Company name: ZUKEN Inc. Listing: Tokyo Stock … 7, 2014 Summary of Consolidated Financial Results...

May 7, 2014

Summary of Consolidated Financial Results for the Fiscal Year Ended March 31, 2014 (FY2013)

[Japanese GAAP] Company name: ZUKEN Inc. Listing: Tokyo Stock Exchange, First Section Stock code: 6947 URL: http://www.zuken.co.jp/ Representative: Makoto Kaneko, President and Representative Director Contact: Nobutaka Nishi, General Manager of Finance Department Tel: +81-45-942-1511 Scheduled date of Annual General Shareholders’ Meeting: June 27, 2014 Scheduled date of payment of dividend: June 30, 2014 Scheduled date of filing of Annual Securities Report: June 27, 2014 Preparation of supplementary materials for financial results: None Holding of financial results meeting: None

(All amounts are rounded down to the nearest million yen)

1. Consolidated Financial Results for the Fiscal Year Ended March 31, 2014 (Apr. 1, 2013–Mar. 31, 2014) (1) Consolidated results of operations (Percentages for net sales and incomes represent year-on-year changes)

Net sales Operating income Ordinary income Net income Fiscal years ended Millions of yen % Millions of yen % Millions of yen % Millions of yen %

Mar. 31, 2014 19,772 10.5 630 77.7 848 73.1 466 53.5 Mar. 31, 2013 17,887 (2.0) 354 (59.8) 489 (50.1) 304 (82.8)

Note: Comprehensive income (Millions of yen) Fiscal year ended Mar. 31, 2014: 738 (up 67.0%) Fiscal year ended Mar. 31, 2013: 441 (down 75.3%)

Net income per share Diluted net income

per share Return on equity

Ordinary income on total assets

Operating income to net sales

Fiscal years ended Yen Yen % % %

Mar. 31, 2014 20.08 - 1.7 2.2 3.2 Mar. 31, 2013 13.08 - 1.1 1.3 2.0

Reference: Equity in earnings of affiliates (Millions of yen) Fiscal year ended Mar. 31, 2014: (25) Fiscal year ended Mar. 31, 2013: (1)

(2) Consolidated financial position

Total assets Net assets Shareholders’ equity ratio Net assets per share Millions of yen Millions of yen % Yen

As of Mar. 31, 2014 38,846 27,680 70.3 1,173.84 As of Mar. 31, 2013 37,098 28,254 75.2 1,199.22

Reference: Shareholders’ equity (Millions of yen) As of Mar. 31, 2014: 27,294 As of Mar. 31, 2013: 27,885

(3) Consolidated cash flows

Cash flows from

operating activities Cash flows from

investing activities Cash flows from

financing activities Cash and cash equivalents at

end of period Fiscal years ended Millions of yen Millions of yen Millions of yen Millions of yen

Mar. 31, 2014 1,243 (706) (337) 12,306 Mar. 31, 2013 338 (708) (564) 11,766

2. Dividends

Dividend per share

Total dividends Payout ratio

(consolidated)

Dividend on equity

(consolidated) 1Q-end 2Q-end 3Q-end Year-end Total

Yen Yen Yen Yen Yen Millions of yen % %

Fiscal year ended Mar. 31, 2013 - 7.00 - 7.00 14.00 325 107.0 1.2 Fiscal year ended Mar. 31, 2014 - 7.00 - 7.00 14.00 325 69.7 1.2 Fiscal year ending Mar. 31, 2015 (forecast)

- 7.00 - 7.00 14.00 27.8

3. Consolidated Forecast for the Fiscal Year Ending March 31, 2015 (Apr. 1, 2014–Mar. 31, 2015) (Percentages represent year-on-year changes)

Net sales Operating income Ordinary income Net income Net income per

share Millions of yen % Millions of yen % Millions of yen % Millions of yen % Yen

Full year 22,300 12.8 1,600 153.9 1,670 96.9 1,170 150.5 50.32

Note: Only the full-year forecast is shown because Zuken manages performance on a fiscal year basis.

* Notes

(1) Changes in significant subsidiaries during the period (changes in specified subsidiaries resulting in change in scope

of consolidation): None (2) Changes in accounting policies and accounting-based estimates, and restatements

(a) Changes in accounting policies due to revisions in accounting standards, others: Yes

(b) Changes in accounting policies other than (a) above: None

(c) Changes in accounting-based estimates: None

(d) Restatements: None

Note: Please refer to “Changes in Accounting Policies” on page 19 for further information.

(3) Number of outstanding shares (common stock)

(a) Number of shares outstanding at the end of period (including treasury shares)

As of Mar. 31, 2014: 23,267,169 shares As of Mar. 31, 2013: 23,267,169 shares

(b) Number of treasury shares at the end of period

As of Mar. 31, 2014: 14,869 shares As of Mar. 31, 2013: 14,299 shares

(c) Average number of shares outstanding during the period

Fiscal year ended Mar. 31, 2014: 23,252,661 shares Fiscal year ended Mar. 31, 2013: 23,253,129 shares

Reference: Summary of Non-consolidated Financial Results

Non-consolidated Financial Results for the Fiscal Year Ended March 31, 2014 (Apr. 1, 2013–Mar. 31, 2014)

(1) Non-consolidated results of operations (Percentages represent year-on-year changes)

Net sales Operating income Ordinary income Net income Fiscal years ended Millions of yen % Millions of yen % Millions of yen % Millions of yen %

Mar. 31, 2014 9,372 9.2 321 - 751 652.7 526 516.3 Mar. 31, 2013 8,585 (5.5) (180) - 99 (93.9) 85 (97.3)

Net income per share Diluted net income per share Fiscal years ended Yen Yen

Mar. 31, 2014 22.63 - Mar. 31, 2013 3.67 -

(2) Non-consolidated financial position

Total assets Net assets Shareholders’ equity ratio Net assets per share Millions of yen Millions of yen % Yen

As of Mar. 31, 2014 31,048 26,594 85.7 1,143.72 As of Mar. 31, 2013 30,560 26,381 86.3 1,134.55

Reference: Shareholders’ equity (Millions of yen) As of Mar. 31, 2014: 26,594 As of Mar. 31, 2013: 26,381

* Information regarding the implementation of audit procedure

The current financial statements in this report are exempted from audit procedures based on the Financial Instruments and Exchange Act. At the time of disclosure, the audit procedures for these financial statements have not been completed.

* Cautionary statement with respect to forward-looking statements and other special items

Forecasts of future performance in this report are based on assumption judged to be valid and information available to the Company’s management at the time this report was prepared, but are not promises by the Company regarding future performance. Actual results may differ substantially from the forecasts for a number of reasons. Please refer to “Analysis of Results of Operations” on page 2 for forecast assumptions and notes of caution for usage.

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Contents of Attachments

1. Analysis of Results of Operations and Financial Position ................................................................................................................... 2

(1) Analysis of Results of Operations .................................................................................................................................................. 2

(2) Analysis of Financial Position ....................................................................................................................................................... 4

(3) Basic Policy for Profit Distribution, and Dividends in the Current and Next Fiscal Years ............................................................ 5

2. Corporate Group .................................................................................................................................................................................. 6

3. Management Policies ........................................................................................................................................................................... 8

(1) Basic Management Policy .............................................................................................................................................................. 8

(2) Performance Targets ...................................................................................................................................................................... 8

(3) Medium- and Long-term Business Strategy and Issues ................................................................................................................. 8

4. Consolidated Financial Statements .................................................................................................................................................... 10

(1) Consolidated Balance Sheet ......................................................................................................................................................... 10

(2) Consolidated Statements of Income and Comprehensive Income ................................................................................................ 12

Consolidated Statement of Income ................................................................................................................................................ 12

Consolidated Statement of Comprehensive Income ...................................................................................................................... 13

(3) Consolidated Statement of Changes in Equity ............................................................................................................................. 14

(4) Consolidated Statement of Cash Flows ........................................................................................................................................ 16

(5) Notes to Consolidated Financial Statements ................................................................................................................................ 17

Going Concern Assumption .......................................................................................................................................................... 17

Basis of Presenting the Consolidated Financial Statements ........................................................................................................... 17

Changes in Accounting Policies .................................................................................................................................................... 19

Reclassifications ............................................................................................................................................................................ 19

Notes to Consolidated Balance Sheet ............................................................................................................................................ 20

Notes to Consolidated Statement of Income .................................................................................................................................. 20

Notes to Consolidated Statement of Comprehensive Income ........................................................................................................ 21

Notes to Consolidated Statement of Changes in Equity ................................................................................................................ 21

Notes to Consolidated Statement of Cash Flows ........................................................................................................................... 22

Financial Instruments .................................................................................................................................................................... 23

Marketable Securities .................................................................................................................................................................... 25

Segment and Other Information .................................................................................................................................................... 27

Per-share Information .................................................................................................................................................................... 29

Subsequent Events ......................................................................................................................................................................... 29

Omission of Disclosure ................................................................................................................................................................. 29

5. Production, Orders and Sales ............................................................................................................................................................. 30

6. Non-consolidated Financial Statements ............................................................................................................................................. 31

(1) Balance Sheet ............................................................................................................................................................................... 31

(2) Statement of Income .................................................................................................................................................................... 33

(3) Statement of Changes in Equity ................................................................................................................................................... 34

7. Others ................................................................................................................................................................................................ 36

(1) Change in Representative Director .............................................................................................................................................. 36

(2) Changes in Other Board Members ............................................................................................................................................... 36

ZUKEN Inc. (6947) Financial Results for the Fiscal Year Ended March 31, 2014

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1. Analysis of Results of Operations and Financial Position

(1) Analysis of Results of Operations

(a) Summary of the fiscal year under review

In the fiscal year that ended on March 31, 2014, the U.S. and Japanese economies continued to recover at a

moderate pace. However, the overall economic outlook remained uncertain because of the prolonged financial

instability in some regions of Europe and slowing economic growth in China.

