Annual Report 2011
Year ended March 31, 2011

TERAOKA SEISAKUSHO CO., LTD.

PROFILE
Since its establishment in 1921, Teraoka Seisakusho Co., Ltd. has developed into a leading manufacturer of highly functional packing, electrical insulation, electronic equipment, other industrial andgeneral home-use adhesive tapes.
Through our continued research and development, along with our dedication to our motto “To
provide high-quality products quickly and at a reasonable price,” in October of this fiscal year (2010)
we released an upgraded version of our single-coated light-resistant tape. Light-resistant tapes areused to enhance flat-screen televisions, laptop computers, tablets, and cellular phones by preventing
the excess light of LEDs, backlights and other light sources from leaking. The newly released versionof this tape has both a higher light-resistance as well as stronger adhesion to enable use on curved
surfaces. Furthermore, this environmentally friendly light-resistant tape ismanufactured without the use of halogen compounds, and has been UL
safety standards certified.
Worldwide demand for LCD products is anticipated to expand, especiallyfor tablets, and we expect that demand for our tapes will grow in step withthis expansion.

An experiment to compare light-resistance byshining light from beneath the tapes.
Light-resistant tapeUpgraded Version

Existing Products

In the newest version, the tape’s pattern did
not show through the tape.

CONTENTS
Consolidated Financial Highlights
To Our Stockholders
Review of Operations
Consolidated Five-year Summary
Financial Statements
Financial Review
Consolidated Balance Sheets
Consolidated Statements of Income
Consolidated Statements of Stockholders' Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Report of Independent Auditors
Company Data
Investor Information
10

Teraoka Seisakusho Co., Ltd.

1
2
4
6
7
8
10
12
13
14
15
21
22
24

Teraoka Seisakusho Co., Ltd. and Consolidated Subsidiaries

CONSOLIDATED FINANCIAL HIGHLIGHTS

For the years ended March 31,
Thosands of
U.S. dollars

Millions of yen

2011

2010

2011

¥23,137¥22,909$278,260

598

522

7,193

1,007

575

12,109Net Income

649

359

7,810

Total Assets

32,33032,098388,817

Net Assets

24,03523,669289,056

Operating Income to Net Sales

2.6

2.3

Equity Ratio

74.3

73.7

Return on Average Assets (ROA)

2.0

1.1

Return on Average Stockholders’ Equity (ROE)

2.7

1.5

Net Sales
Operating Income
Income before Income Taxes

Ratio (%)

Per Share

Yen

U.S. dollars

Net Income¥32.91¥17.93$0.40

Cash Dividends

10.00

7.00

0.12

The U.S. dollar amounts in this annual report are translated from yen, for convenience only,at the rate of ¥83.15 = U.S.$1, the rate prevailing on March 31, 2011.

Net Sales

Net Income (Loss)(¥ billions)

Total Assets(¥ millions)(¥ billions)
40

1,500

30

1,200
30
20
900
20
600
10
10
300

0

07

08

09

10

11

0

09
07

08

10

11

0

07

08

09

10

11

Teraoka Seisakusho Co., Ltd.

1TO OUR STOCKHOLDERS

Business Environment
We extend our deepest sympathy to all stockholders affected by the Great East Japan Earthquake of March this past year.
We would like to announce that fiscal year 2011, the period ending March 31, 2011,
marked TERAOKA’s 101st business term.
Under the severe business environment faced by the company due to protracted appreciation of the yen and the rise in cost of some raw materials, we focused our efforts on
increasing the sales of electrical insulation and electronic equipment tapes, which are ourcore products, while also expanding sales of our new products and promoting overseas
sales. At the end of September 2010, we closed our Ohmiya factory to rationalize operations
and increase productivity at every level of our organization.
Because our Ibaraki factory suffered damage during the Great East Japan Earthquakeof March 11, 2011, we were forced to book substantial restoration expenses against thecatastrophe reserve. During the reconstruction of the Ibaraki factory, we were able to shift
production of electrical-use tapes manufactured there onto other factories. This, and other
determined efforts by the company, allowed us to maintain and provide a stable supply oftape while restoring of the Ibaraki factory, which was reopened in mid-May.

Result for FY 2011
Consolidated net sales for this term increased by 1.0% to ¥23,137 million (US$278,260 thousand), while the consolidated operating income amounted to ¥598 million (US$7,193 thousand) an increase of 14.8% over the previous term. There were unexpected reconstruction
costs and disposal costs for fixed assets involved in the closing of the Ohmiya factory. There
were also restoration costs associated with the Ibaraki factory, which was affected by theGreat East Japan Earthquake. However, due to the income from the sale of the land where
the Ohmiya factory stood, the consolidated income before income taxes was ¥1,007 million (US$12,109 thousand), a 75.3% increase from the previous term, and the consolidated
net income was ¥649 million (US$7,810 thousand), an increase of 80.8% from the previous
term.
The term-end dividend was ¥5.00 (US$0.06) and the interim dividend was ¥5.00(US$0.06), totaling ¥10.00 (US$0.12) per share in dividend payouts for the term.

2

Teraoka Seisakusho Co., Ltd.

Future Focus
The Company, along with a large number of our clients, was adversely
affected by the Great East Japan Earthquake. Many companies in theelectronics, automobile, and food related industries were forced to halt
operation. Moreover, the downturn in consumer confidence and summertime electricity conservation are causing a drastic change in the surrounding business environment. Under this austere situation, TERAOKA
will continue to minimize the effect of the earthquake, and exploit
markets in developing countries where there is high demand.
Furthermore, in March of 2011, we established PT. Teraoka Seisakusho Indonesia in the Republic of Indonesia to handle integrated
manufacturing. This will allow us to focus on Asian markets such as
China and the ASEAN countries whose economies continue to growquickly, while also allowing us to lower our foreign exchange risk fromthe appreciating Yen, aide in the decentralization of our manufacturing base, andstabilize the sourcing of raw materials. This subsidiary is scheduled to begin operationin June 2012.
We will capture the demand for high-functional and high-value products in thehome electronics industry, which is expected continue expanding. We will also concentrate on maximizing corporate value by supplying products with high competitiveness and by developing cutting-edge adhesive technology.
In addition, we would like to enhance our corporate compliance and environmental responsibility by establishing an internal control system to restrict the use of hazardous substances, and treatment of industrial waste.
During these endeavors, we continue to ask for the support and patronage of ourshareholders, clients and friends.
June 24, 2011		Keishiro Teraoka,

		President

Teraoka Seisakusho Co., Ltd.

