized in ﬁ re and explosion prevention, process reviews from the perspective of preventing abnormal reactions and ensuring interlock functions, and process reviews corresponding to the age of facilities. Management of operational safety Our ongoing, autonomous program to ensure operational safety includes safety assessment and hazard identiﬁ cation in accordance with a basic safety management policy, and speciﬁ c plans are imple- mented on both annual and multi-year cycles. Safe, stable plant operation Given our diverse range of operations that include chemicals & ﬁ bers, homes & construction materials, electronics, and health care, the Asahi Kasei Group has plants with a wide variety of different characteristics. No single approach to safety would be appropriate for all plants. We employ a systematic process to tailor the safety effort to each plant’s speciﬁ c requirements. This includes the use of PDCA cycles to ensure the appropriateness of the maintenance standards for each individual unit of equipment. Training for operational safety At our petrochemical sites in Mizushima and Kawasaki, the Asahi Operation Academy (AOA) serves as the training center to cultivate the skills necessary to operate petrochemical plants. AOA teaches the principles and structures of equipment, heightening the ability to identify the cause of equipment failure and respond to it. Miniature plants and simulators are used at AOA to provide hands- on experience with controls and instrumentation. Workplace safety The effort to prevent workplace accidents is integrated in a comprehensive OHSMS* program that combines conventional safety initiatives—such as tidiness/orderliness/cleanliness, reporting of near-accidents and potential hazards, hazard prediction analysis, safety patrols, and case studies—with risk assessments and a prevention- oriented plan-do-check-act (PDCA) system. * Occupational Health and Safety Management System. A standardized management system used to conﬁ rm that continuous improvement is being applied to measures to minimize the risks of workplace injuries and to prevent the emergence of future risks. Occurrence of workplace injuries Of the 10 lost-workday injuries that occurred during ﬁ scal 2014, none were in the “caught in/between” category, which we had strived to eliminate. Although this was a signiﬁ cant achievement considering that 17% of lost-workday injuries were in this catego- ry from ﬁ scal 2004 to 2013, we continue to reduce the risk of accidents in the “caught in/between” category by eliminating sources of danger and enhancing safeguards. In ﬁ scal 2012, we began an ongoing program of comprehensive plant inspections that incorporates fresh perspectives from outside experts and from our personnel of different sites and different core operating com- panies. We also formulated a set of guidelines on machinery safety in accordance with ISO12100* and in ﬁ scal 2014 began machin- ery risk assessments by designers when building new equipment or modifying existing equipment, with deliberation among related parties as part of the equipment inspection. The 3 categories of fall on the same level, fall from height, and trafﬁ c accident accounted for 80% of all lost-workday injuries in ﬁ scal 2014. To prevent these common accidents that could occur even in non- factory workplaces such as sales ofﬁ ces or headquarters, we are promoting safety activities in all workplaces and renewing our emphasis on a culture of safety. * ISO12100 speciﬁ es principles for achieving safety in machinery design and principles of risk assessment and risk reduction. Incidence of lost-workday injury by event category, FY 2014 in Japan Incidence of lost-workday injury by event category, FY 2004–2013 in Japan Fall on same level 20% Fall from height 10% Contact with high-temperature substance/object 20% Traffic accident 50% Total 10 cases Traffic accident 14% Others 8% Hit by flying/ falling object 2% Contact with high-temperature substance/ object 4% Explosion or rupture 4% Fire 1% Caught in/ between machinery 17% Caught in something else 3% Fall on same level 19% Total 123 cases Fall from height 13% Kickback/overexertion 12% Asahi Kasei Report 2015 49 Frequency rate* (%) 1.2 1.0 0.8 0.6 0.4 0.2 0.0 1.05 0.88 0.36 0.98 0.72 0.21 0.94 0.82 0.40 1.0 0.85 0.16 1.06 0.76 0.20 Severity rate* (%) 0.20 0.169 0.153 0.12 0.12 0.08 0.10 0.10 0.17 0.09 0.09 0.05 0.005 0.04 0.013 0.005 0.16 0.12 0.08 0.04 0.00 ‘10 ‘11 ‘12 ‘13 ‘14 FY ‘10 ‘11 ‘12 ‘13 ‘14 FY Asahi Kasei Group Chemical industry, Japan Manufacturing industries, Japan Asahi Kasei Group Chemical industry, Japan Manufacturing industries, Japan Note: Fiscal years for the Asahi Kasei Group, calendar years for the chemical Note: Fiscal years for the Asahi Kasei Group, calendar years for the chemical industry and industry and manufacturing industries in Japan. manufacturing industries in Japan. * Frequency rate: Number of accidental deaths and injuries resulting in the loss of one or more workdays, per million man-hours worked. Our goal of 0.1 or less is extremely ambitious. At a plant with 100 workers, it would mean only one worker in 50 years suffered from a workplace injury which resulted in a day off. * Lost-workdays, severity-weighted, per thousand man-hours worked. Health maintenance The Asahi Kasei Group implements various activities to help employees maintain and advance their mental and physical well-being in accordance with its health management guidelines, including screening for lifestyle- related diseases and mental health checkups. Enhanced health management framework During ﬁ scal 2014, we began a series of interviews to conﬁ rm whether the activities of our health management centers at each site, including the duties of our industrial physicians and health nurses, are being performed in accordance with the Industrial Safety and Health Law and our health management guidelines. Further guidance and support is being provided as necessary. Health maintenance and promotion for employees The Asahi Kasei Group has provided employees with health guid- ance and exercise guidance by outside experts and health mainte- nance staff in each site. In ﬁ scal 2014, the results of annual checkups indicated that the proportion of employees with health warning signs rose slightly, in line with an increase in the average employee age, while BMI and the ratio of employees who smoke was generally unchanged. Since ﬁ scal 2013, we have promoted the use of our health Ratio of employees with health warning signs 60 50 40 30 20 ‘12 ‘13 ‘14 FY Average age Ratio of employees with health warning signs (%) BMI　 Ratio of employees who smoke (%) 50 Asahi Kasei Report 2015 improvement program, a tool for health management that was revised to enable more easy use of speciﬁ ed health guidance. This program is especially useful for the maintenance and improvement of employees’ health at independent plants where on-site health care staff is limited, and also as an outside resource for afﬁ liated companies. Measures to prevent falling Based on the falling risk assessment manual issued by the Japan Industrial Safety & Health Association, in ﬁ scal 2013 we prepared a manual for physical ﬁ tness tests to prevent falling. In ﬁ scal 2014 we began using this manual to assess falling risks of our employees, fol- lowed-up with guidance by industrial physicians. This has been com- pleted at about half of our sites, with preparations advancing at the remaining sites. Mental health and care The Asahi Kasei Group is working to improve the workplace envi- ronment by enhancing its four complimentary approaches to care in accordance with its mental health care guidelines. For self-care by individual employees and care by industrial medical staff, in ﬁ scal 2013 we began full implementation of an intranet-based electronic diagnosis system developed by Fujitsu Software Technologies Ltd. The system has been used to survey stress at 24 sites, with appropri- ate follow-up implemented. Ongoing stress surveys will be per- formed annually at each site. In addition to surveying the stress level of individual employees, this system analyzes workplace stress to help improve the workplace environment as part of our effort for care by line of authority. Product safety To ensure the provision of products that the customer can use safely and reliably, the Asahi Kasei Group con- stantly strives to improve product safety and product quality, while maintaining consistent production control. In ﬁ scal 2014, we once again met our target of no serious product safety incidents. Product safety guidelines Group-wide product safety guidelines have been prepared to secure product safety and prevent the occurrence of product safety incidents. Speciﬁ c product safety measures for individual products are applied by each core operating company in accor- dance with the guidelines. Prevention of product safety incidents Consumer satisfaction and safety Products sold by the Asahi Kasei Group range from industrial materials to consumer products. Many of the materials we sell are used in products which are purchased by ordinary consumers. Consumer satisfaction is therefore the ultimate measure of our success in the provision of safe, high-quality products. We strive to maintain product quality and safety through continual atten- tion to production control to ensure that the products used by consumers are completely free of safety defects. Managing chemical substances To ensure the safety of products and production processes in the Asahi Kasei Group, we maintain awareness of the properties of the chemical substances we use, and manage them strictly and appropriately throughout each phase from materials procurement to production, use, and disposal. The Asahi Kasei Group’s effort Global trends on management of chemical substances The Asahi Kasei Group is enhancing the management of chemical substances in accordance with relevant global trends. Many interna- tional organizations and private-sector associations are promoting chemical management based on risk assessment and advancing product stewardship in supply chains. Committing to the RC Global Charter On May 30, 2008, the President of Asahi Kasei Corp. signed a letter of commitment to the Responsible Care Global Charter (RCGC) on behalf of the Asahi Kasei Group, indicating our recognition of the importance of RC and especially chemical substance control. The RCGC was launched by the International Council of Chemical Associations (ICCA) with a UN resolution. When RC Global Charter was amended in 2014, the President of Asahi Kasei Corp. again signed it on November 19, 2014. Developments in management of chemical substances Organization Related items Development UN OECD EU Resolutions at international conferences concerning global environment Safety checks on existing chemicals Implement new regulation on chemicals • Resolution to minimize adverse effects on human health and the environ- ment due to production, handling, and use of chemical substance; imple- mentation of Action Plans to achieve certain targets by 2020 • Implementation of Globally Harmonized System (GHS)* for the classiﬁ ca- tion and labeling of chemicals • Collection of safety data under the High Production Volume (HPV) Chemicals initiative by each member country and its chemical industry • REACH Regulation for the registration, evaluation, authorization, and restriction of chemicals • RoHS Directive for the restriction of the use of certain hazardous substanc- es in electrical and electronic equipment Outline of efforts for product safety and chemical substance management The Asahi Kasei Group routinely performs employee education on product liability, chemical product safety, and equipment safety, along with risk assessment. We examine the substance of com- plaints about our products and apply lessons learned to our quality assurance systems (QMS and GMP) as part of the continuing effort to ensure product safety and avoid complaints. With regard to the safety of chemical products, the Global Harmonized System of Classiﬁ cation and Labeling of Chemicals (GHS) has been introduced in Japan in accordance with a United Nations advisory. We have revised our SDSs for compatibility with GHS and have labeled our chemical products to make safety infor- mation more visible. In addition to their useful properties, many of our products are potentially hazardous if handled improperly. We therefore provide a range of information for the safe use and handling of our products, con- tinuously review the safety the of our products, and strive to ensure that the safety information that we provide is easy to understand and apply. * Globally Harmonized System of Classiﬁ cation and Labeling of Chemicals (GHS): An international system of standardized hazard categories for chemical products, together with harmonized labeling. Asahi Kasei Report 2015 51 Respect for Employee Individuality The Asahi Kasei Group considers fulﬁ lling and satisfying working conditions and workplace culture, in which personnel feel motivated to achieve and take pride in their careers, to be key to business performance. Our human resources policies are focused on the maintenance and reinforcement of a corporate culture emphasizing Asahi Kasei characteristics, the personal growth of each employee, and the creation and expansion of business through superior people and organizations, based on the understanding that the exceptional power of our people and organizations is the source of our competitive strength. Human Resources Principles The Human Resources Principles of the Asahi Kasei Group are a distillation of the values and beliefs held in com- mon by all employees, a key aspect of a corporate culture where personal growth and corporate development are mutually reinforcing. Corporate Commitment Basic Expectations Expectations of Leaders The basic commitment to human resources is to provide the venue for a dynamic and fulﬁ lling career as a part of a lively and growing corporate group. • Enterprise and growth through challenge and change • Integrity and responsibility in action • Respect for diversity • Building the team, heightening performance and achievement • Going beyond conventional boundaries, in thought and action • Contributing to mutual development and growth Human resource development Group Masters The Asahi Kasei Group employs a “Group Masters” program to rec- ognize employees who have developed and exercised extraordinary expertise and skills that hold universal value, and to facilitate appli- cation thereof throughout the group. As of April 2015, 92 Group Masters are designated: 2 as Group Fellows, 22 as Senior Group Experts, and 68 as Group Experts, with rank and remuneration com- mensurate with division general manager, department general man- ager, and section manager, respectively. Development of global human resources To support the expansion of world-leading businesses under our medium-term management initiative “For Tomorrow 2015” from the perspective of human resources, we are implementing measures such as internship programs for young personnel, expanding over- seas study programs, and holding training sessions including an Intercultural Communication Program for personnel at overseas sub- sidiaries. Development of engineers and technical specialists Under “For Tomorrow 2015,” we are accelerating the creation of new businesses which provide new value for society. Engineers and technical specialists in R&D and manufacturing are essential human resources for successful business development, and therefore we are reinforcing measures to create better, more vibrant workplaces for them as well as examining programs that provide a wide range of career opportunities to enable their personal and professional growth. Valuing human rights and diversity Basic policy Corporate HR & Labor Relations leads the effort to ensure that there will be no discrimination on the basis of gender, nationality, age, or otherwise, to maintain a lively workplace culture which enables per- sonnel to perform at their best, to advance the employment of persons with disabilities, and to rehire personnel after the mandatory retirement. Fiscal 2015 hiring In April 2015, 333 new graduates were hired: 250 men and 83 women. In addition, 61 persons were hired in mid-career between April 2014 and March 2015. Expansion of opportunities for women In 1993, we established a dedicated corporate organ (now Diversity Promotion Group) to promote equal opportunity, and have proac- tively increased the proportion of women hired and expanded the distribution of job assignments for women. While only ﬁ ve employ- ees at the rank of manager or above were women in 1993, this had risen to 454 in June 2015. The variety of posts where women are assigned also continues to expand. 52 Asahi Kasei Report 2015 Number of women as managers* 500 410 370 454 317 344 400 300 200 100 0 ‘11/6 ‘12/6 ‘13/6 ‘14/6 ‘15/6 * Results as of June 30 each year for personnel employed by Asahi Kasei Corp., Asahi Kasei Chemicals Corp., Asahi Kasei Fibers Corp., Asahi Kasei Homes Corp., Asahi Kasei Construction Materials Corp., Asahi Kasei Microdevices Corp., Asahi Kasei E-materials Corp., Asahi Kasei Pharma Corp., and Asahi Kasei Medical Co., Ltd. Preventing harassment Sexual harassment is clearly prohibited in the Asahi Kasei Group by our Corporate Ethics – Code of Conduct and by our corporate employment regulations. Prevention is reinforced through training at each level of promotion in rank, and through periodic company- For more information, please refer to the Asahi Kasei Group CSR Website. http://www.asahi-kasei.co.jp/asahi/en/csr/ wide training within each core operating company for conformance with corporate ethics. A central point of contact is established for consultation about related issues and concerns in the Asahi Kasei Group. Employment of persons with disabilities Asahi Kasei Ability Corp. was established in 1985 for the employ- ment of disabled persons, performing a wide range of services for the Asahi Kasei Group, including data entry, digitizing documents, website design, printing of business cards, document printing and binding, dispatch of sample products, cleaning, copying, and planter box gardening. Rate of employment of disabled persons at applicable Group companies* (%) 2.2 1.94 1.98 2.12 2.08 2.05 2.00 2.1 2.0 1.9 1.8 1.7 ‘11/6 ‘12/6 ‘13/6 ‘14/6 ‘15/6 Asahi Kasei Group Legal minimum * Results as of June 1 each year at applicable Group companies. Calculation based on total employment of 24,037.5 persons in the 19 applicable companies. As of June 1, 2015, the number of disabled persons employed by Asahi Kasei Ability Corp. stood at 314.0 of the total 492.0 disabled employees. Calculated in accordance with the Act on Employment Promotion etc. of Persons with Disabilities. Balancing work and family life Basic policy We provide various forms of support for personnel to work with security and vitality in accordance with their individual circumstances and values from the perspective of balancing work and family life. Parental leave Our parental leave is available through the ﬁ scal year in which the child turns three years old. In ﬁ scal 2014, 457 personnel utilized parental leave. This is included 231 men, which is 40% of those who were qualiﬁ ed, and 226 women. Employees using parental leave* 300 226 179 190 240 242 212 235 233 226 231 200 100 0 ‘10 ‘11 ‘12 ‘13 ‘14 FY Women Men * Results for personnel employed by Asahi Kasei Corp., Asahi Kasei Chemicals Corp., Asahi Kasei Fibers Corp., Asahi Kasei Homes Corp., Asahi Kasei Construction Materials Corp., Asahi Kasei Microdevices Corp., Asahi Kasei E-materials Corp., Asahi Kasei Pharma Corp., and Asahi Kasei Medical Co., Ltd. Main provisions to support balance in work and family life Support for family care Our personnel are allowed to take leave of up to one year for the purpose of attending to any family member who requires care. Enhanced provisions for days off and ﬂ exible working hours are also available to help personnel continue working while providing care for family members. In ﬁ scal 2014, 6 personnel utilized leave of absence for family care. Leave of absence to accompany spouse on overseas assignment As globalization continues to advance, an increasing number of per- sonnel have a spouse who is transferred to an overseas assignment. In ﬁ scal 2013 we adopted a provision for such personnel to take a leave of absence to accompany their spouses living overseas. In ﬁ scal 2014, 7 personnel utilized this provision. Employee survey Management and labor work in concert to resolve people-related issues based on mutual understanding and awareness. We regularly perform a survey of employees to gauge improvements to previous- ly identiﬁ ed problems and track changes in employee perceptions over time. Survey results are also utilized in the evaluation of various measures and the consideration of new measures. e v a e l / f f o e m T i s r e h t O Pregnancy Delivery Child-rearing One year old Two years old Three years old Entry to elementary school End of third grade Family care Time off for morning sickness 42 days Maternity leave 56 days Plus 14 days off before/after delivery Up to April 1 after child reaches three years of age Expanded application of unused paid days off to care for family members (up to 40 days) Parental leave Leave of absence for family care (one year in total) Time off for family care Time off for family illness Shortened working hours for child-rearing Women only Financial assistance for employing babysitters/caretakers “Kids Support” shortened working hours for child-rearing Shortened working hours for family care (one year in total) Flexible working hours for family care Asahi Kasei Report 2015 53 Corporate Citizenship We are committed to advancing in harmony with society from a global perspective through fair information disclosure and the proactive employment of management resources for corporate responsibility and citizenship. Stakeholder dialog Different corporate organs hold responsibility for fair and open dialog with each of our different groups of stakeholders. Stakeholders Customers Shareholders, investors Suppliers Local communities Corporate Communications at Asahi Kasei Corp. Communications sections at core operating companies Marketing and sales departments, consumer contact offices Investor Relations at Asahi Kasei Corp. Purchasing and logistics sections, environment and safety sections at production sites General affairs and administration sections at production sites (cid:115) Issuing news releases (cid:115) Holding news conferences (cid:115) Website disclosure of information (cid:115) Face-to-face discussion by marketing and sales personnel (cid:115) Taking inquiries via telephone, website, etc. (cid:115) Meeting with securities analysts and institutional investors (cid:115) Seminars for Individual investors (cid:115) Website disclosure of information (cid:115) Taking inquiries via telephone, website, etc. (cid:115) Safety discussion forums (cid:115) Information exchange forums (cid:115) Periodic community dialog meetings (cid:115) Community outreach initiatives (cid:115) Issuing news releases (cid:115) Holding news conferences (cid:115) Issuing documents for information disclosure (cid:115) Website disclosure of information (cid:115) Responding to CSR-related questionnaires (cid:115) Promoting social contribution activities Asahi Kasei Group Customer relations For materials, intermediates, and devices, communication with our customers is handled by sales departments and R&D departments. For consumer products such as Saran Wrap™ and Frosch™, pharmaceuticals, and Hebel Haus™, communication with our customers is handled by the customer support center of each product. Investor relations We strive to disclose information in a timely and fair manner to enable our domestic and international investors to gain an accurate understanding of the Asahi Kasei Group. Shareholder distribution Please refer to “Return to Shareholders and Share Information” on page 3. IR meetings with institutional investors and securities analysts In ﬁ scal 2014, Investor Relations (IR) held 293 meetings with institu- tional investors and securities analysts in Japan, including quarterly results brieﬁ ngs and an annual management brieﬁ ng with the President. We proactively hold meetings with investors with the aim of deepening their understanding of key businesses of Asahi Kasei. In addition, 53 meetings were held overseas. In total, 346 meetings were held to directly provide information to institutional investors and securities analysts during the year, with a cumulative attendance of 1,344. We also provide a wide variety of information for investors on our website. Seminars for individual investors To provide individual investors with a better understanding of the operations of the Asahi Kasei Group, 27 seminars were held in ﬁ scal 2014, with total attendance of 2,876 individual investors.