Empower
Annual Report

2013

Year Ended March 31, 2013

Profile
The TAIYO HOLDINGS GROUP is the chemical manufacturer that commands a global market share ofmore than 50% for solder resist, which is essential for the printed wiring boards (PWBs) used in a varietyof electronics products, from such IT devices as cellular phones, PCs, and other digital equipment todigital household appliances and in-vehicle electronics equipment.
Established in 1953 as Taiyo Ink Manufacturing Co., Ltd., with the manufacture and sale of printing ink
and related material products as its business objective, the TAIYO HOLDINGS GROUP undertook a majortransformation of its business domains in 1976, to a business in which solder resist was made its
mainstay product.
To target further growth this year, which marks the 60th anniversary of its establishment, the TAIYOHOLDINGS GROUP is enhancing “every technology” of all its companies based on the technologicalcapabilities that have been accumulated in the development and manufacture of solder resist. The TAIYOHOLDINGS GROUP will continue to supply across the world innovative products that go beyond solder
resist.
In addition to maintaining its unwavering No. 1 position in the solder resist field, in the years to come,the TAIYO HOLDINGS GROUP will be focusing on research and development and on the cultivation ofbusinesses that will become pillars of new growth.

Contents
01 Financial Highlights
02 President’s Message
03 Basic Management Policies
04 History
06 Products Innovation
08 Our Employees’ Personal Skills
10 Interview with the President
16 Research and Development Activities
18 Review of Operations
22 CSR
24 Corporate Governance
26 Board of Directors and Corporate Auditors
27 Financial Section
28 Six-Year Summary
30 Management’s Discussion and Analysis
34 Consolidated Balance Sheets
36 Consolidated Statements of Income
37 Consolidated Statements of Comprehensive Income
38 Consolidated Statements of Changes in Equity
39 Consolidated Statements of Cash Flows
40 Notes to Consolidated Financial Statements
58 Independent Auditor’s Report
59 Domestic and Global Network
60 Corporate Information

Matters Regarding Forward-Looking Statements

This annual report contains forward-looking statements regarding
TAIYO HOLDINGS’ current management plans, strategies, and othermatters. Readers are cautioned that these forward-looking statements
hold inherent risks and uncertainties, and may differ materially from
actual results or business performance.

Financial Highlights
TAIYO HOLDINGS CO., LTD. and Consolidated Subsidiaries
March 31, 2013, 2012 and 2011

Thousands of
U.S. Dollars(Note)

Millions of Yen

2013

2012

2011

2013

¥ 36,184¥ 39,797¥ 40,366$384,936

Operating income

4,386

4,040

5,381

46,660Operating income ratio (%)

12.1

10.2

13.3

Net income

3,368

2,503

3,403

35,830Net cash provided by operating activities

6,109

2,793

4,576

64,989Net cash (used in) provided by investing activities(2,478)(1,343)

758(26,362)

Net cash used in financing activities(2,314)(2,979)(3,697)(24,617)

Research and development expenses

1,199

963

995

12,755

858

861

840

¥ 44,023¥ 40,703¥ 42,851

Return on equity (%)

9.7

7.5

9.9

Equity ratio (%)

82.2

81.1

78.2

36,81033,47634,18798.38¥ 131.78

90.00

90.00

115.000.96

1,423.26

1,297.18

1,316.53

15.14

For the year:
Net sales

Number of employees
At year-end:
Total assets

Total equity$468,330

391,596

Per share data (Yen and U.S. Dollars):¥ 132.38

Net income
Cash dividends
Net assets

¥

$

1.41

* The U.S. dollar amounts stated above and elsewhere in this report have been translated from yen, for convenience only, at the rate of ¥94 = US$1, which was theapproximate rate on the Tokyo Foreign Exchange Market on March 31, 2012.

Net Sales and Operating Income Ratio

Net Income and Return on Equity(Millions of Yen)(%)

(Millions of Yen)

50,000

15

5,000

12

4,000

13.3
40,00040,366

39,79712.1
36,184

9.7
7.5

3,403

10.2
30,0009.9

9Total Assets and Equity Ratio(%)(Millions of Yen)

(%)

10

75,000100

850,000645,000

78.2

81.1

82.2
80

3,368

3,000

42,851

2,503

40,70344,02360

20,000

6

2,000

4

30,00040

10,000

3

1,000

2

15,000

20

0

0

0

0

0

2011

2012

2013

(Years ended March 31)

Net sales (left scale)Operating income ratio (right scale)

2011

2012

(Years ended March 31)

Net Income (left scale)
Return on Equity (right scale)

2013

2011

2012

2013

0

(March 31)

Total Assets (left scale)
Equity Ratio (right scale)

TAIYO HOLDINGS CO., LTD.

Annual Report 201301

President’s Message
We, the TAIYO HOLDINGS GROUP, are a specialty chemical manufacturer that proudly holds more than half of the
global market for solder resist, a material that forms an essential component of the printed wiring boards used incellular phones, computers, and other IT equipment, as well as in digital home electronics, in electronics equipment
installed in automobiles, and a variety of other electronic devices.
Originally established in 1953 as Taiyo Ink Manufacturing Co., Ltd. to manufacture and sell printing ink andother related materials, we took a great step forward by shifting our business segment and making solder resist our
principal product in 1976. This adventurous transformation was underpinned by our confidence in our technologicalcapabilities.
Now, in 2013—which marks the 60th anniversary of the start of our operations—we are targeting further growth,and based as ever on the technological capabilities accumulated in the development and manufacture of solder
resist, we have redefined the Management Philosophy that is to be regarded as the TAIYO HOLDINGS GROUP’s
raison d’être: To realize “a pleasant society” by further advancing “every technology” the Group has and creatinga wide range of products to help fulfill the dreams for the whole world not just with solder resist but also with other
innovative products we create.
In addition to consolidating our solid No. 1 position in the field of solder resist, we will focus on research anddevelopment and on cultivating businesses that will also underpin new growth in the years to come.
Please look for exciting things from the TAIYO HOLDINGS GROUP as we work toward new developments.

Eiji Sato, President and CEO

02 TAIYO HOLDINGS CO., LTD. Annual Report 2013

Basic Management Policies
TAIYO HOLDINGS CO., LTD. (“we” or “our”) has identified its objectives as a corporate group in the Management
Philosophy and Basic Management Policy below. We will develop by continuing the spirit of our Management
Philosophy without changes and reviewing our Basic Management Policy to match changes in the environmentand strategy on a long-term basis.

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 ourinnovative products.

Basic Management Policy
1. We will generate profit and increase corporate value, thereby contributing to the wellbeing and prosperity of customers, communities, shareholders, and employees.

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

3. 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.

TAIYO HOLDINGS CO., LTD.

Annual Report 201303

History

Growth fundamentals built up over 60 years
Now, in 2013—which marks the 60th anniversary of the start of our operations—we are targeting further
growth, and based as ever on the technological capabilities accumulated in the development andmanufacture of solder resist.
Sept.
Established
TAIYO INK MFG. CO.,
(KOREA) LTD.

Sept.
Taiyo Ink Mfg. Co., Ltd. established.

Dec.
Acquired ISO
9001 certificationfor Head Officeand the Ranzan
Facility.

Commenced locally based
production overseas
Mar.
Ranzan Plant (current Ranzan Facility)
established.

Mar.
Completed construction of Technology
Development Centerat the Ranzan Facility.
Dec.
Established marketing subsidiary
TAIYO AMERICA,
INC. in Nevada, U.S.A.

1953

1970

1973

1982

1984

1988

May
Developed and commenced
marketing of epoxy resin,
thermally curable singlecomponent solder resist.

Aug.
Commenced printed wiringboard (PWB) marketing.

1990

1992

1993

1994

Jan.
Developed and commenced
marketing of package board
solder resist, especially BGA
solder resist.

Sept.
Launched initialpublic offering on
the over-the-countermarket.

Nov.
Registered basic patent foralkaline developable solder
resist in Japan.

June
Exhibited liquid developable
solder resist at the JPCA Show.

Feb.
Commenced research anddevelopment into plasma
display panel materials.

TopicsWe acq u i re d t h e s h ares o f Onsta tic Te c hnology Co., Ltd.
In May 2013, the Company acquired the shares of Taiwanbased Onstatic Technology Co., Ltd. (OTC), making the company a subsidiary. OTC manufactures and sells specialty inks
for use in precision equipment, primarily in China andTaiwan. This move will enable the sharing and effective utilization of the mutual management resources of the Group,
which will provide detailed responses to customer requests.

04 TAIYO HOLDINGS CO., LTD. Annual Report 2013

OTC is a professional manufacturer for various solder resist
ink, which is used in PCB production. It is a clear goal for us to
supply the most-qualified and most-reliable products to all of
our customers. We also provide all the necessary technicalsupport to customers during their production processes.

Feb.
Transformed U.S. marketing
subsidiary TAIYO AMERICA,
INC. into a manufacturing andmarketing company, andcommenced local production.

Jan.
Listed on the First Sectionof the Tokyo Stock
Exchange.

Sept.
Established local production subsidiary
TAIWAN TAIYO INK CO., LTD. in Taiwan.

Jan.
Established marketing
subsidiaries TAIYO INKINTERNATIONAL (SINGAPORE)
PTE LTD. in Singapore and
TAIYO INK INTERNATIONAL(HK) LTD. in Hong Kong.

1995

1996

1999

Jan.
Acquired ISO 14001 certification for
Head Office and Ranzan-Kitayama
Facility.

Apr.
Opened the RanzanKitayama Facility, theCompany’s main domestic
production base.
Jul.
Established technical support subsidiary TAIYO INK(THAILAND) CO., LTD. in
Thailand.
Dec.
Established local
production subsidiary
TAIYO INK (SUZHOU)
CO., LTD. in China.

2001

Oct.
Company split implemented and corporatename changed to
TAIYO HOLDINGS CO.,
LTD.

2003

Package board solder resist
Head Office

The Ranzan-Kitayama Facility

Established: Sept. 1998
Location: 7F., No. 1, Ren’ ai Rd., Yingge Dist.,
New Taipei City 239, Taiwan, R.O.C.
Tel: 886-2-26777481
Fax: 886-2-26777484

June
Approval given for
resolution concerningtransfer to holding
company systemthrough corporate
divestiture at 64th
General Meeting of
Shareholders.

2005

2010

Expanded sales of plasma
display panel materials.

The Ranzan-Kitayama Facility wasestablished to replace the Ranzan
Facility as the main production baseof printed wiring board materials.
The Ranzan-Kitayama Facility has
facilities to cope with highly functional products, including package
board materials, and achieves
higher-quality products.

Capital: NT$350,000,000
Business: PCB production
Annual Sales: US$32 million

TAIYO HOLDINGS CO., LTD.

Annual Report 201305

Products Innovation

Sound technological skills enabling next-generation
product breakthroughs
Automobiles

Cellular phones

Computers

The World’s Leading Manufacturerof Solder Resist
Printed wiring boards are used in a variety of electronics products, from mobile
phones, PCs, and other IT equipment to digital household appliances and invehicle electronics equipment. Solder resist is an essential element in these printed
wiring boards. The TAIYO HOLDINGS GROUP is a chemical manufacturer thatboasts a 50% share in the global solder resist industry.

LEDs

Solder resist is an insulating ink that covers the surface of printed
wiring boards and protects the circuit pattern.
One of the main roles of solder resist is to prevent solder from adhering
to unnecessary parts when components are mounted on the board. At
the same time, solder resist also acts as a permanent protective coating,protecting the circuit pattern from dust, heat, and moisture as well as
insulating the board’s circuitry.

Before solder resist coating

06 TAIYO HOLDINGS CO., LTD. Annual Report 2013

After solder resist coating

Board surface after solder resist
patterning

Electron microscope photograph:
Solder resist is the area on the leftof the image.

PWBs

Solder resist

Example of application

Further Expansion of Business Domain
by Expansion in PDP Materials Field
Using our solder resist technology, the TAIYO HOLDINGS GROUP has expanded
operations in the flat panel display materials arena, especially in the field of plasma
display panel materials. The TAIYO HOLDINGS GROUP aims to expand its business domain through the continual development and provision of new chemicalmaterials for the electronics industry.

White SR

The Market Leader in the Solder Resist Field

60%

630

The ink, typically green, that is applied to the surfaces ofprinted wiring boards (PWBs) is, in fact, solder resist (known
in the U.S. and elsewhere as solder mask), the mainstay
product of the TAIYO HOLDINGS GROUP. Solder resist is an
essential material in the production of PWBs used in electronics equipment, from mobile phones and PCs to digitalappliances and automotive electronic devices. The TAIYOHOLDINGS GROUP commands a global market share forsolder resist of more than 60%, making it the No. 1 specialty
chemical manufacturer in this field.

Our business philosophy is to develop and supply productsof the highest value based on superior technical expertise.
Guided by this philosophy, we see our mission as theworld’s leading manufacturer as being to tirelessly researchand develop high-quality products for supply to the world.
Our technical expertise serves as the backbone of our operations, and we are proud to be a company with the manufacturing excellence to serve the world’s needs. We aim tocreate products imbuing the highest value, leveraging thevarious technologies we have amassed as a pioneer insolder resist.

Market share for solder resist

Number of patents

TAIYO HOLDINGS CO., LTD.

Annual Report 201307

Our Employees’ Personal Skills

Human resource training for agile responses
to dynamic global markets

Cheon, Myeong Ho

Yuta Ogawa

Current position and job description

Current position and job description• General Manager of Overseas Sales
Department, Sales and Marketing Division,
TAIYO INK MFG. CO., LTD.
• Sales expansion/after-sales service andmanagement related to overseas users of products made in Japan

What he wants to contribute to the Company in the future

I am working hard every day to collaborate with overseas subsidiaries from a broad perspective, to expand product sales on aworldwide basis, and to continue the overall development of the
Taiyo Group.

• Overseas Sales Department, Sales andMarketing Division, TAIYO INK MFG. CO., LTD.
• Responsible for expanding sales/aftersales service of package substrate
products for overseas subsidiaries

What he wants to contribute to the Company in the future

By proposing the Company’s cutting-edge products to overseas
customers, I would like to continue to make new proposals fromJapan in constant collaboration with overseas subsidiaries, andrapidly link those proposals to new product development.

Yasutaka Mitsui

Yoko Shibasaki

Current position and job description

Current position and job description• Assistant Manager of R&D Department,
R&D Division, TAIYO HOLDINGS CO., LTD.
• Management of medium-term R&D
operations

What he wants to contribute to the Company in the future

In anticipation of the needs of the market aiming for new Company
products to be adopted by customers in the medium-term timespan of three–five years, I want to contribute to the Company
through new product R&D.

08 TAIYO HOLDINGS CO., LTD. Annual Report 2013

• Development Section II, Development
Department II, Technical Development
Division, TAIYO INK MFG. CO., LTD.
• Responsible for development andtechnical services of package substrate products

What she wants to contribute to the Company in the future

I would like to build relationships of trust with customers throughthe development of superior products and to contribute to theCompany’s sales. In addition, I am committed to product development that is capable of contributing to the enrichment of society.

Kang, Jin Kui

Liu, Chuan Hsiung

Current position and job description

Current position and job description• Management of human resources,
general affairs, and systems department
operations• Specialist in the development of touch panel-related materials• Manager of General Affairs Department,
TAIYO INK (SUZHOU) CO., LTD.

What he wants to contribute to the Company in the future• Chief of Touch Panel Team, Research andDevelopment Section, Research and Development Department, TAIWAN TAIYO INK CO., LTD.

What he wants to contribute to the Company in the future

As the sole member of TAIYO HOLDINGS CO., LTD. here, I wantto act as a bridge for the future between China and Japan throughthe General Affairs Department’s operations.

Development and Use of
Global Human Resources
Amid ongoing globalization, the TAIYOHOLDINGS GROUP actively utilizes
global human resources, including
considering the deployment within theGroup as a whole of employees who
have been hired locally at overseas affiliates, and promoting excellent employees
as far as becoming executives of TAIYOHOLDINGS. In the year under review, wearranged for local managers at overseas
affiliates to come and give lectures toyoung employees about the market situation and cross-cultural background ofvarious countries, thereby enabling thetraining to be given in a fresh andauthentic manner.

