ANNUALREPORT2008

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, singulation systems and precision molds for
manufacturing semiconductors, as well as the manufacture and sales of fine 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 Japanese economy over the first half of this consolidated fiscal year has been on arecovery trend, thanks to an increase in exports, especially to Asian nations, and steady capital
expenditure backed by improved corporate profits. However, in the second half of thisconsolidated fiscal year, uncertainty about the future economy has rapidly increased. This has
included escalating resource prices, such as crude oil, and worldwide credit contraction
triggered by the subprime mortgage crisis.
The semiconductor industry has done well on the amount of semiconductor production
based on an expansion of the digital home appliance market and demand for end products
mainly in developing nations, such as BRICs. At the same time, however, the price ofsemiconductors has declined significantly, attributing to intensified intercorporate competition
mainly on memory products.

Performance
Given such an economic atmosphere, for the current period, we achieved consolidated
sales of ¥ 25,754million (¥ 593 million or a 2.4% increase from the same period in the previousyear), due to the strong entry of molding equipment influenced by full operations in China by
Taiwan assembly houses. Also, in terms of profit and loss, operating income soared to ¥ 2,381
million (¥ 1,156 million or a 94.5% increase from the same period in the previous year), and net
income grew to ¥ 2,119 million (¥ 1,080 million or a 104.0% increase from the same period in
the previous year). Behind such drastic increases is the improvement of earning capacity withthe progress of our mid-term management plan and programs, including the improvement of
production systems, such as shortening lead time and increasing production capacity, and the
reduction of fixed cost by closing a mold manufacturing plant in Singapore and downsizing

subsidiaries in the U.S.A. Also, over the current period, we posted a 15-month loss and profit
for six overseas subsidiary companies due to the accounting shifting adopted by their parent
company, TOWA, with a view to strengthening control on loss and profit on a consolidated basis.
Therefore, sales and operating income additionally increased to ¥ 2,266 million and ¥ 268
million respectively. If the consolidated statement for all subsidiary companies is set for theperiod of 12 months from April 2007 to March 2008, the same as their parent company TOWA,
net sales would be ¥ 24,102 million and, operating income, ¥ 2,348 million. (These 12-monthconsolidated unaudited statements are pro forma figures.)Looking Ahead
Our group companies have developed state-of-the-art technologies for semiconductor
packaging in the semiconductor field where technological innovation is significant, and ourtechnological development has helped semiconductor manufacturing companies realize slim
models and miniaturization of semiconductors. We proudly think that our technologicaldevelopment has contributed to slim-models/miniaturization and high functionalization of end
products for everyday use. Moreover, our technologies have been adopted as the best solution in
periphery fields, as in the semiconductor field. Our Mold Die related technology representing
our core competence, such as Ultra-Precision-Molds, brought this success in new fields.
Therefore, with increased sophistication in this Core competence, our group companies haveestablished and implemented the following medium- to long-term strategies.
1. Concentrated allocation of management resources to Core competence
Our origin is "Manufacturing". Since its foundation, our technologies have made it
possible to save natural resources, and realize high quality and high performance in thesemiconductor field. The know-how of our technologies has accumulated as Mold Die
related technology. This remains our Core competence, and also is the source of the highlevel of trust the TOWA Group has earned from the market. By intensively allocating andinvesting our management resources into this Mold Die related technology, we will
maintain overwhelming market share in the semiconductor packaging field. Specificapproaches are as follows:a. Enhance the production capacity of Ultra-Precision-Molds
b. Achieve the quick delivery (shortened lead-time) of Ultra-Precision-Molds
c. Cultivate human resources to maintain our high technical design capability

