Growth through CConstructivehangeAnnual Report 2012 Year ended March 31, 2012 ... 2011 0.8 Advanced...

http://www.teijin.co.jp

Printed in Japan using waterless printing. Issued 2012.7

Growth through Constructive

Change Annual Report 2012Year ended March 31, 2012

Annual R

eport 2012

13%

69%

18%

● Aramid fibers ● Carbon fibers and composites

● Pharmaceuticals● Home healthcare

20110.8

Advancedfibers and composites

Healthcare

Stable-profitbusinesses

Fiscal

¥

Net sales

trillion● Polyester fibers● Polycarbonate resin● PET film● PEN film● Trading and retail● IT

*

© 2012 Teijin Limited. All Rights Reserved.

Italicized product names and service names in this report are trademarks or registered trademarks of the

Teijin Group in Japan and/or other countries. Where noted, other italicized product names and service

names used in this report are protected as the trademarks and/or trade names of other companies.

Contents

2 Message from the CEO

3 CHANGE for 2016

8 Business Group Review

8 Advanced Fibers and Composites

Business Group

10 Electronics Materials and Performance

Polymer Products Business Group

12 Healthcare Business Group

14 Trading and Retail Business Group

15 IT Business Group

16 New Business Development Group

17 Research and Development

20 Corporate Governance

23 Corporate Social Responsibility

25 Financial Section

26 Financial Highlights and Consolidated

10-Year Summary

28 Management’s Discussion and Analysis

36 Consolidated Financial Statements

72 Corporate Data * Excluding the impact of the

standardization of accounting

periods.

Cha

Profi le

In fiscal 2011, Teijin announced a new medium- to long-term management vision, CHANGE for 2016. To achieve the targets set forth

in this vision, Teijin is implementing major constructive change. In recent years, the Company classified its core global operations into

eight business areas with an emphasis on high-performance materials and healthcare. Effective from fiscal 2012, Teijin will seek to

provide solutions to customers and markets, further enhancing the quality of life of people everywhere, by concentrating on three

key domains: Green chemistry, healthcare and overlapping domains. At the same time, Teijin will work to ensure both sustainable

growth and profitability, primarily through its promising growth businesses, notably advanced fibers and composites and healthcare.


Disclaimer Regarding Forward-Looking Statements

Any statements in this document, other than those of historical fact, are forward-looking statements about the future performance of Teijin and its Group companies,

which are based on management’s assumptions and beliefs in light of information currently available and involve risks and uncertainties. Actual results may differ

materially from these forecasts. Potential risks and uncertainties include, but are not limited to, domestic and overseas economic conditions, such as consumer

spending and private capital expenditures; currency exchange rate fl uctuations, notably with the Japanese yen, U.S. dollar, Asian currencies, the euro and other

currencies in which Teijin operates its international business; direct and indirect restrictions imposed by other countries; fl uctuations in the market prices of securities

in which Teijin has substantial holdings; and Teijin’s ability to maintain its strength in many product and geographical areas, through such means as new product

introductions, in a market that is highly competitive in terms of both price and technology, pertinent to the industry to which the Company primarily belongs.

10%

20%

25%

50%

Expand promising growth businesses

Provide solutions

20202.0

New businesses

New electronics materials

Advanced medical materials


Healthcare


Around fiscal

¥

Net sales

trillion

1Teijin Limited

nge* In our view, a company that has attained “global excellence” is one that is recognized as a key global player in its core businesses, has business

activities worldwide, is evaluated positively by society and is a source of pride for its employees.

Secure profi table sustainable growth by providing customers with the solutions they need

Build value that also benefi ts society and contribute to the advancement of humanity by focusing

on businesses that leverage our cutting-edge technologies

Be recognized as a leading player that has attained global excellence*

Long-term vision:

2 Teijin Limited

In February 2012, we announced CHANGE for 2016, our new

medium- to long-term management vision. Central features of

CHANGE for 2016 include our ongoing long-term vision, which

calls for us to secure profi table sustainable growth, build value that

also benefi ts society and attain global excellence by transforming

our four fundamental portfolios, namely business, geographic,

technology and human resources.

CHANGE for 2016 also sets ambitious targets for consolidated

net sales and operating income for fi scal 2016, of ¥1.3 trillion and

¥100 billion, respectively, and for around fi scal 2020, of ¥2.0 trillion

and ¥200 billion. We are well aware that none of these targets

will be reached by remaining on the same path. To achieve the

targets we have set, it is vital that we change—and change in a

constructive and proactive manner.

In the coming years, we will shift away from our traditional busi-

ness model, which positions us as an upstream manufacturer sup-

plying materials to downstream customers, evolving instead toward

a business model that focuses on providing optimal solutions. In

practical terms, this means that rather than simply providing materi-

als, we will focus on extending solutions that respond effectively

to the needs of customers. Despite boasting superior high-

performance products, our materials businesses have traditionally

lacked suffi cient expertise and experience to provide the solutions

that our customers and end users seek. In the years ahead, rather

than limiting ourselves to developing and selling materials, we will

work to integrate advanced materials and processing technolo-

gies, as well as to promote the development and cultivation of

applications in collaboration with customers. We will also broaden

the scope of our efforts to encompass components and devices

that are further down the supply chain, thereby enabling us to offer

innovative, value-yielding products and services and reinventing

Teijin as an organization that is capable of continuously creating

value for its customers. Further, we will reinforce existing and

acquire new technologies that overlap materials and healthcare,

with the aim of providing unparalleled solutions.

The ability to provide solutions is what distinguishes companies

that are capable of sustainable growth from those that are not.

Guided by CHANGE for 2016, we will apply ourselves with full

determination to ensure Teijin is one of the former.

As always, we are grateful for and encouraged by your ongoing

support.

July 2012

Shigeo Ohyagi

President and CEO

Evolving our business model

From supplying materials to providing solutions

Message from the CEO

3Teijin Limited

Population growth

Falling birth rates and aging of society

Increasing consumption of fossil fuels

Rising CO2 emissionsMacro trends

Market needsGreater energy and resource efficiency

Health and comfort

Key domains

Proprietary technologies to be reinforced

High-performance materials technologies

Environmental technologies, biotechnology

Pharmaceuticals and healthcare technologies

● Polymerization ● Composites ● Forming● Advanced molding, film fabrication, processing● Surface treatment, laminating

● Drug discovery, design and evaluation of medical devices● Medical materials

● Nanoparticle production, nanoscale control● Membrane filtration● Biotechnology

Increased material and spiritual affluence

Safety and security

Clean energy

●New healthcare businesses●Advanced medical materials●Bioplastics

●Pharmaceuticals●Home healthcare

Green chemistry

Overlapping domains Healthcare

●Sustainable transportation● Information and electronics●Safety and protection●Environment and energy

Teijin’s New

Medium- to Long-Term

Management Vision

In addition to outlining basic policies that refl ect our long-term vision, CHANGE for 2016 articulates clear performance targets and growth strategies and sets forth a comprehensive plan of action. Guided by CHANGE for 2016, we will focus on three key domains—green chemistry, healthcare and overlapping domains—identifi ed through an analysis of global macro trends and of our competitive advantages. With the aim of evolving as an organization that creates value for customers through technology-driven innovation, we will press forward with efforts to transform our four fundamental portfolios (business, geographic, technology and human resources), a crucial growth strategy. We will also work to reinforce global cost competitiveness. Through these efforts, we will strive to secure profi table sustainable growth. Performance targets include net sales and operating income of ¥1.3 trillion and ¥100 billion, respectively, in fi scal 2016 and ¥2.0 trillion and ¥200 billion by around fi scal 2020.

Basic Policies

1. Press forward with growth strategies in green chemistry, healthcare and overlapping domains

2. Advance and expand existing businesses by broadening scope and adding depth

3. Bolster R&D aimed at fostering new businesses

4. Enhance implementation of strategies through organizational reforms

5. Promote decisive, ongoing efforts to reform cost structure

Articulating clear performance targets that reflect our long-term vision

Promoting the strategic transformation of our four fundamental portfolios

FY2011* FY2016Around

FY2020

Net sales 791.0 1,300 2,000

Operating income 35.3 100 200

Operating margin (%) 4.5 8 10

Net income 13.8 60 120

Operating income to total assets (ROA) (%) 4.6 8 10

Net income to shareholders’ equity (ROE) (%) 4.8 12 15

Creating value for customers through technology-driven innovation

Refining and strengthening key Teijin Group domains and business fields

Billions of yen

Key Aspects of CHANGE for 2016

Secure profi table sustainable growth

Group PerformanceResults and Targets

* Excluding the impact of the standardization of accounting periods.

CHANGE for 2016

4 Teijin Limited

Provide solutions that respond effectively to the needs of end users

Providing optimal solutions

Solutions platform*

Marketing

● Reinforce responsiveness in diverse markets● Create a specialized team to oversee core projects

Development

● Invest purposefully in R&D personnel● Strengthen downstream technologies● Expand facilities for product evaluation● Capitalize on alliances

Advance efforts to develophigh-performance

materials and product lines

Amass a solid base ofexpertise regarding

finished products

Polyester fibers for industrial applications

Polyester fibers for apparel

IT

Advanced Fibers and Composites

Trading and Retail

Electronics Materials and Performance Polymer Products

Healthcare

New Business Development

Carbon Fibers and Composites

Polyester Fibers

Films

Medical and Pharmaceuticals

Fiber Products Marketing

Plastics

IT

Aramid Fibers

New Business Development

Providing optimal solutions through a practical framework

Realigning and simplifying our business groups to create a solutions-oriented organization

Create a solutions platform

From our traditional business model, which principally emphasizes the supply of upstream materials, we will evolve toward a business model that focuses on providing optimal solutions. As a framework for this metamorphosis, we will create a solutions platform that leverages our technological and sales prowess to provide the solutions our customers seek. Concurrently, we will streamline our organization. In our materials businesses, we will gradu-ally integrate core subsidiaries and functional companies. We will also place all R&D personnel under the direction of the Chief Science and Technology Offi cer to facilitate the concentrated allocation of technological expertise. These constructive changes are designed to reinforce and expand our technological foundation, as well as to rally our sales capabilities.

Provide increasingly competitive solutions

Key Aspect

1

* A framework for strengthening

development and sales capabilities to provide the

solutions our customers seek

5Teijin Limited

Core strategicbusinesses

● Advanced fibers and composites

● New businesses

Prioritize and focusinvestment (including in major M&A activities)

New businessesfor incubation

● Healthcare


● Electronics materials and performance polymer products● IT● Fiber products

Selectively concentrate investment in growth businesses

Businesses targeted for investment Investment stance

Allocation of investment

FY2009–FY2011

13%

25%

30%

35%

18%

20%

20%

2%

10%

20%

25%

New electronicsmaterials

Advanced medical materials

● New electronics materials● Advanced medical materials

FY2011*¥0.8 trillion

FY2016¥1.3 trillion

Around FY2020

¥2.0 trillion

Sales in promising growth businesses

Sales by region

Japan

North Americaand Europe

● Advanced fibers and composites

● Healthcare

Emergingeconomies and Asia

Business categories and investment policies

FY2012–Around FY2020

Synthesis andSynthesis andpolymerization of rawpolymerization of raw

materials

Design andmanufacturingmanufacturingufact

Preliminary processingPreliminary processing

ation,m fabricaSpinnning, film, film fabenttmensuurfacace treatm

Secondary processingSecondary processingndary proce

Finishing

Additional hhigh-value-addedh-value-add

iprocessing

eceMMoolding, devicgngmmmanufacturin

Healthcare technologies

Materials technologies

Drugrydiscover &DR&

Clinicicaldevelopopment onoCCommmercializatio

Research related to the control of chemicals and manufacturing

Foster new technologies that integratematerials and healthcare technologies

Strengthen midstream and downstream technologies

Existing technologies Technologies to be reinforced or acquired

Existing technologies

Technologies to be reinforced or acquired

Fundamental portfoliosTechnology

Business

Geographic

Human resources

Transform our four

fundamental portfolios

Business: Taking into account market potential, competitive advantages and profi tability, we will promote the decisive allocation of management resources to accelerate the expansion of promising growth businesses.Geographic: We will emphasize assertive investment in emerging economies and Asia and by focusing on growth drivers in each region. Technology: Our objectives here will be to reinforce existing and acquire new pro-cessing technologies—thereby boosting our ability to provide solutions further down the supply chain—and to integrate materials and healthcare technologies, furthering the creation of new healthcare businesses, notably advanced medical materials.Human resources: We will focus on securing, fostering and positioning talented individuals irrespective of nationality, ethnicity, age or gender to accelerate the diversity of the Teijin family and facilitate the effective implementation of strategies.

Transforming our business portfolio

Focusing on promising growth businesses

Transforming our geographic portfolio

Focusing on emerging economies and Asia

Transforming our technology portfolio

Focusing on solutions

Implement growth strategies

Key Aspect

2

Reinforcing existing and acquiring new technologies to integrate materials and healthcare technologies

* Excluding the impact of

the standardization of

accounting periods.

6 Teijin Limited

Net Sales Operating Income

● Other

● Healthcare

● High-performance materials

● New electronics materials

0.8

1.3

2.0

FY2011* FY2016 AroundFY2020 FY2011* FY2016

AroundFY2020

● Entry into aramid fibers markets in emerging economies

● LiB separators● Printable electronics

● Thermoplastic CFRP for automotive applications● Increase in new applications for aramid fibers

● Increase in sales of new drugs

● Increase in sales of new drugs● Expansion of home healthcare● New healthcare businesses

● Other

● Elimination and corporate

100

35.3

0

200

20

2

75

30

55

26.4

80

55

(30)

28

(15)

16.6(13.1)

5.4

(¥ trillions) (¥ billions)

Uloric®

Feburic®

Adenuric®

Febuxostat: Aiming for annual sales of at

least ¥100 billion (Distributorships covering

117 countries and territories)

Growth drivers

Growth between now and fi scal 2016 will be driven by the expansion of our lineup of new pharmaceuticals and of advanced fi bers. From fi scal 2016 on, our results will also be powered by thermoplastic composites for automotive applications, new electronics materials and new healthcare businesses, among others. Novel gout and hyperuricemia treatment febuxostat is currently sold in more than 20 markets, including Japan, North America and several European countries. With recognition of the drug’s effi cacy growing, we are continuing to build a global network and have already signed exclusive distributorships for the drug covering 117 countries and territories. We are now preparing for launch in several new markets, including the People’s Republic of China (PRC), Turkey and Mexico, and anticipate annual sales of the drug will eventually peak at over ¥100 billion. Our aramid fi bers business continues to see solid growth. The elimination of bottlenecks is facilitating continuous increases in production capacity. With sales expected to strengthen, particularly for automotive applications, ballistic protection products and fi ber optic cables, we are currently considering expanding our production facilities in emerging economies and Asia.

Global marketing of febuxostat for hyperuricemia and gout

Expanding operating income in the high-performance materials and healthcare businesses through fiscal 2020

Key Aspect

3


■ Countries and territories in blue are where Teijin has

exclusive distribution agreements for febuxostat. As of June 30, 2012

7Teijin Limited

Printable electronics

Advanced fibers and composites Healthcare New businesses Stable-profit businesses

Automobiles

Aircraft

Printable electronics

Displays and touch screens

Materials that enhance safety

Infrastructure-related materials

Green businesses and energy

Pharmaceuticals

Home healthcare

Business areas that fuse key technologies

Sustainable transportation

Safety and protection

Information and electronics

Healthcare

Environment and energy

Advanced medical materials, new healthcare businesses

Rehabilitation devices

Global expansion

New drugs (for atrial fibrillation, others)

Global marketing of drugs in three therapeutic areas: Bone and joint disease; respiratory disease; and cardiovascular and metabolic disease (drug for treating hyperuricemia and gout)

Recycling systems, environment-friendly materials

Innovative LiB separators

Solar cells Next-generation solar cells

Seismic and foundation reinforcement materials

Protective clothing, ballistic protection materials

Web-based businesses

Flexible displays, others

Nanosilicon inks

Structural materials

Glazing materials (windows)

Thermoplastic CFRP

Friction materials, tire reinforcement materials, others

Intelligent IT solutions

Key fields Core business areas 2012 2016 2020

Thermoplastic CFRP LiB separators

Having perfected technologies that reduce the time required for molding thermoplastic carbon fi ber–reinforced plastic (CFRP) to less than one minute, in December 2011 we signed an agreement with General Motors Company of the United States to collaborate in the devel-opment of thermoplastic CFRP for use in mass-produced GM vehicles. We will continue to promote collaboration in this area with automakers in Japan and overseas. In the promising area of lithium-ion battery (LiB) separators, we developed two innovative products that boast dramatically improved heat resistance, which enhances capacity and safety and extends lifespan. We have secured the approval of several leading battery manufacturers and in June 2012 commenced operations at our new LiB separator production joint venture in the Republic of Korea (ROK). Next-generation printable electronics technologies facilitate the production of semiconductors and other electronic circuits by printing electroconductive inks directly onto substrates, signifi cantly streamlining fabrication processes. We are currently promoting development efforts targeting the markets for semiconductors, solar cell materials and thin-fi lm transistors. Another focus is new healthcare businesses—including regenerative medicine and tissue repair—that leverage our materials and healthcare technologies.

Core business areas in five key fields

Focus on fi ve key fi elds

● Attracting considerable attention for

its ability to lower vehicle frame weight

● Teijin technologies reduce

molding time to less than one minute

Coating technologies for both aramid and fl uorine

compound coatings facilitate a signifi cant increase

in LiB capacity, as well as ensure outstanding safety

(prevents batteries from exploding) and a long lifespan.

● Dramatically improves heat resistance and durability

● Facilitates a coating speed fi ve times

faster than that of conventional technologies

Materials manufactured using a groundbreaking

silicon nanoparticle technology.

● Streamlines semiconductor fabrication

processes and signifi cantly reduces

semiconductor fabrication costs

(p e e ts ba

●Dram

● F

8 Teijin Limited

Business Group Review

Q How did the advanced fi bers and composites

businesses perform in fi scal 2011?

A Sales of our principal high-performance fi bers were level in

actual terms with fi scal 2010, while operating income increased.

In aramid fi bers, demand for mainstay Twaron and Technora para-

aramid fi bers was steady for most applications. In carbon fi bers

and composites, demand was favorable for aircraft applications,

although demand for general industrial applications and for use

in sports and leisure equipment softened in the second half. The

polyester fi bers business fi nished in the black, bolstered by the

progress of structural reforms, despite fl agging demand in the

immediate aftermath of the Great East Japan Earthquake and the

suspension of operations at production facilities in Thailand as a

result of severe fl ooding.

Q What do you see as your principal challenges in fi scal

2012 and how will you respond?

A We expect demand for aramid fi bers to continue growing at a

steady pace. In response, we will focus on increasing our produc-

tion capacity by eliminating bottlenecks. At the same time, we will

explore the idea of expanding our production facilities in emerging

economies, particularly in Asia. We will also work to boost sales and

further the development of new high-performance polyethylene, as

well as to cultivate new applications such as aramid tape.

Despite persistently weak demand for general industrial applica-

tions and for use in sports and leisure equipment, we anticipate

overall demand for carbon fi bers and composites will remain solid,

led by products for aircraft-related applications and for use in

compounds. Accordingly, we will step up efforts to encourage the

adoption of our products for use in aircraft. We will also continue

with efforts to bolster sales for use in pressure vessels for natural

gas–related applications, a growing market thanks to the expansion

of shale gas development. On another front, we will press forward

with the commercialization of thermoplastic CFRP, notably for

automotive applications.

In polyester fi bers, we will continue to implement measures

designed to achieve the full restoration of our fl ood-damaged

Advanced Fibers and Composites Business Group

Norio Kamei

General Manager,


Business Group

Global Market View

Aramid Fibers

Owing to sizeable technological barriers to new market entrants, the global market for para-aramid fi bers is essentially dominated by Teijin and E.I. DuPont de Nemours and Com-pany (DuPont). Global demand, which has risen steadily since bottoming out in late 2010, has recovered to prerecession levels and is expected to rise by between 7% and 9% annually for the foreseeable future. This projection refl ects the increasing need for materials that contribute to greater safety and security, reduce the weight of fi nished products and help lower energy and resource consumption.

Carbon Fibers

The world’s top three manufacturers of carbon fi bers at present—Teijin, Toray Industries, Inc., and Mitsubishi Rayon Co., Ltd.—currently account for more than 50% of global produc-tion capacity. Demand for carbon fi bers has climbed since bottoming out between April and June 2009 and the supply–demand bal-ance has improved, although competition is intensifying for use in sports and leisure equip-ment, which accounts for approximately 30% of all applications for carbon fi bers. Over the long term, we expect global demand for carbon fi bers to expand by more than 15% annually, as tighter environmental regulations and the growing preference for energy-effi cient, ecologically sound options drives interest in carbon fi bers for aircraft, automotive and general industrial applications.

Principal Products

Carbon fibers

Brand name Tenax®

Applications Aircraft (structural and interior components), general

industrial applications (wind turbine blades, pressure

vessels), sporting goods (golf club shafts, fishing rods,

tennis racquets, yacht bodies)

Carbon fiber composite materials

Applications Automobiles (principal parts and components)

Para-aramid fibers

Brand names Twaron®, Technora®

Applications Brake pads, gaskets, rubber reinforcements (hoses, belts),

tires, protective clothing, plastic reinforcements, civil

engineering materials, optical fiber reinforcements

Meta-aramid fibers

Brand name Teijinconex®

Applications Fireproof clothing, heat-resistant filters, rubber reinforcements,

plastic reinforcements

Artificial leather

Brand name Cordley®

Applications Sporting goods (shoes, balls)

Polyester fibers

Brand name Teijin®Tetoron®

Applications Automobile, train and aircraft seats, tire cords, rubber

reinforcements, seat belts, mats, cushions, filters

PEN fibers

Brand name Teonex®

Applications Tire cords, transmission belts, high-pressure hoses, speaker cones

Outlook for Global Market for Para-Aramid Fibers

Thousand tons

(Source: Teijin estimate)

Annual growth 7%–9%

120

60

02006 2010 2020

Outlook for Global Marketfor Carbon Fibers


Thousand tons

Annual growth 15% +

2003 2010 2020

120

60

0

9Teijin Limited

Thermosetting CFRP molding time: Approximately10 minutes

Thermoplastic CFRP molding time: Less than1minute

Application of heat to mold

Introduction of release agent

Resin impregnation

Resin hardening

Demolding

Press molding Demolding

production facilities in Thailand. We had already resumed produc-

tion on several lines by February. In Japan, we will also capitalize

on demand related to efforts to encourage energy savings and to

post-quake reconstruction initiatives.

Q What are your medium- to long-term strategies?

A With demand for para-aramid fi bers expanding for use in

automotive-related materials, reinforcement materials for fi ber optic

cables and protective clothing, we expect the global market to grow

by between 7% and 9% annually for the foreseeable future. In this

environment, we will strive to reinforce our operating results by

continuing to build on our competitive advantages, which include

our leading global market share and our extensive product portfolio,

which encompasses three principal aramid fi bers products and

high-performance polyethylene products, enabling us to provide

diverse solutions. Our strategic focus will be on promoting the timely

expansion of our production capacity, as well as on reinforcing

our presence in emerging economies and promoting collaboration

with customers with the aim of cultivating new applications.

Competition in the carbon fi bers and composites market is

intensifying, owing to a shift toward in-house production of carbon

fi bers by prepreg manufacturers, the appearance of market entrants

and aggressive diversifi cation by large-tow manufacturers. None-

theless, the global market is expected to rise by more than 15%

annually over the medium to long term, refl ecting expanding demand,

notably for aircraft and general industrial applications. Demand is

also expected to increase for use in automotive-related materials,

owing to the expansion of the market for electric vehicles. Here, we

will continue to capitalize on our principal competitive advantages,

namely, our high global market share, particularly for aircraft appli-

cations, and our innovative mass-production technologies for ther-

moplastic CFRP components. Our basic strategies are to collabo-

rate with customers with the aim of cultivating new markets and

applications and expanding our global operations, as well as to

promote ongoing efforts to develop materials for use in aircraft,

and to work to reduce costs and further enhance quality.

Achieving a tenfold increase in production efficiency

Thermoplastic CFRP

Countries around the world are moving to tighten regulations governing vehicle CO2 emissions and fuel

economy. The European Commission set a CO2 emissions limit of 175 g/km in 2009 and announced plans

for the gradual lowering of limits to 130 g/km in 2012, 95 g/km in 2020 and 70 g/km in 2025. The United

States has announced targets for an improvement in fuel economy of 50% from the 2010 level by 2025. As a

consequence, automakers are rushing to develop commercially viable electric vehicles and other alternatives

to conventional gasoline-powered vehicles that achieve signifi cantly lower emissions and boost fuel economy.

