9

SAKATA INX CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Basis of Presenting Consolidated Financial Statements

The accompanying consolidated financial statements of SAKATA INX CORPORATION (the “Company”) and its consolidated subsidiaries have been prepared in accordance with the provisions set forth in the Japanese Financial Instruments and Exchange Law and its related accounting regulations and in conformity with generally accepted accounting principles in Japan (“Japanese GAAP”), which are different in certain respects as to application and disclosure requirements from International Financial Reporting Standards (IFRS).

The accounts of the Company’s consolidated foreign subsidiaries are based on IFRS or generally accepted accounting principles in the United States of America (U.S. GAAP). The accompanying consolidated financial statements have been restructured and translated into English with some expanded descriptions and the inclusion of consolidated statements of shareholders’ equity from the consolidated financial statements of the Company prepared in accordance with Japanese GAAP and filed with the appropriate Local Finance Bureau of the Ministry of Finance as required by the Financial Instruments and Exchange Law. Some supplementary information included in the statutory Japanese language consolidated financial statements, but not required for fair presentation, is not presented in the accompanying consolidated financial statements. 2. Significant Accounting Policies

Consolidation The consolidated financial statements include the accounts of the Company and its twenty-seven

significant subsidiaries (twenty-three in 2011). The principal subsidiaries of the Company are THE INX GROUP LIMITED, INX International Ink Co., SAKATA INX ESPANA, S.A., P.T. SAKATA INX INDONESIA and SAKATA INX (INDIA) LIMITED. Due to their increased significance, INX GRAVURE CO. LTD., MAOMING SAKATA INX CO., LTD. and other two subsidiaries are included in the scope of consolidation beginning the year ended March 31, 2012. All significant intercompany transactions and accounts have been eliminated. The fiscal year-end of the consolidated foreign subsidiaries, excluding SAKATA INX (INDIA) LIMITED, is December 31 and different from the March 31 year-end of the Company. Significant transactions between December 31 and March 31 are reflected in the consolidated financial statements.

In the elimination of investments in subsidiaries, the assets and liabilities of the subsidiaries, including the portion attributable to minority shareholders, are evaluated using the fair value at the time the Company acquired control of the respective subsidiary. Differences between the cost of investments in consolidated subsidiaries and the equity in the net assets at the date of acquisition are amortized within twenty years.

The equity method is applied to four affiliates (three in 2011). The principal affiliate of the Company is SIIX Corporation. Due to its increased significance, ga city Corp. is included in the scope of application of the equity method. Two unconsolidated subsidiaries (six in 2011), including CDI SAKATA INX CORP., are not accounted for by the equity method because the impact on the Company’s share of their sales, net income or losses, total assets and retained earnings as of and for the year ended March 31, 2012 was immaterial.

Two affiliates (three in 2011), including ETERNAL SAKATA INX CO., LTD., are not accounted for by the equity method because the impact on the Company’s share of net income or losses and retained earnings as of and for the year ended March 31, 2012 was immaterial.

Securities The Companies classify securities as (a) securities held for trading purposes (“trading securities”), (b)

debt securities intended to be held to maturity (“held-to-maturity debt securities”), (c) equity securities issued by subsidiaries and affiliated companies and (d) all other securities that are not classified in any of the above categories (“available-for-sale securities”).

The Companies do not hold trading securities or held-to-maturity debt securities. Equity securities

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issued by subsidiaries and affiliated companies that are not consolidated or accounted for by the equity method are stated at moving average cost. Available-for-sale securities with available fair values are stated at fair value. Unrealized gains and unrealized losses on these securities are reported, net of applicable income taxes, as a separate component of shareholders’ equity. Realized gains and losses on sales of such securities are computed using moving average cost. Other securities with no available fair value are stated at moving average cost.

Inventories Inventories of the Company and its consolidated domestic subsidiaries are stated at cost based on the moving average method, in which the amount of inventories shown on the balance sheet are written down based on any decrease in profitability.

Inventories of the consolidated foreign subsidiaries are stated principally at the lower of cost or market, cost being determined by the first-in, first-out method.

Property, plant and equipment

Property, plant and equipment are carried at cost. The Company and its consolidated domestic subsidiaries provide depreciation principally by the declining balance method over the estimated useful life of the asset. However, depreciation for buildings, excluding building fixtures, of the Company and its consolidated domestic subsidiaries acquired after March 31, 1998 is provided by the straight-line method. Certain consolidated foreign subsidiaries compute depreciation by the straight-line method over the estimated useful life of the asset. The range of useful lives is summarized as follows:

Buildings and structures 3 to 60 years Machinery, equipment and vehicles 2 to 20 years Other 2 to 20 years

Intangible assets Intangible assets consist of in-house software, goodwill and others. The straight-line method is used to

amortize intangible assets. The amortization of in-house software is computed using the straight-line method based on the estimated useful life of five years. Goodwill is amortized using the straight-line method over periods not exceeding twenty years.

Finance leases Lease assets under finance lease transactions that do not transfer title of the lease assets are capitalized

and depreciated on a straight-line basis, with the lease period used as the useful life and no residual value. Finance lease transactions that did not transfer title of the lease assets and that commenced prior to

April 1, 2009 are accounted for as operating leases.

Allowance for doubtful accounts The Company and its consolidated subsidiaries (the “Companies”) have adopted the policy of

providing an allowance for doubtful accounts in an amount sufficient to cover possible losses on collection mainly by estimating the uncollectible amounts of certain receivables and applying a percentage based on collection experience to the remaining receivables.

Bonuses The Company and certain consolidated subsidiaries provide for employees’ bonuses at the balance

sheet date based on the estimated amounts of projected bonus payments.

Retirement benefits The Company and certain domestic consolidated subsidiaries provide funded non-contributory pension

plans, which include defined benefit pension plans and unfunded lump-sum payment plans, under which all eligible employees are entitled to benefits based on the level of wages and salaries at the time of retirement

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or termination, length of service and certain other factors. Certain foreign consolidated subsidiaries provide defined contribution plans besides defined benefit pension plans.

The liabilities and expenses for retirement benefits are determined based on the amounts actuarially calculated using certain assumptions. The Company and certain consolidated subsidiaries provide for employees’ retirement benefits at the balance sheet date based on the estimated amounts of projected benefit obligation and the fair value of plan assets at that date.