While sensing customers’ pleasure when they adopt our products,
I want to build relationships of trust with them through productimprovements and development and thereby contribute to sales. In
addition, I am committed to monozukuri that not only brings delightto the Company’s customers, but also to those who actually use them.

Taiyo Global Network
TAIYO INK (SUZHOU) CO., LTD.
TAIYO INK
INTERNATIONAL (HK) Ltd.

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

GOO-AMC Corporation

TAIYO HOLDINGS CO., LTD.
TAIYO INK
(THAILAND) CO., LTD.

TAIYO AMERICA, INC.
TAIYO INK MFG.
CO., LTD.

TAIYO INK INTERNATIONAL(SINGAPORE) PTE LTD.

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

Onstatic Technology Co., Ltd.

Production and Marketing Subsidiaries
Marketing or Technical Support Subsidiaries

TAIYO HOLDINGS CO., LTD.

Annual Report 201309

Interview with the President

A New Growth Strategy Basedon Speed + Communication

The TAIYO HOLDINGS GROUP results for the fiscal year ended March 31, 2013 (FY2012) showed adecrease in sales mainly attributable to stagnation in the U.S. and European economies, but a profit
increase was secured, and our debt on equity (DOE) ratio and our dividend payout ratio improved
to 6.6% and 68.0%, respectively. Strengthening its business through pivotal medium- to long-term
management strategies centered on R&D system upgrades, the Company has set its sights onfurther improvements in its corporate value in the years to come.

10 TAIYO HOLDINGS CO., LTD. Annual Report 2013

Review of FY2012 and Future Outlook

Q Please tell us a little about the business environment and TAIYO HOLDINGSGROUP results in the fiscal year ended March 2013.
Looking back at the semiconductor industry as a whole in FY2012, there

Operating Income andOperating Income Ratio on Sales(Millions of Yen)

(%)

7,500

15

6,000

13.8

13.3
12.1

10.2

5,381

10.2

4,843
4,500

4,040

12

was robust demand for smartphone and tablet device components, but
demand for PCs and display components destined primarily for flat-panel
TVs remained sluggish. More than 80% of our net sales were generated
overseas, and as many of the printed wiring board (PWB) materials supplied

4,386

9

3,332
3,000

6

1,500

3

by the Company have been adopted as boards for high-end consumer electronics products in developed countries, our results were greatly affected by
the economic situations in Europe and the United States, in particular. The

02009 2010 2011 2012 2013

(Years ended March 31)

Operating Income
Operating Income Ratio on Sales

0

U.S. economy having slowed down since the Lehman Brothers bankruptcy
shock and European economies having stagnated since the sovereign debt
crisis, which overlapped with an appreciating yen, made for a harsh business environment. Under these circumstances, when compared with theend of FY2011, the first half results remained on track and followed an
upward trend, and yet we were unable to achieve our targeted sales volumes due to the economic slowdown in the second half. On the other hand,the correction to the rise of the yen under the so-called Abenomics effect at
the end of the fiscal year served to act as a boost on results.
In the final analysis, our business performance was just about as per forecast, with decreasing sales and increasing profit. Net sales in the fiscal year
ended March 2013 decreased 9.1%, to ¥36,184 million, and operating
income increased 8.5% over the same period, to ¥4,386 million.

Q What is your business environment and results outlook for the fiscal year
ending March 2014?
Although the prospects for the business environment remain as uncertain
as ever, industry demand is expected to increase several percentage points,
centered on PWB materials for smartphones, tablet devices, and car electronics related products. Demonstrating its superiority in terms of cost in
relation to its competitors in Japan and also, in terms of its know-how, its
superiority over foreign rivals, the Company has its sights set on growth thatwill outpace that of industry demand. This will be achieved by strengthening
its sales capabilities, improving its productivity and profitability, and vigorously pushing ahead with the development and sale of new products.
We are planning for net sales to rise 21.6%, to ¥44,000 million, and fora 59.6% increase in operating income, to ¥7,000 million, in the fiscal year
ending March 2014.

TAIYO HOLDINGS CO., LTD.

Annual Report 201311

Around 10% of the significant increase in profit will be generated byCompany measures, with the rest expected to come from the corrections
to the high yen. The acquisition of Onstatic Technology Co., Ltd. (OTC) is
expected to contribute ¥4,000 million in net sales and ¥200 million to operating income. These figures assume a U.S. dollar exchange rate of ¥95 to
the U.S. dollar.

Q Speaking of the now former rival Taiwanese company OTC, you completed that
acquisition in May 2013. What kind of impact do you think the acquisition will
have from the current fiscal year onward?

As previously mentioned, our FY2013 results forecasts incorporate a ¥4,000
million increase in net sales and ¥200 million in operating income from theeffects of having acquired OTC.
For a company that has set its sights maintaining profit while expanding its
market share, M&A is partly an anti-competition measure in conjunction withentry into strategically low-priced markets. As we have achieved our initial
target share particularly in the Chinese market by bringing OTC under the
Taiyo umbrella, we will in the coming years be able to adjust our course to
Onstatic Technology Co., Ltd.

give priority to a profit-pricing policy. It will now also be possible to strengthen collaboration with OTC on strategies with regard to rival companies. As
the advance of low-priced rival products from local companies in China is
expected to continue, among the strategies will be those designed to place
an emphasis on ways to counteract that advance.
We will examine new M&A in the years ahead. For example, a possible
acquisition target besides rival competitors would be companies in otherindustries involved in electronic PWBs or element manufacturers positioned
upstream in the Company’s supply chain.

The TAIYO HOLDINGS GROUP’s Mainstay Products

Q As a leading company in materials for PWBs, please provide us with an
overview of the TAIYO HOLDINGS GROUP’s current mainstay products.
Among the PWB products we make are multiprocessing unit (MPU) package
materials that are on the cutting edge of evolution. Primarily destined forsmartphones and tablet devices, demand for MPUs is continuing to show
double-digit growth. The Company already holds the largest share of theoverall MPU package materials market. It can be said, however, that one of
our key management issues is to gain and maintain an overwhelming global
share of the specific market for smartphone MPU package materials, and for
us to grow in step with market expansion.
12 TAIYO HOLDINGS CO., LTD. Annual Report 2013

At one time, we were a major manufacturer of rigid printed circuit boards(PCBs), but just as that steadily shifted from U.S. companies to companies
in Japan, Taiwan, and China in turn, it is expected that Chinese companies
will also dominate the MPU package market. Especially against the background of China’s 1.3 billion population, growth in the smartphone market
will be huge, and there is no doubt that the country’s parts production iscoming to the forefront. Keeping a close eye on industry trends, when thetime comes for us to relinquish our turn at the forefront of MPU package
production, we will endeavor to be at the stage where we can gain new
manufacturers as customers.

Outline of Medium- to Long-Term Management Strategies

Q Could you please give us a specific explanation of the upgraded R&D systemthat forms the crux of the medium- to long-term management strategies?
R&D Expenditure

The TAIYO HOLDINGS Group has the No. 1 market share globally in solder(Millions of Yen)

resist, which is its main product. For this reason, the Group’s sales and1,400

income are influenced by trends in the overall market for solder resist. The
1,199

1,200
1,000

979

1,016

995

963

Group’s performance is affected particularly by market trends in semiconductors, which are the final products in which its main product finds applica-

800

tion. Despite having achieved our market share plans in FY2012, we ended

600

up suffering a decrease in sales. To overcome this hurdle, and with an eye

400

on products other than solder resist, it is essential for us to create new prod-200

ucts with greater profitability and to create and tap into new markets.

02009 2010 2011 2012 2013

(Years ended March 31)

To strengthen our R&D system to that end, we embarked on a review ofthe separation of R&D roles about three years ago. Under the new system
set up in FY2012, the Company’s R&D Headquarters has been placed incharge of basic research that aims for product commercialization in morethan five years’ time. Specific product commercialization processes are theresponsibility of development divisions at the Group’s operating companies.
At such time as the goal becomes product commercialization, a dedicatedteam is set up in which manufacturing and sales members join development
division members. Given certain responsibilities and granted certain authorities, the team exchanges points of view, such as production techniques,
cost, and sensitive responses to customer needs, and guides the new product to its market launch. To cite one actual new product example, the materials for touch panels are expected to get off the ground within a few years.

TAIYO HOLDINGS CO., LTD.

Annual Report 201313

Q In the medium- to long-term management strategies, mention is made of nurturing self-sufficient employees. Could you please tell us about the purpose
behind the nurturing of the personnel targeted by this move?
Cost of Education and Training

The term self-sufficient employees refers to personnel who enjoy putting in(Millions of Yen)

the effort to attain goals that they themselves have set. To give a specific

80

72

70

these personnel will themselves be able to draw up business plans, from60

R&D to manufacture and sale, and to derive enjoyment from bringing those

50

plans to fruition. As a means of training, we have established a system that

40

40

includes training sessions given by outside trainers and secondment to uni-

30

versities. Also, involving participation in the dedicated development teams,

20
10
0

example, in aiming to develop new products and increase market share,

these employees will gain wide-ranging business experience in Japan and7overseas.
2011

2012

(Years ended March 31)

2013

The ideal vision I have in mind for TAIYO HOLDINGS is of a flat organization where self-sufficient employees gather. Were such a company to reallyexist, they would be able to enjoy creative work from which each and every
person would derive a stimulating “buzz.” I believe that the Company’s
desire for sustainable growth would also be fulfilled as a result. Currently, theCompany employs over 800 people, and in 10 years’ time at the latest,
something like at least 100 of them, including Japanese or people from outside Japan who have been hired in the meantime, will be training afresh to
be self-sufficient employees. I am enjoying working to achieve that end, andalso enjoying listening to the self-sufficient employees’ ideas in a variety ofdecision-making situations.

Q Please explain the specifics of measures to mitigate exchange rate risks that will
be a major factor in making steady progress with the management strategies.
The selling prices of our products are denominated in many foreign currencies, and the situation is that exchange rate fluctuations can easily lead tovariations in our business results. In addition to setting up systems whereby
products sold locally are also produced locally, we are working to try to balance currency income and expenditure by raising the local procurement of
raw materials. The measures to achieve this are linked to mitigating business continuity risk, such as by strengthening our customer response capabilities, including the rapid development of products that meet customer
needs and shortening order lead times, reducing the cost of raw materials,
and procuring those raw materials from multiple suppliers.

14 TAIYO HOLDINGS CO., LTD. Annual Report 2013

Up to now, we have made good progress with the setting up of a local
production system, however, as there are many raw materials that are reliant
on Japanese manufacturing quality, this is being treated as a medium- tolong-term issue.

Approach for Returning Profits to Shareholders

Q Please explain about the uses of cash flow and your approach with regard toreturning profits to shareholders.
With regard to investment, as the acquisition of OTC has been concluded,
the present investment target being considered is the upgrade and expansion of all the facilities necessary to realize a greater market share in existingproducts and the realization of new products. Specifically, investment inplant and equipment, with production-related investment assumed to be
somewhere between ¥1.0 billion and ¥2.0 billion, and R&D-related investment of between ¥100 million and ¥200 million. These are appropriate
levels as we realize the Company’s business categories, business scale,and future vision.
In the meantime, with regard to shareholder returns, we have positioned
returning profits to shareholders through cash dividends as a key policy.
Within this, our basic policy is to return a continuous, steady, and high levelof profits to shareholders. In addition, we are targeting a DOE ratio of at least
5% over the medium and long terms.
Based on these policies, we declared an annual dividend of ¥90 per sharefor the fiscal year under review and the payout ratio was 68.0%.
With regard to the annual dividend for the fiscal year ending March 2014,
the Company will be marking its 60th anniversary. To express our gratitude
to all our shareholders for gracing us with their support, we are planningto add a special commemorative dividend of ¥30 to the interim ordinary
dividend of ¥45, and to pay a year-end dividend of ¥45, for a total annual
dividend of ¥120.
As indicated in our Management Philosophy, TAIYO HOLDINGS is working to advance “every technology,” create a wide range of products to help
fulfill the dreams for the whole world with its innovative products, and to realize a pleasant society. By also generating profit and raising corporate value,
the Company contributes to the happiness and prosperity of all stakeholders, including all of its shareholders.
I would like to conclude by expressing my heartfelt appreciation to allshareholders and other investors for their unwavering understanding of andsupport for the TAIYO HOLDINGS GROUP.
TAIYO HOLDINGS CO., LTD.

Annual Report 201315

Research & Development Activities“We will realize a ‘pleasant society’ by further advancing every technology theGroup has and creating a wide range of products to help fulfill the dreams forthe whole world with our innovative products.” Based on this management philosophy, the TAIYO HOLDINGS GROUP conducts R&D into a variety of insulationand conductive materials that contribute in the electronics field to an advanced
information society and a comfortable environment.

The areas of research on which we are focusing,and their results, are set out below.
(1) Solder Resist
In the case of solder resist, our mainstay product, we are pushing ahead
with R&D to communicate with customers but primarily to enable us to becertain of rapidly attending to their every request.
For information terminal devices represented by smartphones, where
progress has been made in making them more compact and with greater
component density, the direct exposure method suitable for wiring miniaturization is becoming more widespread. From early on, Taiyo developed theprinted wiring board (PWB) materials adapted for the exposure method that
our customers are utilizing. In the coming years, we will be focusing on thedevelopment of highly sensitive solder resist that will advance optimization.
Offering advantages in miniaturization for package (PKG) use, the adoptionof dry film-type solder resist has, as expected, been increasing from year toyear. By bringing to fruition high insulation reliability in dry film, this type has
been adopted for state-of-the-art smartphone PKG substrates. Dry filmtype solder resist possesses environment-friendly characteristics, as volatilization of the flux during the process is less than with conventional liquid
types; steady progress is being made in its development to enable us to
16 TAIYO HOLDINGS CO., LTD. Annual Report 2013

respond to increased demand in the years ahead. From the reliability perspective, solder resist with a thermal expansion coefficient close to that of
the semiconductor element—that is thus capable of reducing the stress ona mounted semiconductor element—is being developed in collaboration
with a customer.
Also developed for and used by our customers is highly reflective whitesolder resist that maximizes the special characteristics of LED lamps, which
are attracting attention from the energy-saving perspective. Further development is under way with a view to offering even better performance.
Taiyo is focusing its efforts on automotive substrates to contribute to theelectrification of the automobile. When mounted in an automobile, substrates are exposed to a harsh environment that includes high temperaturesand vibration. We are improving heat resistance to make it even better thanconventional types that can sufficiently withstand the conditions, whiledeveloping and deploying on the market solder resist that besides being
stronger can withstand temperatures that are 50% higher.
Taiyo is making headway with R&D that contributes to the environment.
Having developed ink made from plant oil, the Company has obtained theJapan Printing Ink Makers Association vegetable oil ink mark. The Company
will be proceeding with applications in a number of fields in the years tocome.

(2) Conductive Materials
Taiyo advances R&D that accurately monitors customer demands as well aschanges in the market and technologies.
Having continued to conduct R&D into conductive materials for plasma
displays, the Company has developed a highly conductive photo-inducible
paste that produces the same performance as conventional types but witha smaller amount.
We are vigorously advancing the development of electrode materials for
touch panels, the market for which is burgeoning centered on smartphones
and tablet PCs. The Company has developed silver paste that has been
adopted for use in screen printing. In partnership with a customer, progress
is being made in the development of a photo-type material that enables
pattern formation to an even-greater definition. As a material of the future,research is also under way into conductive paste that does not require theuse of precious metal.

TAIYO HOLDINGS CO., LTD.