One of the biggest challenges in this effort is to substantially reduce vehicle weight. A vehicle’s frame

accounts for over 30% of its total weight. Using thermoplastic CFRP exclusively for the frame thus facilitates

a sharp reduction in overall vehicle weight, as well as of the powertrain and other components. We recently

completed the development of the world’s fi rst mass-production technologies for thermoplastic CFRP that reduce the time required for mold-

ing to less than one minute, compared with 10 minutes for thermosetting CFRP. Recently, we signed an agreement with General Motors to

cooperate in the development of thermoplastic CFRP for use in mass-produced GM vehicles and will advance the swift commercialization of

thermoplastic CFRP by pursuing initiatives with other automakers. Confi dent in the potential of this business to evolve into a major pillar of our

operations, we are aiming to achieve annual sales in the composites business of between ¥150 billion and ¥200 billion by fi scal 2020.

Development milestones

March 2011 Perfected technologies for the mass production of thermoplastic CFRP

that reduces molding time to less than one minute

November 2011 Resolved to build a pilot plant at our Matsuyama Plant (Japan)

(Scheduled to begin operating in 2012)

December 2011 Signed an agreement with General Motors to collaborate in the development of thermoplastic

CFRP components for use in mass-produced GM vehicles

April 2012 Established the Teijin Composites Application Center (United States)

Tightening of European CO2 Emissions Regulations

2009

175

2012

130

2020

g/km

95

2025

70

-45%

-60%

Down from the 2009 level

10 Teijin Limited

Q How were results in the electronics materials and

performance polymer products businesses in fi scal

2011?

A Operating income for polycarbonate resin declined sharply,

owing to a harsh operating environment for our customers, princi-

pally manufacturers in the electrical and electronics equipment fi eld,

a result of such factors as slack demand for liquid crystal display

(LCD) televisions, the European fi nancial crisis and the impact of the

Great East Japan Earthquake and the severe fl ooding in Thailand.

Demand for polyethylene terephthalate (PET) fi lm softened from the

third quarter for use in LCD refl ective fi lm and solar cell back sheets.



A In the polycarbonate resin business, operating conditions were

harsh through to the end of 2011, but demand began to improve

in January 2012, particularly in the PRC. Rising prices for key raw

materials and forceful moves by competitors to expand production

capacity are expected to have a continuing negative impact. To bol-

ster operating results, we will accelerate the global expansion of our

compounds business. We will also redouble our efforts to market

high-end and mid-range products to customers in Japan and

around the world.

Yoshio Fukuda

General Manager,

Electronics Materials

and Performance

Polymer Products

Business Group

Electronics Materials and Performance Polymer Products Business Group

Principal Products

Polycarbonate resin

Brand name Panlite®

Applications Electrical and electronics components, audiovisual (AV) and office

automation (OA) equipment, personal computer casings, optical

discs (Blu-ray discs, DVDs and CDs), precision instrument

components, automotive components (headlamps, door handles,

bumpers)

Brand names Panlite® Sheet, ELECLEAR®, PURE-ACE®

Applications Sheet Mobile phone front panels, flat panel LCD TVs (flame-resistant

sheet), automotive instrument panels, dummy cans for vending

machines

Film LCDs for mobile phones, personal digital assistants (PDAs) and

other handheld electronics equipment, touch screens (OA and

FA equipment, handheld video game machines)

PEN resin

Brand name Teonex®

Applications Cosmetics containers, school lunch dishware,

pharmaceuticals containers

PET film

Brand names Teijin®Tetoron®, Mylar®, Melinex®, Teflex®

Applications Industrial applications Film for use in LCD reflective film and in solar cell back sheets,

materials for LCDs and plasma and organic electroluminescent

displays (OELDs), cards (integrated circuit [IC] cards, ID cards,

radio frequency identification [RFID] chips), automotive products

(interior and exterior materials and electronics components)

Packaging materials Laminating film for beverage and food cans, shrink wrap, retort

pouches, environment-friendly plastic trays

PEN film

Brand name Teonex®

Applications Digital videocassettes (DVCs), high-density data backup tapes,

electronics materials, electronic circuit materials, high-performance

materials for automotive applications (seat sensors and hybrid

motor materials)

Processed film

Brand name Purex®

Applications Materials for LCDs, electronics materials, films for semiconductor

materials, medical materials, photocatalysts, moisturizing facial

masks

Brand name CurrentFine®

Applications Flexible panel displays, touch screens, membrane switch materials

ELECLEAR®

11Teijin Limited

Polycarbonate Resin

The world’s top fi ve manufacturers of polycarbonate resin are Bayer AG, Saudi Basic Industries Corporation (SABIC), Teijin, the Mitsubishi Group and Styron LLC. Together these companies account for approximately 80% of global production capacity. Although demand for polycarbonate resin began to pick up after bottoming out in October–December 2011, rising prices for key raw materials and the aggressive expansion of production capacity by competitors continue to have a detrimental effect on the market. However, while global demand shrank in fi scal 2011, in fi scal 2012 renewed demand in the PRC and other emerging economies is expected to drive growth of between 5% and 6%.

PET Film

The global market for PET fi lm rallied after bottoming out early in 2010, returning to the prerecession level in the fi rst half of fi scal 2010. However, in fi scal 2011, demand rose only 3%. Nonetheless, demand for refl ective PET fi lm for use in LCD backlights, a principal application for this product, is expected to rebound, while inventory adjustments by customers are nearing completion. Accordingly, demand is expected to expand by approximately 7% annually for the foreseeable future, led by the high-growth Asian market.


Million tons

4

3

2

1

0 2000 2001 2002 2003 2004 2005 2006 2007 2008 20102009 2011


Million tons

2.5

2.0

1.5

1.0

0.5

0 2000 2001 2002 2003 2004 2005 2006 2007 2008 20102009 2011

With inventory adjustments by LCD manufacturers nearing

completion, we expect demand for PET fi lm to begin recovering

in the second half of fi scal 2012. In this market, we will promote

the development of high-performance and low-cost refl ective

fi lm for use in LCD backlights. We will also take decisive steps to

expand sales of products with superior antihydrolitic properties

for use in solar cell back sheets.


A We will focus on reinforcing the profi tability and competitive-

ness of both our polycarbonate resin and PET fi lm businesses by

fortifying our ability to provide attractive solutions.

In polycarbonate resin, we will direct our attention to achiev-

ing a dramatic increase in cost effectiveness by, for example,

modifying production methods. We will also step up efforts to

offer high-value-added products, such as specialty polycarbon-

ate copolymers and environment-friendly materials. In com-

pounds, we will foster the use of other types of resins to provide

comprehensive solutions. Our focus in processed products will

be on securing additional technologies and expertise that will

strengthen our offerings across the value chain—particularly from

components and devices through to fi nished products—thereby

enabling us to accelerate the development of thin-fi lm materials

for electronics applications. We will also focus on augmenting

operations in important growth businesses, including glazing

materials.

In PET fi lm, our medium- to long-term priority is to increase our

production capacity and expand sales in promising Asian markets.

Further, we will endeavor to optimize our product mix and work

with customers to build vertically integrated business models. While

refi ning the competitive advantages of our products in terms of

quality, chiefl y our superior insulation properties and excellent

resistance to heat and chemicals, we will press forward with the

development of distinctive new fi lms and processing technologies.

Global Market for Polycarbonate Resin

Global Market for PET Film

Global Market View

12 Teijin Limited

Q How did the pharmaceuticals and home healthcare

businesses perform in fi scal 2011?

A In the pharmaceuticals business, sales continued to expand

favorably for febuxostat, our novel treatment for hyperuricemia and

gout, and Synvisc Dispo, an intra-articular injection-form drug for

treating pain associated with osteoarthritis of the knee. Febuxo-

stat also earned recognition in Japan—where it is marketed as

Feburic—for outstanding effi cacy and for broadening the options

for treating hyperuricemia and gout, receiving the Prize for Science

and Technology (Development Category) for fi scal 2012, part of the

Commendation for Science and Technology, awarded by Japan’s

Ministry of Education, Culture, Sports, Science and Technology,

as well as the Pharmaceutical Society of Japan Award for Drug

Research and Development 2012.

In the home healthcare business, rental volume for mainstay

HOT equipment rose, while rentals of CPAP ventilators also

increased encouragingly. As a consequence, the pharmaceuticals

and home healthcare businesses reported increases in sales and

operating income.



A In pharmaceuticals, we will take decisive steps to bolster sales

of febuxostat, which we see as an important growth driver. With the

April 2012 approval in Japan for long-term prescription of this drug,

we will endeavor to increase domestic sales through the active

expansion of marketing efforts. Overseas, we currently have distri-

bution agreements for this drug covering 117 countries and territo-

ries. In fi scal 2012, we plan to launch in Taiwan, Hong Kong and

Mexico and will move swiftly to secure regulatory approval to mar-

ket the drug elsewhere. In the area of bone and joint disease, we

will focus on expanding sales of Bonalon®* Bag for I.V. Infusion

Pharmaceuticals: Teijin specializes in three key therapeutic areas, namely, bone and joint disease, respiratory disease and cardiovascular and metabolic disease, and in Japan com-mands a leading share of the markets for pharmaceuticals for treating bone and joint disease and respiratory disease. In the area of cardiovascular and metabolic disease, Teijin has posi-tioned febuxostat—a promising new treatment for hyperurice-mia and gout—as a strategic product with global currency and is pushing ahead with efforts to expand marketing world-wide, having secured exclusive distribution agreements for this drug covering 117 countries and territories.Home Healthcare: Teijin was the fi rst company to commer-cialize home oxygen therapy (HOT) services in Japan and maintains its position as the domestic market leader. Teijin is also Japan’s top provider of continuous positive airway pressure (CPAP) services. Overseas, Teijin provides home healthcare services in the United States, Spain and the ROK. Globally, approximately 400,000 individuals use Teijin’s home healthcare services.

Healthcare Business Group

* Bonalon® is the registered trademark of Merck Sharp & Dohme Corp.,

Whitehouse Station, NJ, U.S.A.

Kentaro Arao

General Manager,

Healthcare

Business Group

Principal Products

Bone and joint disease

Pharmaceuticals

Bonalon®* Treatment for osteoporosis

Onealfa® Treatment for osteoporosis

Synvisc Dispo™ Treatment for pain associated with osteoarthritis

of the knee

Home Healthcare

SAFHS® Sonic Accelerated Fracture Healing System

Respiratory disease

Pharmaceuticals

Mucosolvan® Expectorant

Spiropent ® Bronchodilator

Atrovent ® Prophylaxis for bronchial constriction

Rhinocort ® Treatment for allergic rhinitis

Alvesco® Inhaled corticosteroid agent for asthma

Home Healthcare

Hi-Sanso™ series Therapeutic oxygen concentrator

Mildsanso® Therapeutic oxygen concentrator

NIP NASAL® Noninvasive positive pressure ventilator (NPPV) for

sufferers of sleep apnea syndrome (SAS)

SLEEPMATE ® Positive pressure ventilator for sufferers of SAS

AutoSet™ Positive pressure ventilator for sufferers of SAS

GoodKnight ® Positive pressure ventilator for sufferers of SAS

SleepWatcher ® High-performance sleep disorder diagnostic system

Cardiovascular and metabolic disease

Feburic ® Treatment for hyperuricemia and gout

Tricor ® Treatment for hyperlipidemia

Other

Venilon ® Treatment for severe infectious diseases

Laxoberon ® Laxative

Bonalfa ® Treatment for psoriasis

13Teijin Limited

900 µg, which was launched in May 2012. This drug, which is Japan’s

fi rst intravenous drip–form treatment for osteoporosis, administered

once every four weeks, is attracting considerable attention.

In home healthcare, we will work to enhance our lineup of

HOT devices by adding new performance features and developing

smaller, lighter and lower-cost models. We will seek to bolster

rentals of CPAP ventilators by expanding the number of sleep labs

and are proceeding with the development of a monitoring system

that uses mobile phone networks. To reinforce the profi t structure

of our overseas home healthcare business, which encompasses

operations in the United States, Spain and the ROK, we will take

steps to further enhance operating effi ciency. On another front,

we will press ahead with preparations to enter the market for

devices used in stroke rehabilitation.


A At present, marketing efforts for febuxostat target the devel-

oped economies, but in the years ahead we will concentrate on the

PRC and other emerging economies. We will also seek to broaden

our portfolio, with a particular emphasis on drugs for treating bone

and joint disease, respiratory disease and cardiovascular and meta-

bolic disease, both through in-house development and licensing in.

We will also employ effective life cycle management.

We will work to ensure sustainable profi tability in our home

healthcare business in Japan by promoting the use of CPAP equip-

ment to treat a wider range of diseases, as well as by introducing

new models, including portable HOT devices. At the same time,

we will accelerate global expansion and further hone operating

effi ciency with a view to increasing the profi tability of our overseas

home healthcare business.

Additionally, we will strive to expand into new healthcare

businesses, including sports medicine and home rehabilitation

for individuals suffering from musculoskeletal disorders, such as

locomotive syndrome.

Jan 2012 (Approved)

Aug 2011 (Filed)

Sept 2011

June 2012 (Approved)

July 2011

R&D PipelineAs of June 30, 2012

Area Code No. Target Disease

Phase of Clinical Trials Approved/New LaunchPhase I Phase II Phase III Filed

Bone and joint

disease

GTH-42V Osteoporosis

ITM-058 Osteoporosis

GTH-42J Osteoporosis

Respiratory disease NA872ET Expectorant

Cardiovascular and

metabolic disease

ITM-077 Type 2 diabetes

ITM-014 Acromegaly

NTC-801 Atrial fi brillation and fl utter

OtherGGS-MPA Microscopic polyangiitis

TV-02H (PRC) Psoriasis vulgaris

Hi-Sanso™ 3S

SLEEPMATE ® S9

WalkAide ® System

14 Teijin Limited

Q How did the trading and retail business do in fi scal 2011?

A In textiles and apparel, active efforts to foster alliances in Japan

and overseas supported brisk sales. In industrial textiles and materials,

we saw an increase in shipments of industrial textiles, owing to a rapid

recovery in sales for automotive-related applications and demand associ-

ated with reconstruction efforts in areas devastated by the Great East

Japan Earthquake.

Q What do you see as your principal challenges in fi scal 2012

and how will you respond?

A Effective from fi scal 2012, the polyester fi bers for apparel component

of the polyester fi bers business has been incorporated into the Trading

and Retail Business Group, a move aimed at strengthening our respon-

siveness to market change. With companies on both the supply and the

demand sides accelerating the shift of their operations outside Japan to

other parts of Asia, we will take steps to reinforce our integrated global

business model, which encompasses everything from the procurement

of materials and sewn items and production, through to sales. We will

also strengthen the production and processing capabilities of our OEM

suppliers in the Association of Southeast Asian Nations (ASEAN) region.

Additionally, we will leverage our R&D bases in the PRC to strengthen

relations with the China Chemical Fibers Association (CCFA) and local

blue-chip companies.


A To date, we have sought to build on our technological expertise as

a manufacturer and on our planning prowess to evolve our innovative

business model, bolstering our logistics, credit management and infor-

mation capabilities—thereby enhancing our position as a specialized fi ber

products trading company—and linking these capabilities organically.

These efforts have been guided by with what we call our “3C” approach:

Coordinating our value chain; Compounding materials, technologies and

human resources to cultivate new business opportunities; and, Converting,

that is, maximizing our converter functions to add value. The incorpora-

tion of the apparel component of the polyester fi bers business into our

business group has added polyester fi lament yarn and textile production

technologies, signifi cantly enhancing our integrated supply chain, market

responsiveness and ability to propose comprehensive solutions.

Trading and Retail Business Group

Our newly added polyester fi bers for apparel business encom-passes textile production bases in Japan, the PRC and Thailand, which spe cialize in high-performance, high-quality polyester textiles. Textiles and apparel, which is one component of our original products converting business, centers on a far-reaching global production and sales network that facilitates our involvement in diverse apparel-related businesses, from capabilities in materials development and procurement through dyeing, sewing and other processing stages. In industrial textiles and materials, the second component of our products converting business, we are capitalizing on the broad network and extensive specialized expertise we have cultivated in our polyester fi bers business, and on our superior converting capabilities, to provide a wide range of industrial and consumer-use products, including automotive-related materials and industrial and household items.

Toshihide Fukushima

General Manager,

Trading and Retail

Business Group

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15Teijin Limited

Q How did the IT business perform in fi scal 2011?

A We continued to operate in an uncertain environment, owing to efforts

by companies to constrain IT spending, combined with the impact of the

Great East Japan Earthquake. Nonetheless, thanks to growth-oriented

investments and ongoing efforts to secure profi tability and reinforce our

operating structure, we achieved increases in both sales and operating

income.

Q What do you see as your principal challenges in fi scal 2012

and how will you respond?

A Given the increasing prevalence of smartphones, tablet computers and

other sophisticated information terminals, as well as advances in cloud-

based and other services, user requirements are expected to become

increasingly diverse and the scope of application for IT services is set to

expand. Guided by our new medium-term business plan, we will respond

to these and other changes in operating conditions by implementing deci-

sive measures to accelerate growth, particularly in our core businesses,

namely, internet services, healthcare solutions and GRANDIT®, a web-based

enterprise resource planning (ERP) software package.

Q What can you tell us about your medium-term business plan?

A The watchword of the plan is ‘united innovation.’ Our fi rst priority

will be innovation that enables us to respond quickly to changes in the

operating environment, thereby helping us foster a corporate culture that

emphasizes a willingness to take on challenges, alongside the cultivation

of new businesses and services and quick and accurate responses to

market and technological change.

Second, we will target innovation that bolsters the scale and diversi-

fi es the nature of core businesses. This will involve stepping up efforts to

grow our net services and healthcare solutions businesses, augmenting

and adjusting the focus of IT services for corporate customers and driv-

ing overall growth by taking advantage of promising M&A opportunities.

Specifi c measures in the net services business include capitalizing on

the consumer shift to smartphones to expand into global markets and

to modify our business model, as well as to enhance profi tability and

develop a new platform for our social media services. In IT solutions for

the healthcare fi eld, we will intensify efforts to provide solutions for phar-

maceuticals manufacturers and health insurance associations, as well as

launch new services targeted at peripheral markets, including pharmacies

and nursing care service providers. We will also refi ne and refocus our

IT solutions for corporate customers by fortifying global support for

GRANDIT® customers and advancing the development of cloud-based

services for corporate groups.

To facilitate ‘united innovation,’ we will continue to implement mea-

sures that reinforce our operating foundation. Of particular note, we will

modify business processes and boost operations to better refl ect cus-

tomer perspectives and service quality concerns. We will also work to

secure and foster the talented human resources necessary for the further

global expansion of our operations.

IT Business Group

Norihiro Takehara

General Manager,

IT Business Group

Spearheaded by Infocom Corporation, Teijin’s IT business comprises net services for consumers, encompassing internet-, smartphone- and mobile phone–based services, and IT solutions for corporate and public sector customers.

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16 Teijin Limited

separator

TM

New Business Development Group

Kazuo Imose

General Manager,

New Business

Development Group

Q What can you tell us about your efforts to develop new

businesses?

A We are reinforcing R&D with the aim of promptly commercializing

achievements in four key areas, namely, bioplastics, high-performance

electronics materials, water treatment and advanced medical materi-

als. R&D efforts are led by corporate research facilities, notably the

Teijin Technology Innovation Center, the Integrative Technology

Research Institute and the Material Analysis Research Laboratories.

In the area of bioplastics, we are advancing the commercialization

of a number of promising products, including a highly heat-resistant

polylactic acid bioplastic (BIOFRONT), a bio-derived PET product

(ECOCIRLE Plantfi ber) and a bio-derived polycarbonate resin. In the

area of high-performance electronics materials, development efforts

are accentuating innovative thermoresistant LiB separators, which

respond to rising demand for LiBs that deliver greater safety and

capacity, and printable electronics, which signifi cantly streamline fab-

rication processes for semiconductors and other devices. In water

treatment, our goal is to provide comprehensive wastewater treat-

ment solutions. Of particular note, we are promoting the adoption

of the MSABP®* (Multi-Stage Activated Biological Process) system,

which uses the action of microorganisms, thereby making it possible

to effectively treat effl uent with high concentrations of organic sub-

stances. This system has already been selected for use in such

countries as Angola and the PRC. In advanced medical materials,

we are integrating materials technologies with healthcare technolo-

gies to develop materials for tissue repair, drug delivery systems

and medical equipment.

Q What is special about Teijin’s LiB separators and how

are efforts to commercialize progressing?

A LiB separators are widely used, with applications including

electric vehicles, mobile phones and notebook computers, and we

expect demand to continue rising for greater capacity and improved

safety. By using highly heat-resistant coatings, one made with aramid

materials and one with a fl uorine compound coating, we succeeded

in developing two types of LiB separator that achieve signifi cantly

higher capacity, as well as outstanding safety and a long lifespan.

We have secured the approval of several leading battery manufactur-

ers and have recently established a company to manufacture our

LiB separators in the ROK in a joint venture with a local partner.

The New Business Development Group has three basic mis-sions. The fi rst is to leverage Teijin’s incubation capabilities to facilitate the swift creation of new businesses. The second is to conduct investigative research to develop basic technolo-gies that will enable new businesses to germinate. The third is to promote research with a long-term perspective in areas that straddle existing businesses. Guided by these missions, this group focuses on developing advanced technologies and on transforming such technologies into commercially viable businesses with the objective of building a portfolio of promising businesses and ensuring sustainable growth.

* MSABP® is a registered trademark of Aquarius

Technologies Inc. of the United States.

17Teijin Limited

Recognizing technological innovation as vital to ensuring sustain-

able growth, we continue to place a high priority on R&D. Guided

by the Chief Science and Technology Offi cer, appointed as part of

an effort to reinforce our Group R&D organization as we entered fi s-

cal 2012, more than 1,600 researchers at nine major R&D sites in

Japan and seven overseas continue to undertake ambitious R&D

and contribute to the evolution of our unique solutions-oriented

business model.

For strategic purposes, we have grouped highly promising

markets into fi ve key fi elds: Sustainable transportation; information

and electronics; safety and protection; environment and energy;

and healthcare. We have also identifi ed three core technological

areas—high-performance fi bers and composite materials, high-

performance electronics and advanced medical materials—in

which we will concentrate R&D resources with the aim of providing

innovative solutions in these fi elds.

Transforming our Technology Portfolio to Facilitate the

Provision of Optimal Solutions

Restructuring our technology portfolio is crucial to the Teijin Group’s

evolution toward a business model that focuses on providing

solutions. Our materials businesses have achieved a certain degree

of success in meeting the needs of our customers, but that has

meant our business has traditionally emphasized the supply of

upstream materials, limiting our understanding of the needs of end

users. As a result, despite having superior production and proc-

essing technologies, our ability to provide effective solutions and

uncover latent market needs has been restricted. Under CHANGE

for 2016, we will shift our focus to creating a technology portfolio

that ensures a fi rm grasp of end users’ needs and which facilitates

the provision of optimal solutions further down the supply chain.

Research and Development

Transforming our technology portfolio

Rawmaterials

Preliminary processing

Secondaryprocessing

Additional high-value-added

processing

Healthcare technologies

Materialstechnologies

Finished products

Evolving toward a solutions-oriented business model

Development of materials

Components and devices Customers

Identification of needs

Value for customers

Integrated technologies

Solutions

Development ofapplications

18 Teijin Limited

Basic Objectives behind Transforming our Technology

Portfolio

Our fi rst objective in transforming our technology portfolio is to

broaden the scope of and add depth to existing technologies,

enabling us to enhance our technological advantages and expand

existing businesses. Second, we aim to reinforce existing and

acquire new processing technologies. Our purpose here is to

provide solutions further down the supply chain. To this end, we

will promote the design of distinctive components and devices by

championing the assimilation of advanced materials and sophisti-

cated processing technologies, as well as by combining and amal-

gamating various conventional materials developed independently

and with other companies. In addition, we will pursue collaboration

with customers in the development of new products. Third, we will

work to integrate materials and healthcare technologies, furthering

the creation of pioneering healthcare businesses in such areas as

materials for regenerative medicine and tissue repair and basic

materials for drug delivery systems.

Fostering the Next Generation of Teijin Researchers

In addition to seconding individuals to leading research institutions

both in Japan and overseas, we work to foster junior researchers

through such initiatives as the Teijin 21st Century Forum and the

Teijin Technology Advisory Council. Our Teijin Techno College is

staffed by former Teijin employees, retired from management-level

positions, who act as instructors, sharing their expertise, skill and

technological knowledge with current R&D personnel. We are also

fortunate to have Dr. Ei-ichi Negishi, a Nobel Prize in Chemistry

2010 laureate and a former Teijin employee, on staff at present

as a Teijin Group Distinguished Fellow, a capacity that enables

him to extend invaluable guidance to our researchers.

