ANNUALREPORT2

1

0

1

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
Japan’s economy during this consolidated accounting year displayed gentle recovery
thanks to the government’s package of economic measures including tax cuts, special demandarising from very hot weather and expansion of exports to emerging economies such as China.
However, due to a falloff in demand following the initial surge stimulated by economic
measures and stagnation in personal consumption brought about by the continuing harsh
employment situation and so forth, the recovery trend temporarily stagnated.
On top of that, the Japan Earthquake of March 11, 2011 claimed many victims and dealt ahammer blow to the Japanese economy. The effects of this disaster will continue to be
manifested for some time to come and cast a cloud over future business prospects.

Performance
In the semiconductor market, rebounding from the negative growth of the previous year,
business during the first half was extremely brisk with demand being powerfully boosted by
new electronic devices such as smartphones and tablet devices, etc., while demand for LED
lighting in devices was solid.
Conversely, in the second half of the year, the market stagnated following completion of a roundof investment in manufacturing equipment, inventory adjustment of electronic components anddeceleration of the PC market and so on.
As a result, sales are 22,592 million yen (8,318 million yen and 58.3% increase comparedwith the pre-connected fiscal year), the operating profit 4,067 million yen (The pre-connectedfiscal year is 338 million yen of the operating loss), and an ordinary profit 4,064 million yen(The pre-connected fiscal year is 345 million yen of an ordinary loss). The net income for theperiod became 3,751 million yen (The pre-connected fiscal year is 330 million yen of the net
loss at this season).

－1－

Looking Ahead
However, currently semiconductor production technology is evolving at an ever-increasing
rapid pace, and consequently, the requisite technical and quality standards have also reachedextremely high levels. Due to the growing prominence of our competitors and the expansion ofsemiconductor markets in developing countries, as well as the diversification of semiconductor
uses, our business environment is becoming even more global in scale at an even rapider pace,such that TOWA must seek to raise our level of technical sophistication by, in a sense,
challenging ourselves to our utmost limits.
At TOWA, we are fully cognizant of the above-described state of affairs, and based on such,
we have established a new mid-term management plan, covering the three years starting from
April 2011, in order to clarify our mid-range management activities.
This plan specifies the mid-term management policies for "creating the 'structures' requiredin order to be a company with continued growth". Based on the assumption that upheavals in the
global economy and semiconductor market, competition in business fields, emergence of new
industries and markets and various other changes will occur, TOWA Group aims to be acompany worthy of the trust and confidence of customers now and in the future throughcreating the structures during this term to sustain growth while overcoming such environmental
shifts.
A summary of the new mid-term management plan is given below.
① Constantly seek to realize originality and differentiation through concentrating management
resources into the strengths of TOWA Group.
② Stabilize the management base through improving efficiency and quality.
③ Allocate earnings to investment and development in our business fields, and thereby create apositive cycle as a technical development corporation.
④ Improve the “quality” of human resources.
⑤ Unearth fields for giving shape (as products and services) to our technologies and know how.
Through giving priority to resolution of issues based on higher efficiency and quality while
conducting aggressive investment in advantageous fields, TOWA Group aims to stay fit and leanenough to respond to changes.
Through working on this “concentration on strong points” and “improvement of efficiency andquality,” we hope to realize originality and differentiation in our business fields. This originalityand differentiation will generate stable earnings and, through re-investing these more into our“strengths,” we aim to facilitate further technical innovation and generate competitiveness witha view to “maximizing earnings.”
TOWA Group believes that such a positive cycle as a technology development corporation is the“structure” we require in order to become a continuously growing enterprise.