Among the Zuken Group’s major customer segments, electronics manufacturers remained cautious about making

capital investment but there was a clear upturn in the performance of companies in the automobile-related

manufacturing sector and the industrial equipment manufacturing sector.

Against this background, the Zuken Group took many actions aimed at becoming a “truly global company” in order

to provide the best solutions for supporting the design and manufacturing operations of manufacturers on a global

scale. Becoming a “truly global company” requires departing from the traditional business paradigm in which Japan

is always the starting point followed by other countries. We must perform planning and development activities in the

right locations, wherever our customers reside, be it in Europe, North America, Asia or Japan. Then we must use

these bases to supply the best possible solutions for manufacturers around the world. To accomplish this goal, we

made our worldwide organization much more powerful while continuing to perform extensive development and

sales activities in all our markets during the fiscal year.

The following actions were taken for enforcing our organization.

(i) In the electronics manufacturing sector, we established Zuken SOZO Center (SOZO means “creation” in

Japanese). This center plans and develops products from the global perspective, in Silicon Valley of the United

States, where many leading companies in the electronics and IT fields with global operations are located. The

center plays a key role in developing products for these companies and the first goal is to increase our North

America market share. Another goal is to provide more business opportunities in emerging countries where

these companies have manufacturing bases. As a result, establishing of Zuken SOZO Center is a strategic

investment that targets worldwide growth.

(ii) In the automotive sector, we enforced collaboration between our development bases in Japan and Germany to

perform joint development programs for creating solutions that embody new concepts. Japan and Germany have

the world’s leading technologies for designing and manufacturing automobiles. We believe that the

development of solutions to support the automotive industries in these two countries will contribute to our

global growth in the automotive sector.

The following initiatives were the primary measures for development and sales activities.

(i) In the electronics manufacturing sector, we concentrated on sales of the electronic design solution system

“CR-8000/Design Force”, which has state-of-the-art 3D graphics. Sales of this system increased significantly

because of its advanced GUI capability together with outstanding performance. Our Zuken SOZO Center has

been working on promoting “CR-8000 series” to our medium and long-term strategic prospects.

(ii) In the automotive sector, we developed solutions for automobile safety that comply with international standards

and started selling these solutions. In Germany, we accelerated development activities for data management

systems as a part of the enhancements to our “E3.series” of cabling design systems.

(iii) In the industrial equipment and medical equipment manufacturing sector, we further strengthened the functions

of the “PreSight/visual BOM”, a product component information platform with highly compressed 3D database

technology. Steady sales growth was achieved in Japan.


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(b) Results of the fiscal year under review

(Consolidated results)

Net sales 19,772 million yen (up 10.5% year on year)

Ordinary income 848 million yen (up 73.1% year on year)

Net income 466 million yen (up 53.5% year on year)

By taking these actions, net sales increased significantly from the previous fiscal year. Sales growth was mainly

attributable to higher sales of the “CR-8000 series” of advanced electronic design solution systems and growth in

sales of IT solutions, primarily the “DS-2” data management system and “visual BOM”.

Profits increased due to higher sales despite the growth in expenses for strengthening Zuken’s infrastructure, such as

by establishing a development base in the United States.

Sales by product category were as follows.

(Sales by product)

Printed Circuit Board design solutions 2,996 million yen (up 16.7% year on year)

Circuit design and IC solutions 4,509 million yen (down 1.0% year on year)

IT solutions 4,360 million yen (up 24.4% year on year)

Client services 7,894 million yen (up 8.9% year on year)

Major products of Printed Circuit Board design solutions

CR-8000/Design Force CR-8000/DFM Center

CR-5000/Board Designer

Major products of Circuit design and IC solutions

CR-8000/Design Gateway CR-8000/System Planner E3.series Cabling Designer

CR-5000/System Designer

Major products of IT solutions PreSight/visual BOM DS-2

(c) Forecasts for the fiscal year ending March 31, 2015

The overall economic outlook will probably remain uncertain. Economic recoveries are expected to continue in the

United States and Japan. But there are still financial problems in some regions of Europe and worries about slowing

economic growth in Asia are increasing.

In this difficult environment, the Zuken Group is dedicated to achieving more growth in corporate value by

supplying the best possible solutions for our customers’ complex problems while adapting to the increasingly

borderless nature of manufacturing activities.

We expected net sales of 22,300 million yen, ordinary income of 1,670 million yen, and net income of 1,170 million

yen in the fiscal year ending March 31, 2015.

* Above forecasts are based on information available at the time this report was prepared and actual results may

differ from these forecasts for a number of reasons.


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(2) Analysis of Financial Position

(a) Assets, liabilities and net assets

Total assets at the end of the fiscal year under review increased 1,747 million yen from the end of the previous fiscal

year to 38,846 million yen. The main factors of increase were cash and deposits of 519 million yen, notes and

accounts receivable-trade of 807 million yen, and securities of 174 million yen.

Liabilities at the end of the fiscal year under review increased 2,321 million yen from the end of the previous fiscal

year to 11,166 million yen. The main factors of increase were advances received of 737 million yen and net defined

benefit liability following the revision of the “Accounting Standard for Retirement Benefits” (presented as the

provision for retirement benefits in the previous fiscal year) of 1,491 million yen.

Net assets at the end of the fiscal year under review decreased 573 million yen from the end of the previous fiscal

year to 27,680 million yen, and the shareholders’ equity ratio was 70.3%. The main factor of decrease was

remeasurements of defined benefit plans following the revision of the “Accounting Standard for Retirement Benefits”

of 982 million yen.

(b) Cash flows

Cash and cash equivalents (hereafter “cash”) at the end of the fiscal year under review increased 540 million yen

over the end of the previous fiscal year to 12,306 million yen. Cash flows by category were as follows.

Cash flows from operating activities

Net cash provided by operating activities increased 905 million yen from the previous fiscal year to 1,243 million

yen. The main cash inflows were income before income taxes and minority interests of 928 million yen (a

year-on-year increase of 538 million yen), depreciation of 738 million yen (a year-on-year increase of 87 million

yen), and an increase in net defined benefit liability of 387 million yen. The main cash outflows were an increase in

notes and accounts receivable-trade of 619 million yen (a decrease of 754 million yen in the previous fiscal year),

and income taxes paid of 246 million yen (a year-on-year decrease of 1,254 million yen).

Cash flows from investing activities

Net cash used in investing activities decreased 2 million yen from the previous fiscal year to 706 million yen. This

was mainly due to the payment for the purchase of non-current assets of 628 million yen (same level as in the

previous fiscal year).

Cash flows from financing activities

Net cash used in financing activities decreased 226 million yen from the previous fiscal year to 337 million yen.

This was mainly due to cash dividends paid of 325 million yen (a year-on-year decrease of 232 million yen).

Cash flow indicators were as follows:

Fiscal years ended March 31, 2011 March 31, 2012 March 31, 2013 March 31, 2014

Shareholders’ equity ratio 74.0% 73.0% 75.2% 70.3%

Shareholders’ equity ratio based on market prices 42.0% 40.8% 43.7% 49.1%

Interest-bearing debt to cash flow ratio 2.7% 0.6% 6.1% 1.8%

Interest coverage ratio 1,816.7 4,984.6 - 17,779.3

Calculation formula: Shareholders’ equity ratio: Shareholders’ equity / Total assets Shareholders’ equity ratio based on market prices: Market capitalization / Total assets Interest-bearing debt to cash flow ratio: Interest-bearing debt / Operating cash flows Interest coverage ratio: Operating cash flows / Interest payments Notes: 1. All indicators are calculated based on consolidated figures. 2. Market capitalization is calculated based on the number of shares outstanding (excluding treasury shares). 3. Operating cash flows are calculated using the figures for operating cash flows on the consolidated statement of cash flows. 4. Interest-bearing debt includes all liabilities on the consolidated balance sheet that incur interest.


5

(3) Basic Policy for Profit Distribution, and Dividends in the Current and Next Fiscal Years

Distributing profits to shareholders is one of the highest management priorities of the Zuken Group. The basic

policy is to pay a stable and consistent dividend. In addition, we will continue to consider suitable and highly

effective methods of returning earnings to shareholders while taking into account business performance, operating

conditions and other factors. Profit distributions will also reflect the need to retain earnings for strengthening

business operations and financial soundness and for funding upcoming business activities.