* We will continue to provide accurate and timely information to individual investors through direct com- munications, the corporate website, and articles published in magazines for individual investors. * Excluding participants of the 123rd Ordinary General Meeting of Shareholders. 54 Asahi Kasei Report 2015 For more information, please refer to the Asahi Kasei Group CSR Website. http://www.asahi-kasei.co.jp/asahi/en/csr/ Principled supplier relationships A relationship of mutual trust with our suppliers is fostered through fair and principled purchasing practices based on regulatory compliance and respect for the environment and human rights. Purchasing and Procurement Policy Purchasing departments throughout the Asahi Kasei Group regard suppliers as important partners and work to build relationships with them based on sincerity in accordance with our Group Philosophy. To this end, we are placing greater emphasis on CSR in accordance with our Purchasing and Procurement Policy which was revised in ﬁ scal 2011. The Asahi Kasei Group Purchasing and Procurement Policy Basic Policy 1. Compliance We uphold all laws relevant to purchas- ing transactions as well as the Asahi Kasei Group’s internal regulations. 2. Fairness and impartiality We uphold all laws relevant to purchas- ing transactions as well as the Asahi Kasei Group’s internal regulations. 3. Open door principle We provide fair opportunities to any potential supplier, both domestic and overseas. 4. CSR-focused procurement We perform purchasing in close coordi- nation with our group-wide activities for CSR. 5. Partnership We strive to deepen mutual under- standing and build relationships of trust with our suppliers. Focus on CSR in purchasing and procurement In ﬁ scal 2014, the Asahi Kasei Group asked 160 major suppliers of materials and construction services to participate in a CSR sur- vey, and the response rate was 98%. This objective of the survey was to better understand our suppliers’ efforts to promote CSR, and identify any areas where improvement may be requested. Survey items covered included CSR promotion systems, compli- ance, environmental safety, risk management, product safety, human rights and labor, information security management, and intellectual property management. Survey results were scored on a scale, and feedback was given to suppliers including requests for improvement. Supplier relations at production sites Safety seminars are periodically held at our principal production sites to discuss accident prevention and exchange information with suppliers. Safety seminar in Moriyama, Shiga Public outreach We work to honor and respect the local culture of each community where our operations are based, and to maintain effective dialog and communication with community members. Openness to the community Measures for community dialog and interaction include regularly held forums and meetings with representatives of local govern- ments and members of local residents associations, and the host- ing a variety of events. We also offer plant tours to provide a better understanding of our operations and the measures we implement for the environment and safety. In the Nobeoka/ Hyuga region of Miyazaki, Japan, we constructed two evacuation towers to enable people to quickly reach a safe height in the event of a tsunami. The evacuation towers are available for use by nearby community members. Neighborhood clean-up (Kawasaki, Kanagawa) Local residents at a cherry blossom event (Suzuka, Mie) Community dialog meeting (Izunokuni, Shizuoka) Plant tour (Fuji, Shizuoka) Asahi Kasei Report 2015 55 Community fellowship The Asahi Kasei Group is involved in a wide range of community-focused activities in accordance with its Basic Framework focused on the three themes of Nurturing the Next Generation, Coexistence with the Environment, and Promotion of Culture, Art, and Sports, under our Community Fellowship Policy. The Community Fellowship Committee is organized under direct supervision of the holding company President. Its roles include formulation of overall policy, plans, and courses of action with regard to community fellowship activities in accordance with our Basic Framework. The Committee also monitors and reviews community fellowship activities at each site and at each afﬁ liated company of the Asahi Kasei Group. Community Fellowship Policy Effective utilization of our human resources and technologies to advance community fellowship based on the unique characteristics of the Asahi Kasei Group. Basic Framework Nurturing the Next Generation Striving for meaningful community fellowship actions with a constant awareness of our objectives and effectiveness. Coexistence with the Environment Supporting and nurturing participation in community fellowship by employees, encouraging volunteerism and individual initiative. Promotion of Culture, Art, and Sports 1 2 3 Community fellowship activities Nurturing the Next Generation To promote understanding and heighten interest in science and technology among elementary, junior high, and high school stu- dents, especially those near our production bases, we visit schools and host visits by students to factories to give explanations and demonstrations of science and technology and on environmental issues. We also support career development with occupational lec- tures and problem-solving training. In ﬁ scal 2014, a total of some 3,200 students of 97 schools participated. The Asahi Kasei Group provides sponsorship for chemistry experiment shows and other science-related events that give chil- dren an opportunity to learn about science and chemistry in a fun way. We also sponsor educational events organized by newspaper companies that provide opportunities for children to learn about sci- ence and the environment. Coexistence with the Environment In addition to our afforestation activities in Miyazaki and Shizuoka, Japan, since June 2011 we have participated in an afforestation project in the Horqin Desert of Inner Mongolia, China. In ﬁ s- cal 2014, trees were planted on April 12 and 13. Tree planting in China Disaster relief To support areas affected by the Great East Japan Earthquake, in September 2014 and March 2015 we participated in a Disaster Relief Market outside our Tokyo Head Ofﬁ ce building featuring pro- duce of Iwate, Miyagi, and Fukushima prefectures. This event was co-hosted by Mitsui Fudosan Building Management Co., Ltd. Science class (Nobeoka) Disaster Relief Market Science class (Fuji) Science class (Tokyo) Asahi Kasei Award presented at the Japan Student Science Awards 56 Asahi Kasei Report 2015 Promotion of Culture, Art, and Sports The Asahi Kasei Himuka Cultural Foundation was established in 1985 to enrich the environment of day-to-day life and culture in Miyazaki Prefecture, with a wide range of cultural activi- ties being held. We also con- tribute to community fellowship through our corpo- rate distance running and judo teams. Orchestra concert in Nobeoka (photo by Yukan Daily) Financial Section Contents 58 60 66 68 Consolidated Eleven-Year Summary Management’s Discussion and Analysis Risk Analysis Consolidated Financial Statements 68 Consolidated Balance Sheets 70 Consolidated Statements of Income 71 Consolidated Statements of Comprehensive Income 72 Consolidated Statements of Changes in Net Assets 73 Consolidated Statements of Cash Flows 74 Notes to Consolidated Financial Statements 74 1. Major policies for preparing the consolidated ﬁ nancial statements 74 2. Signiﬁ cant accounting policies 75 3. Changes in signiﬁ cant accounting policies 76 4. Notes to Consolidated Balance Sheets 77 5. Notes to Consolidated Statements of Income 79 6. Notes to Consolidated Statements of Comprehensive Income 79 7. Notes to Consolidated Statements of Changes in Net Assets 81 8. Note to Consolidated Statements of Cash Flows 81 9. Leases 81 10. Financial instruments 85 11. Marketable securities and investment securities 86 12. Derivative ﬁ nancial instruments 88 13. Provision for retirement beneﬁ ts 90 14. Taxes 91 15. Business Combinations 93 16. Asset retirement obligations 93 17. Business segment information 96 18. Information on related parties 97 19. Per share information 98 20. Additional information 98 21. Borrowings 99 Independent Auditor’s Report Asahi Kasei Report 2015 57 Consolidated Eleven-Year Summary Asahi Kasei Corporation and Consolidated Subsidiaries For the years ended March 31 Net salesb Chemicals & Fibers Chemicals Life & Living Fibers Homes & Construction Materials Homes Construction Materials Electronics Health Care Health Care Critical Care Others Domestic sales Overseas sales Operating income Ordinary income Income before income taxes Net income Comprehensive income Net income per share, yen Capital expenditure Depreciation and amortization R&D expenditures Cash dividends per share, yen As of March 31 Total assets Inventories Property, plant and equipment Investments and other assets Net worthc Net worth per share, yen Net worth/total assets, % Number of employees 2015a 2014 2013d 2012 2011e, f ¥1,986,405 ¥1,897,766 ¥1,666,640 ¥1,573,230 ¥1,555,945 954,623 824,288 — 130,335 603,786 551,817 51,969 150,388 257,133 146,485 110,648 20,476 912,505 791,615 — 120,890 589,380 534,377 55,003 144,995 232,387 152,546 79,840 18,499 — — — 684,582 680,112 699,801 — — — 109,613 110,849 108,761 — 486,182 51,504 131,148 — 133,450 52,131 18,031 — 451,965 46,146 146,113 — 119,483 — 18,562 — 409,224 47,418 158,337 — 116,387 — 16,017 1,313,128 1,289,054 1,181,429 1,151,705 1,106,656 673,277 157,933 166,543 158,440 105,652 214,484 75.62 89,108 86,058 75,540 19.00 2015 ¥2,014,531 339,677 502,507 334,368 1,082,654 775.05 53.7 30,313 608,712 143,347 142,865 163,860 101,296 146,102 72.48 92,397 86,052 71,101 17.00 485,211 91,960 95,125 82,302 53,712 117,515 38.43 113,785 80,050 71,120 14.00 421,525 104,258 107,567 94,866 55,766 62,561 39.89 85,124 78,440 66,269 14.00 449,289 122,927 118,219 98,342 60,288 45,088 43.11 66,014 84,092 62,320 11.00 2014 ¥1,915,089 2013 ¥1,800,170 2012 ¥1,410,568 2011 ¥1,425,879 328,540 480,535 285,735 912,699 653.15 47.7 29,127 309,677 461,581 263,704 812,080 581.05 45.1 28,363 279,206 416,119 227,489 706,846 505.72 50.1 25,409 256,248 418,354 220,773 663,566 474.59 46.5 25,016 a. Beginning with the year ended March 31, 2015, the former Chemicals segment and the former Fibers segment are combined as a new Chemicals & Fibers segment, the former Homes segment and the former Construction Materials segment are combined as a new Homes & Construction Materials segment, and the former Health Care segment and the former Critical Care segment are combined as a new Health Care segment. b. Beginning with the year ended March 31, 2014, the sequence of segments has been changed to correspond with the classiﬁ cation of our four business sectors: Chemicals & Fibers, Homes & Construction Materials, Electronics, and Health Care. c. Net assets less minority interests. Through the year ended March 31, 2006, ﬁ gures for shareholders’ equity shown. d. Beginning with the year ended March 31, 2013, Critical Care was added as a new segment in which results of ZOLL Medical Corporation of the US are reported. Critical Care segment results were included beginning on April 27, 2012. e. Beginning with the year ended March 31, 2012, the accounting policy for naphtha resale in the Chemicals segment was changed. This change is applied retroactively to net sales for the years ended March 31, 2008, through March 31, 2011. f. In the year ended March 31, 2011, the Services, Engineering and Others segment was replaced with the Others category. 58 Asahi Kasei Report 2015 2010e, g 2009e, g 2009e 2008e, h 2007 2006i 2005 ¥1,392,212 ¥1,521,178 ¥1,521,178 ¥1,663,778 ¥1,623,791 ¥1,498,620 ¥1,377,697 Millions of yen, except where noted — — — — 580,709 657,393 709,556 846,224 — — — — 101,201 116,405 102,176 114,072 — 389,728 47,024 142,700 — 113,207 — 17,642 — 409,882 60,927 129,655 — 119,619 — 27,297 — 409,882 60,927 91,721 — 119,619 — 27,297 — 386,227 55,732 113,267 — 111,232 — 37,024 — 752,632 52,558 106,639 — 405,695 60,818 112,094 — 104,474 — 28,881 — 660,402 51,942 89,704 — 404,539 56,512 102,859 — 105,842 — 26,821 — 557,439 59,149 104,261 — 375,755 59,908 93,025 — 103,933 — 24,228 1,021,803 1,127,213 1,127,213 1,176,441 1,195,751 1,125,454 1,067,893 370,409 393,965 393,965 57,622 56,367 46,056 25,286 — 18.08 83,990 86,166 62,924 10.00 34,959 32,500 19,031 4,745 — 3.39 34,959 32,500 19,031 4,745 — 3.39 126,725 126,725 79,436 60,849 10.00 79,436 60,849 10.00 487,337 127,656 120,456 105,599 69,945 — 50.01 82,911 73,983 56,170 13.00 428,040 127,801 126,507 114,883 68,575 — 49.00 84,413 71,646 52,426 12.00 373,166 108,726 104,166 94,481 59,668 — 42.46 66,310 69,399 51,467 10.00 309,804 115,809 112,876 91,141 56,454 — 40.16 68,479 71,531 50,715 8.00 2010 ¥1,368,892 2009 ¥1,379,337 2009 ¥1,379,337 2008 ¥1,425,367 2007 ¥1,459,922 2006 ¥1,376,044 2005 ¥1,270,057 251,084 447,497 226,331 633,343 452.91 46.3 25,085 273,539 441,271 218,477 603,846 431.77 43.8 24,244 273,539 441,271 218,477 603,846 431.77 43.8 24,244 272,372 424,193 234,873 666,244 476.39 46.7 23,854 240,006 426,959 281,502 645,655 461.50 44.2 23,715 214,062 414,368 284,390 594,211 424.34 43.2 23,030 202,521 419,969 223,958 511,726 365.43 40.3 23,820 g. In the year ended March 31, 2010, the following segment name changes and intersegment transfers were made. For comparison purposes, results for the year ended March 31, 2009, are recalculated to reﬂ ect these intersegment transfers. (cid:129) The Pharma segment was renamed the Health Care segment, and the Electronics Materials & Devices segment was renamed the Electronics segment. Figures under the previous classiﬁ cations are shown on the same line. (cid:129) Electronic materials operations were transferred from the Chemicals segment and from corporate expenses to the Electronics segment. (cid:129) Leona™ nylon 66 ﬁ lament operations were transferred from the Chemicals segment to the Fibers segment. h. In the year ended March 31, 2008, the Life & Living segment was combined with the Chemicals segment. i. In the year ended March 31, 2006, Leona™ nylon 66 ﬁ lament operations were transferred from the Fibers segment to the Chemicals segment. Asahi Kasei Report 2015 59 Management’s Discussion and Analysis Fiscal year 2014 (April 1, 2014 – March 31, 2015) Operating Environment Non-operating income and expenses, ordinary income Net non-operating income was ¥8.6 billion, a ¥9.1 billion Although the US economy continued to recover and there improvement from the ¥0.5 billion net non-operating were signs of improvement in Europe during ﬁ scal 2014, expenses of a year earlier. Foreign exchange gains increased, slower growth was seen in China and other emerging and equity in losses of afﬁ liates transitioned to equity in countries, while the global economy faced heightened earnings of afﬁ liates. As a result, ordinary income increased by geopolitical risks due to political instability in certain regions. ¥23.7 billion (16.6%) to ¥166.5 billion. As for the Japanese economy, consumer spending softened during the early part of the ﬁ scal year due to the effect of the consumption tax increase, but in the latter part of the ﬁ scal Extraordinary income and loss Extraordinary loss of ¥11.2 billion included ¥4.7 billion in loss year the Japanese economy continued on a path of gradual on disposal of noncurrent assets, ¥4.0 billion in business recovery with the weaker yen and lower oil prices leading to structure improvement expenses, and ¥1.3 billion in impairment improved corporate performance. loss. The net extraordinary loss of ¥8.1 billion was a ¥29.1 billion decline from a year ago. Overview of Consolidated Results Net sales, operating income Consolidated net sales for the ﬁ scal year increased by ¥88.6 Net income With ordinary income of ¥166.5 billion and net extraordinary loss of ¥8.1 billion, income before income taxes and minority billion (4.7%) to ¥1,986.4 billion. Overseas sales increased by interests was ¥158.4 billion. Income tax expense was ¥51.5 ¥64.6 billion (10.6%) to ¥673.3 billion, largely in the Health billion (current income taxes of ¥44.1 billion combined with Care segment, and increased by 1.8 percentage points as a deferred income tax obligation of ¥7.5 billion). Minority a portion of consolidated net sales from 32.1% to 33.9%. interests in income of consolidated subsidiaries were ¥1.2 Domestic sales increased by ¥24.1 billion (1.9%) to ¥1,313.1 billion. As a result, net income increased by ¥4.4 billion (4.3%) billion with strong performance in the Chemicals & Fibers to ¥105.7 billion, and net income per share increased by segment. ¥3.14 to ¥75.62 from the ¥72.48 of the previous year. Operating income increased by ¥14.6 billion (10.2%) to ¥157.9 billion. As a percentage of net sales, cost of sales decreased by 0.6 percentage points to 72.5%. SG&A increased by ¥20.4 billion, increasing as a portion of net sales by 0.2 percentage points to 19.6% despite the increase in net sales. Operating margin increased by 0.4 percentage points to 8.0%. Net Sales, Overseas Sales Ratio Operating Income, Operating Margin SG&A, SG&A Ratio Net Income, Net Income per Share (¥ billion) 2,000 (%) (¥ billion) 40 160 (%) (¥ billion) 16 400 (%) (¥ billion) 40 120 1,500 1,000 500 0 30 120 12 300 30 90 20 80 8 200 20 60 10 40 4 100 10 30 ’10 ’11 ’12 ’13 ’14 0 0 FY ’10 ’11 ’12 ’13 ’14 0 0 FY ’10 ’11 ’12 ’13 ’14 0 0 FY ’10 ’11 ’12 ’13 ’14 Net sales (left scale) Operating income (left scale) SG&A (left scale) Net income (left scale) Overseas sales ratio (right scale) Operating margin (right scale) SG&A ratio (right scale) Net income per share (right scale) 60 Asahi Kasei Report 2015 (¥) 100 75 50 25 0 FY Results by Operating Segment Bemberg™ cupro ﬁ ber was impacted by increased depreciation expenses for a new production facility, but ﬁ bers Beginning with the ﬁ rst quarter of ﬁ scal 2014, the Asahi Kasei operations beneﬁ tted from the weaker yen, and sales of Group’s previous seven reportable segments of Chemicals, Bemliese™ continuous-ﬁ lament cellulose nonwoven for facial Fibers, Homes, Construction Materials, Electronics, Health masks etc., of Lamous™ artiﬁ cial suede for automotive interiors, Care, and Critical Care, together with an “Others” category, and of Roica™ elastic polyurethane ﬁ lament were ﬁ rm. have been changed to the four reportable segments of Chemicals & Fibers, Homes & Construction Materials, Electronics, and Health Care, together with an “Others” Homes & Construction Materials Sales increased by ¥14.4 billion (2.4%) from a year ago to category, in accordance with a change in the governance ¥603.8 billion, and operating income decreased by ¥5.5 billion conﬁ guration. The ﬁ gures for the previous ﬁ scal year have (8.0%) to ¥63.0 billion. been recalculated in accordance with the new segment Among homes operations, in order-built homes, conﬁ guration for comparison purposes. Chemicals & Fibers Sales increased by ¥42.1 billion (4.6%) from a year ago to deliveries increased mainly for Hebel Maison™ apartment buildings based on strong orders in the previous ﬁ scal year, but the cost of materials rose and selling, general and administrative expenses increased with higher costs for sales ¥954.6 billion, and operating income increased by ¥17.2 promotion. In real estate, management of rental units was billion (36.2%) to ¥64.6 billion. ﬁ rm. In remodeling, orders decreased in reaction to the surge Among chemicals operations, in petrochemicals, market in demand prior to the consumption tax increase. prices for styrene declined, but the strengthening of In construction materials operations, shipments of petrochemical operations in Japan had a positive effect on Hebel™ autoclaved aerated concrete (AAC) panels increased, performance, and terms of trade for acrylonitrile improved but shipments of Neoma™ high-performance phenolic foam substantially due to ﬁ rm market prices and lower feedstock panels decreased as an effect of the consumption tax increase costs. Performance polymers beneﬁ tted from the weaker yen and the business was impacted by increased depreciation and sales of engineering plastics were ﬁ rm, but synthetic expenses for a new production line. rubber was impacted by low market prices for general- purpose products. In specialty products, sales of ion-exchange membranes were ﬁ rm, but Saran Wrap™ cling ﬁ lm and other consumables were impacted by the consumption tax increase. Chemicals business operating income increases/decreases Fibers business operating income increases/decreases Homes business operating income increases/decreases (¥ billion) (¥ billion) (¥ billion) Operating costs and others +16.9 54.2 Sales volume +0.4 38.9 Foreign exchange2 +24.3 60 45 30 15 Sales prices1 -26.3 0 ’13 1 Excluding impact of foreign exchange 2 Impact of foreign exchange on sales prices Sales prices1 +1.0 Sales volume +1.6 8.6 Foreign exchange2 +2.0 10.5 Operating costs and others -2.7 15 12 9 6 3 0 Sales prices +11.6 Sales volume +0.8 63.0 59.2 Operating costs and others -16.2 80 60 40 20 0 ’13 ’14 FY ’14 FY ’13 ’14 FY Note: Operating income increases/decreases are shown by business categories corresponding to the former operating segments. Asahi Kasei Report 2015 61 Electronics Sales increased by ¥5.4 billion (3.7%) from a year ago to In medical devices operations, overseas sales of dialysis products and of therapeutic apheresis devices were ﬁ rm and ¥150.4 billion, and operating income increased by ¥0.1 billion shipments of Planova™ virus removal ﬁ lters increased, while (0.4%) to ¥14.3 billion. the weaker yen contributed to performance. Electronic devices operations beneﬁ tted from the weaker In critical care operations, the LifeVest™ wearable yen and shipments of electronic devices for smartphones deﬁ brillator business continues to expand smoothly, and sales increased, but cost of goods sold increased due to a devaluation of other products such as deﬁ brillators and related accessories of inventories in relation to structural improvement of increased, but selling, general and administrative expenses the power management device business continuing from grew with reinforced sales activity. ﬁ scal 2013. Electronic materials operations beneﬁ tted from the weaker yen and sales of high-end products in each product Others Sales in “Others” increased by ¥2.0 billion (10.7%) from category increased, but sales prices decreased mainly for a year ago to ¥20.5 billion, and operating income decreased Hipore™ Li-ion battery separator. by ¥0.8 billion (45.6%) to ¥0.9 billion. Health Care Sales increased by ¥24.7 billion (10.6%) from a year ago to ¥257.1 billion, and operating income increased by ¥4.1 billion (15.3%) to ¥30.8 billion. In pharmaceuticals operations, pharmaceutical products excluding new drugs were impacted by reduced reimbursement prices, and shipments of Teribone™ osteoporosis drug decreased in reaction to the surge in demand prior to the consumption tax increase. Construction Materials business operating income increases/decreases Electronics business operating income increases/decreases Health Care business operating income increases/decreases Sales prices +0.6 Sales volume -0.9 4.1 Operating costs and others -1.1 (¥ billion) 6 5.5 5 4 3 2 1 0 (¥ billion) 25 (¥ billion) 35 30.3 Sales volume -1.8 Operating costs and others +1.7 Foreign exchange2 +1.8 26.7 Sales prices1 -5.2 Sales volume +5.9 14.2 Operating costs and others +0.9 Foreign exchange2 +6.9 14.3 Sales prices1 -13.6 20 15 10 5 0 30 25 20 15 10 5 0 ’13 ’14 FY ’13 ’14 FY ’13 ’14 FY 1 Excluding impact of foreign exchange 2 Impact of foreign exchange on sales prices Note: Operating income increases/decreases are shown by business categories corresponding to the former operating segments. 