Cultivating New Technologies through Open Innovation

In line with our objective of providing customers with advanced

solutions in a timely manner, we are actively promoting open inno-

vation through partnerships involving industry, government and

academia, both in Japan and overseas. Such efforts are designed

to facilitate open, cooperative R&D that integrates basic research,

incubation and marketing, thereby accelerating the development

process.

Patent Applications in Fiscal 2011 (Japan)

Years ended/ending March 31

Patent Applications Related to Key Technological Themes (Japan)

High-Performance Fibers 137

Polyester Fibers 56

Films and Plastics 173

Pharmaceuticals and Home Health Care

23

New Business Development and others

83

Total 472

Intellectual Property

The principal responsibility of the Teijin Intellectual Property Center is to enhance the value of our intellectual property, a task that focuses on expanding our pat-ent portfolio and extending patent terms. To this end, we have identifi ed promising growth businesses and key fi elds and are actively fostering inventions and new technologies, products and processes; applying for patents; securing intellectual property rights; and analyzing competi-tors’ patent information in core techno-logical areas. To enhance the effectiveness of intellectual property management, we are selective in seeking patent protection, main-taining a high percentage of applications for achievements related to signifi cant Groupwide technological themes. The Teijin Intellectual Property Center also works with manage-ment to address challenges pertaining to intellectual property and forges intellectual property strategies in close alliance with man-agement strategies. Of particular note, the center assesses the rel-ative merits of our intellectual property portfolio as it pertains to our signifi cant technological themes and takes steps to strengthen the portfolio as necessary to facilitate the formulation of business and technological strategies. With the further globalization of our oper-ations that will result from the restructuring of our geographic port-folio, the center is developing a new mechanism that will expand the scope of our intellectual property management capabilities beyond patents and trademarks to encompass the protection of knowledge and trade secrets.

Hideko Mihara

President,

Teijin Intellectual

Property Center

29%17%

37%

5%

New Business Development and othersrs

Pharmaceuticalsand HomeHealth Care

Films and Plastics

rformanceHigh-PerfrfFibers

12%PolyesterFibers

250

500

750

1,000

Number of applications

0

15

30

45

60

Key technological themes as a percentage of total applications

OthersKey technological themes

02007 2008 2009 20122010 2011

%

19Teijin Limited

2012 2016 2020

Materials for regenerative medicineand tissue repair

Basic materials for drug delivery systems

Materials for medical equipment

Sports medicine / locomotive syndrome

Clinical development

Products and systems

Marketing

Osteoarthritis treatment systems

Second-generation osteoarthritis treatment systems Pain relief equipment

Mechanical stresstreatment systems

Equipment for building muscular strength Active Aging Center

Materials for tissue repair (adhesive barrier materials)

Drugs for cellular therapy (treatments for stroke)

Materials for tissue repair (bone support materials)

Materials for tissue repair (complex sheets)

Percutaneous administration devices (for vaccinations)

Percutaneous administration devices (polymerized pharmaceuticals)

Injectable gels (polymerized pharmaceuticals)

Nanofiber materials (polymerized pharmaceuticals)

Materials for medical equipment (pump oxygenators)

Materials for medical equipment (vascular substitutes)

Development pipeline for new healthcare businesses

Guided by our CHANGE for 2016 medium- to long-term vision, which

designates promising businesses that straddle our existing green

chemistry and healthcare domains as “overlapping domains,” we

are working to cultivate exciting new healthcare businesses.

We have long conducted R&D aimed at integrating materials

technologies in our portfolio that respond to demand in the medical

fi eld—including technologies used in the development of bioabsorb-

able polymers and other new materials, as well as nanomaterials

processing and microforming technologies—with key Teijin health-

care technologies for cellular engineering, protein engineering, drug

formulation and medical equipment design. Looking ahead, we will

further efforts to reinforce existing and develop new technologies

that integrate materials and healthcare technologies.

New healthcare businesses we are targeting include radical

tissue repair treatment, which involves materials for regenerative

medicine and tissue repair; drug delivery systems, which combine

medical materials and pharmaceuticals; and healthcare for seniors,

which brings together materials for medical equipment, sports med-

icine and techniques for treating musculoskeletal disorders, such

as locomotive syndrome. Materials for regenerative medicine and

tissue repair currently under development include drugs for cellular

therapy, which are used in stroke therapy, adhesive barrier materi-

als and bone support materials. In the area of basic materials for

drug delivery systems, our efforts encompass the clinical develop-

ment of percutaneous administration devices and the development

of injectable gels and nanofi ber materials. In materials for medical

equipment, we are developing pump oxygenators and vascular

substitutes, among others, with the aim of achieving commercial-

ization by 2020. In sports medicine and techniques for treating

musculoskeletal disorders, we are stepping up efforts to develop

osteoarthritis treatment systems, as well as equipment used in

electrical muscle stimulation and pain relief treatment.

Materialstechnologies

Healthcaretechnologies

Nanomaterials processingMicroforming● Microstructured materials

New materials technologies● Bioabsorbable polymers● Biocompatible polymers

Cellular engineering

Protein engineering

Pharmaceuticals manufacturing

Medical equipment design● Device design● Performance analysis

Materials for regenerative medicine and tissue repairDrugs for cellular therapy, hemostaticmaterials, adhesive barrier materials,bone support materials

Basic materials for drug delivery systemsMicroneedle devices, injectable gels,nanofiber materials

Materials for medical equipmentPump oxygenators, vascular substitutes,artificial joints

Sports medicineEquipment used in the treatment ofosteoarthritis and locomotive syndrome

Philosophy behind efforts to foster technologies that integrate materials and healthcare technologies

Promoting R&D in Overlapping Domains

20 Teijin Limited

We believe effective corporate governance is essential if a company is to steadily increase its returns to shareholders on their investments over the medium to long term, as well as to fulfi ll its responsibilities to its various stakeholders. To these ends, we have implemented pioneering reforms aimed at enhancing transparency, ensuring fairness and objectivity and accelerating decision making. These include establishing an Advisory Board, reducing the number of directors on Teijin’s Board of Directors, introducing a corporate offi cer system and adopting a compensation system for directors that is linked to our business performance.

Board of Directors and Corporate Offi cers

To expedite decision making and clarify responsibility for frontline

management, we have set the number of directors on Teijin’s Board

of Directors at a maximum of 10. We have also introduced a corpo-

rate offi cer system and have delegated considerable authority and

responsibility to those offi cers. To ensure the appropriate separation

of responsibility for frontline management and monitoring/supervising,

the Board of Directors is directly responsible to the chairman, who

does not participate in internal, operations-level decision making.

Four of the directors on the Board are independent and

appointed from outside the Company. Responsibility for supervising

the internal directors is vested with these independent outside direc-

tors, who also draw on the exceptional insight they bring to the

position to advise on management-related issues, thereby helping

to increase the transparency and accountability of the Board.

Corporate Governance Milestones

1993 Establishes corporate philosophy, Standards of Conduct and

Corporate Code of Conduct

1998 Establishes Corporate Ethics Committee and formulates

Corporate Standards of Conduct

1999 Installs Advisory Board and introduces corporate offi cer system

2003 Adopts holding company system and issues Teijin Group

Corporate Governance Guide

2007 Updates Teijin Group Corporate Governance Guide

2009 Updates Teijin Group Corporate Governance Guide

2012 Increases the number of independent outside directors to four

Teijin’s Disclosure Policies

1. In disclosing information, Teijin’s basic policy is to disclose the same

content both in and outside Japan simultaneously.

2. In addition to disclosing legally stipulated fi nancial information,

Teijin proactively discloses corporate information from the perspective

of good CSR.

3. Teijin’s general meetings of shareholders are open meetings,

wherein communicating with shareholders is our fi rst priority.

Audit System and Board of Auditors

Teijin’s Board of Auditors comprises fi ve members, three of whom

are independent outside corporate auditors, thereby ensuring trans-

parency and the effective monitoring and auditing of all aspects of

management, including Total Risk Management (TRM). To further

enhance the effi cacy of monitoring and auditing, full-time corporate

auditors not only attend meetings of the CEO Corporate Strategic

Committee and the Management Committee, but also coordinate

meetings of the Group Board of Auditors and may, in addition,

serve concurrently as outside corporate auditors for core Group

companies.

Advisory Board

The Advisory Board is a consultative body that is tasked with advis-

ing on all aspects of management and evaluating the performance

of top executives. The Board, which has two ordinary meetings

each year, comprises six or seven leading experts from outside

the Company—of whom four are Japanese and two or three

non-Japanese—as well as Teijin’s chairman and its president, who

also serves as CEO. The Advisory Board additionally functions as a

nomination and remuneration committee and is charged with delib-

erating the replacement of the CEO and putting forward succes-

sors, proposing candidates for chairman, reviewing systems and

standards governing remuneration for directors and evaluating the

performance of the CEO and representative directors. Compensa-

tion for directors is based on consolidated ROA, calculated using

Corporate Governance

Teijin’s Three-Pronged Approach to Management

Businessstrategies

Corporategovernance CSR

Board of Directors Board of Auditors Advisory Board

Total number of individuals 10 5 8

Number of independent

outside individuals 4 3 6

Percentage of independent

outside individuals 40% 60% 75%

Note: Teijin has formulated its own requirements concerning the independence

of outside directors and corporate auditors that are comparable with those

mandated by U.S. stock exchanges.

Percentage of Independent Outside Members on Teijin’s BoardsAs of July 2012

21Teijin Limited

New Business

Development Group

IT

Trading and Retail

Healthcare

Electronics Materials and

Performance Polymer Products

Advanced Fibers and

Composites

Six

Business

Groups

Majority of members are external

Corporate Governance System

Holding Company System

Ten members(of whom four are external)

Five members(of whom three are external)

Advisory Board

Shareholders’Meeting

Board of Directors

Board of Auditors

CEOTRM Committee

Nomination and Remuneration

Group Board of Auditors

Management CommitteeHeads of Business Groups

and Chief Officers

CEO Corporate

Strategic CommitteeChief Officers

One focus of the management

reforms we initiated in 1999 was the

creation of a fi rst-class corporate

governance system, a move

designed to bring Teijin in line with

other top global players. Our Advisory Board performed a key role

in this effort. In addition to leading experts from Japan, the Advisory

Board’s original members included John A. Krol, former chairman

of global chemicals giant DuPont, and Sir Ronald Hampel, previ-

ously chairman of ICI and of the Hampel Committee, which estab-

lished certain key principles of corporate governance in the United

Kingdom. Both these gentlemen took a very active role in Advisory

Board discussions. Subsequent Advisory Board members have

also made valuable contributions that have consistently enhanced

both our corporate governance system and our corporate value.

Toru NagashimaChairman of Teijin

John W. HimesFormer Senior Vice-President

of DuPont

Lord Leon BrittanVice-Chairman of UBS

Investment Bank

Hajime SawabeExecutive Advisor,

TDK Corporation

operating income; consolidated ROE; and consolidated operating

income—specifi cally, on an examination of whether those targets

have been met and/or improvements seen—as well as on a

qualitative assessment of each individual director’s execution of

his or her duties.

Compliance and Total Risk Management

We operate on the principal that effective corporate governance

depends on strict compliance and comprehensive risk manage-

ment. Individuals employed by the Teijin Group are required not

only to comply with relevant laws and regulations, but also to act

Yutaka IimuraSpecial Envoy of the Government

of Japan (Middle East, Europe)

Nobuo SekiCorporate Advisor,

Chiyoda Corporation

Kenichiro SenohPresident and Chairperson, The

Industry-Academia Collaboration

Initiative Nonprofi t Organization

Shigeo OhyagiPresident and CEO of Teijin

The Teijin Group’s Corporate Governance SystemAs of July 2012

Advisory Board MembersAs of July 2012

with good faith as a businessperson and a member of society in

accordance with ethical and social norms. In line with this convic-

tion, we formulated the Corporate Code of Conduct and the Corpo-

rate Standards of Conduct, which set forth consistent guidelines

for the entire Teijin Group, and work diligently to reinforce aware-

ness of compliance issues among management and employees.

As a countermeasure to the risks and uncertainties we face

as a corporate entity, we established our TRM Committee,

which answers directly to the Board of Directors and which is

charged with the comprehensive management of strategic and

operational risk.

22 Teijin Limited

Management Team

Board of Directors, Corporate Auditors, Advisory Board, Chief Offi cers and Business Group General ManagersAs of July 2012

Board of Directors

Chairman of the Board

Toru Nagashima

President and CEO,

Representative Director

of the Board

Shigeo Ohyagi

Executive Vice-President,


of the Board

Norio Kamei

Senior Executive Officer,


of the Board

Osamu Nishikawa

Senior Executive Officer,

Member of the Board

Takashi Takahashi

Executive Officer,

Member of the Board

Yoshio Fukuda

Independent Outside Director

Hajime Sawabe


Yutaka Iimura


Kenichiro Senoh


Nobuo Seki

Corporate Auditors Full-Time Atsuo Amano

Full-Time Toshiaki Yatabe

Independent Outside Toshiharu Moriya

Independent Outside Noriko Hayashi

Independent Outside Nobuo Tanaka

Advisory Board Toru Nagashima (Chairman)

John W. Himes

Lord Leon Brittan

Hajime Sawabe

Yutaka Iimura

Nobuo Seki

Kenichiro Senoh

Shigeo Ohyagi

Business Group

General Managers

Advanced Fibers and Composites Norio Kamei

Electronics Materials and

Performance Polymer Products Yoshio Fukuda

Healthcare Kentaro Arao

Trading and Retail Toshihide Fukushima

IT Norihiro Takehara

New Business Development Group Kazuo Imose

Chief Offi cers Corporate Strategy Offi cer Kazuhiro Yamamoto

Chief Science and Technology Offi cer Takashi Takahashi

Chief Marketing Offi cer Jun Suzuki

Chief Social Responsibility Offi cer Osamu Nishikawa

Chief Financial Offi cer Yoshihisa Sonobe

Chief Human Resources Offi cer Yasumichi Takesue

Chief Engineering Offi cer Yo Goto

General Manager—Raw Materials,

Polymers & Procurement DivisionYasuhiro Hayakawa

23Teijin Limited

Selective CSR

Advanced CSR

Philanthropic activities

Personnel and occupational issues,

Purchasing and procurement

Basic CSR Compliance, Risk management, ESH, Disaster mitigation,

Product liability issues and quality assurance

Chief Social Responsibility Officer

Group CSR Committee

ESH Office

Risk Management Office

CSR Planning Office

Group Compliance and Risk Management Subcommittee

Group ESH Subcommittee

Group Product Liability and Quality Assurance Subcommittee

Group Secure Export Control Conference

Group Environmental Management Promotion Subcommittee

Group CSR Promotion Subcommittee

CSR Management

The Evolution of Teijin’s CSR Program

The basic goals underlying our approach to CSR are articulated

by the phrases, “Quality of Life,” “In Harmony with Society,” and

“Empowering our People,” which comprise the Teijin Group corpo-

rate philosophy, set forth in 1993. To achieve the goals entailed in

this philosophy, we have formulated a basic policy for CSR and

continue to implement systematic, well-planned initiatives. In April

2005, we inaugurated the role of Chief Social Responsibility Offi cer

and created an internal organization to coordinate all aspects of our

CSR program, including corporate ethics; compliance; risk man-

agement; environment, safety and health (ESH); and efforts to con-

tribute to society. We have also developed specifi c policies, targets

and strategies and continue to promote a wide range of related

activities. Fiscal 2011 was our fi rst year as a member of the United

Nations Global Compact. By joining this program, we have commit-

ted ourselves to abiding by a set of universally accepted principles

related to human rights, labor practices, environmental concerns

and the prevention of corruption.

Advancing CSR Management

We have categorized our various CSR initiatives as addressing

“basic,” “advanced” or “selective” issues. This categorization has

enabled us to clarify the focus of and appropriate course of action

for these initiatives, set medium-term goals and enhance the

effectiveness of our activities.

To date, our CSR management system has centered on the

CSR Planning Offi ce and the ESH Offi ce. Acknowledging the

increasingly important role of risk manage-

ment, effective from fi scal 2012 we have also

established the Risk Management Offi ce.

Environmental Preservation

Teijin’s Sustainable Environment

Declaration

Having long recognized environmental issues

as a crucial management responsibility, in

1992 we formulated the Teijin Group Global

Environmental Charter. Today, we remain

committed to protecting the environment

through ambitious measures. In July 2007, we

published our Sustainable Environment Decla-

ration, which outlines three principal elements:

Environmental preservation, environmental

design and environmental business. In line with

these elements, we continue to implement a

variety of progressive initiatives. In fi scal 2012,

we established the Group Environmental Man-

agement Promotion Subcommittee as the

sixth prong of our Group CSR Committee,

Corporate Social Responsibility

SOCIALLY RESPONSIBLE INVESTMENT

As of July 2012, the Teijin Group is included in the Dow Jones Sustainability Indexes (criteria for inclusion:

economic, environmental and social performance); the FTSE4Good Index Series, which measures the performance of companies that meet globally recognized CSR standards

(criteria for inclusion: efforts to ensure environmental sustainability, development of positive relationships with

stakeholders and support for universal human rights); and the Ethibel Investment Register (criteria for inclusion: ethical economic policy, environmental policy, internal

social policy and external social policy).

Teijin’s CSR Framework

Teijin’s CSR Management System

24 Teijin Limited

50

100

150

200

0 2003 2004 2005 2015 20172012

23%

20%

160

120

7964

45

20

20%

50%

20%

45%57%

30% 35%

1% %7Number of female employees in management positions as a percentage of the total (Based on data for the 12 main domestic Teijin Group companies)

Number of individuals Years ended / ending March 31

Japan

North Americaand Europe

Emergingeconomies and Asia

FY2011 FY2016Around

FY2020

We are committed to creating a working environment that supports personal growth and skill enhancement and which encourages employees to achieve their full potential. In our new medium- to long-term management vision, CHANGE for 2016, we have identifi ed the transformation of our human resources portfolio as a crucial component of our strategy for reinforcing our management founda-tion and achieving growth. Accordingly, we are stepping up efforts to promote diversity in hiring and in maximizing capabilities, enhance early-career efforts to cultivate human resources and ensure effective global placement, all with the aim of fostering a global and highly diverse labor force. To promote diversity in hiring, we are recruiting on a worldwide basis, having set up recruiting offi ces in four locations, namely, Japan, the United States, Europe and Asia. We are also increasing the number of female candidates hired (30% or more of new grad-uates recruited in Japan) and expediting the promotion of female employees to managerial positions. To enhance early-career efforts to cultivate human resources, we are taking swift steps to identify and foster individuals with the potential to become tomorrow’s global frontline leaders, as well as expanding overseas training opportunities and assignments for junior employees and developing and implementing common global systems for job grading and performance evaluation. To ensure effective global placement, we are developing and implementing a global human resources database and promoting cross-border assignments.

Accelerating the promotion of female employees to managerial positions

Human Resources

1

2

3

4

Million tons Years ended March 31

0 1991 2006 2007 2008 2010 20112009

Overseas

Japan

2012

making it possible for us to ensure environmental strategies are

consistent with the Group’s strategies for growth.

CO2 Emissions from Teijin Manufacturing Operations Worldwide

Item Scope Minimum Target

CO2 emissions Japan 20% reduction from the fi scal 1990 level

Chemical substance emissions

Global 80% reduction from the fi scal 1998 level

Disposal of unusable industrial waste

Global 85% reduction from the fi scal 1998 level

Social Responsibility

Creating Bonds of Trust

Individual Teijin Group sites and companies take the initiative in

implementing corporate citizenship initiatives in their own communi-

ties. These efforts are complemented by a Groupwide social contri-

bution program, which was formulated and launched in fi scal 2006.

This program places particular emphasis on three areas—the envi-

ronment, international exchange and social education—and encom-

passes an employee volunteer scheme that includes days off for

volunteer activities and extended leave designed to enable employ-

ees to become, for example, registered bone marrow donors and

volunteer fi refi ghters. In fi scal 2011, we introduced the Volunteer

Support Program, which is intended to assist employees’ efforts

to contribute to society and encourage employee participation in

volunteer activities. Expenses for volunteer activities are covered

in part by donations from concerned employees and directors.

In the wake of the Great East Japan Earthquake, which struck

on March 11, 2011, we donated more than ¥500 million worth

of funds and relief supplies. In January 2012, we joined the

Kesennuma Kizuna (“strong bond”) Project, an initiative led by the

National Institute of Advanced Industrial Science and Technology’s

Smart Life Care Consortium that seeks to provide ongoing support

for efforts by inhabitants of Kesennuma, Miyagi Prefecture, to

restore self-reliance. In our capacity as a participant in this project,

we have supplied a variety of items, including wastewater treatment

systems for use at temporary emergency housing and curtains

made with heat-retentive polyester fi bers manufactured by Teijin

Fibers Limited. Looking ahead, we will continue working to provide

meaningful assistance to the communities affected by the disaster.

Shifting the composition of our human resources portfolio

Principal Environmental Targets of the Teijin Group for 2020

25Teijin Limited 25Teijin Limited

Financial Section

Financial Highlights and

Consolidated 10-Year Summary 26

Management’s Discussion and Analysis 28

Summary 28

Results of Operations 29

Business Segment Results 30

Financial Position 33

Outlook for Fiscal 2012 34

Risk Factors 35

Consolidated Financial Statements 36

Consolidated Balance Sheets 36

Consolidated Statements of Income 38

Consolidated Statements of Comprehensive Income 39

Consolidated Statements of Changes in Net Assets 40

Consolidated Statements of Cash Flows 42

Notes to Consolidated Financial Statements 43

Independent Auditors’ Report 71

26 Teijin Limited

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

815.7854.4

48.6

34.0

890.4 874.6908.4

938.1

1,009.61,036.6

943.4

765.8

13.418.0

75.1

65.2

76.8

38.7

51.9

35.3

4.0%4.4%

5.7%

8.2%

7.4%

6.3%

1.9%1.8%

6.0%

4.0%

0

200

400

600

800

1,000

1,200

0

20

40

60

80

100

120

0

2

4

6

8

10

12

Billions of yen

Net SalesYears ended March 31

Billions of yen %Operating Income

Operating Margin

Notes:

1. The U.S. dollar amounts represent translations of Japanese yen, for convenience only, at the rate of ¥82.19 to U.S.$1.00, the prevailing exchange rate at March 31, 2012.

2. Throughout this annual report, return on equity (ROE) is calculated as net income divided by average shareholders’ equity, and return on assets (ROA) is calculated as oper-

ating income divided by average total assets. Shareholders’ equity = Total net assets at year-end – Subscription rights to shares at year-end – Minority interests at year-end.

3. The debt-to-equity ratio is calculated as interest-bearing debt at year-end divided by shareholders’ equity at year-end.

