ANNUALREPORT2

1

02

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
The current consolidated accounting year has truly been one in which the Japanese economy
was faced with all kinds of problems - recovery from the Great Eastern Japan Earthquake,
power shortages, radioactive contamination, and the European financial crisis, on top of ahistorically high yen. In the closing days of the accounting year, reconstruction demand is at last
fully underway and contributing to economic recovery, so that although anxiety factors such as
internal and external political risks and the high price of crude oil remain, signs of a turnaroundfrom the prolonged slump have come into view.

Performance
In the semiconductor market, sluggish sales of personal computers and televisions have hadlarge impacts on semiconductor manufacturers. Also, the impacts of the flooding in Thailand did
not stop at direct damage to semiconductor manufacturers’ local plants and other facilities, but
made HDDs hard to procure and led to a worsening of the market situation. The price of
DRAMs went into freefall and some major memory manufacturers were even driven into
bankruptcy.
Given such situation, the TOWA Group put in place a full range of services and production
setups, activating the capabilities of all its member companies, and has been carrying out
maximal support in order for our customers who were stricken by the Great Eastern Japan
Earthquake and the Thailand inundations to recover and restart their production at an early date.
Also, as regards sales promotion activities, we held a private show at our Head Office Plant (inKyoto), where we invited some 200 of our customers and gave presentations on our new
products. At this private show we put the new products into actual operation inside the plant andhad the customers see our unique technology with their own eyes and cognize its real worth,which contributed greatly to the equipment orders that we subsequently received. Fine plastic−1−

moldings are a business area where we have won stable orders from the medical field andmaintain a continuing good relationship with users, and this business has continued to trend firmin the current consolidated accounting year.
We have established a certain timeframe for compressing our interest-bearing debt andcompleted a lowering of our break-even sales level, thanks to which, although our sales for the
consolidated accounting year have fallen short of the initial target at 17.14 billion yen (down5.452 billion yen, or 24.1%, from the previous consolidated accounting year), we managed to
exceed the initial targets both in our operating income, which was 1.476 billion yen (down 2.59
billion yen, or 63.7%, from the previous consolidated accounting year), and in our ordinary
income, which was 1.672 billion yen (down 2.391 billion yen, or 58.9%, from the previous
consolidated accounting year), so that our net income was 0.968 billion yen (down 2.783 billion
yen, or 74.2%, from the previous consolidated accounting year).

Looking Ahead
Since the second half of last year, semiconductor manufacturers have been carrying out active
investment in front-end processes, and parallel with that, assembly firms in the China andTaiwan regions and elsewhere will likely show an intensified trend to invest in manufacturing
equipment. In the LED field, where the market had been somewhat stagnant, semiconductor
assembly firms are moving in earnest into LED back-end processes and are making efforts tolower LED prices through investment in manufacturing equipment that gives high production
efficiency. Also, continued stable demand is expected for fine plastic moldings, principally
medical related.
From these circumstances, the semiconductor manufacturing equipment and fine plastic
molding businesses in our group look to be trending in a broadly satisfactory manner. As
regards revenue too, continued maintenance of our high revenue system looks to be possible
when one considers the lightening of interest payment burdens thanks to compression ofinterest-bearing debt, the somewhat ameliorating trend in the historically high yen, andimproved profitability thanks to reduced costs for our existing equipment and our release of new
products onto the market.
Meanwhile, the global map of the semiconductor industry has seen major changes. Sadly, thearea occupied by Japanese semiconductor companies on that map has been getting steadilysmaller. We are now in a period that will test whether we truly have what it takes to be amanufacturing company – that is, whether we can quest profoundly after what the customer
really wants and create new products and new wares that rigorously keep “a quarter of a stepahead”.
Through reform of its financial and earnings structures, TOWA has realized compression of
its interest-bearing debt and lowering of its break-even sales level. Next, in order to switch toaggressive business management, we will be inaugurating a new system in term 35, which is thesecond year (April 1, 2012 to March 31, 2013) of our Mid-Term Management Plan, and−2−

exploiting the true value of our manufacturing business – especially the dies which are its coretechnology – to create things that the customer really wants, and thereby to engage in all-out
efforts for development of the new technologies and products that will secure us a revenue basein the future. The immediate issues for TOWA are whether these efforts will reliably bring forth
results and whether we can shorten the time that it will take for them to lead directly to revenue.
We look forward to your continuing support and assistance in the future.
We would like to express our heartfelt appreciation for your support.
August 2012
Hirokazu Okada
President & COO−3−