－2－(1) Semiconductor molding business
Through securing higher share in the volume zone and disseminating the already original anddifferentiated compression mold system into the market, we are committed to establishing the“TOWA brand” to provide the things customers seek other than price and delivery.
(2) LED business
Definite growth is anticipated in the LED market from now on, however, it will be necessary togreatly reduce the cost of LED packages in order to disseminate LED lighting. Throughapplying the technologies and know-how fostered in the semiconductor business to the LED
business and realizing cost reduction of LED packages, TOWA Group aims to build
relationships of trust with LED makers and expand its LED business.
(3) Chemical products businessIn the medical field, which is regarded as one of the few domestic growth industries, demandfor plastic molded products for use in various instruments is stable. We aim to maintain qualitythat is worthy of customer confidence and secure business profitability in the future.
(4) Unearthing of new business fields
The needs of people and society are constantly changing and the lifecycles of products andservices are likely to become shorter. In order to continue corporate business activities, it isessential to realize continuous change, and TOWA Group is committed to developing newmarkets in which it can give shape (as products and services) to its technologies and expanding“business fields” through developing and refining new technologies.
In addition to soundly executing the measures contained in the newly prepared mid-term
management plan, we aim to prioritize and overcome the management lessons we have learnedin this year’s earthquake and tsunami disaster.
We look forward to your continuing support and assistance in the future.
We would like to express our heartfelt appreciation for your support.
September 2011
Hisao Nishimura
President & COO－3－

Consolidated Balance Sheets
TOWA CORPORATION AND CONSOLIDATED SUBSIDIARIESMarch 31, 2010 and 2011

2010

2011

Thousands of
U.S. dollars(Note 1)
2011

￥

￥

＄

Millions of yen

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

3,897

5,142

61,840Inventories ……………………………………………………
Deferred tax assets (Note 10) …………………………………
Other current assets …………………………………………..

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

5,516
(1)
5,515
2,733
17
262

66,338(12)
66,32632,868204
3,151

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

12,546

13,669164,389

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

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

4,186
12,096
9,814
79(16,401)

50,343
145,472
118,028
950(197,246)

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

10,3709,774

117,547

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

2,318
11
1,494

2,606
48
1,192

31,341577
14,336

Total other assets ………………………………………….

3,823

3,846

46,254

Total assets ………………………………………………………

26,73927,289328,190

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.

－4－Consolidated Balance Sheets
TOWA CORPORATION AND CONSOLIDATED SUBSIDIARIESMarch 31, 2010 and 2011

2010

2011

Thousands of
U.S. dollars(Note 1)
2011

￥

￥

＄

Millions of yen

LIABILITIES AND NET ASSETS
Current 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 ……………………………………………
Deffered tax liabilities…………………………………………….
Other current liabilities(Note 2(10))………………………………

5,587
1,775
2,043
195
46
0
870

2,898
1,793
1,982
461
175
49
1,144

34,854
21,563
23,836
5,544
2,105
589
13,758

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

10,516

8,502

102,249

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 …………………………………………

4,196
783
152
0

3,002
786
228

36,1039,453
2,742

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

5,131

4,016

48,298

Total liabilities …………………………………………………

15,647

12,518150,547

Shareholders' equity (Note 7)
Common stock
Authorized: 80,000,000 shares
Issued :25,021,832 shares at 31st March, 2011…………………
Additional paid-in capital …………………………………………
Retained earnings …………………………………………………
Less: Treasury stock at cost ………………………………………

8,933
462
1,854
(8)

8,933
462
5,606
(8)

107,432
5,556
67,420(96)

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

11,241

14,993

180,312

Accumulated Other Comprehensive Income
Unrealized gain (loss) on other securities …………………………
Translation adjustments ……………………………………………

406
(555)

517
(739)

6,218
(8,887)

Total accumulated other comprehensive income ………………

(149)

(222)

(2,669)26,73927,289328,190

Contingent liabilities (Note 12)

Total liabilities and net assets ………………………

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

－5－Consolidated Statements of Income
TOWA CORPORATION AND CONSOLIDATED SUBSIDIARIESTwo years ended March 31, 2011

Thousands of
U.S. dollars(Note 1 )2011

Millions of yen
2010

2011

￥

￥

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

14,275
11,1903,085

22,593
14,442
8,151＄
271,714173,686
98,028Selling, general and administrative expenses (Notes2(13)and 8)………

3,423

4,083

49,104

Operating Income…………………………………………………..