3REVIEW OF OPERATIONSIn September 2010 we closed our Ohmiya factory in order to rationalize operations and increase productivity at every levelof our organization. Meanwhile, in March 2011 we established PT. Teraoka Seisakusho Indonesia, scheduled to begin operation in June 2012, to capture the rapidly increasing international demands, especially in the Asian region, and to decentralize the manufacturing bases.
During the term, TERAOKA released a non-halogen light-resistant tape, VOC (volatile organic compounds) reduction double-coated adhesive tape and electric insulation tape, electromagnetic shielding copper foil double-coated tape,electronic film double-coated tape, an improved version of the P-Cut Tape (polyethylene cloth adhesive tape) and otherenvironmentally friendly products.
Research & development expenses for the term amounted to ¥970 million (US$11,666 thousand), accounting for 4.1%of total consolidated sales, a decrease of 4.9% over the previous period.
Consolidated net sales for the Company during this term amounted to ¥23,137 million (US$278,260 thousand). The
performance of the individual product segments is detailed below.

Packing Tapes
Sales of packing tapes faced hard times due to the downturn in domestic demand. We have attempted to market our products in other fields, but the competition from the influx of low-priced products from overseas was apparent.
As a result, consolidated sales for this product segment amounted to ¥4,430
million (US$53,277 thousand), a 3.5% decrease from the previous term. Thisdivision accounted for 19.2% of the total consolidated sales, a 0.8% decrease
from the previous term.

Electrical Insulation and Electronic Equipment Tapes
Sales of the Company’s electrical insulation and electronic equipment tapes
grew steadily during the first half of the fiscal term due to the rise in worldwide
demand for cellular phones, computers, and other digital equipment. However,owing to the adjustments in consumer spending due to the rapid appreciation of the yen, sales were lower than expected. The sales of tapes used in
automobiles increased in the first half of the term due to the tax exemption foreco-friendly cars, though it decreased in the second half. Overall, there was asubstantial rise in sales in the East Asian region. Consequently, the consolidated
net sales for this division amounted to ¥12,063 million (US$145,075 thousand),an increase of 2.3% over the previous term. This division accounted for 52.1%
of total consolidated sales, 0.6% higher than the previous term.

BREAKDOWN OF SALES BY CATEGORY

19.2% Packing Tapes
Olive cloth tapes● Kraft paper tapes●●

Polypropylene cloth/film adhesive tapes

52.1% Electrical Insulation andElectronic Equipment Tapes●●●

Polyester cloth/film adhesive tapes
Acetate cloth adhesive tapes
Combination adhesive tapes

Kapton film adhesive tapes● Nomex adhesive tapes●

RR

28.7% Other Industrial Tapes●●

Corrosion-proof tapes
Masking cloth tapes●

Surface protection tapes●

4

Double-coated adhesive tapes

Teraoka Seisakusho Co., Ltd.

●

Glass cloth adhesive tapes●

EMI/RFI shielding tapes

Other Industrial Tapes

CHANGES IN OVERSEAS SALES
Overseas Sales
Export Ratio (%)(¥ billions)

(%)
40

10

8

7.32

6

6.03

7.46
6.30

30

6.70

20
4

10
2

0

The construction industries showed continuous decline due to the slowing
down of public projects. However, the sales of P-Cut Tapes (polyethylene clothadhesive tapes) and curing tapes exceed the total sales of the previous term.
As a result, the consolidated net sales of industrial tapes amounted to ¥6,644
million (US$79,904 thousand), an increase of 1.9% over the previous term. Thisdivision accounted for 28.7% of total consolidated sales, 0.2% higher than theprevious term.

Overseas Sales
During the term, even with a sales decrease of 9.4% in packing tapes and 3.5%
in industrial tapes, electrical insulation and electronic equipment tapes marked
an increase of 13.3%, reflecting the growth in export to the Asian regions,while struggling against the appreciation of the yen. As a result, total overseas
sales amounted to ¥7,462 million (US$89,741 thousand), an 11.3% increaseover the previous term. Overseas sales accounted for 32.3% of TERAOKA’s
total consolidated sales, an increase of 3.0% over the previous term.

0

FY 2007
FY 2008
FY OF
2009 SALESFY 2010FY
2011CATEGORY
BREAKDOWN
BY

52.1% Electrical Insulation and19.2% Packing Tapes

Electronic Equipment Tapes

Olive cloth tapes● Kraft paper tapes●●●

Polypropylene cloth/film adhesive tapes●●

Polyester cloth/film adhesive tapes
Acetate cloth adhesive tapes
Combination adhesive tapes

Kapton film adhesive tapes● Nomex adhesive tapes●

RR

28.7% Other Industrial Tapes●

Double-coated adhesive tapes●

Corrosion-proof tapes
Masking cloth tapes●

Surface protection tapes●

EXPORT MARKETS●Glass cloth adhesive tapes●

EMI/RFI shielding tapes

EXPORT RATIO

Asia

93.0%

Export32.3%

North America

3.8%

Domestic

67.7%

Europe2.4%

Other areas

0.8%

Teraoka Seisakusho Co., Ltd.

5

Teraoka Seisakusho Co., Ltd. and Consolidated Subsidiaries

CONSOLIDATED FIVE-YEAR SUMMARY

Thousands of
U.S. dollars

Millions of yen

2007

2008

2009

2010

2011

2011

¥23,536¥25,945¥23,833¥22,909¥23,137$278,260

Operating Income

1,424

1,540

40

522

598

7,193

Income (Loss) before Income Taxes

2,004

1,155

(426)

575

1,007

12,109Net Income (Loss)

1,242

758

(402)

359

649

7,810

Total Assets

32,271

32,696

31,84932,09832,330388,817

Net Assets

24,472

24,343

23,416

23,66924,035

289,056

Operating Income to Net Sales

6.1

5.9

0.2

2.3

2.6

Equity Ratio

75.8

74.5

73.5

73.7

74.3

Return on Average Assets (ROA)

3.9

2.3

(1.2)

1.1

2.0

5.1

3.1

(1.7)

1.5

2.7

Years ended March 31

Net Sales

Ratio (%)

Return on Average
Stockholders' Equity (ROE)Per Share

Yen

Net Income (Loss)¥62.12¥37.93¥(20.00)¥17.93¥32.91$0.40

Cash Dividends

14.00

14.00

10.00

7.00

10.00

0.12

The U.S. dollars are translated at the rate of ¥83.15 per U.S.$1, prevailing on March 31, 2011.

6

U.S. dollars

Teraoka Seisakusho Co., Ltd.

Financial Statements

Fiscal Year 2011
Year ended March 31, 2011

Teraoka Seisakusho Co., Ltd.

7

FINANCIAL REVIEWBusiness Performance
Net Assets(¥ billions)

80

30

60
20

40

10
20

0

07 08 09 10 11

0

Net Income (Loss)
per Share (Yen)

Return on Average
AssetsSegment(ROA) (%) Information

5

60

4
40
3

2
20
1

0

09
07 08

10 11

0

Cash Dividends
per Share (Yen)
15

6

10

4

5

2

0

8

07 08 09 10 11

Teraoka Seisakusho Co., Ltd.