Consolidated Balance Sheets
TOWA CORPORATION AND CONSOLIDATED SUBSIDIARIESMarch 31, 2011and 2012

2011

2012

Thousands of
U.S. dollars(Note 1)
2012

￥

￥

＄

Millions of yen

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

5,142

4,708

57,282Inventories ……………………………………………………
Deferred tax assets (Note 10) …………………………………
Other current assets …………………………………………..

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

5,800
(9)
5,791
3,372
19
263

70,568(109)
70,45941,027231
3,200

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

13,66914,153

172,199

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

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

4,164
11,9359,768
96(16,266)

50,663
145,212
118,847
1,168(197,907)

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

9,774

9,697

117,983

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

2,606
48
1,192

1,871
61
1,036

22,764742
12,605

Total other assets ………………………………………….

3,846

2,968

36,111

Total assets ………………………………………………………

27,28926,818326,293

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, 2011and 2012

2011

2012

Thousands of
U.S. dollars(Note 1)
2012

￥

￥

＄

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))………………………………

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

1,400
2,670
2,719
448
146
35
980

17,03432,48633,082
5,451
1,776
426
11,923

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

8,502

8,398

102,178

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 ………………………………………..

3,002
786
228

1,533
783
178

18,652
9,526
2,166

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

4,016

2,494

30,344

Total liabilities …………………………………………………

12,518

10,892

132,522

Shareholders' equity (Note 7)
Common stock
Authorized: 80,000,000 shares
Issued :25,021,832 shares at 31st March, 2012…………………
Additional paid-in capital …………………………………………
Retained earnings …………………………………………………
Less: Treasury stock at cost ………………………………………

8,933
462
5,606
(8)

8,933
462
6,324
(8)

108,687
5,621
76,944(97)

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

14,993

15,711

191,155

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

517
(739)

497
(282)

6,047
(3,431)

Total accumulated other comprehensive income ………………

(222)

215

2,616

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

27,28926,818326,293

Contingent liabilities (Note 13)

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, 2012

Thousands of
U.S. dollars(Note 1 )2012

Millions of yen
2011

2012

￥

￥

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

22,593
14,442
8,151

17,14011,7905,350＄
208,541
143,448
65,093

Selling, general and administrative expenses (Notes2(13)and 8)………

4,083

3,873

47,122

Operating Income……………………………………………………..

4,068

1,477

17,971Other income (expenses)
Interest and dividend income……………………………………………
Interest expenses…………………………………………………………
Foreign exchange gains（losses) …………………………………………
Gain on sale of investment securities……………………………………
Equity in earnings（losses) of affiliates……………………………………
Loss on impairment of fixed assets………………………………………
Other, net…………………………………………………………………
Total other income (expenses) ………………………………………

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

45
(120)
118
(559)
31
88
(397)

548
(1,460)1,436(6,802)377
1,071(4,830)

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

3,942

1,080

13,141

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

170
20

140
(28)

1,704
(341)

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

3,752

968

11,778

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

-

-

-

Net Income……………………………………………………………

3,752

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−

￥

968

11,778

38.71
38.71
5.00

U.S. dollars(Note 1 )
＄
0.47
0.47
0.06

￥
150.00150.0010.00

Consolidated Statements of Comprehensive Income
TOWA CORPORATION AND CONSOLIDATED SUBSIDIARIESTwo years ended March 31, 2012

Thousands of
U.S. dollars(Note 1 )2012

Millions of yen
2011

2012

￥
Income Before Minority Interests …………………………………………
Other Comprehensive Income
Unrealized gain on other securities……………………………………
Translation adjustment…………………………………………………
Share of other comprehensive income of affiliates accounted for using
the 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

968

11,778

111
(112)

(20)
8

(243)
97

(72)
(73)
3,679

450
438
1,406

5,475
5,329
17,107

3,679

1,406
-

-

17,107-

Consolidated Statements of Shareholders' Equity
TOWA CORPORATION AND CONSOLIDATED SUBSIDIARIESTwo years ended March 31, 2012

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

8,933

462

￥

1,854

Net Income ………………………………………………….

