NICHICON CORPORATION and Consolidated Subsidiaries

NICHICON CORPORATION and Consolidated Subsidiaries

Consolidated Financial Statements as of and for the Year Ended March 31, 2021 and Independent Auditor's Report

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Consolidated Balance Sheet As of March 31, 2021

Millions of Yen

Thousands of U.S. Dollars

(Note 1)

ASSETS 2021 2020 2021 CURRENT ASSETS:

Cash and cash equivalents (Note 15) ¥ 19,766 ¥ 18,441 $ 178,524 Marketable securities (Notes 5 and 15) 1,044 2,623 9,430 Receivables (Note 15):

Trade 34,507 34,109 311,655 Unconsolidated subsidiaries and associated companies 225 137 2,036 Allowance for doubtful accounts (61 ) (40 ) (553 )

Inventories (Note 6) 21,561 21,682 194,736 Other current assets 824 903 7,438

Total current assets 77,866 77,855 703,266

PROPERTY, PLANT, AND EQUIPMENT (Notes 2.(8) and 19):

Land 5,154 5,154 46,554 Buildings and structures 40,334 39,516 364,290 Machinery and equipment 108,140 105,748 976,695 Furniture and fixtures 10,256 9,730 92,628 Lease assets 2,373 2,167 21,431 Construction in progress 3,256 1,906 29,404

Total property, plant, and equipment 169,513 164,221 1,531,002

Accumulated depreciation (134,007 ) (130,454 ) (1,210,319 )

Net property, plant, and equipment 35,506 33,767 320,683

INVESTMENTS AND OTHER ASSETS:

Investment securities (Notes 5 and 15) 35,169 20,974 317,637 Investments in and advances to unconsolidated

subsidiaries and associated companies (Note 15) 5,163 4,639 46,635 Deferred tax assets (Note 10) 336 358 3,036 Asset for retirement benefit (Note 8) 331 256 2,989 Other assets 1,969 1,809 17,784 Allowance for doubtful accounts (Note 15) (331 ) (231 ) (2,991 )

Total investments and other assets 42,637 27,805 385,090

TOTAL ¥ 156,009 ¥ 139,427 $ 1,409,039

See notes to consolidated financial statements.

Millions of Yen


(Note 1)

LIABILITIES AND EQUITY 2021 2020 2021 CURRENT LIABILITIES:

Short-term borrowings (Notes 7 and 15) ¥ 7,000 ¥ 2,400 $ 63,223 Current portion of long-term debt (Note 7) 4,948 5,004 44,689 Payables (Note 15):

Trade 21,849 20,527 197,338 Unconsolidated subsidiaries and associated companies 209 90 1,888 Construction 1,056 1,202 9,534

Income taxes payable 512 673 4,626 Accrued expenses 4,983 5,429 45,002 Other current liabilities 627 1,182 5,662

Total current liabilities 41,184 36,507 371,962

NON-CURRENT LIABILITIES:

Long-term debt (Note 7) 13,934 18,582 125,848 Liability for retirement benefits (Note 8) 1,511 1,678 13,647 Deferred tax liabilities (Note 10) 7,891 3,128 71,275 Provision for product warranties 1,538 1,418 13,893 Other long-term liabilities 684 663 6,174

Total non-current liabilities 25,558 25,469 230,837

CONTINGENT LIABILITIES (Note 20) EQUITY (Notes 9 and 18):

Common stock, authorized, 137,000,000 shares; issued, 78,000,000 shares in 2021 and 2020 14,287 14,287 129,034

Capital surplus 16,861 16,861 152,281 Retained earnings 48,916 48,855 441,801 Treasury stock, at cost,

9,581,766 shares in 2021 and 9,581,061 shares in 2020 (11,626 ) (11,625 ) (104,995 ) Accumulated other comprehensive income:

Unrealized gain on available-for-sale securities 18,513 7,834 167,203 Foreign currency translation adjustments 236 (618 ) 2,134

Total 87,187 75,594 787,458 Noncontrolling interests 2,080 1,857 18,782

Total equity 89,267 77,451 806,240

TOTAL ¥ 156,009 ¥ 139,427 $ 1,409,039

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Consolidated Statement of Income For the Year Ended March 31, 2021

Millions of Yen


(Note 1)

2021 2020 2021 NET SALES (Note 19) ¥ 116,074 ¥ 119,676 $ 1,048,353 COST OF SALES (Note 12) 99,186 101,463 895,823

Gross profit 16,888 18,213 152,530 SELLING, GENERAL, AND ADMINISTRATIVE

EXPENSES (Notes 11 and 12) 15,314 15,664 138,315

Operating income 1,574 2,549 14,215

OTHER INCOME (EXPENSES):

Interest and dividend income 536 568 4,840 Interest expense (50 ) (63 ) (449 ) Foreign exchange gain, net 427 388 3,850 Equity in earnings of associated companies 5 164 43 Loss on sales and disposals of property, plant, and

equipment, net (19 ) (61 ) (169 ) Write-down of investment securities - (112 ) - Gain on sales of investment securities 290 218 2,619 Loss on COVID-19 (Note 14) (470 ) - (4,245 ) Subsidy income (Note 13) 513 26 4,633 Other, net (53 ) (11 ) (475 )

Other income (expenses), net 1,179 1,117 10,647

INCOME BEFORE INCOME TAXES 2,753 3,666 24,862

INCOME TAXES (Note 10):

Current 751 818 6,779 Deferred 112 (188 ) 1,015

Total income taxes 863 630 7,794

NET INCOME 1,890 3,036 17,068 NET INCOME ATTRIBUTABLE TO NONCONTROLLING

INTERESTS 187 224 1,684

NET INCOME ATTRIBUTABLE TO OWNERS OF THE

PARENT ¥ 1,703 ¥ 2,812 $ 15,384

Yen U.S. Dollars

(Note 1)

PER SHARE OF COMMON STOCK (Notes 2.(20) and 17): Basic net income ¥24.90 ¥40.59 $ 0.22 Diluted net income 22.33 39.41 0.20 Cash dividends applicable to the year 25.00 24.00 0.23


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Consolidated Statement of Comprehensive Income For the Year Ended March 31, 2021

Millions of Yen


(Note 1)

2021 2020 2021 NET INCOME ¥ 1,890 ¥ 3,036 $ 17,068 OTHER COMPREHENSIVE INCOME (LOSS) (Note 16):

Unrealized income (loss) on available-for-sale securities 10,612 (2,012 ) 95,849 Foreign currency translation adjustments 929 (954 ) 8,388 Share of other comprehensive income (loss) in associates 74 (106 ) 669

Total other comprehensive income (loss) 11,615 (3,072 ) 104,906

COMPREHENSIVE INCOME (LOSS) ¥ 13,505 ¥ (36 ) $ 121,974

TOTAL COMPREHENSIVE INCOME (LOSS)

ATTRIBUTABLE TO: Owners of the parent ¥13,236 ¥(205 ) $119,546 Noncontrolling interests 269 169 2,428


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Consolidated Statement of Changes in Equity For the Year Ended March 31, 2021

Thousands Millions of Yen

Accumulated Other

Comprehensive Income

Number of Shares of

Common Stock Outstanding

Common Stock

Capital Surplus

Retained Earnings

Treasury Stock

Unrealized Gain on Available-for-Sale Securities

Foreign Currency

Translation Adjustments Total

Noncontrolling Interests Total Equity

BALANCE, APRIL 1, 2019 69,637 ¥ 14,287 ¥ 17,069 ¥ 47,714 ¥ (10,124 ) ¥ 9,872 ¥ 361 ¥ 79,179 ¥ 2,135 ¥ 81,314

Net income attribute to owners of the parent - - - 2,812 - - - 2,812 - 2,812 Cash dividends, ¥24.0 per share - - - (1,671 ) - - - (1,671 ) - (1,671 ) Purchase of treasury stock (1,218 ) - - - (1,501 ) - - (1,501 ) - (1,501 ) Purchase of shares of consolidated subsidiary - - (208 ) - - - - (208 ) - (208 ) Net change in the year - - - - - (2,038 ) (979 ) (3,017 ) (278 ) (3,295 )

