Driving Change and Building Value - Teijin · 28 Management’s Discussion and Analysis ... the future performance of Teijin and its Group companies, ... Driving Change and Building

2014Annual Report

Driving Change and Building Value

Year ended March 31, 2014

Contents

2 A Message to Shareholders and Investors

3 Special Feature Restructuring Initiatives + Transformation and Growth Strategies

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 Business Unit

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

79 Corporate Data

Profi le

With the aim of attaining the targets of its medium- to long-term

management vision, the Teijin Group is working to provide

solutions to customers and markets, thereby enhancing the

quality of life of people everywhere, by concentrating on core

business domains, namely, high-performance materials,

healthcare and IT, as well as on domains that overlap these

areas. The Group is also striving to secure both sustainable

growth and profi tability by promoting restructuring initiatives

and implementing transformation and growth strategies.

Breakdown of Consolidated Net Sales in Fiscal 2013

Advanced Fibers and Composites

Healthcare

Other

16%

Electronics Materials and Performance Polymer Products

23%

18%

32%

11%●IT

●Trading, retail

●Pharmaceuticals●Home healthcare

●Polycarbonate resin●PET film●PEN film

●Aramid fibers●Carbon fibers and composites●Polyester fibers for industrial applications

Trading and Retail

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 assump-

tions 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 expendi-

tures; 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 restric-

tions imposed by other countries; fl uctuations in the market prices of securities in which Teijin has sub-

stantial 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.

Driving Change and

1Teijin Limited

* 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 global player that has attained global excellence*

Long-term vision:

Transformation and Growth Strategies

Restructuring Initiatives

Reduce costs

Evolve our business model

Rebuild our

competitive

advantages

(Offensive measures)

Reorganize

unprofi table

businesses

(Defensive measures)

Further transform andgrow key businesses

Restore basic profi tability

Foster new businesses in overlapping domains

Building Value

Existing businesses

2 Teijin Limited

A Message to Shareholders and InvestorsA Message to Shareholders and Investors

Bolstered by a recovery in results in the Advanced Fibers and

Composites segment and the impact of restructuring initiatives,

particularly in our materials businesses, consolidated net sales in

fi scal 2013 rose 5.2%, to ¥784.4 billion, while operating income

climbed 46.3%, to ¥18.1 billion. Net income amounted to ¥8.4

billion, up from a net loss of ¥29.1 billion in fi scal 2012.

The foremost objective of CHANGE for 2016, the medium- to

long-term management vision we announced in 2012, is to evolve

toward a solutions-oriented business model and by doing so build

value that benefi ts our customers and society. Accordingly, we

continue to promote ambitious restructuring initiatives and at the

same time have begun implementing forward-looking strategies,

which we have dubbed “transformation and growth strategies.”

Teijin has moved decisively to restructure its businesses numer-

ous times in the 90-plus years since its establishment. The most

notable, perhaps, was our decision to shift the focus of our fi bers

business from rayon to polyester—a major change in direction—in

the late 1950s. In subsequent decades, the emergence of manu-

facturers in, among others, the People’s Republic of China (PRC)

and India fundamentally altered the structure of the polyester fi bers

market such that simply chasing production volume and market

share was no longer a viable strategy for survival. With the global

economic slump precipitated by the collapse of Lehman Brothers,

polyester fi bers became the target of drastic structural reforms, as

a result of which our fi bers business now centers on aramid fi bers

and carbon fi bers. In short, we have always recognized that the

ability to accurately interpret social imperatives and market trends,

and the willingness to make changes accordingly, without being

swayed by past success, are essential to prevent businesses from

falling into decline.

Since the beginning of fi scal 2013, we have suspended opera-

tions on certain loss-making production lines and at certain poorly

performing facilities in Japan and overseas, primarily in our Elec-

tronics Materials and Performance Polymer Products segment.

While the goal of these measures is a short-term improvement in

profi tability through the liquidation or scaling back of unprofi table

sites, our restructuring initiatives are aimed at more than a quick

fi x. In our view, restructuring means decisively paring down existing

businesses using four basic criteria—market growth potential,

technology-derived competitive advantages, medium- to long-term

profi tability and prospects for the creation of signifi cant barriers to

new market entrants—while at the same time working to clarify

and refi ne our competitive strengths, to create a business structure

that is conducive to sustainable growth.

Having also recognized that simply persisting with our current

business model will not enable us to secure sustainable growth,

we are also implementing bold transformation and growth strate-

gies aimed at cultivating promising new businesses. In our materials

businesses, for example, we are shifting away from our traditional

business model, which centers on the production and sales of

materials, toward one that also emphasizes value-added compo-

nents and devices. We will also promote the focused allocation

of resources to expand the Teijin Group’s three core business

domains, namely, high-performance materials, healthcare and IT,

and foster new, highly profi table businesses that overlap these

domains, combining products, services and IT solutions to enhance

value and utility for customers.

We will press forward with efforts to complete restructuring ini-

tiatives by the end of fi scal 2016 at the latest, as well as to restore

basic profi tability enabling us to boost annual operating income

above ¥50.0 billion. We are also confi dent that our transformation

and growth strategies—the seeds of which we are currently plant-

ing—will yield major positive results by around fi scal 2020, thereby

positioning us for a new stage of growth.

Teijin has embarked upon an era of signifi cant change. To

advance our transformation as an organization committed to creat-

ing value for customers, management and staff will work together

to implement the strategies we have formulated. In these and all

our efforts, we look forward to the continued understanding and

support of shareholders.

July 2014

Jun Suzuki

President and CEO

2 Teijin Limited

3Teijin Limited

Special Feature

Driving Change and Building Value

RestructuringInitiatives

Transformation and

Growth Strategies +We continue to press forward with measures aimed at reducing costs and reorganizing production sites, in line

with an ongoing program of rigorous restructuring initiatives launched in fi scal 2013. While we have made consid-

erable progress, our work is only half done. In the coming years, we will step up forward-looking efforts to com-

prehensively realign our production and R&D confi gurations and to redefi ne our business domains with the aim

of restoring basic profi tability, which is essential to securing sustainable growth, by the end of fi scal 2016 at

the latest.

We will also promote bold transformation and growth strategies, that is, strategies aimed at expanding our

three core business domains—high-performance materials, healthcare and IT—and evolving our business model ness model

and at fostering new, highly profi table businesses that overlap these domains. We expecap these domains. We expect these efforts to yield

major positive results by around fi scal 2020, ve results by around fi scal 2020, thereby positioning us for a new stage of growth.

Existing businesses

Present

Planting

the seeds

Reaping the

benefi ts

Completion

Fiscal 2016 Around fi scal 2020

Outlook for profi tability

Restructuring initiatives

Transformationand growth strategies

Restructuring initiatives and measures to reduce costs

Outcome of transformation

and growth strategies Operating income:

¥50.0 billlion

4 Teijin Limited

RestructuringInitiatives

Shifting our focus to businesses capable of sustainable growth

•Netherlands

Aramid fi bers

Reduction of headcount in aramid fi bers business

•Singapore

Plastics

Partial suspension of operations at production facility

Accelerating Efforts to Restore

Profi tability

Having pursued decisive cost reductions

since fi scal 2012, in fi scal 2013 we began

promoting Groupwide restructuring initia-

tives aimed at reorganizing unprofi table

businesses. To accelerate the improve-

ment of our profi tability, we will step up

efforts to achieve our CHANGE for 2016

cost reduction target of ¥40.0 billion well

ahead of schedule. Looking ahead, we

will implement additional cost-cutting

measures aimed at securing sustainable

growth.

Reorganization of Unprofi table Businesses

Further initiatives are currently under consideration

Bring forward achievement of ¥40.0 billion cost reduction target

Impact of Efforts to Bolster Profi tability

(including measures to reduce costs other than restructuring initiatives)

Discontinuation of operations at paraxylene production facility

Films

Suspension of operations at Ibaraki factory

Billions of yen

•Japan

•United States

Carbon fi bers

Partial suspension of operations at production facility in Tennessee

Home healthcare

Integration/closure of services bases

Fiscal

2012

Fiscal

2013

Fiscal

2014

Fiscal

2016

50

40

30

20

10

0

Restructuring initiatives

Other measures to reduce costs

• Cut back procurement of raw materials(by, among others, switching to materials with lower prices and expanding recycling)

• Improve raw materials and energy costs per unit of production

• Promote Group procurement• Rationalize support department costs by

reorganizing head offi ce

13.5

11.5

11.0

Initial target

5Teijin Limited

Business Domains

High-performance materials

Strengths

• High-performance materials that help make

the items in which they are used smaller,

lighter, stronger and more attractive

• Technologies that facilitate the production

of composites combining multiple materials

Value provided

Reduced consumption of energy and

resources; safety and protection

against disasters;

clean energy

Healthcare

Strengths

• Synergies between our pharmaceuticals

and home healthcare businesses

• Nationwide home healthcare services

network

Value provided

Safety and peace of mind; comfort

enhanced quality of life

for patients

IT

Strengths

• Business development focused equally

on business-to-business and business-

to-consumer services

• Solid customer base

(several million private users)

Value provided

Increasingly sophisticated services;

collection and timely use

of information

Market growth

potential

Profi tability

Competitive

advantages

Barriers to

new market

entrants

Production

scale

Location of

production

Production

confi gurations

Decisively redefi ne business domains Optimize

Rebuilding Our Competitive Advantages

Rebuild our competitive advantages

Philosophy behind efforts to rebuild our competitive advantages

To avoid falling into a spiral of balanced

contraction, we will work to clarify our

key competencies—namely, our technol-

ogies, know-how and networks—and to

redefi ne our core business domains. We

will also take steps to further reinforce

these competencies with the purpose

of building a business model that will

enable us to secure sustainable growth.

To these ends, we will invest decisively

in promising domains that will contribute

to future growth.

6 Teijin Limited

Transformation and

Growth StrategiesExploring promising new business domains

Expansion of business domainsStrengthening downstream businesses

Overlapping Domains

Providing solutions

Recognizing needs

Macrotrends

Society

Market

End users

Evolving Our Business ModelCommitted to creating value for customers by providing the solutions they seek, we are broadening our focus beyond

the production and sales of materials toward a solutions-oriented business model that features high-value-added

offerings, including materials, components and devices.

Fostering New Businesses in Overlapping DomainsTeijin is noted for its distinctive business portfolio, which centers on three core business domains, namely,

high-performance materials, healthcare and IT. In the years ahead, we will work to augment this portfolio by

integrating technologies to foster new, highly profi table businesses that overlap these domains.

High-performance materials + Healthcare

Cultivate medical applications for nanomaterials

processing and biocompatible polymer

technologies

Healthcare + ITDeploy information management systems

across our home healthcare network

High-performance materials + IT

Combine device production technologies for

sensors with communications technologies

High-performance materials

Healthcare

IT

Teijin CustomersPrimary processing manufacturers

Materials production

Processing

Components and devices manufacturing

Components and devices manufacturers

Manufacturers of fi nished products

Customers Customers

7Teijin Limited

Polycarbonate resin glazing

Nissan Motor Company has adopted our polycarbonate

resin glazing for the driver–passenger partition in its NV200

taxicabs, which it currently markets to taxi operators in

New York City, evidence of the high marks given our

glazing, which balances excellent

visibility and an attractive appear-

ance. Following the signing of a

supply contract with Nissan, we

commenced production of poly-

carbonate resin glazing, a key

achievement in our drive to

promote downstream solutions.

Surgical materials • World’s fi rst recombinant fi brin surgical sealant

• Easy to use, bioabsorbable, delivers outstanding hemostatic

performance

Materials for drug delivery systems

• Microneedle array* (Painless percutaneous administration device)

Recopick information management system

• Combines production technologies for two-dimensional

communications sheets and radio frequency identifi cation

(RFID) data communications technologies

• Facilitates gathering of information, including presence and

location, for thousands of communications/items in real time

Smart wearable

Image transmission system for disaster situations, emergency vehicles

• Facilitates immediate transmission of images to convey the

situation on the ground to hospitals

More effective healthcare information; early detection of diseases

High-performance materials + Healthcare

High-performance materials + IT

Healthcare + IT

* Comprises multiple tiny biodegradable polymer needles

Thermoplastic

CFRP

Our new thermoplastic carbon fi ber-

reinforced plastic (CFRP), which is

marketed under the name Sereebo*,

represents an important accomplishment in our drive to expand the

focus of our Advanced Fibers and Composites segment to include

downstream solutions. In addition to a molding time that is approxi-

mately 10 times faster than that of conventional CFRPs, Sereebo

contributes to the reduction of CO2 emissions by automobiles—a key

concern in both the automobile market and society at large—by reduc-

ing vehicle weight, underscoring the outstanding promise of this innova-

tive material. Going forward, we will continue to promote Sereebo’s use

in structural components for automobiles, which we see as a signifi cant

latent market. We are currently promoting multiple projects targeted at

developing specifi c components for automobiles and establishing mass-

production procedures, and are making steady progress on both fronts.

* Sereebo is an acronym for “save the earth, revolutionary and evolutionary carbon.”

8 Teijin Limited

Business Group Review

Q How did segment

businesses perform in

fi scal 2013?

A Sales of mainstay Twaron

para-aramid fi bers picked up,

as sales for automotive applica-

tions rallied and sales for

infrastructure-related applica-

tions were fi rm, although

demand for use in ballistic protection products and protective cloth-

ing remained lackluster. Sales of Technora para-aramid fi bers were

stable for automotive applications in Japan, while the weakening of

the yen enhanced the profi tability of exports.

In carbon fi bers, sales were fi rm for use in aircraft. Among gen-

eral industrial applications, sales expanded encouragingly for use in

pressure vessels, but softened for other applications in the second

half of the period. With sales of polyester fi bers solid for automotive

applications, results at our subsidiary in Thailand, which was dam-

aged by the severe fl ooding in that country in fi scal 2011, continued

to recover.

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

2014 and how will you respond?

A Overall, demand is on the mend, but pricing competition

remains fi erce for certain applications. In fi scal 2014, we will seek

to further strengthen profi tability by stepping up the implementation

of restructuring initiatives and measures intended to reduce costs.

In aramid fi bers, we will work to boost profi tability by shrinking

production and head offi ce fi xed costs. In addition to increasing

sales for automotive and infrastructure-related applications, we will

endeavor to increase sales for use in ballistic protection products

Masaya EndoGeneral Manager, Advanced Fibers and Composites Business Group

0

20142013

111.2

-4.7-4.2%

123.6

5.7

4.6%

Billions of yenYears ended March 31

Sales

Operating Income (Loss)

Operating Margin

Advanced Fibers and Composites Business Group

9Teijin Limited

and protective clothing in emerging economies, as well as to build

an effective supply chain. Efforts to enhance profi tability in the

carbon fi bers business will emphasize raising the effi ciency of our

two-pronged production confi guration, which encompasses facili-

ties in Japan and Europe. We will also take steps to augment sales

for highly profi table applications, such as aircraft, and for use in

pressure vessels, an area in which barriers to new market entrants

are signifi cant.

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

A With demand expected to continue growing, particularly for

automotive and infrastructure-related applications, we continue to

position para-aramid fi bers as a promising growth business. Our

strategic focus in this area will remain on expanding the scope of

our operations and bolstering our competitiveness. These are chal-

lenges we will address by building on our competitive advantages—

which include the leading share of the global market and the ability

to offer diverse solutions—to reinforce our presence in emerging

economies and advance joint development with customers with

the aim of cultivating new applications. We will also proceed with

the construction of a new facility in Thailand that will produce a

newly developed type of meta-aramid fi ber that combines superior

heat resistance with excellent dyeability, the latter traditionally an

issue with aramid fi bers, thereby enabling us to expand sales

throughout Asia.

Competition in the carbon fi bers and composites business is

likely to intensify further, owing to a shift toward in-house produc-

tion by prepreg manufacturers, as well as to the presence of new

market entrants and aggressive marketing efforts by large-tow

manufacturers. Nonetheless, demand is expected to grow for

use in aircraft and for general industrial applications. We also

anticipate increased demand for use in automotive materials,

a consequence of tighter environmental regulations, in response

to which we will press forward steadily with efforts to hasten the

commercialization of thermoplastic CFRP for mass-produced

automotive applications.

Principal Products

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

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)

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

10 Teijin Limited

Q How did segment businesses

perform in fi scal 2013?

