TAIYO HOLDINGS CO., LTD.
2-7-1 Hazawa, Nerima-ku, Tokyo 176-8508, Japan
PHONE : 81-3-5999-1511
http://www.taiyo-hd.co.jp/en/

Passion for innovation
Annual Report 2017
Year Ended March 31, 2017

Management Philosophy
We will realize "a pleasant society" by further advancing "every technology"
the Group has and creating a wide range of products to help fulfill
the dreams for the whole world with our innovative products.

Pickup

Our commitment to generating value

Launching new project
teams to get products tomarket sooner
Development and manufacturing division personnel have been added and new project teams arebeing created with the aim of commercializing products within one to two years with particularemphasis on sales marketing. By fostering this type of environment where employees can devote
themselves to development, we are able to create new products ahead of other companies.

02 TAIYO HOLDINGS CO., LTD. Annual Report 2017TAIYO HOLDINGS CO., LTD. Annual Report 201703

Pickup

Leading the global industry

Everywhere youneed us to be
We are expanding our global networks so that we can supply exceptional products to customers
worldwide. We have established manufacturing and sales bases in Japan, China, Taiwan, South
Korea, and the United States and have marketing and technical service centers in Shenzhen andHong Kong in China as well as in Singapore and Thailand, to cover global markets. In addition, weare actively increasing the overseas materials procurement rate to reduce risks posed by currency
exchange rate fluctuations.

04 TAIYO HOLDINGS CO., LTD. Annual Report 2017TAIYO HOLDINGS CO., LTD. Annual Report 201705

PickupCreating the one and only productSelf-sufficient personnel
are vital to the future of
the group
For the Taiyo Group to achieve continuous growth, we need all employees to be self-sufficient, thatis, personnel who are able to use opportunities and achieve personal growth. The Group createssuch opportunities by dispatching employees to universities as well as improving workplaceenvironments so that employees can create flexible ideas in their day-to-day work.

06 TAIYO HOLDINGS CO., LTD. Annual Report 2017TAIYO HOLDINGS CO., LTD. Annual Report 201707

Basic Management Policies

ProfileThe Taiyo Group is the chemical manufacturer that

In addition to maintaining its unwavering No.1 position in thecommands a top-class global market share of solder

solder resist field, in the years to come, the Group will be

resist, which is essential for the printed wiring boards

focusing on research and development and on the cultivation of( PWBs) used in a variety of electronics products, frombusinesses that will become pillars of new growth.

such IT devices as mobile phones, PCs, and other digitalequipment to digital household appliances and in-vehicle
electronics equipment.

Sales by Segment( including inter- segment sales
and transactions )Established in 1953 as Taiyo Ink Manufacturing Co.,

( Millions of Yen)

( Millions of Yen)

12,000598

70,000Ltd., with the manufacture and sale of printing ink and10,000related material products as its business objective, the60,000Group undertook a major transformation of its business

50,000domains in 1976, to a business in which solder resist was

40,000made its mainstay product.

30,000To target further growth, the Group is enhancing "every

4,451

4,076

7,739

8,826

9,855

10,042

1,414

Basic Management Policies

535
1,276

8,000

2,227
1,492

Taiyo Holdings Co., Ltd. ("we" or "our") has identified its objectives as a corporate group in the Management

6,000
21,82020,61917,003

17,917

4,775

Philosophy and Basic Management Policy below. We will develop by continuing the spirit of our Management

4,582

4,000

Philosophy without changes and reviewing our Basic Management Policies to match changes in the

20,000technology" of all its companies based on the

10,000technological capabilities that have been accumulated in0

the development and manufacture of solder resist. The
Group will continue to supply across the world innovative

Operating Income by Segment

2016

2017

( Years ended March 31)

products that go beyond solder resist.

Japan

China

environment and strategy on a long-term basis.

2,000

0

2,255

2,027

2016

2017

( Years ended March 31)

Taiwan

Korea

Other

Japan

China

TaiwanKorea

1

We will generate profit and increase corporate value, thereby contributing to the well-being andprosperity of customers, communities, shareholders, and employees.

Other

We will discharge our corporate social responsibility with regard to the achievement of our

2Management Philosophy, including complying with the law, protecting the environment, ensuring
thorough quality management, and contributing to society.

3Contents

We will leverage our global system to always provide superior products and services.

We will constantly create opportunities for employees to challenge and develop themselves, aiming to28

Regional Information

41

02

Pickup08

Basic Management Policies

28 Japan

42 Six-Year Summary

10

History

30 China

44 Management's Discussion and Analysis

12

Message from the CEO

31 Taiwan

48 Consolidated Balance Sheet

14

Medium-term
Business Plan

32 Korea

50 Consolidated Statement of Income

16

Executive Forum

33 Other

51 Consolidated Statement ofComprehensive Income

20

Topic

22

At a Glance

24

Main Product26

New Products

34

Supply Chains

36

CSR

38

Corporate Governance

40

Board of Directors and Audit &Supervisory Board Members

Financial Section

52 Consolidated Statement of Changes in Equity

4

have a corporate group composed of people who are highly motivated to be successful and to achievegoals set by themselves.
We will increase our comprehensive corporate strengths by maximizing cooperation between the5Group companies and strengthen the teamwork of all employees with emphasis on "speed andcommunication."

6

We aim to have a group of global companies able to contribute to the realization of a pleasant society
by constantly working for technological innovation and creating new products and businesses.

54 Consolidated Statement of Cash Flows
56 Notes to Consolidated Financial Statements
84

Independent Auditor's Report

Matters Regarding Forward-Looking Statements

Definition of Terms

85

Domestic and Global Network

This annual report contains forward-looking statements regarding"Fiscal 2016" refers to the fiscal year ended March 31, 2017, andTaiyo Holdings' current management plans, strategies, and other

other fiscal years are referred to in a corresponding manner inmatters. Readers are cautioned that these forward-looking

this annual report.

86

Corporate Information

statements hold inherent risks and uncertainties, and may differ
materially from actual results or business performance.

08 TAIYO HOLDINGS CO., LTD. Annual Report 2017TAIYO HOLDINGS CO., LTD. Annual Report 201709

History

Growth Fundamentals
Built Up over 60 Years
1953

1976

Taiyo Holdings was founded in 1953 as a manufacturer and marketer of printing ink. In 1976, the company made the major shiftof focusing on solder resist products for the electronics industry.
Today, having changed our company name from "Taiyo Ink Mfg. Co., Ltd." to "Taiyo Holdings Co., Ltd." and having revised
our management philosophy in April 2013, we continue to evolve with the changing times while maintaining our founding desire
to exist as a company that is useful to people everywhere and that brings light to the world like the sun. Moving forward, we willcontinue working to be a company that is loved by all.

1988

2001

2013

Taiyo Ink Mfg. Co., Ltd.
established

Radical change inbusiness policy

Commenced locally-based
production overseas

Listed on the First Section of theTokyo Stock Exchange

Commemorating our 60th anniversary,and taking on new challenges

Taiyo Ink Manufacturing was

In a radical change in businessIn order to respond to rapidly increasing

Our listing on the First Section of the Tokyo StockAs part of our strategy for ongoing Group growth,established as a manufacturing andpolicy, the company decided tosales in Korea, Taiyo Ink Mfg. Co.,

Exchange and the completion of the

we are working to expand our share of the solder

marketing company for printing ink inswitch from printing ink, its traditional(Korea) Ltd. was established andRanzan-Kitayama Facility (current headquarters of

resist market while also creating a framework for

Minato-ku, Tokyo. In Japanese,mainstay since its founding, to solder

locally-based production was

Taiyo Ink Mfg. Co., Ltd.) enabled higher quality andthe continuous development and rapid"taiyo" means "sun". The name wasresist products and other chemicalcommenced. With locally-based

more stable product supply in both Japan andcommercialization of new products that will growdecided on because it reflects ourmaterials for the electronics industry.

production commencing in the USA,overseas. Responding to the dramatically changing

into profit drivers to rival solder resist.

desire to be a useful existence for

At the time, the chemical materials

Taiwan, and China, Taiyo Ink has built up

external environment, we also launched production

people everywhere and bring light tobusiness was still in the trial anda global supply system focused on local

and marketing in China.

the world like the sun, which gives its

error stage and the marketability of

production and local marketing.

blessings to all life on earth.

these products was unknown; thefuture of the company therefore

subsidiary company.

1988

Established Taiyo Ink Co., (Korea) Ltd.

2014
1990

Ranzan Plant (current Ranzan

1985

America, Inc. in Nevada, USA.

1995

Transformed USA sales subsidiary Taiyo

Exhibited liquid developable solder

America, Inc. into a manufacturing andresist at the JPCA Show.

marketing company.

The company developed the current

1996

standard liquid alkaline developable

1999

Established sales subsidiaries Taiyo Ink
Singapore and Taiyo Ink International(HK) Limited in Hong Kong.

Opened the Ranzan-Kitayama Facility, the2015

Obtained Japanese company, "Chugai Kasei Co.,

Established technical support subsidiary Taiyo InkLtd." 's share by a stock swap and made it(Thailand) Co., Ltd. in Thailand and local production

subsidiary company.

subsidiary Taiyo Ink (Suzhou) Co., Ltd. in China.

2010

Company Split implemented and corporate namechanged to Taiyo Holdings Co., Ltd.

Established Taiyo Ink Products Co., Ltd. in Korea asa sales subsidiary of Taiyo Ink Mfg. Co., Ltd.

company's main domestic production base.

Taiwan Taiyo Ink Co., Ltd. in Taiwan.

International (Singapore) Pte Ltd in

10 TAIYO HOLDINGS CO., LTD. Annual Report 2017

2001

Established local production subsidiarysolder resist (PSR- 4000) and applied
for a basic patent.

Established photovoltaic power generation businesssubsidiary Taiyo Green Energy Co., Ltd. in Japan.

Established sales subsidiary Taiyo

Facility) established.

1984

Obtained Taiwanese company, "OnstaticTechnology Co., Ltd." 's share and made it

rested on this decision.

1982

2013

2017

Established pharmaceutical business subsidiary
Taiyo Pharma Co., Ltd.

Established sales subsidiary Taiyo Ink Trading(Shenzhen) Co., Ltd. in Shenzhen, China.

TAIYO HOLDINGS CO., LTD. Annual Report 201711

Message from the CEO

Propelling the Group toFurther Heights by Developing
Self-Sufficient Personnel toLead New Business Creation
During fiscal 2016, the Taiyo Group focused resources oninvestments to support dynamic leaps as a comprehensive

Eiji Sato
President and CEO

In order for our Group to achieve perpetual growth in our

chemical manufacturer. We believe enhancing our R&D

new stage as a comprehensive chemical company whilecapabilities is vital to maintaining a global top tier market

responding to changes in our operating environment, theshare for our mainstay solder resist products. With this indevelopment of human resources who are both excited about

mind, in May 2016 we implemented full-scale renovations to

new business creation and capable of thinking and acting

our Ranzan Lab, the first such undertaking in 24 years. With

independently will be vital. For this reason, I believe it

these renovations, the facility has undergone a dramaticnecessary for us to maintain a positive balance between the

upgrade to set it apart from typical laboratories.

workplace environment, fair evaluations and compensation,

In other news, the Kitakyushu Plant began shipments fromand work satisfaction.

the second half of fiscal 2016. Completed in October 2015,

To address our workplace environment, we renovated thethe plant was constructed to enable mass production of dry

Ranzan Lab by installing the latest in research equipment tofilm solder resist products, which began to represent an

help accelerate new business creation. Beyond just the Lab,

increased percentage of our semiconductor products revenue

we conducted a full-scale renovation of the entire Ranzan

around five years ago.

Facility. Interior decorations that stimulate the imagination

Looking ahead to the next 20 years, we are implementing

and a cafeteria overseen by a famous Tokyo chef are leading

growth strategies that include a focus on new businesses. We

to increased employee motivation. The cafeteria in particular

are investing in Taiyo Green Energy, which oversees a

has led to increased internal satisfaction and more active

renewable energy-based power plant business and plantcommunication. As such, we also renovated the cafeterias atfactory operations. We also established Taiyo Pharma, which

the main office and at Taiyo Ink Mfg. To promote the hiring ofwill begin manufacturing pharmaceutical products. Althoughhighly self-sufficient personnel, we are conducting joint

these forward-looking investments and a trend towards yen

research with universities, which had produced results inappreciation resulted in a year-on-year decline in income forhelping us secure elite personnel.

fiscal 2016, it was the promising outlook for the market itself
that led us to make such aggressive investments.
In January 2017, we executed a capital & business alliance

12 TAIYO HOLDINGS CO., LTD. Annual Report 2017

relationship with new leaders in the electronics industry.

To tie these initiatives to the upcoming fiscal years, wecreated a three-year Medium-term Business Plan titled "NextStage 2020" with fiscal 2017 as the first year of the plan.

with DIC Corporation, a company well-known for its advanced

Based on our business development strategy centered on our

resin development technology and pigment dispersion

chemical business, we outlined goals of an operating margintechnology. Taiyo Holdings is a leader on the inkjet and MIDof 20% or higher, an ROE (return on equity ratio) of 11%,

(molded interconnect device) markets and this alliance withDOE (dividend on shareholders' equity ratio) of 5% or higher,

DIC will enable us to accelerate the speed of our businessand the general goal of achieving a new record high in terms

expansion.

of operating profit. Through the achievement of these goals,

We have positioned marketing personnel in United States,

we will enhance profit returns to our shareholders. Viewing

the birthplace of innovation, to strengthen our global network.

2020 as a turning point, we will strengthen the profitability ofThrough this strategy, we aim to identify the next generation

our solder resist, and get new businesses such as medical,of players who will achieve dramatic technological innovations

pharmaceutical, energy, and food on a growth trajectory as

such as autonomous driving in the field of IoT and develop

we aim for further and more dynamic achievements.

TAIYO HOLDINGS CO., LTD. Annual Report 201713

Medium-term Business Plan

Targets
1

Profit structure
Operating margin 20% or more

2

Profitability
ROE (Return on Equity ratio) 11% or more

3

Shareholder return
DOE (Dividend on Shareholders' Equity ratio) 5% or more

4

Operating results
Achieve a new record high in term of operating profit

Basic Policy

NEXT STAGE 2020
Medium-term Business Plan
In October 2010, the Group announced GBP 2010, a Medium-term Business Plan extending to fiscal year ended March 31,
2013, but has refrained from formulating a new Medium-term Business Plan since that time. A long-term business development

1

Improve profitability of solder resist (SR)2Expand into areas related to printed wiring board (PWB) other thansolder resist3

Launch a medical and pharmaceutical business

4

Move the energy and food businesses into the black

5

Strengthen basic research capabilities

6

Business alliance with DIC Corporation*

7

Execute M&A strategy

8

Expand CSR activities

9

Develop and utilize self-sufficient personnel capable of acting
independently

strategy is important for the Group's business in materials for printed wiring boards (PWB business) because it normally takes
from five to ten years to complete the cycle from development of a new product to adoption by customers and sale of the
mass-produced product. We therefore thought announcing a Medium-term Business Plan that specified monetary targets as we
had before would encourage short-term management limited to achieving the stated goals.
Solder Resist (SR) is the mainstay product of the Group. Overseas sales comprise more than 80% of our total SR sales andthe Group commands over 50% share of the SR market. Because of these factors, the business structure is greatly affected byexternal factors such as fluctuation in exchange rates and market trends in smartphones, servers, and other end-products. The
sluggish pace of new business development and withdrawal from the flat panel display materials business (FPD business) due
to the demise of demand in fiscal year ended March 31, 2015 has increased the Group's dependence on the PWB business,
and we have not been able to restructure our business to lessen our considerable dependence on SR.
We have therefore formulated the Next Stage 2020 three-year Medium-term Business Plan to extricate the Group from thisbusiness structure and make the leap to becoming a comprehensive chemical company, based on the keyword, "chemicals,"
which we have adopted as our guideline.

14 TAIYO HOLDINGS CO., LTD. Annual Report 2017

* Taiyo Holdings Co., Ltd. concluded a business alliance with DIC Corporation on January 25, 2017.
Press release http://www.taiyo-hd.co.jp/_cms/wp-content/uploads/2017/02/20170202_01_en.pdf

TAIYO HOLDINGS CO., LTD. Annual Report 201715

Executive Forum

Hitoshi Saito

Takao Miwa

Director

In charge of Korea

Director

In charge of R&D

self-sufficient personnel but moving forward we must further

comprehensive chemical company but simply expanding

discover and develop unique human resources and create

existing businesses is not enough to achieve dynamic

opportunities for their utilization. The current Medium-term

growth. We also will promote M&A in various fields.

Business Plan discusses our path as we strive to be a

Further Heights as a Comprehensive
Chemical Company
Sato We are identifying energy, food, and medical andpharmaceutical businesses as the new businesses that will

Takayuki Morita
Director

In charge of China

be our foundation as a comprehensive chemical company.

Eiji Sato
President and CEO

Eiji Takehara

Among those, I particularly want to focus on the medical and

Directorpharmaceutical businesses. In the next three to four years, I

In charge of Taiwan

In charge of HD & Japan

expect this will grow to be a second growth pillar. I thinkenergy and food will require a span of 10 to 20 years andwant to take the time to develop them into highly profitable

Commitment toMedium-term Business Planbusinesses.
Miwa I also believe energy is very important. But theenergy business can be influenced by laws and national
interests rather than the quality of the technology itself,
which can make it difficult to conduct business on the same

Sato With this Medium-term Business Plan, what I want toseeds that support this goal. I am manager of Korea Region,level as suppliers. However, I think that tying theemphasize most is that achieving record high operatingwhere the manufacturing and sales of PWB materials

environment and food to regional energy and conservation

income in the three years leading up to 2020 is a must.

accounts for nearly 100% of our business. Moving forward,

activities will lead to big business in the future.

price so this possibility also exists for vegetables produced

Also, I want to continue being aggressive in establishing

we will strive to capture potential sales in the electronic

Takehara The foundation for this will be the Ranzan

under the Taiyo Holdings brand.

new businesses. We will focus on these two points: record

materials field. Also, we will foster lots of self-sufficient

Floating Solar Power Plant, which undertook the challenge

Morita Presently, consumers in China are voicing growing

high operating income and new business.

personnel in order to make the Medium-term Business Planof building floating mega-solar plant. Our factory is also

concerns over food safety. In that sense, vegetables

Takehara I share this commitment. Posting record highsomething more concrete.

located in Ranzan so I think the first step is to establish a

produced in Japan have an advantage due to reliability

operating income is not something we can achieve simply

Morita As manager of the China Region, which is oursituation where all energy needed for operations is provided

among consumers. If a high level of safety can beby heading forward on our existing path. We first must

production center for products to customers in Asia, I

by our own power plant.

guaranteed, products can be sold at high prices. This also

expand current sales and then dedicate ourselves tobelieve that achieving sales goals is our mission. Looking at

Sato I want to achieve that in around three years. Talking

applies to pharmaceuticals so there is significant potential

contributing to increased sales from new businesses. As

the fields of medical care, pharmaceuticals, and food in

about new businesses at overseas locations, I have great

for markets in which competitors are not engaged. Looking

manager of the Taiwan Region, I will work to further

which we are developing new businesses, I believe there is

expectations for the food business in China. Currently, Taiyo

at our existing solder resist (SR) products, in just a few

increase sales of the locations I manage.

much potential in China so I want to focus on businessGreen Energy is proceeding with plant factory tests and weyears China has seen significant growth even among

Saito I too want to commit to achieving record highexpansion in these areas as well.

are considering local management as well as cultivating incompetitor manufacturers. We need to watch the market

operating income. The Medium-term Business Plan is also

Miwa I think developing self-sufficient personnel is critical

Japan and then exporting produce expected to see large

with a sense of urgency to ensure we do not allow

an expression of our commitment to move toward becoming

to our company development. Over the last few years, wedemand. In fact, vegetables sold by a Japanese generalcompetitors to take the lead when we see the next technicala comprehensive chemical company so I want to plant

have been able to secure a certain level of elite

electric machinery manufacturer are being sold for a highinnovation.