-

-

-

Cash dividends…………………………………………………

-

-

-

-

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

-

-

-

-

3,752

￥

￥

￥

(8)

406

(555)

11,092

-

-

-

3,752

-

-

-

-

-

0

0

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

-

-

-

-

-

111

-

111

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

-

-

-

-

-

-

(184)

(184)

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

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

-

-

8,933

-

462

-

0

5,606

(8)

517

-

(739)

14,771Net Income ………………………………………………….

-

-

-

968

-

-

-

968

Cash dividends…………………………………………………

-

-

-

(250)

-

-

-

(250)

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

-

-

-

-

-

-

0

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

-

-

-

-

-

(20)

-

(20)

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

-

-

-

-

-

-

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

-

-

-

-

-

-

Balance at March 31, 2012 …………………………………… 25,021,832

8,933

462

0

6,324

(8)

457

497

457
-

0

(282)

15,926

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, 2011 …………………………………… 25,021,832

108,687

5,621

68,208

＄

＄
(97)

6,290

＄

＄

(8,991)

179,718

Net Income ………………………………………………….

-

-

-

11,778---

11,778Cash dividends…………………………………………………

-

-

-

(3,042)---(3,042)

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

-

-

-

-

-

-

0

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

-

-

-

-

-

(243)

-

(243)

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

-

-

-

-

-

-

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

-

-

-

-

-

-

Balance at March 31, 2012 …………………………………… 25,021,832

108,687

5,621

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

−8−

76,944

0

(97)

6,047

5,560

5,560
-

0

(3,431)

193,771

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

2011
￥
3,942

2012
￥
1,080

2012
＄
13,141

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

1,182

14,381

(31)
(45)
120
(31)
(385)
(641)
(7)
426

(377)
(548)
1,459
(377)
(4,684)(7,799)
(85)
5,183

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

(67)
533
2,134
47
(121)
(163)
1,897

(815)
6,485
25,964572(1,472)(1,983)23,081

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

(88)
661
(942)
350
(94)
(113)

(1,071)
8,042(11,461)
4,258(1,143)(1,375)

Cash Flows from Financing Activities:
Increase（decrease) in short-term borrowings ……………………………………………
Proceeds from issuance of long-term debt ………………………………………………
Repayments of long-term debt ……………………………………………………………
Issue of bonds……………………………………………………………………………
Redemption of bonds…………………………………………………………………….
Purchase of treasury stock ………………………………………………………………
Cash dividends…………………………………………………………………………..
Net cash provided by (used in ) financing activities ……………………………………

(2,634)600(1,303)(472)(0)(3,809)(1,438)1,000(1,857)
300
(36)
(0)
(250)
(2,281)(17,496)
12,167(22,594)
3,650
(438)
(0)
(3,042)(27,753)

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 …………………………………………

(45)
1,098
3,837

(41)
(538)
4,935

(499)
(6,546)60,044

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

4,935

4,397

53,498Cash 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−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, 2012, which was ¥82.19 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. ※１
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

Affiliates(All affiliates are accounted for by the equity method)Name
Ownership
Country of Incorporation
TONGJIN Corporation
35 %
Korea
SECRON Co., Ltd. ※２
23
Korea
TOWA Jipal Technologies Co., Ltd.
40
TaiwanScientific and Semiconductor
20
Japan
Manufacturing Equipment RecyclingCo., Ltd※１．Liquidation proceedings of TOWA Service Co., Ltd. have been completed in the fiscal year ended
March 31, 2012 and its financial statement isn’t consolidated into accompanying financial
statement for 2012.
※２．All the stock that the Company held in SECRON Co., Ltd, have been transferred to the third party
in the fiscal year ended March 31, 2012 and its financial statement isn’t included in theaccompanying consolidated financial statements for 2012.
(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, 2011 and 2012 are as follows:

Millions of Yen
2011
2012
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)
2012

¥5,142¥4,708$57,282

¥207

¥311

$3,784¥4,935¥4,397$53,498(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 interest rate agreements to hedge the fluctuation of interest rate
exposures, and not for speculative purposes. The instruments include interest rate swap agreements.
These instruments were accounted by the deferral hedge accounting. The Company has accounted forinterest 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, 2012, the liability for expected warranty costs was 69 million yen ($840thousand) .
(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.

− 13 −

(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)
On December 4, 2009, the Accounting Standards Board of Japan (“ASBJ”) issued ASBJ statement
No.24, “Accounting Standard for Accounting Changes and Error Corrections” and ASBJ Guidance No.24,“Guidance on Accounting Standard for Accounting Changes and Error Corrections.” The company and its
domestic subsidiaries apply this new accounting standard to accounting changes and error corrections
made on or after April 1, 2011.

− 14 −

3.

Securities(1) 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

Investments in affiliates:

Millions of yen
2011Book Value

Market value not available:
Equity securities¥1,020¥1,020¥2,606Total(2) The following is a summary of investments in affiliates and other securities at March 31, 2012
Millions of yen
2012

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

Book Value(Estimated fairvalue)

Unrealized
gains

Unrealized
losses

¥926
¥926

¥698
¥698

¥24
¥24

¥1,600¥1,600

3
¥929

¥698

¥24

3
¥1,603

Cost

Millions of yen
Investments in affiliates:
2012
Book Value
Market value not available:
Equity securities

¥268
¥268
¥1,871

Total− 15 −

Thousands of U.S. dollars (Note 1)
2012

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

Unrealized
losses$11,267$11,267$8,493$8,493$292$292$19,468$19,468$37$11,304$8,493$292$
37$19,505

Cost

Thousands of
U.S. dollars(Note 1)
2012
Book Value

Investments in affiliates:

Market value not available:
Equity securities$3,259$3,259$22,764

Total
4.

Book Value(Estimated fairvalue)

Unrealized
gains

Estimated Fair Value of Financial Instruments
As of March 31, 2011 and 2012, 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

Millions of yen
2011
Fair Value

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

¥

-

1,982
2,898
36
4,759

1,982
2,898
36
4,761

0
2

¥9,675¥9,677

¥2

¥-

¥(13)

¥(13)

Notes and accounts payable
Short-term borrowings
Bonds
Long-term borrowings
Total liabilities
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
2012
Fair Value

Difference¥4,7085,800(9)¥5,791
1,600¥4,708¥-¥5,791
1,600¥-¥12,100¥12,100

¥

-

2,719
1,400
300
3,903

2,719
1,400
300
3,904

0
1

¥8,322¥8,323

¥1

¥0

¥(18)

¥(18)

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

Thousands of U.S. dollars (Note 1)
2012
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$57,282
70,568(109)$70,459
19,468$57,282$-$70,459
19,468$-$147,209$147,209$-

33,082
17,0343,650
47,48833,082
17,0343,650
47,500012$101,254$101,266$12$0$(219)$(219)

Derivative financial instruments

Financial instruments for which it is extremely difficult to determine the fair value as of March 31, 2011
and 2012 were as follows, respectively.
Thousands of
U.S. dollars(Note 1)Millions of yen
2011
Unlisted equity securities

2012¥1,023− 17 −¥271$3,296

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. The annual average interest rates applicable toshort-term borrowings at March 31, 2011 are 1.9% and 2012 are 1.5%, respectively.
Long-term debt as of March 31, 2011 and 2012 consisted of the following:

Millions of Ｙen
2011
2012
¥4,759¥3,90336
300

Borrowings from financial institutions
1.6% Yen Bonds due 2011
0.6% Yen Bonds due 2016
Long-term installment payment for
Purchase of machinery and equipment
Less: Portion due within one year0
(1,793)¥3,002(2,670)¥1,533Thousands of
U.S. dollars(Note 1)
2012
$47,4883,650(32,486)$18,652

The aggregate annual maturity of long-term debt after March 31, 2012 is summarized as follows:
Thousands of
U.S. dollars
Millions of Ｙen
Years ending March 31,(Note 1)2013
¥2,670$32,486
2014
583
7,093
2015
395
4,806
2016 and thereafter
555
6,753
¥4,203$51,138
The Company's assets pledged as collateral for short-term borrowings and long-term debt were as
follows:

Millions of Yen
2011
2012
Principal of debt:
Short-term borrowings
Portion due within one year
Long-term borrowings¥ 1,000
1,900¥ 2,900

Assets pledged as collateral:
Land
Buildings¥3,7282,874¥6,602− 18 −¥

Thousands of
U.S. dollars(Note 1)2012

¥ 1,900
1,900$ 23,117$23,117¥3,7282,724¥6,452$45,358
33,143$78,501

Regarding loan payables, the syndicate loan contract with limit of ¥3,400 million yen ($41,368
thousand), commitment line contracts with limits of ¥2,500 million yen ($30,417 thousand) andconvertible term loan contract with limit of ¥300 million yen ($3,650 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 and convertible 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（$109,989 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.
(Financial covenant terms included in the commitment line contracts)(1) The amount of Net Assets on the consolidated balance sheets at the end of each fiscal year andeach semiannual period must be maintained ¥10,340 million yen（$125,806 thousand）or more.
(2) The ordinary losses before depreciation in both consolidated statements of income for each fiscal
year must not be existed in two successive periods.
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, 2011 and 2012.

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
2011
2012
¥1,630¥1,805804
876

Thousands of
U.S. dollars(Note 1)
2012
$21,961
10,658

826
40

929
146

11,303
1,777

¥786

¥783

$9,526

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, 2011 and 2012.

Millions of Yen
2011
2012
¥111
¥98
30
29
18
8
¥159
¥135

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

− 19 −

Thousands of
U.S. dollars(Note 1)2012
$1,193353
97$1,643Assumption used in the accounting for the defined benefit plans for the year ended March 31, 2011
and 2012 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

2011
Straight –line basis

2012
Straight –line basis

2.00%
0.00%
-

1.21%
0.00%
-

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, 2011 and 2012were ¥331million and ¥239million ($2,908 thousand), respectively.

9.

Loss on impairment of fixed assets
The Company has recognized impairment loss of 126 million yen ($1,533 thousand) in consolidated
statements of income for the fiscal year ended March 31, 2011, mainly for the following 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 ($1,375thousand).
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, 2011 and 2012.

− 20 −

The deferred tax assets and deferred tax liabilities at March 31, 2011 and 2012 are as follows:
Thousands of
U.S. dollars
Millions of Ｙen(Note 1)
2011
2012
2012
Deferred tax assets:
Inventory write down
¥172
¥293
$3,565
Impairment loss of fixed assets
714
562
6,838
Retirement and severance benefits
302
269
3,273
Net operating loss carried forward
1,696
780
9,490
Other, net
927
915
11,132
Valuation Allowance(3,715)(2,735)(33,277)
96
84
1,021
Deferred tax liabilities:
Other, net
(308)
(217)
(2,640)(308)(217)(2,640)Net deferred tax assets/(liabilities)¥(212)¥(133)$(1,619)
11.

Other Comprehensive Income(Loss)
The reclassification adjustments and tax effects for components of other comprehensive income (loss)
for the year ended March 31, 2012 are as follows:

Millions ofＹen
2012
Unrealized gain on other securities:
Amount arising during the year
Before Tax effectTax effectTotal unrealized gain on other securities
Translation adjustments:
Amount arising during the year
Share of other comprehensive income ofaffiliates accounted for using the equity
method:Amount arising during the year
Reclassification adjustments for losses(income) realized in net income
Total share of other comprehensive
income of affiliates accounted for using
the equity method
Total other comprehensive income (loss)

Thousands of
U.S. dollars(Note 1)
2012

¥(71)
(71)
51
(20)

$(864)
(864)
621
(243)

8

97

39

475

411

5,000

450
¥438

5,475
$5,329The above information for the year ended March 31, 2011 is not required to be presented under the accounting
standard for presentation of comprehensive income as an exemption for the first year of adopting the standard.
12.