Based on the policy of paying a stable dividend, we plan to pay a year-end dividend of 7 yen per share for the fiscal

year ended March 31, 2014. This dividend also reflects the financial condition, outlook for performance in the fiscal

year ending on March 31, 2015, and other items. With the interim dividend of 7 yen per share, this will result in a

full-year dividend of 14 yen per share. For the fiscal year ending on March 31, 2015, we plan to pay a dividend of

14 yen per share, the sum of interim and year-end dividends of 7 yen per share.


6

2. Corporate Group

The Zuken Group consists of ZUKEN Inc., 17 subsidiaries and two affiliates (one affiliate accounted for under the

equity method and one affiliate not accounted for under the equity method). Group companies are engaged in

solutions business including research and development, manufacturing and sales activities involving processes from

design to production in manufacturing industries and associated client services especially in electronics industries.

Major business activities and the roles of group companies are shown below.

Business activities Company name (reportable segment) Major product category

Software R&D

Manufacturing, sales and

consulting

Support services

ZUKEN Inc. (Japan)

Zuken Limited (Europe & Americas)

Zuken GmbH (Europe & Americas)

Printed Circuit Board design solutions

Circuit design and IC solutions

IT solutions

Client services

Zuken E3 GmbH (Europe & Americas)

Zuken Contact GmbH & Co. KG (*)


Client services

Software sales

Support services

Zuken USA Inc. (Europe & Americas)

Zuken UK Limited (Europe & Americas)

Zuken S.A. (Europe & Americas)

Zuken S.r.l. (Europe & Americas)

Zuken Korea Inc. (Asia)

Zuken Singapore Pte. Ltd. (Asia)

Zuken Taiwan Inc. (Asia)

One other company



IT solutions

Client services

Consulting

Support services

CAD Lab. Inc. (Japan)

Zuken Shanghai Technical Center Co.,

Ltd. (Asia)

Middleware and system

board R&D

Manufacturing, sales and

support services

Zuken Elmic, Inc. (Japan) Circuit design and IC solutions

Client services

Network systems sales

Support services

Zuken NetWave Inc. (Japan) IT solutions

Client services

Staffing and other

technology support services

Zsas (Zuken Support and Service) Inc.

(Japan)



IT solutions

Client services

Overall control of UK

operations

Zuken Group Limited (Europe &

Americas)

Notes: 1. Zuken Contact GmbH & Co. KG is an affiliate accounted for under the equity method. All other companies in the above table are consolidated subsidiaries.

2. Zuken Elmic, Inc. has been listed on the Tokyo Stock Exchange MOTHERS Section.


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The diagram below provides a visual representation of the positioning and relationships of businesses within the

group.

<The Company> <Affiliates>

(Overall control of UK operations)

Zuken Group Limited

(R&D, manufacturing, sales, consulting and support services)

Zuken LimitedZuken GmbHZuken E3 GmbHZuken Contact GmbH & Co. KG (*)

(Sales and support services)

Zuken USA Inc.Zuken UK LimitedZuken S.A. Zuken S.r.l. One other company


Zuken Korea Inc.Zuken Singapore Pte. Ltd.Zuken Taiwan Inc.

(Consulting and support services)

Zuken Shanghai Technical Center Co., Ltd.

(Consulting and support services)

CAD Lab. Inc.

(R&D, manufacturing, sales and support services)

Zuken Elmic, Inc.


Zuken NetWave Inc.

(Staffing and other technology support services)

Zsas (Zuken Support and Service) Inc.

(Domestic users) (Overseas users)

ZU

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N In

c.(R

&D

, ma

nu

factu

ring

, sale

s, con

sultin

g a

nd

sup

po

rt service

s for e

ach

solu

tion

)

Product and support services

Product andsupport services



Support services

Consulting andsupport services

Product andsupport services

Staffing and other technology support

services


8

3. Management Policies

(1) Basic Management Policy

The Zuken Group is dedicated to making a significant contribution to the advancement of the manufacturing sector

by assisting in the development and manufacture of products. Our goal is to assist a broad range of manufacturers,

primarily in the electronics sector, improve design and manufacturing efficiency and raise productivity. To

accomplish this goal, we concentrate on supplying the best possible solutions while constantly adapting to changes

in market needs.

(2) Performance Targets

The Zuken Group is fulfilling increasingly important roles in the electronics, automotive and industrial equipment

manufacturing sectors, which are the group’s primary markets, as demand for these products grows in emerging

countries and technological advances are needed for environmental and other requirements. In addition, markets that

the Zuken Group can serve are expanding as all manufacturers rapidly increase the use of electronics in their

products. To capitalize on these opportunities, we will continue our solutions business while aggressively entering

new markets and technology domains. We are determined to generate long-term returns for shareholders as we

continue increasing the scope and scale of our business activities. Consequently, sustaining the growth of earnings

per share is one of our key performance indicators.

(3) Medium- and Long-term Business Strategy and Issues

The Zuken Group aims to become a “truly global company” by meeting needs associated with the increasingly

borderless nature of design and manufacturing activities. We will seamlessly integrate the operations of bases in

Japan, Europe, the United States and Asia to supply customers with the best possible solutions.

We will need to work on the following issues to accomplish this goal. (a) Increase sales of the CR-8000 series, Zuken’s major product

For the state-of-the-art CR-8000 electrical design system, we will continue to respond swiftly to technological

progress and changes in development flow at our customers as we move even faster to expand functions. In

addition, we will use the entire Zuken Group to work aggressively to sell more of these systems worldwide. Our

objective is to achieve more growth in the electronics manufacturing sector. (b) Step up activities in the automotive sector

Electronic control is vital to the safe operation of automobiles. Motor vehicles will use an increasing amount of

electronics and the designs of these devices are becoming more sophisticated and intricate. To meet these needs,

the Zuken Group will leverage its highly advanced software technologies and other expertise gained from many

years of experience in the field of electronics design and manufacturing. We will also use collaboration between

development bases in Japan and Germany. With these activities, we plan to develop new solutions for the

automotive sector and sell them on a global scale. (c) Transform ourselves from “Zuken for Electronics Design” into “Zuken for Products Design”

Zuken will concentrate on further enhancing functions and increasing sales for component data management

solutions that utilize 3D data compression technology, targeting mostly manufacturers of industrial equipment and

medical equipment. These solutions can optimize entire design and manufacturing processes by facilitating the

sharing of component data among a company’s design, production and procurement sections. Our aim is to use

these activities to become an organization that can assist in solving a variety of problems for manufacturers across

multiple industries, electronics, machinery, and many other industries.


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The Zuken Group plans to achieve more growth in corporate value by using these initiatives to supply the best

possible solutions with activities that directly target our customers’ complex problems.


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4. Consolidated Financial Statements

(1) Consolidated Balance Sheet (Thousands of yen)

FY2012

(As of Mar. 31, 2013) FY2013

(As of Mar. 31, 2014)

Assets

Current assets

Cash and deposits 4,552,107 5,071,935

Notes and accounts receivable-trade 4,087,880 4,895,506

Securities 16,013,686 16,188,534

Merchandise and finished goods 152,780 176,908

Work in process 77,982 49,974

Raw materials and supplies 2,283 1,993

Deferred tax assets 416,408 341,853

Other 1,135,023 1,520,183

Allowance for doubtful accounts (28,088) (30,879)

Total current assets 26,410,063 28,216,009

Non-current assets

Property, plant and equipment

Buildings and structures 9,019,231 9,102,396

Accumulated depreciation (5,840,582) (5,954,566)

Buildings and structures, net 3,178,649 3,147,830

Machinery, equipment and vehicles 93,467 98,260

Accumulated depreciation (49,536) (61,515)

Machinery, equipment and vehicles, net 43,931 36,744

Tools, furniture and fixtures 1,794,197 1,965,871

Accumulated depreciation (1,518,104) (1,606,593)

Tools, furniture and fixtures, net 276,093 359,277

Land 3,009,559 3,009,821

Leased assets 31,697 42,463

Accumulated depreciation (11,775) (20,647)

Leased assets, net 19,922 21,815

Construction in progress - 4,015

Total property, plant and equipment 6,528,155 6,579,505

Intangible assets

Goodwill 986,963 997,450

Other 859,315 758,818

Total intangible assets 1,846,279 1,756,268

Investments and other assets

Investment securities 955,800 927,729


Other 651,863 588,756


Total investments and other assets 2,314,014 2,294,393

Total non-current assets 10,688,448 10,630,168

Total assets 37,098,511 38,846,177


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(Thousands of yen)

FY2012

(As of Mar. 31, 2013) FY2013

(As of Mar. 31, 2014)

Liabilities

Current liabilities

Accounts payable-trade 681,494 705,940

Income taxes payable 136,893 315,777

Advances received 2,792,769 3,530,050

Provision for bonuses 682,501 661,002

Provision for directors' bonuses 1,980 18,062

Provision for loss on litigation 72,320 -

Other provision 43,439 13,877

Other 1,385,636 1,350,462

Total current liabilities 5,797,035 6,595,173

Non-current liabilities

Provision for retirement benefits 2,879,473 -

Net defined benefit liability - 4,370,781

Other 167,910 200,067

Total non-current liabilities 3,047,384 4,570,848

Total liabilities 8,844,419 11,166,021

Net assets

Shareholders’ equity

Capital stock 10,117,065 10,117,065

Capital surplus 8,657,753 8,657,753

Retained earnings 8,845,254 8,986,688

Treasury shares (12,762) (13,209)

