A N N U A L R E P O R T 1 9 9 9

The aggregate annual maturities of long-term loans subsequent
to March 31, 1999, are as follows:
Fiscal year ending March 31 Millions of yen Thousands of dollars
2001 ¥711 $5,876
2002 534 4,413
2003 646 5,339
2004 487 4,025
2005 and thereafter 981 8,107
4. Income Taxes
The Company and its subsidiaries are subject to several taxes
(corporate, inhabitant and enterprise) based on income. The
aggregate statutory tax rates and the effective tax rates for the
years ended March 31, 1997, 1998 and 1999 are as follows:
1997 1998 1999
Statutory tax rate 51% 51% 47%
Effective tax rate 71% 56% 49%
Variance between the statutory tax rates and effective tax rates
for the year ended March 31, 1997, consists primarily of the effect of
permanently non-deductible expenses and non-taxable income. The
effective tax rate for the year ended March 31, 1997, was affected by
the lump-sum write-off of goodwill pertaining to the acquisition of
Toppan Moore Co., Ltd. and Avery Toppan Co., Ltd. in 1997. For
the years ended March 31, 1998 and 1999, the variance consists primarily
of all temporary differences reflected to deferred taxes as a
result of adopting the allocation of income taxes.
Significant components of the Company’s deferred tax
assets and liabilities as of March 31, 1999, are as follows:
Millions of yen Thousands of dollars
(Deferred tax assets)
Bad debt reserve ¥1,277 $ 10,554
Accrued bonuses 950 7,851
Enterprise taxes 1,369 11,314
Depreciation 2,071 17,116
Estimated termination
and retirement allowances 3,799 31,397
Intercompany profits 2,145 17,727
Net operating loss carry forwards 1,691 13,975
Other 3,100 25,620
16,402 135,554
Less valuation allowance (1,691) (13,975)
Total 14,711 121,579
(Deferred tax liabilities)
Tax purpose reserves
regulated by Japanese tax law 3,467 28,653
Other 519 4,290
Total 3,986 32,943
Deferred tax assets, net ¥10,725 $ 88,636
(Fixed liabilities)
Deferred tax liabilities
Depreciation ¥177 $1,463
Other 54 446
Total deferred tax liabilities ¥231 $1,909
The valuation allowance mainly relates to deferred tax assets
of the consolidated subsidiaries with operating loss carryforwards
for tax purposes that are not expected to be realized.
The disclosure of significant components of the Company’s
deferred tax assets and liabilities have been required to be disclosed
under accounting principles from fiscal 1999, but such
accounting principles have not been required to restate the
1998 deferred tax information.
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5. Shareholders’ Investment
The Japanese Commerical Code provides that an amount equivalent
to at least 10% of cash dividends paid and of other cash outlays
in each fiscal or interim six-month period be appropriated to a legal
reserve until such reserve equals 25% of the issued share capital.
In accordance with the new disclosure requirements effective
from the year ended March 31, 1999, legal reserve of
¥14,709 million ($121,562 thousand) is included in retained
earnings for 1999. Previously it was presented as a separate
component of the shareholders’ investment. The accompanying
consolidated financial statements for the years ended
March 31, 1997 and 1998 have been reclassified to conform
to the 1999 presentation.
The Code also provides that neither the additional paid-in capital
nor the legal reserve is available for cash dividends, but may be
used to reduce a capital deficit by resolution of the shareholders or
may be capitalized by resolution of the Board of Directors.
Year-end dividends are approved by the shareholders after the
end of each fiscal year, and interim dividends are declared by the
Board of Directors after the end of each semi-annual period. In
accordance with the Commercial Code, the year-end dividends and
the related appropriation of retained earnings are not reflected in
the consolidated financial statements at the end of each fiscal year.
On June 30, 1999, the shareholders approved the declaration
of a year-end cash dividend totaling ¥5,246 million ($43,356 thousand),
which was paid in that month to the shareholders of record
as at March 31, 1999, and the related appropriation of profits to
legal reserve of ¥539 million ($4,455 thousand).
6. Per Share Data
Net income per share is based on the weighted average number
of shares of common stock outstanding and dilutive common
stock equivalents. The 1.9% and 1.4% convertible bonds were
considered as common stock equivalents and were included in
the calculation of earnings per share when they were dilutive. In
computing net income per share, net income is adjusted, at net
of income taxes, by interest expense on the convertible bonds.
Dividends per share shown in the accompanying consolidated
statements of income have been presented on an
accrual basis but include dividends approved after each fiscal
year-end and are applicable to the year then ended.
The number of shares of common stock outstanding used
in computing net income per share was as follows:
Thousands of shares
1997 736,805
1998 730,231
1999 730,195
7. Derivative Financial Instruments
The Company uses derivative financial instruments selectively,
to manage interest rate risk and foreign exchange risk.
The Company enters into forward exchange contracts to
hedge foreign exchange risks and also uses interest rate swaps
to manage floating interest rate risk.
To reduce the credit risk of counterparties in derivative
transactions, the Company selects major, creditworthy financial
institutions as counterparties.
The Company has entered into the following types of
derivative financial instruments as of March 31, 1999.