Annual Report 2013
Year ended March 31, 2013

TERAOKA SEISAKUSHO CO., LTD.

PROFILE
Since its establishment in 1921, Teraoka Seisakusho Co., Ltd. hasdeveloped into a leading manufacturer of highly functional packing,electrical insulation, electronic equipment, and other industrial andgeneral home-use adhesive tapes.
The Company is using the 3-year Midterm Management Plan webegan in April 2012 as a "Challenge and Achievement" period andworking toward wide-scale reform of our company's sales and profit
standards based on our business philosophy.

Business Philosophy
Challenge the global market with cutting-edge adhesive technology.
We will contribute to society by using the convenience of adhesive technology tofull potential and providing our customers with new products.
We will devote ourselves to speed operations, refine technology to meet people andthe environment and promote globalization
We will focus on challenge, foreseeability and diversity, reinforce operating
foundations and continue to regularly produce results

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
22
23
25

Teraoka Seisakusho Co., Ltd. and Consolidated Subsidiaries

CONSOLIDATED FINANCIAL HIGHLIGHTS

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

Millions of yen

2013

2012

2013

¥19,935¥20,333$212,098

Operating Loss

(92)

(168)

(982)

Income (Loss) before Income Taxes

674

(119)

7,175

Net Income (Loss)

263

(138)

2,799

Total Assets

33,64730,434357,982

Net Assets

26,67023,838283,748

Operating Loss to Net Sales

(0.5)

(0.8)

Equity Ratio

79.3

78.3

Return on Average Assets (ROA)

0.8

(0.4)

Return on Average Stockholders’ Equity (ROE)

1.0

(0.6)

Net Sales

Ratio (%)

Per Share

Yen

U.S. dollars

Net Income (Loss)¥9.99¥(7.02)$0.11

Cash Dividends

10.00

10.00

0.11

The U.S. dollar amounts in this annual report are translated from yen, for convenience only,at the rate of ¥93.99 = U.S.$1, the rate prevailing on March 31, 2013.

Net Sales

Net Income (Loss)(¥ billions)

Total Assets(¥ millions)(¥ billions)
40

1,000

30

800
30
20
600
20
400
10
10
200

0

09

10

11

12

13

0

09

12
10

11

13

0

09

10

11

12

13

Teraoka Seisakusho Co., Ltd.

1TO OUR STOCKHOLDERS

Result for FY 2013
We report to you the business summary of Fiscal Year 2013, the period ending
March 31, 2013, TERAOKA’s 103rd business term.
Based on the “Midterm Management Plan,” which is a 3-year strategic framework began in the 2012 fiscal year, the Company and Group focused on yield
improvement from manufacturing technology reform as well as business quality
reform, while gaining new clients thanks to cooperation with ITOCHU Corporation
as well as working out new product development for competitiveness.
As part of our overseas strategy, by establishing Seoul Branch Office in South
Korea and Taipei Representative Office in Taiwan, we constructed a sales office
network which contributes to increasing overseas sales. PT. Teraoka Seisakusho
Indonesia, our Indonesian manufacturing subsidiary, will begin full-scale production from October and we are in the process of building an increased production
system of a rich product line-up with high quality and competitive prices.
As stated above, the Company and Group have been striving for performancerecovery by bettering the entire company, but as a result of the cooling computerand digital electronics markets and unfavorable demand, especially in the appliance/electronic tape field, sales were less than the original forecast.
Consolidated net sales for this term were ¥19,935 million (US$212,098 thousand), a 2.0% decrease from the previous term. As for operating profit/loss,
although we thoroughly decreased sales costs and reviewed expenses, due topreliminary costs for the first operating year of the Indonesia production subsidiary, consolidated operating loss was ¥92 million (US$982 thousand). Consolidated
operating loss for the previous term was ¥168 million (US$1,787 thousand). Also,
due to foreign exchange profit calculated at the end of the term from the weakened yen, consolidated income before income taxes for this term was ¥674 million(US$7,175 thousand) and consolidated net income was ¥263 million (US$2,799
thousand).
The end of term dividend was distributed at ¥5.00 (US$0.05) per share andthe mid-term dividend preceding it was also ¥5.00 (US$0.05) per share for a totalof ¥10.00 (US$0.11) per share in annual dividends.

Future Focus and Problem Prevention
From a worldwide standpoint, the U.S. economy is trending towards recovery andin Japan an active fiscal stimulus package and financial deregulation from the newadministration have been announced with high expectations for economic recovery. At the same time there is an uncertainty factor in certain places from the fi-

2

Teraoka Seisakusho Co., Ltd.

nancial issues in European countries and because we anticipate that
it will take time before realizing effects on actual business, recovery
is expected to be gradual.
Amidst this business environment, the Company and Groupis focusing on investing new products with added-value into themarket, with electronic tape for digital appliances at the forefront,
which we expect to expand going forward.
With the goal of pioneering emerging markets with vigorous
demand, we aim for avoidance of the risk of a strengthening yen
as well as recovery of price competitiveness, leading us to operatea factory boasting a full production line in Indonesia. In addition toan overseas production system, in February of this year we established a branch in South Korea and a representative office in Taiwan, expanding our foundation to reinforce sales in both regions.
Furthermore, thanks to the capital/operations cooperation with
ITOCHU Corporation in March of last year, besides enhancing marketing which utilizes their company’s network and globally-based
sales, we should plan maximization of the Company’s corporate
Keishiro Teraoka,
President

value by taking our competitiveness to the next level along with constant managerial efforts.
Even regarding various limitations, especially specified toxic substance usage
restrictions, industrial waste restrictions, etc., it is our intention to always actively
consider the environment and further enhance compliance management withthorough internal control and internal audits.
We would like to take this opportunity to express our sincere gratitude to ourshareholders for their continued patronage and support.
June 25, 2013

Keishiro Teraoka,
President

Teraoka Seisakusho Co., Ltd.