Prior service costs are recognized mainly as current costs, and actuarial gains and losses are recognized in expenses using the straight-line method over mainly 15 years, a period which reflects the average of the estimated remaining service years of employees, commencing with the current period.

Translation of foreign currencies Receivables and payables denominated in foreign currencies are translated into Japanese yen at

year-end rates. All revenues and expenses in foreign currencies are translated at the exchange rates prevailing when such transactions are made. The resulting gains and losses are recognized in the statements of income.

The balance sheet accounts of the consolidated foreign subsidiaries are translated into Japanese yen at year-end rates, except for equity, which is translated at historical rates. Differences arising from the translations are presented as “Foreign currency translation adjustment” and “Minority interests” in net assets. Income statement accounts of the consolidated foreign subsidiaries are translated at the average annual rates.

Derivatives and hedge accounting The Companies state derivative financial instruments at fair value and recognize changes in the fair

value as gain or loss unless the derivative financial instrument is used for hedging purposes. If derivative financial instruments are used as hedges and meet certain hedging criteria, the Companies defer recognition of gain or loss resulting from a change in fair value of the derivative financial instrument until the corresponding loss or gain on the hedged item is recognized. However, if forward foreign exchange contracts are used as hedges and meet certain hedging criteria, forward foreign exchange contracts and hedged items are accounted for in the following manner:

1. If a forward foreign exchange contract is executed to hedge an existing foreign currency receivable or payable,

(a) the difference, if any, between the Japanese yen amount of the hedged foreign currency receivable or payable translated using the spot rate at the inception date of the contract and the book value of the receivable or payable is recognized in the statement of income in the period which includes the inception date, and

(b) the discount or premium on the contract (the difference between the Japanese yen amount of the contract translated using the contracted forward rate and that translated using the spot rate at the inception date of the contract) is recognized over the term of the contract.

2. If a forward foreign exchange contract is executed to hedge a future transaction denominated in a foreign currency, the future transaction will be recorded using the contracted forward rate, and no gain or loss on the forward foreign exchange contract will be recognized.

Also, if interest rate swap contracts are used as hedges and meet certain hedging criteria, the net

amount to be paid or received under the interest rate swap contract is added to or deducted from the interest on the hedged assets or liabilities.

Cash and cash equivalents Cash on hand, readily available deposits and short-term highly liquid investments with maturities not

exceeding three months at the time of purchase are considered to be cash and cash equivalents.

Research and development expenses Research and development expenses are charged to income as incurred. Research and development

expenses for the years ended March 31, 2012 and 2011 were ¥2,004 million and ¥2,032 million, respectively.

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Income taxes The asset-liability approach is used to recognize deferred tax assets and liabilities for the expected

future tax consequences of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes and operating loss and tax credit carryforwards.

Consumption taxes Consumption taxes are excluded from the revenue and expense accounts. Amounts per share (a) Net income per share of common stock The Companies have adopted ASBJ Statement No. 2, “Accounting Standard for Earnings Per Share”

and Financial Accounting Standards Implementation Guidance No. 4, “Implementation Guidance for Accounting Standard for Earnings Per Share.”

(b) Cash dividends per share Cash dividends per share presented in the statements of income represent the cash dividends declared

applicable to the year, including dividends declared and paid after the end of the year. Net assets Under the Japanese Corporation Law (the “Law”) and regulations, the entire amount paid for new

shares is required to be designated as common stock. However, a company may, by a resolution of the Board of Directors, designate an amount not exceeding one half of the price of the new shares as additional paid-in capital, which is included in capital surplus.

The Law requires that an amount equal to 10% of dividends must be appropriated as additional paid-in capital or legal earnings reserve until the total aggregate amount of legal reserve and additional paid-in capital equals 25% of the common stock.

Additional paid-in capital and legal earnings reserve may not be distributed as dividends. However, all additional paid-in capital and all legal earnings reserve may be transferred to other capital surplus and retained earnings, respectively, which are potentially available for dividends. The maximum amount that the Company can distribute as dividends is calculated based on the nonconsolidated financial statements of the Company in accordance with the Law.

3. Additional Information

Change in Accounting Policies - Accounting Standards for Accounting Changes and Error Corrections The Company and its consolidated domestic subsidiaries adopted “Accounting Standard for

Accounting Changes and Error Corrections” (Accounting Standards Board of Japan (“ASBJ”) Statement No. 24, issued on December 4, 2009) and “Guidance on Accounting Standard for Accounting Changes and Error Corrections” (ASBJ Guidance No. 24, issued on December 4, 2009).

4. Deferred Capital Gains on Tangible Fixed Assets

Under certain conditions, such as exchanges of fixed assets of similar kinds, gains from insurance claims, and sales and purchases resulting from expropriation, Japanese tax laws permit companies to defer gains arising from such transactions by reducing the cost of the assets acquired. Following this provision, deferred capital gains from insurance claims were deducted from the cost of properties acquired in replacement, which amounted to ¥41 million and ¥41 million as of March 31, 2012 and 2011, respectively.

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5. Securities Lent under Loan Agreements

Investment securities include securities lent of ¥246 million and ¥242 million as of March 31, 2012 and 2011, respectively.

6. Effect of Bank Holiday on March 31, 2012

As financial institutions in Japan were closed on March 31, 2012, amounts that would normally be settled on March 31, 2012 were collected or paid on the following business day, April 2, 2012. As a result, notes and accounts receivable increased by approximately ¥1,103 million, notes and accounts payable increased by approximately ¥224 million as of March 31, 2012.

7. Financial Instruments

1. Qualitative Information on Financial Instruments (1) Policies for Using Financial Instruments The Companies have policies to limit fund management to the use of short-term deposits and

financing to bank loans. Derivative transactions are used to avoid the risk of fluctuation in interest rate risk of bank loans with variable interest rates. The Companies do not use derivative transactions for speculation.

(2) Contents, Risk and Risk Management Structure for Financial Instruments Operating receivables such as “Notes and accounts receivable - trade” are exposed to customer credit

risk. Due dates and the balances of operating receivables by customer are monitored by reviewing overdue receivable reports to manage such risk. In addition, credit research is performed regularly on customers whose accounts need attention.

Securities such of available-for-sale securities are exposed to market fluctuations risk, but they are mainly the securities parties with whom the Companies have business relationships. The Companies monitor the fair value of the securities and the financial condition of the investees regularly to evaluate investment policy, taking the business relationships with the investees into consideration.

