背（背幅 6.4mm）

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

Passionfor innovation
Annual Report 2016

Year Ended March 31, 2016

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

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天PickupOur commitment to generating value

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

02 TAIYO HOLDINGS CO., LTD. Annual Report 2016TAIYO HOLDINGS CO., LTD. Annual Report 2016

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天PickupLeading the global industry

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

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天PickupCreating the one and only productSelf-sufficient personnel
are vital to the future of
the group
For the Taiyo Group to achieve continuous growth, we need all employees to be self-sufficient, that is,
personnel who are a b l e to u se o p p o rtu n i ti e s a n d a ch i e ve p e rso n a l g ro w th . Th e Gro u p cre a te s suchopportunities by dispatching employees to universities as well as improving workplace environments so that
employees can create flexible ideas in their day-to-day work.

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天Basic Management Policies

Basic Management Policies

ProfileContents

The Taiyo Group is the chemical manufacturer that commands

02

Pickupa top-class global market share of solder resist, which is

08

Basic Management Policies

Taiyo Holdings Co., Ltd. ( “ we ” or “ our ” ) has identified its objectives as a corporate group in theessential for the printed wiring boards ( PWBs) used in a

10

History

Management Philosophy and Basic Management Policy below. We will develop by continuing thevariety of electronics products, from such IT devices as mobile

12

Message from the CEO

spirit of our Management Philosophy without changes and reviewing our Basic Management

phones, PCs, and other digital equipment to digital household

14

FeaturePolicies to match changes in the environment and strategy on a long-term basis.

appliances and in-vehicle electronics equipment.

14 Kitakyushu Plant

Established in 1953 as Taiyo Ink Manufacturing Co., Ltd.,

16 Ranzan Lab

with the manufacture and sale of printing ink and related

18

material products as its business objective, the Group

20 Main Productundertook a major transformation of its business domains in

22 New Products

1976, to a business in which solder resist was made its

24 Regional Information

mainstay product.

At a Glance

26 China

technology” of all its companies based on the technological

27 Taiwan

capabilities that have been accumulated in the development

28 Koreaand manufacture of solder resist. The Group will continue to

29 USA / Singapore / Thailand

supply across the world innovative products that go beyond

30 Supply Chains

solder resist.

32 Topics

In addition to maintaining its unwavering No. 1 position in thesolder resist field, in the years to come, the Group will be

33 Creating Optimal Working Environments
34 CSR

of businesses that will become pillars of new growth.

36 C o r p o r a t e G o v e r n a n c e
38 Board of Directors and Audit & Supervisory
Board Members

Sales by Segment( including inter- segment sales
and transactions )Operating Income by Segment( Millions of Yen )12,00010,00070,00040,000

9,614

4,451

8,000

1,212

2,227

7,739
1,763
9,855

6,000
4,775

30,00020,421

21,820

4,000

3,508

20,0000

15,78617,0032015

2016( Years ended March 31)

Japan
Other

China

0

2,467

2,255

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

4

We will constantly create opportunities for employees to challenge and develop
themselves, aiming to have a corporate group composed of people who are highly motivatedto be successful and to achieve goals set by themselves.

5

We will increase our comprehensive corporate strengths by maximizing cooperation
between the Group companies and strengthen the teamwork of all employees withemphasis on “speed and communication.”

6

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

Korea

Japan
O t her46 Consolidated Balance Sheet

Matters Regarding Forward - Looking Statements

48 Consolidated Statement of Income

This annual report contains forward-looking statements regarding Taiyo Holdings’ current management plans, strategies,

49 Consolidated Statement of Comprehensive
Incomeand may differ materially from actual results or business performance.

and other matters. Readers are cautioned that these forward-looking statements hold inherent risks and uncertainties,

50 Consolidated Statement of Changes in Equity

Definition of Terms

52 Consolidated Statement of Cash Flows“Fiscal 2015” refers to the fiscal year ended March 31, 2016, and other fiscal years are referred to in a corresponding
manner in this annual report.

2 015

2016

84 Independent Auditor ’s Report
85 Domestic and Global Network( Years ended March 31)

Taiwan39 Financial Section

54 Notes to Consolidated Financial Statements

2,000
10,000342 Management ’s Discussion and Analysis

1,414
555

9,200

We will discharge our corporate social responsibility with regard to the achievement of
our Management Philosophy, including complying with the law, protecting theenvironment, ensuring thorough quality management, and contributing to society.

40 Six-Year Summary
598( Millions of Yen)

4,141

2

32 Environmental Initiatives

focusing on research and development and on the cultivation

50,000We will generate profit and increase corporate value, thereby contributing to the well-being
and prosperity of customers, communities, shareholders, and employees.

24 Japan

To target further growth, the Group is enhancing “every

60,0001

China

Taiwan86 Corporate Information
Korea

08 TAIYO HOLDINGS CO., LTD. Annual Report 2016TAIYO HOLDINGS CO., LTD. Annual Report 2016

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天History

Growth Fundamentals
Built Up over 60 Years
Taiyo Holdings was founded in 1953 as a manufacturer and marketer of printing ink. In 1976, thecompany made the major shift of focusing on solder resist products for the electronics industry.
Today, having changed our company name from “Taiyo Ink Mfg. Co., Ltd.” to “Taiyo Holdings Co.,
Ltd.” and having revised our management philosophy in April 2013, we continue to evolve with thechanging times while maintaining our founding desire to exist as a company that is useful to people
everywhere and that brings light to the world like the sun. Moving forward, we will continue working
to be a company that is loved by all.

1953

1988

1976

2001

2013

Taiyo Ink Mfg. Co., Ltd.
established

Radical change inbusiness policy

Commenced locally-based
production overseas

Listed on the First Section of theTokyo Stock Exchange

Commemorating our 60th anniversary,and taking on new challenges

Taiyo Ink Manufacturing was

In a radical change in business policy, theIn order to respond to rapidly increasing sales in

Our listing on the First Section

As part of our strategy for ongoing Group growth, we areestablished as a manufacturing

company decided to switch from printing

K o r e a , Ta i y o I n k M f g . C o . , ( K o r e a ) L t d . w a sof the Tokyo Stock Exchange

working to expand our share of the solder resist market

and marketing company for

ink, its traditional mainstay since its

established and locally-based production was

and the completion of thewhile also creating a framework for the continuous

printing ink in Minato-ku, Tokyo.

founding, to solder resist products andcommenced. With locally-based production

Ranzan-Kitayama Facility

development and rapid commercialization of new products

In Japanese, "taiyo" meansother chemical materials for the electronics

commencing in the USA, Taiwan, and China, Taiyo(current headquarters of Taiyo

that will grow into profit drivers to rival solder resist.

"sun". The name was decided

industry. At the time, the chemical materials

Ink has built up a global supply system focused on

on because it reflects our desirebusiness was still in the trial and error

local production and local marketing.

Ink Mfg. Co., Ltd.) enabled higher quality and more stable

to be a useful existence forstage and the marketability of thesepeople everywhere and bringproducts was unknown; the future of thelight to the world like the sun,company therefore rested on this decision.

which gives its blessings to alllife on earth.

1982 Ranzan Plant (current Ranzan
Facility) established.

1984 Exhibited liquid developable solder
resist at the JPCA Show.

1985 The company developed the current

standard liquid alkaline developable
solder resist (PSR- 4000) and applied
for a basic patent.

product supply in both Japan and overseas. Responding
to the dramatically changing external environment,

1988 Established Taiyo Ink Co., (Korea) Ltd.

we also launched production and marketing in China.

1990 Established sales subsidiary2013 Obtained Taiwanese company, "Onstatic Technology
Co., Ltd."'s share and made it subsidiary company.

2014 Established photovoltaic power generation businesssubsidiary Taiyo Green Energy Co., Ltd. in Japan.

Taiyo America, Inc. in Nevada, USA.

2001 O p e n e d t h e R a n z a n - K i t a y a m a F a c i l i t y, t h ecompany ’s main domestic production base.

1995 Tr a n s f o r m e d U S A s a l e s s u b s i d i a r y Ta i y o

E s t a b l i s h e d t e c h n i c a l s u p p o r t s u b s i d i a r y Ta i y o
Ink (Thailand) Co., Ltd. in Thailand and local
p r o d u c t i o n s u b s i d i a r y Ta i y o I n k ( S u z h o u ) C o . ,Ltd. in China.

America, Inc. into a manufacturing andm arketing company.

1996 E s t a b l i s h e d l o c a l p r o d u c t i o n s u b s i d i a r y
Taiwan Taiyo Ink Co., Ltd. in Taiwan.

2015 Established Taiyo Ink Products Co., Ltd. in Korea asa sales subsidiary of Taiyo Ink Mfg. Co., Ltd.

O b t a i n e d J a p a n e s e c o m p a n y, " C h u g a i K a s e i C o . ,Ltd."'s share by a stock swap and made it subsidiarycompany.

2010 Company Split implemented and corporate name1999 E s t a b l i s h e d s a l e s s u b s i d i a r i e s Ta i y o I n kchanged to Taiyo Holdings Co., Ltd.

International (Singapore) Pte Ltd in Singapore

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

a n d Ta i y o I n k I n t e r n a t i o n a l ( H K ) Li mi t ed i nHong Kong.

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天Message from the CEO

Focusing on Semiconductors
and Other Growth Markets,
Continuing to Advance Our
Growth Strategies.
In fiscal 2015, Taiyo Group achieved record highs in net

products and service that meet the needs of oursales, operating income, and net income*. Specifically, net

customers. We also are seeing the continuing globalization

sales were 49,843 million yen (up 3.3% year on year),of our transaction partners and beginning to receive

operating income was 10,964 million yen (up 18.5% year

more comprehensive orders. In Taiwan and Korea, we

on year), and net income* was 7,796 million yen (upare beginning initiatives aimed at anticipating the needs

16.9% year on year). This success was achieved throughof our customers.

promoting the local procurement of inexpensive,

The second strategy is the development of new products.

good-quality raw materials and an improved cost

We are fostering the seeds of future core businesses by

ratio t h r o u g h t h e a c q u i s i t i o n o f f o r m e r c o m p e t i t o r

dividing our research into three categories: research that

Onstatic Technology Co., Ltd. (OTC). The trend towards

will return results in 1-2 years, research that will lead toyen depreciation also had a positive impact. Anothercommercialization in 3-5 years, and research in new

major factor was adding Chugai Kasei Co., Ltd., which

domains looking forward 5-10 years. May 2016 marked

became a member of our Group in 2015, to the scope ofthe completion of our renovated R&D center, the Ranzanconsolidation beginning in May of this fiscal period.

Lab. Featuring the latest in advanced equipment, theFor the upcoming fiscal period, we expect that thefacility provides an environment for internal R&D fortransition towards yen appreciation since the latter half ofsemiconductors and other fields. The new Ranzan Lab will

fiscal 2015 will have an impact on earnings but we willfurther enhance our new business development initiatives.

work toward achieving sustainable growth by focusing on

The third is the development of self-sufficient humanfor ward-thinking management.

resources. We participate in intern programs with

One such initiative we have worked towards since last

universities and collaborating research institutions andfiscal year is R&D related to internalizing dry film solder

implement other initiatives aimed at providing various

resist (hereafter, dry film SR). The goal of this project was

experiences that cannot be gained at the workplace. In

to establish technology for processing previously

June 2016, a proposal by young employees led to the first

outsourced. The knowhow accumulated through thisupdate to our work uniforms in 21 years. We will continue

project greatly contributed to the creation of a dry film

to support such projects driven by employee feedback.

SR mass production line in the Kitakyushu Plant

The Group is committed to our growth strategies and we

co m p l e te d this year. Dry film SR is a product used inwill strive to enhance returns for our shareholders bysemiconductors, a sector that is expected to see

applying income generated through these growthsignificant growth in the future, and can become a new

strategies to provide stable dividends. In particular, we willcore technology for our company so we have great

aim to continue achieving a medium- to long-term dividend

expectations for long-term business growth.

on equity ratio (DOE) of 5%. We will work as a Group

There are three strategies that are acting as drivers of

to meet expectations and constantly be worthy of theGroup growth. The first is our global network, which istrust imparted on us by our shareholders and all ourvital to our Group as the company with the global top

stakeholders.

Eiji Sato, President and CEOshare of the solder resist market. We partner with offices
around the world to ensure our constant ability to offer

Eiji Sato, President a nd CEO

12 TAIYO HOLDINGS CO., LTD. Annual Report 2016

*Net income attributable to owners of parent

TAIYO HOLDINGS CO., LTD. Annual Report 2016

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天FeatureNew Manuf acturing Base in
Kitakyushu to Strengthen Our
BCP and Competitive Advantage

Construction of our dry film plant was completed in
Kitakyushu in October 2015. There are two reasons
why we chose Kitakyushu as the location of our new
manufacturing base. The first is our Business

Saitama
Plant

Continuity Plan (BCP). Kitakyushu offers excellent

Kitakyushu Plant

access to Korea, Taiwan, and China, which are home
to many of our customers. And due to its physicalseparation from the Kanto Region, we saw Kitakyushu

Customer needs related to our products are changing,a s t h e o p t i m a l l o c a t i o n f o r o u r No. 2 m a n u f a c t u r i n g

mainly due to shift towards lighter, smaller smartphonesbase. This will enable stable supplies from Japan, theand tablets seen in recent years. As a product thatmain manufacturing base for our high-performancemeets these needs, demand for dry film-type solder

products. The second reason is reestablishing Japan’s

resist (dry film SR) is growing. Liquid-type solder resist

technological superiority. While purely from a cost(liquid SR) long dominated the market but today theperspective it might be cheaper to establish a new

focus is shifting to dry film SR, which is ideal as aplant overseas, we chose Kitakyushu because wesolution for the continuing trend towards reduced size

want to focus on showing the world the strengths ofand low-profile products and contributes to theJapanese technology. We are committed to delivering

We gradually transition customers onto Kitakyushu

reduction of manufacturing steps. There are highto global markets technology that cannot be mimicked

products through a process that entails providing sample

expectations that dry film SR will find broad use in theby overseas manufacturers. We will remain committed

work until we earn customer approval. In addition to dry

next generation of products brought about due to theto addressing the needs of our customers while

fi l m S R , w e s i m u l t a n e o u s l y c o n d u c t s a m p l e w o r k

growing trend towards I oT. However, we did not have aworking daily to strengthen our BCP and improve ourf or liquid SR in order to further solidify our BCP and

top-to-bottom in-house production system in place fortechnological competitiveness.

reestablish Japan’s technological superiority.

dry film processing because in the past we outsourced
the dry film coating process. Recognizing the need for
rapid and flexible responses to future dramaticchanges in customer needs, we decided to apply our
cumulative technology and experience towards
establishing a mass production system and internalizing
processes related to dry film products.

Global Smartphone Shipments( Millions of Unit )
2,000

+24%

1,500

1301.71432.91839.71482.51019.7

1,000
725.3
494.5

500

Location ： Yahatanishi-ku, Kitakyushu, Fukuoka

304.7

Ta i yo Ink Mfg Co ., Ltd.

173.5

0

2009

2010

2011

2012

2013

2014

2015

2016

Kit akyushu Plant------ 2020

Site area ： approx.. 18,000m2
Product： Liquid-type SR and Dry film-type SR for semiconductor PKG board

Capacity ： Liquid-type 1,500 tons per year, Dry film - type 2,800,000m2 per year

Source : I DC

14 TAIYO HOLDINGS CO., LTD. Annual Report 2016TAIYO HOLDINGS CO., LTD. Annual Report 2016

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天FeatureBirth of the Ranzan Lab
Featuring Advanced
Facilities for Medium-and
Long-Term Growth

Ability to expand new businessbeyond the SR sector
Another notable point is that we now have an internal

In the past, we have outsourced evaluations tofacility for conducting R&D for sectors related toexternal partners but results typically took one to threesemiconductors, a field that is expected to see significant

weeks. Conducting this work in-house will enable us to

growth in the future. The new construction of the Ranzan

gain results in one to two days, which will greatly reduce

Lab enables us to conduct R&D for a wide range ofdevelopment time. This further increases our ability to

se m i co n d u cto r m a te r i a l s b e yo n d SR .

create new business ahead of our competitors.

Enables speedy internal R&D
As a top manufacturer of solder resist (SR), ourcompany aims to achieve further growth (strategy).
Amid an environment of intensifying competition,
moving forward it will be vital that we develop new
products ahead of our competitors while adapting tohectic changes in the market. We will challenge
ourselves to not focusing only on SR, but instead
applying our expertise in electronic material
technology and chemical technology to develop
business in a diverse range of markets and industries.
To achieve this, for the first time in 20 years our Group
conducted a full renovation of our R&D center. The
Ranzan Lab was completed on May 31, 2016.
The No.1 feature of the Ranzan Lab is the functionalarrangement of advanced equipment. This includes

Optimal research environmentorganic synthesizers, analyzers such as NMR, GCMS,

for engineersand LCMS, advanced measurement equipment such as
FE-SEM and AFM, a white light interference microscope,

The Ranzan Lab is designed to provide a pleasant

Lab features a collection of Japanese traditional art,

and reliability evaluation equipment for the wide range

working environment for engineers. Beyond its

and drawings and calligraphy from around the worldof materials we create. The creation of a one-stop

design as an optimal facility for the use of organic

to help stimulate the imagination and creativity ofinternal R&D solution enables us to conduct speedy

solvents, we factored in necessary functionality andour engineers. The space provides an opportunity forvalidation and evaluations.

worker movement to emphasize size reductions andour engineers to experience fine art form around

improve research efficiency.

the world.

16 TAIYO HOLDINGS CO., LTD. Annual Report 2016

The interior of the Ranzan Lab features a design that

Engineers who have used the Ranzan Lab haveis far removed from the typical lab. The typical image

provided strongly positive feedback, noting that theof a research lab is a cold, inorganic environmentlab is more spacious and brighter, and that speedy

but these renovations completely eliminate that look.

test results make it possible to get started on new

We chose wood-grain lab tables and walls with vivid

work. This renovation is sure to promote the development

colors such as yellow and green to create a warmof our engineers and further accelerate the creation

environment. The office area adjacent to the Ranzanof new businesses.

TAIYO HOLDINGS CO., LTD. Annual Report 2016

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17

At a Glance

Classification of Products

Summary of Sales

Rigid PWB Materials

Consolidated Net Sales

is a printed wiring board (PWB) made with a rigid insulated substrate. This single
board, primarily installed inside electronic devices, is mounted with LSIs,

22.2%
PWB Materials
Other than Rigid PWB( PKG,FPC, and build-up
board materials )Our net sales, operating income, and net income reached theresistors, condensers and other components.

highest ever results in f iscal 2015 (ended March 31, 2016).

PWB Materials Other than Rigid PWB¥35,242 million

Flexible Printed Circuit( FPC ) Materials

70.7%
Rigid PWB
Materials

Rigid PWB Materials( PKG , FPC , and build - up board materials )Semiconductor Packaging( PKG ) Materials

Other Related
Products

FPD
Materials

by Product Group¥ 49,844 million

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

6.5%

0.6%

Build-upMaterials( Millions of Yen )33,53935,000

Looking back over the past 5 years, demand for smartphones, communications servers and

30,000vehicle installation parts had remained strong. Combined with the benefits of acquiring Onstatic

25,000Technology Co., Ltd. (OTC), sales increased by 73.7% between fiscal 2011 and fiscal 2015.

20,000Sluggish smartphone demand in fiscal 2015 resulted in sales volume falling below numbers from15,000the previous fiscal year but strong sales of high function products and yen depreciation resulted
in an increase in year-on-year sales.

35,242

29,235
20,29020,262

2012

2013

10,000
5,000
0

2014

2015

2016

10,936

11,0782015

2016( Years ended March 31)

PWB Materials Other than Rigid PWB( PKG,FPC, and build-up board materials )( Millions of Yen )12,000¥11,078 million
Solder resist applied to the surface ofMain products include solder resist

Main products include hole-plugging

Demand for PKG board materials, particularly demand for smartphone parts, has been
firm over the past 5 years, resulting in fiscal 2015 sales that are up by 72.0% compareda PKG board. Two types available:that is applied to the surface of

ink and interlayer insulation materials.

liquid and dry film. A PKG board is a

flexible boards and a photoimageable

Build-up refers to a method oftype of printed wiring board used ascoverlay. One of our new products,

manufacturing heavily layered PWBs

an interposer when mounting

this photoimageable polyimide filmby alternately laminating insulated

to fiscal 2011. Although smartphone sales were sluggish in fiscal 2015, sales increasedslightly year-on-year by 1.3% thanks to increased sales volume for dry film solder resist
and the effect of yen depreciation.