(338)

4,068

48,924

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

25
(265)
(39)
22
36
274
53

29
(197)
(65)
186
(126)
47
(126)

349
(2,369)(782)
2,237(1,515)564(1,516)

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

(285)

3,942

47,408

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

54
(9)

170
20

2,044
241

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

(330)

3,752

45,123

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

-

-

-

Net Income……………………………………………………………

(330)

3,752

45,123150.00150.00
10.00

U.S. dollars(Note 1 )
＄
1.80
1.80
0.12

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.

－6－

￥

￥
(13.19)(13.19)0.00

Consolidated Statements of Comprehensive Income
TOWA CORPORATION AND CONSOLIDATED SUBSIDIARIESTwo years ended March 31, 2011

Thousands of
U.S. dollars(Note 1 )2011

Millions of yen
2010

2011

￥
Income Before Minority Interests …………………………………………
Other Comprehensive Income
Unrealized gain on other securities……………………………………
Translation adjustment…………………………………………………
Share of other comprehensive income of affiliates accounted forthe equity method
Total other comprehensive income
Comprehensive Income(Comprehensive income attributable to)Comperehensive income attributable to owners of the parent……………
Comprehensive income attributable to minority interests…………………

－7－

￥

＄

-

3,752

45,123

111
(112)

1,335
(1,346)

-

(72)
(73)
3,679

(866)
(877)
44,246-

3,679

44,246--

Consolidated Statements of Shareholders' Equity
TOWA CORPORATION AND CONSOLIDATED SUBSIDIARIESTwo years ended March 31, 2011

Millions of yen
Accumulated other
Shareholders' equity
Number ofcomprehensive income
Unrealized

Additional

shares ofCommonpaid-in

Retained

Treasurygain on otherTranslation

Total

common stock

stock

capitalearnings

stock

securities

adjustments

net assets

￥

￥

￥

8,933

3,115

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

￥
(469)

￥
(7)

￥
82

￥

(564)

11,090(330)

Net Income ………………………………………………….

-

-

-

(330)

-

-

-

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

-

-

-

-

(1)

-

-

(1)

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

-

-

-

-

-

324

-

324

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

-

-

-

-

-

-

9

9

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

--(2,653)

2,653

-

-

-

0

462

1,854

(8)

(555)

11,092

3,752

3,752

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

8,933

Net Income ………………………………………………….

-

-

-

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

-

-

-

-

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

-

-

-

-

-

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

-

-

-

-

-

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

-

-

-

-

-

Balance at March 31, 2011 …………………………………… 25,021,832

8,933

462

406

-

-

-

-

-

0

111

-

111

-

(184)

(184)

-

-

0

(739)

14,771

0

5,606

(8)

517

Thousands of U.S.dollars (Note 1 )Accumulated other
Shareholders' equity
Number ofcomprehensive income
Unrealized

Additional

shares ofCommonpaid-in

Retained

Treasurygain on otherTranslation

Total

common stock

stock

capitalearnings

stock

securities

adjustments

net assets

＄

＄

＄

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

107,432

5,556

22,297

＄

＄
(96)

＄

＄

(6,675)

133,397--

45,123

-

-

0

-

1,335
(2,212)

4,883

Net Income ………………………………………………….