Operating payables such as “Notes and accounts payable: Trade” are mostly due within one year. Short-term loans payable and lease obligations on finance leases are used as financing mainly for

operating transactions, and long-term loans payable and lease obligations on finance leases are used as financing mainly for capital expenditure.

Loans payable at variable interest rates are exposed to the risk of interest rate fluctuation. However, for some long-term loans payable, derivative transactions (interest rate swap contracts) are used as hedging instruments to avoid the interest rate risk and stabilize interest expense. Hedge effectiveness testing is not conducted as the interest rate swap contracts meet certain hedging criteria.

The execution and management of derivative transactions are performed under derivative transaction management rules based on the Company’s regulations, and the counterparties of derivative financial instruments are limited to high credit rating financial institutions to mitigate credit risk.

Operating payables and bank loans are exposed to liquidity risk, but the Companies manage the risk by preparing and reviewing respective monthly cash management plans.

(3) Supplementary explanation for the fair value of financial instruments The contract amounts for the derivative transactions under Note 13, “Derivative transactions,” do not

reflect the market risk for the derivative transactions themselves.

2. Fair values of financial instruments Consolidated balance sheet amounts and fair values of financial instruments and any difference as of

March 31, 2012 and 2011 are set forth in the tables below. Note that the following tables do not include fair values for financial instruments for which the fair

value was extremely difficult to measure.

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Year ended March 31, 2012 Millions of yen Consolidated

balance sheet amount

Fair value

Difference

(1) Cash and deposits ························· ¥ 5,194 ¥ 5,194 ¥ - (2) Notes and accounts

receivable - trade ························

36,547

36,547

-

(3) Short-term investments ·················· 5 5 - (4) Investments:

Equity securities ························ Available-for-sale securities ··········

4,846 7,984

7,512 7,984

2,666

- Total assets ····································· ¥ 54,576 ¥ 57,242 ¥ 2,666 (1) Notes and accounts payable: Trade ···· ¥ 22,295 ¥ 22,295 ¥ - (2) Short-term loans payable ················ 6,488 6,488 - (3) Long-term loans payable ················ 12,982 13,028 46 (4) Notes and accounts payable: Other

Other noncurrent liabilities Lease obligations ·······················

778

783

5

Total liabilities ································ ¥ 42,543 ¥ 42,594 ¥ 51 Derivative transactions(*) ··················· (17) (17) -

(*) Derivative assets and (liabilities) are on a net basis.

Year ended March 31, 2011 Millions of yen Consolidated

balance sheet amount

Fair value

Difference

(1) Cash and deposits ························· ¥ 3,753 ¥ 3,753 ¥ - (2) Notes and accounts

receivable - trade ························

33,247

33,247

-

(3) Short-term investments ·················· 5 5 - (4) Investments:

Equity securities ························ Available-for-sale securities ··········

4,759 9,073

6,792 9,073

2,033

- Total assets ····································· ¥ 50,837 ¥ 52,870 ¥ 2,033 (1) Notes and accounts payable: Trade ···· ¥ 19,213 ¥ 19,213 ¥ - (2) Short-term loans payable ················ 6,897 6,897 - (3) Long-term loans payable ················ 13,654 13,757 103 (4) Notes and accounts payable: Other

Other noncurrent liabilities Lease obligations ·······················

689

693

4 Total liabilities ································ ¥ 40,453 ¥ 40,560 ¥ 107 Derivative transactions ······················· - - -

Note 1: Determination of fair value of financial instruments, securities and derivative transactions Assets

(1) Cash and deposits, (2) Notes and accounts receivable - trade and (3) Short-term investments The fair value approximates the carrying amount because of the short maturity of these instruments.

(4) Investments The fair value of securities is stated at quoted market price. The securities are classified as securities in affiliates or available-for-sale securities. Proceeds from the

sale of available-for-sale securities and the related gains amounted to 63 million and 46 million yen, respectively, in the year ended March 31, 2012.

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Consolidated balance sheet amount, acquisition cost and any difference as of March 31, 2012 and 2011 were as follows:

Year ended March 31, 2012 Millions of yen Securities with consolidated balance sheet amount exceeding acquisition cost ···································

Consolidated balance sheet

amount Acquisition

cost (*) Difference

¥

11,740

¥

5,803

¥

5,937 Securities with consolidated balance sheet amount not exceeding acquisition cost ···································

1,090

1,376

(286) Total ················································· ¥ 12,830 ¥ 7,179 ¥ 5,651

(*) Acquisition cost is the consolidated balance sheet amount after write-down.

(*) Acquisition cost is the consolidated balance sheet amount after write-down. The amount of write-down accounted for the year ended March 31, 2011 was ¥349 million.

Liabilities

(1) Notes and accounts payable: Trade and (2) Short-term loans payable The fair value approximates the carrying amount because of the short maturity of these instruments.

(3) Long-term loans payable The fair value of long-term loans payable is estimated by the present value of the total amount of

principal and interest discounted at the interest rate that would apply to similar new borrowing. For variable interest, long-term loans payable which are hedged by interest rate swap contracts and meet certain hedging criteria (See Note 13, “Derivative Transactions”), the principal and interest booked with an interest rate swap as a unit will be assessed by discounting at the reasonably estimated interest rate of similar borrowing.

(4) Lease obligations The fair value of lease obligations is estimated by the present value of the principal and interest

discounted at the assumed interest rate of similar lease transactions. Derivative transactions

Refer to the Note 13, “Derivative Transactions.” Note 2: Financial instruments for which the fair value is extremely difficult to measure

Available-for-sale securities (non-listed equity securities) in the consolidated balance sheet amount of ¥1,392 million as of March 31, 2012 and ¥1,269 million as of March 31, 2011 were not included in “Assets (4) Investments” because they had no quoted market price, future cash flows were not estimable and the fair values were unavailable.

Year ended March 31, 2011 Millions of yen Securities with consolidated balance sheet amount exceeding acquisition cost·····································

Consolidated balance sheet

amount Acquisition

cost (*) Difference

¥

12,562

¥

5,569

¥

6,993 Securities with consolidated balance sheet amount not exceeding acquisition cost·····································

1,270

1,452

(182) Total ·················································· ¥ 13,832 ¥ 7,021 ¥ 6,811

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The amount of write-down accounted for the year ended March 31, 2012 for available-for-sale securities (non-listed equity securities) was ¥2 million.