2. Providing new solutions
In addition to our conventional transfer molding technology, the TOWA Group havedeveloped and commercialized compression molding technology. With these two molding
technologies, TOWA will meet our customers’ diversified demands and also promote
applications in new business fields. The main approaches are as follows:a. Achieve state-of-the-art packaging, such as multistage stacks, with compression
molding technology
b. Provide packaging solutions that address customer needs, such as cost reduction
c. Apply compression molding technologies to the LED market
3. Enhancing business scale with new products
The production site of the "singulation system", which is a main product of our group, has
moved from the U.S. to Japan. We have achieved a competitive price and quality by
fundamentally changing the design from U.S. specifications to Japanese specifications. With
the release of this new singulation system to the market during FY2008, we are attempting
to regain the top share in the singulation system field and enhance the business scale. Also, amulti press mass production machine for the LED molding system, which has been adopted
as the best solution due to the application of mold technology, will be released. We will fully
expand our business in the LED field where an expansion of the market scale is expected.
4. Corporate Strategy of the TOWA GroupOur group consists of 17 companies in total, including 12 consolidated subsidiaries and 4
affiliated companies. Each company operates its business through the segmentation of
manufacturing and sales with bases all over the world. By choosing an appropriate
manufacturing or sales system for the market environment or economical and politicalsituations of the host country, we are reducing labor costs and other fixed costs, reducing
distribution costs, shortening lead time, and optimizing QCD.
We look forward to your continuing support and assistance in the future.
We would like to express our heartfelt appreciation for your support.
August 2008

Yoichi Kawahara
President & COO

Consolidated Balance Sheets
TOWA CORPORATION AND CONSOLIDATED SUBSIDIARIESMarch 31, 2007 and 2008

2007

2008

Thousands of
U.S. dollars(Note 1)
2008

￥

￥

＄

Millions of yen

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

3,542

3,351

33,446Inventories …………………………………………………….
Deferred tax assets (Note 9) …………………………………
Other current assets …………………………………………..

8,617
(186)
8,431
5,391
29
320

9,871
(102)
9,769
4,053
48
429

98,523(1,018)97,50540,453479
4,282

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

17,713

17,650176,165

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

4,650
12,451
9,572
70(14,147)

4,529
12,3989,653
36(14,684)

45,204
123,745
96,347360(146,562)

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

12,596

11,932

119,094

Other assets:
Investment securities (Note 3) ………………………………..
Deferred income taxes (Note 9) ……………………………..
Other …………………………………………………………..

3,417
38
1,162

3,046
36
1,696

30,402359
16,928

Total other assets ………………………………………….

4,617

4,778

47,689Total assets ………………………………………………………

34,92634,360342,948

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.

Consolidated Balance Sheets
TOWA CORPORATION AND CONSOLIDATED SUBSIDIARIESMarch 31, 2007 and 2008

2007

2008

Thousands of
U.S. dollars(Note 1)
2008

￥

￥

＄

Millions of yen

LIABILITIES ANDSHAREHOLDERS' EQUITYCurrent liabilities:
Short-term borrowings (Note 4) ………………………………
Current portion of long-term debt (Note 4) ……………………
Notes and accounts payable ……………………………………
Accrued expenses(Note 2(10)) …………………………………
Accrued income taxes …………………………………………
Other current liabilities(Note 2(9))……………………………

5,244
2,826
2,535
429
114
1,689

5,274
2,524
2,931
463
83
1,569

52,64025,192
29,254
4,621
829
15,66012,837

12,844

128,196

6,007
712

4,127
739

41,192
7,376

25
402
2

255
1

2,545
10

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

7,148

5,122

51,123

Total liabilities ………………………………………………

19,985

17,966

179,319

Shareholders' equity (Note 6)
Common stock
Authorized: 80,000,000 shares
Issued :25,021,832 shares at 31st March, 2008……………
Additional paid-in capital ………………………………………
Retained earnings ………………………………………………
Unrealized gain on other securities ……………………………
Translation adjustments ………………………………………
Less: Treasury stock at cost ……………………………………

8,933
3,115
1,927
621
351
(6)

8,933
3,115
3,921
333
99
(7)

89,16131,091
39,136
3,323
988
(70)

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

14,941

16,394

163,629

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

34,92634,360342,948

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

Long-term liabilities:
Long-term debt (Note 4) ………………………………………
Accrued severance indemnities for employees(Notes2(11)and
Accrued severance indemnities for directors
and corporate auditors………………
Deferred tax liabilities (Note 9) ………………………………
Other long-term liabilities ………………………………………

--Contingent liabilities (Note 11)

The accompanying notes are an integral part of these financial statements

Consolidated Statements of Income
TOWA CORPORATION AND CONSOLIDATED SUBSIDIARIESTwo years ended March 31, 2008

Thousands of
U.S. dollars(Note 1 )2008

Millions of yen
2007

2008

￥

￥

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

25,16019,455
5,705

25,754
18,221
7,533＄
257,052
181,864
75,188Selling, general and administrative expenses (Notes2(10)and 7)…

4,481

5,152

51,423Operating Income…………………………………………………..