In comparison to the previous term, the Company’s business environment was
severe, due to protracted appreciation of the yen and the rise of prices for
Equitysome
Ratioraw materials. However, we made a concerted effort to increase sales of(%)
our core products as well as our new products, and we also promoted overseas sales. During the term, we closed our Ohmiya factory to rationalize operations and increase productivity at every level of our organization. Some of themachines in the Ibaraki factory were damaged by the Great East Japan Earthquake of March 11, 2011, and we allocated substantial restoration costs to thecatastrophe reserve.
With the contribution of the increase in exports of our core products,
electrical insulation and electronic equipment tapes to the Asian region, theconsolidated net sales for the term in review were ¥23,137 million (US$278,260
thousand), an increase of 1.0% over the previous term. Consolidated operating income was ¥598 million (US$7,193 thousand), a 14.8% increase from theprevious term. Consolidated income before income taxes was ¥1,007 million(US$12,109 thousand), a 75.3% increase from the previous term. The consoliwas ¥649 million (US$7,810 thousand), an increase of 80.8%
07 08dated
09 net10 income11
from the previous term.

0

Sales for TERAOKA’s packing tapes division remained severe, owing to a market contraction stemming from the continued stagnation of domestic demand.
We have attempted to market our products in other fields, but the accelerating
influx of low-priced products from overseas has made it challenging. Consolidated net sales for this segment were ¥4,430 million (US$53,277 thousand), a
3.5% decrease from the previous term. This division accounted for 19.2% of
total consolidated sales, 0.8% lower than the previous term.
The Company’s electrical insulation and electronic equipment tapes division saw improvement in sales in the first half of the term due to the steady increase in demand for cellular phones, computers, and other digital equipment.
However, owing to the adjustments in consumer spending due to the rapid
appreciation of the yen, sales were lower than our expectations. The sales of
09 used in automobiles also increased in the first half of the term due totapes
07 08a tax exemption
10 11
for eco-friendly cars, though sales decreased in the second
half. Overall, there was a substantial rise of sales in the East Asian region. In
Returnconsequence,on Average the consolidated net sales for this division amounted to ¥12,063
million Equity(US$145,075
Stockholders'(ROE) (%)thousand), an increase of 2.3% over the previous term.
This division accounted for 52.1% of total consolidated sales, 0.6% higher thanthe previous term.
The domestic construction industries showed continuous decline due tothe slowing down of public projects. However, the sales of P-Cut tapes (polyethylene cloth tapes) and curing tapes exceeded the total sales of the previous
term. As a result, the consolidated net sales of this division amounted to \6,644
million (US$79,904 thousand), an increase of 1.9% over the previous term. Thisdivision accounted for 28.7% of total consolidated sales, 0.2% higher than theprevious term.

09
07 08

10 11

Financial Position
Equity Ratio
(%)
80

60

40

20

10 11

0

(Loss)

07 08 09 10 11

Return on Average
Assets (ROA) (%)en)
5

Cash Flows

4

3

2

1

10 11

0

nds

09
07 08

10 11

Return on Average
Stockholders' Equity (ROE) (%)en)

Total assets at the end of the fiscal term were ¥32,330 million (US$388,817
thousand), an increase of 0.7% or ¥232 million (US$2,790 thousand). The
capital-to-asset ratio was 74.3%, up 0.6 points from the previous term.
Total current assets at the term-end amounted to ¥19,571 million(US$235,377 thousand), an increase of 11.8% or ¥2,063 million (US$24,811
thousand) when compared with the previous term-end, primarily owing to anincrease of cash deposits.
Total fixed assets decreased by 12.6%, or ¥1,831 million (US$22,020 thousand), to ¥12,759 million (US$153,440 thousand) during the term. This is dueto the decrease in physical fixed assets from the closure of the Ohmiya factory.
Total liabilities decreased 1.6%, or ¥134 million (US$1,612 thousand), to¥8,295 million (US$99,761 thousand) during the term.
Total current liabilities increased by 1.8% or ¥105 million (US$1,263 thousand), amounting to ¥6,153 million (US$74,002 thousand) at term-end, owing
to an increase of accrued income tax and other tax payments.
Total long-term liabilities decreased by 10.1% or ¥239 million (US$2,874
thousand) to ¥2,142 million (US$25,759 thousand), in part because of the decrease in long-term borrowings.
Total net assets increased by 1.5% or ¥366 million (US$4,402 thousand) to¥24,035 million (US$289,056 thousand) due to the increase in income causedby the rebound in total sales for this term.

6

4

Funds obtained through operating activities totaled ¥2,540 million (US$30,546
thousand), a decrease of 22.5% or ¥737 million (US$8,863 thousand) from theprevious term. This was due mainly to the decrease in depreciation and amortization of ¥575 million (US$6,915 thousand) from the previous term.
Funds used for investment purposes amounted to ¥774 million (US$9,303
thousand). In the previous term there was a decrease of ¥1,543 million(US$18,557 thousand), but due primarily to revenue from the sale of the
Ohmiya factory, these funds increased in the term under review.
Funds used for finance activities amounted to ¥675 million (US$8,117
thousand) during the term under review. In the previous term, we obtained¥409 million (US$4,919 thousand) through these activities. Consequently the
total amount decreased by ¥266 million (US$3,199 thousand) from the previous term. This was mainly due to the repayment of ¥500 million (US$6,013
thousand) in long-term borrowings.
Through these activities, consolidated cash and cash equivalents at theend of the term in review amounted to ¥10,021 million (US$120,519 thousand),an increase of ¥2,601 million (US$31,281 thousand) when compared with theend of the previous consolidated accounting term.

Dividends
2

10 11

0

09
07 08

10 11

TERAOKA considers the payment of dividends to its shareholders as one ofour most important business functions, and we operate under a basic policy ofcontinued stable dividend payments. After careful consideration of this term’sbusiness results, overall financial condition, cash flow, dividend propensityand future business forecasts, we have implemented a term-end dividend of¥5 (US$0.06) per share and an interim dividend of ¥5 (US$0.06) per share,amounting to an annual dividend of ¥10 (US$0.12) per share.

Teraoka Seisakusho Co., Ltd.