10,000
8,000
6,000

2,000
0

offers both high resolution and highand conductive layers on a core board

bendability. A flexible printed circuit(or base board). The ink used to fill¥ 292 million

board is a soft, flexible board madeconductive holes in a core board

After peaking in fiscal 2011, sales of plasma display panel (PDP) materials, previously thefrom polyester or polyimide filmis c a l l e d h o l e - p l u g g i n g i n k . The

mainstay product of the FPD business, deteriorated and become non-existent by September

12,000coated with copper foil.

laminated insulation is called2014 as electronics manufacturers withdrew from the PDP business. Fiscal 2015 sales were

9,000

further impacted by a year-on-year decline in both sales volume and amount due to the

6,000

FPD Materials

shutdown of PDP materials production. Beginning next year, this segment will be recorded( Millions of Yen )Other Related Products¥ 3,232 million

M ain pr oduc t s inc l u d e m a r k i n g i n k , e t c h i n g i n k , p l a t i n g m a t e r i a l s , f l u x a n d s o l ve n t.

2014

15,000

3,500
3,000
2,500
2,000
1,500
1,000
500
0

3,232

1,444
761

870

2012

2013

2014

12,307

7,316
4,555
1,977

3,000
0

Other Related
Products

2013( Millions of Yen )under “Other Related Products”.

M ain pr oduc t s inc l u d e c o n d u c t i v e s i l v e r p a s t e a n d c o n d u c t i v e a d h e s i v e s .

2012( Years ended March 31)

CPUs, smartphone AP or memory.

Flat Panel Display ( FPD ) Materials

7,736
6,439

4,000

semiconductors such as computeri n te r l a ye r insulation.

8,991

292
2012

2013

2014

2015

2016

( Years ended March 31)

1,808

2015

2016

( Years ended March 31)

Liquid - Type SR

Dry Film - Type SR

There are various types of SR, but Taiyo Ink was a pioneer in the development of alkalinedevelopable liquid-type SR, which has now become a leading product. It is characterized

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

by high sensitivity as well as outstanding gold plating resistance and water-soluble flux

can be achieved. The use of dry film-type SR on semiconductor PKG substrates is

resistance. It is also used as SR on automotive PWBs for its excellent migration resistanceincreasing. Because the drying process, which is essential for liquid-type SR, canand pressure cooker test resistance.

18 TAIYO HOLDINGS CO., LTD. Annual Report 2016

Taiyo Ink S R pro duc t s

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

TAIYO HOLDINGS CO., LTD. Annual Report 201619

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天

Main Product

Solder Resist
PCs

Printed wiring boards (PWBs) are used in various digital consumer electronics such as mobile phones
as well as electronic products such as automobile electronics equipment. Solder resist (SR), a coreproduct of the Taiyo Group, protects PWBs by coating the surface of the conductor circuits, preventing
short circuits and other product problems, and making long-term, stable use possible.

Automotive
components

Network
server

SolderResistSmart phones

Flat - screen
televisions

CameraRoles of Solder Resist
1

Game machine

Photoimageable Solder Resist Pattern Formation Process( Photolithography )Preventing solder attachment in areas
where it is not needed

1. Printing ( coating )2. Pre - curing

3. Light exposure

S R i s appl i ed to the enti re s urfac e.

The wiring board is heated to 80° C for
20 to 30 minutes and provisionally dried.

The wiring board is exposed to ultraviolet
light passed t hrough a negative f ilm .
The SR in areas exposed to the lighthardens.

When various components are mounted on a PWB, SR plays a role in preventing short circuits that canoccur as a result of solder adhering to areas other than contacts that are electrically connected.

2

Protecting circuit patterns from dust ,heat , and moistureB e f o re S R a p p l i c a t i o n( Copper circuit pattern formed )SR protects circuit patterns from the external environment including dust, heat, and moisture. This
makes it possible for electronic devices to operate stably over extended periods.

3

Maintaining electrical insulation
between circuit patterns

4. Developing
The unhardened SR is washed o f f using adeveloping agent (a dilute a l k a l i w a t e rsolution).

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

5. Post - curing
T h e c i r c u i t b o a r d i s h e a t e d t o 1 5 0 °C f o r 5 0 t o
60 m i n u t e s t o h a r d e n t h e S R . T h e S R p a t t e r n
f o r m a t i on p r o c e s s i s c o m p l e t e .

insulation between circuit patterns, preventing short circuits.

20 TAIYO HOLDINGS CO., LTD. Annual Report 2016TAIYO HOLDINGS CO., LTD. Annual Report 2016

地プロセス 4 色21

Stretchable
Conductive Paste

Solder Resist for
Inkjet PrinterToday, wristbands and various other wearable terminals have developed to a point where they have reached a

In the current PCB industry, coatings using the inkjet method have been limited to those used for printing

status of familiarity among consumers.

on boards. We launched this project with the objective of leading our industry in the introduction of products

On the horizon is the full-scale development of the market for medical healthcare wearables, which will further

fo r a p p l yi n g so l d e r r e si st.

drive growth on the wearable market and the need for the stretchable conductive paste that allows electrical floweven when expanded or contracted.
Applying the technologies we have cultivated over the years, we have succeeded in the development of stretchable

Characteristics

conductive materials. Our objective is to achieve commercialization by working with direct customers and end

Solder resist printing using an inkjet system has the benefit of significantly reducing the number ofcustomers in Japan and overseas to develop unprecedented innovative products.

processes compared to conventional photoimageable solder resist. There also are a number of sectors able
to take advantage of the ability to form images directly using data. As such, we view this market as having
si g n i fi ca n t d e ve l o p m e n t p o te n ti a l .

CurrentEx.) Ph o to i m a g i n g SR p a tte r n fo r m a tion

1

Before solder resist coating

Characteristics
wearing them on the body. This often requires
stretching properties in the parts and materials used inthese devices.
The stretchable conductive paste we developed is a

Pa tte r n i n g co m p l e te d so l e l y
Beforestretching

50%
stretchw i th In kj e t p r i n te r .

maintains high electrical conductivity when stretched.

4

Exposure

Light source
mountedon inkjet head

Development and post-cure

UV
lamp

Inkjet head

Printing direction

UC hardening

Substratewith a single process

Even at 50% stretch the LED

Ink spraying

Tack-free

Patterning completed processmaterial that allows for wiring through screen printing
and processing in low-temperature conditions, and3

Printing and pre-cure

Inkjet solder resist
pr inting method

Wiring using
conductive
paste

Wearable devices are electronics that are used by

2

1

〜 4

in the center remains lit.

Going forward we will continue to develop new customers and aim to start sales of materials based on mass

Going forward we will utilize our Group strengths to engage in sales of products utilizing SR ahead of our

production application within the next few years and launch innovative new products on the global market.

competitors as we aim to corner the market.

22 TAIYO HOLDINGS CO., LTD. Annual Report 2016TAIYO HOLDINGS CO., LTD. Annual Report 201623

Regional Information

Consolidated Group Subsidiaries

Japan

TAIYO INK MFG CO., LTDD e ve l o p m e n t, m a n u fa ctu r e , a n d sa l e o f p r i n te d w i r i n g board materials and flat panel display materials

CHUGAI KASEI CO., LTD.
M a n u fa ctu r e a n d sa l e o f d ye s, p i g m e n ts, ch e m i ca l s a n d others

Fulfilling the Vital Role of Asian Marketing and R&D
Unconsolidated Group Subsidiaries

One of the major roles we fulfill as the Group holding

reliability evaluation equipment for the wide range ofcompany is the general management, implementation,materials we create. The facility enables researchers to

TAIYO GREEN ENERGY CO., LTD.*and promotion of our Asia market strategy. Capturingconduct speedy validation and evaluations. And

Power generation via natural energy and other sources, the supply and sale of electricity, plant factory operation

customers before they realize their own needs requirese s t a b l i s h i n g a n e n v i ro n m e n t fo r i n te r n a l R &D i n th e

*Became a consolidated subsidiary beginning in fiscal 2016.

that we constantly watch the entire Asian market andextremely promising semiconductor field will enable us

conduct marketing-backed R&D to create new products

to conduct R&D on a wide range of materials other thanthat match customer needs.

SR. The new facility will enhance all our research

For example, in China new manufacturers ofactivities, from short-term research aimed at 1-2 years

smartphone components are constantly spinning out

ahead to forward-looking research aimed at new

from major companies. Because quickly ascertaining

business development 10 years from now.

the existence of these new companies is difficult for our

Since 2015, our Kitakyushu Plant has been working on

local subsidiary to accomplish on their own, we are

R&D aimed at establishing a production line for dry film

applying the marketing power of our Japanese offices tosolder resist used in semiconductor packages withdirectly approach promising printed wiring board (PWB)

operations scheduled to begin in 2017. To further our

manufacturers. Once we know that the company has

efforts to accumulate Group knowhow and expand into

unconventional needs, then we move onto an evaluation

new fields, we acquired Chugai Kasei Co., Ltd. in 2015.

of new product development.

Chugai Kasei is involved in R&D in the fine chemical

To ensure our ability to adapt flexibly to various

TAIYO INK MFG CO., LTD

CHUGAI KASEI CO., LTD.

TAIYO GREEN ENERGY CO., LTD.

sector, a high added value area that previously wemarket, our Japanese marketing team features

outsourced to other companies.

personnel who are knowledgeable in the markets of

By fulfilling our vital role as the core of Asia marketing

each country and are fluent in foreign languages.

and as a driver of R&D, we will continue to promote

Currently, we have dedicated Indian staff who isimproved earnings in each country.

Per formance Overview
Overall demand remained flat for the high function products of PWB materials. However, the inclusion of Chugai Kasei
Co., Ltd. in the scope of consolidation as of this first quarter ended June 30, 2016 had an impact, with the sales amountaggressively researching Indian markets that seem

increasing year on year. On the other hand, the impact of upfront costs related to setting up the Kitakyushu Plant, Taiyo

poised to explode in the future.

Ink Mfg. Co., Ltd.’ s new factory, led profit to drop year on year.

Conversely, it is easier for us in Japan to gather
the latest information related to the promising

As a result, net sales amounted to 17,002 million yen (up 7.7% year on year) with segment profit at 2,254 million yen(down 8.6% year on year).

semiconductor market compared to offices in other(Millions of Yen)
20,000o f semiconductor manufacturers to pick up on
developments on next-generation products ahead of ourcompetitors and provide rapid, attentive service.
Another role we fulfill is to drive R&D. May 2016
marked the completion of our renovated R&D center,(Millions of Yen)
2,500
15,78627.9 %

15,00011,78813,065analyzers such as NMR and GCMS, measurement

2,255

（％）
25

1,906

2,000
1,686

20
15.6
15

1,500

10,000
1,000

990

12.9

13.6

13.3

10

8.4

5,000

0

2,467

17,00314,005500

the Ranzan Lab. The Ranzan Lab features the latest inadvanced equipment, from organic synthesizers to

Operatingincome rate

OperatingincomeSales

regions. We partner with sales staff in charge

2012

2013

( Years ended March 31)

2014

2015

2016

0

5

2012

2013

2014

2015

2016

0

( Years ended March 31)

equipment for a white light interference microscopy, and

24 TAIYO HOLDINGS CO., LTD. Annual Report 2016TAIYO HOLDINGS CO., LTD. Annual Report 201625

420× 297mm

天Regional Information

China

Taiwan( including Hong Kong )Identifying Trends Among Semiconductor

Three Strategies to Expand Share

Manufactures and Innovating Productivity

In the China market, we are executing threesmartphone industry. The market is expected to see

The economy of Taiwan is unique for its high level ofo u t J a p a n e s e m a r k e t i n g t e a m to quickly identify

strategies aimed at expanding Group market share.

significant growth in the future and is a core market

dependency on exports. Among its many export

trends in PWB manufacturer R&D departments, andThe first is the procurement of inexpensive,

for our Group. The number of units sold by Chinese

p ro d ucts, th e co un try’s co re e xpo rts are e l ectro n ics

among semiconductor and other electronics

good-quality raw materials in the generic products

device manufacturers is expected to become theproducts. Like many advanced nations, manufacturers

manufacturers. We will expand sales by introducing

sector to improve a business structure that has been

highest in the world as numbers are driven up by thein Taiwan are trending towards moving production

proposals that p r o a c t i v e l y t a r g e t n e x t - g e n e r a t i o nsusceptible to the influences of the currency market.

country’ s continuously increasing population. As a result,facilities to developing nations. In particular, theproducts.

These cost reductions will increase our superiority

new parts manufacturers are constantly emerging inmajority of PWB manufacturers are now conducting

To promote these activities, we are planningover competitors and expand our market share.

China, with many of these companies developing into

production in China and other countries. However,improvements to production processes that will

The second strategy is to conduct sales activities

blue chip manufacturers of terminals and parts. Our

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

improve productivity at Taiwan Taiyo Ink Co., Ltd. andtargeting automotive parts manufacturers that selectGroup will partner with our Japanese marketing teamdecision-making concerning the selection and use ofother production facilities to facilitate the quick

and employ PWB parts. The automotive market has

to identify the technical strengths and key customers

new parts and materials used in new products isprovision of products t h a t m e e t t h e n e e d s o f o u rnumerous untapped parts manufacturers and theof parts manufacturers we have yet to approach inbeing conducted in Taiwan. However, when it comes

customers.

segment appears poised for growth. We will continueorder to develop new customers and increase market

to semiconductors and the other high value-added

our initiatives from the previous fiscal year byshare. We expect these efforts will be reflected in theelectronic components that make up the core of

conducting aggressive sales activities to increase

net sales and income for this fiscal year and beyond.

finished products, everything from R&D to production

market share.

continues to be conducted in Taiwan. With this in

The third strategy is the development of themind, our Taiwanese s u b s i d i a r y i s p a r t n e r i n g w i t hConsolidated Group Subsidiaries

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

● TAIYO INK INTERNATIONAL (HK) LIMITED● ONSTATIC INK (SHENZHEN) CO., LTD.

● TAIYO INK TRADING (SHENZHEN) CO., LTD.

Per formance Over viewOperatingincomeSales(Millions of Yen)In addition to firm sales of materials for lighting
and vehicle installation parts, yen depreciation in

20,421

20,000As a result, net sales amounted to 21,820 million
yen (up 6.9% year on year) with segment profit at
4,775 million yen (up 36.1% year on year).

3,508

3,000
16.5

10,637 10,835

2,000
1,751
1,000

5,000
0

2012

2013

2014

( Years ended March 31)

2015

Per formance Over view（％）
4,775 30

4,000

15,00010,000● ONSTATIC TECHNOLOGY CO., LTD

Demand notably for materials for smartphones

21,82017,791

2016

0

2012

21.9

1,585

2013

was lackluster. The sales amount, however, rose

25

year on year, partly owing to the impact of yen
20

2,617
17.2

14.6

depreciation in foreign exchange, in addition to
the shift to higher-priced PWB materials from

15

14.7

lower- priced PWB materials.

10

2014

2015

2016

16.2 %● TAIWAN TAIYO INK CO., LTD.

Operatingincome rate

(Millions of Yen)
5,000

25,000

foreign exchange contributed to a year-on-yearincrease in net sales and profit.

35.8 %As a result, net sales amounted to 9,854 million0yen (up 2.5% year on year) with segment profit at
2,227 million yen (up 26.3% year on year).

( Years ended March 31)

26 TAIYO HOLDINGS CO., LTD. Annual Report 2016

OperatingincomeSales(Millions of Yen)
10,000

9,614

9,855

8,399

8,000

4,000

1,000
500

2012

2013

2014

( Years ended March 31)

2,227
1,763

2015

2016

0

22.6

1,428

1,500
3,936

2,000
0

（％）
30

(Millions of Yen)
2,500
2,000

6,000
3,706

Operatingincome rate

12.7

12.7

470

498

2012

2013

17.0

25
20

18.3
15
10

2014

2015

2016

0

( Years ended March 31)

TAIYO HOLDINGS CO., LTD. Annual Report 2016

地プロセス 4 色27

420× 297mm

天Regional Information

Korea

Other

New Subsidiary to Strengthen Our Ability to Identify

New Marketing Functions in USA and Europe,

Semiconductor Trends and Improve Productivity

Evaluating Construction of New Plant in ASEAN

Earnings by our consolidated subsidiaries in Korea

Group in Japan to conduct rapid and aggressive

In America, Taiyo America Inc. is securing stable

either Thailand, Vietnam, or Malaysia. Including

were greatly impacted by numerous PDP

proposal activities to manufactures of semiconductors

sales and income. To further improve profitability, we

potential customers, each of these regions represents

m anuf ac t ur er s pull i n g o u t o f t h e P D P m a r k e t d u e t o

and other electronics products to expand sales

will incorporate advanced and innovative marketing.

extremely promising business opportunities and wea decline in PDP demand on the flat screen TV

i n Korea.

For example, quickly identifying semiconductor

have been conducting full-scale market research sincemarket. In fact, our manufacturing subsidiary Taiyo

Furthermore, to promote sales growth we conductedmarket trends in Europe and the USA is vital to the2016. And considering launching a new plant requires

Ink Manufacturing (Korea) saw a decline in net

a complete reevaluation of production processes atdevelopment of new, forward-looking businesses. As

significant knowhow and skills, we view this new

sales due to a withdrawal from the PDP market by

the product facility of Taiyo Ink Mfg. Co., (Korea) Ltd.

such, we established an office with marketing

plant construction as vital to our human resource

major customers.

and created a production line for high-function

functions in Silicon Valley, a hub for the latest

development initiatives.

products expected to become mainstay products in

information on semiconductors, to conduct market

the future.

research. Moving forward, we will rapidly share

On the other hand, sales of highly profitable dry
film for semiconductor packaging (PKG) materials
have grown significantly in Korea and the impact of

information on promising new elements and materials

yen depreciation resulted in improved profitability

with our Japanese R&D department to create a

and an increased profit margin.

system that ties into the rapid development andMoving forward, Ta i yo Ink Pro d ucts e sta bl ishe d i n

production of new products.

2015 will take the lead in strengthening sales of

While currently we have only sales offices insemiconductor parts. This company will take on

ASEAN countries, moving forward we will proactively

marketing functions previously fulfilled by the T a i y oevaluate the establishment of production facility inConsolidated Group Subsidiaries

Consolidated Group Subsidiaries● TAIYO INK PRODUCTS CO., LTD.

Per formance Over view
While demand for high-price PKG board materials
remained firm in the PWB materials market, in theof PDP materials. On the other hand, profit
increased year on year partly due to a weaker
yen in the foreign exchange market.

OperatingincomeSales(Millions of Yen)
20,000at 1,414 million yen (up 16.6% year on year).

7.3 %Unconsolidated Group Subsidiaries

1,212

1,200
11,723

10,00010,600

1,074

7,739

600

650

3.9
2012

2013

( Years ended March 31)

2014

2015

2016

13.2

591

20

steadily due to the expansion of the market of2012

depreciation in foreign exchange contributed toa year-on-year increase in net sales and profit.

5

5.0
2013

material for vehicle installation parts and yen

10

10.1

300
0

Taiyo Ink International (Singapore) performed

15

900
9,200

5,000

0

18.3

the corresponding period of the previous year.

2014

2015

2016

As a result, net sales amounted to 4,451 million
yen (up 7.5% year on year) with segment profit0

at 597 million yen (up 7.7% year on year).

( Years ended March 31)

28 TAIYO HOLDINGS CO., LTD. Annual Report 2016

OperatingincomeSales

Taiyo America performed at the same level as（％）
1,414 25

16,66815,000

Per formance Over viewOperatingincome rate

(Millions of Yen)
1,500

As a result, net sales amounted to 7,739 million
yen (down 15.9% year on year) with segment profit● TAIYO INK INTERNATIONAL (SINGAPORE) PTE LTD● TAIYO INK (THAILAND) CO., LTD.

FPD materials market, net sales decreased year
on year, reflecting the end of manufacturing● TAIYO AMERICA, INC.

12.7%

● TAIYO INK MFG. CO., (KOREA) LTD.