1,224

2,381

23,765

Other income (expenses)
Interest and dividend income……………………………………………
Interest expenses…………………………………………………………
Foreign exchange gains（losses) …………………………………………
Gain on sale of investment securities……………………………………
Equity in earnings of affiliates……………………………………………
Gain(Loss) on sale of investment in stocks of affiliated company………
Loss on subsidiaries liquidation (Note 8) …………………………………
Gain on sale of assets for discontinuing operation ………………………
Other, net…………………………………………………………………
Total other income (expenses) ………………………………………

38
(410)
78
257
(110)
156
9

43
(337)
(426)
31
332
(17)
49
108
(217)

429
(3,364)(4,252)
309
3,314
(170)
489
1,079
(2,166)

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

1,233

2,164

21,599

Income taxes (Note 9)
Current ……………………………………………………………….
Deferred ……………………………………………………………..

213
(19)

60
(15)

599
(150)

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

1,039

2,119

21,150Minority Interests …………………………………………………………

-

-

-

Net Income……………………………………………………………

1,039

2,119

21,150

84.70
10.00

U.S. dollars(Note 1 )
＄
0.85
0.10

Yen
Amount per share of common stock (Note 2 (18) ):Net Income……………………………………………………………
Diluted net income ……………………………………………………
Cash dividends ………………………………………………………

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

￥

￥
41.59
5.00

Consolidated Statements of Shareholders' Equity
TOWA CORPORATION AND CONSOLIDATED SUBSIDIARIESTwo years ended March 31, 2008

Millions of yen
Number of

Unrealized

Additional

Total

shares ofCommonpaid-in

Retained

gain on otherTranslation

Treasuryshareholders'common stock

stock

capitalearnings

securities

adjustmentsstockequity

￥

￥

￥

￥

8,533

8,446

(4,837)

761

Balance at March 31, 2006 …………………………………… 24,021,832

￥

￥
105

￥
(5)

13,003

1,039

Net Income ………………………………………………….

-

-

-

1,039

-

-

-

Bonus to corporate directors …………………………………

-

-

-

(6)

-

-

-

(6)

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

-

-

-

-

-

-

(1)

(1)

-

-

-

(140)

-

-

(140)

400

400

-

-

-

-

800

-

-

246

-

246

-

-

-

Net increase of unrealized gain on other securities ……………
Allocation of new shares to a third party…………………

1,000,000

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

-

-

-

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

--(5,731)

5,731

3,115

1,927

Balance at March 31, 2007 …………………………………… 25,021,832

8,933

621

351

-

(6)

14,941Net Income ………………………………………………….

-

-

-

2,119

-

-

-

2,119

Cash dividends …………………………………………………

-

-

-

(125)

-

-

-

(125)

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

-

-

-

-

-

-

(1)

(1)

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

-

-

-

-

(288)

-

-

(288)

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

-

-

(252)

-

(252)

99

(7)

16,394

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

8,933

3,115

3,921

333

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

Unrealized

Additional

Total

shares ofCommonpaid-in

Retained

gain on otherTranslation

Treasuryshareholders'common stock

stock

capitalearnings

securities

adjustmentsstockequity＄＄＄＄89,16131,091

19,233

Balance at March 31, 2007 …………………………………… 25,021,832

＄

6,198

＄

3,503

＄
(60)

149,126

Net Income ………………………………………………….