-

-

-

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

-

-

-

-

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

-

-

-

-

-

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

-

-

-

-

-

-

(2,212)

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

-

-

-

-

-

-

-

0

(8,887)

177,643

Balance at March 31, 2011 …………………………………… 25,021,832

107,432

5,556

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

－8－45,12367,420

0

(96)

1,335

6,218

Consolidated Statement of Cash Flows
TOWA CORPORATION AND CONSOLIDATED SUBSIDIARIESTwo years ended March 31, 2011

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

(285)

2011
￥
3,942

2011
＄
47,408

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

1,171
126
(186)
(29)
197
29
0
111
45
(10)
(32)

14,083
1,515(2,237)
(349)
2,369
349
0
1,335
541
(120)
(385)

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

117
361
5,842
48
(203)
(115)
5,572

1,407
4,343
70,259577(2,442)(1,383)67,011

Cash Flows from Investing Activities:
Purchase of investment securities …………………………………………………………
Sale 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)
0
(470)
178
8
(291)

(7)
1
(490)
17
(141)
(620)

(84)
12
(5,892)204(1,696)(7,456)

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…………………………………………………………………….
Net cash provided by (used in ) financing activities ……………………………………

(3,098)3,400(2,463)(572)(2,733)(2,634)600(1,303)(472)(3,809)(31,679)
7,217(15,671)(5,676)(45,809)

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 …………………………………………

(33)
(562)
4,399

(45)
1,098
3,837

(541)
13,205
46,146

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

3,837

4,935

59,351

Cash 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) ……………………………………………………
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.

－9－

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, 2011, which was ¥83.15 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.

－ 10 －

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
TOWA Asia-Pacific Pte. Ltd.
TOWA (Shanghai) Co., Ltd.
TOWA TAIWAN Co., Ltd
TOWA Semiconductor Equipment
Philippines Corporation
TOWA Europe GmbH

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
TaiwanPhilippines100

Germany

Ownership
35 %
23
40
20

Country of Incorporation
Korea
Korea
TaiwanJapan

Affiliates(All affiliates are accounted for by the equity method)Name
TONGIJIN Corporation
SECRON Co., Ltd.
TOWA Jipal Technologies Co., Ltd.
Scientific and Semiconductor
Manufacturing Equipment RecyclingCo., Ltd※１．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 and 2011.
(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 aretranslated into Japanese yen at the exchange rates in effect at the balance sheet date except forshareholders’ equity, which are translated at the historical rates. And revenue and expenses are translated
at the exchange rate in effect at the balance sheet date. The differences resulting from translation in thismanner are included in “Translation adjustments” which is listed in Accumulated Other Comprehensive
Income in the accompanying consolidated balance 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.

－ 11 －

Components of cash and cash equivalents as of March 31, 2010 and 2011 are as follows:

Millions of Yen
2010
2011
Cash on hand and at banks
Less: Time deposits with deposit termof over three months
Cash and cash equivalentat end of year

Thousands of
U.S. dollars(Note 1)
2011

¥3,897¥5,142$61,840¥60¥207$2,489¥3,837¥4,935$59,351(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 to
Accumulated Other Comprehensive Income as “Unrealized gain/(loss) on Other Securities”
after netting off the deferred 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.
The moving average method is applied for calculation of the costs of securities.

－ 12 －

(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.
(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.
However, finance lease transactions other than those in which titles to leased property are determined
to be transferred to lessees, which transactions started on or before March 31, 2008, are stated by applying
the accounting treatment applicable to ordinary operating lease transactions.
(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, 2011, the liability for expected warranty costs was 154 million yen($1,852thousand) .

－ 13 －

(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.
(Additional Information)
Effective from the fiscal year ended March 31, 2011, the “Accounting Standard for Presentation ofComprehensive Income” (ASBJ Statement No.25 issued on June 30, 2010) has been adopted. As a resultof the adoption of the standard, the Company has presented the consolidated statement of comprehensive
income in the consolidated financial statements for the fiscal year ended March 31, 2011.
The consolidated balance sheet and the consolidated statement of changes in net assets as of and forthe fiscal year ended March 31, 2010 have been modified to conform with the new presentation rules of2011. In addition, the Company has presented the consolidated statement of comprehensive income forthe fiscal year ended March 31, 2010 as well as that for the fiscal year ended March 31, 2011.

－ 14 －

3.