Note 3: Aggregate annual maturities of money claims and securities with maturities as of March 31, 2012

and 2011 were as follows:

Year ended March 31, 2012 Millions of yen Cash and deposits ·················

2013

2014-2018

2019-2023

2024 and thereafter

¥ 5,194 ¥ - ¥ - ¥ - Notes and accounts

receivable - trade ················

36,508

39

-

-

Short-term investments ·········· 5 - - - Investments:

Available-for-sale securities with maturities ·················

-

-

-

- Total ································ ¥ 41,707 ¥ 39 ¥ - ¥ -

Note 4: Aggregate annual maturities of long-term loans payable and lease obligations as of March 31, 2012

and 2011 were as follows:

Year ended March 31, 2012 Millions of yen Long-term

loans payable ················

2013 2014 2015 2016 2017 2018 and thereafter

¥

6,683

¥

4,422

¥

774

¥

337

¥

189

¥

577

Lease obligations ············· 232 204 137 86 45 74 Total ···························· ¥ 6,915 ¥ 4,626 ¥ 911 ¥ 423 ¥ 234 ¥ 651

Year ended March 31, 2011 Millions of yen Long-term

loans payable ················

2012 2013 2014 2015 2016 2017 and thereafter

¥

1,620

¥

6,396

¥

4,353

¥

314

¥

270

¥

701

Lease obligations ············· 192 166 143 83 43 62 Total ···························· ¥ 1,812 ¥ 6,562 ¥ 4,496 ¥ 397 ¥ 313 ¥ 763

Year ended March 31, 2011 Millions of yen Cash and deposits ··················

2012

2013-2017

2018-2022

2023 and thereafter

¥ 3,753 ¥ - ¥ - ¥ - Notes and accounts

receivable - trade ·················

33,106

- 141

-

-

Short-term investments ··········· 5 - - - Investments:

Available-for-sale securities with maturities ··················

-

-

-

- Total ································· ¥ 36,864 ¥ 141 ¥ - ¥ -

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8. Securities

The following tables summarize the consolidated balance sheet amount, acquisition cost and fair value of available-for sale securities as of March 31, 2012 and March 31, 2011. Available-for-sale securities (non-listed equity securities) in the consolidated balance sheet amount of ¥173 million as of March 31, 2012 and ¥175 million as of March 31, 2011 were not included in “Equity securities” because they had no quoted market price, the future cash flows were not estimable and the fair values were unavailable.

For the year ended March 31, 2012, proceeds from the sale of available-for-sale securities amounted to ¥63 million, and the related gains amounted to ¥46 million. There were no such transactions for the year ended March 31, 2011.

The amount of available-for-sale securities impaired for the year ended March 31, 2012 and March 31, 2011 were ¥2 million and ¥349 million, respectively.

Regarding impairment loss, where the fair value at the fiscal year end is lower than acquisition cost by 50% or more, the whole amount of such difference is recorded as an impairment loss, in principle.

While in case where the fair value at the fiscal year end is lower than acquisition cost by between 30% and 50%, an amount deemed to be necessary is recorded as an impairment loss in determining recoverability by considering the quoted market price transaction during a certain period in the past, business performance and other factors.

Year ended March 31, 2012 Millions of yen Securities with consolidated balance

sheet amount exceeding acquisition cost ··························

Consolidated balance sheet

amount

Acquisition cost

Difference

¥

6,894

¥

5,340

¥

1,554 Securities with consolidated balance

sheet amount not exceeding acquisition cost ··························

1,090

1,376

(286) Total ········································ ¥ 7,984 ¥ 6,716 ¥ 1,268

Year ended March 31, 2011 Millions of yen Securities with consolidated balance

sheet amount exceeding acquisition cost ··························

Consolidated balance sheet

amount

Acquisition cost

Difference

¥

7,803

¥

5,105

¥

2,698 Securities with consolidated balance

sheet amount not exceeding acquisition cost ··························

1,270

1,452

(182) Total ········································ ¥ 9,073 ¥ 6,557 ¥ 2,516

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9. Inventories

Inventories at March 31, 2012 and 2011 consisted of the following: Millions of yen 2012 2011 Finished goods ································································· ¥ 5,200 ¥ 5,100 Merchandise ··································································· 639 742 Work-in-process ······························································· 761 720 Raw materials and supplies ·················································· 4,329 4,040 ¥ 10,929 ¥ 10,602 10. Short-term Loans Payable and Long-term Loans Payable

Short-term loans payable at March 31, 2012 and 2011 consisted of short-term notes generally for one year bearing interest ranging from 0.48% to 13.25%.

Long-term loans payable at March 31, 2012 and 2011 consisted of the following:

Millions of yen 2012 2011 Secured: Loans principally from banks at 0.45% - 13.50% maturing through 2023 ···························· ¥ 1,615 ¥ 2,081 Unsecured: Loans principally from banks at 0.00% - 11.20% maturing through 2024 ···························· 11,367 11,573 12,982 13,654 Less amounts due within one year ··········································· 6,683 1,620 ¥ 6,299 ¥ 12,034

The aggregate annual maturities of long-term loans payable at March 31, 2012 were as follows:

Year ending March 31, Millions of yen

2013 ································································································· ¥ 6,683 2014 ································································································· 4,422 2015 ································································································· 774 2016 ································································································· 337 2017 and thereafter················································································ 766 ¥ 12,982

The Company has specific commitment lines with two banks to finance working capital as follows: Specific commitment lines ········································· ¥ 3,000 million Unused portion as of March 31, 2012 ···························· ¥ 3,000 million

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11. Assets Pledged as Collateral

Assets pledged as collateral as of March 31, 2012 and 2011 were as follows: Millions of yen

2012 2011 Notes and accounts receivable - trade ······································ ¥ 201 ¥ 107 Property, plant and equipment, net of accumulated depreciation ··············································· 2,971 3,203

Investments in other ·························································· 39 41 ¥ 3,211 ¥ 3,351

Liabilities secured by the above assets were as follows: Millions of yen

2012 2011 Short-term loans payable ····················································· ¥ 201 ¥ 107 Current portion of long-term loans payable ······························· 258 109 Notes and accounts payable ················································· 448 410 Long-term loans payable ····················································· 1,707 1,972 Other noncurrent liabilities ·················································· 2 4 ¥ 2,616 ¥ 2,602 12. Finance Leases