-

-

-

21,150---21,150Cash dividends …………………………………………………

-

-

-

(1,247)---(1,247)

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

-

-

-

-

-

-

(10)

(10)

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

-

-

-

-

(2,875)--(2,875)

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

--(2,515)-(2,515)988(70)

163,629

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

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

89,16131,091

39,136

3,323

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

2007
￥
1,233

2008
￥
2,164

2008
＄
21,599

1,145
(257)
(38)
410
(29)
110
296
67
360
(944)

1,228
(332)
(43)
337
(224)
(1,578)
1,097
(127)
494

12,257(3,314)(429)
3,364(2,236)(15,750)
10,949(1,268)
4,931

(246)
337
2,444
47
(371)
(225)
1,895

(77)
54
2,993
45
(362)
(89)
2,587

(769)
539
29,873449(3,613)(888)
25,821

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 ………………………………………

(6)
(587)
946
(101)
252

(27)
246
(1,369)163(97)(1,084)

(269)
2,455
(13,664)
1,627
(968)
(10,819)

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…………………………………………………………………….
Issue of common stock………………………………………………………………….
Purchase of treasury stock ……………………………………………………………….
Cash dividends ……………………………………………………………………………
Other, net …………………………………………………………………………………
Net cash provided by (used in ) financing activities ……………………………………

(2,150)1,410(2,076)
352
(536)
800
(1)
(2)
(2,203)283
800(2,332)
(572)
(1)
(125)
(1,947)

2,824
7,985
(23,276)(5,709)(10)(1,247)(19,433)

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 …………………………………………

9
(47)
3,589

253
(191)
3,542

2,525
(1,906)35,353

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

3,542

3,351

33,447

Cash Flows from Operating Activities:
Net Income before income taxes and minority interests …………………………………
Adjustments for:
Depreciation ………………………………………………………………………….
Equity in earnings of affiliates ……………………………………………………….
Interest and dividends income ……………………………………………………….
Interest expenses ……………………………………………………………………
Foreign exchange losses (gains) ……………………………………………………
Loss 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.

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.
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, 2008, which was ¥100.19 to US$1.00.
These convenience translations should not be construed as representations that the Japanese yen amounts
have been, could have been, or could in the future be, converted into U.S. dollars at this or any other rateof exchange.
For the purpose of enhancement of group management, the company decided to unify the financial
period for all its subsidiaries. As a result of a change in the fiscal year-end from December 31 to March
31(including assumed settling day for 3 subsidiaries), the accounting term for TOWAM Sdn. Bhd.,
TOWA Singapore Mfg Pte.Ltd, TOWA-Intercon Technology,Inc., TOWA (Shanghai) Co.,Ltd., TOWA
(Suzhou) Co.,Ltd., and TOWA TAIWAN Co., Ltd was 15 months for the year ended March 31, 2008.As
a result, sales and operating income for the year ended March 31, 2008 increased by 2,266 million
yen($22,617thousand) and 268 million yen($2,675thousand), respectively.

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. At March 31, 2008, the year-end of the consolidated
subsidiaries matches that of the consolidated financial statements(see note 1).
Shown below are the significant subsidiaries and affiliates of the Company.

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

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

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

100
100

Germany
Singapore

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．TOWA Singapore Mfg.Pte.Ltd is in process of liquidation.
※２．Ratio of capital contribution of TONGING Corporation by the Company has been decreased from
50% to 35% by selling off of its shares.
※３．The Board directors of TOWA-Intercon Technology, Inc decided to change its company name as
TOWA America Corporation effecive July 1, 2008.
(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 Shareholders’ Equity in theaccompanying 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.

Components of cash and cash equivalents as of March 31, 2007 and 2008 are as follows:
Thousands of
U.S. dollars(Note 1)
2008

Millions of Yen
2007
2008
Cash on hand and at banks
Less: Time deposits with deposit termof over three months
Cash and cash equivalentat end of year