Annual Report 201317

Review of Operations

Geographical Segment Review
Breakdown of Net Sales

Net Sales (Millions of Yen)(including inter-segment sales or transactions)

18,491

11,788JAPAN

13,065

30.8%
2011

2012

2013

10,637

10,8352012

2013(Years ended March 31)

11,916

CHINA(including Hong Kong)

25.5%
2011
(Years ended March 31)

4,414
3,706

TAIWAN

3,936

9.3%
2011

(Years ended March 31)

2012

2013

16,66813,743
11,723

KOREA

27.6%
2011

2012

2013

(Years ended March 31)

3,061
2,619

OTHER
REGIONS

6.7%
2011(Years ended March 31)

18 TAIYO HOLDINGS CO., LTD. Annual Report 2013

2,854

2012

2013

Segment Profit (Millions of Yen)

1,686

1,014

990

2011

2012

2013

Performance Overview

Consolidated Group Subsidiaries

The consolidated company located in Japan is TAIYO INK
MFG. CO., LTD., a manufacturing and marketing subsidiary.
The smartphone market expanded globally, which
pushed up the sales of high-function products, althoughsales of rigid board materials decreased due to the slowdown of the domestic electronics market, mainly the TV
market.
As a result, net sales amounted to ¥13,065 million (up10.8% year on year) with segment profit at ¥1,686 million(up 70.4% year on year).

TAIYO INK MFG. CO., LTD.

The consolidated companies located in China are TAIYOINK (SUZHOU) CO., LTD., a manufacturing and marketing
subsidiary, and TAIYO INK INTERNATIONAL (HK) LTD. and
TAIYO INK TRADING (SHENZHEN) CO., LTD., marketing
subsidiaries operating mainly in the southern China region.
Although sales of lower-priced rigid board materials performed favorably, sales of FPD materials were sluggish.
As a result, net sales amounted to ¥10,835 million (up1.9% year on year) with segment profit at ¥1,585 million(down 9.5% year on year).

TAIYO INK (SUZHOU) CO., LTD.
TAIYO INK INTERNATIONAL (HK)LTD.
TAIYO INK TRADING (SHENZHEN)
CO., LTD.

The consolidated company located in Taiwan is TAIWANTAIYO INK CO., LTD., a manufacturing and marketing subsidiary.
Despite a fall in sales volume, the sales mix of rigid board
materials improved.
As a result, net sales amounted to ¥3,936 million (up6.2% year on year) with segment profit at ¥498 million (up6.0% year on year).

Onstatic Technology Co., Ltd. (OTC)TAIWAN TAIYO INK CO., LTD.

The consolidated company located in Korea is TAIYO INK CO.,
(KOREA) LTD., a manufacturing and marketing subsidiary.
Sales volumes of FPD materials declined substantially,
while sales amounts were also down considerably compared with the same period of the previous fiscal year due
to a fall in the price of silver, which has a connection withsale unit prices of FPD materials.
As a result, net sales amounted to ¥11,723 million (down
29.7% year on year) with segment profit at ¥591 million(down 9.1% year on year).

TAIYO INK CO., (KOREA) LTD.

The other consolidated companies are TAIYO AMERICA, INC.
and TAIYO INK INTERNATIONAL (SINGAPORE) PTE LTD.
TAIYO INK INTERNATIONAL (SINGAPORE) performed
steadily amid continued recovery from damage caused by
the floods in Thailand.
At TAIYO AMERICA, sales were roughly at the same levelwith the same period of the previous fiscal year.
As a result, net sales amounted to ¥2,854 million (up9.0% year on year) with segment profit at ¥324 million (up18.7% year on year).

TAIYO AMERICA, INC.
TAIYO INK INTERNATIONAL(SINGAPORE) PTE LTD.

(Years ended March 31)

2,814

1,751

2011

(Years ended March 31)

511

2011

2012

470

2012

1,585

2013

498

2013

(Years ended March 31)

979

650

2011

2012

591

2013

(Years ended March 31)

324
273
238

2011

2012

2013

(Years ended March 31)

TAIYO HOLDINGS CO., LTD.

Annual Report 2013

19

Analysis of Operating Results
During the fiscal year ended March 31, 2013, the global

Operating under these conditions, net sales for the current

economy continued to be uncertain due to such factors as

fiscal year amounted to ¥36,184 million (down 9.1% year on

the lingering impact of the European debt crisis and the slow-year).

down of economic growth in China. However, from the latterIn the PWB (printed wiring board) materials market,

half of the year, the U.S. economy started to show a recovering

although sales volumes were almost in line with the previous

trend. The Japanese economy also remained stagnant owing

fiscal year, the sales unit price rose due to the strong sales ofto the sluggish global economy and the extremely strong yen.

high-function products. As a result, net sales of PWB materi-

Nonetheless, after the new government was formed,

als were ¥27,998 million (up 4.7% year on year).

consumer consumption and corporate earnings started toSales of FPD materials, mainly consisting of PDP materials,

be on a recovery track thanks to correction of the extremely

dropped to ¥7,316 million (down 40.6% year on year), owing

strong yen.

to lower sales volume and a fall in unit prices driven by a sig-

In the electronics components industry, in which the Group
operates, demand for products for smartphones and tablet

nificant drop in the market price of silver, which constitutes
one of the products’ raw materials.

devices was firm, while demand for display products mainly

As a result, operating income amounted to ¥4,385 million

for PCs and TVs was weak.

(up 8.5% year on year) with net income at ¥3,367 million (up34.6% year on year).

Sales Results by Product Group Category(Millions of Yen)

40,00030,00020,000

Rigid board materials
PKG board and flexible board materials
Build-up board materials
FPD materials
Others

10,000

2013

0

2011

2012

2013

Product Description
The Group’s products divide principally into the two categories of printed wiring board (PWB) materials and flat panel display (FPD) materials. The Group is also utilizing the elemental
technologies cultivated in these existing segments to develop

TAIYO HOLDINGS GROUP Product Segments
Printed Wiring Board(PWB) Materials

new fields and products targeting the electronic components

Package Board
Materials

industry.
PWB materials are grouped into the three categories of (1)rigid board materials, (2) package and flexible board materials,
and (3) build-up board materials. The key contributor is solder
resist (SR), the Group’s mainstay product (see chart).

20 TAIYO HOLDINGS CO., LTD. Annual Report 2013

Rigid Board
Materials

Flexible Board
Materials
Build-up Board
Materials

Flat Panel Display(FPD) Materials
Plasma Display
Panel(PDP) Materials

Development of
New Product LinesPWB Materials
PWB materials are chemicals used in PWB manufacturing

electronic circuits in various PWB layers, (2) legend (orprocesses. They have been the traditional mainstay of themarking) ink, which is used on PWB surfaces to indicate

Group’s business. PWB materials are further classified into

names, numbers, positions, or other information that relates

SR and non-SR products.

to mounted electronic components, and (3) interlayer insula-

SR is masking ink applied over the surface of a PWB.
It forms an insulating layer to protect the underlying board

tion materials, which are used in build-up substrates to separate the various layers of mounted components.

circuit pattern. SR can be divided into “photoimageable”

SR generates a large proportion of Group sales. The Groupand other types. Other important SR categories are LPI

was the pioneering inventor of alkaline developable SR, a major(liquid photoimageable) and DFR (dry film).

variant of photoimageable SR (the current mainstream type),

Non-SR products include (1) hole plugging ink, used toand commands the leading share of the global SR market.

provide an insulating in-fill for the through-holes that connect

FPD Materials
Within FPD materials, plasma display panel (PDP) materials

pattern pastes to create the black patterns for generating

for use in flat-screen TV panels account for the majority ofimage contrast. FPD materials now constitute the Group’s

sales. The Group manufactures and sells conductive pastes,

second-largest product segment behind PWB materials.

which function as the electrodes in plasma TV sets, and black

New Fields and Products
Two of our new products were created by adding value tocomponent density and increased circuit resolution in the

our existing SR products. The first is white SR. Demand forchips fitted to smartphones and other mobile devices havesuch an SR variant has grown in recent years due to themade conventional photo-irradiation methods obsolete due toemergence of light-emitting diode (LED) lights and LED backlit

the need for more resolution. New SR variants are required for

LCD TV sets, which have energy-saving and eco-friendly fea-

novel direct etching methods that do not utilize a negativetures. White SR helps boost the luminance of LEDs or LED

film. We have developed black SR that copes with the contra-

backlighting due to high light reflectance. The Group gained a

dictory requirements of being sufficiently light absorbent but

related patent in 2009. Product sales have been growing

also allowing enough light to penetrate to enable hardening ofsteadily and white SR sales are forecast to grow further in thethe high resolution circuit patterns. This product is suitable for

future. Sales for the year ended March 2012 also increased

laser direct imaging and can also be used within a develop-

from the previous year.

able photo-paste that contains high concentrations of

The second new product is black SR, which offers anotherlight-blocking silver particles, which are applied using photo-alternative to the standard green or blue SR colors. In recent

lithographic printing techniques. The resulting product com-

years, more products have started to feature black PWBs thatbines a deep black hue with the required sensitivity anduse a black SR. The Group has applied its expertise in photo-precision for high-resolution etching.

lithography to develop this new product range. The higher

TAIYO HOLDINGS CO., LTD.

Annual Report 2013

21

CSR
The Group has prospered by earning the trust of sharehold-business activities. In conducting business, we are committed

ers, customers, business partners, and other stakeholders. To

to fulfilling our corporate social responsibilities as an enter-remain worthy of such trust and support the Group’s contin-

prise.

ued development, we have formulated our CSR Philosophy

In addition, various management structures and commit-

and a Code of Conduct based on our Management

tees provide the infrastructure needed to support appropriate

Philosophy and Basic Management Policy to guide all of our

promotion of the CSR-related activities that we undertake.

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

Code of Conduct
We will observe the following code to put the Group’s CSR Philosophy into practice.
1. Ethical and Legal Compliance

We will observe laws and other social norms, and, understanding the spirit
thereof, will act openly and fairly.

2. Workplace Environment

We will respect employees’ human rights, and create a workplace that is fairand free of discrimination.

3. Fair Business Dealings

We will deal with all our business partners in an honest manner and conductbusiness with them based on impartial and fair business conditions.

4. Respect for Stakeholders

We will always conduct business activities with respect for the viewpoints of all
our stakeholders, and disclose information in a timely and appropriate manner.

5. Ensuring Confidentiality

We will work to ensure the protection of confidential information related to ourbusiness partners, the Company itself, and any individual.

6. Ensuring Quality (Quality Policy)

We will ensure that we always provide safe, quality products that satisfy ourcustomers.

7. Protecting the Environment(Basic Environmental Philosophy)

We will endeavor to protect the environment as part of the performance of oursocial responsibility, and will engage in business activities that are in harmony
with the environment.

8. Social Contribution

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

9. Respect for Intellectual Property

We will take appropriate precautions to protect our intellectual property rights,
and those of third parties.

10. Exclusion of Anti-Social Forces

We will take a resolute stance towards anti-social forces and will not respond inany way to illegal or improper demands.

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

CSR Philosophy

Requirements/expectations
Share price, environmental protection,
high-functionality products

Code of Conduct
Provision
Social contribution, dividends, fairbusiness dealings, tax payment

Management
Internal controls

Information disclosure
Website, CSR report, business report

Green procurement
Environmentallyfriendly products

Environment
Evaluation
Rating, awards, degree of customer
satisfaction

22 TAIYO HOLDINGS CO., LTD. Annual Report 2013

Environment management
substance reduction
Prevention of
global warming

Risk management
Information
securityCompliance

Social contribution

Society
Employment,
human rights,
occupational safety

Sustained development/stabilizationof management

Management Philosophy

Communication
with stakeholders

Relationship with Shareholders

Relationship with Local Communities and Society

Performing IR Activities

Social Contribution

TAIYO HOLDINGS maintains a basic policy of ensuring accu-

As part of its social contribution activities, the TAIYO

racy, fairness, and promptness in the performance of IR activi-

HOLDINGS GROUP makes monetary donations to support

ties. On the basis of this policy, we deliver to shareholders

relief efforts in the event of major disasters causing significant

and investors information effective for making investment

damage.

decisions.

Although over two years has elapsed since the Great East

In terms of specific IR activities, we publish an annual

Japan Earthquake struck Japan in March 2011, much dam-report, offer IR information on our website, hold financial

age remains in the afflicted region. Looking ahead, we will

results briefings for analysts and institutional investors, andprovide as much support as possible in our role of people

meet individually with institutional investors, among otherliving in the same society.

activities. We are also proactive in providing information
to overseas institutional investors. In the year under review,Environmental Protection Activities

for example, we held IR meetings in Singapore.

The TAIYO HOLDINGS GROUP conducts various community
beautification programs as part of its environmental protection

Relationship with Customers

activities. At our Ranzan Facility, about 10 management-level

Innovating Quality Management and Utilizing Complaints

employees are split into two teams, which take turns picking

The TAIYO HOLDINGS GROUP carries out initiatives to

up garbage from roads around the site on a monthly basis.

ensure high levels of quality and safety that satisfy our cus-

In addition, TAIYO INK is registered with a road beautification

tomers. In the year under review, we focused on improving

program in Saitama Prefecture, and employees contributethe effectiveness of our quality management system, and on

their time once a month to clean up the roads, focusing on

the fundamental streamlining of our system after mainly

national road No. 254.

reconfirming the workflow. In the current fiscal year, we willbuild an easy-to-understand clear-cut quality system after

We also participate in programs to protect the great purple
emperor, designated as Japan’s national butterfly.

clarifying the objectives and roles of each process, and theconnections between processes, thereby further streamlining
the system for efficiency.
We consider customer complaints as opportunities toimprove quality. After receiving a complaint, we identify theroots of the problem and take effective response measures

Protection of Great Purple Emperor,
Japan’s National Butterfly

that will lead to the manufacturing and provision of products

Designated Japan’s national butterfly, the great purple

with stabler quality.

emperor (Sasakia charonda) is found in nettle trees (Celtis
sinensis), on which it feeds during the larval stage and on

Relationship with Suppliers
Carry Out Supplier Assessments and On-Site Audits
In order to conduct business transactions with suppliers ina relationship of trust, the TAIYO HOLDINGS GROUP carries
out supplier assessments, clarifies anything necessary, andproceeds with the cooperation of the supplier.
We carry out on-site audits of our suppliers of raw materials
and products, with the understanding and approval of ourwhich adults deposit eggs. The butterfly inhabits the densely
wooded areas in the town of Ranzan in Saitama Prefecture,including on two species of oak tree, Quercus serrata andQuercus acutissima, which produce the sap on which theadult butterflies feed.
TAIYO INK undertakes protection activities in conjunction
with the town, for instance by creating an environment within
our Ranzan Facility site in which the butterflies can easily
pass the winter.

suppliers, as a way to maintain and improve the quality,

Employees also take anenvironmental friendliness, and delivery of procured goods.

active part in the volunteer activity of creating
secondary forest.

TAIYO HOLDINGS CO., LTD.

Annual Report 201323

Corporate GovernanceConstruction of Sound Management Structures

The Board of Directors is composed of seven Directors, one

We have a holding company structure. Having Group man-of whom is an outside director. The Board of Corporate

agement and strategic functions, the holding company aims

Auditors is composed of four Corporate Auditors, two of

to develop and improve our strategies while optimizing thewhom are outside auditors. Meetings of the Board of

allocation of resources. The operating subsidiaries under the

Directors are held regularly each month, but the Board canholding company can act promptly and autonomously. This

also hold extraordinary meetings if necessary. The Board

system enables us to respond better to customers acrossdiscusses and resolves important matters, and also over-various markets while also speeding up decision making andsees the execution of duties by the Representative Director.

boosting operational efficiency. Its aim is to increase profits

Corporate Auditors, including outside auditors, attend mostand help us build corporate value.

meetings of the Board and Executive Committee, whichconvene on a number of occasions each year, to engage in

Basic Thinking on Corporate Governancediscussions and to monitor proceedings in detail. Two of the

In line with our Management Philosophy and Basic

Corporate Auditors are full-time auditors with the power toManagement Policy, we aim to prosper together with our cus-

submit questions to the Group employees. The system

tomers, regional communities, shareholders, employees, busi-

enables the Corporate Auditors to conduct adequate moni-

ness partners, and other stakeholders. We also believe it istoring of the execution of duties by Directors.

necessary for us to embrace social responsibilities as well as

The Internal Audit Department, which has a staff of two

seek to generate profits. To this end, we seek to promote

employees, is fully independent of other Group operations. It

management transparency and to fulfill our disclosure obliga-

undertakes an audit of all departments of the holding com-

tions to support the Company’s continued prosperity.

pany and operating subsidiaries based on the annual audit
plan approved by the Board of Directors. Results of these

Corporate Governance Structuresaudits are reported to the Board of Directors and Board of

Our corporate governance system is centered on the

Corporate Auditors.