9

Teraoka Seisakusho Co., Ltd. and Consolidated Subsidiaries

CONSOLIDATED BALANCE SHEETSMarch 31, 2011 and 2010

Thousands of
U.S. dollars

Millions of yen

2011

2010

2011

¥ 10,021¥   7,420$ 120,519

5,888
(9)
3,079
298
294
19,571

6,447
(12)
3,205
275
173
17,50870,812(105)
37,0293,582
3,540
235,377

Less: Accumulated depreciation�����������������������������������������������������������������
Property, plant and eqipment, net��������������������������������������������������������������

3,733
8,502
22,308211
34,754(24,268)
10,486

3,861
8,992
24,130131
37,114(24,951)
12,16344,892102,244268,289
2,540
417,965(291,854)
126,111

Intangible Assets����������������������������������������������������������������������������������������

76

124

915

Investments and Other Assets:
Investments in securities (Notes 2-b and 5)������������������������������������������������
Deferred income taxes (Note 2-f)���������������������������������������������������������������
Other��������������������������������������������������������������������������������������������������������
Less: Allowance for doubtful accounts (Note 2-g)��������������������������������������
Total investments and other assets�������������������������������������������������������������

1,960
53
208
(24)
2,197

2,102
37
195
(31)
2,303

23,567
640
2,496
(289)
26,414

Total assets�����������������������������������������������������������������������������������������

¥ 32,330¥ 32,098$ 388,817

ASSETS
Current Assets:
Cash and time deposits�����������������������������������������������������������������������������
Notes and accounts receivable:
Trade�����������������������������������������������������������������������������������������������������
Less: Allowance for doubtful accounts (Note 2-g)��������������������������������������
Inventories (Note 2-c)��������������������������������������������������������������������������������
Deferred income taxes (Note 2-f)���������������������������������������������������������������
Other current assets����������������������������������������������������������������������������������
Total current assets�����������������������������������������������������������������������������

Property, Plant and Equipment (Note 2-d):Land����������������������������������������������������������������������������������������������������������
Buildings���������������������������������������������������������������������������������������������������
Machinery and equipment�������������������������������������������������������������������������
Construction in progress����������������������������������������������������������������������������

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

10

Teraoka Seisakusho Co., Ltd.

Thousands of
U.S. dollars

Millions of yen

2011

2010

2011

¥ 3,629
3
500
357
532
103
1,029
6,153

¥ 3,879
3
500
31
606
—
1,029
6,048

$ 43,647
38
6,013
4,296
6,404
1,236
12,36874,002

1,375

1,875

16,536

438
18
166
51
94
2,142

323
18
—
76
89
2,381

5,267
222
2,001
613
1,120
25,759Total liabilities�������������������������������������������������������������������������������������

8,295

8,429

99,761

NET ASSETSStockholders’ Equity:
Common stock:
Authorized: 80,000,000 shares
Issued:	20,081,955 shares as of March 31, 2011
and 2010, respectively���������������������������������������������������������
Additional paid-in capital���������������������������������������������������������������������������
Retained earnings��������������������������������������������������������������������������������������
Less: Treasury stock, at cost�����������������������������������������������������������������������
Total Stockholders’ equity�������������������������������������������������������������������

3,904
3,491
16,741(137)
23,9993,904
3,491
16,269(136)
23,52846,956
41,987201,333(1,642)
288,634

Accumulated Other Comprehensive Income:Unrealized gains on securities (Notes 2-b and 5)����������������������������������������
Foreign currency translation adjustments (Note 2-j)������������������������������������
Total accumulated other comprehensive income����������������������������������������
Total net assets�����������������������������������������������������������������������������������

252
(217)
35
24,035

284
(143)
141
23,6693,031(2,609)422
289,056

Total liabilities and net assets��������������������������������������������������������������

¥32,330¥32,098$388,817

LIABILITIES AND STOCKHOLDERS’ EQUITYCurrent Liabilities:
Notes and accounts payable:
Trade�����������������������������������������������������������������������������������������������������
Short-term borrowings������������������������������������������������������������������������������
Current portion of long-term borrowings��������������������������������������������������
Accrued income taxes��������������������������������������������������������������������������������
Accrued expenses��������������������������������������������������������������������������������������
Provision for loss on disaster (Note 2-h)�����������������������������������������������������
Other current liabilities������������������������������������������������������������������������������
Total current liabilities�������������������������������������������������������������������������
Long-term Liabilities:
Long-term borrowings�������������������������������������������������������������������������������
Retirement & severance benenfits (Notes 2-i and 6)
Employees����������������������������������������������������������������������������������������������
Deferred liabilities taxes (Note 2-f)�������������������������������������������������������������
Asset retirement obligations (Note 2-m)�����������������������������������������������������
Negative Goodwill�������������������������������������������������������������������������������������
Other��������������������������������������������������������������������������������������������������������
Total long-term liabilities���������������������������������������������������������������������

Teraoka Seisakusho Co., Ltd.

11

Teraoka Seisakusho Co., Ltd. and Consolidated Subsidiaries

CONSOLIDATED STATEMENTS OF INCOME
For the years ended March 31, 2011 and 2010

Thousands of
U.S. dollars

Millions of yen

2011¥23,137
17,597
5,540
4,942
598

2010
¥22,909
17,156
5,753
5,231
522

2011
$278,260
211,630
66,63059,437
7,193

53
(42)
(10)
43
—
(4)
(118)
16
1,106
(358)

55
(49)
—
14
(29)
(22)
(22)
—
—
—

638
(511)
(116)
519
—
(47)
(1,420)194
13,296(4,304)

(177)
(26)
(155)
81
409

—
—
—
106
53

(2,124)(309)(1,862)962
4,916

Income before income taxes�������������������������������������������������������������������

1,007

575

12,109

Income taxes:
Current�����������������������������������������������������������������������������������������������������
Deferred����������������������������������������������������������������������������������������������������
Total income taxes����������������������������������������������������������������������������������
Net income before minority interests������������������������������������������������������
Net income��������������������������������������������������������������������������������������������

374
(16)
358
649
¥   649

58
158
216
359
¥   359

4,503
(203)
4,300
7,810
$  7,810

Net Sales�����������������������������������������������������������������������������������������������������
Cost of Sales�����������������������������������������������������������������������������������������������
Gross profit��������������������������������������������������������������������������������������������
Selling, General and Administrative Expenses����������������������������������������
Operating income����������������������������������������������������������������������������������
Other Income and Expenses:
Interest and dividend income���������������������������������������������������������������������
Interest expenses���������������������������������������������������������������������������������������
Loss on valuation of investment securities��������������������������������������������������
Gain on sales of investment securities��������������������������������������������������������
Loss on sales of investment securities���������������������������������������������������������
Loss on disposal of property, plant and equipment�������������������������������������
Foreign exchange gains (losses), net����������������������������������������������������������
Gain on allotment of shares�����������������������������������������������������������������������
Gain on sales of land���������������������������������������������������������������������������������
Business structure improvement expenses��������������������������������������������������
Loss on adjustment for changes of accounting standard for
asset retirement obligations���������������������������������������������������������������������
Environmental expenses����������������������������������������������������������������������������Disaster loss�����������������������������������������������������������������������������������������������
Other, net��������������������������������������������������������������������������������������������������

Thousands of
U.S. dollars

Millions of yen

Consolidated Statement of Comprehensive Income
Net income before minority interests������������������������������������������������������
Other Comprehensive Income
Unrealized gains on securities
Foreign currency translation adjustments
Total other comprehensive income
Comprehensive Income
Total comprehensive income attributable to:
Owners of the parent
Minority interests
The accompanying notes to consolidated financial statements are an integral part of these statements.