¥3,542¥3,351$33,446---¥3,542¥3,351$33,446(4) Securities
Securities are classified into four categories.
Categorization and valuation for investments in securities are as follows:1. Trading Securities
・ Such securities held for the purpose of generating profits from short-term price movements.
・ Unrealized gain/loss at the end of period resulting from the valuation by applying the fairvalue at such date is directly debited/credited to income;・ Such securities are treated in current assets in the balance sheet.
2. Held-to-maturity Debt Securities
・ Debt securities whose maturity dates are predetermined and are to be redeemed at par,acquired with intention to hold to their maturity dates;
・ The difference between the acquisition cost and the amount expected to gain at maturity isamortized or appreciated over the remaining period to maturity date. The amount amortized orappreciated is charged/credited to income for the respective period as interest expense orinterest income, as the case may be.
・ Unrealized loss will be required to be charged to income as impairment unless unrealized loss
is expected to recover within a reasonable period.
3. Shares in equity of Subsidiaries and Affiliates
・ Those securities are carried at cost unless such investment is regarded impaired.
4. Other Securities:
・ Such securities other than those categorized in 1 to 3 above;・ Other Securities with market quotation are valued at such market price at the end of period,
and those without market quotation are valued at cost.
・ Unrealized gain/loss at the end of period resulting from such valuation is charged toshareholders’ equity as “Unrealized gain/(loss) on Other Securities” after netting off thedeferred income taxes thereto.
・ Unrealized loss which it incurred as the fair value is less than 50% of its acquisition cost will
be required to be charged to income.
・ Unrealized loss which it incurred as the fair value is 30% ~50% of its acquisition cost will be
required to be charged to income unless the unrealized loss is expected to recover within areasonable period.
The moving average method is applied for calculation of the costs of securities.

(5) Inventories
Inventories are mainly stated at the lower of cost or market, the cost being determined by mainly
specific identification method for finished products and work-in-process, by mainly moving-averagemethod 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.
Pursuant to revision of the Corporation Tax Law, the Company and its domestic subsidiaries havechanged their method of depreciating assets acquired on or after April 1, 2007, to confirm to revised law.
As a result, operating income and income before income taxes for the year ended March 31, 2008
decreased by 21 million yen($210 thousand), respectively.
The Company and its domestic consolidated subsidiaries also depreciate the difference between 5% of
the acquisition cost of asset acquired on or before March 31, 2007 and the memorandum value uniformly
over a five-year period, starting the year following the fiscal year in which the depreciated value of said
assets reaches 5% of the acquisition cost of assets using the pre-amendment depreciation method. As aresult, operating income and income before income taxes for the year ended March 31, 2008 decreased by
38 million yen($379 thousand), respectively.
(8) 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.
(9) 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, 2008, the liability for expected warranty costs was 72 million yen ($719 thousand) .

(10) Accrued Bonus for Directors
The Company and its subsidiaries provide for accrued bonuses to directors for the expected payment
of directors’ bonuses for the current fiscal year to those directors serving at the end of the fiscal year.
Effective from the year ended March 31, 2007, the Company applied “Accounting standard for
directors’ bonus” (Accounting Standard Board of Japan Statement No.4 issued on November 29, 2005
by the Accounting Standards Board of Japan).
As a result of the application of this standard, operating profit, ordinary income and income before
income taxes for the year ended March 31, 2007 decreased by ¥26 million($260 thousand), respectively.
(11) 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.
(12) New bond issue expense
The Company record the expenses incurred relating to new bond issues to be charged to income.
(13) New share issue expense
The Company record the expenses incurred relating to new share issues to be charged to income.
(14) Research and Development Costs
Research and development expenditure is charged to income when incurred.
Expenditure relating to computer software developed for internal use is charged to income whenincurred, except if it contributes to the generation of income or to future cost savings. Such expenditure iscapitalized as an asset and is amortized using the straight-line method over its estimated useful life, which
is within 5 years.
(15) Leases
Finance leases arrangements entered into by the Company and its domestic subsidiaries, other thanthose, which are deemed to transfer the ownership of the leased assets to lessees, are accounted for by themethod similar to that applied to ordinary operating leases. For overseas subsidiaries, property leased
under the capital lease arrangement is record as property, plant, equipment and other assets in theaccompanying consolidated balance sheets.
(16) 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.
(17) 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.

(18) 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.

3.

Securities(1) The following is a summary of investments in affiliates and other securities at March 31, 2007:
Millions of yen
2007

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

Book Value(Estimated fairvalue)

Unrealized
gains

Unrealized
losses¥1,016¥1,016¥1,023¥1,023¥4¥4¥2,035¥2,035212¥1,228¥1,023¥4

212¥2,247

Cost

Investments in affiliates:

Millions of yen
2007
Book Value

Market value not available:
Equity securities……...

