ANNUAL REPORT
２ ０ １ ０

A MESSAGE TO OUR SHAREHOLDERS
Greetings
Since its founding in Japan’s ancient capital, Kyoto, in April 1979, TOWA Corporation has
consistently developed proprietary technologies and created numerous de facto standards. Our
primary operations are composed of development, manufacturing and sales of resin
encapsulation systems for semiconductors and LED resin sealed devices, singulation systems
and precision molds for manufacturing semiconductors, as well as the manufacture and sales offine plastic molded products. We maintain a leading share of the global market for our mainstay
semiconductor resin encapsulation systems, which enjoy an excellent reputation with users.

Economic Overview
During the current consolidated accounting year, there have been continuing efforts inJapan to search for an exit from the global recession, seeking out "post-crisis" expansion. In
addition, companies are looking beyond the stagnation of domestic markets to find paths tooverseas markets, resulting in a further increase in interest toward emerging markets.
Although severe conditions continued for the semiconductor industry during the first halfof the year, conditions changed drastically during the second half. Economic stimulus policies invarious countries have finally had a synergistic effect with strong demands for finished products,
allowing manufacturers to make aggressive business investments.

Performance
During the time it takes the semiconductor market to recover fully, the Towa Group has
been thoroughly controlling fixed costs to reduce them compared to the previous fiscal year. At
the same time, we have responded promptly to a sudden increase in orders, such as by bringing
an end to production cutbacks, following the rise of the market during the second half of theprevious fiscal year.
As a result, sales are 14,274 million yen (2,696 million yen and 23.3% increase comparedwith the pre-connected fiscal year), the operating loss 338 million yen (The pre-connected fiscal
year is 3,337 million yen of the operating loss), and an ordinary loss 345 million yen (Thepre-connected fiscal year is 3,677 million yen of an ordinary loss). The net deficit for the period
became 330 million yen (The pre-connected fiscal year is 4,163 million yen of the net loss at
this season).

－1－

Looking Ahead
We forecast that the semiconductor market will continue to expand steadily, and that
manufacturers' drive to invest will continue, such as with updated facilities that will meet theneeds of increased production and new packages. Further, we expect the LED market to expand
beyond backlighting for LCD televisions and notebook computers, and move fully into themarket for lighting fixtures.
However, the semiconductor market is quite volatile, and the interval between fluctuating cycles
grows shorter each year. Therefore, we will move forward positively with efforts to implement
the strategies stipulated in the medium-term management plan formulated in April 2009 in orderto build a system that is economically stable even within the greatly fluctuating market of thesemiconductor industry.
The basic philosophy of our company is to "respond to continued evolution insemiconductor technology, which is indispensible to modern society, in order to expand
businesses that are built upon the foundation of 'technological development' that is required byindustry, and to provide markets with new products taking a quarter lead". We will continue tobe a leading company in semiconductor packages, while also actively utilizing the advanced
technological skills we have developed in that filed into other high-growth businesses, such as
LED.
We have already introduced new compression molded products to the market, and expect toincrease our share in the semiconductor molding market.
In our LED business, we will make the most of the advantages of batch molding, utilizing an
encapsulation method not found at any other company. This will allow us to cement our position
as a leading company in the field of LED encapsulation as well.
TOWA faces the challenge of strengthening the market competitiveness of our products
and providing good products in a timely fashion, the starting point of monozukuri(manufacturing), by moving forward with reforms in production processes and quality control,
improving customer satisfaction and quality, reducing cost price, and improving our balance
sheet.
We look forward to your continuing support and assistance in the future.
We would like to express our heartfelt appreciation for your support.
September 2010
Hisao Nishimura
President & COO－2－

Consolidated Balance Sheets
TOWA CORPORATION AND CONSOLIDATED SUBSIDIARIESMarch 31, 2009 and 2010

2009

2010

Thousands of
U.S. dollars(Note 1)
2010

￥

￥

＄

Millions of yen

ASSETS
Current assets:
Cash on hand and at banks ……………………………………

4,399

3,897

41,885Inventories ……………………………………………………
Deferred tax assets (Note 10) …………………………………
Other current assets …………………………………………..

3,313
(18)
3,295
4,872
19
219

5,623
(9)
5,614
2,807
25
203

60,436(96)
60,34030,170269
2,182

Total current assets ………………………………………..

12,804

12,546

134,846

Land ……………………………………………………………
Buildings and structures ………………………………………
Machinery and equipment ……………………………………
Construction in progress ………………………………………
Less: Accumulated depreciation ……………………………

4,361
12,413
9,924
49(15,375)

4,232
12,3579,784
23(16,026)

45,486
132,814105,159
247(172,249)

Total property, plant and equipment ……………………….

11,372

10,370111,457

Other assets:
Investment securities (Note 3) ………………………………..
Deferred income taxes (Note 10) ……………………………..
Other ………………………………………………………….

1,822
9
1,943

2,318
11
1,494

24,914118
16,058

Total other assets ………………………………………….

3,774

3,823

41,090Total assets ………………………………………………………

27,95026,739287,393

Notes and accounts receivable :Trade ……………………………………………………….
Less: Allowance for doubtful accounts ……………………

Property, plant and equipment, at cost :The accompanying notes are an integral part of these financial statements.