12

Teraoka Seisakusho Co., Ltd.

2011
¥ 649

2010
—

2011
$ 7,810

(32)
(74)
(106)
544

—
—
—
—

(385)
(886)
(1,271)
6,539

544
—

—
—

6,539
—

Teraoka Seisakusho Co., Ltd. and Consolidated Subsidiaries

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
For the years ended March 31, 2011 and 2010

Thousands of
U.S. dollars

Millions of yen

2011

2010

2011

Common Stock:
Balance at beginning of year���������������������������������������������������������������������
Issuance during the year����������������������������������������������������������������������������

¥ 3,904—¥ 3,904—$ 46,956—

Balance at end of year�������������������������������������������������������������������������������

3,904

3,904

46,956

Additional Paid in Capital:
Balance at beginning of year���������������������������������������������������������������������
Net sales treasury stock�����������������������������������������������������������������������������

3,491
—

3,491
—

41,987—

Balance at end of year�������������������������������������������������������������������������������

3,491

3,491

41,987Retained Earnings:
Balance at beginning of year���������������������������������������������������������������������Net Income������������������������������������������������������������������������������������������������Cash dividends paid�����������������������������������������������������������������������������������

16,269649(177)

16,031
359(121)

195,659
7,810(2,136)

Balance at end of year�������������������������������������������������������������������������������

16,741

16,269201,333

Treasury Stock, at Cost:
Balance at beginning of year���������������������������������������������������������������������
Purchase of treasury stock�������������������������������������������������������������������������

(136)
(1)

(1)
(135)

(1,640)(2)

Balance at end of year�������������������������������������������������������������������������������

¥  (137)¥  (136)$   (1,642)

Accumulated Other Comprehensive Income (Loss):
Unrealized Gains on Securities:
Balance at beginning of year������������������������������������������������������������������
Net change during the year��������������������������������������������������������������������

284
(32)

83
201

3,415
(384)

Balance at end of year����������������������������������������������������������������������������

252

284

3,031

Foreign Currency Translation Adjustments:
Balance at beginning of year������������������������������������������������������������������
Net change during the year��������������������������������������������������������������������

(143)
(74)

(92)
(51)

(1,723)(886)

Balance at end of year����������������������������������������������������������������������������

(217)

(143)

(2,609)Yen

Per Share of Common Stock
Net income������������������������������������������������������������������������������������������������Cash dividends paid�����������������������������������������������������������������������������������

¥32.91
10.00

U.S. dollars¥17.93
7.00

$0.40
0.12

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

Teraoka Seisakusho Co., Ltd.

13

Teraoka Seisakusho Co., Ltd. and Consolidated Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWSFor the years ended March 31, 2011 and 2010

Thousands of
U.S. dollars

Millions of yen

2011

2010

2011

¥   649¥   359$  7,810

1,859
(10)
115
(16)
(1,106)
358
—
(43)
10

2,434
2
295
157
—
—
22
14
—

22,355
(126)
1,378
(203)
(13,296)
4,304
—
(519)
116

507
116
(209)
325
(15)
1,891
2,540

(1,186)
(20)
585
132
483
2,918
3,277

6,099
1,393
(2,515)
3,907(157)
22,73630,546

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

(516)
(3)
(3)
141
1,155
774

(1,636)
(28)
(3)
124
—
(1,543)(6,203)
(32)
(35)
1,695
13,878
9,303

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

(178)
3
(500)
(0)
(675)

(120)
(29)
(125)
(135)
(409)

(2,136)34(6,013)(2)(8,117)

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 Year������������������������������������Cash and Cash Equivalents at End of Year�����������������������������������������������

(38)
2,601
7,420
¥10,021

(31)
1,294
6,126
¥ 7,420(453)
31,27989,240$120,519

Additional Cash flow information
Interest paid����������������������������������������������������������������������������������������������
Income taxes paid��������������������������������������������������������������������������������������

42¥    5049¥   (74)511$    596

Operating Activities:
Net Income������������������������������������������������������������������������������������������������
Adjustments to reconcile net income to net cash provided byoperating activities:
Depreciation and amortization���������������������������������������������������������������
Allowance for doubtful accounts������������������������������������������������������������
Provision for retirement benefits�������������������������������������������������������������
Deffered income taxes���������������������������������������������������������������������������
Gain on sales of land������������������������������������������������������������������������������
Business structure improvement expenses����������������������������������������������
Loss on disposal of property, plant and equipment���������������������������������
Loss (gain) on sales of investment securities��������������������������������������������
Loss (gain) on valuation of investment 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 payable���������������������������
Other, net�������������������������������������������������������������������������������������������
Total adjustment������������������������������������������������������������������������������
Net cash provided by operating activities�����������������������������������������

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

14

Teraoka Seisakusho Co., Ltd.

Teraoka Seisakusho Co., Ltd. and Consolidated Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended March 31, 2011 and 2010

1. Basis of Presenting Financial Statements
The accompanying consolidated financial statements of
TERAOKA SEISAKUSHO CO., LTD. (the “Company”) and its
subsidiaries are prepared on the basis of accounting
principles generally accepted in Japan, which are different incertain respects as to application and disclosure requirements from International Financial Reporting Standards, andare compiled from the consolidated financial statements
prepared by the Company, as required by the Financial
Instruments and Exchange Law of Japan. However, certain
account balances, as disclosed in the basic consolidated
financial statements in Japan, have been reclassified to theextent deemed necessary to enable presentation in a form
which is more familiar to readers outside Japan.
Under accounting standards generally accepted inJapan, a consolidated statement of comprehensive income
is required from fiscal year ended March 31, 2011 and has

been presented herein. Accordingly, accumulated othercomprehensive income is presented in the consolidatedbalance sheets and the consolidated statements ofstockholders’ equity. Information with respect to othercomprehensive income for the year ended March 31, 2010is disclosed in Note 7. In addition, “net income before
minority interests” is disclosed in the consolidated statements of income from the year ended March 31, 2011.
The accounts of overseas consolidated subsidiaries are
based on their accounting records maintained in conformity with generally accepted accounting principles andpractices prevailing in the respective countries of domicile.
For the convenience of readers, the accompanying
consolidated financial statements are presented in U.S.
dollars by translating yen amounts at the rate of ¥83.15=
U.S.$1, the prevailing exchange rate on March 31, 2011.