Board of Directors and the Board of Corporate Auditors,
whose members are both approved by resolutions at theInternal Controls

Shareholders’ Meeting. We have also adopted a system of

We regard the construction of a system of internal controls as

Executive Officers to separate management oversight froma critical part of corporate governance. These controls include

operational execution. The Executive Officers appointed to

the five components described below.

serve on the Executive Committee are General Managers of(1) Keep all Directors and employees informed about our CSR

divisions of TAIYO HOLDINGS and representatives of over-(Corporate Social Responsibility) Philosophy and the Code ofseas subsidiaries. This setup aims to promote faster opera-

Conduct.

tional execution as well as right strategic decision making.

Shareholders’ Meeting
Reports to

Appoints and dismisses

Board of Directors

Reports to
AuditsInstructs

Reports to

Appoints
and dismisses

President and CEO
Executive Officers
Reports toReports to

Appoints and dismisses

Board of Corporate Auditors
Cooperation

Cooperation

Audits

Office of Internal Audits
Internal audits

Departments and Subsidiaries

Accounting Auditors
AuditsReports to

Instructs

24 TAIYO HOLDINGS CO., LTD. Annual Report 2013

Appoints and dismisses

Cooperation

(2) The appointment of one Director as Chief Complianceresult, the Group confirmed that it could respond rapidly in

Officer to chair the Ethics Committee and lead a team pro-the event of an earthquake. We also verified that we had

moting internal business ethics.

secured a method of communication to use immediately after(3) An internal hotline to enable employees to report compli-

an earthquake, and that time is needed to confirm the safety

ance violations or any related concerns to an external lawyer.

status of those employees who are on leave when an earth-(4) Regular reports by the Chief Compliance Officer to thequake occurs.

Board of Directors concerning the ethics and complianceIn this context, the Risk Management Committee used thisframework status.

post-earthquake information as a basis to review a manual(5) Establishment of an independent Internal Audit

describing the emergency situation caused by a fire or earth-

Department that reports audit findings to the Board of

quake, and how to respond afterwards. This manual forms

Directors and the Board of Corporate Auditors, and wherepart of the Risk Management Manual, and is meant to benecessary to the accounting auditors as well.

used in such an emergency. We ensured that the manual is

To maintain the reliability of our financial reporting, we have

simply written and clearly lists what must be done. We also

also developed a system of internal controls to ensure thatcombined the antidisaster drills that had been conducted at

effective and appropriate internal control reports are pro-each base hitherto, and performed a joint drill at three

duced, based on the provisions of the Financial Instruments

domestic bases.

and Exchange Law.

Executive Compensation
Risk Management

The Group policy on executive compensation is to set in an

The Group has studied and instituted ways of mitigating, orobjective and transparent way for executive compensationof taking appropriate steps in response to, a variety of risks

levels that provide incentives to executives to increase cor-

associated with business activities.

porate value and shareholder value, while also being proper-

One Director is appointed as “the Director in charge of risk

ly justifiable. Executive compensation is deliberated by the

management.” Moreover, the department in charge of risks

Compensation Committee, a body that includes an outside

occurring in the course of natural work operations evaluates

auditor. The Directors’ compensation is decided by theand responds to these risks. Furthermore, the Risk

Board of Directors and the Corporate Auditors’ compensa-

Management Committee conducts risk management in ation is decided in collaboration with the Board of Corporatecross-departmental manner over the entire Group. As

Auditors, after the aforementioned deliberation by theregards the detailed activities conducted during the fiscal year

Compensation Committee.

ended March 2012, the Group completely reviewed the Risk

Directors’ compensation is made up of a base salary plus

Management Manual, and also focused activities on issues

performance-based components linked to the Group earn-

related to the aftermath of the Great East Japan Earthquake

ings and the share price. The Corporate Auditors onlythat occurred in March 2011. As part of our responses in thereceive a base salary.

period after the earthquake, we established an earthquake

Executive compensation for the year ended March 2013

countermeasure conference framework, and arranged foris shown below.

domestic bases to hold frequent television conferences. As a

Executive Compensation
Aggregate remuneration by component (Millions of yen)

Aggregate
remuneration(Millions of yen)

Base salary

Earnings-based
performance

135

96

39

—

10

Corporate Auditor

8

8

—

—

2

Outside Corporate Auditor

43

43

—

—

4

Executive category

Director

Retirement
benefits

Total number of
executives

TAIYO HOLDINGS CO., LTD.

Annual Report 201325

Board of Directors and Corporate Auditors (As of June 26, 2013)

Front row:
Takayuki Morita

Masahisa Kakinuma

Mitsuo Kawahara

Eiji Sato

Seiki Kashima

Jong Tae Kim

Director

Director

Honorary Chairman

President and CEO

Director

Director

Back row:
Si Bum Yoo

Toshio Nemoto

Takato Kawahara

Masayuki Hizume

Akihito Sakai

Haruomi Yoshimoto

Corporate Auditor

Outside Corporate Auditor

Director

Outside Director

Outside Corporate Auditor

Corporate Auditor

Directors
Eiji Sato

Corporate Auditors
President and CEO

Masahisa Kakinuma
Seiki Kashima

Director
Director

Takayuki Morita
Jong Tae Kim

Director

Director

Takato Kawahara

Director

Masayuki Hizume

Outside Director

26 TAIYO HOLDINGS CO., LTD. Annual Report 2013

Outside Corporate Auditor

Akihito Sakai
Toshio Nemoto
Si Bum Yoo

Outside Corporate Auditor

Corporate Auditor

Haruomi Yoshimoto

Corporate Auditor

Financial Section
28 Six-Year Summary
30 Management’s Discussion and Analysis
34 Consolidated Balance Sheets
36 Consolidated Statements of Income
37 Consolidated Statements of Comprehensive Income
38 Consolidated Statements of Changes in Equity
39 Consolidated Statements of Cash Flows
40 Notes to Consolidated Financial Statements
58 Independent Auditor’s Report

TAIYO HOLDINGS CO., LTD.

Annual Report 201327

Six-Year Summary
TAIYO HOLDINGS CO., LTD. and Consolidated Subsidiaries
The years ended March 31

2008(TAIYO INK MFG. CO., LTD.)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 used in financing activities
At year-end:
Total assets
Property, plant and equipment, net
Total liabilities
Minority interests
Total equity¥45,338
29,512
6,930
8,896
6,171
1,529
9,241
(3,390)(1,969)48,93815,8999,792
737
39,140Per share data:
Basic net income (loss)
Cash dividends applicable to the year
Net assets¥ 233.18
115.001,450.87

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

19.6%
16.5
78.5

Common stock:
Number of shares issued

28,464,000

See notes to consolidated financial statements.

Net Sales

Operating Income
and Operating Income Ratio(Millions of Yen)

(Millions of Yen)(%)

50,000

6,000

18

5,381
40,366 39,797

40,00035,056

4,843
13.8

36,1844,000

30,000

13.3
4,386
4,040
12.1

12

10.2

20,0002,000

610,00002010 2011 2012 2013

(Years ended March 31)02010 2011 2012 2013

(Years ended March 31)

Operating income (left scale)Operating income ratio (right scale)

28 TAIYO HOLDINGS CO., LTD. Annual Report 20130

Millions of Yen

2009

2010

2011

2012

2013

¥32,614
22,635
6,647
3,332
1,958
1,396
4,581
(1,470)(4,428)¥35,056
24,123
6,089
4,843
3,010
1,261
3,126
(70)
(2,366)¥40,366
28,428
6,557
5,381
3,403
1,127
4,575
758
(3,696)¥39,797
29,823
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)40,86914,664
6,285
522
34,58443,704
13,954
8,018
679
35,68542,851
13,0508,664
696
34,18640,703
12,546
7,227
478
33,47644,023
12,664
7,213
605
36,810¥ 131.78
115.001,316.53¥ 98.38
90.00
1,297.18¥ 132.38
90.00
1,423.26(TAIYO INK MFG. CO., LTD.)Yen¥ 74.2590.00
1,313.20¥ 116.08
90.00
1,349.61
%

10.2%
5.4
83.3

13.8%
8.7
80.1

13.3%
9.9
78.2

10.2%
7.5
81.1

12.1%
9.7
82.2

Thousands of Shares

27,464,000

27,464,000

27,464,000

Net Income and Net Income Per Share

Return on Equity(Millions of Yen)

(Yen)

(%)

4,000

200

12

150

9

3,403
3,000

3,368

3,010
131.782,503

132.389.9

27,464,000

27,464,000

9.7

8.7
7.5

116.08
2,000

98.38

1,000

0

2010 2011 2012 2013

(Years ended March 31)

100

6

50

3

0

0

2010 2011 2012 2013

(Years ended March 31)

Net income (left scale)
Net income per share (right scale)
TAIYO HOLDINGS CO., LTD.

Annual Report 201329

Management’s Discussion and Analysis
Overview of the Consolidated Results

Net income

During the fiscal year ended March 31, 2013, the global

Income before income taxes and minority interests and net

economy continued to be uncertain due to such factors asincome both increased year on year, to ¥4,699 million (upthe lingering impact of the European debt crisis and the

32.0%) and ¥3,368 million (up 34.6%), respectively. These

slowdown of economic growth in China. However, from theincreases were due mainly to an increase in net income

latter half of the year, the U.S. economy started to show a

before minority interests

recovering trend. The Japanese economy also remained
stagnant owing to the sluggish global economy and the

Net income per share increased 34.6% year on year, from
¥98.38 to ¥132.38.

extremely strong yen. Nevertheless, after Japan’s new government was formed, consumer consumption and corporate
earnings entered a recovery track thanks to a correction of

Results by Segment

the extremely strong yen.

Japan

In the electronics components industry, in which the

The smartphone market expanded globally, which pushed

Group operates, demand for products for smartphones andup the sales of multifunction products, although sales oftablet devices was firm, while demand for display products

rigid board materials decreased due to the slowdown of themainly for PCs and TVs was weak.

domestic electronics market, mainly the TV market.

Net sales

As a result, net sales amounted to ¥13,065 million (upIn the PWB (printed wiring board) materials market, although

10.8% year on year), with segment profit at ¥1,686 million

the sales of the products for PCs and AV items decreased,(up 70.3% year on year).

sales of products for cars and amusement were robust.

China (including Hong Kong)

Sales volumes were almost in line with the previous fiscal

Although sales of lower-priced rigid board materials wereyear, and sales unit prices rose due to the strong sales offavorable, sales of FPD materials were sluggish.

multifunction products. As a result, net sales of PWB materials were ¥27,998 million (up 4.7% year on year).
Sales of flat panel display (FPD) materials, mainly consisting of PDP materials, dropped to ¥7,316 million (down
40.6% year on year), owing to lower sales volume and a fallin unit prices driven by a significant drop in the market priceof silver, which constitutes one of the products’ raw materials.
As a result, consolidated net sales for the year underreview amounted to ¥36,184 million (down 9.1% year onyear).
Gross profit and operating income
Gross profit increased 8.9% year on year, to ¥10,865 million,
due mainly to a 15.1% decrease in the cost of sales, to¥25,319 million. Selling, general and administrative expenses increased 9.2%, to ¥6,479 million. As a result, operating
income increased 8.6% year on year, to ¥4,386 million.
The operating income ratio increased 1.9 percentage
points, from 10.2% to 12.1%.

30 TAIYO HOLDINGS CO., LTD. Annual Report 2013

As a result, net sales amounted to ¥10,835 million (up1.9% year on year), with segment profit at ¥1,585 million(down 9.5% year on year).
TaiwanDespite a fall in sales volume, the sales mix of rigid board
materials improved.
As a result, net sales amounted to¥ 3,936 million (up6.2% year on year), with segment profit at ¥498 million (up6.0% year on year).
Korea
The sales volume of FPD materials declined substantially,
while sales were also down considerably compared with thesame period of the previous fiscal year due to a fall in theprice of silver, which has a connection with sales unit prices
of FPD materials.
As a result, net sales amounted to ¥11,723 million (down
29.7% year on year), with segment profit at ¥591 million(down 9.1% year on year).

OtherTotal equity

TAIYO INK INTERNATIONAL (SINGAPORE) performed

Total equity, after adding minority interests, was ¥36,810

steadily amid continued recovery from damage caused bymillion as of March 31, 2013, a 10.0% increase from thethe floods in Thailand. At TAIYO AMERICA, sales wereprevious fiscal year-end. This was mainly due to a ¥2,072

roughly at the same level with the same period of themillion increase in foreign currency translation adjustments

previous fiscal year.

and a ¥127 million increase in minority interests.

As a result, net sales amounted to ¥2,854 million (up9.0% year on year), with segment profit at ¥324 million (upAs a result, the equity ratio increased 1.1 percentage
points, from 81.1% to 82.2%. The ROE was 9.7%.

18.7% year on year).

Analysis of Cash Flows
Analysis of Financial Position

Cash flows from operating activities
Net cash provided by operating activities for the fiscal year

Assetsincreased 219% year on year, to ¥6,109 million. The main

Current assets increased 2.3%, to ¥26,979 million. This

cash inflows were depreciation and amortization of ¥1,004

increase was mainly attributable to a ¥2,203 million increase

million and a devaluation loss of ¥67 million on investments

in cash and cash equivalents and a ¥562 million decrease inin subsidiaries. The main cash outflows were a decrease ininventories (down 13.2% year on year).

accounts payable—trade and other current liabilities of ¥919

Total property, plant and equipment rose 0.9%, to¥12,664 million.
Investments and other assets increased 246.6%, to¥4,380 million. This increase was mainly attributable to a
¥2,572 million increase in investments in unconsolidated
subsidiaries and affiliates (up 508.9% year on year).
As a result, total assets stood at ¥44,023 million at March
31, 2013, 8.2% higher than at the previous fiscal year-end.
Liabilities
Current liabilities increased 5.2%, to ¥6,725 million. This
increase was mainly due to a ¥319 million increase inincome taxes payable (up 267.9% year on year) and a ¥166
million increase in deferred tax liabilities (up 288.6% year onyear)—though there was a ¥365 million decrease in notes
and accounts payable—trade (down 7.5% year on year).
Long-term liabilities decreased 41.5% year on year, tomillion and income taxes—paid amounting to ¥1,072 million.
Cash flows from investing activities
Net cash used in investing activities for the fiscal year
amounted to ¥2,478 million, a decline of 184.5% from theprevious year. This was mainly due to ¥644 million provided
for deposits into time deposits, ¥552 million for the purchases of property, plant and equipment, and ¥2,669 million forpurchase primarily of subsidiaries and affiliates’ stock.
Cash flows from financing activities
Net cash used in financing activities for the fiscal year
decreased 22.3%, to ¥2,314 million. The main usage ofcash was for dividends paid of ¥2,290 million.
As a result, cash and cash equivalents as of March 31,
2013 stood at ¥13,767 million, ¥2,203 million higher thanat the previous fiscal year-end.

¥488 million. This was mainly due to a ¥256 million decreasein deferred tax liabilities (down 59.5% year on year) and an¥81 million decrease in liability for retirement benefits (down
26.3% year on year).

TAIYO HOLDINGS CO., LTD.