BALANCE, APRIL 1, 2020 68,419 14,287 16,861 48,855 (11,625 ) 7,834 (618 ) 75,594 1,857 77,451

Net income attribute to owners of the parent - - - 1,703 - - - 1,703 - 1,703 Cash dividends, ¥24.0 per share - - - (1,642 ) - - - (1,642 ) - (1,642 ) Purchase of treasury stock (1 ) - - - (1 ) - - (1 ) - (1 ) Disposal of treasury shares - - - - 0 - - 0 - 0 Net change in the year - - - - - 10,679 854 11,533 223 11,756

BALANCE, MARCH 31, 2021 68,418 ¥ 14,287 ¥ 16,861 ¥ 48,916 ¥ (11,626 ) ¥ 18,513 ¥ 236 ¥ 87,187 ¥ 2,080 ¥ 89,267

Thousands of U.S. Dollars (Note 1)

Accumulated Other

Comprehensive Income

Common

Stock Capital Surplus

Retained Earnings

Treasury Stock

Unrealized Gain on Available-for-Sale Securities

Foreign Currency

Translation Adjustments Total

Noncontrolling Interests Total Equity

BALANCE, APRIL 1, 2020 $ 129,034 $ 152,281 $ 441,247 $ (104,989 ) $ 70,760 $ (5,585 ) $ 682,748 $ 16,770 $ 699,518

Net income attribute to owners of the parent - - 15,384 - - - 15,384 - 15,384 Cash dividends, $0.23 per share - - (14,830 ) - - - (14,830 ) - (14,830 ) Purchase of treasury stock - - - (7 ) - - (7 ) - (7 ) Disposal of treasury shares - - - 1 - - 1 - 1 Net change in the year - - - - 96,443 7,719 104,162 2,012 106,174

BALANCE, MARCH 31, 2021 $ 129,034 $ 152,281 $ 441,801 $ (104,995 ) $ 167,203 $ 2,134 $ 787,458 $ 18,782 $ 806,240


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Consolidated Statement of Cash Flows For the Year Ended March 31, 2021

Millions of Yen


(Note 1)

2021 2020 2021 OPERATING ACTIVITIES:

Income before income taxes ¥ 2,753 ¥ 3,666 $ 24,862

Adjustments for: Income taxes paid (938 ) (992 ) (8,476 ) Depreciation and amortization 5,245 5,336 47,378 Loss on sales and disposals of property, plant, and

equipment, net 19 61 169 Changes in assets and liabilities:

Decrease (increase) in trade accounts receivable 322 (316 ) 2,908 Decrease in inventories 427 56 3,857 Increase (decrease) in trade accounts payable 1,017 (1,913 ) 9,184 Decrease in accrued expenses and other current

liabilities (457 ) (862 ) (4,129 ) Decrease in liability for retirement benefits (167 ) (184 ) (1,510 )

Surcharge paid - (1,531 ) - Other, net (1,125 ) 1,490 (10,154 )

Total adjustments 4,343 1,145 39,227

Net cash provided by operating activities 7,096 4,811 64,089

INVESTING ACTIVITIES: Purchases of marketable and investment securities (1,764 ) (2,080 ) (15,936 ) Proceeds from sales and redemption of marketable and

investment securities 4,733 4,350 42,749 Purchases of property, plant, and equipment (5,922 ) (6,887 ) (53,490 ) Long-term loans (640 ) (280 ) (5,780 ) Long-term loans received 110 118 991 Other, net (531 ) 13 (4,790 )

Net cash used in investing activities (4,014 ) (4,766 ) (36,256 )

FINANCING ACTIVITIES: Net increase in short-term borrowings 4,600 600 41,546 Purchases of treasury stock (1 ) (1,501 ) (6 ) Dividends paid (1,688 ) (1,786 ) (15,247 ) Repayments of long-term bank loans (4,672 ) (3,504 ) (42,197 ) Proceeds from issuance of convertible bonds - 12,120 - Other, net (365 ) (946 ) (3,294 )

Net cash (used in) provided by financing activities (2,126 ) 4,983 (19,198 )

FOREIGN CURRENCY TRANSLATION ADJUSTMENTS ON CASH AND CASH EQUIVALENTS 369 (215 ) 3,337

NET INCREASE IN CASH AND CASH EQUIVALENTS 1,325 4,813 11,972

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 18,441 13,628 166,552

CASH AND CASH EQUIVALENTS, END OF YEAR ¥ 19,766 ¥ 18,441 $ 178,524


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Notes to the Consolidated Financial Statements As of and for the Year Ended March 31, 2021

1. BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS

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

In preparing these consolidated financial statements, certain reclassifications and rearrangements have been made to the consolidated financial statements issued domestically in order to present them in a form which is more familiar to readers outside Japan. In addition, certain reclassifications have been made in the 2020 consolidated financial statements to conform them to the classifications used in 2021.

The consolidated financial statements are stated in Japanese yen, the currency of the country in which NICHICON CORPORATION (the "Company") is incorporated and operates. The translations of Japanese yen amounts into U.S. dollar amounts are included solely for the convenience of readers outside Japan and have been made at the rate of ¥110.72 to $1, the approximate rate of exchange at March 31, 2021. Such translations should not be construed as representations that the Japanese yen amounts could be converted into U.S. dollars at that or any other rate.

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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(1) Consolidation

The consolidated financial statements as of March 31, 2021, include the accounts of the Company and its 21 significant subsidiaries (together, the "Group"), which are listed below.

Name

Country and Jurisdiction of Incorporation

Equity Ownership

Percentage at March 31, 2021

Fiscal Year End

NICHICON HI-TECH FOIL CORPORATION Japan 100.0% March 31 NICHICON (KUSATSU) CORPORATION Japan 100.0% March 31 NICHICON (KAMEOKA) CORPORATION Japan 100.0% March 31 NICHICON (OHNO) CORPORATION Japan 100.0% March 31 NICHICON (IWATE) CORPORATION Japan 100.0% March 31 NICHICON (WAKASA) CORPORATION Japan 100.0% March 31 TORISHIMA ELECTRIC WORKS LTD. Japan 100.0% March 31 NIPPON LINIAX CO., LTD. Japan 100.0% March 31 YUTAKA ELECTRIC MFG. CO., LTD. Japan 100.0% March 31 NICHICON (AMERICA) CORPORATION U.S.A. 100.0% March 31 NICHICON (HONG KONG) LTD. China

(Hong Kong) 100.0% March 31

NICHICON (SINGAPORE) PTE. LTD. Singapore 100.0% March 31 NICHICON (MALAYSIA) SDN. BHD. Malaysia 100.0% March 31 NICHICON (TAIWAN) CO., LTD. Taiwan 100.0% March 31 NICHICON (AUSTRIA) GmbH Austria 100.0% March 31 NICHICON (THAILAND) CO., LTD. Thailand 49.0% March 31 NICHICON ELECTRONICS (WUXI) CO., LTD. China 100.0% December 31 NICHICON ELECTRONICS TRADING

(SHANGHAI) CO., LTD. China 100.0% December 31

NICHICON ELECTRONICS TRADING (SHENZHEN) CO., LTD. *1

China 100.0% December 31

WUXI NICHICON ELECTRONICS R&D CENTER CO., LTD.

China 100.0% December 31

NICHICON ELECTRONICS (SUQIAN) CO., LTD. China 100.0% December 31

*1 Although the consolidated subsidiary, "NICHICON ELECTRONICS TRADING (SHENZHEN) CO., LTD.," has a closing date falling on December 31, the consolidated financial statements contained herein are based on the statements of provisional settlement of accounts, which were performed on the consolidated closing date.