2. Summary of Significant Accounting Policies
a. Consolidation
The accompanying consolidated financial statements
include the accounts of the Company and fivesubsidiaries, TERAOKA SEISAKUSHO (Hong Kong)CO., LTD., TERAOKA SEISAKUSHO (Shanghai) CO.,LTD., TERAOKA SEISAKUSHO (Shenzhen) CO., LTD.,
SHIN-EI SHOJI CO., LTD. and PT. TERAOKA SEISAKUSHO INDONESIA.
Significant inter-company balances, unrealizedinter-company profits and losses among the companies are entirely eliminated. The assets and liabilities of
the consolidated subsidiaries are incorporated into thefinancial statements at fair value and the difference
between net assets at fair value and investment
amounts are amortized by the straight-line method
over a period of five years.
The fiscal years of overseas subsidiaries end
December 31. Overseas subsidiaries’ financial statements are based on temporary settlement dates ofMarch 31, 2011 and 2010 and are used for the
consolidation of the Company.
b. Investments in securities
Debt securities that are intended to be held tomaturity (“held-to maturity debt securities”) aremeasured at amortized cost in the balance sheet.
Securities other than held-to maturity debt securities(“other securities”) are measured at fair value.
Other Securities that have fair values are stated atfair value, with unrealized gains and losses included in

the net assets, net of applicable income taxes. Realized
gains and losses on sales of securities are based on themoving average cost of the securities. Other securities
that do not have fair values are stated at cost determined by the moving average method.
c. Inventories
The Company mainly applies the cost method basedon the periodic average method which determines
the amount of the inventories shown on the balance
sheet by writing them down based on the decrease in
their profitability.
d. Property, plant and equipment and depreciation
Property, plant and equipment are carried at cost.
Depreciation is computed principally by the decliningbalance method at a rate based on their estimateduseful lives, which range as follow:
Buildings������������������������������������������������ 3~50 years
Machinery and equipment����������������������� 4~8 years
Depreciation of buildings, machinery and equipment of overseas subsidiaries and buildings acquired by
the Company and its domestic subsidiary on or after
April 1, 1998 is computed by the straight-line method
due to changes in Japanese income tax regulations.
e. Leased assets
Under accounting standards generally accepted inJapan, leased assets related to finance leases that do nottransfer ownership of the leased property to the lessee
are depreciated on a straight-line basis, with lease periodused as their useful lives and no residual value.
Teraoka Seisakusho Co., Ltd.

15

f. Income taxes
Income taxes are provided based on amounts requiredby the tax return for the period.
The Company has adopted the asset-liability
method of tax effect accounting to recognize deferred
tax assets and liabilities for the expected future tax
consequences of temporary differences between the
carrying amounts of assets and liabilities for financial
reporting purpose, and the amounts used for income
tax purposes.
g. Allowance for doubtful accounts
Allowance for doubtful accounts provides for possible
losses on the uncollectability of receivables at theamount of estimated uncollectability, based on pastexperience of doubtful receivables and individual
evaluation of collectability of the receivables.
h. Provision for loss on disaster
The provision for loss on disaster is provided for
payments of restoration costs on the Tohoku Earthquake at an amount estimated at the fiscal year-end.
i. Retirement and severance benefits
Employees who terminate their services with theCompany are generally entitled to lump-sum severance payments based on their current basic rates of
pay and length of service. In addition, the Company
maintains tax-qualified pension plans with insurancecompanies and trust banks. The plans entitle employees with more than 10 years of services, uponretirement, to receive either lump-sum payments or
annuity payments over 10 years.
The provision for employees’ retirement benefits
recorded in the balance sheets, less the pension plan
assets, was sufficient to satisfy the projected benefit
obligation for employees’ services up to the balance
sheet dates.
The Company’s overseas subsidiaries do not havesuch retirement benefit plan.
j. Foreign currency translation
All receivables and payables denominated in foreign
currencies at the balance sheet date are translated into
yen at current exchange rates. The resulting exchange
gains or losses are charged to income.
Balance sheets of consolidated overseas subsidiaries
are translated into yen at the year-end rates except for
stockholders’ equity accounts, which are translated at

16

Teraoka Seisakusho Co., Ltd.

the historical rates. Income statements of consolidated
overseas subsidiaries are translated at average rates.
Translation differences are presented as “foreign
currency translation adjustments” in the accompanying consolidated financial statements.
k. Derivatives and hedge accounting
Derivative financial instruments are stated at fair value
unless they are used for hedging purposes.
If derivative financial instruments are used as hedges
and meet certain hedging criteria, the Company and its
consolidated subsidiaries defer recognition of gains orlosses resulting from changes in fair value of derivative
financial instruments until the related losses or gains on
the hedged items are recognized.
However, in cases where forward foreign exchange
contracts are used as hedges and meet certain hedging
criteria, forward foreign exchange contracts and hedged
items are accounted for in the following manner:
If a forward foreign exchange contract is executedto hedge a future transaction denominated in aforeign currency, the future transaction will berecorded using the contracted forward rate, and nogains or losses on the forward foreign exchange
contract are recognized.
l. Cash and cash equivalents
Cash and cash equivalents in the consolidated
statements of cash flows include all highly liquid
investments, generally with original maturities of threemonths or less, that are readily convertible to known
amounts of cash and are so near maturity that theypresent insignificant risk of changes in value.
m. Changes in significant accounting policies:
Adoption of accounting standard for asset
retirement obligations
Effective the year ended March 31, 2011, the Company and its domestic subsidiaries have adopted“Accounting Standard for Asset Retirement Obligations” (ASBJ Statement No. 18, issued on March 31,2008) and “Guidance on Accounting Standard for
Asset Retirement Obligations” (ASBJ Guidance No. 21,
issued on March 31, 2008).
As a result of this adoption, income before income
taxes decreased by ¥177 million (U.S.$2,124 thousand) for the year ended March 31, 2011.

3. Contingent Liabilities
Contingent liabilities in respect of trade notes and export
bills discounted with banks with recourse in the ordinary

course of business, amounted to ¥13 million (US$156
thousand) and ¥43 million at March 31, 2011 and 2010.

4. Financial Instruments
Overview(1) Policy for financial instruments
The Company raises the funds by bank borrowings,
and manages funds only through short-term time
deposit and others. The Company uses derivatives forthe purposes of managing foreign currency exchange
risk related to trading receivables and payables, anddoes not enter into derivatives for speculative or
trading purposes.
(2) Types of financial instruments and related risk
Trade receivables – notes receivable and accounts
receivable – are exposed to credit risk in relation tocustomers. In addition, the Company is exposed toforeign currency exchange risk arising from receivables
denominated in foreign currencies resulting from tradewith overseas customers.
Equity securities – the Company holds equity
securities, which are mainly issued by company who
have business relationships with the Company, andthese securities are exposed to the risk of fluctuation inmarket prices. Trade payables – notes payable andaccounts payable – mostly have payment due dates
within one year. A portion of trade payables, which isdenominated in foreign currencies, is exposed toforeign currency exchange risk. Long-term debt istaken out principally for the purpose of capital
expenditure. Long-term debt with interest rate
fluctuation risks is carried out on fixed rate loans. Debt
is exposed to liquidity risk relating to the funding as
described below.