(Millions of Yen)
5,000
4,141

4,000
3,000

4,451

2,619

555

598

（％）
21
18

453

15

400

2,854

324
300

2,000

200

1,000
0

(Millions of Yen)
600
500

3,525

Operatingincome rate

273
10.4

12.9

13.4

13.4

11.4

9

100
2012

2013

2014

( Years ended March 31)

2015

2016

0

12

6
2012

2013

2014

2015

2016

0

( Years ended March 31)

TAIYO HOLDINGS CO., LTD. Annual Report 2016

地プロセス 4 色29

Supply Chains

Quality Managementin the Overall Supply Chain
To p r o v i d e s u p e r i o r p r o d u c t s a n d s e r v i c e s a t a l l

Network Covering the Global Market

t i m e s to customers throughout the world, activities to

In fiscal 2015, about 93% of the Taiyo Group sales wereUnited States as well as marketing and technical service

indispensable.

accounted for by PWB materials. The principal centers

centers in Shenzhen and Hong Kong in China,First, to enable customers to select the optimal products

for production of PWBs have shifted from the United

Singapore, and Thailand.

for their needs from the diverse lineup of items the Group

improve quality through the G roup’ s supply c hain are

States and Europe to Japan and then to emerging

Th e q u a l i t y o f t h e G r o u p ’ s p r o d u c t s a n d s e r v i c e soffers, marketing personnel in charge endeavor to match

countries, and, in recent years, production in China has

together with the agility of its global network has enabled

product specifications with client requirements throughrisen rapidly.

the Group to secure the leading share in SR in global

close communication. When client requirements

acceptance of raw materials and ensuring that deliveries

While responding to these global changes in themarkets, and overseas sales have climbed to account forexceed the specif ications of existing products, this isof raw materials that are not up to standard arebusiness environment, the Group has conducted

about 79% of its net sales. Further growth is expected incommunicated to product development divisions, designs

prevented. Moreover, the Group has structured a qualitytransactions with PWB manufacturers around the world.

the m e d i u m to long term in demand for PWB materials

are drawn up, and, af ter production process plans aremanagement s y s t e m b a s e d o n I S O 9001 a t e a c h o f

The Group has been aware that its most-importantfor use in electronics components around the world.

prepared by the manufacturing divisions, the Group works

the Group’s production bases.

mission is to provide superior products and services at

The Group will step up its activities to develop its

to p r ov i d e c usto m e r s w i t h p r o du c t s t h at m atc h t h e i r

Finally, the Group is aiming to win a high level of

all times and has worked to expand this network to coverbusinesses globally and will endeavor to respond to

specifications. To enhance quality and provide for smoothcustomer satisfaction by creating a detailed management

global markets. Today, the Group has manufacturing andburgeoning demand.

deliveries to customers, another impor tant process is

system that extends from packing and shipment throughmaterials procurement. To ensure the stable procurement

to deliveries. The Group is also providing follow-up afterof both volumes and quantities, the Group conducts auditsdeliveries and is asking for assessments as well asof supplier factories and makes periodic assessments offeedback from customers regarding each stage of thetheir operations, while al s o s et t in g st an dar ds fo r t h e

supply chain .

marketing bases in Japan, China, Taiwan, Korea, and the

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

Offering Advantages to Customers through

TAIYO INK PRODUCTS CO., LTD.

“ Local Production and Local Procurement ”

CHUGAI KASEI CO., LTD.
TAIYO INK ( SUZHOU) CO., LTD.
TAIYO HOLDINGS CO., LTD.
ONSTATIC INK ( SHENZHEN) CO., LTD.
TAIYO INK MFG. CO., LTD.
TAIYO INK
( THAILAND ) CO., LTD.

TAIYO AMERICA, INC.

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

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

The Group does business with customers in virtually“Local production and local procurement” leads toevery country. In many cases, product sales prices arestrengthening the Group’ s capabilities for responding

quoted in foreign currencies, and one management issue

to client requests and needs. For example, throughis that fluctuations in exchange rates have an impact on

this approach, the Group can develop products that

the Group’s performance. To deal with this, the Group ismeet customers’ needs in the local markets quickly, andpromoting the implementation of “local production andlead time for filling orders can be shortened. This

local procurement” or, in other words, “products that areapproach is also effective for facilitating businesssold in local areas (markets) are made from materials

continuity plans (BCPs) because it means that prices

procured in the local area and manufactured there.” Byof raw materials can be lowered and that multiple

increasing the percentage of raw materials that aresupply chains can be structured.

procured locally, the Group is working to respond by

Especially regarding lead time, the Group is rapidly

having income and expenditures denominated in themaking preparations for shortening required delivery

same currency.

times to meet clients’ requests and put into place systems
that will enable the next-day delivery of orders.

Production and Marketing Subsidiaries
Marketing or Technical Support Subsidiaries

30 TAIYO HOLDINGS CO., LTD. Annual Report 2016TAIYO HOLDINGS CO., LTD. Annual Report 201631

Topics

Solar PowerThe Taiyo Group launched the solar power business with awater-based mega-solar installation in Ranzan-machi, locatedin t he H ik i D ist r ic t of S ait ama Prefe c ture, and a ro of to p

Uniform

generating facility on the management building roof top ofFirst update to work uniforms inGreener Environment : Launching

the R a n z a n Fa c i l i t y. The Group’s ef for ts star ted with theover 20 years after proposala solar power businessinstallation of generating facilities on the management buildingby new employees

Brighter Communities,

younger gener ations would enjoy wear ing. The president
immediately gave his approval and the project was kicked off

rooftop at the Ranzan Facility on February 27, 2015. This wasfollowed in October 2015 by the lease of a regulating reservoir

As a company that encourages innovation in our talent, young

adjacent to the Ranzan-machi Hanamidai Industrial Park from

employees are driving the development of various new projects.

the Ranzan-machi council and the installation of a water-based

One such project was the updating of work uniforms. At amega-solar facility. Approximately 4,500 solar panels provide

company gathering, new females employee proposed to theenough electricity for around 370 households. In terms ofcompany president that we update to a trendy design that

immediately. At first, the employees had no idea how to go
about making suc h a c hange and at one point they werer eady to gi ve up. H owever, t hr ough supp o r t f r om s eni o rworkers, they began by focusing on concept development
and the project was completed af ter t wo years. The result
was completely new uniforms, the first update in 21 years,

reducing carbon dioxide emissions, the mega-solar facility alone

combined breathability and other features with a stand-up

is expected to cut emissions by approximately 400 tons annually.

collar and other innovative elements not normally seen in

In addition to these programs, the Group is making other active

work uniforms. The new uniforms have been ver y popular

contributions to the local community through measures suchwith employees, who have commented that they are moreas donating facilities equipped with solar panels and batteries

p l e a s a n t a n d a l l o w b e t t e r m o b i l i t y. A l s o , e m p l o y e e s

to the Hanamidai Industrial Park Management Center, which is

involved in the update commented that through this project

the designated evacuation area of Ranzan-machi, in order tot h ey g e nuin e l y f e l t t h e c o mp any ’s c ul t ur e t hat p r ov i d e sprovide electricity in the event of a power outage.

freedom to those who voice their opinions.

Environmental Initiatives

Creating Optimal Working Environments

Plant Factory

Nursery School ( On- Site Daycare Center )Starting production of safe and secure
vegetables at a clean room farm

An on - site daycare center will be opened for employees
to let them focus on work without worries.

In October of 2015, the Group began full-scale operations

As a part of efforts to create an optimal work environmentof a plant factory, which are increasingly common in recent

for employees, a daycare center will open at a site

years, as a part of its contributions, as a chemicals manufacturer,

adj acent to the Ranzan Facility in December 2015.

to a safe and secure food supply. The facility was establishedThe center will be equipped with security facilities toin a Taiyo Holdings research center and uses artificial light forp r o v i d e p e a c e o f mind. There is a forest nearby, andhydroponic cultivation. Operations are not af fected by theweather and regularly produce fresh, organic vegetables.
Initially, the vegetables will help supplied the on-site employee
c afeter ia, and when stable production is achieved, sales
channels will be expanded.Compared to outdoor cultivation,
the p l a n t f a c t o r y i m p o s e s f e w e r p h y s i c a l b u r d e n s o nthere will be many o p p o r t u n i t i e s f o r t h e c h i l d r e n t oexperience the blessings of nature including living
creatures and trees. Such efforts will assist in recruiting
outstanding personnel, whether mid - career employees
or recent graduates.
The daycare center will also be open to local residents
to e n h a n ce l o ca l o p ti o n s fo r ch i l d ca r e .

w o r ke r s , and as the population ages, we expect that it will
provide employment oppor tunities for senior citizens.

32 TAIYO HOLDINGS CO., LTD. Annual Report 2016TAIYO HOLDINGS CO., LTD. Annual Report 2016

33

CSR

Compliance
The Taiyo Group continuously strives to increase our credibility by promoting activities that strengthen our internal organization andSince its establishment in September 1953, Taiyo Holdings has continued to grow thanks to the trust placed in it by the stakeholders,increase ethics and compliance awareness among all our employees.
Our internal Compliance Promotion Organization spearheads awareness and educational activities to ensure that employees

including its shareholders, customers, and business partners.
In order to continue to respond to that trust and grow together, all directors and employees of Taiyo Group will fulfill our corporatesocial responsibilities by taking a consistently forward-looking approach to business activities and observing ethics and laws.
In order to fulfill these responsibilities, Taiyo Group has established a corporate CSR Philosophy and a Code of Conduct, and is
involved in a variety of CSR activities through its CSR organization comprising of various management systems and committees.The
directors and employees of Taiyo Group will strive to create a company that is trusted by society and is actively involved in CSR
activities.

understand the Taiyo Group’s CSR Philosophy and Code of Conduct, and to continuously ensure that the Group’s activities are alignedwith the spirit of our CSR Philosophy and Code of Conduct. During fiscal 2015, in Japan we established a Hotline for employee
consultations and internal reporting and advance the development of a system for obtaining information on revisions to laws andregulations relevant to Group operations. And at our overseas Group companies, we are promoting proactive and autonomous ethics andcompliance activities that give consideration to the unique cultures and customs of each country.

Relationship with Shareholders
Through profi t di v i dends and appropri ate c ommuni c ati on, w e c on t r ib u t e t o t h e w e a lt h a n d p r o sp e r it y o f a ll o u r sh a r e h o ld e r s.

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

Prof it Dividends

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

Code of Conduct

Fiscal period

2011

2012

2013

2014

2015

Dividends per share( Yen)

90

90

90

120

110

Shareholders’ equity
dividend ratio (%)

6.1

6.1

7.8

5.7

6.5

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

Relationship with Suppliers

1. Ethical and Legal Compliance

6. Ensuring Quality (Quality Policy)

We will observe laws and other social norms, and understanding

We will ensure that we always provide safe, quality products thatthe spirit thereof, will act openly and fairly.

satisfy our customers.

2. Workplace Environment
We will respect employees’ human rights, and create a workplace

7. Protecting the Environment(Basic Environmental Philosophy)that is fair and free of discrimination.

We will endeavor to protect the environment as part of theare conducted by teams made up primarily of personnel from the Purchasing Department and Quality Assurance Division, and in some cases employees

performance of our social responsibility, and will engage infrom manufacturing technology and design divisions also participate. Audits are conducted with the aim of enhancing the quality of raw materials andbusiness activities that are in harmony with the environment.

secondary materials.

conduct business with them based on impartial and fair business

8. Social Contributions

conditions.

As members of society, we will engage in activities that contribute

Relationship with Local Communities and Society

to society.

Working as a member of society to contribute to social development. This too is a vital responsibility of a corporation. All member companies of

3. Fair Business Dealings
We will deal with all our business partners in an honest manner and

4. Respect for Stakeholders

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

the Taiyo Group partner to conduct wide-ranging activities in order to ensure our ability to leave precious, limited resources for future
9. Protecting Intellectual Property

viewpoints of all our stakeholders, and disclose i n f o r m a t i o n i n atimely and appropriate manner.

We will take appropriate precautions to protect Taiyo Group’s intellectual
property rights, and those of third parties.

5. Ensuring Confidentiality

10. Exclusion of Anti-social Forces

We will work to ensure the protection of confidential information

We will take a resolute stance towards anti-social forces and will

related to our business partners, the company itself, and any

not respond in any way to illegal or improper demands.

Code of Conduct

Provision

Management

Social contribution, dividends,
fair business dealings, tax payment

Evaluation

Rating, awards,
degree of customer satisfaction

34 TAIYO HOLDINGS CO., LTD. Annual Report 2016

Internal controls

Green procurement
Environmentallyfriendly products

Environment

Compliance

SocialEnvironment management
contribution
substance reduct ion
Prevention of global warming

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

Passing on irreplaceable earth for future generations !

Environmental Protection Activities
the local mountain conservation group, whose activities include creatinga protected environment for the great purple emperor butterfly on land

Environment
conservation

Assisting people inneed, including in
the face of disaster!

owned by Taiyo Ink Manufacturing. Previously, employees participated on
an individual basis but moving forward, the Company will show its
support by serving as a sponsoring member while also enjoying
participating in local mountain conservation activities.

Humanitarianaid

Community
contributions

Sustained
development / stabilizationof management

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

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

Requirements / expectations

Social Contribution Goals of the Taiyo Group

Embracing regional
exchange!

Management Philosophy

Communication
with stakeholders

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

This year, Taiyo Holdings began participating as a sponsoring member ofindividual.

Website, CSR repor t, business repor tcontribute to quality stability.

Implementation of Supplier Evaluations and On-Site Audits

We will always conduct business activities with respect for the

Information disclosure

Based on Green Procurement Standards, we practice the procurement of raw materials that are environmentally-conscious, safe, and thatfamilies, volunteers, and local residents. Together, we planted some 50

Taxes

hackberry and cherry blossom trees and made a walkway using thinning

Securing
appropriate

Educationandacademics

Suppor ting our
future,the children!

p rof its!

Social welfare

In March 2016, participants planted trees on the land of the Ranzan
Facility. The day’s activities featured participation by employees and theirwood. Located next to the Taiyo Daycare Center that opened in December

Ar ts,
culture,spor ts

2015, it represents the creation of a wonderful environment for the children.

Fostering enrichedhear ts and minds!

Suppor ting the independence and skills developmentof persons with disabilities!

National butterfly the“Great purple emperor”

Photo of planting activities

TAIYO HOLDINGS CO., LTD. Annual Report 201635

420× 297mm

天Corporate GovernanceCorporate GovernanceInternal Controls
We regard the construction of a system of internal controls as a critical part of corporate governance. These controls include the fivecomponents described below.

Construction of Sound
Management Structures

Basic Thinking on Corporate
Governance

We have a holding company structure. Having Group management

In line with our Management Philosophy and Basic Management(3) An internal hotline to enable employees to report compliance violations or any related concerns to an external lawyer.

and strategic functions, the holding company aims to develop and

Policy, we aim to prosper together with our customers, regional(4) Regular reports by the chief compliance officer to the Board of Directors concerning the ethics and compliance framework status.

improve our strategies while optimizing the allocation ofcommunities, shareholders, employees, business partners, and(5) Establishment of an independent Internal Audit Department that reports audit findings to the Board of Directors and the Audit &resources. The operating subsidiaries under the holding company

other stakeholders. We also believe it is necessary for us to

can act promptly and autonomously. This system enables us toembrace social responsibilities as well as seek to generate profits.

respond better to customers across various markets while also

To this end, we seek to promote management transparency anddocuments of Chugai Kasei Co., Ltd., a new member of the Taiyo Group, in accordance with the Fiscal 2015 (70th Fiscal Period)

speeding up decision making and boosting operational efficiency.

to fulfill our disclosure obligations to support the C o m p a n y’s

Basic Plan for Internal Controls. We also switched the individual IT systems in use at the three companies of the Onstatic Group to

Its aim is to increase profits and help us build corporate value.

continued prosperity.

the same system in use at Taiyo Suzhou and Taiwan Taiyo to standardize their workflow processes. This was done to improve the(1) Keep all directors and employees informed about our CSR (Corporate Social Responsibility) Philosophy and the Code of Conduct.
(2) The appointment of one director as chief compliance officer to chair the Ethics Committee and lead a team promoting internalbusiness ethics.

Supervisory Board, and where necessary to the accounting auditors as well.
In f iscal 2015, we initiated operations related to the development of an internal controls system and the organization of relevant

efficacy and efficiency of internal control systems.

Corporate Governance Structures

Risk Management

Our corporate governance system is centered on the Board of Directors and the Audit & Supervisory Board, whose members are both

The Group has studied and instituted ways of mitigating, or of taking appropriate steps in response to, a variety of risks associated withapproved by resolutions at the Shareholders’ Meeting. We have also adopted a system of executive officers to invigorate the Board

business activities. One director is appointed as “the director in charge of risk management.” Moreover, the department in charge of risks

of Directors and expedite operational execution.

occurring in the course of natural work operations evaluates and responds to these risks. Furthermore, the Risk Management Committee

Executive officers are granted an extensive scope of decision-making authority for carrying out their duties, and it is believed that

conducts risk management in a cross-departmental manner over the entire Group.

this will enable rapid decision-making. In addition, a discretionary Compensation Advisory Committee was established as an advisory

Fiscal 2015 marked the completion of construction for the Kitakyushu Plant, Taiyo Ink’ s new factory. This factory will strengthen the

body to the Board of Directors in order to ensure objectivity and transparency in director and executive officer compensation. A

Group’s BCP (business continuity plan). With the completion of the Kitakyushu Plant, we have increased the number of manufacturing

discretionary Nomination Advisory Committee was also established to ensure objectivity and transparency in nominating directors

bases for our mainstay SR products to eight (2 in Japan, 6 overseas), which further strengthens our BCP structure. We believe that theand audit & supervisory board members. The results of resolutions of both of these bodies are reported to the Board of Directors.

stable provision of products, even in the event of a major earthquake or other emergency situation, is part of our responsibilities as the

Majorities of both the Compensation Advisory Committee and Nomination Advisory Committee are outside members, and the

manufacturer with the world ’ s No. 1 market share, and we will continue working to strengthen our BCP structure.

chairmen are selected from among the outside members.
The Board of Directors is composed of seven directors, two of whom are outside directors. The Audit & Supervisory Board is

Executive Compensation

composed of three audit & supervisory board members, two of whom are outside auditors. Meetings of the Board of Directors areheld regularly each month, but the Board can also hold extraordinary meetings if necessary. The Board discusses and resolves

In addition to base compensation, a director compensation system that provides for the payment of performance-based monetaryimportant matters, and also oversees the execution of duties by the representative director. Audit & supervisory board members,

compensation and performance-based stock compensation to executive directors (here and hereafter, directors specified in each item ofincluding outside auditors, attend most meetings of the Board and Executive Committee, which convene on a number of occasions

Article 363, Paragraph 1 of the Companies Act of Japan) was approved at the ordinary General Shareholders’ Meeting held on June 20, 2014.

each year, to engage in discussions and to monitor proceedings in detail. One of the audit & supervisory board member is full-time
auditor with the power to submit questions to the Group employees. The system enables the audit & supervisory board members

This director compensation system is intended to provide even further motivation to executive directors to raise the corporate value of theto conduct adequate monitoring of the execution of duties by directors.

Group over the medium to long term by increasing the degree to which executive directors share interests with shareholders.

The Internal Audit Department, which has a staff of two employees, is fully independent of other Group operations. It undertakes an audit

Compensation paid to directors other than executive directors and to audit & supervisory board members consists of base compensationof all departments of the holding company and operating subsidiaries based on the annual audit plan approved by the Board of Directors.

only. The amount of base compensation paid to directors and the methods of calculating amounts of performance-based monetary

Results of these audits are reported to the Board of Directors and Audit & Supervisory board.

compensation and performance-based stock compensation paid to to executive directors as well as the timing of payment, distribution, and soon are determined by the Board of Directors with within the range approved by the General Shareholders’ Meeting. When making such

System Outline

decisions, the chairman of the Compensation Advisory Committee, who is an outside director, performs an objective, comparative verification

Shareholders’ Meeting
Reports toCompensation Advisory
Committee
Nomination Advisory
Committee

Reports toBoard of Directors
Reports toReports toReports to

President and CEO

within the range approved by the General Shareholders’ Meeting.

Executive compensation for the year ended March 2016 is shown below.