62 Asahi Kasei Report 2015 Liquidity and Capital Resources Interest-bearing debt decreased by ¥34.9 billion (11.5%) to ¥269.0 billion. Financial position Total assets at ﬁ scal year end were ¥2,014.5 billion, ¥99.4 billion (5.2%) higher than a year earlier. Net assets increased by ¥172.0 billion (18.6%) from ¥925.8 billion to ¥1,097.7 billion. Net income was ¥105.7 billion, foreign currency translation adjustments increased by Current assets increased by ¥1.2 billion (0.1%) to ¥891.6 ¥52.8 billion, and net unrealized gain on other securities billion, mainly as inventories increased by ¥11.1 billion and increased by ¥37.9 billion, while dividend payments were notes and accounts receivable–trade increased by ¥8.9 billion, ¥26.5 billion. As a result, net worth per share increased by while cash and deposits decreased by ¥27.7 billion, ¥121.91 to ¥775.05, net worth/total assets increased from Noncurrent assets increased by ¥98.3 billion (9.6%) to 47.7% to 53.7%, and debt-to-equity ratio decreased by 0.08 ¥1,123.0 billion, notably with a ¥51.0 billion increase in points to 0.25. investment securities largely due to higher fair market value and a ¥27.7 billion increase in property, plant and equipment. Current liabilities decreased by ¥69.3 billion (12.0%) to ¥507.4 billion, mainly as a result of a ¥38.3 billion decrease in income taxes payable and a ¥10.0 billion decrease in commercial paper. Although deferred tax liabilities increased by ¥14.5 billion, noncurrent liabilities decreased by ¥3.2 billion (0.8%) to ¥409.4 billion with a ¥15.6 billion decrease in long-term loans payable. Critical Care business operating income increases/decreases Others operating income increases/decreases Foreign exchange2 -0.4 4.1 Operating costs and others -8.9 (¥ billion) 2.0 Sales volume +0.1 1.7 1.5 1.0 0.5 0.9 Operating costs and others -0.9 (¥ billion) 15 Sales volume +16.6 Sales prices1 +0.3 10 5 0 (5) -3.5 ’13 Total Assets, Net Worth (¥ billion) 2,500 2,000 1,500 1,000 500 0 ’14 FY 0 ’13 1 Excluding impact of foreign exchange 2 Impact of foreign exchange on sales prices ’14 FY ’10 ’11 ’12 ’13 ’14 FY Total assets Net worth Note: Operating income increases/decreases are shown by business categories corresponding to the former operating segments. Asahi Kasei Report 2015 63 Capital expenditure Notable capex by operating segment was as follows. Capital expenditure (capex) was primarily for new and expanded production plant and equipment in long-term Chemicals & Fibers Construction of new line for solution-polymerized styrene- growth ﬁ elds. Investments were also made for rationalization, butadiene rubber (S-SBR), construction of new plant for labor-saving, maintenance, and IT systems to bring greater polycarbonatediol (PCD) construction of new production product reliability and cost reductions. facility for Bemberg™, rationalization, labor-saving, and Capex by operating segment shown below is for maintenance. property, plant and equipment and intangible assets (other than goodwill), combined, excluding consumption tax. A total of ¥89.1 billion was invested during the ﬁ scal year for the expansion of businesses with competitive superiority, particularly in the Chemicals & Fibers segment, as well as for modiﬁ cation and rationalization. Totals for the year (¥ million) Compared to previous year (%) Chemicals & Fibers Homes & Construction Materials Electronics Health Care Others Combined 41,718 10,864 11,600 16,595 1,389 82,165 Corporate assets and eliminations 6,943 Consolidated 89,108 107.6 72.2 79.5 91.4 99.6 93.4 155.4 96.4 Homes & Construction Materials Rationalization, labor-saving, and maintenance. Electronics Rationalization, labor-saving, and maintenance. Health Care Rationalization, labor-saving, and maintenance. Others Rationalization, labor-saving, and maintenance. Corporate assets R&D equipment, IT systems, and maintenance. Net Worth to Total Assets Interest-Bearing Debt, D/E Ratio Capex, Depreciation and Amortization (%) 60 50 40 30 20 10 0 (¥ billion) 400 (¥ billion) 0.8 120 300 200 100 0 ’10 ’11 ’12 ’13 ’14 FY ’10 ’11 ’12 ’13 ’14 0.6 0.4 0.2 0.0 FY 90 60 30 0 ’10 ’11 ’12 ’13 ’14 FY Interest-bearing debt (left scale) Capex D/E ratio (right scale) Depreciation and amortization 64 Asahi Kasei Report 2015 Cash ﬂ ows Cash ﬂ ows from ﬁ nancing activities Cash used included ¥44.4 billion to reduce loans payable, Free cash ﬂ ows* were a positive ¥37.1 billion, as cash bonds payable, and commercial paper and ¥26.5 billion for generated, principally from income before income taxes and dividend payments. Net cash used in ﬁ nancing activities was minority interests and from depreciation and amortization, ¥74.0 billion, ¥31.1 billion less than a year earlier. exceeded cash used, principally for purchase of property, plant and equipment, purchase of intangible assets, and purchase of investment securities. Cash ﬂ ows from ﬁ nancing activities were a net ¥74.0 billion used, principally due to a decrease in short-term loans payable. As a result, cash and cash equivalents at ﬁ scal year end were ¥112.3 billion, ¥30.8 billion less than a year earlier. * Total of net cash provided by (used in) operating activities and net cash provided by (used in) investment activities. Financial Policy We aim to increase free cash ﬂ ows with increased earnings through enhanced cost efﬁ ciency, greater product Cash ﬂ ows from operating activities Cash used included ¥85.4 billion for income taxes paid and a competitiveness, and business structure improvements, and with greater capital efﬁ ciency through utilization of group ¥13.6 billion decrease in notes and accounts payable–trade. ﬁ nance and maintenance of optimum inventory levels. Income before income taxes and minority interests generated A wide range of fund-raising methods including bank ¥158.4 billion and depreciation and amortization generated borrowings, bonds, and commercial paper will be utilized ¥86.1 billion. Net cash provided by operating activities was dynamically in accordance with the ﬁ nancial circumstances of ¥137.6 billion, ¥106.6 billion less than a year earlier. the Asahi Kasei Group in order to obtain stable ﬁ nancing at low cost. Cash ﬂ ows from investing activities Cash used included ¥83.0 billion for purchase of property, These resources will be used to fund strategic investments under the “For Tomorrow 2015” strategic plant and equipment for continuing expansion of management initiative focused on the expansion of world- competitively superior operations and enhancement of overall leading businesses and the creation of new value for society competitiveness and ¥10.7 billion for purchase of intangible by expanding operations in the ﬁ elds of the Environment & assets. Net cash used in investing activities was ¥100.5 billion, Energy, Residential Living, and Health Care, as well as ¥3.3 billion less than a year earlier. dividends for shareholders. Advancing these measures will enable us to further enhance corporate value and provide an appropriate return to shareholders while maintaining discipline for a sound ﬁ nancial constitution. Free Cash Flows (¥ billion) Cash Flows (¥ billion) 160 120 80 40 0 (40) (80) (120) (160) 300 200 100 0 (100) (200) (300) ’10 ’11 ’12 ’13 ’14 FY ’10 ’11 ’12 ’13 ’14 FY Net cash provided by operating activities Net cash used in investing activities Net cash provided by (used in) financing activities Asahi Kasei Report 2015 65 Risk Analysis Operating risks and non-operating risks which may materially inﬂ uence investor decisions are described below. The management maintains awareness of the possibility that these scenarios may emerge and, to the fullest possible extent, implements measures to avoid their emergence and to minimize their impact on corporate performance in the event that they do emerge. The description of risks given here includes elements which may emerge in the future, but as it is based on current evaluations at the time of preparation of this report, it does not include risks which could not be foreseen. Crude oil and naphtha prices Housing-related tax policy, interest rate ﬂ uctuation Operating costs in operations based on petrochemicals are Operations in the homes business are affected by Japanese affected by prices for crude oil and naphtha. If crude oil tax policies as they relate to home acquisition and by and naphtha prices rise, selling prices for products derived ﬂ uctuations in Japanese interest rates. Changes in Japanese from these feedstocks must be increased in a timely tax policy, including consumption taxes, or ﬂ uctuations in manner to maintain sufﬁ cient price spreads. Price spreads Japanese interest rates may result in diminished housing may diminish, thereby affecting our consolidated demand, thereby affecting our consolidated performance performance and ﬁ nancial condition. and ﬁ nancial condition. Exchange rate ﬂ uctuation Proﬁ tability of electronics-related businesses Operations based overseas maintain accounts in the local The electronics industry is characterized by sharp market currency where they operate. The yen value of items cycles. The proﬁ tability of electronics-related businesses carried in these accounts is affected by the rate of may decline signiﬁ cantly in a relatively short time, thereby exchange at the time of conversion to yen. Although affecting our consolidated performance and ﬁ nancial measures such as currency exchange hedges are utilized to condition. Because products in this ﬁ eld rapidly become minimize the short-term effects of exchange rate obsolete, the timely development and commercialization of ﬂ uctuations, such ﬂ uctuations may exceed the foreseeable leading-edge devices and materials is required. New range over the short to long term, thereby affecting our product development may be delayed, or demand consolidated performance and ﬁ nancial condition. ﬂ uctuations may exceed expectations, thereby affecting our consolidated performance and ﬁ nancial condition. Overseas operations Pharmaceutical, medical device, and acute critical care Overseas operations may face a variety of risks which device businesses cannot be foreseen, including the existence or emergence of economically unfavorable circumstances due to legal Pharmaceutical, medical device, and acute critical care and regulatory changes, vulnerability of infrastructure, device businesses may be signiﬁ cantly affected by difﬁ culty in hiring/retaining qualiﬁ ed employees, or other government measures regarding health care or other factors, and social or political instability due to terrorism, changes in government policy in various countries. war, or other factors. Overseas operations may be impaired Unforeseeable side effects or complications may emerge, by such scenarios, thereby affecting our consolidated signiﬁ cantly affecting these businesses. Product approval performance and business plans. may be withdrawn as a result of reexamination, and 66 Asahi Kasei Report 2015 competition may intensify as a result of the market entry of Business and capital alliances generics. For products under development, regulatory approval may be prolonged or fail to be obtained, market Acquisitions, business alliances, and capital alliances may demand may be lower than expected, and reimbursement bear lower results or less synergy than anticipated due to prices may be lower than expected. Such scenarios may deterioration of the operating environment, thereby affect our consolidated performance and ﬁ nancial affecting our consolidated performance and ﬁ nancial condition. condition. Poor performance at companies in which we have invested may require the recording of an impairment loss for goodwill, etc., thereby affecting our consolidated Industrial accidents and natural disasters performance and ﬁ nancial condition. The occurrence of a signiﬁ cant industrial accident or natural disaster at a plant or elsewhere may result in a loss of public trust, the emergence of costs associated with accident response, including compensation, and opportunity loss due to plant shutdown caused by damage to plant facilities, supply chain disruptions which impede raw materials procurement, etc., thereby affecting our consolidated performance and ﬁ nancial condition. Intellectual property, product liability, and legal regulation An unfavorable ruling may emerge in a dispute relating to intellectual property, a product defect resulting in a large- scale recall and compensation whose costs exceed insurance coverage may emerge, and detrimental legal and regulatory changes may emerge in any country where we operate. Such scenarios may affect our consolidated performance and ﬁ nancial condition. Irrecoverable credits Credits extended to customers may become irrecoverable to an unforeseeable extent, necessitating additional losses or allowances to be recorded in ﬁ nancial accounts, and thereby affecting our consolidated performance and ﬁ nancial condition. Asahi Kasei Report 2015 67 Consolidated Financial Statements Consolidated Balance Sheets Asahi Kasei Corporation and Consolidated Subsidiaries March 31, 2015 and 2014 ASSETS Current assets: Cash and deposits (Notes 8 and 10) Notes and accounts receivable—trade Short-term investment securities (Notes 8, 10 and 11) Merchandise and ﬁ nished goods Work in progress Raw materials and supplies Deferred tax assets (Note 14) Other Allowance for doubtful accounts Total current assets Noncurrent assets: Property, plant and equipment Buildings and structures (Note 4(b), (d)) Accumulated depreciation Buildings and structures, net Machinery, equipment and vehicles (Note 4(b), (d)) Accumulated depreciation Machinery, equipment and vehicles, net Land (Note 4(d)) Lease assets (Note 9) Accumulated depreciation Lease assets, net Construction in progress Other (Note 4(d)) Accumulated depreciation Other, net Subtotal Intangible assets Goodwill (Note 15(d)) Other Subtotal Investments and other assets Millions of yen Thousands of U.S. dollars (Note 1) 2015 2014 2015 ¥123,821 325,568 1,802 161,554 112,813 65,311 21,707 80,520 (1,517) 891,579 ¥151,474 316,705 — 151,156 112,243 65,141 27,469 68,106 (1,894) 890,401 471,033 (261,352) 209,681 453,498 (250,633) 202,866 1,345,790 1,290,526 (1,170,771) (1,127,452) 175,019 59,287 13,054 (10,232) 2,822 37,566 143,593 (125,461) 18,133 502,507 163,074 58,067 13,567 (9,095) 4,472 35,216 137,897 (121,056) 16,841 480,535 $1,030,553 2,709,680 14,998 1,344,603 938,935 543,579 180,666 670,162 (12,626) 7,420,549 3,920,375 (2,175,214) 1,745,160 11,200,916 (9,744,245) 1,456,671 493,442 108,648 (85,160) 23,487 312,659 1,195,114 (1,044,203) 150,920 4,182,330 153,835 132,241 286,076 137,679 120,740 258,419 1,280,358 1,100,633 2,380,990 Investment securities (Notes 4(a), (b), 10 and 11) 289,393 238,419 2,408,598 Long-term loans receivable (Note 10) Net deﬁ ned beneﬁ t asset (Note 13) Deferred tax assets (Note 14) Other Allowance for doubtful accounts Subtotal 9,952 2,929 11,351 21,016 (273) 334,368 9,173 2,369 16,278 19,751 (256) 285,735 82,830 24,378 94,474 174,915 (2,272) 2,782,921 Total noncurrent assets 1,122,952 1,024,689 9,346,251 Total assets The accompanying notes are an integral part of these statements. 68 Asahi Kasei Report 2015 ¥2,014,531 ¥1,915,089 $16,766,800 LIABILITIES AND NET ASSETS Liabilities: Current liabilities: Notes and accounts payable—trade (Note 10) Short-term loans payable (Notes 4(b), 10 and 21) Commercial paper (Notes 10 and 21) Lease obligations (Notes 9, 10 and 21) Accrued expenses Income taxes payable (Note 10) Advances received Provision for periodic repairs Provision for product warranties Provision for removal cost of property, plant and equipment Asset retirement obligations (Note 16) Other Total current liabilities Noncurrent liabilities: Bonds payable (Notes 10 and 21) Long-term loans payable (Notes 4(b), 10 and 21) Lease obligations (Notes 9, 10 and 21) Deferred tax liabilities (Note 14) Provision for directors’ retirement beneﬁ ts Provision for periodic repairs Provision for removal cost of property, plant and equipment Net deﬁ ned beneﬁ t liability (Note 13) Asset retirement obligations (Note 16) Long-term guarantee deposits (Note 10) Other Total noncurrent liabilities Total liabilities Net assets: Shareholders’ equity Capital stock Authorized—4,000,000,000 shares Issued and outstanding—1,402,616,332 shares Capital surplus Retained earnings (Note 7(b)(ii)) Treasury stock (2015—5,742,862 shares, 2014—5,230,736 shares) Total shareholders’ equity Accumulated other comprehensive income Net unrealized gain on other securities Deferred gains or losses on hedges Foreign currency translation adjustments Remeasurements of deﬁ ned beneﬁ t plans Total accumulated other comprehensive income Minority interests Total net assets Commitments and contingent liabilities (Notes 4(c) and 9) Millions of yen Thousands of U.S. dollars (Note 1) 2015 2014 2015 ¥151,867 96,015 — 1,383 101,164 10,203 74,675 2,396 2,562 2,832 533 63,817 507,449 40,000 130,400 1,219 57,943 — 1,248 7,865 142,035 3,506 19,146 5,998 409,360 916,809 103,389 79,408 699,259 (3,041) 879,014 113,562 (1,697) 99,531 (7,757) 203,639 15,068 1,097,722 ¥159,925 103,605 $1,263,978 799,126 10,000 1,784 93,313 48,520 80,164 7,964 2,503 2,893 806 65,305 576,782 40,000 146,037 2,445 43,441 818 173 9,526 143,523 3,244 18,899 4,434 412,541 989,323 103,389 79,404 635,403 (2,591) 815,605 75,626 (171) 46,734 (25,094) 97,095 13,067 925,766 — 11,511 841,981 84,919 621,515 19,942 21,323 23,571 4,436 531,144 4,223,462 332,917 1,085,310 10,146 482,256 — 10,387 65,460 1,182,147 29,180 159,351 49,921 3,407,074 7,630,537 860,499 660,907 5,819,883 (25,310) 7,315,972 945,169 (14,124) 828,390 (64,561) 1,694,873 125,410 9,136,263 Total liabilities and net assets ¥2,014,531 ¥1,915,089 $16,766,800 The accompanying notes are an integral part of these statements. Asahi Kasei Report 2015 69 Millions of yen Thousands of U.S. dollars (Note 1) 2015 2014 2015 ¥1,986,405 ¥1,897,766 $16,532,709 1,439,344 1,385,704 11,979,559 547,061 389,128 157,933 1,389 3,923 1,738 5,197 5,041 17,288 3,056 — 1,168 869 3,586 8,678 166,543 2,756 382 — 3,137 112 1,136 4,728 1,255 4,010 — 11,241 158,440 44,059 7,483 51,542 106,898 1,246 512,062 368,715 143,347 1,183 3,681 — 425 5,288 10,578 3,375 1,756 1,366 1,075 3,488 11,060 142,865 330 1,672 53,532 55,534 — 1,223 5,575 441 22,546 4,753 34,539 4,553,150 3,238,685 1,314,465 11,561 32,651 14,465 43,254 41,956 143,887 25,435 — 9,721 7,233 29,846 72,226 1,386,126 22,938 3,179 — 26,109 932 9,455 39,351 10,445 33,375 — 93,558 163,860 1,318,685 68,166 (6,399) 61,767 102,093 796 366,700 62,280 428,980 889,705 10,370 ¥105,652 ¥101,296 $879,334 Consolidated Statements of Income Asahi Kasei Corporation and Consolidated Subsidiaries Years Ended March 31, 2015 and 2014 Net sales (Note 17) Cost of sales (Note 5(b)) Gross proﬁ t Selling, general and administrative expenses (Note 5(a)) Operating income (Note 17) Non-operating income: Interest income Dividends income Equity in earnings of afﬁ liates Foreign exchange gains Other Total non-operating income Non-operating expenses: Interest expense Equity in losses of afﬁ liates Costs associated with idle portion of facilities Donations Other Total non-operating expenses Ordinary income Extraordinary income: Gain on sales of investment securities Gain on sales of noncurrent assets (Note 5(c)) Income from compensation for damage (Note 5(d)) Total extraordinary income Extraordinary loss: Loss on sales of investment securities Loss on valuation of investment securities Loss on disposal of noncurrent assets (Note 5(e)) Impairment losses (Note 5(f)) Business structure improvement expenses (Note 5(f), (g)) Loss on discontinuation of development project (Note 5(f), (h)) Total extraordinary loss Income before income taxes and minority interests Income taxes (Note 14) — current — deferred Total income taxes Income before minority interests Minority interests in income Net income The accompanying notes are an integral part of these statements. 