(3) Risk management for financial instruments(a) Monitoring of credit risk (the risk that customers
may default)
In accordance with the internal policies for managing
credit risk of the Company, the Company monitors
credit worthiness of their main customers periodically,
and monitors due dates and outstanding balances bycustomer.
To minimize the credit risk when entering into
derivative transactions, counterparties are limited tofinancial institutions with high ratings.
(b) Monitoring of market risks (the risks arising fromfluctuations in foreign exchange rates, interest rates
and others)
For equity securities included in investments in securities, the fair values of these securities are periodicallyreviewed and reported to the Board of Directors.
In conducting and managing derivative transactions,the accounting department confirm the effectiveness ofhedging and obtain approval from the responsible
person, depending on the notional contract value,
based on the internal policies and formal regulations onmarket risk for financial instruments.
(c) Monitoring of liquidity risk for financing (the risk that
the Company may not be able to meet its obligations
on the scheduled due dates)
The Company manages the liquidity risk mainly
through the monthly cash-flow plans, prepared by
the Company.
(4) Supplementary explanation of the estimated fair valueof financial instruments
The notional amounts of derivatives listed below are
not necessarily indicative of the actual market risk
involved in derivative transactions.

Teraoka Seisakusho Co., Ltd.

17

Estimated Fair Value of Financial Instruments
The carrying value of the financial instruments on the
consolidated balance sheet as of March 31, 2011 andunrealized gain (loss) are shown in the following table.

The table does not include financial instruments for which
it is extremely difficult to determine the fair value. (Pleaserefer to (2) below).
Millions of yen(1) Cash and deposits������������������������������������������������������������������������������������������

¥10,021

Estimate fairvalue
¥10,021(2) Notes and accounts receivable������������������������������������������������������������������������

5,888

5,888

—

(3) Marketable securities and investments in securities����������������������������������������

1,941

1,941

—

(4) Notes and accounts payable���������������������������������������������������������������������������

(3,629)(3,629)—(5) Short-term debt����������������������������������������������������������������������������������������������

(3)

(3)

—

(6) Long-term debt����������������������������������������������������������������������������������������������

(1,875)(1,897)(22)(7) Derivative transactions������������������������������������������������������������������������������������

—

—

—

Carrying value(1) Methods to determine the estimated fair value offinancial instruments and other matters related tosecurities and derivative transactions
Cash and deposits and notes and accounts receivable
Since these items are settled in a short period, theircarrying value approximates fair value.
Investment in securities
The fair value of equity securities is based on quoted
market prices.
Notes and accounts payable and short-term debt
Since these items are settled in a short period of time,
their carrying value approximates fair value.
Long-term debt
The fair value of long-term debt is based on thepresent value of the total amount including principal
and interest, discounted by the expected interest rate
to be applied if similar new loans with a similar
remaining period were entered into.
(2) Financial instruments for which it is extremely difficult
to determine the fair value were as follows:
As of March 31, 2011
Unlisted equity securities

Millions of yen¥18

Because no quoted market prices are available and it isextremely difficult to determine the fair value, the above
financial instruments are not included in the preceding table.

18

Teraoka Seisakusho Co., Ltd.

Difference¥—(3) Redemption schedule for receivables and marketablesecurities with maturities at March 31, 2011
Millions of yen

Due in One
Year or Less
Cash and deposits���������������������������������������
¥10,021
5,888
Notes and accounts receivable���������������������
Marketable securities andinvestments in securities����������������������������
—Total���������������������������������������������������������
¥15,909(4) The redemption schedule for short-term debt andlong-term debt at March 31, 2011 and 2010 was asfollows:
Average interest
rates (%)

Millions of yen

2011
2010
Short-term debt���������������������� ¥3 ¥3Long-term debt���������������������� 1,375 1,875
Current portion of long-term debt����
500
500
Total������������������������������������ ¥1,878 ¥2,378

2011
4.3
1.9
1.9

The annual maturities of long-term debt for 5 years
subsequent to March 31, 2011 are summarized below:
Year ending March 31,

2012�����������������������������������������������������������
2013�����������������������������������������������������������
2014�����������������������������������������������������������
2015�����������������������������������������������������������

Millions of yen

¥500
500
500
375

5. Securities
Historical costs, fair value and gross unrealized gains and losses for marketable securities as of March 31, 2011 and 2010
are as follows.
Millions of yen

Historical costs

Fair value

2011
Net differences

Gross gains

Gross losses

Equity securities................................................

¥1,517¥1,941¥423¥536¥(113)

Other................................................................

—

—

—

—

—

Total.....................................................................

¥1,517¥1,941¥423¥536¥(113)

Other securities:

Millions of yen

Historical costs

Fair value

2010
Net differences

Gross gains

Gross losses

Equity securities................................................

¥1,605¥2,082

¥477

¥518

¥(41)

Other................................................................

—

—

—

—

—

Total.....................................................................

¥1,605¥2,082

¥477

¥518

¥(41)

Other securities:

Thousands of U.S. dollars

Historical costs

Fair value

2011
Net differences

Gross gains

Gross losses$18,244$23,343$5,087$6,446$(1,359)

Other securities:
Equity securities................................................
Other................................................................

—

—

—

—

—

Total.....................................................................

$18,244$23,343$5,087$6,446$(1,359)

Securities that do not have fair values are as follows:
Thousands of
U.S. dollars

Millions of yen

Equity securities..............................................................................................

2011
¥18

2010
¥18

2011
$216

Others............................................................................................................

—

—

—

Total...............................................................................................................

¥18

¥18

$216

Teraoka Seisakusho Co., Ltd.

19

6. Retirement and Severance Benefits
Employees who terminate their services with the Company
are generally entitled to lump-sum severance payments basedon their current basic rates of pay and length of service. In

addition, the Company maintains tax-qualified pension plansfor employees with more than 10 years of services.