Under the control and influence concepts, those companies in which the Company, directly or indirectly, is able to exercise control over operations are fully consolidated, and those companies over which the Group has the ability to exercise significant influence are accounted for by the equity method.

Investment in two associated companies are accounted for by the equity method. Investments in four unconsolidated subsidiaries and one associated company are stated at cost. If the equity method of accounting had been applied to the investments in these companies, the effect on the accompanying consolidated financial statements would not be material.

All significant intercompany balances and transactions have been eliminated in consolidation. All material unrealized profit included in assets resulting from transactions within the Group is also eliminated.

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(2) Unification of Accounting Policies Applied to Foreign Subsidiaries for the Consolidated Financial Statements

Under Accounting Standards Board of Japan ("ASBJ") Practical Issues Task Force ("PITF") No. 18, "Practical Solution on Unification of Accounting Policies Applied to Foreign Subsidiaries for the Consolidated Financial Statements," the accounting policies and procedures applied to a parent company and its subsidiaries for similar transactions and events under similar circumstances should in principle be unified for the preparation of the consolidated financial statements. However, financial statements prepared by foreign subsidiaries in accordance with either International Financial Reporting Standards or generally accepted accounting principles in the United States of America (Financial Accounting Standards Board Accounting Standards Codification) tentatively may be used for the consolidation process, except for the following items should be adjusted in the consolidation process so that net income is accounted for in accordance with Japanese GAAP, unless they are not material: (1) amortization of goodwill; (2) scheduled amortization of actuarial gain or loss of pensions that has been recorded in equity through other comprehensive income; (3) expensing capitalized development costs of research and development ("R&D"); (4) cancellation of the fair value model of accounting for property, plant, and equipment and investment properties and incorporation of the cost model of accounting; and (5) recording a gain or loss through profit or loss on the sale of an investment in an equity instrument for the difference between the acquisition cost and selling price, and recording impairment loss through profit or loss for other-than-temporary declines in the fair value of an investment in an equity instrument, where a foreign subsidiary elects to present in other comprehensive income subsequent changes in the fair value of an investment in an equity instrument.

(3) Unification of Accounting Policies Applied to Foreign Associated Companies for the Equity Method

ASBJ Statement No. 16, "Accounting Standard for Equity Method of Accounting for Investments," requires adjustments to be made to conform the associate's accounting policies for similar transactions and events under similar circumstances to those of the parent company when the associate's financial statements are used in applying the equity method, unless it is impracticable to determine such adjustments. In addition, financial statements prepared by foreign associated companies in accordance with either International Financial Reporting Standards or generally accepted accounting principles in the United States of America tentatively may be used in applying the equity method if the following items are adjusted so that net income is accounted for in accordance with Japanese GAAP, unless they are not material: (1) amortization of goodwill; (2) scheduled amortization of actuarial gain or loss of pensions that has been recorded in equity through other comprehensive income; (3) expensing capitalized development costs of R&D; (4) cancellation of the fair value model of accounting for property, plant, and equipment and investment properties and incorporation of the cost model of accounting; and (5) recording a gain or loss through profit or loss on the sale of an investment in an equity instrument for the difference between the acquisition cost and selling price, and recording impairment loss through profit or loss for other-than-temporary declines in the fair value of an investment in an equity instrument, where a foreign associate elects to present in other comprehensive income subsequent changes in the fair value of an investment in an equity instrument.

(4) Cash Equivalents

Cash equivalents are short-term investments that are readily convertible into cash and exposed to insignificant risk of changes in value. Cash equivalents include time deposits, all of which mature due within three months of the date of acquisition.

(5) Inventories

Inventories are stated at the lower of cost, determined by the average cost method for finished products and work in process, and by the moving-average method principally for raw materials and supplies, or net selling value.

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(6) Allowance for Doubtful Accounts

The allowance for doubtful accounts is stated in amounts considered to be appropriate based on each company's past credit loss experience and an evaluation of potential losses in the receivables outstanding.

(7) Marketable and Investment Securities

Marketable and investment securities are classified and accounted for, depending on management's intent, as follows:

i) Held-to-maturity debt securities, for which there is a positive intent and ability to hold to maturity, are reported at amortized cost.

ii) Available-for-sale securities, which are not classified as the aforementioned securities, are reported at fair value, with unrealized gains and losses, net of applicable taxes, reported in a separate component of equity.

Nonmarketable available-for-sale securities are stated at cost determined by the moving-average method. For other-than-temporary declines in fair value, investment securities are reduced to net realizable value by a charge to income.

(8) Property, Plant, and Equipment

Property, plant, and equipment are stated at cost. Depreciation of property, plant, and equipment of the Company and its consolidated domestic subsidiaries is computed substantially by the declining balance method, while the straight-line method is applied to buildings acquired on or after April 1, 1998, and building improvements and structures acquired on or after April 1, 2016, and lease assets. Depreciation of consolidated foreign subsidiaries is computed principally by the straight-line method. The range of useful lives is from 3 to 50 years for buildings and structures, and from 4 to 12 years for machinery and equipment. The useful lives for lease assets are the terms of the respective leases.

Under certain conditions, such as exchanges of similar kinds of fixed assets, sales and purchases resulting from expropriation and acquisitions made with the benefit of a government subsidy, Japanese tax laws permit companies to defer the profit arising from such transactions by reducing the cost of the assets acquired or by providing a special reserve in the equity section. The cumulative reduction in acquisition cost of property, plant, and equipment as of March 31, 2021 and 2020, was ¥6,897 million ($62,291 thousand) and ¥6,926 million, respectively.

(9) Long-Lived Assets

The Group reviews its long-lived assets for impairment whenever events or changes in circumstances indicate the carrying amount of an asset or asset group may not be recoverable. An impairment loss is recognized if the carrying amount of an asset or asset group exceeds the sum of the undiscounted future cash flows expected to result from the continued use and eventual disposition of the asset or asset group. The impairment loss would be measured as the amount by which the carrying amount of the asset exceeds its recoverable amount, which is the higher of the discounted cash flows from the continued use and eventual disposition of the asset or the net selling price at disposition.

(10) Capitalized Computer Software Costs

Capitalized computer software costs comprise costs related to software used in the Group's business. Amortization of capitalized computer software costs, which are included in "Other assets" in investments and other assets, is computed using the straight-line method over five years, the estimated useful life of the assets.

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(11) Provision for Product Warranties

A provision for product warranties is provided to cover the cost of all services anticipated to be incurred during the entire warranty period and based on past experience.

(12) Retirement and Pension Plans

The Company and certain consolidated domestic subsidiaries have noncontributory, funded defined benefit pension plans and lump-sum severance payment plans. The Company and certain consolidated overseas subsidiaries have defined contribution pension plans.

The Company accounts for the liability for retirement benefits based on the projected benefit obligations and plan assets at the consolidated balance sheet date. The projected benefit obligations are attributed to periods on a benefit formula basis. Past service costs and actuarial gains and losses are charged or credited to income as incurred.

(13) Long-Term Contracts

Construction revenue and construction costs are recognized by the percentage-of-completion method, if the outcome of a long-term contract can be estimated reliably. When total construction revenue, total construction costs and the stage of completion of the contract on the basis of the direct labor hours can be reliably measured, the outcome of a long-term contract is deemed to be estimated reliably. If the outcome of a construction contract cannot be reliably estimated, the completed-contract method should be applied.

(14) Research and Development Costs

R&D costs are charged to income as incurred.

(15) Leases

Finance lease transactions are capitalized by recognizing lease assets and lease obligations in the balance sheet.

All other leases are accounted for as operating lease.