70 Asahi Kasei Report 2015 Consolidated Statements of Comprehensive Income Asahi Kasei Corporation and Consolidated Subsidiaries Years Ended March 31, 2015 and 2014 Income before minority interests Other comprehensive income Net increase in unrealized gain on other securities Deferred gains or losses on hedges Foreign currency translation adjustment Remeasurements of deﬁ ned beneﬁ t plans Share of other comprehensive income of afﬁ liates accounted for using equity method Total other comprehensive income (Note 6) Comprehensive income Comprehensive income attributable to: Owners of the Parent Minority interests The accompanying notes are an integral part of these statements. Millions of yen 2015 2014 ¥106,898 ¥102,093 Thousands of U.S. dollars (Note 1) 2015 $889,705 37,947 (1,526) 48,945 17,096 5,125 107,587 214,484 212,159 ¥2,326 12,952 729 29,095 — 1,233 44,009 146,102 144,956 ¥1,145 315,830 (12,701) 407,366 142,289 42,655 895,439 1,785,135 1,765,784 $19,359 Asahi Kasei Report 2015 71 Consolidated Statements of Changes in Net Assets Asahi Kasei Corporation and Consolidated Subsidiaries Years Ended March 31, 2015 and 2014 Shareholders’ equity Accumulated other comprehensive income Millions of yen Capital stock Capital surplus Retained earnings (Note 7(b)) Treasury stock Total shareholders’ equity Net unrealized gain on other securities Deferred gains or losses on hedges Foreign currency translation adjustment Remeasure- ments of deﬁ ned beneﬁ t plans Total accumulated other comprehensive income Minority interests Total net assets Balance at March 31, 2014 ¥103,389 ¥79,404 ¥635,403 ¥(2,591) ¥815,605 ¥75,626 ¥(171) ¥46,734 ¥(25,094) ¥97,095 ¥13,067 ¥925,766 Cumulative effect of changes in accounting policies (15,741) (15,741) (15,741) Restated balance 103,389 79,404 619,662 (2,591) 799,863 75,626 (171) 46,734 (25,094) 97,095 13,067 910,025 Changes during the ﬁ scal year Dividends from surplus Net income Purchase of treasury stock Disposal of treasury stock Change of scope of consolidation Change of scope of equity method Net changes of items other than shareholders’ equity Total changes of items during the period (26,547) 105,652 (26,547) 105,652 (455) (455) 3 5 296 197 8 296 197 (26,547) 105,652 (455) 8 296 197 — 3 79,597 (450) 79,151 37,937 (1,526) 52,797 17,338 106,545 2,002 187,697 37,937 (1,526) 52,797 17,338 106,545 2,002 108,546 Balance at March 31, 2015 ¥103,389 ¥79,408 ¥699,259 ¥(3,041) ¥879,014 ¥113,562 ¥(1,697) ¥99,531 ¥(7,757) ¥203,639 ¥15,068 ¥1,097,722 Shareholders’ equity Accumulated other comprehensive income Millions of yen Capital stock Capital surplus Retained earnings (Note 7(b)) Treasury stock Total shareholders’ equity Net unrealized gain on other securities Deferred gains or losses on hedges Foreign currency translation adjustment Remeasure- ments of deﬁ ned beneﬁ t plans Total accumulated other comprehensive income Minority interests Total net assets Balance at March 31, 2013 ¥103,389 ¥79,403 ¥553,557 ¥(2,431) ¥733,918 ¥62,622 ¥(900) ¥16,440 ¥— ¥78,162 ¥12,371 ¥824,451 Cumulative effect of changes in accounting policies — — Restated balance 103,389 79,403 553,557 (2,431) 733,918 62,622 (900) 16,440 — 78,162 12,371 824,451 Changes during the ﬁ scal year Dividends from surplus Net income Purchase of treasury stock Disposal of treasury stock Change of scope of consolidation Change of scope of equity method Net changes of items other than shareholders’ equity Total changes of items during the period (19,566) 101,296 (19,566) 101,296 (162) (162) 1 2 1,323 (1,208) 3 1,323 (1,208) (19,566) 101,296 (162) 3 1,323 (1,208) — 1 81,845 (160) 81,687 13,004 729 30,294 (25,094) 18,932 696 101,315 13,004 729 30,294 (25,094) 18,932 696 19,628 Balance at March 31, 2014 ¥103,389 ¥79,404 ¥635,403 ¥(2,591) ¥815,605 ¥75,626 ¥(171) ¥46,734 ¥(25,094) ¥97,095 ¥13,067 ¥925,766 Shareholders’ equity Accumulated other comprehensive income Thousands of U.S. dollars (Note 1) Capital stock Capital surplus Retained earnings (Note 7(b)) Treasury stock Total shareholders’ equity Net unrealized gain on other securities Deferred gains or losses on hedges Foreign currency translation adjustment Remeasure- ments of deﬁ ned beneﬁ t plans Total accumulated other comprehensive income Minority interests Total net assets Balance at March 31, 2014 $860,499 $660,874 $5,288,414 $(21,565) $6,788,223 $629,430 $(1,423) $388,964 $(208,856) $808,115 $108,756 $7,705,085 Cumulative effect of changes in accounting policies (131,011) (131,011) (131,011) Restated balance 860,499 660,874 5,157,403 (21,565) 6,657,203 629,430 (1,423) 388,964 (208,856) 808,115 108,756 7,574,074 Changes during the ﬁ scal year Dividends from surplus Net income Purchase of treasury stock Disposal of treasury stock Change of scope of consolidation Change of scope of equity method Net changes of items other than shareholders’ equity Total changes of items during the period (220,949) 879,334 (220,949) 879,334 (3,787) (3,787) 25 42 2,464 1,640 67 2,464 1,640 (220,949) 879,334 (3,787) 67 2,464 1,640 — 25 662,480 (3,745) 658,768 315,747 (12,701) 439,426 144,303 886,767 16,663 1,562,189 315,747 (12,701) 439,426 144,303 886,767 16,663 903,421 Balance at March 31, 2015 $860,499 $660,907 $5,819,883 $(25,310) $7,315,972 $945,169 $(14,124) $828,390 $(64,561) $1,694,873 $125,410 $9,136,263 The accompanying notes are an integral part of these statements. 72 Asahi Kasei Report 2015 Consolidated Statements of Cash Flows Asahi Kasei Corporation and Consolidated Subsidiaries Years Ended March 31, 2015 and 2014 Cash ﬂ ows from operating activities: Income before income taxes and minority interests Depreciation and amortization Impairment losses Amortization of goodwill Amortization of negative goodwill (Decrease) increase in provision for periodic repairs Increase in provision for product warranties (Decrease) increase in provision for removal cost of property, plant and equipment Decrease in net deﬁ ned beneﬁ t liability Interest and dividend income Interest expense Equity in (earnings) losses of afﬁ liates Gain on sales of investment securities Loss on valuation of investment securities Gain on sale of property, plant and equipment Loss on disposal of noncurrent assets Income from compensation for damage Decrease (increase) in notes and accounts receivable—trade Increase in inventories Decrease in notes and accounts payable—trade Increase in accrued expenses (Decrease) increase in advances received Other, net Subtotal Interest and dividend income, received Interest expense paid Proceeds from compensation for damage Income taxes paid Net cash provided by operating activities Cash ﬂ ows from investing activities: Payments into time deposits Proceeds from withdrawal of time deposits Purchase of property, plant and equipment Proceeds from sales of property, plant and equipment Purchase of intangible assets Purchase of investment securities Proceeds from sales of investment securities Purchase of shares in subsidiaries resulting in change in scope of consolidation Additional purchase of investments in consolidated subsidiaries Payments for transfer of business Payments of loans receivable Collection of loans receivable Other, net Net cash used in investing activities Cash ﬂ ows from ﬁ nancing activities: (Decrease) increase in short-term loans payable Decrease in commercial paper Proceeds from long-term loans payable Repayment of long-term loans payable Redemption of bonds Repayments of lease obligations Purchase of treasury stock Proceeds from disposal of treasury stock Cash dividends paid Cash dividends paid to minority shareholders Other, net Net cash used in ﬁ nancing activities Effect of exchange rate change on cash and cash equivalents Net (decrease) increase in cash and cash equivalents Cash and cash equivalents at beginning of year Increase in cash and cash equivalents resulting from changes in scope of consolidation Cash and cash equivalents at end of year (Note 8) The accompanying notes are an integral part of these statements. Millions of yen Thousands of U.S. dollars (Note 1) 2015 2014 2015 ¥158,440 86,058 1,255 9,320 (159) (4,496) 22 (1,723) (2,300) (5,312) 3,056 (1,738) (2,644) 1,136 (382) 4,728 — 717 (3,610) (13,559) 5,662 (6,553) (8,587) 219,331 6,761 (3,081) — (85,415) 137,597 (17,182) 13,436 (82,990) 944 (10,661) (1,349) 5,341 (2,808) — (3,763) (5,296) 6,295 (2,438) (100,470) (24,324) (10,000) 10,950 (21,064) — (1,830) (462) 8 (26,547) (745) (2) (74,016) 5,467 (31,423) 143,139 ¥163,860 86,052 441 8,823 (231) 1,519 343 7,549 (1,648) (4,864) 3,375 1,756 (330) 1,223 (1,672) 5,575 (53,532) (4,082) (12,377) (17,831) 476 17,811 15,549 217,786 5,818 (3,447) 53,532 (29,538) 244,152 (7,526) 5,685 (80,933) 2,588 (15,576) (2,695) 1,018 (1,697) (152) — (10,517) 7,433 (1,382) (103,753) 3,679 (60,000) 13,362 (34,426) (5,000) (2,521) (165) 3 (19,566) (589) 152 (105,070) 3,305 38,633 104,008 581 ¥112,297 498 ¥143,139 $1,318,685 716,255 10,445 77,570 (1,323) (37,420) 183 (14,340) (19,143) (44,211) 25,435 (14,465) (22,006) 9,455 (3,179) 39,351 — 5,968 (30,046) (112,851) 47,124 (54,540) (71,469) 1,825,476 56,271 (25,643) — (710,903) 1,145,210 (143,005) 111,827 (690,720) 7,857 (88,731) (11,228) 44,453 (23,371) — (31,319) (44,078) 52,393 (20,291) (836,205) (202,447) (83,229) 91,136 (175,314) — (15,231) (3,845) 67 (220,949) (6,201) (17) (616,030) 45,501 (261,531) 1,191,336 4,836 $934,640 Asahi Kasei Report 2015 73 Notes to Consolidated Financial Statements Asahi Kasei Corporation and Consolidated Subsidiaries 1. Major policies for preparing the consolidated ﬁ nancial statements The consolidated ﬁ nancial statements, which are ﬁ led with the prime minister of Japan as required by the Financial Instruments and Exchange Act in Japan, are prepared in accordance with accounting principles generally accepted in Japan, which are different in certain respects from the application and disclosure requirements of International Financial Reporting Standards. The accompanying con- solidated ﬁ nancial statements are a translation of those ﬁ led with the prime minister of Japan and incorporate certain modiﬁ cations to enhance foreign readers’ understanding of the consolidated ﬁ nancial statements. In addition, the notes to the consolidated ﬁ nancial state- ments include certain ﬁ nancial information which is not required under the disclosure regulations in Japan, but is presented herein as additional information. The U.S. dollar amounts presented in the consolidated ﬁ nancial statements are included solely for the convenience of readers. These translations should not be construed as representations that the Japanese yen amounts actually represent, or have been or could be converted into U.S. dollars. As the amounts shown in U.S. dollars are for convenience only, and are not intended to be computed in accor- dance with generally accepted translation procedures, the approximate current exchange rate of ¥120.15=US$1 prevailing on March 31, 2015, has been used. Consolidation and investments in afﬁ liated companies The consolidated ﬁ nancial statements consist of the accounts of the parent company and 140 subsidiaries (131 subsidiaries at March 31, 2014, hereinafter collectively referred to as the “Company”) which, with minor exceptions due to immateriality, are all majority and wholly owned companies, including 9 core operating companies (Asahi Kasei Chemicals Corp., Asahi Kasei Fibers Corp., Asahi Kasei Homes Corp., Asahi Kasei Construction Materials Corp., Asahi Kasei Microdevices Corp., Asahi Kasei E-materials Corp., Asahi Kasei Pharma Corp., Asahi Kasei Medical Co., Ltd. and ZOLL Medical Corporation), and Tong Suh Petrochemical Corp. Ltd. (Korea). Material inter-company transactions and accounts have been eliminated. Investments in unconsolidated subsidiaries and 20% to 50% owned companies in which the Company exercises signiﬁ cant inﬂ uence are accounted for, with minor exceptions due to immateriality, using the equity method of accounting. There were 37 such unconsolidated subsidiaries and 20% to 50% owned companies to which the equity method is applied at March 31, 2015 (40 at March 31, 2014), including Asahi Kasei EIC Solutions Corp., Asahi Kasei Geotechnologies Co., Ltd. and Asahi Organic Chemicals Industry Co., Ltd. Certain subsidiaries’ results are reported in the consolidated ﬁ nan- cial statements using a ﬁ scal year ending December 31. Material dif- ferences in inter-company transactions and accounts arising from the use of different ﬁ scal year-ends are appropriately adjusted for through consolidation procedures. All assets and liabilities of acquired companies are measured at their fair value and any difference between the net assets and the cost of investment is recognized as goodwill or negative goodwill. Goodwill, and negative goodwill incurred through business combinations which took place before April 1, 2010, are amortized using the straight-line method over a reasonable period during which their effects would last, with the exception of minor amounts which are charged to income as incurred. 2. Signiﬁ cant accounting policies (a) Cash and cash equivalents For cash ﬂ ow statement purposes, cash and cash equivalents include all highly liquid investments, generally with original maturities of three months or less, which are readily convertible to known amounts of cash, and therefore present an insigniﬁ cant risk of changes in value due to changes in interest rates. (b) Inventories Inventories held for sale in the ordinary course of business are stated at the lower of cost or net realizable value. Residential lots and dwell- ings for sale are stated at speciﬁ cally identiﬁ ed costs. (c) Noncurrent assets and depreciation/amortization Property, plant and equipment (except for lease assets) are stated at cost. Signiﬁ cant renewals and improvements are capitalized at cost, while maintenance and repairs are charged to income as incurred. Depreciation is provided for under the declining-balance method for property, plant and equipment, except for buildings which are depreci- ated using the straight-line method, at rates based on estimated useful lives of the assets, principally ranging from 5 to 60 years for buildings and from 4 to 22 years for machinery and equipment and vehicles. Intangible ﬁ xed assets (except for lease assets), including software for internal use, are mainly amortized using the straight-line method over the estimated useful lives of the assets. The estimated useful life of software for internal use is mainly 5 years. Lease assets (ﬁ nancing lease transactions without title transfer) are depreciated/amortized on a straight-line basis over the period of the lease with no residual value. For ﬁ nancing lease transactions without title transfer whose transaction date is before March 31, 2008, the previous method of accounting for lease transactions continues to be applied, with periodic lease charges for ﬁ nancing leases being charged to income as incurred. (d) Signiﬁ cant allowances i) Allowance for doubtful accounts Estimates of the unrecoverable portion of receivables, generally based on historical rates and for speciﬁ c receivables of particular concern based on individual estimates of recoverability, are recog- nized as allowance for doubtful accounts. 74 Asahi Kasei Report 2015 ii) Provision for periodic repairs The portion of foreseeable periodic repair expenses deemed to correspond to normal wear and tear of plant and equipment as of the closing date of the ﬁ scal year is recognized as provision for periodic repairs. iii) Provision for product warranties Estimates of product warranty expenses based on historical rates are recognized as provision for product warranties. iv) Provision for removal cost of property, plant and equipment Provision for removal cost of property, plant and equipment is recorded based on estimated future removal cost of property, plant and equipment at the end of each ﬁ scal year. (Additional information) Termination of retirement beneﬁ t plan for directors and corporate auditors The Company decided to terminate its retirement beneﬁ t plan for directors and corporate auditors at its ordinary general shareholders’ meeting held in June 2014. As of March 31, 2015, the unpaid balance totaling ¥591 million ($4,919 thousand), which had previously been reported as provision for directors’ retirement beneﬁ ts, is included in other under noncurrent liabilities. (e) Accounting for retirement beneﬁ ts i) Method of attributing expected retirement beneﬁ ts to each period In calculating retirement beneﬁ t obligations, the Company applies a method of attributing expected retirement beneﬁ ts to each period based on beneﬁ t formula basis. ii) Accounting for actuarial gains/losses and prior service costs Actuarial gains/losses are amortized using the straight-line method from the ﬁ scal year following their accrual over a certain period (mainly 10 years) within the average remaining service period of employees at the time of accrual. Prior service costs are amortized using the straight-line method over a certain period (mainly 10 years) within the average remaining service period of employees at the time of accrual. iii) Adoption of the simpliﬁ ed method In calculating expected deﬁ ned beneﬁ t liability and periodic retire- ment beneﬁ t expenses, certain consolidated subsidiaries have adopted the simpliﬁ ed method. Under this method, the expected deﬁ ned beneﬁ t liability is recorded at the severance payment amount to be required should all employees retire voluntarily at ﬁ scal year end. (f) Signiﬁ cant revenue and expense recognition i) Construction activities that are realizable as of ﬁ scal year end The percentage-of-completion method (progress of work is esti- mated using the percentage of costs incurred to the total projected costs) is applied. ii) Other construction activities The completed-contract method is used. (g) Financial instruments i) Securities Securities are classiﬁ ed into four categories: trading securities, held-to-maturity debt securities, equity securities of unconsolidat- ed subsidiaries and afﬁ liates, and other securities. At March 31, 2015 and 2014, the Company did not have trading securities or held-to-maturity debt securities. Equity securities of unconsolidated subsidiaries and afﬁ liates are accounted for, with minor exceptions due to immateriality, using the equity method of accounting. Other securities whose fair values are readily determinable are carried at fair value with net unrealized gains or losses, net of income taxes, being included as a component of net assets. Other securities whose fair values are not readily determinable are stated at cost. In cases where any signiﬁ cant decline in the realizable value is assessed to be other than temporary, the cost of other securities is devalued by the impaired amount and is charged to income. Realized gains and losses are determined using the average cost method and are reﬂ ected in the consolidated income statements. 3. Changes in signiﬁ cant accounting policies (a) Changes in accounting policies The provisions of Article 35 of Accounting Standards Board of Japan (ASBJ) Statement No. 26 “Accounting Standard for Retirement Beneﬁ ts” and the provisions of Article 67 of ASBJ Guidance No. 25 “Guidance on Accounting Standard for Retirement Beneﬁ ts” are applied from the beginning of the ﬁ scal year ended March 31, 2015. The calculation method for the present value of retirement beneﬁ t obligations and current service costs has been revised. The method of attributing projected retirement beneﬁ t obligations to each period has been changed from the straight-line basis to a ben- eﬁ t fomula basis. The method of determining the discount rate used in calculation has been changed from one where the number of years approximately equal to the average remaining service period of employees is used as the basis for determining the discount rate to one using a single weighted average discount rate which reﬂ ects each forecasted period of payment of retirement beneﬁ t obligations and the amount of payment forecasted for each period. In accordance with transitional accounting treatment as stipulated in Article 37 of ASBJ Statement No. 26 “Accounting Standard for Retirement Beneﬁ ts,” the effect of the changes in calculation methods of retirement obligation and service cost arising from initial application is reﬂ ected in retained earnings at the beginning of the ﬁ scal year ended March 31, 2015. As a result, net deﬁ ned beneﬁ t liability increased by ¥23,336 million (US$194,224 thousand), investment securities decreased by ¥127 million (US$1,057 thousand), and retained earnings decreased by ¥15,741 million (US$131,011 thousand) as of the beginning of the ﬁ scal year ended March 31, 2015. In addition, the effect on operating income, ordinary income, and income before income taxes and minor- ity interests for the ﬁ scal year ended March 31, 2015, is immaterial. Furthermore, the net impact to per share information is considered to be immaterial. ii) Derivative ﬁ nancial instruments All derivatives are stated at fair value. Gains or losses arising from changes in fair value are recognized in the period in which they arise, except for derivatives that are designated as hedging instru- ments. Gains or losses arising from changes in fair value of these qualifying hedges are deferred as “Deferred gains or losses on hedges” until being offset against gains or losses of the underlying hedged assets and liabilities. (h) Taxes Accrued income taxes are stated at the estimated amount of payables for corporation, enterprise, and inhabitant taxes. The asset and liability approach is used to recognize deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases of assets and liabilities. The Company has elected to ﬁ le its return under the consolidated tax ﬁ ling system in Japan. Transactions subject to consumption taxes are recorded at amounts net of consumption taxes. (i) Translation of foreign currencies Foreign currency receivables and payables are translated into Japanese yen at the exchange rates prevailing at the balance sheet date. Resulting gains and losses are charged to income for the period. Assets and liabilities of foreign subsidiaries are translated into Japanese yen at ﬁ scal year-end exchange rates, and income and expenses of same are translated into Japanese yen at the average exchange rate for the ﬁ scal year. Shareholders’ equity of foreign sub- sidiaries is translated into Japanese yen at the historical exchange rates. The translation differences in Japanese yen amounts arising from the use of different