Financial Highlights and Consolidated 10-Year Summary

Years ended/as of March 31 2003 2004 2005 2006

Operating Results Net sales ¥ 890,434 ¥874,569 ¥908,389 ¥938,082

Operating income 35,298 38,745 51,865 76,757

Net income (loss) (20,977) 8,455 9,159 24,853

Financial Position Total assets ¥1,036,518 ¥914,502 ¥852,029 ¥943,991

Interest-bearing debt 443,564 356,658 277,032 298,298

Shareholders’ equity 278,527 293,898 290,586 338,609

Cash Flows Cash fl ows from operating activities ¥ 58,316 ¥ 44,973 ¥ 73,313 ¥ 75,491

Cash fl ows from investing activities (65,919) (16,715) 12,708 (74,062)

Free cash fl ow (7,603) 28,258 86,021 1,429

Cash fl ows from fi nancing activities 10,842 (32,325) (79,643) 1,511

Per Share Data Net income (loss) ¥ (22.7) ¥ 9.0 ¥ 9.7 ¥0 26.6

Shareholders’ equity 300.3 316.8 313.3 364.8

Cash dividends 6.5 6.5 6.5 7.5

Other Data Capital expenditure ¥ 70,184 ¥ 52,996 ¥ 54,135 ¥ 66,777

Depreciation and amortization 53,028 52,794 52,287 50,389

R&D expenses 29,880 32,830 30,024 31,196

Number of employees 23,265 20,551 18,960 18,819

27Teijin Limited

12.6

(43.0)

3.3%

(35.7)-12.3%

25.2

-12.4%

9.1%

12.0

4.2%

325.2361.3 320.3

267.4

1.6%

6.1%

1.18 times

0.94 times

1,016.0

874.2

823.1

761.5

261.0

4.5%

0.89 times

762.1

0.83 times

1.18 times

6.5%

1.9%

0

200

400

600

800

1,000

1,200

0

2

4

6

8

10

12

0

0.5

1.0

1.5

2.0

2.5

3.0

-45

-30

-15

0

15

30

45

-15

-10

-5

0

5

10

15

2008 2009 2010 2011 2012 2008 2009 2010 2011 2012

Years ended March 31 As of March 31

Billions of yenNet Income (Loss)

%ROE

TimesBillions of yen %

Total Assets Interest-Bearing DebtROADebt-to-Equity

Ratio

Millions of yen Percentage change Thousands of U.S. dollars

2007 2008 2009 2010 2011 2012 2012/2011 2012

¥1,009,586 ¥1,036,624 ¥943,410 ¥765,840 ¥815,656 ¥854,371 +4.7% $ 10,395,072

75,061 65,162 17,966 13,436 48,560 34,044 -29.9% 414,211

34,125 12,613 (42,963) (35,684) 25,182 11,979 -52.4% 145,748

¥ 999,917 ¥1,015,991 ¥874,157 ¥823,071 ¥761,535 ¥762,118 +0.1% $ 9,272,637

295,480 325,245 361,342 320,285 267,400 261,034 -2.4% 3,175,983

366,753 391,010 305,577 271,306 284,236 292,030 +2.7% 3,553,121

¥ 96,456 ¥ 53,740 ¥ 40,392 ¥ 80,433 ¥ 77,132 ¥ 53,669 $ 652,987

(87,065) (79,218) (116,304) (33,437) (27,745) (35,165) (427,850)

9,391 (25,478) (75,912) 46,996 49,387 18,504 225,137

(19,074) 16,080 79,178 (42,949) (42,063) (14,123) (171,834)

Yen U.S. dollars

¥ 36.8 ¥ 13.2 ¥ (43.7) ¥ (36.3) ¥ 25.6 ¥ 12.2 $ 0.15

395.2 397.3 310.5 276.2 288.8 296.7 3.61

10.0 8.0 5.0 2.0 5.0 6.0 0.07

Millions of yen Thousands of U.S. dollars

¥ 75,698 ¥ 84,641 ¥ 75,806 ¥ 36,314 ¥ 29,249 ¥ 32,294 $ 392,919

54,009 62,668 67,364 61,879 56,410 52,304 636,379

35,097 36,282 37,630 33,356 31,483 31,845 387,455

19,053 19,125 19,453 18,778 17,542 16,819


28 Teijin Limited

Management’s Discussion and Analysis

Operating Environment

Global economic conditions were generally soft in fiscal 2011,

ended March 31, 2012. With the world still reeling from the destruc-

tion wrought by the Great East Japan Earthquake of March 11,

2011, only seven months later, in October 2011, Thailand was hit

by massive floods that resulted in global supply chain disruptions.

The impact of the European sovereign debt crisis began to spill

over into the real economy, slowing growth in Europe as well as

overseas. In Japan, economic conditions were also impeded by

such factors as electric power shortages and the unprecedented

strength of the yen and remained harsh throughout the period.

Strategies in Action

Having designated fiscal 2011 as the year in which we would repo-

sition Teijin on a growth trajectory, we focused on manifesting the

positive results of structural reforms, as well as on strengthening

our sales capabilities and R&D platform. We also continued to place

a high priority on securing and enhancing financial soundness and

at the same actively fostered businesses expected to support future

growth, as well as promising projects.

Operating Results

With the aim of guaranteeing timely disclosure and the efficiency of

business performance management, effective from fiscal 2011, all

consolidated subsidiaries of Teijin now close their books on March

31. As a consequence, for this fiscal year only, certain consolidated

subsidiaries and equity method affiliates reported operating results

for a 15-month period (January 1, 2011–March 31, 2012). Results

excluding the impact of this change are provided, where relevant,

for convenience only.

Billions of yen

Years ended March 31 2011 2012 Change

Net Sales ¥815.7 ¥854.4 4.7%¥791.0* –3.0%

Net sales totaled ¥854.4 billion, up 4.7% from fiscal 2010. This

increase was attributable to the positive impact of the standardiza-

tion of accounting periods for all consolidated subsidiaries of Teijin.

However, if this factor is discounted, net sales declined, owing

primarily to a slump in sales in the Films and Plastics segment.

Billions of yen


Operating Income ¥48.6 ¥34.0 –29.9%

¥35.3* –27.3%

Operating income declined considerably, mainly attributable to sup-

ply chain disruptions caused by the natural disasters in Japan and

Thailand, as well as to lackluster conditions in electronics markets

Summary worldwide, which caused a deterioration of results in the Films and

Plastics segment.

Billions of yen


Net Income ¥25.2 ¥12.0 –52.4%

¥13.8* –45.2%

Declines in operating income and equity in earnings of affiliates,

as well as an extraordinary loss resulting from amendments to the

employee retirement benefit plans of certain European subsidiaries,

combined to cause a substantial drop in net income.

Billions of yen

As of March 31 2011 2012 Change

Total Assets ¥761.5 ¥762.1 0.1%

Total assets were essentially level, despite constraints on major capi-

tal investment and the progress of depreciation and amortization,

owing to increases in trade notes and accounts receivable and other

components of working capital.

Billions of yen

Years ended March 31 2011 2012

Free Cash Flow ¥49.4 ¥18.5Free cash flow fell steeply as the sizeable decline in net income

drove down net cash and cash equivalents provided by operating

activities, while outlays for capital investment pushed up net cash

and cash equivalents used in investing activities.

Key Indicators

Years ended March 31 2011 2012

ROA 6.1 % 4.5 %

ROE 9.1 % 4.2 %

Debt-to-equity ratio 0.94 times 0.89 times

Owing to the marked declines in operating income and net income,

return on assets (ROA)—calculated using operating income—and

return on equity (ROE) retreated sharply. The debt-to-equity ratio

improved slightly, reflecting the reduction of interest-bearing debt.

Tasks Ahead

Fiscal 2012 is the first year of our new medium- to long-term

management vision, CHANGE for 2016. Guided by this, we will

implement basic strategies for transforming our four fundamental

portfolios—strategies that reflect effective risk management—and

will promote initiatives aimed at strengthening our sales and devel-

opment capabilities. In all these efforts, we will move swiftly and

with purpose, mindful of our commitment to securing profitable

sustainable growth, a key element of our long-term vision.

29Teijin Limited

of net sales, up 0.3 percentage point. R&D expenses rose 1.1%,

or ¥362 million, to ¥31.8 billion, reflecting ongoing forward-looking

investments in corporate research in key technological areas and

in the cultivation of new businesses.Net Sales

In the period under review, we reported consolidated net sales

of ¥854.4 billion, an increase of 4.7%, or ¥38.7 billion, from fiscal

2010. Sales in our materials businesses accounted for 52% of net

sales, the same as in fiscal 2010, while sales in overseas markets

represented 39% of the total, up 2.0 percentage points.

Discounting the impact of the standardization of accounting

periods for all consolidated subsidiaries of Teijin, consolidated net

sales amounted to ¥791.0 billion, down 3.0%, or ¥24.6 billion, as

the natural disasters disrupted the supply chain and results in the

Films and Plastics segment worsened, a trend precipitated by list-

less global electronics markets. Nonetheless, all other segments

reported moderate sales increases.

Costs and Expenses

Cost of sales rose 7.3%, or ¥42.9 billion, to ¥629.2 billion, a

consequence of costs incurred by subsidiaries that changed their

accounting period and of rising prices for fuel and raw materials. As

a percentage of net sales, cost of sales edged up 1.8 percentage

points, to 73.6%, reflecting the rising raw materials prices and

fuel costs and reduced operating rates in response to production

adjustments in the second half of the period. Selling, general and

administrative (SG&A) expenses rose 6.7%, or ¥10.0 billion, also

reflecting the standardization of accounting periods, as well as an

increase in labor costs. SG&A expenses were equivalent to 18.6%

Results of Operations

Operating Income

Despite favorable growth in operating income in the High-

Performance Fibers, the Pharmaceuticals and Home Health Care

and the Trading and Retail segments, operating income declined

29.9%, or ¥14.5 billion, to ¥34.0 billion, mainly attributable to sup-

ply chain disruptions caused by the natural disasters in Japan and

Thailand, as well as to lackluster conditions in electronics markets

worldwide, which caused a deterioration of results in the Films and

Plastics segment. As a consequence, the operating margin dipped

2.0 percentage points, to 4.0%. Discounting the impact of the stan-

dardization of accounting periods, operating income fell 27.3%, or

¥13.3 billion, to ¥35.3 billion.

Increases in sales volume in the High-Performance Fibers and

the Pharmaceuticals and Home Health Care segments and higher

sales prices had a positive impact of ¥32.0 billion on operating

income, while rising prices for fuel and raw materials, along with

a decline in sales volume in the Films and Plastics segment and

other factors, had a counteracting negative impact of ¥46.5 billion,

resulting in the net decline of ¥14.5 billion.

Effective from fiscal 2011, the Company and its domestic

consolidated subsidiaries adopted a new method of depreciation,

switching from the declining balance method to the straight-line

750

800

850

900

0 2011 2012

¥815.7Net sales

¥ 854.4

Net sales


+6.6

Others

+2.4

High-Performance Fibers

+17.4

Polyester Fibers

+6.4

Films and Plastics

-1.7

Trading and Retail

+7.7

Billions of yenAnalysis of Net Sales

Years ended March 31

750

800

850

900

0 2011 2012

¥815.7Net sales

¥ 791.0

Net sales


+3.1

Trading and Retail

+2.0

Others

+2.4

High-Performance Fibers

+0.9

Polyester Fibers

+3.4

Films and Plastics

-36.5

Billions of yen

Analysis of Net SalesExcluding the impact of the standardization of accounting periods


25

50

75

100 40

30

20

10

%%

0 02008 2009 2010 20122011

75.3% 76.8% 74.9% 71.9%

15.0%17.3%

18.9% 18.3%

73.6%

18.6%


Cost of Sales as a Percentage of Net Sales

SG&A Expenses as aPercentage of Net Sales

25

50

75

100

0 2011 2012

¥48.6 Operatingincome

¥ 34.0

Sales prices up +¥23.0Raw materials prices and fuel costs up

-¥27.0

Sales volume up(High-Performance Fibers, Pharmaceuticals and Home Health Care)+¥9.0

Sales volume down (Films and Plastics)-¥13.0

Other

-¥6.5

Billions of yenAnalysis of Operating Income


Operatingincome

30 Teijin Limited

High-Performance FibersSales in the High-Performance Fibers segment amounted to ¥120.7 billion. Operating income was ¥6.3 billion.

Aramid Fibers

Results were firm in most product categories.

The market for Twaron para-aramid fibers was solid, particularly

for use in automotive-related materials, ballistic-protection products

and fiber optic cables. Although the Great East Japan Earthquake

hindered domestic demand for Technora para-aramid fibers from

some quarters for use in composite materials and civil engineering

applications, overall demand remained steady, supported by over-

seas demand for automotive-related applications. Despite firm

domestic demand for use in protective clothing, Teijinconex meta-

aramid fibers entered an adjustment phase as demand slowed in

Japan for use in filters, a consequence of the strong yen, and in

Europe for use in industrial materials, reflecting the economic slow-

down. In this environment, we continued to push ahead with active

efforts to enhance profitability by reducing costs and cultivating

new applications for all products.

Carbon Fibers and Composites We proceeded with assertive efforts to promote the use of thermoplastic CFRP.

Demand for Tenax carbon fibers was favorable for use in aircraft

and comparatively firm for use in compounds, particularly in Japan.

Despite increasing in the first half, demand for general industrial

applications and for use in sports and leisure equipment softened

overall, owing to such factors as production adjustments by cus-

tomers in Asia. We responded by working actively to cultivate new

markets and customers worldwide, including in emerging econo-

mies. To capitalize on new growth opportunities, we will promote

the development of technologies designed to improve productivity

and product quality, as well as the development of advanced

prepreg for aircraft applications and high-performance carbon

fibers for use in pressure vessels.

We also persevered with preparations for the commercialization

of revolutionary technologies that reduce the time required for

molding thermoplastic CFRP (CFRP made with thermoplastic resin)

components to less than one minute. In December 2011, we

signed an agreement with General Motors Company of the United

States to collaborate in the development of thermoplastic CFRP

components for use in mass-produced GM vehicles, a move that

bodes well for the expanded use of such components. We are also

currently building a pilot plant for the fully integrated production

of thermoplastic CFRP components at our factory in Matsuyama,

Ehime Prefecture, which is slated to begin operations by the middle

of fiscal 2012. In March 2012 we announced the establishment of

the Teijin Composites Application Center in the northeastern United

States, which will focus on cultivating new applications and markets

with the aim of accelerating the development of commercially viable

thermoplastic CRFP components. To facilitate the broad adoption

of CFRP in vehicles, we will continue to collaborate with automak-

ers in Japan and overseas in the development of lighter vehicle

bodies and components, thereby contributing to the reduction

of CO2 emissions and the improvement of fuel efficiency.

These technologies received the Global Automotive Carbon

Composites Technology Innovation Award from world-renowned

market research firm Frost & Sullivan for 2011. In addition, the tech-

nologies were honored with the Overall Innovation Award, as well

as winning the Best Product Innovation category, at the 2011

ICIS Innovation Awards, an event run by International Chemical

method, used by its overseas consolidated subsidiaries. This

change added ¥6.3 billion more to operating income than would

have been the case under the previous method.

Other Income (Expenses)

Other expenses, a net figure, amounted to ¥6.2 billion, up from

¥4.1 billion in fiscal 2010. This increase occurred despite the

absence of business structure improvement expenses and a

significant decline in earthquake-related loss and was attributable

to a ¥3.3 billion actuarial loss resulting from amendments to the

employee retirement benefit plans of certain European subsidiaries.

Other factors included a decline in equity in earnings of affiliates,

as well as a decrease in both gain on sales of investment securities

and gain on sales of property, plant and equipment, plus an

increase in impairment loss.

Net Income

Net income, affected by the declines in operating income and equity

in earnings of affiliates, fell 52.4%, or ¥13.2 billion, to ¥12.0 billion. As

a consequence, ROE retreated sharply to 4.2%, from 9.1% in fiscal

2010. Discounting the impact of the standardization of accounting

periods, net income dropped 45.2%, or ¥11.4 billion, to ¥13.8 billion.

Business Segment Results

50

100

150 30

20

10

-10

0 0

20122011 2012*2010

30

20

10

-10

0

%

103.4120.7

104.3

89.9

(7.7)

4.4 6.3 5.4

-8.6%

4.3% 5.2% 5.2%


Billions of yenBillions of yen


Sales Operating Income (Loss)Operating Margin

104.3

3 5.4

.2%5.

31Teijin Limited

Information Service (ICIS), a leading United Kingdom–based

provider of information for the chemicals industry.

Polyester FibersThe Polyester Fibers segment, which also includes the polyester raw materials and polymerization businesses, generated sales of ¥109.9 billion and operating income of ¥1.9 billion. Efforts to resume operations at three flood-damaged production facilities in Thailand proceeded apace.

Despite flagging demand in the immediate aftermath of the Great

East Japan Earthquake, as well as damage from the severe flood-

ing to production facilities belonging to three Thai subsidiaries—all

of which were forced to suspend operations—the Polyester Fibers

segment remained profitable, bolstered by the positive impact of

structural reforms and a sharp recovery in automobile production

that began in the summer of 2011, as well as by demand associ-

ated with post-quake reconstruction efforts and measures to

promote energy savings. The bulk of production from the flood-

damaged facilities in Thailand was temporarily transferred to

domestic subsidiary Teijin Fibers Limited, among others, to fulfill

our responsibilities as a supplier. Efforts to repair the facilities

proceeded apace and in February 2012 production resumed on

several lines, with the first shipments since the floods going out

before the close of the fiscal year.

In the area of product development, ultrafine polyester

nanofiber Nanofront, which delivers superb slip resistance and

fit, was adopted for use in a line of golf gloves designed for profes-

sional golfers. On another front, to strengthen our presence in

the PRC, which boasts a rapidly expanding consumer market, in

January 2012 we launched that country’s first closed-loop system

for recycling polyester uniforms. In March we signed an agreement

with the China Chemical Fibers Association (CCFA) to establish a

comprehensive alliance that will enhance growth opportunities for

both parties through close collaboration and participation in joint

development projects. Additionally, in April 2012 we announced

plans for the August establishment of Teijin Product Development

China Co., Ltd., a fiber and textile product R&D base, a move

aimed at helping foster the local chemical fibers industry.

Films and PlasticsSales in the Films and Plastics segment totaled ¥215.4 billion. Operating income was ¥3.7 billion.

Plastics The plastics business struggled, owing to sluggish market conditions.

Our mainstay polycarbonate resin business was hampered by

a harsh operating environment for electrical and electronics

equipment manufacturers, its principal customers, stemming from

factors such as slack demand for LCD televisions, the European

financial crisis, the impact of the Great East Japan Earthquake and

the severe flooding in Thailand. October 2011 saw the beginning

of a market slump that drew comparisons with conditions in the

wake of the Lehman Brothers collapse, although demand in

certain sectors began to pick up in early 2012, particularly in the

PRC. Prices for key raw materials continued to climb as ongoing

geopolitical tensions drove up crude oil prices. Accordingly,

despite unclear market prospects for end products, we pressed

ahead with efforts to revise sales prices, as well as to lower costs

and trim inventories.

In the area of processed polycarbonate resin products, operat-

ing conditions waned, reflecting stagnant demand for PURE-ACE

polycarbonate retardation film, used primarily in 3D glasses for

movie theaters, and a sharp decline in sales of transparent electro-

conductive film for resistive touch screens. One bright spot was

the adoption of a newly developed transparent electroconductive

film for capacitive touch screens for use in smartphones and

tablet computers, which bodes well for the future of this product.

Films

Demand for PET film in Asia recovered. In Europe and the United States, structural reforms neared completion.

We have a number of polyester films joint ventures with E.I. du Pont

de Nemours and Company (DuPont) of the United States around the

world. Demand for PET film, robust in fiscal 2010, remained firm in

the first half of fiscal 2011, notably for use as LCD reflective film—one

2010 2011 2012 2012*

(5.4)

122.1

3.0

103.5

1.9

109.9

2.3

106.9

-4.4%

2.9%1.7% 2.1%50

100

150 30

20

10

-10

0 0

15

10

5

-5

0


%Billions of yenBillions of yen


Sales Operating Income (Loss)Operating Margin

2.3

106.9

%2.1

2010 2011 2012 2012*

8.9

177.8

23.4

217.1

3.7

215.4

4.9

180.6

5.0%

10.8%

1.7%2.7%

60

120

180

240 40

30

20

10

0 0

20

15

10

5

0




Sales Operating IncomeOperating Margin

%

4.9

180.6

2..7%

32 Teijin Limited

of the principal applications for this product—and in solar cell back

sheets. However, in the third quarter demand declined worldwide,

owing primarily to deteriorating conditions in electronics markets.

In Japan, we were forced to temporarily suspend production

at our Utsunomiya Factory, in Tochigi Prefecture, and our Ibaraki

Factory, in Ibaraki Prefecture, in the wake of the Great East Japan

Earthquake, which hampered our supply capabilities from April until

late June 2011, by which time both facilities had resumed produc-

tion on all lines. Sales of PET film for use as LCD reflective film

began to soften toward the end of the second quarter and remained

sluggish in the third quarter, owing to production cuts by LCD

manufacturers. Demand for use in solar cell back sheets dropped

sharply, primarily as a result of worsening fiscal problems across

Europe, which prompted the reduction of subsidies to solar cell

manufacturers.

Demand in Indonesia remained comparatively solid. In the PRC,

demand flourished, but a rush by local manufacturers to expand

production capacity upset the supply–demand balance, a situation

that negatively affected our local joint venture’s sales prices. In

the United States and Europe, demand for use in solar cell back

sheets, brisk in fiscal 2010, weakened in the second quarter,

forcing us to take steps—including temporarily suspending

production of certain product lines to make necessary inventory

adjustments—that hindered profitability.

Pharmaceuticals and Home Health CareSales in the Pharmaceuticals and Home Health Care segment amounted to ¥143.0 billion, while operating income was ¥25.9 billion.

Pharmaceuticals Sales of our novel treatment for hyperuricemia and gout expanded.

In the domestic market, sales continued to expand favorably for

Synvisc Dispo, an intra-articular injection-form drug for treating pain

associated with osteoarthritis of the knee launched in December

2010, and Feburic, a novel treatment for hyperuricemia and gout

launched in May 2011. In January 2012, in the domestic market,

we obtained approval to manufacture and sell Bonalon®* Bag for

I.V. Infusion 900 µg, Japan’s first intravenous drip–form treatment

for osteoporosis, which is administered once every four weeks.

The drug was launched in May 2012.

Overseas, in July 2011 we commenced sales of our innovative

hyperuricemia treatment, already sold in North America and Europe,

in the ROK under the name Feburic. This drug is now sold in over

20 countries and territories, including Japan. We also secured

regulatory approval to market the drug in Taiwan and Hong Kong.

Additionally, we signed exclusive distributorship agreements

with Takeda Pharmaceuticals North America, Inc., for marketing

in Mexico and the Caribbean; Algorithm SAL, for marketing in the

Middle East and North Africa; Astellas Pharma Inc., for marketing

in Southeast Asia and India; and the Menarini Group for marketing

in Central and South America, the Commonwealth of Independent

States (CIS) and Oceania. Thanks to these agreements, our

distributorships currently cover 117 countries and territories.

On another note, our novel treatment for hyperuricemia and

gout was recognized with the Prize for Science and Technology

(Development Category) for fiscal 2012, part of the Commendation

for Science and Technology by Japan’s Ministry of Education,

Culture, Sports, Science and Technology. The drug also received

the Pharmaceutical Society of Japan Award for Drug Research

and Development 2012.

In R&D, we commenced clinical testing of GGS-MPA (human

immunoglobulin preparation Venilon) for the treatment of micro-

scopic polyangiitis, a new indication, and NA872ET, a small

sustained-release tablet-form version of expectorant Mucosolvan.

We also filed for approval to manufacture and market GTH-42J,

a new oral jelly form of osteoporosis treatment Bonalon®, and

ITM-014, a cutting-edge treatment for acromegaly.

* Bonalon® is the registered trademark of Merck Sharp & Dohme Corp., Whitehouse Station,

NJ, U.S.A.

Home Health Care Rental volume for HOT equipment and CPAP ventilators remained favorable.

In Japan, rental volume for mainstay HOT equipment rose.

Rentals of CPAP ventilators, used to treat sleep apnea syndrome,

also increased favorably, bolstered by SLEEPMATE S9, a high-

performance positive pressure ventilator launched in April 2011

that is both small and light, which has emerged as a major pillar

of our home healthcare business. The markets for other offerings,

including noninvasive positive pressure ventilators (the NIP NASAL

series and AutoSet CS) and SAFHS (Sonic Accelerated Fracture

Healing System), expanded encouragingly.

Overseas, we currently provide home healthcare services in the

United States, Spain and the ROK, bringing the total number of

patients using these services worldwide to approximately 400,000.

40

80

120

160 40

30

20

10

0 02010 2011 2012 2012*

24.3

131.7

22.9

136.4

25.9

143.0

26.4

139.5

18.5%

16.8%18.1%

18.9% 20

15

10

5

0





%

26.4

139.5139.5

18.9%

33Teijin Limited

Analysis of Assets, Liabilities, Net Assets and Cash Flows

Interest-bearing debt decreased ¥6.4 billion, to ¥261.0 billion. As a

consequence, the debt-to-equity ratio edged up 0.05 point, to 0.89

times. The equity ratio was 38.3%, up 1.0 percentage point.

Our long-term debt ratings remained unchanged from fiscal

2010. Despite only a slight increase in interest expenses paid and

a decline in interest-bearing debt, our interest coverage ratio fell to

10.9 times, from 17.2 times in the previous period, owing to a sub-

stantial decline in cash and cash equivalents provided by operating

activities. The debt payback period rose to 4.9 years, from 3.5

years in the previous period.

As of March 31, 2012

Moody’s Rating and Investment Information, Inc.

Rating A3 AOutlook Stable Stable

Assets, Liabilities and Net Assets

Total assets as of March 31, 2012, amounted to ¥762.1 billion, an

increase of ¥583 million from the end of fiscal 2010. This increase

occurred despite constraints on major capital investment and the

progress of depreciation and amortization and was primarily a con-

sequence of increases in notes and account receivable—trade

and other components of working capital.