－3－Consolidated Balance Sheets
TOWA CORPORATION AND CONSOLIDATED SUBSIDIARIESMarch 31, 2009 and 2010

2009

2010

Thousands of
U.S. dollars(Note 1)
2010

￥

￥

＄

Millions of yen

LIABILITIES ANDSHAREHOLDERS' EQUITYCurrent liabilities:
Short-term borrowings (Note 5) ………………………………….
Current portion of long-term debt (Note 5) ………………………
Notes and accounts payable ………………………………………
Accrued expenses(Note 2(11)) ……………………………………
Accrued income taxes ……………………………………………
Other current liabilities(Note 2(10))………………………………

8,653
2,143
549
234
41
928

5,587
1,775
2,043
195
46
870

60,04919,07821,958
2,096
494
9,352

Total current liabilities …………………………………………

12,54810,516

113,027

Long-term liabilities:
Long-term debt (Note 5) …………………………………………
Accrued severance indemnities for employees(Notes2(12)and 6)
Deferred tax liabilities (Note 10) …………………………………
Other long-term liabilities …………………………………………

3,464
764
83
1

4,196
783
152
0

45,099
8,416
1,633
0

Total long-term liabilities ………………………………………

4,312

5,131

55,148

Total liabilities …………………………………………………

16,86015,647

168,175

Shareholders' equity (Note 7)
Common stock
Authorized: 80,000,000 shares
Issued :25,021,832 shares at 31st March, 2010…………………
Additional paid-in capital …………………………………………
Retained earnings …………………………………………………
Unrealized gain (loss) on other securities …………………………
Translation adjustments ……………………………………………
Less: Treasury stock at cost ………………………………………

8,933
3,115
(469)
82
(564)
(7)

8,933
462
1,854
406
(555)
(8)

96,012
4,966
19,927
4,364(5,965)(86)

Total shareholders' equity ………………………………………

11,09011,092

119,218

Total liabilities and shareholders' equity ………………………

27,95026,739287,393

Contingent liabilities (Note 12)

The accompanying notes are an integral part of these financial statements.

－4－Consolidated Statements of Income
TOWA CORPORATION AND CONSOLIDATED SUBSIDIARIESTwo years ended March 31, 2010

Thousands of
U.S. dollars(Note 1 )2010

Millions of yen
2009

2010

￥

￥

Net sales……………………………………………………………………
Cost of sales…………………………………………………………………
Gross profit…………………………………………………………

11,578
10,680898

14,275
11,190
3,085＄
153,429
120,271
33,158Selling, general and administrative expenses (Notes2(13)and 8)………

4,235

3,423

36,791

Operating Income…………………………………………………..

(3,337)(338)(3,633)

Other income (expenses)
Interest and dividend income……………………………………………
Interest expenses…………………………………………………………
Foreign exchange gains（losses) …………………………………………
Valuation loss of investment securities…………………………………
Equity in earnings（losses) of affiliates……………………………………
Loss on impairment of fixed assets………………………………………
Gain on subsidiaries liquidation …………………………………………
Other, net…………………………………………………………………
Total other income (expenses) ………………………………………

43
(300)
(33)
(226)
(64)
(165)
22
(723)

25
(265)
(39)
22
36
274
53

269
(2,848)
(419)
236
387
2,945
570

Income before income taxes and minority interests …………………

(4,060)(285)(3,063)

Income taxes (Note 10)
Current ……………………………………………………………….
Deferred ……………………………………………………………..

27
77

54
(9)

580
(97)

Income before minority interests ………………………………………

(4,164)(330)(3,546)

Minority Interests …………………………………………………………

-

-

-

Net Income……………………………………………………………

(4,164)(330)(3,546)(13.19)(13.19)0.00

U.S. dollars(Note 1 )＄(0.14)(0.14)
0.00

Amount per share of common stock (Note 2 (16) ):Net Income……………………………………………………………
Diluted net income ……………………………………………………
Cash dividends ………………………………………………………

The accompanying notes are an integral part of these financial statements.

－5－￥(166.45)(166.45)0.00￥

Consolidated Statements of Shareholders' Equity
TOWA CORPORATION AND CONSOLIDATED SUBSIDIARIESTwo years ended March 31, 2010

Millions of yen
Number of

Unrealized

Additional

Total

shares ofCommonpaid-in

Retained

gain on otherTranslation

Treasuryshareholders'common stock

stock

capitalearnings

securities

adjustmentsstockequity

￥

￥

￥

￥

8,933

3,115

Balance at March 31, 2008 …………………………………… 25,021,832

3,921

￥
333

￥
99

￥
(7)

16,394

Effect of change to IFRS ………………………………………

-

-

-

24

-

-

-

24

Net Income ………………………………………………….

-

-

-

(4,164)---(4,164)-(250)

Cash dividends …………………………………………………

-

-

-

(250)

-

-

Net increase of treasury stock ……………………………..

-

-

-

-

-

-

Net increase of unrealized gain on other securities ………..

-

-

-

-

(251)

-

-

(251)

Net increase of translation ……………………………………

-

-

-

-

-

(663)

-

(663)

Reserve from legal capital surplus ……………………………

-

-

-

-

-

-

-

0

(564)

(7)

11,090

Balance at March 31, 2009 …………………………………… 25,021,832

8,933

3,115

(469)

82

0

0

Effect of change to IFRS ………………………………………

-

-

-

-

-

-

-

0

Net Income ………………………………………………….

-

-

-

(330)

-

-

-

(330)

Cash dividends …………………………………………………

-

-

-

-

-

-

-

0

Net increase of treasury stock ……………………………..

-

-

-

-

-

-

(1)

(1)

-

324

Net increase of unrealized gain on other securities ………..

-

-

-

-

324

Net increase of translation ……………………………………

-

-

-

-

-

9

-

9

Reserve from legal capital surplus ……………………………

--(2,653)

2,653

-

-

-

0

462

1,854

(555)

(8)

11,092

Balance at March 31, 2010 …………………………………… 25,021,832

8,933

-

406

Thousands of U.S.dollars (Note 1 )Number of

Unrealized

Additional

Total

shares ofCommonpaid-in

Retained

gain on otherTranslation

Treasuryshareholders'common stock

stock

capitalearnings

securities

adjustmentsstockequity＄＄＄＄96,012

33,480(5,041)

Balance at March 31, 2009 …………………………………… 25,021,832

＄
881

＄

(6,062)＄(75)

119,195

Effect of change to IFRS ………………………………………

-

-

-

-

-

-

-

0

Net Income ………………………………………………….