Annual Report 201331

Consolidated Forecasts for the Next Fiscal Year

Under these circumstances, the Group will continue to

Although the operating environment in the next fiscal year

strengthen its marketing capabilities, expand the proportion

ending March 31, 2014 is expected to remain uncertain,of raw materials that it procures from overseas markets,

demand for small information terminals such as smartphones

and improve productivity. At the same time, it will actively

and tablet devices and car electronics related products con-promote the development and marketing of new products

tinues to be strong in the electronics components industry inwith the ultimate goal of increasing its market share andwhich the Group operates. We also expect that the correction

expanding earnings.

of the extremely strong yen will make a positive contribution
to the Group’s earnings throughout the year.
Net sales(Millions of yen)

Operating income(Millions of yen)

Net income(Millions of yen)

Net income per share(yen)

For the fiscal year ending March 31, 2014 (Forecast)

40,000

6,800

4,700

184.76

For the fiscal year ended March 31, 2013 (Actual results)

36,184

4,386

3,368

132.38Rate of change (%)

10.5

55.0

39.5

39.6

Research and Development Expenses

2) Risks related to PDP materials

The TAIYO HOLDINGS GROUP conducts research and

Our PDP materials customers are restricted to a few panel

development activities centered on the fields of insulation

manufacturers. As we rely heavily on certain customers,

materials, conductive materials, and adhesive materials forthe performance of these customers could significantly

the fast-evolving electronics industry.

impact our own sales.

Research and development expenses for the year ended

As PDPs compete with LCDs and other technologies

March 31, 2013 totaled ¥1,199 million, ¥236 million higher

in the FPD market, the future demand of PDPs involves

than in the previous fiscal year.

uncertainty.
b. Risks associated with patents

Risk Factors
a. Technological innovation risks

In order for our Group to maintain a superior competitive
position, efforts are being made to protect the products
and technology we develop through patents and intellec-

1) Risks related to PWBs

tual property. However, in the event a patent application,

Our Group is reliant on the manufacture and sale of PWB

etc. does not result in the granting of rights or a third party

materials, and solder resist (SR) in particular, as a major

requests invalidation, insufficient protection of our rights

source of our sales. If radical technological developments,

as a Group may result. Moreover, infringing the intellectual

such as electronic parts that do not use PWBs or PWBs

property rights owned by a third party could impact thethat do not use SR, were to be widely adopted, this would

performance of our Group as a result of the payment of

result in a significant decrease in demand for our prod-royalties or large amounts of damages.

ucts.
From the viewpoint of product characteristics, operability, and economic viability, there is little possibility thatsuch technological innovations will be widely adopted in
the near future. However, the Company considers it to be
an important issue in the field of research and development to find possible new manufacturing methods for
PWBs.

32 TAIYO HOLDINGS CO., LTD. Annual Report 2013

c. Risk of major production facilities
being affected by a disaster
Our Group has manufacturing bases in Japan, Taiwan,
Korea, China, and the United States. In the event that anyof our manufacturing bases is damaged by a natural
disaster and their manufacturing functions are obstructed,
manufacturing and supply functions would be switched toanother manufacturing base as an emergency measure.

However, this would require some preparation and adjust-h. Risks related to fluctuations in product demandment and our business would be negatively affected in the Demand for our Group’s main products is influenced byinterim.
d. Risk related to procurement of raw materials The Group procures many of its raw materials from external raw material manufacturers.

electronic components market trends, which may affectthe performance of our Group.
i. Credit risks related to receivables The Group has many customers and, although we do not   Problems at these raw material manufacturers or a lackconcentrate an excessive amount of receivables on spe-of supplies that hinders the Group’s production activities

cific customers, the deterioration of the financial position

may negatively affect the performance of the Group.

of customers and the resulting bad debt may affect thee. Country-specific risks related to business deployment
overseas Our Group conducts manufacturing activities in Japan,

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

Taiwan, Korea, China, and the United States. Sales of ourmaterials have risen, which may affect the performance ofGroup’s products particularly in China, Taiwan, Korea,

our Group. The profitability of PDP materials, in particular,

ASEAN countries, and other Asian markets are expand-

may be affected due to the rising cost of silver, one of theing. Accordingly, terrorist activities, destabilization of the

key raw materials used in PDP production.

political situation, economic fluctuations, the outbreak ofearthquakes and contagion, unforeseen changes to legal,
regulatory, or tax systems, and other country-specificrisks could impact on the business strategies and performance of our Group.

k. Risk of recoverability of deferred tax assets With respect to deductible temporary differences and taxloss carryforwards, the Group determines recoverability
after reasonably estimating future taxable income whenrecording deferred tax assets. However, in the event

f. Risk of exchange rate fluctuations

deferred tax assets are deemed unrecoverable in whole or Our ratio of overseas sales to net sales is comparatively

in part as actual taxable income may differ from estimateshigh, and there are many instances when we calculate

due to changes in the business environment and otherproduct prices in foreign currencies. Accordingly, our busi­

factors, or should changes in tax rates or revisions in tax

ness performance is affected by fluctuations in exchangesystems occur in various countries, a recalculation ofrates, with a highly appreciated yen normally leading todeferred tax assets would become necessary. If, as a

reduced sales and profits.

result of the above, a reversal of deferred tax assets is

g. Risk of price fluctuations in key products PWB manufacturing is shifting to other Asian countries,

necessary, it could impact on our operating results andfinancial position.

especially China, and we are engaged in continuing pricewars with rival companies, including local companies aswell as other Japanese firms regarding SR. There is alsopressure to lower SR prices, which has resulted fromprice 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 ourGroup.

TAIYO HOLDINGS CO., LTD.

Annual Report 201333

Consolidated Balance Sheets
TAIYO HOLDINGS CO., LTD. and Consolidated Subsidiaries
March 31, 2013 and 2012

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

ASSETS

2013

2012

2013

¥13,767¥11,564$146,457

886

1,400

9,426

Notes and accounts receivable—trade (Notes 5 and 12)

8,200

8,452

87,234Inventories (Note 6)

3,686

4,248

39,213

Consumption taxes receivable

123

246

1,309

Deferred tax assets (Note 10)

93

64

989

Other current assets

330

505

3,511

Allowance for doubtful accounts (Note 12)

(106)

(98)

(1,128)26,97926,381

287,011

Land

4,179

4,084

44,457

Buildings and structures—net

6,872

6,859

73,106

Machinery, equipment, and vehicles—net

1,218

1,204

12,957

394

374

4,192

1

25

11

12,664

12,546

134,723

587

497

6,245

3,201

629

34,053

Goodwill

30

49

319

Software

156

153

1,660

Deferred tax assets (Note 10)

73

56

777

Other assets

741

766

7,882

Allowance for doubtful accounts

(408)

(374)

(4,340)

4,380

1,776

46,596¥44,023¥40,703$468,330

CURRENT ASSETS:
Cash and cash equivalents (Note 12)
Time deposits (Note 12)

Total current assets

PROPERTY, PLANT, AND EQUIPMENT (Note 7):

Tools, furniture, and fixtures—net
Construction in progress
Total property, plant, and equipment

INVESTMENTS AND OTHER ASSETS:
Investment securities (Notes 4 and 12)
Investments in unconsolidated subsidiaries and affiliates (Note 12)

Total investments and other assets
TOTAL
See notes to consolidated financial statements.

34 TAIYO HOLDINGS CO., LTD. Annual Report 2013

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

LIABILITIES AND EQUITY

2013

2012

2013

¥ 4,487¥ 4,852$ 47,734

Accounts payable—other (Note 12)

684

628

7,277

Income taxes payable (Note 12)

509

190

5,415

Accrued expenses

593

537

6,309

Deferred tax liabilities (Note 10)

254

88

2,702

Other current liabilities

198

98

2,106

6,725

6,393

71,543Liability for retirement benefits (Note 8)

227

308

2,415

Asset retirement obligations

54

53

574

Deferred tax liabilities (Note 10)

174

430

1,851

Other long-term liabilities

33

43

351

488

834

5,191

Common stock—authorized, 50,000,000 shares;
issued, 27,464,000 shares in 2013 and 2012

6,135

6,135

65,266

Capital surplus

7,102

7,102

75,553Retained earnings

30,37929,301

323,181

Treasury stock—at cost, 2,025,826 shares in 2013 and2,025,666 shares in 2012

(5,372)(5,372)(57,149)

38,244

37,166

406,851

135

78

1,436

(2,174)(4,246)(23,127)(2,039)(4,168)(21,691)

Minority interests

605

478

6,436

Total equity

36,81033,476

391,596¥44,023¥40,703$468,330

TAIYO HOLDINGS CO., LTD.

Annual Report 2013

CURRENT LIABILITIES:
Notes and accounts payable—trade (Note 12)

Total current liabilities

LONG-TERM LIABILITIES:

Total long-term liabilities
COMMITMENTS AND CONTINGENT LIABILITIES (Note 14)
EQUITY (Notes 9 and 17):
Shareholders’ equity:

Total shareholders’ equity
Accumulated other comprehensive income (loss):
Valuation difference on available-for-sale securities
Foreign currency translation adjustments
Total accumulated other comprehensive loss

TOTAL

35

Consolidated Statements of Income
TAIYO HOLDINGS CO., LTD. and Consolidated Subsidiaries
Years Ended March 31, 2013 and 2012

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

2013

2012

2013

NET SALES¥36,184¥ 39,797$384,936

COST OF SALES

25,31929,823

269,351

10,865

9,974

115,585

6,479

5,934

68,925

4,386

4,040

46,660

150

72

1,596

(2)

(3)

(21)

Foreign exchange gain (loss)—net

149

(125)

1,585

Loss on valuation of investments in unconsolidated subsidiaries
and affiliates

(67)

(421)

(713)

Loss on insurance cancellation(14)

Other—net

97

(2)

1,031

313

(479)

3,329

4,699

3,561

49,989Current

1,431

1,002

15,223

Deferred(167)

3(1,777)

1,264

1,005

13,446

3,435

2,556

36,543

67

53

713

¥ 3,368¥2,503$ 35,830

Gross profit
SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES (Note 11)
Operating income
OTHER INCOME (EXPENSES):Interest and dividend income
Interest expense

Other income (expenses)—net
INCOME BEFORE INCOME TAXES AND MINORITY INTERESTS(149)

INCOME TAXES (Note 10):

Total income taxes
NET INCOME BEFORE MINORITY INTERESTSMINORITY INTERESTS IN NET INCOME
NET INCOME

Yen

U.S. Dollars

PER SHARE OF COMMON STOCK (Notes 2.s and 16):
Basic net income
Cash dividends applicable to the year
See notes to consolidated financial statements.

36 TAIYO HOLDINGS CO., LTD. Annual Report 2013¥132.38¥98.38

$1.41

90.00

90.00

0.96

Consolidated Statements of Comprehensive Income
TAIYO HOLDINGS CO., LTD. and Consolidated Subsidiaries
Years Ended March 31, 2013 and 2012

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

NET INCOME BEFORE MINORITY INTERESTS

2013

2012

2013

¥3,435¥2,556$36,543

57

(12)

606

2,156

(22)

22,936

2,213

(34)

23,542¥5,648¥2,522$60,085¥5,497¥2,433$58,479

151

89

1,606

OTHER COMPREHENSIVE INCOME (LOSS) (Note 15):
Valuation difference on available-for-sale securities
Foreign currency translation adjustments
Total other comprehensive income (loss)
COMPREHENSIVE INCOME (Note 15)
COMPREHENSIVE INCOME ATTRIBUTABLE TO:
Owners of the parent
Minority interests
See notes to consolidated financial statements.

TAIYO HOLDINGS CO., LTD.

Annual Report 201337

Consolidated Statements of Changes in Equity
TAIYO HOLDINGS CO., LTD. and Consolidated Subsidiaries
Years Ended March 31, 2013 and 2012

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

SHAREHOLDERS’ EQUITY:
Common stock:
Balance at the end of previous year—shares issued,
2013—27,464,000 shares,
2012—27,464,000 shares
Balance at the end of current year—shares issued,
2013—27,464,000 shares,
2012—27,464,000 shares
Capital surplus:
Balance at the end of previous year
Balance at the end of current year
Retained earnings:
Balance at the end of previous year
Net income
Dividends from surplus
Balance at the end of current year
Treasury stock—at cost:
Balance at the end of previous year
2013—2,025,666 shares,
2012—2,025,546 shares
Purchase of treasury stock
2013—160 shares,
2012—120 shares
Balance at the end of current year
2013—2,025,826 shares,
2012—2,025,666 shares
TOTAL SHAREHOLDERS’ EQUITYACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS):
Valuation difference on available-for-sale securities:
Balance at the end of previous year
Changes of items during the year
Balance at the end of current year
Foreign currency translation adjustments:
Balance at the end of previous year
Changes of items during the year
Balance at the end of current year
TOTAL ACCUMULATED OTHER COMPREHENSIVE LOSSMINORITY INTERESTS:
Balance at the end of previous year
Changes of items during the year
Balance at the end of current year
TOTAL EQUITY:
Balance at the end of previous year
Net income
Dividends from surplus
Net changes of items other than shareholders’ equity
Balance at the end of current year
See notes to consolidated financial statements.

38 TAIYO HOLDINGS CO., LTD. Annual Report 2013

2013

2012

2013

¥ 6,135¥ 6,135$ 65,266¥ 6,135¥ 6,135$ 65,266¥ 7,102¥ 7,102¥ 7,102¥ 7,102$ 75,553$ 75,553¥29,301
3,368(2,290)¥30,379¥29,724
2,503(2,926)¥29,301$311,713
35,830(24,362)$323,181¥ (5,372)¥ (5,372)$ (57,149)¥ (5,372)¥38,244¥ (5,372)¥37,166$ (57,149)$406,851

¥

¥

$

¥

78
57
135

¥

90
(12)
78

$

830
606
1,436

¥ (4,246)
2,072¥ (2,174)¥ (2,039)¥ (4,188)(58)¥ (4,246)¥ (4,168)$ (45,170)
22,043$ (23,127)$ (21,691)

¥

¥

$

¥

478
127
605

¥33,476
3,368(2,290)2,256¥36,810

¥

696
(218)
478

¥34,187
2,503(2,926)(288)¥33,476

$

5,085
1,351
6,436

$356,128
35,830(24,362)
24,000$391,596

Consolidated Statements of Cash Flows
TAIYO HOLDINGS CO., LTD. and Consolidated Subsidiaries
Years Ended March 31, 2013 and 2012

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

2013

2012

2013

¥ 4,699¥ 3,561$ 49,989

Income taxes—paid(1,072)(1,591)(11,404)

Depreciation and amortization

1,004

1,046

10,681

67

421

713

1,199

285

12,755Decrease (increase) in inventories

963

(192)

10,244

Decrease in notes and accounts payable—trade

(962)

(444)

(10,234)

Increase (decrease) in other current liabilities

43

(363)

457

Increase in accrued expenses

214

80

2,277

(46)

(10)

(489)

Total adjustments

1,410

(768)

15,000Net cash provided by operating activities

6,109

2,793

64,989Payments into time deposits(2,164)(3,137)(23,021)

Proceeds from withdrawal of time deposits

2,808

2,601

29,872

Purchases of property, plant, and equipment

(552)

(494)

(5,872)

Purchase of stocks of subsidiaries and affiliates(2,669)(201)(28,394)

Purchase of software

(54)

(102)

(574)

Other—net

153

(10)

1,627

(2,478)(1,343)(26,362)

Repayments of short-term loans payable

700

1,200

7,447

Proceeds from short-term loans payable(700)(1,200)(7,447)(2,290)(2,926)(24,362)

(24)

(53)

(255)

(2,314)(2,979)(24,617)

886

(60)

9,426

NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS

2,203(1,589)23,436

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR

11,564

13,153123,021

CASH AND CASH EQUIVALENTS, END OF YEAR

¥13,767¥11,564$146,457

TAIYO HOLDINGS CO., LTD.

Annual Report 2013

OPERATING ACTIVITIES:
Income before income taxes and minority interests
Adjustments for:

Loss on valuation of investments in unconsolidated subsidiaries
and affiliates
Decrease in notes and accounts receivable—trade

Other—net

INVESTING ACTIVITIES:Net cash used in investing activities
FINANCING ACTIVITIES:Cash dividends paid
Cash dividends paid to minority shareholders
Net cash used in financing activities
FOREIGN CURRENCY TRANSLATION ADJUSTMENTS ON
CASH AND CASH EQUIVALENTS

See notes to consolidated financial statements.