A Both polycarbonate resin and

polyester fi lm struggled, as heightened

pricing competition drove down sales

prices. In this environment, we took

steps to create an effi cient production

confi guration and reduce costs. In our polycarbonate resin busi-

ness, we suspended production on certain lines at our plant in

Singapore, while in our fi lms business we terminated production

at our domestic joint venture’s Ibaraki factory.



A Given that the adverse supply–demand balance for polycarbon-

ate resin is expected to continue, harsh operating conditions in

this business are likely to persist. In response, we will endeavor

to bolster profi tability by suspending production on an additional

line at our Singapore plant. We are also looking to broaden our

high-performance compounds and processed products businesses,

as well as to expand applications in such areas as automobiles,

housing and infrastructure development, and have established new

sales bases with the goal of cultivating customers in inland areas in

the PRC and the ASEAN region.

We also expect operating conditions in our polyester fi lms busi-

ness to remain challenging, owing mainly to sluggishness in the

market for liquid crystal display (LCD) televisions. In addition to

developing low-priced fi lms for use in LCD televisions, we will

work to further expand sales of release fi lms for manufacturing

processes, which are currently fi rm, particularly for use in the pro-

duction of smartphones and tablet computers. We will also further

integrate and enhance the effi ciency of domestic production facili-

ties, as well as increase capacity and promote the production of

high-value-added items at facilities in Asia.

Yoshio FukudaGeneral Manager, Electronics Materials and Performance Polymer Products Business Group

20142013

-1.1%-4.0%

0

175.5 179.4

(1.9) (7.2)


Sales

Operating Loss

Operating Margin

Electronics Materials and Performance Polymer Products Business Group

11Teijin Limited


A We will continue to direct our attention to achieving a dramatic

increase in profi tability by improving our ability to provide attractive

solutions. We will also accelerate the integration of sales capabilities,

technologies and personnel.

In the resin and plastics processing business, we will broaden

our lineup of compounds that feature other types of resin or com-

bine resin with our high-performance fi bers. As part of this effort,

we will proceed with preparations for the start of operations at a

new polyphenylene sulfi de (PPS) joint venture, which is scheduled

for fi scal 2015. In processed products, our emphasis will be on bol-

stering sales of fi lms that capitalize on the properties of polycarbonate

resin for use in smartphones and tablet computers, as well as on

expanding our lineup of materials that offer both outstanding perfor-

mance and superb decorative potential, including plastic glazing for

automotive applications.

In polyester fi lm, we will promote bold measures aimed at realiz-

ing cost-effective operations and optimizing our product mix in

promising Asian markets. With the goal of providing solutions in

such wide-ranging areas as fl exible displays, next-generation batter-

ies and energy, and automobiles, we will push ahead with the

development of distinctive new fi lms made with materials other than

polyester and will fortify and widen the scope of new processing

technologies.

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 instru-

ment components, automotive components (headlamps, door

handles, bumpers)

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

Applications Sheet Mobile phone front panels, flat panel LCD televisions (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, fire extinguishers

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,

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 semiconduc-

tor materials, medical materials, photocatalysts, moisturizing

facial masks

12 Teijin Limited

Q How did segment

businesses perform in

fi scal 2013?

A Operating conditions for our

domestic pharmaceuticals busi-

ness remained harsh, owing to

the launch of rival products and

rising sales of generic drugs, but

sales of hyperuricemia and gout

treatment febuxostat expanded favorably. In the home healthcare

business, rental volume for therapeutic oxygen concentrators

remained fi rm, while that for CPAP ventilators for the treatment

of sleep apnea syndrome (SAS) rose steadily. Adverse conditions

also persisted in the United States, a situation we responded to by

integrating and closing sales bases and by reducing headcount.



A Our principal challenges in fi scal 2014 will be to ensure sustain-

able growth and improve profi tability. We will address these chal-

lenges by reinforcing marketing efforts and reducing costs, as well

Overview

Pharmaceuticals: Teijin specializes in three key therapeutic

areas, namely, bone and joint disease, respiratory disease

and cardiovascular and metabolic disease, and in Japan

commands a major 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

positioned febuxostat—a promising treatment for hyperurice-

mia and gout developed in-house—as a strategic product

with global currency and is pushing ahead with efforts to

expand marketing worldwide.

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) ventilators. Overseas, Teijin provides home

healthcare services in the United States, Spain and the

Republic of Korea (ROK). Globally, approximately 430,000

individuals use Teijin’s home healthcare services.

Pharmaceuticals Development Pipeline

Area Code No. Target Disease Phase of Clinical Trials Approved/

New LaunchPhase I Phase II Phase III Filed

Bone and joint disease

KTP-001* Lumbar disc hernia

ITM-058 Osteoporosis

Respiratorydisease

NA872ET Expectorant FFeb 2014

PTR-36 Bronchial asthma JJune 20133

Cardiovascular and metabolic disease

TMG-123 Type 2 diabetes

ITM-014N Neuroendocrine tumors OOct 2013

TMX-67TLS Tumor lysis syndrome OOct 2013

TMX-67(PRC) Hyperuricemia and gout

Other

GGS-MPA Microscopic polyangiitis NNov 2013

GGS-ON Optic neuritis

GGS-CIDP Chronic infl ammatory demyelinating polyneuropathy DDec 2013

24.8 24.5

138.3 138.4

17.9% 17.7%

0 20142013


Sales

Operating Income

Operating Margin

Hiroshi UnoGeneral Manager,Healthcare Business Group

Healthcare Business Group

As of May 31, 2014

* KTP-001 was discovered and is under development by Teijin Pharma Limited and Kaketsuken (The Chemo-Sero-Therapeutic Research Institute), a general incorporated foundation, based

on an enzyme engineered by Professor Hirotaka Haro of the University of Yamanashi’s Graduate School of Medicine and Engineering Advanced Medical Science and Dr. Hiromichi Komori,

assistant head of the Department of Orthopaedic Surgery at Yokohama City Minato Red Cross Hospital.

13Teijin Limited

as by fortifying our drug discovery capabilities and hastening clinical

development efforts.

In pharmaceuticals, we will focus on further bolstering domestic

sales of febuxostat as well as on broadening the overseas availability

of the drug beyond North America and Europe, where it continues

to enjoy solid growth. In home healthcare, our emphasis will be on

increasing rentals of our CPAP ventilators by capitalizing on our

new monitoring system, expanding our call center services and

stepping up marketing efforts. Overseas, we will seek to boost prof-

itability and rebuild the operating foundation of our U.S. operations.


A Maintaining our focus on our three key therapeutic areas of

bone and joint disease, respiratory disease and cardiovascular and

metabolic disease, we will continue working to develop new prod-

ucts and services in our pharmaceuticals and home healthcare

businesses, as well as to provide distinctive healthcare solutions

that maximize synergies between the two.

In pharmaceuticals, marketing efforts for febuxostat currently

target the developed world, but in the years ahead we will concen-

trate on augmenting sales in the PRC and other emerging econo-

mies. At the same time, we will actively seek to enlarge our product

portfolio by promoting the in-house development and licensing-in

of promising drug candidates and by ensuring effective life cycle

management. Additionally, we will step up efforts aimed at strength-

ening our pharmaceuticals lineup by collaborating actively with

other fi rms. These include commencing joint R&D with Amgen Inc.

of the United States in the area of novel treatments for autoimmune

disorders.

The focus of initiatives in our home healthcare business will be

on ensuring sustainable growth by advancing the use of CPAP ven-

tilators in the treatment of a wider range of diseases, as well as by

introducing new models—one example being our new portable

oxygen concentrator—and maximizing our expanded call center

capabilities to strengthen our competitive edge. Additionally, we

will strive to diversify into new areas, with a particular emphasis

on devices used in physical rehabilitation.

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

Station, NJ, U.S.A.

† Somatuline® is a registered trademark of Ipsen Pharma S.A.S., Paris, France.

Principal Products

Bone and joint disease

Pharmaceuticals

Bonalon®* Treatment for osteoporosis

Onealfa® Treatment for osteoporosis

Synvisc® 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

Somatuline ®† Treatment for acromegaly

Other

Venilon ® Treatment for severe infectious diseases

Laxoberon ® Laxative

Bonalfa ® Treatment for psoriasis

14 Teijin Limited

Q How did segment businesses perform in fi scal 2013?

A Results in our fi ber materials and apparel business benefi ted

from robust exports of textiles for use in fashion apparel and sports-

wear to Europe and North America. In textiles and apparel, sales in

our mainstay OEM business rose, although yen depreciation and

higher production costs overseas combined to squeeze profi tability

in all product categories. In industrial textiles and materials, sales of

Overview

In October 2012, we integrated trading subsidiary N.I. Teijin

Shoji Co., Ltd., with the polyester fi bers for apparel business of

subsidiary Teijin Fibers Limited to form a new company, Teijin

Frontier Co., Ltd., a hybrid “global converter” that combines the

functions of a trading company and a manufacturer.

Today, the Trading and Retail Business Group boasts

extensive apparel-related capabilities, which include materials

development and procurement, dyeing, sewing and other pro-

cesses, as well as a global production and sales network, a

business model that

enables it to provide com-

prehensive solutions that

encompass everything from

materials development

through to commercializa-

tion, thereby positioning

it to expand its presence

worldwide.

N.I. Teijin Shoji Co., Ltd.A specialized textiles

trading company

Teijin Fibers LimitedA leading textiles

manufacturer

Manufacturing

capabilities

Trading

capabilities

Teijin Frontier Co., Ltd.

materials and components

increased sharply worldwide for

automotive, civil engineering

and construction-related

applications.



A Our biggest challenge in fi scal 2014 will be to further leverage

our comprehensive capabilities as a global converter with a busi-

ness portfolio that extends from raw materials through to produc-

tion and distribution of fi nished products. To this end, we have

outlined three basic strategies that will guide decisive efforts to

promote both our retail and trading businesses. The fi rst strategy

is to step up efforts to identify and respond to customer prefer-

ences and reinforce our ability to provide innovative solutions.

Second, we will push ahead with the strategic expansion of our

global operations by strengthening our production capabilities.

Third, we will incorporate greater concern for the environment

and safety into the establishment of new businesses.


A Our principal medium- to long-term strategy is to achieve sus-

tainable growth by responding effectively to the increasingly diverse

needs of customers and the progress of economic globalization.

Accordingly, our strategies will emphasize evolving our solutions-

oriented business capabilities by maximizing overall synergies. We

will also take decisive steps to fortify our converting capabilities,

expand our overseas businesses and diversify into new businesses.

Tetsushi TakenakaGeneral Manager,Trading and Retail Business Group

0

4.7 5.2

237.2254.2

2.0% 2.0%

20142013


Sales

Operating Income

Operating Margin

Trading and Retail Business Group

15Teijin Limited

Q How did segment businesses perform in fi scal 2013?

A In IT services, sales generated by healthcare-related services

rose, while ongoing efforts to strengthen quality control, the transfer

of unprofi table businesses and other factors supported an increase

in profi tability. In net services, results were fi rm for smartphone-based

services, including the distribution of e-books. As a consequence,

Norihiro TakeharaGeneral Manager,IT Business Group

Overview

Spearheaded by Infocom Corporation, Teijin’s IT business

comprises net services for consumers, encompassing Internet-,

smartphone- and mobile phone-based services, and IT services,

provided to corporate, healthcare-related and public sector

customers. In line with Infocom’s medium-term business plan,

which emphasizes efforts on three fronts under the banner

“united innovation,” we will work to enhance our presence

as a provider of cutting-edge solutions.

Net services IT services

Services for consumers Services for corporate, healthcare-related and public sector customers

toB Business usiness

toB Cusiness onsumer

we achieved record-level seg-

ment sales and operating income

for the third consecutive year.



A Given signs of recovery in corporate investment and the

increasing prevalence of smartphones, tablet computers and other

sophisticated information terminals, and advances in cloud-based

and other services, user requirements are expected to grow

increasingly diverse, while the scope of application for our IT

services is set to expand. In this environment, we will focus on

reinforcing core businesses, notably healthcare-related solutions

and GRANDIT®, a web-based enterprise resource planning (ERP)

software package, by making vital advance investments. In net

services, we will work to bolster results by strengthening our

distribution services for e-books.


A We will continue to uphold the concept of “united innovation”

by implementing measures in line with the three central strategies of

our medium-term business plan, which are to develop and market

value-added services in a timely manner, expand the scale of core

businesses and establish business processes that refl ect customer

perspectives and service quality concerns, thereby enhancing our

presence as a provider of cutting-edge services.

Efforts to expand the scale of core businesses will continue to

center on the focused allocation of management resources to net

services, healthcare-related solutions and GRANDIT®. Through

related initiatives, we will work to increase the percentage of net

sales accounted for by these businesses to 73%, from 58% at

present, over the next three years.

United Innovation

Foster innovation that enables us to respond quickly to changes in the operating environment.

Promote innovation that bolsters the scale and diversifi es the nature of core businesses.

Drive innovation that reinforces our operating foundation.

0

3.5 3.7

37.4 39.1

9.4% 9.4%

20142013


Sales

Operating Income

Operating Margin

Note: Graph is based on consolidated operating results reported by Infocom.

IT Business Group

16 Teijin Limited

Q What was the purpose of recent organizational

changes?

A Guided by our current medium- to long-term management

vision, CHANGE for 2016, which began in 2012, the Teijin Group is

working to drive growth and evolve its business model. In line with

the Group’s transformation and growth strategies, and to revamp

the Group’s fundamental portfolios, there is a greater need now

than ever before to rally the capabilities of the Group to facilitate the

creation of new businesses. The recent realignment of the Group’s

R&D and new business development structure was meant principally

to facilitate this.

In April 2014, the business development side of the former New

Business Development Group was reorganized and renamed the

New Business Development Business Unit, while the group’s

research function became part of the Technology Center. This

realignment has positioned us to focus on swiftly commercializing

the achievements of core projects.

Overview

To accelerate the realization of new businesses, in April 2014

the New Business Development Group was reorganized and

renamed the New Business Development Business Unit. The

unit currently focuses on the prompt commercialization of

achievements in such areas as battery components, water

treatment, bioplastics, materials for printable electronics

and healthcare.



A In the area of battery components, we will continue to develop

and launch new lithium-ion battery (LiB) separators—full-scale

production and sales of which are well under way—with the aim of

further expanding this business. In water treatment, efforts will center

on systems for small and medium-sized wastewater treatment

plants in Asian markets, particularly the PRC and Japan, with the

goal of providing comprehensive water treatment solutions. In

bioplastics, we will continue to focus on leveraging proprietary tech-

nologies to enhance performance. We will also work to expand

applications in the environment/energy and advanced materials

fi elds to include, among others, oil and gas extraction and medical

materials. In electronics materials, U.S. subsidiary NanoGram Cor-

poration will step up R&D in the area of nanosilicon inks and pastes,

enabling us to promptly commercialize our fi rst materials for print-

able electronics. In healthcare, we will continue promoting the

integration of materials technologies and healthcare technologies

with the goal of cultivating new businesses, including materials for

regenerative medicine, tissue repair, drug delivery systems and

medical devices.

New Business Development Business Unit

Kentaro AraoGeneral Manager, New Business Development Business Unit

Core Projects in Key Areas

Electronics materials LiB separators

Materials for printable electronics

Environment /energy Comprehensive wastewater treatment solutions

Highly heat-resistant bioplastics

Healthcare Materials for regenerative medicine

Materials for tissue repair

Materials for drug delivery systems

Materials for medical devices

17Teijin Limited

Recognizing technological innovation as vital to ensuring

sustainable growth, we continue to place a high priority on

R&D. Guided by the Chief Science and Technology Offi cer,

more than 1,600 researchers at eight major R&D sites in Japan

and eight overseas continue to undertake ambitious R&D and

contribute to the evolution of our unique solutions-oriented

business model.

For strategic purposes, we group highly promising markets

into fi ve key fi elds—sustainable transportation; information

and electronics; safety and protection; environment/energy;

and healthcare—in which we concentrate R&D resources with

the aim of providing innovative solutions.

Research and Development

In existing businesses, our focus is on improving competi-

tiveness. Having expanded our product pipeline, reviewed our

technology roadmap and taken steps to optimize our produc-

tion confi gurations, we are now promoting investments

designed to improve the effi ciency of our R&D efforts, among

others. We are also pressing forward with the development of

components and devices that integrate our outstanding propri-

etary materials with advanced processing technologies and

with collaboration with customers in the development of new

products. In addition, we continue to encourage open innova-

tion through partnerships involving industry, government and

academia, as well as to reassess and strengthen processes

and systems that support R&D, including our intellectual prop-

erty strategies and materials analysis practices. We also work

to foster the abilities of R&D personnel.