rates are recognized as foreign currency translation adjustments in the consolidated balance sheets. A portion of the foreign currency translation adjustment is allocated to minority interest and the Company’s portion is presented as a separate component of net assets in the consolidated balance sheets. (b) Accounting standards issued but not yet applied Accounting standards for business combinations: The ASBJ issued ASBJ Statement No. 21 “Revised Accounting Standard for Business Combinations,” ASBJ Statement No. 22 “Revised Accounting Standard for Consolidated Financial Statements,” ASBJ Statement No. 7 “Revised Accounting Standard for Business Divestitures,” ASBJ Statement No. 2 “Revised Accounting Standard for Earnings Per Share,” ASBJ Guidance No. 10 “Revised Guidance on Accounting Standard for Business Combinations and Accounting Standard for Business Divestitures,” and ASBJ Guidance No. 4 “Revised Guidance on Accounting Standard for Earnings Per Share.” Under these revised accounting standards, various accounting treatments were revised regarding changes in ownership interest in a subsidiary when control over the subsidiary is retained. Revisions apply to treatment of the change in ownership interest and treatment of costs related to acquisition of increased ownership interest. The pre- sentation method of net income was amended, “minority interests” were changed to “non-controlling interests,” and transitional provisions for accounting treatments were deﬁ ned. The Company will apply the revised accounting standards and guidance from the beginning of the ﬁ scal year ending March 31, 2016. The transitional accounting will be applied from business com- binations performed on or after the beginning of the ﬁ scal year end- ing March 31, 2016. The effects of the adoption of the revised accounting standards and guidance are currently under assessment at the time of prepara- tion of the accompanying consolidated ﬁ nancial statements. Accounting standards for uniﬁ cation of accounting policies applied to foreign subsidiaries for consolidated ﬁ nancial statements: The ASBJ issued ASBJ Statement No. 18 “Practical Solution on Accounting for Uniﬁ cation of Accounting Policies Applied to Foreign Subsidiaries for Consolidated Financial Statements” Asahi Kasei Report 2015 75 This accounting standard responds to the accounting standards of the United States for goodwill which was revised in January 2014 and ASBJ Statement No. 22 “Accounting Standard for Consolidated Financial Statements” which was revised in September 2013, and clar- iﬁ es the accounting treatment of actuarial differences as cost under the accounting standards for retirement beneﬁ ts. The Company will adopt the revised accounting standards for Uniﬁ cation of Accounting Policies Applied to Foreign Subsidiaries for Consolidated Financial Statements from the beginning of the ﬁ scal year ending March 31, 2016. The adoption of the accounting standard will have no impact. (c) Changes in presentation Statements of income: In the ﬁ scal year ended March 31, 2015, donations, which had previ- ously been included in other under non-operating expenses, exceeded 10% of total non-operating expenses, and is reported separately, while insurance income, which had previously been reported separately, became 10% or less of total non-operating income, and is included in other under non-operating income. The statements of income for the ﬁ scal year ended March 31, 2014, have been reclassiﬁ ed accordingly, resulting in other under non-operating expenses being ¥1,075 million lower than previously reported, reﬂ ecting the separation of ¥1,075 million as donations, and other under non-operating income being ¥1,132 million higher than previously reported, reﬂ ecting the inclusion of ¥1,132 million of insurance income. Statements of cash ﬂ ows: In the ﬁ scal year ended March 31, 2015, under cash ﬂ ows from ﬁ nancing activities, increase in short-term loans payable and decrease in short-term loans payable, which had previously been reported sepa- rately, are reported as a single amount as a net increase (decrease) in short-term loans payable, while proceeds from issuance of commercial paper and redemption of commercial paper, which had previously been reported separately, are reported as a single net amount as a decrease in commercial paper, in consideration of the short-term nature and rapid turnover of these accounts. The consolidated statements of cash ﬂ ows for the ﬁ scal year ended March 31, 2014, have been reclassiﬁ ed accordingly, resulting in the previously reported ¥85,603 million as increase in short-term loans payable and ¥(81,924) million as decrease in short-term loans payable being combined to ¥3,679 million as net increase (decrease) in short-term loans payable, and the previously reported ¥85,000 million as proceeds from issuance of commercial paper and ¥(145,000) million as redemption of commercial paper being combined to ¥(60,000) million as decrease in commercial paper. 4. Notes to Consolidated Balance Sheets (a) Investment securities Among investment securities, shares of unconsolidated subsidiaries and afﬁ liates as of March 31, 2015 and 2014, amounted to ¥69,210 million (US$576,030 thousand) and ¥68,399 million, respectively. Included in those amounts are investments in joint ventures of ¥33,912 million (US$282,247 thousand) and ¥33,878 million, respectively. (b) Pledged assets and secured debt A summary of assets pledged as collateral and secured debt as of March 31, 2015 and 2014, is shown below: Pledged assets Buildings and structures Machinery, equipment and vehicles Secured debt Short-term loans payable Long-term loans payable Millions of yen 2015 ¥130 2 ¥132 ¥2 135 ¥137 2014 ¥163 2 ¥166 ¥3 208 ¥211 Thousands of U.S. dollars 2015 $1,082 17 $1,099 $17 1,124 $1,140 Besides the above, investment securities pledged to suppliers as transaction guarantees at March 31, 2015 and 2014, were ¥64 million (US$533 thousand) and ¥53 million, respectively. (c) Contingent liabilities Contingent liabilities at March 31, 2015 and 2014, arising in the ordinary course of business were as follows: Loans guaranteed Letters of awareness Completion guarantees Millions of yen 2015 ¥38,664 — 16,250 ¥54,914 2014 ¥41,789 134 16,416 ¥58,339 Thousands of U.S. dollars 2015 $321,798 — 135,248 $457,045 The parent company and certain of its subsidiaries and afﬁ liates are defendants in several pending lawsuits. However, based upon the infor- mation currently available to both the Company and its legal counsel, management of the Company believes that any damages from such law- suits will not have a material impact to the Company’s consolidated ﬁ nancial statements. 76 Asahi Kasei Report 2015 (d) Deferred gain on property, plant and equipment deducted for tax purposes The accumulated reduced-value entries, which are directly deducted from property, plant and equipment, as of March 31, 2015 and 2014, were ¥9,176 million (US$76,371 thousand) and ¥9,511 million, respectively. The breakdown of reduced-value entries as of March 31, 2015 and 2014, was as follows: Buildings and structures Machinery, equipment and vehicles Land Other Millions of yen 2015 ¥3,442 5,394 167 173 ¥9,176 2014 ¥3,491 5,677 188 155 ¥9,511 Thousands of U.S. dollars 2015 $28,648 44,894 1,390 1,440 $76,371 5. Notes to Consolidated Statements of Income (a) Selling, general and administrative expenses Major components of selling, general and administrative expenses for the years ended March 31, 2015 and 2014 were as follows: Salaries and beneﬁ ts Research and development* Freight and storage Millions of yen 2015 ¥148,306 57,896 ¥36,091 2014 ¥134,442 53,390 ¥35,277 Thousands of U.S. dollars 2015 $1,234,340 481,864 $300,383 * The aggregate amounts of research and development expenses included in manufacturing costs and selling, general and administrative expenses for the years ended March 31, 2015 and 2014, were ¥75,540 million (US$628,714 thousand) and ¥71,101 million, respectively. (b) Loss on valuation of inventories Inventories held for sale in the ordinary course of business are stated at the lower of cost or net realizable value. Loss on valuation of inventories for the years ended March 31, 2015 and 2014, were as follows: (c) Gain on sales of noncurrent assets Major components of gain on sales of noncurrent assets for the years ended March 31, 2015 and 2014, were as follows: Millions of yen 2015 ¥2,142 2014 ¥994 Land Machinery Other Millions of yen 2015 ¥176 184 ¥21 2014 ¥1,477 184 ¥11 Thousands of U.S. dollars 2015 $17,828 Thousands of U.S. dollars 2015 $1,465 1,531 $175 (d) Income from compensation for damage With regard to litigation in the US by the Company’s subsidiary Asahi Kasei Pharma Corp. against Actelion Ltd. of Switzerland and its afﬁ liated companies and executives in relation to a license agreement for fasudil, a rho-kinase inhibitor discovered and owned by Asahi Kasei Pharma Corp., the California Superior Court entered a judgment in November 2011 ordering the defendants to pay US$415.7 million in recognition of the peti- tion of Asahi Kasei Pharma Corp. The judgment was ﬁ nalized in March 2014, and Asahi Kasei Pharma Corp. received US$523.2 million including the legal interest rate etc. from the date of judgment to the date of payment. As a result, a total of ¥53,532 million was recorded as income from compensation for damage under extraordinary income in the consolidated statements of income for the ﬁ scal year ended March 31, 2014. (e) Loss on disposal of noncurrent assets Loss on disposal of noncurrent assets for the years ended March 31, 2015 and 2014, was primarily loss on abandonment and sale of buildings, machinery and equipment, etc. The abandonment and sale of buildings, machinery and equipment, etc. was performed under a single, all-inclusive contract for each facility. Asahi Kasei Report 2015 77 (f) Impairment losses Major components of impairment losses for the years ended March 31, 2015 and 2014, were as follows: Millions of yen Thousands of U.S. dollars Use Asset class Location 2015 2014 2015 Item on the Consolidated Statements of Income Idle assets Production facility for petrochemicals Production facility for semiconductors Production facility for plastic raw materials Facility for wastewater recycling Production facility for petrochemicals and goodwill related to the petrochemical business Production facility for pharmaceutical products Production facility for plastic raw materials Others Buildings, etc. Machinery and equipment, etc. Machinery and equipment Machinery and equipment, etc. Machinery and equipment Machinery and equipment, Goodwill, etc. Construction in progress, etc. Machinery and equipment, etc. Machinery and equipment, etc. Fuji, Shizuoka, etc. Kurashiki, Okayama Goshogawara, Aomori Ulsan, Korea Jiangsu, China Kurashiki, Okayama Miyoshi, Aichi Kawasaki, Kanagawa Oita, etc. ¥621 ¥367 $5,169 Impairment losses 455 268 217 145 3,787 Business structure improvement expenses 2,231 Impairment losses 1,806 Impairment losses 1,207 Impairment losses 6,776 2,601 878 ¥172 ¥127 $1,432 Business structure improvement expenses Loss on discontinuation of development project Business structure improvement expenses Impairment losses and business structure improvement expenses Grouping of operating assets is based on managerial accounting categories, with consideration given to production process, geographic loca- tion, and domain of authority for making investment decisions. Idle assets are recorded separately in each ﬁ xed assets class. With respect to idle assets, production facility for plastic raw materials (Korea), facility for wastewater recycling, and part of others, the book value was reduced to the recoverable amount due to disappearance of prospects for future use, and with respect to production facility for petro- chemicals, production facility for semiconductors, production facility for petrochemicals and goodwill related to the petrochemical business, production facility for plastic raw materials (Kanagawa), production facility for pharmaceutical products, and part of others, the book value was reduced to the recoverable amount due to diminished proﬁ tability. The recoverable amount is stated as value for future usage, which is calculated based on discounted future cash ﬂ ow with applicable discount rate of 6% as of March 31, 2015 and 2014. Among the extraordinary losses under others, ¥168 million (US$1,398 thousand) and ¥53 million, were recorded under business structure improvement expenses for the years ended March 2015 and 2014, respectively. (g) Business structure improvement expenses Major components of business structure improvement expenses for the years ended March 31, 2015 and 2014, were as follows: Impairment of ﬁ xed assets Additional payment of retirement beneﬁ ts due to application of early retirement, etc. Loss on disposal and devaluation of inventory and others Millions of yen 2015 ¥623 — 3,387 ¥4,010 2014 ¥7,707 449 14,390 ¥22,546 (h) Loss on discontinuation of development project Loss on discontinuation of development project for the year ended March 31, 2014, was as follows: Impairment of ﬁ xed assets Loss on disposal and devaluation of inventory and others Compensation expense, etc. Millions of yen 2015 ¥— — — ¥— 2014 ¥2,601 1,480 673 ¥4,753 Thousands of U.S. dollars 2015 $5,185 — 28,190 $33,375 Thousands of U.S. dollars 2015 $— — — $— 78 Asahi Kasei Report 2015 6. Notes to Consolidated Statements of Comprehensive Income Recycling adjustment and tax effects on other comprehensive income for the years ended March 31, 2015 and 2014, were as follows: Net unrealized gain on other securities Changes during the ﬁ scal year Recycling adjustment Pre-tax effect Tax effect Net increase in unrealized gain on other securities Deferred gains or losses on hedges Changes during the ﬁ scal year Recycling adjustment Pre-tax effect Tax effect Deferred gains or losses on hedges Foreign currency translation adjustment Changes during the ﬁ scal year Recycling adjustment Pre-tax effect Tax effect Foreign currency translation adjustment Remeasurements of deﬁ ned beneﬁ t plans Changes during the ﬁ scal year Recycling adjustment Pre-tax effect Tax effect Remeasurements of deﬁ ned beneﬁ t plans Millions of yen 2015 2014 ¥53,024 (2,689) 50,335 (12,389) 37,947 (2,037) 72 (1,965) 438 (1,526) 48,829 (24) 48,805 140 48,945 20,168 5,516 25,685 (8,588) 17,096 ¥19,995 (23) 19,972 (7,020) 12,952 (932) 2,055 1,122 (394) 729 29,001 — 29,001 94 29,095 — — — — — Thousands of U.S. dollars 2015 $441,315 (22,380) 418,935 (103,113) 315,830 (16,954) 599 (16,355) 3,645 (12,701) 406,400 (200) 406,201 1,165 407,366 167,857 45,909 213,774 (71,477) 142,289 Share of other comprehensive income of afﬁ liates accounted for using equity method Changes during the ﬁ scal year Recycling adjustment Share of other comprehensive income of afﬁ liates accounted for using equity method Total other comprehensive income 5,174 (49) 5,125 ¥107,587 1,232 1 1,233 ¥44,009 43,063 (408) 42,655 $895,439 7. Notes to Consolidated Statements of Changes in Net Assets For the year ended March 31, 2015 (a) Class and total number of issued and outstanding shares and treasury stock Issued and outstanding shares Common stock Total Treasury stock Common stock (Notes 1 & 2) Total Thousands of shares Number of shares as of March 31, 2014 Increase in number of shares during the ﬁ scal year Decrease in number of shares during the ﬁ scal year Number of shares as of March 31, 2015 1,402,616 1,402,616 5,231 5,231 — — 522 522 — — 10 10 1,402,616 1,402,616 5,743 5,743 Notes: 1. The increase of 522 thousand shares in common stock of treasury stock was due to the purchase of shares in quantities of less than one share unit. 2. The decrease of 10 thousand shares in common stock of treasury stock was due to the sale of shares in quantities of less than one share unit. Asahi Kasei Report 2015 79 (b) Dividends i) Cash dividends paid 1) The following was resolved by the Board of Directors on May 9, 2014. Dividends for common stock Total dividends Dividend per share Date of record Payment date ¥13,974 million (US$116,305 thousand) ¥10.00 (US$0.08)* March 31, 2014 June 5, 2014 * Including ¥8.00 (US$0.07) ordinary dividend and ¥2.00 (US$0.02) special dividend 2) The following was resolved by the Board of Directors on November 5, 2014. Dividends for common stock Total dividends Dividend per share Date of record Payment date ¥12,573 million (US$104,644 thousand) ¥9.00 (US$0.07) September 30, 2014 December 1, 2014 ii) Dividends for which the date of record falls within the ﬁ scal year under review but the payment date occurs in the following ﬁ scal year The following was resolved by the Board of Directors on May 12, 2015. Dividends for common stock Total dividends Source of dividends Dividend per share Date of record Payment date ¥13,969 million (US$116,263 thousand) Retained earnings ¥10.00 (US$0.08) March 31, 2015 June 4, 2015 For the year ended March 31, 2014 (a) Class and total number of issued and outstanding shares and treasury stock Issued and outstanding shares Common stock Total Treasury stock Common stock (Notes 1 & 2) Total Thousands of shares Number of shares as of March 31, 2013 Increase in number of shares during the ﬁ scal year Decrease in number of shares during the ﬁ scal year Number of shares as of March 31, 2014 1,402,616 1,402,616 5,017 5,017 — — 219 219 — — 5 5 1,402,616 1,402,616 5,231 5,231 Notes: 1. The increase of 219 thousand shares in common stock of treasury stock was due to the purchase of shares in quantities of less than one share unit. 2. The decrease of 5 thousand shares in common stock of treasury stock was due to the sale of shares in quantities of less than one share unit. (b) Dividends i) Cash dividends paid 1) The following was resolved by the Board of Directors on May 9, 2013. Dividends for common stock Total dividends Dividend per share Date of record Payment date ¥9,783 million ¥7.00 March 31, 2013 June 5, 2013 2) The following was resolved by the Board of Directors on October 31, 2013. Dividends for common stock Total dividends Dividend per share Date of record Payment date ¥9,783 million ¥7.00 September 30, 2013 December 2, 2013 80 Asahi Kasei Report 2015 ii) Dividends for which the date of record falls within the ﬁ scal year under review but the payment date occurs in the following ﬁ scal year The following was resolved by the Board of Directors on May 9, 2014. Dividends for common stock Total dividends Source of dividends Dividend per share Date of record Payment date ¥13,974 million Retained earnings ¥10.00* March 31, 2014 June 5, 2014 * Including ¥8.00 ordinary dividend and ¥2.00 special dividend 8. Note to Consolidated Statements of Cash Flows Cash and cash equivalents Reconciliation of cash and cash equivalents on the consolidated statements of cash ﬂ ows to the amounts disclosed on the consolidated balance sheets at March 31, 2015 and 2014, was as follows: Cash and deposits Time deposits with deposit term of over 3 months Money market funds included in short-term investment securities Cash and cash equivalents 9. Leases (a) Financing lease transactions Financing lease transactions without title transfer i) Components of lease assets are as follows: Millions of yen 2015 ¥123,821 (13,326) 1,802 ¥112,297 2014 ¥151,474 (8,335) — ¥143,139 Thousands of U.S. dollars 2015 $1,030,553 (110,911) 14,998 $934,640 1) Property, plant and equipment: Mainly model homes (buildings and structures) for housing business. 