-

-

-

(3,546)---(3,546)

Cash dividends …………………………………………………

-

-

-

-

-

-

-

0

Net increase of treasury stock ……………………………..

-

-

-

-

-

-

(11)

(11)

-

3,483

-

97

-

97

-

-

-

0

(5,965)(86)

119,218

Net increase of unrealized gain on other securities ………..

-

-

-

-

Net increase of translation ……………………………………

-

-

-

-

Reserve from legal capital surplus ……………………………

--(28,514)28,514

4,966

19,927

Balance at March 31, 2010 …………………………………… 25,021,832

96,012

The accompanying notes are an integral part of these financial statements.

－6－

3,483

4,364

-

Thousands of
U.S. dollars(Note 1 )Millions of yen

(285)

2010
＄
(3,063)

1,315
165
64
(43)
300
175
226
6,482
(922)
175
(2,258)

1,309
0
(22)
(25)
265
68
0
(36)
(2,244)
2,046
57
1,485

14,069
0
(236)
(269)
2,848
731
0
(387)
(24,119)
21,991
613
15,961

(439)
(264)
916
51
(314)
(46)
607

95
58
2,771
26
(255)
(47)
2,495

1,021
623
29,783279(2,741)(505)
26,816

Cash Flows from Investing Activities:
Purchase of investment securities …………………………………………………………
Purchase of property, plant and equipment ………………………………………………
Sale of property, plant and equipment ……………………………………………………
Other, net …………………………………………………………………………………
Net cash provided by (used in) investing activities ………………………………………

(7)(1,438)7(53)(1,491)

(7)
(470)
178
8
(291)

(75)
(5,052)
1,913
86(3,128)Cash Flows from Financing Activities:
Increase（decrease) in short-term borrowings ……………………………………………
Proceeds from issuance of long-term debt ………………………………………………
Repayments of long-term debt ……………………………………………………………
Redemption of bonds…………………………………………………………………….
Cash dividends ……………………………………………………………………………
Net cash provided by (used in ) financing activities ……………………………………

3,246
1,500
(1,952)
(572)
(250)
1,972

(3,098)3,400(2,463)(572)
0(2,733)(33,298)
36,544(26,472)(6,148)0(29,374)

Effect of exchange rate changes on Cash and Cash Equivalents …………………………
Net increase(decrease) in Cash and Cash Equivalents ………………………………………
Cash and Cash Equivalents at Beginning of Period …………………………………………

(40)
1,048
3,351

(33)
(562)
4,399

(355)
(6,041)47,281

Cash and Cash Equivalents at End of Period (Note2(3)) ……………………………………

4,399

3,837

41,240Cash Flows from Operating Activities:
Net Income before income taxes and minority interests …………………………………
Adjustments for:
Depreciation ………………………………………………………………………….
Loss on impairment of fixed assets ………………………………………………..
Equity in earnings of affiliates ……………………………………………………….
Interest and dividends income ……………………………………………………….
Interest expenses ……………………………………………………………………
Foreign exchange losses (gains) ……………………………………………………
Valuation loss (gains) of investment securities……………………………………
Gain on subsidiaries liquidation……………………………………………………
(Increase) decrease in trade notes and accounts receivable ………………………………
(Increase) decrease in inventories …………………………………………………………
(Increase) decrease in other current assets ……………………………………………….
Increase (decrease) in notes and accounts payable ………………………………………
Increase(decrease) in accrued andother current liabilities …………………………………………………
Other, net …………………………………………………………………………………
Sub-total …………………………………………………………………………………
Interest and dividends received ……………………………………………………………
Interest paid ………………………………………………………………………………
Income taxes paid …………………………………………………………………………
Net cash provided by (used in) operating activities …………………………………….

The accompanying notes are an integral part of these financial statements.

－7－

2009
￥
(4,060)2010￥

Notes to the Consolidated Financial Statements
TOWA CORPORATION AND CONSOLIDATED SUBSIDIARIES

1.

Basis of presenting Consolidated Financial Statements
TOWA CORPORATION (the “Company”) and its domestic subsidiaries maintain their accounts andrecords in accordance with the provisions set forth in the Corporate Law of Japan and the Securities andExchange Law and in conformity with accounting principles and practices generally accepted in Japan(“JPGAAP”), which are different, in certain respects from the application and disclosures and disclosure
requirements of International Financial Reporting Standards (“IFRS”).
The Company’s overseas subsidiaries maintain their accounts and records in conformity withgenerally accepted accounting principles and practices prevailing in their respective countries of domicile,and the Company makes necessary adjustments to its consolidated accounting process in case there areconsiderable differences as to application and disclosure requirements from International Financial
Reporting Standards.
The accompanying consolidated financial statements of the Company are prepared on the basis ofaccounting principles generally accepted in Japan, as required by the Securities and Exchange Law ofJapan.
In preparing the accompanying consolidated financial statements, certain reclassifications andrearrangements have been made to the consolidated financial statements issued domestically in order topresent them in a form which is more familiar readers outside Japan.
The consolidated financial statements are not intended to present the consolidated financial position,
results of operations and cash flows in accordance with the accounting principles and practices generally
accepted in countries and jurisdictions other than Japan.
The translation of the Japanese yen amounts into U.S. dollars is included solely for the convenience ofthe reader, using the approximate exchange rate at March 31, 2010, which was ¥93.04 to US$1.00. These
convenience translations should not be construed as representations that the Japanese yen amounts havebeen, could have been, or could in the future be, converted into U.S. dollars at this or any other rate ofexchange.

2. Summary of Significant Accounting Policies(1) Principles of Consolidation
The accompanying consolidated financial statements include the accounts of the Company and its
subsidiaries and affiliates. All significant inter-company transactions, account balances and unrealized
profits have been eliminated in consolidation. Fiscal year end of some subsidiaries is December 31, which
differs from that of the Company, March 31, and the Company consolidate such subsidiaries using theirprovisional settlements as of March 31. Shown below are the significant subsidiaries and affiliates of theCompany.