16 TAIYO HOLDINGS CO., LTD. Annual Report 2017TAIYO HOLDINGS CO., LTD. Annual Report 201717

Executive Forum

Sato For both new businesses and existing businesses,

pigments and synthetic resins, we will need to think about

And achieving this will require that we foster the

self-sufficient personnel from among the local management

how we expand business will need to involve reading global

what kind of synergy we can generate. We also aredevelopment of human resources with unique creativity. I

system, we are fostering personnel in Japan with an initial

trends. Looking at technical innovation with SR, it will be

evaluating the possibilities for inkjet and molded

believe this will be the foundation that supports our growth.

focus on developing independent thinkers. From evaluations

vital that we are prepared for the expansion of circuit

interconnect devices (MID) that combine the latest technicalAs business manager, this is a personal goal that I alsoof wage levels to workstyle changes, we are committed tomaterials based on printable methods such as 3D printers.

innovations. DIC is advancing with overseas expansion as abelieve will contribute to both our earnings and the overall

being a company that is attractive to personnel with highA lot of attention is paid to 3D printing but we are more thanglobal company and they have idle plants and equipment. I

development of our society.

potential, both in Japan and overseas.

capable of engaging in the development of a durable,

want to take advantage of resources that align with our

Saito In the field of semiconductors, China will be at the

Miwa Some say that one day self-learning AI will surpass

fast-setting SR for use in 3D printing.

technology. For raw materials as well, we want to conduct

forefront moving forward. There are many things we can still

humans. What elite human resources have in common is

Miwa As opposed to mass production, 3D printing isbatch procurement as a way to reduce costs.

do to expand existing business. Taking aggressive action in

their high capacity for learning but AI is especially adept atincreasing its presence in domains requiring custom

Saito We are mutually engaged in the production of similar

those areas will require that we foster the development of

this. Furthermore, the creativity our company requires can

production such as figures, special effects makeup, andproducts but there were cases where we had different

many independent human resources who will support ourbe defined as the ability to combine objects. This is anotherprosthetics. If we are to engage in this field, I can imagine a

specification definitions. As such, I think it will be important

continued growth as a company. In that sense, we mustarea in which I think AI will surpass humans. As such,

scenario where we target a major market that involves bothto align definitions when conducting joint development.

work towards organization development that ensures wecompanies that effectively incorporate AI into their research

3D printers and medical care. As we look to the global

These differences in technical approaches will lead to newpossess leading potential so that we are never in a position

will come out on top. Then, what is it that only humans canmarket, we need to be more engaged with semiconductors,

findings and discoveries, which can be expected to produce

where our technology falls behind that of our competitors.

do? I believe this is expressing the will to create somethingwhich are the source of technical innovation. Over the next

even greater synergy.

Morita There are three routes for hiring personnel inor achieve something. For this reason, I believe elite

10 years, China's semiconductor industry is expected toChina: hiring locally, hiring locally and having them work inpersonnel equates to people of superior will. We must be a

explode. The arrival of the device that replaces the iPhone,Japan, and hiring Chinese workers in Japan. Currently, we

company that discovers people of such superior will and as

robots and autonomous driving made possible through IoT.

have around 30 people employed with the head office. As aa company we must create a platform that enables such

The dissemination of these products and development ofratio, approximately 20% of workers are foreigners. We are

personnel to fulfill their wishes. I want to entrust our future

semiconductors are proportional.

implementing initiatives that will enable us to utilize theseas a comprehensive chemical company to such personnel.

Takehara Looking at technology innovation in the SR

personnel locally. Rather than fostering the development of

domain, the growth of SR for inkjet printing has been
profound but we also are working to improve the added
value of existing products. In particular, we are focusing on

Profilesincreasing sales of automobile SR and SR for flexible
boards. With SR for automobiles, it is easy to makenumerical growth projections but there is also still significant
room for growth in SR for flexible boards. Also, in thesteering committee based on the capital partnership with
DIC, which possesses core technology related to organic

Eiji Sato

Takayuki Morita

Eiji Takehara

Hitoshi Saito

Takao Miwa

President and CEO

Director

Director

Director

Director

Auditor of Taiwan Taiyo
Ink in 2001. Assumed roleof director at Taiyo
Holdings in 2008. Became
executive officer andGroup CFO in 2009.
President and CEO since2011.

After serving as a director
at Taiwan Taiyo Ink since2001, Morita becamechairman and generalmanager of Taiyo Ink(Suzhou) in 2011. Became
director at Taiyo Holdings
in 2012 and President of
Taiyo Ink Trading(Shenzhen) and Taiyo Ink
International (HK) since2013.

Became director of Taiyo
Ink Mfg. in 2010. Became
director at Taiyo Holdings
in 2014, after which heassumed the position of
director at Taiwan Taiyo
Ink in 2016. Responsible
for Taiyo Ink Mfg. newbusiness projects.

Established Taiyo Ink(Thailand) in 2001.
Became representative
director and CEO of Taiyo
Ink Products in 2015 andTaiyo Ink Mfg. (Korea) in
2016. Became a directorof Taiyo Holdings in June
2016.

After becoming generalmanager of R&D at Taiyo
Holdings in 2013, Miwa
became an executive
managing officer in 2014.
Appointed to position ofrepresentative director
and chairman of Chugai
Kasei in 2015. Became
director of Taiyo Holdings
in 2016 to oversee the
R&D Division.

In charge of HD & Japan

Developing Self-sufficient Personnel
to Drive Company Development
Sato In the electronics industry, in particular the ranking of

focus not only on the production of conventional parts andsemiconductors is changing dramatically. As we face amaterials, but that we also embrace new material

paradigm shift, achieving further growth will require that wedevelopment to forge our own path and lead global industry.

18 TAIYO HOLDINGS CO., LTD. Annual Report 2017

In charge of China

In charge of Taiwan

In charge of Korea

In charge of R&D

TAIYO HOLDINGS CO., LTD. Annual Report 201719

TopicCapital andBusiness Alliancewith DIC Corporation
New business opportunities are steadily emerging into target dramatic growth than relying solely on our own

technology sectors peripheral to SR than seen thus far. This

management resources, and we have been exploringis occurring due to the advent of technology such as

partner companies.

photosensitive insulation materials for next generation PKG

The Taiyo and DIC groups determined that combining theSpecific Uses of Proceeds from Financing
AmountSpecific Uses

Anticipated Timing of
Expenditures(Billions of Yen)

To fund rebuilding of the plant in Taiwan

7.5

April 2017 to July 2020

To fund expansion of the number of lines
at the Kitakyushu plant

2.5

April 2018 to March 2020

To fund the purchase of shares in Onstatic Technology
Co., Ltd., making it a wholly owned subsidiary

2.5

February 2017 to September 2017

To fund reconfiguration of the IT platform

3.0

April 2017 to March 2021

To promote streamlining of production facilities

1.0

April 2018 to March 2020

(semiconductor packages) required for imaging andTaiyo Group's strengths in utilizing our PWB and SR supply

To fund R&D and M&A related to the materials andcomponent businesses in PWB-related areas

Approx. 8.2

insulation reliability at the single-digit micron level,

chains to ascertain market needs and in marketing with the

Total

Approx. 24.7

multi-layer wiring board insulation and circuit forming

strengths of the DIC Group in materials development, its

materials for reducing components and making vehicles

manufacturing and distribution locations throughout thelighter, and wiring boards that use printable electronics toworld, and its financial resources would enable us to seize

reduce environmental burden and manufacturing process

the major business opportunities before us. We therefore

The DIC Group was founded to manufacture and sell printing ink. It thenburden, as well as insulating and conductive materials.

chose one another as business partners and decided to

expanded the scope of its business based on the organic pigments andTo seize new business opportunities in this businessenter into this capital and business alliance as a strategic

synthetic resins that comprise the basic materials for printing ink. The DIC

environment, we decided that forming a partnership with abusiness partnership with the goal of resolving theGroup offers a wide range of products from materials to processing, andcompany that could complement the business expansion ofshort-term management issues of the Taiyo Group andtoday provides products that meet the needs of its customers and society

the Taiyo Group, with our superior materials development

procuring the necessary capital for pursuing our medium tothrough the five segments of printing ink, fine chemicals, polymers,

capabilities and concentration in East Asia, would enable us

long-term business strategy.

compounds, and application materials in over 60 countries and regions

February 2017 to March 2019-

Who is DIC?

worldwide.
Company NameDIC Corporation

Headquarters

DIC Building, 7-20, Nihonbashi 3-chome,
Chuo-ku, Tokyo 103-8233, Japan

EstablishedFebruary 15, 1908

Capital96.6 billion yen

Joint development of new components and materials for printed wiring boards such as MIDs (molded

Number of Employees

Consolidated 20,481, Non-consolidated 3,510

interconnect devices) using technology possessed by the Taiyo Group and DIC

Group Companies

174 (Domestic : 31, Overseas : 143)

Net sales

751.4 billion yen

Operating income

54.2 billion yen

Synergistic Effects from Business Alliance1

2

3

Joint development of printable wiring board materials using DIC's advanced resin development
technology and pigment dispersion technology
Improve products to match market needs and swiftly launch them by using the Taiyo Group's thickpipeline to the industry and evaluation technology for new businesses involving products for theelectronics market that DIC is considering

4

Outsource SR production to DIC's plants overseas to reduce production costs and improve operating
rates at the overseas plants（As of December 31, 2016）

Net Sales

Operating Income(Billions of Yen)

(Billions of Yen)

1000.0

60.0

750.0

830.1

51.1
751.4

40.0

500.0

54.2

41.1

20.0

250.0
0

2014

(Years ended December 31)

20 TAIYO HOLDINGS CO., LTD. Annual Report 2017

820.0

2015

2016

0

2014

2015

2016

(Years ended December 31)

TAIYO HOLDINGS CO., LTD. Annual Report 201721

At a Glance

Classification of Products

Summary of Sales
by Product Group

Other Related Products 6.6%

Rigid PWB Materials
Consolidated Net Sales

A liquid solder resist that is applied to the surface of a rigid board. A mainboard is

PWB Materials Other than Rigid PWB¥ 47,866 milliona printed wiring board (PWB) made with a rigid insulated substrate. This single
board, primarily installed inside electronic devices, is mounted with LSIs, resistors,( PKG,FPC, and build-up board materials )Rigid PWB Materials 69.4%

condensers and other components.

Rigid PWB Materials

PWB Materials Other than Rigid PWB¥33,216 million( PKG , FPC , and build - up board materials )Semiconductor Packaging( PKG ) Materials

24.0%

Flexible Printed Circuit( FPC ) Materials

Looking back on the past 5 years, between the fiscal year ended March 2013 and the fiscal
year ended March 2017, sales grew by 63.9%, thanks in part to the benefits of acquiring

Build-upMaterials

Onstatic Technology Co., Ltd. (OTC). During the fiscal year ended March 2017, overall sales
were firm, particularly for vehicle installation parts. However, net sales declined by 5.7% year

(Millions of Yen)
35,00030,00025,00020,00015,00010,0005,000
029,235
20,262

2013 2014( Years ended March 31)

on year due to the impact of yen appreciation.

33,539 35,242 33,216

2015

2016

2017

PWB Materials Other than Rigid PWB ( PKG,FPC, and build-up board materials )¥11,485 million

Solder resist applied to the surface of a

Main products include solder resist that is

Main products include hole-plugging ink and

PKG board. Two types available: liquid andapplied to the surface of flexible boards andinterlayer insulation materials. Build-up

dry film. A PKG board is a type of printed

a photoimageable coverlay. One of our new

refers to a method of manufacturing heavily

Looking back on the past 5 years, between the fiscal year ended March 2013 and the fiscal(Millions of Yen)year ended March 2017, sales grew by 48.5%, thanks in part to favorable demand for PKG

10,0006,000

wiring board used as an interposer when

products, this photoimageable polyimide

layered PWBs by alternately laminating(semiconductor package) board materials. During the fiscal year ended March 2017, net

mounting semiconductors such as computer

film offers both high resolution and highinsulated and conductive layers on a coresales of PKG board materials increased by 3.7% year on year thanks to firm demand forCPUs, smartphone AP or memory.

bendability. A flexible printed circuit board isboard (or base board). The ink used to filla soft, flexible board made from polyester or

conductive holes in a core board is calledhighly functional smartphone-related materials and a year on year increase sales volume forpolyimide film coated with copper foil.

hole-plugging ink. The laminated insulation
is called interlayer insulation.

Other Related Products

Main products include conductive silver paste and conductive adhesives.

Beginning this fiscal year, earnings from sales of FPD materials has been reported under

7,736

4,000
2,000
0
2013 2014( Years ended March 31)

2015

2016

2017

3,232

3,165

2016

2017

¥ 3,165 million"Other Related Products" due to these sales representing a minor percentage of all products.

Other Related ProductsThis represents total net sales for products other than the above as well as net sales for
Chugai Kasei Co., Ltd. and Taiyo Green Energy Co., Ltd.

Main products include marking ink, etching ink, plating materials, flux and solvent.

(Millions of Yen)
3,500
3,000
2,500
2,000
1,500
1,000
500
0

1,444

Dry Film - Type SR

There are various types of SR, but Taiyo Ink was a pioneer in the development of

Existing liquid-type SR can be preprocessed into a film and a uniform thickness

alkaline developable liquid-type SR, which has now become a leading product. It is

can be achieved. The use of dry film-type SR on semiconductor PKG substrates ischaracterized by high sensitivity as well as outstanding gold plating resistance andincreasing. Because the drying process, which is essential for liquid-type SR, canwater-soluble flux resistance. It is also used as SR on automotive PWBs for its

be eliminated, it is expected that dry film-type SR will reduce manufacturing costs.

1,808

870

2013 2014( Years ended March 31)

Liquid - Type SR

22 TAIYO HOLDINGS CO., LTD. Annual Report 2017

8,000

8,991

flexible board materials and build-up board materials.

Flat Panel Display ( FPD ) Materials

excellent migration resistance and pressure cooker test resistance.

10,936 11,078 11,485

12,0002015

Taiyo Ink SR products

TAIYO HOLDINGS CO., LTD. Annual Report 201723

Main Product

Solder Resist

Roles of Solder Resist

Printed wiring boards (PWBs) are used in various digital consumer electronics such as mobile phones as well as electronic
products such as automobile electronics equipment. Solder resist (SR), a core product of the Taiyo Group, protects PWBs by

1

Preventing solder attachment in areas where it is not needed
We will generate profit and increase corporate value, thereby contributing to the well-being andcoating the surface of the conductor circuits, preventing short circuits and other product problems, and making long-term, stableprosperity of customers, communities, shareholders, and employees.

use possible.

2

Protecting circuit patterns from dust , heat , and moisture
SR protects circuit patterns from the external environment including dust, heat, and moisture. This
makes it possible for electronic devices to operate stably over extended periods.

PCs

3

Maintaining electrical insulation between circuit patterns
In conjunction with the miniaturization of electronic devices, package substrates are also becoming
increasingly fine with circuit patterns on general circuit boards in the 50 µm to 150 µm range. SR

Automotive
components

Network
servermaintains insulation between circuit patterns, preventing short circuits.

Photoimageable Solder Resist Pattern
Formation Process ( Photolithography )SolderResistSmart phones

1. Printing (coating)

2. Pre - curing

SR is applied to the entire surface.

The wiring board is heated to 80°C for 20 to

Flat - screen
televisions

Camera30 minutes and provisionally dried.

Game machine

3. Light exposure

4. Developing

The wiring board is exposed to ultraviolet

The unhardened SR is washed off using alight passed t hrough a negative film. The

developing agent (a dilute alkali water

SR in areas exposed to the light hardens.

solution).

5. Post - curing
The circuit board is heated to 150°C for 50 to 60 minutes to harden the SR.The SR patternformation process is complete.

24 TAIYO HOLDINGS CO., LTD. Annual Report 2017TAIYO HOLDINGS CO., LTD. Annual Report 201725

New Products

Solder Resist for 3D MoldedInterconnect Devices (3D-MID)
The boards that comprise the electronic components we use and encounter in our everyday lives aren't

Cellulose Nanofiber
Composite Insulation Material
for Electronic Components

necessarily all flat and square in shape. As we continue our pursuit of functionality and the true shape ofelectronic products, there may come a time when the traditional square board design reaches its limits.

Electronic components are becoming higher in density due to the continuing pursuit of size reductions in

3D boards are not new to the market. However, iterations thus far have not gone so far as to replace theelectronics products. As a result, there is a need for the insulation material used in electronic components to be

PCB. This is likely because, compared to PCB, there were issues such as reliability concerns, process

high performance and highly reliable. Through our research into characteristics such as high strength and a low

management instability, and complexity in changing structural components. Even if manufacturers wanted tocoefficient of thermal expansion for cellulose nanofiber (CNF), which is garnering much attention as ause 3D boards, it would have proven difficult to eliminate all of these concerns.

plant-based, next-generation material, we succeeded in creating a highly functional material that is the world's

Our research indicated that we did not have a solder resist that was suitable for MID manufacturing methods.

first CNF-based insulation material for electronic components.

As such, we developed a 3D-MID solder resist that is compatible with various MID manufacturing methods.

About CNF

Characteristics

A material created by unwinding plant fibers down to the nano-level. The thinnest of these fiber strands can have adiameter of a mere 3 nanometers. The main characteristic of these fibers is that while light, they are 5 times stronger
than steel and experience very light thermal transformation. And because they are a plant-based material, there islimited environment impact. With Japan's vast forest resources, this new material is expected to have applications in a1Compatible with various MID manufacturing methods and various mold resin types

2

Optimized ink and application method to ensure compatibility with various 3D molded products

3

Makes weld volume control easy, improving the reliability of automated mounting (connections)variety of fields, including the automotive and construction industries.

Tree

4
5

Wood structure

Pulp（20-40 μm diameter）

Cellulose nanofiber（3-100nm diameter）

Improved circuit insulation and reliability of insulation between circuits to ensure reliability on par with
PCB
Enables the use of conventional finishing methods (plating, preflux) and eliminates the need to treat
components with high-cost, full gold plating. In addition to cost reductions, the ability to use trusted
conventional materials ensures customer peace of mind.

Characteristics
Resins used as insulation material in electronic components tend to have a high coefficient of thermal
expansion, which is lowered through the use of fillers. However, this method causes materials to become brittle,

We will continue to develop new customers in search of new added value not possible with PCB. In the next few

resulting in a limit the level at which both a low coefficient of thermal expansion and high strength are

years, we will launch material sales based on mass production applications as we strive to expand our new

achievable. To address this, we focused on the ability of a small volume of CNF to cause large improvement on

products to global markets.

resin properties. However, due to the high hydro affinity of CNF (property of blending well with water and not
blending well with oils), conventional technology could not be used to disperse CNF in resin materials. We
conducted research on various combinations of CNF materials and resins as well as compounding methods to
produce an electronic component insulation material that comprises both a low coefficient of thermal expansion
and high strength.
This fiscal year we will begin working on samples as we aim to launch small-scale production next fiscal year.

26 TAIYO HOLDINGS CO., LTD. Annual Report 2017TAIYO HOLDINGS CO., LTD. Annual Report 201727

Regional Information

Japan

Consolidated Group Subsidiaries
TAIYO INK MFG CO., LTD
Development, manufacture, and sale of printed wiring board materials and flat panel display materials

Fulfilling the Vital Role of Asian Marketing and R&D
One of the major roles we fulfill as the Group holding

equipment for the wide range of materials we create. The

company is the general management, implementation, andfacility enables researchers to conduct speedy validation

promotion of our Asia market strategy. Capturing customers

and evaluations. And establishing an environment for

before they realize their own needs requires that weinternal R&D in the extremely promising semiconductor field

constantly watch the entire Asian market and conduct

will enable us to conduct R&D on a wide range of materials

marketing-backed R&D to create new products that matchother than SR. The new facility will enhance all our researchcustomer needs.

activities, from short-term research aimed at 1-2 years

For example, in China new manufacturers of smartphonecomponents are constantly spinning out from major
companies. Because quickly ascertaining the existence of

CHUGAI KASEI CO., LTD.
Manufacture and sale of dyes, pigments, chemicals and others

ahead to forward-looking research aimed at new businessdevelopment 10 years from now.
The Kitakyushu Plant, completed in October 2015, beganthese new companies is difficult for our local subsidiary toshipping dry film solder resist in the latter half of the fiscal

accomplish on their own, we are applying the marketing

year ended March 2017. The plant will serve to complement

power of our Japanese offices to directly approach

BCP functions at our domestic production plants whilepromising printed wiring board (PWB) manufacturers. Once

responding to increasing demand for miniaturization. To

we know that the company has unconventional needs, thenfurther our efforts to accumulate Group knowhow and

we move onto an evaluation of new product development.

expand into new fields, we acquired Chugai Kasei Co., Ltd.

