Annual Report 2021
Year ended March 31, 2021

TERAOKA SEISAKUSHO CO., LTD.

Teraoka Seisakusho Co., Ltd.

17

PROFILE
Since its establishment as a comprehensive manufacturer of adhesive tape in
1921, Teraoka Seisakusho Co., Ltd. has remained an industry leader in driving
development of original and advanced technology, continuing to provide
customers with a diverse lineup of adhesive tapes that extend to packing,electrical insulation, electronic equipment, other industrial and general home-use
adhesive tapes.
On February 11, 2021, Teraoka celebrated its 100 year anniversary. This is
entirely thanks to all of you and we would like to express our deep gratitude foryour support and kindness.
As we prepare for this “new century,” we begin formulation of our new tertiary
medium-term business plan, corporate philosophy and ideal standards that will
last over ﬁve years, ending in the 2025 ﬁscal year (lasting from April 2021 to March
2026). We will achieve this through putting to use our reﬂections on Phase 2 of thesecondary medium-term business plan and expectations of rapid technologicalinnovations with the potential to shape an ideal society.

- Corporate Philosophy Embrace change, value the process and endeavor to create “New Century” value that
pursuits harmonization of people, nature and technology.
- Ideal Standards - Creativity, Thought, Distinction
Creativity
Regularly rouse innovation in creative ways, take on challenges
Thought
Ideas, conviction, pride and confidence, diligent analysis and reflection
Distinction Different from the norm, Differentiate from the rest, Full of individuality, Dig deep

CONTENTS
Consolidated Financial Highlights.......................... 1
To Our Stockholders................................................. 2
Special Issue 100 Year Anniversary Interview ..... 3
Review of Operations ............................................... 6
Consolidated Five-Year Summary .......................... 8
Consolidated Financial Statements........................ 9
Financial Review .................................................... 10
Report of Independent Auditors .......................... 28
Company Data ........................................................... 30
Investor Information ................................................. 32
12

Teraoka Seisakusho Co., Ltd.

Teraoka Seisakusho Co., Ltd. and Consolidated Subsidiaries

CONSOLIDATED FINANCIAL HIGHLIGHTS

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

Millions of yen

2021

2020

2021

¥21,662¥22,895$195,648

Operating Income

129

104

1,164

Income before Income Taxes

302

317

2,729

Net Income

91

149

822

Total Assets

37,03335,140334,477

Net Assets

29,04627,939262,341

Operating Income to Net Sales

0.6

0.5

Equity Ratio

78.4

79.5

Return on Average Assets (ROA)

0.3

0.4

Return on Average Stockholders’ Equity (ROE)

0.3

0.5

Net Sales

Ratio (%)

Per Share

Yen

Net Income
Cash Dividends

U.S. dollars¥ 3.59¥ 5.90

$0.03

12

10.00

0.11

The U.S. dollar amounts in this annual report are translated from yen, for convenience only,at the rate of ¥110.72 = US$1, the rate prevailing on March 31, 2021.

Net Sales

Net Income

Total Assets(¥ billions)(¥ millions)(¥ billions)
40

1,200

30

1,000
30
800

20

20

600

10

400
10
200

0

17

18

19

20

21

0

17

18

19

20

21

0

17

18

19

20

21

Teraoka Seisakusho Co., Ltd.

1TO OUR STOCKHOLDERS

Result for FY 2021
Fiscal year 2021, the year ended March 31, 2021 marks the 111th business term for theCompany Group.
There was a signiﬁcant decrease in income due to the inﬂuence of extended trade
friction between the U.S. and China and the COVID-19 pandemic. Despite this, we wereable to recover from signiﬁcant deﬁcit early in the year and achieve surplus in all proﬁt
items thanks to various measures to reduce ﬁxed costs as much as possible, and securing proﬁtable tendencies from September onward.
Each department made efforts to achieve this. The sales division focused on
recovery and expansion of orders for tapes for vehicles, electronics and acquiring newcommercial rights. At the same time they worked on reviewing unproﬁtable transactions
and starting business for new models while promoting improved productivity through a
new way of working, utilizing teleworking. The technology division tackled launching of
new products supported by new technology and investment in new large-scale equipment with an eye on medium-term business development. Administrative division worked
to improve productivity through zero-base review of conventional operations and to make
improvements through operational reforms.
As a result, net sales for the consolidated ﬁscal year were ¥21,662 million (US$195,648
thousand), decreasing 5.4% from the same term the previous year. The operating income
was ¥129 million (US$1,164 thousand). This is a 24.2% increase from the same term theprevious year. Income before income taxes was ¥302 million (US$2,729 thousand), a 4.8%
decrease from the previous term. Net income for the parent company was ¥91 million(US$822 thousand), a 39.1% decrease below the previous term.
The end of term regular dividend was set at ¥5.00 (US$0.05) per share, and combined with the commemorative dividend of ¥4.00 (US$0.04) for the 100 year anniversary,¥9.00 (US$0.08) per share was distributed. The preceding mid-term dividend was ¥3.00(US$0.03) per share for a total of ¥12.00 (US$0.11) per share in annual dividends.
We would like to take this opportunity to express our sincere gratitude to our shareholders for their continued patronage and support.

June 22, 2021

Keishiro Teraoka, Chairman

2

Teraoka Seisakusho Co., Ltd.

Kenichi Tsuji, President

Special Issue

100 Year Anniversary Interview

Looking Ahead to the Next 100 Years

Right:

Keishiro Teraoka, Chairman

Left:

Kenichi Tsuji, President

Center: Keiko Hatta, Director

February 11, 2021 marked the 100 year anniversary of the founding of Teraoka. To commemorate the occasion, Chairman Keishiro Teraoka, President Kenichi Tsuji and Outside
Director Keiko Hatta discussed the past and future of the Company.

Director Hatta
Congratulations on 100 years. I’m sure there were many ups and downs, but how does it
feel now, to finally be at 100?

Chairman Teraoka
Thank you very much. We have always worked in development, production and sales ofadhesive tapes since the founding of the Company, in this very spot in Shinagawa, in 1921.
However our main products have changed with the times. When we
first started out, the main product was Black Tape, used for electrical insulation, but by around 1950 packing tapes, especially tapes
made from fabric, became the backbone of the Company. The mostwell-known of these is Olive Tape. After that we created a system of“listening to the customer and adapting quickly,” which led to focus
on development of electrical insulation and electronic equipment
tapes. We worked hard to develop and diversify vinyl tapes, polyester tapes, acetate tapes, etc. These products are now used internallyin electronic devices such as smartphones and tablets and accountfor more than half of the Company’s sales. It has been 100 years ofadapting to the times and answering our customers’ needs one at atime.

Director Hatta
When I took the position of outside director last year, the first thing I did was look at thecompany creed and financial statements. The company creed first created by the president two generations ago has continued to be prevalent for 59 years in the emphasis on
quality, selflessness when it concerns stakeholders, contributions to society and considerations for the lives of employees. It was also clear from the financial statements that thebusiness has been operating extremely soundly and safely. Why do you think the Company
has survived for 100 years and what are the strengths?
Mr. Tsuji, what are your thoughts on this, as the first Company president from outside
the family of the founder.

Teraoka Seisakusho Co., Ltd.

3

President Tsuji
The reason the Company has survived 100 years is first of all, is because at the core of thecompany, it is serious and sincere about all matters. The agents and customers understand and appreciate this sincerity. As a result, I believe we are blessed to have had the
support of our agents and customers, and in response our employees
and directors have worked hard, which has built up over time.
Also, although the Company tragically suffered factory fires twice
during the Showa era, we were able to bounce back from that adversity, and all employees rallied together at a scale that we were able to
all aim for together, extremely casually. I think that is another reason.

Chairman Teraoka
Not long after the Company’s founding the president and employees
ate rice out of the same pan. After the war, the president and several
employees operated the Company as a technical corps with far more
unity than when they started, cultivating a familial corporate culture.
It’s now been 100 years since the founding and I believe we can keep the good points
while improving on what needs it and reviewing the points that should be adapted to thetimes.

Director Hatta
The Company has caused tape to evolve with the development of technology. As we head
forward in a future where we must coexist with the earth’s environment, it is likely the automobile industry and communications industry technology will change greatly. Please tell us
about how this relates to the Company and the future of adhesive tape.

President Tsuji
The good things about adhesive tape are that it is light, it is highly accurate, it can beadapted to the shape of what it will stick to, and it can contribute to improvement of thecustomer’s productivity. Therefore, adhesive tape can respond flexibly to changes in theworld. Our mission is to discover what solutions we can provide to our customers using
adhesive tape. Our strength is that we deal in products with flexibility that allow us to respond in that way.

Chairman Teraoka
The distinguishing characteristic of our Company is our R&D system in which our technicians meet with the customers, ask for their demands and create order-made products
according to the customers’ uses. This system that we have cultivated, shall continue to be
the foundation of our research and development.

4

Teraoka Seisakusho Co., Ltd.