Total liabilities, at ¥449.9 billion, were down ¥3.9 billion from

the fiscal 2010 year-end. Interest-bearing debt, which includes

commercial paper, short-term loans payable and long-term loans

payable, declined ¥6.4 billion, to ¥261.0 billion, thanks to the use

of cash generated as a result of operating activities and as a result

of constraints on major capital investment to pay down such debt.

In all three overseas markets, we took steps to ensure the expan-

sion of rental volume and sought to reinforce our earnings base

by improving the efficiency of operations.

Trading and RetailThe Trading and Retail segment yielded sales of ¥224.6 billion, while operating income was ¥6.0 billion. During the period, we continued to actively promote alliances both in Japan and overseas.

Financial Position

Textiles and ApparelActive efforts to foster both production and sales alliances in Japan

and overseas, including capital investment in production bases in the

ASEAN region and equity participation in a leading Japanese apparel

manufacturer, supported brisk sales, particularly of sportswear,

everyday apparel and apparel targeted specifically at the Tokyo

metropolitan area market.

Industrial Textiles and MaterialsShipments of industrial textiles for automotive-related applications

recovered rapidly. Sales of general-purpose products were brisk,

owing to demand associated with post-quake reconstruction

efforts, while sales of tents, REFTEL heat reflecting and insulating

film and other products rose on the strength of demand related

to domestic measures to promote energy savings.

OthersThis segment, which does not qualify as a reportable operating segment, generated sales of ¥40.8 billion and operating income of ¥3.3 billion. Sales in the IT business were hampered by restraints on corporate IT spending, while sales in the e-commerce site management and healthcare solutions businesses were firm.

60

120

180

240 10.0

7.5

5.0

2.5

0 02010 2011 2012 2012*

3.4

205.3

4.7

216.9

6.0

224.6

5.9

218.9

1.7%

2.2%

2.7% 2.7%

4

3

2

1

0





%

5.9

218.9

7%7%2.7

20

40

60

80 12

9

6

3

0 02010 2011 2012 2012*

2.6

39.0

3.1

38.3

3.3

40.8

3.5

40.7

6.7%

8.1% 8.2%8.6%

12

9

6

3

0





%

3.5

40.7

8.6%

34 Teijin Limited

Total net assets were ¥312.2 billion, an increase of ¥4.5 billion.

Shareholders’ equity and total valuation and translation adjustments

together represented ¥292.0 billion of the total, up ¥7.8 billion. This

result was attributable to net income of ¥12.0 billion for the period

under review and a decrease in the deduction for foreign currency

translation adjustments, among others.

Cash Flows

Net cash and cash equivalents provided by operating activities in

fiscal 2011 amounted to ¥53.7 billion. Contributing factors included

net income, which offset increases in receivables and inventories

and income taxes paid, as well as an increase in payables,

depreciation and amortization and the amortization of goodwill.

Net cash and cash equivalents used in investing activities

amounted to ¥35.2 billion. This result was primarily a consequence

of outlays for the purchase of property, plant and equipment.

Operating and investing activities in fiscal 2011 thus provided

a net total of ¥18.5 billion.

Net cash and cash equivalents used in financing activities

amounted to ¥14.1 billion. This reflected the issue and redemption

of bonds and commercial paper, the net result of proceeds from

short- and long-term loans payable and the repayment thereof and

the payment of dividends, among others.

After factoring in the impact of exchange rate fluctuations,

operating, investing and financing activities in the period under

review resulted in a net increase in cash and cash equivalents of

¥4.8 billion as of March 31, 2012.

Outlook for Operating Results

Owing to a variety of factors, including pessimism about European

debt resolution and further increases in crude oil prices stemming

from geopolitical risk, prospects for Teijin’s operating environment

remain uncertain. However, economic conditions worldwide are

expected to pick up toward the end of the first half of fiscal 2012,

bolstered by steady growth in emerging economies, a result

of increased consumer spending and the easing of monetary

restrictions, and the emergence of additional demand related

to post-quake reconstruction in Japan.

Fiscal 2012 is the first year of our new medium- to long-term

management vision, CHANGE for 2016. Guided by this, we will

implement basic strategies for transforming our four fundamental

portfolios—strategies that reflect effective risk management—and

will promote initiatives aimed at strengthening our sales and devel-

opment capabilities. In all these efforts, we will move swiftly and

with purpose, mindful of our commitment to securing profitable

sustainable growth, a key element of our long-term vision.

In the current period, efforts in our materials businesses will

focus on responding to a recovery in demand from the automotive

and electronics industries by restoring production and sales to

appropriate levels. We will also endeavor to capitalize on demand

in Japan associated with post-quake reconstruction efforts and

measures to promote energy savings. In our healthcare business,

we will work to boost sales of new drugs and rentals of home

healthcare equipment both in Japan and overseas. In new busi-

nesses, we recently established companies in the ROK to support

the commercialization of two innovative separators for LiBs, the

market for which is expanding rapidly. Production and sales of

the separators, marketed under the LIELSORT brand name, com-

menced in June 2012. Additionally, we will accelerate the expan-

sion of our water treatment business in overseas markets, focusing

on our innovative wastewater treatment system, which has been

adopted for use in a number of countries, including the PRC and

Angola. Another priority will be to step up R&D aimed at facilitating

the early commercialization of nanoparticle silicon ink–based print-

able electronics, which substantially shorten the time required for

the fabrication of semiconductors and thin-film transistors, and of

new healthcare businesses, including materials for regenerative

medicine and tissue repair, which overlap our existing materials

and healthcare business domains.

With operations at the nuclear power plants in Japan now

essentially suspended, projections are for a shortage of electric

power this summer. To minimize the potential impact of this situa-

tion on the operations of the Teijin Group, we will strive to make full

use of in-house generators, as well as to maximize energy savings.

As a consequence of these and other factors, we currently fore-

cast consolidated net sales of ¥840.0 billion, operating income of

¥43.0 billion and net income of ¥22.0 billion for fiscal 2012, repre-

senting increases of 6.2%, 21.8% and 59.5%, respectively, from

fiscal 2011 adjusted results. Our fiscal 2012 forecasts assume

exchange rates of ¥80 to US$1.00 and ¥110 to €1.00 and a

Dubai crude oil price of US$110 per barrel.

Forecast for Financial Position

In fiscal 2012, we will press forward with efforts to first maintain,

and then enhance, financial soundness. At the same time, we

will actively promote promising investments and projects with

the potential to contribute to future growth, in line with our new

medium- to long-term management vision. Our forecasts for fiscal

2012 are for an ROA of 5.5%, ROE of 7.4% and a debt-to-equity

ratio of 0.8 times.

Outlook for Fiscal 2012

5

10

15

20 40

30

20

10

%

0 02008 2009 2010 20122011

3.54.0

8.9

6.1

37.3%

4.9

38.3%

33.0%35.0%

38.5%

Years


Debt Payback Period Equity Ratio

35Teijin Limited

Risk Factors

The Teijin Group recognizes certain risks as having the potential to

affect its operating results and/or financial position. As of the date

of this document, these risks included, but were not limited to,

the risks listed below.

Market-Related Risk

The Teijin Group manufactures and sells products, the sales of

which may be affected by market conditions and competition with

other companies, as well as by market price fluctuations arising

thereof. Businesses involving commoditized materials—notably

polyester fibers, polyester films and polycarbonate resin—are

particularly vulnerable to fluctuations in shipments, sales prices and

procurement costs for raw materials and fuel related to market con-

ditions and competition with other companies. Because the cost of

raw materials and fuel accounts for a major portion of production

costs in these businesses, fluctuations in the price of crude oil may

have a significant impact on the Group’s income performance.

The majority of products in the Teijin Group’s materials busi-

nesses are intermediates. Owing to inventory adjustments at each

stage of production and sales, the rate of expansion or contraction

of end-user demand for such products may exceed that of the real

economy.

The Teijin Group’s Healthcare segment is vulnerable to

changes in drug reimbursement prices under Japan’s National

Health Insurance (NHI) scheme, as well as to increasingly intense

competition, both of which may have a negative impact on sales

prices.

Fluctuations in foreign exchange and interest rates also have

the potential to affect the Teijin Group’s operating results and/or

financial position.

Product Quality Risk

Teijin Pharma Limited, the principal subsidiary in the Teijin Group’s

Healthcare segment, has established its own product reliability

assurance function in the form of a compliance division. This

division, which functions independently of other Group businesses,

is charged with quality assurance in all aspects of our healthcare

businesses. The Group maintains insurance coverage against

product liability.

Nonetheless, as the pharmaceuticals business involves prod-

ucts that may affect the lives of users, quality issues have the

potential to negatively affect, among others, the Group’s operating

results, financial position and public reputation.

R&D-Related Risk in the Pharmaceuticals Business

R&D in the pharmaceuticals business is characterized by significant

investments of funds and time. Pharmaceuticals discovery research

has a high incidence of failure. In the initial stages, there is a high

risk that researchers will fail to discover a promising drug. Even if a

promising drug is discovered, clinical trials may prove it not to be as

effective as anticipated, or to have unexpected adverse side effects,

thereby forcing the abandonment of plans to apply for approval.

There is also a risk that a new drug candidate may not receive reg-

ulatory approval as a result of the examination process that follows

application, or that approval may be rescinded based on the

outcome of research conducted subsequent to launch.

Risks Related to Overseas Operations

The Teijin Group has operations in the PRC, Southeast Asia

(including Thailand and Singapore), Europe (including Germany

and the Netherlands) and the United States. These operations are

vulnerable to the impact of fluctuations in foreign exchange and

interest rates. Our operations in the PRC and Southeast Asia, in

particular, may also be affected by such factors as the enforcement

of new—or unexpected changes to existing—laws, regulations or

tax systems that exert an adverse impact on the Group; economic

fluctuations; and social unrest triggered by, among others, changes

of government or acts of terror or war. The manifestation of such

risks has the potential to adversely affect the Group’s operating

results and/or financial position.

Risks Related to Accidents and Disasters

The Teijin Group has prepared common disaster prevention

guidelines for use by all Group companies and is an active propo-

nent of efforts to prevent and/or alleviate the impact of disasters

through disaster prevention diagnostics, earthquake response

measures, fire prevention and other advance prevention strategies,

disaster prevention education and training and post-disaster

impact mitigation measures.

Nonetheless, in the event of a major natural disaster or unfore-

seen accident that results in damage to the Group’s production

facilities or significantly impedes the Group’s supply chain, such

developments may have a negative impact on the Group’s

operating results and/or financial position.

36 Teijin Limited

Consolidated Balance Sheets

Millions of yen

Thousands of

U.S. dollars

(Note 1)

2011 2012 2012

ASSETS

Current assets:

Cash and time deposits (Notes 4 and 5) ¥ 28,612 ¥ 33,441 $ 406,874

Receivables:

Notes and accounts receivable—trade (Notes 3 and 5):

Unconsolidated subsidiaries and affiliates 3,439 3,324 40,443

Other 152,693 168,763 2,053,328

Short-term loans receivable (Note 5):


Other 594 994 12,094

Other 16,360 20,222 246,040

Inventories (Note 8) 105,507 108,997 1,326,159

Deferred tax assets (Note 16) 13,230 12,215 148,619

Other current assets 10,206 5,829 70,922

Allowance for doubtful accounts (2,114) (2,940) (35,771)

Total current assets 336,895 361,790 4,401,875

Investments and other assets:

Investment securities (Notes 5 and 6):


Other 39,932 37,596 457,428

Long-term loans receivable (Note 5):


Other 1,368 788 9,588

Prepaid pension cost (Note 10) 15,994 15,599 189,792

Other 13,109 13,225 160,906

Allowance for doubtful accounts (1,970) (2,321) (28,239)

93,150 91,939 1,118,615

Property, plant and equipment (Note 12):

Land 44,532 43,630 530,843

Buildings and structures 176,560 178,980 2,177,637

Machinery, equipment and vehicles 512,070 517,928 6,301,594

Tools 72,108 71,978 875,751

Construction in progress 6,629 7,370 89,670

Other 2,261 2,460 29,931

814,160 822,346 10,005,426

Accumulated depreciation (554,501) (578,045) (7,033,033)

259,659 244,301 2,972,393

Intangible assets 15,843 16,371 199,185

Deferred tax assets (Note 16) 4,215 1,397 16,997

Goodwill 51,773 46,320 563,572

71,831 64,088 779,754

¥761,535 ¥ 762,118 $ 9,272,637

See accompanying Notes to Consolidated Financial Statements.

TEIJIN LIMITED

As of March 31, 2011 and 2012

37Teijin Limited

Millions of yen

Thousands of

U.S. dollars

(Note 1)

2011 2012 2012

LIABILITIES AND NET ASSETS

Current liabilities:

Short-term loans payable (Notes 5 and 9) ¥ 44,568 ¥ 61,555 $ 748,935

Current portion of long-term loans payable (Notes 5 and 9) 18,942 47,359 576,214

Commercial paper (Note 5) 33,000 18,000 219,005

Payables:

Notes and accounts payable—trade (Note 3):

Unconsolidated subsidiaries and affiliates 1,192 961 11,692

Other 86,092 89,265 1,086,081

Other 22,911 25,780 313,663

Income taxes payable 7,459 5,604 68,183

Accrued expenses 19,264 19,017 231,379

Deferred tax liabilities (Note 16) 162 11 134

Other current liabilities 11,181 10,400 126,537

Total current liabilities 244,771 277,952 3,381,823

Long-term loans payable (Notes 5 and 9) 168,871 132,192 1,608,371

Provision for retirement benefits (Note 10) 18,153 18,783 228,531

Deferred tax liabilities (Note 16) 9,285 8,837 107,519

Other non-current liabilities 12,757 12,137 147,671

Contingent liabilities (Note 20)

Net assets (Note 11)

Shareholders’ equity:

Capital stock

Authorized—3,000,000,000 shares in 2011 and 2012

Issued— 984,758,665 shares in 2011

984,758,665 shares in 2012 70,817 70,817 861,626

Capital surplus 101,373 101,390 1,233,605

Retained earnings 135,385 141,441 1,720,903

Treasury stock, at cost: 561,229 shares in 2011

483,968 shares in 2012 (152) (128) (1,558)

Total shareholders’ equity 307,423 313,520 3,814,576

Valuation and translation adjustments:

Valuation difference on available-for-sale securities 10,824 9,913 120,611

Deferred gains (losses) on hedges (199) 306 3,723

Foreign currency translation adjustments (33,812) (31,708) (385,789)

Total valuation and translation adjustments (23,187) (21,489) (261,455)

Subscription rights to shares 439 567 6,899

Minority interests 23,023 19,619 238,702

Total net assets 307,698 312,217 3,798,722

¥761,535 ¥762,118 $9,272,637

38 Teijin Limited

Millions of yen

Thousands of

U.S. dollars

(Note 1)

2011 2012 2012

Net sales ¥815,656 ¥854,371 $10,395,072

Costs and expenses:

Cost of sales 586,262 629,152 7,654,849

Selling, general and administrative expenses 149,351 159,330 1,938,557

Research and development expenses 31,483 31,845 387,455

Operating income 48,560 34,044 414,211

Other income (expenses):

Interest and dividend income 1,382 1,325 16,121

Interest expenses (4,416) (4,885) (59,435)

Gain on sales of investment securities 2,220 1,234 15,014

Gain on sales of property, plant and equipment 1,354 282 3,431

Gain on sales of stocks of subsidiaries and affiliates — 713 8,675

Loss on disposal of property, plant and equipment (585) (953) (11,595)

Loss on valuation of investment securities (117) (192) (2,336)

Impairment loss (Note 12) (1,792) (2,614) (31,804)

Provision for allowance for doubtful accounts (883) (791) (9,624)

Business structure improvement expenses (1,050) — —

Equity in earnings of affiliates 6,300 5,299 64,473

Net gain related to flooding (Note 14) — 347 4,222

Loss on revision of retirement benefit plans (Note 10) — (3,300) (40,151)

Earthquake-related loss (Note 13) (2,861) (327) (3,979)

Other, net (3,618) (2,349) (28,581)

(4,066) (6,211) (75,569)

Income before income taxes 44,494 27,833 338,642

Income taxes (Note 16):

Income taxes—current 11,976 9,943 120,976

Income taxes—deferred 4,196 4,780 58,158

16,172 14,723 179,134

Minority interests in net income (3,140) (1,131) (13,760)

Net income ¥ 25,182 ¥ 11,979 $ 145,748

Yen

U.S. dollars

(Note 1)

Net income per share (Note 2) ¥25.59 ¥12.17 $0.15

Net income per share—diluted 25.56 12.15 0.15

Cash dividends applicable to the year 5.00 6.00 0.07

Consolidated Statements of IncomeTEIJIN LIMITED

Years ended March 31, 2011 and 2012


39Teijin Limited

Millions of yen

Thousands of

U.S. dollars

(Note 1)

2011 2012 2012

Income before minority interests ¥ 28,323 ¥13,110 $159,508

Other comprehensive income (Note 15):

Valuation difference on available-for-sale securities (2,209) (901) (10,962)

Deferred gains (losses) on hedges (487) 504 6,132

Foreign currency translation adjustments (8,294) 2,099 25,538

Share of other comprehensive income of associates accounted for

using the equity method 770 (21) (255)

Total (10,220) 1,681 20,453

Comprehensive income ¥ 18,103 ¥14,791 $179,961

Breakdown of comprehensive income:

Comprehensive income attributable to shareholders of the parent ¥ 15,045 ¥13,677 $166,407

Comprehensive income attributable to minority interests ¥ 3,058 ¥ 1,114 $ 13,554

Consolidated Statements of Comprehensive IncomeTEIJIN LIMITED



40 Teijin Limited

Millions of yen

Thousands of

U.S. dollars

(Note 1)

2011 2012 2012

Shareholders’ equity Capital stock Balance at beginning of current fiscal year ¥ 70,817 ¥ 70,817 $ 861,626

Changes in items during the period:

Issuance of new shares — — —

Total — — —

Balance at end of current fiscal year 70,817 70,817 861,626

Capital surplus Balance at beginning of current fiscal year 101,328 101,373 1,233,398



Disposal of treasury stock 45 17 207

Transfer of loss on disposal of treasury stock — — —

Total 45 17 207

Balance at end of current fiscal year 101,373 101,390 1,233,605

Retained earnings Balance at beginning of current fiscal year 112,983 135,385 1,647,220

Change owing to application of accounting policies for overseas equity method affiliates 1,154 — —


Dividends from surplus—other capital surplus (3,933) (5,906) (71,858)

Net income 25,182 11,979 145,748

Others* (1) (17) (207)

Transfer of loss on disposal of treasury stock — — —

Total 21,248 6,056 73,683

Balance at end of current fiscal year 135,385 141,441 1,720,903

Treasury stock at cost Balance at beginning of current fiscal year (773) (152) (1,849)


Purchase of treasury stock (41) (15) (183)


Total 621 24 291

Balance at end of current fiscal year (152) (128) (1,558)

Shareholders’ equity, total Balance at beginning of current fiscal year 284,355 307,423 3,740,395





Net income 25,182 11,979 145,748

Others* (1) (17) (207)



Total 21,914 6,097 74,181

Balance at end of current fiscal year ¥307,423 ¥313,520 $3,814,576

Consolidated Statements of Changes in Net AssetsTEIJIN LIMITED


* In 2011 and 2012, changes in surpluses owing to change in scope of consolidation.


41Teijin Limited

Millions of yen

Thousands of

U.S. dollars

(Note 1)

2011 2012 2012

Valuation and translation adjustments Valuation difference on available-for-sale securities Balance at beginning of current fiscal year ¥ 13,025 ¥ 10,824 $ 131,695


Net changes in items other than shareholders’ equity (2,201) (911) (11,084)

Total (2,201) (911) (11,084)


Deferred gains (losses) on hedges Balance at beginning of current fiscal year 299 (199) (2,421)


Net changes in items other than shareholders’ equity (498) 505 6,144

Total (498) 505 6,144

Balance at end of current fiscal year (199) 306 3,723

Foreign currency translation adjustments Balance at beginning of current fiscal year (26,373) (33,812) (411,388)


Net changes in items other than shareholders’ equity (7,439) 2,104 25,599

Total (7,439) 2,104 25,599

Balance at end of current fiscal year (33,812) (31,708) (385,789)

Valuation and translation adjustments, total Balance at beginning of current fiscal year (13,049) (23,187) (282,114)


Net changes in items other than shareholders’ equity (10,138) 1,698 20,659

Total (10,138) 1,698 20,659

Balance at end of current fiscal year (23,187) (21,489) (261,455)

Subscription rights to shares Balance at beginning of current fiscal year 401 439 5,341


Net changes in items other than shareholders’ equity 38 128 1,558

Total 38 128 1,558

Balance at end of current fiscal year 439 567 6,899

Minority interests Balance at beginning of current fiscal year 23,575 23,023 280,119


Net changes in items other than shareholders’ equity (552) (3,404) (41,417)

Total (552) (3,404) (41,417)


Net assets, total Balance at beginning of current fiscal year 295,282 307,698 3,743,741





Net income 25,182 11,979 145,748

Others* (1) (17) (207)



Net changes in items other than shareholders’ equity (10,652) (1,578) (19,200)

Total 11,262 4,519 54,981

Balance at end of current fiscal year ¥307,698 ¥312,217 $3,798,722

42 Teijin Limited

Consolidated Statements of Cash Flows

Millions of yen

Thousands of

U.S. dollars

(Note 1)

2011 2012 2012

Cash flows from operating activities:Income before income taxes ¥ 44,494 ¥ 27,833 $ 338,642

Depreciation and amortization 56,410 52,304 636,379

Impairment loss 1,792 2,614 31,804

Increase in provision for retirement benefits 630 679 8,261

Increase in allowance for doubtful accounts 1,082 1,157 14,077

Interest and dividend income (1,382) (1,325) (16,121)

Interest expenses 4,416 4,885 59,435

Equity in earnings of affiliates (6,300) (5,299) (64,473)

Loss (gain) on sales or disposal of property, plant and equipment (770) 671 8,164

Gain on sales of investment securities (2,220) (1,947) (23,689)

Loss on valuation of investment securities 117 192 2,336

Increase in notes and accounts receivable—trade (10,937) (14,410) (175,325)

Increase in inventories (6,283) (3,358) (40,857)

Increase in notes and accounts payable—trade 8,477 1,279 15,562

Other, net (260) (915) (11,131)

Subtotal 89,266 64,360 783,064

Interest and dividend income received 4,053 3,672 44,677

Interest expenses paid (4,481) (4,903) (59,654)

Income taxes paid (11,706) (9,460) (115,100)

Net cash and cash equivalents provided by operating activities 77,132 53,669 652,987

Cash flows from investing activities:Purchase of property, plant and equipment (25,456) (27,641) (336,306)

Proceeds from sales of property, plant and equipment 1,125 487 5,925

Purchase of investment securities (4,439) (1,601) (19,479)

Proceeds from sales of investment securities 3,719 2,355 28,653

Purchase of investments in subsidiaries — (4,950) (60,226)

Increase in short-term loans receivable (810) (687) (8,359)

Increase in long-term loans receivable (662) (57) (694)

Decrease in long-term loans receivable 933 136 1,655

Other, net (2,155) (3,207) (39,019)

Net cash and cash equivalents used in investing activities (27,745) (35,165) (427,850)

Cash flows from financing activities:Net increase (decrease) in short-term loans payable (3,648) 16,781 204,173

Net decrease in commercial paper (18,000) (15,000) (182,504)

Proceeds from issuance of bonds 13,022 6,106 74,291

Redemption of bonds (22,584) (10,957) (133,313)

Proceeds from long-term loans payable 6,788 22,159 269,607

Repayment of long-term loans payable (10,517) (25,287) (307,665)

Cash dividends paid (3,933) (5,906) (71,858)

Cash dividends paid to minority shareholders (2,996) (1,676) (20,392)

Other, net (195) (343) (4,173)

Net cash and cash equivalents used in financing activities (42,063) (14,123) (171,834)

Effect of exchange rate changes on cash and cash equivalents (1,946) 447 5,439

Net increase in cash and cash equivalents 5,378 4,828 58,742

Cash and cash equivalents at beginning of year 22,964 28,455 346,210

Increase in cash and cash equivalents resulting from change in scope of consolidation 113 — —

Cash and cash equivalents at end of year (Note 4) ¥ 28,455 ¥ 33,283 $ 404,952


TEIJIN LIMITED


43Teijin Limited

Notes to Consolidated Financial StatementsTEIJIN LIMITED

Note 1. Basis of presenting consolidated financial statements

The accompanying consolidated financial statements of Teijin

Limited (the “Company”) have been prepared in accordance with

the provisions set forth in the Financial Instruments and Exchange

Law (the “Law”) and the related accounting regulations, and in

conformity with accounting principles generally accepted in Japan

(“Japanese GAAP”), which are different in certain respects as to

application and disclosure requirements of International Financial

Reporting Standards.