3REVIEW OF OPERATIONSIn the spirit of on one of our company policies, “Serve our customers quickly and affordably with quality products,” newproduct development, quality improvement, production/sales productivity improvement in adhesive tape and measures
for global environment problems are the pillars of the Company’s research and development activities.
New achievements for the Company and Group’s research and development activities for this consolidated accounting year include the single- and double-coated adhesive tape series for various components of smartphones and othermobile devices, the waterproof and shock resistance double-coated adhesive tape series, flame retardant double-coatedthermal conductive adhesive tape, splash prevention heat shield film, polyethylene cloth tape for masking and low VOC
double-coated adhesive tape, which are already on the market and we have high expectations for product development
for the extensive industrial field.
Total R&D costs in this consolidated accounting period were ¥877 million (US$9,331 thousand) and consolidated sales
ratio was 4.4%. This decreased 1.2% from the previous term.
Consolidated sales for the Company and Group were¥19,935 million (US$212,098 thousand), which we have broken
down by product segment below.

Packing Tapes
From the stagnant distribution market movement of goods, thePacking Tapes division transitioned at a low level throughout theyear. In the 4th quarter, sales also decreased from the previous
term due to unfavorable weather conditions. As a result, consolidated sales for this product segment decreased by 1.2% under
the previous term to ¥4,052 million (US$43,106 thousand). This
segment accounts for 20.4% of total consolidated sales andincreased by 0.2 points over the previous term.

Electrical Insulation and Electronic Equipment Tapes
Electrical insulation and electronic equipment tapes continue toface difficult times. Electronic equipment tapes were unavoidably
sluggish in vehicle and industrial machinery products and sales
were level with the previous term. Affected by poor digital appliance sales and a decrease in demand of major Japanese users,
our electrical tape continued to struggle. Although we executed
activities to acquire new demand, such as overseas, we have notyet been able to reach the planned level and we were unable
to ensure enough new sales to compensate for the decline ofalready existing sales.
As a result, consolidated sales for this product segment
decreased by 7.7% under the previous term to ¥9,335 million(US$99,321 thousand). This segment’s consolidated sales accountfor 46.8% and decreased by 2.9 points under the previous term.

4

Teraoka Seisakusho Co., Ltd.

BREAKDOWN OF SALES BY CATEGORY

20.4% Packing Tapes
Olive cloth tapes● Kraft paper tapes

46.8% Electrical Insulation andElectronic Equipment Tapes

●

●

●

Polypropylene film adhesive tapes●●●

Double-coated adhesive tapes

Corrosion-proof tapes● Masking cloth tapes

Kapton film adhesive tapes
Nomex adhesive tapes●

Glass cloth adhesive tapes●

EMI/RFI shielding tapes●

Silicone rubber adhesive tapes●●

Acetate cloth adhesive tapes
Combination adhesive tapes●●

32.8% Other Industrial Tapes

Polyester film adhesive tapes

R

R

Surface protection tapes

Other Industrial Tapes
Sales expansion activities were successful in the industrial tapes
segment and record-setting annual sales volume of P-Cut tape (Polyethylene
cloth adhesiveSALEStape) contributed
GEOGRAPHICALMARKETSto an increase of sales inthis product segment. Sales returned to pre-earthquake levels. As
aAsia
result, consolidated sales for this product segment increased by
7.0%
28.6over% the previous term to ¥6,548 million (US$69,671 thousand). This segment’s consolidated Japansales account for 32.8% and69.5term.
%
increased by 2.7 points over the previous

BREAKDOWN OF SALES BY CATEGORYCHANGES IN OVERSEAS SALES

20.4% Packing Tapes
Overseas Sales●

Olive cloth tapes
Kraft paper tapes●

Polypropylene film adhesive tapes●(¥ billions)
10

8

7.46
6.30

6.01

32.8% Other Industrial Tapes
6●

Overseas Sales
Regarding overseas sales for this term, while we established theSeoul branch and new representative office in Taiwan in February
2013, focusing on North
our Asia-based
America business activities, due to product adjustments of mobile device manufacturers we were unable
1.2%
to reach our original forecasts from the previous term. Compared
Europeto the previous term packaging tapes decreased 23.7%, electrical
0.4%
insulation and electronic equipment tapes decreased 20.9%, both
Other areas
significantly lower than the previous term and despite the strength0.3% improved 6.0% over the previous term.
ened yen, industrial
tapes
Gross export value was ¥6,072 million (US$64,598 thousand), a
1.0% increase over the previous term. Gross export value makes
up 30.5% of total consolidated sales and increased 0.9 points compared to the previous term.