Director Hatta
This year you have formulated a new 5-year medium-term plan, which
also serves as the first step toward the next 100 years. Please give us
some insight into the problems and goals you plan to tackle as well as
your resolutions.

President Tsuji
The reason that we went with a 5-year medium-term plan is that theworld is currently in the middle of the fourth industrial revolution, andwe believe there are certain possibilities, such as the defacto standard,
being determined sometime in the next five years. It is an extremely
significant time, in that, how we deal this revolutionary period may determine our future 30
or 50 years from now.
This year, we decided on, “Embrace change, value the process and endeavor to create “New Century” value that pursuits harmonization of people, nature and technology,” asour first corporate philosophy. The human race has been destroying the earth’s nature, but
the age of mass production and mass consumption is coming to an end. We believe that
we need to create a foundation in the form of pursuit of qualitative repletion and expansion
by effective use of precious resources. Our vision five years down the road is to come a“Smart Convenience Producer.” We aim to become an integrated manufacturer that rather
than just selling products, sells convenience and instead of just providing products andservices, we hope to be providing added value.
We aim to become a group that is capable of integrated production, encompassing
the fact that we must pursuit technology in which people, nature and technology are harmonized, without providing the sort of convenience that destroys the environment.

Chairman Teraoka
In addition, I believe that the Company must remain a corporation that continues to reward
stockholders, clients and vendors, employees, the local society etc., for the next 100 years
as well.

President Tsuji
As the chairman said, I believe that our mission is to reward all those involved. Therefore
we must become a corporation that is recognized by all those involved as having value andimportance through developing product technology for customers that reduces their burden on the environment, eliminating loss even at the product manufacturing stage, reduce
waste and using energy effectively so that our customers can use products perfect forthem, creating a virtuous circle. We are steadfast in becoming this sort of Company as weembark upon the next 100 years.

Director Hatta
Thank you for powerful determination in facing the next 100 years. This concludes today’s
discussion.

Teraoka Seisakusho Co., Ltd.

5

REVIEW OF OPERATIONS
Safety, hygiene and health are always the top priorities of the Company Group R&D, which is held up by
the pillars of both short-term and medium to long-term
perspectives, developing new products, materials withnew function and new manufacturing methods, introduction of new technology thanks to external alliances,improved quality and stability in production. This is all
based on adhesive tapes and resin sheets producedwith consciousness of sustainability such as global environmental protection providing value to customers andsolving problems. For the past several years especially,
we have focused on development of environmentallyfriendly products and related technology, and since the
COVID-19 pandemic starting plaguing us last year, wehave also focused on initiatives geared toward eliminating risk of viral infection.
The market accomplished dramatic reforms withthe permeation of SDGs, global trends toward achievingcarbon neutrality and decarbonization, the new CASE
automobile concept born through a collaboration of
the automobile and communications industries, augmented communication speed and volume through 5G
and changes in industrial structure and the way we workthrough AI and DX. The COVID-19 pandemic that started
in 2020 has triggered a paradigm shift on a global scale,spurring reforms in the medical systems, services, human logistics, production activities, individual consumption trends, etc.
With this, the needs of the Company Group’s customers have also become more diverse and sophisticated. The appeal for carbon neutrality and viral infection
risk response on a global scale have especially important values to the Company Group. It has been determined that a research and development system that can
provide stable products, supply value and solutions to
the market is extremely important in a changing environment with such a massive impact both on society andon the economy. In addition to taking our current technologies to the next level in response to these trends,
we are also tackling development of new technology andcapital investment.
New achievements in this consolidated fiscal year
include advanced-fixation heat-resistant tape, tape forvarious parts in manufacturing processes with heatresistance and added cost competitiveness, heat management tape, new flame-resisting tape that is also
environmentally friendly, etc.

Also, many newtechnological developments expected to belaunched in the medium to long-term saw
progress, and we arealways expanding our
R&D system, including
actively investing inequipment and drafting technical strategies that span fromthe short to mediumterms.
Total R&D costs in this consolidated accounting period were¥944 million (US$8,526 thousand),decreasing 11.5% compared to theprevious term. Furthermore, R&D
accounted for 4.4% of consolidated
sales, which was a 0.3 point decrease below the previous term.
Individual initiatives by department this fiscal year
saw the sales department focus on recovery and expansion of orders for tapes for vehicles and electronics andacquiring new commercial rights while at the same time
starting business for new models. The technology department tackled launching of new products supported
by new technology, new large-scale equipment, etc. At
the management level, managers worked to improve
productivity through zero-base review of conventional
operations and to make improvements through operational reforms.
The result was that consolidated net sales for the
consolidated fiscal year decreased by 5.4% for the same
term the previous year to ¥21,662 million (US$195,648
thousand). Operating income were ¥129 million(US$1,164 thousand). This is a 24.2% increase fromthe same term the previous year. Consolidated income
before income taxes was ¥302 million (US$2,729 thousand), a 4.8% decrease from the previous term. Consolidated net income attributable to the parent company
was ¥91 million (US$822 thousand), a 39.1% decrease
below the previous term.
The Company Group business consists of a single
segment, manufacture and sale of adhesive tape. However, the following is an explanation of the state of sales
by product division.

Sales of Packing Tapes

Sales of Electrical Insulation andElectronic Equipment Tapes

Sales of Other Industrial Tapes(¥ billions)5(¥ billions)(¥ billions)
8

4

3.7

14

3.7

3.7

12

3.6

10

2.9

3

11.6

12.2

11.7

10.3

7.5

7.6

7.6

17

18

19

20

7.0

6

8
4

6

2

7.3

11.7

4

2

1
2
0

6

0

0

17

18

Teraoka Seisakusho Co., Ltd.

19

20

21

17

18

19

20

21

21

BREAKDOWN OF SALES BY CATEGORY

54.2% Electrical Insulation and13.5% Packing Tapes

Electronic Equipment Tapes

Olive cloth tapes● Kraft paper tapes●●

Polypropylene film adhesive tapes●

Polyester film adhesive tapes●

Acetate cloth adhesive tapes
Combination adhesive tapes●

R

Kapton film adhesive tapes● Nomex adhesive tapes●

R

32.3% Other Industrial Tapes●●●●

Double-coated adhesive tapes
Corrosion-proof tapes
Masking cloth tapes●

Glass cloth adhesive tapes●

EMI/RFI shielding tapes●

Silicone rubber adhesive tapes

Surface protection tapes

Packing Tapes
While demand for home centers was steady due to the increase of people
working at home and staying at home, there was a decrease in corporate
tape demand, and sales this term for the Packing Tapes division dropped
19.6%
compared tothe sameterm the previous year, attributed to review
GEOGRAPHICAL
SALESMARKETSof unprofitable transactions. Consolidated sales for this product segment
wereAsia ¥2,914 million (US$26,318 thousand). This segment accounted for
13.5% of total consolidated sales and has dropped 2.3 points from the
27.6% term.
previousJapan

CHANGES IN OVERSEAS SALES(¥ billions)
10

8.02

8

8.03

7.31
6.59

69.0%Equipment Tapes
Electrical Insulation and Electronic

6.11

6

Sales for the Electrical Insulation and Electronic Equipment Tapes divisionwere ¥11,748 million (US$106,101 thousand), on par with the previous term.
This is attributed to low numbers in the first half of the term with decreasein demand due to people’s lives being put on hold, but thanks to recovery
of orders for vehicle and electronic parts tapes in the second half of theterm and new modelbusiness.
This is a 0.4% increase over the same term
North
Americathe previous year. This segment accounts for 54.2% of total consolidated
1.5%3.1 points over the previous term.
sales and has increased

4

2

0

17

Europe

18

19

20

21

Other Industrial0.9
Tapes%

While demand for tapevehicles started to recover late in the year, due
Otherforareas
to sluggish demand for tapes related to offices, events and construc1.0%Industrial Tapes division were ¥7,000 million
tion, sales for the Other(US$63,229), which was a 7.6% decrease from the same term the previous
year. This segment accounted for 32.3% of total consolidated sales andhas decreased by 0.8 points from the previous term.

GEOGRAPHICAL SALES MARKETS
Asia

21.8%

Japan

Overseas Sales
The Company Group has expanded activities overseas by establishingcorporate bodies and bases in Hong Kong SAR, Shanghai, Shenzhen,
Indonesia, as well as Taiwan.
Looking at overseas sales for the current consolidated fiscal year
by segment, Packing Tapes were ¥136 million (US$1,233 thousand), a
decrease of 44.9% while Electrical Insulation and Electronic Equipment
Tapes sales were ¥5,751 million (US$51,945 thousand), decreasing by
23.4% from the previous term’s sales. Other Industrial Tapes sales were¥224 million (US$2,019 thousand), which was a 17.8% decrease below
the previous term. The result of this was overseas sales of ¥6,111 million(US$55,197 thousand), dropping by 23.9% compared to the same term theprevious year. This accounted for 28.2% of consolidated sales which wasa 6.9-point decrease from the same term the previous year.