39

Notes to Consolidated Financial Statements
TAIYO HOLDINGS CO., LTD. and Consolidated Subsidiaries
Year Ended March 31, 2013

1. Basis of Presenting
Consolidated
Financial Statements

The accompanying consolidated financial statements have been prepared in accordance withthe provisions set forth in the Japanese Financial Instruments and Exchange Act and its related
accounting regulations, and in conformity with accounting principles generally accepted inJapan (“Japanese GAAP”), which are different in certain respects as to application and disclosure requirements of International Financial Reporting Standards.
In preparing these consolidated financial statements, certain reclassifications and rearrangements have been made to the consolidated financial statements issued domestically in order topresent them in a form that is more familiar to readers outside Japan. In addition, certain
reclassifications have been made in the 2012 financial statements to conform to the classifications used in 2013.
The consolidated financial statements are stated in Japanese yen, the currency of the country
in which TAIYO HOLDINGS Co., Ltd. (the “Company”) is incorporated and operates. The translation of Japanese yen amounts into U.S. dollar amounts is included solely for the convenienceof readers outside Japan and has been made at the rate of ¥94 to $1, the approximate rate ofexchange at March 31, 2013. Such translation should not be construed as representations that
the Japanese yen amounts could be converted into U.S. dollars at that or any other rate.

2. Summary of
Significant
Accounting Policies

a. Consolidation
The consolidated financial statements as of March 31, 2013, include the accounts of theCompany and its eight significant (eight as of March 31, 2012) subsidiaries (together, the“Group”).
Under the control or influence concept, those companies in which the Company, directly
or indirectly, is able to exercise control over operations are fully consolidated, and thosecompanies over which the Group has the ability to exercise significant influence are accounted for by the equity method.
(Names of Consolidated Subsidiaries)
TAIYO INK MFG. CO., LTD.
TAIWAN TAIYO INK CO., LTD.
TAIYO INK CO., (KOREA) LTD.
TAIYO INK (SUZHOU) CO., LTD.
TAIYO AMERICA, INC.
TAIYO INK INTERNATIONAL (SINGAPORE) PTE LTD.
TAIYO INK INTERNATIONAL (HK) LTD.
TAIYO INK TRADING (SHENZHEN) CO., LTD.
Investments in the remaining three (three as of March 31, 2012) unconsolidated subsidiaries are stated at cost. If the equity method of accounting had been applied to the investments in these companies, the effect on the accompanying consolidated financial
statements would not be material.
The excess of the cost of an acquisition over the fair value of the net assets of theacquired subsidiary at the date of acquisition is being amortized on a straight-line basis overa period of five years.
Investment in one (none in 2012) associated company is accounted for by the equity method.
(Name of Associated Company)
ONSTATIC TECHNOLOGY CO., LTD. (“OTC”)
Since the Company acquired 25.5% of the outstanding shares of OTC, investment in this associated company is accounted for by the equity method from the year ended March 31, 2013. With
regard to the five associated companies owned by OTC, the Company does not count them in
the number of associated companies accounted for by the equity method in consideration of the

40 TAIYO HOLDINGS CO., LTD. Annual Report 2013

fact that OTC establishes one commercial distribution channel with the five companies, and they
are considered one company as a whole.
	  The excess of cost over the fair value of net assets acquired is being amortized on astraight‑line basis over a period of 20 years.
All significant intercompany balances and transactions have been eliminated in consolidation.
All material unrealized profit included in assets resulting from transactions within the Group iseliminated.
As of March 31, 2012, two of the Company’s consolidated subsidiaries closed their accounts
on December 31. To prepare the Company’s consolidated financial statements, these subsidiaries prepared a set of accounts with a closing date of March 31, and these were used forconsolidation purposes.
b. Unification of Accounting Policies Applied to Foreign Subsidiaries
for the Consolidated Financial Statements	 In May 2006, the Accounting Standards Board of Japan (“ASBJ”) issued ASBJ Practical
Issues Task Force (“PITF”) No. 18, “Practical Solution on Unification of Accounting Policies
Applied to Foreign Subsidiaries for the Consolidated Financial Statements.” PITF No. 18 prescribes (1) the accounting policies and procedures applied to a parent company and its subsidiaries for similar transactions and events under similar 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 Standards or the generally accepted accounting principles in the United States ofAmerica tentatively may be used for the consolidation process, (3) however, the following
items should be adjusted in the consolidation process so that net income is accounted for inaccordance with Japanese GAAP, unless they are not material: (a) amortization of goodwill;(b) scheduled amortization of actuarial gain or loss of pensions that has been directly recorded in the equity; (c) expensing capitalized development costs of research and development(“R&D”); (d) cancellation of the fair value model accounting for property, plant and equipment
and investment properties, and incorporation of the cost model accounting; and (e) exclusionof minority interests from net income, if included.
c. Business Combination	 In October 2003, the Business Accounting Council issued a statement of opinion,“Accounting for Business Combinations,” and in December 2005, the ASBJ issued ASBJ
Statement No. 7, “Accounting Standard for Business Divestitures” and ASBJ Guidance No.
10, “Guidance for Accounting Standard for Business Combinations and Business
Divestitures.” The accounting standard for business combinations allowed companies toapply the pooling of interests method of accounting only when certain specific criteria were
met such that the business combination was essentially regarded as a uniting of interests.
For business combinations that did not meet the uniting-of-interests criteria, the businesscombination was considered to be an acquisition and the purchase method of accounting
was required. This standard also prescribed the accounting for combinations of entities
under ­common control and for joint ventures.
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 as follows: (1) The revised
standard requires accounting for business combinations only by the purchase method. As aresult, the pooling of interests method of accounting is no longer allowed. (2) The previous
accounting standard accounts for R&D costs to be charged to income as incurred. Underthe revised standard, in process R&D acquired in a business combination is capitalized as anintangible asset. (3) The previous accounting standard provided for a bargain purchase gain
(negative goodwill) to be systematically amortized over a period not exceeding 20 years.
Under the revised standard, the acquirer recognizes the bargain purchase gain in profit orloss immediately on the acquisition date after reassessing and confirming that all of theassets acquired and all of the liabilities assumed have been identified after a review of the
TAIYO HOLDINGS CO., LTD.

Annual Report 201341

procedures used in the purchase allocation. This standard was applicable to business combinations undertaken on or after April 1, 2010. The Company adopted this standard on April
1, 2010.
d. C ash Equivalents	 Cash equivalents are short-term investments that are readily convertible into cash and thatare exposed to insignificant risk of changes in value.
Cash equivalents include time deposits, certificates of deposit, commercial paper, andbond funds, all of which mature or become due within three months of the date of acquisition.
e. Inventories	 Inventories are principally stated at the lower of cost, determined by the moving-­averagemethod, or net selling value.
f. Marketable and Investment Securities	 The Company classifies all marketable and investment securities as available-for-sale securities, which are reported at fair value, with unrealized gains and losses, net of applicabletaxes, reported in a separate component of equity.
Nonmarketable available-for-sale securities are stated at cost determined by the moving-average method. For other-than-temporary declines in fair value, investment securities
are reduced to net realizable value by a charge to income.
g. A
 llowance for Doubtful Accounts
	 The allowance for doubtful accounts is provided for at the aggregate amounts of estimatedcredit losses based on the individual financial review of doubtful or troubled accounts and ageneral reserve for other accounts based on the Company’s historical credit loss experienceof a certain past period.
 roperty, Plant, and Equipmenth. P	 Property, plant, and equipment are stated at cost.
Buildings are depreciated principally using the straight-line method, and property, plant,
and equipment other than buildings are depreciated principally using the declining-balancemethod over the estimated useful lives of the assets.
The ranges of useful lives for major categories are as follows:   Buildings and structures:   Machinery, equipment, and vehicles:   Tools, furniture, and fixtures:

From 7 to 60 years
From 4 to 10 years
From 3 to 8 years

i. Long-Lived Assets	 The Group reviews its long-lived assets for impairment whenever events or changes in circumstance indicate the carrying 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 groupexceeds the sum of the undiscounted future cash flows expected to result from the continued use and eventual disposition of the asset or asset group. The impairment loss would bemeasured as the amount by which the carrying amount of the asset exceeds its recoverable
amount, which is the higher of the discounted cash flows from the continued use and­eventual disposition of the asset or the net selling price at disposition.
j. Software	 Software for internal use is amortized by the straight-line method over the estimated usefullife of mainly five years.
k. R&D Costs
	  R&D costs are charged to income as incurred.

42 TAIYO HOLDINGS CO., LTD. Annual Report 2013l. Accrued Bonuses	 The Company and certain consolidated subsidiaries provide accrued bonuses for employees, directors, and corporate auditors, based on future projections for the current fiscal year.
m. Retirement and Pension Plans
	  Liabilities for retirement benefits are recorded for employees’ pension and severance­payments, based on the projected benefit obligations and fair value of plan assets at thebalance sheet date.
Prior service costs are amortized on the straight-line method over five years.
Actuarial gains (losses) are amortized on the straight-line method over five years from thefollowing year after incurrence.
Liability for directors and corporate auditors is recorded to state for the p­ ayments of theirretirement benefits based on the internal rules.
The Company, at the meeting of the board of directors held on April 22, 2010, resolved
to abolish the directors’ retirement benefits system and the agenda item regarding lumpsum payments resulting from said abolishment was approved at the 64th General Meetingof Shareholders held on June 29, 2010. These p­ ayments will be effected as retirement benefits paid at the time of retirement according to the period of service up to the abolishmentof the system.
n. Asset Retirement Obligations	 In March 2008, the ASBJ published the accounting standard for asset retirement obligations,
ASBJ Statement No. 18, “Accounting Standard for Asset Retirement Obligations” and ASBJ
Guidance No. 21, “Guidance on Accounting Standard for Asset Retirement Obligations.”
Under these accounting standards, an asset retirement obligation is defined as a legal obligation imposed either by law or contract that results from the acquisition, construction,
development, and the normal operation of a tangible fixed asset, and is associated with theretirement of such tangible fixed asset. The asset retirement obligation is recognized as thesum of the discounted cash flows required for the future asset retirement and is recorded in
the period in which the obligation is incurred if a reasonable estimate can be made. If a reasonable estimate of the asset retirement obligation cannot be made in the period the asset
retirement obligation is incurred, the liability should be recognized when a reasonable estimate of asset retirement obligation can be made. Upon initial recognition of a liability for an
asset retirement obligation, an asset retirement cost is capitalized by increasing the carrying
amount of the related fixed asset by the amount of the liability. The asset retirement cost is
subsequently allocated to expense through depreciation over the remaining useful life of theasset. 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 increase or a decrease in the carrying amount of the liability and the­capitalized amount of the related asset retirement cost.
o. Income Taxes	 The provision for income taxes is computed based on the pretax income included in the consolidated statement of income. The asset and liability approach is used to recognize deferred
tax assets and liabilities for the expected future tax consequences of temporary differences
between the carrying amounts and the tax bases of assets and liabilities. Deferred taxes aremeasured by applying currently enacted tax laws 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.
p. 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 balance sheet date.
The foreign exchange gains and losses from translation are recognized in the consolidated
statement of income.
TAIYO HOLDINGS CO., LTD.

Annual Report 201343

q. Foreign Currency Financial Statements	 The balance sheet accounts of the consolidated foreign subsidiaries are translated into
Japanese yen at the current exchange rates as of the balance sheet date, except for equity,which is translated at the historical exchange rates. Differences arising from such translation
were shown as “Foreign currency translation adjustments” under accumulated other comprehensive income in a separate component of equity. Revenue and expense accounts ofconsolidated foreign subsidiaries are translated into Japanese yen at the average exchange
rates.
r. Derivative Financial Instruments	 The Group uses derivative financial instruments to manage its exposures to fluctuations inforeign exchange. Foreign exchange forward contracts are utilized by the Group to reduce
foreign currency exchange risks.
The Group does not enter into derivatives for trading or speculative purposes.
All derivatives are recognized as either assets or liabilities and measured at fair value, andgains or losses on derivative transactions are recognized in the c­ onsolidated statement ofincome.
s. P
 er Share Information
	 Basic net income per share is computed by dividing net income available to c
­ ommon shareholders by the weighted-average number of common shares o­ utstanding for the period.
Diluted net income per share is not disclosed because it is antidilutive.
Cash dividends per share presented in the accompanying consolidated ­statement ofincome are dividends applicable to the respective years, including ­dividends to be paid after
the end of the year.
t. Accounting Changes and Error Corrections	 In December 2009, the ASBJ issued ASBJ Statement No. 24, “Accounting Standard for
Accounting Changes and Error Corrections” and ASBJ Guidance No. 24, “Guidance on
Accounting Standard for Accounting Changes and Error Corrections.” Accounting treatments under this standard and guidance are as f­ollows: (1) Changes in Accounting
Policies—When a new accounting policy is applied with revision of accounting standards,
the new policy is applied retro­spectively, unless the revised accounting standards include
specific transitional ­provisions. When the revised accounting standards include specific transitional ­provisions, an entity shall comply with the specific transitional provisions. (2) Changes
in Presentations—When the presentation of financial statements is changed, prior period
financial statements are reclassified in accordance with the new presentation. (3) Changes in
Accounting Estimates—A change in an accounting estimate is accounted for in the period of
the change if the change affects that period only, and is accounted for prospectively if thechange affects both the period of the change and future periods. (4) Corrections of PriorPeriod Errors—When an error in prior-period financial statements is discovered, those statements are restated. This accounting standard and the guidance are applicable to accountingchanges and corrections of prior-period errors, which are made from the beginning of the­fiscal year that begins on or after April 1, 2011.
u. Accounting Standard Issued but Not Yet Adopted
	 On May 17, 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 Standard for Retirement Benefits that
had been issued by the Business Accounting Council in 1998 with an effective date of April
1, 2000, and the other related practical guidances, being followed by partial amendmentsfrom time to time through 2009.

44 TAIYO HOLDINGS CO., LTD. Annual Report 2013

Major changes are as follows:(1) Overview(a) Treatment in the consolidated balance sheet
Under the current requirements, actuarial gains (losses) and prior service costs that are yet tobe recognized in profit or loss are not recognized in the balance sheet, and the difference
between projected benefit obligations and plan assets (hereinafter, “deficit or surplus”),
adjusted by such unrecognized amounts, is recognized as a liability or asset.
Under the revised accounting standard, actuarial gains (losses) and prior service costs thatare yet to be recognized in profit or loss shall be recognized within equity (accumulated othercomprehensive income (loss)), after adjusting for tax effects, and the deficit or surplus shallbe recognized as a liability (liability for retirement benefits) or asset (asset for retirement
benefits).
(b) Treatment in the consolidated statement of income and the consolidated statement ofcomprehensive income (loss)
The revised accounting standard would not change how to recognize actuarial gains (losses)
and prior service costs in profit or loss. Those amounts would be recognized in profit or loss
over a certain period no longer than the expected average remaining working lives of theemployees. However, actuarial gains (losses) and prior service costs that arose in the current
period and yet to be recognized in profit or loss shall be included in other comprehensive
income (loss) and actuarial gains (losses) and prior service costs that were recognized inother comprehensive income (loss) in prior periods and then recognized in profit or loss inthe current period shall be treated as reclassification adjustments.
(2) Expected application date
The Group expects to apply this accounting standard and the guidance from the end of the
fiscal year beginning on or after April 1, 2013.
(3) Effects of the application of the standard and the guidance
Effects on the consolidated financial statements are currently under review.

3. Accounting Change

Change in Depreciation Method
Due to the corporation tax reform, effective from April 1, 2012, the Company and its domestic
consolidated subsidiaries changed their depreciation method for property, plant, and equipment acquired on and after April 1, 2012, in accordance with the revised corporation tax law.
The effects of this change were immaterial.

4. Marketable andInvestment Securities

Marketable and investment securities at March 31, 2013 and 2012, consisted of the following:
Millions of Yen

Thousands of
U.S. Dollars

2013

2012

2013

¥574
1

¥484
1

$6,106
11

¥575

¥485

$6,117

Noncurrent:
Marketable equity securities
Government and corporate bonds
Total

TAIYO HOLDINGS CO., LTD.