In April 2014, we integrated the functions of the Chief

Science and Technology Offi cer with the Engineering Division,

the Raw Materials and Polymers Technology Development

Division and the research function of the former New Business

Development Group to create the Technology Center, a move

designed to reinforce overall R&D. We also established the

New Business Development Business Unit, which is charged

with promoting individual projects and accelerating commer-

cialization.

Achievements in Fiscal 2013

R&D highlights in our materials businesses included the develop-

ment in July 2013 of a new hydrolysis-resisting agent for use in

cyclic carbodiimide compounds. The cyclic structure of these

compounds prevents the generation of isocyanate gas when

We are implementing a number of organizational reforms aimed

at reinforcing our R&D capabilities and facilitating the early commercialization

of promising new products.

18 Teijin Limited 18 Teijin Limited

the compounds react with resin, thus making it safe to use them

in any manufacturing environment. In November 2013, we unveiled

a novel polyvinyl butyral (PVB) prepreg made with para-aramid

fi bers and a special PVB resin, as well as Twaron UD22, a unidi-

rectional laminate for use in ballistic protection products. Two

months earlier, in September, we announced the development of

Fireguard FCX-210, a new phosphorous fl ame retardant, which

uses our proprietary molecular design technology, thereby offering

an attractive solution to increasing customer needs for halogen-

free fl ame retardants. Unlike conventional phosphorous fl ame

retardants, Fireguard FCX-210 does not hamper the natural heat

resistance of resins when added, facilitating use with a broader

range of resins.

In healthcare, we commenced clinical trials in Japan for

ADC3680 (development code: PTR-36)—a treatment for bronchial

asthma licensed in from U.K. fi rm Pulmagen Therapeutics (Asthma)

Limited—in June 2013. The same month, we concluded a drug

discovery contract and an R&D and marketing option agreement

with Amgen Inc. of the United States for novel treatments for

autoimmune disorders under which we will collaborate with Amgen

in research aimed at discovering truly groundbreaking new drugs.

On another front, in April 2013 we launched the WalkAide System,

a neuromuscular electrical stimulation device for the treatment of

gait impairment resulting from stroke and other causes.

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 we have traditionally emphasized the supply of upstream

materials, limiting our understanding of the needs of end users.

As a result, despite having superior production and processing

technologies, our ability to provide effective solutions and uncover

latent market needs has been restricted. Under CHANGE for 2016,

we are shifting our emphasis 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.

Strategic Actions

In fi scal 2013, we continued to take decisive steps to accelerate

the transformation of our technology portfolio. In April 2013, we

opened Technical Center Asia, an R&D facility in Shanghai that is

Reorganization of Teijin’s R&D Structure

With the aim of accelerating R&D initiatives that hasten efforts to ensure an R&D structure capable of yielding profi table

products and services over the medium to long term, in April 2014 we integrated our existing R&D group with the Engineer-

ing Division and the research function of the former New Business Development Group to create the Technology Center.

Looking ahead, we will take steps to further unify our materials-related R&D while focusing the Technology Center’s efforts

on developing technologies and systems to facilitate the production and commercialization of composites and downstream

products, maintaining and enhancing basic technologies, and advancing facility technologies. These organizational changes

will position us better to realize two essential objectives, which are to shift from a materials- to a solutions-oriented business

model and to cultivate new businesses that integrate materials and healthcare and in some cases also incorporate IT.Yo Goto, General Manager,

Technology Center

19Teijin Limited

charged with developing applications and providing technical ser-

vices to customers in the PRC and elsewhere in Asia. Designed as

an open facility, Technical Center Asia will seek to create new solu-

tions that accommodate the needs of Teijin customers throughout

the region.

In our polyester fi bers business, we proceeded with preparations

for the April 2014 establishment of Teijin Product Development

China Co., Ltd., in Nantong, Jiangsu Province. This facility conducts

R&D in all aspects of polyester fi bers, from yarn through to fi nished

products, and in the area of production capabilities, enabling us

to respond swiftly to local demand for the integration of R&D and

production in one location.

In May 2013, we relocated the Teijin Composites Innovation

Center, the hub of R&D in the area of thermoplastic CFRP, from

Shizuoka Prefecture to our Matsuyama Plant, which is in Ehime

Prefecture and also houses a thermoplastic CFRP pilot plant,

thereby creating a confi guration that allows us to centralize

all CFRP-related development, from molding technologies to

composite materials and engineering and bonding technologies.

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, which

provides an opportunity for the exchange of information and opinions

with leading researchers invited from top domestic university and

public sector research institutions, and the Teijin Technology Advi-

sory 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 as a Teijin Group Distinguished Fellow, a capacity

that enables him to extend invaluable guidance to our researchers.

Overseas Patent Applications as a Percentage of Total Applications

Advanced Fibers and Composites 115


128

Healthcare 20

New Business Development and Others 84

Total 347

Intellectual Property

The Intellectual Property Division works with management to

address challenges pertaining to intellectual property and forges

intellectual property strategies in close alliance with business and

technological strategies. Of particular note, the division takes

steps to strengthen our intellectual property portfolio as necessary

to facilitate the restructuring of our business and technology port-

folios. In light of the further globalization of our operations that will

result from the restructuring of our geographic portfolio, the divi-

sion is working to increase overseas patent applications as a per-

cent of total applications, as well as to expand the scope of our

intellectual property management capabilities beyond patents

and trademarks to encompass the protection of knowledge and

trade secrets.

Patent Applications in Japan

in Fiscal 2013

33%24%

6%%%%

New BusinessDevelopmentand Others

Healthcare


37%

Electronics Materials andPerformance

Polymer Products

10

20

30

0 2011 20142012 2013

% Years ended March 31

20 Teijin Limited

New Business Development Business Unit

IT Business Group

Trading and Retail Business Group

Healthcare Business Group

Electronics Materials andPerformance Polymer Products Business Group

Advanced Fibers and Composites Business Group

Majority of members are external

Corporate Governance System

Ten members(of whom four are external)

Five members(of whom three are external)

Advisory Board

Shareholders’Meeting

Board of Directors

Board of Corporate Auditors

CEOTRM Committee

Nomination and Remuneration

Group Corporate Auditors’ Committee

Group Management Committee

Heads of Business Groupsand Chief Officers

Group Strategy CommitteeChief Officers

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,

accelerating decision making and increasing accountability.

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, the number of directors on Teijin’s Board of Directors is set at a maximum of 10. We also have a corporate offi cer system and delegate considerable authority and responsibility to those offi -cers. To ensure the appropriate separation of responsibility for front-line management and monitoring/supervising, the Board of Directors is directly responsible to the chairman, or, in the absence of a chair-man, the senior advisor or an independent outside director. 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 posi-tion to advise on management-related issues, thereby helping to increase the transparency and accountability of the Board.

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.

The Teijin Group’s Corporate

Governance System

As of July 2014

Corporate Governance

Audit System and Board of Corporate Auditors

Teijin’s Board of Corporate Auditors comprises fi ve members, three of whom are independent outside corporate auditors, thereby ensuring transparency 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 Group Strategy Committee and the Group Management Committee, but also coor-dinate meetings of the Group Corporate Auditors’ Committee and may, in addition, serve concurrently as outside corporate auditors for core Group companies.

Board of DirectorsBoard of Corporate

Auditors Advisory Board

Total number of individuals 10 5 8Number of independent outside individuals 4 3 6Percentage 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 2014

21Teijin Limited

One focus of the management reforms we initiated in 1999 was the creation of a fi rst-class cor-porate 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, previously chairman of ICI and of the Hampel Committee, which established certain key principles of corporate governance in the United Kingdom. Both of 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 corpo-rate governance system and our corporate value.

Shigeo OhyagiChairman, Teijin Limited

(Board chairman)

John W. HimesFormer Senior Vice-President,

DuPont

Lord Leon BrittanVice-Chairman of UBS

Investment Bank

Hajime SawabeExecutive Advisor,

TDK Corporation

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 from three to four

Advisory Board

The Advisory Board is a consultative body that is tasked with advising on all aspects of management and evaluating the per-formance of top executives. The Board, which has two ordinary meetings each year, comprises between fi ve and seven leading experts from outside the Company—two or three of whom are not Japanese—as well as Teijin’s chairman, or in the absence of a chairman, the senior advisor, and its president, who also serves as CEO. The Advisory Board additionally functions as a nomination and remuneration committee and is charged with deliberating the replacement of the CEO and putting forward successors, proposing candidates for chairman, reviewing systems and standards govern-ing remuneration for directors and evaluating the performance of the CEO and representative directors. Compensation for directors is based on consolidated ROA*, with consideration also given to consolidated ROE and operating income—specifi cally to whether targets have been met and/or improvements seen—as well as to a qualitative assessment of each individual director’s execution of his or her duties.

* Calculated using operating income

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 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 awareness 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.

Yutaka IimuraSpecial Envoy of the Government

of Japan (Middle East, Europe)

Nobuo SekiFormer President/Chairman,

Chiyoda Corporation

Kenichiro SenohPresident and Chairperson, The

Industry-Academia Collaboration

Initiative Nonprofi t Organization

Jun SuzukiPresident and CEO, Teijin Limited

Advisory BoardAs of July 2014

Advisory Board Meeting Agenda

May 13, 2013 (Tokyo)

• Report on operating results for fi scal 2012

• Presentation on business plan for fi scal 2013

• Deliberation of succession plan

• Evaluation of CEO’s performance in fi scal 2012 and discussion

to determine amount of bonus

• Deliberation of CEO’s targets for fi scal 2013

December 4, 2013 (Tokyo)

• Report on operating results for the fi rst half of fi scal 2013

• Presentation on outlook for the second half of fi scal 2013

• Deliberation of succession plan

Overview

Members

22 Teijin Limited

Management Team

Board of Directors, Corporate Auditors, Advisory Board, Chief Offi cers and Business Group General ManagersAs of July 2014

Board of Directors

Chairman,

Member of the Board

Shigeo Ohyagi

President and CEO,

Representative Director

of the Board

Jun Suzuki

Senior Executive Officer,

Representative Director

of the Board

Osamu Nishikawa

Senior Executive Officer,

Member of the Board

Yoshio Fukuda

Corporate Officer,

Member of the Board

Yoshihisa Sonobe

Independent Outside Director

Hajime Sawabe


Yutaka Iimura


Kenichiro Senoh


Nobuo Seki

Executive Officer,

Member of the Board

Yo Goto

Corporate Auditors Full-Time Atsuo Amano Full-Time Toshiaki Yatabe

Independent Outside Toshiharu Moriya Independent Outside Noriko HayashiIndependent Outside Nobuo Tanaka

Advisory Board Shigeo Ohyagi (Board chairman)John W. HimesLord Leon BrittanHajime SawabeYutaka IimuraNobuo SekiKenichiro SenohJun Suzuki

Business Group General Managers

Advanced Fibers and Composites Masaya EndoElectronics Materials and

Performance Polymer Products Yoshio Fukuda

Healthcare Hiroshi UnoTrading and Retail Tetsushi Takenaka

IT Norihiro Takehara New Business Development Business Unit Kentaro Arao

Chief Offi cers Corporate Strategy Offi cer Yoshihisa SonobeGeneral Manager, Technology Center Yo Goto

Chief Marketing Offi cer Kentaro Arao Chief Social Responsibility Offi cer Osamu Nishikawa

Chief Financial Offi cer,

General Manager—Accounting,

Finance & Procurement Division Kazuhiro Yamamoto

Chief Human Resources Offi cer Yasuhiro 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

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); product liability;

and efforts to contribute to society. We have also developed spe-

cifi c policies, targets and strategies and continue to promote a wide

range of related activities. Fiscal 2011 was our fi rst year as a mem-

ber of the United Nations Global Compact. By joining this program,

we committed 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 categorize 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.

Our CSR management system centers on the Group CSR

Committee, which considers proposals and drives the implementa-

tion of CSR initiatives for the entire Teijin Group. The Committee

oversees six supporting entities, comprising fi ve subcommittees

and one conference. Four of these supporting entities—the Group

ESH Subcommittee, the Group Compliance and Risk Management

Subcommittee, the Group Product Liability and Quality Assurance

Subcommittee and the Group Secure Export Control Conference—

are collectively in charge of CSR initiatives that focus on basic

issues, which the Group views as particularly important. CSR

initiatives pertaining to advanced and selective issues are the

responsibility of the Group CSR Promotion Subcommittee.

Corporate Social Responsibility

SOCIALLY RESPONSIBLE INVESTMENT

As of July 2014, the Teijin Group is included in the Dow Jones Sustainability Indices (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).

Environmental Initiatives

Teijin’s Sustainable Environment Declaration

Having long recognized environmental issues as a crucial manage-

ment 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 Declaration, 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 Management Pro-

motion Subcommittee as one element of our Group CSR Commit-

tee, making it possible for us to ensure environmental strategies

are consistent with the Group’s strategies for growth.

1

2

3

4

Million tons Years ended March 31

0 1991 2006 2007 2008 2010 20112009

Overseas

Japan

2012 2013 2014

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 levelTeijin’s CSR Framework

Principal Environmental Targets of the Teijin Group for Fiscal 2020

24 Teijin Limited

50

100

150

200

0

Number of individuals Years ended / ending March 31

2

4

6

8

%

0

7%

160

85 8879

71

20

Percentage of managerial positions occupied by female employees

Female employees in managerial positions

2003 2011 2012 2013 2014 2017(Target)

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 medium- to long-term

management vision, CHANGE for 2016, we identifi ed the transfor-

mation of our human resources portfolio as a crucial component

of our strategy for reinforcing our management foundation and

achieving growth. Accordingly, we have stepped up efforts to

promote diversity in hiring and in maximizing capabilities, enhance

the early-career cultivation of human resources and ensure effec-

tive 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 hiring of female candi-

dates (consistently 30% or more of

new graduates recruited by the fi ve

main domestic Teijin Group compa-

nies) by, among others, expanding our

in-house recruiting system and expe-

diting the promotion of female employees to managerial positions.

These efforts have earned considerable acclaim. In March 2014, we

were named to the fi scal 2013 Diversity Management Selection 100,

a list of companies recognized for excellence in promoting diversity

by Japan’s Ministry of Economy, Trade and Industry (METI). To

enhance the early-career cultivation of human resources, we are

taking swift steps to identify and foster individuals with the poten-

tial 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

worldwide human resources database and promoting cross-border

assignments. In fi scal 2011, we introduced EaGLES, a global lead-

ership excellence training program that is offered in four languages

and fi ve regions.

Accelerating the Promotion of Female Employees to Managerial Positions

Human Resources

Note: Graph is based on data for the fi ve main domestic Teijin Group companies.

Social Responsibility

Creating Bonds of Trust

Recognizing that it has a responsibility as a corporate citizen to

contribute to the communities in which it operates, and to the wider

global community, the Teijin Group actively participates and pro-

vides support for a variety of academic, educational, cultural, sports

and other activities, as well as for programs aimed at protecting the

environment and minimizing the impact of disasters. Teijin has also

established an employee volunteer scheme that includes days off

for volunteer activities and extended leave designed to enable

employees to become, for example, registered bone marrow

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

Volunteer Support Program, which assists employees’ efforts to

contribute to society and encourages employee participation in

volunteer activities. Expenses for volunteer activities are covered

in part by donations from concerned employees and directors.

We continue to promote

a variety of initiatives in areas

devastated by the Great East

Japan Earthquake, which

struck in March 2011. In

2013, subsidiary Infocom,

which spearheads our IT

Business Group, built Iwan-

uma Minna no Ie (“House for

Everyone”), a multipurpose

facility for residents of Iwan-

uma, Miyagi Prefecture. In

addition, we extended support to a junior soccer camp in Iwanuma,

inviting coaching staff from FC Schalke 04, the German Bundesliga

club where Japan national team member Atsuto Uchida currently

plays, to provide instruction. We also continued to participate in

TABLE FOR TWO, an initia-

tive that helps provide school

lunches for children in the

developing world, as well as

in the Book Dream Project,

which uses proceeds from

the sale of old books donated

by Teijin employees and other

endeavors to buy picture

books for libraries in Indone-

sia and Thailand. TABLE FOR TWO school lunches (Kenya)

Ceremony celebrating the completion of

Iwanuma Minna no Ie

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 34

Outlook for Fiscal 2014 34

Risk Factors 35

Consolidated Financial Statements 36

Consolidated Balance Sheets 36

Consolidated Statements of Operations 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 Auditor’s Report 78

26 Teijin Limited

815.7854.4

48.6

34.0

908.4938.1

1,009.61,036.6

943.4

765.8

13.418.0

75.1

65.2

76.8

51.9

5.7%

8.2%

7.4%

6.3%

1.9%1.8%

6.0%

4.0%

745.7

12.4

1.7%

784.4

18.1

2.3%

0

200

400

600

800

1,000

1,200

0

20

40

60

80

100

120

0

2

4

6

8

10

12

2005 2006 2007 2008 2009 2010 2011 2012 20142013

Billions of yen

Net Sales

Years 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 ¥102.92 to U.S.$1.00, the prevailing exchange rate at March 31, 2014.