71.8%

North America

4.7%
Europe0.8%
Other areas

0.9%
Teraoka Seisakusho Co., Ltd.

7

Teraoka Seisakusho Co., Ltd. and Consolidated Subsidiaries

CONSOLIDATED FIVE-YEAR SUMMARY

Thousands of
U.S. dollars

Millions of yen

2017

2018

2019

2020

2021

2021

¥21,262¥22,816¥23,558¥22,895¥21,662$195,648

1,039

1,319

1,144

104

129

1,164

Income before Income Taxes

768

1,291

1,366

317

302

2,729

Net Income

616

921

1,034

149

91

822

Total Assets

34,64035,57535,85435,14037,033

334,477

Net Assets

27,994

28,68628,97827,93929,046262,341

Operating Income to Net Sales

4.9

5.8

4.9

0.5

0.6

Equity Ratio

80.8

80.6

80.8

79.5

78.4

Return on Average Assets (ROA)

1.8

2.6

2.9

0.4

0.3

2.2

3.3

3.6

0.5

0.3

Years ended March 31

Net Sales
Operating Income

Ratio (%)

Return on Average
Stockholders' Equity (ROE)Per Share

Yen

Net Income¥23.96¥36.37¥40.84¥ 5.90¥ 3.59$0.03

Cash Dividends

11.00

12.00

14.00

10.00

12.00

0.11

The U.S. dollars are translated at the rate of ¥110.72 per US$1, prevailing on March 31, 2021.

8

U.S. dollars

Teraoka Seisakusho Co., Ltd.

CONSOLIDATED FINANCIAL STATEMENTS
Fiscal Year 2021
Year ended March 31, 2021

Teraoka Seisakusho Co., Ltd.

9

FINANCIAL REVIEWBusiness Performance

Net Assets(¥ billions)
30

20

10

0

17

18

19

20

21

Net Income
per Share (Yen)
40

30

20

Equity Ratio
In this(%) consolidated fiscal year, economic activities in Japan have been restricted due todeclarations of state of emergency because of the spread of COVID-19, creating a rough100
economicsituation in Japan, but starting late in the year there were signs of recovery mainly
from export of products for vehicles and electronic parts such as semi-conductors to China.
Looking
at the world economy, China returned to its pre-COVID economic standards rela80
tively quickly and the U.S. is seeing signs of recovery from resuming economic activity instages and the effects of economic measures, but the future remains unclear.
60 Amidst this economic environment, the Company Group income was lower than normal
years due to the influence of extended trade friction between the U.S. and China and the
COVID-19
pandemic. Despite this, we were able to recover from significant deficit early in40
the year and achieve surplus in all profit items thanks to various measures to reduce fixed
costs as much as possible, and securing profitable tendencies from September onward.
20 Each department made efforts to achieve this. The sales department focused on recovery and expansion of orders for tapes for vehicles and electronics and acquiring newcommercial
rights. At the same time they worked on reviewing unprofitable transactions
0
17 18 business
19 20 for21new models while promoting improved productivity through a newand starting
way of working, utilizing teleworking. The technology department tackled launching of new
products
supportedby new technology and investment in new large-scale equipment with
Returnon Average
an eyeon medium-termbusiness development. At the management level, managers worked
Assets(ROA) (%)
to improve productivity through zero-base review of conventional operations and to make3
improvements through operational reforms.
As a result, net sales for the consolidated fiscal year were ¥21,662 million (US$195,648
thousand), decreasing 5.4% from the same period the previous year. The operating income
was ¥129 million (US$1,164 thousand). This is a 24.2% increase from the same term the2previous
year. Income before income taxes was ¥302 million (US$2,729 thousand), a 4.8%
decrease from the previous term. Net income for the parent company was ¥91 million (US$822
thousand), a 39.1% decrease below the previous term.

Segment
Information
1
10

0

17

18

19

20

21

19 20

21

Cash Dividends
per Share (Yen)
15

10

5

0

10

17 18

Teraoka Seisakusho Co., Ltd.

The Company Group business consists of a single segment, manufacture and sale of adhesive tape. However, the following is an explanation of the state of sales by product division.
In the Packing Tapes segment this term, while demand for home centers was steadydue
0 to the increase of people working at home and staying at home, there was a decrease in
17 tape18 19
20 21sales for this division dropped 19.6% compared to the same term
corporate
demand,the previous year to ¥2,914 million (US$26,318 thousand), attributed to review of unprofitabletransactions.
This segment accounts for 13.5% of total consolidated sales and has dropped
Return on Averageby 2.3pointsbelow
the(ROE)
previous
term.
Stockholders' Equity
(%)
Sales
for
the
ElectricalInsulationand Electronic Equipment Tapes segment were ¥11,748
4
million (US$106,101 thousand), which is attributed to low numbers in the first half of the termwith decrease in demand due to people’s lives being put on hold, but thanks to recovery oforders for vehicle and electronic parts tapes in the second half of the term and new model3
business. This is a 0.4% increase over the same term the previous year. This segment accounts for 54.2% of total consolidated sales, an increase of 3.1 points over the previousterm.
2
In the Other Industrial Tapes segment, while demand for tape for vehicles started torecover late in the year, due to sluggish demand for tapes related to offices, events andconstruction, sales this segment were ¥7,000 million (US$63,229 thousand), which was a1
7.6%
decrease below the same term the previous year. This segment accounts for 32.3% ofconsolidated sales and dropped 0.8 points below the previous term.
On the other hand, looking at results for the Overseas Sales segment, overseas sales
for0 this accounting period were ¥6,111 million (US$55,197 thousand) which was a 23.9%
17 from
18 19
20 21 term.
decrease
the previous

Breaking down overseas sales by division, Packing Tapes sales decreased by 44.9%.
Electrical Insulation and Electronic Equipment Tapes decreased by 23.4% and Other Industrial Tapes decreased by 17.8%. Overseas Sales accounts for 28.2% of consolidated sales
and shrunk by 6.9 points compared to the previous year.

Equity Ratio(%)
100

Financial Position

80

60

40

20

21

0

17

18

19

20

21

Return on Average
Assets (ROA) (%)
3

2

Total assets for the end of year consolidated accounting increased by 5.4% over the previous end of year consolidated accounting to ¥37,033 million (US$334,477 thousand).
Total current assets for the end of year decreased by 2.7% from the previous end ofyear consolidated accounting to ¥20,282 million (US$183,179 thousand). This was mainly attributed to a decrease in cash and deposits due to capital investment.
Total fixed assets for the end of year consolidated accounting grew 17.2% from the previous end of year consolidated accounting to ¥16,751 million (US$151,298 thousand). Thiswas mainly due to an increase in construction in process.
Total liabilities for the end of year consolidated accounting increased 10.9% over theprevious end of year consolidated accounting to ¥7,9 86 million (US$72,136 thousand).
Out of this, total current liabilities increased 4.3% over the previous end of term to ¥6,381
million (US$57,636 thousand). This was mainly due to liabilities related to equipment accompanying an increase in capital investment.
Furthermore, total long-term liabilities increased 48.6% over the previous end of year
consolidated accounting to ¥1,605 million (US$14,500 thousand). This was mainly due to anincrease in long-term borrowing and asset retirement obligation.
Total net assets for the end of year consolidated accounting increased 4.0% over theprevious end of year consolidated accounting to ¥29,046 million (US$262,341 thousand).
This is mainly due to an increase in adjusted cumulative total for retirement benefits.
The result of these figures is a capital-to-asset ratio of 78.4%, a decrease of 1.1 points
from the previous term.

Cash Flows
1

21

21

0

17

18

19

20

21

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

Dividends

3

2

1

0

Increase in capital from operating activities was ¥3 million (US$27 thousand). This increaseon the previous year’s consolidated accounting was ¥1,458 million. This was mainly due toan increase in trade receivables and inventories.
Cash flow used for investment activities was ¥1,536 million (US$13,876 thousand). Evenin the activities of the previous consolidated accounting term, ¥912 million was used forinvestment. This was mainly due to expenditures for acquisition of tangible fixed assets.
Increase of capital from financial activities was ¥78 million (US$703 thousand). Decrease in capital for the previous consolidated accounting year was ¥272 million. The reason
for the increase this term was mainly income from borrowing.
From these activities, consolidated cash and cash equivalents for end of year consolidated accounting were ¥7,781 million (US$70,274 thousand), a decrease of ¥1,411 million
compared to the previous year end consolidated accounting.

17 18 19 20 21

TERAOKA considers the payment of dividends to its shareholders as one of our most important business issues, and we operate according to a basic policy of continuing to issue
stable dividend payments.
Regarding dividends, in addition to elements affecting the amount, such as businessresults, current financial state, cash flow, dividend payout ratio, etc., dividends were determined based overall considerations of future business strategy, business development
policies and projections, including considerations for ensuring a certain level of flexibility, as
well as ensuring capital for reinvestment.
According to our basic stance on this type of dividend, the end of term dividend was¥9.00 (US$0.08) and combined with the previously distributed interim dividend of ¥3.00(US$0.03) per share, the total annual dividends were ¥12.00 (US$0.11) per share. The payout
ratio for this term was 64.6%.
Teraoka Seisakusho Co., Ltd.