Total shareholders’ equity 27,607,311 27,748,297

Accumulated other comprehensive income

Valuation difference on available-for-sale securities 306,188 318,521

Foreign currency translation adjustment (28,094) 210,057

Remeasurements of defined benefit plans - (982,326)

Total accumulated other comprehensive income 278,093 (453,747)

Minority interests 368,687 385,606

Total net assets 28,254,092 27,680,156

Total liabilities and net assets 37,098,511 38,846,177


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(2) Consolidated Statements of Income and Comprehensive Income

Consolidated Statement of Income

(Thousands of yen)

FY2012

(Apr. 1, 2012 – Mar. 31, 2013) FY2013

(Apr. 1, 2013 – Mar. 31, 2014)

Net sales 17,887,827 19,772,854

Cost of sales 4,929,623 5,251,693

Gross profit 12,958,203 14,521,160

Selling, general and administrative expenses 12,603,504 13,890,920

Operating income 354,699 630,240

Non-operating income

Interest income 27,664 26,722

Foreign exchange gains - 66,035

Amortization of negative goodwill 50,234 50,234

Rent income 38,096 44,001

Subsidy income 5,794 31,464

Other 37,396 37,204

Total non-operating income 159,187 255,663

Non-operating expenses

Share of loss of entities accounted for using equity method 1,707 25,617

Loss on investments in partnership 11,016 10,260

Foreign exchange losses 6,223 -

Other 5,073 1,984

Total non-operating expenses 24,021 37,862

Ordinary income 489,865 848,041

Extraordinary income

Gain on sales of non-current assets 5,147 2,877

Transfer of rights income - 73,824

Payback of directors' retirement benefits - 9,670

Gain on sales of investment securities - 1,875

Gain on transfer of business 19,124 -

Total extraordinary income 24,271 88,247

Extraordinary losses

Loss on disposal of non-current assets 14,851 6,242

Impairment loss 16,335 1,123

Provision for loss on litigation 72,320 -

Special retirement expenses 20,071 -

Total extraordinary losses 123,578 7,365

Income before income taxes and minority interests 390,558 928,923

Income taxes-current 169,531 394,034

Income taxes-deferred (14,898) 47,119

Total income taxes 154,632 441,153

Income before minority interests 235,925 487,769

Minority interests in income (loss) (68,297) 20,795

Net income 304,223 466,973


13

Consolidated Statement of Comprehensive Income (Thousands of yen)

FY2012

(Apr. 1, 2012 – Mar. 31, 2013) FY2013

(Apr. 1, 2013 – Mar. 31, 2014)

Income before minority interests 235,925 487,769

Other comprehensive income


Foreign currency translation adjustment 190,213 225,284

Share of other comprehensive income of associates accounted for using equity method

(349) 12,866

Total other comprehensive income 205,943 250,342

Comprehensive income 441,869 738,111

Comprehensive income attributable to

Comprehensive income attributable to owners of the parent 509,828 717,458

Comprehensive income attributable to minority interests (67,958) 20,653


14

(3) Consolidated Statement of Changes in Equity FY2012 (Apr. 1, 2012 – Mar. 31, 2013)

(Thousands of yen)


Capital stock Capital surplus Retained earnings Treasury shares Total shareholders’

equity Balance at beginning of current period

10,117,065 8,657,753 9,099,109 (12,542) 27,861,384

Changes of items during period

Dividends of surplus (558,077) (558,077)

Net income 304,223 304,223

Purchase of treasury shares (219) (219)

Net changes of items other than shareholders’ equity

Total changes of items during period

- - (253,854) (219) (254,073)

Balance at end of current period 10,117,065 8,657,753 8,845,254 (12,762) 27,607,311


Minority interests

Total net assets Valuation

difference on available-for-sale

securities

Foreign currency translation adjustment

Total accumulated other

comprehensive income

Balance at beginning of current period

290,447 (217,958) 72,489 436,646 28,370,520


Dividends of surplus (558,077)

Net income 304,223

Purchase of treasury shares (219)


15,740 189,864 205,604 (67,958) 137,645


15,740 189,864 205,604 (67,958) (116,428)

Balance at end of current period 306,188 (28,094) 278,093 368,687 28,254,092


15

FY2013 (Apr. 1, 2013 – Mar. 31, 2014) (Thousands of yen)


Capital stock Capital surplus Retained earnings Treasury shares Total shareholders’

equity Balance at beginning of current period

10,117,065 8,657,753 8,845,254 (12,762) 27,607,311



Net income 466,973 466,973




- - 141,433 (447) 140,986

Balance at end of current period 10,117,065 8,657,753 8,986,688 (13,209) 27,748,297


Minority interests

Total net assets

Valuation difference on

available-for-sale securities

Foreign currency translation adjustment

Remeasurements of defined

benefit plans

Total accumulated

other comprehensive

income Balance at beginning of current period

306,188 (28,094) - 278,093 368,687 28,254,092


Dividends of surplus (325,539)

Net income 466,973

Purchase of treasury shares (447)


12,333 238,151 (982,326) (731,841) 16,918 (714,922)


12,333 238,151 (982,326) (731,841) 16,918 (573,936)

Balance at end of current period 318,521 210,057 (982,326) (453,747) 385,606 27,680,156


16

(4) Consolidated Statement of Cash Flows (Thousands of yen)

FY2012

(Apr. 1, 2012 – Mar. 31, 2013) FY2013

(Apr. 1, 2013 – Mar. 31, 2014)

Cash flows from operating activities

Income before income taxes and minority interests 390,558 928,923

Depreciation 650,691 738,546

Amortization of goodwill 99,031 79,339

Interest and dividend income (30,680) (30,076)

Foreign exchange losses (gains) (11,878) (25,954)

Share of (profit) loss of entities accounted for using equity method

1,707 25,617

Decrease (increase) in notes and accounts receivable-trade 754,152 (619,692)

Increase (decrease) in notes and accounts payable-trade (66,473) (144,261)

Increase (decrease) in provision for retirement benefits (22,190) -

Increase (decrease) in net defined benefit liability - 387,808

Other, net 40,747 122,670

Subtotal 1,805,666 1,462,920

Interest and dividend income received 33,609 26,910

Interest expenses paid - (69)

Income taxes paid (1,501,270) (246,487)

Net cash provided by (used in) operating activities 338,005 1,243,274

Cash flows from investing activities

Decrease (increase) in time deposits (3,801) (136,950)

Purchase of securities (1,999,540) (3,998,800)

Proceeds from redemption of securities 2,000,000 4,000,000

Purchase of property, plant and equipment (194,703) (343,128)

Proceeds from sales of property, plant and equipment 66,911 25,860

Purchase of intangible assets (433,408) (285,360)

Purchase of investment securities (40,000) -

Proceeds from sales and redemption of investment securities 4,760 38,484

Payments for investments in capital of subsidiaries and associates

(85,867) -

Other, net (23,034) (6,594)

Net cash provided by (used in) investing activities (708,684) (706,489)

Cash flows from financing activities


Cash dividends paid (558,077) (325,539)

Other, net (5,835) (11,831)

Net cash provided by (used in) financing activities (564,132) (337,817)

Effect of exchange rate change on cash and cash equivalents 238,312 341,166

Net increase (decrease) in cash and cash equivalents (696,498) 540,133

Cash and cash equivalents at beginning of period 12,463,138 11,766,640

Cash and cash equivalents at end of period 11,766,640 12,306,774


17

(5) Notes to Consolidated Financial Statements

Going Concern Assumption

Not applicable.

Basis of Presenting the Consolidated Financial Statements

1. Scope of consolidation

Number of consolidated subsidiaries: 17

Name of the consolidated subsidiaries are stated in the Section “2. Corporate Group.”

2. Application of equity method

(1) Number of affiliates accounted for under the equity method: 1 (Zuken Contact GmbH & Co. KG) (2) Number of affiliates not accounted for under the equity method: 1 (Zuken Contact Verwaltungs GmbH)

Zuken Contact Verwaltungs GmbH is not included in the scope of application of the equity method since it is a small-scale

business whose net income (equity in earnings) and retained earnings (equity in earnings) have no significant effect on the

overall results of consolidated financial statements.

(3) The fiscal year-end of Zuken Contact GmbH & Co. KG is different from the fiscal year-end for the consolidated financial

statements. ZUKEN Inc. (the “Company”) prepares provisional accounts for Zuken Contact GmbH & Co. KG as of the fiscal

year-end for the consolidated financial statements.

3. Fiscal year-end of consolidated subsidiaries

Among the consolidated subsidiaries, fiscal year-ends of Zuken Korea Inc., Zuken Singapore Pte. Ltd. and Zuken Taiwan Inc.

are the end of February, and fiscal year-end of Zuken Shanghai Technical Center Co., Ltd. is the end of December.