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 2005 2006 2007 2008

Operating Results Net sales ¥908,389 ¥938,082 ¥1,009,586 ¥1,036,624

Operating income 51,865 76,757 75,061 65,162

Net income (loss) 9,159 24,853 34,125 12,613

Financial Position Total assets ¥852,029 ¥943,991 ¥ 999,917 ¥1,015,991

Interest-bearing debt 277,032 298,298 295,480 325,245

Shareholders’ equity 290,586 338,609 366,753 391,010

Cash Flows Cash fl ows from operating activities ¥ 73,313 ¥ 75,491 ¥ 96,456 ¥ 53,740

Cash fl ows from investing activities 12,708 (74,062) (87,065) (79,218)

Free cash fl ow 86,021 1,429 9,391 (25,478)

Cash fl ows from fi nancing activities (79,643) 1,511 (19,074) 16,080

Per Share Data Net income (loss) ¥ 9.7 ¥0 26.6 ¥ 36.8 ¥ 13.2

Shareholders’ equity 313.3 364.8 395.2 397.3

Cash dividends 6.5 7.5 10.0 8.0

Other Data Capital expenditure ¥ 54,135 ¥ 66,777 ¥ 75,698 ¥ 84,641

Depreciation and amortization 52,287 50,389 54,009 62,668

R&D expenses 30,024 31,196 35,097 36,282

Number of employees 18,960 18,819 19,053 19,125

27Teijin Limited

(35.7)

25.2

-12.4%

9.1%

12.04.2%

(29.1)

-10.3%

8.4

3.0%

320.3267.4

1.6%

6.1%

1.18 times

0.94 times

823.1

761.5

261.0

4.5%

0.89 times

762.1

270.8

1.6%

281.5

2.4%

1.00 times 1.00 times

762.4 768.4

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

2010 2011 2012 20142013 2010 2011 2012 20142013

Years ended March 31 As of March 31

Billions of yenNet Income (Loss)

%

ROETimesBillions of yen %

Total Assets Interest-Bearing DebtROADebt-to-Equity

Ratio

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

2009 2010 2011 2012 2013 2014 2014/2013 2014

¥943,410 ¥765,840 ¥815,656 ¥854,371 ¥745,713 ¥784,425 +5.2% $7,621,697

17,966 13,436 48,560 34,044 12,358 18,078 +46.3% 175,651

(42,963) (35,684) 25,182 11,979 (29,131) 8,356 − 81,189

¥874,157 ¥823,071 ¥761,535 ¥762,118 ¥762,399 ¥768,411 +0.8% $7,466,100

361,342 320,285 267,400 261,034 270,765 281,524 +4.0% 2,735,367

305,577 271,306 284,236 292,030 271,252 281,680 +3.8% 2,736,883

¥ 40,392 ¥ 80,433 ¥ 77,132 ¥ 53,669 ¥ 64,305 ¥ 38,587 $ 374,922

(116,304) (33,437) (27,745) (35,165) (37,868) (47,279) (459,376)

(75,912) 46,996 49,387 18,504 26,437 (8,692) (84,454)

79,178 (42,949) (42,063) (14,123) (12,606) (7,902) (76,778)

Yen U.S. dollars

¥ (43.7) ¥ (36.3) ¥ 25.6 ¥ 12.2 ¥ (29.6) ¥ 8.5 $ 0.08

310.5 276.2 288.8 296.7 276.0 286.6 2.79

5.0 2.0 5.0 6.0 4.0 4.0 0.04

Millions of yen Thousands of U.S. dollars

¥ 75,806 ¥ 36,314 ¥ 29,249 ¥ 32,294 ¥ 36,261 ¥ 30,182 $ 293,257

67,364 61,879 56,410 52,304 46,877 45,664 443,684

37,630 33,356 31,483 31,845 33,184 32,234 313,195

19,453 18,778 17,542 16,819 16,637 15,756

28 Teijin Limited

Management’s Discussion and Analysis

Operating Environment

While the pace of economic growth in developed countries, particu-

larly the United States, saw a gradual return to stability, growth

worldwide lacked strength in fiscal 2013, ended March 31, 2014, as

conditions in emerging economies, notably the PRC, remained gen-

erally weak. In Japan, signs of revival persisted, shored up by firm

domestic demand, but a self-sustained recovery remained elusive,

owing to a variety of factors, including the weakness of both exports

and capital investment.

Strategies in Action

Our principal emphasis in the period under review was to implement

measures aimed at achieving a self-driven recovery in profitability

and at improving our ability to generate cash without relying on a

favorable turn in the general operating environment. Efforts focused

on restructuring our materials businesses* by realigning production

configurations and on reducing fixed costs. In line with our medium-

to long-term management vision, we also pursued a number of

basic strategies for transforming our four fundamental portfolios.

Operating Results

Billions of yen

Years ended March 31 2013 2014 Change

Net Sales ¥745.7 ¥784.4 5.2%

Net sales were up, supported by a recovery in sales in the Advanced

Fibers and Composites segment and steadily rising sales in the

Trading and Retail segment, as well as to the positive impact of yen

depreciation. Results also reflected increases in sales in the PRC

and the ASEAN region, two key areas in which we are working to

expand our operations.

Billions of yen


Operating Income ¥12.4 ¥18.1 46.3%

Although the operating loss in the Electronics Materials and

Performance Polymer Products segment worsened, overall operat-

ing income climbed, supported by a recovery in demand in the

Advanced Fibers and Composites segment, particularly from

automakers, and the positive impact of restructuring initiatives.

Billions of yen


Net Income (Loss) ¥(29.1) ¥8.4 —

Owing to higher operating income, as well as to a gain on sales of

investment securities, an increase in equity in earnings of affiliates

and a decrease in impairment loss, we achieved a return to

profitability.

Summary Billions of yen

As of March 31 2013 2014 Change

Total Assets ¥762.4 ¥768.4 0.8%

The weaker yen enhanced the value of assets denominated in other

currencies. Total assets were essentially level, despite an increase in

investments and other assets, reflecting declines in cash and time

deposits and in property, plant and equipment.

Billions of yen

Years ended March 31 2013 2014

Free Cash Flow ¥26.4 ¥(8.7)

Free cash flow was a negative as net cash and cash equivalents

used in investing activities, pushed up by an increase in outlays for

purchase of investment securities, among others, exceeded net

cash and cash equivalents provided by operating activities.

Key Indicators

Years ended March 31 2013 2014

ROA 1.6 % 2.4 %

ROE -10.3 % 3.0 %

Debt-to-Equity Ratio 1.00 times 1.00 times

Bolstered by higher operating income and a return to profitability

at the net income level, return on assets (ROA)—calculated using

operating income—and return on equity (ROE) improved. The

debt-to-equity ratio was unchanged, as total shareholders’ equity

rose, while a weaker yen pushed up the yen value of interest-bearing

debt denominated in other currencies.

Tasks Ahead

In fiscal 2014, we will continue to implement a variety of measures—

balancing our two key priorities, namely, restructuring initiatives and

transformation and growth strategies—with the aim of achieving

sustainable growth.

We expect that restructuring initiatives commenced in fiscal

2013 will continue yielding positive results. We will also accelerate

the implementation of such initiatives with the aim of rebuilding our

earnings base in a manner that does not depend on an upswing in

operating conditions. Transformation and growth strategies will

continue to focus on the central goal of our medium- to long-term

management vision, which is to evolve toward a solutions-oriented

business model, and we will continue to concentrate management

resources on promising projects designed to create new value

for customers.

* “Materials businesses” encompasses the businesses of the Advanced Fibers and

Composites and the Electronics Materials and Performance Polymer Products segments.

29Teijin Limited

Costs and Expenses

Despite ongoing Groupwide efforts to reduce costs, cost of sales

increased 6.3%, or ¥34.9 billion, to ¥590.1 billion, a consequence

of rising prices for raw materials and fuel and the weak yen. As a

percentage of net sales, cost of sales edged up 0.8 percentage

point, to 75.2%.

Net Sales

With economic conditions in Japan and other developed countries

recovering gradually, sales rallied. This, combined with the positive

impact of yen depreciation, prompted an increase in consolidated

net sales of 5.2%, or ¥38.7 billion, to ¥784.4 billion. While sales in

the Healthcare segment were essentially level, we saw firm increases

in sales in the Advanced Fibers and Composites and Trading and

Retail segments, owing to firm demand for automotive applications,

among others. Sales were up in both developed and emerging

countries, underscored by advances in key geographic segments

(26.7% in Europe and others, 11.3% in the PRC and 22.2% in

Asia, which excludes Japan and the PRC).

Results of Operations Thanks to efforts to increase the efficiency of support depart-

ments and reduce related costs, selling, general and administrative

(SG&A) expenses dipped 0.6%, or ¥0.9 billion, to ¥144.0 billion.

SG&A expenses were equivalent to 18.4% of net sales, down 1.1

percentage points. R&D expenses decreased 2.9%, or ¥1.0 billion,

to ¥32.2 billion, although we continued to allocate resources to

healthcare and other core strategic businesses, as well as to prom-

ising new businesses.

Operating Income

Despite sagging results in the Electronics Materials and Performance

Polymer Products segment, operating income climbed 46.3%, or

¥5.7 billion, to ¥18.1 billion, as results in the Advanced Fibers and

Composites segment recovered.

Substantial increases in demand for both aramid fibers and car-

bon fibers, combined with a decline in amortization expenses due

to the impairment of goodwill, supported a significant improvement

in the Advanced Fibers and Composites segment’s performance,

restoring profitability at the operating income level. In contrast, flag-

ging demand for both plastics and films for electronics applications,

including LCD televisions, PCs and digital cameras, widened the

Electronics Materials and Performance Polymer Products segment’s

operating loss, while persistently harsh conditions for osteoporosis

treatments and for our U.S. home healthcare business led to a

slight decline in operating income in the Healthcare segment,

despite a sharp increase in sales of hyperuricemia and gout treat-

ment febuxostat. As a consequence of these and other factors,

the operating margin rose 0.6 percentage point, to 2.3%.

The ¥5.7 billion increase in operating income reflected the posi-

tive impact of cost reductions and structural reforms, a decrease

in amortization of goodwill and higher sales volumes, estimated at

approximately ¥23.5 billion in total, which countered the combined

negative impact of differences in raw materials and fuel prices,

changes in sales prices and product mix and advance development

costs, estimated at approximately ¥18.0 billion.

700

750

800

850

0 2013 2014

745.7

784.4

Trading and Retail

+17.0

Others+5.3

Advanced Fibers and Composites+12.4


+3.9

Healthcare+0.1

Net sales

Net sales

Billions of yenAnalysis of Net Sales


25

50

75

100 40

30

20

10

%%

0 0

75.2%74.9% 71.9% 73.6%

18.4%18.9% 18.3% 18.6%

74.5%

19.4%

0 2010 2011 20142012 2013


Cost of Sales as a Percentage of Net Sales

SG&A Expenses as aPercentage of Net Sales

12

24

36

48

0 2013 2014

Operatingincome

12.4

18.1

Cost reductions and structural reforms

+13.5

Amortization of goodwill decrease

+5.0

Sales volume down+5.0

Changes in sales prices and product mix-5.0

Differences in raw materialsand fuel prices-8.5

Advancedevelopment costs,

others-4.3

Operatingincome

Billions of yenAnalysis of Operating Income


30 Teijin Limited


Sales in the Advanced Fibers and Composites segment

totaled ¥123.6 billion, an increase of 11.1%, while operating

income was ¥5.7 billion, compared with an operating loss

of ¥4.7 billion in fiscal 2012.

Other Income (Expenses)

Other expenses, a net figure, amounted to ¥3.6 billion, a decline of

¥30.9 billion from fiscal 2012. Principal factors contributing to this

result included a ¥3.6 billion increase in equity in earnings of affili-

ates attributable to the recording of a valuation allowance against

deferred tax assets at certain equity method affiliates, an ¥8.3 billion

gain on sales of investment securities and a decline in impairment

loss to ¥8.8 billion, from ¥29.4 billion in the previous fiscal year.

Net Income (Loss)

Net income amounted to ¥8.4 billion, up from a net loss of ¥29.1

billion in fiscal 2012, owing to a variety of factors, including increases

in operating income and equity in income of affiliates, a gain on

sales of investment securities and a decrease in impairment loss.

As a consequence, ROE improved significantly, to 3.0%, from

-10.3% in fiscal 2012.

Business Segment Results

High-Performance Fibers

Demand recovered, led by that for automotive applications.

Sales of Twaron para-aramid fibers for automotive applications,

including tires, recovered in Europe, while sales for infrastructure-

related applications, including optical fiber and rope reinforcements,

were firm. In contrast, demand for use in ballistic protection prod-

ucts and protective clothing remained lackluster, while pricing

competition for all applications intensified. Demand for Technora

para-aramid fibers was stable in Japan for automotive applications,

while the weakening of the yen enhanced the profitability of exports.

Teijinconex meta-aramid fibers benefited from firm demand for

industrial applications, while demand for use in filters expanded

despite mounting competition. In polyester fibers for industrial

applications, solid sales for automotive and certain other applica-

tions helped revive income at our subsidiary in Thailand, but

profitability in Japan was hampered by rising prices for a number

of raw materials.

Under these circumstances, we resolved to commercialize a

new type of meta-aramid fiber offering superior heat resistance and

dyeability and proceeded with preparations to begin production in

Thailand in July 2015. Against a background of increasingly stringent

regulations pertaining to heat-resistant materials and environmental

safety, we will focus on expanding our business in promising Asian

markets and emerging economies. In the PRC, our polyester recy-

cling joint venture in Zhejiang Province pushed ahead with the con-

struction of a new facility in preparation for the start of operations in

fiscal 2014.

Carbon Fibers and Composites

Sales for principal applications were encouraging.

Demand for TENAX carbon fibers for use in aircraft remained firm,

while among general industrial applications demand for use in

pressure vessels for natural gas extraction was favorable in North

America, supported by the expansion of shale gas development.

However, demand for other applications languished, reflecting the

uncertain economic outlook in Europe and the PRC. Sales prices,

persistently low in recent years, showed signs of recovering,

although the outlook remained difficult to gauge, owing to sales

offensives by other manufacturers, particularly late market entrants

overseas. In this environment, steps aimed at strengthening our

operations in promising Asian markets, notably India and the ASEAN

region, proceeded smoothly. These include the establishment in

July 2013 of Toho Tenax Singapore Pte. Ltd.

During the period, the Teijin Composites Innovation Center—a

facility in Matsuyama, Ehime Prefecture, that spearheads research in

the area of advanced composite materials—sought to cultivate mar-

kets for our new thermoplastic CFRP, which is marketed under the

brand name Sereebo, an acronym for “save the earth, revolutionary

4.9%4.7%

-4.2%

123.6

5.74.6%

%

60

120

180 30

20

10

-10

0 0

2012 2012*

30

20

10

-10

0

2013 2014

153.2135.8

7.2 6.6

111.2

(4.7)

Billions of yenBillions of yen


Sales Operating Income (Loss)

Operating Margin

* Excluding the impact of the standardization of accounting periods.

31Teijin Limited

and evolutionary carbon.” Efforts focused particularly on carving

out markets for automotive and general industrial applications.

Underscoring its revolutionary nature, Sereebo was chosen for use

in the structural components of several new digital single-lens reflex

(SLR) cameras. Going forward, we will further capitalize on the ability

of CFRP to reduce the weight of finished products to promote

Sereebo’s use in structural components for mass-produced vehi-

cles, which we see as a significant latent market. To this end, our

thermoplastic CFRP pilot plant, situated within the Matsuyama Plant,

and the Teijin Composites Application Center, located in Metro

Detroit, in the United States, are collaborating on multiple projects

targeted at developing specific components and establishing

mass-production procedures, and are making steady progress

on both fronts.