Accounting Auditors
Cooperation

Cooperation

AuditsExecutive Category

Cooperation

Instructs

Directors

Instructs

Departments and Subsidiaries

36 TAIYO HOLDINGS CO., LTD. Annual Report 2016

Amounts of Compensation by Type ( Millions of Yen )Basecompensation

Performancebased monetarycompensation

Performancebased stockcompensation

Retirement
Benefits

Number of
executives

75

124

317

-

6

( excluding outside audit & supervisor yboard members )

14

14

-

-

-

2

Outside officers

37

37

-

-

-

4

Audit & supervisory board members

Internal Audits

Total Amount ofCompensation( Millions of Yen)

517

( excluding outside directors )Office of Internal Audits

Executive Officer
Reports toBoard of Corporate Auditors
AuditsCompensation paid to audit & supervisory board members is determined through consultations with the audit & supervisory board members

Appoints andDismisses

Appoints andDismisses

AuditsAppoints andDismisses

and levels, and reports to the Board of Directors. The Board makes determinations based on the Committee’s report.

Reports to

Appoints andDismisses

Appoints andDismissesof compensation levels using officer compensation survey data from an outside research organization, deliberates on compensation policies

TAIYO HOLDINGS CO., LTD. Annual Report 2016

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420× 297mm

天Board of Directors and Audit & Supervisory Board Members

Financial
Section40
Six-Year Summary
42Management’s Discussion and Analysis
46

Front row ( lef t to right )Hitoshi Saito
Director

Takayuki Morita
Director

Consolidated Balance Sheet
Eiji Sato
President and CEO

Eiji Takehara
Director

48

Takao Miwa
Director

Consolidated Statement of Income
49

Back row ( lef t to right )Haruomi Yoshimoto
Audit & Supervisory
Board Member

Keitaro Iwaki
Outside Director

Masayuki Hizume
Outside Director

Akihito Sakai
Outside Audit & Supervisory
Board Member

Consolidated Statement of Comprehensive Income

Kiyoshi Endo
Outside Audit & Supervisory
Board Member

50
Consolidated Statement of Changes in Equity
52

Board of Directors

Consolidated Statement of Cash Flows

Eiji Sato

President and CEO

Takao Miwa

Director

Takayuki Morita

Director

Masayuki Hizume

Outside Director

Eiji Takehara

Director

Keitaro Iwaki

Outside Director

Hitoshi Saito

Director

54
Notes to Consolidated Financial Statements
84
Independent Audito r’s Report

Audit & Supervisory Board Members
Haruomi Yoshimoto

Audit & Supervisory Board Member

Akihito Sakai

Outside Audit & Supervisory Board Member

Kiyoshi Endo

Outside Audit & Supervisory Board Member( As of June 21, 2016 )38 TAIYO HOLDINGS CO., LTD. Annual Report 2016TAIYO HOLDINGS CO., LTD. Annual Report 2016

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420× 297mm

天Financial Section

Six-Year Summary
Millions of Yen

TAIYO HOLDINGS CO., LTD. and Consolidated Subsi di ari es
The years ended March 31

2011

2012

2013

2014

2015

2016

¥ 40,366
28,428
6,557
5,381
3,403
1,127
4,575
758
(3,696)¥ 39,797
5,934
4,040
2,503
1,046
2,793
(1,343)(2,979)¥ 36,184
25,319
6,479
4,386
3,368
1,004
6,109
(2,478)(2,314)¥ 44,225
28,349
8,307
7,569
4,931
1,181
7,020
(3,839)2,350¥ 48,260
28,865
10,1409, 255
6,667
1, 4129,233( 2,913 )( 9,920 )¥ 49,844
27,356
11,52310, 965
7,796
1, 891
10,546( 6,750)( 2,741)

42,851
13,0508,664
696
34,18640,703
12,546
7,227
478
33,47644,023
12,664
7,213
605
36,81058,36914,376
15,713
2,046
42,656

61,242
16,86519,9292,238
41,312

65,465
19,644
20,2142,136
45,251¥ 193.83
120.001,596.45¥ 264.05
90.00
1,703.14¥ 337.99
110.001,865.94

17.1%
12.8
69.6

19.2 %
16.7
63.8

22.0%
19.0
65.9

27,464,000

27,464,000

27, 485,600

For the Year :Net sales
Cost of sales
Selling, general and administrative expenses
Operating income
Net income
Depreciation and amortization
Net cash provided by operating activities
Net cash used in (provided by) investing activities
Net cash provided by (used in) financing activities

At year-end :Total assets
Property, plant and equipment, net
Total liabilities
Noncontrolling interests
Total equity

Yen

Per share data :Basic net income
Cash dividends applicable to the year
Net assets¥ 131.78
115.001,316.53¥ 98.38
90.00
1,297.18¥ 132.38
90.00
1,423.26%

Ratios :Ratio of operating income to net sales
Return on equity
Equity ratio

13.3%
9.9
78.2

10.2%
7.5
81.1

12.1%
9.7
82.2
Thousands of Shares

Common stock :Number of shares issued

27,464,000

27,464,000

27,464,000

See notes to consolidated financial statements.

Net Sales

Operating Income and Operating Income Ratio

Net income and Net Income Per Share( Millions of Yen)

( Millions of Yen)

( %)( Millions of Yen)

12,00036

8,000

48,26050,00040,36640,00049,84444,22539,797

10,965

10,00036,18419.2

30,0006,000
20,0004,000

10,000

0

5,381
13.3

10.2

2,000

2011

2012

2013

2014

2015

2016

( Years ended March 31)

0

4,040

2011

2012

4,386

24

22.0

17.1

18

4,000

2,000

2014

2015

2016

131.78

0

0

3,368
2,503

2011

2012

Net Income

40 TAIYO HOLDINGS CO., LTD. Annual Report 2016

20

200

193.83

100

19.0

2015

2016

12.8
10

9.9

150

132.38

16.7
15

250

264.05

7.5

9.7

5

50

2013

2014

2015

2016

0

0

2011

2012

2013

2014

( Years ended March 31)( Years ended March 31)
Operating Income Ratio

400
350

98.38

1,000

( Years ended March 31)
Operating Income

3,403

3,000

6

(%)

337.99 300
4,931

5,000

12

12.1

2013

6,667

6,000

7,569

8,000

7,796

7,000

30

9,255

Return on Equity(Yen)

Net Income Per ShareTAIYO HOLDINGS CO., LTD. Annual Report 2016

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天Financial Section

Management’s Discussion and Analysis

3. Taiwan

materials. On the other hand, profit increased year on year partly due
to a weaker yen in the foreign exchange market.

The consolidated companies comprising the Taiwan segment are

As a result, net sales amounted to 7,739 million yen (down 15.9%

manufacturing and marketing subsidiaries Taiwan Taiyo Ink Co., Ltd.,(1) Analysis of operating results

year on year) with segment profit at 1,414 million yen (up 16.6% year

and Onstatic Technology Co., Ltd. (and other three subsidiaries).

on year).

In the PWB materials market, demand notably for materials forIn the global economy during the fiscal year ended March 31, 2016, the U.S. economy recovered modestly driven by low unemployment rate andsmartphones was lackluster. The sales amount, however, rose year ona boost in consumer spending, and the European economy also continued on a recovery track. On the other hand, the trend of slowdown in theyear, partly owing to the impact of yen depreciation in foreign

Chinese economy did not stop, and with the weakening domestic and external demands, manufacturing activities of companies also slowedexchange, in addition to the shift to higher-priced PWB materials fromdown. Recovery of the Japanese economy came to a standstill, with weak consumer spending, etc.

lower-priced PWB materials.

5. Other
The consolidated companies comprising the operations in areas
other than the above are Taiyo America, Inc. and Taiyo Ink

As a result, net sales amounted to 9,854 million yen (up 2.5% year on

In the electronics components industry, in which the Group operates, while demand for servers and vehicle installation parts remained firm, itInternational (Singapore) Pte Ltd.

year) with segment profit at 2,227 million yen (up 26.3% year on year).

was flat as a whole partly due to lackluster demand for materials for smartphones.

Taiyo America performed at the same level as the corresponding
period of the previous year.

Under these conditions, net sales for the current fiscal year amounted to 49,843 million yen (up 3.3% year on year) mainly due to a weaker yen
in the foreign exchange market.

4. KoreaIn the PWB materials market, the sales volume for rigid board materials decreased year on year, but firm sales of high function products and

The consolidated companies comprising the Korea segment are

yen depreciation in foreign exchange had an impact on results, which led to a year-on-year increase in net sales. As a result, net sales of PWB

Taiyo Ink Co., (Korea) Ltd., a manufacturing and marketing

Taiyo Ink International (Singapore) performed steadily due to the
expansion of the market of material for vehicle installation partsand yen depreciation in foreign exchange contributed to a
year-on-year increase in net sales and profit.

subsidiary and Taiyo Ink Products Co., Ltd., a marketing subsidiary.

materials were 46,319 million yen (up 4.1% year on year).

As a result, net sales amounted to 4,451 million yen (up 7.5% year

While demand for high-price PKG board materials remained firm

In the FPD materials market, net sales decreased year on year, reflecting the end of manufacturing of PDP materials. As a result, net sales ofon year) with segment profit at 597 million yen (up 7.7% year on year).

in the PWB materials market, in the FPD materials market, net sales

FPD materials were 292 million yen (down 85.2% year on year).

decreased year on year, reflecting the end of manufacturing of PDP

As a result, operating income amounted to 10,964 million yen (up 18.5% year on year) with ordinary income at 11,129 million yen (up 16.8%
year on year) and profit attributable to owners of parent at 7,796 million yen (up 16.9% year on year).

( Consolidated forecasts for the next fiscal year )The operating environment in the next fiscal year ending March 31, 2017 is expected that demand for servers and vehicle installation

Sales results by product group category

parts will be firm in the electronics components industry in which the Group operates, while demand for small-sized information

The following are sales results by product group category for the fiscal year ended March 31, 2016.

(Millions of Yen)terminals, such as smartphones and tablet devices, and general home electric appliances will be low.

Compared to the previous fiscal year
Name of product group category

Previous fiscal
year results

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

Current fiscal
year results

ChangeRate of change (%)

33,5399,844
1,091

35,242
10,007
1,069

1,702
163
( 21)

5.1
1.7
( 2.0)FPD materials
PDP materials

1,976

292

(1,684)( 85.2)Other related products

1,808

3,231

1,423

78.7

Total

48,26049,843

1,583

3.3

Moreover, since our ratio of overseas sales to net sales is high, our business performance is forecast to be affected by a further
appreciation of yen in the next period.

Net sales(Millions of Yen)

Operating income(Millions of Yen)

Ordinary income(Millions of Yen)

Profit attributableto owners of parent(Millions of Yen)

Basic earnings
per share(Yen)

For the fiscal year ending March 31,2017 (Forecast)

45,700

8,000

7,800

5,500

238.03For the fiscal year ended March 31,
2016 (Actual results)

49,843

10,964

11,1297,796

337.99( 8.3)( 27.0)(29.9)(29.5)(29.6)

Rate of change (%)

Forecast for fiscal year ending March 2017 is calculated with the average foreign exchange rate during the period of 105 yen/U.S. dollar.

For reference, the following is earnings forecast for fiscal year ending March 2017 calculated with the average foreign exchange
Results by segment are as follows.

rate during the period of 120 yen/U.S. dollar, an equivalent level as for fiscal year ended March 2016:

2. China (including Hong Kong)( Percentages indicate year-on-year changes. )The consolidated companies comprising the China segment are

1. JapanTaiyo Ink (Suzhou) Co., Ltd. and Onstatic Ink (Shenzhen) Co., Ltd.,The consolidated companies comprising the Japan segment are Taiyo Ink

International (HK) Limited and Taiyo Ink Trading (Shenzhen) Co.,

Mfg. Co., Ltd. and Chugai Kasei Co., Ltd., manufacturing and marketing

Ltd., marketing subsidiaries operating mainly in the southern China

subsidiaries.

region. Onstatic Ink (Shenzhen) Co., Ltd. is a subsidiary of Onstatic

Overall demand remained flat for the high function products of PWB

Technology Co., Ltd.

Net sales

manufacturing and marketing subsidiaries, and Taiyo Inkmaterials. However, the inclusion of Chugai Kasei Co., Ltd. in the scope ofIn the PWB materials market, in addition to firm sales of

consolidation as of this first quarter ended June 30, 2016 had an impact,materials for lighting and vehicle installation parts, yenwith the sales amount increasing year on year. On the other hand, thedepreciation in foreign exchange contributed to a year-on-year

impact of upfront costs related to setting up the Kitakyushu Plant, Taiyo

increase in net sales and profit.

Ink Mfg. Co., Ltd.’s new factory, led profit to drop year on year.

As a result, net sales amounted to 21,820 million yen (up 6.9%

As a result, net sales amounted to 17,002 million yen (up 7.7% year on

year on year) with segment profit at 4,775 million yen (up 36.1%

year) with segment profit at 2,254 million yen (down 8.6% year on year).

year on year).

42 TAIYO HOLDINGS CO., LTD. Annual Report 2016

Operating income

Ordinary income

Profit attributableto owners of parent

Basic earnings
per share

Millionsof Yen%Millionsof Yen%Millionsof Yen%Millionsof Yen%Yen

S i x months endi ng
S eptember 30, 2016

26,2003.1

5,100(12.2)

5,000(15.1)

3,550(13.2)

153.64

Fiscal year ending
March 31, 2017

51,2002.7

10,100

(7.9)

9,900

(11.0)

7,000(10.2)

302.94TAIYO HOLDINGS CO., LTD. Annual Report 2016

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天Financial Section(3) Basic policy on profit distribution and dividends for the current fiscal
year and next fiscal year

(2) Analysis of financial position
a. Positions of assets, liabilities and net assets

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

The following shows the positions of assets, liabilities and net assets as of March 31, 2016.
ChangeAs of March 31, 2015 As of March 31, 2016
( M i l l i o n s o f Yen )( Millions of Yen) ( Millions of Yen)

profit distribution at high levels. We use the dividend on equity ratio as our target index, keeping this figure at least 5% ofconsolidated financial results for the mid-to long-term.

Main factors( comparison with the end of the previous fiscal year )In accordance with this policy, the Company paid an interim dividend of 55 yen per share.
As already announced, we also plan to pay a year-end dividend of 55 yen and this will be placed on the agenda of the next

Cash and deposits increased approx. 1,600 million yen, andCurrent assets

39,34037,942

1,397

Ordinary General Meeting of Shareholders. This will result in an annual dividend of 110 yen per share for the current fiscal year.

merchandise and finished goods decreased approx. 300
million yen.

Concerning dividends of the next fiscal year, we plan to pay an interim dividend of 55 yen and a year-end dividend of 55 yen,and this will result in an annual dividend of 110 yen per share and a rate of return to shareholders of 46.2%.

Construction in progress decreased approx. 1,200 million

Non-current assets

26,12423,2982,825

yen, buildings and structures increased approx. 2,500 million
yen, machinery and equipment increased approx. 700 million
yen, and tools, furniture and fixtures increased approx. 400
million yen.

Total assets

61,241

65,464

4,223

Total liabilities

19,92920,214284

Total net assets
Total liabilities andnet assets

3,938

65,464

61,241

The fol l ow i ng are the mai n ri s k s that may i nfl uenc e the bus i nes s d e v e lo p m e n t o f t h e G r o u p .
Asset retirement obligations increased approx. 200 million yen.

a. Technological innovation risks

Profit increased approx. 7,700 million yen, cash dividends paid

45,25041,312(4) Risk factors

of approx. 2,300 million yen, foreign currency translation

Our Group is reliant on the manufacture and sale of PWB materials, andadjustment decreased approx. 2,100 million yen.

SR in particular, as a major source of our income. If radical technological

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

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

China, and the United States. Sales of our Group’s products particularlythat do not use SR, were to be widely adopted, this would result in a

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

significant decrease in demand for our products.

expanding. Accordingly, terrorist activities, destabilization of the political

From the viewpoint of product characteristics, operability, and economic

situation, economic fluctuations, the outbreak of earthquakes andviability, there is little possibility that such technological innovations willcontagion, unforeseen changes to legal, regulatory or tax systems, andbe widely adopted in the near future. However, the Company considers itother country-specific risks could impact on the business strategies andas important issue in the field of research and development to findperformance of our Group.

4,223

b. Cash flow position
The following is the position of cash flows for the fiscal year ended March 31, 2016.
Fiscal year ended March 31, 2016
(Millions of Yen)

Net cash provided by (used in)operating activities
Net cash provided by (used in)investing activities

possible new met hods for PWBs.

f. Risk of exchange rate fluctuations

Main factors

Profit before income taxes provided approx. 11,100 million yen, depreciation provided

10,546

approx. 1,800 million yen and income taxes paid used approx. 3,200 million yen.
Purchase of property, plant and equipment used approx. 4,200 million yen,

(6,750)payments into time deposits used approx. 4,300 million yen, proceeds from(2,740)Net increase (decrease) incash and cash equivalents

Our ratio of overseas sales to net sales is high and there are many

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

Accordingly, our business performance is affected by fluctuations indevelop through patents and intellectual property. However, in theevent a patent application, etc. does not result in the granting ofrights or a third party requests invalidation, insufficient protection

Cash dividends paid used approx. 2,300 million yen.

of our rights as a Group may result. Moreover, infringing the38

Cash and cash equivalents
at end of periodb. Risks associated with patents
efforts are being made to protect the products and technology wewithdrawal of time deposits provided approx. 2,700 million yen.

Net cash provided by (used in)financing activities

e. Country-specific risks related to businessdeployment overseas

instances when we calculate product prices in foreign currencies.
exchange rates, with a highly appreciated yen normally leading to
reduced income and profits.

g. Risk of price fluctuations in key products

intellectual property rights owned by a third party could impact thePWB manufacturing is shifting to other Asian countries, especiallyperformance of our Group as a result of the payment of royalties or

China, and we are engaged in continuing price wars with rival

large amounts of damages.

companies including local companies as well as other Japanese firms

18,385

regarding SR. There is also pressure to lower SR prices which has

c. Risk of major production facilities being
affected by a disasterc. Trend of indicators

Our Group has manufacturing bases in Japan, Taiwan, Korea, China

The following is the transition of cash flow indicators.

resulted from price competition in the PWB market. Because of this,
there is a possibility that the price of our main product, SR, may drop
thus affecting the performance of our Group.

Fiscal year ended
March 31, 2012

Fiscal year ended
March 31, 2013

Fiscal year ended
March 31, 2014

Fiscal year ended
March 31, 2015

Fiscal year ended
March 31, 2016

bases is damaged by a natural disaster and manufacturing functions

h. Risks related to f luctuationsin product demand

Equity ratio (%)

82.2

69.6

63.8

65.9

are obstructed, manufacturing and supply functions would be switched

81.1

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

to another manufacturing base as an emergency measure. However,components market trends, which may affect the performance of our Group.

Equity ratio on mark-to-market basis (%)

138.7

156.0

133.1

158.3

134.5

–

–

0.9

0.9

0.8

992.5

3,850.3

331.3

304.8

168.4

Interest-bearing debt to cash flow ratio (year)
Interest coverage ratio ( times)

and the United States. In the event that any of our manufacturing

this would require some preparation and adjustment and our businesswould be affected in the interim.

i. Credit risks related to receivables
The Group has many customers and, although we do not concentrate and. Risk related to procurement of raw materials

Equity ratio:(Net assets- Non-controlling interests)/Total assets

Equity ratio on mark-to-market basis:

Total market capitalization/Total assets

The Group procures many of its raw materials from external raw

Interest-bearing debt to cash flow ratio:

Interest-bearing debt/Cash flow

material manufacturers. Problems at these raw material manufacturers

Interest coverage ratio:

Operating cash flow/Interest paid

or a lack of supplies that hinder the Group’s production activities may
affect the performance of the Group.

(1) The above indicators are calculated based on consolidated financial figures.
(2) Total market capitalization is calculated based on total number of issued shares at the fiscal year end (excluding treasury shares) ×

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

j. Risks related to the soaring cost of
raw materials
Due to the state of the oil market, the prices of certain raw materials

stock market price at the fiscal year end.
(3) Net cash provided by (used in) operating activities stated in the consolidated statement of cash flows is used for “Cash flows.”

have risen, which may affect the performance of our Group.

“Interest paid” are the amounts stated under interest expenses paid in the consolidated statement of cash flows.