2) Intangible ﬁ xed assets: Software ii) Depreciation of lease assets: As stated in Note 2. Signiﬁ cant accounting policies (c) Noncurrent assets and depreciation/amortization. The ﬁ nancing lease transactions with- out title transfer which occurred prior to March 31, 2008, are accounted for on a basis similar to an operating lease. For such leases, informa- tion for the cost and related accumulated amortization, computed using the straight-line method over the term of the lease assuming such lease transactions accounted for as an operating lease had been accounted for as a ﬁ nancing lease, is required to be disclosed. However, such disclosure is omitted due to immateriality. (b) Operating lease transactions Future lease payments for the non-cancelable portion of the Company’s operating leases at March 31, 2015 and 2014, were as follows: Due within one year Due after one year 10. Financial instruments (a) Overview of ﬁ nancial instruments i) Policy related to ﬁ nancial instruments The Company raises long-term funds as required mainly for its planned capital expenditures by borrowing from banks, borrowing from life insurance companies, issuing bonds, etc. A portion of the surplus funds is invested only in highly stable ﬁ nancial assets. Short-term working funds are raised by bank borrowings, issuance of commercial paper, etc. Derivative transactions are mainly entered into for the purpose of reducing risks related to assets and liabilities which are exposed to risks of ﬂ uctuations of exchange rate and interest rate. Derivatives are not traded for speculative purposes. ii) Components of ﬁ nancial instruments, their risks and risk management structure As operating receivables, notes and accounts receivable—trade, are exposed to credit risk of customers. As the business of the Company spans a wide range of ﬁ elds, operating receivables are not exces- sively concentrated on speciﬁ c customers, but the parent company and each consolidated subsidiary monitor and manage the credit condition of each customer. Millions of yen 2015 ¥4,986 7,313 ¥12,300 2014 ¥5,095 9,387 ¥14,482 Thousands of U.S. dollars 2015 $41,498 60,866 $102,372 Investment securities are exposed to the risk of ﬂ uctuations in market price, but they are mainly equity securities of companies with which the Company has business relationships. These securities are held for the purpose of maintaining the business relationships. Fair value is periodically evaluated, and the ﬁ nancial condition of the issuing company is monitored. As operating liabilities, notes and accounts payable—trade, generally have a payment term of 1 year or less. Variable interest-rate borrowings are exposed to the risk of interest-rate ﬂ uctuations, but derivatives (interest-rate and currency swaps, interest-rate swaps) are used as hedges to ﬁ x interest expens- es for a portion of long-term variable interest-rate borrowings. Operating receivables and operating liabilities include those denominated in currencies other than Japanese yen, and are thus exposed to the risk of exchange-rate ﬂ uctuations. In order to mini- mize the effects of short-term exchange-rate ﬂ uctuations, the Company hedges with derivative transactions (forward exchange contracts), in principle, within the range of the underlying receiv- ables and liabilities amount. Asahi Kasei Report 2015 81 Derivative transactions are exposed to the credit risk of trans- acting ﬁ nancial institutions, but the credit condition of those ﬁ nancial institutions is reviewed through periodical monitoring. Such transactions are performed and managed in accordance with the Company’s internal regulations which stipulate the related authority, procedures, limits, etc. Borrowings are exposed to liquidity risk, but the parent company speciﬁ es standards for required on-hand funds based on the Company’s funding plans, prepares and revises plans for cash receipts and disbursements as appropriate, and enters into commitment-line agreements with transacting ﬁ nancial institutions to manage such risk. Loan securitization in the housing business is exposed to the risk of interest-rate ﬂ uctuations between the time of origination of housing loans and the time of execution of their securitization, but derivative transactions (interest-rate swaps) are entered into in order to reduce such risk. iii) Supplementary explanation of fair value of ﬁ nancial instruments The fair value of ﬁ nancial instruments is based on their quoted market price, if available. In the case where no quoted market price is available, a reasonably estimated fair value is used. As variable factors are incorporated in its estimation, fair value may change due to the adoption of different assumptions, conditions, etc. The stated amount of contracts regarding derivative transactions included in Note 12 “Derivative ﬁ nancial instruments” is not itself an indication of the market risk of the derivative transactions. (b) Fair value of ﬁ nancial instruments Amounts carried on the consolidated balance sheets, their fair values, and the differences between them as of March 31, 2015 and 2014, were as shown below. Financial instruments whose fair values are deemed extremely difﬁ cult to determine are not included in this table (See Notes 2) and 3) below). Cash and deposits Notes and accounts receivable—trade Allowance for doubtful accounts (*1) Short-term investment securities and investment securities Other securities Long-term loans receivable Total assets Notes and accounts payable—trade Short-term loans payable Commercial paper Income taxes payable Bonds payable Long-term loans payable Lease obligations Long-term guarantee deposits Total liabilities Derivative ﬁ nancial instruments (*2) Cash and deposits Notes and accounts receivable—trade Allowance for doubtful accounts (*1) Short-term investment securities and investment securities Other securities Long-term loans receivable Total assets Notes and accounts payable—trade Short-term loans payable Commercial paper Income taxes payable Bonds payable Long-term loans payable Lease obligations Long-term guarantee deposits Total liabilities Derivative ﬁ nancial instruments (*2) 82 Asahi Kasei Report 2015 Carrying amount ¥123,821 325,568 (1,369) 324,199 215,200 10,758 673,979 151,867 62,648 — 10,203 40,000 163,767 2,603 6,937 438,025 ¥(2,356) Carrying amount ¥151,474 316,705 (1,751) 314,955 163,193 9,766 639,388 159,925 84,776 10,000 48,520 40,000 164,867 4,229 6,654 518,971 ¥(1,161) Millions of yen 2015 Fair value ¥123,821 324,199 215,200 10,751 673,971 151,867 62,648 — 10,203 41,190 165,733 2,605 6,925 441,171 ¥(2,356) Millions of yen 2014 Fair value ¥151,474 314,955 163,193 9,770 639,392 159,925 84,776 10,000 48,520 41,278 166,661 4,233 6,632 522,025 ¥(1,161) Difference ¥— — — (8) (8) — — — — (1,190) (1,966) (2) 12 (3,146) ¥— Difference ¥— — — 4 4 — — — — (1,278) (1,794) (4) 22 (3,054) ¥— Cash and deposits Notes and accounts receivable—trade Allowance for doubtful accounts (*1) Short-term investment securities and investment securities Other securities Long-term loans receivable Total assets Notes and accounts payable—trade Short-term loans payable Commercial paper Income taxes payable Bonds payable Long-term loans payable Lease obligations Long-term guarantee deposits Total liabilities Derivative ﬁ nancial instruments (*2) Carrying amount $1,030,553 2,709,680 (11,394) 2,698,285 1,791,094 89,538 5,609,480 1,263,978 521,415 — 84,919 332,917 1,363,021 21,665 57,736 3,645,651 $(19,609) Thousands of U.S. dollars 2015 Fair value $1,030,553 Difference $— 2,698,285 — 1,791,094 89,480 5,609,413 1,263,978 521,415 — 84,919 342,821 1,379,384 21,681 57,636 3,671,835 $(19,609) — (67) (67) — — — — (9,904) (16,363) (17) 100 (26,184) $— (*1) This reduction represents speciﬁ c allowance for doubtful accounts related to notes and 3) Long-term loans payable accounts receivable—trade. (*2) The amounts represent net amount of assets and liabilities resulting from derivative transactions. In the case of a net liability, the amount is shown in parentheses. Note 1) Method to determine the estimated fair value of ﬁ nancial instruments; securities and derivative ﬁ nancial instruments i) Assets 1) Cash and deposits, notes and accounts receivable—trade As their fair value approximates book value due to their short maturity, the corresponding book value amount is used as fair value. 2) Short-term investment securities and investment securities The stock exchange prices are used to determine fair value of traded stocks, and the corresponding book value amount is used as fair value of money market funds, because their fair value approximates book value. Refer to the Note 11 “Marketable securities and investment securities” for information on securities classiﬁ ed by holding purpose. 3) Long-term loans receivable The carrying amounts shown include long-term loans receivable scheduled for repayment within one year. Their fair values are determined based on the present value of principal and interest, discounted using current assumed rates for similar long-term loans receivable. For long-term loans receivable bearing variable interest rates, as they are deemed to reﬂ ect market interest rates within a short term, book values are used as fair value. ii) Liabilities 1) Notes and accounts payable—trade; short-term loans payable; commercial paper; income taxes payable As their fair values approximate book value due to their short maturity, the corresponding book value amounts are used as fair value. 2) Bonds payable Fair value of the bonds payable issued by the parent company is based on the quoted market price if available. For those without a quoted market price that are subject to special treatment for interest-rate swaps, fair value is based on the present value by totaling the amount of principal and interest, together with related interest-rate swaps, discounted by the interest rate that would apply if equivalent bonds were newly issued. The carrying amounts shown include long-term loans payable that are scheduled for repayment within one year of March 31, 2015 and 2014, amounting to ¥33,367 million (US$277,711 thousand) and ¥18,830 million, respectively. Their fair values are based on present value of principal and interest discounted using the current assumed rates for similar long-term loans payable. For long-term loans payable bearing variable interest rates, fair value of those subject to special treatment of interest rate-swaps is based on present value by totaling the amount of principal and interest, together with related interest-rate swaps, discounted by the interest rate that would apply if equivalent long-term loans were newly entered. For other long-term loans payable, book value is used as fair value as they are deemed to reﬂ ect market interest rates within a short term. 4) Lease obligations The carrying amounts shown are the total amount of lease obligations under current liabilities and lease obligations under noncurrent liabilities. Present value, calculated by discounting the total amount of principal and interest using the presumed interest rate that would apply if lease transactions were newly made, is used as the fair value. 5) Long-term guarantee deposits In cases where the deposit period can be estimated, the fair value of long-term guarantee deposits is determined using a discounted cash ﬂ ow over that period. iii) Derivative transactions Refer to the Note 12 “Derivative ﬁ nancial instruments.” Note 2) For equity investments in nonpublic companies, with a carrying amount as of March 31, 2015 and 2014, amounting to ¥75,995 million (US$632,501 thousand) and ¥75,226 million, respectively, fair value is not included in short-term investment securities and investment securities, as no quoted market price is available and it is deemed extremely difﬁ cult to determine fair value due to the impossibility of estimating future cash ﬂ ows. Note 3) For long-term guarantee deposits, the fair value of a portion having a carrying amount as of March 31, 2015 and 2014, amounting to ¥12,209 million (US$101,615 thousand) and ¥12,245 million, respectively, is not included as no quoted market price is available and it is deemed extremely difﬁ cult to determine fair value due to the impossibility of estimating future cash ﬂ ows. Note 4) For monetary credits and securities with maturity, the amounts scheduled for redemption subsequent to the closing date are as follows. Asahi Kasei Report 2015 83 Cash and deposits Notes and accounts receivable—trade Long-term loans receivable Cash and deposits Notes and accounts receivable—trade Long-term loans receivable Cash and deposits Notes and accounts receivable—trade Long-term loans receivable Millions of yen 2015 Due within one year Due after one year, within ﬁ ve years Due after ﬁ ve years, within ten years Due after more than ten years ¥123,821 325,568 806 ¥450,196 ¥— — 9,952 ¥9,952 ¥— — — ¥— ¥— — — ¥— Millions of yen 2014 Due within one year Due after one year, within ﬁ ve years Due after ﬁ ve years, within ten years Due after more than ten years ¥151,474 316,705 593 ¥468,773 ¥— — 8,969 ¥8,969 ¥— — 205 ¥205 ¥— — — ¥— Thousands of U.S. dollars 2015 Due within one year Due after one year, within ﬁ ve years Due after ﬁ ve years, within ten years Due after more than ten years $1,030,553 2,709,680 6,708 $3,746,950 $— — 82,830 $82,830 $— — — $— $— — — $— Note 5) For bonds payable, long-term loans payable, lease obligations, and other interest-bearing debt, the amounts scheduled for repayment subsequent to the closing date are as follows. Millions of yen 2015 Commercial paper Bonds payable Long-term loans payable Lease obligations ¥— — — — — ¥— ¥— — 20,000 — 20,000 ¥— ¥33,367 41,046 20,566 49,468 11,208 ¥8,112 Millions of yen 2014 ¥1,383 908 227 59 22 ¥2 Commercial paper Bonds payable Long-term loans payable Lease obligations ¥10,000 — — — — ¥— ¥— — — 20,000 — ¥20,000 ¥18,830 31,457 39,143 17,975 45,009 ¥12,453 Thousands of U.S. dollars 2015 Commercial paper Bonds payable $— — — — — $— $— — 166,459 — 166,459 $— Long-term loans payable $277,711 341,623 171,169 411,719 93,283 $67,516 ¥1,784 1,367 848 168 21 ¥40 Lease obligations $11,511 7,557 1,889 491 183 $17 Short-term loans payable ¥62,648 — — — — ¥— Short-term loans payable ¥84,776 — — — — ¥— Short-term loans payable $521,415 — — — — $— Total ¥97,398 41,954 40,793 49,527 31,230 ¥8,114 Total ¥115,390 32,824 39,991 38,144 45,030 ¥32,493 Total $810,637 349,180 339,517 412,210 259,925 $67,532 Year ending March 31 2016 2017 2018 2019 2020 2021 and thereafter Year ending March 31 2015 2016 2017 2018 2019 2020 and thereafter Year ending March 31 2016 2017 2018 2019 2020 2021 and thereafter 84 Asahi Kasei Report 2015 11. Marketable securities and investment securities (a) Other securities with available fair value The aggregate cost, carrying amount which was identical to fair value, and gross unrealized gains and losses of debt and equity securities classiﬁ ed as other securities for which fair values were available at March 31, 2015 and 2014, were as follows: Securities with unrealized gains: Equity securities Others Subtotal Securities with unrealized losses: Equity securities Others Subtotal Securities with unrealized gains: Equity securities Others Subtotal Securities with unrealized losses: Equity securities Others Subtotal Securities with unrealized gains: Equity securities Others Subtotal Securities with unrealized losses: Equity securities Others Subtotal Millions of yen 2015 Cost ¥39,063 — 39,063 7,060 1,802 8,862 ¥47,925 Millions of yen 2014 Cost ¥34,203 — 34,203 12,020 — 12,020 ¥46,223 Thousands of U.S. dollars 2015 Cost $325,119 — 325,119 58,760 14,998 73,758 $398,876 Carrying amount ¥206,513 — 206,513 6,884 1,802 8,686 ¥215,200 Carrying amount ¥151,902 — 151,902 11,291 — 11,291 ¥163,193 Carrying amount $1,718,793 — 1,718,793 57,295 14,998 72,293 $1,791,094 (b) Realized gains and losses on the sale of other securities The realized gains and losses on the sale of other securities during the years ended March 31, 2015 and 2014, were as follows: Selling amount Gain on sales of securities Loss on sales of securities Millions of yen 2015 ¥3,005 2,756 ¥— 2014 ¥990 330 ¥— Unrealized gains (losses) ¥167,450 — 167,450 (176) — (176) ¥167,274 Unrealized gains (losses) ¥117,698 — 117,698 (729) — (729) ¥116,970 Unrealized gains (losses) $1,393,675 — 1,393,675 (1,465) — (1,465) $1,392,210 Thousands of U.S. dollars 2015 $25,010 22,938 $— (c) Loss on other devaluation of investment securities whose fair values are readily determinable Loss on other devaluation of investment securities whose fair values are readily determinable for the year ended March 31, 2015, was ¥1,656 million (US$13,783 thousand), which is the sum of ¥1,649 million (US$13,725 thousand) for equity securities of unconsolidated subsidiaries and afﬁ liates, and ¥7 million (US$58 thousand) for other securities, and for the year ended March 31, 2014, ¥1,223 million, which is for other securities. Among the loss on other devaluation of investment securities for the year ended March 31, 2015, ¥520 million (US$4,328 thousand) was recorded under business structure improvement expenses. Asahi Kasei Report 2015 85 12. Derivative ﬁ nancial instruments (a) Derivative ﬁ nancial instruments for which hedge accounting is not applied i) Foreign exchange forward contracts Classiﬁ cation Items Amount of contract Amount of contract over 1 year Fair value Proﬁ t (loss) from valuation Millions of yen 2015 Foreign exchange forward contracts Selling Off-market transactions U.S. dollar Euro Thai baht Buying U.S. dollar ¥21,592 6,486 988 2,672 ¥31,738 ¥— — — 260 ¥260 ¥(332) 135 (27) (263) ¥(486) ¥(332) 135 (27) (263) ¥(486) Millions of yen 2014 Classiﬁ cation Items Amount of contract Amount of contract over 1 year Fair value Proﬁ t (loss) from valuation Foreign exchange forward contracts Selling Off-market transactions U.S. dollar Euro Thai baht Buying U.S. dollar ¥19,904 6,114 1,157 3,501 ¥30,676 ¥— — — 166 ¥166 ¥(267) (80) (26) (661) ¥(1,035) ¥(267) (80) (26) (661) ¥(1,035) Thousands of U.S. dollars 2015 Classiﬁ cation Items Amount of contract Amount of contract over 1 year Fair value Proﬁ t (loss) from valuation Foreign exchange forward contracts Selling Off-market transactions U.S. dollar Euro Thai baht Buying U.S. dollar $179,709 53,983 8,223 22,239 $264,153 $— — — 2,164 $2,164 $(2,763) 1,124 (225) (2,189) $(4,045) $(2,763) 1,124 (225) (2,189) $(4,045) (b) Derivative ﬁ nancial instruments for which hedge accounting is applied i) Foreign exchange forward contracts Classiﬁ cation Items Hedged assets/liabilities Amount of contract Foreign exchange forward contracts Selling Millions of yen 2015 Amount of contract over 1 year Principle-based accounting U.S. dollar Euro Buying U.S. dollar Thai baht U.S. dollar Accounts receivable—trade Accounts receivable—trade Accounts payable—trade Accounts payable—trade Investment securities ¥2,039 — 1,791 55 195,205 ¥199,089 ¥— — — — — ¥— Fair value ¥43 — 79 2 (1,995) ¥(1,870) 86 Asahi Kasei Report 2015 Classiﬁ cation Items Hedged assets/liabilities Amount of contract Foreign exchange forward contracts Selling Millions of yen 2014 Amount of contract over 1 year Principle-based accounting U.S. dollar Euro Buying U.S. dollar Thai baht U.S. dollar Accounts receivable—trade Accounts receivable—trade Accounts payable—trade Accounts payable—trade Investment securities ¥3,887 109 1,149 65 — ¥5,210 ¥— — — — ¥— Classiﬁ cation Items Hedged assets/liabilities Amount of contract Foreign exchange forward contracts Selling Thousands of U.S. dollars 2015 Amount of contract over 1 year Principle-based accounting U.S. dollar Euro Buying U.S. dollar Thai baht U.S. dollar Accounts receivable—trade Accounts receivable—trade $16,970 — Accounts payable—trade Accounts payable—trade Investment securities 14,906 458 1,624,677 $1,657,004 $— — — — — $— ii) Interest-rate swaps, and interest-rate and currency swaps Classiﬁ cation Special treatment for interest-rate swaps Special treatment for interest-rate and currency swaps Classiﬁ cation Special treatment for interest-rate swaps Special treatment for interest-rate and currency swaps Classiﬁ cation Special treatment for interest-rate swaps Special treatment for interest-rate and currency swaps Items Hedged assets/liabilities Amount of contract Millions of yen 2015 Amount of contract over 1 year Interest-rate swaps Pay ﬁ xed/receive ﬂ oating Interest-rate and currency swaps U.S. dollar receive ﬂ oating/ Thai baht pay ﬁ xed Long-term loans payable ¥90,425 ¥77,122 Long-term loans payable — — ¥90,425 ¥77,122 Items Hedged assets/liabilities Amount of contract Millions of yen 2014 Amount of contract over 1 year Interest-rate swaps Pay ﬁ xed/receive ﬂ oating Interest-rate and currency swaps U.S. dollar receive ﬂ oating/ Thai baht pay ﬁ xed Long-term loans payable ¥88,580 ¥76,317 Long-term loans payable 321 — ¥88,901 ¥76,317 Items Hedged assets/liabilities Amount of contract Thousands of U.S. dollars 2015 Amount of contract over 1 year Interest-rate swaps Pay ﬁ xed/receive ﬂ oating Interest-rate and currency swaps U.S. dollar receive ﬂ oating/ Thai baht pay ﬁ xed Long-term loans payable $752,601 $641,881 Long-term loans payable — — $752,601 $641,881 Fair value ¥(139) (1) 13 (0) — ¥(126) Fair value $358 — 658 17 (16,604) $(15,564) Fair value (*) — — Fair value (*) (*) — Fair value (*) — — (*) Fair value of interest-rate swaps and interest-rate and currency swaps, for which special treatment is applied, is included in fair value of the corresponding long-term loans payable for which hedge accounting is applied. Asahi Kasei Report 2015 87 13. Provision for retirement beneﬁ ts Upon terminating employment, employees of the parent company and its major subsidiaries in Japan are entitled, under most circumstances, to lump-sum severance indemnities and/or pension payments determined by reference mainly to their current basic rate of pay and length of service. Additional beneﬁ ts may be granted to employees depending on the conditions under which termination of employment occurs. Certain foreign subsidiaries have deﬁ ned beneﬁ t pension plans or deﬁ ned contribution plans. The obligation for these severance indemnity beneﬁ ts is provided for through accruals, contributory funded deﬁ ned beneﬁ t pension plans, contributory funded deﬁ ned beneﬁ t enterprise pension plans, and non-contributory funded tax-qualiﬁ ed pension plans. Certain consolidated subsidiaries adopt the simpliﬁ ed method in calculating expected deﬁ ned beneﬁ t liability. Reconciliations of beginning and ending balances of projected beneﬁ t obligations for the ﬁ scal years ended March 31, 2015 and 2014, were as follows: Beginning balance of the projected beneﬁ t obligations Cumulative effect of changes in accounting polices Restated balance Service cost Interest cost Actuarial gains/losses Payment of retirement beneﬁ ts Other Ending balance of the projected beneﬁ t obligations Millions of yen 2015 ¥329,869 23,336 353,205 13,624 3,431 (191) (17,558) 302 ¥352,813 2014 ¥331,038 — 331,038 12,352 4,887 1,525 (20,315) 381 ¥329,869 Thousands of U.S. dollars 2015 $2,745,476 194,224 2,939,700 113,392 28,556 (1,590) (146,134) 2,514 $2,936,438 Reconciliations of beginning and ending balances of plan assets for the ﬁ scal years ended March 31, 2015 and 2014, were as follows: Beginning balance of plan assets Expected return Actuarial gains/losses Contributions Payment of retirement beneﬁ ts Other Ending balance of plan assets Millions of yen 2015 ¥188,715 4,717 19,977 10,015 (9,915) 198 ¥213,707 2014 ¥177,112 4,368 9,237 9,873 (11,971) 97 ¥188,715 Thousands of U.S. dollars 2015 $1,570,662 39,259 166,267 83,354 (82,522) 1,648 $1,778,668 Reconciliations of ending balance of projected beneﬁ t obligations and the plan assets, and of net deﬁ ned beneﬁ t liability and net deﬁ ned beneﬁ t asset, as recorded in the consolidated balance sheet at March 31, 2015 and 2014, were as follows: Projected beneﬁ t obligations of funded plans Plan assets Subtotal Projected beneﬁ t obligations of unfunded plans Net of liability and asset that have been recorded in the consolidated balance sheet Net deﬁ ned beneﬁ t liability Net deﬁ ned beneﬁ t asset Net of liability and asset that have been recorded in the consolidated balance sheet Millions of yen 2015 ¥219,775 (213,707) 6,068 133,038 139,106 142,035 (2,929) ¥139,106 2014 ¥204,264 (188,715) 15,549 125,605 141,154 143,523 (2,369) ¥141,154 Thousands of U.S. dollars 2015 $1,829,172 (1,778,668) 50,504 1,107,266 1,157,769 1,182,147 (24,378) $1,157,769 Periodic retirement beneﬁ t expenses for employees and the breakdown of items for the years ended March 31, 2015 and 2014, were as follows: Service cost (net of employee contributions) Interest cost Expected return on plan assets Amortization of actuarial gains/losses Amortization of prior service costs Additional retirement beneﬁ ts Retirement beneﬁ t expenses of deﬁ ned beneﬁ t plans 88 Asahi Kasei Report 2015 Millions of yen 2015 ¥12,037 3,431 (4,717) 5,375 142 992 ¥17,259 2014 ¥10,713 4,887 (4,368) 6,140 (547) 903 ¥17,728 Thousands of U.S. dollars 2015 $100,183 28,556 (39,259) 44,736 1,182 8,256 $143,645 The components of other comprehensive income on deﬁ ned beneﬁ t plans for the ﬁ scal years ended March 31, 2015 and 2014, were as follows: Prior service costs Actuarial gains/losses Total Millions of yen 2015 ¥142 25,543 ¥25,685 2014 ¥— — ¥— Accumulated other comprehensive income on deﬁ ned beneﬁ t plans at March 31, 2015 and 2014, was follows: Unrecognized prior service costs Unrecognized actuarial gains/losses Total Share by major classiﬁ cations for plan assets at March 31, 2015 and 2014, was as follows: Bonds Stock Alternative investments Life insurance Cash and deposits Other Total Millions of yen 2015 ¥503 11,116 ¥11,619 2014 ¥644 36,659 ¥37,303 2015 43% 24% 16% 12% 4% 1% 100% Thousands of U.S. dollars 2015 $1,182 212,593 $213,774 Thousands of U.S. dollars 2015 $4,186 92,518 $96,704 2014 41% 27% 15% 13% 3% 1% 100% Notes: 1. Alternative investments include mainly investments in real estate and hedge funds. 