TAIYO INK MFG CO., LTD

CHUGAI KASEI CO., LTD.

Performance Overview

in 2015. Chugai Kasei is involved in R&D in the fine

Rigid board materials saw strong growth in sales, primarily for

our Japanese marketing team features personnel who are

chemical sector, a high added value area that previously wevehicle installation parts, and sales of PKG board materials wereknowledgeable in the markets of each country and are fluent

outsourced to other companies.

To ensure our ability to adapt flexibly to various market,

in foreign languages. Currently, we have dedicated Indian

By fulfilling our vital role as the core of Asia marketing

staff who is aggressively researching Indian markets thatand as a driver of R&D, we will continue to promote

seem poised to explode in the future.

improved earnings in each country.

29.2%

strong mainly due to demand for high function
smartphone-related materials. However, the impact fromappreciation of the yen resulted in sales of 17,917 million yen (up5.4% year on year), with segment profit of 2,027 million yen(down 10.1% year on year).

Conversely, it is easier for us in Japan to gather the latest
information related to the promising semiconductor market
compared to offices in other regions. We partner with sales
staff in charge of semiconductor manufacturers to pick up
on developments on next-generation products ahead of ourcompetitors and provide rapid, attentive service.
Another role we fulfill is to drive R&D. May 2016 marked
the completion of our renovated R&D center, the Ranzan
Lab. The Ranzan Lab features the latest in advanced
equipment, from organic synthesizers to analyzers such as
NMR and GCMS, measurement equipment for a white light

Sales

Operatingincome(Millions of Yen)

(Millions of Yen)

20,0002,500

15,78615,00013,06517,003

17,9172,000

14,005

1,686

Operatingincome rate
2,467

1,000
5,000

0

12.9

25

2,255
2,027

1,906

1,500
10,000

(%)

15

15.6

13.6

13.3

11.3

2014

( Years ended March 31)

2015

2016

2017

0

10
5

500

2013

20

2013

2014

2015

2016

2017

0

( Years ended March 31)

interference microscopy, and reliability evaluation

28 TAIYO HOLDINGS CO., LTD. Annual Report 2017TAIYO HOLDINGS CO., LTD. Annual Report 201729

Regional Information

China

TaiwanThree Strategies to Expand Share

Identifying Trends Among Semiconductor

In the China market, we are executing three strategies

The third strategy is the development of the smartphone

aimed at expanding Group market share.

industry. The market is expected to see significant growth in

The first is the procurement of inexpensive, good-quality

the future and is a core market for our Group. The number

raw materials in the generic products sector to improve aof units sold by Chinese device manufacturers is expectedbusiness structure that has been susceptible to theto become the highest in the world as numbers are driven

influences of the currency market. These cost reductions will

up by the country's continuously increasing population. As aincrease our superiority over competitors and expand our

result, new parts manufacturers are constantly emerging inmarket share.

China, with many of these companies developing into blue

The second strategy is to conduct sales activities

chip manufacturers of terminals and parts. Our Group will

targeting automotive parts manufacturers that select andpartner with our Japanese marketing team to identify theemploy PWB parts. The automotive market has numerous

technical strengths and key customers of parts

untapped parts manufacturers and the segment appears

manufacturers we have yet to approach in order to develop

poised for growth. We will continue our initiatives from the

new customers and increase market share. We expect

previous fiscal year by conducting aggressive sales

these efforts will be reflected in the net sales and income foractivities to increase market share.

this fiscal year and beyond.

Consolidated Group Subsidiaries● TAIYO INK (SUZHOU) CO., LTD.
● ONSTATIC INK (SHENZHEN) CO., LTD.

Rigid board materials saw strong growth in sales,
primarily for vehicle installation parts, but the impact
from appreciation of the yen resulted in sales of
20,619 million yen (down 5.5% year on year), withsegment profit of 4,582 million yen (down 4.0% year
on year).

Sales

everything from R&D to production continues to be

dependency on exports. Among its many export products,

conducted in Taiwan. With this in mind, our Taiwanese

the country's core exports are electronics products. Like

subsidiary is partnering with out Japanese marketing teammany advanced nations, manufacturers in Taiwan are

to quickly identify trends in PWB manufacturer R&D

trending towards moving production facilities to developing

departments, and among semiconductor and othernations. In particular, the majority of PWB manufacturers

electronics manufacturers. We will expand sales by

are now conducting production in China and other countries.

introducing proposals that proactively target next-generation

However, R&D functions remain in Taiwan and, in general,

products.

decision-making concerning the selection and use of new

To promote these activities, we are planningparts and materials used in new products is being

improvements to production processes that will improve

conducted in Taiwan. However, when it comes to

productivity at Taiwan Taiyo Ink Co., Ltd. and othersemiconductors and the other high value-added electronic

production facilities to facilitate the quick provision ofcomponents that make up the core of finished products,

products that meet the needs of our customers.

(Millions of Yen)

(Millions of Yen)

25,0005,000

20,421
20,00021,820

(%)
4,775

4,000

15,000

3,000

3,508
14.6

10,835
10,000

2,000

5,000
0

Operatingincome rate

20,61917,791

14.7

21.9

4,582
22.2

17.2

2014

2015

2016

2017

1,585

0

2013

2014

2015

( Years ended March 31)

25
20
15

2,617

1,000

2013

● TAIWAN TAIYO INK CO., LTD.
● ONSTATIC TECHNOLOGY CO., LTD.

33.5%

Operatingincome( Years ended March 31)

30 TAIYO HOLDINGS CO., LTD. Annual Report 2017

The economy of Taiwan is unique for its high level ofConsolidated Group Subsidiaries● TAIYO INK INTERNATIONAL (HK) LIMITED● TAIYO INK TRADING (SHENZHEN) CO., LTD.

Performance Overview

Manufactures and Innovating Productivity

2016

2017

Performance Overview
Rigid board materials saw strong growth in sales,
primarily for vehicle installation parts, but the impact
from appreciation of the yen resulted in sales of
10,042 million yen (up 1.9% year on year), with

10

segment profit of 1,492 million yen (down 33.0%

5year on year).

0

16.3%

Sales

Operatingincome rate

Operatingincome(Millions of Yen)

10,0429,614 9,855

10,000(Millions of Yen)

(%)

2,500

8,399
8,000

2,000

6,000
4,000

1,000

2,000
0

500

2013

2014

( Years ended March 31)

2015

2016

2017

0

18.3

17.0

2,227

1,763

1,500
3,936

25

22.6

12.7

20
14.9
1,492

1,428

10

498

2013

15

5

2014

2015

2016

2017

0

( Years ended March 31)

TAIYO HOLDINGS CO., LTD. Annual Report 201731

Regional Information

USA

Japan

Korea

Other

New Subsidiary to Strengthen Our Ability to Identify

New Marketing Functions in USA and Europe,

Semiconductor Trends and Improve Productivity

Evaluating Construction of New Plant in ASEAN

Earnings by our consolidated subsidiaries in Korea werepreviously fulfilled by the Taiyo Group in Japan to conduct

In America, Taiyo America Inc. is securing stable sales andVietnam, or Malaysia. Including potential customers, each ofgreatly impacted by numerous PDP manufacturers pulling

rapid and aggressive proposal activities to manufactures ofincome. To further improve profitability, we will incorporate

these regions represents extremely promising businessout of the PDP market due to a decline in PDP demand on

semiconductors and other electronics products to expand

advanced and innovative marketing. For example, quickly

opportunities and we have been conducting full-scale

the flat screen TV market. In fact, our manufacturing

sales in Korea.

identifying semiconductor market trends in Europe and themarket research since 2016. And considering launching a

USA is vital to the development of new, forward-looking

new plant requires significant knowhow and skills, we view

subsidiary Taiyo Ink Manufacturing (Korea) saw a decline in

Furthermore, to promote sales growth we conducted a

Singaporenet sales due to a withdrawal from the PDP market by majorcomplete reevaluation of production processes at thebusinesses. As such, we established an office withthis new plant construction as vital to our human resource

customers.

product facility of Taiyo Ink Mfg. Co., (Korea) Ltd. andmarketing functions in Silicon Valley, a hub for the latest

development initiatives.

created a production line for high-function products

information on semiconductors, to conduct market research.

expected to become mainstay products in the future.

Moving forward, we will rapidly share information on

On the other hand, sales of highly profitable dry film forsemiconductor packaging (PKG) materials have grownsignificantly in Korea and the impact of yen depreciation

promising new elements and materials with our Japanese

resulted in improved profitability and an increased profit

R&D department to create a system that ties into the rapid

margin.

development and production of new products.

Moving forward, Taiyo Ink Products established in 2015

While currently we have only sales offices in ASEAN

will take the lead in strengthening sales of semiconductor

countries, moving forward we will proactively evaluate theparts. This company will take on marketing functions

establishment of production facility in either Thailand,

Consolidated Group Subsidiaries

Consolidated Group Subsidiaries● TAIYO INK MFG. CO., (KOREA) LTD.
● TAIYO INK PRODUCTS CO., LTD.

Performance Overview
Rigid board materials saw strong growth in sales,
primarily for vehicle installation parts, and sales of
PKG board materials were strong due to demand forhigh function smartphone-related materials.
However, the impact from appreciation of the yen
resulted in sales of 8,826 million yen (up 14.0% year
on year), with segment profit of 1,276 million yen(down 9.8% year on year).

32 TAIYO HOLDINGS CO., LTD. Annual Report 2017

● TAIYO AMERICA, INC.
● TAIYO INK INTERNATIONAL (SINGAPORE) PTE LTD● TAIYO GREEN ENERGY CO., LTD. (since fiscal 2016)

14.4%

Sales

(Millions of Yen)

(Millions of Yen)
12,00011,723(%)

1,500

10,60010,000

9,200
7,739

8,000

8,826

1,212
1,074

1,276

600
300

2,000

2013

2014

( Years ended March 31)

2015

2016

2017

0

20

18.3
14.5

900

4,000

25

1,414

1,200

6,000

0

Operatingincome rate

Operatingincome

13.2

591
10.1
5.0
2013

2014

2015

( Years ended March 31)

2016

2017

Performance Overview
Rigid board materials saw strong growth in sales as
the market for vehicle installation parts expanded,
but the impact from appreciation of the yen resulted

Sales(Millions of Yen)

5,000
4,141
4,000

in sales of 4,076 million yen (down 8.4% year on

3,000

10

year), with segment profit of 535 million yen (down

2,000

5

10.6% year on year).

1,000

600

4,451
4,076

3,525

(%)

598
535

15
324

2014

( Years ended March 31)

2015

2016

2017

21
18

453

400

2,854

2013

555

500

300

0

Operatingincome rate

Operatingincome(Millions of Yen)

15

0

6.6%

11.4

13.4

12.9

13.4

13.1

12

200

9

100

6

0

2013

2014

2015

2016

2017

0

( Years ended March 31)

TAIYO HOLDINGS CO., LTD. Annual Report 201733

Supply Chains

Supply Chains

Quality Managementin the Overall Supply Chain
To provide superior products and services at all times to

Network Covering the Global Market

customers throughout the world, activities to improve quality
through the Group's supply chain are indispensable.

In fiscal 2016, about 93% of the Taiyo Group sales were

and technical service centers in Shenzhen and Hong Kong

accounted for by PWB materials. The principal centers forin China, Singapore, and Thailand.

production of PWBs have shifted from the United States and

The quality of the Group’s products and services together

Europe to Japan and then to emerging countries, and, inwith the agility of its global network has enabled the Group

recent years, production in China has risen rapidly.

to secure the leading share in SR in global markets, andWhile responding to these global changes in the businessoverseas sales have climbed to account for about 80% of its

environment, the Group has conducted transactions with

net sales. Further growth is expected in the medium to long

PWB manufacturers around the world. The Group has been

term in demand for PWB materials for use in electronics

aware that its most-important mission is to provide superior

components around the world.

products and services at all times and has worked to expand

The Group will step up its activities to develop its

this network to cover global markets. Today, the Group hasbusinesses globally and will endeavor to respond to

manufacturing and marketing bases in Japan, China,

burgeoning demand.

Taiwan, Korea, and the United States as well as marketing

Global Network

First, to enable customers to select the optimal products
for their needs from the diverse lineup of items the Group
offers, marketing personnel in charge endeavor to matchproduct specifications with client requirements through close
communication. When client requirements exceed theof raw materials and ensuring that deliveries of raw

specifications of existing products, this is communicated tomaterials that are not up to standard are prevented.

product development divisions, designs are drawn up, and,Moreover, the Group has structured a quality management

after production process plans are prepared by thesystem based on ISO 9001 at each of the Group's

manufacturing divisions, the Group works to provide

production bases.

customers with products that match their specifications. To

Finally, the Group is aiming to win a high level ofenhance quality and provide for smooth deliveries tocustomer satisfaction by creating a detailed management

customers, another important process is materials

system that extends from packing and shipment through to

procurement. To ensure the stable procurement of bothdeliveries. The Group is also providing follow-up after

volumes and quantities, the Group conducts audits ofdeliveries and is asking for assessments as well as feedback

supplier factories and makes periodic assessments of theirfrom customers regarding each stage of the supply chain.

operations, while also setting standards for the acceptance
TAIYO INK MFG. CO., (KOREA) LTD.
TAIYO INK PRODUCTS CO., LTD.

Offering Advantages to Customers through"Local Production and Local Procurement"

CHUGAI KASEI CO., LTD.
TAIYO INK ( SUZHOU) CO., LTD.

ONSTATIC INK ( SHENZHEN) CO., LTD.

TAIYO HOLDINGS CO., LTD.
TAIYO PHARMA CO., LTD.
TAIYO INK MFG. CO., LTD.

TAIYO INK
( THAILAND ) CO., LTD.

TAIYO AMERICA, INC.

TAIYO GREEN ENERGY CO., LTD.
TAIWAN TAIYO INK CO., LTD.
ONSTATIC TECHNOLOGY CO., LTD.

TAIYO INK INTERNATIONAL(SINGAPORE) PTE LTDTAIYO INK INTERNATIONAL ( HK) LIMITEDThe Group does business with customers in virtually every"Local production and local procurement" leads tocountry. In many cases, product sales prices are quoted instrengthening the Group's capabilities for responding toforeign currencies, and one management issue is thatclient requests and needs. For example, through thisfluctuations in exchange rates have an impact on theapproach, the Group can develop products that meetGroup's performance. To deal with this, the Group is

customers'needs in the local markets quickly, and lead time

promoting the implementation of "local production and local

for filling orders can be shortened. This approach is also

procurement" or, in other words, "products that are sold in

effective for facilitating business continuity plans (BCPs)

local areas (markets) are made from materials procured inbecause it means that prices of raw materials can be

the local area and manufactured there." By increasing thelowered and that multiple supply chains can be structured.

percentage of raw materials that are procured locally, the
TAIYO INK TRADING (SHENZHEN) CO., LTD.

Production and Marketing Subsidiaries

Especially regarding lead time, the Group is rapidly making

Group is working to respond by having income andpreparations for shortening required delivery times to meet

expenditures denominated in the same currency.

clients'requests and put into place systems that will enable
the next-day delivery of orders.

Marketing or Technical Support Subsidiaries

34 TAIYO HOLDINGS CO., LTD. Annual Report 2017TAIYO HOLDINGS CO., LTD. Annual Report 2017

35

CSR

CSR

Compliance
The Taiyo Group continuously strives to increase our credibility by promoting activities that strengthen our internal organization and increase

Since its establishment in September 1953, Taiyo Holdings has continued to grow thanks to the trust placed in it by the stakeholders, including its

ethics and compliance awareness among all our employees.
Our internal Compliance Promotion Organization spearheads awareness and educational activities to ensure that employees understand theshareholders, customers, and business partners.
In order to continue to respond to that trust and grow together, all directors and employees of Taiyo Group will fulfill our corporate social

Taiyo Group's CSR Philosophy and Code of Conduct, and to continuously ensure that the Group's activities are aligned with the spirit of our CSR
Philosophy and Code of Conduct. During the fiscal year ended March 2017, we focused on compliance education and our responses to legal andresponsibilities by taking a consistently forward-looking approach to business activities and observing ethics and laws.
In order to fulfill these responsibilities, Taiyo Group has established a corporate CSR Philosophy and a Code of Conduct, and is involved in avariety of CSR activities through its CSR organization comprising of various management systems and committees.The directors and employeesof Taiyo Group will strive to create a company that is trusted by society and is actively involved in CSR activities.

regulatory revisions. At the same time, with the addition of Taiyo Ink Products and Chugai Kasei to our Group, we organized and launched ethicaland legal compliance systems within each company.

Relationship with Shareholders
Through profit dividends and appropriate communication, we contribute to the wealth and prosperity of all our shareholders.

CSR Philosophy

Profit Dividends

We will discharge our corporate social responsibility, including complying with the law, protecting the environment, ensuring thorough quality
management, and contributing to society.

Transitions in shareholder’s equity dividend ratio ( consolidated )Taiyo Holdings views cash-based profit returns to our investors as part ofour core strategy, and distribute sustainable and stable profit returns at ahigh rate. Specifically, we establish shareholder's equity dividend ratio asa target indicator and aim for a medium - to long-term shareholder's equity
dividend ratio of 5% or higher based on consolidated earnings.

Code of Conduct

Fiscal period

2012

2013

2014

2015

2016

Dividends per share( Yen)

90

90

120

110

120.1

Shareholders' equity
dividend ratio (%)

6.1

7.8

5.7

6.5

5.6

Relationship with Suppliers

We will observe the following code to put the Group's CSR Philosophy into practice.

Based on Green Procurement Standards, we practice the procurement of raw materials that are environmentally-conscious, safe, and that

1. Ethical and Legal Compliance

6. Ensuring Quality (Quality Policy)

We will observe laws and other social norms, and understanding the spirit

We will ensure that we always provide safe, quality products that satisfy

thereof, will act openly and fairly.

our customers.

2. Workplace Environment

7. Protecting the Environment(Basic Environmental Philosophy)

This fiscal year, the Group continued conducting on-site audits in cooperation with suppliers in order to build and strengthen relationships of trust. Audits are

We will respect employees'human rights, and create a workplace that isfair and free of discrimination.

We will endeavor to protect the environment as part of the performance of

manufacturing technology and design divisions also participate. Audits are conducted with the aim of enhancing the quality of raw materials and secondary

our social responsibility, and will engage in business activities that are inmaterials.

contribute to quality stability.

Implementation of Supplier Evaluations and On-Site Audits
conducted by teams made up primarily of personnel from the Purchasing Department and Quality Assurance Division, and in some cases employees fromharmony with the environment.

3. Fair Business Dealings
conduct business with them based on impartial and fair business

8. Social Contributions

Relationship with Local Communities and Society

conditions.

As members of society, we will engage in activities that contribute toWorking as a member of society to contribute to social development. This too is a vital responsibility of a corporation. All member companies of

We will deal with all our business partners in an honest manner andsociety.

the Taiyo Group partner to conduct wide-ranging activities in order to ensure our ability to leave precious, limited resources for future generations,

4. Respect for Stakeholders

and to exist as a company that grows together with and enriches the hearts and minds of everyone with whom we interact.

We will always conduct business activities with respect for the viewpoints

9. Protecting Intellectual Propertyof all our stakeholders, and disclose information in a timely andWe will take appropriate precautions to protect Taiyo Group's intellectual

appropriate manner.

property rights, and those of third parties.

5. Ensuring Confidentiality

10. Exclusion of Anti-social Forces

We will work to ensure the protection of confidential information related to

We will take a resolute stance towards anti-social forces and will not

our business partners, the company itself, and any individual.

respond in any way to illegal or improper demands.

Social Contribution Goals of the Taiyo Group

Social contribution activities
Blood donation supporters

Code of Conduct

Provision

Management

Social contribution, dividends,
fair business dealings, tax payment

Evaluation

Rating, awards,
degree of customer satisfaction

36 TAIYO HOLDINGS CO., LTD. Annual Report 2017

Internal controls

Green procurement
Environmentallyfriendly products

Environment

Compliance

SocialEnvironment management
contribution
substance reduct ion
Prevention of global warming

Risk management
Information
securitySociety
Employment,
human rights,
occupat ional safety

Environment
conservation

Assisting people inneed, including in
the face of disaster!