11

Teraoka Seisakusho Co., Ltd. and Consolidated Subsidiaries

CONSOLIDATED BALANCE SHEETSMarch 31, 2021 and 2020

Thousands of
U.S. dollars

Millions of yen

2021

2020

2021

¥  8,467
5,891
1,166
2,362
1,076
845
484
(9)
20,282¥  9,807
5,708
1,035
1,813
1,121
912
458
(8)
20,846$  76,469
53,207
10,531
21,331
9,719
7,631
4,372
(81)
183,179

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

12,237
20,448
4,040
269
1,997
2,345
41,336(28,807)
12,52911,94022,335
4,034
269
893
2,248
41,719(30,396)
11,323

110,521
184,684
36,4852,434
18,034
21,183373,341(260,182)
113,159

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

114

111

1,027

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

2,956
18
940
194
—
4,108

2,600
97
—
166
(3)
2,860

26,702
164
8,486
1,760
—
37,112

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

¥ 37,033¥ 35,140$ 334,477

ASSETS
Current Assets:
Cash and time deposits ����������������������������������������������������������������������������
Notes and accounts receivable – trade ������������������������������������������������������
Electronically recorded monetary claims – operating ���������������������������������
Merchandise and finished goods (Note 2-c) ����������������������������������������������
Work in process (Note 2-c) �����������������������������������������������������������������������
Raw materials and supplies (Note 2-c) �������������������������������������������������������
Other �������������������������������������������������������������������������������������������������������
Less: Allowance for doubtful accounts (Note 2-h) �������������������������������������
Total current assets ����������������������������������������������������������������������������

Property, Plant and Equipment (Notes 2-d and 2-f):
Buildings and structures ����������������������������������������������������������������������������
Machinery, equipment and vehicles ����������������������������������������������������������
Land ���������������������������������������������������������������������������������������������������������
Leased assets ��������������������������������������������������������������������������������������������
Construction in progress ���������������������������������������������������������������������������
Other �������������������������������������������������������������������������������������������������������

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

12

Teraoka Seisakusho Co., Ltd.

Thousands of
U.S. dollars

Millions of yen

2021

2020

2021

LIABILITIES AND STOCKHOLDERS’ EQUITYCurrent Liabilities:
Notes and accounts payable – trade ���������������������������������������������������������
Electronically recorded obligations – operating ������������������������������������������
Short-term loans payable ��������������������������������������������������������������������������
Lease obligations ��������������������������������������������������������������������������������������
Accrued income taxes �������������������������������������������������������������������������������
Accrued expenses �������������������������������������������������������������������������������������
Other �������������������������������������������������������������������������������������������������������
Total current liabilities ������������������������������������������������������������������������

¥ 1,427
2,319
121
19
93
556
1,846
6,381

¥ 1,298
2,583
—
19
53
508
1,659
6,120

$ 12,884
20,948
1,092
175
838
5,025
16,674
57,636Long-term Liabilities:
Long-term loans payable ��������������������������������������������������������������������������
Lease obligations ��������������������������������������������������������������������������������������
Deferred liabilities taxes (Note 2-g) �����������������������������������������������������������
Provision for environmental measures �������������������������������������������������������
Net defined benefit liability �����������������������������������������������������������������������
Asset retirement obligations ���������������������������������������������������������������������
Long-term accounts payable - other ���������������������������������������������������������
Other �������������������������������������������������������������������������������������������������������
Total long-term liabilities ��������������������������������������������������������������������

179
191
465
74
76
504
57
59
1,605

—
211
38
316
104
304
57
51
1,081

1,618
1,723
4,197
672
686
4,553
512
539
14,500Total liabilities ������������������������������������������������������������������������������������

7,986

7,201

72,136NET ASSETSStockholders’ Equity:
Common stock �����������������������������������������������������������������������������������������
Authorized: 80,000,000 shares
Issued:    26,687,955 shares as of March 31, 2021 and26,687,955 shares as of March 31, 2020, respectively
Additional paid-in capital ��������������������������������������������������������������������������
Retained earnings �������������������������������������������������������������������������������������
Less: Treasury stock, at cost ����������������������������������������������������������������������
Total Stockholders’ equity ������������������������������������������������������������������

5,057

5,057

45,675

4,644
17,824(462)
27,063

4,644
17,935(462)
27,17441,944160,984(4,180)244,423

Accumulated other comprehensive income
Unrealized gains on securities (Notes 2-b and 5) ���������������������������������������
Foreign currency translation adjustments (Note 2-j) �����������������������������������
Remeasurements of defined benefit plans ������������������������������������������������
Total accumulated other comprehensive income ��������������������������������
Total net assets ����������������������������������������������������������������������������������
Total liabilities and net assets �������������������������������������������������������������

1,140
262
582
1,984
29,047¥37,033

764
137
(136)
765
27,939¥35,140

10,2982,371
5,249
17,918262,341$334,477

Teraoka Seisakusho Co., Ltd.

13

Teraoka Seisakusho Co., Ltd. and Consolidated Subsidiaries

CONSOLIDATED STATEMENTS OF INCOME
For the years ended March 31, 2021 and 2020

Thousands of
U.S. dollars

Millions of yen

2021¥21,662
16,734
4,928
4,799
129

2020
¥22,895
17,411
5,484
5,380
104

2021
$195,648
151,135
44,513
43,349
1,164

10
81
18
83
(140)
(0)
(68)
(14)
175
—
28
173

14
93
22
(135)
(4)
—
(53)
—
247
22
7
213

86
737
163
753
(1,270)
(4)
(610)
(122)
1,579
—
253
1,565

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

302

317

2,729

Income taxes:
Current ����������������������������������������������������������������������������������������������������
Deferred ���������������������������������������������������������������������������������������������������
Total income taxes ���������������������������������������������������������������������������������

140
71
211

162
6
168

1,261
646
1,907

Net income �������������������������������������������������������������������������������������������

¥    91¥   149$    822

Profit attributable to non-controlling interests ����������������������������������������������
Profit attributable to owners of parent ���������������������������������������������������������

—
91

—
149

—
822

Net Sales ������������������������������������������������������������������������������������������������������
Cost of Sales ������������������������������������������������������������������������������������������������
Gross Profit �������������������������������������������������������������������������������������������
Selling, General and Administrative Expenses �����������������������������������������������
Operating income ���������������������������������������������������������������������������������
Other Income and Expenses:
Interest income �����������������������������������������������������������������������������������������
Dividend income ���������������������������������������������������������������������������������������
Insurance income �������������������������������������������������������������������������������������
Foreign exchange gains (losses), net ���������������������������������������������������������
Loss on retirement of non-current assets ���������������������������������������������������
Interest paid ���������������������������������������������������������������������������������������������
Commission paid ��������������������������������������������������������������������������������������
100th Anniversary project expenses ����������������������������������������������������������
Gain on sales of investment securities �������������������������������������������������������
Gain on sales of fixed assets ���������������������������������������������������������������������
Other, net �������������������������������������������������������������������������������������������������Per Share
Per share of common stock
Net income �����������������������������������������������������������������������������������������������Cash dividends �����������������������������������������������������������������������������������������

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

14

Teraoka Seisakusho Co., Ltd.

Yen

¥ 3.59
12.00

U.S. dollars¥ 5.90
10.00

$0.03
0.11

Teraoka Seisakusho Co., Ltd. and Consolidated Subsidiaries

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the years ended March 31, 2021 and 2020

Thousands of
U.S. dollars

Millions of yen

2021¥   91

2020
¥ 149

2021
$   822

376
125
718
1,219

(681)
(126)
(128)
(935)

3,399
1,128
6,482
11,009Comprehensive Income ��������������������������������������������������������������������������������

¥1,310¥(786)$11,831

Total comprehensive income attributable to:Comprehensive income attributable to owners of parent ��������������������������
Comprehensive income attributable to non-controlling interests ���������������

1,310
—­

(786)
—­

11,831—­

Net income ��������������������������������������������������������������������������������������������������
Other Comprehensive Income
Unrealized gains on securities �������������������������������������������������������������������
Foreign currency translation adjustments ��������������������������������������������������
Remeasurements of defied benefit plans ��������������������������������������������������
Total other comprehensive income ������������������������������������������������������������

Teraoka Seisakusho Co., Ltd.