The consolidated financial statements include the financial statements of these consolidated subsidiaries as of their fiscal

year-ends. However, adjustments to the consolidated financial statements are made as needed for significant transactions at the

above four subsidiaries with different fiscal year-ends that occur between their fiscal year-ends and the fiscal year-end for the

consolidated financial statements.

4. Accounting standards

(1) Valuation standards and methods for principal assets

(a) Securities

Held-to-maturity debt securities: Stated at cost determined by the amortized cost method (straight-line method).

Available-for-sale securities

Marketable securities: Stated at fair value using quoted market price on the balance sheet date. (Unrealized gain or loss

is included in net assets. Cost of securities sold is determined by the moving-average method).

Non-marketable securities Stated at cost determined by the moving-average method.

With respect to investments in investment partnerships (regard as marketable securities under

Article 2-2 of the Japanese Financial Instruments and Exchange Act), the net amount equivalent

to the level of equity based on the most recently available financial statements for the reporting

date specified in the partnership agreement is used.

(b) Inventories

Valued at the cost method (the book value on the balance sheet is written down to reflect the effect of lower profitability).

Merchandise: Primarily stated at cost, determined by the moving-average method.

Finished goods, work in process: Stated at cost, determined by the specific identification method at the Company and its

major consolidated subsidiaries, and stated at cost, determined by the periodic average

method at some consolidated subsidiaries.

Raw materials: Stated at cost, determined by the moving-average method at the Company, and stated at cost, determined by

the specific identification method at major consolidated subsidiaries.

Supplies: Stated at cost, determined by the last purchased price method at the Company and its major consolidated

subsidiaries.


18

(2) Depreciation and amortization of significant depreciable assets

(a) Property, plant and equipment (excluding leased assets)

The Company and its domestic consolidated subsidiaries compute depreciation of buildings (excluding attached structures)

by the straight-line method, other than buildings, the declining-balance method is used. Overseas consolidated subsidiaries

compute depreciation mainly by the straight-line method.

Estimated useful lives of principle assets are as follows: Buildings and structures: 3 years to 60 years Tools, furniture and fixtures: 2 years to 20 years

(b) Intangible assets (excluding leased assets)

Software for sale at the Company and its domestic consolidated subsidiaries are amortized using the straight-line method

over the period of validity starting when sales begin (not more than three years) and software for internal use at these

companies is amortized using the straight-line method over the estimated useful lives (not more than five years).

Amortization of other intangible assets is calculated by the straight-line method.

(c) Leased assets

Depreciation of finance lease transaction where there is no transfer of ownership is calculated based on the straight-line

method, assuming the lease period to be the useful lives and a residual value of zero.

For finance lease transaction where there is no transfer of ownership that started on or before March 31, 2008, the Company

uses an accounting method that is based on the method used for ordinary rental transactions.

(3) Recognition of significant allowances

(a) Allowance for doubtful accounts

To prepare for losses on doubtful accounts such as notes and account receivables-trade and loans receivable, allowances

equal to the estimated amount of uncollectible receivables are booked for general receivables based on the historical

write-off ratio, and bad receivables based on case-by-case determination of collectibility.

(b) Provision for bonuses

To provide for employee bonus obligation, the Company and some consolidated subsidiaries provide an allowance at the

amount based on the estimated bonus obligations.

(c) Provision for directors' bonuses

To provide for directors’ bonuses, the Company and some consolidated subsidiaries provide an allowance at the amount

based on the estimated bonus obligations.

(4) Accounting for retirement benefit

(a) Allocation method for the estimated retirement benefit obligations

For the determination of retirement benefit obligations, the straight-line attribution standard is used as the method for

allocating estimated retirement payments over the period ending in the fiscal year under review.

(b) Accounting for actuarial gain or loss

Actuarial gain or loss is amortized and charged to expenses in the year following the fiscal year in which such gain or loss is

recognized by the straight-line method over five years.

(5) Recognition of significant income and expenses

Recognition criteria for net sales and cost of sales of completed construction contracts

(a) The portion of contracted work deemed to have been completed by the end of the fiscal year under review

The percentage-of-completion standard (with the percentage of completion estimated on the cost-to-cost basis).

(b) Other contracted work

The completed-contract standard.


19

(6) Translation of significant foreign currency-denominated assets and liabilities

Foreign currency receivables and payables are translated into Japanese yen at year-end exchange rates and resulting exchange

gains or losses are recognized in earnings currently. All assets and liabilities of overseas consolidated subsidiaries and

affiliates are translated into Japanese yen at year-end exchange rates, and income and expenses into Japanese yen at the

average of the exchange rates in effect during each fiscal period, and resulting exchange gains or losses are included in foreign

currency translation adjustments and minority interests under the net assets section.

(7) Amortization method and amortization period of goodwill

Goodwill is amortized using the straight-line method within 15 years, with the number of years determined by the origin of the

goodwill. Negative goodwill recorded due to business combinations and other events on or prior to March 31, 2010 is

amortized using the straight-line method within five years.

(8) Scope of cash and cash equivalents on consolidated statement of cash flows

Cash and cash equivalents consist of cash on hand and readily available deposits and short-term investments which can be

easily converted to cash and are exposed to little risk of change in value.

(9) Other significant accounting policies in the preparation of consolidated financial statements

(a) Accounting for consumption taxes, etc.

Consumption taxes, etc. are accounted by the tax-exclusion method.

Changes in Accounting Policies

Accounting standard for retirement benefits

Following the application of the “Accounting Standard for Retirement Benefits (Accounting Standards Board of Japan (ASBJ)

Statement No. 26, May 17, 2012; excluding the provisions set forth in Clause 35) and “Guidance on Accounting Standard for

Retirement Benefits (ASBJ Guidance No. 25, May 17, 2012; excluding the provisions set forth in Clause 67),” the Company has

changed its accounting treatment to record the retirement benefit obligations as a net defined benefit liability after deducting plan

assets, and recorded the unrecognized actuarial gain or loss as a net defined benefit liability from the fiscal year under review.

For the application of these accounting standard, in accordance with the transitional accounting treatments set forth in Clause 37

of the Accounting Standard for Retirement Benefits, the monetary effect of this change has been included in the remeasurements

of defined benefit plans of accumulated other comprehensive income at the end of the fiscal year under review.

The effect of this change was to decrease accumulated other comprehensive income by 982,326 thousand yen in the fiscal year

under review.

Net assets per share decreased 42.24 yen.

Reclassifications

Consolidated statement of income

“Subsidy income,” included in “Other” under “Non-operating income” in the previous fiscal year, is reclassified and presented as

a separate line item in the fiscal year under review since it has increased materiality in the context of consolidated financial

statements. To conform to this change, the consolidated financial statements for the previous fiscal year are reclassified.

As a result, “Other” (43,191 thousand yen) under “Non-operating income” shown in the previous fiscal year’s consolidated

statement of income is reclassified and divided into “Subsidy income” (5,794 thousand yen) and “Other” (37,396 thousand yen).


20

Notes to Consolidated Balance Sheet

1. Investments and other assets for non-consolidated subsidiaries and affiliates are as follows. (Thousands of yen)

FY2012

(As of Mar. 31, 2013) FY2013

(As of Mar. 31, 2014)

Other (Investments in capital) 83,810 71,059

2. Presentation of goodwill and negative goodwill Goodwill and negative goodwill are stated in net terms. The figures for each before netting are as follows.

(Thousands of yen)

FY2012

(As of Mar. 31, 2013) FY2013

(As of Mar. 31, 2014)

Goodwill 1,049,757 1,010,009

Negative goodwill 62,793 12,558

Net amount 986,963 997,450

Notes to Consolidated Statement of Income 1. Major items of selling, general and administrative expenses are as follows.

(Thousands of yen)

FY2012

(Apr. 1, 2012 – Mar. 31, 2013) FY2013

(Apr. 1, 2013 – Mar. 31, 2014)

Salaries and allowances 4,346,386 4,786,924

Depreciation 568,348 659,035


Provision for directors' bonuses 1,980 18,062

Provision for retirement benefits 148,121 195,162

Research and development expenses 2,627,389 2,823,871

2. Total amount of research and development expenses included in general and administrative expenses

(Thousands of yen) FY2012

(Apr. 1, 2012 – Mar. 31, 2013) FY2013

(Apr. 1, 2013 – Mar. 31, 2014)

2,627,389 2,823,871

3. Breakdown of gain on sales of non-current assets is as follows.

(Thousands of yen)

FY2012 (Apr. 1, 2012 – Mar. 31, 2013)

FY2013 (Apr. 1, 2013 – Mar. 31, 2014)

Vehicles 5,082 2,731

Tools, furniture and fixtures 64 145

Total 5,147 2,877

4. Transfer of rights income

This income was recorded due to the sale of IP addresses that were not expected to be used.