Taxes
Educationandacademics

Suppor ting our
future,the children!

Securing
appropriate
p rof its!

Social welfare

The low birthrates and population facing Japan has resulted in a decline inpeople giving blood and an increase in people requiring bloodtransfusions, resulting in a serious blood shortage. Blood cannot be
produce artificially so there is a need to continuously conduct blood drives
in order to secure required blood stores. Supporting the blood donation

Humanitarianaid

Community
contributions

Sustained
development / stabilizationof management

Share price, environmental protection,h igh - functionalit y products

Stakeholders( Shareholders, customers, business partners,
regional communities, employees )CSR Philosophy

Requirements / expectations

Website, CSR repor t, business repor t

Embracing regional
exchange!

Management Philosophy

Communication
with stakeholders

Information disclosure

Passing on irreplaceable earth for future generations !

promotional initiative launched by the MHLW, the Taiyo Ink main officeencourages employees to participate in blood donation activities. Also,
each year employees working at other locations in the Taiyo Group
cooperate with visiting blood donation trucks.

Ar ts,
culture,spor ts

Fostering enrichedhear ts and minds!

Suppor ting the independence and skills developmentof persons with disabilities!

Blood donation truck visiting a Taiyo office

TAIYO HOLDINGS CO., LTD. Annual Report 201737

Corporate GovernanceCorporate GovernanceInternal Controls
We regard the construction of a system of internal controls as a critical part of corporate governance. These controls include the five components

Construction of Sound
Management Structures

Basic Thinking on Corporate
Governance

We have a holding company structure. Having Group management

In line with our Management Philosophy and Basic Management

and strategic functions, the holding company aims to develop and

Policy, we aim to prosper together with our customers, regional

improve our strategies while optimizing the allocation of resources.

communities, shareholders, employees, business partners, and other

The operating subsidiaries under the holding company can act

stakeholders. We also believe it is necessary for us to embrace social

promptly and autonomously. This system enables us to respond better

responsibilities as well as seek to generate profits. To this end, we

to customers across various markets while also speeding up decision

seek to promote management transparency and to fulfill our disclosure

making and boosting operational efficiency. Its aim is to increase

obligations to support the Company's continued prosperity.

profits and help us build corporate value.

described below.
(1) Keep all directors and employees informed about our CSR (Corporate Social Responsibility) Philosophy and the Code of Conduct.
(2) The appointment of one director as chief compliance officer to chair the Ethics Committee and lead a team promoting internal business ethics.
(3) An internal hotline to enable employees to report compliance violations or any related concerns to an external lawyer.
(4) Regular reports by the chief compliance officer to the Board of Directors concerning the ethics and compliance framework status.
(5) Establishment of an independent Internal Audit Department that reports audit findings to the Board of Directors and the Audit & Supervisory Board,
and where necessary to the accounting auditors as well.
During the fiscal year ended March 2017, in accordance with the Basic Plan for Internal Controls for the 71st Period, we created an internal control
system and organized relevant documents for Taiyo Ink Products which started operations in 2016. System implementation was started according toschedule. Also, we conducted a full review of the internal control system at Taiyo Ink Mfg. (Korea) to improve administrative efficiency and further
reduce financial reporting risks.

Risk Management

Corporate Governance Structures

The Group has studied and instituted ways of mitigating, or of taking appropriate steps in response to, a variety of risks associated with businessOur corporate governance system is centered on the Board of Directors and the Audit & Supervisory Board, whose members are both approved byresolutions at the Shareholders' Meeting. We have also adopted a system of executive officers to invigorate the Board of Directors and expedite
operational execution.
Executive officers are granted an extensive scope of decision-making authority for carrying out their duties, and it is believed that this will enable
rapid decision-making. In addition, a discretionary Compensation Advisory Committee was established as an advisory body to the Board of Directors
in order to ensure objectivity and transparency in director and executive officer compensation. A discretionary Nomination Advisory Committee wasalso established to ensure objectivity and transparency in nominating directors and audit & supervisory board members. The results of resolutions ofboth of these bodies are reported to the Board of Directors. Majorities of both the Compensation Advisory Committee and Nomination Advisory

activities. One director is appointed as "the director in charge of risk management." Moreover, the department in charge of risks occurring in thecourse of natural work operations evaluates and responds to these risks. Furthermore, the Risk Management Committee conducts risk management
in a cross-departmental manner over the entire Group.
At the Kitakyushu Plant, we implemented regular disaster drills and safety education. We also established a 6S Committee*, which conducts regular
activities related to increasing safety awareness and reducing risks. The 6S Committee holds monthly meetings at which area supervisors gather tovisit plants where they identify and implement measures related to improving workflow and addressing risks. This fiscal year, the committee conducted
56 improvement activities and succeeded in eliminating certain risk factors. Through 6S activities, we will aim for even safer work environments andworkplaces with no accidents or injuries.
*5S activities + safety (5S = Seiri (organize) / Seiton (tidy) / Seiso (cleaning) / Seiketsu (cleanliness) / Shitsuke (discipline))

Committee are outside members, and the chairmen are selected from among the outside members.
The Board of Directors is composed of eight directors, two of whom are outside directors. The Audit & Supervisory Board is composed of threeaudit & supervisory board members, two of whom are outside auditors. Meetings of the Board of Directors are held regularly each month, but the

Executive Compensation

Board can also hold extraordinary meetings if necessary. The Board discusses and resolves important matters, and also oversees the execution of

At the 71st General Shareholders' Meeting held on June 21, 2017, we received approval for a director's compensation system comprising the payment

duties by the representative director. Audit & supervisory board members, including outside auditors, attend most meetings of the Board andof base salary, performance cash bonus, and, as compensation to executive directors (hereinafter refers to directors as defined in each paragraph of

Executive Committee, which convene on a number of occasions each year, to engage in discussions and to monitor proceedings in detail. One of the

Article 363, Section 1 of the Companies Act), a stock compensation system comprised of restricted stock and performance cash bonus deferral in

audit & supervisory board member is full-time auditor with the power to submit questions to the Group employees. The system enables the audit &restricted stock.
This director's compensation system aims to provide incentives to executive directors to strive for the sustainable growth of our Group's corporate

supervisory board members to conduct adequate monitoring of the execution of duties by directors.
The Internal Audit Department, which has a staff of two employees, is fully independent of other Group operations. It undertakes an audit of all
departments of the holding company and operating subsidiaries based on the annual audit plan approved by the Board of Directors. Results of theseaudits are reported to the Board of Directors and Audit & Supervisory board.

value while further promoting value sharing between our executive directors and our shareholders.
Compensation paid to directors other than executive directors and to audit & supervisory board members consists of base salary only.
The calculation method, payment timing, distribution, and other matters concerning the base salary amount to directors as well as the performance
cash bonus, restricted stock, and performance cash bonus deferral in restricted stock to executive directors shall be determined by the Board of
Directors in accordance with framework approved at the General Shareholders' Meeting. Prior to making said decision, the Compensation Advisory
Committee chaired by an outside director and comprised of a majority of outside committee members shall conduct an objective comparison andvalidation of compensation standards using executive compensation survey data from a third-party institution. The committee shall deliberate on

System Outline

compensation policies and compensation levels, and then issue its recommendation to the Board of Directors, which shall take said recommendation

Shareholders’ Meeting
Reports toCompensation Advisory
Committee
Nomination Advisory
Committee

Reports to

Appoints andDismisses

Board of Directors
Reports toReports to

President and CEO

Reports toBoard of Corporate Auditors
AuditsCooperation

Cooperation

Instructs

Instructs

Departments and Subsidiaries

38 TAIYO HOLDINGS CO., LTD. Annual Report 2017

Accounting Auditors
Cooperation

Office of Internal Audits

Executive Officer
Reports toCompensation paid to audit & supervisory board members is determined through consultations with the audit & supervisory board members within
Appoints andDismisses

Appoints andDismisses

AuditsAppoints andDismisses

into account when making a final determination.

Reports to

Appoints andDismisses

Internal Audits

the range approved by the General Shareholders' Meeting.

Executive compensation for the year ended March 2017 is shown below.

AuditsExecutive Category
Directors

Total Amount ofCompensation( Millions of Yen)

Amounts of Compensation by Type ( Millions of Yen )Basecompensation

Performancebased monetarycompensation

Performancebased stockcompensation

Retirement
Benefits

Number of
executives

154

72

82

-

-

8

( excluding outside audit & supervisor yboard members )

15

15

-

-

-

1

Outside officers

37

37

-

-

-

5

( excluding outside directors )Audit & supervisory board members

TAIYO HOLDINGS CO., LTD. Annual Report 201739

Board of Directors and Audit & Supervisory Board Members

Financial
SectionBoard of Directors

Eiji Sato

Hitoshi Saito

Masayuki Hizume

President and CEO

Director

Outside Director

Takayuki Morita

Takao Miwa

Keiko Tsuchiya

Director

Director

Outside Director

Eiji Takehara

Masaya Nakafuji

Director

Director

42

Six-Year Summary

44Management’s Discussion and Analysis

48

Consolidated Balance Sheet

50

Consolidated Statement of Income

51

Consolidated Statement of Comprehensive Income

52

Consolidated Statement of Changes in Equity

54

Consolidated Statement of Cash Flows

56

Notes to Consolidated Financial Statements

84

Independent Auditor’s Report

Audit & Supervisory Board Members

Akihito Sakai
Outside Audit & Supervisory Board Member

Haruomi Yoshimoto
Audit & Supervisory Board Member

Kiyoshi Endo
Outside Audit & Supervisory Board Member( As of June 30, 2017)40 TAIYO HOLDINGS CO., LTD. Annual Report 2017TAIYO HOLDINGS CO., LTD. Annual Report 201741

Financial Section

Management's Discussion and Analysis

5. Other
Rigid board materials saw strong growth in sales as the market for vehicle
installation parts expanded, but the impact from appreciation of the yen
resulted in sales of 4,076 million yen (down 8.4% year on year), withsegment profit of 535 million yen (down 10.6% year on year).

(1) Overview of operating results for fiscal year ended March 31, 2017
During fiscal year ended March 31, 2017, the U.S. continued to experience a gradual economic recovery underpinned by continued strong
consumer spending and a recovery in corporate investment activities. The European economy also continued to recover as consumer spending
gradually improved. Steady growth in income sustained firm growth of the Chinese economy, despite the need to pay careful attention to future
conditions due to the decline in rate of growth in housing investments and strong pressure to reduce excess production capacity. The Japanese
economy also experienced a continual gradual rebound in its economy despite delayed improvement in some areas.

(2) Overview of financial position as of March 31, 2017
The following shows the status of assets, liabilities and net assets as of March 31, 2017.
As of March 31, 2016 As of March 31, 2017
Change(Millions of yen)
(Millions of yen) (Millions of yen)In the electronics component industry, a market related to the Taiyo Group, demand for smartphones and vehicle installation parts remained strong.
Such conditions led to net sales of 47,866 million yen (down 4.0% year on year) for the current consolidated fiscal year. This was mainly due tothe trend of appreciation in the Japanese yen.
Sales of rigid board materials were flat in terms of unit volume, however, sales declined to 33,216 million yen (down 5.7% year on year), due inCurrent assets

39,34067,48428,144

Increases of 27,391 million yen in cash and deposits and 510
million yen in notes and accounts receivable – trade.

Non-current assets

26,12524,903(1,222)

Impairment losses of 1,019 million yen on property, plant andequipment.

Total assets

65,46592,387

26,922

Total liabilities

20,214

20,540326

An increase of 405 million yen in notes and accounts payable – trade

Total net assets

45,251

71,847

26,596

Positive factors: 6,398 million yen in net income, 13,963 million
yen in treasury shares, 2,982 million yen in capital stock, 7,519
million yen in capital surplus
Negative factors: 2,544 million yen in payment of dividends

Total liabilities andnet assets

65,46592,387

26,922part to appreciation of the yen.
PKG board and flexible board materials saw unit volume growth over the previous fiscal year, however, sales barely grew to 10,348 million yen(up 3.4% year on year), due in part to continued appreciation of the yen.
Operating income consequently fell to 9,221 million yen (down 15.9% year on year), ordinary income fell to 9,202 million yen (down 17.3% year
on year), and profit attributable to owners of parent fell to 6,398 million yen (down 17.9% year on year).

Sales results by product group category
The following are sales results by product group category for the fiscal year ended March 31, 2017.

(Millions of Yen)

Compared to the previous fiscal year
Name of product group category

Previous fiscal
year results

Current fiscal
year results

ChangeChange (%)

PWB materials
Rigid board materials
PKG board and flexible printed circuit board materials
Build-up board materials

35,242
10,007
1,069

33,216
10,3481,136(2,026)
340
67

(5.7)
3.4
6.3

Other related products

3,523

3,165

(358)

(10.2)

Total

49,84347,866(1,977)(4.0)

Main factors(Comparison with the end of the previous fiscal year)(3) Consolidated statements of cash flows
The following is the status of cash flows for the fiscal year ended March 31, 2017.
Fiscal year ended March 31, 2017
(Millions of Yen)

Main factors

Net cash provided by (used in)operating activities

9,042

Cash inflows included 8,756 million yen in profit before income taxes and 2,485 million yen
in depreciation. Payment of income taxes resulted in a cash outflow of 2,779 million yen.

Net cash provided by (used in)investing activities(1,064)

Cash outflows included 1,584 million yen for acquisition of property, plant and equipment
and 2,247 million yen from the deposit of cash in time deposits. Redemption of time deposits
resulted in a cash inflow of 3,082 million yen.

Net cash provided by (used in)financing activities

20,343

Cash outflows included 2,544 million yen in payment of dividends and 1,667 million yen inacquisition of subsidiary shares. Cash inflows included 18,932 million yen from the sale oftreasury shares and 5,965 million yen from the issuance of shares.

Results by segment are as follows (Segment sales include inter-segment sales and transactions).

Net increase (decrease) incash and cash equivalents

28,232

1. Japan

3. Taiwan

46,661

Rigid board materials saw strong growth in sales, primarily for vehicle
installation parts, and sales of PKG board materials were strong mainly
due to demand for high function smartphone-related materials. However,
the impact from appreciation of the yen resulted in sales of 17,917 million
yen (up 5.4% year on year), with segment profit of 2,027 million yen (down
10.1% year on year).

Rigid board materials saw strong growth in sales, primarily for vehicle
installation parts, but the impact from appreciation of the yen resulted insales of 10,042 million yen (up 1.9% year on year), with segment profit of
1,492 million yen (down 33.0% year on year).

Cash and cash equivalents
at end of period

2. China

4. Korea

Rigid board materials saw strong growth in sales, primarily for vehicle
installation parts, but the impact from appreciation of the yen resulted insales of 20,619 million yen (down 5.5% year on year), with segment
profit of 4,582 million yen (down 4.0% year on year).

Rigid board materials saw strong growth in sales, primarily for vehicle
installation parts, and sales of PKG board materials were strong due todemand for high function smartphone-related materials. However, theimpact from appreciation of the yen resulted in sales of 8,826 million yen(up 14.0% year on year), with segment profit of 1,276 million yen (down
9.8% year on year).

Notes:
Sales of FPD (Flat Panel Display) materials are reported as Other related products from the current consolidated fiscal year because they
comprise a small percentage of all products.
The geographical segmentation of Taiyo Holdings’ business is based its manufacturing and sales structure. There are four reportable segments:
Japan, China, Taiwan, and Korea.

44 TAIYO HOLDINGS CO., LTD. Annual Report 2017TAIYO HOLDINGS CO., LTD. Annual Report 201745

Financial Section(4) Future forecasts(6) Risk factors

In regard to the business environment for the Taiyo Group during fiscal year ending March 31, 2018, we anticipate demand to remain strong for

The following are the main risks that may influence the business development of the Group.

vehicle installation parts and high function smartphone-related materials in the electronic components industry, which is a market related to thegroup, but expect low demand for general home electric appliances. In China, we also anticipate a steep rise in raw material costs due to stricter

a. Technological innovation risks

e. Country-specific risks related to businessdeployment overseas

environmental regulations and an increase in personnel expenses.

Our Group is reliant on the manufacture and sale of PWB materials, and
SR in particular, as a major source of our income. If radical technological

Our Group conducts manufacturing activities in Japan, Taiwan, Korea,

The Taiyo Group also has a high ratio of overseas sales to net sales. We therefore expect appreciation of the yen to have an impact on earnings

developments, such as electronic parts that do not use PWBs or PWBs

China, and the United States. Sales of our Group’s products particularly in

results for the next period.

that do not use SR, were to be widely adopted, this would result in a

China, Taiwan, Korea, ASEAN countries, and other Asian markets are

significant decrease in demand for our products.

expanding. Accordingly, terrorist activities, destabilization of the political

Net sales(Millions of Yen)

Operating income(Millions of Yen)

Ordinary income(Millions of Yen)

Profit attributable toowners of parent(Millions of Yen)

Basic earnings
per share(Yen)

For the fiscal year ending
March 31, 2018 (Forecast)

46,400

8,100

8,000

5,600

194.56

For the fiscal year ended
March 31, 2017 (Actual results)

47,866

9,221

9,202

6,398

266.46(3.1)(12.2)(13.1)(12.5)(27.0)

Rate of change (%)

From the viewpoint of product characteristics, operability, and economic

situation, economic fluctuations, the outbreak of earthquakes andviability, there is little possibility that such technological innovations will becontagion, unforeseen changes to legal, regulatory or tax systems, andwidely adopted in the near future. However, the Company considers it asother country-specific risks could impact on the business strategies andimportant issue in the field of research and development to find possible

performance of our Group.

new met hods for PWBs.

b. Risks associated with patents

f. Risk of exchange rate fluctuations
Our ratio of overseas sales to net sales is high and there are many

In order for our Group to maintain a superior competitive position, efforts

instances when we calculate product prices in foreign currencies.

are being made to protect the products and technology we develop

Accordingly, our business performance is affected by fluctuations in

The forecasts for fiscal year ending March 31, 2018 were calculated based on the assumption that the average exchange rate for the period willthrough patents and intellectual property. However, in the event a patentexchange rates, with a highly appreciated yen normally leading to reduced

be JPY100/USD.

application, etc. does not result in the granting of rights or a third party

income and profits.

For purposes of reference, the earnings forecasts for fiscal year ending March 31, 2018 would be as follows if calculated based on JPY109/USD,

result. Moreover, infringing the intellectual property rights owned by a third
party could impact the performance of our Group as a result of thethe average exchange rate during fiscal year ended March 31, 2017.
(Percentages indicate year-on-year changes)

Net sales

Millions of Yen
Six months ending
September 30, 2017
Fiscal year ending
March 31, 2018

24,900Operating income%

Millions of Yen

6.2

4,900

%

7.5

requests invalidation, insufficient protection of our rights as a Group may

Ordinary income

Millions of Yen
4,800

%
4.3

Profit attributable toowners of parent

Millions of Yen
3,400

%

(6.2)

Basic earnings
per shareYen
118.13

payment of royalties or large amounts of damages.

g. Risk of price fluctuations in key products
PWB manufacturing is shifting to other Asian countries, especially China,
and we are engaged in continuing price wars with rival companies

c. Risk of major production facilities being
affected by a disasterincluding local companies as well as other Japanese firms regarding SR.

Our Group has manufacturing bases in Japan, Taiwan, Korea, China andthe price of our main product, SR, may drop thus affecting thethe United States. In the event that any of our manufacturing bases isperformance of our Group.

There is also pressure to lower SR prices which has resulted from pricecompetition in the PWB market. Because of this, there is a possibility thatdamaged by a natural disaster and manufacturing functions are

49,700

3.8

9,700

5.2

9,600

4.3

6,700

4.7

232.78obstructed, manufacturing and supply functions would be switched towould require some preparation and adjustment and our business would

h. Risks related to f luctuationsin product demand

be affected in the interim.