Provision for employees’ retirement benefit obligations as of March 31, 2011 and 2010 consisted of the following:Thousands of
U.S. dollars

Millions of yen

Benefit obligations������������������������������������������������������������������������������������������

2011¥(3,713)2010¥(3,839)2011$(44,654)

Pension assets�������������������������������������������������������������������������������������������������

3,199

3,199

38,473

Unrecognized actuarial differences������������������������������������������������������������������

76

317

914

Prepaid retirement benefits cost in consolidated balance sheets����������������������

—

—

—

Provisions for retirement benefits��������������������������������������������������������������������

438

323

5,268

Employees’ retirement benefit expenses for the years ended March 31, 2011 and 2010 consisted of the following:Thousands of
U.S. dollars

Millions of yen

Service costs���������������������������������������������������������������������������������������������������

2011
¥227

2010
¥213

2011
$2,730Interest costs���������������������������������������������������������������������������������������������������

76

75

914

Expected return on pension assets������������������������������������������������������������������

(64)

(57)

(770)

Amortization of unrecognized actuarial difference������������������������������������������

117

347

1,407

Benefits expenses total������������������������������������������������������������������������������������

¥356

¥578

$4,281Significant assumptions of pension plans used to determine these amounts are as follows:
2011
2.0%

Discount rate

2010
2.0%

Expected rate of return on pension assets�������������������������������������������������������������������

2.0%

2.0%

Years over which the actuarial differences obligations are allocated�����������������������������

5 years

5 years

7. Comprehensive Income
Total comprehensive income for the year ended March 31,
2010 was as follows:

Other comprehensive income for the year ended March
31, 2010 consisted of the following:

Millions of yen

Millions of yen

2010
Total comprehensive income attributable to:2010
Other comprehensive income:Owners of the parents����������������������������

¥508

Unrealized gains on securities�����������������

¥201

Minority interests�����������������������������������

—Foreign currency translation adjustment���(52)

Total comprehensive income���������������������

¥508

Total other comprehensive income������������

¥149

8. Subsequent EventAppropriation of retained earnings
Subsequent to March 31, 2011, the Company’s Board of
Directors, with the approval of stockholders on June 24,2011 declared a cash dividend of ¥99 million (US$1,186

20

Teraoka Seisakusho Co., Ltd.

thousand) equal to ¥5.00 (US$0.06) per share, applicableto earnings of the year ended March 31, 2011 andpayable to stockholders on the stockholders’ register on
March 31, 2011.

REPORT OF INDEPENDENT AUDITORSINOUE AUDITING CO., INC.
Shuhan Kaikan Bldg.
3-37, Kanda-sakuma-cho
Chiyoda-ku, Tokyo, JapanTo the Board of Directors of Teraoka Seisakusho Co., Ltd.
We have audited the accompanying consolidated balance sheets of Teraoka Seisakusho Co.,
Ltd. and consolidated subsidiaries as of March 31, 2010 and 2011, and the related consolidated statements of income, stockholders’ equity and cash flows for the years then ended
and consolidated statement of comprehensive income for the year ended March 31, 2011, allexpressed in Japanese yen. These consolidated financial statements are the responsibility of
the Company’s management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in Japan.
Those standards require that we plan and perform the audit to obtain reasonable assurance
that the financial statements are free of material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and significant estimates madeby management, as well as evaluating the overall financial statement presentation. We believethat our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Teraoka Seisakusho Co., Ltd. and consolidated subsidiaries as of March 31, 2010 and 2011, and the results of their operations and their cash flows
for the years then ended in conformity with accounting principles generally accepted in Japan.
The accompanying consolidated financial statements as of and for the year ended March 31,
2011 have been translated into U.S. dollars solely for the convenience of the readers. We
have recomputed the translation and, in our opinion, the consolidated financial statements
expressed in yen have been translated into U.S. dollars on the basis set forth in Note 1 of theNotes to Consolidated Financial Statements.
Tokyo, Japan
June 24, 2011

Inoue Auditing Co., Inc.

Teraoka Seisakusho Co., Ltd.

21

COMPANY DATA

Company Outline

(as of March 31, 2011)

Company NameTERAOKA SEISAKUSHO CO., LTD.

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

Incorporated

May 5, 1943

Paid-in Capital¥3,904 million

Employees

552 (599 consolidated)

Board of Directors and Auditors

(as of June 24, 2011)

President

Keishiro Teraoka

Managing Directors

Kiyohiro Takagi
Takeo Kawaguchi

Directors

Jun Watanabe
Nobuo Ito
Hiroyoshi Ohbori
Tadashi Shirota

Minoru Tanaka
Standing Corporate Auditor

Yutaka Nomiyama

Corporate Auditors

Motoaki Hattori
Yoshiyasu Ito
Kazunori Shimamoto

Operating Officers

Masao Mochizuki
Taiji Namekawa

22

Teraoka Seisakusho Co., Ltd.

Consolidated Subsidiaries
Shin-ei Shoji Co., Ltd.

Tokyo, Japan

Teraoka Seisakusho (Hong Kong) Co., Ltd.

Hong Kong, China

Teraoka Seisakusho (Shanghai) Co., Ltd.

Shanghai, China

Teraoka Seisakusho (Shenzhen) Co., Ltd.

Shenzhen, China

PT. Teraoka Seisakusho Indonesia

Indonesia

R&D Center, Factories and Offices
R&D Center

Shinagawa-ku, Tokyo

Factories  Ibaraki Factory

Kitaibaraki, Ibaraki Prefecture  Sano Factory

Sano, Tochigi Prefecture  Kannami Factory

Kannami-cho, Shizuoka Prefecture

Branch Offices

Tokyo, Osaka and Nagoya

Sales Offices

Sendai and Ohmiya

Teraoka Seisakusho Co., Ltd.

23

INVESTOR INFORMATION

Investor Information

Head Office(as of March 31, 2011)

Teraoka Seisakusho Co., Ltd.
4-22, Hiromachi 1-chome,Shinagawa-ku, Tokyo 140-8711, Japan
Telephone: 81-3-3491-1141
Facsimile: 81-3-3491-5316

Financial Year

April 1 to March 31

Common Stocks

Authorized Shares 80,000,000
Issued Shares 20,081,955

Stockholders

2,645

Stock Listing

Tokyo Stock Exchange, Second Section (Code: 4987)

Transfer Agency

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

Major Stockholders
Stockholders

Customers’ Stockholding Group24

Number of shares Ratio of share(thousand shares) holding (%)

2,069

10.49

Keishiro Teraoka

883

4.48

The Bank of Tokyo-Mitsubishi UFJ, Ltd.

818

4.15

Resona Bank, Ltd.

678

3.44

The Nomura Trust and Banking Co., Ltd. (Trust Account)

605

3.07

Japan Trustee Services Bank, Ltd. (Trust Account)

537

2.72

Kuniko Teraoka

526

2.67

Employees’ Stockholding Group

494

2.51

Trust & Custody Services Bank, Ltd. (Trust Account)

328

1.66

Citigroup Global Markets Inc. — Securities Safekeeping Account 418

277

1.41

Teraoka Seisakusho Co., Ltd.

Teraoka Seisakusho Co., Ltd.

13

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Teraoka Seisakusho Co., Ltd.

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