The Electronics Materials and Performance Polymer

Products segment reported sales of ¥179.4 billion, up 2.2%,

and an operating loss of ¥7.2 billion.

Resin and Plastics Processing

A supply–demand imbalance persisted for polycarbonate resin.

Pricing competition in the market for mainstay polycarbonate resin

intensified, owing to sluggish demand—a consequence of deceler-

ating growth in the PRC, among others—and moves by competi-

tors to maintain operating rates and implement year-end inventories

adjustments. Under these circumstances, we sought to preserve

sales volumes through flexible pricing and to reduce costs by

suspending production on certain lines at our plant in Singapore.

Despite these actions, profitability was severely undermined.

In the area of specialty polycarbonate resin, sales were steady

in Taiwan, the PRC and the ROK for use in lenses for smartphone

and mobile phone cameras and for onboard vehicle cameras.

In processed plastics products, sales of Panlite Sheet were encour-

aging for use in dummy cans for vending machines, automotive

instrument panels and motorcycle windshields, as were sales of

PURE-ACE polycarbonate retardation film for use as antireflective

film in vehicle navigation systems. In plastic glazing*, in October

2013 Nissan Motor Company began using Panlite polycarbonate

resin for the driver–passenger partition in its NV200 taxicabs, which

it markets to taxi operators in New York City. With the goal of build-

ing plastic glazing into a full-scale business, we also took steps

to create a dedicated production configuration. Other highlights

included the addition of Fireguard FCX-210, a new phosphorus

flame retardant suitable for use in a broad range of resins, to our

lineup, which previously centered on brominated products, posi-

tioning us to market flame retardants for electronics, automotive

and other applications.

* Made with injection-molded polycarbonate resin, plastic glazing is an attractive alternative to

metal and glass for vehicle parts.

Films

The integration of domestic polyethylene terephthalate (PET)

film production facilities continued to bolster cost competitive-

ness.

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. In the area of products for electronics applications, sales

of release films for manufacturing processes remained firm for use

in smartphones and tablet computers. In contrast, films for use in

LCD televisions struggled, owing to a glut of LCDs in the market and

increasingly fierce competition with overseas films manufacturers,

which have driven down sales prices. Demand for films for special-

ized packaging and for magnetic applications tapered, as a result of

which profitability waned. In this environment, we suspended oper-

ations on the PET film line at our domestic joint venture’s Ibaraki

factory and integrated the company’s other production facilities.

Looking ahead, we will focus on further enhancing production line

efficiency, with the aim of restoring cost competitiveness. In the

area of release films for manufacturing processes and other appli-

cations, we will endeavor to fortify collaboration with customers,

as well as to broaden marketing.

Overseas, cost reductions were insufficient to offset flagging

demand in the United States. In contrast, sales in Europe were solid

for packaging and general industrial applications. With demand in

the PRC steady, despite the impact of facility expansion by local

manufacturers, which amplified competition, we sought to maintain

profitability by leveraging our superior technological and quality

control capabilities.

3.7

215.4

4.9

180.6

(1.9)

175.5

(7.2)

179.4

2.7%1.7%

-1.1%

-4.0%

-5

%

2012 2012* 2013 2014

80

160

240 24

16

8

-8

0 0

15

10

5

0

Operating Income (Loss)Billions of yenBillions of yen


Sales

Operating Margin


32 Teijin Limited

HealthcareSales in the Healthcare segment edged up 0.1%, to ¥138.4

billion, while operating income was ¥24.5 billion, a decline

of 1.1%.

Pharmaceuticals

Sales of our novel treatment for hyperuricemia and gout

expanded favorably.

Operating conditions for our domestic pharmaceuticals business

remained harsh, owing to the launch of rival products, as well as to

rising sales of generic drugs. Despite overall market conditions, sales

of hyperuricemia and gout treatment Feburic (febuxostat) expanded

favorably, further boosting our leading share of the Japanese market

for such treatments. We also continued working to achieve further

market penetration for osteoporosis treatment Bonalon®† by adding

new formulations to our osteoporosis drug lineup, including an

intravenous and an oral jelly, both firsts for Japan.

Sales of febuxostat also continued to expand favorably over-

seas. We have secured exclusive distributorship agreements for

febuxostat covering 117 countries and territories. The drug is cur-

rently sold in 37 of these countries and territories, and we are in

the process of obtaining regulatory approval to make it available

in the others.

In R&D, we commenced clinical trials in Japan for ADC3680

(development code: PTR-36)—a treatment for bronchial asthma

licensed in from U.K. firm Pulmagen Therapeutics (Asthma)—in

June 2013. In the United States, we proceeded with clinical devel-

opment of KTP-001‡, a treatment for herniated lumbar discs, which

began in 2012. In February 2014, we filed an application with

Japan’s Ministry of Health and Welfare for approval to manufacture

and market NA872ET, a small, sustained-release tablet form of

expectorant Mucosolvan. We also pressed forward with clinical

trials for new indications for other drugs in our portfolio.

Also in June 2013, we concluded a drug discovery contract and

an R&D and marketing option agreement with Amgen of the United

States for novel treatments for autoimmune disorders. Under this

agreement, we will collaborate with Amgen in research aimed at

discovering truly groundbreaking new drugs.

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

NJ, U.S.A.

‡ KTP-001 was discovered and is under development by Teijin Pharma Limited and

Kaketsuken (The Chemo-Sero-Therapeutic Research Institute), a general incorporated

foundation, based on an enzyme engineered by Professor Hirotaka Haro of the University

of Yamanashi’s Graduate School of Medicine and Engineering Advanced Medical Science

and Dr. Hiromichi Komori, assistant head of the Department of Orthopaedic Surgery at

Yokohama City Minato Red Cross Hospital.

Home Healthcare

Rental volumes remained high or increased.

We currently provide home healthcare services to approximately

430,000 individuals in Japan and overseas. In Japan, rental volume

for mainstay therapeutic oxygen concentrators for HOT remained

firm, thanks to the release of new therapeutic oxygen concentrator

models Hi-Sanso 3S and Hi-Sanso Portable α (alpha). Rental

volume for CPAP ventilators for the treatment of SAS advanced

favorably, augmented by the launch of NemLink, a monitoring

system for CPAP ventilators that uses mobile phone networks and

which also provides pertinent data to medical care facilities to

enhance the effectiveness of treatment. Rentals of our noninvasive

positive pressure ventilators (NPPVs) (the NIP NASAL series and

AutoSet CS) and for SAFHS (Sonic Accelerated Fracture Healing

System) also rose encouragingly. To fortify support services for

individuals, we established a new home healthcare call center in

Osaka, improving our ability to respond effectively to patient needs.

In April 2013, we launched the WalkAide System, a neuromuscular

electrical stimulation device for the treatment of gait impairment

resulting from stroke and other causes. Looking ahead, we will

gradually broaden marketing efforts for this device, which initially

focused on medical institutions in the Tokyo metropolitan area,

with the goal of expanding rentals.

Overseas, we currently provide home healthcare services in

the United States, Spain and the ROK. In the period under review,

operating conditions in the United States remained harsh, a conse-

quence of healthcare system reform and sizeable ensuing declines

in medical treatment fees and other factors. We responded by tak-

ing steps to restore profitability, including integrating sales bases

and reducing headcount.

Trading and Retail

The Trading and Retail segment yielded sales of ¥254.2

billion, an increase of 7.2%, and operating income of ¥5.2

billion, up 10.0%. During the period, the segment sought to

showcase the broad synergies between its trading and

25.9

143.0

26.4

139.5

24.8 24.5

138.3 138.4

18.9%18.1% 17.9% 17.7%

0 0

40

30

20

10

0

%

2012 2012* 2013 2014

50

100

150

200 60

45

30

15



Sales Operating Income

Operating Margin


33Teijin Limited

manufacturing businesses, which enable it to propose

innovative solutions.

In the fiber materials and apparel business, exports of textiles for

use in fashion apparel and sportswear were robust to Europe

and North America, bolstered by the depreciation of the yen. To

expand sales, we promoted the development of state-of-the-art

high-performance materials, including the Delta series, created in

collaboration with leading sportswear manufacturers overseas, as

well as enhanced our fabric supply capabilities in the ASEAN region.

In textiles and apparel, we stepped up efforts to shore up our

production bases in the ASEAN region, including our new subsidiary

in Myanmar, to reinforce our integrated global supply configuration,

which encompasses everything from raw materials through to fin-

ished products. Sales in our mainstay OEM business rose on the

strength of favorable shipments in early autumn and last-minute

demand in advance of a consumption tax hike in Japan, although

yen depreciation and higher production costs overseas combined

to squeeze profitability in all product categories.

In industrial textiles and materials, sales of materials and

components for use in seats, tires and transmission belts and

hoses increased sharply worldwide, as production and sales

levels at domestic and overseas automakers remained solid. In

general-purpose materials, shipments of tents and materials for

fisheries applications slowed as reconstruction-related demand in

areas affected by the Great East Japan Earthquake wound down,

but sales of materials for civil engineering and construction-related

applications were firm, as were sales of sewing thread. Shipments

of interior materials and films and plastics slackened, a consequence

of sluggish market conditions.

In this environment, subsidiary Teijin Frontier, which marked its

first anniversary, staged a comprehensive exhibition of segment

products. Through this event, the company sought to encourage

customer and market appreciation for the broad synergies it

realizes as a company that combines the functions of a trading

company and a manufacturer.

Others

Others, which does not qualify as a reportable operating

segment, generated sales of ¥88.8 billion, up 6.4%, and

operating income of ¥1.7 billion, down 58.9%.

In the IT business, sales from the distribution of e-books and other

factors contributed to firm sales in the net services category. To cre-

ate an operating structure capable of supporting the further expan-

sion of this business, we spun off the net services operations of sub-

sidiary Infocom into a separate company, which began operating in

October 2013 under the name Amutus Corporation. The new compa-

ny’s sales from the distribution of e-books have continued to expand

since and are currently estimated at ¥10 billion-plus on an annual

basis. We also took steps to bolster our share of the healthcare-

related information services market, including acquiring the medical

radiology information systems business of AJS Inc. Going forward,

we will seek to further strengthen our ability to develop and market

sales support systems for pharmaceuticals manufacturers.

In the polyester raw materials and polymerization business,

we discontinued in-house production and sales of paraxylene (PX)

in March 2014. This move was in response to a disruption of the

supply–demand balance, which significantly damaged profitability.

In new business development, we sought to expand sales of

LIELSORT LiB separators, manufactured in the ROK, to capitalize

on soaring demand for these separators—which have already been

adopted for use by multiple battery manufacturers—in promising

Asian markets. On another front, we responded to rapidly increas-

ing wastewater treatment needs in the PRC by expanding related

operations in that country, which are anchored by subsidiary Teijin

(Shenyang) Environmental Technologies Co., Ltd. We also moved

ahead with efforts to commercialize nanosilicon inks, which are

used in printable electronics; BIOFRONT, a highly heat-resistant

bioplastic that is attracting increased attention for use in shale gas

and petroleum extraction; and advanced medical materials, includ-

ing those for tissue repair and drug delivery systems. With the aim

of hastening the commercialization of promising new products, in

April 2014 we reorganized our New Business Development Group

and renamed it the New Business Development Business Unit.

0 0

6.6

262.7

6.6

255.0

4.75.2

237.2254.2

2.6%2.5%

2.0% 2.0%

8

6

4

2

0

%

2012 2012* 2013 2014

80

160

240

320 10.0

7.5

5.0

2.5




Operating Margin


0 0

3.7

80.1

3.7

80.1

4.2

1.7

83.588.8

4.6%4.7% 5.0%

2.0%

8

6

4

2

0

%

2012 2012* 2013 2014

25

50

75

100 10.0

7.5

5.0

2.5




Operating Margin


34 Teijin Limited

Free cash flow in fiscal 2013 was thus a negative as operating

and investing activities combined used a net total of ¥8.7 billion.

Net cash and cash equivalents used in financing activities

amounted to ¥7.9 billion. Among reasons behind this result were

the issue and redemption of bonds, the net result of proceeds from

short- and long-term debt and the repayment thereof and the pay-

ment of dividends.

After factoring in the impact of exchange rate fluctuations, oper-

ating, investing and financing activities in the period under review

resulted in a net decrease in cash and cash equivalents of ¥15.7

billion as of March 31, 2014.

Forecast for Operating Results

Recovery in developed countries is expected to continue underpin-

ning global economic conditions, countering the negative impact of

flagging growth in emerging economies. Nonetheless, future pros-

pects remain uncertain, owing to a number of factors, including the

danger of a further slowing of growth in the PRC and geopolitical

risks in Europe.

Given this outlook, in fiscal 2013 we began promoting decisive

restructuring initiatives worldwide. In fiscal 2014, we expect these

efforts to begin yielding positive results. Going forward, we will

accelerate the implementation of such initiatives with the aim of

rebuilding our earnings base in a manner that does not rely on

a favorable turn in the general operating environment.

We will also broaden our focus beyond our materials busi-

nesses. In line with our goal of evolving toward a solutions-oriented

business model featuring high-value-added offerings, not only

materials but also components and finished products, we will con-

tinue to concentrate management resources on promising projects

designed to create new value for customers.

Outlook for Fiscal 2014

Analysis of Assets, Liabilities, Net Assets and Cash Flows

Interest-bearing debt, at ¥281.5 billion, was up ¥10.8 billion, a

result mainly of increases in the yen value of liabilities denominated

in other currencies attributable to the weaker yen. Shareholders’

equity increased by a similar amount, rising ¥10.4 billion. As a con-

sequence, the debt-to-equity ratio was 1.00 times, on a par with

the previous fiscal year. The equity ratio was 36.7%, up 1.1 per-

centage points.

Citing declines in the profitability of our materials businesses

and our ability to generate cash, Japan’s Rating and Investment

Information, Inc., lowered its rating of our long-term debt from A to

A–. Additionally, our debt payback period increased to 7.3 years,

from 4.2 years in fiscal 2012, while our interest coverage ratio fell to

10.5 times, from 18.4 times in the previous period.As of March 31, 2014

Rating and Investment Information, Inc. Rating A–

Outlook Stable

Assets, Liabilities and Net Assets

Total assets as of March 31, 2014, amounted to ¥768.4 billion,

up ¥6.0 billion from the end of fiscal 2012, as the weaker yen

enhanced the value of assets denominated in other currencies.

While stock purchases and other factors led to a sharp increase in

the value of investment securities, cash and time deposits declined.

The impact of depreciation and impairment accounting pushed

down noncurrent assets.

Total liabilities, at ¥468.3 billion, were down ¥2.0 billion from the

fiscal 2012 year-end. Interest-bearing debt, which included short-

term loans payable and long-term loans payable, rose ¥10.8 billion,

to ¥281.5 billion, mainly a result of an increase in the yen value of

outstanding debt denominated in other currencies, owing to the

depreciation of the yen.

Total net assets advanced ¥8.0 billion, to ¥300.1 billion.

Shareholders’ equity and total accumulated other comprehensive

income together represented ¥281.7 billion of the total, up ¥10.4

billion. This increase was attributable to, among others, net income

and a decline in the deduction for foreign currency translation

adjustments.

Cash Flows

Net cash and cash equivalents provided by operating activities in

fiscal 2013 amounted to ¥38.6 billion. This result reflected net

income for the period, as well as the fact that the impact of non-

cash items such as depreciation and amortization exceeded that

of, among others, an increase in working capital.

Net cash and cash equivalents used in investing activities

amounted to ¥47.3 billion. Contributing factors included outlays for

the purchase of property, plant and equipment and the purchase of

investment securities.

Financial Position

5

10

15

20 40

30

20

10

0 0

4.93.5

4.0

38.3%

7.3

36.7%

4.2

35.6%37.3%33.0%

%

2010 2011 20142012 2013

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

conditions and competition with other companies. Because the

cost of raw materials and fuel accounts for a major portion of pro-

duction 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.

At present, we forecast consolidated net sales of ¥780.0 billion,

a decline of about 1% from fiscal 2013. We also forecast operating

income of ¥25.0 billion, ordinary income of ¥22.5 billion and net

income of ¥10.0 billion, representing increases of approximately

38%, 13% and 20%, respectively. These forecasts assume an

exchange rate of ¥100 to US$1.00.

