ETIC to Provide Support to Yamagiwa Corporation
April 15th, 2011
Enterprise Turnaround Initiative Corporation of JapanThe Enterprise Turnaround Initiative Corporation of Japan (“ETIC”) has decided to provide
support to Yamagiwa Corporation under Article 25, Clause 4 of the Enterprise Turnaround
Initiative Corporation of Japan Act (Act 63, of 2009, hereafter “the ETIC Act”).
1. Name of persons or companies concerned
Yamagiwa Corporation (hereafter “Yamagiwa”)
2. Name of the financial institution jointly applying for rehabilitation support with Yamagiwa
The Bank of Tokyo-Mitsubishi UFJ, Ltd. (hereafter “BTMU”)
3. Outline of business revitalization plan
Please see appendix
4. Comments from State Ministers in charge of ETIC
Prime Minister, Minister of Internal Affairs and Communications, Minister of Finance,
Minister of Economy, Trade and Industry: No opinion expressed
Minister of Health, Labour and Welfare: “I have no objection to the decision to support
Yamagiwa. However, I ask that after reaching the decision to support, ETIC should
encourage Yamagiwa to discuss the situation with employees of the company as soon
as possible. I also ask that in advising on and guiding the implementation of thecorporate revitalization plan, ETIC should aim to ensure that Yamagiwa complies withrelated laws and regulations, and that Yamagiwa also provides adequate opportunities
for substantive discussions with the workforce with due consideration of employment
stability and other such factors.”
5. Comment from State Minister supervising business activities
Minister of Economy, Trade and Industry: “Currently, LED lighting technology is
progressing rapidly, and given the high degree of freedom available in the designand specification process, the LED lighting segment is expected to shift toward highadded-value products with superior functionality and design. Yamagiwa has an1

excellent track record in the field of lighting design, and revitalizing the company in a
way that leverages this strength also has merit as a means of guiding the direction of
growth for Japan’s LED lighting industry. For this, I hope that ETIC should guide thecompany to the steady progress in the revitalization.”
6. Debt purchase application period
From Friday, April 15th, 2011 for receipt by ETIC no later than Wednesday, June 22nd,2011
7. Request for temporary suspension
Under Article 27, Clause 1 of the ETIC Act, financial institutions have been requested not
to recover loans or exercise any other rights they may have as creditors before the end of
the debt purchase period as per item 6 above.
8. Treatment of trade and general credits
The decision by ETIC to provide support involves requesting financial support only fromthe financial institutions providing the loans to Yamagiwa. No request for support will bemade with regard to trade debt. Therefore there will be no impact on trade and generalcreditors.
9. Basis for decision to support
ETIC’s basis for deciding to provide support is as follows.
9.1 Rationale
Yamagiwa’s core business is in lighting products, where the company’s brand is widely
known as high added value lighting equipment (“brand strength”) provider. The company
also focuses on lighting for high quality architectural spaces, specializing in designing andmanufacturing to special order lighting solutions that meet the particular needs ofindividual building layouts, and highly recognized for its work in art galleries, high-end
hotels and other facilities requiring sophisticated lightings (“superior customer base”).
Based on the company’s aforementioned brand strength and sophisticated lighting
solutions, and leveraging the company’s high-end building design office and skilled design
professionals, Yamagiwa has built up a strong customer base of superior clients operating
at the leading edge of lighting quality (“superior customer base”). The brand strength,
sophisticated lighting solutions and superior customer base are intrinsic to Yamagiwa, andneed to be leveraged to help develop Japan’s lighting industry in the midst of a turning2

point for the industry worldwide.
By making use of the management resources noted above, Yamagiwa is not only sellinghigh quality lighting equipment for the high end of the market, but is also contributing to
improving the quality of Japan’s culture and lifestyle by using its design skills and productquality in medical facilities, museums, art galleries and other public institutions (“improving
culture and lifestyles”). At the same time, by promoting the development of high quality
next-generation LED products in recent years, Yamagiwa has been contributing to theadoption of pro-environment technology (“promoting green technology”).
In addition, in the context of the substantial physical, personal, and economic damages
sustained by Japan in the recent earthquake and tsunami on the Pacific northeast coast,
Yamagiwa, as part of the lighting equipment industry, can be expected to play an activerole in supporting the restorations of the affected region, which means that the decision to
support the company will contribute in some part to realizing the earliest possible recovery
from the disaster (“providing “lights” for city infrastructure and contributing to restoration”).
9.2 Role of ETICIn deciding to support Yamagiwa, ETIC’s planned role is as follows:(1) Act as a coordinator among the financial institutions involved(2) Implement a capital injection of ¥500 million(3) Guarantee 50% of a maximum of ¥500 million in new financing(4) Supply management personnel
With regard to (1) above, ETIC will reduce excessive interest-bearing debt and improve
the financial condition of Yamagiwa by requesting debt forgiveness from financial
institutional creditors. With regard to (2), ETIC will underwrite the issue of ¥500 million in
ordinary shares, thereby providing funding necessary for structural reform and other suchmatters. (The underwriting amount is the total from acquiring shares in the Continuing
Company (see attached information) and injecting capital in that company). With regard to(3), ETIC will facilitate funding procurement by guaranteeing 50% of a maximum total of¥500 million in new financing planned to be provided by BTMU and Resona Bank. With
regard to (4), ETIC will place management personnel in the Continuing Company after thecapital injection, thereby supporting the business revitalization process.