2. In the ﬁ scal year ended March 31, 2015, alternative investments, which had previously been included in other, are reported separately. The current and future allocation of plan assets, and the current and future long-term rate of expected return from the variety of assets that make up the plan assets, are considered in determining the long-term rate of expected return on plan assets. Major actuarial assumptions at March 31, 2015 and 2014, were as follows: Discount rate The long-term rate of expected return on plan assets Expected rate of increase in salary 2015 Mainly 0.9% Mainly 2.5% 2.3-7.3% 2014 Mainly 1.4% Mainly 2.5% 2.3-7.3% Required payments to deﬁ ned contribution plans at March 31, 2015, amounted to ¥774 million (US$6,442 thousand), and at March 31, 2014, amounted to ¥578 million. Asahi Kasei Report 2015 89 14. Taxes Income taxes applicable to the parent company and subsidiaries in Japan include (1) corporation tax, (2) enterprise tax, and (3) inhabitants tax. Signiﬁ cant components of deferred tax assets and liabilities at March 31, 2015 and 2014, were as follows: Deferred tax assets: Net deﬁ ned beneﬁ t liability Tax loss carry forwards Accrued bonuses Unrealized gain on noncurrent assets and others Impairment losses Loss on disposal of noncurrent assets Depreciation Unrealized loss on investment securities Accrued enterprise tax Provision for product warranties Devaluation of inventories Provision for periodic repairs Asset retirement obligations Allowance for doubtful accounts Deferred gains or losses on hedges Environmental expenses Experiment and research expenses Other Subtotal deferred tax assets Less: Valuation allowance Total deferred tax assets Deferred tax liabilities: Unrealized gain on other securities Identiﬁ ed intangible assets during business combination Deferred gain on property, plant and equipment Depreciation—overseas subsidiaries Accelerated depreciation Other Total deferred tax liabilities Millions of yen 2015 2014 ¥44,782 15,474 8,125 4,481 4,180 4,071 2,968 2,553 1,537 1,261 1,217 1,198 918 758 678 313 115 11,123 105,753 (19,314) 86,439 (55,582) (34,704) (9,406) (5,149) (203) (6,287) (111,330) ¥50,379 17,045 8,593 4,342 5,096 6,331 3,403 2,412 4,187 1,284 1,190 2,830 1,234 969 54 409 90 9,922 119,771 (24,590) 95,181 (43,469) (30,452) (10,546) (3,849) (299) (6,683) (95,297) Thousands of U.S. dollars 2015 $372,717 128,789 67,624 37,295 34,790 33,883 24,702 21,248 12,792 10,495 10,129 9,971 7,640 6,309 5,643 2,605 957 92,576 880,175 (160,749) 719,426 (462,605) (288,839) (78,285) (42,855) (1,690) (52,326) (926,592) Net deferred tax assets (liabilities) ¥(24,891) ¥(115) $(207,166) Net deferred tax assets (liabilities) at March 31, 2015 and 2014, were included in the following line items on the consolidated balance sheets. Current assets—deferred tax assets Noncurrent assets—deferred tax assets Current liabilities—other Noncurrent liabilities—deferred tax liabilities Millions of yen 2015 ¥21,707 11,351 (7) ¥(57,943) 2014 ¥27,469 16,278 (420) ¥(43,441) Thousands of U.S. dollars 2015 $180,666 94,474 (58) $(482,256) 90 Asahi Kasei Report 2015 Reconciliation of the differences between the statutory tax rate and the effective income tax rate for the years ended March 31, 2015 and 2014, was as follows: Statutory tax rate Increase (reduction) in taxes resulting from: Non-deductible expenses and non-taxable income Equalization of inhabitants taxes R&D expenses deductible from income taxes Amortization of goodwill and negative goodwill Equity in earnings (losses) of unconsolidated subsidiaries and afﬁ liates Undistributed earnings of foreign subsidiaries Difference of tax rates for foreign subsidiaries Valuation allowance Decrease in deferred tax assets due to the change in statutory tax rate Other Effective income tax rate 2015 35.6% 2014 38.0% 0.7 0.3 (4.2) 2.1 (0.4) 0.4 (2.7) (1.6) 3.2 (0.8) 32.5% 0.7 0.3 (3.5) 1.9 0.4 0.4 (0.3) (1.2) 0.9 0.1 37.7% Note: In the ﬁ scal year ended March 31, 2015, tax credits on tax incentive for investment in productivity improving assets and tax incentive for salary growth, which had previously been included in other, are included in R&D expenses deductible from income taxes due to their materiality. The ﬁ gure shown as other for the ﬁ scal year ended March 31, 2014, has been restated accordingly. The “Act for partial Revision of the Income Tax Act etc.” (Act. No. 9 of 2015) and “Act for Partial Revision of the Local tax Act, etc.” (Act No. 2 of 2015) were issued on March 31, 2015, and applied from the ﬁ scal year beginning on or after April 1, 2015. In accordance with this change, the statutory effective tax rate applied in calculating deferred tax assets and liabilities was changed from 35.6% to 33.1% from the ﬁ scal year beginning on or after April 1, 2015, and changed from 33.1% to 32.3% from the ﬁ scal year beginning on or after April 1, 2016. As a result of this change, deferred tax assets (after netting deferred tax liabilities) decreased by ¥969 million (US$8,065 thousand), income taxes—deferred increased by ¥4,996 million (US$41,581 thou- sand), net unrealized gain on other securities increased by ¥4,228 mil- lion (US$35,189 thousand), deferred gains or losses on hedges increased by ¥35 million (US$291 thousand), and remeasurements of deﬁ ned beneﬁ t plans increased by ¥166 million (US$1,382 thousand) in the consolidated ﬁ nancial statements for the ﬁ scal year ended March 31, 2015. 15. Business combinations Business combinations accounted for by the purchase method were as follows: 1. Impact Instrumentation, Inc. (a) Outline of business combination i) Name of counterparty Impact Instrumentation, Inc. ii) Nature of the businesses Manufacture and sale of respiratory care medical devices iii) Main reasons for the acquisition The addition of respiratory care devices of Impact Instrumentation, Inc. to ZOLL Medical Corporation’s product group will complement ZOLL’s product portfolio of acute critical care medical devices centered on cardiac function. iv) The acquisition date October 31, 2014 v) Statutory form of business combination Transfer of business for cash as consideration vi) Name of company after transaction ZOLL Medical Corporation vii) Basic means of materializing the acquisition Transfer of business for cash as consideration by a consolidated subsidiary of the Company. (b) The period of acquiree’s results included in the consolidated ﬁ nancial statements From November 1, 2014, to March 31, 2015 (c) Cost of acquisition and details Business transfer price Purchase price Millions of yen ¥3,061 ¥3,061 Thousands of U.S. dollars $25,476 $25,476 Note: Business transfer price includes ¥262 million (US$2,181 thousand) of contingent consideration (fair value). (d) The amount of goodwill, measurement principle, amortization method and useful life i) Amount of goodwill ¥1,356 million (US$11,286 thousand) ii) Measurement principle Goodwill is measured as the excess of the purchase price over the fair value of identiﬁ able assets acquired and liabilities assumed. iii) Amortization method and useful life Straight-line method over 10 years (e) Details of assets acquired and liabilities assumed as of the acquisition date Current assets Noncurrent assets Total assets Current liabilities Noncurrent liabilities Total liabilities Millions of yen Thousands of U.S. dollars ¥1,178 2,461 3,640 381 198 ¥578 $9,804 20,483 30,295 3,171 1,648 $4,811 (f) Nature of contingent consideration stipulated in the asset purchase agreement and its accounting treatment in the subsequent period i) Nature of contingent consideration The payment amount of contingent consideration depends on the degree of achievement of a speciﬁ ed performance metric after the acquisition date. ii) Accounting treatment in the subsequent period The Company will recognize the variable portion of contingent consideration in accordance with accounting standards general- ly accepted in the United States. Asahi Kasei Report 2015 91 (g) Amount of identiﬁ able intangible assets other than (c) Cost of acquisition and details goodwill, its details and major weighted average useful life Purchase price allocated to intangible assets and its i) major items Technology-related assets Trademarks Customer-related assets Millions of yen ¥437 22 ¥623 ii) Major weighted average useful life Technology-related assets Trademarks Customer-related assets Total Thousands of U.S. dollars $3,637 183 $5,185 13 years 5 years 7 years 10 years (h) Pro forma effects on the consolidated statements of income assuming the business combination had occurred at the beginning of the ﬁ scal year, and its measurement Information is omitted due to immateriality. This note is not audited. 2. Advanced Circulatory Systems, Inc. (a) Outline of business combination i) Name of acquiree Advanced Circulatory Systems, Inc. ii) Nature of the businesses Manufacture and sale of Intrathoracic Pressure Regulation devices iii) Main reasons for the acquisition Advanced Circulatory Systems’ novel and non-invasive Intrathoracic Pressure Regulation (IPR) therapy platform has far-reaching implications for multiple medical conditions. Increasing the accuracy of cardiopulmonary resuscitation through a combination with ZOLL’s deﬁ brillators and the IPR therapy platform will enable more lives of patients who are in critical condition to be saved. The acquisition of Advanced Circulatory Systems further demonstrates ZOLL’s commitment to offering the most comprehensive portfolio of products for acute events where rapid medical intervention is needed. iv) The acquisition date January 14, 2015 v) Statutory form of business combination Stock purchase for cash as consideration vi) Name of company after transaction Advanced Circulatory Systems, Inc. vii) Acquired voting right Voting right before the acquisition Additional voting right acquired as of the acquisition date Voting right after the acquisition 4% 96% 100% viii) Basic means of materializing the acquisition Stock purchase for cash as consideration by a consolidated subsidiary of the Company. (b) The period of acquiree’s results included in the consolidated ﬁ nancial statements From January 14, 2015, to March 31, 2015 Stock purchase price Purchase price Millions of yen ¥3,541 ¥3,541 Thousands of U.S. dollars $29,471 $29,471 Note: Stock purchase price includes ¥2,106 million (US$17,528 thousand) of contingent consideration (fair value). (d) The amount of goodwill, measurement principle, amortization method and useful life i) Amount of goodwill* ¥1,351 million (US$11,244 thousand) ii) Measurement principle Goodwill is measured as the excess of the purchase price over the fair value of identiﬁ able assets acquired and liabilities assumed. iii) Amortization method and useful life Straight-line method over 10 years * Based on provisional calculation, as the purchase price allocation is incomplete at the time of preparation of the accompanying ﬁ nancial statements. (e) Details of assets acquired and liabilities assumed as of the acquisition date Current assets Noncurrent assets Total assets Current liabilities Noncurrent liabilities Total liabilities Millions of yen Thousands of U.S. dollars ¥478 3,958 4,436 403 492 ¥895 $3,978 32,942 36,921 3,354 4,095 $7,449 (f) Nature of contingent consideration stipulated in the share purchase agreement and its accounting treatment in the subsequent period i) Nature of contingent consideration The payment amount of contingent consideration depends on the degree of achievement of speciﬁ ed milestones and a per- formance metric after the acquisition date. ii) Accounting treatment in the subsequent period The Company will recognize the variable portion of contingent consideration in accordance with accounting standards general- ly accepted in the United States. (g) Amount of identiﬁ able intangible assets other than goodwill, its details and major weighted average useful life Purchase price allocated to intangible assets and its i) major items Technology-related assets ¥2,587 Millions of yen Thousands of U.S. dollars $21,531 ii) Major weighted average useful life Technology-related assets 14 years (h) Purchase price allocation The fair value of assets and liabilities has not been determined, and the purchase price allocation has not been completed at March 31, 2015. Therefore, provisional accounting treatment has been applied based on reasonable information available at that time. (i) Pro forma effects on the consolidated statements of income assuming the business combination had occurred at the beginning of the ﬁ scal year, and its measurement Information is omitted due to immateriality. This note is not audited. 92 Asahi Kasei Report 2015 16. Asset retirement obligations (a) Outline of asset retirement obligations Due to commitments pertaining to restoration to original state before vacating in accordance with land lease agreements such as for ofﬁ ces, and due to commitments to dismantle leased buildings upon termination of lease period, etc., in accordance with lease agreements for model home parks, relevant asset retirement obligations are recorded in the consolidated balance sheets. In accordance with building lease agreements such as for the head ofﬁ ces, commitments pertaining to restoration to original state before vacating are recognized as asset retirement obligations. However, instead of recording them as the relevant asset retirement obligations under liabilities, the amount of lease deposit that cannot ultimately be expected to be collected was estimated in a reasonable manner, and of that, the amount corresponding to the ﬁ scal year ended March 31, 2015, was recorded under operating expenses. (b) Method of calculating the amount of relevant asset retirement obligations The calculation of asset retirement obligations is based on the following: expected term of use of 4 to 55 years, inﬂ ation rate of 0.0% to 4.1%, and discount rate of 0.2% to 6.4%. (c) Increase (decrease) in the total amount of asset retirement obligations in the ﬁ scal years ended March 31, 2015 and 2014. Balance at beginning of year Increase due to asset retirement obligations accrued Adjustment due to passage of time Increase due to accounting estimates* Decrease due to fulﬁ llment of asset retirement obligations Increase (decrease) due to foreign exchange ﬂ uctuation Balance at end of year Millions of yen 2015 ¥4,050 332 123 18 (513) 29 ¥4,039 2014 ¥3,556 383 112 161 (463) 300 ¥4,050 Thousands of U.S. dollars 2015 $33,708 2,763 1,024 150 (4,270) 241 $33,616 * Increase or decrease in asset retirement obligations was made as it became clear that the cost of asset retirement will be different than originally estimated at the time of asset acquisition. The amount of lease deposit which will be written off for a certain percentage at the end of the lease period is charged to expense rather than recorded under asset retirement obligations. Increase (decrease) in those expensed amounts for the ﬁ scal years ended March 31, 2015 and 2014, were as follows: Balance at beginning of year Increase due to new lease agreements Decrease due to the cancelation of existing lease agreements Balance at end of year 17. Business segment information (a) Overview of reportable segments The Company’s business segments are based on organizational units for which separate ﬁ nancial information is available, and the Board of Directors carries out periodic review to allocate management resources and evaluate business performance. The Company is organized under a holding company conﬁ gura- tion with nine core operating companies performing operations in nine business ﬁ elds. Each core operating company lays out strategy and develops business activities in Japan and abroad. At the beginning of the ﬁ scal year ended March 31, 2015, the Company’s previous seven reportable segments of Chemicals, Fibers, Homes, Construction Materials, Electronics, Health Care, and Critical Care, together with an “Others” category, have been changed to the four reportable segments of Chemicals & Fibers, Homes & Construction Materials, Electronics, and Health Care, together with an “Others” category, in accordance with a change in the governance conﬁ guration to enhance the management foundation in the business ﬁ elds that the Company is focused on, to obtain more transparent governance, and to enable ﬂ exible adaptation to changes in the operating environment. The ﬁ gures for the ﬁ scal year ended March 31, 2014, have been recal- culated in accordance with the new segment conﬁ guration for com- parison purposes. Main products of the four reportable segments are as follows: Chemicals and Fibers segment Chemicals business The Company produces, processes, and sells petrochemical products (such as nitric acid, caustic soda, acrylonitrile, styrene, methyl methac- rylate (MMA), and acrylic resin, Suntec™ polyethylene, and polysty- rene), performance polymer products (such as Stylac™-AS Millions of yen 2015 ¥1,652 14 (17) ¥1,650 2014 ¥1,629 114 (90) ¥1,652 Thousands of U.S. dollars 2015 $13,749 117 (141) $13,733 styrene-acrylonitrile, Stylac™-ABS acrylonitrile-butadiene-styrene, Tenac™ polyacetal, Xyron™ modiﬁ ed polyphenylene ether (mPPE), adipic acid, Leona™ polyamide 66, and synthetic rubber), and specialty products (such as coating materials, latex, Ceolus™ microcrystalline cellulose, explosives, explosion-bonded metal clad, Microza™ UF and MF membranes and systems, ion-exchange membranes and electrolysis systems, Saran Wrap™ cling ﬁ lm, Ziploc™ storage bags, and plastic ﬁ lms, sheets, and foams). Fibers business The Company produces, processes, and sells Roica™ elastic polyure- thane ﬁ lament, Bemberg™ cupro ﬁ ber, nonwoven fabrics (such as Eltas™ spunbond and Lamous™ artiﬁ cial suede), and Leona™ nylon 66 ﬁ lament. Homes and Construction Materials segment Homes business The Company constructs Hebel Haus™ unit homes and Hebel Maison™ apartments, and operates real estate businesses (such as management of Hebel Maison™ rental units, Atlas™ condominiums, Hebel Town™ housing developments, and brokerage of used Hebel Haus™ homes), remodeling businesses (such as exterior wall refurbishing, rerooﬁ ng, redesign, interior renovation, and solar panel installation), and ﬁ nancial and other services (such as mortgage ﬁ nancing, etc.). Construction Materials business The Company produces and sells Hebel™ and Hebel Powerboard™ autoclaved aerated concrete (AAC) panels, Neoma™ and Jupii™ phe- nolic foam insulation panels, Eazet™, ATT Column™, and other piling systems, and BasePack™ column base attachment systems. Asahi Kasei Report 2015 93 Electronics segment The Company manufactures and sells Hipore™ Li-ion battery separa- tors, photomask pellicles, APR™ photosensitive resin and printing plate making systems, Pimel™ photosensitive polyimide precursor, Sunfort™ photosensitive dry ﬁ lm, mixed-signal LSIs, Hall elements, and glass fabric for printed wiring boards. Health Care segment Health Care business The Company manufactures and sells pharmaceuticals (such as Teribone™, Recomodulin™, Elcitonin™, Flivas™, Toledomin™, and Bredinin™), Lucica™ GA-L assay kits, L-series enriched liquid diets, APS™ polysulfone-membrane artiﬁ cial kidneys, therapeutic apheresis devices, Planova™ virus removal ﬁ lters, and Sepacell™ leukocyte reduction ﬁ lters. Critical Care business The Company manufactures and sells deﬁ brillators for medical profes- sionals, LifeVest™ wearable deﬁ brillators, ZOLL AED Plus™ automated external deﬁ brillators, and IVTM—Thermogard XP™ intravascular tem- perature management systems. (b) Methods to determine net sales, income or loss, assets, and other items by reportable business segment Proﬁ t by reportable business segment is stated on an operating income basis. Intersegment net sales and transfers are based on the values of transactions undertaken between third parties. (c) Information concerning net sales, income or loss, assets, and other items for each reportable segment Millions of yen 2015 Chemicals & Fibers Homes & Construction Materials Electronics Health Care Subtotal Others (Note 1) Total ¥954,623 ¥603,786 ¥150,388 ¥257,133 ¥1,965,929 ¥20,476 ¥1,986,405 18,216 68 544 41 18,868 972,838 603,853 150,932 257,174 1,984,798 64,624 63,037 14,300 30,845 172,806 22,283 42,760 949 41,152 2,027,557 173,755 810,787 414,028 179,102 501,990 1,905,906 62,874 1,968,780 Sales: External customers Intersegment Total Operating income Assets Other items Depreciation (Note 2) Amortization of goodwill Investments in afﬁ liates accounted for using equity method Increase in property, plant and equipment, and intangible assets 35,655 484 46,243 9,430 13,874 — — 17 304 20,104 8,555 79,064 9,056 1,094 264 80,158 9,320 — 46,547 17,013 63,560 ¥41,718 ¥10,864 ¥11,600 ¥16,595 ¥80,776 ¥1,389 ¥82,165 Notes: 1. The “Others” category includes plant engineering and environmental engineering, research and analysis, and employment agency/stafﬁ ng operations. 2. Amortization of goodwill is not included. Sales: External customers Intersegment Total Operating income Assets Other items Depreciation (Note 2) Amortization of goodwill Investments in afﬁ liates accounted for using equity method Increase in property, plant and equipment, and intangible assets Millions of yen 2014 Chemicals & Fibers Homes & Construction Materials Electronics Health Care Subtotal Others (Note 1) Total ¥912,505 ¥589,380 ¥144,995 ¥232,387 ¥1,879,267 ¥18,499 ¥1,897,766 17,149 84 490 39 17,762 929,655 589,464 145,485 232,425 1,897,029 47,447 68,517 14,239 26,742 156,945 775,386 399,220 174,883 476,765 1,826,254 23,767 42,266 1,745 62,935 41,529 1,939,295 158,690 1,889,190 36,969 553 40,657 — — 8,069 14,303 20,017 8,015 79,357 8,583 994 240 80,351 8,823 15 2,954 41 43,652 17,948 61,601 ¥38,762 ¥15,037 ¥14,583 ¥18,154 ¥86,536 ¥1,395 ¥87,930 Notes: 1. The “Others” category includes plant engineering and environmental engineering, research and analysis, and employment agency/stafﬁ ng operations. 2. Amortization of goodwill is not included. 94 Asahi Kasei Report 2015 Thousands of U.S. dollars 2015 Chemicals & Fibers Homes & Construction Materials Electronics Health Care Subtotal Others (Note 1) Total $7,945,260 $5,025,268 $1,251,669 $2,140,100 $16,362,289 $170,420 $16,532,709 151,610 566 4,528 341 157,037 185,460 342,505 8,096,862 5,025,826 1,256,196 2,140,441 16,519,334 355,888 16,875,214 537,861 524,653 119,018 256,721 1,438,252 7,898 1,446,151 6,748,123 3,445,926 1,490,653 4,178,027 15,862,722 523,296 16,386,017 296,754 78,485 115,472 167,324 141 71,203 658,044 75,372 9,105 2,197 667,149 77,570 4,028 384,877 — — 2,530 — 387,407 141,598 529,005 Sales: External customers Intersegment Total Operating income Assets Other items Depreciation (Note 2) Amortization of goodwill Investments in afﬁ liates accounted for using equity method Increase in property, plant and equipment, and intangible assets $347,216 $90,420 $96,546 $138,119 $672,293 $11,561 $683,854 Notes: 1. The “Others” category includes plant engineering and environmental engineering, research and analysis, and employment agency/stafﬁ ng operations. 