¥1,170¥1,170¥3,417Total(2) The following is a summary of investments in affiliates and other securities at March 31, 2008
Millions of yen
2008

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

Cost

Unrealized
gains

Unrealized
lossesBook Value(Estimated fairvalue)¥1,042¥1,042

¥
¥

634
634

¥52
¥52

¥1,624¥1,6247¥1,049

¥

634

¥52

7
¥1,631Investments in affiliates:

Millions of yen
2007
Book Value

Market value not available:
Equity securities……...

¥1,415¥1,415¥3,046

Total

Thousands of U.S. dollars (Note 1)
2008

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

Book Value(Estimated fairvalue)

Unrealized
gains

Unrealized
losses$10,400$10,400$6,328$6,328$519$519$16,209$16,209$70$10,470$6,328$519$
70$16,279

Cost

Investments in affiliates:

Market value not available:
Equity securities
Total

Thousands of
U.S. dollars(Note 1)
2008
Book Value$14,123$14,123$30,402

4． 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, 2007 and 2008 are 3.0% and 2.5%,
respectively.
Long-term debt as of March 31, 2007 and 2008 consisted of the following:Borrowings from financial institutions
1.0% Yen Bonds due 2010
1.1% Yen Bonds due 2011
1.0% Yen Bonds due 2011
1.6% Yen Bonds due 2011
Long-term installment payment for
Purchase of machinery and equipment
Capital lease payable
Less: Portion due within one year

Millions of Ｙen
2007
2008
¥6,526¥4,977
700
500
400
300
800
600
324
252
155
2
(2,900)¥6,00783(2,585)¥4,127

Thousands of
U.S. dollars(Note 1)
2008
$49,676
4,991
2,994
5,989
2,515
828
(25,801)$41,192

The aggregate annual maturity of long-term debt after March 31, 2008 is summarized as follows:
Thousands of
U.S. dollars
Millions of Ｙen(Note 1)Years ending March 31,
2009¥1,976$19,7232010
1,792
17,886
2011
359
3,583
2012 and thereafter¥4,127$41,192
The Company's assets pledged as collateral for short-term borrowings and long-term debt were as
follows:
Thousands of
U.S. dollars
Millions of Yen(Note 1)
2007
2008
2008
Principal of debt:
Short-term borrowings
¥ 170
¥ 70
$ 699
Portion due within one year
606
425
4,242
Long-term borrowings
443
18
180
¥1,219¥ 513$5,121
Assets pledged as collateral:
Land
Buildings¥2,5863,455¥6,041¥2,3752,747¥5,122$23,705
27,418$51,123

Regarding loan payables, the syndicate loan contract with limit of ¥4,000 million
yen($39,924thousand) and commitment line contracts with limits of ¥ 2,500 million yen ($ 24,953
thousand), respectively include financial covenant terms. The contractor triggers acceleration and isenforced to repay the full principal and interest if the contractor breaches either of the following terms.

(Financial covenant terms included in the syndicated loan contract and commitment line contract)(1) The amount of shareholder’s equity on the consolidated and non-consolidated balance sheets at theend of each fiscal year and each semiannual period must be maintained at 60 % or more of the same
respective period in the previous year, and 60 % or more of the shareholder’ equity on the consolidated
and non-consolidated balance sheet of the fiscal year ended March 31, 2004.
(2) The ordinary losses in both consolidated and non-consolidated statements of income for each fiscal
year must not be existed in two successive periods after the fiscal year ended March 31, 2005.
5.

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, 2007 and 2008.
Thousands of
U.S. dollars
Millions of Yen(Note 1)
2007
2008
2008
Projected benefit obligation at end of year
¥1,485¥1,556$15,530
Fair value of plan assets at end of year
792
748
7,466
Funded status:
Benefit obligation in excess of plan assets
693
808
8,064
Unrecognized actuarial loss
(19)
69
688
Accrued pension liability recognized in theConsolidation balance sheets
¥712
¥739
$7,376
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, 2007 and 2008.
Thousands of
U.S. dollars
Millions of Yen(Note 1)
2007
2008
2008
Service cost
¥136
¥122
$1,218Interest cost
26
26
259
Expected return on plan assets
(16)
(6)
(60)
Actuarial losses
(15)
(3)
(30)
Net periodic benefit cost
¥131
¥139
$1,387
Assumption used in the accounting for the defined benefit plans for the year ended March 31, 2007
and 2008 are as follows:
2007
2008
Method of attributing benefit
Straight –line basis
Straight –line basis
to periods of service
Discount rate
2.0%
2.0%
Long-term rate of return on fund assets
2.2%
0.7%
Amortization unrecognized projected
Benefit obligation at the date of transition
Amortization period for actuarial losses
15years(declining15years(decliningbalance basis)balance basis)