Demand for our Group’s main products is influenced by electronic

another manufacturing base as an emergency measure. However, this(5) Basic policy on profit distribution and dividends for the current fiscal
year and next fiscal year

d. Risk related to procurement of raw materials

The Company regards profit distribution to shareholders in cash as an important policy and will effectuate a continuous, stable profit distribution at

manufacturers. Problems at these raw material manufacturers or a lack ofi. Credit risks related to receivableshigh levels. We use the dividend on equity ratio as our target index, keeping this figure at least 5% of consolidated financial results for the mid-to

supplies that hinder the Group’s production activities may affect the

The Group has many customers and, although we do not concentrate an

long-term.
In accordance with this policy, the Company paid an interim dividend of 55 yen per share, and a year-end dividend of 65.10 yen per share. This
resulted in an annual dividend of 120.10 yen per share for the current fiscal year.
Concerning dividends of the next fiscal year, we plan to pay an interim dividend of 65.10 yen and a year-end dividend of 65.10 yen, and this will
result in an annual dividend of 130.20 yen per share and a rate of return to shareholders of 66.9%.

components market trends, which may affect the performance of our

The Group procures many of its raw materials from external raw material

performance of the Group.

Group.

excessive amount of receivables on specific customers, the deteriorationof the financial position of customers and the resulting bad debt may
affect the performance of our Group.

j. Risks related to the soaring cost of
raw materials
Due to the state of the oil market, the prices of certain raw materials haverisen, which may affect the performance of our Group.

46 TAIYO HOLDINGS CO., LTD. Annual Report 2017TAIYO HOLDINGS CO., LTD. Annual Report 201747

Financial Section

Consolidated Balance Sheet
Thousands of
U.S. Dollars(Note 1)TAIYO HOLDINGS CO., LTD. and Consolidated Subsidiaries
March 31, 2017

Millions of Yen
ASSETS

2017

2017

2016

¥ 46,661¥ 18,386$ 415,873

2,139

3,023

19,064

13,347

12,836

118,957

4,418

4,017

39,376

Consumption taxes receivable

321

248

2,861

Deferred tax assets (Note 12)

82

72

731

Other current assets

615

1,098

5,481

Allowance for doubtful accounts (Note 14)

(99)

(340)

(882)

67,484

39,340601,461

Time deposits (Note 14)
Notes and accounts receivable—trade (Notes 5 and 14)
Inventories (Note 6)

Total current assets

Millions of Yen
LIABILITIES AND EQUITY

2017

2016

2017

¥ 1,275¥ 933$ 11,364

500

440

4,456

Notes and accounts payable—trade (Note 14)

6,171

5,765

55,000Accounts payable—other (Note 14)

1,210

1,697

10,784

Income taxes payable (Note 14)

885

776

7,888

Accrued expenses

881

710

7,852

Deferred tax liabilities (Note 12)

253

412

2,255

Other current liabilities

433

166

3,859

11,608

10,899103,458

CURRENT LIABILITIES:CURRENT ASSETS:
Cash and cash equivalents (Note 14)

Short-term bank loans (Notes 9 and 14)
Current portion of long-term debt (Notes 9 and 14)

Total current liabilities

LONG-TERM LIABILITIES:
7,170

7,413

63,904

Liability for retirement benefits (Note 10)

223

274

1,987

Asset retirement obligations

352

331

3,137

39

27

348

1,135

1,259

10,116

13

11

116

8,932

9,315

79,608

9,171

6,188

81,738

Capital surplus

14,8247,305

132,121

Retained earnings

46,30842,490412,727(178)( 14,142)( 1,586)

70,12541,841

625,000

Valuation difference on available-for-sale securities

196

96

1,747

Foreign currency translation adjustments

742

1,190

6,613

1

(12)

9

939

1,274

8,369

783

2,136

6,979

71,84745,251

640,348¥ 92,387¥ 65,465$ 823,414

Long-term debt (Notes 9 and 14)

PROPERTY, PLANT, AND EQUIPMENT (Note 7):
3,921

4,617

34,947

Buildings and structures—net

10,35910,52492,326

Machinery, equipment, and vehicles—net

2,850

2,765

25,401Tools, furniture, and fixtures—net

1,155

1,154

10,294

Construction in progress (Note 8)

101

580

900

4

4

36

18,39019,644

163,904

Land

Other
Total property, plant, and equipment

INVESTMENTS AND OTHER ASSETS:
1,058

657

9,430

19

39

169

Goodwill

4,104

4,433

36,578

Software

305

340

2,718

Net defined benefit asset (Note 10)

333

356

2,968

Deferred tax assets (Note 12)

149

97

1,328

Other assets

700

560

6,239

(155)

(1)

(1,381)

6,513

6,481

58,049¥ 92,387¥ 65,465$ 823,414

Investment securities (Notes 4 and 14)
Investments in unconsolidated subsidiaries (Note 14)

Allowance for doubtful accounts
Total investments and other assets

TOTAL

Thousands of
U.S. Dollars(Note 1)

Accrued liability for stock benefits
Deferred tax liabilities (Note 12)
Other long-term liabilities
Total long-term liabilities

COMMITMENTS AND CONTINGENT LIABILITIES (Note 16)
EQUITY (Notes 11 and 22):
Shareholders' equity:
Common stock—authorized, 50,200,000 shares;
issued, 28,841,100 shares in 2017 and 27,485,600 shares in 2016

Treasury stock—at cost, 58,515 shares in 2017 and
4,379,037 shares in 2016
Total shareholders' equity
Accumulated other comprehensive income:Remeasurements of defined benefit plans (Note 10)
Total accumulated other comprehensive income
Noncontrolling interests
Total equity

TOTAL

See notes to consolidated financial statements.

48 TAIYO HOLDINGS CO., LTD. Annual Report 2017TAIYO HOLDINGS CO., LTD. Annual Report 201749

Financial Section

Consolidated Statement of Comprehensive Income

Consolidated Statement of Income
Thousands of
U.S. Dollars(Note 1)TAIYO HOLDINGS CO., LTD. and Consolidated Subsidiaries
Year Ended March 31, 2017

Millions of Yen
2017

2016

2017

¥ 47,866¥ 49,844$ 426,613

COST OF SALES

26,22027,356

233,690

Gross profit

21,64622,488

192,923

NET SALESSELLING, GENERAL,AND ADMINISTRATIVE EXPENSES (Note 13)
Operating income

Interest expense
Foreign exchange gain—net
Subsidy income
Loss on impairment of long-lived assets (Note 8)

12,425

11,523

110,740

9,221

10,96582,183

98

112

873

(86)

(69)

(766)

14

24

125

20

23

178

( 1,019)(32)(9,082)

(1)
509

115

4,537

(464)

172

(4,135)

8,757

11,13778,048Current

2,589

2,855

23,075

Deferred

(389)

154

(3,467)

Total income taxes

2,200

3,009

19,608

6,557

8,128

58,440

158

332

1,408

¥ 6,399¥ 7,796$ 57,032

Other income (expenses)—net
INCOME BEFORE INCOME TAXES

Millions of Yen
2017

2016

2017

¥ 6,557¥ 8,128$ 58,440

100

(14)

891

Foreign currency translation adjustments(519)(2,256)( 4,626)

Remeasurements of defined benefit plans

13

34

116

(406)

(2,236)( 3,619)¥ 6,151¥ 5,892$ 54,821¥ 6,06388¥ 5,674$ 54,037
784

Valuation difference on available-for-sale securities

Total other comprehensive loss

Commission for purchase of treasury shares
Other—net

NET INCOME

Thousands of
U.S. Dollars(Note 1)OTHER COMPREHENSIVE INCOME (LOSS) (Note 18):

OTHER INCOME ( EXPENSES ) :Interest and dividend income

TAIYO HOLDINGS CO., LTD. and Consolidated Subsidiaries
Year Ended March 31, 2017

COMPREHENSIVE INCOME

COMPREHENSIVE INCOME ATTRIBUTABLE TO:
Owners of the parent
Noncontrolling interests

218

See notes to consolidated financial statements.

INCOME TAXES ( Note 12) :NET INCOME
NET INCOME ATTRIBUTABLE TO NONCONTROLLINGINTERESTS
NET INCOME ATTRIBUTABLE TO OWNERS OF THE PARENT

Yen

U.S. Dollars

PER SHARE OF COMMON STOCK (Notes 2.t and 19):
Basic net income
Cash dividends applicable to the year

¥ 266.46¥ 337.99$ 2.37120.10110.001.07

See notes to consolidated financial statements.

50 TAIYO HOLDINGS CO., LTD. Annual Report 2017TAIYO HOLDINGS CO., LTD. Annual Report 201751

Financial Section

Consolidated Statement of Changes in Equity
Millions of Yen

TAIYO HOLDINGS CO., LTD.
and Consolidated Subsidiaries
Year Ended March 31, 2017

Accumulated Other Comprehensive Income

Shareholders' Equity
Number of
Shares ofCommon Stock
Outstanding

CommonStockCapitalSurplusRetained
Earnings

Treasury
Stock—At CostTotal
Shareholders'EquityValuation Difference
on Availablefor-Sale Securities

Foreign
Currency
Translation
Adjustments

Remeasurements ofDefinedBenefit Plans

Total
Accumulated
Other
Comprehensive
IncomeNoncontrolling
Interests

Total
Equity22,942,010¥ 6,135¥ 7,144¥ 36,997¥ (14,599)¥ 35,677¥ 111¥ 3,332¥ (46)¥ 3,397¥ 2,238¥ 41,312

BALANCE, MARCH 31, 2015
Net income attributable toowners of the parent

7,796

7,796

7,796

Dividends from surplus(2,303)(2,303)(2,303)106

106

Issuance of shares

21,600Purchase of treasury stock
Disposal of treasury stock

53

53

(217)

(1)

(1)

(1)

143,170

458

566

566

108

Changes of items during the year
BALANCE, MARCH 31, 2016

23,106,563

6,188

7,305

42,490(14,142)

41,841(15)(2,142)34(2,123)(102)(2,225)

96

1,190

(12)

1,274

2,136

45,251

Net income attributable toowners of the parent

6,399

6,399

6,399

Dividends from surplus(2,545)(2,545)(2,545)

(36)

(36)

(36)

(610)

(610)

(610)

2,983

5,966

5,966

19,11019,110Changes in scope of consolidation
Decrease in equity interest fromacquisition of consolidated
subsidiary shares
1,355,500

Issuance of shares
Purchase of treasury stock(88)

Disposal of treasury stock

4,320,610

2,983

5,146

13,964

Changes of items during the year
BALANCE, MARCH 31, 2017

28,782,585¥ 9,171¥ 14,824¥ (178)¥ 70,125

(448)

13

(335)

(1,353)(1,688)

¥ 196

¥ 742

¥1

¥ 939

¥ 783

¥ 71,847

Thousands of U.S. Dollars (Note 1)

TAIYO HOLDINGS CO., LTD.
and Consolidated Subsidiaries
Year Ended March 31, 2017

BALANCE, MARCH 31, 2016

¥ 46,308

100

Shareholders' Equity

Accumulated Other Comprehensive Income

CommonStockCapitalSurplusRetained
Earnings

Treasury
Stock—At CostTotal
Shareholders'Equity$ 55,152$ 65,107$ 378,699$ (126,042)$ 372,916

Valuation Difference
on Availablefor-Sale Securities

Foreign
Currency
Translation
Adjustments

Remeasurements ofDefinedBenefit Plans

Total
Accumulated
Other
Comprehensive
IncomeNoncontrolling
Interests

Total
Equity$ 856$ 10,606$ (107)$ 11,355$ 19,036$ 403,307

Net income attributable toowners of the parent

57,03257,03257,032

Dividends from surplus(22,683)(22,683)(22,683)

(321)

(321)

(321)

(5,437)(5,437)(5,437)

26,58653,172

53,172

Changes in scope of consolidation
Decrease in equity interest fromacquisition of consolidated
subsidiary shares
Issuance of shares

26,586

Purchase of treasury stock
45,865

Disposal of treasury stock

124,456

BALANCE, MARCH 31, 2017

$ 81,738$ 132,121$ 412,727$ (1,586)

170,321

170,321

Changes of items during the year
$ 625,000

891(3,993)116(2,986)$ 1,747$ 6,613$9$ 8,369(12,057)(15,043)$ 6,979 $ 640,348

See notes to consolidated financial statements.

52 TAIYO HOLDINGS CO., LTD. Annual Report 2017TAIYO HOLDINGS CO., LTD. Annual Report 201753

Financial Section

Consolidated Statement of Cash Flows
TAIYO HOLDINGS CO., LTD. and Consolidated Subsidiaries
Year Ended March 31, 2017

Thousands of
U.S. Dollars(Note 1)Millions of Yen

2017

2016

2017

¥ 8,757¥ 11,137$ 78,048(2,779)
2,485
1,019
(925)
(421)
567
36
303

(3,294)
1,891
32
(592)
464
349
(25)
584

(24,768)
22,148
9,082(8,244)(3,752)
5,053
321
2,700

285

(591)

2,540

9,042

10,54680,588(2,248)(4,372)(20,036)

Proceeds from withdrawal of time deposits

3,082

2,708

27,469Purchases of property, plant, and equipment(1,585)(4,217)(14,127)

Purchase of software

(77)

(160)

(686)

Purchase of investment securities

(272)

(115)

(2,424)

36

(594)

321

(1,064)(6,750)( 9,483)

308

261

2,745

OPERATING ACTIVITIES :Income before income taxes
Adjustments for:
Income taxes—paidDepreciation and amortization
Loss on impairment of long-lived assets
Increase in notes and accounts receivable—trade(Increase) decrease in inventories
Increase in notes and accounts payable—trade
Increase (decrease) in accrued expenses
Other—net
Total adjustments
Net cash provided by operating activities
INVESTING ACTIVITIES :Payments into time deposits

Other—net
Net cash used in investing activities

Thousands of
U.S. Dollars(Note 1)Millions of Yen

2017

2016

2017

¥ 28,232¥ 38$ 251,622

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR

18,38618,183

163,868

INCREASE IN CASH AND CASH EQUIVALENTS DUE TO
NEW CONSOLIDATION43

NET INCREASE IN CASH AND CASH
EQUIVALENTS—(Forward)

INCREASE IN CASH AND CASH EQUIVALENTS DUE TO
SHARE EXCHANGE (Note 20)
CASH AND CASH EQUIVALENTS, END OF YEAR

383
165

¥ 46,661¥ 18,386$ 415,873

See notes to consolidated financial statements.

FINANCING ACTIVITIES :Increase in short-term loans
Proceeds from long-term debt

300

500

2,674

Repayments of long-term debt

(467)

(984)

(4,162)

Proceeds from redemption of corporate bond

(100)

(891)
(1)

Purchase of treasury stock
Proceeds from disposal of treasury stock

18,932

1

168,734

Cash dividends paid

(2,545)(2,303)(22,683)

Cash dividends paid to noncontrolling shareholders

(383)

(321)

(3,414)

Proceeds from issuance of shares

5,966

106

53,173Acquisition of subsidiary shares not accompanied
by a change in the scope of consolidation
Other—net
Net cash provided by (used in) financing activities
FOREIGN CURRENCY TRANSLATION ADJUSTMENTS ON
CASH AND CASH EQUIVALENTS
NET INCREASE IN CASH AND CASH
EQUIVALENTS—(Forward)

54 TAIYO HOLDINGS CO., LTD. Annual Report 2017

(1,667)(14,857)(1)(9)

20,343(2,741)

181,310(89)(1,017)(793)¥ 28,232¥ 38$ 251,622

TAIYO HOLDINGS CO., LTD. Annual Report 201755

Financial Section

Notes to Consolidated Financial Statements
TAIYO HOLDINGS CO., LTD. and Consolidated Subsidiaries
Year Ended March 31, 2017

1. BASIS OF PRESENTING CONSOLIDATED FINANCIAL STATEMENTS
The accompanying consolidated financial statements have been prepared in accordance with the provisions set forth in theJapanese 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 application anddisclosure requirements of International Financial Reporting Standards.
In preparing these consolidated financial statements, certain reclassifications and rearrangements have been made to theconsolidated financial statements issued domestically in order to present them in a form that is more familiar to readers outside
Japan. In addition, certain reclassifications have been made in the 2016 consolidated financial statements to conform to theclassifications used in 2017.

The excess of the cost of an acquisition over the fair value of the net assets of the acquired subsidiary at the date of acquisition
is being amortized on a straight line basis over a period of five or 20 years.
There are no investments in associated companies accounted for using the equity method in 2017 and 2016.
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 eliminated.
The fiscal years of two (two as of March 31, 2016) consolidated subsidiaries end on December 31. To prepare theCompany's consolidated financial statements, TAIYO INK (SUZHOU) CO., LTD. and TAIYO INK TRADING (SHENZHEN) CO.,LTD. prepared a set of accounts with a closing date of March 31 and these were used for consolidation purposes. The
Company used the financial statements of OTC and four companies whose fiscal year ends on December 31 for consolidation
since the difference of fiscal year ends between the Company and these companies are no more than three months. The
necessary adjustments for significant transactions, if any, during the intervening period are made on consolidation.

b. Unification of Accounting Policies Applied to Foreign Subsidiaries
for the Consolidated Financial Statements

The consolidated financial statements are stated in Japanese yen, the currency of the country in which TAIYO HOLDINGS

Under Accounting Standards Board of Japan ("ASBJ") Practical Issues Task Force ("PITF") No. 18, "Practical Solution onCO., LTD. (the "Company") is incorporated and operates. The translation of Japanese yen amounts into U.S. dollar amounts is

Unification of Accounting Policies Applied to Foreign Subsidiaries for the Consolidated Financial Statements," the accounting

included solely for the convenience of readers outside Japan and has been made at the rate of ¥112.2 to $1, the approximate

policies and procedures applied to a parent company and its subsidiaries for similar transactions and events under similarrate of exchange at March 31, 2017. Such translation should not be construed as representations that the Japanese yen

circumstances should in principle be unified for the preparation of the consolidated financial statements. However, financial

amounts could be converted into U.S. dollars at that or any other rate.

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

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Codification—"FASB ASC") tentatively may be used for the consolidation process, except for the following items that should be
adjusted in the consolidation process so that net income is accounted for in accordance with Japanese GAAP, unless they are
not material: (a) amortization of goodwill; (b) scheduled amortization of actuarial gain or loss of pensions that has beena. Consolidation

recorded in equity through other comprehensive income; (c) expensing capitalized development costs of research and

The consolidated financial statements as of March 31, 2017, include the accounts of the Company and its 16 significant (15 asdevelopment ("R&D"); and (d) cancellation of the fair value model of accounting for property, plant and equipment andof March 31, 2016) subsidiaries (collectively, the "Group").

investment properties and incorporation of the cost model of accounting.

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 using the equity method.

c. Business Combinations
Business combinations are accounted for using the purchase method. Acquisition-related costs, such as advisory fees orprofessional fees, are accounted for as expenses in the periods in which the costs are incurred. If the initial accounting for a(Names of Consolidated Subsidiaries)

business combination is incomplete by the end of the reporting period in which the business combination occurs, an acquirer

TAIYO INK MFG. CO., LTD.

TAIYO AMERICA, INC.

shall report in its financial statements provisional amounts for the items for which the accounting is incomplete. During the

CHUGAI KASEI CO., LTD. ("Chugai Kasei")TAIYO INK INTERNATIONAL (HK) LTD.

measurement period, which shall not exceed one year from the acquisition, the acquirer shall retrospectively adjust the

TAIYO INK (SUZHOU) CO., LTD.

TAIYO INK TRADING (SHENZHEN) CO., LTD.

provisional amounts recognized at the acquisition date to reflect new information obtained about facts and circumstances that

TAIWAN TAIYO INK CO., LTD.

TAIYO INK INTERNATIONAL (SINGAPORE) PTE LTD.

existed as of the acquisition date and that would have affected the measurement of the amounts recognized as of that date.

ONSTATIC TECHNOLOGY CO., LTD. ("OTC")TAIYO INK PRODUCTS CO., LTD.

Such adjustments shall be recognized as if the accounting for the business combination had been completed at the acquisition

TAIYO INK CO., (KOREA) LTD.

TAIYO GREEN ENERGY CO., LTD.

date. A parent's ownership interest in a subsidiary might change if the parent purchases or sells ownership interests in its

TAIYO GREEN ENERGY CO., LTD. is included within the scope of consolidation in the year ended March 31, 2017, becauseof the growing importance for management strategy.
As OTC owns four subsidiaries, the total number of consolidated subsidiaries is 16.
Investments in the remaining one (two as of March 31, 2016) unconsolidated subsidiary is stated at cost. If the equity method

subsidiary. The carrying amount of noncontrolling interest is adjusted to reflect the change in the parent's ownership interest in
its subsidiary while the parent retains its controlling interest in its subsidiary. Any difference between the fair value of theconsideration received or paid and the amount by which the noncontrolling interest is adjusted is accounted for as capital surplus
as long as the parent retains control over its subsidiary.

of accounting had been applied to the investments in this company, the effect on the accompanying consolidated financial
statements would not be material.