(16) Income Taxes

The provision for income taxes is computed based on the pretax income included in the consolidated statement of income. The asset and liability approach is used to recognize deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases of assets and liabilities. Deferred taxes are measured by applying currently enacted income tax rates to the temporary differences.

The Company and certain domestics subsidiaries file a tax return under the consolidated taxation system, which allow companies to base tax payments on the combined profits of losses of the parent company and its wholly owned domestic subsidiaries.

The Company and certain subsidiaries measured deferred taxes relating to the Group Tax Sharing System by applying the income tax laws before amendments in accordance with "Practical Solution on the Treatment of Tax Effect Accounting for the Transition from the Consolidated Taxation System to the Group Tax Sharing System" (ASBJ PITF No. 39, March 31, 2020).

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(17) Foreign Currency Transactions

All short-term and long-term monetary receivables and payables denominated in foreign currencies are translated into Japanese yen at the exchange rates at the consolidated balance sheet date. The foreign exchange gains and losses from translation are recognized in the consolidated statement of income to the extent that they are not hedged by forward exchange contracts.

(18) Foreign Currency Financial Statements

The balance sheet accounts of the consolidated foreign subsidiaries are translated into Japanese yen at the current exchange rate as of the consolidated balance sheet date except for equity, which is translated at the historical rate. Differences arising from such translation are shown as "Foreign currency translation adjustments" under accumulated other comprehensive income in a separate component of equity. Revenue and expense accounts of consolidated foreign subsidiaries are translated into yen at the average exchange rate.

(19) Derivatives and Hedging Activities

The Group uses derivative financial instruments to manage its exposures to fluctuations in foreign currency exchange rates. Foreign exchange forward contracts are utilized by the Group to reduce foreign currency exchange rate risks. The Group does not enter into derivatives for trading or speculative purposes.

The foreign currency forward contracts employed to hedge foreign exchange exposures for export sales are measured at fair value and the unrealized gains/losses are recognized in income. Forward contracts applied for forecasted (or committed) transactions are also measured at fair value, but the unrealized gains/losses are deferred until the underlying transactions are completed.

(20) Per Share Information

Basic net income per share is computed by dividing net income available to common shareholders by the weighted-average number of common shares outstanding for the period, retroactively adjusted for stock splits.

Diluted net income per share reflects the potential dilution that could occur if securities were exercised or converted into common stock. Diluted net income per share of common stock assumes full conversion of the outstanding convertible notes and bonds at the beginning of the year (or at the time of issuance) with an applicable adjustment for related interest expense, net of tax, and full exercise of outstanding stock acquisition rights.

Cash dividends per share presented in the accompanying consolidated statement of income are dividends applicable to the respective years including dividends to be paid after the end of the year.

(21) Bond Issue Costs

Bond issue costs are amortized by the straight-line method over the bond term in accordance with ASBJ PITF No. 19, "Tentative Solution on Accounting for Deferred Assets," which was issued by the ASBJ in August 2006.

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(22) Accounting Changes and Error Corrections

Under ASBJ Statement No. 24, "Accounting Standard for Accounting Changes and Error Corrections," and ASBJ Guidance No. 24, "Guidance on Accounting Standard for Accounting Changes and Error Corrections," accounting treatments are required as follows: (1) Changes in Accounting Policies—When a new accounting policy is applied following revision of an accounting standard, the new policy is applied retrospectively unless the revised accounting standards include specific transitional provisions, in which case the entity shall comply with the specific transitional provisions. (2) Changes in Presentation—When the presentation of financial statements is changed, prior-period financial statements are reclassified in accordance with the new presentation. (3) Changes in Accounting Estimates—A change in an accounting estimate is accounted for in the period of the change if the change affects that period only, and is accounted for prospectively if the change affects both the period of the change and future periods. (4) Corrections of Prior-Period Errors—When an error in prior-period financial statements is discovered, those statements are restated.

(23) New Accounting Pronouncements

Accounting Standard for Revenue Recognition – On March 30, 2018, the ASBJ issued the following accounting standards and implementation guidance (these standards and guidance were revised on March 31, 2020 and March 26, 2021):

— ASBJ Statement No. 29, "Accounting Standard for Revenue Recognition"

— ASBJ Guidance No. 30 (revised 2021), "Implementation Guidance on Accounting Standard for Revenue Recognition"

— ASBJ Guidance No. 19 (revised 2020), "Implementation Guidance on Disclosures about Fair Value of Financial Instruments"

The core principle of the standard and guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. An entity should recognize revenue in accordance with that core principle by applying the following steps:

Step 1: Identify the contract(s) with a customer Step 2: Identify the performance obligations in the contract Step 3: Determine the transaction price Step 4: Allocate the transaction price to the performance obligations in the contract Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation

The accounting standard and guidance are effective for annual periods beginning on or after April 1, 2021. Earlier application is permitted for annual periods beginning on or after April 1, 2018. The Company expects to apply the accounting standard and guidance for annual periods beginning on or after April 1, 2021, and is in the process of measuring the effects of applying the accounting standard and guidance in future applicable periods.

Accounting Standards for Fair Value Measurement, etc. – On July 4, 2019, the ASBJ issued the following accounting standards and implementation guidance:

— ASBJ Statement No. 30, "Accounting Standard for Fair Value Measurement"

— ASBJ Guidance No. 31, "Implementation Guidance on Accounting Standard for Fair Value Measurement"

— ASBJ Statement No. 9 (revised 2019), "Accounting Standard for Measurement of Inventories"

— ASBJ Statement No. 10 (revised 2019), "Accounting Standard for Financial Instruments"

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In order to enhance consistency and comparability of requirements under the Japanese accounting standards to those under international accounting standards, "Accounting Standard for Fair Value Measurement" and "Implementation Guidance on Accounting Standard for Fair Value Measurement" have been developed and the guidance on the method of fair value measurement, etc. have been established.

The Company expects to apply the accounting standard and guidance for annual periods beginning on or after April 1, 2021, and is in the process of measuring the effects of applying the accounting standard and guidance in future applicable periods.

3. SIGNIFICANT ACCOUNTING ESTIMATES

Impairment of Property, Plant, and Equipment

(1) Carrying amounts

Millions of

Yen Thousands of U.S. Dollars

2021 2021

Buildings and structures ¥ 40,334 $ 364,290 Machinery and equipment 108,140 976,695 Others 21,039 190,017 Accumulated depreciation (134,007 ) (1,210,319 )

Net property, plant, and equipment ¥ 35,506 $ 320,683

(2) Information on the significant accounting estimate

The Group owns fix assets such as buildings and structures, machinery and equipment related to the manufacture and sale of capacitors and relevant products. The Group identified assets and asset groups based on the business segment used for performance management. The Group identified indications of impairment for certain asset groups included in the business segment of "capacitors for electronics," "capacitors for electric apparatus and power utilities, and capacitor applied systems," and "circuit products." For those assets or asset groups that showed indications of impairment, the Group compared the carrying amount of the asset or asset group with the asset or asset group's undiscounted future cash flows. As a result, the undiscounted future cash flows exceeded the carrying amount and no impairment loss was recognized.

The undiscounted future cash flows were estimated based on management approved business plans, which depend on assumptions such as market trends, production plans and other factors, and also by assuming a growth rate based on the expected business environment and applying it against the aforementioned business plan to cover the periods beyond the term of the business plan.

In the case that the Group needs to revise future business plans for reasons such as deterioration in market environment compared with current assumptions, the Group could recognize impairment losses in the following fiscal year.

Recoverability of Deferred Tax Assets

(1) Carrying amounts

Millions of


2021 2021

Deferred tax assets ¥ 336 $ 3,036 Deferred tax liabilities 7,891 71,275

- 19 -

(2) Information on the significant accounting estimate

The Group recorded important deferred tax assets relating to tax losses carried forward. The Group estimated the taxable profit before reduction of the tax loss carried forward for the next fiscal year and determined the recoverable amount as deferred tax assets.