Prior to the year ended March 31, 2009, the accounts of

overseas subsidiaries were based on their accounting records

maintained in conformity with generally accepted accounting princi-

ples prevailing in the respective countries of domicile. From the

fiscal year ended March 31, 2009, the Company adopted “Practical

Solution on Unification of Accounting Policies Applied to Foreign

Subsidiaries for Consolidated Financial Statement” (Practical

Issues Task Force (“PITF”) No. 18, issued by the Accounting

Standards Board of Japan (“ASBJ”) on May 17, 2006). In principle,

the Company unified accounting standards for foreign subsidiaries

and makes necessary adjustments upon consolidation. There

were no material effects as a result of the adoption of PITF No. 18

on the consolidated financial statements for the years ended March

31, 2011 and 2012.

The accompanying consolidated financial statements have

been reformatted and translated into English with some expanded

descriptions from the consolidated financial statements of the

Company prepared in accordance with Japanese GAAP and

filed with the appropriate Local Finance Bureau of the Ministry of

Finance as required by the Law. Certain supplementary information

included in the statutory Japanese-language consolidated financial

statements, but not required for fair presentation, is not presented

in the accompanying consolidated financial statements.

The translation of the Japanese yen amounts into U.S. dollar

amounts is included solely for the convenience of readers outside

Japan, using the prevailing exchange rate at March 31, 2012, which

was ¥82.19 to U.S.$1.00. The convenience translations should not

be construed as representations that the Japanese yen amounts

have been, could have been, or could in the future be, converted

into U.S. dollars at this or any other rate of exchange.

Note 2. Summary of significant accounting policies

Consolidation

The consolidated financial statements include the accounts of the

Company and 76 significant subsidiaries for the years ended March

31, 2011 and 2012. Investments in 68 (69 in 2011) unconsolidated

subsidiaries and affiliates are, with minor exceptions, stated at

cost, adjusted for equity in undistributed earnings and losses

since acquisition.

Companies which are 40% or more owned and substantially

controlled by the Company are considered subsidiaries for inclusion

in the consolidation. Equity method accounting is applied to uncon-

solidated subsidiaries and affiliates which are substantially con-

trolled or of which operating and financial policies are significantly

influenced by the Company.

In the elimination of investments in subsidiaries, the assets and

liabilities of the subsidiaries, including the portion attributable to

minority shareholders, are evaluated using the fair value at the time

the Company acquired control of the respective subsidiaries.

Goodwill is usually amortized using the straight-line method

over the estimated useful life from five to 20 years.

Prior to the year ended March 31, 2012, the accounts of 38

consolidated subsidiaries were included on the basis of their fiscal

years ending December 31 (plus January 31 for one and February

28 for two other subsidiaries). These subsidiaries did not prepare,

for consolidation purposes, statements for the period that corre-

sponds to the fiscal year of the Company. For these 41 consolidated

subsidiaries, when there were significant transactions that occurred

between their respective fiscal year ends and the Company’s year

end, necessary adjustments were made to reflect the transactions

in the accompanying consolidated financial statements.

Effective from the year ended March 31, 2012, 25 consolidated

subsidiaries changed their fiscal year end from December 31 (plus

one from January 31 and two from the last day of February) to

March 31. As a result, the consolidated financial statements for the

year ended March 31, 2012, include the results for a 15-month

period (January 1, 2011, to March 31, 2012) for 25 subsidiaries, a

14-month period (February 1, 2011, to March 31, 2012) for one

subsidiary and a 13-month period (March 1, 2011, to March 31,

2012) for two subsidiaries. However, 13 consolidated subsidiaries

did not change their fiscal year end from December 31. These 13

subsidiaries prepared, for consolidation purposes, statements for

the period that corresponds to the fiscal year of the Company.

As a result, the consolidated financial statements for the year ended

March 31, 2012, also include the results for a 15-month period for

these 13 subsidiaries, from January 1, 2011, to March 31, 2012.

Statements of cash flows

In preparing the consolidated statements of cash flows, cash on

hand, readily available deposits and short-term highly liquid invest-

ments with maturities not exceeding three months at the time of

purchase are considered to be cash and cash equivalents.

44 Teijin Limited

Allowance for doubtful accounts

The allowance for doubtful accounts is provided in amounts

sufficient to cover possible losses on collection. It is determined

by adding the individually estimated uncollectible amounts of

certain accounts to an amount calculated using the provision

rate based on past experience.

Securities

Under the Japanese accounting standard for financial instruments,

all companies are required to classify securities as (a) securities

held for trading purposes (“trading securities”), (b) debt securities

intended to be held to maturity (“held-to-maturity debt securities”),

(c) equity securities issued by subsidiaries and affiliated companies,

and (d) all other securities that are not classified in any of the above

categories (“available-for-sale securities”).

The Company and its consolidated subsidiaries (the “Companies”)

do not hold trading securities. Held-to-maturity debt securities are

stated at amortized cost.

Equity securities issued by subsidiaries and affiliated compa-

nies, which are not consolidated or accounted for using the equity

method, are stated at moving-average cost. Available-for-sale

securities with available fair market values are stated at fair market

value. Unrealized gains and losses on these securities are reported,

net of applicable income taxes, as a separate component of net

assets. Realized gains and losses on sales of such securities are

computed using moving-average cost.

Debt securities with no available fair market value are stated

at amortized cost, net of the amount considered not collectible.

Other securities with no available fair market value are stated at

moving-average cost.

If the market value of held-to-maturity debt securities, equity

securities issued by unconsolidated subsidiaries and affiliated com-

panies and available-for-sale securities decline significantly, such

securities are stated at fair market value and the difference between

fair market value and the carrying amount is recognized as a loss in

the period of the decline. If the fair market value of equity securities

issued by unconsolidated subsidiaries and affiliated companies not

accounted for using the equity method is not readily available, the

securities will be written down to net asset value with a correspond-

ing charge in the consolidated statements of income in the event

net asset value declines significantly. In these cases, the fair market

value or the net asset value will be the carrying amount of the

securities at the beginning of the following year.

Inventories

Inventories are stated at the lower of average cost or net realizable

value.

Property, plant and equipment

Effective from the year ended March 31, 2012, the Company and

its domestic consolidated subsidiaries (the “domestic companies”)

changed their method of depreciation from the declining balance

method to the straight-line method to depreciate tangible fixed

assets. Previously, the Company and its domestic companies

mainly used the declining balance method and generally used

the straight line method for overseas consolidated subsidiaries.

The Company’s facilities have been operating in a stable man-

ner since the year ended March 31, 2010, owing to the implemen-

tation of structural reforms undertaken to optimize the Company’s

global production system. Having largely completed these struc-

tural reforms, and with the aim of repositioning itself on a growth

trajectory, effective from the year ended March 31, 2012, the

Company lifted a moratorium on major capital investment, thus

enabling the domestic companies to make promising new

investments.

It was as a consequence of this change in the capital invest-

ment situation that management reviewed its method of deprecia-

tion. As a result of this review, after investigating which approach

would best demonstrate the feasibility of stable operating condi-

tions at facilities now and in the future, and allow for the appropri-

ate periodic allocation of costs, management resolved to switch

to the straight-line method of depreciation for the domestic

companies.

As a result of this change, operating income and income

before income taxes increased by ¥6,320 million ($76,895 thou-

sand) and ¥6,483 million ($78,878 thousand), respectively, com-

pared to what would have been recorded under the previous

method.

Intangible assets

Goodwill, patents, trademarks and other intangible assets are

amortized using the straight-line method over the estimated useful

life of the asset.

Software for internal use is amortized using the straight-line

method over the estimated useful life, i.e. five to 10 years.

Research and development expenses

The Company charges research and development expenses to

income as incurred.

Retirement benefits

(1) EmployeesThe Company has an unfunded lump-sum benefit plan and a

funded contributory pension plan, generally covering all employees.

Certain consolidated subsidiaries have unfunded lump-sum

benefit plans and non-contributory pension plans. Most foreign

subsidiaries do not have pension plans.

Under the terms of the lump-sum benefit plans, eligible

employees are entitled under most circumstances, upon manda-

tory retirement at age 60 or earlier voluntary termination, to a

lump-sum payment based on their compensation at the time

of severance and years of service.

The liabilities and expenses for severance and retirement

benefits are determined based on the amounts actuarially calcu-

45Teijin Limited

lated using certain assumptions. The Companies provided for

employees’ severance and retirement benefits at March 31, 2011

and 2012, based on the estimated amounts of projected benefit

obligation and the fair value of the pension assets at those dates.

Prior service costs and actuarial gains and losses are recog-

nized in expenses using the straight-line method over mainly 12

years, which is within the average of the estimated remaining ser-

vice years of the employees, commencing with the current and

the following period, respectively.

Effective from the year ended March 31, 2012, certain consol-

idated subsidiaries transferred a portion of their defined benefit

plan to a defined contribution pension plan or multiemployer

contributory funded pension plan.

(2) Directors and statutory auditorsPrior to the year ended March 31, 2012, the Company and its

domestic companies provided for lump-sum retirement payments

for directors and statutory auditors in amounts that would be

required if they retired at the balance sheet dates.

At the general shareholders’ meeting held on June 22, 2011,

the Company resolved to abolish the lump-sum retirement pay-

ments for directors and auditors of the Company and instead to

make a lump-sum payment to each eligible director and auditor

for duties performed up to the date of abolition, upon retirement.

As a result, the remaining amount reserved for retirement allow-

ance for directors and auditors, ¥1,102 million ($13,408 thou-

sand), is included in other non-current liabilities at March 31,

2012.

Liabilities arising from the application of the equity

method

Liabilities arising from the application of the equity method have

been provided with respect to losses that may arise from the

Company’s portion of the capital deficits of unconsolidated sub-

sidiaries and affiliates that are accounted for by the equity method,

after giving consideration to the Company’s investments in, and

guarantees for, such companies.

Derivatives and hedge accounting

The Companies state derivative financial instruments at fair value

and recognize changes in the fair value as gain or loss unless the

derivative financial instruments are used for hedging purposes.

If derivative financial instruments are used as hedges and

meet certain hedging criteria, the Company and its domestic

companies defer recognition of the gain or loss resulting from a

change in fair value of the derivative financial instrument until the

related gain or loss on the hedged item is recognized.

Also, if interest rate swap contracts are used as hedges

and meet certain hedging criteria, the net amount to be paid or

received under the interest rate swap contract is added to or

deducted from the interest on the assets or liabilities for which the

swap contract was executed.

(Change in accounting procedures)

Prior to the year ended March 31, 2010, the domestic companies

applied a method of accounting for foreign currency forward contract

transactions entered into to hedge transactions denominated in foreign

currencies over the term of the contract based on a predetermined

rate.

With the implementation of a new backbone system, effective

from the year ended March 31, 2011, the domestic companies

changed their method of accounting for such foreign currency for-

ward contract transactions and began applying a principle-based

method, in line with the accounting standard for financial instruments.

The aim of this change was to achieve a more accurate presentation

of foreign currency assets, liabilities and derivatives positions. This

change had no material impact on the consolidated financial

statements for the year ended March 31, 2011.

Income taxes

The provision for income taxes is based on income for financial state-

ment purposes. Income taxes comprise corporation tax, enterprise tax,

and prefectural and municipal inhabitants taxes. The assets and liabili-

ties approach is used 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 purposes and the amounts used for income tax purposes.

The Company and its wholly owned domestic consolidated

subsidiaries have adopted the consolidated tax return filing under

Japanese tax regulations for the year ended March 31, 2006 and

thereafter.

Translation of foreign currency

Cash, receivables and payables denominated in foreign currencies

are translated into Japanese yen at year-end exchange rates. All

revenues and expenses in foreign currencies are translated at the

exchange rates prevailing when such transactions are made. The

resulting exchange loss or gain is charged or credited to income.

The balance sheet accounts of the foreign consolidated subsidiar-

ies and foreign investments accounted for by the equity method are

translated at the rates of exchange in effect at the balance sheet date,

except for capital accounts and assets and liabilities due to/from the

Company, which are translated at historical rates. Accounts in the

consolidated statements of income are translated at the average

rates of exchange for the year. Differences arising from translations

are presented as “Foreign currency translation adjustments” in the

accompanying consolidated financial statements. The Companies

report foreign currency translation adjustments in net assets.

Net income per share

Computations of net income per share of common stock are based

on the weighted-average number of shares outstanding during each

period. Diluted net income per share is calculated based on the

assumption that all dilutive convertible debentures and stock

46 Teijin Limited

warrants were converted or exercised at the beginning of the year

or at the time of issue.

Net income per share for the years ended March 31, 2011 and

2012, is calculated based on the following factors:

Year ended March 31, 2011

( a ) Net income: ¥25,182 million

(b ) Amount not attributable to

common shareholders: ¥ — million

( c ) Bonuses to directors and

statutory auditors included in (b): ¥ — million

(d ) Net income allocated to common stock: ¥25,182 million

( e ) Average number of shares

outstanding during the period: 984,033 thousand shares

( f ) Increase in number of shares: 1,269 thousand shares

(g ) Increase in number of subscription

rights to shares included in (f): 1,269 thousand shares

( h ) Summary of outstanding potential shares

excluded from the computation of diluted

EPS, if calculated for the period, since such

potential stocks do not have a dilutive effect:

—

Year ended March 31, 2012

( a ) Net income: ¥11,979 million ($145,748 thousand)

(b ) Amount not attributable to

common shareholders: ¥ — million ($ — thousand)

( c ) Bonuses to directors and

statutory auditors included in (b): ¥ — million ($ — thousand)

(d ) Net income allocated to

common stock: ¥11,979 million ($145,748 thousand)

( e ) Average number of shares

outstanding during the period: 984,230 thousand shares

( f ) Increase in number of shares: 1,310 thousand shares

(g ) Increase in number of subscription

rights to shares included in (f): 1,310 thousand shares

( h ) Summary of outstanding potential

shares excluded from the

computation of diluted EPS, if

calculated for the period, since

such potential stocks do not have

a dilutive effect:

—

(Change in accounting procedures)

Accounting standards for investments applied to equity

method affiliates

Effective from the year ended March 31, 2011, the Company

applied “Accounting Standard for Equity Method of Accounting for

Investments” (ASBJ Statement No. 16, issued on March 10, 2008)

and “Practical Solution on Unification of Accounting Policies Applied

to Associates Accounted for Using the Equity Method” (ASBJ PITF

Statement No. 24, issued on March 10, 2008). In principle, the

Companies make adjustments as necessary for their consolidated

financial statements. As a result, operating income and income

before income taxes each decreased by ¥420 million, compared to

what would have been recorded under the previous method.

Accounting standards for asset retirement obligations

Effective from the year ended March 31, 2011, the domestic compa-

nies applied “Accounting Standard for Asset Retirement Obligations”

(ASBJ Statement No. 18, issued on March 31, 2008) and “Guidance

on Accounting Standard for Asset Retirement Obligations” (ASBJ

Guidance No. 21, issued on March 31, 2008). As a result, operating

income decreased by ¥34 million, and income before income taxes

decreased by ¥563 million, compared to what would have been

recorded under the previous method.

Accounting standards for business combinations

Effective from the year ended March 31, 2011, the domestic compa-

nies applied “Accounting Standard for Business Combinations”

(ASBJ Statement No. 21, issued December 26, 2008), “Accounting

Standard for Consolidated Financial Statements” (ASBJ Statement

No. 22, issued on December 26, 2008), “Partial Amendments to

Accounting Standard for Research and Development Costs” (ASBJ

Statement No. 23, issued on December 26, 2008), “Revised

Accounting Standard for Business Divestitures” (ASBJ Statement

No. 7, issued on December 26, 2008), “Revised Accounting

Standard for Equity Method of Accounting for Investments” (ASBJ

Statement No. 16, issued on December 26, 2008), and “Revised

Guidance on Accounting Standard for Business Combinations and

Accounting Standard for Business Divestitures” (ASBJ Guidance

No. 10, issued on December 26, 2008).

Reclassifications and restatement

Certain prior year amounts have been reclassified and restated to

conform with the current year presentation. These reclassifications

and restatements have no impact on previously reported results of

operations or retained earnings.

(Additional information)

Accounting standards for presentation of comprehensive

income

Effective from the year ended March 31, 2011, the Company applied

“Accounting Standard for Presentation of Comprehensive Income”

(ASBJ Statement No. 25, issued on June 30, 2010).

Accounting standards for accounting changes and error

correction

Effective from the year ended March 31, 2012, the Company and its

domestic companies adopted “Accounting Standard for Accounting

Changes and Error Corrections” (ASBJ Statement No. 24, issued on

December 4, 2009) and the “Guidance on Accounting Standard for

Accounting Changes and Error Corrections” (ASBJ Guidance No.

24, issued on December 4, 2009). This Standard and its accompa-

nying Guidance are applied to accounting changes and corrections

of prior period errors made on or after April 1, 2011.

47Teijin Limited

Note 3. Effect of the March 31, 2012, bank holiday

Although financial institutions in Japan were closed on March 31, 2012, and notes maturing on March 31, 2012, were settled on the following

business day, April 2, 2012, notes receivable of ¥2,760 million ($33,581 thousand) and notes payable of ¥2,343 million ($28,507 thousand)

were accounted for as if settled on March 31, 2012.

Note 4. Statements of cash flows

The reconciliation of cash and time deposits in the consolidated balance sheets and cash and cash equivalents in the consolidated statements

of cash flows, as of March 31, 2011 and 2012, is as follows:

Millions of yenThousands of U.S. dollars

2011 2012 2012

Cash and time deposits in the consolidated balance sheets ¥28,612 ¥ 33,441 $ 406,874

Time deposits with maturities exceeding 3 months (157) (158) (1,922)

Cash and cash equivalents in the consolidated statements of cash flows ¥28,455 ¥ 33,283 $ 404,952

The assets and liabilities of two subsidiaries, P.T. Teijin Indonesia Fiber Tbk. and Teijin Monofilament Germany GmbH, which are

excluded from the consolidation following the sale of their share of common stock during the year ended March 31, 2011, were as follows:

Millions of yen

Current assets ¥ 8,965

Fixed assets 12,654

Assets, total ¥ 21,619

Current liabilities ¥(22,983)

Long-term liabilities (1,765)

Liabilities, total ¥(24,748)

Note 5. Fair value of financial instruments

(1) Qualitative information on financial instruments

(a) Policies for using financial instruments The Companies’ fund management policy is to put money

into short-term deposit only and to raise money through

loans payable, commercial paper and corporate bonds.

The Companies principally enter into derivatives transac-

tions in connection with managing their market risk and not

for speculation or trading purposes.

(b) Details of financial instruments used and the exposure to risk and how it arises

Notes and accounts receivable—trade are exposed to

customers’ credit risk. To manage that risk, the Companies

check the balance of the accounts and confirm the collec-

tion of money at the due date. The Companies also review

the credit risk of their main customers every six months

in accordance with the Company’s credit management

regulations.

Securities are exposed to market price fluctuation risk;

however, the Companies only hold shares in firms with

which they have business relations and these are not

for speculation.

The due dates of notes and accounts payable—trade

are mainly within one year.

Commercial paper and short-term loans receivable are

used mainly for operating purposes, and funding through

corporate bonds and long-term loans payable is mainly for

capital investment. Debts with a floating rate are exposed to

interest rate fluctuation risk, but interest on some long-term

loans payable is converted to a fixed rate through interest

rate swap transactions.

The Companies use derivative transactions of, for example,

forward currency exchange and currency swaps that are

used to hedge the risk of fluctuation in foreign currency

exchange rates with respect to monetary receivables and

48 Teijin Limited

payables denominated in foreign currencies resulting from

import and export transactions. With respect to other

derivative transactions, interest rate swap transactions are

used to hedge the risk of fluctuation in interest rates and

commodity swap transactions are used to hedge the risk of

fluctuation in the commodity price of fuel. The Companies

evaluate hedge effectiveness by comparing the cumulative

changes in cash flows from, or the changes in fair value

of, hedged items with the corresponding changes in the

hedging derivative instruments.

The Companies report periodically to the Chief Financial

Officer and the Accounting and Treasury Office on the actual

results of derivative transactions. The actual results of deriv-

ative transactions for which hedge accounting cannot be

applied are reported to the Board of Directors after the

end of each year. Furthermore, the Companies enter into

contracts with highly rated international institutions as

counterparts to these transactions to minimize credit risk

exposure.

(c) Supplementary information on fair values The fair value of financial instruments is calculated based on

quoted market price or, in cases where there is no market

price, by making a reasonable estimation. Because the

preconditions applied include a floating element, estimations

of fair value may vary. The contracted amounts, as pre-

sented in Note 7, “Derivative transactions,” do not reflect

market risk.

(2) Fair values of financial instruments

The following tables summarize fair value and book value of the financial instruments, and the difference between them, as of March 31,

2011 and 2012. Items for which fair value is difficult to estimate are not included in the following tables.

Millions of yen

2011

Book value Fair value Difference

(1) Cash and time deposits ¥ 28,612 ¥ 28,612 ¥ —

(2) Receivables 156,132 156,132 —

(3) Short-term loans receivable 8,872 8,872 —

(4) Investment securities 36,620 36,620 —

(5) Long-term loans receivable 3,992 — —

Allowance for doubtful accounts* (555) — —

3,437 3,437 —

Total ¥233,673 ¥233,673 ¥ —

(1) Payables ¥ 87,284 ¥ 87,284 ¥ —

(2) Short-term loans payable 44,568 44,568 —

(3) Commercial paper 33,000 33,000 —

(4) Bonds 35,959 37,024 1,065

(5) Long-term loans payable 151,855 152,991 1,136

Total ¥352,666 ¥354,867 ¥2,201

Derivative transactions†

(1) For which hedge accounting is not applied ¥ 1,593 ¥ 1,593 ¥ —

(2) For which hedge accounting is applied (242) (242) —

Total ¥ 1,351 ¥ 1,351 ¥ —

49Teijin Limited


2012 2012

Book value Fair value Difference Difference

(1) Cash and time deposits ¥ 33,441 ¥ 33,441 ¥ — $ —

(2) Receivables 172,087 172,087 — —

(3) Short-term loans receivable 11,838 11,838 — —

(4) Investment securities 33,090 33,090 — —

(5) Long-term loans receivable 3,537 — — —

Allowance for doubtful accounts* (550) — — —

2,987 2,987 — —

Total ¥253,443 ¥253,443 ¥ — $ —

(1) Payables ¥ 90,226 ¥ 90,226 ¥ — $ —

(2) Short-term loans payable 61,555 61,555 — —

(3) Commercial paper 18,000 18,000 — —

(4) Bonds 30,501 31,409 908 11,048

(5) Long-term loans payable 149,050 149,908 858 10,439

Total ¥349,332 ¥351,098 ¥1,766 $21,487

Derivative transactions†

(1) For which hedge accounting is not applied ¥ 341 ¥ 341 ¥ — $ —

(2) For which hedge accounting is applied 475 475 — —

Total ¥ 816 ¥ 816 ¥ — $ —

* Allowance for doubtful accounts is estimated for each category and is deducted from long-term loans receivable.

† Derivative transactions are presented net of receivables and liabilities, and figures within parenthesis indicate net liabilities.

(Note 1) The method of estimating the fair value for securities and derivative transactions is as follows:

Assets(1) Cash and time deposits, (2) Receivables, (3) Short-term loans receivable

These terms are all short-term, and the fair value is nearly equal to book value, so the book value is used as fair value.

(4) Investment securities

The fair value of shares is the market price. See Note 6, “Investment securities” for information on investment securities

categorized by holding purpose.

(5) Long-term loans receivable

The fair value of long-term loans receivable, distinguished by the term, is discounted by the interest rate that is based on that

of government bonds, to which a spread that reflects credit risk has been added.

Moreover, the fair value of long-term loans receivable that are doubtful is estimated in the same way or is provided in an

amount sufficient to cover possible losses on collection.

Liabilities(1) Payables, (2) Short-term loans payable, (3) Commercial paper

These terms are all short-term and the fair value is nearly equal to book value, so the book value is used as fair value.

(4) Bonds

The fair value of corporate bonds is calculated based on market price. In cases where there is no market price, fair value is

calculated by using the discounted cash flow based on the sum of the principal and total interest of the remaining period and

credit risk.

(5) Long-term loans payable

The fair value of long-term loans payable is the sum of the principal and total interest discounted by the rate that is applied

if a new loan is made. Certain long-term loans payable with floating rates are tied to interest rate swap transactions and

subject to special treatment.

Derivative transactions See Note 7, “Derivative transactions.”