15

Teraoka Seisakusho Co., Ltd. and Consolidated Subsidiaries

CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETSFor the years ended March 31, 2021 and 2020

Millions of yen
Accumulated Other Comprehensive Income

Stockholders’ Equity

Balance at April 1, 2019 �������Cash dividends paid ���������������
Net income ����������������������������
Purchase of treasury stock ������
Net changes of items otherthan Stockholders’ equity �����
Total changes of items during
the period ����������������������������
Balance at March 31, 2020 ��
Balance at April 1, 2020 �������Cash dividends paid ���������������
Net income ����������������������������
Purchase of treasury stock ������
Net changes of items otherthan Stockholders’ equity �����
Total changes of items during
the period ����������������������������
Balance at March 31, 2021 ��CommonStock:

Additional Paidin Capital

Retained
Earnings¥5,057———¥4,644———¥18,039
(253)
149
—

—

—

—

—
¥5,057¥5,057————¥4,644¥4,644———(104)¥17,935¥17,935
(202)
91
—

—

—

—

—
¥5,057—¥4,644(111)¥17,824

Foreign
Remeasure- Total AccumuCurrency
ments oflated Other
Translation
DefinedComprehenAdjustments Benefit Plans sive Income

Total
Treasury Stock, Stockholders’at CostEquityUnrealized
Gains onSecurities¥(462) ¥27,278
—
(253)
—
149
(0)
(0)

¥1,445
—
—
—

¥ 263
—
—
—

¥  (8)———¥1,700———¥28,978
(253)
149
(0)

—

(681)

(126)

(128)

(935)

(935)

(0)
(104)
¥(462) ¥27,174¥(462) ¥27,174
—
(202)
—
91
(0)
(0)

(681)
¥  764¥  764
—
—
—

(126)
¥ 137
¥ 137
—
—
—

(128)
¥(136)¥(136)———(935)¥  765¥  765———(1,039)¥27,939¥27,939
(202)
91
(0)

—

376

125

718

1,219

1,219

—
(111)
¥(462) ¥27,063

376¥1,140

125
¥ 262

718
¥ 582

1,219
¥1,984

1,108¥29,047——

Total Net
AssetsThousands of U.S. dollars
Stockholders’ Equity
CommonStock

Balance at April 1, 2020 ������� $45,675—
Cash dividends paid ���������������
—Net income ����������������������������
—Purchase of treasury stock ������
Net changes of items other—than Stockholders’ equity �����
Total changes of items during—
the period ����������������������������
Balance at March 31, 2021 �� $45,675

Additional
Paid in
CapitalRetained
Earnings$41,944 $161,992—(1,830)
—
822
—
—
—

—

—
(1,008)$41,944 $160,984

Accumulated Other Comprehensive Income

Treasury
Stock,
at CostUnrealized
Gains onSecurities$(4,179) $245,432—(1,830)
—
822
(1)
(1)

$6,899———$1,243
—
—
—

—

3,399

1,128

6,482

11,00911,009(1)(1,009)$(4,180) $244,423

3,399$10,298

1,128$2,371

6,482$ 5,249

11,009$17,918

10,000$262,341—

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

16

Teraoka Seisakusho Co., Ltd.

Foreign
Remeasure- Total AccumuCurrency
ments oflated Other
Translation
DefinedComprehenAdjustments Benefit Plans sive Income

Total
Stockholders’Equity$(1,233) $ 6,909
—
—
—
—
—
—

Total Net
Assets$252,341(1,830)822(1)Teraoka Seisakusho Co., Ltd. and Consolidated Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWSFor the years ended March 31, 2021 and 2020

Thousands of
U.S. dollars

Millions of yen

2021

2020

2021

¥  302¥  317$  2,729

838
195
143
(175)
—
(2)
(241)
66
(91)
0
(43)

1,001
—
4
(247)
(22)
3
—
(4)
(107)
—
55

7,571
1,766
1,294
(1,579)—(17)(2,178)
598
(823)
4
(393)

(303)
(430)
(142)
(106)
11
91
(0)
(99)
3

212
348
20
83
1,663
107
—
(312)
1,458

(2,740)(3,888)(1,286)
(955)
103
823
(4)
(895)
27

Investing Activities:
Payment for purchases of property, plant and equipment �������������������������
Payments for retirement of property, plant and equipment �����������������������
Proceeds from sales of property, plant and equipment ������������������������������
Payment for purchases of intangible assets �����������������������������������������������
Payment for purchases of investment in securities �������������������������������������
Proceeds from sales of investment securities ���������������������������������������������
Payments for asset retirement obligations �������������������������������������������������
Decrease (increase) in time deposits ����������������������������������������������������������
Net cash used in investing activities ��������������������������������������������������

(1,734)
(10)
3
(52)
(3)
315
—
(55)
(1,536)(1,030)
—
29
(36)
(3)
286
(3)
(155)
(912)

(15,658)
(94)
28
(474)
(26)
2,847
—
(499)
(13,876)

Financing Activities:
Increase in short-term loans payable ���������������������������������������������������������
Proceeds from long-term loans payable ����������������������������������������������������
Dividends paid ������������������������������������������������������������������������������������������
Payment for acquisition of treasury stock ��������������������������������������������������
Other, net �������������������������������������������������������������������������������������������������
Net cash used in financing activities �������������������������������������������������

120
180
(203)
(0)
(19)
78

—
—
(253)
(0)
(19)
(272)

1,084
1,626
(1,830)
(1)
(176)
703

Effect of Exchange Rate Changes on Cash and Cash Equivalents ����������Net Increase (Decrease) in Cash and Cash Equivalents ���������������������������Cash and Cash Equivalents at Beginning of Period ��������������������������������Cash and Cash Equivalents at End of Period �������������������������������������������

44(1,411)
9,192¥ 7,781

(41)
233
8,959
¥ 9,192399(12,747)
83,021$ 70,274

Operating Activities
Income before income taxes ������������������������������������������������������������������������
Adjustments to reconcile net income to net cash provided byoperating activities:
Depreciation and amortization ��������������������������������������������������������������
Asset retirement cost ����������������������������������������������������������������������������
Loss on retirement of non-current assets �����������������������������������������������
Gain on sales of investment securities ���������������������������������������������������
Gain on sales of fixed assets ������������������������������������������������������������������
Increase (decrease) in allowance for doubtful accounts ��������������������������
Increase (decrease) in provision for environmental measures ������������������
Increase (decrease) in net defied benefit liability ������������������������������������
Interest and dividends income ���������������������������������������������������������������
Interest expenses �����������������������������������������������������������������������������������
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 �����������������������������
Other, net ���������������������������������������������������������������������������������������������
Subtotal �����������������������������������������������������������������������������������������������
Interest and dividends income received ����������������������������������������������
Interest expenses paid ������������������������������������������������������������������������
Income taxes (paid) refund �����������������������������������������������������������������
Net cash provided by operating activities ����������������������������������������

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

Teraoka Seisakusho Co., Ltd.

17

Teraoka Seisakusho Co., Ltd. and Consolidated Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended March 31, 2021 and 2020

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 ¥110.72=
US$1, the prevailing exchange rate on March 31, 2021.

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,
2021 and 2020 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 cost18

Teraoka Seisakusho Co., Ltd.

determined by the moving average method. For otherthan temporary declines in fair value, other securities
are reduced to net realizable value by a charge toincome.
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
The straight line method is used for depreciation of
tangible fixed assets (excluding leased assets). The
straight line method is used for depreciation of intangible fixed assets (excluding leased assets). The straightline method is used based on period that the software
can be used within the Company (5 years).
Depreciation of leased assets related to financial
leases other than transfer of ownership, shall be calculated using the straight line method with the lease
period as the service life and 0 as the salvage value.
e. Impairment of assets
Assets are reviewed for impairment whenever events orchanges in circumstance indicate the carrying amountof an asset or asset group may not be recoverable. An
impairment loss is recognized if the carrying amount ofan asset or asset group exceeds the sum of the undiscounted future cash flows expected to result from thecontinued use and eventual disposition of the asset or
asset group. The impairment loss would be measured
as the amount by which the carrying amount of anasset or asset group exceeds its recoverable amount,which is the higher of the discounted cash flows fromthe continued use and eventual disposition of the asset
or asset group, or the net selling price at disposition.
f. 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.
g. 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.
h. 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.
i. Accrued retirement benefits(1) The‌
method of attributing expected retirement
benefit to periods
The Company applies the benefit formula basis tomeasure the pension obligation. The expected
retirement benefit attributed to periods of service
under the plan’s benefit formula is deemed asarising in each period.
(2) D ifferences in actuarial valuation and cost processing method for past service costs
Differences in actuarial valuation are processed sothat the amount distributed according to thestraight line method using a certain number ofyears within the average remaining period of
employment (5 years) of employees when the
difference occurred in each consolidated accounting period to remove them from the following
consolidated accounting period.
Past service costs are processed according to thestraight line method using a certain number ofyears within the average remaining period of
employment (10 years) of employees when theservice occurred.

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
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 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.
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.
(Not used accounting standards, etc.)•“
 Accounting standards related to revenue recognition”(Corporate Accounting Standards #29, March 31, 2020)•“
 Policy for application of accounting standards related torevenue recognition” (Corporate Accounting Standards#30, March 26, 2021)

Teraoka Seisakusho Co., Ltd.