56 TAIYO HOLDINGS CO., LTD. Annual Report 2017TAIYO HOLDINGS CO., LTD. Annual Report 201757

Financial Section

d. Cash Equivalents

m. Accrued Liability for Stock Benefits

Cash equivalents are short-term investments that are readily convertible into cash and that are exposed to insignificant risk of

The Company accrues liability for stock benefits to be granted to employees in accordance with the "Rules on Distribution ofchanges in value.

Shares" based on the projected stock benefit liability.

Cash equivalents include time deposits, certificates of deposit, commercial paper, and bond funds, all of which mature or
become due within three months of the date of acquisition.

n. Retirement and Pension Plans

e. Inventories

The Company and certain consolidated subsidiaries have contributory funded defined benefit pension plans and unfunded

Inventories are principally stated at the lower of cost, determined by the moving-average method, or net selling value.

f. Marketable and Investment Securities
The Company classifies all marketable and investment securities as available-for-sale securities, which are reported at fairvalue, 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 using 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.

g. Allowance for Doubtful Accounts
The allowance for doubtful accounts is provided for at the aggregate amounts of estimated credit losses based on the individual
financial review of doubtful or troubled accounts and a general reserve for other accounts based on the Company's historicalcredit loss experience of a certain past period.

h. Property, Plant, and Equipment

retirement benefit plans for employees. Other consolidated subsidiaries have unfunded retirement benefit plans. The Company
accounts for the liability for retirement benefits based on the projected benefit obligations and plan assets at the balance sheet
date. The projected benefit obligations are attributed to periods on a benefit formula. Actuarial gains and losses and past
service costs that are yet to be recognized in profit or loss are recognized within equity (accumulated other comprehensive
income), after adjusting for tax effects and are recognized in profit or loss over five years no longer than the expected averageremaining service period of the employees.
In calculating net defined benefit liability and net periodic benefit costs, certain consolidated subsidiaries adopt the simplified
method whereby the projected benefit obligations are calculated at an amount that would be paid if all eligible employees
voluntarily retired at the consolidated balance sheet date.
Liability for directors and corporate auditors is recorded to account for the payments of their retirement benefits based on theinternal rules of the Company.
The Company, at the meeting of the board of directors held on April 22, 2010, resolved to abolish the directors' retirement
benefits system, and the agenda item regarding lump-sum payments resulting from said abolishment was approved at the 64th
general meeting of shareholders held on June 29, 2010. These payments will be effected as retirement benefits paid at the timeof retirement according to the period of service up to the abolishment of the system.

Property, plant, and equipment are stated at cost.
Buildings are depreciated principally using the straight-line method, while property, plant, and equipment other than buildings
are depreciated principally using the declining-balance method over the estimated useful lives of the assets.
The ranges of useful lives for major categories are as follows:o. Asset Retirement Obligations
An asset retirement obligation is recorded for a legal obligation imposed either by law or contract that results from theacquisition, construction, development and normal operation of a tangible fixed asset and is associated with the retirement of

Buildings and structures:

From 7 to 60 years

such tangible fixed asset. The asset retirement obligation is recognized as the sum of the discounted cash flows required for

Machinery, equipment, and vehicles:

From 4 to 10 years

the future asset retirement and is recorded in the period in which the obligation is incurred if a reasonable estimate can be

Tools, furniture, and fixtures:

From 3 to 8 years

made. If a reasonable estimate of the asset retirement obligation cannot be made in the period the asset retirement obligation isi. Long-Lived Assets

incurred, the liability should be recognized when a reasonable estimate of the asset retirement obligation can be made. Upon
initial recognition of a liability for an asset retirement obligation, an asset retirement cost is capitalized by increasing the

The Group reviews its long-lived assets for impairment whenever events or changes in circumstance indicate the carrying

carrying amount of the related fixed asset by the amount of the liability. The asset retirement cost is subsequently allocated toamount of an asset or asset group may not be recoverable. An impairment loss would be recognized if the carrying amount ofexpense through depreciation over the remaining useful life of the asset. Over time, the liability is accreted to its present value

an asset or asset group exceeds the sum of the undiscounted future cash flows expected to result from the continued use andeach period. Any subsequent revisions to the timing or the amount of the original estimate of undiscounted cash flows are

eventual disposition of the asset or asset group. The impairment loss would be measured as the amount by which the carrying

reflected as an adjustment to the carrying amount of the liability and the capitalized amount of the related asset retirement cost.

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.

p. Income Taxes

j. Software

The provision for income taxes is computed based on pretax income included in the consolidated statement of income. The

Software for internal use is amortized using the straight-line method over the estimated useful life of mainly five years.

k. R&D Costs
R&D costs are charged to income as incurred.

l. Accrued Bonuses
The Company and certain consolidated subsidiaries provide accrued bonuses for employees, directors, and corporate auditors

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 temporary differences.
The Group files a tax return under the consolidated corporate tax system, which allows companies to base tax payments on
the combined profit or losses of the parent company and its wholly owned domestic subsidiaries.
The Company applied ASBJ Guidance No. 26, "Guidance on Recoverablity of Deferred Tax Assets," effective April 1, 2016.
There was no impact from this for the year ended March 31, 2017.

based on future projections for the current fiscal year.

58 TAIYO HOLDINGS CO., LTD. Annual Report 2017TAIYO HOLDINGS CO., LTD. Annual Report 201759

Financial Section

q. 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 arerecognized in the consolidated statement of income.

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

s. Derivative Financial Instruments

Under this plan, the Company establishes a trust for persons who satisfy the beneficiary requirements from among employees, andentrust money necessary for acquisition of the Company's shares. The trustee of the trust will acquire the Company's shares, to be
distributed to employees in the future, from the Company in accordance with the "Rules on Distribution of Shares." Subsequently, thetrustee will grant a certain number of the Company's shares to beneficiaries based on "qualification grade etc." during the trust term.
Beneficiaries will assume no cost in this regard since the underlying funds in the trust are fully contributed by the Company.
Assets and liabilities in relation to the trust are recorded in the consolidated balance sheet, and gains and losses therefrom arerecorded in the consolidated statement of income.

( 2 ) The Company's shares held by the trust
The Company's shares held by the trust were accounted for as treasury stock in net assets at book value (that do not include
transaction costs paid to acquire the shares) in the trust. Under the trust, the book value and the number of shares of treasury stocks
as of March 31, 2017 and 2016, were ¥178 million and 58,480 shares, and ¥226 million and 74,390 shares, respectively.

v. New Accounting Pronouncements
・"Practical Solution on Unification of Accounting Policies Applied to Foreign Subsidiaries for Consolidated Financial Statement"(ASBJ Practical Issues Task Force No. 18, issued on March 29, 2017)

The Company enters into derivative financial instruments to manage foreign exchange risks and interest rate risks. The

・"Current Treatment of Accounting Procedures for Equity-Method Affiliates" (ASBJ Practical Issues Task Force No. 24, issued

Company uses long-term borrowings denominated in foreign currency to reduce foreign currency risks arising from investments

on March 29, 2017)

in foreign subsidiaries. The Company also uses interest rate swap contracts for the purpose of hedging the interest rate risk
associated with the underlying borrowings.
All derivative financial instruments are recognized at fair value in the consolidated balance sheet. For derivatives used forhedging purposes, the gains and losses are deferred until the hedged item is recognized. The Company records in "Foreign
currency translation adjustments" the gains or losses on the derivative financial instruments that are designated as hedging
instruments for investments in foreign subsidiaries. Exceptional treatment is applied for interest rate swap contracts that qualify
for hedge accounting and meet specific matching criteria.
The Company evaluates effectiveness of hedging activities for investments in foreign subsidiary by referring the accumulated
gains or losses on the hedging instruments and the related hedged items from the commencement of the hedging transactions.
The Company omits the assessment of hedge effectiveness of interest rate swaps that qualify for hedge accounting and meet
specific criteria.

t. Per Share Information
Basic net income per share ("EPS") is computed by dividing net income available to common shareholders by the weightedaverage number of common shares outstanding for the period.
Diluted EPS is not disclosed because it is antidilutive.
Cash dividends per share presented in the accompanying consolidated statement of income are dividends applicable to therespective years, including dividends to be paid at the end of the year.
First Series Class A shares and Second Series Class A shares have rights equivalent to common shares in terms of rights toclaim dividends and those to claim residual property distribution and, therefore, are included in common shares when calculating(1) Overview
It is the amendment on the inclusion of the domestic subsidiaries or the domestic affiliates, disclosed in the securities report, basedon the Financial Instruments and Exchange Act, within the scope of the "Practical Solution on Unification of Accounting Policies
Applied to Foreign Subsidiaries for Consolidated Financial Statement" by preparing the consolidated financial statements inconformity with the designated international accounting standards or the modified international standards.

(2) Scheduled date of application
These accounting standards are effective from the year beginning on April 1, 2018.

(3) Effect of the adoption of accounting standards
The impact of adopting these accounting standards and relevant regulations on consolidated financial statements is currently underassessment.

w. Changes in Presentation Methods
Consolidated Statement of Cash Flows
During the current year, the Company classified the "(increase) decrease in other current assets" within the "operating activities"
section of the consolidated statement of cash flows as "other-net" in the "operating activities" section of the consolidated statement ofcash flows as the amounts were immaterial.
Accordingly, the Company reclassified ¥142 million presented as "(increase) decrease in other current assets" within the "operating
activities" in the consolidated statement of cash flows to "other-net" in the "operating activities" section of the consolidated statementof cash flows for the previous fiscal year ended March 31, 2016.

per share information.

u. Employee Stock Ownership Plan
The Company has applied the "Practical Solution on Transactions of Delivering the Company's Own Stock to Employees etc.
through Trusts (Practical Issue Task Force (PITF) No. 30 issued on March 26, 2015)" for the year ended March 31, 2015.

(1) Outline of transactions
At the board of directors' meeting held on May 2, 2014, a resolution was made to introduce the Employee Stock Ownership Plan("ESOP") trust for granting stock as an employee incentive plan. The purpose of this incentive plan is (i) to increase employee
commitment and encourage involvement in the management of the business; (ii) to raise morale and give employees an incentive to
behave in ways that will contribute to the Company's long-term performance and stock price; and (iii) to improve the mid-and
long-term corporate value of the Company.

60 TAIYO HOLDINGS CO., LTD. Annual Report 2017TAIYO HOLDINGS CO., LTD. Annual Report 201761

Financial Section

3. ACCOUNTING CHANGE

Available-for-sale securities whose fair values were not readily determinable as of March 31, 2017 and 2016, were as follows:
Thousands of
U.S. Dollars

Millions of Yen

Change in Depreciation Method
Pursuant to an amendment to the Corporate Tax Act, the Company adopted Accounting Standards Board of Japan

2017

2016

2017

Practical Issues Task Force No. 32 “Practical Solution on a Change in Depreciation Method Due to Tax Reform 2016” andAvailable-for-sale—equity securities

¥3

¥ 12

$ 27

changed the depreciation method for building improvements and structures acquired on or after April 1, 2016, from the

Available-for-sale—investments in partnership

459

187

4,091

declining-balance method to the straight-line method. The effect of this change on operating income and income before
income taxes for the year ended March 31, 2017 is immaterial.

The information for available for sale securities, which were sold during the year ended March 31, 2017, was omitted because it
would not be material. There were no available-for-sale securities that were sold during the year ended March 31, 2016.

4. MARKETABLE AND INVESTMENT SECURITIES

5. NOTES MATURED ON MARCH 31, 2017 AND 2016

Marketable and investment securities as of March 31, 2017 and 2016, consisted of the following:Notes that were to mature at the consolidated balance sheet date were accounted for at the date of actual settlement. The
Thousands of
U.S. Dollars

Millions of Yen

2017

2016

2017

¥ 597

¥ 457

$ 5,321

¥ 597

¥ 457

$ 5,321

March 31, 2016 and 2017 year ends of certain subsidiaries coincided with a bank holiday, and the following notes matured on
March 31, 2017 and 2016, were included in the consolidated balance sheets as of March 31, 2017 and 2016:

Marketable equity securities
Total

The costs and aggregate fair values of marketable and investment securities as of March 31, 2017 and 2016, were as follows:
Millions of Yen

March 31, 2017

Cost

Unrealized
Gains

Notes receivable—trade

Total

¥ 337
¥ 337

¥ 271
¥ 271

2017

2016

2017

¥4

¥1

$ 36

6. INVENTORIESInventories as of March 31, 2017 and 2016, consisted of the following:

Unrealized
LossesFair
Value¥ (11)¥ (11)¥ 597¥597

March 31, 2016

Thousands of
U.S. Dollars

Millions of Yen

2017

2016

2017

Merchandise and finished products
Work in process
Raw materials and supplies¥ 2,183437
1,798¥ 2,013
1,594$ 19,456
3,895
16,025

Total¥ 4,418¥ 4,017$ 39,376

Securities classified as available for sale—
Equity securities

Thousands of
U.S. Dollars

Millions of Yen

Noncurrent—

410

Securities classified as available for sale—
Equity securities
Total

¥ 320

¥ 162

¥ 25

¥ 457

7. PROPERTY, PLANT, AND EQUIPMENT

¥ 320

¥ 162

¥ 25

¥ 457

Accumulated depreciation at March 31, 2017 and 2016, was ¥27,569 million ($245,713 thousand) and ¥25,637 million,
respectively.

Thousands of U.S. Dollars

March 31, 2017

Unrealized
Gains

Unrealized
LossesFair
Value$ 3,004$ 2,415$ (98)$ 5,321$ 3,004$ 2,415$ (98)$ 5,321

Cost

Securities classified as available for sale—
Equity securities
Total

62 TAIYO HOLDINGS CO., LTD. Annual Report 2017TAIYO HOLDINGS CO., LTD. Annual Report 201763

Financial Section

8. LONG LIVED ASSETS

Annual maturities of long-term debt for the next five years and thereafter as of March 31, 2017, were as follows:

The Group reviewed its long-lived assets for impairment for the years ended March 31, 2017 and 2016.

Year Ending
March 31

The Group recognized impairment losses for the year ended March 31, 2017, as follows:
Location

Usage

Classification

Millions of Yen

Thousands of U.S. Dollars

Head Office (Nerima-ku, Tokyo)

Administrative

Land and buildings¥ 1,019$ 9,082

In principle, business use assets are grouped based on the department of the Group, and idle assets are grouped based oneach asset.
The Company tackling relocation and consolidation of its management function as part of the base restructuring. Land and

2017
2018
2019
2020
2021
2022 and thereafter
Total

Millions of Yen

Thousands of
U.S. Dollars

¥ 500
4,820
2,200
117
33

$ 4,456
42,95919,6081,043
294¥ 7,670$ 68,360

building of Head Office are written down to recoverable amounts because they are expected to become the idle assets.
The recoverable amount is net sales amount, calculated by a reasonable method (real estate appraisal value).

10. RETIREMENT AND PENSION PLANS

The Group recognized impairment losses for the year ended March 31, 2016, as follows:

The Company has noncontributory-funded defined benefit plans based on the point system and defined contribution plans.

Location

Usage

Classification

Millions of Yen

TAIWAN TAIYO INK CO., LTD.

Business use

Construction in progress¥ 32

Certain overseas consolidated subsidiaries have defined contribution plans and other types of plans.
The liability for retirement benefits at March 31, 2017 and 2016, for directors and corporate auditors is ¥95 million ($847
thousand) and ¥157 million, respectively. The retirement benefits for directors and corporate auditors are paid subject to theBusiness use assets are principally grouped by the department of the Group.

approval of the shareholders.

Business use assets of TAIWAN TAIYO INK CO., LTD., a consolidated subsidiary of the Company, were written down to their
Defined Benefit Plans

recoverable amounts because their profitability and fair values declined drastically compared to their book values.
The recoverable amount was measured at its value in use and the recoverable amount was deemed as zero since no future

The changes in the projected benefit obligations for the years ended March 31, 2017 and 2016, were as follows:

cash flows were expected.

9. SHORT-TERM BANK LOANS AND LONG-TERM DEBT
The weighted-average interest rates applicable to the short-term borrowings at March 31, 2017 and 2016, were 0.02% and0.68%, respectively.
Long-term debt as of March 31, 2017, consisted of the following:Thousands of
U.S. Dollars

Millions of Yen

Current portion of long-term debt, with weighted-averageinterest of 0.60% as of March 31, 2017

¥ 500

$ 4,456

Long-term debt, due 2021 with weighted-averageinterest of 1.10% as of March 31, 2017

7,170

63,904¥ 7,670$ 68,360

Total

Millions of Yen

Current portion of long-term debt, with weighted-averageinterest of 0.65% as of March 31, 2016

¥ 440

Long-term debt, due 2021 with weighted-averageinterest of 0.73% as of March 31, 2016

7,413

64 TAIYO HOLDINGS CO., LTD. Annual Report 2017

Balance at beginning of year (as restated)
Service cost
Interest cost
Actuarial losses
Benefits paid
Foreign exchange difference
Balance at end of year

2017

2016

2017

¥ 1,946
159
14
30
(107)
10

¥ 1,856
152
14
20
(81)
(15)

$ 17,344
1,417
125
268
(954)
89

¥ 2,052¥ 1,946$ 18,289

The changes in plan assets for the years ended March 31, 2017 and 2016, were as follows:
Thousands of
U.S. Dollars

Millions of Yen

Balance at beginning of year

Long-term debt as of March 31, 2016, consisted of the following:

Total

Thousands of
U.S. Dollars

Millions of Yen

Expected return on plan assets
Actuarial losses
Employer contributions
Benefits paid
Foreign exchange difference
Balance at end of year

2017

2016

2017

¥ 2,278
23
15
138
(107)
8

¥ 2,195
22
19
136
(81)
(13)

$ 20,303
205
134
1,230
(954)
71

¥ 2,355¥ 2,278$ 20,989¥ 7,853TAIYO HOLDINGS CO., LTD. Annual Report 201765

Financial Section

A reconciliation between the liabilities recorded in the consolidated balance sheet and the balances of projected benefit

The expected long-term rate of return on plan assets is determined considering the current and expected distribution of plan

obligations and plan assets as of March 31, 2017 and 2016, was as follows:

assets and the current and expected long-term rate of return derived from various components of plan assets.
Thousands of
U.S. Dollars

Millions of Yen

Assumptions used for the years ended March 31, 2017 and 2016, were set forth as follows:

2017

2016

2017

Funded projected benefit obligations
Plan assets¥ 2,052(2,355)¥ 1,945(2,278)$ 18,289(20,990)

Discount rate

Net asset for defined benefit obligations¥ (303)¥ (333)$ (2,701)

Expected long-term rate of return on plan assets

¥ 29
(332)

¥ 23
(356)

$ 258
(2,959)¥ (303)¥ (333)$ (2,701)

Liability for retirement benefits
Asset for retirement benefits
Net asset for defined benefit obligations

Thousands of
U.S. Dollars

2017

2016

2017

Service cost
Interest cost
Expected return on plan assets
Recognized actuarial gains (losses)
Amortization of prior service cost

¥ 160
14
(23)
8
10

¥ 152
14
(22)
(12)
10

$ 1,426
125
(205)
71
89

Net periodic benefit costs

¥ 169

¥ 142

$ 1,506

Amounts recognized in other comprehensive income (before income tax effect) in respect of defined benefit plans before tax forthe years ended March 31, 2017 and 2016, were as follows:
Thousands of
U.S. Dollars

Millions of Yen

2016

0.645 %

0.645 %

1.0

1.0

14.12

14.12

Projected rate of salary increases

Defined Contribution Plans That Adopted the Simplified Method
The changes in net defined benefit liability for the plans that adopted the simplified method for the year ended March 31, 2017

The components of net periodic benefit costs for the years ended March 31, 2017 and 2016, were as follows:
Millions of Yen

2017

2017

2016

Actuarial losses
Prior service cost

¥7
11

¥ 34
10

$ 62
98

Total

¥ 18

¥ 44

$ 160

and 2016, were as follows:

2017
Balance at beginning of year
Net periodic benefit costs
Benefits paid
Decrease resulting from transfer of benefit
obligation relating to employees' pension fund
Increase resulting from new consolidation
Balance at end of year

2016

¥ 93
5

¥2
(10)

2017
$ 829
45

(34)
135
¥ 98

¥ 93

$ 874

A reconciliation between the liabilities recorded in the consolidated balance sheet and the balances of projected benefit
obligations and plan assets as of March 31, 2017 and 2016, was as follows:

2017

Amounts recognized in accumulated other comprehensive income (before income tax effect) in respect of defined benefit plans

Thousands of
U.S. Dollars

Millions of Yen

Thousands of
U.S. Dollars

Millions of Yen

Nonfunded projected benefit obligations
Net liability for defined obligations
Net defined benefit liability
Net liability for defined obligations

2017

2016

¥ 98
98
98
98

¥ 93
93
93
93

2017
$ 873
873
873
873

before tax as of March 31, 2017 and 2016, were as follows:
Thousands of
U.S. Dollars

Millions of Yen

2017

2016

2017

¥ 22
(21)

¥ 14
(30)

$ 196
(187)

¥1

¥ (16)

$9

2017

2016

General account

100%

100%

Total

100%

100%

Unrecognized actuarial gains
Unrecognized prior service cost
Total

Net periodic benefit costs calculated using the simplified method for the years ended March 31, 2017 and 2016, were as
follows:
Thousands of
U.S. Dollars

Millions of Yen

Net periodic benefit costs calculated using the simplified method

2017

2016

¥5

¥2

2017
$ 45

Plan assets as of March 31, 2017 and 2016, consisted of the following:

66 TAIYO HOLDINGS CO., LTD. Annual Report 2017

Defined Contribution Plans
The required contribution amount to the defined contribution plans by the Company and its certain consolidated subsidiaries at
March 31, 2017 and 2016, is ¥166 million ($1,480 thousand) and ¥106 million, respectively.