－8－Subsidiaries(All subsidiaries have been consolidated)
Name
BANDICK Corporation
TOWATEC Co., Ltd.
TOWA Service Co., Ltd.
TOWAM Sdn. Bhd.
TOWA (Suzhou) Co., Ltd.
TOWA America Corporation ※１
TOWA Asia-Pacific Pte. Ltd.
TOWA (Shanghai) Co., Ltd.
TOWA TAIWAN Co., Ltd
TOWA Semiconductor Equipment
Philippines Corporation
TOWA Europe GmbHTOWA Singapore Mfg Pte. Ltd. ※２

Ownership
100%
100
100
100
100
100
100
100
100
100

Country of Incorporation
Japan
Japan
Japan
Malaysia
China
The United States of America
Singapore
China
TaiwanPhilippines

100
100

Germany
Singapore

Affiliates(All affiliates are accounted for by the equity method)Name
OwnershipTONGIJIN Corporation
35 %SECRON Co., Ltd.
23
TOWA Jipal Technologies Co., Ltd.
40
Scientific and Semiconductor
20
Manufacturing Equipment RecyclingCo., LtdCountry of Incorporation
Korea
Korea
TaiwanJapan※１．The Board directors of TOWA-Intercon Technology, Inc decided to change its company name as
TOWA America Corporation effective July 1, 2008.
※２．Liquidation proceedings of TOWA Singapore Mfg.Pte.Ltd have been completed in the fiscal year
ended March 31, 2010 and its financial statement isn’t consolidated into accompanying financial
statement for 2010.
(2) Translation of Foreign Currency Items
In accordance with the Japanese accounting standard, every monetary assets and liabilities
denominated in foreign currencies are principally translated into Japanese yen at the exchange rate ineffect at the balance sheet date. The foreign exchange gains and losses from translation are recognized in
the statements of income.
With respect to financial statements of overseas subsidiaries, the balance sheet accounts are translated
into Japanese yen at the exchange rates in effect at the balance sheet date except for shareholders’ equity,which are translated at the historical rates. And revenue and expenses are translated at the exchange ratein effect at the balance sheet date. The differences resulting from translation in this manner are included
in “Translation adjustments” which is listed in Shareholders’ Equity in the accompanying consolidatedbalance sheets.
(3) Cash and Cash Equivalents
For the purposes of cash flow statements, cash and cash equivalents comprise cash in hand, deposits
held at call with banks, net of overdrafts and all highly liquid investments with maturities of three months
or less.

－9－Components of cash and cash equivalents as of March 31, 2009 and 2010 are as follows:
Thousands of
U.S. dollars(Note 1)
2010

Millions of Yen
2009
2010
Cash on hand and at banks
Less: Time deposits with deposit termof over three months
Cash and cash equivalentat end of year

¥4,399¥3,897$41,885

-

¥60

$645

¥4,399¥3,837$41,240(4) Securities
Securities are classified into four categories.
Categorization and valuation for investments in securities are as follows:1. Trading Securities
・ Such securities held for the purpose of generating profits from short-term price movements.
・ Unrealized gain/loss at the end of period resulting from the valuation by applying the fairvalue at such date is directly debited/credited to income;・ Such securities are treated in current assets in the balance sheet.
2. Held-to-maturity Debt Securities
・ Debt securities whose maturity dates are predetermined and are to be redeemed at par,acquired with intention to hold to their maturity dates;
・ The difference between the acquisition cost and the amount expected to gain at maturity isamortized or appreciated over the remaining period to maturity date. The amount amortized orappreciated is charged/credited to income for the respective period as interest expense orinterest income, as the case may be.
・ Unrealized loss will be required to be charged to income as impairment unless unrealized loss
is expected to recover within a reasonable period.
3. Shares in equity of Subsidiaries and Affiliates
・ Those securities are carried at cost unless such investment is regarded impaired.
4. Other Securities:
・ Such securities other than those categorized in 1 to 3 above;・ Other Securities with market quotation are valued at such market price at the end of period,
and those without market quotation are valued at cost.
・ Unrealized gain/loss at the end of period resulting from such valuation is charged toshareholders’ equity as “Unrealized gain/(loss) on Other Securities” after netting off thedeferred income taxes thereto.
・ Unrealized loss which it incurred as the fair value is less than 50% of its acquisition cost will
be required to be charged to income.
・ Unrealized loss which it incurred as the fair value is 30% ~50% of its acquisition cost will be
required to be charged to income unless the unrealized loss is expected to recover within areasonable period.