6.70

2

Double-coated adhesive tapes●

Corrosion-proof tapes
Masking cloth tapes●

Surface protection tapes

●

4

6.07

0

FY 2009

FY 2010

FY 2011

FY 2012FY 2013GEOGRAPHICAL SALES MARKETS
Asia

28.6%

Japan

69.5%

North America

1.2%

Europe0.4%

Other areas

0.3%

Teraoka Seisakusho Co., Ltd.

5

Teraoka Seisakusho Co., Ltd. and Consolidated Subsidiaries

CONSOLIDATED FIVE-YEAR SUMMARY

Thousands of
U.S. dollars

Millions of yen

2009

2010

2011

2012

2013

2013

¥23,833¥22,909¥23,137¥20,333¥19,935$212,098

40

522

598

(168)

(92)

(982)

Income (Loss) before Income Taxes

(426)

575

1,007

(119)

674

7,175

Net Income (Loss)

(402)

359

649

(138)

263

2,799

Total Assets

31,84932,09832,33030,43433,647357,982

Net Assets

23,416

23,66924,03523,83826,670283,748

Operating Income to Net Sales

0.2

2.3

2.6

(0.8)

(0.5)

Equity Ratio

73.5

73.7

74.3

78.3

79.3

Return on Average Assets (ROA)

(1.2)

1.1

2.0

(0.4)

0.8

(1.7)

1.5

2.7

(0.6)

1.0

Years ended March 31

Net Sales
Operating Income (Loss)

Ratio (%)

Return on Average
Stockholders' Equity (ROE)Per Share

Yen

Net Income (Loss)¥(20.00)¥17.93¥32.91¥(7.02)

¥9.99

$0.11

Cash Dividends

10.00

7.00

10.00

10.00

10.00

0.11

The U.S. dollars are translated at the rate of ¥93.99 per U.S.$1, prevailing on March 31, 2013.

6

U.S. dollars

Teraoka Seisakusho Co., Ltd.

Financial Statements

Fiscal Year 2013
Year ended March 31, 2013

Teraoka Seisakusho Co., Ltd.

7

FINANCIAL REVIEWBusiness Performance

Net Assets(¥ billions)
30

20

10

0

09 10 11 12 13

Net Income (Loss)
per Share (Yen)40

30

In addition to the strengthened yen in the first part of the fiscal year in Japan’s economy
and overseas economic slowdown, especially in emerging nations, European financial
problems
Equityhave
Ratiobeen prolonged and the uncertainty factor still remains in the U.S. financial(%)
problems,
leaving no room for digression in this consolidated accounting year. Entering the
80second half of the fiscal year, due to the weakening yen and rise in stock with the change ofgoverning party in December, we have begun to see the signs of economic recovery.
The Company and Group focused on industrial technology and corporate reform whilealso
cultivating
new clients and developing new products. For overseas strategy, we estab60
lished a branch in South Korea and a new representative office in Taiwan, constructing field
offices in a company-wide effort to build up overseas sales. However, personal computer
40and digital appliance markets have cooled, demand for Electrical insulation and electronicequipment tapes are no longer favorable and it is a struggle to produce results.
Consolidated net sales for this term were ¥19,935 million (US$212,098 thousand), a
202.0% decrease from the previous term. Consolidated operating loss was ¥92 million (US$982
thousand). This is because selling, general and administrative expenses were ¥4,349 million(US$46,278 thousand), ¥250 million (US$2,660 thousand) more than the previous term due
0to initial start-up costs of the Indonesia manufacturing subsidiary.
09 10 11 12 13
Consolidated operating loss for the previous term was ¥168 million (US$1,787 thousand). However, because of the foreign exchange profit from the weakened yen at the end
Return on Averageof theterm,(ROA)
consolidated
income before income taxes was ¥674 million (US$7,175 thou(%)
Assetssand). Total income taxes increased ¥392 million (US$4,171 thousand) over the previous
3
term to ¥411 million (US$4,376 thousand) but consolidated net income was ¥263 million(US$2,799 thousand).

Segment Information

2

20

10

0

12

09
10 11

13

Cash Dividends
per Share (Yen)
15

10

5

0

8

09 10 11 12 13

Teraoka Seisakusho Co., Ltd.

From the stagnant distribution market movement of goods, the Packing Tapes divisiontransitioned at a low level throughout the year. We were unable to cultivate enough newtransactions to compensate for the shrinking domestic demand in Japan and sales dropped
slightly in the 4th quarter due to adverse weather conditions. From a profit standpoint, we
1
found inexpensive raw materials, cultivated relationships with overseas raw material makers,
etc., in an effort to improve profitability. As a result, consolidated sales for this product segment decreased by 1.2% under the previous term to ¥4,052 million (US$43,106 thousand).
09
120This segment accounts for 20.4%of total consolidated sales and increased by 0.2 points
11
13
over the10previous
term.
Electrical Insulation and Electronic Equipment Tapes continued to face hard times. In
addition
toon
reformsof already existing products to meet environmental standards, etc., we
ReturnAverage
Stockholders'Equitybut
(ROE)
made
efforts in sales,
the(%)
share competition with South Korea and China adhesive tape4manufacturers has become tougher than before, unavoidably slowing electrical tape activities for vehicles and industrial equipment, with a result of sales level with the previous term.
The Company has always put efforts into electrical tape for the digital market, which has
3continued to suffer poor sales and a decrease in demand of major Japanese users. We madeefforts to acquire new demand overseas, but due to product adjustments of mobile devices
by overseas manufacturers, we were unable to reach the level of our original plan and we
2were unable to ensure enough new sales to compensate for the decline of already existingsales.
As a result, consolidated sales for this product segment decreased by 7.7% under the1
previous term to ¥9,335 million (US$99,321 thousand). This segment’s consolidated sales
account for 46.8% and decreased by 2.9 points under the previous term.
09Sales expansion
12 activities were successful in the other industrial tapes segment and0record-setting
annual10 11
13 sales volume of P-Cut tape (Polyethylene cloth adhesive tape) contributed to an increase of sales in this product segment. We began sales of P-Cut tape in
October, which uses low-cost raw materials. Sales returned to pre-earthquake levels. As a