Securities(1) 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

Investments in affiliates:

Millions of yen
2010
Book Value

Market value not available:
Equity securities

¥927
¥927
¥2,318Total(2) The following is a summary of investments in affiliates and other securities at March 31, 2011
Millions of yen
2011

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

Book Value(Estimated fairvalue)

Unrealized
gains

Unrealized
losses

¥837
¥837

¥769
¥769

¥23
¥23

¥1,583¥1,583

3
¥840

¥769

¥23

3
¥1,586

Cost

Millions of yen
Investments in affiliates:
2011
Book Value
Market value not available:
Equity securities¥1,020¥1,020¥2,606Total－ 15 －

Thousands of U.S. dollars (Note 1)
2011

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

Unrealized
gains

Unrealized
losses$10,066$10,066$9,248$9,248$277$277$19,037$19,037$
36$10,102$9,248$277$
36$19,073

Cost

Thousands of
U.S. dollars(Note 1)
2011
Book Value

Investments in affiliates:

Market value not available:
Equity securities$12,268$12,268$31,341

Total

4.

Book Value(Estimated fairvalue)

Estimated Fair Value of Financial Instruments
As of March 31, 2010 and 2011, the book value and fair value of financial instruments and the differences
between these figures are set forth in the table below. The table does not include financial instruments forwhich it is extremely difficult to determine the fair value.

Book Value
Cash and deposits
Notes and accounts receivable
Less:Allowance for Doubtful Accounts
Investment securities
Total assets
Notes and accounts payable
Short-term borrowings
Bonds
Long-term borrowings
Total liabilities

Millions of yen
2010
Fair Value

Difference¥3,8975,623(9)¥5,614
1,388¥3,897¥0¥5,614
1,388¥0
0¥10,899¥10,899

¥0

2,043
5,587
508
5,463

2,043
5,587
509
5,466

0
0
1
3

¥13,601¥13,605

¥4

¥0

¥(29)

¥(29)

Derivative financial instruments－ 16 －

Book Value
Cash and deposits
Notes and accounts receivable
Less:Allowance for Doubtful Accounts
Investment securities
Total assets

Millions of yen
2011
Fair Value

Difference¥5,1425,516(1)¥5,515
1,583¥5,142¥0¥5,5151,583¥0
0¥12,240¥12,240

¥0

1,982
2,898
36
4,759

1,982
2,898
36
4,761

0
0
0
2

¥9,675¥9,677

¥2

¥0

¥(13)

¥(13)

Notes and accounts payable
Short-term borrowings
Bonds
Long-term borrowings
Total liabilities
Derivative financial instruments

Thousands of U.S. dollars (Note 1)
2011
Fair Value
DifferenceBook Value
Cash and deposits
Notes and accounts receivable
Less:Allowance for Doubtful Accounts
Investment securities
Total assets
Notes and accounts payable
Short-term borrowings
Bonds
Long-term borrowings
Total liabilities$61,840
66,338(12)$66,326
19,038$61,84000$60,340
19,038$(5,986)
0$147,204$141,218$(5,986)

23,83634,854433
57,234

23,83634,854433
57,25800024$116,357$116,381$24$0$(156)$(156)

Derivative financial instruments$0

Financial instruments for which it is extremely difficult to determine the fair value as of March 31, 2010
and 2011 were as follows, respectively.
Thousands of
U.S. dollars(Note 1)Millions of yen
2010
Unlisted equity securities

2011
¥930

¥1,023$12,303

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.
－ 17 －

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, 2010 are 1.8% and 2011 are 1.9%,
respectively.
Long-term debt as of March 31, 2010 and 2011 consisted of the following:

Millions of Ｙen
2010
2011
¥5,463¥4,759
100
100
200
108
36

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
Less: Portion due within one year1
(1,776)¥4,1960(1,793)¥3,002Thousands of
U.S. dollars(Note 1)
2011
$57,234
432(21,563)$36,103