The taxable profit of the following fiscal year was estimated based on business plan approved by management that depend on assumptions such as market trends, production plans and other factors.

In the case that the Group needs to revise future business plans for reasons such as deterioration in market environment compared with current assumptions, the Group could reduce deferred tax assets that are expected to be unrecoverable in the following fiscal year.

4. ADDITIONAL INFORMATION

The Group was confronted with a severe business environment in the first half of the fiscal year ended March 31, 2021, due to the substantial decline in the global economy arising from the COVID-19 pandemic. However, in accordance with the global resumption of economic activities, economic conditions are showing signs of gradual recovery. Although there are concerns about the resurgence of COVID-19 and the prolonged economic recovery period, the Group foresees that the economic recovery remains on track with the continuing uncertainties. Accounting estimates, such as the impairment of assets and the recoverability of deferred tax assets, are reflected in the accounting treatment based on these assumptions. There are many uncertainties in these assumptions. In the case that it takes more time to contain the spread of COVID-19 and the impact of COVID-19 is prolonged, the Group could record losses.

5. MARKETABLE AND INVESTMENT SECURITIES

Marketable and investment securities at March 31, 2021 and 2020, consisted of the following:

Millions of Yen Thousands of U.S. Dollars

2021 2020 2021

Current: Government and corporate bonds ¥1,044 ¥2,623 $9,430

Non-current:

Marketable equity securities ¥ 34,551 ¥ 19,223 $ 312,059 Government and corporate bonds 702 1,810 6,337 Unlisted equity securities 359 159 3,241

Total ¥ 35,612 ¥ 21,192 $ 321,637

- 20 -

The costs and aggregate fair values of marketable and investment securities at March 31, 2021 and 2020, were as follows:

Millions of Yen

Cost Unrealized

Gains Unrealized

Losses Fair Value

March 31, 2021

Securities classified as:

Available-for-sale securities ¥8,258 ¥26,422 ¥129 ¥34,551 Held-to-maturity debt

securities 1,303 4 2 1,305

March 31, 2020

Securities classified as: Available-for-sale securities ¥8,331 ¥11,267 ¥375 ¥19,223 Held-to-maturity debt

securities 4,215 1 3 4,213


Cost Unrealized

Gains Unrealized

Losses Fair Value

March 31, 2021

Securities classified as:

Available-for-sale securities $74,587 $238,640 $1,168 $312,059 Held-to-maturity debt

securities 11,768 32 17 11,783

Any marketable and investment securities whose fair values cannot be reliably determined at March 31, 2021 and 2020, were as follows:


2021 2020 2021 Non-current:

Available-for-sale equity securities ¥359 ¥159 $3,241

The information for available-for-sale securities, which were sold during the years ended March 31, 2021 and 2020, is as follows:

Millions of Yen

March 31, 2021 Proceeds Realized

Gains Realized Losses

Available-for-sale:

Equity securities ¥478 ¥291 ¥ - Held-to-maturity debt securities 803 - 1

March 31, 2020 Available-for-sale:

Equity securities ¥387 ¥218 ¥ -

- 21 -


March 31, 2021 Proceeds Realized

Gains Realized Losses

Available-for-sale:

Equity securities $4,321 $2,631 $ - Held-to-maturity debt securities 7,256 - 12

The impairment loss on investment securities for the year ended March 31, 2020, was ¥112 million. No impairment loss was recognized for the year ended March 31, 2021.

6. INVENTORIES

Inventories at March 31, 2021 and 2020, consisted of the following:


2021 2020 2021

Finished products ¥ 8,329 ¥ 8,214 $ 75,226 Work in process 4,859 5,343 43,886 Raw materials and supplies 8,373 8,125 75,624

Total ¥ 21,561 ¥ 21,682 $ 194,736

7. SHORT-TERM BORROWINGS AND LONG-TERM DEBT

Short-term borrowings at March 31, 2021 and 2020 consisted of notes to banks and bank overdrafts. The weighted-average annual interest rates applicable to the short-term borrowings at March 31, 2021 and 2020 were 0.1% and 0.1%, respectively.

Long-term debt at March 31, 2021 and 2020, consisted of the following:


2021 2020 2021

Zero coupon convertible bonds due 2024 ¥ 12,088 ¥ 12,112 $ 109,176 Unsecured 0.2% bank loans due 2023 5,824 10,496 52,601 Obligations under finance leases 970 978 8,760 Less current portion (4,948 ) (5,004 ) (44,689 )

Long-term debt, less current portion ¥ 13,934 ¥ 18,582 $ 125,848

Annual maturities of long-term debt as of March 31, 2021, were as follows:

Year Ending March 31 Millions of


2022 ¥ 4,948 $ 44,689 2023 1,485 13,409 2024 89 808 2025 12,153 109,759 2026 64 578 2027 and there after 143 1,294

Total ¥ 18,882 $ 170,537

- 22 -

Zero coupon convertibles bonds in long-term debt as of March 31, 2021 were as follows:

Class of Shares to Be Issued Ordinary Shares of Common Stock

Issue price for stock acquisition rights - Exercise price per share ¥1,687 ($15.24) Total amount of debt securities issued ¥12,000 million ($108,382 thousand) Total amount of shares issued by exercising

stock acquisition rights - Percentage of shares with stock acquisition

rights (%) 100 Exercise period January 6, 2020 – December 9, 2024

If all the outstanding stock acquisition rights incorporated in convertible bonds had been exercised at March 31, 2021, 7,113 thousand shares of common stock would have been issued. The conversion price of the convertible bonds is subject to adjustments to reflect stock splits and certain other events.

The Company had loan commitment agreements amounting to ¥13,500 million ($121,929 thousand) and ¥13,500 million with four banks as of March 31, 2021 and 2020, respectively. Under these loan commitment agreements, ¥7,000 million ($63,223 thousand) and ¥2,400 million were executed as of March 31, 2021 and 2020, respectively.

8. RETIREMENT AND PENSION PLANS

Under the pension plans, employees of the Company with more than three years of service are generally entitled to receive lump-sum payments at the time of retirement. Employees terminating their employment are, in most circumstances, entitled to pension payments based on their average pay during their employment, length of service, and certain other factors.

The defined benefit obligations of certain subsidiaries are calculated using a simplified method, which is permitted for small-size companies in accordance with the accounting standard for retirement benefits.

(1) The changes in defined benefit obligation for the years ended March 31, 2021 and 2020, were as follows (excluding the above simplified method):


2021 2020 2021

Balance at beginning of year ¥ 9,862 ¥ 9,560 $ 89,071 Current service cost 592 580 5,353 Interest cost 79 76 712 Actuarial losses 71 71 644 Benefits paid (397 ) (425 ) (3,590 )

Balance at end of year ¥ 10,207 ¥ 9,862 $ 92,190

- 23 -

(2) The changes in plan assets for the years ended March 31, 2021 and 2020, were as follows (excluding the above simplified method):


2021 2020 2021

Balance at beginning of year ¥ 8,503 ¥ 7,940 $ 76,800 Expected return on plan assets 128 119 1,152 Actuarial losses (60 ) (31 ) (539 ) Contributions from the employer 912 893 8,237 Benefits paid (380 ) (418 ) (3,430 )

Balance at end of year ¥ 9,103 ¥ 8,503 $ 82,220

(3) The changes in defined benefit obligation calculated using the simplified method for the years

ended March 31, 2021 and 2020, were as follows:


2021 2020 2021

Balance at beginning of year ¥ 63 ¥ 50 $ 567 Benefit costs 65 72 590 Benefits paid (25 ) (20 ) (228 ) Contributions from the employer (27 ) (39 ) (242 )

Balance at end of year ¥ 76 ¥ 63 $ 687

(4) Reconciliation between the liability recorded in the consolidated balance sheet and the balances

of defined benefit obligation and plan assets was as follows (including the above simplified method):