50 Teijin Limited

(Note 2) Financial instruments for which fair value is difficult to estimate:


2011 2012 2012

Unlisted shares ¥ 3,142 ¥ 4,362 $ 53,072

Shares in affiliated companies 17,258 18,169 221,061

Total ¥20,400 ¥22,531 $274,133

Market prices of the above shares are not available and the future cash flow cannot be estimated. Therefore, fair value is difficult

to estimate. Hence these are not included in Note 6, “Investment securities,” below.

(Note 3) Expected repayment of monetary assets and securities with maturity after the date of the accounting period is as follows:

Millions of yen

2011

Within one yearOne year to five years

Over five years

Cash and time deposits ¥ 28,612 ¥ — ¥—

Receivables 156,132 — —

Short-term loans receivable 8,872 — —

Long-term loans receivable 90 3,902 —

Millions of yen

2012


Over five years

Cash and time deposits ¥ 33,441 ¥ — ¥ —

Receivables 172,087 — —


Long-term loans receivable 101 3,424 12

Thousands of U.S. dollars

2012


Over five years

Cash and time deposits $ 406,874 $ — $ —

Receivables 2,093,771 — —


Long-term loans receivable 1,229 41,660 146

(Note 4) Expected repayment of bonds and long-term loans payable:

See Note 9, “Loans payable.”

51Teijin Limited

Note 6. Investment securities

(1) Information on securities held by the Companies at March 31, 2011, is as follows:

a) There were no held-to-maturity debt securities with fair values at March 31, 2011.

b) The following table summarizes acquisition costs and book values (fair values) of available-for-sale securities with fair values as of

March 31, 2011.

Millions of yen

2011

Acquisition cost Book value Difference

Securities with book values exceeding acquisition costs:

Corporate shares ¥12,621 ¥31,717 ¥19,096

Securities with book values not exceeding acquisition costs:

Corporate shares 7,207 4,903 (2,304)

Total ¥19,828 ¥36,620 ¥16,792

c) Total sales of available-for-sale securities in the year ended March 31, 2011, and the related gains and losses amounted to ¥3,715

million, ¥2,231 million and ¥8 million, respectively.

d) Available-for-sale securities with no fair values as of March 31, 2011, consisted mostly of non-listed equity securities, bonds and

others amounting to ¥2,847 million, ¥1 million and ¥294 million, respectively.

(2) Information on securities held by the Companies at March 31, 2012 is as follows:

a) There were no held-to-maturity debt securities with fair values at March 31, 2012.

b) The following table summarizes acquisition costs and book values (fair values) of available-for-sale securities with fair values as of

March 31, 2012.


2012 2012

Acquisition cost Book value Difference Difference

Securities with book values exceeding acquisition costs:

Corporate shares ¥12,432 ¥29,311 ¥16,879 $205,366

Securities with book values not exceeding acquisition costs:

Corporate shares 5,926 3,779 (2,147) (26,123)

Total ¥18,358 ¥33,090 ¥14,732 $179,243

c) Total sales of available-for-sale securities in the year ended March 31, 2012, and the related gains and losses amounted to ¥1,890

million ($22,995 thousand), ¥1,268 million ($15,428 thousand) and ¥15 million ($183 thousand), respectively.

d) Available-for-sale securities with no fair values as of March 31, 2012, consisted mostly of non-listed equity securities, bonds and

others amounting to ¥4,093 million ($49,799 thousand), ¥1 million ($12 thousand) and ¥268 million ($3,261 thousand), respectively.

52 Teijin Limited

Note 7. Derivative transactions

(1) The following tables summarize market value information of outstanding derivative transactions as of March 31, 2011, for which hedge

accounting is not applied.

Outstanding positions, for which gains and losses were recognized in the consolidated financial statements as of March 31, 2011,

were as follows:

Currency-related derivativesMillions of yen

2011

Contract amountAmount of principal due over one year Fair value Recognized gain (loss)

Foreign currency swap transactions:

Japanese yen received for Euro ¥19,481 ¥7,566 ¥1,656 ¥1,656

Foreign currency forward contract transactions:

Sell: U.S. dollars ¥ 1,912 ¥ — ¥ (26) ¥ (26)

Sell: Japanese yen ¥ 679 ¥ — ¥ (36) ¥ (36)

Buy: U.S. dollars ¥ 195 ¥ — ¥ 0 ¥ 0


accounting is applied.

Currency-related derivatives: Principle-based methodMillions of yen

2011

Contract amountAmount of principal due over one year Fair value


Sell: U.S. dollars ¥24,962 ¥ 8,273 ¥ 941

Sell: Euro ¥ 2,988 ¥ — ¥(113)

Sell: Japanese yen ¥ 6,956 ¥ 3,531 ¥(260)

Buy: U.S. dollars ¥17,896 ¥ — ¥ 181

Buy: Euro ¥ 125 ¥ — ¥ 2

Buy: British pounds ¥ 0 ¥ — ¥ 0

Buy: Thai baht ¥ 0 ¥ — ¥ 0

Buy: Hong Kong dollars ¥ 0 ¥ — ¥ 0

Interest-rate-related derivatives: Principle-based methodMillions of yen

2011


Interest rate swap transactions:

Receive variable rate in Euro, pay fixed rate in Euro ¥21,041 ¥21,041 ¥(542)

Receive variable rate in Euro, pay variable rate in Euro ¥ 745 ¥ 745 ¥ (5)

Receive variable rate in Japanese yen, pay fixed rate in Euro ¥14,217 ¥ 7,566 ¥(446)

Receive fixed rate in Japanese yen, pay variable rate in Euro ¥ 2,502 ¥ — ¥ (2)

Receive fixed rate in Japanese yen, pay fixed rate in Euro ¥ 2,762 ¥ — ¥ 2

53Teijin Limited

Interest-rate-related derivatives: Conventional methodMillions of yen

2011



Receive variable rate in Japanese yen, pay fixed rate in Japanese yen ¥22,400 ¥20,000 ¥—

Receive variable rate in U.S. dollars, pay fixed rate in U.S. dollars ¥ 246 ¥ 246 ¥—

(3) The fair value of foreign currency forward contract transactions is based on the year-end forward rate. The fair value of foreign currency

swap transactions and interest rate swap transactions is based on the prices presented by the counterpart financial institutions.

(4) The recognized gain or loss is estimated by the counterpart financial institutions.


accounting is not applied.

Outstanding positions, for which gains and losses were recognized in the consolidated financial statements as of March 31, 2012,

were as follows:

Currency-related derivativesMillions of yen


2012 2012

Contract amountAmount of principal due over one year Fair value Recognized gain (loss) Recognized gain (loss)

Foreign currency swap transactions:

Japanese yen received for Euro ¥8,201 ¥— ¥ 452 ¥ 452 $5,499


Sell: U.S. dollars ¥7,756 ¥— ¥ (70) ¥ (70) $ (852)

Sell: Euro ¥1,615 ¥— ¥ (72) ¥ (72) $ (876)

Sell: Japanese yen ¥ 897 ¥— ¥ (6) ¥ (6) $ (73)

Buy: U.S. dollars ¥ 15 ¥— ¥ 0 ¥ 0 $ 0

Buy: Euro ¥ 122 ¥— ¥ 1 ¥ 1 $ 12

Buy: Japanese yen ¥ 13 ¥— ¥ 0 ¥ 0 $ 0

Buy: Renminbi ¥1,061 ¥— ¥ 36 ¥ 36 $ 438

54 Teijin Limited


accounting is applied.

Currency-related derivatives: Principle-based methodMillions of yen


2012 2012

Contract amountAmount of principal due over one year Fair value Fair value


Sell: U.S. dollars ¥20,535 ¥9,631 ¥569 $6,923

Sell: Euro ¥ 611 ¥ — ¥ (9) $ (110)

Sell: Japanese yen ¥ 7,043 ¥4,522 ¥ 412 $5,013

Buy: U.S. dollars ¥ 9,339 ¥ — ¥333 $4,052

Buy: Euro ¥ 94 ¥ — ¥ 3 $ 37

Buy: Swiss francs ¥ 12 ¥ — ¥ 1 $ 12

Interest-rate-related derivatives: Principle-based methodMillions of yen


2012 2012



Receive variable rate in Euro, pay fixed rate in Euro ¥22,509 ¥22,509 ¥(544) $(6,619)

Receive variable rate in Euro, pay variable rate in Euro ¥ 758 ¥ 758 ¥ (6) $ (73)

Receive variable rate in Japanese yen, pay fixed rate in Euro ¥ 7,699 ¥ — ¥(284) $ (3,455)

Receive fixed rate in Japanese yen, pay fixed rate in Euro ¥ 502 ¥ — ¥ 0 $ 0

Interest-rate-related derivatives: Conventional methodMillions of yen


2012 2012



Receive variable rate in Japanese yen, pay fixed rate in Japanese yen ¥40,000 ¥40,000 ¥— $—

(7) The fair value of foreign currency forward contract transactions is based on the year-end forward rate. The fair value of foreign currency

swap transactions and interest rate swap transactions is based on the prices presented by the counterpart financial institutions.

(8) The recognized gain or loss is estimated by the counterpart financial institutions.

55Teijin Limited

Note 8. Inventories

Inventories at March 31, 2011 and 2012, consisted of the following:


2011 2012 2012

Finished goods ¥ 71,448 ¥ 69,315 $ 843,351

Work in progress 9,163 10,142 123,397

Raw materials 19,559 24,168 294,050

Supplies 5,337 5,372 65,361

Total ¥105,507 ¥108,997 $1,326,159

Note 9. Loans payable

Short-term loans payable were represented by bank overdrafts and short-term notes with average annual interest rates of approximately

1.2% and 1.3% in 2011 and 2012, respectively.

Long-term loans payable at March 31, 2011 and 2012, consisted of the following:


2011 2012 2012

Unsecured:

Banks and insurance companies at 0.2–1.7%, maturing serially through 2017 ¥ 99,110 ¥107,282 $1,305,293

1.6% bonds, due 2013 15,000 15,000 182,504

1.8% bonds, due 2015 15,000 15,000 182,504

1.0% medium-term notes, due 2011 993 — —

0.3–1.3% medium-term notes, due 2010–2011 1,986 — —

0.4% medium-term notes, due 2011 993 — —

0.5% medium-term notes, due 2011 1,986 — —

0.2% medium-term notes, due 2012 — 501 6,096

Loans denominated in foreign currencies (principally U.S. dollars),

0.7–4.3% maturing serially through 2015 52,745 41,768 508,188

Lease obligations, 8.0% maturing serially through 2024 2,019 1,928 23,458

189,832 181,479 2,208,043

Less amounts due within one year 19,179 47,711 580,496

Total ¥170,653 ¥133,768 $1,627,547

The aggregate annual maturities of long-term loans payable at March 31, 2012, were as follows:

Year ending March 31 Millions of yenThousands of U.S. dollars

2013 ¥47,711 $580,496

2014 64,269 781,956

2015 19,440 236,525

2016 28,247 343,679

2017 and thereafter 21,812 265,387

56 Teijin Limited

Note 10. Employees’ retirement benefits

(1) The liabilities for severance and retirement benefits included in the liability section of the consolidated balance sheets as of March 31,

2011 and 2012, consisted of the following:


2011 2012 2012

Projected benefit obligation ¥ 131,743 ¥104,285 $ 1,268,828

Unrecognized prior service costs 3,349 2,633 32,036

Less unrecognized actuarial differences (25,247) (15,999) (194,659)

Less fair value of pension assets (110,522) (87,735) (1,067,466)

Prepaid pension cost 18,830 15,599 189,792

Liability for severance and retirement benefits ¥ 18,153 ¥ 18,783 $ 228,531

As described in Note 2, certain consolidated subsidiaries

transferred a portion of their defined retirement benefit plan to a

defined contribution pension plan or multiemployer contributory

funded pension plan. The effect of this change was to decrease

projected benefit obligation by ¥26,003 million ($316,377 thou-

sand), fair value of pension assets by ¥23,957 million ($291,483

thousand), unrecognized actuarial differences by ¥4,724 million

($57,477 thousand), prepaid pension cost by ¥2,870 million

($34,920 thousand), and liability for severance and retirement

benefits by ¥191 million ($2,324 thousand), in the consolidated

balance sheets as of March 31, 2012.

(2) The expenses for severance and retirement benefits included in the consolidated statements of income for the years ended March 31,

2011 and 2012, comprised the following:


2011 2012 2012

Service costs—benefits earned during the year ¥ 4,846 ¥ 5,154 $ 62,708

Interest cost on projected benefit obligation 3,144 3,218 39,153

Expected return on pension assets (3,586) (3,406) (41,441)

Amortization of actuarial differences 3,038 3,633 44,202

Amortization of prior service costs (669) (708) (8,614)

Severance and retirement benefit expenses* ¥ 6,773 ¥ 7,891 $ 96,009

* In addition to the aforementioned service costs, the Company recorded ¥3,300 million ($40,151 thousand) in contributions to a defined contribution pension plan.

(3) The discount rate and the rate of expected return on pension assets used by the Companies were mainly 2.0% and 3.6%, respectively,

for the years ended March 31, 2011 and 2012.

(4) The estimated amount of all retirement benefits to be paid at

future retirement dates is allocated equally to each service year

using the estimated number of total service years. Prior service

costs and actuarial gains and losses are recognized in

expenses using the straight-line method over mainly 12 years,

which is within the average of the estimated remaining service

years of the employees, commencing with the current and the

following period, respectively.

57Teijin Limited

(5) The funded status of the multiemployer contributory funded pension plans at December 31, 2011 (based on information available as of

March 31, 2012), to which contributions are recorded as net periodic retirement benefit costs by the Companies, is as follows:

Millions of yenThousands of U.S.

dollars

2011 2012 2012

Fair value of plan assets ¥— ¥ 1,255,124 $ 15,271,006

Benefit obligation in the calculation of pension financing — (1,262,700) (15,363,183)

Difference ¥— ¥ (7,576) $ (92,177)

Companies’ contribution percentage for multiemployer contributory funded pension plans* — 5.7%

* This percentage shows the Companies’ portion of the total estimated annual contribution to the plans, which is not necessarily equal to the actual percentage of the

Companies’ portion against the funded status in the above table.

Note 11. Net assets

Under Japanese laws and regulations, the entire amount of the

issue price of shares is required to be accounted for as capital

stock, although a company may, by resolution of its Board of

Directors, account for an amount not exceeding one-half of the

issue price of the new shares as capital surplus.

Under the Japanese Corporate Law, in cases where dividend

distribution of surplus is made, the smaller of an amount equal to

10% of the dividend and excess, if any, of 25% of capital stock

over the total of additional paid-in capital and legal earnings reserve

must be set aside as additional paid-in capital or legal earnings

reserve. Additional paid-in capital is included in capital surplus and

legal earnings reserve is included in retained earnings in the

accompanying consolidated balance sheets.

Legal earnings reserve and additional paid-in capital may be

used to eliminate or reduce a deficit or may be capitalized by a res-

olution of the shareholders’ meeting. All additional paid-in capital

and all legal earnings reserve may be transferred to other capital

surplus and retained earnings, respectively, which are potentially

available for dividends. The maximum amount that the Company

can distribute as dividends is calculated based on the unconsoli-

dated financial statements of the Company in accordance with

Japanese laws and regulations.

At the Board of Directors’ meeting held on May 9, 2012, appropriations of retained earnings for year-end dividends applicable to the

year ended March 31, 2012, were duly approved as follows:


Cash dividends:¥3.00 ($0.04) per share ¥2,953 $35,929

Note 12. Impairment loss

Certain consolidated subsidiaries accounted for impairment losses for the year ended March 31, 2012, as follows:

Impairment lossLocation Usage purpose Type of assets Millions of yen


Emmen, Netherlands High-performance fibers production facilities Machinery, etc. ¥ 829 $10,086

Nordrhein-Westfalen, Germany High-performance fibers production facilities Machinery, etc. 823 10,013

Tennessee, U.S.A. High-performance fibers production facilities Machinery, etc. 444 5,402

Shunan City in Yamaguchi Prefecture Polyester fibers production facilities Machinery, etc. 145 1,764

Utsunomiya City in Tochigi Prefecture Idle assets Machinery 139 1,691

California, U.S.A. Pharmaceuticals and home healthcare business Intangible assets 96 1,168

Kentucky, U.S.A. High-performance fibers business Goodwill 59 718

Matsuyama City in Ehime Prefecture Polyester fibers production facilities Machinery 46 560

Others — — 33 402

Total ¥2,614 $31,804

58 Teijin Limited

The Companies set asset groups by the business unit on which

the profit or loss is continually controlled. Idle assets, which are not

being used for business, are separately treated.

Among the assets used for business purposes, certain produc-

tion facilities were devalued to the recoverable values by ¥2,475

million ($30,113 thousand) as “Impairment loss.” Recoverable

value was measured by the usage value, which was calculated

by discounting future cash flows with discount rates of 10%–20%.

The book values of idle assets with no utilization plan were

written down to recoverable values by ¥139 million ($1,691 thou-

sand). Recoverable value was measured by the net salvage value,

based on real-estate appraisals or similar methods. If it is deter-

mined that an idle asset cannot be sold or diverted to another use,

the asset is valued at zero.

Note 13. Earthquake-related loss

Earthquake-related loss represents costs related to the Great East Japan Earthquake in March 2011 and consisted of the following:


2011 2012 2012

Restoration expense ¥1,442 ¥ — $ —

Loss on valuation of inventories 816 — —

Others 603 327 3,979

Total ¥2,861 ¥327 $3,979

Note 14. Net gain related to flooding

Net gain related to flooding, which represents the net result of losses related to the flooding in Thailand in October 2011 and insurance

received in compensation, consisted of the following:


Insurance compensation ¥ 5,939 $ 72,259

Facility reconstruction expenses (2,239) (27,242)

Loss on valuation of inventories (1,832) (22,290)

Fixed costs during downtime (1,244) (15,136)

Others (277) (3,369)

Total ¥ 347 $ 4,222

59Teijin Limited

Note 15. Consolidated statements of comprehensive income

Components of other comprehensive income for the year ended March 31, 2012, consisted of the following:


Valuation difference on available-for-sale securities:

Increase (decrease) during the year ¥ (3,253) $(39,579)

Reclassification adjustments 789 9,600

Subtotal, before tax ¥ (2,464) $(29,979)

Tax (expense) or benefit 1,563 19,017

Subtotal, net of tax ¥ (901) $(10,962)

Deferred gains (losses) on hedges:

Increase (decrease) during the year ¥ 515 $ 6,266

Reclassification adjustments 79 961

Subtotal, before tax ¥ 594 $ 7,227

Tax (expense) or benefit (90) (1,095)

Subtotal, net of tax ¥ 504 $ 6,132

Foreign currency translation adjustments

Subtotal, net of tax ¥ 2,099 $ 25,538

Share of other comprehensive income of associates accounted for using the equity method:

Increase (decrease) during the year ¥ (25) $ (304)

Reclassification adjustments 4 49

Subtotal ¥ (21) $ (255)

Total other comprehensive income ¥ 1,681 $ 20,453

Note 16. Income taxes

The Company is subject to a number of taxes based on income, which, in the aggregate, indicate a statutory rate in Japan of approximately

40.4% for the years ended March 31, 2011 and 2012. The following table summarizes the significant differences between the Company’s

effective tax rate and the actual income tax rate for financial statement purposes for the years ended March 31, 2011 and 2012.

2011 2012

Effective tax rate 40.4% 40.4%

Non-deductible expenses 2.1 3.9

Difference in statutory tax rate between Japan and other countries (7.6) (2.5)

Equity in earnings of affiliates (5.7) (7.8)

Amortization of goodwill 5.9 11.4

Changes in valuation allowance 3.2 9.5

Decrease in statutory tax rate — 0.5

Other (2.0) (2.5)

Actual income tax rate 36.3% 52.9%

The “Act for Partial Revision of the Income Tax Act, etc. for the Purpose of Creating a Taxation System that Responds to Changes in

Economic and Social Structures” (2011, Act No. 114) and the “Act on Special Measures for Securing the Financial Resources Necessary to

60 Teijin Limited

Implement Measures for Reconstruction Following the Great East

Japan Earthquake” (2011, Act No. 117), promulgated in Japan on

December 2, 2011, resulted in a reduction in the corporate tax rate

and the imposition of a special reconstruction corporate tax for the

fiscal years beginning in the period from April 1, 2012, to March 31,

2015. This changed the effective statutory tax rate from 40.4% to

37.8% for those temporary differences expected to be eliminated

in the fiscal years beginning on or after April 1, 2012, and to 35.4%

for those temporary differences expected to be eliminated in the

years beginning on or after April 1, 2015. As a result of this change,

deferred tax assets, income taxes—deferred, net unrealized gains

on securities and deferred gains (losses) on hedges increased by

¥496 million ($6,035 thousand), ¥146 million ($1,776 thousand),

¥538 million ($6,546 thousand) and ¥104 million ($1,265 thousand),

respectively, in the consolidated financial statements for the year

ended March 31, 2012.

Significant components of the Companies’ deferred tax assets and liabilities as of March 31, 2011 and 2012, are as follows:


2011 2012 2012

Deferred tax assets:

Excess bonuses accrued ¥ 4,060 ¥ 3,406 $ 41,441

Provision for loss on guarantees 2,529 2,264 27,546

Write-down of investment securities 2,965 2,639 32,109

Retirement benefits 4,507 4,192 51,004

Accumulated impairment loss 3,631 3,856 46,916

Net operating losses 68,022 53,776 654,289

Capital losses 1,778 — —

Other 11,952 13,547 164,824

Total 99,444 83,680 1,018,129

Valuation allowance (62,157) (54,485) (662,916)

Total deferred tax assets 37,287 29,195 355,213

Offset with deferred tax liabilities (19,842) (15,583) (189,597)

Net deferred tax assets ¥ 17,445 ¥ 13,612 $ 165,616

Deferred tax liabilities:

Adjustments to fixed assets based on Corporate Tax Law ¥ (7,108) ¥ (6,326) $ (76,968)

Accelerated depreciation of foreign subsidiaries’ fixed assets (3,677) (2,459) (29,918)

Tax effect of foreign subsidiaries’ undistributed earnings (3,849) (2,250) (27,376)

Valuation difference of newly acquired subsidiaries (5,750) (5,111) (62,185)

Valuation difference on available-for-sale securities (6,062) (4,504) (54,800)

Other (2,843) (3,781) (46,003)

Total deferred tax liabilities (29,289) (24,431) (297,250)

Offset with deferred tax assets 19,842 15,583 189,597

Net deferred tax liabilities ¥ (9,447) ¥ (8,848) $ (107,653)

61Teijin Limited

Note 17. Leases

(1) Finance leases as lessee

Finance lease transactions that commenced on and before March 31, 2008, and which did not transfer ownership are accounted for in

the same manner as operating leases.

The original lease obligations, payments to date and payments remaining for assets leased from other parties under non-capitalized

finance leases as of March 31, 2011 and 2012, are as follows:

Millions of yen

Year ended March 31, 2011 Original lease obligation Payments to date Payments remaining

Machinery, equipment and vehicles ¥2,058 ¥1,787 ¥271

Other fixed assets 878 693 185

Intangible assets 48 36 12

Total ¥2,984 ¥2,516 ¥468

Millions of yen


Machinery, equipment and vehicles ¥1,846 ¥1,705 ¥141

Other fixed assets 610 529 81


Total ¥2,504 ¥2,278 ¥226



Machinery, equipment and vehicles $22,460 $20,745 $1,715

Other fixed assets 7,422 6,437 985


Total $30,466 $27,716 $2,750

Future minimum lease payments for the remaining lease periods as of March 31, 2011 and 2012, including interest, are as follows:


2011 2012 2012

Due within one year ¥236 ¥150 $1,825

Due over one year 234 81 986

Total ¥470 ¥231 $2,811

Lease payments for finance leases that do not transfer ownership were ¥451 million and ¥198 million ($2,409 thousand) for the

years ended March 31, 2011 and 2012, respectively.

(2) Operating leases as lessee

Future minimum lease payments for the remaining lease periods, as of March 31, 2011 and 2012, are as follows:


2011 2012 2012

Due within one year ¥ 257 ¥ 303 $ 3,687

Due over one year 1,491 2,003 24,370

Total ¥1,748 ¥2,306 $28,057

62 Teijin Limited

Note 18. Stock option plans

Information on stock option plans at March 31, 2012, is shown below.

The account title and the amount related to stock options in the years ended March 31, 2011 and 2012, are as follows:


Account title 2011 2012 2012

Selling, general and administrative expenses ¥91 ¥181 $2,202

The following tables summarize the contents of stock options as of March 31, 2012.