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.

− 21 −

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, 2011 and 2012 are¥2million and ¥1 million ($12 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, 2011
Millions of yen

Acquisition costs
Accumulated
Depreciation
Net leased property

MachineryAnd
Equipment
¥ 7
5

Other

¥ 2

Total
¥-

¥7
5

¥ -

¥2

As of March 31, 2012
Millions of yen

Acquisition costs
Accumulated
Depreciation
Net leased property

MachineryAnd
Equipment
¥ 7
7

Other

¥ 0

Total
¥-

¥7
7

¥ -

¥0

Thousands of U.S. dollars (Note 1)

Acquisition costs
Accumulated
Depreciation
Net leased property

MachineryAnd
Equipment
$85
85

Other

$0

$-

Total
$85
85

$-

$0

Future minimum lease payments as of March 31, 2011 and 2012:

Due within one year
Due after one year
Total

Millions of yen
2011
¥1
0
¥1

Thousands ofMillions of yen
U.S. dollars (Note 1)
2012
2012
¥0
$0
¥0
$0

− 22 −

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 ¥1 million ($12 thousand) for the year ended March 31, 2011and 2012,
respectively.
13.

Contingent Liabilities
The Companies have no significant contingent liabilities.

14.

Segment Information(1) Segment by products
Millions of Ｙen

Year ended March 31, 2011

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¥ 21,304
21,304¥1,2891,289¥-¥22,593
22,593

1,131
158

¥-

18,525¥ 4,068¥ 1,075
¥ 86
¥ 36

-

¥ 27,289¥ 1,171¥ 578

17,394¥ 3,910¥ 26,214¥ 1,085¥ 542

Millions of Ｙen

Year ended March 31, 2012

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¥ 15,852
15,852¥1,2881,288¥-¥17,140
17,14014,559¥ 1,293

1,104
¥ 184

¥-

15,663¥ 1,477¥ 25,458¥ 1,109¥ 938¥ 1,360
¥ 73
¥ 398

-

¥ 26,818¥ 1,182¥ 1,336− 23 −

Year ended March 31, 2012

Thousands of U.S. dollars (Note 1)

Semiconductor
equipment

Fine plastic
moldElimination/
Unallocated
AssetsConsolidated$192,870
192,870$15,671
15,671$-$208,541
208,541

177,138$ 15,732

13,432$ 2,239$-$190,570$ 17,971$309,746$ 13,493$ 11,413$16,547$ 888$ 4,842-$326,293$ 14,381$ 16,255

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
2011
2012
¥ 4,508¥ 3,320
17,060602
423
18,085¥22,593− 24 −

13,581165
74
13,820¥17,140

Thousands of
U.S. dollars(Note 1)
2012
$40,394
165,2392,008
900
168,147$208,541

Corporate Information
as of June 28, 2012
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.

Hirokazu Okada

Directors
Tsuyoshi Amakawa
Hisaji Konishi
Makoto Fukutomi
Hisao Nishimura

Paid-in Capital:¥8,932,627,777

Hajime Kuwaki

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
Hisayoshi Kobayashi

100
First Section of the Tokyo Stock Exchange

Corporate Auditors

First Section of the Osaka Securities Exchange

Masanori Sugiyama

Mizuho Trust & Banking Co., Ltd

Daisuke Wake

From April 1 to March 31429
http://www.towajapan.co.jp
BANDICK Corporation
TOWATEC 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
TOWA-Jipal Technologies Co., Ltd.
Scientific and Semiconductor Manufacturing Equipment Recycling Co., Ltd.

− 25 −

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