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Appendix: Outline of the Business Revitalization Plan
Section 1: Overview of the companies receiving support(all information as of December 31st, 2010 unless otherwise stated)
1.1 Name of company
Yamagiwa Corporation (hereafter “Yamagiwa”)
1.2 Head office
4-5-4 Hachobori, Chuo-ku, Tokyo
1.3 Date of establishment
December 24th, 1946
1.4 Capital¥94,233,600 (as of January 7th, 2011)
1.5 Shares
Number of shares authorized:

28,110,960 shares

Number of shares issued and outstanding:

6,282,240 shares (as ofJanuary 7th, 2011)

1.6 Main shareholders (as of March 31, 2010)
Name of Shareholder
YAMAGIWA SHOMEI ZOKEI BIJUTSUSHINKOKAI
Hyogo Konagaya
Tsuneyuki Yamagiwa
1.7 Main business

Number ofshares held
1,831,160

Percentage
of total
29.15%

1,732,180
1,042,075

27.57%
16.59%Development and sale of specialized lighting and original lighting, and importand sale of general lighting and interior products
1.8 Number of employees
264
1.9 Main facility locations

1.10

Head officeChuo-ku, Tokyo

New Tokyo showroom

Chuo-ku, Tokyo

Kinki sales division

Chuo-ku, Osaka city

Nagoya sales officeNaka-ku, Nagoya city

Fukuoka sales officeChuo-ku, Fukuoka city

Main banks
The Bank of Tokyo-Mitsubishi UFJ, Ltd.; Resona Bank, Ltd.; Mizuho Bank, Ltd.;others4

1.11 Affiliated companies
Yamagiwa International, Corp.; Yamagiwa Interior Development Corp.;
Yamagiwa Engineering Co., Ltd.; TL LABORATORY INC.; Color Kinetics
Japan Incorporated; 3 other overseas affiliate companies
1.12 Financial overview (financial results for the year ended February 28th, 2010)
Unit: ¥ million

Net sales¥14,095

Gross profit¥4,922

Operating income¥131

Ordinary income(¥385)Net income(¥2,071)

Net assets¥2,446

Total assets¥25,114

Section 2: Background and circumstances leading to request for ETIC support
Yamagiwa was an electronic materials wholesaler on establishment, after which it expanded
into lighting equipment sales. From the outset, Yamagiwa differentiated itself from major
lighting equipment manufacturers by dealing in high added value lighting equipments.
Backed by a full lineup of such quality products, the company successfully moved into retail
outlets for general customers, and at its peak had 11 retail lighting equipment storesnationwide. Yamagiwa maintained its strong differentiation from others in the business,building a strong brand and becoming widely known as a leading high-end lighting
equipment maker in Japan despite its smaller scale. It achieved this by insisting on going
beyond mere ‘illumination’ to instead provide lighting that delivered atmosphere andspectacle. Moreover, in addition to its original lighting equipment business, Yamagiwa
focused on lighting for high quality architectural spaces, specializing in designing andmanufacturing special order lighting solutions that meet the particular needs of individual
building layouts, and becoming highly recognized for its work in the art galleries, thehigh-end hotels and other facilities requiring top quality lightings (“sophisticated lighting
solutions”).
Leveraging the company’s high-end building design office and skilled design professionals,
Yamagiwa built up a strong customer base of superior clients operating at the leading edge5

of lighting quality (“superior customer base”).
However, after the collapse of Japan’s economic bubble consumer demand declined andthe retail side of the business slumped. The burden of interest-bearing debt, which had beenborrowed from the financial institutions to finance business development, placed a severe
strain on the company’s financial situation. From 2002 onwards, the company sold its
consumer electronics and software operations, sold its retail network’s real estate and took
other such steps to rapidly reduce interest-bearing debt, but the global recession following
the 2008 Lehman Shock put further pressure on consumer spending and reduced
construction activity, with the result that sales declined significantly. Further restructuring
was implemented, including merging three affiliated companies in the manufacturing division
to reduce production unit costs and procurement costs, withdrawing completely from retail
operations, and at the same time reducing staff numbers and salaries to reflect the lower
sales, but these measures were insufficient to cover the impact of the reduced scale ofoperations. Poor administrative management led to a worsening of the excessive inventory
problem, and without a clear strategy to respond to the shrinking of the business, it was
decided that the excess of interest-bearing debt in relation to revenues meant that acomprehensive business restructuring presented difficulties.
Accordingly, Yamagiwa, after discussions with main banks BTMU and Resona, resolved toapply for support from ETIC, and with the support of ETIC aim to minimize damage toenterprise value while adopting transparent, fair procedures to request support fromfinancial institutions as part of comprehensive business restructuring to maximize the valueof the company.
Section 3: Outline of business revitalization plan
(1) Business plan
A core Continuing Company (defined below) will receive the ongoing business of
Yamagiwa through a company separation (absorption separation) using the second
company method, and under the support of ETIC, the Continuing Company will be
structured to enable it to operate effectively as a business in the context of an uncertain
business environment. The core management resources and unique positioning of thecompany that were established and maintained through the development of thebusiness—namely, its superior customer base, sophisticated lighting solutions andbrand strength—will be enhanced and leveraged, and the company will be revitalized inline with the following basic policy.
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The three main points of the business revitalization plan are:
Structure the company to operate effectively in an uncertain business environment
1. Implement reform to change operating structure
Change operating structure by withdrawing from real estate operations, restructuring
affiliated companies, and undertaking other such measures necessary to enable
revitalization
2. Reform earnings and cost structure
Strengthen cost competitiveness by reducing unit costs, restructuring the domestic
logistics network, optimizing personnel numbers and reducing expenses.
Enhance and leverage management resources
3. Strengthen management and organization
Create a strong, dynamic operation by reviewing the management and organizational
structure. Implement a marketing strategy to enhance and leverage Yamagiwa’s brandand other strengths and develop a differentiated business amid a business environmentthat can be expected to change.

