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6 industry. Q. What is your marketing policy? A.Agrochemicals for sale on the global market must meet stringent international standards in terms of safety, ease of use, environmental impact, and selectivity. Nissan Chemical has been engaged in the development of herbicides and insecticides for such major agricultural products as rice, wheat, corn, soybean, beet and cotton, and has market is already mature. However, this is balanced by sales of PERMIT herbicide for com crops, which is now in the second year of full- 19 Research on agrochemicals for nursery cultivation tLa u.l::'lI.......r Q.can you tell us about your export target areas and major export products? A.We are targeting the North American market, particularly the United States, the largest producer and exporter of agricultural products. The North American market accounts for 44% of our total exports of agrochemicals. We are promoting development of this market through technical and sales tie-ups with major chemical companies. We are not expecting rapid growth in sales of I T ARGA herbicide for upland crops, as the (f) Translation offoreign currency Except for those assets and liabilities which are covered by forward exchange contracts, current monetary assets and liabilities in foreign currencies are translated into yen at the exchange rates prevailing at the respective balance-sheet dates. Other assets and liabilities in foreign currencies are translated at historical rates. Revenue and expense items denominated in foreign currencies are translated into yen at the rates of exchange prevailing when such transactions occur. Gains and losses on foreign exchanges are cre- dited or charged to income in the respective periods in which they are incurred. (I) Accounting for the consumption tax The consumption tax is imposed at the flat rate of 3% on all domestic consumption of goods and services (with certain exemptions). The amounts of consumption tax withheld on sales and consumption tax paid on purchases of goods and services are not included in the amounts of respective revenue, cost or expense items in the accompanying Non-Consolidated Statements of Income. Net balance of consumption tax withheld and paid is included in "other current liabilities" in the Non- Consolidated Balance Sheets. sector, we also have a long history. We were Japan's first chemical fertilizer sales success of TARGA herbicide for upland crops, SIRIUS herbicide for paddy rice, and PERMIT herbicide for com crops. Regarding the fertilizers developing advanced original herbicides is reflected in the worldwide Q.Can you outline the characteristics of the product lineup of the Agricultural Division? A. The Agricultural Division is composed of the agrochemical and fertilizer sectors. The world's agrochemical market consists of herbicides at 47%, insecticides at 29%, fungicides at 19%, and others at 5%. As you see, herbicides make up the major constituent of the total market, and we have been strengthening development of herbicides. Our success in terms of labor-saving agrochemicals and offer original products, backed by our advanced chemical formulation techniques, as well as DIEHARD, a water- remained sluggish in FY97 due to structural deficiencies in Japan's agricultural industry, namely a drop in competitiveness caused by liberalization of agricultural product imports, a decrease in farmland, and the aging of the agricultural work force. In these circumstances, we have concentrated on the development of fertilizers. We (j) Appropriation of retained earnings Under the Commercial Code of Japan, the appropriation of retained earnings with respect to a given financial year is made by resolution of the shareholders at a general meeting held subsequent to the close of such financial year. The accounts for that year do not, therefore, reflect such appropriation. (i) Amortisation of deferred assets Amortisation of premium of notes years on the straight-line method. Bond issue expenses and research and development expenses are charged to income when incurred. market recognition. other companies' products. dispersible granule herbicide for rice paddy plants, and PRINCE, an insecticide for nursery rice boxes, among others, now enjoy high (d) Property, plant and equipment and depreciation Property, plant and equipment are carried at cost. Depreciation is computed on the estimated lives of the respective assets which are prescribed by Japanese income tax laws. Approximately 80 percent in amount, at 31st March, 1996, of property, plant and equipment were depreciated by the straight-line method and approximately 20 percent in amount of property, plant and equipment were depreciated by the declining-balance method. Effective 1st April, 1996, the Company applied the declining- balance method of depreciation to all property, plant and equipment of the Company. (e) Investments in and advances to subsidiaries and affiliated companies and other investments in securities Investments in subsidiaries and affiliated companies and other investments in securities are stated at cost or less. The Commercial Code of Japan requires that such investments be written down where there has been persistent impairment in the value of the investments. Where considered necessary, the Company has written down its investments to reflect such impairment. (Ie) Accounting for leases Finance leases other than, those which are deemed to transfer the ownership of the leased assets to lessees are accounted for by the method similar to that applicable to ordinary operating leases, computed 4 (c) Inventories Inventories except Supplies are stated at cost determined by the average method and Supplies are stated at cost determined by the moving average method. In the domestic market, demand and prices recognition on a global basis, and our agrochemical exports now have a 33.2% of sector sales. succeeded in creating the excellent three herbicides I mentioned before and SANMITE acaricide. Our achievements have won market (a) Marketable securities and Investments in securities Marketable equity securities in current and non-current assets have been stated at the lower of the moving average cost or market at the balance-sheet date. Bonds and other securities are stated at the moving average cost. with warrants (h) Income taxes Income taxes are recorded on an accrual basis, but deferred income taxes pertaining to timing differences between financial and tax reporting are not recognised. (g) Pension plan The Company has a qualified pension plan covering all employees, which was renewed as of 1st October, 1996. The assets of the pension plan were \<3,404 million ($27,429 thousand) and Y4,321 million ($34,819 thousand) at 30th September, 1995 and 1996, respectively. Total pension expense, including amortisation of prior service costs, amounted to approximately Yl,645 million ($13,255 thousand) and Yl,628 million ($13,118 thousand) in 1995 and 1996, respectively, is share (b) Allowance for doubtful accounts Allowance for doubtful accounts is provided at the estimated amount of doubtful receivables plus the maximum amount which can be charged to income under Japanese income tax laws. of the See Note 11 below for further contracts on the Company's notes details of the forward with warrants. exchange 2. Summary of Significant Accounting Policies Strategy n the Agricultural Interview with Soji Takahashi Managing Director Division Field test sita in Indiana. U,S, ':.-',: I"~,~~,-, , ~~:,," ,.I ..."'................._~~:"!t-~ _i:~,:::.g~7~)2~~~~~.t5i~f~~ ~:.l~!1 w,'" '$.i.:.Ji,.e: .....~.._.......lt,~ ,~'. .~ i~~~~~ - ...........~I.~....:..r.~.. '..~.f .......~.(""'~.:-~1D-:=s.: .~ ... Nissan Chemical Industries, Ltd. (the Company) maintains its accounting records and prepares its financial statements in accor- dance with accounting principles and practices generally accepted in Japan. The accompanying non-consolidated financial statements have been compiled from the financial statements filed with the Minister of Finance as required by the Securities and Exchange Law of Japan and include certain additional financial information for the convenience of the reader. 1. Basis of Presenting the Non-Consolidated Financial Statements Business Strategy Designed teake Us a "Value Creating Enterprise" ,e NOTES TO NON-CONS<eOATEO FINANCIAL STATEME. NISSAN CHEMICAL INDUSTRIES, LTD.