Forecast for Financial Position

In fiscal 2014, 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 current

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

2014 are for an ROA of 3.2%, ROE of 3.6% and a debt-to-equity

ratio of 1.00 times.

36 Teijin Limited

Consolidated Balance Sheets

Millions of yen

Thousands of

U.S. dollars

(Note 1)

2013 2014 2014

ASSETS

Current assets:

Cash and time deposits (Notes 4 and 5) ¥ 48,859 ¥ 33,135 $ 321,949

Receivables:

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

Unconsolidated subsidiaries and affiliates 2,871 2,084 20,249

Other 166,144 163,156 1,585,270

Short-term loans receivable (Note 5):


Other 1,031 1,101 10,698

Other 12,154 14,673 142,567

Inventories (Note 8) 111,633 118,668 1,153,012

Deferred tax assets (Note 14) 11,617 7,269 70,628

Other current assets 8,153 9,965 96,823

Allowance for doubtful accounts (3,660) (2,687) (26,108)

Total current assets 372,255 364,908 3,545,550

Property, plant and equipment (Note 12):

Land 43,735 43,691 424,514

Buildings and structures 185,466 191,145 1,857,219

Machinery, equipment and vehicles 551,899 571,339 5,551,292

Tools 75,406 78,663 764,312

Construction in progress 9,562 9,298 90,342

Other 2,714 3,043 29,567

868,782 897,179 8,717,246

Accumulated depreciation (623,926) (660,318) (6,415,837)

244,856 236,861 2,301,409

Intangible assets 15,572 13,651 132,637

Deferred tax assets (Note 14) 1,691 2,272 22,075

Goodwill 18,105 15,806 153,576

35,368 31,729 308,288

Investments and other assets:

Investment securities (Notes 5 and 6):


Other 43,066 55,664 540,847

Long-term loans receivable (Note 5):


Other 747 723 7,025

Prepaid pension cost (Note 10) 23,004 — —

Net defined benefit asset (Note 10) — 28,837 280,188

Other 15,112 15,871 154,208

Allowance for doubtful accounts (2,340) (3,085) (29,975)

109,920 134,913 1,310,853

¥ 762,399 ¥ 768,411 $ 7,466,100

See accompanying Notes to Consolidated Financial Statements.

TEIJIN LIMITED

As of March 31, 2013 and 2014

37Teijin Limited

Millions of yen

Thousands of

U.S. dollars

(Note 1)

2013 2014 2014

LIABILITIES AND NET ASSETS

Current liabilities:

Short-term loans payable (Notes 5 and 9) ¥ 67,326 ¥ 84,605 $ 822,046

Current portion of long-term loans payable (Notes 5 and 9) 69,387 28,772 279,557

Payables:

Notes and accounts payable—trade (Note 3):


Other 90,674 78,884 766,459

Other 30,402 25,115 244,024

Income taxes payable 2,891 2,915 28,323

Accrued expenses 17,759 17,757 172,532

Deferred tax liabilities (Note 14) 13 60 583

Other current liabilities 9,627 9,436 91,683

Total current liabilities 289,281 248,663 2,416,080

Long-term loans payable (Notes 5 and 9) 132,247 166,402 1,616,809

Provision for retirement benefits (Note 10) 20,351 — —

Net defined benefit liability (Note 10) — 30,204 293,471

Deferred tax liabilities (Note 14) 12,658 9,783 95,054

Other non-current liabilities 15,734 13,246 128,703

Contingent liabilities (Note 18)

Net assets (Note 11)

Shareholders’ equity:

Common stock:

Authorized—3,000,000,000 shares in 2013 and 2014

Issued—984,758,665 shares in 2013

984,758,665 shares in 2014 70,817 70,817 688,078

Capital surplus 101,408 101,429 985,513

Retained earnings 107,329 111,754 1,085,834

Treasury stock, at cost: 1,926,149 shares in 2013

1,995,089 shares in 2014 (417) (436) (4,237)

Total shareholders’ equity 279,137 283,564 2,755,188

Accumulated other comprehensive income:

Valuation difference on available-for-sale securities 13,551 10,759 104,538

Deferred gains (losses) on hedges 1,069 1,018 9,891

Foreign currency translation adjustments (22,505) (13,026) (126,564)

Remeasurements of defined benefit plans — (635) (6,170)

Total accumulated other comprehensive income (7,885) (1,884) (18,305)

Subscription rights to shares 650 738 7,170

Minority interests 20,226 17,695 171,930

Total net assets 292,128 300,113 2,915,983

¥762,399 ¥768,411 $7,466,100

38 Teijin Limited

Millions of yen

Thousands of

U.S. dollars

(Note 1)

2013 2014 2014

Net sales ¥745,713 ¥784,425 $7,621,697

Costs and expenses:

Cost of sales 555,209 590,092 5,733,502

Selling, general and administrative expenses 144,962 144,021 1,399,349

Research and development expenses 33,184 32,234 313,195

Operating income 12,358 18,078 175,651

Other income (expenses):

Interest and dividend income 1,348 1,465 14,234

Interest expenses (3,409) (3,359) (32,637)

Gain (loss) on sales of investment securities (60) 8,289 80,538

Gain on sales of property, plant and equipment 1,408 152 1,477

Gain on valuation of derivatives 2,617 1,496 14,536

Loss on disposal of property, plant and equipment (1,510) (1,676) (16,284)

Loss on valuation of investment securities (762) (106) (1,030)

Impairment loss (Note 12) (29,417) (8,781) (85,319)

Equity in earnings of affiliates 572 4,181 40,624

Gain on revision of retirement benefit plans (Note 10) 418 — —

Business structure improvement expenses (58) (2,386) (23,183)

Other, net (5,606) (2,834) (27,536)

(34,459) (3,559) (34,580)

Income (loss) before income taxes and minority interests (22,101) 14,519 141,071

Income taxes (Note 14):

Current 4,224 5,126 49,806

Deferred 1,884 2,781 27,021

6,108 7,907 76,827

Minority interests in net loss (income) (922) 1,744 16,945

Net income (loss) ¥ (29,131) ¥ 8,356 $ 81,189

Yen

U.S. dollars

(Note 1)

Net income (loss) per share (Note 2) ¥ (29.61) ¥ 8.50 $ 0.08

Net income per share—diluted — — —

Cash dividends applicable to the year 4.00 4.00 0.04


Consolidated Statements of OperationsTEIJIN LIMITED

For the years ended March 31, 2013 and 2014

39Teijin Limited

Millions of yen

Thousands of

U.S. dollars

(Note 1)

2013 2014 2014

Income (loss) before minority interests ¥(28,209) ¥ 6,612 $ 64,244

Other comprehensive income (Note 13):

Valuation difference on available-for-sale securities 3,639 (2,791) (27,118)

Deferred gains (losses) on hedges 763 (51) (496)

Foreign currency translation adjustments 8,786 7,957 77,313

Share of other comprehensive income of associates accounted for

using the equity method 596 1,505 14,623

Total 13,784 6,620 64,322

Comprehensive income ¥(14,425) ¥13,232 $128,566

Breakdown of comprehensive income:

Comprehensive income attributable to shareholders of the parent ¥(15,528) ¥14,992 $145,667

Comprehensive income attributable to minority interests ¥ 1,103 ¥ (1,760) $ (17,101)


Consolidated Statements of Comprehensive IncomeTEIJIN LIMITED


40 Teijin Limited

Millions of yen

Shareholders’ equity

Number of

shares of

common stock

Common

stock

Capital

surplus

Retained

earnings

Treasury

stock, at cost

Total

shareholders’

equity

Balance at March 31, 2012 984,758,665 ¥70,817 ¥101,390 ¥141,441 ¥(128) ¥313,520

Changes of items during the period:

Dividends from surplus (4,922) (4,922)

Net loss (29,131) (29,131)

Others (59) (59)

Purchase of treasury stock (327) (327)

Disposal of treasury stock 18 38 56

Net changes of items other than

shareholders’ equity

Total — 18 (34,112) (289) (34,383)

Balance at March 31, 2013 984,758,665 ¥70,817 ¥101,408 ¥107,329 ¥(417) ¥279,137



Net income 8,356 8,356





Total — 21 4,425 (19) 4,427

Balance at March 31, 2014 (Note 19) 984,758,665 ¥70,817 ¥101,429 ¥111,754 ¥(436) ¥283,564

Thousands of U.S. dollars (Note 1)

Shareholders’ equity

Common

stock

Capital

surplus

Retained

earnings

Treasury

stock, at cost

Total

shareholders’

equity

Balance at March 31, 2013 $688,078 $985,309 $1,042,839 $(4,052) $2,712,174



Net income 81,189 81,189





Total — 204 42,995 (185) 43,014

Balance at March 31, 2014 (Note 19) $688,078 $985,513 $1,085,834 $(4,237) $2,755,188


Consolidated Statements of Changes in Net AssetsTEIJIN LIMITED


41Teijin Limited

Millions of yen

Accumulated other comprehensive income

Valuation

difference on

available-for-sale

securities

Deferred

gains

(losses)

on hedges

Foreign

currency

translation

adjustments

Remeasure-

ments of

defined

benefit plans Total

Subscription

rights to

shares

Minority

interests

Total

net assets

Balance at March 31, 2012 ¥ 9,913 ¥ 306 ¥(31,708) ¥ — ¥(21,489) ¥567 ¥19,619 ¥312,217


Dividends from surplus (4,922)

Net loss (29,131)

Others (59)

Purchase of treasury stock (327)

Disposal of treasury stock 56


shareholders’ equity 3,638 763 9,203 — 13,604 83 607 14,294

Total 3,638 763 9,203 — 13,604 83 607 (20,089)

Balance at March 31, 2013 ¥13,551 ¥1,069 ¥(22,505) ¥ — ¥ (7,885) ¥650 ¥20,226 ¥292,128



Net income 8,356




shareholders’ equity (2,792) (51) 9,479 (635) 6,001 88 (2,531) 3,558

Total (2,792) (51) 9,479 (635) 6,001 88 (2,531) 7,985

Balance at March 31, 2014 (Note 19) ¥10,759 ¥1,018 ¥(13,026) ¥(635) ¥ (1,884) ¥738 ¥17,695 ¥300,113

Thousands of U.S. dollars (Note 1)

Accumulated other comprehensive income

Valuation

difference on

available-for-sale

securities

Deferred

gains

(losses)

on hedges

Foreign

currency

translation

adjustments

Remeasure-

ments of

defined

benefit plans Total

Subscription

rights to

shares

Minority

interests

Total

net assets

Balance at March 31, 2013 $131,665 $10,387 $(218,665) $ — $(76,613) $6,315 $196,522 $2,838,398



Net income 81,189




shareholders’ equity (27,127) (496) 92,101 (6,170) 58,308 855 (24,592) 34,571

Total (27,127) (496) 92,101 (6,170) 58,308 855 (24,592) 77,585

Balance at March 31, 2014 (Note 19) $104,538 $ 9,891 $(126,564) $(6,170) $(18,305) $7,170 $171,930 $2,915,983


42 Teijin Limited

Consolidated Statements of Cash Flows

Millions of yen

Thousands of

U.S. dollars

(Note 1)

2013 2014 2014

Cash flows from operating activities:

Income (loss) before income taxes and minority interests ¥(22,101) ¥ 14,519 $ 141,071

Depreciation and amortization 46,877 45,664 443,684

Impairment loss 29,417 8,781 85,319

Increase in provision for retirement benefits 1,199 — —

Increase in net defined benefit liability — 1,425 13,846

Decrease (increase) in net defined benefit asset (7,302) 1,259 12,233

Increase (decrease) in allowance for doubtful accounts 476 (382) (3,712)

Interest and dividend income (1,348) (1,776) (17,256)

Interest expenses 3,409 3,359 32,637

Equity in earnings of affiliates (572) (4,181) (40,624)

Loss on sales or disposal of property, plant and equipment 102 1,524 14,807

Loss (gain) on sales of investment securities 60 (8,289) (80,538)

Gain on valuation of derivatives (2,617) (1,496) (14,536)

Loss on valuation of investment securities 762 106 1,030

Decrease in notes and accounts receivable—trade 11,070 8,592 83,482

Decrease (increase) in inventories 2,509 (2,371) (23,037)

Increase in notes and accounts payable—trade (4,787) (15,999) (155,451)

Increase (decrease) in accrued payments due to change in retirement benefits 6,546 (2,421) (23,523)

Other, net (4,763) (5,325) (51,739)

Subtotal 58,937 42,989 417,693

Interest and dividend income received 4,044 5,404 52,507

Interest expenses paid (3,488) (3,663) (35,591)

Income taxes paid (3,309) (6,143) (59,687)

Disaster insurance compensation 8,121 — —

Net cash and cash equivalents provided by operating activities 64,305 38,587 374,922

Cash flows from investing activities:

Purchase of property, plant and equipment (31,031) (30,863) (299,874)

Proceeds from sales of property, plant and equipment 1,929 472 4,586

Purchase of intangible assets (2,665) (2,209) (21,463)

Purchase of investment securities (3,947) (21,203) (206,014)

Proceeds from sales of investment securities 316 10,847 105,393

Increase in short-term loans receivable (1,564) (2,981) (28,964)

Payments of long-term loans receivable (775) (56) (544)

Collection of long-term loans receivable 231 255 2,478

Other, net (362) (1,541) (14,974)

Net cash and cash equivalents used in investing activities (37,868) (47,279) (459,376)

Cash flows from financing activities:

Net increase (decrease) in short-term loans payable (2,548) 11,135 108,191

Net decrease in commercial paper (18,000) — —

Proceeds from issuance of bonds 23,912 11,111 107,958

Redemption of bonds (7,695) (21,632) (210,183)

Proceeds from long-term loans payable 44,347 51,730 502,623

Repayment of long-term loans payable (46,862) (55,340) (537,699)

Cash dividends paid (4,922) (3,932) (38,204)

Cash dividends paid to minority shareholders (185) (554) (5,383)

Other, net (653) (420) (4,081)

Net cash and cash equivalents used in financing activities (12,606) (7,902) (76,778)

Effect of exchange rate changes on cash and cash equivalents 1,587 869 8,443

Net increase (decrease) in cash and cash equivalents 15,418 (15,725) (152,789)

Cash and cash equivalents at beginning of year 33,283 48,701 473,193

Cash and cash equivalents at end of year (Note 4) ¥ 48,701 ¥ 32,976 $ 320,404


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 Japan’s 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 (“IFRS”).

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 their respective countries of domicile. From the

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

Solution on Unification of Accounting Policies Applied to Foreign

Subsidiaries for Consolidated Financial Statements” (Practical

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

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

the Company has unified the accounting standards for overseas

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, 2013 and 2014.

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 state-

ments, 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, 2014, which

was ¥102.92 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 69 significant subsidiaries for the year ended March

31, 2014. For 2013, 72 significant subsidiaries were included in the

consolidated financial statements. Investments made in 78 (71 in

2013) 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.

Of the Company’s consolidated subsidiaries, 11 (same in 2013)

did not change their fiscal year-end from December 31. These 11

subsidiaries prepared, for consolidation purposes, statements for

the period that correspond to the fiscal year of the Company.

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.

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.

44 Teijin Limited

Equity securities issued by subsidiaries and affiliated companies,

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 operations 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

Property, plant and equipment are amortized using the straight-line

method over the estimated useful life of the asset.

(Change in accounting treatment for rental home health-care devices)Up to and including the year ended March 31, 2013, certain of the

home healthcare devices that the Companies rent were recognized

in expenses at the time of rental. However, effective from the year

ended March 31, 2014, the Companies have recognized these

devices as fixed assets and have depreciated them using the

straight-line method.

The Companies anticipate rapid growth in the market for con-

tinuous positive airway pressure (“CPAP”) ventilators for the treat-

ment of sleep apnea syndrome (“SAS”) and have established a

business configuration capable of responding to such growth. In

light of these factors, having considered what accounting method

would most appropriately reflect the constant environment for

use of its core CPAP ventilators at present and in the future, the

Companies resolved to treat these devices as property, plant and

equipment and to depreciate them using the straight-line method,

which they use to depreciate its other home healthcare devices. As

a result of this change, consolidated operating income and income

before income taxes and minority interests for the year ended

March 31, 2014 were each ¥1,740 million ($16,906 thousand)

higher than would have been the case had the previous method

of depreciation been used.