5. Breakdown of loss on disposal of non-current assets is as follows. (Thousands of yen)

FY2012 (Apr. 1, 2012 – Mar. 31, 2013)

FY2013 (Apr. 1, 2013 – Mar. 31, 2014)

Buildings, etc. 6,695 4,275

Tools, furniture and fixtures 4,393 1,967

Others 3,762 -

Total 14,851 6,242


21

Notes to Consolidated Statement of Comprehensive Income Re-classification adjustments and tax effect with respect to other comprehensive income

(Thousands of yen) FY2012

(Apr. 1, 2012 – Mar. 31, 2013) FY2013

(Apr. 1, 2013 – Mar. 31, 2014) Valuation difference on available-for-sale securities:

Amount incurred during the period 24,784 17,056 Re-classification adjustments - 1,875

Before tax effect adjustments 24,784 18,931 Tax effect (8,705) (6,739) Valuation difference on available-for-sale securities 16,079 12,191

Foreign currency translation adjustment: Amount incurred during the period 190,213 225,284

Share of other comprehensive income of associates accounted for using equity method

Amount incurred during the period (349) 12,866 Total other comprehensive income 205,943 250,342

Notes to Consolidated Statement of Changes in Equity

FY2012 (Apr. 1, 2012 – Mar. 31, 2013)

1. Type of share and number of shares of outstanding shares and treasury shares (Shares)

Number of shares as of Apr. 1, 2012

Increase Decrease Number of shares

as of Mar. 31, 2013

Outstanding shares

Common stock 23,267,169 - - 23,267,169

Total 23,267,169 - - 23,267,169

Treasury shares

Common stock (Note) 13,901 398 - 14,299

Total 13,901 398 - 14,299

Note: Number of treasury shares of common stock increased 398 shares due to the acquisition of odd-lot shares.

2. Dividends

(1) Dividend payment

Resolution Type of share Total dividends

(Thousands of yen) Dividend per share (yen)

Record date Effective date

General Shareholders’ Meeting on Jun. 28, 2012

Common stock 395,305 17 Mar. 31, 2012 Jun. 29, 2012

Board of Directors’ meeting on Nov. 5, 2012

Common stock 162,772 7 Sep. 30, 2012 Dec. 4, 2012

(2) Dividends with a record date in the fiscal year under review but an effective date in the following fiscal year

Resolution Type of share

Total dividends (Thousands of yen)

Source of funds

Dividend per share (yen)



Common stock

162,770 Retained earnings

7 Mar. 31, 2013 Jun. 28, 2013


22

FY2013 (Apr. 1, 2013 – Mar. 31, 2014)

1. Type of share and number of shares of outstanding shares and treasury shares (Shares)

Number of shares as of Apr. 1, 2013

Increase Decrease Number of shares

as of Mar. 31, 2014

Outstanding shares

Common stock 23,267,169 - - 23,267,169

Total 23,267,169 - - 23,267,169

Treasury shares

Common stock (Note) 14,299 570 - 14,869

Total 14,299 570 - 14,869

Note: Number of treasury shares of common stock increased 570 shares due to the acquisition of odd-lot shares.

2. Dividends

(1) Dividend payment

Resolution Type of share Total dividends

(Thousands of yen) Dividend per share (yen)



Common stock 162,770 7 Mar. 31, 2013 Jun. 28, 2013

Board of Directors’ meeting on Nov. 5, 2013

Common stock 162,769 7 Sep. 30, 2013 Dec. 3, 2013

(2) Dividends with a record date in the fiscal year under review but an effective date in the following fiscal year

Resolution Type of share

Total dividends (Thousands of yen)

Source of funds

Dividend per share (yen)



Common stock

162,766 Retained earnings

7 Mar. 31, 2014 Jun. 30, 2014

Notes to Consolidated Statement of Cash Flows

1. Reconciliation of cash and cash equivalents at end of period and amount of consolidated balance sheet is made as follows. (Thousands of yen)

FY2012

(Apr. 1, 2012 – Mar. 31, 2013) FY2013

(Apr. 1, 2013 – Mar. 31, 2014)


Short-term investments included in securities account 7,314,093 7,488,834

Time deposit with maturities over three months (99,561) (253,995)

Cash and cash equivalents 11,766,640 12,306,774


23

Financial Instruments

1. Conditions of financial instruments

(1) Policy for handling financial instruments

Safety is the highest priority of the Zuken Group when investing funds in financial instruments, while also taking into account

credit risk, interest rates and other factors. Funds are invested in financial instruments that are believed to have an extremely

small risk of the value falling below face value. (2) Details of financial instruments, their risks and risk management system

Notes and accounts receivable-trade, which are operating receivables, are vulnerable to credit risk associated with customers.

The Company performs rigorous credit management for each customer and supervise payment dates and balances. In addition,

there are measures to quickly identify doubtful receivables caused by a decline in a customer’s financial soundness or other

event and to reduce the amount of these receivables.

Marketable securities and investment securities are bonds held to maturity and stock of companies with relationships with the

Zuken Group. These securities are vulnerable to risk associated with changes in their market prices. The Company periodically

checks fair values, the financial condition of issuers and other items in order to quickly identify securities that may need to be

written down and reduce the amount of these securities.

Accounts payable-trade, which is operating debt, is mostly due within one year.

(3) Supplemental explanation concerning fair values, etc. of financial instruments

Fair value of the financial instrument is measured at a quoted market price, if available, or reasonably assessed value if a quoted

market price is not available. As the calculation of the reasonably assessed value incorporates varying factors, the amount may

vary if different assumptions are used. 2. Items related to fair values of financial instruments

The book value, fair value, and their differences are shown as follows. However, financial instruments, whose fair value is

deemed to be extremely difficult to measure, are not included (please refer to Note 2 below.)

FY2012 (As of Mar. 31, 2013)

(Thousands of yen)

Book value Fair value Difference

(1) Cash and deposits 4,552,107 4,552,107 -

(2) Notes and accounts receivable-trade 4,087,880 4,087,880 -

(3) Marketable securities and investment securities

16,594,313 16,594,321 7

Assets total 25,234,301 25,234,309 7

(1) Accounts payable-trade 681,494 681,494 -

Liabilities total 681,494 681,494 -

FY2013 (As of Mar. 31, 2014)

(Thousands of yen)

Book value Fair value Difference

(1) Cash and deposits 5,071,935 5,071,935 -

(2) Notes and accounts receivable-trade 4,895,506 4,895,506 -


16,777,236 16,777,136 (100)

Assets total 26,744,678 26,744,578 (100)

(1) Accounts payable-trade 705,940 705,940 -

Liabilities total 705,940 705,940 -

Notes 1. Matters concerning determination of fair value of financial instruments and marketable securities

Assets

(1) Cash and deposits, and (2) Notes and accounts receivable-trade


24

Fair value of the financial instruments in these categories is deemed to be equal to their carrying amount.


For fair value of the financial instruments in these categories, stocks are valued based on their prices on securities exchanges. Bonds are valued based on securities exchange prices or prices provided by financial institutions. Please refer to the section “Marketable Securities” for information about securities categorized by purpose.

Liabilities

(1) Accounts payable-trade

Fair value of the financial instrument in this category is deemed to be equal to their carrying amount because they are settled within a short period of time.

2. Financial instruments whose fair values are deemed to be extremely difficult to measure.

(Thousands of yen)

Item FY2012

(As of Mar. 31, 2013) FY2013

(As of Mar. 31, 2014)

Unlisted stocks 306,195 306,063

Investment in partnership 68,978 32,964

Investments in capital of subsidiaries and associates 83,810 71,059

These instruments are not included in the above table because there are no market prices and the fair values are deemed to be extremely difficult to measure.

3. Balance of money claims and marketable securities with maturity scheduled to be redeemed in the subsequent fiscal years

FY2012 (As of Mar. 31, 2013) (Thousands of yen)

Due within one

year One to five years Five to ten years Over ten years

Cash and deposits 4,552,107 - - -

Notes and accounts receivable-trade 4,087,880 - - -

Marketable securities and investment securities

Held-to-maturity debt securities

Government bonds 2,000,000 - - -

Total 10,639,987 - - -


Due within one

year One to five years Five to ten years Over ten years

Cash and deposits 5,071,935 - - -

Notes and accounts receivable-trade 4,895,506 - - -

Marketable securities and investment securities

Held-to-maturity debt securities

Government bonds 2,000,000 - - -

Total 11,967,441 - - -


25

Marketable Securities

1. Held-to-maturity debt securities


Type Book value Fair value Unrealized gains (losses)

Securities with fair value exceeds book value

Government bonds 1,999,592 1,999,600 7

Sub-total 1,999,592 1,999,600 7

Securities with fair value not exceeding book value

Government bonds - - -

Sub-total - - -

Total 1,999,592 1,999,600 7

FY2013 (As of Mar. 31, 2014)

(Thousands of yen)

Type Book value Fair value Unrealized gains (losses)

Securities with fair value exceeds book value

Government bonds - - -

Sub-total - - -

Securities with fair value not exceeding book value

Government bonds 1,999,700 1,999,600 (100)

Sub-total 1,999,700 1,999,600 (100)

Total 1,999,700 1,999,600 (100)

2. Available-for-sale securities

FY2012 (As of Mar. 31, 2013)

(Thousands of yen)

Type Book value Acquisition cost Unrealized gains (losses)

Securities with book value exceeds acquisition cost

(1) Shares 576,064 100,747 475,316

(2) Bonds - - -

(3) Others - - -

Sub-total 576,064 100,747 475,316

Securities with book value not exceeding acquisition cost

(1) Shares 4,563 4,770 (207)

(2) Bonds - - -

(3) Others 14,014,093 14,014,093 -

Sub-total 14,018,656 14,018,863 (207)

Total 14,594,721 14,119,611 475,109

Note: Unlisted stocks (book value of 306,195 thousand yen) and investment in partnership (book value of 68,978 thousand yen) are not included in available-for-sale securities in the above table because there are no market prices and the fair values are deemed to be extremely difficult to measure.