－ 10 －

The moving average method is applied for calculation of the costs of securities.
(5) Inventories
Inventories are mainly stated at the lower of cost or net selling value, the cost being determined bymainly specific identification method for finished products and work-in-process, by mainly
moving-average method for raw materials and by the last purchase cost method for supplies.
Effective the year ended March 31, 2009, the Company and its domestic subsidiaries adopted“Accounting Standard for Measurement of Inventories” (Accounting Standards Board of Japan (ASBJ)
Statement No.9 issued on July 5, 2006).As a result of the adoption of this accounting standard, operating
income and income before income taxes for the year ended March 31, 2009 decreased by 133 million yen($1,354 thousand).
(6) Allowance for Doubtful Accounts
The Company and its domestic subsidiaries have provided the allowance based on the past
uncollectible receivable experience for a certain reference period. Furthermore, for receivables which arefrom the debtors with financial difficulty, the allowance is provided for estimated unrecoverable amounts
individually. Overseas subsidiaries have provided an allowance for doubtful accounts in the estimatedamounts of possible bad debts.
(7) Property, Plant and Equipment
Property, plant and equipment are stated at cost.
Depreciation for property, plant and equipment of the Company and its domestic subsidiaries iscalculated by applying declining-balance method, except for buildings acquired on and after April 1, 1998
which are applied the straight-line method, over the estimated useful lives.
The principal estimated useful lives are as follows:
Buildings and structures
2 ～ 50 years
Machinery and equipment
2 ～ 10 years
Depreciation for those of overseas subsidiaries is computed by the straight-line method in accordancewith the regulations of respective domicile countries.
(8) Leased Assets
Leased assets are depreciated to a residual value of zero by the straight-line method using the contract
term as the useful life.
Up to the year ended March 31, 2008, finance lease transactions which do not transfer ownership tolessee were accounted for as operating leases.
Effective the year ended March 31, 2009, as the “Accounting Standard for Lease Transactions” (ASBJ
Statement No.13 originally issued by the First Committee of the Business Accounting Council on June 17,1993 and revised by the ASBJ on March 30, 2007) and the “Guidance on Accounting Standard for Lease
Transactions” (ASBJ Guidance No.16 originally issued by the Accounting System Committee of theJapanese Institute of Certified Public Accountants on January 18, 1994 and revised by the ASBJ on
March 30, 2007) have been applied, lease transactions of the Company and its domestic subsidiaries areaccounted for as finance leases if substantially all of the benefits and risks of ownership have beentransferred to the lessee.
Effective April 1, 2008, since the Company and its domestic subsidiaries applied the accounting
standard for lease transactions outlined above, finance lease transactions, which do not transfer ownershipto lessee, started before April 1, 2008 were accounted for as operating leases.

－ 11 －

(9) Derivatives
The Company has entered into foreign exchange agreements and interest rate agreements to hedge thefluctuation of foreign currency and interest rate exposures, and not for speculative purposes. The
instruments include foreign currency forward contracts and interest rate swap agreements.
These instruments were accounted by the deferral hedge accounting. The Company has accounted forforeign currency forward contracts by the designation accounting, and accounted for interest rate swap
agreements by the exception accounting.
(10) Product Warranties
The Company has accounted for the estimate amounts of maintenance expenses as the productwarranties, which corresponded to the sales based on the prior track record for the outcome ofmaintenance expenses of the sold products during the period of warranty.
As of March 31, 2010, the liability for expected warranty costs was 63 million yen ($677thousand) .
(11) Accrued Bonus
The Company and its subsidiaries provide for accrued bonuses to directors and employees for the
expected payment of their bonuses for the current fiscal year to those directors and employees serving at
the end of the fiscal year.
(12) Accrued Severance Indemnities
Employees who terminate their service with the Company and its domestic subsidiaries are under mostcircumstances, entitled to lump-sum severance indemnities determined by reference to current basis rates
of pay, length of service and conditions under which the terminations occur.
Accrued severance indemnities are provided based on the amount of projected benefit obligation lesspension plan assets at fair value at the end of the annual period.
(13) Research and Development Costs
Research and development expenditure is charged to income when incurred.
(14) Income Taxes
Income taxes of the Company and its domestic subsidiaries consist of corporate income taxes, local
taxes and enterprise taxes. Enterprise taxes are deductible when paid for the computation of other taxes.
Deferred income taxes are recognized using the asset and liability approach, whereby deferred tax
assets and liabilities were recognized in respect of temporary differences between the tax basis of assets
and liabilities and those as reported in the financial statements.
(15) Appropriation of Retained Earnings
Under the Japanese Corporate Law and the Articles of Incorporation of the Company, theappropriation of retained earnings or disposition of accumulated deficit could be adopted by the Board of
Directors. The appropriations of retained earnings reflected in the accompanying consolidated financial
statements include the results of such appropriations applicable to the immediately preceding financial
year as approved by the Board of Directors, and effected, during the relevant year. Dividends are paid toshareholders on the shareholders' register as at the end of each financial year.
(16) Per Share Information
Net income per share and diluted net income per share are computed based on the weighted-average
number of shares of common stock outstanding during each year and stock splits are reflected in thecalculation of the weighted-average number of shares of common stock.
Cash dividend per share is the total of the per-share amounts of interim cash distribution and the yearend cash dividends for the income of the respective financial periods.

－ 12 －

3.

Securities(1) The following is a summary of investments in affiliates and other securities at March 31, 2009:
Millions of yen
2009

Other securities:
Market value available:
Equity securities
Market value notavailable:
Equity securities
Other securities total

Book Value(Estimated fairvalue)

Unrealized
gains

Unrealized
losses

¥824
¥824

¥196
¥196

¥36
¥36

¥984
¥984

3
¥827

¥196

¥36

3
¥987

Cost

Investments in affiliates:

Millions of yen
2009Book Value

Market value not available:
Equity securities

¥835
¥835
¥1,822Total(2) The following is a summary of investments in affiliates and other securities at March 31, 2010:
Millions of yen
2010

Other securities:
Market value available:
Equity securities
Market value notavailable:
Equity securities
Other securities total

Book Value(Estimated fairvalue)

Unrealized
gains

Unrealized
losses

¥831
¥831

¥569
¥569

¥12
¥12

¥1,388¥1,388

3
¥834

¥569

¥12

3
¥1,391

Cost

Millions of yen
Investments in affiliates:
2010
Book Value
Market value not available:
Equity securities

¥927
¥927
¥2,318Total－ 13 －

Thousands of U.S. dollars (Note 1)
2010

Other securities:
Market value available:
Equity securities
Market value notavailable:
Equity securities
Other securities total

Unrealized
gains

Unrealized
losses$8,932$8,932$6,116$6,116$129$129$14,919$14,919$32$8,964$6,116$129$
32$14,951

Cost

Thousands of
U.S. dollars(Note 1)
2010
Book Value

Investments in affiliates:

Market value not available:
Equity securities$9,963$9,963$24,914Total

4.