Annual Report 201345

The costs and aggregate fair values of marketable and investment securities at March 31,
2013 and 2012, were as follows:
Millions of Yen
Cost

Unrealized
Gains

Unrealized
LossesFair
Value

Equity securities

¥365

¥216

¥7

¥574

Debt securities

1

March 31, 2013

Securities classified as available-for-sale:
1
¥7

¥575

Cost

Unrealized
Gains

Unrealized
LossesFair
Value

Equity securities

¥364

¥130

¥10

¥484

Debt securities

1

Total

¥366

¥216
Millions of Yen

March 31, 2012

Securities classified as available-for-sale:

Total

1

¥365

¥130

¥10

¥485

Thousands of U.S. Dollars
Cost

Unrealized
Gains

Unrealized
LossesFair
Value

Equity securities$3,883$2,298$75$6,106

Debt securities

11

March 31, 2013

Securities classified as available-for-sale:

Total

11

$3,894$2,298$75$6,117Available-for-sale securities whose fair values are not readily determined at March 31, 2013
and 2012, were as follows:
Millions of Yen

Available-for-sale—equity securities

Thousands of
U.S. Dollars

2013

2012

2013

¥12

¥12

$128

The Group did not sell available-for-sale securities during the years ended March 31, 2013
and 2012.

5. Notes Maturing on
March 31, 2013 and2012

Notes that were to mature at the balance sheet date were accounted for at the date of actual
settlement. The end of the years ended March 31, 2013 and 2012, coincided with a bankholiday, and the following notes maturing on March 31, 2013 and 2012, were included in the
consolidated balance sheets at March 31, 2013 and 2012:
Millions of Yen

Notes receivable—trade

46 TAIYO HOLDINGS CO., LTD. Annual Report 2013

Thousands of
U.S. Dollars

2013

2012

2013

¥125

¥108

$1,3306. Inventories

Inventories at March 31, 2013 and 2012, consisted of the following:
Millions of Yen

Thousands of
U.S. Dollars

2013

2012

2013

Merchandise and finished products
Work in process
Raw materials and supplies¥1,816196
1,674¥2,155
199
1,894$19,319
2,085
17,809Total¥3,686¥4,248$39,213

7. Property, Plant, andEquipment

Accumulated depreciation at March 31, 2013 and 2012, was ¥18,894 million ($201,000 thousand) and ¥17,459 million, respectively.

8. Retirement andPension Plans

The Company has non-contributory-funded defined benefit plans based on the point systemand defined contribution plans. Certain overseas consolidated subsidiaries have defined contribution plans and other types of plans.
The liability for retirement benefits at March 31, 2013 and 2012, for directors and corporate
auditors is ¥10 million ($106 thousand) and ¥104 million, respectively. The retirement benefits
for directors and corporate auditors are paid subject to the approval of the shareholders.
The liability for retirement benefits for employees at March 31, 2013 and 2012, consisted of
the following:
Millions of Yen

Projected benefit obligations
Fair value of plan assets
Unfunded retirement benefit obligations
Unrecognized actuarial losses
Unrecognized prior service costs
Liability for retirement benefits

Thousands of
U.S. Dollars

2013

2012

2013

¥(2,541)
2,271¥(2,396)
2,094$(27,032)
24,160

(270)
43
10

(302)
77
21

(2,872)457
106¥ (217)¥ (204)$ (2,309)

The components of net periodic benefit costs for the years ended March 31, 2013 and2012, are as follows:
Millions of Yen

Thousands of
U.S. Dollars

2013

2012

2013

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

¥158
42
(29)
17
10

¥142
54
(27)
(22)
10

$1,681
447
(309)
181
106

Net periodic benefit costs

¥198

¥157

$2,106

In addition to the costs shown in the preceding table, other expenses for the defined contribution plans of the Company and certain overseas consolidated subsidiaries amounted to¥27 million ($287 thousand) and ¥24 million for the years ended March 31, 2013 and 2012,
respectively.

TAIYO HOLDINGS CO., LTD.

Annual Report 201347

Assumptions used for the years ended March 31, 2013 and 2012, are as follows:
Discount rate
Expected rate of return on plan assets
Amortization period of actuarial (gains) losses
Amortization period of prior service costs

9. Equity

2013

2012

1.2%
1.0%
Mainly 5 years
Mainly 5 years

1.2%
1.0%
Mainly 5 years
Mainly 5 years

Japanese companies are subject to the Companies Act of Japan (the “Companies Act”). The
significant provisions in the Companies Act that affect financial and accounting matters are
summarized below:
a. Dividends
Under the Companies Act, companies can pay dividends at any time during the fiscal year in
addition to the year-end dividend upon resolution at the shareholders meeting. For companies
that meet certain criteria such as (1) having the board of directors, (2) having independent
auditors, (3) having a board of corporate auditors, and (4) the term of service of the directors
is prescribed as one year rather than two years of normal 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.
The Companies Act permits companies to distribute dividends in kind (noncash assets) toshareholders subject to a certain limitation and additional requirements.
Semiannual interim dividends may also be paid once a year upon resolution by the boardof directors, if the articles of incorporation of the Company so stipulate. The Companies
Act provides certain limitations on the amounts available for dividends or the purchase oftreasury stock. The limitation is defined as the amount available for distribution to the shareholders, 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 appropriatedas a legal reserve (a component of retained earnings) or as additional paid-in capital (a component of capital surplus) depending on the equity account that was charged upon the paymentof such dividends until the total of aggregate amount of legal reserve and additional paid-in
capital equals 25% of the common stock.
Under the Companies Act, the total amount of additional paid-in capital and legal reserve
may be reversed without limitation.
The Companies Act also provides that common stock, legal reserve, additional paid-in
capital, other capital surplus, and retained earnings can be transferred among the accounts
under certain conditions upon resolution of the shareholders.
c. Treasury Stock and Treasury Stock Acquisition Rights
The Companies Act also provides for companies to purchase treasury stock and dispose ofsuch treasury stock by resolution of the board of directors. The amount of treasury stock
purchased cannot exceed the amount available for distribution to the shareholders, which isdetermined by specific formula.
Under the Companies Act, stock acquisition rights are presented as a separate component of equity.
The Companies Act also provides that companies can purchase both treasury stockacquisition rights and treasury stock. Such treasury stock acquisition rights are presented asa separate component of equity or deducted directly from stock acquisition rights.

48 TAIYO HOLDINGS CO., LTD. Annual Report 2013

10. Income Taxes

The Company and its domestic subsidiaries are subject to Japanese national and local income
taxes, which, in the aggregate, resulted in a normal effective statutory tax rate of approximately
38% and 41% for the years ended March 31, 2013 and 2012, respectively.
The tax effects of significant temporary differences, which resulted in deferred tax assets andliabilities at March 31, 2013 and 2012, are as follows:
Thousands of
U.S. Dollars

Millions of Yen
2013

2012

2013

Retirement benefits

¥ 114

¥ 124

$ 1,213

Unrealized profit

107

73

1,138

Deduction of foreign corporation tax carried forward

67

467

713

Allowance for doubtful accounts

61

65

649

Accrued expenses

106

86

1,128

Loss on valuation of investments in unconsolidated
subsidiaries and affiliates
Other

182
260

159
161

1,936
2,765

Total deferred tax assets
Less valuation allowance

897
(185)

1,135
(528)

9,542
(1,968)

712

607

7,574

(719)
(82)
(74)

(797)
(81)
(42)

(7,649)
(872)
(787)

Deferred tax assets:

Total deferred tax assets, net of valuation allowance
Deferred tax liabilities:
Undistributed earnings of associated companies
Reserve for technique and development
Valuation difference on available-for-sale securities
Other
Total deferred tax liabilities
Net deferred tax assets

(99)

(85)

(1,053)(974)(1,005)(10,361)¥(262)¥ (398)$(2,787)

Reconciliation between the normal effective statutory tax rates and the actual effective tax
rates reflected in the accompanying consolidated statements of income for the years ended
March 31, 2013 and 2012, is as follows:

11. R&D Costs

2013

2012

Normal effective statutory tax rate
Tax rates difference relating to overseas subsidiaries
Elimination of dividend income
Deduction of foreign corporation tax carried forward

37.87%(13.46)1.50(1.02)

40.54%(19.53)1.96(2.06)

Undistributed earnings of associated companies
Nondeductible withholding income tax of dividends
Tax exemption for experiments and research expenses and other
Valuation allowance
Other(1.79)
6.44(2.33)(1.36)
1.05(0.49)
6.28(1.81)
1.97
1.38

Actual effective tax rate

26.90%

28.24%

R&D costs charged to income for the years ended March 31, 2013 and 2012, were ¥1,199
million ($12,755 thousand) and ¥963 million, respectively.

TAIYO HOLDINGS CO., LTD.

Annual Report 201349

(1) Summary of Financial Instruments Status
12. Financial
a. Group policy for financial instruments
Instruments and	 
The Group’s policy is to fund operations internally wherever possible. With large-scale capital
Related Disclosuresprojects, the Group borrows funds from banks or arranges other types of funding, dependingon market conditions.
Short-term surplus funds are managed conservatively using only financial instruments thatprovide 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.
b. Nature and extent of risks arising from financial instruments	 Operating receivables, such as trade notes and trade accounts, are exposed to credit risks
relating to the Group’s customers. Operating receivables denominated in foreign currencies
that arise in the course of conducting overseas business are exposed additionally to
exchange rate fluctuation risk.
Marketable and investment securities mainly comprise bonds and investments in theshares of affiliated business partners. These investments are exposed to the risk of fluctuations in market prices.
Operating liabilities, such as notes and accounts payable—trade, typically have payment
due dates within four months. The Group also has some foreign currency-denominated liabilities of this kind that are exposed to exchange rate fluctuation risk.
Foreign exchange forward contracts are used to hedge the exchange rate fluctuation risk
associated with foreign currency-denominated operating assets.
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 assets­regularly, in line with internal regulations governing the management of credit limits and tradereceivables. Besides managing due dates and outstanding balances by counterparty, theCompany also aims to identify as early as possible and alleviate any concerns about non­payment caused by deterioration in financial condition or other factors.
Consolidated Group 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 tobe minimal.
The Group only enters into derivative contracts with highly rated financial institutions as
counterparties. The associated credit risk is regarded as negligible.
Management of Market Risk (Relating to Fluctuations in Exchange Rates, Interest Rates,etc.)
To manage the currency fluctuation risk associated with foreign currency-denominated operating assets and liabilities, the Company and certain consolidated Group subsidiaries assess
related exposures for each currency on a monthly 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 andthe relationships with relevant business partners.
With respect to the management of derivatives, the internal party responsible for the­transaction must gain the 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 derivatives transactions
are reported to the board of directors p­ eriodically.

50 TAIYO HOLDINGS CO., LTD. Annual Report 2013

Management of Liquidity Risks Associated with Fund Procurement (Relating to Risk ofNonpayment by Due Date)
Appropriate operational funding plans are created and approved for all Group firms. The Groupmanages any related liquidity risks and ensures that cash on hand is maintained at adequatelevels.
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 case of unquoted instruments. Estimated values can vary depending on theassumptions employed for the various factor variables used in such calculations.
(2) Fair Value of Financial Instruments
Carrying amount, fair value, and unrealized gain (loss) at March 31, 2013 and 2012, were as
follows:
Financial instruments whose fair values are difficult to measure are excluded from the tablebelow.
Millions of Yen
March 31, 2013

Carrying
AmountFair
Value(1) Cash and cash equivalents¥13,767¥13,767886

886(2) Time deposits(3) Notes and accounts receivable—trade

8,200

Less allowance for doubtful receivables

(106)
8,094

8,094

575

575

4,487

4,487

(6) Accounts payable—other

684

684

(7) Income taxes payable

509

509

(8) Derivatives—net

83

83¥11,564¥11,564(2) Time deposits

1,400

1,400

(3) Notes and accounts receivable—trade

8,452(4) Investment securities(5) Notes and accounts payable—trade

Unrealized
Gain (Loss)

March 31, 2012

(1) Cash and cash equivalents

Less allowance for doubtful receivables

(98)
8,354

(4) Investment securities

8,354

485

485

4,852

4,852

(6) Accounts payable—other

628

628

(7) Income taxes payable

190

190

(8) Derivatives—net

5454(5) Notes and accounts payable—trade

TAIYO HOLDINGS CO., LTD.

Annual Report 2013

51

Thousands of U.S. Dollars
Carrying
AmountFair
Value$146,457$146,457(2) Time deposits

9,426

9,426

(3) Notes and accounts receivable—trade87,234

March 31, 2013

(1) Cash and cash equivalents

Less allowance for doubtful receivables

Unrealized
Gain (Loss)(1,128)
86,106

86,106(4) Investment securities

6,117

6,117

(5) Notes and accounts payable—trade47,73447,734(6) Accounts payable—other

7,277

7,277

(7) Income taxes payable

5,415

5,415

883

883

(8) Derivatives—net

The amount of allowance for doubtful receivables is deducted from receivables.
Notes: 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 value of cash and deposit, and receivables approximate carrying values due to the short maturity ofthese instruments.
(4) Investment securities
The fair values of investment securities are measured at the quoted market price of the stock exchange for theequity instruments, and at the quoted price obtained from the financial institution for certain debt instruments.
Fair value information of the fair value for the investment securities by classification is included in Note 4.
(5) Notes and accounts payable—trade, (6) Accounts payable—other, and (7) Income taxes payable
The fair value of the above approximates carrying values due to the short maturity of these instruments.
(8) Derivatives
Please see Note 13.
2. Carrying amounts of financial instruments whose fair values cannot be reliably determined
Thousands of
U.S. Dollars

Millions of Yen

Investment securities—unlisted securities

2013

2012

12

¥ 12

$

2,702

130

28,744

499

499

5,309

¥

2013

128

Investments in unconsolidated subsidiaries:
Unlisted securities
Investment in partnership

3. Maturity analysis for financial assets and securities with contractual maturities

Millions of Yen

March 31, 2013

Due inOne Yearor Less

Cash and cash equivalents¥13,767

Time deposits
Notes and accounts receivable—trade

Due after One
Year throughFive Years

886
8,200
¥1

Government and corporate bonds

Thousands of
U.S. Dollars

March 31, 2013

Due inOne Yearor Less

Cash and cash equivalents$146,457

Time deposits
Notes and accounts receivable—trade
Government and corporate bonds

52 TAIYO HOLDINGS CO., LTD. Annual Report 2013

Due after One
Year throughFive Years

9,426
87,234$11

13. Derivative Financial
Instruments

Derivative transactions to which hedge accounting is not applied at March 31, 2013 and 2012,were as follows:
Millions of Yen

March 31, 2013

Contract
AmountContract
Amount Dueafter One Year

Fair
Value

Unrealized(Loss) Gain

¥3,113

¥(86)

¥(86)

282

3

3

¥2,836

¥(63)

¥(63)

930

9

9

Foreign exchange forward contracts:
Selling U.S. dollar
Buying yen
March 31, 2012

Foreign exchange forward contracts:
Selling U.S. dollar
Buying yen

Thousands of U.S. Dollars

March 31, 2013

Contract
AmountContract
Amount Dueafter One Year

Fair
Value

Unrealized(Loss) Gain

$33,117$(915)$(915)

3,000

32

32

Foreign exchange forward contracts:
Selling U.S. dollar
Buying yen

14. Contingent
Liabilities

At March 31, 2013 and 2012, the Group had the following contingent liabilities:
Millions of Yen

Export bill discount

15. Comprehensive
IncomeThousands of
U.S. Dollars

2013

2012

2013

¥26

¥21

$277

Components of other comprehensive income for the years ended March 31, 2013 and 2012,were as follows:
Millions of Yen

Thousands of
U.S. Dollars

2013

2012

2013

¥

89

¥(31)

(32)

19

(341)

57

(12)

606

Gain (loss) arising during the year

2,156

(22)

22,936

Total other comprehensive income (loss)¥2,213¥(34)$23,542

Valuation differences on available-for-sale securities:(Loss) gain arising during the year
Income tax effect$947

Foreign currency translation adjustments—

TAIYO HOLDINGS CO., LTD.