26

FY2013 (As of Mar. 31, 2014)

(Thousands of yen)

Type Book value Acquisition cost Unrealized gains (losses)

Securities with book value exceeds acquisition cost

(1) Shares 588,702 97,677 491,024

(2) Bonds - - -

(3) Others - - -

Sub-total 588,702 97,677 491,024

Securities with book value not exceeding acquisition cost

(1) Shares - - -

(2) Bonds - - -

(3) Others 14,188,834 14,188,834 -

Sub-total 14,188,834 14,188,834 -

Total 14,777,536 14,286,511 491,024

Note: Unlisted stocks (book value of 306,063 thousand yen) and investment in partnership (book value of 32,964 thousand yen) are not included in available-for-sale securities in the above table because there are no market prices and the fair values are deemed to be extremely difficult to measure.

3. Available-for-sale securities sold

FY2012 (Apr. 1, 2012 – Mar. 31, 2013)

Not applicable.

FY2013 (Apr. 1, 2013 – Mar. 31, 2014)

(Thousands of yen)

Type Sales amount Aggregate gains Aggregate losses

(1) Shares 9,715 1,875 -

(2) Bonds - - -

(3) Others - - -

Total 9,715 1,875 -


27

Segment and Other Information

1. General information about reportable segments

Reportable segments of the Company are based on the Company’s components from which financial information

can be obtained separately, so that CEO can judge how to distribute management resources and to evaluate its

performance.

The Company is engaged in solutions business including research and development, manufacturing and sales

activities involving processes from design to production in manufacturing industries and related client services

especially in electronics industries. In the domestic market, the Company and its domestic subsidiaries are in charge

and in overseas, each sales subsidiary which is an independent management unit in each country is in charge in

Europe (mainly UK, Germany, France) and USA, Asia (Korea, Singapore, China, Taiwan). The subsidiary in USA is

under the management of the German subsidiary.

Therefore, the Company consist of segments based on the sales structure. Reportable segments are divided into

following three areas: Japan, Europe & Americas, and Asia. Each reportable segment consists of sales of solutions

for processes extending from designs to production in manufacturing industries and related client services especially

in electronics industries.

2. Basis of measurement about reportable segments profit or loss, segment assets, segment liabilities and other

material items

The accounting treatment methods for reportable business segments are the same as those listed in the section “Basis

of Presenting the Consolidated Financial Statements.”

Profits for reportable segments are operating income figures in the consolidated statement of income.

Intersegment sales or transfers are based on market price.

3. Information about reportable segments profit or loss, segment assets, segment liabilities and other material items

FY2012 (Apr. 1, 2012 – Mar. 31, 2013)

(Thousands of yen)

Reportable segment Adjustment amount (Note 1)

Appropriated amount in the consolidated financial statements

(Note 2) Japan

Europe & Americas

Asia Total

Net sales

(1) Sales to third parties 12,889,032 4,020,822 977,973 17,887,827 - 17,887,827

(2) Intersegment sales or transfers 691,250 388,113 70,958 1,150,323 (1,150,323) -

Total 13,580,282 4,408,936 1,048,931 19,038,150 (1,150,323) 17,887,827

Segment profit (loss) (34,824) 149,329 246,755 361,260 (6,560) 354,699

Segment assets 16,093,878 4,685,025 1,289,844 22,068,748 15,029,763 37,098,511

Other items

Depreciation and amortization 556,266 88,093 11,341 655,702 (5,011) 650,691

Amortization of goodwill - 149,266 - 149,266 - 149,266

Investment on companies accounted for using equity method

- 82,262 - 82,262 - 82,262

Increase in property, plant and equipment and intangible assets

545,941 91,635 14,125 651,703 - 651,703

Notes: 1. Contents of adjustments are as follows. (1) Adjustment amount in segment profit (or loss) includes amount of -6,560 thousand yen eliminated for intersegment

transactions. (2) Adjustment amount in segment assets includes amount of -1,842,598 thousand yen eliminated for intersegment

transactions and total company assets of 16,872,361 thousand yen. The total company assets mainly composed of surplus funds (cash and deposits and marketable securities), and long-term invested assets (investment securities) of the Company.

(3) Adjustment amount of depreciation and amortization includes amount of -5,011 thousand yen eliminated for


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intersegment transactions. 2. Segment profit (loss) is adjusted with operating income in the consolidated statement of income.

FY2013 (Apr. 1, 2013 – Mar. 31, 2014)

(Thousands of yen)

Reportable segment Adjustment amount (Note 1)

Appropriated amount in the consolidated financial statements

(Note 2) Japan

Europe & Americas

Asia Total

Net sales

(1) Sales to third parties 13,610,527 5,090,973 1,071,353 19,772,854 - 19,772,854

(2) Intersegment sales or transfers 707,798 399,035 84,230 1,191,065 (1,191,065) -

Total 14,318,325 5,490,009 1,155,584 20,963,919 (1,191,065) 19,772,854

Segment profit (loss) 574,024 (216,437) 261,774 619,361 10,878 630,240

Segment assets 16,655,122 5,533,364 1,513,267 23,701,754 15,144,423 38,846,177

Other items

Depreciation and amortization 602,923 126,240 13,262 742,426 (3,879) 738,546

Amortization of goodwill - 129,574 - 129,574 - 129,574

Investment on companies accounted for using equity method

- 69,511 - 69,511 - 69,511

Increase in property, plant and equipment and intangible assets

474,090 161,057 3,568 638,716 - 638,716

Notes: 1. Contents of adjustments are as follows. (1) Adjustment amount in segment profit (or loss) includes amount of 10,878 thousand yen eliminated for intersegment

transactions. (2) Adjustment amount in segment assets includes amount of -1,883,059 thousand yen eliminated for intersegment

transactions and total company assets of 17,027,482 thousand yen. The total company assets mainly composed of surplus funds (cash and deposits and marketable securities), and long-term invested assets (investment securities) of the Company.

(3) Adjustment amount of depreciation and amortization includes amount of -3,879 thousand yen eliminated for intersegment transactions.

2. Segment profit (loss) is adjusted with operating income in the consolidated statement of income.


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Per-share Information (Yen)

FY2012

(Apr. 1, 2012 – Mar. 31, 2013) FY2013

(Apr. 1, 2013 – Mar. 31, 2014)

Net assets per share 1,199.22 1,173.84

Net income per share 13.08 20.08

Notes: 1. Diluted net income per share is not presented since there is no dilutive share. 2. Basis for calculation of net income per share is as follows

FY2012

(Apr. 1, 2012 – Mar. 31, 2013) FY2013

(Apr. 1, 2013 – Mar. 31, 2014)

Net income per share

Net income (Thousands of yen) 304,223 466,973

Amount not available to common shareholders (Thousands of yen)

- -

Net income applicable to common stock (Thousands of yen)

304,223 466,973

Average number of shares outstanding during period (Shares)

23,253,129 23,252,661

Subsequent Events

Not applicable.

Omission of Disclosure

Disclosure of the notes on leases, derivatives, retirement benefits, stock options, deferred tax accounting, business combinations,

asset retirement obligations, rental and other properties, and related party information was omitted since the disclosure of these

information are not significant in the context of the summary of financial results.


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5. Production, Orders and Sales

(1) Sales and Orders

(a) Sales (Thousands of yen)

Segment

FY2012

(Apr. 1, 2012 – Mar. 31, 2013)

FY2013

(Apr. 1, 2013 – Mar. 31, 2014)

Amount Composition (%) Amount Composition (%)

Japan 12,889,032 72.1 13,610,527 68.8

Europe & Americas 4,020,822 22.5 5,090,973 25.7

Asia 977,973 5.4 1,071,353 5.5

Total 17,887,827 100.0 19,772,854 100.0

(b) Orders received and order backlog (Thousands of yen)

Segment

FY2012

(Apr. 1, 2012 – Mar. 31, 2013)

FY2013

(Apr. 1, 2013 – Mar. 31, 2014)

Orders received Order backlog Orders received Order backlog

Japan 13,479,363 4,203,689 13,789,010 4,382,172

Europe & Americas 4,039,346 1,639,105 5,354,916 2,163,474

Asia 1,009,962 270,113 997,214 223,211

Total 18,528,672 6,112,908 20,141,141 6,768,858

Notes: 1. Intersegment transactions have been eliminated. 2. The above amounts are based on selling prices and the amounts do not include consumption taxes.

(Reference) Results by product category are as follows.