Book Value(Estimated fairvalue)

Estimated Fair Value of Financial Instruments
The book value of the financial instruments on the consolidated balance sheet as of March 31, 2010
and unrealized gain(loss) are shown in the following table. The table does not include financial instruments
for which it is extremely difficult to determine the fair value.

Book Value
Cash and deposits
Notes and accounts receivable
Less:Allowance for Doubtful Accounts

Millions of yen
2010
Fair Value

Difference¥3,897¥0Investment securities
Total assets¥3,8975,623(9)¥5,614
1,388¥10,899¥5,614
1,388¥10,899¥00¥0Notes and accounts payable
Short-term borrowings
Bonds
Long-term borrowings
Total liabilities

2,043
5,587
508
5,463
¥13,601

2,043
5,587
509
5,466
¥13,605

0
0
1
3
¥4

¥0

¥(29)

¥(29)

Derivative financial instruments－ 14 －

Thousands of U.S. dollars (Note 1)
2010
Fair Value
DifferenceBook Value
Cash and deposits
Notes and accounts receivable
Less:Allowance for Doubtful Accounts
Investment securities
Total assets$41,885
60,436(96)$60,340
14,918$117,143$41,88500$60,340
14,918$117,143$00$0Notes and accounts payable
Short-term borrowings
Bonds
Long-term borrowings
Total liabilities

21,95860,0495,460
58,717$146,184

21,95860,0495,471
58,479$146,227

0
0
11
32
$43

$0

$(312)$(312)

Derivative financial instruments$0

Financial instruments for which it is extremely difficult to determine the fair value as of March 31, 2010
were as follows:

Unlisted equity securities

Millions of yen¥930

Thousands of
U.S. dollars(Note 1)
$9,996

Because no quoted market prices are available and it is extremely difficult to determine the fair value, theabove financial instruments are not included in “Investment securities” in the preceding table.
The redemption schedule for bonds and long-term borrowings is disclosed in Note5.
5． Short-term Borrowings and Long-term Debt
Short-term borrowings represent loans from banks and an insurance company. The annual averageinterest rates applicable to short-term borrowings at March 31, 2009 are 2.0% and 2010 are 1.8%,
respectively.
Long-term debt as of March 31, 2009 and 2010 consisted of the following:

Millions of Ｙen
2009
2010
¥4,526¥5,463
300
100
200
100
400
200
180
108

Borrowings from financial institutions
0.7% Yen Bonds due 2010
1.1% Yen Bonds due 2011
0.6% Yen Bonds due 2011
1.6% Yen Bonds due 2011
Long-term installment payment for
Purchase of machinery and equipment
Capital lease payable
Less: Portion due within one year16
1(2,159)¥3,464－ 15 －

1(1,776)¥4,196

Thousands of
U.S. dollars(Note 1)
2010
$58,717
1,075
1,075
2,150
1,161
11
(19,090)$45,099

The aggregate annual maturity of long-term debt after March 31, 2010 is summarized as follows:
Thousands of
U.S. dollars
Millions of Ｙen(Note 1)Years ending March 31,
2011¥1,776$19,090
2012
1,734
18,6372013
2,275
24,452
2014 and thereafter
187
2,010
¥5,972$64,189
The Company's assets pledged as collateral for short-term borrowings and long-term debt were as
follows:
Thousands of
U.S. dollars(Note 1)
2010

Millions of Yen
2009
2010
Principal of debt:
Short-term borrowings
Portion due within one year
Long-term borrowings¥¥
Assets pledged as collateral:
Land
Buildings

Regardingloan

payables,

the

110
18
0
128

¥

¥2,375
2,572¥4,947

syndicateloan

contract

¥

5
500
2,900
3,405

$54
5,374
31,169$36,597¥3,893
3,196¥7,089$41,842
34,351$76,193

with

limit

of

¥3,400

millionyen($36,543thousand) and commitment line contracts with limits of ¥ 2,500 million yen ($ 26,870
thousand), respectively include financial covenant terms. The contractor triggers acceleration and isenforced to repay the full principal and interest if the contractor breaches either of the following terms.
(Financial covenant terms included in the syndicated loan contract and commitment line contract)(1) The amount of shareholder’s equity on the consolidated balance sheets at the end of each fiscal
year and each semiannual period must be maintained 9,040 million yen（$97,163 thousand）or more.
(2) The ordinary losses in both consolidated statements of income for each fiscal year must not be
existed in two successive periods after the fiscal year ended March 31, 2010.

－ 16 －

6.

Accrued Severance Indemnities for employees
The following tables set forth the changes in benefit obligation, plan assets and funded status of theCompany and its subsidiaries at March 31, 2009 and 2010.

Projected benefit obligation at end of year
Fair value of plan assets at end of year
Funded status:
Benefit obligation in excess of plan assets
Unrecognized actuarial loss
Accrued pension liability recognized in theConsolidation balance sheets

Millions of Yen
2009
2010
¥1,500¥1,652
628
781

Thousands of
U.S. dollars(Note 1)
2010
$17,756
8,394

872
108

871
88

9,362
946

¥764

¥783

$8,416

Note: Some subsidiaries adopted the alternative method of accounting for retirement benefit
allowable for small business entity under the new accounting standards.
Severance and pension costs of the Company and its subsidiaries included the following components
for the year ended March 31, 2009 and 2010.