13result, consolidated sales for this product segment increased by 7.0% over the previous termto ¥6,548 million (US$69,671 thousand). This segment’s consolidated sales accounts for
32.8% and increased by 2.7 points over the previous term.
Equity Ratio
80

60

40

20

0

ss)

13

13

Financial Position(%)

09 10 11 12 13

Return on Average
Assets (ROA) (%)
3

2

1

0

Total assets for the end of year consolidated accounting increased 10.6% or ¥3,213 million(US$34,184 thousand) over the previous end of year consolidated accounting to ¥33,647
million (US$357,982 thousand).
Total current assets for the end of the term increased 5.7% or ¥925 million (US$9,841
thousand) over the previous end of year consolidated accounting to ¥17,015 million(US$181,033 thousand). This was mainly due to an increase in cash/savings.
Total fixed assets for the end of year consolidated accounting increased 15.9% or¥2,287 million (US$24,332 thousand) over the previous end of year consolidated accounting
to ¥16,631 million (US$176,949 thousand). This was mainly due to acquisition of fixed assets
from the Indonesia manufacturing subsidiary.
Total liabilities for the end of year consolidated accounting increased 5.8% or ¥382 million (US$4,064 thousand) over the previous end of year consolidated accounting to ¥6,977
million (US$74,234 thousand). Out of this, total current liabilities increased 14.1% or ¥707
million (US$7,522 thousand) over the previous end of term to ¥5,734 million (US$61,002
thousand). This was mainly due to an increase in notes and accounts payable. Total longterm liabilities for the end of the term decreased 20.7% or ¥325 million (US$3,458 thousand) under the previous end of year consolidated accounting to ¥1,243 million (US$13,232
thousand). This was mainly due to returns of long-term loans.
Total net assets for the end of year consolidated accounting increased 11.9% or ¥2,832
million US$30,131 thousand) over the previous end of year consolidated accounting to¥26,670 million (US$283,748 thousand). This was mainly due to an increase of capital andcapital surplus from third-party allotment of new shares.
The result of these figures is a capital-to-asset ratio of 79.3%, an increase of 1.0 pointfrom the previous term.

Cash Flows
09

12
13

10 11

Return on Average
Stockholders' Equity (ROE) (%)
4

3

2

Decrease of capital from operating activities was ¥1,756 million (US$18,680 thousand), a¥361 million (US$3,841 thousand) drop from the previous consolidated accounting period,
but it increased this term. This is mainly due to depreciation costs.
There was a ¥2,544 million (US$27,065 thousand) decrease in cash flow used for investment activities. In the previous term activities there was also a 2,792 million (US$29,705
thousand) decrease in capital. This term, expenditure for acquisition of tangible fixed assets
was the main factor for the decrease.
There was a ¥1,561 million (US$16,605 thousand) increase in capital from financial
activities. This was a decrease of ¥697 million (US$7,416 thousand) in used capital from theprevious accounting year. The main factor for this was third-party allotment of new shares
and an increase in capital surplus.
From these activities, consolidated cash and cash equivalents for end of year consolidated accounting were ¥7,004 million (US$74,516 thousand), an increase of ¥923 million(US$9,820 thousand) compared to the previous year end consolidated accounting.

Dividends
1

0

09

12
10 11

13

TERAOKA considers the payment of dividends to its shareholders as one of our most important business functions, and we operate under a basic policy of continued stable dividend
payments.
The end of term dividend was ¥5.00 (US$0.05) and combined with the previously
distributed interim dividend of ¥5.00 (US$0.05) per share, makes the total annual dividends¥10.00 (US$0.11) per share. As a result, the dividend payout ratio was 33.2%.

Teraoka Seisakusho Co., Ltd.

9

Teraoka Seisakusho Co., Ltd. and Consolidated Subsidiaries

CONSOLIDATED BALANCE SHEETSMarch 31, 2013 and 2012

Thousands of
U.S. dollars

Millions of yen

2013

2012

2013

¥  7,004¥  6,081$  74,516

5,803
(10)
3,424
310
484
17,015

5,955
(10)
3,200
213
651
16,09061,737(105)
36,431
3,295
5,159
181,033

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

4,033
11,03624,09357
39,219(25,457)
13,762

3,959
8,524
21,5152,355
36,353(24,537)
11,81642,905
117,412
256,349603
417,269(270,850)
146,419

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

70

54

742

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 ������������������������������������������������������������

2,489
9
304
(2)
2,800

2,157
108
212
(3)
2,474

26,481
93
3,234
(20)
29,788

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

¥ 33,647¥ 30,434$ 357,982

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

LIABILITIES AND STOCKHOLDERS’ EQUITYCurrent Liabilities:
Notes and accounts payable:
Trade ����������������������������������������������������������������������������������������������������
Short-term borrowings �����������������������������������������������������������������������������
Current portion of long-term borrowings �������������������������������������������������
Accrued income taxes �������������������������������������������������������������������������������
Accrued expenses �������������������������������������������������������������������������������������
Other current liabilities �����������������������������������������������������������������������������
Total current liabilities ���������������������������������������������������������������������

2013

2012

2013

¥ 3,645
4
500
329
566
690
5,734

¥ 3,111
3
500
20
534
859
5,027

$ 38,783
40
5,320
3,500
6,017
7,342
61,002Long-term Liabilities:
Long-term borrowings ������������������������������������������������������������������������������
Provision for retirement benefits (Notes 2-h and 6)
Employees ���������������������������������������������������������������������������������������������
Deferred liabilities taxes (Note 2-f) ������������������������������������������������������������
Asset retirement obligations ���������������������������������������������������������������������
Negative Goodwill ������������������������������������������������������������������������������������
Other �������������������������������������������������������������������������������������������������������
Total long-term liabilities �����������������������������������������������������������������

375

875

3,990

405
160
171
—
132
1,243

404
8
169
25
87
1,568

4,307
1,706
1,823
—
1,406
13,232

Total liabilities ���������������������������������������������������������������������������������

6,977

6,595

74,234

Authorized: 80,000,000 shares
Issued:   26,687,955 shares as of March 31, 2013 and20,081,955 shares as of March 31, 2012, respectively ��������
Additional paid-in capital ��������������������������������������������������������������������������
Retained earnings �������������������������������������������������������������������������������������
Less: Treasury stock, at cost ����������������������������������������������������������������������
Total Stockholders’ equity ���������������������������������������������������������������

5,057
4,644
16,438(136)
26,0033,904
3,491
16,405(136)
23,66453,80549,409174,890(1,454)
276,650

Accumulated other comprehensive income
Unrealized gains on securities (Notes 2-b and 5) ���������������������������������������
Foreign currency translation adjustments (Note 2-i) �����������������������������������
Total accumulated other comprehensive income �����������������������������

641
26
667

403
(229)
174

6,824
274
7,098

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

26,67023,838283,748

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

¥33,647¥30,434$357,982

NET ASSETSStockholders’ Equity:
Common stock:

Teraoka Seisakusho Co., Ltd.

11

Teraoka Seisakusho Co., Ltd. and Consolidated Subsidiaries

CONSOLIDATED STATEMENTS OF INCOME
For the years ended March 31, 2013 and 2012

Thousands of
U.S. dollars

Millions of yen

2013¥19,935
15,678
4,257
4,349
(92)

2012
¥20,333
16,402
3,931
4,099
(168)

2013
$212,098
166,80245,296
46,278
(982)

66
(23)
(5)
(115)
794
—
—
49
766

65
(32)
(21)
—
39
(70)
(9)
77
49

700
(243)
(50)
(1,223)
8,449
—
—
524
8,157

Income (Loss) before income taxes ��������������������������������������������������������

674

(119)

7,175

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

348
63
411
263

42
(23)
19
(138)

3,701
675
4,376
2,799

Net income (loss) �����������������������������������������������������������������������������������

¥   263¥  (138)$  2,799

Net Sales ������������������������������������������������������������������������������������������������������
Cost of Sales ������������������������������������������������������������������������������������������������
Gross profit �������������������������������������������������������������������������������������������
Selling, General and Administrative Expenses �����������������������������������������������
Operating loss ���������������������������������������������������������������������������������������
Other Income and Expenses:
Interest and dividend income ��������������������������������������������������������������������
Interest expenses ��������������������������������������������������������������������������������������
Loss on disposal of property, plant and equipment ������������������������������������
Loss on abandonment of inventories ��������������������������������������������������������
Foreign exchange gains, net ���������������������������������������������������������������������Disaster loss ����������������������������������������������������������������������������������������������
Loss on valuation of telephone subscription right ��������������������������������������
Other, net �������������������������������������������������������������������������������������������������

Thousands of
U.S. dollars

Millions of yen

Consolidated Statement of Comprehensive Income
Net income (loss) before minority interests ��������������������������������������������
Other Comprehensive Income
Unrealized gains on securities �������������������������������������������������������������������
Foreign currency translation adjustments ��������������������������������������������������
Total other comprehensive income ������������������������������������������������������������

2013
¥263

2012
¥(138)

2013$2,799

238
254
492

151
(12)
139

2,537
2,706
5,243

Comprehensive Income �����������������������������������������������������������������������������

755

1

8,042

Total comprehensive income attributable to:
Owners of the parent �������������������������������������������������������������������������������
Minority interests ��������������������������������������������������������������������������������������

755
—

1
—

8,042
—

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

12

Teraoka Seisakusho Co., Ltd.