2021 2020 2021

Funded defined benefit obligation ¥ 10,364 ¥ 10,023 $ 93,604 Plan assets (9,639 ) (9,051 ) (87,060 )

725 972 6,544 Unfunded defined benefit obligation 455 450 4,114

Net liability arising from defined benefit

obligation ¥ 1,180 ¥ 1,422 $ 10,658


2021 2020 2021

Liability for retirement benefits ¥ 1,511 ¥ 1,678 $ 13,647 Asset for retirement benefits (331 ) (256 ) (2,989 )

Net liability arising from defined benefit

obligation ¥ 1,180 ¥ 1,422 $ 10,658

- 24 -

(5) The components of net periodic benefit costs for the years ended March 31, 2021 and 2020, were as follows:


2021 2020 2021

Service cost ¥ 593 ¥ 580 $ 5,353 Interest cost 79 76 712 Expected return on plan assets (128 ) (119 ) (1,152 ) Recognized actuarial losses 131 102 1,183 Benefit costs calculated using the simplified

method 65 71 590

Net periodic benefit costs ¥ 740 ¥ 710 $ 6,686

(6) Plan assets

a. Components of plan assets Plan assets as of March 31, 2021 and 2020, consisted of the following:

2021 2020

Life insurance company general accounts 84.4 % 84.6 % Debt investments 15.4 15.1 Equity investments 0.2 0.2 Others 0.0 0.1

Total 100.0 % 100.0 %

b. Method of determining the expected rate of return on plan assets

The expected rate of return on plan assets is determined considering the long-term rates of return, which are expected currently and in the future from the various components of the plan assets.

(7) Assumptions used for the years ended March 31, 2021 and 2020, are set forth as follows:

2021 2020

Discount rate 0.8% 0.8% Expected rate of return on plan assets 1.5% 1.5% Expected rate of salary increase 2.0% 1.9%

The Company determines the compensation increase index in accordance with the Company's human resources and wage policy for the calculation of the defined benefit obligation. The Company uses the indices as of November 30, 2020 and 2019, for the calculation as of March 31, 2021 and 2020, respectively.

The amount of contributions which the Company and certain consolidated overseas subsidiaries should contribute under the defined contribution plan is ¥27 million ($245 thousand) and ¥27 million for the years ended March 31, 2021 and 2020, respectively.

- 25 -

9. EQUITY

Japanese companies are subject to the Companies Act of Japan (the "Companies Act"). The significant provisions in the Companies Act that affect financial and accounting matters are summarized below:

a. Dividends

Under the Companies Act, companies can pay dividends at any time during the fiscal year in addition to the year-end dividend upon resolution at the shareholders' meeting. Additionally, for companies that meet certain criteria including (1) having a Board of Directors; (2) having independent auditors; (3) having an Audit and Supervisory board; and (4) the term of service of the directors being prescribed as one year rather than the normal two-year term by its articles of incorporation, the Board of Directors may declare dividends (except for dividends-in-kind) at any time during the fiscal year if the company has prescribed so in its articles of incorporation. However, the Company does not meet all the above criteria.

The Companies Act permits companies to distribute dividends-in-kind (non-cash assets) to shareholders subject to a certain limitation and additional requirements.

Semiannual interim dividends may also be paid once a year upon resolution by the Board of Directors if the articles of incorporation of the company so stipulate. The Companies Act provides certain limitations on the amounts available for dividends or the purchase of treasury stock. The limitation is defined as the amount available for distribution to the shareholders, but the amount of net assets after dividends must be maintained at no less than ¥3 million.

b. Increases/Decreases and Transfer of Common Stock, Reserve and Surplus

The Companies Act requires that an amount equal to 10% of dividends must be appropriated as a legal reserve (a component of retained earnings) or as additional paid-in capital (a component of capital surplus), depending on the equity account charged upon the payment of such dividends, until the aggregate amount of legal reserve and additional paid-in capital equals 25% of the common stock. Under the Companies Act, the total amount of additional paid-in capital and legal reserve may be reversed without limitation.

The Companies Act also provides that common stock, legal reserve, additional paid-in capital, other capital surplus, and retained earnings can be transferred among the accounts within equity under certain conditions upon resolution of the shareholders.

c. Treasury Stock and Treasury Stock Acquisition Rights

The Companies Act also provides for companies to purchase treasury stock and dispose of such treasury stock by resolution of the Board of Directors. The amount of treasury stock purchased cannot exceed the amount available for distribution to the shareholders which is determined by a specific formula.

Under the Companies Act, stock acquisition rights are now presented as a separate component of equity.

The Companies Act also provides that companies can purchase both treasury stock acquisition rights and treasury stock. Such treasury stock acquisition rights are presented as a separate component of equity or deducted directly from stock acquisition rights.

10. INCOME TAXES

The Company and its domestic subsidiaries are subject to Japanese national and local income taxes, which, in the aggregate, resulted in a normal effective statutory tax rate of approximately 30.6% for the years ended March 31, 2021 and 2020. Consolidated foreign subsidiaries are subject to income taxes in the countries in which they operate.

- 26 -

The tax effects of significant temporary differences and tax loss carryforwards, which resulted in deferred tax assets and liabilities at March 31, 2021 and 2020, are as follows:


2021 2020 2021

Deferred tax assets: Tax loss carryforwards ¥ 10,118 ¥ 10,402 $ 91,381 Liability for retirement benefits 396 485 3,574 Allowance for doubtful accounts 114 78 1,026 Allowance for accrued bonuses 319 327 2,885 Expenses for environmental protection

measures 301 425 2,717 Property, plant, and equipment 2,097 2,147 18,936 Losses relating to antitrust laws 24 24 220 Other 1,032 991 9,329

Total of tax loss carryforwards and temporary differences 14,401 14,879 130,068

Less valuation allowance for tax loss carryforwards (9,883 ) (10,011 ) (89,265 )

Less valuation allowance for temporary differences (3,917 ) (4,136 ) (35,379 )

Total valuation allowance (13,800 ) (14,147 ) (124,644 )

Total of deferred tax assets 601 732 5,424

Deferred tax liabilities: Net unrealized gain on available-for-sale

securities 8,035 3,360 72,576 Reserve for advanced depreciation of non-

current assets 24 24 214 Other 97 118 873

Total deferred tax liabilities 8,156 3,502 73,663

Net deferred tax liabilities ¥ 7,555 ¥ 2,770 $ 68,239

The expiration of tax loss carryforwards, the related valuation allowances and the resulting net deferred tax assets as of March 31, 2021 and 2020, were as follows:

Millions of Yen

March 31, 2021 1 Year or

Less

After 1 Year through 2 Years

After 2 Years through 3 Years



After 5 Years Total

Deferred tax assets

relating to tax loss carryforwards ¥ 758 ¥ 900 ¥ 632 ¥ 219 ¥ 445 ¥ 7,164 ¥ 10,118

Less valuation allowances for tax loss carryforwards (708 ) (900 ) (623 ) (219 ) (295 ) (7,138 ) (9,883 )

Net deferred tax assets relating to tax loss carryforwards 50 - 9 - 150 26 235

- 27 -

Millions of Yen


Less





After 5 Years Total

Deferred tax assets

relating to tax loss carryforwards ¥ 122 ¥ 766 ¥ 900 ¥ 631 ¥ 281 ¥ 7,702 ¥ 10,402

Less valuation allowances for tax loss carryforwards (105 ) (711 ) (900 ) (623 ) (281 ) (7,391 ) (10,011 )

Net deferred tax assets relating to tax loss carryforwards 17 55 - 8 - 311 391



Less





After 5 Years Total

Deferred tax assets

relating to tax loss carryforwards $ 6,844 $ 8,128 $ 5,707 $ 1,980 $ 4,015 $ 64,707 $ 91,381

Less valuation allowances for tax loss carryforwards (6,390 ) (8,128 ) (5,630 ) (1,980 ) (2,665 ) (64,472 ) (89,265 )

Net deferred tax assets relating to tax loss carryforwards 454 - 77 - 1,350 235 2,116

Deferred tax assets for the tax loss carryforwards are recognized in accordance with the probability that taxable profit will be available.