The aggregate annual maturity of long-term debt after March 31, 2011 is summarized as follows:
Thousands of
U.S. dollars
Millions of Ｙen(Note 1)Years ending March 31,
2012¥1,793$21,5632013
2,410
28,984
2014
323
3,884
2015 and thereafter
269
3,235
¥4,795$57,666
The Company's assets pledged as collateral for short-term borrowings and long-term debt were as
follows:

Millions of Yen
2010
2011
Principal of debt:
Short-term borrowings
Portion due within one year
Long-term borrowings

¥

5
500
2,900
¥ 3,405

Assets pledged as collateral:
Land
Buildings¥3,893
3,196¥7,089－ 18 －¥

Thousands of
U.S. dollars(Note 1)2011

¥ 1,000
1,900
2,900

$ 12,026
22,850$34,876¥3,7282,874¥6,602$44,835
34,564$79,399

Regarding

loan

payables,thesyndicateloan

contract

with

limit

of

¥3,400

millionyen($40,890thousand) , commitment line contracts with limits of ¥ 2,500 million yen ($ 30,066 thousand)and convertible term loan contract with limit of ¥300 million yen ($ 3,608 thousand), respectively include
financial covenant terms. The contractor triggers acceleration and is enforced 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, commitment line contract andconvertible term loan contract)(1) The amount of Net Assets on the consolidated balance sheets at the end of each fiscal year andeach semiannual period must be maintained 9,040 million yen（$108,719 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.
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, 2010 and 2011.

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
2010
2011
¥1,652¥1,630781
804

Thousands of
U.S. dollars(Note 1)
2011
$19,603
9,669

871
88

826
40

9,934
481

¥783

¥786

$9,453

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, 2010 and 2011.

Millions of Yen
2010
2011
¥102
¥111
27
30
22
18
¥151
¥159

Service cost
Interest cost
Expected return on plan assets
Actuarial losses
Net periodic benefit cost

－ 19 －

Thousands of
U.S. dollars(Note 1)2011
$1,335361
216$1,912

Assumption used in the accounting for the defined benefit plans for the year ended March 31, 2010
and 2011 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

2010
Straight –line basis

2011
Straight –line basis

2.0%
0.0%
-

2.0%
0.0%
-

10years(decliningbalance basis)

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, 2010 and 2011were ¥145million and ¥331million ($3,981 thousand), respectively.

9.

Loss on impairment of fixed assets
The Company has recognized impairment loss of 126 million yen ($1,515 thousand), mainly for thefollowing group of assets as of March 31, 2011.
Location

Use

Category

TOWA
America
Corporation(CA, United States)

Equipment for production of
Semiconductor equipment

Land and Buildings

Impairment loss
(millions of yen)

113

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 of asset above, the company has decided to mark theassets down to the appraised value, and accrued impairment loss as ¥113million ($1,359thousand).
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 40.6% for the years ended of March 31, 2010 and 2011.

－ 20 －

The deferred tax assets and deferred tax liabilities at March 31, 2010 and 2011 are as follows:
Thousands of
U.S. dollars
Millions of Ｙen(Note 1)
2010
2011
2011
Deferred tax assets:
Inventory write down
¥229
¥172
$2,069Impairment loss of fixed assets
696
714
8,587
Retirement and severance benefits
298
302
3,632
Net operating loss carried forward
2,940
1,696
20,397
Other, net
900
927
11,147
Valuation Allowance(5,000)(3,715)(44,678)
63
96
1,154
Deferred tax liabilities:
Other, net
(179)
(308)
(3,704)(179)(308)(3,704)
Net deferred tax assets/(liabilities)¥(116)¥(212)$(2,550)

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, 2010 and 2011 are¥2million and ¥2 million ($24 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, 2010
Millions of yen