1. Non-capitalized finance leases of the Companies at March 31, 2012 and 2011 were as follows: (As lessee) (1) Acquisition cost, accumulated depreciation and book value of leased properties, including interest:

Millions of yen 2012 2011 Machinery, equipment and vehicles: Acquisition cost ································································ ¥ 1,342 ¥ 1,542 Accumulated depreciation ···················································· 925 935 Book value ······································································ ¥ 417 ¥ 607

Millions of yen 2012 2011 Other property, plant and equipment: Acquisition cost ································································ ¥ 316 ¥ 520 Accumulated depreciation ···················································· 280 401 Book value ······································································ ¥ 36 ¥ 119

(2) Future minimum lease payments, including interest: Millions of yen

2012 2011 Due within one year ························································· ¥ 186 ¥ 267 Due over one year ···························································· 267 459 Total ·········································································· ¥ 453 ¥ 726

(3) Lease payments and equivalent depreciation amount Lease payments under the above leases for the years ended March 31, 2012 and 2011 were ¥265

million and ¥350 million, respectively.

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(4) Depreciation method of lease equivalents Accumulated depreciation of lease assets under non-capitalized finance lease transactions are

computed using the straight-line method, with the lease period used as the useful life and no residual value.

2. Capitalized finance leases of the Companies at March 31, 2012 and 2011 were as follows:

(As lessee) Finance leases for which the ownership of the leased assets is not considered to be transferred to the

lessee as of and for the years ended March 31, 2012 and March 31, 2011 were as follows: (1) Description of leased assets

Tangible fixed assets: Mainly the production facilities in the Printing ink business (Machinery and Equipment) and

computers (Tools, Furniture and Fixtures) for common purpose or each business etc..

(2) Depreciation method for leased assets As described in Note 2, “Significant Accounting Policies - Finance leases.”

13. Derivative Transactions

1. Derivative transactions to which hedge accounting has not been applied Year ended March 31, 2012

(Millions of yen)

Section Hedging instruments

Contract amount Fair value (*)

Gain (loss) on evaluation Over

1 year

Transaction excepting market transaction

Interest rate swap contracts Fixed payments, Variable receivables

¥ 387 ¥ 329 ¥ (17) ¥ (17)

(*)The fair values of derivative transactions are determined at the quoted price obtained from the relevant financial institutions.

Year ended March 31, 2011 Not applicable

2. Derivative transactions to which hedge accounting has been applied

Year ended March 31, 2012

(Millions of yen)

Hedge accounting

Hedging instruments

Hedged items

Contract amount Fair value

Evaluation of

fair value Over 1 year

Certain hedging criteria for interest rate swap contracts

Interest rate swap contracts Fixed payments, Variable receivables

Long-term loans payable ¥ 5,000 ¥ 2,000 (*) -

(*) The fair value is booked with the hedged items such as long-term loans payable as a unit because the transaction meets certain hedging criteria for interest rate swap contracts. The fair value is included in the fair value of long-term loans payable in Note 7, “Financial Instruments.”

21

Year ended March 31, 2011 (Millions of yen)

Hedge accounting

Hedging instruments

Hedged items

Contract amount Fair value

Evaluation of

fair value Over 1 year

Certain hedging criteria for interest rate swap contracts

Interest rate swap contracts Fixed payments, Variable receivables

Long-term loans payable ¥ 5,200 ¥ 5,000 (*) -

(*) The fair value is booked with the hedged items such as long-term loans payable as a unit because the transaction meets certain hedging criteria for interest rate swap contracts. The fair value is included in the fair value of long-term loans payable in Note 7, “Financial Instruments.”

14. Provision for Retirement Benefits

The Company and certain domestic consolidated subsidiaries provide funded non-contributory pension plans, which include defined benefit pension plans and unfunded lump-sum payment plans. Certain foreign consolidated subsidiaries provide defined contribution plans besides defined benefit pension plans.

The liability for retirement benefits included in the liability section of the consolidated balance sheets as of March 31, 2012 and 2011 consisted of the following:

Millions of yen 2012 2011 Projected benefit obligation ··········································· ¥ 9,498 ¥ 9,473 Less unrecognized actuarial differences ····························· (1,761) (2,000) Less unrecognized prior service cost ································ 0 0 Less fair value of pension assets······································ (5,591) (5,539) Prepaid pension expenses ············································· 581 645 Liability for retirement benefits ······························· ¥ 2,727 ¥ 2,579

Retirement benefit expenses included in the consolidated statements of income for the years ended

March 31, 2012 and 2011 consisted of the following:

Millions of yen 2012 2011 Service costs – benefits earned during the year ····················· ¥ 326 ¥ 328 Interest cost on projected benefit obligation ························ 188 192 Expected return on plan assets ········································ (162) (162) Reversal of prior service costs ········································ 0 0 Amortization of actuarial differences ································ 281 272 Retirement benefit expenses ··································· ¥ 633 ¥ 630

The discount rate and the rate of expected return on plan assets were mainly 2.0% and 3.0%,

respectively. The estimated amount of all retirement benefits to be paid at future retirement dates is allocated equally to each service year using the estimated total number of service years. Prior service costs are recognized mainly as current costs, and actuarial gains and losses are recognized in the consolidated statements of income using the straight-line method over mainly 15 years, which is within the average of the estimated remaining service years of employees, commencing with the current period.

22

15. Deferred Income Taxes Significant components of the Companies’ deferred tax assets and liabilities as of March 31, 2012 and

2011 were as follows: Millions of yen

2012 2011 Deferred tax assets:

Allowance for doubtful accounts ··································· ¥ 313 ¥ 366 Provision for bonuses ················································ 381 400 Provision for retirement benefits ··································· 789 805 Write-down of inventories ··········································· 151 166 Intangible assets ······················································· 378 491 Loss on valuation of investments in capital

of subsidiaries and affiliates ·······································

-

310 Tax loss carryovers ·················································· 599 498 Other ···································································· 689 852

Subtotal ····································································· 3,300 3,888 Valuation allowance ·················································· (850) (1,318)

Total deferred tax assets ·················································· 2,450 2,570 Deferred tax liabilities:

Valuation difference on available-for-sales securities ··········· (446) (1,021) Special reserves ······················································· (414) (476) Other ···································································· (1,122) (1,139)