A reconciliation between the normal effective statutory tax rates and the actual effective tax rates reflected in the accompanying consolidated statements of income for the years ended March 31, 2021 and 2020, is as follows:

2021 2020

Normal effective statutory tax rate 30.6 % 30.6 % Expenses not deductible for income tax purposes 1.9 3.0 Per capita inhabitant tax 1.0 0.8 Foreign withholdings tax 2.8 2.4 Difference between Japanese and foreign tax rates (7.7 ) (5.4 ) Changes in valuation allowance 13.4 (0.7 ) Equity in earnings of associated companies (0.1 ) (1.4 ) Adjustments in elimination of allowance for doubtful accounts (12.7 ) (7.2 ) Unrecognized tax effect on unrealized profit (0.9 ) (3.3 ) Difference between statutory tax rate and reduced tax rates 0.4 0.5 Amendment of deferred tax asset by changing tax rate - (0.3 ) Other, net 2.6 (1.8 )

Actual effective tax rate 31.3 % 17.2 %

- 28 -

11. SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES

Selling, general, and administrative expenses in the accompanying consolidated statements of income for the years ended March 31, 2021 and 2020, consisted of the following:


2021 2020 2021

Freight charges ¥ 2,668 ¥ 2,612 $ 24,094 Advertising 285 395 2,572 Employees' salary and bonuses 4,820 4,730 43,531 Net periodic retirement benefit costs 280 221 2,527 Provision for bonuses 255 265 2,307 R&D expenses 1,245 1,560 11,248 Provision for product warranties 242 286 2,183 Depreciation and amortization 605 597 5,464 Commission 1,459 1,466 13,179 Others 3,455 3,532 31,210

Total ¥ 15,314 ¥ 15,664 $ 138,315

12. RESEARCH AND DEVELOPMENT COSTS

R&D costs charged to income were ¥4,570 million ($41,271 thousand) and ¥4,496 million for the years ended March 31, 2021 and 2020, respectively.

13. SUBSIDY INCOME

The Group received subsidies from national and local governments to compensate for the suspension of the operations of some factories due to the prevention of the spread of COVID-19 and the payment of salaries during the suspension. The Group recorded these subsidies as other income for the year ended March 31, 2021.

14. LOSS ON COVID-19

Certain domestic and overseas consolidated subsidiaries temporarily suspended their operations of certain factories to prevent the spread of COVID-19 in accordance with the requests by the national and local governments. The Group recorded fixed expenses, such as personnel expenses, rental expenses, depreciation, and other expenses, incurred during the suspension as "loss on COVID-19" for the year ended March 31, 2021.

15. FINANCIAL INSTRUMENTS AND RELATED DISCLOSURES

(1) Group Policy for Financial Instruments

The Group uses bank loans and convertibles bonds for its ongoing operations and capital investment. Cash surpluses are invested in low risk financial assets. Derivatives are not used for speculative purposes, but to hedge the exchange rate risk of the trade receivables denominated in foreign currencies.

(2) Nature and Extent of Risks Arising from Financial Instruments, and Risk Management for Financial Instruments

Trade receivables, such as trade notes and trade accounts, are exposed to customer credit risk. The Group, pursuant to its credit management rule, manages customers' credit by monitoring the collection terms and balances of trade receivables and by updating customer credit conditions annually. Receivables denominated in foreign currencies are exposed to the market risk of fluctuation in foreign currency exchange rates.

- 29 -

As for the held-to-maturity debt securities, the Group, according to its securities management rule, invests only in high-rated bonds. Thus, the Group believes that the held-to-maturity debt securities included in marketable and investment securities are exposed to little credit risk. Equity securities held for business-relation purposes, included in investment securities, are exposed to the risk of market fluctuations. The Group regularly reviews balances of investment equity securities according to the market price and the financial condition of the issuers.

Advances to unconsolidated subsidiaries are regularly monitored for changes in the credit condition of such affiliated companies.

Most payment terms of payables, such as trade notes and trade accounts, are less than one year. Although trade payables and borrowings are exposed to liquidity risk, the Group manages the liquidity risk by appropriately preparing monthly cash flow projections.

Short-term and long-term bank loans are used for its ongoing operations and capital investment.

Convertible bonds are used to fund the Group's capital investment, repayments of long-term debt, and purchase of treasury stock.

The Group deals and manages derivative transactions in accordance with its derivatives management policy. To minimize credit risk associated with the derivatives transactions, the Group carries out derivative transactions only with highly rated financial institutions.

(3) Fair Values of Financial Instruments

Fair values of financial instruments are based on quoted prices in active markets. If a quoted price is not available, another rational valuation technique is used instead.

(a) Fair value of financial instruments

Millions of Yen

March 31, 2021 Carrying Amount

Fair Value

Unrealized Gain/Loss

Cash and cash equivalents ¥ 19,766 ¥ 19,766 ¥ - Receivables, net 34,671 34,671 - Marketable and investment securities:

Held-to-maturity debt securities 1,303 1,305 2 Available-for-sale securities 34,551 34,551 -

Investments in associated companies 985 3,438 2,453 Advances to unconsolidated subsidiaries 1,878 Allowance for doubtful accounts (101 )

Advances to unconsolidated subsidiaries, net 1,777 1,777 -

Total ¥ 93,053 ¥ 95,508 ¥ 2,455

Short-term borrowings ¥ 7,000 ¥ 7,000 ¥ - Payables 23,114 23,114 - Long-term debt:

Convertible bonds 12,088 12,690 602 Bank loans, including current portion 5,824 5,823 (1 )

Total ¥ 48,026 ¥ 48,627 ¥ 601

- 30 -

Millions of Yen


Fair Value


Cash and cash equivalents ¥ 18,441 ¥ 18,441 ¥ - Receivables, net 34,206 34,206 - Marketable and investment securities:

Held-to-maturity debt securities 4,215 4,213 (3 ) Available-for-sale securities 19,223 19,223 -

Investments in associated companies 912 1,366 454 Advances to unconsolidated subsidiaries 1,345 Allowance for doubtful accounts (1 )


Total ¥ 78,341 ¥ 78,793 ¥ 451

Short-term borrowings ¥ 2,400 ¥ 2,400 ¥ - Payables 21,819 21,819 - Long-term debt:

Convertible bonds 12,112 11,580 (532 ) Bank loans, including current portion 10,496 10,496 (0 )

Total ¥ 46,827 ¥ 46,295 ¥ (532 )



Fair Value


Cash and cash equivalents $ 178,524 $ 178,524 $ - Receivables, net 313,138 313,138 - Marketable and investment securities:

Held-to-maturity debt securities 11,768 11,783 15 Available-for-sale securities 312,059 312,059 -

Investments in associated companies 8,893 31,054 22,161 Advances to unconsolidated subsidiaries 16,957 Allowance for doubtful accounts (911 )


Total $ 840,428 $ 862,604 $ 22,176

Short-term borrowings $ 63,223 $ 63,223 $ - Payables 208,760 208,760 - Long-term debt:

Convertible bonds 109,176 114,613 5,437 Bank loans, including current portion 52,601 52,591 (10 )

Total $ 433,760 $ 439,187 $ 5,427

Cash and Cash Equivalents, and Receivables

The carrying values of cash and cash equivalents, and receivables approximate fair value because of their short maturities.

Marketable and Investment Securities

The fair values of marketable and investment securities are measured at the quoted market price of the stock exchange for the equity instruments, and at the quoted price obtained from the financial institution for certain debt instruments. Fair value information for marketable and investment securities by classification is included in Note 5.