Company name Teijin Limited

Position and number of grantee Directors and Corporate Officers: 54

Class and number of stock Common Stock 146,000

Date of issue July 10, 2006

Condition of settlement of rights No provisions

Period grantees provide service in return for stock options No provisions

Period subscription rights are to be exercised From July 10, 2006 to July 9, 2026
































Date of issue March 12, 2012



Period subscription rights are to be exercised From March 12, 2012 to March 11, 2032

63Teijin Limited

The following tables summarize the scale and movement of stock options as of March 31, 2012.

Non-exercisable stock optionsStocks


2006 2007 2008 2009 2010 2012

Stock options outstanding at April 1, 2011 — — — — — —

Stock options granted — — — — — 737,000

Forfeitures — — — — — —

Conversion to exercisable stock options — — — — — 737,000

Stock options outstanding at March 31, 2012 — — — — — —

Exercisable stock options Stocks


2006 2007 2008 2009 2010 2012

Stock options outstanding at April 1, 2011 103,000 150,000 275,000 410,000 349,000 —

Conversion from non-exercisable stock options — — — — — 737,000

Stock options exercised 29,000 28,000 24,000 32,000 5,000 —

Forfeitures — — — — — —

Stock options outstanding at March 31, 2012 74,000 122,000 251,000 378,000 344,000 737,000

The following table summarizes price information of stock options as of March 31, 2012.

Yen


2006 2007 2008 2009 2010 2012

Paid-in value ¥ 1 ¥ 1 ¥ 1 ¥ 1 ¥ 1 ¥ 1

Average market price of the stock at the time of exercise ¥319 ¥319 ¥334 ¥334 ¥337 ¥ —

Fair value at the date of grant ¥663 ¥610 ¥307 ¥253 ¥261 ¥245

The method of estimation for the fair value of stock options granted in the year ended March 31, 2012, is as follows:

Method of valuation Black-Scholes Model

Volatility 36%

Expected remaining period 4.5 years

Expected dividend ¥6.0 per share

Interest rate without any risks 0.26%

64 Teijin Limited

Note 19. Segment information

(1) Reportable segment information

The Company’s reportable operating segments are compo-

nents of an entity for which separate financial information is

available and evaluated regularly by its chief decision-making

authority in determining the allocation of management

resources and in assessing performance. Up to and including

the fiscal year ended March 31, 2012, the Company divided

its operations into business groups based on type of product,

nature of business and services provided. The business groups

formulate product and service strategies in a comprehensive

manner in Japan and overseas. Accordingly, the Company

divided its operations into five reportable operating segments

on the same basis as it uses internally: High-Performance

Fibers; Polyester Fibers; Films and Plastics; Pharmaceuticals

and Home Health Care; and Trading and Retail.

Each segment is as follows:

High-Performance Fibers: — Production and sales of aramid fibers and carbon fibers and

composites for industrial applications, and artificial leather

Polyester Fibers: — Production and sales of polyester fibers and raw material for

apparel and industrial applications

Films and Plastics: — Production and sales of films and resins for various industrial

applications

Pharmaceuticals and Home Health Care: — Production and sales of prescription and non-prescription drugs

and production, sales and rental of home healthcare devices

Trading and Retail: — Trading and retail of polyester filaments and other fibers

(2) Accounting methods used to calculate segment sales, segment income, segment assets and other items for reportable segments

Accounts for reportable segments are for the most part calculated in line with generally accepted standards for the preparation of

consolidated financial statements. Segment income for reportable segments is based on operating income. Amounts for intersegment

transactions or transfers are calculated based on market prices or on prices determined using the cost-plus method.

(3) Segment sales, segment income, segment assets and other items for reportable segments

Segment information for the years ended March 31, 2011 and 2012, is shown below.

Millions of yen

2011

High-Performance

Fibers Polyester FibersFilms and Plastics

Pharmaceuticals and Home

Health CareTrading and

Retail Total OthersConsolidated

total

Sales:

1) External customers ¥103,354 ¥103,502 ¥217,109 ¥136,446 ¥216,922 ¥777,333 ¥ 38,323 ¥815,656

2) Intersegment net sales

and transfer 10,651 40,776 7,951 1 4,813 64,192 30,312 94,504

Net sales 114,005 144,278 225,060 136,447 221,735 841,525 68,635 910,160

Segment income 4,423 3,017 23,447 22,910 4,744 58,541 3,105 61,646

Segment assets 215,824 101,534 185,208 93,420 76,472 672,458 50,407 722,865

Other items:

Depreciation 16,781 5,624 11,492 9,486 201 43,584 2,052 45,636

Amortization of goodwill 5,531 — (40) 1,817 16 7,324 (73) 7,251

Investments in associates

accounted for using the

equity method 3,816 3,409 9,314 772 367 17,678 4,506 22,184

Increase in tangible and

intangible fixed assets 5,077 4,204 4,277 12,441 273 26,272 1,242 27,514

65Teijin Limited

Millions of yen

2012

High-Performance





total

Sales:

1) External customers ¥120,724 ¥109,944 ¥215,376 ¥143,000 ¥224,574 ¥813,618 ¥ 40,753 ¥854,371


and transfer 9,966 33,246 6,464 0 3,938 53,614 34,338 87,952

Net sales 130,690 143,190 221,840 143,000 228,512 867,232 75,091 942,323

Segment income 6,309 1,895 3,733 25,913 6,013 43,863 3,325 47,188

Segment assets 195,934 107,966 169,701 97,909 85,457 656,967 55,614 712,581

Other items:

Depreciation 16,985 4,448 10,946 7,921 430 40,730 1,588 42,318

Amortization of goodwill 5,884 — 132 1,970 16 8,002 (68) 7,934



equity method 5,486 3,397 10,619 569 731 20,802 3,602 24,404


intangible fixed assets 7,982 4,032 4,427 11,332 1,009 28,782 1,985 30,767


2012

High-Performance





total

Sales:

1) External customers $1,468,840 $1,337,681 $2,620,465 $1,739,871 $2,732,376 $9,899,233 $495,839 $10,395,072


and transfer 121,256 404,502 78,647 0 47,913 652,318 417,788 1,070,106

Net sales 1,590,096 1,742,183 2,699,112 1,739,871 2,780,289 10,551,551 913,627 11,465,178

Segment income 76,761 23,056 45,419 315,282 73,160 533,678 40,455 574,133

Segment assets 2,383,915 1,313,615 2,064,740 1,191,252 1,039,749 7,993,271 676,652 8,669,923

Other items:

Depreciation 206,655 54,119 133,179 96,374 5,232 495,559 19,321 514,880

Amortization of goodwill 71,590 — 1,606 23,969 195 97,360 (828) 96,532



equity method 66,747 41,331 129,201 6,923 8,894 253,096 43,826 296,922


intangible fixed assets 97,117 49,057 53,863 137,876 12,276 350,189 24,151 374,340

(Notes)

1. “Others” includes the Company’s IT business and does not qualify as a reportable operating segment.

2. Depreciation and Increase in tangible and intangible fixed assets include long-term prepaid expenses and their amortization.

3. As described in Note 2, Teijin and its domestic consolidated subsidiaries changed their method of depreciating fixed assets acquired on or after April 1, 2011. As a result of

this change, segment income was ¥777 million ($9,454 thousand) higher in High-Performance Fibers, ¥606 million ($7,373 thousand) higher in Polyester Fibers, ¥1,228 mil-

lion ($14,941 thousand) higher in Films and Plastics, ¥2,632 million ($32,023 thousand) higher in Pharmaceuticals and Home Health Care, ¥364 million ($4,429 thousand)

higher in Trading and Retail and Others, combined, and ¥713 million ($8,675 thousand) lower in Elimination and corporate, compared to what would have been recorded

under the previous method.

66 Teijin Limited

Reconciliation of published figures and aggregates of reportable operating segments for the years ended March 31, 2011 and 2012,

is shown below:


Adjustment for net sales 2011 2012 2012

Reportable operating segments ¥841,525 ¥867,232 $10,551,551

Others segment 68,635 75,091 913,627

Elimination of intersegment transactions (94,504) (87,952) (1,070,106)

Net sales ¥815,656 ¥854,371 $10,395,072


Adjustment for operating income 2011 2012 2012

Reportable operating segments ¥58,541 ¥ 43,863 $ 533,678

Others segment 3,105 3,325 40,455

Elimination of intersegment transactions 584 250 3,042

Corporate expenses * (13,670) (13,394) (162,964)

Operating income ¥48,560 ¥ 34,044 $ 414,211

* Corporate expenses are expenses that cannot be allocated to individual reportable operating segments and are primarily related to basic research and head office

administration.

Reconciliation of published figures and aggregates of reportable operating segments as of March 31, 2011 and 2012, is shown below:

Millions of yenThousands of U.S.

dollars

Adjustment for assets 2011 2012 2012

Reportable operating segments ¥672,458 ¥656,967 $7,993,271

Others segment 50,407 55,614 676,652

Elimination of intersegment transactions 94,852 91,088 1,108,261

Corporate assets † (56,182) (41,551) (505,547)

Total assets ¥761,535 ¥762,118 $9,272,637

† Corporate assets are assets that cannot be allocated to individual reportable operating segments and are primarily related to investments of the parent company in “Cash and

time deposits” and “Investment securities,” etc.

Millions of yen

2011

Other items Reportable operating segments Others Adjustment Total

Depreciation ¥43,584 ¥2,052 ¥3,523 ¥49,159

Amortization of goodwill 7,324 (73) — 7,251

Investments in associates accounted for using the equity method 17,678 4,506 — 22,184

Increase in tangible and intangible fixed assets 26,272 1,242 1,735 29,249

Millions of yen

2012


Depreciation ¥40,730 ¥1,588 ¥2,052 ¥44,370




67Teijin Limited


2012


Depreciation $495,559 $19,321 $24,967 $539,847




(4) Information by geographical segment

1. Net sales by region for the years ended March 31, 2011 and 2012, is shown below: Millions of yen

2011

Japan China Asia Americas Europe and others Consolidated total

¥512,152 ¥111,494 ¥68,752 ¥64,129 ¥59,129 ¥815,656

Millions of yen

2012


¥518,973 ¥121,886 ¥72,166 ¥71,004 ¥70,342 ¥854,371


2012


$6,314,308 $1,482,978 $878,039 $863,901 $855,846 $10,395,072

2. Tangible fixed assets by region as of March 31, 2011 and 2012, is shown below:

Millions of yen

2011

Japan Netherlands Asia Americas Europe Consolidated total

¥142,582 ¥55,194 ¥44,297 ¥6,984 ¥10,602 ¥259,659

Millions of yen

2012


¥141,755 ¥47,907 ¥39,418 ¥6,037 ¥9,184 ¥244,301


2012


$1,724,723 $582,881 $479,596 $73,452 $111,741 $2,972,393

(5) Information by major customer

Information for the year ended March 31, 2012, is omitted as no single customer accounts for more than 10% of consolidated net sales

as reported in the consolidated statements of income.

(6) Loss on impairment and goodwill by reportable segment

Loss on impairment by reportable segment for the years ended March 31, 2011 and 2012, is shown below:

Millions of yen

2011

High-Performance




Retail OthersElimination and

corporateConsolidated

total

Loss on impairment * ¥549 ¥537 ¥148 ¥— ¥— ¥558 ¥— ¥1,792

* The figure for “Others” is losses on impairment of power supply equipment and/or facilities.

68 Teijin Limited

Millions of yen

2012

High-Performance






total

Loss on impairment ¥2,167 ¥212 ¥139 ¥96 ¥— ¥— ¥— ¥2,614


2012

High-Performance






total

Loss on impairment $26,366 $2,579 $1,691 $1,168 $— $— $— $31,804

Goodwill by reportable segment as of March 31, 2011 and 2012, is shown below:

Millions of yen

2011

High-Performance






total

Amortization of goodwill ¥ 5,531 ¥— ¥ (40) ¥ 1,817 ¥16 ¥ (73) ¥— ¥ 7,251

Balance as of March 31, 2011 ¥39,869 ¥— ¥(135) ¥12,251 ¥62 ¥(274) ¥— ¥51,773

Millions of yen

2012

High-Performance






total

Amortization of goodwill ¥ 5,884 ¥— ¥ 132 ¥ 1,970 ¥16 ¥ (68) ¥— ¥ 7,934

Balance as of March 31, 2012 ¥33,926 ¥— ¥2,020 ¥10,502 ¥47 ¥(175) ¥— ¥46,320


2012

High-Performance






total

Amortization of goodwill $ 71,590 $— $ 1,606 $ 23,969 $195 $ (828) $— $ 96,532

Balance as of March 31, 2012 $412,775 $— $24,577 $127,777 $572 $(2,129) $— $563,572

Note 20. Contingent liabilities

At March 31, 2011 and 2012, the Companies were contingently liable as follows:


2011 2012 2012

(a) As endorser of notes discounted or endorsed ¥ 52 ¥ 63 $ 767

(b) As guarantors of indebtedness of:

Unconsolidated subsidiaries and affiliates ¥2,429 ¥1,386 $16,863

Others 2,744 2,765 33,642

¥5,173 ¥4,151 $50,505

(c) As guarantor of accounts receivable negotiated to third parties ¥3,086 ¥2,268 $27,595

69Teijin Limited

Note 21. Subsequent events

(1) At the Board of Directors’ meeting held on May 9, 2012, appropriations of retained earnings for year-end dividends applicable to the

year ended March 31, 2012, were duly approved as follows:


Cash dividends: ¥3.00 ($0.04) per share ¥2,953 $35,929

(2) With the aim of enhancing market responsiveness and integrating fundamental technologies, on October 1, 2012, a company split

will be implemented between the Company and core subsidiary Teijin Fibers Limited, in a bid to advance the creation of value for cus-

tomers, a key objective of the Company’s new medium-term management vision. On the same date, four mergers will be implemented

(plus one merger on April 1, 2013), involving the Company and five consolidated subsidiaries of the Company. The details are as follows:

a) Company splita. Agenda

Approval of the Board of Directors May 9, 2012

Date of contract May 25, 2012

Approval granted at the general shareholders’ meeting June 22, 2012

Effective date of the company split October 1, 2012 (scheduled)

b. Names and major businesses of the parties

Name Major business

Split company Teijin Fibers Limited Manufacturing and sales of polyester fibers

Successor company Teijin Limited Holding company

c. Legal form of the split

A simple absorption-type split with the Company as the successor company.

d. Split business

All businesses of Teijin Fibers Limited, except for its apparel business.

e. Stock acquisition rights and convertible bonds

There are no stock acquisition rights or convertible bonds issued by the Company.

f. Outline of accounting treatment

The transaction is implemented as a business combination under common control.

b) Mergera. Agenda

Approval of the Board of Directors May 9, 2012

Date of contract May 25, 2012

Approval granted at the general shareholders’ meeting June 22, 2012

Effective date of merger October 1, 2012 (scheduled, except Teijin Chemicals Limited)

Effective date of merger (Teijin Chemicals Limited) April 1, 2013 (scheduled)

b. Names and major businesses of the parties

Name Major business

Surviving company Teijin Limited Holding company

Absorbed companies Teijin Techno Products Limited Manufacture and sales of high-performance fibers

Teijin Films Limited Coordination of joint venture films business

Teijin Intellectual Property Center Limited Intellectual property–related services for the Teijin Group

Teijin Creative Staff Co., Ltd. Contracting out of support service personnel for the Teijin Group

Teijin Chemicals Limited Manufacture and sales of films and plastics

70 Teijin Limited

c. Legal form of the merger

A simple absorption-type merger with the Company as the surviving company.

d. Outline of accounting treatment

These transactions are implemented as a business combination under common control. In addition, there is no plan to issue or

allocate new shares, and no plan to increase capital as a result of the merger.

(3) To maximize the Teijin Group’s comprehensive capabilities and

expedite the implementation of growth strategies, the Company

has formulated essential organizational reforms under its hold-

ing company system. Up to and including the year ended

March 31, 2012, the Company had divided its operations into

five reportable operating segments: High-Performance Fibers;

Polyester Fibers; Films and Plastics; Pharmaceuticals and

Home Health Care; and Trading and Retail. Effective from April

1, 2012, these segments were reorganized into four reportable

operating segments. The new segment names are as follows:

Advanced Fibers and Composites; Electronics Materials and

Performance Polymer Products; Healthcare; and Trading

and Retail.

The High-Performance Fibers segment has been renamed

the Advanced Fibers and Composites segment, and now also

includes polyester fibers for industrial applications, which was

previously accounted for in the Polyester Fibers segment. The

Films and Plastics segment has been renamed Electronics

Materials and Performance Polymer Products, while the

Pharmaceuticals and Home Health Care segment is now

Healthcare. The apparel component of the Polyester Fibers

segment has been incorporated into the Trading and Retail

segment. Others (other businesses) retained the same

name, but now also includes the polyester raw materials

and polymerization businesses, previously part of the

Polyester Fibers segment.

Each segment is now as follows:

Advanced Fibers and Composites: — Production and sales of aramid fibers, carbon

fibers, polyester fibers and composites for industrial

applications

Electronics Materials and Performance Polymer Products:

— Production and sales of films and resins for various

industrial applications

Healthcare: — Production and sales of prescription and non-

prescription drugs and production, sales and rental

of home healthcare devices

Trading and Retail: — Trading and retail of polyester filaments, other fibers

and polymer products

Segment information for the year ended March 31, 2012, restated to conform with the new segmentation, is as follows:

Millions of yen

2012


Electronics Materials and Performance

Polymer Products Healthcare

Trading and Retail

Total for reportable segments Others Total

Elimination and corporate

Consolidated total

Sales to external

customers ¥153,218 ¥215,376 ¥143,000 ¥262,710 ¥774,304 ¥80,067 ¥854,371 ¥ — ¥854,371

Segment income 7,182 3,733 25,913 6,621 43,449 3,739 47,188 (13,144) 34,044


2012


Electronics Materials and Performance

Polymer Products Healthcare

Trading and Retail

Total for reportable segments Others Total

Elimination and corporate

Consolidated total

Sales to external

customers $1,864,193 $2,620,465 $1,739,871 $3,196,374 $9,420,903 $974,169 $10,395,072 $ — $10,395,072

Segment income 87,383 45,419 315,282 80,557 528,641 45,492 574,133 (159,922) 414,211

71Teijin Limited

To the Shareholders and the Board of Directors of Teijin Limited:

We have audited the accompanying consolidated financial statements of Teijin Limited and its consolidated subsidiaries, which comprise

the consolidated balance sheets at March 31, 2011 and 2012, and the consolidated statements of income, statements of comprehensive

income, statements of changes in net assets and statements of cash flows for the years then ended, and a summary of significant

accounting polices and other explanatory information.

Management’s Responsibility for the Consolidated Financial StatementsManagement 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 is necessary to enable

the preparation of consolidated financial statements that are free from material misstatements, whether due to fraud or error.

Auditor’s ResponsibilityOur responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in

accordance with auditing standards generally accepted in Japan. Those standards require that we comply with ethical requirements and

plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material

misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial

statements. The procedures selected depend on our judgment, including the assessment of the risks of material misstatement of the

consolidated financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant

to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are

appropriate in the circumstances, while the objective of the financial statement audit is not for the purpose of expressing an opinion on

the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and

the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated

financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

OpinionIn our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of Teijin Limited and

its consolidated subsidiaries at March 31, 2011 and 2012, and their financial performance and cash flows for the years then ended in

accordance with accounting principles generally accepted in Japan.

Emphasis of MatterWithout qualifying our opinion, we draw attention to Note 2 to the consolidated financial statements. From the year ended March 31, 2012,

the Company and its domestic consolidated subsidiaries changed their method of depreciation from the declining balance method to the

straight-line method to depreciate tangible fixed assets. Previously, the Company and its domestic consolidated subsidiaries mainly used

the declining balance method.

Convenience TranslationThe U.S. dollar amounts in the accompanying consolidated financial statements with respect to the year ended March 31, 2012, are

presented solely for convenience. Our audit also included the translation of yen amounts into U.S. dollar amounts and, in our opinion,

such translation has been made on the basis described in Note 1 to the consolidated financial statements.

Tokyo, Japan

June 22, 2012

Independent Auditors’ Report

72 Teijin Limited

Established June 17, 1918

Head Offices Osaka Head Office6-7, Minami Hommachi 1-chome, Chuo-ku, Osaka 541-8587, Japan

Tel: +81-6-6268-2132

Tokyo Head OfficeKasumigaseki Common Gate West Tower,

2-1, Kasumigaseki 3-chome, Chiyoda-ku, Tokyo 100-8585, Japan

Tel: +81-3-3506-4529

Fiscal Year-End March 31

Common Stock Authorized 3,000,000,000 shares

Issued 984,758,665 shares

Paid-in capital ¥70,817 million

Shareholders 123,487

Number of Teijin Group Companies Japan 68

Overseas 81

Total 149

Number of Teijin Group Employees

(Consolidated)

Japan 9,708

Overseas 7,111

Total 16,819

Stock Exchange Listings Tokyo, Osaka

Stock Code 3401

Stock Transfer Agent Mitsubishi UFJ Trust and Banking Corporation

Dividends Dividends are usually declared in May and November.

Dividends are usually paid in or about May and November.

Reports Available to Shareholders and Investors Corporate Brochure

Annual Report

Fact Book

Kessan Tanshin (Japanese summary financial report)

The Teijin Group CSR Report

Annual Meeting of Shareholders The annual meeting of shareholders is held before the end of June.

Independent Public Accountants KPMG AZSA LLC

Teijin on the Internet http://www.teijin.co.jp

Teijin’s web site offers a wealth of corporate and product information, including the latest annual report,

financial results and corporate news.

Investor Relations If you have any questions or would like copies of any of our reports, please contact:

Masahiro Ikeda,

General Manager,

Investor Relations Office,

Kasumigaseki Common Gate West Tower,

2-1, Kasumigaseki 3-chome,

Chiyoda-ku, Tokyo 100-8585, Japan

Tel: +81-3-3506-4407 Fax: +81-3-3506-4150

E-mail: [email protected]

Corporate DataAs of March 31, 2012

13%

69%

18%

● Aramid fibers ● Carbon fibers and composites

● Pharmaceuticals● Home healthcare

20110.8


Healthcare


Fiscal

¥

Net sales

trillion● Polyester fibers● Polycarbonate resin● PET film● PEN film● Trading and retail● IT

*

© 2012 Teijin Limited. All Rights Reserved.

Italicized product names and service names in this report are trademarks or registered trademarks of the

Teijin Group in Japan and/or other countries. Where noted, other italicized product names and service

names used in this report are protected as the trademarks and/or trade names of other companies.

Contents

2 Message from the CEO

3 CHANGE for 2016

8 Business Group Review

8 Advanced Fibers and Composites

Business Group

10 Electronics Materials and Performance

Polymer Products Business Group

12 Healthcare Business Group

14 Trading and Retail Business Group

15 IT Business Group

16 New Business Development Group

17 Research and Development

20 Corporate Governance

23 Corporate Social Responsibility

25 Financial Section

26 Financial Highlights and Consolidated

10-Year Summary

28 Management’s Discussion and Analysis

36 Consolidated Financial Statements

72 Corporate Data * Excluding the impact of the

standardization of accounting

periods.

Cha

Profi le

In fiscal 2011, Teijin announced a new medium- to long-term management vision, CHANGE for 2016. To achieve the targets set forth

in this vision, Teijin is implementing major constructive change. In recent years, the Company classified its core global operations into

eight business areas with an emphasis on high-performance materials and healthcare. Effective from fiscal 2012, Teijin will seek to

provide solutions to customers and markets, further enhancing the quality of life of people everywhere, by concentrating on three

key domains: Green chemistry, healthcare and overlapping domains. At the same time, Teijin will work to ensure both sustainable

growth and profitability, primarily through its promising growth businesses, notably advanced fibers and composites and healthcare.


Disclaimer Regarding Forward-Looking Statements

Any statements in this document, other than those of historical fact, are forward-looking statements about the future performance of Teijin and its Group companies,

which are based on management’s assumptions and beliefs in light of information currently available and involve risks and uncertainties. Actual results may differ

materially from these forecasts. Potential risks and uncertainties include, but are not limited to, domestic and overseas economic conditions, such as consumer

spending and private capital expenditures; currency exchange rate fl uctuations, notably with the Japanese yen, U.S. dollar, Asian currencies, the euro and other

currencies in which Teijin operates its international business; direct and indirect restrictions imposed by other countries; fl uctuations in the market prices of securities

in which Teijin has substantial holdings; and Teijin’s ability to maintain its strength in many product and geographical areas, through such means as new product

introductions, in a market that is highly competitive in terms of both price and technology, pertinent to the industry to which the Company primarily belongs.

http://www.teijin.co.jp

Printed in Japan using waterless printing. Issued 2012.7


Change Annual Report 2012Year ended March 31, 2012

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