Total deferred tax liabilities ·············································· (1,982) (2,636) Net deferred tax assets (liabilities) ······································ ¥ 468 ¥ (66)

The reconciliation between the effective tax rate reflected in the consolidated financial statements and

the statutory tax rate for the years ended March 31, 2012 and 2011 were summarized as follows: 2012 2011 Statutory tax rate of the Company······································· -% 40.5% (Reconciliation) Expenses not qualifying for deduction ····························· - 2.3 Revenues not in gross revenue ······································ - (2.7) Corporate inhabitants tax ············································ - 0.7 Tax credits ····························································· - (2.7) Equity in earnings of affiliates ······································ - (5.8) Elimination of dividend income ···································· - 2.4 Valuation allowance ·················································· - 1.5 Other ···································································· - (1.2) Effective tax rate after adoption of tax-effect accounting ············ -% 35.0%

The note of each rate is omitted the because difference between the statutory tax rate and the effective tax rate after adoption of tax-effect accounting was less than 5% of the former rate for the year ended March 31, 2012.

(Additional Information)

Adjustment of deferred tax assets and liabilities for enacted changes in tax laws and rates On December 2, 2011, “Act for Partial Revision of the Income Tax Act, etc. for the Purpose of

Creating Taxation System Responding to Changes in Economic and Social Structures” (Act No. 114 of 2011) and “Act on Special Measures for Securing Financial Resources Necessary to Implement Measures for Reconciliation Following the Great East Japan Earthquake” (Act No. 117 of 2011) were enacted into law. As a result of these amendments, the statutory income tax rate for the Company will be reduced to 38.0% for years beginning on or after April 1, 2012 and 35.6% for years beginning on or after April 1, 2015. Based on the amendments, the statutory income tax rates utilized for the measurement of deferred tax assets and liabilities expected to be settled or realized from April 1, 2012 to March 31, 2015 and on or after April 1, 2015 are 38.0% and 35.6%, respectively, as of March 31, 2012. Due to these changes in statutory income tax

23

rates, net deferred tax assets decreased by ¥44 million as of March 31, 2012, and deferred income tax expense recognized for the year ended March 31, 2012 increased by ¥105 million and valuation difference on available-for-sale securities increased by ¥60 million. 16. Contingent Liabilities

(Contingent liabilities) At March 31, 2012 and 2011, the Companies were contingently liable as follows:

Millions of yen 2012 2011 ¥ 762 ¥ 1,028

The Company provides letters of awareness to banks for bank loans of unconsolidated subsidiaries and

affiliated companies, and the Company also provides guarantees of indebtedness for leases of unconsolidated subsidiaries and affiliated companies.

The guarantee obligations include the amount guaranteed by the other parties, and that amount is excluded from the amount stated above.

(Amount guaranteed by the other parties)

Millions of yen 2012 2011 ¥ 37 ¥ -

17. Selling, General and Administrative Expenses

The main items of selling, general and administrative expenses for the years ended March 31, 2012 and March 31, 2011 were as follows:

Millions of yen 2012 2011 Freightage and packing expenses ······································ ¥ 3,748 ¥ 3,654 Salaries and allowances ·················································· 6,792 7,323 Depreciation ······························································· 733 762 Provision of allowance for doubtful accounts ························ 77 243 Provision for bonuses ···················································· 580 582 Retirement benefit expenses ············································ 392 424 Research and development expenses ·································· 2,004 2,032

18. Consolidated Statements of Comprehensive Income

Reclassification adjustment and tax benefit concerning other comprehensive income for the year ended March 31, 2012 were as follow:

Millions of yen Valuation difference on available-for-sale securities

Unrealized holding gains arising during the period ········································· ¥ (1,201) Reclassification adjustment included in net income ········································ (46) Pre-tax amount ················································································· (1,247) Tax benefit ······················································································ 576 Valuation difference on available-for-sale securities ····································· (671)

Foreign currency translation adjustment Amount arising during the period ··························································· (871)

Share of other comprehensive income of affiliates accounted for using equity method Amount arising during the period ··························································· (437)

Total other comprehensive income ··························································· ¥ (1,979)

24

19. Segment Information

1. Overview of reportable segments The Companies’ reportable segments are components of the Companies whose separate financial

information is obtainable and which the Board of Directors and Management Committee regularly consider in order to determine the allocation of business resources and to evaluate business performance. The Companies are mainly engaged in the manufacture and sale of printing inks. Multiple divisions of the Company are engaged in domestic market and foreign subsidiaries are engaged in their own respective oversea markets such as markets of Asia, North America and Europe.

Foreign subsidiaries that have independent management units establish their own comprehensive strategy and develop business activities in respective regions and surrounding areas. Besides the sale of printing inks, the Company purchases and sells graphic arts materials the in domestic market. In addition, the Company purchases and sells printing equipment as well as printing inks in the domestic market.

The functional materials business such as inkjet ink, toner, pigment dispersion and others developed through the basic technology of printing inks like pigment dispersion, make up various independent operational segments. The Companies focus on expanding the revenue base of the functional materials business led by the Company.

Therefore, the Companies’ printing inks business, our core business, comprises the geographic segments based on the production and sales structure. The Companies’ printing inks business consists of the four reportable segments of “Printing inks and graphic arts materials (Japan),” “Printing inks (Asia),” “Printing inks (North America)” and “Printing inks (Europe).” Furthermore, the “Functional materials” business, in which the Companies promote business expansion, constitutes another reportable segment for a total of five reportable segments.

2. Basis of measurement for reported segment sales, profit or loss, assets and other items The accounting policies of the reportable segments are essentially the same as those described in Note

2, “Significant Accounting Policies.” Segment profit or loss is stated on an operating income basis. Intersegment income and transfers are

based on the prevailing markets prices.

Reportable segment Main products and merchandise Printing inks and graphic arts materials (Japan)

News paper printing ink, Commercial printing ink, Packaging ink, Flexible packaging gravure ink, Print and plate making equipment and materials, Packaging equipment and supplies

Printing inks (Asia) News paper printing ink, Commercial printing ink, Metal decorating ink, Packaging ink, Flexible packing gravure ink

Printing inks (North America) Commercial ink, Metal decorating ink, Packaging ink, Flexible packaging gravure ink

Printing inks (Europe) Commercial ink, Metal decorating ink, Packaging ink, Flexible packaging gravure ink

Functional materials Inkjet ink, Toner, Pigment dispersion for color filter, Functional coating

25

3. Information about reported segment sales, segment profit or loss, segment assets and other items

(*1) The “Other businesses” category includes the chemical products business, color film developing and printing services and equipment for color

matching systems not shown in reportable segments. (*2) Adjustments are as follows:

1. The adjustment of ¥185 million for segment profit includes eliminations for intersegment transactions of ¥374 million and corporate expenses of ¥(189) million that have not been allocated to any segment. Corporate expenses are mainly service fees to unconsolidated subsidiaries and affiliates.