Additionally, up to and including the year ended March 31,

2013, purchases of the aforementioned devices for rental, now

recognized as property, plant and equipment, were accounted for

in “Cash flows from operating activities.” However, effective from

the year ended March 31, 2014, these outlays are accounted for

in “Purchase of property, plant and equipment” in “Cash flows

from investing activities.” Depreciation of such equipment is now

accounted for in “Depreciation and amortization” in “Cash flows

from operating activities.” As a result of this change, “Net cash and

cash equivalents provided by operating activities” and “Net cash

and cash equivalents used in investing activities” for the year ended

March 31, 2014 were ¥2,139 million ($20,783 thousand) higher and

¥2,139 million ($20,783 thousand) lower, respectively, than would

have been the case had the previous method of accounting

been used.

For information, on the impact of this change on segment

results, see Note 17, “Segment information.”

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 overseas subsidiaries

do not have pension plans.

Under the terms of the lump-sum benefit plans, eligible

employees are upon mandatory retirement at age 60 or voluntary

termination before such age, entitled under most circumstances 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-

lated using certain assumptions. The Companies provided for

employees’ severance and retirement benefits at March 31, 2013

and 2014 based on the estimated amounts of projected benefit

obligation and the fair value of the plan 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

45Teijin Limited

following period, respectively. Effective from October 1, 2012, the

Company and certain consolidated subsidiaries transferred the

defined benefit portions of their pension plans for current employ-

ees to a defined contribution pension plan. The period used to

amortize prior service costs and actuarial gains and losses for the

defined benefit portion prior to the transfer was changed to mainly

five years, which is within the average of the estimated remaining

payout periods for the employees at the time of the transfer.

(Application of Accounting Standard for Retirement Benefits)Effective March 31, 2014, the Company has applied the “Accounting

Standard for Retirement Benefits” (ASBJ Statement No. 26, issued

on May 17, 2012) and “Guidance on Accounting Standard for

Retirement Benefits” (ASBJ Guidance No. 25, issued on May 17,

2012), with the exception of provisions set forth in Clause 35 of the

standard and Clause 67 of its accompanying guidance.

Under the new accounting standard, the difference between

projected benefit obligation and fair value of plan assets is recog-

nized as a net defined benefit liability or, in the event that the fair

value of plan assets exceeds the projected benefit obligation, as

a net defined benefit asset. Unrecognized actuarial gains and

losses and prior service costs are recognized as a net defined

benefit liability.

The application of the new accounting standard and its accom-

panying guidance is subject to the transitional accounting treatment

set forth in Clause 37 of the standard. In the year ended March 31,

2014, remeasurements of defined benefit plans were included in

accumulated other comprehensive income to reflect the impact

of this change in method of accounting. As a result, the Company

recorded a net defined benefit liability of ¥7,729 million ($75,097

thousand) and a net defined benefit asset of ¥7,091 million ($68,898

thousand), while comprehensive income decreased by ¥635 million

($6,169 thousand). Shareholders’ equity per share was reduced by

¥0.65 ($0.006).

(Additional information)Previously, the pension plans of the Company and certain consoli-

dated subsidiaries included a defined benefit portion. Effective from

October 1, 2012, the Company and these subsidiaries transferred

the defined benefit portion of their pension plans for current

employees to a defined contribution pension plan. To account for

this transfer, effective from the year ended March 31, 2013, the

Company has applied the “Guidance on Accounting for Transfers

between Retirement Benefit Plans” (ASBJ Guidance No. 1, issued

on January 31, 2002). As a result of this change, a gain on revision

of retirement benefit plans of ¥418 million is included in other

income.

(Change in accounting estimates)Prior service costs and actuarial gains and losses for the defined

benefit portion of pension plans were previously recognized in

expenses using the straight-line method over mainly 12 years,

which is within the average of the estimated remaining service

years of current employees. With the transfer of the defined

benefit portion of pension plans for current employees to a defined

contribution pension plan, the period used in this calculation was

changed to mainly five years, which is within the average of the

estimated remaining payout period for these employees. As a

result, in the year ended March 31, 2013, operating income and

ordinary income decreased by ¥616 million, and loss before income

taxes and minority interests increased by ¥616 million, compared

to what would have been recorded had the previous accounting

estimate been used.

(2) Directors and statutory auditorsPrior to the general shareholders’ meeting held on June 22, 2011,

the Company resolved to abolish the lump-sum retirement payments

for directors and auditors of the Company and instead to make

upon retirement a lump-sum payment to each eligible director

and auditor for duties performed up to the date of abolition.

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 subsid-

iaries 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 consolidated subsid-

iaries 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.

If a forward foreign exchange contract is executed to hedge a

future transaction denominated in a foreign currency, the forecast

transaction will be recorded using the contracted forward rate on

recognition, and no gains or losses on the forward foreign exchange

contract are recognized (the “principle-based method”).

If interest rate swap contracts of the Company 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 (the “conventional method”).

Income taxes

The provision for income taxes is based on income for financial

statement purposes. Income taxes comprise corporation tax,

enterprise tax and prefectural and municipal inhabitants’ taxes.

The assets and liabilities 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

46 Teijin Limited

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 overseas consolidated

subsidiaries 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 operations are

translated at the average rates of exchange for the year. Differences

arising from translations are presented as “Foreign currency trans-

lation adjustments” in the accompanying consolidated financial

statements. The Companies report foreign currency translation

adjustments in net assets.

Net income (loss) per share

Computations of net income (loss) per share of common stock are

based on the weighted-average number of shares outstanding dur-

ing each period. Diluted net income per share is calculated based

on the assumption that all dilutive convertible debentures and stock

warrants were converted or exercised at the beginning of the year

or at the time of issue.

Net income (loss) per share for the years ended March 31,

2013 and 2014 is calculated based on the following factors:


( a ) Net loss ¥29,131 million

(b ) Amount not attributable to common share-holders: ¥ — million

( c ) Bonuses to directors and statutory auditors included in (b): ¥ — million

(d ) Net loss allocated to common stock: ¥29,131 million

( e ) Average number of shares outstanding dur-ing the period: 983,748 thousand shares

( f ) Increase in number of shares: —

(g ) Increase in number of subscription rights to shares included in (f): —

( 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:

—


( a ) Net income: ¥8,356 million ($81,189 thousand)

(b ) Amount not attributable to com-mon shareholders: ¥ — million ($ — thousand)

( c ) Bonuses to directors and statutory auditors included in (b): ¥ — million ($ — thousand)

(d ) Net income allocated to common stock: ¥8,356 million ($81,189 thousand)

( e ) Average number of shares out-standing during the period: 982,860 thousand shares

( f ) Increase in number of shares: 2,947

(g ) Increase in number of subscription rights to shares included in (f): 2,947

( h ) Summary of outstanding potential shares excluded from the compu-tation of diluted EPS, if calculated for the period, since such potential stocks do not have a dilutive effect:

—

(Accounting standards issued but not yet effective)(1) Accounting Standard for Retirement Benefits“Accounting Standard for Retirement Benefits” (ASBJ Statement

No. 26, issued on May 17, 2012)

“Guidance on Accounting Standard for Retirement Benefits” (ASBJ

Guidance No. 25, issued on May 17, 2012)

1. Outline

The new accounting standard contains amendments to, among

others, formulas for amortizing unrecognized actuarial gains and

losses and prior service costs, as well as formulas for computing

and standards for disclosing projected benefit obligation and ser-

vice costs.

2. Timing of adoption

The Company expects to adopt new methods for computing

projected benefit obligation and service costs from the beginning

of the year ending March 31, 2015.

The new accounting standard and its accompanying guid-

ance are subject to transitional accounting treatment.

Accordingly, it will not be applied retroactively to consolidated

financial statements from past years.

3. Impact of the adoption of the accounting standard

The Company is currently in the process of evaluating the impact

of the application of this new accounting standard on its consoli-

dated financial statements in the year ending March 31, 2015.

(2) Accounting standards for business combinations “Revised Accounting Standard for Business Combinations” (ASBJ

Statement No. 21)

“Revised Accounting Standard for Consolidated Financial

Statements” (ASBJ Statement No. 22)

“Revised Accounting Standard for Business Divestitures” (ASBJ

Statement No. 7)

47Teijin Limited

“Revised Accounting Standard for Earnings per Share” (ASBJ

Statement No. 2)

“Revised Guidance on Accounting Standard for Business

Combinations and Accounting Standard for Business Divestitures”

(ASBJ Guidance No. 10)

“Revised Guidance on Accounting Standard for Earnings per

Share” (ASBJ Guidance No. 4)

All of the above were issued on September 13, 2013.

1. Outline

The accounting treatment for changes in a parent’s ownership

interest in a subsidiary when the parent retains control over the

subsidiary in the additional acquisition of shares therein and

acquisition related costs was revised. In addition, besides the

amendment of “minority interests” to “non-controlling interests,”

the presentation method of net income was amended and transi-

tional provisions for accounting treatments were defined.

2. Timing of adoption

The Company expects to apply these revised accounting stan-

dards and guidance from the beginning of the fiscal year ending

March 31, 2016.

However, the transitional provisions for accounting treatments

will be applied from business combinations performed on or after

the beginning of the fiscal year ending March 31, 2016.

3. Impact of the adoption of the accounting standards

The effect of adoption of these revised accounting standards is

now under assessment at the time of preparation of the accom-

panying consolidated financial statements.

(Reclassifications and restatements)Certain prior year amounts have been reclassified and restated to

conform to the current year’s presentation. These reclassifications

and restatements have no impact on previously reported results of

operations or retained earnings.

(Additional information)Accounting Standard for Accounting Changes and

Error Corrections

Effective from the year ended March 31, 2012, the Company and

the consolidated companies adopted the “Accounting Standard for

Accounting Changes and Error Corrections” (ASBJ Statement No.

24, issued on December 4, 2009) and “Guidance on Accounting

Standard for Accounting Changes and Error Corrections” (ASBJ

Guidance No. 24, issued on December 4, 2009). This standard and

its accompanying guidance are applied to accounting changes and

corrections of prior periods’ errors made on or after April 1, 2011.

Note 3. Effect of March 31, 2013 being a bank holiday

Although financial institutions in Japan were closed on March 31, 2013 and notes maturing on March 31, 2013 were settled on the following

business day—April 1, 2013—notes receivable of ¥2,778 million and notes payable of ¥2,315 million were accounted for as if settled on

March 31, 2013.

Note 4. Statements of cash flows

The reconciliations of cash and time deposits in the consolidated balance sheets and cash and cash equivalents in the consolidated state-

ments of cash flows as of March 31, 2013 and 2014 are as follows:

Millions of yenThousands of U.S. dollars

2013 2014 2014

Cash and time deposits in the consolidated balance sheets ¥48,859 ¥ 33,135 $321,949

Time deposits with maturities exceeding 3 months (158) (159) (1,545)

Cash and cash equivalents in the consolidated statements of cash flows ¥48,701 ¥32,976 $320,404

48 Teijin Limited

Note 5. Fair value of financial instruments

(1) Qualitative information on financial instruments

(a) Policies for using financial instrumentsThe Companies’ fund management policy is to put money

into short-term deposits only and to raise money through

loans payable, commercial paper and corporate bonds.

The Companies principally enter into derivative 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 arisesNotes and accounts receivable–trade are exposed to cus-

tomers’ 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 held

for speculation.

The due dates of notes and accounts payable–trade

are mainly within one year.

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 con-

verted 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 receiv-

ables and 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 fluctu-

ation in interest rates. The Companies evaluate hedge effec-

tiveness 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 Treasury Office on the actual results of deriv-

ative transactions. The actual results of derivative transac-

tions 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 valuesThe fair value of financial instruments is calculated based

on quoted market price or, in cases where there is no mar-

ket price, by making a reasonable estimation. Because the

preconditions applied include a floating element, estima-

tions of fair value may vary. The contracted amounts, as

presented 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, 2013 and 2014. Items for which fair value is difficult

to estimate are not included in the following tables.

49Teijin Limited

Millions of yen

2013

Book value Fair value Difference

(1) Cash and time deposits ¥ 48,859 ¥ 48,859 ¥ —

(2) Receivables 169,015 169,015 —

(3) Short-term loans receivable 14,243 14,243 —

(4) Investment securities 38,472 38,472 —

(5) Long-term loans receivable 2,897 — —

Allowance for doubtful accounts* (543) — —

2,354 2,354 —

Total ¥272,943 ¥272,943 ¥ —

(1) Payables ¥ 91,876 ¥ 91,876 ¥ —

(2) Short-term loans payable 67,326 67,326 —

(3) Bonds 46,996 47,741 745

(4) Long-term loans payable 154,638 155,595 957

Total ¥360,836 ¥362,538 ¥1,702

Derivative transactions†

(1) For which hedge accounting is not applied ¥ 3,023 ¥ 3,023 ¥ —

(2) For which hedge accounting is applied 1,638 1,638 —

Total ¥ 4,661 ¥ 4,661 ¥ —

Millions of yen

2014


(1) Cash and time deposits ¥ 33,135 ¥ 33,135 ¥ —

(2) Receivables 165,240 165,240 —




Allowance for doubtful accounts* (537) — —

1,567 1,567 —

Total ¥270,027 ¥270,027 ¥ —

(1) Payables ¥ 80,003 ¥ 80,003 ¥ —


(3) Bonds 36,961 37,434 473

(4) Long-term loans payable 158,213 159,445 1,232

Total ¥359,782 ¥361,487 ¥1,705


(1) For which hedge accounting is not applied ¥ 4,395 ¥ 4,395 ¥ —


Total ¥ 5,788 ¥ 5,788 ¥ —

50 Teijin Limited

Thousands of U.S. dollars

2014


(1) Cash and time deposits $ 321,949 $ 321,949 $ —

(2) Receivables 1,605,519 1,605,519 —




Allowance for doubtful accounts* (5,218) — —

15,225 15,225 —

Total $2,623,659 $2,623,659 $ —

(1) Payables $ 777,332 $ 777,332 $ —


(3) Bonds 359,124 363,720 4,596

(4) Long-term loans payable 1,537,243 1,549,213 11,970

Total $3,495,745 $3,512,311 $16,566


(1) For which hedge accounting is not applied $ 42,703 $ 42,703 $ —


Total $ 56,238 $ 56,238 $ —

* 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 and (3) short-term loans receivable

The terms of all of the above are short term and the fair value thereof 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 cate-

gorized by holding purpose.

(5) Long-term loans receivable

The fair value of long-term loans receivable, distinguished by 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 and (2) short-term loans payable

The terms of all of the above are short term and the fair value thereof is nearly equal to book value, so the book value is used

as fair value.

(3) 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.

(4) 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 conventional treatment.

51Teijin Limited

Derivative transactions See Note 7, “Derivative transactions.”

(Note 2) Financial instruments for which fair value is difficult to estimate:


2013 2014 2014

Unlisted shares ¥ 4,564 ¥ 4,008 $ 38,943

Shares in affiliated companies 21,760 26,576 258,220

Total ¥26,324 ¥30,584 $297,163

Market prices of the above shares are not available and the future cash flow cannot be estimated. Therefore, fair value is difficult

to estimate. Accordingly, these are not included in Note 6, “Investment securities.”

(Note 3) Expected repayment amounts of monetary assets and securities with maturity after the date of the accounting period are

as follows:

Millions of yen

2013

Within one yearOne year to five years

Over five years

Cash and time deposits ¥ 48,859 ¥ — ¥ —

Receivables 169,015 — —

Short-term loans receivable 14,243 — —

Long-term loans receivable 240 2,151 505

Millions of yen

2014


Over five years

Cash and time deposits ¥ 33,135 ¥ — ¥ —

Receivables 165,240 — —


Long-term loans receivable 45 1,559 500


2014


Over five years

Cash and time deposits $ 321,949 $ — $ —

Receivables 1,605,519 — —


Long-term loans receivable 437 15,148 4,858

(Note 4) Expected repayment of bonds and long-term loans payable:

See Note 9, “Loans payable.”