Acquisition costs
Accumulated
Depreciation
Net leased property

MachineryAnd
Equipment
¥ 7
4

Other

¥ 3

¥3
3

Total
¥10
7

¥ -

¥3

As of March 31, 2011
Millions of yen

Acquisition costs
Accumulated
Depreciation
Net leased property

MachineryAnd
Equipment
¥ 7
5

Other

¥ 2

－ 21 －

Total
¥-

¥7
5

¥ -

¥2

Thousands of U.S. dollars (Note 1)
MachineryAnd
Equipment$84
60

Acquisition costs
Accumulated
Depreciation
Net leased property

Other

$24

$-

Total
$84
60

$-

$24

Future minimum lease payments as of March 31, 2010 and 2011:

Due within one year
Due after one year
Total

Millions of yen
2010
¥2
2
¥4

Thousands ofMillions of yen
U.S. dollars (Note 1)
2011
2011
¥1
$12
0
0
¥1
$12

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 ¥2 million and ¥2 million ($24 thousand) for the year ended March 31, 2010and 2011,
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, 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
Assets¥ 13,172
13,172¥1,103
1,103¥-¥14,275
14,275

924
179

¥-

14,613¥ (338)

¥ 980
¥ 99
¥ 20

-

¥ 26,739¥ 1,309¥ 236

13,689¥ (517)¥ 25,759¥ 1,210¥ 216－ 22 －¥

Consolidated

Millions of Ｙen

Year ended March 31, 2011

Semiconductor
equipment¥ 21,304
21,304

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

17,394¥ 3,910

Ⅱ.Assets
Total assets
Depreciation and amortization
Capital expenditure¥ 26,214¥ 1,085¥ 542

Year ended March 31, 2010

Fine plastic
moldElimination/
Unallocated
AssetsConsolidated¥1,2891,289¥-¥22,593
22,593

1,131
158

¥-

18,525¥ 4,068¥ 1,075
¥ 86
¥ 36

-

¥ 27,289¥ 1,171¥ 578¥

Thousands of U.S. dollars (Note 1)

Semiconductor
equipment

Fine plastic
moldElimination/
Unallocated
AssetsConsolidated$256,212
256,212$15,50215,502$-$271,714
271,714

209,188$ 47,024

13,602$ 1,900$-$222,790$ 48,924$315,262$ 13,049$ 6,518$12,928$ 1,034$ 433-$328,190$ 14,083$ 6,951

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) Sales by region

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

Millions of Ｙen
2010
2011
¥ 3,381¥ 4,508
10,305382
207
10,894¥14,275－ 23 －

17,060602
423
18,085¥22,593

Thousands of
U.S. dollars(Note 1)
2011
$54,216
205,171
7,240
5,087
217,498$271,714

Corporate Information
as of June 29, 2011
Corporate Data
Corporate Name:
Headquarters/Factory:

Board of Directors

TOWA CORPORATION
5 Kamichoshi-cho, Kamitoba,

Chairman & CEO
Kazuhiko Bandoh

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

April 17, 1979

President & COO

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.

Hisao Nishimura

Directors
Hirokazu Okada
Makoto Fukutomi
Hisaji Konishi
Hajime Kuwaki

Paid-in Capital:¥8,932,627,777

Common StockStanding Corporate Auditor

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:

Kiyoshi Osaki

100

Coporate Auditors

First Section of the Tokyo Stock Exchange

Masanori Sugiyama

First Section of the Osaka Securities Exchange

Katsuhiro Umeyama

Mizuho Trust & Banking Co., Ltd
From April 1 to March 31438
http://www.towajapan.co.jp
BANDICK Corporation
TOWATEC Co., Ltd.
TOWA Service Co., Ltd.
TOWAM Sdn. Bhd.
TOWA Asia-Pacific Pte. Ltd.
TOWA Semiconducter Equipment Philippines Corporation
TOWA America Corporation
TOWA Europe GmbHTOWA (Shanghai) Co., Ltd.
TOWA (Suzhou) Co., Ltd.
TOWA TAIWAN Co., Ltd.
TONGJIN Corporation
SECRON Co., Ltd.
TOWA-Jipal Technologies Co., Ltd.
Scientific and Semiconductor Manufacturing Equipment Recycling Co., Ltd.

－ 24 －

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