2. Amortization of goodwill is not included. (d) Reconciliation of differences between total amounts of reportable segments and amounts appearing in the consolidated ﬁ nancial statements (adjustment of difference) Sales Total of reporting segments Net sales in “Others” category Elimination of intersegment transactions Net sales on consolidated statements of income Operating income Total of reporting segments Operating income in “Others” category Elimination of intersegment transactions Corporate expenses, etc.* Operating income on consolidated statements of income Millions of yen 2015 ¥1,984,798 42,760 (41,152) ¥1,986,405 2014 ¥1,897,029 42,266 (41,529) ¥1,897,766 Millions of yen 2015 ¥172,806 949 1,087 (16,910) ¥157,933 2014 ¥156,945 1,745 359 (15,702) ¥143,347 * Corporate expenses, etc. include corporate revenue, basic research expense, and group management expense, etc. which are not allocated to reporting segments. Assets Total of reporting segments Assets in “Others” category Elimination of intersegment transactions Corporate assets* Total assets on consolidated balance sheets Millions of yen 2015 ¥1,905,906 62,874 (249,428) 295,179 ¥2,014,531 2014 ¥1,826,254 62,935 (238,714) 264,613 ¥1,915,089 Thousands of U.S. dollars 2015 $16,519,334 355,888 (342,505) $16,532,709 Thousands of U.S. dollars 2015 $1,438,252 7,898 9,047 (140,741) $1,314,465 Thousands of U.S. dollars 2015 $15,862,722 523,296 (2,075,972) 2,456,754 $16,766,800 * Corporate assets include assets of the parent company—surplus operating funds (cash and deposits), long-term investment capital (investment securities, etc.), and land, etc. Asahi Kasei Report 2015 95 Total of reportable segments Others Adjustments (Note 1) Amounts from consolidated ﬁ nancial statements Millions of yen Thousands of U.S. dollars Millions of yen Thousands of U.S. dollars Millions of yen Thousands of U.S. dollars Millions of yen Thousands of U.S. dollars Other items 2015 2014 2015 2015 2014 2015 2015 2014 2015 2015 2014 2015 Depreciation (Note 2) ¥79,064 ¥79,357 $658,044 ¥1,094 $9,105 ¥5,900 ¥5,701 $49,105 ¥86,058 ¥86,052 $716,255 9,056 8,583 75,372 264 2,197 ¥994 240 46,547 43,652 387,407 17,013 17,948 141,598 — — — — — 9,320 8,823 77,570 — 63,560 61,601 529,005 Amortization of goodwill Investments in afﬁ liates accounted for using the equity method Increase in property, plant and equipment, and intangible assets ¥80,776 ¥86,536 $672,293 ¥1,389 ¥1,395 $11,561 ¥6,943 ¥4,466 $57,786 ¥89,108 ¥92,397 $741,640 Notes: 1. Adjustments include elimination of intersegment transactions and corporate expenses, etc. 2. Amortization of goodwill is not included. (e) Related Information i) Information on products and services Please refer to (c) Information concerning net sales, income or loss, assets, and other items for each reportable segment. ii) Geographic information 1) Net sales Millions of yen 2015 2014 Thousands of U.S. dollars 2015 Japan China Other regions Total Japan China Other regions Total Japan China Other regions Total ¥1,313,128 ¥194,007 ¥479,271 ¥1,986,405 ¥1,289,054 ¥187,247 ¥421,465 ¥1,897,766 $10,929,072 $1,614,707 $3,988,939 $16,532,709 2) Property, plant and equipment Millions of yen 2015 2014 Thousands of U.S. dollars 2015 Japan Other regions Total Japan Other regions Total Japan Other regions Total ¥361,130 ¥141,377 ¥502,507 ¥363,241 ¥117,295 ¥480,535 $3,005,660 $1,176,671 $4,182,330 3) Information by major customer Information by major customer is not shown because no customer accounts for 10% or more of net sales on the consolidated statements of income. 18. Information on related parties Related party transactions Transactions between consolidated subsidiaries of the company submitting the consolidated ﬁ nancial statements and related parties (a) Subsidiaries, afﬁ liates, etc. of the company submitting the consolidated ﬁ nancial statements Type of related party Name of company Location Paid-in capital Business line Share of voting rights held by the company (of which, indirectly held) Relationship with the related party Nature of transaction Transaction amount Account name Balance at end of year An afﬁ liated company PTT Asahi Chemical Co., Ltd. Rayong, Thailand 14,246 million Thai baht Chemicals 48.5% (48.5%) Debt guarantee Guarantee for completion of manufacturing facilities ¥16,250 million ($135,248 thousand) in the year ended March 31, 2015, ¥16,416 million in the year ended March 31, 2014 — — 96 Asahi Kasei Report 2015 (b) Directors, Corporate Auditors, major shareholders, etc. of the company submitting the consolidated ﬁ nancial statements Type of related party Name of company Location Paid-in capital Business line Share of voting rights held by the related party Relationship with the related party Nature of transaction Transaction amount Account name Balance at end of year Type of related party Name of company Location Paid-in capital Business line Share of voting rights held by the related party Relationship with the related party Nature of transaction Transaction amount Account name Balance at end of year A company in which close relative(s) of a Director or Corporate Auditor of the Company hold(s) a majority of voting rights Miwa-Syouji Co., Ltd. Nobeoka, Miyazaki, Japan ¥65 million ($541 thousand) Wholesale trade 0.0% Purchasing consumable goods Purchasing consumable goods ¥228 million ($1,898 thousand) in the year ended March 31, 2015, no transactions in the year ended March 31, 2014 Accrued expenses ¥43 million ($358 thousand) as of March 31, 2015, no balance as of March 31, 2014 A company in which close relative(s) of a Director or Corporate Auditor of the Company hold(s) a majority of voting rights Miwa Vinyl Co., Ltd. Nobeoka, Miyazaki, Japan ¥10 million ($83 thousand) Manufacture and sale of plastic packaging material — Purchasing raw materials Purchasing raw materials ¥49 million ($408 thousand) in the year ended March 31, 2015, no transactions in the year ended March 31, 2014 Notes and accounts payable—trade ¥2 million ($17 thousand) as of March 31, 2015, no balance as of March 31, 2014 Notes: 1. Transaction amounts are shown net of consumption taxes, while balances at end of year include consumption taxes. 2. Transaction terms and the policy of deciding transaction terms: Ordinary transaction terms are applied to the purchase of products. 19. Per share information Basic and diluted net assets per share and net income per share for the years ended March 31, 2015 and 2014, were as follows: Basic net assets per share Basic net income per share (a) Basis for calculation of net assets per share Total net assets Amount deducted from total net assets of which, minority interests Net assets allocated to capital stock Yen 2015 ¥775.05 ¥75.62 2014 ¥653.15 ¥72.48 Millions of yen 2015 ¥1,097,722 15,068 (15,068) ¥1,082,654 2014 ¥925,766 13,067 (13,067) ¥912,699 U.S. dollars 2015 $6.45 $0.63 Thousands of U.S. dollars 2015 $9,136,263 125,410 (125,410) $9,010,853 Number of shares of capital stock outstanding at ﬁ scal year end used in calculation of net assets per share (thousand) 1,396,873 1,397,386 1,396,873 (b) Basis for calculation of net income per share Net income Amount not allocated to capital stock Net income allocated to capital stock Weighted-average number of shares of capital stock (thousand) Millions of yen 2015 ¥105,652 — ¥105,652 1,397,094 2014 ¥101,296 — ¥101,296 1,397,501 Thousands of U.S. dollars 2015 $879,334 — $879,334 1,397,094 As the Company had no dilutive securities at March 31, 2015 and 2014, the Company does not disclose diluted net income per share for the years ended March 31, 2015 and 2014. Asahi Kasei Report 2015 97 20. Additional information Asahi Kasei Corporation has entered into a deﬁ nitive merger agreement to acquire Polypore International, Inc. (NYSE:PPO, hereinafter: “Polypore”), a manufacturer of microporous membranes, which currently has two business segments: Energy Storage and Separations Media. In conjunction with this transaction, Polypore also announced that it has entered into a deﬁ nitive asset purchase agreement to sell the assets and liabilities related to the Separations Media segment to 3M Company (NYSE:MMM, hereinafter: “3M”) for cash consideration of approximately US$1.0 billion. Polypore is a compelling ﬁ t with Asahi Kasei’s electronic materials business, led by Asahi Kasei’s Hipore™ lithium-ion battery (“LIB”) separator with applications in energy storage for both consumer electronics and automotive applications. Asahi Kasei, through its U.S. subsidiary ESM Holdings Corporation which was established for this acquisition, will acquire all of the outstanding shares of Polypore’s common stock for US$60.50 per share, which is a 28.4% premium over the average stock price during the one month period up to February 20, 2015, in the form of a cash merger, which would occur immediately after the closing of the sale of the Separations Media segment to 3M. As a result of these transactions, Asahi Kasei will acquire Polypore’s Energy Storage business for total net consideration of approximately US$2.2 billion. The transactions have been approved by the Boards of Directors of Asahi Kasei, 3M, and Polypore, and are subject to customary conditions, including approval of Polypore’s shareholders and receipt of applicable regulatory clearances. 21. Borrowings (a) Bonds payable at March 31, 2015 and 2014, comprised the following: Unsecured 1.46% yen bonds due in 2019 Unsecured 0.30% yen bonds due in 2017 Total Notes: 1. The current portion of bonds payable is recorded under current liabilities on the consolidated balance sheets. 2. The aggregate annual maturities of long-term debt after March 31, 2015, are as follows: Year ending March 31 2016 2017 2018 2019 2020 2021 and thereafter (b) Loans payable at March 31, 2015 and 2014, comprised the following: Short-term loans payable with an interest rate of 0.59% Current portion of long-term loans payable with an interest rate of 0.60% Current portion of lease obligations with an interest rate of 1.41% Long-term loans payable (except portion due within one year) with an interest rate of 0.71% Lease obligations (except portion due within one year) with an interest rate of 1.35% Commercial paper (due within one year) Millions of yen 2015 ¥20,000 20,000 ¥40,000 2014 ¥20,000 20,000 ¥40,000 Millions of yen ¥— — 20,000 — 20,000 — ¥40,000 Millions of yen 2015 ¥62,648 33,367 1,383 130,400 1,219 — ¥229,018 2014 ¥84,776 18,830 1,784 146,037 2,445 10,000 ¥263,872 Thousands of U.S. dollars 2015 $166,459 166,459 $332,917 Thousands of U.S. dollars $— — 166,459 — 166,459 — $332,917 Thousands of U.S. dollars 2015 $521,415 277,711 11,511 1,085,310 10,146 — $1,906,101 Notes: 1. Interest rates shown are weighted average interest rates for the balance outstanding at March 31, 2015. 2. The aggregate annual maturities of long-term loans payable and lease obligations (except portion due within one year) after March 31, 2016, are as follows: Year ending March 31 2017 2018 2019 2020 2021 and thereafter Long-term loans payable Lease obligations Millions of yen ¥41,046 20,566 49,468 11,208 ¥8,112 Thousands of U.S. dollars $341,623 171,169 411,719 93,283 $67,516 Millions of yen Thousands of U.S. dollars ¥908 227 59 22 ¥2 $7,557 1,889 491 183 $17 98 Asahi Kasei Report 2015 Asahi Kasei Report 2015 99 Major Subsidiaries and Afﬁ liates As of May 31, 2015 Paid-in capital (million) Equity interest (%) Main products/business line Chemicals Packaging products and solutions Specialty chemicals Cling ﬁ lm, other household products Aluminum paste Sale of civil engineering materials Shotgun cartridges Water treatment equipment, environmental chemicals Processed plastic products Synthetic rubber Polystyrene Biaxially oriented polystyrene sheet Silicone Industrial explosives Coloring and compounding of performance resin Compounded performance resin operations Sale of purging compound Acrylonitrile, sodium cyanide Sale of adipic acid High-performance HDI-based polyisocyanate Polyacetal Industrial ﬁ ltration membranes and systems Sale of performance resin Sale of performance resin Sale of performance resin Company Chemicals & Fibers Segment Asahi Kasei Chemicals Corp.* Asahi Kasei Pax Corp.* Asahi Kasei Finechem Co., Ltd.* Asahi Kasei Home Products Corp.* Asahi Kasei Metals Ltd.* Asahi Kasei Geotechnologies Co., Ltd. Asahi SKB Co., Ltd. Asahi Kasei Clean Chemical Co., Ltd. Asahi Kasei Technoplus Co., Ltd.* Japan Elastomer Co., Ltd.* PS Japan Corp.* Sundic Inc. Wacker Asahikasei Silicone Co., Ltd. Kayaku Japan Co., Ltd. Asahi Kasei Plastics North America, Inc.* Asahikasei Plastics (America) Inc.* Sun Plastech Inc.* Tongsuh Petrochemical Corp., Ltd.* Asahi Kasei Chemicals Korea Co., Ltd. Asahi Kasei Performance Chemicals Corp.* Asahi Kasei POM (Zhangjiagang) Co., Ltd. Asahi Kasei Microza (Hangzhou) Co., Ltd.* Asahikasei Plastics (Shanghai) Co., Ltd. Asahi Kasei Plastics (Guangzhou) Co., Ltd. Asahi Kasei Plastics (Hong Kong) Co., Ltd. Asahikasei (Suzhou) Plastics Compound Co., Ltd. Coloring and compounding of performance resin Asahi Kasei Synthetic Rubber Singapore Pte. Ltd.* Synthetic rubber Performance resin Asahi Kasei Plastics Singapore Pte. Ltd.* PPE powder Polyxylenol Singapore Pte. Ltd.* Coloring and compounding of performance resin Asahikasei Plastics (Thailand) Co., Ltd. Acrylonitrile, methyl methacrylate PTT Asahi Chemical Co., Ltd. Sale of performance resin Asahi Kasei Plastics Europe SA/NV* Fibers, textiles Asahi Kasei Fibers Corp.* Flash spun products DuPont-Asahi Flash Spun Products Co., Ltd. Spandex Hangzhou Asahikasei Spandex Co., Ltd.* Warp-knit spandex textiles Hangzhou Asahikasei Textiles Co., Ltd.* Spandex Formosa Asahi Spandex Co., Ltd. Promotion and marketing of ﬁ bers Asahi Kasei Fibers (HK) Ltd.* Spunbond nonwovens Asahi Kasei Spunbond (Thailand) Co., Ltd.* Spandex Thai Asahi Kasei Spandex Co., Ltd.* Spandex Asahi Kasei Spandex Europe GmbH* Asahi Kasei Fibers Italy SRL* Sale of cupro cellulosic ﬁ ber and nonwovens Homes & Construction Materials Segment Asahi Kasei Homes Corp.* Asahi Kasei Fudousan Residence Corp.* Asahi Kasei Jyuko Co., Ltd.* Asahi Kasei Mortgage Corp.* Asahi Kasei Reform Co., Ltd.* Asahi Kasei Home Construction Corp.* Asahi Kasei Construction Materials Corp.* Asahi Kasei Foundation Systems Corp.* Asahi Kasei Extech Corp.* ¥ Housing Real estate development, brokerage, and related business ¥ ¥ Steel frames ¥ Financial services ¥ Home maintenance and remodeling ¥ Construction of homes ¥ Construction materials ¥ Installation of piles ¥ Exterior wall panel installation 3,000 490 325 250 250 132 100 100 160 1,000 5,000 1,500 1,050 60 ¥ ¥ ¥ ¥ ¥ ¥ ¥ ¥ ¥ ¥ ¥ ¥ ¥ ¥ US$ US$ US$ 1 KRW 237,642 KRW 1,500 285 CNY 265 CNY 69 CNY 18 CNY 10 CNY 2.6 US$ 50 CNY 160 US$ 46 US$ 35 US$ 140 THB THB 14,246 A 5 3,000 450 154 78 1,003 65 1,185 1,350 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 99.4 75.0 62.1 50.0 50.0 50.0 21.7** 100.0 17.8** 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 51.0 100.0 100.0 70.0 100.0 48.5 100.0 100.0 50.0 100.0 92.5 50.0 100.0 89.5 60.0 23.8** 100.0 100.0 ¥ ¥ CNY CNY NT$ HK$ THB THB A A 3 3,250 3,200 2,820 1,000 250 100 3,000 200 50 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 * Consolidated subsidiary ** Including capital reserve 100 Asahi Kasei Report 2015 Paid-in capital (million) Equity interest (%) 3,000 ¥ 3,000 ¥ 300 ¥ 50 ¥ 50 ¥ 50 ¥ ¥ 10 KRW 7,962 2.9 US$ 820 KRW 30 ¥ ¥ 40 181 CNY 143 CNY 14 CNY 10 NT$ 1 NT$ 49 NT$ 326 NT$ A 3.0 A 3.4 0.3 £ 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 80.6 51.0 100.0 100.0 100.0 3,000 3,000 140 100.0 ¥ 100.0 ¥ 100.0 ¥ 49** 100.0 US$ 100.0 30 US$ 100.0 US$ 0.5 100.0 KRW 1,000 100.0 165 CNY 100.0 NT$ 5 A 100.0 17.8 A 100.0 0.5 100.0 0.3 100.0 0.01 100.0 10 1,723** 100.0 100.0 SG$ YTL ¥ US$ ¥ 230 Electronic devices Electronic materials Epoxy resin LSIs Glass fabric Hall elements Fine pattern coils Energy and electronic materials Sale of LSIs Electronic devices marketing and technical support LSI design Electronic devices and printed wiring boards Electronic devices marketing and technical support Electronic devices marketing and technical support Sale of pellicles Photosensitive dry ﬁ lm Glass fabric Electronic devices marketing and technical support Sale of photopolymer, printing-plate making systems Sale of photopolymer, printing-plate making systems Pharmaceuticals Medical devices, bioprocess products Medical devices Clinical trials for new drugs, sale of pharmaceuticals Bioprocess equipment and systems Sale of medical devices, medical systems Sale of medical devices, medical systems Hemodialyzers; sale of medical devices Sale of medical devices, medical systems Sale of medical devices, medical systems Sale of virus removal ﬁ lters Sale of bioprocess products Sale of medical devices, medical systems Medical devices, bioprocess products Acute critical care devices and systems Sale of acute critical care devices in Japan Main products/business line Company Electronics Segment Asahi Kasei Microdevices Corp.* Asahi Kasei E-materials Corp.* Asahi Kasei Epoxy Co., Ltd.* Asahi Kasei Microsystems Co., Ltd.* Asahi-Schwebel Co., Ltd.* Asahi Kasei Electronics Co., Ltd.* Asahi Kasei FP Corp.* Asahi Kasei E-materials Korea Inc.* AKM Semiconductor, Inc.* Asahi Kasei Microdevices Korea Corp. AKM Technology Corp. Asahi Kasei Technosystem Co., Ltd. Asahi Kasei Electronics Materials (Suzhou) Co., Ltd.* Photosensitive dry ﬁ lm Asahi Kasei Electronics Materials (Changshu) Co., Ltd.* Photosensitive dry ﬁ lm Asahi Kasei Microdevices (Shanghai) Co., Ltd. Asahi Kasei Microdevices Taiwan Corp. Asahi Kasei EMD Taiwan Corp. Asahi Kasei Wah Lee Hi-Tech Corp.* Asahi-Schwebel (Taiwan) Co., Ltd.* Asahi Kasei Microdevices Europe SAS Asahi Photoproducts (Europe) SA/NV* Asahi Photoproducts (UK) Ltd.* Health Care Segment Asahi Kasei Pharma Corp.* Asahi Kasei Medical Co., Ltd.* Med-Tech Inc.* Asahi Kasei Pharma America Corp.* Asahi Kasei Bioprocess America. Inc.* Asahi Kasei Medical America Inc.* Asahi Kasei Medical Trading (Korea) Co., Ltd.* Asahi Kasei Medical (Hangzhou) Co., Ltd.* Asahi Kasei Medical Trading (Taiwan) Co., Ltd.* Asahi Kasei Medical Europe GmbH* Asahi Kasei Bioprocess Europe SA/NV* Asahi Kasei Bioprocess Singapore Pte. Ltd. Asahi Kasei Medical Trading Ltd. Sti.* Asahi Kasei Medical MT Corp. ZOLL Medical Corporation* Asahi Kasei ZOLL Medical Corp.* Others Asahi Research Center Co., Ltd.* Asahi Kasei Engineering Corp.* Asahi Kasei Advance Corp.* Asahi Kasei Amidas Co., Ltd.* AJS Inc. Asahi Organic Chemicals Industry Co., Ltd. Asahi Kasei America, Inc.* Asahi Kasei Holdings US, Inc.* Crystal IS, Inc.* Asahi Kasei (China) Co., Ltd.* Asahi Kasei India Pvt. Ltd. ¥ Information and analysis ¥ Plant, equipment, process engineering ¥ Sale of Asahi Kasei products ¥ Employment agency, consulting ¥ Computer software, IT systems ¥ Synthetic resin, fabricated plastic products US$ Business support services Holding company of ZOLL US$ Development of aluminum nitride substrates and UV LEDs US$ CNY Investment and business support services INR Business support services 1,000 400 500 80 800 5,000 0.1 100.0 100.0 100.0 100.0 49.0 30.1 100.0 1,723** 100.0 31.9** 100.0 100.0 275 100.0 45 * Consolidated subsidiary ** Including capital reserve Asahi Kasei Report 2015 101 Company Information Corporate Proﬁ le (as of March 31, 2015) Company Name Asahi Kasei Corporation Date of Establishment May 21, 1931 Paid-in Capital ¥103,389 million Employees 30,313 (consolidated) 1,185 (non-consolidated) Asahi Kasei Group Ofﬁ ces Asahi Kasei Corporation Core Operating Companies Tokyo Head Ofﬁ ce 1-105 Kanda Jinbocho, Chiyoda-ku Tokyo 101-8101 Japan Phone: +81-3-3296-3000 Fax: +81-3-3296-3161 Asahi Kasei (China) Co., Ltd. 8/F, One ICC Shanghai International Commerce Centre No. 999 Huai Hai Zhong Road Shanghai 200031 China Phone: +86-21-6391-6111 Fax: +86-21-6391-6686 Beijing Ofﬁ ce Room 1407 New China Insurance Tower No. 12 Jian Guo Men Wai Avenue Chao Yang District Beijing 100022 China Phone: +86-10-6569-3939 Fax: +86-10-6569-3938 Asahi Kasei America, Inc. 800 Third Avenue, 30th Floor New York, NY 10022 USA Phone: +1-212-371-9900 Fax: +1-212-371-9050 Asahi Kasei India Pvt. Ltd. The Capital 801C, Plot No. C70, G Block, Bandra Kurla Complex, Bandra (East), Mumbai 400051 India Phone: +91-22-6710-3962 102 Asahi Kasei Report 2015 Asahi Kasei Chemicals 1-105 Kanda Jinbocho, Chiyoda-ku Tokyo 101-8101 Japan Phone: +81-3-3296-3200 Asahi Kasei Fibers 3-3-23 Nakanoshima, Kita-ku Osaka 530-8205 Japan Phone: +81-6-7636-3500 Asahi Kasei Homes 1-24-1 Nishi-shinjuku, Shinjuku-ku Tokyo 160-8345 Japan Phone: +81-3-3344-7111 Asahi Kasei Construction Materials 1-105 Kanda Jinbocho, Chiyoda-ku Tokyo 101-8101 Japan Phone: +81-3-3296-3500 Asahi Kasei Microdevices 1-105 Kanda Jinbocho, Chiyoda-ku Tokyo 101-8101 Japan Phone: +81-3-3296-3911 Asahi Kasei E-materials 1-105 Kanda Jinbocho, Chiyoda-ku Tokyo 101-8101 Japan Phone: +81-3-3296-3939 Asahi Kasei Pharma 1-105 Kanda Jinbocho, Chiyoda-ku Tokyo 101-8101 Japan Phone: +81-3-3296-3600 Asahi Kasei Medical 1-105 Kanda Jinbocho, Chiyoda-ku Tokyo 101-8101 Japan Phone: +81-3-3296-3750 ZOLL Medical Corporation 269 Mill Rd., Chelmsford, MA 01824-4105 USA Phone: +1-978-421-9655 Investors Information (As of March 31, 2015) Stock Listings Stock Code Tokyo 3407 Authorized Shares 4,000,000,000 Outstanding Shares 1,402,616,332 Transfer Agent Sumitomo Mitsui Trust Bank, Ltd. Largest Shareholders % of equity* The Master Trust Bank of Japan, Ltd. (trust account) Nippon Life Insurance Co. Japan Trustee Services Bank, Ltd. (trust account) Asahi Kasei Group Employee Stockholding Assn. Sumitomo Mitsui Banking Corp. 5.24 5.23 3.90 2.54 2.53 1.45 1.45 1.40 1.37 1.32 Independent Auditors PricewaterhouseCoopers Aarata Mizuho Bank, Ltd. Number of Shareholders 85,482 Tokio Marine & Nichido Fire Insurance Co., Ltd. Sumitomo Life Insurance Co. National Mutual Insurance Federation of Agricultural Cooperatives Meiji Yasuda Life Insurance Co. * Percentage of equity ownership after exclusion of treasury stock. In this report, the TM symbol indicates a trademark or registered trademark of Asahi Kasei Corporation, afﬁ liated companies, or third parties granting rights to Asahi Kasei Corporation or afﬁ liated companies. Asahi Kasei Report 2015 103 2015旭化成e_c_1029初修正.indd 4 2015旭化成e_c_1029初修正.indd 4 2015/11/06 10:53 2015/11/06 10:53 A s a h i K a s e i R e p o r t 2 0 1 5 1-105 Kanda Jinbocho, Chiyoda-ku, Tokyo 101-8101 Japan www.asahi-kasei.co.jp/asahi/en Corporate Communications Tel: +81-3-3296-3008, Fax: +81-3-3296-3162 Printed in Japan 2015.11 2015旭化成e_c_1029初修正.indd 1 2015旭化成e_c_1029初修正.indd 1 2015/11/06 10:53 2015/11/06 10:53

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