Annual Report 201353

16. Net Income
Per Share

Reconciliation of the differences between basic and diluted net income per share (“EPS”) for
the years ended March 31, 2013 and 2012 was as follows:
Millionsof YenThousandsof Shares

Year Ended March 31, 2013

Net
IncomeWeighted-Average
SharesBasic EPS—Net income available
to common shareholders¥3,36825,438¥132.38¥2,50325,438¥98.38Yen

U.S. Dollars
EPS

$1.41

Year Ended March 31, 2012

Basic EPS—Net income available
to common shareholders

Diluted net income per share is not disclosed because there are no dilutive securities.

17. Subsequent Event(1) Dividends
The following appropriation of retained earnings at March 31, 2013, was approved at theCompany’s shareholders meeting held on June 26, 2013:

Year-end cash dividends, ¥45 ($0.48) per share

Millions of Yen

Thousands of
U.S. Dollars¥1,145$12,181(2) Loan Agreements
At the board of directors’ meeting held on May 13, 2013, the Company resolved to borrow
long-term funds and the loans were executed as follows:(a) Purpose of the funds
Additional acquisition of shares of ONSTATIC TECHNOLOGY CO., LTD. (“OTC”)(b) Lenders
Sumitomo Mitsui Banking Corporation
Mizuho Bank, Ltd.
(c) Loan amount$55 million(d) Interest rate
Floating interest rate(e) Terms of repayment
Bullet repayment(f) Execution date
May 16, 2013(g) Repayment date
May 16, 2018(h) Assets pledged as collateral or loan guarantee
Not applicable(3) Acquisition of Shares of the Company in Taiwan
At the board of directors’ meeting held on May 13, 2013, the Company resolved to acquire
additional shares of OTC, an equity method associated company. Accordingly, the Company
acquired the shares on May 16, 2013.
(a) Purpose of the acquisition
The Group manufactures and distributes specialty ink for precision equipment, expanding business activities mainly in Japan, China, Taiwan, Korea, and ASEAN. In the meantime, OTC, the54 TAIYO HOLDINGS CO., LTD. Annual Report 2013

acquired company, manufactures and distributes specialty ink for precision equipment mainly
focusing on China and Taiwan.
	  The Company acquired the shares of OTC in Taiwan and made it its subsidiary, whereby theGroup expects to share and use the respective management resources effectively, providing
intensive services to meet the customers’ needs.
(b) Information of the acquired subsidiary
Company name:
ONSTATIC TECHNOLOGY CO., LTD.
Location:	7F., No. 1, Ren’ ai Rd., Yingge Dist., New Taipei City 239,
TaiwanTitle and name of the representative: President, D. S. Jiang
Business:	Production and distribution of specialty ink for precisionequipment
Capital amount:
NT$309 million(c) The principal sellers
Company Name

Location

ADVANCE MATERIALS CORPORATIONThe No. 2 of 498 Lane, Nanshan Road,
Luzhu Village, Taoyuan, Taiwan

GOO CHEMICAL CO., LTD.

58, Ijiri, Iseda-cho, Uji City, Kyoto(d) Number of the shares and the acquisition cost
Number of the shares acquired:	8,085,000 shares (25.5% of outstanding shares)
Acquisition cost:
NT$751 million(e) Shares of the Company and the sellers
Shares(Ownership of Voting Rights)

The Company

ADVANCE
MATERIALS
CORPORATIONGOO CHEMICAL
CO., LTD.

8,100,000

4,813,500

4,301,437(25.5%)(15.2%)(13.6%)

8,085,000

2,243,000

2,004,000(25.5%)(7.1%)(6.3%)

16,185,000

2,570,500

2,297,437(51.0%)(8.1%)(7.2%)

Before the acquisition
Change of the shares
After the acquisition

18. Segment Information	(1) Description of Reportable Segments
	The Group’s reportable segments are those for which separate financial information is available, and regular evaluation by the Company’s management is being performed in order todecide how resources are allocated among the Group.
The Group made the transition to the holding company system on October 1, 2010. The
business of the Group consists mainly of one activity, the manufacture and distribution ofsolder resist for PWBs, among others. Each Group company formulates comprehensive
strategies and deploys business activities, operating under a holding company system,
whereby the Company is the holding company.
The Group is composed of four reportable segments divided by geographic area, namely“Japan,” “China,” “Taiwan,” and “Korea,” based on our manufacturing and marketing system.
(2) Method of Measurement for Information for the Amounts of Sales, Profit (Loss),
Assets, Liabilities, and Other Items by Reportable Segments
	The accounting policies of each reportable segment are consistent with those ­disclosuresin Note 2, “Summary of Significant Accounting Policies.”

TAIYO HOLDINGS CO., LTD.

Annual Report 201355

(3) Information about Sales, Profit (Loss), Assets, Liabilities, and Other Items by Reportable Segments
Millions of Yen
Reportable Segments
Year Ended March 31, 2013

Japan

China

Taiwan

Korea

Total

Other

Total

Reconciliations

Consolidated

Sales:
Sales to external customers¥ 8,822 ¥10,683 ¥2,897 ¥10,986 ¥33,388 ¥2,796 ¥36,184
4,243

6,229

¥(6,229)

Total sales¥13,065 ¥10,835 ¥3,936 ¥11,723 ¥39,559 ¥2,854 ¥42,413¥(6,229)¥36,184

Segment profit¥ 1,686 ¥ 1,585 ¥ 498 ¥Intersegment sales or transfers

152

1,039

737

6,171

58

¥36,184¥ (298)¥ 4,386

7,430

8,079

4,646

7,046

27,201

1,728

28,92915,09444,023

Depreciation

193

187

150

103

633

13

646

358

1,004

Increase in property, plant, andequipment and intangible assets

165

98

91

155

509

10

519

87

606

Segment assets

591 ¥ 4,360 ¥ 324 ¥ 4,684

Other items:

Millions of Yen
Reportable Segments
Japan

Year Ended March 31, 2012

China

Taiwan

Korea

Total

Other

Total

Reconciliations

Consolidated

Sales:
Sales to external customers¥ 8,606 ¥10,543 ¥2,829 ¥15,234 ¥37,212 ¥2,585 ¥39,797

Intersegment sales or transfers

3,182

94

877

1,434

5,587

34

5,621

¥39,797¥ (5,621)

Total sales¥11,788 ¥10,637 ¥3,706 ¥16,668 ¥42,799 ¥2,619 ¥45,418¥ (5,621)¥39,797

Segment profit

¥

¥

(94)

¥ 4,040

Segment assets

990 ¥ 1,751 ¥ 470 ¥650 ¥ 3,861 ¥ 273 ¥ 4,134

8,840

8,331

4,121

6,299

27,591

1,695

29,286

11,41740,703

Depreciation

285

164

132

82

663

14

677

369

1,046

Increase in property, plant, andequipment and intangible assets

141

99

81

178

499

1

500

183

683

Other items:

Thousands of U.S. Dollars
Reportable Segments
Year Ended March 31, 2013

Japan

China

Taiwan

Korea

Total

Other

Total

Reconciliations

Consolidated

Sales:
Sales to external customers$ 93,851 $113,649 $30,819 $116,872 $355,191 $29,745 $384,936
45,138

1,617

11,053

7,841

65,649617$384,936

66,266$(66,266)

Total sales$138,989 $115,266 $41,872 $124,713 $420,840 $30,362 $451,202$(66,266)$384,936

Segment profit$ 17,936 $ 16,862 $ 5,298 $ 6,287 $ 46,383 $ 3,447 $ 49,830

Intersegment sales or transfers$ (3,170)$ 46,660

79,04385,94749,42674,957289,373

18,383

307,756

160,574

468,330

Depreciation

2,053

1,989

1,596

1,096

6,734

138

6,872

3,809

10,681

Increase in property, plant, andequipment and intangible assets

1,755

1,043

968

1,649

5,415

106

5,521

926

6,447

Segment assets
Other items:

Notes: (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 U.S. and other Asian countries.
(c) Depreciation does not include goodwill amortization.
(d) Segment profit of “Reconciliations” includes unallocated segment loss of ¥266 million ($2,830 thousand) and ¥80 million, which is mainly composed of theloss concerning the holding company in 2013 and 2012, respectively.
(e) Segment assets of “Reconciliations” include unallocated segment assets of ¥16,765 million ($178,351 thousand) and ¥13,943 million, which are mainlycomposed of the assets concerning the holding company in 2013 and 2012, respectively.

56 TAIYO HOLDINGS CO., LTD. Annual Report 2013

19. Related-Party
Disclosures	Transactions of the Company with related parties for the fiscal years ended March 31, 2013
and 2012, were as follows:
2013
Nature of related party:	Unconsolidated subsidiaryName:
TAIYO LOGISTICS CO., LTD.
Location:
Saitama, Japan
Capital amount:¥12 million ($128 thousand)Business:
Logistic subcontracting services to the Company
Ownership of voting rights:
100%
Description of transaction:
Receipt of dividend
Transaction amount:¥78 million ($830 thousand)2012
Nature of related party:
Name:
Ownership of voting rights:
Description of transaction:
Transaction amount:

Officer
Si Bum Yoo—%
Purchase of shares of subsidiaries¥201 million

Note: Valuation of stocks is based on appraisal of outside agency.

TAIYO HOLDINGS CO., LTD.

Annual Report 201357

Independent Auditor’s Report

58 TAIYO HOLDINGS CO., LTD. Annual Report 2013

Domestic and Global Network
Domestic Network
TAIYO HOLDINGS CO., LTD. Head Office2-7-1 Hazawa, Nerima-ku, Tokyo 176-8508, Japan
PHONE: 81-3-5999-1511 FAX: 81-3-5999-1501
TAIYO HOLDINGS CO., LTD. Ranzan Facility
388 Ohkura, Ranzan-machi, Hiki-gun, Saitama 355-0222, Japan
PHONE: 81-493-62-7777 FAX: 81-493-62-2330
TAIYO INK MFG. CO., LTD.
900 Hirasawa, Ranzan-machi, Hiki-gun, Saitama 355-0215, Japan
PHONE: 81-493-61-2711 FAX: 81-493-61-2701

Head Office

The Ranzan-Kitayama Facility

Global Network
Company

Voting Shares HeldBusiness Description

TAIWAN TAIYO INK CO., LTD.

99.8%

Manufacture and marketing of PWB materials

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

89.8%

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.

69.2%

Manufacture and marketing of PWB materials

GOO-AMC Corporation*1

Manufacture and marketing of PWB materials

TAIYO INK INTERNATIONAL (SINGAPORE) PTE LTD.

100.0%

Marketing of PWB materials

TAIYO INK INTERNATIONAL (HK) LTD.

100.0%

Marketing of PWB materials

TAIYO INK TRADING (SHENZHEN) CO., LTD.

100.0%

Marketing of PWB materials

TAIYO INK (THAILAND) CO., LTD.

100.0%

Technical support for PWB materials*1 GOO-AMC Corporation is a wholly owned subsidiary of Onstatic Technology Co., Ltd.

Production and Marketing Subsidiaries
TaiwanTAIWAN TAIYO INK CO., LTD.
No. 7 Ta Tung 2nd Road.
Kuan-Yin Industry Park,
Taoyuan, Taiwan, R.O.C.
PHONE: 886-3-483-3230
FAX: 886-3-483-3240
http://www.taiyoink.com.tw

Korea
TAIYO INK MFG. CO., (KOREA)
LTD.
1058-8, Singil-dong,
Danwon-gu, Ansan City,
Gyeonggi-do, Korea
PHONE: 82-31-491-9250
FAX: 82-31-491-7671
http://www.taiyoink.co.kr

China
TAIYO INK (SUZHOU) CO., LTD.
No. 26 Taishan Road, Suzhou
New District, Suzhou City,
Jiangsu, P.R. China
PHONE: 86-512-6665-5550
FAX: 86-512-6665-5011
http://www.taiyoink.com.cn

USA
TAIYO AMERICA, INC.
2675 Antler Drive, Carson City,
NV 89701, U.S.A.
PHONE: 1-775-885-9959
FAX: 1-775-885-9972
http://www.taiyo-america.com

GOO-AMC Corporation
Building No. 38, WesternIndustrial Zone, Sha-Yi Village,
Sha-Jing Town,
Shenzhen, Guangdong, China
PHONE: 86-755-8173-7288
FAX: 86-755-8173-7282

Onstatic Technology Co., Ltd.
7F., No. 1, Ren’ ai Rd., Yingge
Dist., New Taipei City 239,
Taiwan, R.O.C.
PHONE: 886-2-26777481
FAX: 886-2-26777484
http://www.otcink.com.tw/

Marketing or Technical Support Subsidiaries
Singapore
TAIYO INK INTERNATIONAL(SINGAPORE) PTE LTD.
133 New Bridge Road #09-08
Chinatown Point, Singapore
059413
PHONE: 65-6372-1141
FAX: 65-6372-1151

Hong Kong
TAIYO INK INTERNATIONAL(HK) LTD.
Room 703, 7/F, Silvercord,
Tower 2, 30 Canton Road,
Tsim Sha Tsui, Kowloon,
Hong Kong
PHONE: 852-2735-0636
FAX: 852-2375-7332

China
TAIYO INK TRADING(SHENZHEN) CO., LTD.
Rm. 1509, Office Tower,
Shun Hing Square Di Wang
Comm. Centre, 5002 Shen Nan
Dong Road, Shenzhen,
Guangdong, PRC
PHONE: 86-755-2583-4787
FAX: 86-755-8207-0989

ThailandTAIYO INK (THAILAND) CO.,LTD.
1199 Piyavan Tower, 14F/Room
14C Phaholyothin Rd,
Samsen-Nai, Phayathai,Bangkok 10400, Thailand
PHONE: 66-2-619-5670
FAX: 66-2-619-7527

TAIYO HOLDINGS CO., LTD.

Annual Report 201359

Corporate Information
Company Overview

Accessing Our Investor Information Site
An Introduction to TAIYO HOLDINGS’s Website

Name: TAIYO HOLDINGS CO., LTD.
Phone: 81-3-5999-1511

TAIYO HOLDINGS is committed to providing a fullrange of information to all stakeholders including shareholders, investors, customers, and business partners.

Established: September 29, 1953

http://www.taiyo-hd.co.jp/English/Group/index.html

Head office: 2-7-1 Hazawa, Nerima-ku, Tokyo 176-8508, Japan

Capital: ¥6,135 million
Shares authorized: 50,000,000

TAIYO HOLDINGS CO., LTD.

Total number of issued shares: 27,464,000
Stock listing: Tokyo
Number of shareholders: 7,403
Major shareholders:Shares(thousands)

Shareholding as apercentage of total
shares issued (%)

Kowa Co., Ltd.

6,554

23.86

Company’s Treasury Stock

2,025

7.37

Japan Trustee Services Bank, Ltd. (Trust. Accountre-entrusted by Sumitomo Mitsui Trust Bank,
Limited. Retirement Benefit Trust. Account reentrusted by Sumitomo Mitsui Trust Bank, Limited)

1,116

4.06

Japan Trustee Services Bank, Ltd.
(Trust Account)

1,050

3.82

The Master Trust Bank of Japan, Ltd.
(Trust Account)

873

3.18

State Street Bank and Trust Company 505223

723

2.63

SHIKOKU CHEMICALS CORPORATION

631

2.29

Toshin Yushi Co., Ltd.

538

1.96

NORTHERN TRUST COMPANY (AVFC) SUB A/C
AMERICAN CLIENTS

524

1.90

Mellon Bank, N.A. as Agent for its Client Mellon
Omnibus US Pension (Standing proxy: Mizuho
Corporate Bank, Ltd.)

516

1.87

Name

Investor Information

Stock Price and Trading Volume(Yen)(Thousands of shares)

15,0005,000

12,000

4,000

9,000

3,000

6,000

2,000

3,000

1,000

0

2009

Nikkei Stock Average (left scale)

60 TAIYO HOLDINGS CO., LTD. Annual Report 20132010
Stock Price (left scale)2011
Trading Volume (right scale)

2012

2013

0

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

Printed in Japan