44 TAIYO HOLDINGS CO., LTD. Annual Report 2016TAIYO HOLDINGS CO., LTD. Annual Report 2016

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420× 297mm

天Financial Section

Consolidated Balance Sheet
Thousands of
U.S. Dollars( Note 1 )TAIYO HOLDINGS CO., LTD. and Consolidated Subsidiaries
March 31, 2016

Millions of Yen
ASSETS

2016

2015

Millions of Yen
LIABILITIES AND EQUITY

2016

Time deposits ( Note 13)
Notes and accounts receivable—trade (Notes 4 and 13)
Inventories ( Note 5)

2016

2015

2016

¥ 933

¥ 730

$ 8,286

CURRENT LIABILITIES:
Short-term bank loans (Notes 8 and 13)

CURRENT ASSETS:
Cash and cash equivalents (Note 13)

Thousands of
U.S. Dollars( Note 1 )

440

340

3,908

Notes and accounts payable—trade (Note 13)

5,765

5,661

51,199Accounts payable—other (Note 13)

1,697

2,033

15,070

776

1,139

6,892

Accrued expenses

715

702

6,350

Deferred tax liabilities (Note 11)

412

403

3,659

Current portion of long-term debt (Notes 8 and 13)¥ 18,386¥ 18,183$ 163,286

3,023

1,584

26,847

12,836

13,112

113,996

Income taxes payable (Note 13)

4,017

4,527

35,675

Consumption taxes receivable

248

169

2,202

Deferred tax assets ( Note 11)

72

100

639

Other current liabilities

161

49

1,430

Other current assets

1,098

609

9,753

Total current liabilities

10,89911,057

96,794

Allowance for doubtful accounts ( Note 13 )(340)

( 341)( 3,020 )

39,34037,943349,378

7,413

7,686

65,835

Liability for retirement benefits (Note 9)

274

10

2,433

Asset retirement obligations

331

56

2,940

Accrued liability for stock benefits

27

42

240

1,259

1,070

11,180

Other long-term liabilities

11

9

98

Total long-term liabilities

9,315

8,873

82,726

Common stock—authorized, 50,000,000 shares;
issued, 27,485,600 shares in 2016 and 27,464,000 shares in 2015

6,188

6,135

54,956

Capital surplus

7,305

7,144

64,87642,49036,997377,353( 14,142 )( 14,599 )(125,595)

41,84135,677

371,590

96

111

853

1,190

3,332

10,568(12)(46)(107 )

1,274

3,397

11,314

Noncontrolling interests

2,136

2,238

18,970Total equity

45,251

41,312401,874¥ 65,465¥ 61,242$ 581,394

Total current assets

LONG-TERM LIABILITIES :Long-term debt (Notes 8 and 13)

PROPERTY, PLANT, AND EQUIPMENT ( Note 6 ) :
4,617

4,342

41,004

10,524

8,014

93,464

Machinery, equipment, and vehicles—net

2,765

1,970

24,556

Tools, furniture, and fixtures—net

1,154

747

10,249Construction in progress (Note 7)

580

1,792

5,151

Land
Buildings and structures—net

Other
Total property, plant, and equipment

4
19,644

Deferred tax liabilities (Note 11)

COMMITMENTS AND CONTINGENT LIABILITIES (Note 15)
EQUITY (Notes 10 and 20):34
16,865

Shareholders’ equity:

174,458

Retained earnings

INVESTMENTS AND OTHER ASSETS:
657

362

5,835

39

39

346

Goodwill

4,433

4,850

39,369Software

340

306

3,020

Net defined benefit asset (Note 9)

356

340

3,162

97

63

861

Other assets

560

475

4,974

Allowance for doubtful accounts

(1)

(1)

( 9)

6,481

6,434

57,558¥ 65,465¥ 61,242$ 581,394

Investment securities (Notes 3 and 13)
Investments in unconsolidated subsidiaries (Note 13)

Deferred tax assets (Note 11)

Total investments and other assets

TOTAL

Treasury stock — at cost, 4,379,037 shares in 2016 and
4,521,990 shares in 2015
Total shareholders’ equity
Accumulated other comprehensive income:
Valuation difference on available-for-sale securities
Foreign currency translation adjustments
Remeasurements of defined benefit plans (Note 9)
Total accumulated other comprehensive income

TOTAL

See notes to consolidated financial statements.

46 TAIYO HOLDINGS CO., LTD. Annual Report 2016TAIYO HOLDINGS CO., LTD. Annual Report 2016

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420× 297mm

天Financial Section

Consolidated Statement of Comprehensive Income

Consolidated Statement of Income
TAIYO HOLDINGS CO., LTD. and Consolidated Subsidiaries
Year Ended March 31, 2016

Thousands of
U.S. Dollars(Note 1)Millions of Yen
2016

2015

2016

¥ 49,844¥ 48,260$ 442,664

COST OF SALES

27,35628,865242,948

Gross profit

22,48819,395

199,716

11,523

10,140102,336

10,965

9,255

97,380NET SALESSELLING, GENERAL,AND ADMINISTRATIVE EXPENSES (Note 12)
Operating income

TAIYO HOLDINGS CO., LTD. and Consolidated Subsidiaries
Year Ended March 31, 2016

Thousands of
U.S. Dollars( Note 1 )Millions of Yen
2016

2015

2016

¥ 8,128¥ 6,972$ 72,185( 14 )( 125 )

(124 )

Foreign currency translation adjustments( 2,256 )3,324( 20,036 )Remeasurements of defined benefit plans

34

29

302

( 2,236 )3,228(19 , 858 )¥ 5,892¥ 10,200$ 52,327¥ 5,674218¥ 9,651$ 50,391
1,936

NET INCOME

OTHER COMPREHENSIVE INCOME (LOSS) (Note 17):
Valuation difference on available-for-sale securities

OTHER INCOME ( EXPENSES ) :Interest and dividend income

112

126

995

Interest expense

(69)

(30)

( 613 )

Foreign exchange gain—net

24

127

213

Subsidy income

23

5

204

Loss on impairment of long-lived assets (Note 7)
Commission for purchase of treasury shares( 32)

COMPREHENSIVE INCOME

(284)

(1)

(52)

Refunded consumption taxes

28

Gain on sales of investment securities

387

(9)
COMPREHENSIVE INCOME ATTRIBUTABLE TO:
Owners of the parent(15)

Loss on valuation of golf club membership

Noncontrolling interests

Other—net

115

89

1,022

Other income—net

172

665

1,528

11,137

9,920

98,908Current

2,855

2,671

25,355

Deferred

154

277

1,368

3,009

2,948

26,723

8,128

6,972

72,185

332

305

2,949

¥ 7,796¥ 6,667$ 69,236

INCOME BEFORE INCOME TAXES

Total other comprehensive (loss) income

549

See notes to consolidated financial statements.

INCOME TAXES ( Note 11) :Total income taxes

NET INCOME
NET INCOME ATTRIBUTABLE TO NONCONTROLLINGINTERESTS
NET INCOME ATTRIBUTABLE TO OWNERS OF THE PARENT

Yen

U.S. Dollars

PER SHARE OF COMMON STOCK (Notes 2.t and 18):
Basic net income
Cash dividends applicable to the year

¥ 337.99
110.00¥ 264.05
90.00$ 3.000.98

See notes to consolidated financial statements.

48 TAIYO HOLDINGS CO., LTD. Annual Report 2016TAIYO HOLDINGS CO., LTD. Annual Report 2016

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Financial Section

Consolidated Statement of Changes in Equity
Millions of Yen

TAIYO HOLDINGS CO., LTD. andConsolidated Subsidiaries

BALANCE, MARCH 31, 2014(as previously reported)

Number of
Shares ofCommon Stock
Outstanding

CommonStockCapitalSurplusRetained
Earnings

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

Foreign
Currency
Translation
Adjustments

Remeasurements ofDefinedBenefit Plans

Total
Accumulated
Other
Comprehensive
IncomeNoncontrolling
Interests

T otalEquity25,437,890¥ 6,135¥ 7,102¥ 32,257¥ ( 5,373)¥ 40,121

¥ 235

¥ 329

¥ ( 75)¥ 489¥ 2,046¥ 42,656

Cumulative effects ofchanges in accounting policies
BALANCE, APRIL 1, 2014(as restated)

Accumulated Other Comprehensive Income

Shareholders’ Equity

Year Ended March 31, 2016

362
25,437,890

6,135

7,102

Net income attributable toowners of the parent
Dividends from surplus
Purchase of treasury stock(2,606,180)

Disposal of treasury stock

110,300

32,619362( 5,373)

40,483

22,942,010

7,144

Net income attributable toowners of the parent
Dividends from surplus
Issuance of new shares

21,600Purchase of treasury stock(217)

Disposal of treasury stock

143,170

53

23,106,563(9,520)(9,520)( 9,520 )

294

336

336

36,997(14,599)

35,677

3,003

29

2,908

192

3,100

111

3,332

(46)

3,397

2,238

41,312

7,796

7,796

7,796

( 2,303)( 2,30 3)(2,303)

106

106

( 1)

( 1)

( 1)

458

566

566

¥ 42,490¥ (14,142)¥ 41,841(15)(2,142)34( 2,123)( 102)( 2,225)¥ 96¥ 1,190¥ (12)¥ 1,274¥ 2,136¥ 45,251

Noncontrolling
Interests

T otalEquity$ 19,876$ 366,892

Accumulated Other Comprehensive Income

Shareholders’ Equity

Year Ended March 31, 2016

CommonStock$ 54,485

CapitalSurplusRetained
Earnings

Treasury
Stock—At CostTotal
Shareholders’EquityValuation Difference
on Availablefor-Sale Securities$ 63,446$ 328,570$ (129,654)$ 316,847$ 986

Net income attributable toowners of the parent
Dividends from surplus
471

Disposal of treasury stock$ (408)

Total
Accumulated
Other
Comprehensive
Income$ 30,169

69,236(20,453)(20,453)(20,453)

942

942

(9)

(9)

(9)

4,068

5,027

471
959

$ 64,876$ 29,591

Remeasurements ofDefinedBenefit Plans

69,236

Changes of items during the year
$ 54,956

Foreign
Currency
Translation
Adjustments

69,236

Purchase of treasury stock

BALANCE, MARCH 31, 2016

(124)

Thousands of U.S. Dollars ( Note 1)

Consolidated Subsidiaries

Issuance of new shares

43,018(2,289)TAIYO HOLDINGS CO., LTD. andBALANCE, MARCH 31, 2015

2,046

(2,289)53¥ 7,305489( 2,289)108¥ 6,188

(75)

6,667

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

329

6,667

42

6,135

235

6,667

Changes of items during the year
BALANCE, MARCH 31, 2015362

$ 377,353$ (125,595)$ 371,590

5,027( 133 )

( 19,023 )301( 18,855 )( 906 )

(19,761)$ 853$ 10,568$ (107)$ 11,314$ 18,970$ 401,874

See notes to consolidated financial statements.

50 TAIYO HOLDINGS CO., LTD. Annual Report 2016TAIYO HOLDINGS CO., LTD. Annual Report 201651

420× 297mm

天Financial Section

Consolidated Statement of Cash Flows
TAIYO HOLDINGS CO., LTD. and Consolidated Subsidiaries
Ye a r En d e d M a r ch 3 1, 2016
Thousands of
U.S. Dollars(Note 1)Millions of Yen

OPERATING ACTIVITIES:
Income before income taxes
Adjustments for :Income taxes—paidDepreciation and amortization
Gain on sales of investment securities
Loss on impairment of long-lived assets(Increase) decrease in notes and accounts receivable—trade
Decrease in inventories
Increase (decrease) in notes and accounts payable—trade
Increase in other current liabilities
Decrease in accrued expenses
Other—net

2016

2015

2016

¥ 11,137¥ 9,920$ 98,908(3,294)
1,891(2,033)
1,412
(387)

(29,254)
16,79432( 592)
464
349
142
(25)
442

(580)
31
(14)
243

284
(5,258)
4,121
3,099
1,261
(221)
3,925

( 591)( 687)( 5,249)

10,546

9,233

93,659(4,372)( 2,188)( 38,829 )Proceeds from withdrawal of time deposits

2,708

1,579

24,050Purchases of property, plant, and equipment(4,217)( 2,711)( 37,451)

Purchase of software

(160)

(127)

(1,421)

Purchase of investment securities(115)

Total adjustments
Net cash provided by operating activities

366
275

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

2016

2015

2016

¥ 38

¥ ( 2,155)$ 337

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR

18,183

20,338161,483

INCREASE IN CASH AND CASH EQUIVALENTS DUE TO
SHARE EXCHANGE (Note 19)

165

NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS—(Forward)

CASH AND CASH EQUIVALENTS, END OF YEAR

¥ 18,386

1,466¥ 18,183$ 163,286

See notes to consolidated financial statements.

INVESTING ACTIVITIES :Payments into time deposits

Proceeds from sales of investment securities
Other—net
Net cash used in investing activities(1,021)
571

(594)

( 37)

(5,275)(6,750)( 2,913)(59,947 )

261

137

2,318

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

500

6,632

4,440

Repayments of long-term debt

(984)

( 4,925 )(8,739)Purchase of treasury stock(1)( 9,201)(9)

Disposal of treasury stock

1

18

9

( 2,303 )( 2,290 )( 20,453 )(321)( 291)(2,851)

Cash dividends paid
Cash dividends paid to noncontrolling shareholders
Proceeds from issuance of shares
Net cash used in financing activities
FOREIGN CURRENCY TRANSLATION ADJUSTMENTS ON
CASH AND CASH EQUIVALENTS
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS—(Forward)

106

942

( 2,741)( 9,920)( 24,343)(1,017)1,445( 9,032 )¥ 38¥ ( 2,155)$ 337

52 TAIYO HOLDINGS CO., LTD. Annual Report 2016TAIYO HOLDINGS CO., LTD. Annual Report 2016

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天Financial Section

Notes to Consolidated Financial Statements

The excess of the cost of an acquisition over the fair value of the net assets of the acquired subsidiary at the dateof acquisition is being amortized on a straight-line basis over a period of 5 or 20 years.
There are no investments in associated companies accounted for using the equity method in 2016 and 2015.

TAIYO HOLDINGS CO., LTD. and Consolidated Subsidiaries
Ye a r En d e d M a r ch 3 1, 2016

All significant intercompany balances and transactions have been eliminated in consolidation. All material
unrealized profit included in assets resulting from transactions within the Group is eliminated.
The fiscal years of two (two as of March 31, 2015) consolidated subsidiaries end on December 31. To prepare the

1. BASIS OF PRESENTING CONSOLIDATED FINANCIAL STATEMENTS

Company’s consolidated financial statements, TAIYO INK (SUZHOU) CO., LTD. and TAIYO INK TRADINGThe accompanying consolidated financial statements have been prepared in accordance with the provisions set forth(SHENZHEN) CO., LTD. prepared a set of accounts with a closing date of March 31 and these were used forconsolidation purposes. The Company used the financial statements of OTC whose fiscal year ends on December 31

in the Japanese Financial Instruments and Exchange Act and its related accounting regulations and in accordancefor consolidation since the difference of fiscal year ends between the Company and OTC is no more than threewith accounting principles generally accepted in Japan ("Japanese GAAP"), which are different in certain respects

months. The necessary adjustments for significant transactions, if any, during the intervening period are made on

as to application and disclosure requirements of International Financial Reporting Standards.

consolidation.

In preparing these consolidated financial statements, certain reclassifications and rearrangements have been madeto the consolidated financial statements issued domestically in order to present them in a form that is more familiar
to readers outside Japan. In addition, certain reclassifications have been made in the 2015 consolidated financial
statements to conformb. Unification of Accounting Policies Applied to Foreign Subsidiaries
for the Consolidated Financial Statements

to the classifications used in 2016.

The consolidated financial statements are stated in Japanese yen, the currency of the country in which TAIYOHOLDINGS CO., LTD. (the "Company") is incorporated and operates. The translation of Japanese yen amounts into U.S.

In May 2006, the Accounting Standards Board of Japan ("ASBJ") issued ASBJ Practical Issues Task Force ( “PITF” ) No.

dollar amounts is included solely for the convenience of readers outside Japan and has been made at the rate of ¥112.6

18, "Practical Solution on Unification of Accounting Policies Applied to Foreign Subsidiaries for the Consolidated

to $1, the approximate rate of exchange at March 31, 2016. Such translation should not be construed as representations

Financial Statements" which was subsequently revised in February 2010 and March 2015 to reflect revisions of thethat the Japanese yen amounts could be converted into U.S. dollars at that or any other rate.

relevant Japanese GAAP or accounting standards in other jurisdictions. PITF No. 18 prescribes (1) the accounting
policies and procedures applied to a parent company and its subsidiaries for similar transactions and events undersimilar circumstances should in principle be unified for the preparation of the consolidated financial statements; (2)financial statements prepared by foreign subsidiaries in accordance with either International Financial Reporting

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESStandards or accounting principles generally accepted in the United States of America tentatively may be used for the
consolidation process; and (3) however, the following items should be adjusted in the consolidation process so that net

a. Consolidation

income is accounted for in accordance with Japanese GAAP, unless they are not material: (a) amortization of goodwill;

The consolidated financial statements as of March 31, 2016, include the accounts of the Company and its 15(b) scheduled amortization of actuarial gain or loss of pensions that has been recorded in equity through othersignificant (14 as of March 31, 2015) subsidiaries (collectively, the "Group").

comprehensive income; (c) expensing capitalized development costs of research and development ("R&D"); and (d)cancellation of the fair value model of accounting for property, plant, and equipment and investment properties, andUnder the control and influence concepts, those companies in which the Company, directly or indirectly, isincorporation of the cost model of accounting.

able to exercise control over operations are fully consolidated and those companies over which the Group has
the ability to exercise significant influence are accounted for using the equity method.

c. Business Combinations( Nam es of Cons oli d a t e d S u b s i d i a r i e s )TAIYO INK MFG. CO., LTD.

TAIYO INK INTERNATIONAL (SINGAPORE) PTE LTD

In October 2003, the Business Accounting Council issued a statement of opinion, "Accounting for Business

CHUGAI KASEI CO., LTD.

TAIYO INK INTERNATIONAL (HK) LTD.

Combinations," and in December 2005, the ASBJ issued ASBJ Statement No. 7, "Accounting Standard for Business

TAIWAN TAIYO INK CO., LTD.

TAIYO INK TRADING (SHENZHEN) CO., LTD.

Divestitures" and ASBJ Guidance No. 10, "Guidance for Accounting Standard for Business Combinations and Business

TAIYO INK CO., (KOREA) LTD.

TAIYO INK PRODUCTS CO., LTD.

Divestitures."TAIYO INK (SUZHOU) CO., LTD.

ONSTATIC TECHNOLOGY CO., LTD. ("OTC")In December 2008, the ASBJ issued a revised accounting standard for business combinations, ASBJ Statement No. 21,"Accounting Standard for Business Combinations." Major accounting changes under the revised accounting standard are

TAIYO AMERICA, INC.

as follows: (1) The revised standard requires accounting for business combinations only by the purchase method. As a
CHUGAI KASEI CO., LTD. is included within the scope of consolidation because the Company newly acquired its

result, the pooling-of-interests method of accounting is no longer allowed. (2) The previous accounting standard accounts

shares in the year ended March 31, 2016.

for R&D costs to be charged to income as incurred. Under the revised standard, in-process R&D costs acquired in a

TAIYO INK PRODUCTS CO., LTD. is included within the scope of consolidation because it was newly establishedbusiness combination is capitalized as an intangible asset. (3) The previous accounting standard provided for a bargain

in the year ended March 31, 2016.

purchase gain (negative goodwill) to be systematically amortized over a period not exceeding 20 years. Under the revised

As OTC owns four subsidiaries, the total number of consolidated subsidiaries is 15.

standard, the acquirer recognizes the bargain purchase gain in profit or loss on the acquisition date immediately after

Investments in the remaining two (two as of March 31, 2015) unconsolidated subsidiaries are stated at cost. If

reassessing and confirming that all of the assets acquired and all of the liabilities assumed have been identified after athe equity method of accounting had been applied to the investments in these companies, the effect on thereview of the procedures used in the purchase allocation. This standard was applicable to business combinations

accompanying consolidated financial statements would not be material.

undertaken on or after April 1, 2010. The Company adopted this standard on April 1, 2010.

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In September 2013, the ASBJ issued revised ASBJ Statement No. 21, "Accounting Standard for Business

The revised accounting standards and guidance for (b) presentation of the consolidated balance sheet and (c)Combinations," revised ASBJ Guidance No. 10, "Guidance on Accounting Standards for Business Combinations andpresentation of the consolidated statement of income shall be applied to all periods presented in financial statements

Business Divestitures," and revised ASBJ Statement No. 22, "Accounting Standard for Consolidated Financial

containing the first-time application of the revised standards and guidance.

