TERAOKA SEISAKUSHO CO., LTD.

INTERIM REPORTThe six-month period ended September 30, 2008

TERAOKA SEISAKUSHO CO., LTD. AND CONSOLIDATED SUBSIDIARIES

Consolidated Balance Sheets
As of September 30, 2008 and 2007

Millions ofYen

Millions ofYen

Thousands of
US Dollars

2008

2007

2008

ASSETS
Current Assets:¥5,810¥4,568$56,065

7,573

7,328

73,077

Less:Allowance for doubtful accounts

(5)

(3)

(48)

Marketable securities－2,498

－

3,382

3,268

32,635

Deferred income taxes

2442492,355

Other current assets

2482192,393

Total current assets

17,252

18,127

166,477

Land

3,784

3,724

36,514

Buildings

7,314

7,321

70,578

Machinery and equipment

20,396

20,164

196,816

Construction in progress

4,275

1,011

41,25235,76932,220345,160(22,496)(21,648)(217,079)

13,273

10,572

128,081

261

397

2,518

Investments in securities

2,509

3,694

24,211

Investments in affiliate－105－

Deferred income taxes

192－

1,853

Other

265

243

2,557

2,966

4,042

28,621¥33,752¥33,138$325,697

Cash and time deposits
Notes and accounts receivable:
Trade

Inventories

Property, Plant and Equipment:

Less: Accumulated depreciation
Property, plant and equipment, net
Intangible Assets
Investments and Other Assets:

Total investments and other assets
Total assets

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

-1-

Millions ofYen

Millions ofYen

Thousands of
US Dollars

2008

2007

2008

LIABILITIES AND STOCKHOLDERS' EQUITYCurrent Liabilities:
Notes and accounts payable:
Trade
Short-term borrowings
Accrued income taxes
Accrued expenses
Other current liabilities
Total current liabilities¥4,2901,019
205
631
2,912
9,057

¥4,312
1,065
372
609
1,734
8,092

$41,397
9,833
1,978
6,089
28,10087,397Long-term Liabilities:
Retirement and severance benefits:
Employees
Deferred liabilities taxes
Negative Goodwill
Other
Total long-term liabilities
Total liabilities

2718
118
88
251
9,308

－263
8117
388
8,480

260
174
1,139
849
2,422
89,819NET ASSETSStockholders' Equity:
Common stock:
Authorized: 80,000,000 shares
Issued: 20,081,955 shares as of September 30,2008 and 2007, respectively
Additional paid-in capitalRetained earnings
Less: Treasury stock, at cost
Total stockholders' equity

3,904
3,491
16,893(0)24,2883,904
3,491
16,612(77)
23,93037,672
33,687163,013(0)234,372

Valuation and translation adjustments：
Unrealized gains on securities
Foreign currency translation adjustments
Total valuation and translation adjustments
Total net assets
Total liabilities and net assets

199
(43)
156
24,444¥33,752694
34
728
24,658¥33,138

1,921
(415)
1,506
235,878$325,697-2-TERAOKA SEISAKUSHO CO., LTD. AND CONSOLIDATED SUBSIDIARIES

Consolidated Statements of Income
For the six-month period ended September 30, 2008 and 2007

Millions ofYen

Millions ofYen

Thousands ofUS Dollars

2008

2007

2008

Net Sales¥13,395¥12,504$129,257

Cost of Sales

10,482

9,436

101,148

2,913

3,068

28,109

2,454

2,237

23,680

459

831

4,429

Interest and dividend income

4946473

Interest expenses

(3)

(2)

(29)

Foreign exchange gains(losses), net

8(10)

77

Equity in earnings(losses) of affiliated company－6－

Loss on disposals of property, plant and equipment

(8)

(4)

(77)Loss on disposals of inventories

(12)

(4)

(116)

Gross profit
Selling, General and Administrative Expenses
Operating income
Other Income and Expenses:

Subsidiary establishment expense

－(11)

－

Loss on write-down of marketable securities

(85)

(98)

(820)

Other, net

4230405

(9)

(47)

(87)

Income Taxes

130286

1,254

Net income

¥320

¥498

$3,088Per Share of Common Stock:
Net income
Cash dividends paid

YenYen¥15.96¥24.90

$0.15

7.00

7.00

0.07

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

-3-US Dollars

TERAOKA SEISAKUSHO CO., LTD. AND CONSOLIDATED SUBSIDIARIES

Consolidated Statements of Stockholders' Equity
For the six-month period ended September 30, 2008 and 2007

Millions ofYen

Millions ofYen

Thousands ofUS Dollars

2008

2007

2008

Common Stock:
Balance at beginning of period¥3,904¥3,904$37,672

Issuance during the period---

Balance at end of period

3,904

3,904

37,672

Balance at beginning of period

3,491

3,491

33,687

Net change during the period

---

3,491

3,491

33,687

16,732

16,254

161,459

Sales of treasury stock(19)－(183)Cash dividends paid

(140)