- 31 -

Investments in Associated Companies

The fair value of investments in an associated company is measured at the quoted market price of the stock exchange for the equity instruments.

Advances to Unconsolidated Subsidiaries

The fair values of advances to unconsolidated subsidiaries based on floating interest rates are determined by the carrying values because their carrying values approximate fair values.

Payables and Short-Term Borrowings

The carrying values of payables and short-term borrowings approximate fair value because of their short maturities.

Long-Term Debt

The fair value of convertible bonds is measured at the quoted price obtained from the financial institution.

The fair value of bank loans is estimated at present value, which is calculated by discounting principal and interest at a rate assumed to be applied to a similar new bank loan.

(b) The carrying amount of financial instruments whose fair values cannot be reliably determined is as follows:


2021 2020 2021

Investments in equity instruments that do not have a quoted market price in an active market ¥2,811 ¥2,648 $25,384

(4) Maturity Analysis for Financial Assets and Securities with Contractual Maturities

Millions of Yen

March 31, 2021

Due in One Year or Less

Due after One Year through

Five Years

Due after Five Years

through 10 Years

Due after 10 Years

Cash and cash equivalents ¥ 19,766 ¥ - ¥ - ¥ - Receivables, net 34,671 - - - Marketable and investment

securities: Held-to-maturity securities 601 702 - - Negotiable certificates of

deposit 443 - - - Advances to unconsolidated

subsidiaries 150 603 666 459

Total ¥ 55,631 ¥ 1,305 ¥ 666 ¥ 459

- 32 -

Millions of Yen

March 31, 2020



Five Years


through 10 Years

Due after 10 Years

Cash and cash equivalents ¥ 18,441 ¥ - ¥ - ¥ - Receivables, net 34,206 - - - Marketable and investment

securities: Held-to-maturity securities 2,405 1,810 - - Negotiable certificates of

deposit 218 - - - Advances to unconsolidated

subsidiaries 256 419 404 265

Total ¥ 55,526 ¥ 2,229 ¥ 404 ¥ 265


March 31, 2021



Five Years


through 10 Years

Due after 10 Years

Cash and cash equivalents $ 178,524 $ - $ - $ - Receivables, net 313,138 - - - Marketable and investment

securities: Held-to-maturity securities 5,431 6,337 - - Negotiable certificates of

deposit 4,000 - - - Advances to unconsolidated

subsidiaries 1,356 5,449 6,018 4,134

Total $ 502,449 $ 11,786 $ 6,018 $ 4,134

Please see Note 7 for annual maturities of long-term debt.

- 33 -

16. COMPREHENSIVE INCOME (LOSS)

The components of other comprehensive income (loss) for the years ended March 31, 2021 and 2020, were as follows:


2021 2020 2021

Unrealized gain (loss) on available-for-sale securities: Gains (losses) arising during the year ¥ 15,579 ¥ (2,966 ) $ 140,713 Reclassification adjustments to profit or loss (291 ) 106 (2,631 )

Amount before income tax effect 15,288 (2,860 ) 138,082 Income tax effect (4,676 ) 848 (42,233 )

Total ¥ 10,612 ¥ (2,012 ) $ 95,849

Foreign currency translation adjustments:

Adjustments arising during the year ¥ 929 ¥ (954 ) $ 8,388

Total ¥ 929 ¥ (954 ) $ 8,388

Share of other comprehensive income (loss) in

associates: Gains (losses) arising during the year ¥ 74 ¥ (106 ) $ 669

Total ¥ 74 ¥ (106 ) $ 669

Total other comprehensive income (loss) ¥ 11,615 ¥ (3,072 ) $ 104,906

17. NET INCOME PER SHARE

Millions of Yen

Thousands of Shares Yen

U.S. Dollars

Net Income

Weighted-Average Shares EPS

Year Ended March 31, 2021:

Basic earnings per share ("EPS") Net income available to common

shareholders ¥ 1,703 68,419 ¥ 24.90 $ 0.22

Effect of dilutive securities: Convertible bonds (16 ) 7,113

Diluted EPS - Net income for

computation ¥ 1,687 75,532 ¥ 22.33 $ 0.20

Year Ended March 31, 2020:

Basic earnings per share ("EPS") Net income available to common

shareholders ¥ 2,812 69,281 ¥ 40.59

Effect of dilutive securities: Convertible bonds - 2,074

Diluted EPS - Net income for

computation ¥ 2,812 71,356 ¥ 39.41

- 34 -

18. SUBSEQUENT EVENT

Appropriation of Retained Earnings

The Company's Board of Directors approved a resolution, which is subject to approval at the general meeting of shareholders on June 29, 2021, outlining a plan to pay cash dividends.

The resolution of cash dividends is as follows:

Millions of Yen


Year-end cash dividends, ¥13.0 ($0.12) per share ¥889 $8,029

19. SEGMENT INFORMATION

Under ASBJ Statement No. 17, "Accounting Standard for Segment Information Disclosures," and ASBJ Guidance No. 20, "Guidance on Accounting Standard for Segment Information Disclosures," an entity is required to report financial and descriptive information about its reportable segments. Reportable segments are operating segments or aggregations of operating segments that meet specified criteria. Operating segments are components of an entity about which separate financial information is available and such information is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. Generally, segment information is required to be reported on the same basis as is used internally for evaluating operating segment performance and deciding how to allocate resources to operating segments.

(1) Description of Reportable Segments

The Group's main operations are manufacturing and distributing capacitors and related products. The Group consists of business segments based on sales offices and manufacturing bases. Since the factors of each sales office and manufacturing base, such as the economic characteristics, the contents of the products and services, and the manufacturing or marketing processes of products, are similar, the Group's reportable segment is a single segment, namely "manufacturing and distributing capacitors and related products." Therefore, the Group has omitted segment information.

(2) Information about Products and Services

Millions of Yen

2021

Capacitors for

Electronics

Capacitors for Electric Apparatus and Power Utilities,

and Capacitor Applied Systems

Circuit Products Other Total

Sales to external

customers ¥62,645 ¥15,976 ¥37,216 ¥237 ¥116,074

Millions of Yen

2020

Capacitors for

Electronics




Sales to external

customers ¥62,222 ¥16,354 ¥40,623 ¥477 ¥119,676

- 35 -


2021

Capacitors for

Electronics




Sales to external

customers $565,793 $144,294 $336,125 $2,141 $1,048,353

(3) Information about Geographical Area

(a) Sales

Millions of Yen

2021

Japan USA Greater China Asia Other Total

¥52,503 ¥8,074 ¥38,146 ¥10,584 ¥6,767 ¥116,074

Millions of Yen

2020


¥58,174 ¥8,523 ¥34,153 ¥11,262 ¥7,564 ¥119,676


2021


$474,193 $72,925 $344,531 $95,590 $61,114 $1,048,353

(b) Property, plant, and equipment

Millions of Yen

2021


¥24,839 ¥308 ¥6,628 ¥3,678 ¥53 ¥35,506

Millions of Yen

2020


¥24,700 ¥321 ¥4,971 ¥3,697 ¥78 ¥33,767


2021


$224,340 $2,780 $59,861 $33,220 $482 $320,683

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20. INVESTIGATION BY COMPETITION AUTHORITIES AND CLASS ACTION LAWSUITS

The Group had been investigated by the authorities of several countries regarding the sale of capacitors. The authorities completed their investigation, and the Group has already paid fines. Moreover, class action lawsuits were filed against the Group in the United States of America and Canada over the alleged violation of applicable laws. The Group reached settlement agreements in the United States of America and the Group continues to deal with lawsuits in Canada in an appropriate manner. As these procedures are ongoing, the final conclusion might have future consequences on the Group's business results.

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NICHICON CORPORATION and Consolidated Subsidiaries

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