Statements." Major accounting changes are as follows:

The revised standards and guidance for (d) provisional accounting treatments for a business combination are effective
for a business combination that occurs on or after the beginning of annual periods beginning on or after April 1, 2015.
Earlier application is permitted for a business combination that occurs on or after the beginning of annual periods(a) Transactions with noncontrolling interest

beginning on or after April 1, 2014.

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

The Company applied the revised accounting standards and guidance for (a) transactions with noncontrolling interest,

carrying amount of noncontrolling interest is adjusted to reflect the change in the parent’s ownership interest in its subsidiary while theparent retains its controlling interest in its subsidiary. Under the previous accounting standard, any difference between the fair value of(b) presentation of the consolidated balance sheet, (c) presentation of the consolidated statement of income, and (e)the consideration received or paid and the amount by which the noncontrolling interest is adjusted is accounted for as an adjustment ofacquisition-related costs above, effective April 1, 2015, and (d) provisional accounting treatments for a businessgoodwill or as profit or loss in the consolidated statement of income. Under the revised accounting standard, such difference is

combination above for a business combination that occurred on or after April 1, 2015. The revised accounting standards

accounted for as capital surplus as long as the parent retains control over its subsidiary.

and guidance for (a) transactions with noncontrolling interest and (e) acquisition-related costs were applied prospectively.
(b) Presentation of the consolidated balance sheet

With respect to (b) presentation of the consolidated balance sheet and (c) presentation of the consolidated statement ofincome, the applicable line items in the 2015 consolidated financial statements have been accordingly reclassified andIn the consolidated balance sheet, "minority interest" under the previous accounting standard is changed to "noncontrolling interest"
under the revised accounting standard.

presented in line with those in 2016.
As a result, operating income and income before income taxes for the year ended March 31, 2016, increased by ¥68(c) Presentation of the consolidated statement of income

million ($604 thousand). There is no impact on the capital surplus as of March 31, 2016.

In the consolidated statement of income, "net income before minority interest" under the previous accounting standard is changed to "netIn the consolidated statement of cash flows for the fiscal year ended March 31, 2016, cash flows related to the purchaseincome" under the revised accounting standard, and "net income" under the previous accounting standard is changed to "net income
attributable to owners of the parent" under the revised accounting standard.

or sales of investments in subsidiaries that do not result in changes in the scope of consolidation are stated in “net cashused in financing activities.” Cash flows for expenses associated with the purchase of investments in subsidiaries that do(d) Provisional accounting treatments for a business combination

result in changes in the scope of consolidation and cash flows for expenses associated with the purchase or sales ofIf the initial accounting for a business combination is incomplete by the end of the reporting period in which the business combination
occurs, an acquirer shall report in its financial statements provisional amounts for the items for which the accounting is incomplete.

investments in subsidiaries that do not result in changes in the scope of consolidation are stated in “net cash provided by

Under the previous accounting standard guidance, the impact of adjustments to provisional amounts recorded in a business combination

operating activities.”on profit or loss is recognized as profit or loss in the year in which the measurement is completed. Under the revised accounting standard

In addition, net assets per share as of March 31, 2016, decreased by ¥2.97 ($0.03) and net income per share for theguidance, during the measurement period, which shall not exceed one year from the acquisition, the acquirer shall retrospectively adjust

year ended March 31, 2016, decreased by ¥2.98 ($0.03).

the provisional amounts recognized at the acquisition date to reflect new information obtained about facts and circumstances that existed
as of the acquisition date and that would have affected the measurement of the amounts recognized as of that date. Such adjustments
shall be recognized as if the accounting for the business combination had been completed at the acquisition date.

d. Cash Equivalents(e) Acquisition-related costs
Acquisition-related costs are costs, such as advisory fees or professional fees, which an acquirer incurs to effect a business combination.

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

Under the previous accounting standard, the acquirer accounts for acquisition-related costs by including them in the acquisition costs ofrisk of changes in value.

the investment. Under the revised accounting standard, acquisition-related costs shall be accounted for as expenses in the periods in

Cash equivalents include time deposits, certificates of deposit, commercial paper, and bond funds, all of which mature or

which the costs are incurred.

become due within three months of the date of acquisition.
The above accounting standards and guidance for (a) transactions with noncontrolling interest, (b) presentation ofe. Inventories

the consolidated balance sheet, (c) presentation of the consolidated statement of income, and (e) acquisition-related

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

costs are effective for the beginning of annual periods beginning on or after April 1, 2015. Earlier application ispermitted from the beginning of annual periods beginning on or after April 1, 2014, except for (b) presentation of thef. Marketable and Investment Securities

consolidated balance sheet and (c) presentation of the consolidated statement of income. In the case of earlier

The Company classifies all marketable and investment securities as available-for-sale securities, which are reported at fair

application, all accounting standards and guidance above, except for (b) presentation of the consolidated balancevalue, with unrealized gains and losses, net of applicable taxes, reported in a separate component of equity.

sheet and (c) presentation of the consolidated statement of income, should be applied simultaneously.

Nonmarketable available-for-sale securities are stated at cost determined using the moving-average method. For other

Either retrospective or prospective application of the revised accounting standards and guidance for (a)-than-temporary declines in fair value, investment securities are reduced to net realizable value by a charge to income.

transactions with noncontrolling interest and (e) acquisition-related costs is permitted. In retrospective application of
the revised standards and guidance, the accumulated effects of retrospective adjustments for all (a) transactions
with noncontrolling interest and (e) acquisition-related costs that occurred in the past shall be reflected asg. Allowance for Doubtful Accounts

adjustments to the beginning balance of capital surplus and retained earnings for the year of the first-time

The allowance for doubtful accounts is provided for at the aggregate amounts of estimated credit losses based on theapplication. In prospective application, the new standards and guidance shall be applied prospectively from theindividual financial review of doubtful or troubled accounts and a general reserve for other accounts based on the

beginning of the year of the first-time application.

Company’s historical credit loss experience of a certain past period.

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h. Property, Plant, and Equipment(1) Under the revised accounting standard, actuarial gains and losses and past service costs that are yet to berecognized in profit or loss are recognized within equity (accumulated other comprehensive income), after adjusting

Property, plant, and equipment are stated at cost.

for tax effects, and any resulting deficit or surplus is recognized as a liability (liability for retirement benefits) or

Buildings are depreciated principally using the straight-line method, while property, plant, and equipment other thanasset (asset for retirement benefits).

buildings are depreciated principally using the declining-balance method over the estimated useful lives of the assets.

(2) The revised accounting standard does not change how to recognize actuarial gains and losses and past service costs

The ranges of useful lives for major categories are as follows:
Buildings and structures:

From 7 to 60 years

Machinery, equipment, and vehicles:

From 4 to 10 years

Tools, furniture, and fixtures:

From 3 to 8 years

in profit or loss. Those amounts are recognized in profit or loss over a certain period no longer than the expected averageremaining service period of the employees. However, actuarial gains and losses and past service costs that arose in thecurrent period and have not yet been recognized in profit or loss are included in other comprehensive income andactuarial gains and losses and past service costs that were recognized in other comprehensive income in prior periods
and then recognized in profit or loss in the current period shall be treated as reclassification adjustments (see Note 17).

i. Long-Lived Assets(3) The revised accounting standard also made certain amendments relating to the method of attributing expected

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

benefit to periods and relating to the discount rate and expected future salary increases.

amount of an asset or asset group may not be recoverable. An impairment loss would be recognized if the carrying
amount of an asset or asset group exceeds the sum of the undiscounted future cash flows expected to result from theThis accounting standard and the guidance for (1) and (2) above are effective for the end of annual periods

continued use and eventual disposition of the asset or asset group. The impairment loss would be measured as the

beginning on or after April 1, 2013, and for (3) above are effective for the beginning of annual periods beginning on oramount by which the carrying amount of the asset exceeds its recoverable amount, which is the higher of the discounted

after April 1, 2014, or for the beginning of annual periods beginning on or after April 1, 2015, subject to certain disclosure

cash flows from the continued use and eventual disposition of the asset or the net selling price at disposition.

in March 2015, both with earlier application being permitted from the beginning of annual periods beginning on or after
April 1, 2013. However, no retrospective application of this accounting standard to consolidated financial statements inprior periods is required.

j. Software

The Company applied the revised accounting standard and guidance for retirement benefits for (1) and (2) above,

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

effective March 31, 2014, and for (3) above, effective April 1, 2014.
With respect to (3) above, the Company changed the method of attributing the expected benefit to periods from ak. R&D Costs

straight-line basis to a benefit formula basis, the method of determining the discount rate from using the period

R&D costs are charged to income as incurred.

which approximates the expected average remaining service period to using a single weighted average discount rate
reflecting the estimated timing and amount of benefit payment, and recorded the effect of (3) above as of April 1,
2015, in retained earnings.

l. Accrued Bonuses

In calculating net defined benefit liability and net periodic benefit costs, certain consolidated subsidiaries adopt the

The Company and certain consolidated subsidiaries provide accrued bonuses for employees, directors, andsimplified method whereby the projected benefit obligations are calculated at an amount that would be paid if all eligible

corporate auditors based on future projections for the current fiscal year.

employees voluntarily retired at the consolidated balance sheet date.
Certain consolidated subsidiaries received the approval from the Minister of Health, Labour and Welfare for the returnof the substitutional portion of the government welfare pension fund on May 30, 2015. As a result, gain on transfer ofm. Accrued Liability for Stock Benefits

benefit obligation relating to employees’ pension fund of ¥34 million ($302 thousand) was recorded under other income
for the year ended March 31, 2016.

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

Liability for directors and corporate auditors is recorded to account for the payments of their retirement benefits based

Distribution of Shares" based on the projected stock benefit liability.

on the internal rules.
The Company, at the meeting of the board of directors held on April 22, 2010, resolved to abolish the directors’

n. Retirement and Pension Plans

retirement benefits system, and the agenda item regarding lump-sum payments resulting from said abolishment was

The benefit formula basis is used to attribute expected benefits to periods of services in calculating projected benefit

approved at the 64th general meeting of shareholders held on June 29, 2010. These payments will be effected as

obligations.

retirement benefits paid at the time of retirement according to the period of service up to the abolishment of the system.

Effective April 1, 2000, the Company adopted a new accounting standard for retirement benefits and accounted for the

The increase in provision for directors’ retirement benefits for the year ended March 31, 2016, was due to CHUGAI

liability for retirement benefits based on the projected benefit obligations and plan assets at the balance sheet date. The

KASEI CO., LTD., which became a consolidated subsidiary from the current fiscal year.

projected benefit obligations are attributed to periods on a straight-line basis. Actuarial gains and losses are mainly
amortized on a straight-line basis over five years within the average remaining service period.
In May 2012, the ASBJ issued ASBJ Statement No. 26, “Accounting Standard for Retirement Benefits” and ASBJ
Guidance No. 25, “Guidance on Accounting Standard for Retirement Benefits,” which replaced the accounting standardo. Asset Retirement Obligations

for retirement benefits that had been issued by the Business Accounting Council in 1998 with an effective date of April 1,

In March 2008, the ASBJ issued ASBJ Statement No. 18, "Accounting Standard for Asset Retirement Obligations" and2000, and the other related practical guidance, and were followed by partial amendments from time to time through 2009.

ASBJ Guidance No. 21, "Guidance on Accounting Standard for Asset Retirement Obligations." Under these accounting

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standards, an asset retirement obligation is defined as a legal obligation imposed either by law or contract that resultst. Per Share Informationfrom the acquisition, construction, development, and normal operation of a tangible fixed asset and is associated with the

Basic net income per share ("EPS") is computed by dividing net income available to common shareholders by

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

the weighted-average number of common shares outstanding for the period.

flows required for the future asset retirement and is recorded in the period in which the obligation is incurred if a

Diluted EPS is not disclosed because it is antidilutive.

reasonable estimate can be made. If a reasonable estimate of the asset retirement obligation cannot be made in the

Cash dividends per share presented in the accompanying consolidated statement of income are dividends

period the asset retirement obligation is incurred, the liability should be recognized when a reasonable estimate of theapplicable to the respective years, including dividends to be paid at the end of the year.

asset retirement obligation can be made. Upon initial recognition of a liability for an asset retirement obligation, an asset

First Series Class A shares have rights equivalent to common shares in terms of rights to claim dividends andretirement cost is capitalized by increasing the carrying amount of the related fixed asset by the amount of the liability.

those to claim residual property distribution and, therefore, are included in common shares when calculating per

The asset retirement cost is subsequently allocated to expense through depreciation over the remaining useful life ofshare information.

the asset. Over time, the liability is accreted to its present value each period. Any subsequent revisions to the timing or
the amount of the original estimate of undiscounted cash flows are reflected as an adjustment to the carrying amount of

u. Employee Stock Ownership Planthe liability and the capitalized amount of the related asset retirement cost.

Th e C o m p a n y h a s a p p l i e d th e "Pr a cti ca l So l u ti o n o n Transactions of Delivering the Company’ s Own Stock to
Em p l o ye e s e tc. th r o u g h Tr u sts ( Pr a cti ca l Issu e Ta sk Force (PIT F ) No. 30 issued on March 26, 2015)" for thep. Income Taxes

year ended March 31, 2015.

The provision for income taxes is computed based on the pretax income included in the consolidated statement of(1) Outline of transactions

income. The asset and liability approach is used to recognize deferred tax assets and liabilities for the expected future

At the board of directors’ meeting held on May 2, 2014, a resolution was made to introduce the Employee Stock Ownership Plan ("ESOP")
trust for granting stock as an employee incentive plan. The purpose of this incentive plan is (i) to increase employee commitment andencourage involvement in the management of the business; (ii) to raise morale and give employees an incentive to behave in ways thatwill contribute to the Company’ s long-term performance and stock price; and (iii) to improve the mid- and long-term corporate value of theCompany.
Under this plan, the Company establishes a trust for persons who satisfy the beneficiary requirements from among employees, andentrust money necessary for acquisition of the Company’ s shares. The trustee of the trust will acquire the Company’s shares, to be
distributed to employees in the future, from the Company in accordance with the "Rules on Distribution of Shares." Afterward, the trustee
w i l l g r a n t a c e r t a i n n u m b e r o f t h e C o m p a n y’s s h a r e s t o b e n e f i c i a r i e s b a s e d o n " q u a l i f i c a t i o n g r a d e e t c . " d u r i n g t h e t r u s t t e r m .
Beneficiaries will assume no cost in this regard since the underlying funds in the trust are fully contributed by the Company.
Assets and liabilities in relation to the trust are recorded in the consolidated balance sheet, and gains and losses therefrom arerecorded in the consolidated statement of income.

tax consequences of temporary differences between the carrying amounts and the tax bases of assets and liabilities.
Deferred taxes are measured by applying currently enacted income tax rates to the temporary differences.
The Group files a tax return under the consolidated corporate tax system, which allows companies to base tax
payments on the combined profit or losses of the parent company and its wholly owned domestic subsidiaries.

q. Foreign Currency Transactions
All short-term and long-term monetary receivables and payables denominated in foreign currencies are translated into
Japanese yen at the exchange rates at the consolidated balance sheet date. The foreign exchange gains and losses fromtranslation are recognized in the consolidated statement of income.

( 2 ) The Company’ s shares held by the trustr. Foreign Currency Financial Statements

The Company’s shares held by the trust were accounted for as treasury stock in net assets at book value (that do not include transaction
costs paid to acquire the shares) in the trust. Under the trust, the book value and the number of shares of treasury stocks as of March 31,
2016 and 2015, were ¥226 million and 74,390 shares, and ¥301 million and 98,760 shares, respectively.

The balance sheet accounts of the consolidated foreign subsidiaries are translated into Japanese yen at the current

v. New Accounting Pronouncements

exchange rates as of the consolidated balance sheet date, except for equity, which is translated at the historicalexchange rates. Differences arising from such translation are shown as "Foreign currency translation adjustments"

Tax Effect Accounting

under accumulated other comprehensive income in a separate component of equity. Revenue and expense accounts

On March 28, 2016, the ASBJ issued ASBJ Guidance No. 26, "Guidance on Recoverability of Deferred Tax Assets," which includedof consolidated foreign subsidiaries are translated into Japanese yen at the average exchange rates.

certain revisions of the previous accounting and auditing guidance issued by the Japanese Institute of Certified Public Accountants.
While the new guidance continues to follow the basic framework of the previous guidance, it provides new guidance for the application ofs. Derivative Financial Instruments

judgment in assessing the recoverability of deferred tax assets.

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

depending on the Company’s classification in respect of its profitability, taxable profit and temporary differences, etc.

The previous guidance provided a basic framework that included certain specific restrictions on recognizing deferred tax assets
The new guidance does not change such basic framework but, in limited cases, allows companies to recognize deferred tax assets even

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

for a deductible temporary difference for which it was specifically prohibited to recognize a deferred tax asset under the previous

from investments in foreign subsidiaries. The Company also uses interest rate swap contracts for the purpose of

guidance, if the company can justify, with reasonable grounds, that it is probable that the deductible temporary difference will be utilizedagainst future taxable profit in some future period.

hedging the interest rate risk associated with the underlying borrowings.

The new guidance is effective for the beginning of annual periods beginning on or after April 1, 2016. Earlier application is permitted for

All derivative financial instruments are recognized at fair value in the consolidated balance sheet. For derivatives

annual periods ending on or after March 31, 2016. The new guidance shall not be applied retrospectively and any adjustments from theused for hedging purposes, the gains and losses are deferred until the hedged item is recognized. The Company

application of the new guidance at the beginning of the reporting period shall be reflected within retained earnings or accumulated othercomprehensive income at the beginning of the reporting period.

records in "Foreign currency translation adjustments" the gains or losses on the derivative financial instruments that

The Company expects to apply the new guidance on recoverability of deferred tax assets effective April 1, 2016, and is in the process ofare designated as hedging instruments for investments in foreign subsidiaries. Exceptional treatment is applied formeasuring the effects of applying the new guidance in future applicable periods.

interest rate swap contracts that qualify for hedge accounting and meet specific matching criteria.
The Company evaluates effectiveness of hedging activities for investments in foreign subsidiary by referring theaccumulated gains or losses on the hedging instruments and the related hedged items from the commencement of
the hedging transactions. The Company omits the assessment of hedge effectiveness of interest rate swaps that
qualify for hedge accounting and meet specific criteria.

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w. Changes in Presentation Methods

Available-for-sale securities whose fair values were not readily determinable as of March 31,
2016 and 2015, were as follows:

Consolidated Statement of Cash Flows

Thousands of
U.S. Dollars

Millions of Yen

While the gross amounts were presented for “proceeds from short-term loans” and “repayments of short-term loans” under “financing
activities” until the previous fiscal year, since they are short term and quickly revolving items, their net amounts are presented as

2016

2015

Available-for-sale—equity securities

¥ 12

¥ 12

Available-for-sale—investments in partnership

187“increase in short-term loans” for the current fiscal year. To reflect this change in presentation method, the Company has reclassified its
consolidated financial statements for the previous fiscal year.
As a result, ¥1,808 million presented as “proceeds from short-term loans” and ¥(1,671) million as “repayments of short-term loans”
under “financing activities” in the consolidated statement of cash flows for the previous fiscal year is reclassified as ¥137 million of

2016
$ 107
1,661

“increase in short-term loans.”