(a) Sales (Thousands of yen)

Product category

FY2012

(Apr. 1, 2012 – Mar. 31, 2013)

FY2013

(Apr. 1, 2013 – Mar. 31, 2014)

Amount Composition (%) Amount Composition (%)

Printed Circuit Board design solutions 2,568,779 14.4 2,996,524 15.2

Circuit design and IC solutions 4,554,100 25.5 4,509,395 22.8

IT solutions 3,504,308 19.6 4,360,927 22.1

Client services 7,247,523 40.4 7,894,587 39.8

Others 13,115 0.1 11,418 0.1

Total 17,887,827 100.0 19,772,854 100.0

(b) Orders received and order backlog (Thousands of yen)

Product category

FY2012

(Apr. 1, 2012 – Mar. 31, 2013)

FY2013

(Apr. 1, 2013 – Mar. 31, 2014)

Orders received Order backlog Orders received Order backlog

Printed Circuit Board design solutions 2,614,272 408,416 3,258,884 693,601

Circuit design and IC solutions 4,713,607 770,611 4,367,364 659,720

IT solutions 3,755,064 684,782 4,183,545 515,465

Client services 7,431,483 4,247,717 8,321,308 4,900,071

Others 14,245 1,380 10,038 -

Total 18,528,672 6,112,908 20,141,141 6,768,858

Note: The above amounts are based on selling prices and the amounts do not include consumption taxes.


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6. Non-consolidated Financial Statements (1) Balance Sheet

(Thousands of yen)

FY2012

(As of Mar. 31, 2013) FY2013

(As of Mar. 31, 2014)

Assets

Current assets


Notes receivable-trade 103,065 139,446

Accounts receivable-trade 2,025,751 2,473,112

Securities 15,950,571 16,125,384

Inventories 65,010 25,743


Other 199,475 189,395

Allowance for doubtful accounts (427) (780)

Total current assets 19,692,553 20,228,249

Non-current assets

Property, plant and equipment

Buildings 3,037,630 3,006,985

Structures 52,921 49,022

Vehicles 9,808 13,845

Tools, furniture and fixtures 97,596 112,729

Land 3,009,559 3,009,559

Leased assets 16,643 11,641

Total property, plant and equipment 6,224,158 6,203,783

Intangible assets

Other 639,081 555,548

Total intangible assets 639,081 555,548

Investments and other assets

Investment securities 921,790 902,098

Stocks of subsidiaries and affiliates 816,409 816,409

Investments in capital of subsidiaries and affiliates 739,946 739,946

Long-term trade accounts receivables from subsidiaries 534,706 602,336


Other 432,240 401,648


Total investments and other assets 4,004,565 4,061,277

Total non-current assets 10,867,805 10,820,609

Total assets 30,560,358 31,048,858


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(Thousands of yen)

FY2012

(As of Mar. 31, 2013) FY2013

(As of Mar. 31, 2014)

Liabilities

Current liabilities

Accounts payable-trade 470,311 473,996

Accounts payable-other 499,587 413,361

Income taxes payable 25,453 193,940

Advances received 473,682 473,869


Provision for directors’ bonuses 1,900 15,000

Other 243,455 189,131

Total current liabilities 2,042,390 2,093,299

Non-current liabilities

Provision for retirement benefits 2,006,312 2,188,795

Provision for loss on business of subsidiaries and affiliates 13,000 49,000

Long-term accounts payable-other 104,850 104,850

Other 12,246 18,694

Total non-current liabilities 2,136,408 2,361,340

Total liabilities 4,178,799 4,454,639

Net assets


Capital stock 10,117,065 10,117,065

Capital surplus

Legal capital surplus 8,657,753 8,657,753

Total capital surpluses 8,657,753 8,657,753

Retained earnings

Legal retained earnings 311,082 311,082

Other retained earnings

General reserve 6,325,000 6,325,000

Retained earnings brought forward 677,328 878,006

Total retained earnings 7,313,411 7,514,088

Treasury shares (12,762) (13,209)

Total shareholders’ equity 26,075,467 26,275,697

Valuation and translation adjustments


Total valuation and translation adjustments 306,091 318,521

Total net assets 26,381,559 26,594,219

Total liabilities and net assets 30,560,358 31,048,858


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(2) Statement of Income (Thousands of yen)

FY2012

(Apr. 1, 2012 – Mar. 31, 2013) FY2013

(Apr. 1, 2013 – Mar. 31, 2014)

Net sales 8,585,648 9,372,479

Cost of sales 2,142,551 2,425,096

Gross profit 6,443,096 6,947,383

Selling, general and administrative expenses 6,624,068 6,626,295

Operating income (loss) (180,972) 321,088

Non-operating income

Interest income 545 96

Interest on securities 18,881 14,252

Dividend income 75,926 157,234

Foreign exchange gains 60,979 118,403

Rent income 127,625 144,704

Other 26,933 23,718

Total non-operating income 310,891 458,409

Non-operating expenses

Sales discounts 390 426

Rent cost of real estate 18,693 17,358

Loss on investments in partnership 11,016 10,260

Other - 77

Total non-operating expenses 30,101 28,122

Ordinary income 99,817 751,374

Extraordinary income

Gain on sales of non-current assets - 2,259

Transfer of rights income - 73,824

Reversal of provision for loss on business of subsidiaries and associates

45,000 -

Reversal of allowance for doubtful account for affiliates 1,667 -

Total extraordinary income 46,667 76,083

Extraordinary losses

Loss on disposal of non-current assets 2,165 2,920

Provision for loss on business of subsidiaries and associates - 36,000

Impairment loss 12,759 -

Special retirement expenses 20,071 -

Total extraordinary losses 34,996 38,920

Income before income taxes 111,489 788,538

Income taxes-current 20,236 218,415

Income taxes-deferred 5,862 43,905

Total income taxes 26,099 262,321

Net income 85,390 526,216


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(3) Statement of Changes in Equity FY2012 (Apr. 1, 2012 – Mar. 31, 2013)

(Thousands of yen)


Capital stock

Capital surplus Retained earnings

Legal capital surplus

Total capital surpluses

Legal retained earnings


Total retained earnings General

reserve

Retained earnings brought forward


10,117,065 8,657,753 8,657,753 311,082 4,325,000 3,150,016 7,786,099


Provision of general reserve 2,000,000 (2,000,000)


Net income 85,390 85,390

Purchase of treasury shares



- - - - 2,000,000 (2,472,687) (472,687)

Balance at end of current period

10,117,065 8,657,753 8,657,753 311,082 6,325,000 677,328 7,313,411

Shareholders’ equity Valuation and translation adjustments

Total net assets Treasury shares

Total shareholders’ equity



Total valuation and translation

adjustments


(12,542) 26,548,374 290,581 290,581 26,838,956


Provision of general reserve


Net income 85,390 85,390

Purchase of treasury shares (219) (219) (219)


15,510 15,510 15,510


(219) (472,907) 15,510 15,510 (457,396)


(12,762) 26,075,467 306,091 306,091 26,381,559


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FY2013 (Apr. 1, 2013 – Mar. 31, 2014) (Thousands of yen)


Capital stock

Capital surplus Retained earnings

Legal capital surplus

Total capital surpluses

Legal retained earnings


Total retained earnings General

reserve

Retained earnings brought forward


10,117,065 8,657,753 8,657,753 311,082 6,325,000 677,328 7,313,411



Net income 526,216 526,216

Purchase of treasury shares



- - - - - 200,677 200,677


10,117,065 8,657,753 8,657,753 311,082 6,325,000 878,006 7,514,088

Shareholders’ equity Valuation and translation adjustments

Total net assets Treasury shares

Total shareholders’ equity



Total valuation and translation

adjustments


(12,762) 26,075,467 306,091 306,091 26,381,559



Net income 526,216 526,216

Purchase of treasury shares (447) (447) (447)


12,429 12,429 12,429


(447) 200,230 12,429 12,429 212,659


(13,209) 26,275,697 318,521 318,521 26,594,219


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7. Others (1) Change in Representative Director Not applicable.

(2) Changes in Other Board Members (Scheduled for June 27, 2014) (a) Candidate for director

Director:

Takashi Sano (currently President, Sano Certified Public Accountant Office)

Note: Mr. Takashi Sano is a candidate to become outside director. Mr. Sano is currently an outside audit &

supervisory board member of the Company. As specified by the Tokyo Stock Exchange, a notice has been

submitted to the exchange that Mr. Sano is an independent corporate officer. If Mr. Sano is elected as an

outside director, the Company plans to continue to submit a notice that he is an independent corporate

officer.

(b) Candidate for audit & supervisory board member

Audit & supervisory board member (part-time):

Takashi Handa (currently Representative, White Bear International Audit & Co.)

Note: Mr. Takashi Handa is a candidate to become outside audit & supervisory board member. The Company plans

to submit a notice that Mr. Handa as an independent corporate officer as prescribed by the Tokyo Stock

Exchange.

(c) Retiring audit & supervisory board member

Audit & supervisory board member (part-time):

Takashi Sano

This financial report is solely a translation of “Kessan Tanshin” (in Japanese, including attachments), which has been prepared in accordance with accounting principles and practices generally accepted in Japan, for the convenience of readers who prefer an English translation.

Company name: ZUKEN Inc. Listing: Tokyo Stock … 7, 2014 Summary of Consolidated Financial Results...

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