Teraoka Seisakusho Co., Ltd. and Consolidated Subsidiaries

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
For the years ended March 31, 2013 and 2012

Thousands of
U.S. dollars

Millions of yen

2013

2012

2013

Shareholders’ Equity
Common Stock:
Balance at beginning of year �����������������������������������������������������������������
Issuance of new shares ��������������������������������������������������������������������������
Balance at end of year ���������������������������������������������������������������������������

¥ 3,904
1,153
5,057

¥ 3,904—
3,904$ 41,540
12,26553,805Additional Paid in Capital:
Balance at beginning of year �����������������������������������������������������������������
Issuance of new shares ��������������������������������������������������������������������������
Balance at end of year ���������������������������������������������������������������������������

3,491
1,153
4,644

3,491
—
3,491

37,144
12,26549,409Retained Earnings:
Balance at beginning of year �����������������������������������������������������������������
Net income (loss) �����������������������������������������������������������������������������������Cash dividends paid ������������������������������������������������������������������������������
Balance at end of year ���������������������������������������������������������������������������

16,405263(230)
16,43816,740(138)(197)
16,405

174,541
2,799(2,450)174,890

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

(136)
0
(136)

(136)
0
(136)

(1,453)(1)(1,454)

Total Shareholders’ Equity
Balance at end of year ���������������������������������������������������������������������������

¥26,003¥23,664$276,650

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

403
238
641

252
151
403

4,287
2,537
6,824

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

(229)
254
26

(217)
(12)
(229)

(2,432)
2,706
274

Total Accumulated Other Comprehensive Income
Balance at end of year ���������������������������������������������������������������������������

¥   667¥   174$  7,098

Total Net Assets
Balance at end of year ���������������������������������������������������������������������������

¥26,670¥23,838$283,748

Yen

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

¥ 9.99
10.00

U.S. dollars¥ (7.02)
10.00

$0.11
0.11

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, 2013 and 2012

Thousands of
U.S. dollars

Millions of yen

2013

2012

2013

¥   263¥  (138)$  2,799

1,216
(2)
1
63
(603)

1,451
(19)
(34)
(23)
—

12,942(16)
7
675(6,421)

152
(194)
534
543
—
(217)
1,493
1,756

(67)
(121)
(518)
(502)
(103)
(287)
(223)
(361)

1,616
(2,062)
5,680
5,774
—
(2,314)
15,881
18,680Investing 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 land ����������������������������������������������������������������������
Net cash used in investing activities ������������������������������������������������

(2,496)(45)(3)—(2,544)(2,850)(18)(4)
80(2,792)(26,557)
(482)
(26)
—
(27,065)

Financing Activities:
Dividends paid ������������������������������������������������������������������������������������������
Increase (Decrease) in short-term borrowings ��������������������������������������������
Increase (Decrease) in long-term borrowings ���������������������������������������������
Proceeds from issuance of common stock �������������������������������������������������
Other, net �������������������������������������������������������������������������������������������������
Net cash used in financing activities ������������������������������������������������

(230)
—
(500)
2,291
(0)
1,561

(197)
—
(500)
—
(0)
(697)

(2,450)—(5,320)24,376(1)
16,605

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 ������������������������������������������

150
923
6,081

(90)
(3,940)10,021

1,596
9,816
64,700Cash and Cash Equivalents at End of Year ����������������������������������������������������

¥ 7,004¥ 6,081$ 74,516

Additional Cash Flow Information
Interest paid ���������������������������������������������������������������������������������������������
Income taxes paid �������������������������������������������������������������������������������������

23¥  (131)32¥   544243$ (1,398)

Operating Activities:
Net Income (loss) ����������������������������������������������������������������������������������������������
Adjustments to reconcile net income to net cash provided byoperating activities:
Depreciation and amortization ��������������������������������������������������������������
Allowance for doubtful accounts �����������������������������������������������������������
Provision for retirement benefits ������������������������������������������������������������
Deferred income taxes ��������������������������������������������������������������������������
Foreign exchange losses (gains) �������������������������������������������������������������
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 ��������������������������
Increase (Decrease) in provision for loss on disaster ����������������������������
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, 2013 and 2012

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.
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 ¥93.99=
U.S.$1, the prevailing exchange rate on March 31, 2013.

2. Summary of Significant Accounting Policies
a. Consolidation
The accompanying consolidated financial statements
include the accounts of the Company and five subsidiaries,
TERAOKA SEISAKUSHO (Hong Kong) CO., LTD.,TERAOKA SEISAKUSHO (Shanghai) CO., LTD.,TERAOKA SEISAKUSHO (Shenzhen) CO., LTD.,
SHIN-EI SHOJI CO., LTD. and PT. TERAOKA SEISAKUSHOINDONESIA.
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 of March 31,
2013 and 2012 and are used for the consolidation of
the Company.
b. Investments in securities
Debt securities that are intended to be held to maturity (“held-to maturity debt securities”) are measured
at amortized cost in the balance sheet. Securities otherthan 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. For other than
temporary declines in fair value, other securities are
reduced to net realizable value by a charge to income.
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��������������������� 4~16 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 retirement benefits
Employees who terminate their services with the Company are generally entitled to lump-sum severance
payments based on their current basic rates of pay andlength of service. In addition, the Company maintains
defined benefit pension plans with insurance companies and trust banks. The plans entitle employees
upon retirement, 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.
i. 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
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.

16

Teraoka Seisakusho Co., Ltd.

j. 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 a foreign
currency, the future transaction will be recorded using
the contracted forward rate, and no gains or losses on
the forward foreign exchange contract are recognized.
k. 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.
l. Accounting standards issued but not yet applied
On May 17, 2012 the Accounting Standards Board ofJapan (the “ASBJ”) issued the following accounting
standard and guidance.
• ASBJ Statement No. 26 “Accounting Standard for
Retirement Benefits”• ASBJ Guidance No. 25 “Guidance on AccountingStandard for Retirement Benefits”
These accounting standard and guidance are
effective for the end of annual periods beginningon or after April 1, 2013. The Company has not
yet adopted these standard and guidance as ofMarch 31, 2013.