6. 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.
Effective from the year ended March 31, 2007, the Company has applied “Accounting standards forpresentation of net assets in the balance sheet (Accounting Standards Board of Japan Statement No.5)”,and “Implementation guidance for Accounting standards for presentation of net assets in the balance sheet(Accounting Standards of Japan Guidance No.8)” both issued by the Accounting Standard Board of Japanon December 9, 2005.

7.

Research and Development Costs
Research and development costs charged to income for the years ended March 31, 2007 and 2008
were ¥357million and ¥747million ($7,456 thousand), respectively.

8. Loss on subsidiaries liquidation
The contents of loss on subsidiaries liquidation are losses on liquidation of TOWA Singapore
Mfg.Pte.Ltd. TOWA Singapore Mfg.Pte.Ltd is in process of liquidation.

9.

Income Taxes
The company is subject to a number of different income taxes, which in the aggregate, result in astatutory tax rate in Japan of approximately 39.8% for the years ended of March 31, 2007 and 2008.

Reconciliation between the Japanese effective statutory tax rate and the Company’s tax rate is asfollows:
2008
Statutory tax rate…………………………….
39.8%
Non-deductible expenses...........................
0.7
Differences in tax rate between foreignsubsidiaries and the Company…………...
(2.1)
Loss on decrease of valuation reserve…...
(37.6)
Other,net……………………....................
1.3
Effective income tax rate
2.1

The deferred tax assets and deferred tax liabilities at March 31, 2007 and 2008 are as follows:
Thousands of
U.S. dollars(Note 1)Millions of Ｙen
2007
2008
2008
Deferred tax assets:
Inventory write down
¥512
¥243
$2,425
Impairment loss of fixed assets
751
691
6,897
Retirement and severance benefits
239
249
2,485
Net operating loss carried forward
2,830
2,269
22,647
Other, net
1,045
932
9,302
Valuation Allowance(5,310)(4,300)(42,918)
67
84
838
Deferred tax liabilities:
Special tax purpose provision(5)
Other, net
(397)
(255)
(2,545)(402)(255)(2,545)Net deferred tax assets/(liabilities)¥(335)¥(171)$(1,707)
10.

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.
Total lease payments for such lease arrangements for the year ended March 31, 2007 and 2008 are¥21million and ¥12 million ($120 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, 2007
Millions of yen

Acquisition costs
Accumulated
Depreciation
Net leased property

MachineryAnd
Equipment¥ -Software
¥ 5
5

Other
¥42
24

Total
¥ 47
29

¥ -

¥ 0

¥18

¥ 18

MachineryAnd
Equipment¥ 7
1

Software
¥-

Other
¥34
26

Total
¥41
27

¥ 6

¥-

¥ 8

¥14

As of March 31, 2008
Millions of yen

Acquisition costs
Accumulated
Depreciation
Net leased property

Thousands of U.S. dollars (Note 1)

Acquisition costs
Accumulated
Depreciation
Net leased property

MachineryAnd
Equipment$70
10

Software
$-

Other
$339
260

Total
$409
270

$60

$-

$ 79

$139

Future minimum lease payments as of March 31, 2007 and 2008:

Due within one year
Due after one year
Total

Millions of yen
2007
¥10
8
¥18

Thousands ofMillions of yen
U.S. dollars (Note 1)
2008
2008
¥7
$70
7
70
¥14
$140

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 ¥21 million and ¥12 million ($120 thousand) for the year ended March 31, 2007 and2008, respectively.
11.

Contingent Liabilities
The Companies have no significant contingent liabilities.

12.