2. The adjustment of ¥16,855 million for segment assets includes eliminations for intersegment transactions of ¥(2,630) million and corporate assets of ¥19,485 million that have not been allocated to any segment. Corporate assets are mainly investment securities held for a common purpose.

(*3) Segment profit is adjusted to be consistent with operating income shown on the consolidated statements of income.

Year ended March 31, 2012

Millions of yen

Reportable Segment

Other businesses

(*1) Total Adjustments

(*2) Consolidated

(*3)

Printing inks

and graphic arts materials (Japan)

Printing inks

(Asia)

Printing inks

(North America)

Printing inks

(Europe)

Functional materials Total

Net sales to outside customers ¥59,282 ¥15,498 ¥24,937 ¥5,541 ¥6,112 ¥111,370 ¥8,201 ¥119,571 ¥ - ¥119,571 Intersegment and transfers 35 152 1,587 199 69 2,042 4,317 6,359 (6,359) -

Total 59,317 15,650 26,524 5,740 6,181 113,412 12,518 125,930 (6,359) 119,571

Segment profit ¥3,041 ¥570 ¥(294) ¥106 ¥176 ¥3,599 ¥477 ¥4,076 ¥185 ¥4,261

Segment assets 36,164 11,720 11,044 4,133 5,387 68,448 5,692 74,140 16,855 90,995

Depreciation 864 278 681 159 489 2,471 23 2,494 - 2,494

Amortization of goodwill - 27 - - 168 195 - 195 - 195 Increase in property, plant and equipment and intangible assets 441 773 348 65 1,107 2,734 10 2,744 - 2,744

26

(*1) The “Other businesses” category includes the chemical products business, color film developing and printing services and equipment for color

matching systems not shown in reportable segments. (*2) Adjustments are as follows:

1. The adjustment of ¥145 million for segment profit includes eliminations for intersegment transactions of ¥338 million and corporate expenses of ¥(193) million that have not been allocated to any segment. Corporate expenses are mainly service fees to unconsolidated subsidiaries and affiliates.

2. The adjustment of ¥18,312 million for segment assets includes eliminations for intersegment transactions of ¥(2,050) million and corporate assets of ¥20,362 million that have not been allocated to any segment. Corporate assets are mainly investment securities held for a common purpose.

(*3) Segment profit is adjusted to be consistent with operating income shown on the consolidated statements of income.

Year ended March 31, 2011

Millions of yen

Reportable Segment

Other businesses

(*1) Total Adjustments

(*2) Consolidated

(*3)

Printing inks

and graphic arts materials (Japan)

Printing inks

(Asia)

Printing inks

(North America)

Printing inks

(Europe)

Functional materials Total

Net sales to outside customers ¥60,290 ¥12,997 ¥25,562 ¥5,389 ¥6,083 ¥110,321 ¥7,342 ¥117,663 ¥ - ¥117,663 Intersegment and transfers 27 11 1,346 22 121 1,527 4,014 5,541 (5,541) -

Total 60,317 13,008 26,908 5,411 6,204 111,848 11,356 123,204 (5,541) 117,663

Segment profit ¥3,411 ¥394 ¥478 ¥123 ¥319 ¥4,725 ¥179 ¥4,904 ¥145 ¥5,049

Segment assets 35,501 9,293 10,902 3,979 5,108 64,783 3,955 68,738 18,312 87,050

Depreciation 906 300 728 156 412 2,502 24 2,526 - 2,526

Amortization of goodwill - 37 - - 287 324 - 324 - 324 Increase in property, plant and equipment and intangible assets 513 309 565 149 320 1,856 2 1,858 - 1,858

27

(Related Information)

Year ended March 31, 2012

1. Information about each product and service Year ended March 31, 2012

Millions of yen Printing inks Graphic arts

materials Functional materials Other Total

Net sales to outside customers ¥ 84,949 ¥ 20,466 ¥ 6,112 ¥ 8,044 ¥ 119,571

2. Information about geographic areas

Year ended March 31, 2012

Millions of yen

Japan Asia America Europe Other Total

Net sales ¥ 69,232 ¥ 16,701 ¥ 23,437 ¥ 6,182 ¥ 4,019 ¥ 119,571 Property, plant and equipment ¥ 11,631 ¥ 2,784 ¥ 3,492 ¥ 1,263 ¥ 69 ¥ 19,239

Note: Net sales are classified by country and region based on customer location.

3. Major customers No information is available as there were no outside customers accounting for 10% or more of the

Companies’ total net sales.

(Loss on impairment of fixed assets by reportable segments) Not applicable

(Amortization and unamortized balance of goodwill)

Year ended March 31, 2012 Millions of yen

Reportable Segment

Other businesses Adjustments Consolidated

Printing inks and

graphic arts materials (Japan)

Printing inks

(Asia)

Printing inks

(North America)

Printing inks

(Europe)

Functional materials Total

Amortization of goodwill ¥ - ¥ 27 ¥ - ¥ - ¥ 168 ¥ 195 ¥ - ¥ - ¥ 195

Balance as of March 31, 2012 ¥ - ¥ 14 ¥ - ¥ - ¥ 207 ¥ 221 ¥ - ¥ - ¥ 221

(Negative goodwill in other income by reportable segments)

Not applicable

28

Year ended March 31, 2011

1. Information about each product and service Year ended March 31, 2011

Millions of yen

Printing inks Graphic arts materials

Functional materials Other Total

Net sales to outside customers ¥ 81,740 ¥ 22,952 ¥ 6,082 ¥ 6,889 ¥ 117,663

2. Information about geographic areas

Year ended March 31, 2011

Millions of yen Japan Asia America Europe Other Total

Net sales ¥ 68,821 ¥ 14,470 ¥ 24,230 ¥ 6,207 ¥ 3,935 ¥ 117,663 Property, plant and equipment ¥ 11,297 ¥ 2,134 ¥ 3,988 ¥ 1,445 ¥ 104 ¥ 18,968

Note: Net sales are classified by country and region based on customer location. 3. Major customers

No information is available as there were no outside customers accounting for 10% or more of the Companies’ total net sales.