There were no available-for-sale securities that were sold during the year ended March 31, 2016.
The information for available-for-sale securities, which were sold during the year ended March 31, 2015,
was as follows:

3. MARKETABLE AND INVESTMENT SECURITIESMillions of Yen

March 31, 2015

Marketable and investment securities as of March 31, 2016 and 2015, consisted of the following:

2016

2015

2016

¥ 457

¥ 350

$ 4,059

¥ 457

¥ 350

$ 4,059

Realized Gains

Realized Losses

¥ 572

¥ 390

¥4

¥ 572

¥ 390

¥4

Se cu r i ti e s cl a ssi fi e d a s a va i l a b l e fo r sa l e —Thousands of
U.S. Dollars

Millions of Yen

Proceeds

Equity securities
To ta lNoncurrent—
Marketable equity securities
Total

4. NOTES MATURING ON MARCH 31, 2016 AND 2015
Notes that were to mature at the consolidated balance sheet date were accounted for at the date of actual
settlement. The year-end of March 31, 2016, of certain subsidiaries and the year-end of March 31, 2015, coincided

The costs and aggregate fair values of marketable and investment securities as of March 31,
2016 and 2015, were as follows:with a bank holiday and the following notes maturing on March 31, 2016 and 2015, was included in the consolidatedbalance sheets as of March 31, 2016 and 2015:

Millions of Yen

March 31, 2016

Cost

Unrealized
Gains

Unrealized
Losses

Fair
Value

¥ 320

¥ 162

¥ 25

¥ 457

¥ 320

¥ 162

¥ 25

¥ 457

2016

Securities classified as available for sale—
Equity securities
Total

¥ 188

¥ 164

¥2

¥ 350

¥ 188

¥ 164

¥2

¥ 350

Unrealized
Gains

Unrealized
LossesFair
Value$ 2,842$ 1,439$ 222$ 4,059$ 2,842$ 1,439$ 222$ 4,059

Cost

Total

Thousands of
U.S. Dollars

Millions of Yen

Securities classified as available for sale—
Equity securities$9

Inventories as of March 31, 2016 and 2015, consisted of the following:Thousands of U.S. Dollars

March 31, 2016

2016

5. INVENTORIES

Securities classified as available for sale—

Total

2015

¥1

Notes receivable—trade

March 31, 2015

Equity securities

Thousands of
U.S. Dollars

Millions of Yen

2016

2015

2016

Merchandise and finished products
Work in process
Raw materials and supplies¥ 2,013410
1,594¥ 2,349
1,886$ 17,878
3,641
14,156

Total¥ 4,017¥ 4,527$ 35,675

292

6. PROPERTY, PLANT, AND EQUIPMENT
Accumulated depreciation at March 31, 2016 and 2015, was ¥25,637 million ($227,682 thousand) and ¥22,864
million, respectively.

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7. LONG -LIVED ASSETS

Annual maturities of long-term debt for the next five years and thereafter as of March 31, 2016,
were as follows:

The Group reviewed its long-lived assets for impairment for the years ended March 31, 2016 and 2015.

Year Ending
March 31

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

Usage

Classification

TAIWAN TAIYO INK CO., LTD.

Business use

Construction in progress

2017
2018
2019
2020
2021
2022 and thereafter

Millions of Yen Thousands of U.S. Dollars

¥ 32

$ 284

In principle, business use assets are grouped based on the department of the Group.
Business use assets of TAIWAN TAIYO INK CO., LTD., a consolidated subsidiary of the Company, were written down to

To talrecoverable amounts because their profitability and fair values declined drastically compared to their book values.

Millions of Yen

Thousands of
U.S. Dollars

¥ 440
440
4,776
2,140
57

$ 3,908
3,908
42,41619,005506¥ 7,853$ 69,743

The recoverable amount is measured at its value in use and the recoverable amount is deemed as zero since no future
cash flow is expected.
No impairment losses were recognized for the year ended March 31, 2015.

9. RETIREMENT AND PENSION PLANS
The Company has noncontributory-funded defined benefit plans based on the point system and defined contribution

8. SHORT-TERM BANK LOANS AND LONG -TERM DEBT

plans. Certain overseas consolidated subsidiaries have defined contribution plans and other types of plans.
The liability for retirement benefits at March 31, 2016 and 2015, for directors and corporate auditors is ¥157 million

The weighted-average interest rates applicable to the short-term borrowings at March 31, 2016 and 2015, were 0.68%($1,394 thousand) and ¥10 million, respectively. The retirement benefits for directors and corporate auditors are

and 0.62%, respectively.

paid subject to the approval of the shareholders.

Long-term debt as of March 31, 2016, consisted of the following:Thousands of
U.S. Dollars

Millions of Yen

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

¥ 440

Defined Benefit Plans
The changes in projected benefit obligations for the years ended March 31, 2016 and 2015, were as follows:$ 3,908

Thousands of
U.S. Dollars

Millions of Yen

Long-term debt, 2021 with weighted-averageinterest of 0.73% as of March 31, 2016
To tal7,413

65,835¥ 7,853$ 69,743

Balance at beginning of year (as previously reported)

Balance at beginning of year (as restated)
Service cost
Interest cost
Actuarial (gains) losses
Benefits paid
Transfer to defined contribution plans
Foreign exchange difference

Millions of Yen

Long-term debt, 2020 with weighted-averageinterest of 0.59% as of March 31, 2015
To tal2015

2016¥ 1,856¥ 2,772(561)$ 16,483

1,856
152
14
20
( 81)

16,483
1,350
124
178
( 720 )

(15)

2,211
208
36
(14)
(126)
( 512)
53¥ 1,946¥ 1,856$ 17,282

Cumulative effects of changes in accounting policies

Long-term debt as of March 31, 2015, consisted of the following:

Current portion of long-term debt, with weighted-averageinterest of 0.70% as of March 31, 2015

2016

¥ 340

7,686

Balance at end of year(133)

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

The changes in plan assets for the years ended March 31, 2016 and 2015, were as follows:

Balance at beginning of year
Expected return on plan assets
Actuarial (gains) losses
Employer contribution
Benefits paid
Transfer to defined contribution plans
Foreign exchange difference
Balance at end of year

plans before tax for the years ended March 31, 2016 and 2015, were as follows:

Thousands of
U.S. Dollars

Millions of Yen

2016

2015

2016

¥ 2,195
22
19
136
(81)

$ 19,494
195
169
1,208
(720)

(13)

¥ 2,455
42
(4)
133
(160)
(318)
47

¥ 2,278¥ 2,195$ 20,231

Thousands of
U.S. Dollars

Millions of Yen

2016

2016

2015

Actuarial losses

¥ 34

¥ 46

$ 302

Prior service cost

10

10

89

¥ 44

¥ 56

$ 391

Total

(115 )
Amounts recognized in accumulated other comprehensive income (before income tax effect) in respect ofdefined benefit plans before tax as of March 31, 2016 and 2015, were as follows:

Thousands of
U.S. Dollars

2016

2015

2016

Funded projected benefit obligations¥ 1,946¥ 1,855$ 17,283

Plan assets(2,278)(2,195 )(20,231)

Net asset for defined obligations¥ (332)¥ (340 )$ (2,948)

Liability for retirement benefits
Asset for retirement benefits

¥ 23
(356)

¥ (340)$ 204( 3,162)¥ (333)¥ (340)$ (2,958)

Net asset for defined benefit obligations

2016

2016

2015

Unrecognized actuarial gains (losses)¥ 14¥ (18)$ 124

Unrecognized prior service cost

(30)

( 41)

(266)

¥ (16)¥ (59)$ (142)

2016

2015

General account

100%

100%

Total

100%

100%

benefit obligations and plan assets as of March 31, 2016 and 2015, was as follows:
Millions of Yen

Thousands of
U.S. Dollars

Millions of Yen

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

Total

Plan assets as of March 31, 2016 and 2015, consisted of the following:

The expected long-term rate of return on plan assets is determined considering the current and expected distribution of
The components of net periodic benefit costs for the years ended March 31, 2016 and 2015, were as follows:
Thousands of
U.S. Dollars

Millions of Yen

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

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

2016

2015

2016

¥ 152
14
(22)
(12)
10

¥ 208
36
(42)
33
10

$ 1,350
124
(195)
(107)
89

Assumptions used for the years ended March 31, 2016 and 2015, were set forth as follows:

Discount rate
Expected long-term rate of return on plan assets
Projected rate of salary increases

¥ 142

¥245

2016

2015

0.645%

0.645%

1.0

1.0

14.12

14.12

$ 1,261

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Defined Contribution Plans That Adopt Simplified Method

10. EQUITY

The changes in net defined benefit liability for the plans that adopt simplified method for the year ended MarchJapanese companies are subject to the Companies Act of Japan (the "Companies Act"). The significant provisions in

31, 2016, were as follows:

the Companies Act that affect financial and accounting matters are summarized below:
Mi l l i ons o f Y en

Thous ands of
U .S . D ol l ars

a. Dividends

Balance at beginning of year
¥2
(10)

$ 18
( 89)

Decrease resulting from transfer of benefit obligation
relating to employees’ pension fund(34)

( 302)

Increase resulting from new consolidation

135

1,199

¥ 93

$ 826

Net periodic benefit costs
Benefits paid

Balance at end of year

Under the Companies Act, companies can pay dividends at any time during the fiscal year in addition to theyear-end dividend upon resolution at the shareholders’ meeting. Additionally, for companies that meet certain
criteria, including (1) having a board of directors; (2) having independent auditors; (3) having a board of corporate
auditors; and (4) the term of service of the directors being prescribed as one year rather than the normal two-year
term by its articles of incorporation, the board of directors may declare dividends (except for dividends in kind) at
any time during the fiscal year if the company has prescribed so in its articles of incorporation. The Company meets
all the above criteria, and accordingly, the Board of Directors may declare dividends (except for dividends in kind) at
any time during the fiscal year.
The Companies Act permits companies to distribute dividends in kind (noncash assets) to shareholders subject toa certain limitation and additional requirements.

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

Semiannual interim dividends may also be paid once a year upon resolution by the board of directors if the articles ofbenefit obligations and plan assets as of March 31, 2016, was as follows:incorporation of the Company so stipulate. The Companies Act provides certain limitations on the amounts available for
Mi l l i ons o f Y en

Thous ands of
U .S . D ol l ars

¥ 93

$ 826

Net liability for defined obligations

93

826

Net defined benefit liability

93

826

Net liability for defined obligations

93

826

Nonfunded projected benefit obligations

dividends or the purchase of treasury stock. The limitation is defined as the amount available for distribution to theshareholders, but the amount of net assets after dividends must be maintained at no less than ¥3 million.

b. Increases / Decreases and Transfer of Common Stock, Reserve, and Surplus
The Companies Act requires that an amount equal to 10% of dividends must be appropriated as a legal reserve (acomponent of retained earnings) or as additional paid-in capital (a component of capital surplus) depending on theequity account that was charged upon the payment of such dividends until the total of aggregate amount of legal
reserve and additional paid-in capital equals 25% of the common stock.

Net periodic benefit costs calculated using the simplified method for the year ended March 31, 2016, were as follows:
Mi l l i ons o f Y en

Net periodic benefit costs calculated using the simplified method¥ 2Under the Companies Act, the total amount of additional paid-in capital and legal reserve may be reversed without
limitation.

Thous ands of
U .S . D ol l ars

The Companies Act also provides that common stock, legal reserve, additional paid-in capital, other capitalsurplus, and retained earnings can be transferred among the accounts under certain conditions upon resolution of$ 18

the shareholders.
With the issuance of First Series Class A shares by the third-party allocation, common stock and a capital surplus
as of March 31, 2016, rose ¥53 million ($471 thousand), respectively.

In addition to the above, gain on transfer of benefit obligation relating to employees’ pension fund of ¥34 million ($302
thousand) was recorded under other income, upon approval for the return of the substitutional portion of the governmentc. Treasury Stock and Treasury Stock Acquisition Rights

welfare pension.

The Companies Act also provides for companies to purchase treasury stock and dispose of such treasury stock byresolution of the board of directors. The amount of treasury stock purchased cannot exceed the amount available for
distribution to the shareholders, which is determined by a specific formula.

Defined Contribution Plans

Under the Companies Act, stock acquisition rights are presented as a separate component of equity.

The required contribution amount to the defined contribution plans by the Company and its certain consolidated

The Companies Act also provides that companies can purchase both treasury stock acquisition rights and treasury

subsidiaries at March 31, 2016 and 2015, is ¥106 million ($941 thousand) and ¥46 million, respectively.

stock. Such treasury stock acquisition rights are presented as a separate component of equity or deducted directlyfrom stock acquisition rights.

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11. INCOME TAXESA reconciliation between the normal effective statutory tax rates and the actual effective tax rates reflected in theaccompanying consolidated statement of income for the year ended March 31, 2016, with the corresponding figures

The Company and its domestic subsidiaries are subject to Japanese national and local income taxes, which, in thefor 2015, is as follows:

aggregate, resulted in normal effective statutory tax rates of approximately 33% and 36% for the years ended March 31,

2016

2015

Normal effective statutory tax rate

32.95 %

35.52 %Tax rates difference relating to overseas subsidiaries(12.88)(13.31)

0.94

0.85

(0.08)(0.10)

0.63

3.67

2016 and 2015, respectively.
The tax effects of significant temporary differences, which resulted in deferred tax assets and liabilities as of March 31,
2016 and 2015, are as follows:

Elimination of dividend income

2016

Deduction of foreign corporation tax carried forward

Thousands of
U.S. Dollars

Millions of Yen

2015

Undistributed earnings of associated companies

2016

¥ 96

¥3

$ 853

Unrealized profit

67

100

595

Deduction of foreign corporation tax carried forward

2

48

18

Allowance for doubtful accounts

40

27

355

Accrued expenses

100

97

888

Retirement benefits

5.97

4.89

(3.26)(2.57)

Valuation allowance

0.31(0.34)

Other

2.44

1.10

27.02 %

29.71%

Nondeductible withholding income tax of dividends

Deferred tax assets:

Tax exemption for experiments and research expenses and other

Actual effective tax rate

8

14

71

The "Act on Partial Revision of the Income Tax Act" (Act No. 15 of 2016) and "Act on Partial Revision of the Local

Other

311

259

2,762

Tax Act" (Act No. 13 of 2016) were enacted by the Japanese Diet on March 29, 2016. Accordingly, the normal

Total deferred tax assets
Less valuation allowance

624
(217)

548
(133)

5,542
(1,927)

effective statutory tax rates used to calculate deferred tax assets and deferred tax liabilities were changed toTotal deferred tax assets, net of valuation allowance

407

415

3,615

2016, 30.76% for those in the consolidated fiscal year beginning on April 1, 2017, and 30.52% for those in the

Accrued liability for stock benefits

30.75% for temporary differences that are expected to reverse in the consolidated fiscal year beginning on April 1,
consolidated fiscal year beginning on April 1, 2018.
The effects of these changes are immaterial.

Deferred tax liabilities:(1,560)(1,480)

Valuation difference on available-for-sale securities

(59)

(52)

(524)

Net defined benefit assets

(114)

(115)

(1,013)

12. R&D COSTS

Other

(175)

(54)

(1,554)R&D costs charged to income for the years ended March 31, 2016 and 2015, were ¥2,442 million ($21,687 thousand) and(1,908)( 1,725 )( 16,945 )¥ (1,501)¥ ( 1,310)$ (13,330)

Undistributed earnings of associated companies(24)

Reserve for technique and development

Total deferred tax liabilities
Net deferred tax liabilities(13,854)¥2,213 million, respectively.

13. FINANCIAL INSTRUMENTS AND RELATED DISCLOSURES(1) Summary of Financial Instruments Statusa. Group policy for financial instruments
The Group’s policy is to fund operations internally wherever possible. With large-scale capital projects, the Groupborrows funds from banks or arranges other types of funding, depending on market conditions.
Short-term surplus funds are managed conservatively using only financial instruments that provide high security.
The Group employs derivatives to mitigate known future risks, but does not use such instruments for speculative
purposes as a matter of policy.

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b. Nature and extent of risks arising from financial instruments(2)

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

Carrying amounts, fair values, and unrealized gain (loss) as of March 31, 2016 and 2015, were as follows:customers. Operating receivables denominated in foreign currencies that arise in the course of conducting overseas
business are additionally exposed to exchange rate fluctuation risk.

Fair Value of Financial Instruments

Financial instruments whose fair values are difficult to measure are excluded from the table below.

Marketable and investment securities mainly comprise bonds and investments in the shares of affiliated business
partners. These investments are exposed to the risk of fluctuations in market prices.

Millions of Yen

Operating liabilities, such as notes and accounts payable—trade, typically have payment due dates within four

March 31, 2016

months. The Group also has some foreign currency-denominated liabilities of this kind that are exposed to exchange
rate fluctuation risk.

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

Foreign exchange forward contracts and others are used to hedge the exchange rate fluctuation risk associatedwith foreign currency-denominated operating assets and others.
Please see Note 14 for more details about derivatives.

(4) Investment securities(5) Notes and accounts payable—trade(6) Accounts payable—other(7) Income taxes payable(8) Short-term bank loans(9) Long-term debt
(10) Derivatives—net

c. Risk management system for risks associated with financial instruments
Management of Credit Risk (Relating to Contractual Defaults by Business Partners)
The Company monitors the status of business partners with respect to operating assets regularly in line with internal
regulations governing the management of credit limits and trade receivables. Besides managing due dates andoutstanding balances by counterparty, the Company also aims to identify as early as possible and alleviate any concerns
about nonpayment caused by deterioration in financial condition or other factors.

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

Consolidated subsidiaries also follow the Company’s policy on credit risk management.
Bond investments are limited to high-rated bonds. The associated credit risk is judged to be minimal.
The Group only enters into derivative contracts with highly rated financial institutions as counterparties. The associatedcredit risk is regarded as negligible.

Carrying Amount

Fair Value¥ 18,386
3,023
12,836(340)¥18,386
3,023

12,496

12,496

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

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

17

17

¥18,183
1,584
13,112(341)¥ 18,183
1,584

12,771

12,771

350
5,661
2,033
1,139
730
8,026

350
5,661
2,033
1,139
730
8,050

Unrealized Loss

¥ (38)March 31, 2015

Management of Market Risk (Relating to Fluctuations in Exchange Rates, Interest Rates, Etc.)(1) Cash and cash equivalents(2) Time deposits(3) N o te s a n d a cco u n ts r e ce i va b l e —tr a d e
L e ss a l l o w a n ce fo r d o u b tfu l r e ce i va b l e s

To manage the currency fluctuation risk associated with foreign currency-denominated operating assets and liabilities
and long-term debt, the Company and certain consolidated subsidiaries assess related exposures for each currency on amonthly basis.
The market values and financial condition of issuers (most of which are the Group’s business partners) are assessed
regularly for all marketable and investment securities. The ownership of any shares is reviewed on an ongoing basis,
depending on market conditions and the relationships with relevant business partners.
With respect to the management of derivatives, the internal party responsible for the transaction must gain the(4) Investment securities(5) Notes and accounts payable—trade(6) Accounts payable—other(7) Income taxes payable(8) Short-term bank loans(9) Long-term debt
(10) Derivatives—net

approval of the authorized settlement managers to exercise any derivatives contract, in line with internal management
regulations specifying the transactional authority and related limits for contractual exposures. The results of derivativetransactions are reported to the board of directors periodically.

Management of Liquidity Risks Associated with Fund Procurement (Relating to Risk of Nonpayment by Due Date)
Appropriate operational funding plans are created and approved for all Group firms. The Group manages any related¥ (24)(a) Derivatives to which hedge accounting
is not applied(b) Derivatives to which hedge accounting
is appliedliquidity risks and ensures that cash on hand is maintained at adequate levels.

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

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2. Carrying amounts of financial instruments whose fair values cannot be reliably determined

Thousands of U.S. Dollars

March 31, 2016
(1) Cash and cash equivalents(2) Time deposits(3) Notes and accounts receivable—trade
Less allowance for doubtful receivables(4) Investment securities(5) Notes and accounts payable—trade(6) Accounts payable—other(7) Income taxes payable(8) Short-term bank loans(9) Long-term debt
(10) Derivatives—net(a) Derivatives to which hedge accounting
is not applied

Carrying Amount

Fair Value$ 163,286
26,847
113,996(3,020)$ 163,286
26,847110,976

110,976

4,059
51,19915,071
6,892
8,286
69,742

4,059
51,19915,071
6,892
8,286
70,080151

151

Unrealized Loss

Thousands of
U.S. Dollars

Millions of Yen

Investment securities—unlisted securities

2016

2015

2016

¥ 12

¥ 12

$ 107

39

39

Investments in unconsolidated subsidiaries:
Unlisted securities
Investments in partnership

187

346
1,661

3. Maturity analysis for financial assets and securities with contractual maturities$ (338)Millions of Yen

March 31, 2016(b) Derivatives to which hedge accounting
is applied

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

Due in One Yearor Less

Due after
One Year throughFive Years¥ 18,386
3,023
12,836

The amount of allowance for doubtful receivables is deducted from receivables.
March 31, 2015

The value of assets and liabilities arising from derivatives is shown at net value.

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

Notes:¥ 18,183
1,58 4
13,112

1. Measurement of fair value of financial instruments(1) Cash and cash equivalents, (2) Time deposits, and (3) Notes and accounts receivable—trade
The fair values of cash and deposit and receivables approximate carrying values due to the short maturity of these instruments.