Segment Information(1) Segment by products
Millions of Ｙ en

Year ended March 31, 2007

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¥23,628
23,628¥1,532
1,532¥-¥25,160
25,16022,591¥1,037

1,345
¥187

¥-

23,936¥1,224¥33,611¥1,030¥578¥1,315
¥115
¥126

-

¥34,926¥1,145¥704

Millions of Ｙ en

Year ended March 31, 2008

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¥ 24,440
24,440¥1,314
1,314¥-¥25,754
25,754

22,255¥ 2,185

1,118
¥ 196

¥-

23,373¥ 2,381¥ 33,252¥ 1,134¥ 1,424¥ 1,108
¥ 94
¥ 84

-

¥ 34,360¥ 1,228¥ 1,508

Year ended March 31, 2008

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

Thousands of U.S. dollars (Note 1)

Semiconductor
equipment

Fine plastic
moldElimination/
Unallocated
AssetsConsolidated$243,937
243,937$13,115
13,115$-$257,052
257,052

222,128$21,809

11,159$1,956$-$233,287$23,765$331,889$ 11,318$ 14,213$11,059
$ 938
$ 838

-

$342,948$ 12,256$ 15,051

(2) Segmented by geographical location of activities
Millions of Ｙen

Year ended March 31, 2007

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

Cost of sales andOperating expenses
Operating income (loss)
Ⅱ.AssetsAsia¥21,273238
21,511

¥

548
6,227
6,775

¥3,306
855
4,161

¥33
56
89

¥

(7,376)(7,376)¥25,160¥25,160

19,672¥ 1,839

6,392
¥ 383

5,015
¥(854)

77¥12(7,220)¥ (156)23,936¥ 1,224¥31,290¥ 5,761¥2,829¥97¥(5,051)¥34,926

Millions of Ｙen
NorthAmerica

Cost of sales andOperating expenses
Operating income (loss)

Ⅱ.Assets

OthersElimination/
Unallocated
AssetsConsolidated

Japan

Asia

¥23,818287
24,105¥1,682
6,865
8,547

¥226
839
1,065

¥28
74
102

¥
(8,065)(8,065)¥25,754¥25,754

22,382¥ 1,723

7,863
¥ 684

1,160
¥(95)

91
¥11

(8,123)¥58

23,373¥ 2,381¥33,265¥6,253¥1,432¥90¥(6,680)¥34,360

Year ended March 31, 2008

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

OthersElimination/
Unallocated
AssetsConsolidated

Japan

Year ended March 31, 2008

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

North
AmericaThousands of U.S. dollars (Note 1)

North
America

OthersElimination/
Unallocated
AssetsConsolidated

Japan

Asia

$237,728
2,865
240,593$16,788
68,52085,308$2,256
8,374
10,630

$280
739
1,019

223,396$ 17,197

78,481$ 6,827

11,578$ (948)

908
$ 111

$

$332,019$62,411$14,293$ 898$(80,498)(80,498)$257,052$257,052(81,076)578

233,287$ 23,765$(66,673)$342,948

(3) Sales by region

Millions of Ｙen
2007
2008
¥ 7,653¥ 6,925

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

13.

16,743543
221
17,507¥25,160

18,020654
15518,829¥25,754

Thousands of
U.S. dollars(Note 1)
2008
$69,119
179,858
6,528
1,547
187,933$257,052

Related party transaction
In the financial year ended March 31, 2007
(1) Directors and Individual Major Shareholders
Pw

Relationship

Name

Holding rateofVoting rights

Type ofTransaction(Notes)Amounts of transaction(Millions of Yen)

(Thousands of
U.S. dollars)

Chairman andAcceptance of
8.4%
¥800
$6,777CEO of the Kazuhiko Bandoh
new stock issueCompanyNotes
New stock issue is allocation of new shares to a third party which was approved at the meeting of boardof directors of the Company on March 31 2006.

Corporate Information
as of June 27, 2008
Corporate Data
Corporate Name:
Headquarters/Factory:

TOWA CORPORATION
5 Kamichoshi-cho, Kamitoba,

Board of Directors
Chairman & CEO
Kazuhiko Bandoh

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

April 17, 1979

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.

President & COO
Yoichi Kawahara

Directors
Hisao Nishimura
Hirokazu Okada
Makoto Fukutomi
Kiyoshi Osaki

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:

100

Tsutomu Shirayama

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 31455
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.

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