19

(Changes in accounting estimates)(1) Reserve fund for environmental measures
Conventionally, a reserve fund for environmental measures was accounted for in order to be prepared for
expenses to dispose of PCB waste. However, in thisconsolidated accounting period, the revision of the“Ordinance for Enforcement of the Act on Special
Measures for Promotion of Proper Disposal of Polychlorinated Biphenyl Waste” served as an opportunity tochange estimates. Inspection of actual contents for
disposal made it possible to produce even moredetailed estimates and the differences from the former
estimates were accounted for as extraordinary profit.
This increases Income before income taxes for thisconsolidated accounting period by ¥217 million.
(2) Asset retirement obligation
Conventionally, asset retirement obligations were
accounted for in order to be prepared for expenses toeliminate asbestos in buildings used by the company.
However, in this consolidated accounting period, therevision of the “Air Pollution Control Law” served as
an opportunity to change estimates. Inspection of
actual contents made it possible to produce even moredetailed estimates and the differences from the former
estimates were accounted for as extraordinary loss.
Due to this change, the current net profit prior toadjustment for taxes, etc., in this consolidated accounting period decreased by ¥195 million.
(Changes in accounting policy that are difficult todistinguish from changes in accounting estimates)
Change to depreciation method for tangible fixed assets
In the past, the Company and consolidated subsidiaries inJapan used the fixed percentage method (however, thestraight line method was used for buildings acquired from

April 1, 1998, and later (excluding equipment belonging
to buildings), equipment belonging to buildings from April
1, 2016, and later, and structures) for tangible fixed assets(excluding leased assets), but this has been changed to thestraight line method starting this consolidated accounting
period. These changes were made because it was decided
that distributing costs evenly over the period of service life
using the straight line method was appropriate for reflecting the actual status of use of tangible fixed assets due to
expected stable operation of equipment as a result ofinspecting the usage situation at the time of new capital
investment.
Compared to the conventional method, operating
profit, ordinary profit and net profit before income tax
adjustments each increased by ¥106 million for this consolidated fiscal period.
(Additional information)(1) Accounting estimates having to do with COVID-19
The Company Group (company and subsidiaries) has
been affected by the global COVID-19 pandemic andaccounting estimates of fixed asset values assume
gradual recovery going forward. Due to uncertainties
in estimates of the spread and settling of the COVID19 pandemic, actual results may differ from theseassumptions.
(2) Accounting standards applied from this consolidated
accounting period•“ Accounting standards related to accounting estimates” (Corporate Accounting Standards #31,
March 31, 2020)•“
 Accounting standards related to disclosure ofaccounting policy, accounting changes and correcting mistakes” (Corporate Accounting Standards #24,
March 31, 2020)

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 ¥7 million at March 31,
2020, and to ¥10 million at March 31, 2021.

4. Financial Instruments
Overview(1) Policy for financial instruments
The Company raises the funds by bank borrowings, andmanages funds only through short-term time deposit

20

Teraoka Seisakusho Co., Ltd.

and others. The Company uses derivatives for the purposes of managing foreign currency exchange risk related to trading receivables and payables, and does notenter into derivatives for speculative or trading purposes.

(2) Types of financial instruments and related risk
Trade receivables – notes receivable and accounts
receivable, and electronically recorded monetaryclaims – are exposed to credit risk in relation to customers. In addition, the Company is exposed to foreign 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, and electronically recorded obligations – mostly have payment due dates within one
year. A portion of trade payables, which is denominated in foreign currencies, is exposed to foreign
currency exchange risk. Long-term debt is taken 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 toliquidity 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 throughthe 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.
Estimated fair value of financial instruments
The carrying value of the financial instruments on the
consolidated balance sheet as of March 31, 2021 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

Financial Instruments

Carrying

Estimatefair value

Difference(1) Cash and deposits �����������������������������������������������������������������������������������

¥ 8,467¥ 8,467¥—(2) Notes and accounts receivable �����������������������������������������������������������������

5,891

5,891

—

(3) Electronically recorded monetary claims ���������������������������������������������������

1,166

1,166

—

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

2,937

2,937

—

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

(1,427)(1,427)—(6) Electronically recorded obligations �����������������������������������������������������������

(2,319)(2,319)—(7) Short-term loans payable �������������������������������������������������������������������������

(120)

(120)

—

(8) Long-term loans payable *1 ���������������������������������������������������������������������

(180)

(180)

—

*1: Including current maturities of long-term loans payable

Teraoka Seisakusho Co., Ltd.

21

(1) Methods to determine the estimated fair value offinancial instruments and other matters related tosecurities and derivative transactions(3) Redemption schedule for receivables and marketablesecurities with maturities at March 31, 2021
Millions of yen

Due in One
Year or Less

Cash and deposits, Notes and accounts receivable, andElectronically recorded monetary claims
Since these items are settled in a short period, theircarrying value approximates fair value.

Cash and deposits ��������������������������������������
Notes and accounts receivable - trade ��������
Electronically recorded monetaryclaims - operating �������������������������������������
Marketable securities andinvestments in securities ���������������������������
Total ��������������������������������������������������������

Investment in securities
The fair value of equity securities is based on quoted
market prices.

1,166—¥15,524(4) The redemption schedule for short-term loans payable
and long-term loans payable at March 31, 2021 was
as follows.

Notes and accounts payable, Electronically recorded
obligations, and short-term debt
Since these items are settled in a short period of time,
their carrying value approximates fair value.

Millions of yen

Average interest
rates (%)

2021
Short-term loans payable �����������
Long-term loans payable ������������
Total ���������������������������������������

Long-term loans payable
Since these items are based on a floating interest rate,
the market interest rate is reflected in a short period oftime and the market value is almost equal to the carrying value, so it is based on the carrying value.

¥121
179
¥300

0.87
0.57

The annual maturities of long-term loans payable for 5 years
subsequent to March 31, 2021 are summarized below:
Year ending March 31,(2) Financial instruments for which it is extremely difficult
to determine the fair value were as follows:
As of March 31, 2021
Unlisted equity securities¥ 8,467
5,891

Millions of yen

2022 ����������������������������������������������������������
2023 ����������������������������������������������������������
2024 ����������������������������������������������������������
2025 ����������������������������������������������������������
2026 ����������������������������������������������������������

Millions of yen

¥19

¥0
5
5
5
5

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.

5. Securities
Historical costs, fair value and gross unrealized gains and losses for marketable securities as of March 31, 2021 and 2020 are
as follows:
Millions of yen

2021
Historical costs

Fair value

Net differences

Gross gains

Gross losses

Other Securities:

22

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

¥1,045¥2,621¥1,576¥1,576¥—

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

293

316

23

23

—

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

¥1,338¥2,937¥1,599¥1,599¥—Teraoka Seisakusho Co., Ltd.

Millions of yen

2020
Historical costs

Fair value

Net differences

Gross gains

Gross losses¥1,183¥2,280¥1,097¥1,138¥(41)

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

293

301

8

8

—

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

¥1,476¥2,581¥1,105¥1,146¥(41)

Thousands of U.S. dollars

2021
Historical costs

Fair value

Net differences

Gross gains

Gross losses

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

$ 9,442$23,674$14,232$14,232$—

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

2,644

2,857

213

213

—

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

$12,086$26,531$14,445$14,445$—

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

Millions of yen

2021

2021

2020

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

¥19

¥19

$171

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

—

—

—

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

¥19

¥19

$171

6. Retirement and Pension Plans
The Company has a defined benefit pension plan. Our
domestic consolidated subsidiary and one of overseas
consolidated subsidiaries have retirement lump-sum plans.
In addition, when an employee retires, an employee may
be paid additional retirement benefits that are not part ofretirement benefit obligations. In lump-sum benefit plansoffered by domestic consolidated subsidiary etc. the retirement benefits and liabilities relating to the retirement
benefits are calculated using the simplified method.
Please note, as of February 1, 2021, the Company
reformed the retirement benefits system from a portion of
the final salary to a point system.

The detailed notes relating to defined benefit pension plans for the fiscal year ended March 31, 2021 and 2020 were as follows:(1) Changes in defined benefit obligations
Thousands of
U.S. dollars

Millions of yen

2021

2020

2021

Beginning balance of benefit obligations ������������������������������������������������������������

¥4,964¥4,840$44,839

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

262

260

2,365

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

25

20

223

Actuarial gains and losses �������������������������������������������������������������������������������

(68)

(61)

(613)

Benefits paid ���������������������������������������������������������������������������������������������������

(436)

(95)

(3,937)

Past service costs ���������������������������������������������������������������������������������������������

(526)

—

(4,753)Ending balance of benefit obligations �����������������������������������������������������������������

¥4,221¥4,964$38,124

Teraoka Seisakusho Co., Ltd.