Millions of Yen
2009
2010
¥94
¥102
27
27
0
0
10
22
¥131
¥151

Service cost
Interest cost
Expected return on plan assets
Actuarial losses
Net periodic benefit costThousands of
U.S. dollars(Note 1)2010
$1,096290
0236$1,622

Assumption used in the accounting for the defined benefit plans for the year ended March 31, 2009
and 2010 are as follows:

Method of attributing benefit
to periods of service
Discount rateLong-term rate of return on fund assets
Amortization unrecognized projected
Benefit obligation at the date of transition
Amortization period for actuarial losses

2009
Straight –line basis

2010
Straight –line basis

2.0%
0.0%
-

2.0%
0.0%
-

15years(decliningbalance basis)－ 17 －

10years(decliningbalance basis)

7. Shareholders’ Equity
Under the Japanese Corporate Law the appropriation of retained earnings or disposition of
accumulated deficit could be adopted by the Board of Directors.
The Japanese Company Law requires that amounts equal to 10% of interim cash dividend and 10% ormore of cash dividends and other appropriations of retained earnings paid out with respect to eachfinancial period be set aside in the legal reserve until an aggregate amount of additional paid-in capitaland the legal reserve equals 25% of the amount of stated capital. The amount of total additional paid-in
capital and legal reserve which exceeding 25% of stated capital can be transferred to retained earnings by
a resolution of the shareholders, which may be available for dividends.
Under the Japanese Corporate Law, although the entire amount of the issue price of new shares isrequired to be accounted for as common stock a company may, by resolutions of its Board of Directors,
account for an amount not exceeding one-half of the issue price of such new shares as additional paid-in
capital.
8.

Research and Development Costs
Research and development costs charged to income for the years ended March 31, 2009 and 2010
were ¥266million and ¥145million ($1,558 thousand), respectively.

9.

Loss on impairment of fixed assets
The Company has recognized impairment loss of 165 million yen ($1,680 thousand), for the following
group of assets as of March 31, 2009.
Location

Use

Category

Kyoto East Plant(Kyoto, Japan)

Equipment for development
Manufacturing plant for
precision mold.

Land

Impairment loss
(millions of yen)

165

The company and its subsidiaries assessed impairment of each group of assets, which are grouped on
the basis of segment by products for domestic companies and by location for foreign subsidiaries.
Therefore, due to the decline in real estate value and poor performance of assets, operating profitability
has worsened substantially, the company has decided to mark the assets down to the recoverable value,
and accrued impairment loss as ¥165million ($1,680thousand).
10.

Income Taxes
The company is subject to a number of different income taxes, which in the aggregate, result in astatutory tax rate in Japan of approximately 39.8% and 40.6% for the years ended of March 31, 2009 and2010 respectively.
The deferred tax assets and deferred tax liabilities at March 31, 2009 and 2010 are as follows:
Thousands of
U.S. dollars(Note 1)Millions of Ｙen
2009
2010
2010
Deferred tax assets:
Inventory write down
¥303
¥229
$2,461
Impairment loss of fixed assets
707
696
7,481
Retirement and severance benefits
261
298
3,203
Net operating loss carried forward
3,429
2,940
31,599Other, net
1,086
900
9,673
Valuation Allowance(5,758)(5,000)(53,740)
28
63
677
Deferred tax liabilities:
Other, net
(83)
(179)
(1,923)(83)(179)(1,923)Net deferred tax assets/(liabilities)¥(55)¥(116)$(1,246)－ 18 －

11.

LeasesThe Company and its consolidated subsidiaries and equity method affiliates have been utilizing
finance lease arrangements other than those deemed to transfer the ownership of the leased property to thelessee to employ certain machinery and equipment.
The finance lease transactions, which do not transfer ownership to lessee, started before April 1, 2008
were accounted for as operating leases.
Total lease payments for such lease arrangements for the year ended March 31, 2009 and 2010 are¥7million and ¥2 million ($21 thousand), respectively.
Summarized below are the pro forma information on acquisition costs, accumulated depreciation andfuture minimum lease payments for the property held under such lease as mentioned above:
As of March 31, 2009
Millions of yen

Acquisition costs
Accumulated
Depreciation
Net leased property

MachineryAnd
Equipment
¥ 7
3

Other
¥12
9

Total
¥19
12

¥ 4

¥ 3

¥7

As of March 31, 2010
Millions of yen

Acquisition costs
Accumulated
Depreciation
Net leased property

MachineryAnd
Equipment
¥ 7
4

Other

¥ 3

¥3
3

Total
¥10
7

¥ 0

¥3

Thousands of U.S. dollars (Note 1)

Acquisition costs
Accumulated
Depreciation
Net leased property

MachineryAnd
Equipment
$75
43

Other
$32
32

Total
$107
75

$32

$ 0

$32

Future minimum lease payments as of March 31, 2009 and 2010:

Due within one year
Due after one year
Total

Millions of yen
2009
¥4
3
¥7

Thousands ofMillions of yen
U.S. dollars (Note 1)
2010
2010
¥2
$21
2
21
¥4
$42

－ 19 －

Depreciation is calculated by the straight-line method on the assumption that the term of the lease isuseful life of the relevant leased asset and residual value is zero.
Depreciation expense, which is not reflected in the accompanying consolidated statements of income,would have been ¥7 million and ¥2 million ($21 thousand) for the year ended March 31, 2009and 2010,
respectively.
12.

Contingent Liabilities
The Companies have no significant contingent liabilities.

13.

Segment Information(1) Segment by products
Millions of Ｙen

Year ended March 31, 2009

Ⅰ.Sales and operating income
Net sales to customers
Inter-segment sales
Cost of sales andOperating expenses
Operating income
Ⅱ.Assets
Total assets
Depreciation and amortization
Capital expenditure

Semiconductor
equipment

Fine plastic
moldElimination/
Unallocated
AssetsConsolidated¥ 10,361
10,361¥1,217
1,217¥-¥11,578
11,57813,826¥ (3,465)

¥

1,089
128

¥-

14,915¥ (3,337)¥ 26,895¥ 1,205¥ 1,192¥ 1,055
¥ 110
¥ 105

-

¥ 27,950¥ 1,315¥ 1,297

Millions of Ｙen

Year ended March 31, 2010

Ⅰ.Sales and operating income
Net sales to customers
Inter-segment sales
Cost of sales andOperating expenses
Operating income
Ⅱ.Assets
Total assets
Depreciation and amortization
Capital expenditure