(2) Business restructuring
Yamagiwa will establish a new company (hereafter, the “Continuing Company”) that will
receive the lighting equipment and interior business operations of Yamagiwa through a
company separation (absorption separation) using the second company method. Afterthe company separation, Yamagiwa will be liquidated through special liquidation
proceedings.
(3) Request for financial support
Of the ¥12.2 billion owed to financial institutions by Yamagiwa, financial support ofapproximately ¥8.3 billion will be requested from financial institutions (Note: The amountof financial support is based on a calculation of the current disposal value of
non-operations-related real estate held by the companies. The final amount of financial
support will change, as the amount of loan repayment is linked to the achieved realestate disposal values.)(4) Financing
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ETIC will underwrite ¥500 million of ordinary shares issued by the Continuing Company
to fund business restructuring expenses. (The amount is the total from acquiring sharesin the Continuing Company and implementing a capital injection.) MUFG and Resona
Bank will provide the Continuing Company with new financing up to a maximum of¥500 million. ETIC will provide a credit guarantee for 50% of the actual amount offinance provided.
(5) Numerical Targets
For the fiscal year ending February 2014, forecast net sales are ¥10.9 billion, with
forecast ordinary income of ¥250 million.
Section 4. Conformance with standards for support
1. Possession of effective management resources
Yamagiwa possesses effective management resources, including a strong brand,
sophisticated lighting solutions, and a superior customer base, for its lighting productbusiness. By making use of these management resources, Yamagiwa is not only sellinghigh quality lighting equipment for the top end of the market, but is also contributing to
improving the quality of Japan’s culture and lifestyle by using its design skills and productquality in medical facilities, museums, art galleries and other public institutions (“improving
culture and lifestyles”). At the same time, by promoting the development of high quality
next-generation LED products in recent years, Yamagiwa has been contributing to theadoption of environmentally friendly technology (“promoting green technology”).
2. Excessive indebtedness
Yamagiwa carries an excessive amount compared to revenues. Financial support isessential to the revitalization of Yamagiwa.
3. Factors confirming potential for business revitalization
3.1 Agreement of main creditors
The application by Yamagiwa was made jointly with the Bank of Tokyo-Mitsubishi UFJ,
Ltd, and The Resona Bank, Ltd.
3.2 Standards for productivity improvement
The required standards for productivity improvement are expected to be met within
three years from the day of the implementation of this business revitalization plan.
3.3 Standards for financial soundness
The required standards for financial soundness are expected to be met within three
years from the day of the implementation of this business revitalization plan.
84. Comparison with liquidation value
The value of Yamagiwa’s debt on liquidation is estimated to be less than the value
available through implementation of the business revitalization plan.
5. Potential to refinance and sale of shares within three years
Implementation of the business revitalization plan is expected to significantly improve
the financial condition of Yamagiwa, enabling it to reach steady a level of cash flow, andmaking refinancing and the sale of ETIC’s shares highly possible.
6. Connection with structural oversupply
Implementation of the business revitalization plan will not increase the supply capacity of
Yamagiwa. Accordingly, the plan has been judged as ‘not hindering the resolution of
structural oversupply’ with reference to Article 19 of the Act on Special Measures for
Industrial Revitalization and Industrial Innovation.
7. Status of consultations with unions
As part of the revitalization process it is planned that a meeting with representatives ofthe labor union will be scheduled promptly after the announcement of the decision by
ETIC to provide support, and opportunities will be provided to discuss aspects of thebusiness revitalization plan including employment and working conditions.
Section 5: Responsibility of management
The responsibility of the former management team for the current predicament of Yamagiwa
will be reflected through the resignation in principle of all directors, without directors’
retirement benefits. They shall have no role in the management of the continuing businessafter the company separation
Section 6: Responsibility of shareholders
Shareholders of Yamagiwa, during the special liquidation process of the former company
after company separation, will not receive any distribution of remaining assets, and will have
all their shares cancelled.
ENDS

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