(Loss on impairment of fixed assets by reportable segments)

Not applicable

(Amortization and unamortized balance of goodwill) Year ended March 31, 2011 Millions of yen

Reportable Segment

Other businesses Adjustment Consolidated

Printing inks and

graphic arts materials (Japan)

Printing inks

(Asia)

Printing inks

(North America)

Printing inks

(Europe)

Functional materials Total

Amortization of goodwill

¥ - ¥ 37 ¥ - ¥ - ¥ 287 ¥ 324 ¥ - ¥ - ¥ 324

Balance as of March 31, 2011

¥ - ¥ 41 ¥ - ¥ - ¥ 386 ¥ 427 ¥ - ¥ - ¥ 427

(Negative goodwill in other income by reportable segments)

Not applicable

29

20. Related Party Transactions

Transactions with related parties required to be disclosed by Japanese GAAP for the years ended March 31, 2012 and 2011 were as follows:

Year ended March 31, 2012

Note 1: The trade terms of the above transactions were determined using the same method as for third party transactions. Note 2: The amount of ¥62 million was accounted for as allowance for doubtful accounts to cover possible losses on collection from

SHENZHEN SAKATA INX CO., LTD., and the amount of bad debt expense accounted for the year ended March 31, 2012 was ¥3 million.

Year ended March 31, 2011 Not applicable

21. Changes in Net Assets

1. Information on type and number of shares issued and treasury stock Type and number of shares issued and treasury stock in the year ended March 31, 2012

Number of shares

as of the beginning of current period

Increase in number of shares

during the period

Decrease in number of shares

during the period

Number of shares as of the end of

current period

Shares issued: Common stock 62,601,161 - - 62,601,161

Treasury stock: Common stock 2,082,767 2,878 - 2,085,645

Note: The increase in number of shares of treasury stock was due to the purchase of fractional shares.

Type and number of shares issued and treasury stock in the year ended March 31, 2011

Number of shares

as of the beginning of current period

Increase in number of shares

during the period

Decrease in number of shares

during the period

Number of shares as of the end of current period

Shares issued: Common stock 62,601,161 - - 62,601,161

Treasury stock: Common stock 2,079,771 2,996 - 2,082,767

Note: The increase in the number of shares of treasury stock was due to the purchase of fractional shares.

Attribute Name Location

Capital Stock

(Millions of yen)

Operations or

occupation

Holding equity

(%) Relationship Transaction

details

Transaction Amount (Millions of yen)

Account

Balance at year end (Millions of yen)

Affiliate SHENZHEN SAKATA INX CO., LTD.

Shenzhen, China

¥ 28 Printing ink Direct 25.0

Sales of finished goods

Sales of finished goods ¥ 998

Notes and accounts

receivable -trade

¥ 1,103

Investments and other

assets: Other

¥ 62

30

2. Information on dividends Dividends paid in the year ended March 31, 2012

Dividends paid in the year ended March 31, 2011

Dividends with a record date attributable to the year ended March 31, 2012 but an effective date after March 31, 2012

Date of resolution Type of shares

Source of dividends

Amounts of dividends

(Millions of yen)

Cash dividends per share

(Yen) Record date Effective

date

Annual meeting of stockholders

held on June 28, 2012

Common stock

Retained earnings ¥ 424 ¥ 7 March 31,

2012 June 29, 2012

Dividends with a record date attributable to the year ended March 31, 2011 but an effective date after March 31, 2011

Date of resolution Type of shares

Source of dividends

Amounts of dividends

(Millions of yen)

Cash dividends per share

(Yen) Record date Effective

date

Annual meeting of stockholders

held on June 29, 2011

Common stock

Retained earnings ¥ 363 ¥ 6 March 31,

2011 June 30, 2011

Date of resolution Type of shares

Amounts of dividends

(Millions of yen)

Cash dividends per share

(Yen) Record date Effective date

Annual meeting of stockholders held on

June 29, 2011

Common Stock ¥ 363 ¥ 6 March 31,

2011 June 30, 2011

Directors' meeting held on

November 9, 2011

Common Stock ¥ 424 ¥ 7 September 30,

2011 December 2,

2011

Date of resolution Type of shares

Amounts of dividends

(Millions of yen)

Cash dividends per share

(Yen) Record date Effective date

Annual meeting of stockholders held on

June 29, 2010

Common Stock ¥ 363 ¥ 6 March 31,

2010 June 30,

2010

Directors' meeting held on

November 5, 2010

Common Stock ¥ 363 ¥ 6 September 30,

2010 December 3,

2010

31

22. Information on Significant Affiliates

A summary of the financial statements of SIIX Corporation required to be disclosed by Japanese GAAP as summarized financial statements of significant affiliates is as follows:

Summarized balance sheets as of December 31, 2011and 2010

Millions of yen 2011 2010

Current assets ························ ¥

43,885 ¥ 47,913 Noncurrent assets ··················· ¥ 15,587 ¥ 14,875 Current liabilities ···················· ¥ 33,476 ¥ 38,966 Noncurrent liabilities ··············· ¥ 5,869 ¥ 4,051 Net assets ····························· ¥ 20,127 ¥ 19,771

Summarized statements of income for the years ended December 31, 2011 and 2010

Millions of yen 2011 2010

Net sales ······························ ¥ 167,826 ¥ 166,481 Income before income taxes ······· ¥ 4,138 ¥ 4,999 Net income ··························· ¥ 2,724 ¥ 3,271

23. Amounts Per Share

Yen 2012 2011

Net assets per share ·················· ¥ 605.70 ¥ 598.73

Dividends per share ················· ¥ 13.00 ¥ 12.00

Net income per share ················ ¥ 49.27 ¥ 62.08

Note 1: There are no dilutive securities. Note 2: The calculation of net income per share was as follows:

2012 2011

Net income (millions of yen) ····················· ¥ 2,982 ¥ 3,757

Net income attributable to shares of common stock (millions of yen) ··········· ¥ 2,982 ¥ 3,757

Average number of shares of common stock during the fiscal year (thousands) ············· 60,516 60,520