23

(2) Changes in pension assets
Thousands of
U.S. dollars

Millions of yen

2021

2020

2021

Beginning balance of pension assets ������������������������������������������������������������������

¥4,916¥4,959$44,402

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

98

99

888

Actuarial gains and losses �������������������������������������������������������������������������������

376

(250)

3,399

Contributions by the employer ������������������������������������������������������������������������

206

203

1,858

Benefits paid ���������������������������������������������������������������������������������������������������

(435)

(95)

(3,937)

Ending balance of pension assets �����������������������������������������������������������������������

¥5,161¥4,916$46,610(3) Reconciliation of retirement benefit liabilities using the simplified method
Thousands of
U.S. dollars

Millions of yen

2021

2021

2020

Beginning balance of retirement benefit liabilities �����������������������������������������������

¥56

¥43

$506

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

21

14

186

Benefits paid ���������������������������������������������������������������������������������������������������

(1)

(1)

(6)

Ending balance of retirement benefit liabilities ���������������������������������������������������

¥76

¥56

$686

(4) Reconciliation‌of benefit obligations and pension assets with net defined benefit liability and asset on theConsolidated Balance Sheets
Thousands of
U.S. dollars

Millions of yen

2021

2020

2021

Funded defined benefit obligations ��������������������������������������������������������������������

¥ 4,221¥ 4,964$ 38,124

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

(5,161)(4,916)(46,610)

Subtotal ����������������������������������������������������������������������������������������������������������

(940)

48

(8,486)

Unfunded defined benefit obligations ����������������������������������������������������������������

76

56

686

Net amount of liabilities and assets recognized in consolidated balance sheet ����

(864)

104

(7,800)Liabilities (net defined benefit liability) ����������������������������������������������������������������

76

104

686

Assets (net defined benefit assets) ����������������������������������������������������������������������

(940)

—

(8,486)

Net amount of liabilities and assets recognized in consolidated balance sheet ����

¥  (864)¥  104$ (7,800)

Note: This includes plans using the simplified method.

(5) Retirement benefit expenses
Thousands of
U.S. dollars

Millions of yen

2021
Service costs �������������������������������������������������������������������������������������������������������

24

2021

2020

¥262

¥260

$2,365Interest costs ������������������������������������������������������������������������������������������������������

25

20

223

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

(98)

(99)

(888)

Recognition of actuarial gains and losses ������������������������������������������������������������

72

4

655

Amortization of past service costs ����������������������������������������������������������������������

(9)

—

(79)

Benefits expenses calculated on the simplified method ��������������������������������������

21

14

186

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

¥273

¥199

$2,462

Teraoka Seisakusho Co., Ltd.

(6) Remeasurements of defined benefit plans (Other comprehensive income)Thousands of
U.S. dollars

Millions of yen

2021

2021

2020

Actual differences �����������������������������������������������������������������������������������������������

¥  517¥(185)$4,668

Past service costs ������������������������������������������������������������������������������������������������

517

—

4,674

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

¥1,034¥(185)$9,342(7) Remeasurements of defined benefit plans (Accumulated other comprehensive income)Thousands of
U.S. dollars

Millions of yen

2021
Unrecognized actuarial gains and losses �������������������������������������������������������������

¥320

2021

2020
¥(197)$2,890

Unrecognized past service costs ��������������������������������������������������������������������������

517

—

4,674

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

¥837¥(197)$7,564(8) Pension Assets① Breakdown of pension assets

2021

2020

Debt securities ��������������������������������������������������������������������������������������������������������������������������������

67%

71%

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

26%

20%

Cash and deposits ��������������������������������������������������������������������������������������������������������������������������

3%

4%

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

4%

5%

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

100%

100%

② Rate of expected return on pension assets

Expected return rate on plan assets is determined by considering the current and anticipated future portfolio of
pension assets and current and anticipated future

long-term performance of individual asset classes thatcomprise the funds’ asset mix.

(9) Basic assumptions for calculating benefit obligations
2021

2020

Discount rate ����������������������������������������������������������������������������������������������������������������������������������

0.5%

0.4%

Expected return rate on plan assets ������������������������������������������������������������������������������������������������

2.0%

2.0%

Salary Increase Rate ������������������������������������������������������������������������������������������������������������������������

—

2.8%

Note: Starting this consolidated accounting period, calculation of Projected Benefit Obligation will use a method that does not include future point totals
based on the benefit calculation standards, so projected raise rate is not included in this consolidated accounting period.

Teraoka Seisakusho Co., Ltd.

25

7. Income Taxes
Deferred income tax assets and liabilities as of March 31, 2021 and 2020 were composed of the following:Thousands of
U.S. dollars

Millions of yen

2021

2021

2020

Deferred tax assets:
Allowance for doubtful accounts ��������������������������������������������������������������������
Accrued bonus to employees ��������������������������������������������������������������������������
Accrued enterprise tax ������������������������������������������������������������������������������������
Unrealized intercompany profits ����������������������������������������������������������������������
Loss on valuation of inventories ����������������������������������������������������������������������
Depreciation ���������������������������������������������������������������������������������������������������
Long-term accounts payable - other ���������������������������������������������������������������
Loss on valuation of investment securities �������������������������������������������������������
Loss on valuation of golf club membership �����������������������������������������������������
Net defined benefit liability �����������������������������������������������������������������������������
Impairment loss ����������������������������������������������������������������������������������������������
Asset retirement obligations ����������������������������������������������������������������������������
Tax loss carryforward ���������������������������������������������������������������������������������������
Provision for environmental measures �������������������������������������������������������������
Other ��������������������������������������������������������������������������������������������������������������
Subtotal ����������������������������������������������������������������������������������������������������������
Valuation allowance for tax loss carried forward (Note 2) ��������������������������������
Valuation allowance for deductible temporary difference ��������������������������������
Total valuation allowance (Note 1) ������������������������������������������������������������������
Total deferred tax assets ����������������������������������������������������������������������������������
Deferred tax liabilities:
Reserve for advanced depreciation of noncurrent assets
Unrealized gains on other securities
Net defined benefit asset
Other
Total deferred tax liabilities
Net deferred tax assets (liabilities)

¥   3
137
12
55
60
1
17
80
2
21
192
157
74
23
88
922
(55)
(415)
(470)
¥ 452

¥   3
125
13
47
81
2
17
80
2
16
209
94
37
97
112
935
(37)
(357)
(394)
¥ 541

$   25
1,234
110
500
541
13
157
726
20
187
1,731
1,420
671
206
788
8,329
(496)
(3,744)(4,240)$ 4,089

(34)
(459)
(31)
(375)
¥(899)¥(447)

(6)
(342)
(45)
(89)
¥(482)¥  59(310)(4,146)(282)(3,384)$(8,122)$(4,033)

Notes: 1. The total valuation allowance increased by ¥75 million. This increase is due to increase of the valuation allowance for tax loss carryforwards inconsolidated subsidiaries.
2. The tax loss carryforwards amount and the amount of deferred tax assets by the carryforwards maturity datePrevious Consolidated Fiscal Year (March 31, 2020)
Tax loss carryforwards (a)Within 1 year

1 to 2 years

2 to 3 years

3 to 4 years

4 to 5 years

More than 5 years

Total

—

—

—

—

37

—

¥37 million

Valuation allowance

—

—

—

—

37

—

¥37 million

Deferred tax assets

—

—

—

—

—

—

—

(a) The amount of tax loss carryforwards is the amount multiplied by the statutory tax rate.

Current Consolidated Fiscal Year (March 31, 2021)
Tax loss carryforwards (b)Within 1 year

1 to 2 years

2 to 3 years

3 to 4 years

4 to 5 years

More than 5 years

Total

—

—

—

12

61

1

¥74 million

Valuation allowance

—

—

—

—

55

—

¥55 million

Deferred tax assets

—

—

—

12

6

1

(c) ¥19 million(b) The amount of tax loss carryforwards is the amount multiplied by the statutory tax rate.
(c) The result of considering prospective taxable earnings based on future earning power of the consolidated subsidiaries, we have determined that the deferred tax assets
pertaining to tax loss carryforwards can be recovered.

26

Teraoka Seisakusho Co., Ltd.

A reconciliation on the difference between the statutory tax rate and effective rate on taxable income for the fiscal years
ended March 31, 2021 and 2020 is as follows:
Statutory tax rate ����������������������������������������������������������������������������������������������������������������������������

2021

2020

30.6%

30.6%

Entertainment and other non-deductible expenses �������������������������������������������������������������������������

4.4

1.9

Dividend and other non-taxable income �����������������������������������������������������������������������������������������

(1.7)

(1.8)

Per capita levy of inhabitant taxes ���������������������������������������������������������������������������������������������������

6.4

6.1

Increase in valuation allowance ������������������������������������������������������������������������������������������������������

24.8

13.6

Tax deduction for research expenses �����������������������������������������������������������������������������������������������

(9.2)

(8.5)

Rate difference from foreign subsidiaries ����������������������������������������������������������������������������������������

6.5

0.0

Consolidated adjustment ����������������������������������������������������������������������������������������������������������������

8.0

10.6

Other, net ���������������������������������������������������������������������������������������������������������������������������������������

0.1

0.6

Effective tax rate �����������������������������������������������������������������������������������������������������������������������������

69.9%

52.9%

8. Subsequent EventAppropriation of retained earnings
Subsequent to March 31, 2021, the Company’s Board of
Directors, with the approval of stockholders on June 22,2021 declared a cash dividend of ¥228 million (US$2,059
thousand) equal to ¥9.00 (US$0.08) per share, applicableto earnings of the year ended March 31, 2021 and payable to stockholders on the stockholders’ register on
March 31, 2021.