TAIYO HOLDINGS CO., LTD. Annual Report 201767

Financial Section

11. EQUITY

12. INCOME TAXESJapanese companies are subject to the Companies Act of Japan (the "Companies Act"). The significant provisions in the

The Company and its domestic subsidiaries are subject to Japanese national and local income taxes, which, in the aggregate,

Companies Act that affect financial and accounting matters are summarized below:

resulted in normal effective statutory tax rates of approximately 31% and 33% for the years ended March 31, 2017 and 2016,a. Dividends
Under the Companies Act, companies can pay dividends at any time during the fiscal year in addition to the year-end

respectively.
The tax effects of significant temporary differences, which resulted in deferred tax assets and liabilities as of March 31, 2017and 2016, were as follows:

dividend upon resolution at the shareholders' meeting. Additionally, for companies that meet certain criteria, including (1)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 theThousands of
U.S. Dollars

Millions of Yen

having a board of directors; (2) having independent auditors; (3) having a board of corporate auditors; and (4) the term of

2017

2017

2016
¥ 43

$ 339

Deferred tax assets:company has prescribed so in its articles of incorporation. The Company meets all the above criteria, and accordingly, theRetirement benefits¥ 38board of directors may declare dividends (except for dividends-in-kind) at any time during the fiscal year.

Unrealized profit

177

67

1,578

Accrued bonuses

112

100

998

Accrued business taxes

57

19

508

Tax loss carryforwards

19

11

169

The Companies Act permits companies to distribute dividends in kind (noncash assets) to shareholders subject to acertain limitation and additional requirements.
Semiannual interim dividends may also be paid once a year upon resolution by the board of directors if the articles ofincorporation of the Company so stipulate. The Companies Act provides certain limitations on the amounts available for

Excess of depreciation and amortization

96

24

856

dividends or the purchase of treasury stock. The limitation is defined as the amount available for distribution to the

Assets retirement obligation

110

103

980

shareholders, but the amount of net assets after dividends must be maintained at no less than ¥3 million.

Impairment loss

330

72

2,941

Other

177

185

1,578

1,116
(514)

624
(217)

9,947
(4,581)

602

407

5,366

(1,395)(1,561)(12,433)

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 (acomponent of retained earnings) or as additional paid-in capital (a component of capital surplus) depending on the equity
account that was charged upon the payment of such dividends until the total of the aggregate amount of legal reserve andadditional paid-in capital equals 25% of the common stock.

Total deferred tax assets
Less valuation allowance
Total deferred tax assets, net of valuation allowance
Deferred tax liabilities:

Under the Companies Act, the total amount of additional paid-in capital and legal reserve may be reversed without limitation.

Undistributed earnings of associated companies

The Companies Act also provides that common stock, legal reserve, additional paid-in capital, other capital surplus, andValuation difference on available-for-sale securities

(104)

(59)

(927)

Net defined benefit assets

(101)

(114)

(900)

Other

(159)

(175)

(1,418)(1,759)(1,909)( 15,678)¥ (1,157)¥ (1,502)$ ( 10,312)

retained earnings can be transferred among the accounts under certain conditions upon resolution of the shareholders.
With the issuance of First Series Class A shares by the third-party allocation, common stock and capital surplus as ofMarch 31, 2016, rose ¥53 million.
With the issuance of Second Series Class A shares by the third-party allocation, common stock and capital surplus as ofMarch 31, 2017, rose ¥77 million ($685 thousand).
With the issuance of shares of common stock by the third-party allocation, common stock and capital surplus as of March

Total deferred tax liabilities
Net deferred tax liabilities

31, 2017, rose ¥2,906 million ($25,901 thousand).
With the additional purchase of OTC's shares, capital surplus as of March 31, 2017, decreased ¥610 million ($5,437
thousand).

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 byresolution 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 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 fromstock acquisition rights.
With the disposal of the treasury stocks by the third-party allocation to DIC Corporation on February 10, 2017, the grantand sale to employees by the ESOP trust, and the sale of odd-lot shares, treasury stocks as of March 31, 2017, decreased¥13,964 million ($124,456 thousand).

68 TAIYO HOLDINGS CO., LTD. Annual Report 2017TAIYO HOLDINGS CO., LTD. Annual Report 201769

Financial Section

A reconciliation between the normal effective statutory tax rates and the actual effective tax rates reflected in the accompanying

b. Nature and extent of risks arising from financial instruments

consolidated statement of income for the year ended March 31, 2017, with the corresponding figures for 2016, is as follows:

Operating receivables, such as trade notes and trade accounts, are exposed to credit risks relating to the Group's customers.

Normal effective statutory tax rate

2017

2016

30.75 %

32.95 %

(11.65)(12.88)

1.00

0.94

Undistributed earnings of associated companies(0.10)

0.63

Nondeductible withholding income tax of dividends

5.50

5.97

(3.76)(3.26)

3.79

0.31(0.41)

2.36

25.12 %

27.02 %Tax rates difference relating to overseas subsidiaries
Elimination of dividend income

Tax exemption for experiments and research expenses and other
Valuation allowance
Other

Operating receivables denominated in foreign currencies that arise in the course of conducting overseas business are additionally
exposed to exchange rate fluctuation risk.
Marketable and investment securities mainly comprise bonds and investments in the shares of affiliated business partners. These
investments are exposed to the risk of fluctuations in market prices.
Operating liabilities, such as notes and accounts payable—trade, typically have payment due dates within four months. The Groupalso has some foreign currency-denominated liabilities of this kind that are exposed to exchange rate fluctuation risk.
Foreign exchange forward contracts and others are used to hedge the exchange rate fluctuation risk associated with foreign
currency-denominated operating assets and others.
Please see Note 15 for more details about derivatives.

c. Risk management system for risks associated with financial instruments
Management of Credit Risk (Relating to Contractual Defaults by Business Partners)

Actual effective tax rate

The Company monitors the status of business partners with respect to operating assets regularly in line with internal regulations
governing the management of credit limits and trade receivables. Besides managing due dates and outstanding balances by

The "Act on the Partial Revision of the Act on the Partial Revision of the Consumption Tax Act for the Drastic Reform of the Tax

counterparty, the Company also aims to identify as early as possible and alleviate any concerns about nonpayment caused by

System to Ensure Secure Financial Resources for Social Security" (Act No. 85, 2016) and the "Act for the Partial Revision ofdeterioration in financial condition or other factors.

the Act for the Partial Revision of the Local Government Tax Act for the Drastic Reform of the Tax System to Secure Financial
Resources for Social Security" (Act No. 86, 2016) were established on November 18, 2016 in the Diet and the timing to raise
the consumption tax rate to 10% was postponed from April 1, 2017 to October 1, 2019.
Along with these enactments, the timing of the abolition of the local corporation special tax and the restoration of theConsolidated subsidiaries also follow the Company's policy on credit risk management.
Bond investments are limited to high-rated bonds. The associated credit risk is judged to be minimal.
The Group only enters into derivative contracts with highly rated financial institutions as counterparties. The associated credit risk
is regarded as negligible.

corporate enterprise tax that accompanies it, the revision of the tax rate of the local corporation tax, and the revision of the tax

Management of Market Risk (Relating to Fluctuations in Exchange Rates, Interest Rates, Etc.)

rate of corporate inhabitant tax will also be postponed from the consolidated fiscal year that starts on April 1, 2017 to the

To manage the currency fluctuation risk associated with foreign currency-denominated operating assets and liabilities and long-term

consolidated fiscal year that starts on October 1, 2019. There is no change in the statutory effective tax rate used to calculate

debt, the Company and certain consolidated subsidiaries assess related exposures for each currency on a monthly basis.

deferred tax assets and deferred tax liabilities, but the tax rate will be reclassified between national tax and local tax.
The effects of these changes are immaterial.

The market values and financial condition of issuers (most of which are the Group's business partners) are assessed regularly for
all marketable and investment securities. The ownership of any shares is reviewed on an ongoing basis, depending on market
conditions and the relationships with relevant business partners.
With respect to the management of derivatives, the internal party responsible for the transaction must gain the approval of the

13. R&D COSTS

authorized settlement managers to exercise any derivatives contract, in line with internal management regulations specifying the

R&D costs charged to income for the years ended March 31, 2017 and 2016, were ¥3,236 million ($28,481 thousand) anddirectors periodically.

¥2,442 million, respectively.

14. FINANCIAL INSTRUMENTS AND RELATED DISCLOSURES(1) Summary of Financial Instruments Statusa. Group policy for financial instruments
The Group's policy is to fund operations internally wherever possible. With large-scale capital projects, the Group borrows funds fromtransactional authority and related limits for contractual exposures. The results of derivative transactions are reported to the board ofManagement of Liquidity Risks Associated with Fund Procurement (Relating to Risk of Nonpayment by Due Date)
Appropriate operational funding plans are created and approved for all Group firms. The Group manages any related liquidity risks
and ensures that cash on hand is maintained at adequate levels.

d. Fair value of financial instruments and related matters
The fair value of financial instruments is based on market prices where available and rational estimates in the case of unquoted
instruments. Estimated values can vary depending on the assumptions employed for the various factor variables used in suchcalculations.

banks or arranges other types of funding, depending on market conditions.
Short-term surplus funds are managed conservatively using only financial instruments that provide high security.
The Group employs derivatives to mitigate known future risks, but does not use such instruments for speculative purposes as amatter of policy.

70 TAIYO HOLDINGS CO., LTD. Annual Report 2017TAIYO HOLDINGS CO., LTD. Annual Report 201771

Financial Section(2) Fair Value of Financial Instruments

Thousands of U.S. Dollars
March 31, 2017

Carrying amounts, fair values, and unrealized gain (loss) as of March 31, 2017 and 2016, were as follows:(1) Cash and cash equivalents(2) Time deposits(3) Notes and accounts receivable—trade
Less allowance for doubtful receivables

Financial instruments whose fair values are difficult to measure are excluded from the table below.
Millions of Yen
March 31, 2017
(1) Cash and cash equivalents(2) Time deposits(3) Notes and accounts receivable—trade
Less allowance for doubtful receivables(4) Investment securities(5) Notes and accounts payable—trade(6) Accounts payable—other(7) Income taxes payable(8) Short-term bank loans(9) Long-term debt
(10) Derivatives—net(a) Derivatives to which hedge accounting
is not applied(b) Derivatives to which hedge accounting
is applied

Carrying Amount

Fair Value¥ 46,661
2,139
13,347(100)¥ 46,661
2,139

13,247

13,247

597
6,171
1,210
885
1,275
7,670

597
6,171
1,210
885
1,275
7,692

8

8

Unrealized Loss(4) Investment securities(5) Notes and accounts payable—trade(6) Accounts payable—other(7) Income taxes payable(8) Short-term bank loans(9) Long-term debt
(10) Derivatives—net¥ (22)(4) Investment securities(5) Notes and accounts payable—trade(6) Accounts payable—other(7) Income taxes payable(8) Short-term bank loans(9) Long-term debt
(10) Derivatives—net(a) Derivatives to which hedge accounting
is not applied(b) Derivatives to which hedge accounting
is applied

Fair Value$ 415,873
19,064
118,957(891)$ 415,873
19,064

118,066

118,066

5,321
55,00010,784
7,888
11,36468,3605,321
55,00010,784
7,888
11,36468,55671

71(a) Derivatives to which hedge accounting
is not applied(b) Derivatives to which hedge accounting
is applied

Unrealized Loss

$ (196)

The amount of allowance for doubtful receivables is deducted from receivables.
The value of assets and liabilities arising from derivatives is shown at net value.

Notes:March 31, 2016
(1) Cash and cash equivalents(2) Time deposits(3) Notes and accounts receivable—trade
Less allowance for doubtful receivables

Carrying Amount¥ 18,386
3,023
12,836(340)¥ 18,386
3,023

12,496

12,496

457
5,765
1,697
776
933
7,853

457
5,765
1,697
776
933
7,891

17

17

1. Measurement of fair value of financial instruments(1) Cash and cash equivalents, (2) Time deposits, and (3) Notes and accounts receivable—trade
The fair values of cash and deposit and receivables approximate carrying values due to the short maturity of these
instruments.
(4) Investment securities
The fair values of investment securities are measured at the quoted market price of the share exchange for the equity
instruments and at the quoted price obtained from the financial institution for certain debt instruments. Fair value
information for investment securities by classification is included in Note 4.

¥ (38)(5) Notes and accounts payable—trade, (6) Accounts payable—other, (7) Income taxes payable, and (8) Short term bankloans
The fair values of the above approximate carrying values due to the short maturity of these instruments.
(9) Long-term debt
For long-term debt with floating interest rates, the fair values approximate carrying value due to the variable interest ratethat reflects the market rate in a short period of time and the fact that the credit status of the Company has not changed
drastically since the execution of borrowings. For long-term debt with interest rate swap contracts to which hedge
accounting is applied, the fair values are calculated by discounting the total amount of principal and interest at interest
rates based on the expected rate of new debts.
(10) Derivatives
Please see Note 15.

72 TAIYO HOLDINGS CO., LTD. Annual Report 2017TAIYO HOLDINGS CO., LTD. Annual Report 201773

Financial Section

2. Carrying amounts of financial instruments whose fair values cannot be reliably determined
Thousands of
U.S. Dollars

Millions of Yen

Investment securities—unlisted securities

2017

2016

2017

¥3

¥ 12

$ 27

19

169

39
187

459

4,091

3. Maturity analysis for financial assets and securities with contractual maturities

Cash and cash equivalents
Time deposits
Notes and accounts receivable—trade

Millions of Yen

Due in One Yearor Less

Contract
AmountContract
Amount Dueafter One Year

Fair
Value

Unrealized Gain
(Loss)

Foreign exchange forward contracts:
Selling U.S. dollar
Buying yen

¥481
71

¥9
(1)

¥9
(1)

¥ 547
56

¥ 18
(1)

¥ 18
(1)

March 31, 2016
Foreign exchange forward contracts:

Millions of Yen

March 31, 2017

Derivative transactions to which hedge accounting is not applied as of March 31, 2017 and 2016, were as follows:

March 31, 2017

Investments in unconsolidated subsidiaries:
Unlisted securities
Investments in partnership

15. DERIVATIVE FINANCIAL INSTRUMENTS

Due after
One Year throughFive Years

Selling U.S. dollar
Buying yen

Thousands of U.S. Dollars¥ 46,661
2,139
13,347

March 31, 2017

Contract
AmountContract
Amount Dueafter One Year

Fair
Value

Unrealized Gain
(Loss)

Foreign exchange forward contracts:
Selling U.S. dollar
Buying yen

March 31, 2016
Cash and cash equivalents
Time deposits
Notes and accounts receivable—trade¥ 18,386
3,023
12,836$ 4,287
633

$ 80
(9)

$ 80
(9)

The fair value of derivative transactions is measured at the quoted price obtained from the financial institution.
Derivative transactions to which hedge accounting is applied as of March 31, 2017 and 2016, were as follows:
Millions of Yen

Thousands of U.S. Dollars

March 31, 2017
Cash and cash equivalents
Time deposits
Notes and accounts receivable—trade

Due in One Yearor Less$ 415,873
19,064
118,957

Due after
One Year throughFive Years

March 31, 2017
Interest rate swaps—Floating rate receipt,
fixed-rate payment

HedgedItem

Contract
AmountContract
Amount Dueafter One Year

Long-term
debt¥ 2,720¥ 2,380

Long-term
debt¥ 3,060¥ 2,720

Fair
Value

March 31, 2016
Interest rate swaps—Floating rate receipt,
fixed-rate payment

Please see Note 9 for annual maturities of long-term debt.

Thousands of U.S. Dollars

March 31, 2017
Interest rate swaps—Floating rate receipt,
fixed-rate payment

HedgedItem

Contract
AmountContract
Amount Dueafter One Year

Long-term
debt$ 24,242$ 21,212

Fair
Value

Note:
Interest rate swaps to which exceptional treatment is applied are accounted for together with long-term debt designated as ahedged item. Therefore, their fair values are included in the fair value of long-term debt.

74 TAIYO HOLDINGS CO., LTD. Annual Report 2017TAIYO HOLDINGS CO., LTD. Annual Report 201775

Financial Section

16. CONTINGENT LIABILITIESFor the year ended March 31, 2016

The Group's contingent liabilities as of March 31, 2017 and 2016, were as follows:a. Overview of Business Combination
Thousands of
U.S. Dollars

Millions of Yen

Export bill discount

2017

2016

2017

¥ 30

¥ 38

$ 267

(1) Name of acquired company and description of business
Name of acquired company:

Chugai Kasei

Description of business:

Manufacturing and distribution of dyes, pigments, chemical products and inks

(2) Purpose of the business combination

17. BUSINESS COMBINATIONSThe Company believes that it can leverage management resources in a complementary and effective manner with the
combination of Chugai Kasei's basic technology related to organic compounds and the Company's well established sales

For the year ended March 31, 2017

network by making Chugai Kasei its wholly owned subsidiary.

a. Overview of Business Combination

This combination will enable the Company to respond faster and more flexibly to customer needs by offering options for
new business development, strengthening competitiveness, and deploying its product in new markets.

(1) Name of constituent company and description of business(3) Date of the business combination

Name of company:

OTC

Description of business:

Manufacturing and marketing of Printed Wiring Board ("PWB") materials

April 30, 2015 (acquisition date for the purpose of the consolidation)(4) Legal form of the business combination(2) Date of the business combination

Share exchange

December 31, 2016 (acquisition date for the purpose of the consolidation)(5) Name of the company after the business combination(3) Legal form of the business combination

TAIYO HOLDINGS CO., LTD.

Stock purchase from noncontrolling shareholders(6) Acquired voting rights(4) Other

100%

The Company acquired 22.38% of stocks at shares with voting rights.

(7) Grounds for determination of the acquiring company

b. Acquisition Cost and Compensation

The Company was selected as the acquiring company by comprehensively considering several factors, such as a
Millions of Yen

Thousands of
U.S. Dollars

Cash and cash equivalents¥ 1,667$ 14,857

Acquisition cost

¥ 1,667$ 14,857

relatively large percentage of voting rights of its shareholders, the difference in the scale of the business and so on, as
well as the fact that the Company became a wholly owning parent company.

b. Acquisition Cost and Breakdown
Millions of Yenc. Changes in Shareholders' Equity

Consideration for acquisition—Acquisition costs—
ordinary shares of TAIYO HOLDINGS CO., LTD.