Semiconductor
equipment

Fine plastic
moldElimination/
Unallocated
AssetsConsolidated¥ 13,172
13,172¥1,103
1,103¥-¥14,275
14,275

13,689¥ (517)

924
179

¥-

14,613¥ (338)

¥ 980
¥ 99
¥ 20

-

¥ 26,739¥ 1,309¥ 236¥ 25,759¥ 1,210¥ 216－ 20 －¥

Year ended March 31, 2010

Thousands of U.S. dollars (Note 1)

Semiconductor
equipment

Fine plastic
moldElimination/
Unallocated
AssetsConsolidated$141,574
141,574$11,855
11,855$-$153,429
153,429

147,130$(5,556)

9,931$1,924$-$157,062$(3,633)$276,859$ 13,005$ 2,322$10,534$ 1,064$ 215-$287,393$ 14,069$ 2,537

Ⅰ.Sales and operating income
Net sales to customers
Inter-segment sales
Cost of sales andOperating expenses
Operating income
Ⅱ.Assets
Total assets
Depreciation and amortization
Capital expenditure(2) Segmented by geographical location of activities
Millions of Ｙen

Year ended March 31, 2009

Japan
Ⅰ.Sales and operating income
Net sales to customers
Inter-segment sales
Cost of sales andOperating expenses
Operating income(loss)
Ⅱ.Assets

Asia
¥145
3,715
3,860

¥5
364
369

¥5
60
65

¥
(4,346)(4,346)¥11,578¥11,578

15,026¥(3,396)

3,761
¥ 99

384
¥(15)

80
¥(15)

(4,336)¥(10)

14,915¥(3,337)¥27,068¥3,815¥1,273¥56¥(4,262)¥27,950

Millions of Ｙen

Japan

Cost of sales andOperating expenses
Operating income (loss)
Ⅱ.Assets

OthersElimination/
Unallocated
AssetsConsolidated¥11,423207
11,630Year ended March 31, 2010

Ⅰ.Sales and operating income
Net sales to customers
Inter-segment sales

North
America

Asia

North
America

OthersElimination/
Unallocated
AssetsConsolidated¥13,681
143
13,824

¥568
2,772
3,340

¥17
274
291

¥9
57
66

¥
(3,246)(3,246)¥14,275¥14,275

14,178¥(354)

3,223
¥ 117

470
¥(179)

72¥(6)(3,330)¥(84)

14,613¥(338)¥25,537¥4,241¥937¥55¥(4,031)¥26,739－ 21 －

Year ended March 31, 2010

Ⅰ.Sales and operating income
Net sales to customers
Inter-segment sales
Cost of sales andOperating expenses
Operating income (loss)

Ⅱ.AssetsJapan

Thousands of U.S. dollars (Note 1)
Elimination/
North
UnallocatedAsia
America
OthersAssetsConsolidated$147,044
1,537
148,581$6,10529,79435,899

$183
2,945
3,128

$97
613
710

$(34,889)(34,889)$153,429$153,429

152,386$(3,805)

34,641$ 1,258

5,052$(1,924)

774
$(64)

(35,791)$(902)

157,062$(3,633)$274,473$45,583$10,071$591$(43,325)$287,393(3) Sales by region

Year ended March 31
Japan
Overseas
Asia
America
Other
Overseas total
Consolidated sales

Millions of Ｙen
2009
2010
¥ 3,303¥ 3,381
7,588
410
277
8,275
¥11,578－ 22 －

10,305382
207
10,894¥14,275

Thousands of
U.S. dollars(Note 1)
2010
$36,339
110,759
4,106
2,225
117,090$153,429

Corporate Information
as of June 29, 2010
Corporate Data
Corporate Name:
Headquarters/Factory:

Board of Directors

TOWA CORPORATION

Chairman & CEO

5 Kamichoshi-cho, Kamitoba,

Kazuhiko Bandoh

Minami-ku, Kyoto 601-8105, Japan
Established:

April 17, 1979

Vice Chairman

Operations:

Develop, design, manufacture, and sell
precision molds, manufacturing systems forelectronic components, inspection systems forelectronic components, precision-molded andassembly products, medical-use equipment, andelectronic-communications equipment.
Other related business.

Yoichi Kawahara

President & COO
Hisao Nishimura

Directors
Hirokazu Okada

Paid-in Capital:¥8,932,627,777

Makoto Fukutomi

Common Stock
Authorized:

80,000,000

Issued Number of Shares:

25,021,832

Unit for Trading:
Stock Listings:

Transfer Agents:
Fiscal Year:
Number of Employees:
URL:
Subsidiaries andAffiliated Companies:

Standing Corporate Auditor
Kiyoshi Osaki

100
First Section of the Tokyo Stock Exchange

Corporate Auditors

First Section of the Osaka Securities Exchange

Masanori Sugiyama

Mizuho Trust & Banking Co., Ltd

Katsuhiro Umeyama

From April 1 to March 31
460
http://www.towajapan.co.jp
BANDICK Corporation
TOWATEC Co., Ltd.
TOWA Service Co., Ltd.
TOWAM Sdn. Bhd.
TOWA (Suzhou) Co., Ltd.
TOWA America Corporation
TOWA Asia-Pacific Pte. Ltd.
TOWA (Shanghai) Co., Ltd.
TOWA TAIWAN Co., Ltd.
TOWA Semiconductor Equipment Philippines Corporation
TOWA Europe GmbHTONGJIN Corporation
SECRON Co., Ltd.
TOWA-Jipal Technologies Co., Ltd.
Scientific and Semiconductor Manufacturing Equipment Recycling Co., Ltd.

－ 23 －

5 Kamichoshi-cho, Kamitoba, Minami-ku,
Kyoto 601-8105, JapanTEL (075) 692-0250 FAX (075) 692-0270