Thousands of U.S. Dollars(4) Investment securities

March 31, 2016

The fair values of investment securities are measured at the quoted market price of the share exchange for the equity instruments

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

and at the quoted price obtained from the financial institution for certain debt instruments. Fair value information for investment
securities by classification is included in Note 3.

Due in One Yearor Less

Due after
One Year throughFive Years$ 163,286
26,847
113,996(5) Notes and accounts payable—trade, (6) Accounts payable—other, (7) Income taxes payable, and (8) Short-term bank loans
The fair values of the above approximate carrying values due to the short maturity of these instruments.

Please see Note 8 for annual maturities of long-term debt.

(9) Long-term debt
For long-term debt with floating interest rates, the fair values approximate carrying value due to the variable interest rate that reflects themarket rate in a short period of time and the fact that the credit status of the Company has not changed drastically since the executionof borrowings. For long-term debt with interest rate swap contracts to which hedge accounting is applied, the fair values are calculatedby discounting the total amount of principal and interest at interest rates based on the expected rate of new debts.
(10) Derivatives
Please see Note 14.

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14. DERIVATIVE FINANCIAL INSTRUMENTS

15. CONTINGENT LIABILITIES

Derivative transactions to which hedge accounting is not applied as of March 31, 2016 and 2015, were as follows:

The Group's contingent liabilities as of March 31, 2016 and 2015, were as follows:

Millions of Yen

March 31, 2016

Contract
AmountContract
Amount Dueafter One Year

Millions of Yen

Fair
Value

Unrealized Gain
(Loss)

¥ 18
(1)

¥ 18
(1)

Export bill discountThousands of
U.S. Dollars

2016

2015

2016

¥ 38

¥ 29

$ 337

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

¥ 547
56

16. BUSINESS COMBINATIONSMarch 31, 2015

a. Overview of Business Combination

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

¥ 745
39

¥1

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

Thousands of U.S. Dollars

March 31, 2016

Contract
AmountContract
Amount Dueafter One Year

Fair
Value

Unrealized Gain
(Loss)$ 4,858
497

$ 160
(9)

$ 160
(9)

CHUGAI KASEI CO., LTD. ("Chugai Kasei")

Description of business:

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

(2) Purpose of the business combination

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

Name of acquired company:

The Company believes that it can leverage management resources in a complementary and effective manner withthe combination of Chugai Kasei’s basic technology related to organic compounds and the Company’ s wellestablished sales network by making Chugai Kasei its wholly owned subsidiary.
This combination will enable the Company to respond faster and more flexibly to customer needs by offering

The fair value of derivative transactions is measured at the quoted price obtained from the financial institution.

options for new business development, strengthening competitiveness, and deploying its product in new markets.

Derivative transactions to which hedge accounting is applied as of March 31, 2016 and 2015, were as follows:(3) Date of the business combination

Millions of Yen

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

HedgedItem

Contract
AmountContract
Amount Dueafter One Year

Long-term
debt¥ 3,060¥ 2,720

April 30, 2015 (acquisition date for the purpose of the consolidation)

Fair
Value

(4) Legal form of the business combination
Share exchange

March 31, 2015
Interest rate swaps—Floating rate receipt,
fixed-rate payment(5) Name of the company after the business combination
Long-term
debt¥ 3,40 0

TAIYO HOLDINGS CO., LTD.

¥ 3,0 60

(6) Acquired voting rights

Thousands of U.S. Dollars

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

HedgedItem

Contract
AmountContract
Amount Dueafter One Year

Long-term
debt$ 27,176$ 24,156

100%
Fair
Value

(7) Grounds for determination of the acquiring company
The Company was selected as the acquiring company by comprehensively considering several factors, such asa relatively large percentage of voting rights of its shareholders, the difference in the scale of the business andso on, as well as the fact that the Company became a wholly owning parent company.

Note:b. Acquisition Cost and Breakdown

Interest rate swaps to which exceptional treatment is applied are accounted for together with long-term debt
designated as a hedged item. Therefore, their fair values are included in the fair value of long-term debt.
Consideration for acquisition — Acquisition costs —ordinar y shares of TAIYO HOLDINGS CO., LTD.

76 TAIYO HOLDINGS CO., LTD. Annual Report 2016

Millions of Yen

Thousands of
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天Financial Section

c. Goodwill

2. Calculation methods
KPMG appraised th e Compan y’ s s h a r e v a l u e b a s e d o n t h e a v e r a g e m a r k e t p r i c e a n a l y s i s g i v e n t h a t t h e r e i s a(1) Amount of goodwill

market price of the ordinary shares of the Company due to it being listed on a share exchange. The appraisal for¥6 million ($53 thousand)

Chugai Kasei is based on (a) the comparable companies analysis (given that there are multiple listed companies(2) Reason for good willon that method) and (b) discounted cash flow analysis ("DCF analysis") (so as to reflect the state of future

Goodwill was generated as a result of acquisition costs exceeding net assets of the acquiring company.

changes in assets and liabilities compared to recent financial statements are not anticipated in Chugai Kasei’sthat are similar to and comparable with Chugai Kasei and it is therefore possible to infer the share value based
business activities of Chugai Kasei in the appraisal). Substantial increase or decrease in the profit and significant
business plan, on which KPMG relied in appraising Chugai Kasei’ s share value based on the DCF analysis.

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

The share exchange ratio ranges calculated by KPMG when the share value per ordinary share of
Chugai Kasei is set at 1 are as follows:
Method Adopted

d. Exchange Ratio and the Calculation Methods by Type of Shares andNumber of Shares Issued

The Company

Chugai Kasei

Average market price analysis

Comparable companies analysis
DCF analysis(1) Exchange ratio by type of shares
1 ordinary share of Chugai Kasei :0.12 ordinary shares of the Company

Ap p r a is a l Re s u lt s o f
Share Exchange

0.068 – 0.230
0.083 – 0.152

c. Number of Shares Issued
118,800 shares(2) Calculation method of share exchange ratio
a. Reason and Rationale for Allotment Ratio of Shares
In order to ensure the fairness and appropriateness of the share exchange ratio for the share exchange, the Company

e. Detail of Acquisition Related Expenses

and Chugai Kasei decided to each obtain valuation of the share exchange ratio by KPMG FAS KK ("KPMG"), an
independent third-party valuation institution, in determining the share exchange ratio. The Company carefully

Advisory fees, etc.: ¥68 million ( $604 thousand )considered the share exchange ratio, referring to the calculation concerning the share exchange ratio conducted by
the third-party valuation institution. The Company and Chugai Kasei negotiated and consulted with each other on theshare exchange ratio, considering various factors, including each party’ s financial condition, operating performance,
and the market level of the share price of the Company. As a result, the Company and Chugai Kasei came to thef. The Estimated Fair Values of the Assets Acquired and Liabilities Assumed at
the Acquisition Dateconclusion that the share exchange ratio (as described in d. (1) above) is fair and the share exchange with suchs h a r e e x c h a n g e r a t i o w i l l n o t u n d e r m i n e t h e i n t e r e s t s o f e a c h p a r t y’s r e s p e c t i v e s h a r e h o l d e r s . A t t h e b o a r d o f
d i r e c t o r s’ m e e t i n g h e l d o n A p r i l 2 0 , 2 0 1 5 , t h e C o m p a n y a n d C h u g a i K a s e i d e t e r m i n e d t o i m p l e m e n t t h e s h a r e

Please see Note 19 for supplemental cash flow information.

exchange at the share exchange ratio and entered into the share exchange agreement on the same date.
In the event any material change occurs with respect to the conditions that constitute the basis of the shareexchange ratio, the Company and Chugai Kasei may consult with each other and change such ratio pursuant to theterms of the share exchange agreement.

g. Approximate Amounts and Calculation Method of Impact on the Consolidated
Statement of Income for the Year Ended March 31, 2016, Assuming That theBusiness Combination Had Been Completed at the Beginning of the Fiscal Yearb. Basis for Calculation
1. Name of valuation institution and its relationship with the Company and Chugai Kasei

The approximate amounts have not been disclosed since they are immaterial.

KPMG, a third-party valuation institution of the Company and Chugai Kasei, is independent of the Company and
Chugai Kasei. KPMG is not a related party to either the Company or Chugai Kasei and does not have any materialinterest in connection with the share exchange.

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17. OTHER COMPREHENSIVE INCOME (LOSS)

Millions of Yen

Components of other comprehensive income (loss) for the years ended March 31, 2016 and 2015, were as follows:
Thousands of
U.S. Dollars

Millions of Yen

2016¥ (25)
11
(14)

1,452

12,895

7

62

(448)

(3,979)(1,135)(10,080)

492

4,369

Acquisition costs
Cash and cash equivalents

(124)

(125)

$ 5,471

Noncurrent liabilities$ (222)98¥ (203)78¥ 616

Noncurrent assets
Current liabilities

Valuation difference on available-for-sale securities:
Loss arising during the year
Income tax effectCurrent assets
Goodwill

2016

2015

Thousands of
U.S. Dollars

165

1,466

Transfer value of the treasury stock(492)(4,369)

Increase in cash and cash equivalents due to share exchange¥ 165$ 1,466

Foreign currency translation adjustments—(2,256)

3,324(20,036)

44
(10)

56
(27)

391
(89)

34

29

302

¥ ( 2,236)¥ 3,228$ (19,858)(Loss) gain arising during the year
Remeasurements of defined benefit plans:
Gain arising during the year
Income tax effectTotal other comprehensive (loss) income

There was no supplemental cash flow information to be disclosed for the year ended March 31, 2015.

20. SUBSEQUENT EVENT
The appropriation of retained earnings as of March 31, 2016, approved at the Company’s shareholders’ meeting heldon June 21, 2016, is as follows:

18. NET INCOME PER SHARE
A reconciliation of the differences between basic and diluted EPS for the years ended March 31, 2016 and 2015,

Year - end cash dividends, ¥55 ($0.49) per share

M illio n s o f Ye n

Thousands of
U.S. Dollars¥ 1,274$ 11,314

was as follows:
Millions of Yen

Thousandsof Shares

Year Ended March 31, 2016

Net Income Attributableto Owners of the Parent

WeightedAverageShares

Basic EPS—Net income available
to common shareholders¥ 7,796

23,067

Yen

U.S. Dollars

21. SEGMENT INFORMATION

EPS¥ 337.99(1) Description of Reportable Segments$ 3.00

The Group’ s reportable segments are those for which separate financial information is available and regularYear Ended March 31, 2015
Basic EPS—Net income available
to common shareholders

evaluation by the Company’s management is being performed in order to decide how resources are allocated¥ 6,667

25,249among the Group.

¥ 264.05

The Group made the transition to a holding company system on October 1, 2010. The business of the Groupconsists mainly of one activity, the manufacture and distribution of solder resist for printed wiring boards, among

Notes :

others. Each Group company formulates comprehensive strategies and deploys business activities, operating undera holding company system, whereby the Company is the holding company.

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

The Group is composed of four reportable segments divided by geographic area, namely "Japan," "China,"

The Company’ s shares owned by the ESOP trust are included in treasury stock. The ESOP trust owned 81,912 and"Taiwan," and "Korea," based on our manufacturing and marketing system.

84,474 weighted-average shares of the Company for the years ended March 31, 2016 and 2015, respectively.

(2) Method of Measurement for Information for the Amounts of Sales, Profit (Loss),
Assets, Liabilities, and Other Items by Reportable Segments

19. SUPPLEMENTAL CASH FLOW INFORMATION

The accounting policies of each reportable segment are consistent with those disclosures in Note 2, "Summaryof Significant Accounting Policies."

Chugai Kasei is included within the scope of consolidation because the Company newly acquired its shares in theyear ended March 31, 2016. The details of assets and liabilities of these companies at the date of consolidation andreconciliation between acquisition costs of the shares and increase in cash and cash equivalents due to shareexchange are as follows:

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Financial Section(a) The "China" segment covers local subsidiaries in China and Hong Kong.
(b) The "Other" segment is not included in reportable segments and covers the business activities of local
subsidiaries in the United States and other Asian countries.

(3) Information about Sales, Profit (Loss), Assets, Liabilities, and Other Items
by Reportable Segments(c) Depreciation does not include goodwill amortization.
Millions of Yen
Reportable Segments

Year Ended
March 31, 2016

Japan

China

Taiwan

Korea

Total

Other

Total

(d) The "Taiwan" and "China" segments include sales and operating income of OTC (including OTC’ s fourReconciliations Consolidated

subsidiaries). As one of its subsidiaries is not engaged in any business activities, the subsidiary is not included in
the segments above.

Sales:
External customers ¥ 10,565
6,438Intersegment¥ 20,688¥ 6,864¥ 7,386¥ 45,503¥ 4,341¥ 49,844

1,132

2,991

353

10,914110

11,024¥ 17,003¥ 21,820¥ 9,855¥ 7,739¥ 56,417¥ 2,255¥ 4,775¥ 2,227¥ 1,414¥ 10,671¥ 598¥ 11,269¥ (304)¥ 10,965

16,214

14,847

14,221

7,725

53,0072,393

55,40010,06565,465

832

288

190

135

1,445

17

1,462

429

1,891

2,587

349

95

75

3,106

8

3,114

941

4,055

Total sales
Segment profit
Segment assets

The Group liquidated one company of OTC (and five other subsidiaries) as of February 20, 2015.

¥ 49,844

As one of the subsidiaries of OTC does not operate any business, it does not constitute a reportable segment.

¥ (11,024)¥ 4,451 ¥ 60,868 ¥ (11,024)¥ 49,844

22. RELATED-PARTY DISCLOSURES

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

Transactions of the Company with related parties for the fiscal years ended March 31, 2016 and 2015, were as follows:

For the Year Ended March 31, 2016
Nature ofRelated Party

Millions of Yen
Reportable Segments

Year Ended
March 31, 2015

Total

Reconciliations Consolidated

Japan

China

Taiwan

Korea

Total

Other

¥ 9,411
6,375¥ 18,837
1,584¥ 7,1422,472¥ 8,836364¥ 44,226
10,795¥ 4,034107¥ 48,260
10,902 ¥ (10,902)¥ 48,260¥ 15,786¥ 20,421¥ 9,614¥ 9,200¥ 55,021¥ 4,141¥ 59,162 ¥ (10,902 )¥ 48,260¥ 2,467
12,618¥ 3,508
15,079¥ 1,763
14,683¥ 1,2128,613¥ 8,950
50,993

¥ 555
2,419

¥ 9,505
53,412¥ (250)7,830¥ 9,255
61,242

399

238

207

154

998

15

1,013

399

1,412

2,034

414

99

108

2,655

17

2,672

649

3,321

Directors

Sales:
External customers
Intersegment
Total sales
Segm ent pr of it
Segm ent as s et s
Other items:
Depreciation
Increase in property,
plant, and equipment
and intangible assets

Reportable Segments

Japan

China

Taiwan

Korea

Total

External customers $ 93,828 $ 183,730
57,176
10,053
Intersegment$ 60,959$ 65,595

26,5633,135

96,927

Other

Total

Eiji Sato
Seiki Kashima
Masahisa Kakinuma
Takayuki Morita
Eiji Takehara

Voting Shares of
the Company

Description ofTransaction

Transaction Amount

0.25%
0.03
0.06
0.03
0.04

Third-party allocation
Third-party allocation
Third-party allocation
Third-party allocation
Third-party allocation¥ 61 million $ 542 thousand¥ 21 million $187 thousand¥ 6 million$ 53 thousand¥ 10 million$ 89 thousand¥ 6 million$ 53 thousand

For the Year Ended March 31, 2015

Thousands of U.S. Dollars

Year Ended
March 31, 2016

Name

Reconciliations Consolidated

Nature of related party:
Name:
Location:
Capital amount:
Business:

Other related entity (shareholder)
KOWA CO., LTD.
Tokyo, Japan¥ 27 million
Investments in securities and real estates

Voting shares of the Company:
Description of transaction:
Transaction amount:

17.6%
Purchase of treasury stock¥ 9,195 million

Sales:$ 404,112 $ 38,552$ 442,664$ 442,664

97,904$ (97,904)$ 39,529 $ 540,568$ (97,904)$ 442,664

977$ 151,004$ 193,783$ 87,522$ 68,730$ 501,039$ 20,026$ 42,407$ 19,778$ 12,558$ 94,769$ 5,311$ 100,080$ (2,700)$ 97,380

143,996

131,856

126,297

68,606

470,755

21,252492,00789,387581,394

Depreciation

7,389

2,558

1,687

1,199

12,833151

12,984

3,810

16,794

Increase in property,
plant, and equipment
and intangible assets

22,975

3,099

844

666

27,58471

27,6558,357

36,012

Total sales
Segment profit
Segment assets

Note :The Company determined the per share value of the Company’ s stock, taking into consideration certain discount factors,
based on the average closing price of the Company’ s ordinary shares traded on the first section of the Tokyo Stock
Exchange for the three-month period up to the business day proceeding the day on which the resolution by the board of
directors of the Company was made.

Other items:

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Independent Auditor’s Report

Domestic Network
TAIYO HOLDINGS CO., LTD. Head Office

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

Global Network
Company

Vot ing Shares HeldBusiness Description

TAIWAN TAIYO INK CO., LTD.

99.8%

Manufacture and marketing of PWB materials

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

90.4%

Manufacture and marketing of PWB and FPD materials

TAIYO INK (SUZHOU) CO., LTD.

100.0%

Manufacture and marketing of PWB materials

TAIYO AMERICA, INC.

100.0%

Manufacture and marketing of PWB materials

ONSTATIC TECHNOLOGY CO., LTD.

70.1%

Manufacture and marketing of PWB materials

ONSTATIC INK (SHENZHEN) CO., LTD.

＊1

Manufacture and marketing of PWB materials

TAIYO INK INTERNATIONAL(SINGAPORE) PTE LTD

100.0%

Marketing of PWB materials

TAIYO INK INTERNATIONAL(HK) LIMITED

100.0%

Marketing of PWB materials

TAIYO INK TRADING (SHENZHEN) CO., LTD.

100.0%

Marketing of PWB materials

TAIYO INK PRODUCTS CO., LTD.

100.0%

Marketing of PWB materials

TAIYO INK (THAILAND) CO., LTD.

100.0%

Technical support for PWB materials＊1

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

Production and Marketing Subsidiaries
TaiwanChina

TAIWAN TAIYO INK CO., LTD.

TAIYO INK (SUZHOU) CO., LTD.

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

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

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

P.R.China

ONSTATIC TECHNOLOGY CO., LTD.

ONSTATIC INK (SHENZHEN) CO., LTD.

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

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

Korea

USA

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

TAIYO AMERICA, INC.

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

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

Marketing or Technical Support Subsidiaries
Singapore

China

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

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

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

Korea

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

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

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

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Company Overview ( As of March 31, 2016)
Name : TAIYO HOLDINGS CO., LTD.

Shares authorized : 50,200,000

Head office : 2-7-1 Hazawa, Nerima-ku, Tokyo 176-8508, Japan

Total number of issued shares : 27,485,600

Phone : 81-3-5999-1511

Stock listing : Tokyo

Established : September 29, 1953

Number of shareholders : 5,623

Capital : ¥ 6,188 million

Major Shareholders
Shares ( Thousands)

Investment Ratio (%)

Kowa CO., LTD.

5,233

19.04

Company’s Treasury Stock

4,304

15.66

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

1,116

4.06

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

934

3.40

Japan Trustee Services Bank, Ltd. (Trust account)

900

3.27

SHIKOKU CHEMICALS CORPORATION

631

2.29

MISAKI ENGAGEMENT MASTER FUND

604

2.19

Toshin Yushi Co., Ltd.

538

1.95

JP MORGAN CHASE BANK 385632

510

1.85

Mitsuo Kawahara

500

1.81

Name

Accessing Our Investor Information Site :An Introduction to Taiyo Holdings Website
Taiyo Holdings is committed to providing a full range ofin fo r m a tio n to a ll stakehol ders i ncl udi ng sharehol ders,investors, c u s t o m e r s , a n d b u s i n e s s p a r t n e r s .

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

Stock Price and Trading Volume（ Thousands of Shares ）( Ye n )25,0005,000

20,0004,000

15,0003,000

10,000

2,000

5,000

1,000

0

2012

2013

Nikkei Stock Average ( left scale )2014
Stock Price ( left scale )

2015

2016

0

Trading Volume ( right scale)

86 TAIYO HOLDINGS CO., LTD. Annual Report 2016

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