(140)

(1,351)Net Income

320

498

3,088

¥16,893¥16,612$163,013

Balance at beginning of period

(98)

(76)

(946)

Net change during the period

98

(1)

946

Balance at end of period

(0)

(77)

(0)

Balance at beginning of period

395

855

3,811

Net change during the period

(196)

(161)

(1,891)

Balance at end of period

199

694

1,920

Balance at beginning of period(81)

44(782)

Net change during the period

38(10)

367

Balance at end of period(43)

34(415)Additional Paid in Capital:

Balance at end of period
Retained Earnings:
Balance at beginning of period

Balance at end of period
Treasury Stock, at cost:

Unrealized Gains on Securities:

Foreign Currency Translation Adjustments:

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

-4-

TERAOKA SEISAKUSHO CO., LTD. AND CONSOLIDATED SUBSIDIARIES

Consolidated Statements of Cash Flow
For the six-month period ended September 30, 2008 and 2007

Millions ofYen

Millions ofYen

Thousands ofUS Dollars2008

20072008

¥320

¥498

$3,088649(1)
1－85659(140)(6)
986,263
(10)
10－
820

(153)
162
(519)
(136)
352
440
760

(184)
(496)
421
50
71
473
971

(1,476)
1,563(5,008)(1,312)
3,396
4,246
7,334

Investing Activities:
Payment for purchases of property, plant and equipment
Payment for purchases of intangible assets
Payment for purchases of investment in securities
Payment for purchases of marketable securities
Proceeds from sales of marketable securities
Net cash used in investing activities

(881)
(14)
(2)
－－
(897)

(870)
(44)
(33)
(1,396)
1,398
(945)

(8,502)(135)(19)－－(8,656)

Financing Activities:
Increase(decrease) in short-term borrowings
Dividends paid
Otner, net
Net cash used in financing activities

(30)
(140)
(2)
(172)

58
(140)
(1)
(83)

(290)
(1,351)(19)(1,660)

27
(282)
6,039

(6)
(63)
4,831

261
(2,721)
58,27553¥5,810－¥4,768511$56,065

Operating Activities:
Net Income
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization
Allowance for doubtful accounts
Provision for retirement benefits
Equity in earnings (losses) of affiliated company
Loss on write-down of marketable securities
Changes in assets and liabilities:(Increase) decrease in notes and accounts receivable(Increase) decrease in inventories
Increase (decrease) in notes and accounts payable
Increase (decrease) in accrued income taxes
Other, net
Total adjustment
Net cash provided by operating activities

Effect of Exchange Rate Changes on Cash and Cash Equivalents
Net Increase (Decrease) in Cash and Cash Equivalents
Cash and Cash Equivalents at Beginning of Period
Cash and Cash Equivalents Increased Dueto Consolidation of Subsidiaries
Cash and Cash Equivalents at End of Period

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

-5-

TERAOKA SEISAKUSHO CO., LTD. AND CONSOLIDATED SUBSIDIARIES

Notes to Consolidated Financial Statements
1. The translation of Yen amounts into U.S. dollars is included solely for the convenience of readers
outside Japan, using the prevailing exchange rate at September 30, 2008, which was ¥103.63 toU.S.$1.
2. Consolidated subsidiaries and affiliate are as follows.
Consolidated subsidiaries
Teraoka Seisakusho (Shanghai) Co., Ltd.
Teraoka Seisakusho (Hong Kong) Co., Ltd.
Teraoka Seisakusho (Shenzhen) Co., Ltd.
Shin-ei Shoji Co., Ltd.
3. Contingent liabilities in respect of trade notes and export bills discounted with banks withrecourse in the ordinary course of business at September 30, 2008 and 2007, amounted to ¥69
million (US$ 665 thousand) and ¥80 million respectively.

Corporate Information(as of September 30, 2008)

Head Office

4-22, Hiromachi 1-chome
Shinagawa-ku, Tokyo 140-8711, Japan
Tel: +81-3-3491-1141
Fax: +81-3-3491-5316

FoundedFebruary 11, 1921

Paid-in Capital¥3,904 million

Shareholders

2,294

Stock Listing

Tokyo Stock Exchange, 2nd Section

Transfer Agent

Mitsubishi UFJ Trust and Banking Corporation
4-5, Marunouchi 1-chome
Chiyoda-ku, Tokyo 100-8212, Japan

Employees

560

Branch Offices

Tokyo, Osaka, Nagoya, Ohmiya, Sendai,Fukuoka

R&D CenterTokyo

Factories

Ibaraki, Sano, Ohmiya, Kannami

Websitehttp://www.teraokatape.co.jp-6-