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 ¥1 million (US$12
thousand) and ¥15 million at March 31, 2013 and 2012.

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, 2012 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

Carrying

Estimatefair value(1) Cash and deposits ������������������������������������������������������������������������������������������������������ ¥ 7,004

Financial Instruments¥ 7,004—(2) Notes and accounts receivable ������������������������������������������������������������������������������������

5,803

5,803

—

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

2,470

2,470

—

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

(3,645)(3,645)—(5) Short-term debt ����������������������������������������������������������������������������������������������������������

(4)

(4)

—

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

(875)

(880)

(5)

(7) Derivative transactions ������������������������������������������������������������������������������������������������

—

—

—

(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 the present value of the total amount including principal andinterest, discounted by the expected interest rate to be
applied if similar new loans with a similar remaining
period were entered into.

(3) Redemption schedule for receivables and marketablesecurities with maturities at March 31, 2013
Millions of yen

Due in One
Year or Less

Cash and deposits���������������������������������������
Notes and accounts receivable���������������������
Marketable securities andinvestments in securities����������������������������
Total���������������������������������������������������������

(2) Financial instruments for which it is extremely difficult
to determine the fair value were as follows:
As of March 31, 2013
Unlisted equity securities

Millions of yen¥19

The above financial instruments are not included in thepreceding table, because no quoted market prices are available and it is extremely difficult to determine the fair value.

Teraoka Seisakusho Co., Ltd.

¥ 7,004
5,803—¥12,807(4) The redemption schedule for short-term debt andlong-term debt at March 31, 2013 and 2012 was asfollows:
Average interest
rates (%)

Millions of yen

Short-term debt����������������������
Long-term debt����������������������
Current portion of long-term debt����
Total������������������������������������

2013
2012
¥  4 ¥    3
375
875
500
500
¥879 ¥1,378

2013
5.0
1.9
1.9

The annual maturities of long-term debt for 5 years subsequent to March 31, 2013 are summarized below:
Year ending March 31,

18

Difference2014�����������������������������������������������������������
2015�����������������������������������������������������������

Millions of yen

¥500
375

5. Securities
Historical costs, fair value and gross unrealized gains and losses for marketable securities as of March 31, 2013 and 2012 are
as follows.
Millions of yen

2013
Historical costs

Fair value¥1,524¥2,470Net differences

Gross gains

Gross losses

¥959

¥(13)

Other securities:
Equity securities �����������������������������������������������

¥946

Other ���������������������������������������������������������������

—

—

—

—

—

Total ��������������������������������������������������������������������

¥1,524¥2,470

¥946

¥959

¥(13)

Gross gains

Gross losses

¥691

¥(74)

Millions of yen

2012
Historical costs

Fair value¥1,521¥2,138Net differences

Other securities:
Equity securities �����������������������������������������������

¥617

Other ���������������������������������������������������������������

—

—

—

—

—

Total ��������������������������������������������������������������������

¥1,521¥2,138

¥617

¥691

¥(74)

Thousands of U.S. dollars

2013
Historical costs

Fair value

Net differences

Gross gains

Gross losses

Other securities:
Equity securities �����������������������������������������������

$16,213$26,280$10,067$10,210$(143)

Other ���������������������������������������������������������������

—

—

—

—

—

Total ��������������������������������������������������������������������

$16,213$26,280$10,067$10,210$(143)

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

Millions of yen

2013

2012

2013

Equity securities ��������������������������������������������������������������������������������������������������

¥19

¥19

$201

Others ����������������������������������������������������������������������������������������������������������������

—

—

—

Total �������������������������������������������������������������������������������������������������������������������

¥19

¥19

$201

Teraoka Seisakusho Co., Ltd.

19

6. Provision for Retirement Benefits
Employees who terminate their services with the Company
are generally entitled to lump-sum severance payments
based on their current basic rates of pay and length ofservice. In addition, the Company maintains defined benefit pension plans for employees.

Provision for employees’ retirement benefit obligations as of March 31, 2013 and 2012 consisted of the following:Thousands of
U.S. dollars

Millions of yen

2013

2012

2013

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

¥(4,008)¥(3,958)$(42,645)

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

3,739

3,296

39,780

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

(136)

257

(1,442)

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

—

—

—

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

(405)

(404)

(4,307)

Employees’ retirement benefit expenses for the year ended March 31, 2013 and 2012 consisted of the following:Thousands of
U.S. dollars

Millions of yen

2013

2012

2013

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

¥220

¥220

$2,342

Interest costs ������������������������������������������������������������������������������������������������������

79

74

834

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

(66)

(64)

(702)

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

95

28

1,011

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

¥328

¥257

$3,485Significant assumptions of the pension plan used to determine these amounts are as follows:

20

2013

2012

Method of attributing benefits to periods of service �������������������������������������������������������

Straight line
methodStraight line
methodDiscount rate ������������������������������������������������������������������������������������������������������������������

2.0%

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

Teraoka Seisakusho Co., Ltd.