¥ 491

(1) Variation factor of capital surplus
Additional acquiring of stocks of subsidiary(2) Decrease in the amount of the capital surplus¥610 million ($5,437 thousand)c. Goodwill(1) Amount of goodwill¥6 million(2) Reason for goodwill
Goodwill was generated as a result of acquisition costs exceeding net assets of the acquiring company.

(3) Method and period of amortization of goodwill
Lump-sum amortization

76 TAIYO HOLDINGS CO., LTD. Annual Report 2017TAIYO HOLDINGS CO., LTD. Annual Report 201777

Financial Section

d. Exchange Ratio and the Calculation Methods by Type of Shares andNumber of Shares Issued(1) Exchange ratio by type of shares
1 ordinary share of Chugai Kasei:e. Detail of Acquisition Related Expenses
Advisory fees, etc.: ¥68 million
f. The Estimated Fair Values of the Assets Acquired and Liabilities Assumed at
the Acquisition Date

0.12 ordinary shares of the Company

Please see Note 20 for supplemental cash flow information.

(2) Calculation method of share exchange ratio(a) Reason and Rationale for Allotment Ratio of Shares
In order to ensure the fairness and appropriateness of the share exchange ratio for the share exchange, the Company and
Chugai Kasei decided to each obtain valuation of the share exchange ratio by KPMG FAS KK ("KPMG"), an independent thirdparty valuation institution, in determining the share exchange ratio. The Company carefully considered the share exchange ratio,referring to the calculation concerning the share exchange ratio conducted by the third-party valuation institution. The Company
and Chugai Kasei negotiated and consulted with each other on the share exchange ratio, considering various factors, including
each party's financial condition, operating performance, and the market level of the share price of the Company. As a result, theCompany and Chugai Kasei came to the conclusion that the share exchange ratio (as described in d. (1) above) is fair and theshare exchange with such share exchange ratio will not undermine the interests of each party's respective shareholders. At theg. Approximate Amounts and Calculation Method of Impact on the Consolidated
Statement of Income for the Year Ended March 31, 2016, Assuming That theBusiness Combination Had Been Completed at the Beginning of the Fiscal Year
The approximate amounts have not been disclosed since they are immaterial.

18. OTHER COMPREHENSIVE INCOME (LOSS)
Components of other comprehensive income (loss) for the years ended March 31, 2017 and 2016, were as follows:board of directors' meeting held on April 20, 2015, the Company and Chugai Kasei determined to implement the share exchange
In the event any material change occurs with respect to the conditions that constitute the basis of the share exchange ratio, theCompany and Chugai Kasei may consult with each other and change such ratio pursuant to the terms of the share exchange
agreement.

1. Name of valuation institution and its relationship with the Company and Chugai Kasei
KPMG, a third-party valuation institution of the Company and Chugai Kasei, is independent of the Company and Chugai Kasei.
KPMG is not a related party to either the Company or Chugai Kasei and does not have any material interest in connection withthe share exchange.

2017

2016

2017

¥ 145
(45)

¥ (25)
11$ 1,292
(401)

100

(14)

891

(519)

(2,256)(4,626)

18
(5)

44
(10)

160
(44)

13

34

116

¥ (406)¥ (2,236)$ (3,619)

Valuation difference on available-for-sale securities:
Gain (loss) arising during the year
Income tax effect(b) Basis for Calculation

Thousands of
U.S. Dollars

Millions of Yen

at the share exchange ratio and entered into the share exchange agreement on the same date.

Foreign currency translation adjustments—
Loss arising during the year
Remeasurements of defined benefit plans:

2. Calculation methods
KPMG appraised the Company's share value based on the average market price analysis given that there is a market price of theordinary shares of the Company due to it being listed on a share exchange. The appraisal for Chugai Kasei is based on (a) theGain arising during the year
Income tax effectcomparable companies analysis (given that there are multiple listed companies that are similar to and comparable with Chugai
Kasei and it is therefore possible to infer the share value based on that method) and (b) discounted cash flow analysis ("DCF

Total other comprehensive loss

analysis") (so as to reflect the state of future business activities of Chugai Kasei in the appraisal). Substantial increase or
decrease in the profit and significant changes in assets and liabilities compared to recent financial statements are not anticipatedin Chugai Kasei's business plan, on which KPMG relied in appraising Chugai Kasei's share value based on the DCF analysis.
The share exchange ratio ranges calculated by KPMG when the share value per ordinary share of Chugai Kasei is set at 1
are as follows:
Method Adopted

Appraisal Results ofShare Exchange

The Company

Chugai Kasei

Average market price analysis

Comparable companies analysis

0.068–0.230

DCF analysis

0.083–0.152(c) Number of Shares Issued
118,800 shares

78 TAIYO HOLDINGS CO., LTD. Annual Report 2017TAIYO HOLDINGS CO., LTD. Annual Report 201779

Financial Section

19. NET INCOME PER SHARE

21. LEASESA reconciliation of the differences between basic and diluted EPS for the years ended March 31, 2017 and 2016, was as follows:

The minimum rental commitments under noncancelable operating leases at March 31, 2017 and 2016, were as follows:

Millions of Yen

Thousandsof Shares

Year Ended March 31, 2017

Net Income Attributableto Owners of the Parent

WeightedAverageShares

Basic EPS—Net income available
to common shareholders¥ 6,399

24,015

Yen

U.S. Dollars

EPS¥ 266.46$ 2.37

Thousands of
U.S. Dollars

Millions of Yen

Due within one year
Due after one year
Total

2017

2017

2016

¥ 15
415

¥ 15
430

$ 138
3,691

¥ 430

¥ 445

$ 3,829

Year Ended March 31, 2016
Basic EPS—Net income available
to common shareholders¥ 7,796

23,067

22. SUBSEQUENT EVENT¥ 337.99

The appropriation of retained earnings as of March 31, 2017, approved at the Company's shareholders' meeting held on June

Notes :

21, 2017,was as follows:

Diluted EPS is not disclosed as there were no dilutive securities.

Millions of Yen

Thousands of
U.S. Dollars¥ 1,877$ 16,729

The Company's shares owned by the ESOP trust are included in treasury stock. The ESOP trust owned 63,565 and 81,912
Year-end cash dividends, ¥65.1 ($0.58) per shareweighted-average shares of the Company for the years ended March 31, 2017 and 2016, respectively.

20. SUPPLEMENTAL CASH FLOW INFORMATION

23. SEGMENT INFORMATION

There was no supplemental cash flow information to be disclosed for the year ended March 31, 2017. Chugai Kasei is included
within the scope of consolidation because the Company newly acquired its shares in the year ended March 31, 2016. The
details of assets and liabilities of these companies at the date of consolidation and reconciliation between acquisition costs ofthe shares and increase in cash and cash equivalents due to share exchange are as follows:

Current assets¥ 616

Noncurrent assets

1,452

Current liabilities
Noncurrent liabilities

7(448)(1,135)Acquisition costs

492

Cash and cash equivalents

165

Transfer value of the treasury stock(492)

Increase in cash and cash equivalents due to share exchange¥ 165

80 TAIYO HOLDINGS CO., LTD. Annual Report 2017

The Group's reportable segments are those for which separate financial information is available and regular evaluation by
the Company's management is being performed in order to decide how resources are allocated among the Group.

Millions of Yen

Goodwill(1) Description of Reportable Segments

The Group made the transition to a holding company system on October 1, 2010. The business of the Group consists
mainly of one activity, the manufacturing and distribution of solder resist for printed wiring boards, among others. EachGroup company formulates comprehensive strategies and deploys business activities, operating under a holding company
system, whereby the Company is the holding company.
The Group is composed of four reportable segments divided by geographic area, namely "Japan," "China," "Taiwan,"and "Korea," based on its manufacturing and marketing system.

(2) Method of Measurement for Information for the Amounts of Sales, Profit (Loss),
Assets, Liabilities, and Other Items by Reportable Segments
The accounting policies of each reportable segment are consistent with the disclosures in Note 2,"Summary of Significant
Accounting Policies."

TAIYO HOLDINGS CO., LTD. Annual Report 201781

Financial Section

Notes:(3) Information about Sales, Profit (Loss), Assets, Liabilities, and Other Items
by Reportable Segments(a) The "Taiwan" and "China" segments include sales and operating income of OTC (including OTC's three subsidiaries).
Millions of Yen

Year Ended
March 31, 2017(b) The "Other" segment is not included in reportable segments and covers the business activities of local subsidiaries in

Reportable Segments

Japan

China

Taiwan

Korea

Total

Other

Total

¥ 9,446¥ 19,924¥ 6,063¥ 8,459¥ 43,892¥ 3,974¥ 47,866

8,471

695

3,979

367

13,512102

Reconciliations Consolidated

Sales:
External customers
Intersegment¥ 47,866

13,614 ¥ (13,614)¥ 4,076 ¥ 61,480 ¥ (13,614)¥ 47,866

the United States and other Asian countries.
(c) Depreciation does not include goodwill amortization.

24. RELATED-PARTY DISCLOSURES

Total sales¥ 17,917¥ 20,619 ¥ 10,042¥ 8,826¥ 57,404

Segment profit
Segment asset¥ 2,027¥ 4,582¥ 1,492¥ 1,276¥ 9,377¥ 535¥ 9,912¥ (691)¥ 9,221

17,976

14,973

14,8696,711

54,5292,989

57,51834,86992,387For the Year Ended March 31, 2017

1,068

252

474

119

1,913

93

2,006

479

2,485

Nature ofRelated Party

526

272

49

99

946

20

966

757

1,723

Directors

Total

Other items:
Depreciation
Increase in property,
plant, and equipment
and intangible assets

Transactions of the Company with related parties for the fiscal years ended March 31, 2017 and 2016, were as follows:

Millions of Yen

Year Ended
March 31, 2016

Reportable Segments

Reconciliations Consolidated

Japan

China

Taiwan

Korea

Total

Other

¥ 10,565
6,438¥ 20,688
1,132¥ 6,864
2,991¥ 7,386353¥ 45,503
10,914¥ 4,341110¥ 49,844
11,024 ¥ (11,024)¥ 49,844¥ 17,003¥ 21,820¥ 9,855¥ 7,739¥ 56,417¥ 4,451¥ 60,868 ¥ (11,024)¥ 49,844¥ 2,255
16,214¥ 4,775
14,847¥ 2,227
14,221¥ 1,414
7,725¥ 10,671
53,007

832

288

19 0

135

1,445

17

2,587

349

95

75

3,106

Sales:
External customers
Intersegment
Total sales
Segment profit
Segment assets
Other items:
Depreciation
Increase in property,
plant, and equipment
and intangible assets¥ 598 ¥ 11,269
2,393
55,400¥ (304)
10,065¥ 10,965
65,465

1,462

429

1,891

8

3,114

941

4,055

Reportable Segments

Japan

China

Taiwan

Korea

Total

Other

Total

$ 84,189 $ 177,576$ 54,037$ 75,392$ 391,194$ 35,419$ 426,613

Reconciliations Consolidated

Sales:
External customers
Intersegment909$ 426,613

121,337 $ (121,337)

75,4996,194

35,464

3,271

120,428

Total sales$ 159,688$ 183,770$ 89,501$ 78,663$ 511,622$ 36,328 $ 547,950 $ (121,337)$ 426,613

Segment profit
Segment assets$ 18,066$ 40,838$ 13,298$ 11,372$ 83,574$ 4,768$ 88,342$ (6,159)$ 82,183

160,214

133,449

132,52259,813

485,998

26,640512,638

310,776

823,414

Depreciation

9,519

2,246

4,224

1,061

17,050829

17,8794,269

22,148

Increase in property,
plant, and equipment
and intangible assets

4,688

2,424

437

882

8,431

179

8,610

6,747

15,357

Eiji Sato
Seiki Kashima
Takayuki Morita
Eiji Takehara

Voting Shares of
the Company

Description ofTransaction

0.29%
0.04
0.03
0.04

Third-party allocation
Third-party allocation
Third-party allocation
Third-party allocation

Transaction Amount¥ 99 million¥ 25 million¥ 18 million¥ 11 million$ 882 thousand$ 223 thousand$ 160 thousand$ 98 thousand

Notes:
1. The policy for determining the terms and conditions of business and business transactions:Being the issuance of the Second Series Class A shares related to the performance-based stock compensation of thecurrent fiscal year, the issuance of these shares is based on the stock price of our common stock.
2. The percentage of voting shares of the Company is calculated by deducting treasury stocks.
For the Year Ended March 31, 2016
Nature ofRelated Party
Directors

Thousands of U.S. Dollars

Year Ended
March 31, 2017

Name

Name
Eiji Sato
Seiki Kashima
Masahisa Kakinuma
Takayuki Morita
Eiji Takehara

Voting Shares of
the Company

Description ofTransaction

Transaction Amount

0.25%
0.03
0.06
0.03
0.04

Third-party allocation
Third-party allocation
Third-party allocation
Third-party allocation
Third-party allocation¥ 61 million¥ 21 million¥ 6 million¥ 10 million¥ 6 million

Notes:
1. The policy for determining the terms and conditions of business and business transactions:Being the issuance of the First Series Class A shares related to the performance-based stock compensation of theprevious fiscal year, the issuance of these shares is based on the stock price of our common stock.
2. The percentage of voting shares of the Company is calculated by deducting treasury stocks.

Other items:

82 TAIYO HOLDINGS CO., LTD. Annual Report 2017TAIYO HOLDINGS CO., LTD. Annual Report 201783

Independent Auditor's Report

Domestic and Global Network

Domestic Network
TAIYO HOLDINGS CO., LTD. Head Office

TAIYO INK MFG. CO., LTD. Kansai Sales Office2-7-1 Hazawa, Nerima-ku, Tokyo 176-8508, JapanFIS Bldg. Room 611, 403 Shimomaruya-cho, 2-chome Nijo-kudaru,
Kawaramachidori, Nakagyo-ku, Kyoto 604-8006, JapanTAIYO HOLDINGS CO., LTD. Ranzan Facility
388 Ohkura, Ranzan-machi, Hiki-gun, Saitama 355-0222, JapanCHUGAI KASEI CO., LTD.
35-3 Akaizawa, Nihonmatsu-shi, Fukushima 964-0982, JapanTAIYO INK MFG. CO., LTD.
900 Hirasawa, Ranzan-machi, Hiki-gun, Saitama 355-0215, JapanTAIYO GREEN ENERGY CO., LTD.
388 Ohkura, Ranzan-machi, Hiki-gun, Saitama 355-0222, JapanTAIYO INK MFG. CO., LTD. Kitakyushu Plant
1-1 Kurosakishiroishi, Yahatanishi-ku, Kitakyushu-City Fukuoka 806-0004, JapanTAIYO PHARMA CO., LTD.
3F, Otemachi Financial City Grand Cube, 1-9-2 Otemachi, Chiyoda-ku,
Tokyo 100-0004, Japan

Global Network
Company

Voting Shares HeldBusiness Description

TAIWAN TAIYO INK CO., LTD.

99.8%

Manufacture and marketing of PWB materials

TAIYO INK MFG. CO., (KOREA) LTD.

90.4%

Manufacture and marketing of PWB and FPD materials

TAIYO INK (SUZHOU) CO., LTD.

100.0%

Manufacture and marketing of PWB materials

TAIYO AMERICA, INC.

100.0%

Manufacture and marketing of PWB materials

ONSTATIC TECHNOLOGY CO., LTD.

92.5%

Manufacture and marketing of PWB materials

ONSTATIC INK (SHENZHEN) CO., LTD.

＊1

Manufacture and marketing of PWB materials

TAIYO INK INTERNATIONAL(SINGAPORE) PTE LTD

100.0%

Marketing of PWB materials

TAIYO INK INTERNATIONAL(HK) LIMITED

100.0%

Marketing of PWB materials

TAIYO INK TRADING (SHENZHEN) CO., LTD.

100.0%

Marketing of PWB materials

TAIYO INK PRODUCTS CO., LTD.

100.0%

Marketing of PWB materials

TAIYO INK (THAILAND) CO., LTD.

100.0%

Technical support for PWB materials＊1

ONSTATIC INK (SHENZHEN) CO.,LTD. is a wholly-owned subsidiary of ONSTATIC TECHNOLOGY CO., LTD.

Production and Marketing Subsidiaries
TaiwanChina

TAIWAN TAIYO INK CO., LTD.

TAIYO INK (SUZHOU) CO., LTD.

No.7, Datong 2nd Rd., Guanyin Industry Park, Guanyin Dist., Taoyuan

No.26 Taishan Road, Suzhou New District, Suzhou City, Jiangsu,

City 32849, Taiwan (R.O.C.)

P.R.China

ONSTATIC TECHNOLOGY CO., LTD.

ONSTATIC INK (SHENZHEN) CO., LTD.

7F., No.1, Ren' ai Rd., Yingge Dist., New Taipei City 239, Taiwan ( R.O.C.)

Building No 38, Western Industrial Zone, Sha-Yi Village, Sha-Jing
Town, Shenzhen City, Guangdong Province, P.R.China

Korea

USA

TAIYO INK MFG. CO., ( KOREA ) LTD.

TAIYO AMERICA, INC.

166, Manhae-ro, Danwon-gu, Ansan-si, Gyeonggi-do, Korea

2675 Antler Drive, Carson City, NV89701, U.S.A.

Marketing or Technical Support Subsidiaries
Singapore

China

TAIYO INK INTERNATIONAL (SINGAPORE) PTE LTDTAIYO INK TRADING (SHENZHEN) CO., LTD.

133 New Bridge Road, #09-08 Chinatown Point, Singapore 059413

Hong Kong
TAIYO INK INTERNATIONAL (HK) LIMITED
Room 2305, 23/F, The Metropolis Tower, 10 Metropolis Drive,
Hunghom, Kowloon, Hong Kong

Korea

Rm1509-1512, Office Tower, Shun Hing Square Di Wang Comm.
Centre, 5002 Shen Nan Dong Road, Luo Hu District, Shenzhen
City, Guangdong Province, P.R.China

ThailandTAIYO INK (THAILAND) CO., LTD.
1199 Piyavan Tower, 14F/Room 14C Phaholyothin Rd, Samsen-Nai,
Phayathai, Bangkok 10400, Thailand

TAIYO INK PRODUCTS CO., LTD.
7F & 8F Hanjoong Bldg. 8, Singil-ro, Danwon-gu, Ansan-si, Gyeonggi-do, Korea

84 TAIYO HOLDINGS CO., LTD. Annual Report 2017TAIYO HOLDINGS CO., LTD. Annual Report 201785

Corporate Information

Company Overview (As of March 31, 2017)Name

TAIYO HOLDINGS CO., LTD.

Shares authorized

50,200,000

Head office2-7-1 Hazawa, Nerima-ku, Tokyo 176-8508, Japan

Total number of issued shares

28,841,100

Phone81-3-5999-1511

Stock listingTokyo

Number of shareholders

4,757

Established September 29, 1953
Capital¥ 9,171million

Major Shareholders
Shares (Thousands)

Name
DIC Corporation

Investment Ratio (%)

5,617

19.47

Kowa CO., LTD.

5,233

18.14

Japan Trustee Services Bank, Ltd. (Trust account)

1,466

5.08

Japan Trustee Services Bank, Ltd. (shares retrusted to Sumitomo Mitsui Trust Bank, Limited,and shares entrusted to Sumitomo Mitsui Banking Corporation retirement benefit trust account)

1,116

3.86

The Master Trust Bank of Japan, Ltd. (Trust account)

903

3.13

JP MORGAN CHASE BANK 385632

661

2.29

SHIKOKU CHEMICALS CORPORATION

631

2.18

MISAKI ENGAGEMENT MASTER FUND

587

2.03

Toshin Yushi Co., Ltd.

538

1.86

Mitsuo Kawahara

500

1.73

Accessing Our Investor Information Site :An Introduction to Taiyo Holdings Website
Taiyo Holdings is committed to providing a full range of information to
all stakeholders including shareholders, investors, customers, andbusiness partners.

http : // www.taiyo- hd. co. jp /en /TAI YO HOLDINGS CO., LTD.

Stock Price and Trading Volume（Yen）（ Thousands of Shares）

25,0005,000

20,0004,000

15,0003,000

10,000

2,000

5,000

1,000

0

2013

2014

2015

Nikkei Stock Average ( left scale)

Stock Price ( left scale)

86 TAIYO HOLDINGS CO., LTD. Annual Report 20172016

Trading Volume (right scale)20170