Teraoka Seisakusho Co., Ltd.

27

Teraoka Seisakusho Co., Ltd. and Consolidated Subsidiaries

REPORT OF INDEPENDENT AUDITORS
Independent Auditor’s Report
To the Board of Directors of Teraoka Seisakusho Co., Ltd.
OpinionWe have audited the accompanying consolidated financial statements of Teraoka Seisakusho Co., Ltd., which comprise theconsolidated balance sheet as of March 31, 2021, and the consolidated statements of income, comprehensive income,changes in equity and cash flows for the year then ended, and basis of presenting consolidated financial statements, othernotes and consolidated supplemental schedules.
In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial
position of Teraoka Seisakusho Co., Ltd. and its consolidated subsidiaries (the “Group”) as of March 31, 2021, and theirconsolidated financial performance and cash flows for the year then ended in accordance with accounting principles generally accepted in Japan.
Basis for Audit Opinion
We conducted our audit in accordance with auditing standards generally accepted in Japan. Our responsibilities underthose standards are further described in the Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Company and its consolidated subsidiaries in accordance with the
ethical requirements that are relevant to our audit of the consolidated financial statements in Japan, and we have fulfilled
our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we haveobtained is sufficient and appropriate to provide a basis for our opinion.
Emphasis of Matter
As described in Note 2 “(Changes in Accounting Estimates)” to the consolidated financial statements, the Company
changes estimate method of a provision for environmental measures and an asset retirement obligations from the end of
the current consolidated fiscal year.
As described in Note 2 “(Changes in accounting policy that are difficult to distinguish from changes in accounting estimates)” to the consolidated financial statements, the Company and its domestic consolidated subsidiary change to thedepreciation of property, plant and equipment, which used to be the declining-balance method, to the straight-line
method from the current consolidated fiscal year.
Our opinion is not qualified in respect of these matters.
Responsibilities of Management, Audit & Supervisory Board Members and the Audit & Supervisory Board for
the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with accounting principles generally accepted in Japan, and for such internal control as management determines isnecessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, management is responsible for assessing whether it is appropriate toprepare the consolidated financial statements with the assumption of a going concern, and in accordance with accounting
principles generally accepted in Japan, for disclosing, as necessary, matters related to going concern.
Audit & Supervisory Board members and the Audit & Supervisory Board are responsible for overseeing the directors’
performance of duties within the maintenance and operation of the financial reporting process.
Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements
Our responsibilities are to obtain reasonable assurance about whether the consolidated financial statements as a whole arefree from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion
on the consolidated financial statements based on our audit from an independent point of view. Misstatements can arise
from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected toinfluence the decisions of users of these consolidated financial statements. In accordance with auditing standards generally
accepted in Japan, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:• Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or
error, and design and perform audit procedures responsive to those risks. Selecting audit procedures to be applied is at
the discretion of the auditor. Obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion.

28

Teraoka Seisakusho Co., Ltd.

• When auditing the consolidated financial statements, obtain an understanding of internal control relevant to the audit
in order to design audit procedures that are appropriate in the circumstances in making risk assessments, but not forthe purpose of expressing an opinion on the effectiveness of the entity’s internal control.
• Evaluate the appropriateness of accounting policies used by management and their method of application, as well as
the reasonableness of accounting estimates made by management and related notes thereto.
• Conclude on the appropriateness of management’s use of the going concern basis for preparing the consolidated
financial statements and, based on the audit evidence obtained, whether a material uncertainty exists related to events
or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude thata material uncertainty exists, we are required to draw attention in our auditor’s report to the related notes to the consolidated financial statements or, if the notes to the consolidated financial statements on material uncertainty are inadequate, to express a qualified opinion with exceptions on the consolidated financial statements. Our conclusions are
based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may
cause the Group to cease to continue as a going concern.
• Evaluate whether the presentation of the consolidated financial statements and notes to the consolidated financial
statements are in accordance with accounting standards generally accepted in Japan, as well as evaluate the overall
presentation, structure, and content of the consolidated financial statements, including the related notes thereto, andwhether the consolidated financial statements fairly represent the underlying transactions and accounting events.
• Obtain sufficient appropriate audit evidence regarding the financial information of the Group to express an opinion on
the consolidated financial statements. We are responsible for the direction, supervision and performance of the audit of
the consolidated financial statements. We remain solely responsible for our audit opinion.
We communicate with Audit & Supervisory Board members and the Audit & Supervisory Board regarding, among othermatters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies ininternal control that we identify during our audit process, and other matters required by auditing standards.
We also provide the Audit & Supervisory Board members and the Audit & Supervisory Board with a statement that wehave complied with relevant ethical requirements in Japan regarding independence, and to communicate with them all
relationships and other matters that may reasonably be thought to bear on our independence, and where applicable,
related safeguards in order to eliminate or reduce obstruction factors.
Interest required to be disclosed by the Certified Public Accountants Act of Japan
Our firm and its designated engagement partners do not have any interest in the Group which is required to be disclosed
pursuant to the provisions of the Certified Public Accountants Act of Japan.

Designated Engagement Partner,
Certified Public Accountant:Hideo, Kayashima

Designated Engagement Partner,
Certified Public Accountant:
Masami, Hiramatsu

Designated Engagement Partner,
Certified Public Accountant:
Yoshiharu Tsukamoto

INOUE AUDIT CORPORATIONTokyo, Japan
November 19, 2021

Teraoka Seisakusho Co., Ltd.

29

Teraoka Seisakusho Co., Ltd. and Consolidated Subsidiaries

COMPANY DATA

Company Outline

(as of March 31, 2021)

Company NameTERAOKA SEISAKUSHO CO., LTD.

Head Office

4-22, Hiromachi 1-chome, Shinagawa-ku, Tokyo 140-8711, Japan
Tel:81-3-3491-1141
Fax:81-3-3491-1143

FoundedFebruary 11, 1921

Incorporated

May 5, 1943

Paid-in Capital¥5,057 million

Employees

521 (714 consolidated)

Board of Directors and Auditors

(as of June 22, 2021)

President

Kenichi Tsuji

ChairmanKeishiro Teraoka

Managing Director

Masakazu Naitou

Directors

Taiji Namekawa
Nobuhisa Ishizaki
Tatsuya Kubo
Shinji Asakura
Tatsuya Kamikawa
Keiko Hatta
Katsunori Furuichi

Audit & Supervisory Board Members

Yutaka Nomiyama
Jun Watanabe
Masaki Miyake
Harushige Sakai

Operating Officers

Mitsuhiro Takano
Satoshi Hironaka
Hideyuki Suzuki

30

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

Karawang, 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, Nagoya and Seoul

Representative Office

Taipei

Teraoka Seisakusho Co., Ltd.

31

Teraoka Seisakusho Co., Ltd. and Consolidated Subsidiaries

INVESTOR INFORMATION

Investor Information

Head Office(as of March 31, 2021)

Teraoka Seisakusho Co., Ltd.
4-22, Hiromachi 1-chome, Shinagawa-ku, Tokyo 140-8711, Japan
Telephone: 81-3-3491-1141
Facsimile: 81-3-3491-1143

Financial Year

April 1 to March 31

Common Stocks

Authorized Shares 80,000,000
Issued Shares 26,687,955

Stockholders

3,848

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(as of March 31, 2021)
Number ofshares(thousandshares)Ratio of shareholding (%)

ITOCHU Corporation

6,672.0

26.34

Customers’ Stockholding Group

3,044.0

12.02

Custody Bank of Japan, Ltd. (Trust Account)

990.1

3.91

MUFG Bank, Ltd.

818.8

3.23

BNP PARIBAS SECURITIES SERVICESLUXEMBOURG/JASDEC/FIM/LUXEMBOURG FUNDS/UCITS ASSETS

780.0

3.08

Keishiro Teraoka

773.6

3.05

Resona Bank, Ltd.

678.8

2.68

Kuniko Teraoka

526.0

2.08

Employees’ Stockholding Group

401.3

1.58

Yasuhara Chemical Co., Ltd.

250.0

0.99

Stockholders

32

Teraoka Seisakusho Co., Ltd.

http://www.teraokatape.co.jp

Printed in Japan

14

Teraoka Seisakusho Co., Ltd.