7. Income Taxes
Deferred income tax assets and liabilities as of March 31, 2013 and 2012 were composed of the following:Thousands of
U.S. dollars

Millions of yen

2013

2012

2013

Accrued bonus to employees ��������������������������������������������������������������������������

¥ 162

¥ 148

$ 1,727

Depreciation ���������������������������������������������������������������������������������������������������

48

60

509

Deferred tax assets:

Loss on valuation of investment securities �������������������������������������������������������

122

122

1,301

Retirement & severance benefits ���������������������������������������������������������������������

144

138

1,534

Tax loss carryforward ���������������������������������������������������������������������������������������

130

163

1,383

Other ��������������������������������������������������������������������������������������������������������������

53

(101)

558

Valuation allowance ����������������������������������������������������������������������������������������

(341)

(209)

(3,624)

Total deferred tax assets ����������������������������������������������������������������������������������

¥ 318

¥ 321

$ 3,388

Deferred tax liabilities:
Reserve for advanced depreciation of noncurrent assets ���������������������������������

(37)

(48)

(390)

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

(305)

(214)

(3,243)

Other deferred tax liabilities ����������������������������������������������������������������������������

182

254

1,927

Total ����������������������������������������������������������������������������������������������������������������

¥(160)¥  (8)$(1,706)

Net deferred tax assets ������������������������������������������������������������������������������������

¥ 158

¥ 312

$ 1,682

8. Subsequent Event(1) Appropriation of retained earnings
Subsequent to March 31, 2013, the Company’s Boardof Directors, with the approval of stockholders on June25, 2013 declared a cash dividend of ¥132 million(US$1,401 thousand) equal to ¥5.00 (US$0.05) per

share, applicable to earnings of the year ended March
31, 2013 and payable to stockholders on the stockholders’ register on March 31, 2013.

Teraoka Seisakusho Co., Ltd.

21

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, 2013 and the related consolidated statements of income, comprehensive
income, stockholders’ equity and cash flows for the years then ended, and a summary of significant accounting policies and other explanatory information, all expressed in Japanese yen.
Management’s Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial statements in conformity with accounting principles generally accepted in Japan, and for such internal control as
management determines is necessary to enable the preparation of consolidated financial statements that are
free from material misstatements, whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We
conducted our audits in conformity with auditing standards generally accepted in Japan. Those standards
require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated
financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
consolidated financial statements. The procedures selected depend on the auditor’s judgment, including theassessment of the risks of material misstatement of the consolidated financial statements, whether due tofraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s
preparation and fair presentation of the consolidated financial statements in order to design audit proceduresthat are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting
principles used and the reasonableness of accounting estimates made by management, as well as evaluating
the overall presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
audit opinion.
OpinionIn our opinion, the consolidated financial statements referred to above present fairly, in all material respects,
the consolidated financial position of Teraoka Seisakusho Co., Ltd. and consolidated subsidiaries as of March
31, 2013 and the consolidated results of their operations and their cash flows for the years then ended inconformity with accounting principles generally accepted in Japan.
Convenience Translation
Our audit also comprehended the translation of Japanese yen amount into U.S. dollar amounts and, in our
opinion, such translation has been made in conformity with the basis stated in Note 1. Such U.S. dollar
amounts are presented solely for the convenience of readers outside Japan.
Tokyo, Japan
June 25, 2013

Inoue Auditing Co., Inc.

22

Teraoka Seisakusho Co., Ltd.

COMPANY DATA

Company Outline

(as of March 31, 2013)

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¥5,057 million (US$53,805 thousand)Employees

543 (591 consolidated)

Board of Directors and Auditors

(as of June 25, 2013)

President

Keishiro Teraoka

Managing Director

Kenichi Tsuji

Directors

Tadashi Shirota

Minoru Tanaka
Kiyohiro Takagi
Hiroyoshi Ohbori

Masakazu Naito
Tsuyoshi Ohsaki
Standing Audit & Supervisory Board Member

Yutaka Nomiyama

Audit & Supervisory Board Members

Masaru Nakamura
Yoshiyasu Ito
Kazunori Shimamoto

Senior Operating Officer

Jun Watanabe

Operating Officers

Taiji Namekawa
Masao Mochizuki
Ken Ebitani
Kenji Abe

Teraoka Seisakusho Co., Ltd.

23

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

24

Teraoka Seisakusho Co., Ltd.

  Ibaraki Factory

Kitaibaraki, Ibaraki Prefecture  Sano Factory

Sano, Tochigi Prefecture  Kannami Factory

Kannami-cho, Shizuoka Prefecture

Branch Offices

Tokyo, Osaka, Nagoya, Seoul and Taipei

Sales OfficeSendaiINVESTOR INFORMATION

Investor Information

Head Office(as of March 31, 2013)

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 26,687,955

Stockholders

2,503

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

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

Itochu Corporation

6,672

25.34

Customers’ Stockholding Group

2,490

9.46

Keishiro Teraoka

885

3.36

Japan Trustee Services Bank, Ltd. (Trust Account)

862

3.27

The Bank of Tokyo-Mitsubishi UFJ, Ltd.

818

3.11

Resona Bank, Ltd.

678

2.58

Employees’ Stockholding Group

573

2.18

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

544

2.07

Kuniko Teraoka

526

2.00

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

445

1.69

Teraoka Seisakusho Co., Ltd.

25

http://www.teraokatape.co.jp

Printed in Japan

12

Teraoka Seisakusho Co., Ltd.