52 Teijin Limited

(2) Information on securities held by the Companies at March 31, 2014 is as follows:

a) There were no held-to-maturity debt securities with fair values at March 31, 2014.

b) The following table summarizes acquisition costs and book values (fair values) of available-for-sale securities with fair values as of

March 31, 2014.Millions of yen

2014

Acquisition cost Book value Difference

Securities with book values exceeding acquisition costs:

Corporate shares ¥10,755 ¥31,408 ¥20,653

Securities with book values not exceeding acquisition costs:

Corporate shares 24,832 20,077 (4,755)

Total ¥35,587 ¥51,485 ¥15,898


2014



Corporate shares $104,499 $305,169 $200,670



Total $345,774 $500,243 $154,469

c) Total sales of available-for-sale securities in the year ended March 31, 2014 and the related gains and losses amounted to ¥10,847

million ($105,393 thousand), ¥8,296 million ($80,606 thousand) and ¥7 million ($68 thousand), respectively.

d) Available-for-sale securities with no fair values as of March 31, 2014 consisted mostly of non-listed equity securities, bonds and others

amounting to ¥2,601 million ($25,272 thousand), ¥1 million ($10 thousand) and ¥1,406 million ($13,661 thousand), respectively.

Note 6. Investment securities

(1) Information on securities held by the Companies at March 31, 2013 is as follows:

a) There were no held-to-maturity debt securities with fair values at March 31, 2013.

b) The following table summarizes acquisition costs and book values (fair values) of available-for-sale securities with fair values as of

March 31, 2013.Millions of yen

2013



Corporate shares ¥11,740 ¥33,830 ¥22,090



Total ¥18,048 ¥38,472 ¥20,424

c) Total sales of available-for-sale securities in the year ended March 31, 2013 and the related gains and losses amounted to ¥345

million, ¥45 million and ¥105 million, respectively.

d) Available-for-sale securities with no fair values as of March 31, 2013 consisted mostly of non-listed equity securities, bonds and

others amounting to ¥3,714 million, ¥1 million and ¥850 million, respectively.

53Teijin Limited

(1) The following tables summarize market value information of outstanding derivative transactions as of March 31, 2013 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, 2013,

were as follows:

Currency-related derivativesMillions of yen

2013

Contract amountAmount of principal due over one year Fair value Recognized gain (loss)

Foreign currency swap transactions:

Japanese yen received for Euro ¥ 1,922 ¥ — ¥ 75 ¥ 75

U.S. dollars received for Euro ¥ 3,018 ¥ 3,018 ¥ 171 ¥ 171

U.S. dollars received for Japanese yen ¥ 12,350 ¥ 12,350 ¥ 2,617 ¥ 2,617

Foreign currency forward contract transactions:

Sell: U.S. dollars ¥ 8,529 ¥ — ¥ (135) ¥ (135)

Sell: Euro ¥ 1,524 ¥ — ¥ (39) ¥ (39)

Sell: Japanese yen ¥ 721 ¥ — ¥ 121 ¥ 121

Sell: Thai baht ¥ 0 ¥ — ¥ (0) ¥ (0)

Buy: U.S. dollars ¥ 2,020 ¥ — ¥ 154 ¥ 154

Buy: Euro ¥ 145 ¥ — ¥ (2) ¥ (2)

Buy: Renminbi ¥ 399 ¥ — ¥ 54 ¥ 54

Buy: Singapore dollars ¥ 1,411 ¥ — ¥ 7 ¥ 7

Buy: British pounds ¥ 0 ¥ — ¥ — ¥ —


accounting is applied.

Currency-related derivatives: Principle-based methodMillions of yen

2013

Contract amountAmount of principal due over one year Fair value


Sell: U.S. dollars ¥ 20,072 ¥ 9,762 ¥ 155

Sell: Euro ¥ 608 ¥ — ¥ (7)

Sell: Japanese yen ¥ 4,472 ¥ 2,302 ¥ 774

Buy: U.S. dollars ¥ 18,326 ¥ — ¥ 1,196

Buy: Euro ¥ 139 ¥ — ¥ 5

Interest rate–related derivatives: Principle-based methodMillions of yen

2013


Interest rate swap transactions:

Receive variable rate in Euro, pay fixed rate in Euro ¥ 24,750 ¥ 24,750 ¥ (428)

Receive variable rate in Euro, pay variable rate in Euro ¥ 833 ¥ 833 ¥ (3)

Receive variable rate in Japanese yen, pay variable rate in Euro ¥ 1,922 ¥ — ¥ 4

Receive variable rate in U.S. dollars, pay fixed rate in Euro ¥ 3,018 ¥ 3,018 ¥ (59)

Note 7. Derivative transactions

54 Teijin Limited

Interest rate–related derivatives: Conventional methodMillions of yen

2013



Receive variable rate in Japanese yen, pay fixed rate in Japanese yen ¥67,650 ¥67,650 ¥—

(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, 2014,

were as follows:

Currency-related derivativesMillions of yen

2014



Japanese yen received for Euro ¥ 6,981 ¥ — ¥ (20) ¥ (20)

U.S. dollars received for Euro ¥ 3,541 ¥ — ¥ (66) ¥ (66)

U.S. dollars received for Japanese yen ¥ 12,350 ¥ — ¥ 4,113 ¥ 4,113


Sell: U.S. dollars ¥ 3,584 ¥ — ¥ 136 ¥ 136

Sell: Euro ¥ 1,786 ¥ — ¥ (29) ¥ (29)

Sell: Japanese yen ¥ 987 ¥ — ¥ 245 ¥ 245

Buy: U.S. dollars ¥ 1,351 ¥ — ¥ 11 ¥ 11

Buy: Euro ¥ 95 ¥ — ¥ 0 ¥ 0

Buy: Renminbi ¥ 381 ¥ — ¥ 6 ¥ 6

Buy: British pounds ¥ 0 ¥ — ¥ 0 ¥ 0

Buy: Japanese yen ¥ 10 ¥ — ¥ 0 ¥ 0


2014



Japanese yen received for Euro $ 67,829 $ — $ (194) $ (194)

U.S. dollars received for Euro $ 34,405 $ — $ (641) $ (641)

U.S. dollars received for Japanese yen $ 119,996 $ — $ 39,963 $ 39,963


Sell: U.S. dollars $ 34,823 $ — $ 1,321 $ 1,321

Sell: Euro $ 17,353 $ — $ (282) $ (282)

Sell: Japanese yen $ 9,590 $ — $ 2,380 $ 2,380

Buy: U.S. dollars $ 13,127 $ — $ 107 $ 107

Buy: Euro $ 923 $ — $ 0 $ 0

Buy: Renminbi $ 3,702 $ — $ 58 $ 58

Buy: British pounds $ 0 $ — $ 0 $ 0

Buy: Japanese yen $ 97 $ — $ 0 $ 0

55Teijin Limited


accounting is applied.

Currency-related derivatives: Principle-based methodMillions of yen

2014



Sell: U.S. dollars ¥ 10,680 ¥ — ¥ 709

Sell: Euro ¥ 950 ¥ — ¥ (11)

Sell: Japanese yen ¥ 1,890 ¥ — ¥ 573

Buy: U.S. dollars ¥ 16,257 ¥ — ¥ 190

Buy: Euro ¥ 70 ¥ — ¥ 0

Buy: CHF ¥ 3 ¥ — ¥ 0

Buy: British pounds ¥ 0 ¥ 0 ¥ 0

Buy: Renminbi ¥ 49 ¥ — ¥ 0


2014



Sell: U.S. dollars $ 103,770 $ — $ 6,889

Sell: Euro $ 9,230 $ — $ (107)

Sell: Japanese yen $ 18,364 $ — $ 5,567

Buy: U.S. dollars $ 157,958 $ — $ 1,846

Buy: Euro $ 680 $ — $ 0

Buy: CHF $ 29 $ — $ 0

Buy: British pounds $ 0 $ 0 $ 0

Buy: Renminbi $ 476 $ — $ 0

Interest rate-related derivatives: Principle-based methodMillions of yen

2014



Receive variable rate in Euro, pay fixed rate in Euro ¥ 12,749 ¥ 4,250 ¥ (65)

Receive variable rate in Euro, pay variable rate in Euro ¥ 977 ¥ — ¥ (1)

Receive variable rate in Japanese yen, pay variable rate in Euro ¥ 6,981 ¥ — ¥ 24

Receive variable rate in U.S. dollars, pay fixed rate in Euro ¥ 3,541 ¥ 3,541 ¥ (26)


2014



Receive variable rate in Euro, pay fixed rate in Euro $ 123,873 $ 41,294 $ (632)

Receive variable rate in Euro, pay variable rate in Euro $ 9,493 $ — $ (10)

Receive variable rate in Japanese yen, pay variable rate in Euro $ 67,829 $ — $ 233

Receive variable rate in U.S. dollars, pay fixed rate in Euro $ 34,405 $ 34,405 $ (253)

56 Teijin Limited

Interest rate–related derivatives: Conventional methodMillions of yen

2014



Receive variable rate in Japanese yen, pay fixed rate in Japanese yen ¥87,650 ¥87,650 ¥—


2014



Receive variable rate in Japanese yen, pay fixed rate in Japanese yen $851,632 $851,632 $—

(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) Interest rate swaps for which conventional methods have been applied are accounted for together with long-term items. Therefore, the

fair value of interest rate swaps is included in the fair value of the hedged long-term debt.

Inventories at March 31, 2013 and 2014 consisted of the following:


2013 2014 2014

Finished goods ¥ 74,111 ¥ 79,014 $ 767,722

Work in process 9,468 9,084 88,263

Raw materials 22,558 25,208 244,928

Supplies 5,496 5,362 52,099

Total ¥ 111,633 ¥ 118,668 $ 1,153,012

Note 8. Inventories

57Teijin Limited


2013 2014 2014

Unsecured:

Banks and insurance companies at 0.2–1.5%, maturing serially through 2021 ¥ 88,747 ¥108,657 $1,055,743

1.6% bonds, due 2013 15,000 — —

1.8% bonds, due 2015 15,000 15,000 145,744

0.7% bonds, due 2019 15,000 15,000 145,744

0.1% medium-term notes, due 2013 998 — —

0.2% medium-term notes, due 2013 998 — —

0.1% medium-term notes, due 2014 — 497 4,829

0.2% medium-term notes, due 2014 — 6,463 62,796

Loans denominated in foreign currencies (principally U.S. dollars), 0.4–2.9% maturing serially through 2018 65,888 49,557 481,510

Lease obligations at 8.5%, maturing serially through 2024 1,805 1,745 16,955

203,436 196,919 1,913,321

Less amounts due within one year 69,770 29,107 282,812

Total ¥133,666 ¥167,812 $1,630,509

The aggregate annual maturities of long-term loans payable at March 31, 2014 were as follows:

Year ending March 31 Millions of yenThousands of U.S. dollars

2015 ¥29,107 $282,812

2016 34,509 335,300

2017 28,295 274,922

2018 44,159 429,061

2019 and thereafter 60,848 591,226

Short-term loans payable were represented by bank overdrafts and short-term notes with average annual interest rates of approximately

1.2% and 1.1% in 2013 and 2014, respectively.

Long-term loans payable at March 31, 2013 and 2014 consisted of the following:

Note 9. Loans payable

(1) The liabilities for severance and retirement benefits included in the liability section of the consolidated balance sheets as of March 31,

2013 consisted of the following:Millions of yen

2013

Projected benefit obligation ¥ 83,392

Unrecognized prior service costs (852)

Less unrecognized actuarial differences (8,496)

Less fair value of plan assets (76,697)

Prepaid pension cost 23,004

Liability for severance and retirement benefits ¥ 20,351

As described in Note 2, the Company and certain consolidated subsidiaries transferred the defined benefit portion of their pension

plans for current employees to a defined contribution pension plan. The effect of this change was to decrease projected benefit obliga-

tion by ¥27,133 million, fair value of plan assets by ¥16,719 million, unrecognized actuarial differences by ¥4,585 million and unrecog-

nized prior service costs by ¥3,253 million and to increase prepaid pension cost by ¥9,082 million in the consolidated balance sheets

as of March 31, 2013.

Note 10. Employees’ retirement benefits

58 Teijin Limited

Discount rate*2013

Defined benefit portion of pension plan Mainly 0.1%

Lump-sum benefit plan Mainly 1.0%

(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. However, effective from October

(5) The funded status of the multiemployer contributory funded pension plans at December 31, 2012 (based on information available as of

March 31, 2013), to which contributions are recorded as net periodic retirement benefit costs by the Companies, is as follows:Millions of yen

2013

Fair value of plan assets ¥ 1,656,053

Benefit obligation in the calculation of pension financing (1,647,481)

Difference ¥ 8,572

Companies’ contribution percentage for multiemployer contributory funded pension plans* 6.7%

* 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.

Expected return rate2013

Mainly 2.7%

1, 2012, the Company and certain consolidated subsidiaries

transferred the defined benefit portions of their pension plans

for current employees to a defined contribution pension plan.

As a result, the period used to calculate actuarial gains and

losses was changed to mainly five years, which is within the

average of the estimated remaining payout periods for these

employees at the time of the transfer.

The assets to be transferred to the defined contribution pension plan amount to ¥25,383 million and the transfer other than plan

assets is made over four years. At March 31, 2013, the assets not transferred to the plan amount to ¥6,546 million, which is included

in other payables and other non-current liabilities.

(2) The expenses for severance and retirement benefits included in the consolidated statements of operations for the year ended March 31,

2013 comprised the following:Millions of yen

2013

Service costs—benefits earned during the year ¥ 3,225

Interest cost on projected benefit obligation 1,795

Expected return on pension assets (1,546)

Amortization of actuarial differences 3,896

Amortization of prior service costs (300)

Severance and retirement benefit expenses ¥ 7,070

Gains and losses of retirement benefit plans ¥ (418)

Contribution to defined contribution pension plan 1,592

Total ¥ 8,244

(3) The discount rate and the rate of expected return on plan assets used by the Companies for the year ended March 31, 2013 are as fol-

lows:.

59Teijin Limited

(6) Funded contributory pension plan

(a) Projected benefit obligation at beginning and end of year (excludes benefits of the companies to which the simplified method is

applied)


2014 2014

Balance at April 1, 2013 ¥80,181 $779,061

Service cost 2,269 22,046

Interest cost 597 5,801

Actuarial loss (gain) (437) (4,246)

Benefits paid (6,578) (63,914)

Other 16 156

Balance at March 31, 2014 ¥76,048 $738,904

(b) Fair value of plan assets at beginning and end of year (excludes benefits of the companies to which the simplified method is applied)


2014 2014

Balance at April 1, 2013 ¥74,309 $722,007

Expected return on plan assets 1,315 12,777

Actuarial loss (gain) 4,791 46,551

Contributions paid by the employer 652 6,335

Benefits paid (5,140) (49,942)

Balance at March 31, 2014 ¥75,927 $737,728

(c) Projected benefit obligation at beginning and end of year of the companies to which the simplified method is applied


2014 2014

Balance at April 1, 2013 ¥1,307 $12,699

Retirement benefit costs 306 2,973

Benefits paid (127) (1,234)

Contributions paid by the employer (240) (2,332)

Balance at March 31, 2014 ¥1,246 $12,106

(d) Adjustments to reconcile projected benefit obligation and fair value of plan assets at end of year with the difference between net

defined benefit liability and net defined benefit asset recognized in the consolidated balance sheets


2014 2014

Funded retirement benefit obligations ¥ 79,030 $ 767,878

Plan assets (78,533) (763,049)

Subtotal ¥ 497 $ 4,829

Unfunded retirement benefit obligations 870 8,453

Total net liability (asset) for retirement benefits at March 31, 2014 1,367 13,283

Liability for retirement benefits 30,204 293,471

Asset for retirement benefits (28,837) (280,188)

Total net liability (asset) for retirement benefits at March 31, 2014 ¥ 1,367 $ 13,283

Note: This calculation includes benefits of the companies to which the simplified valuation method is applied.

60 Teijin Limited

(e) Severance and retirement benefits expenses


2014 2014

Service cost ¥ 2,269 $ 22,046

Interest cost 597 5,801

Expected return on plan assets (1,316) (12,787)

Net actuarial loss amortization 3,550 34,493

Past service costs amortization 301 2,925

Total retirement benefit costs for the fiscal year ended March 31, 2014 based on the simplified method 306 2,973

Other (Extra retirement payments, etc.) 1,677 16,294

Total retirement benefit costs for the fiscal year ended March 31, 2014 ¥ 7,384 $ 71,745

(f) Remeasurements of defined benefit plans

Components of remeasurements of defined benefit plans, excluding the impact of tax effect accounting, and the value thereof were

as follows:


2014 2014

Past service costs that are yet to be recognized ¥(628) $(6,101)

Actuarial gains and losses that are yet to be recognized (10) (97)

Total balance at March 31, 2014 ¥(638) $(6,198)

(g) Composition of plan assets

The composition of plan assets was as follows:2014

Equity securities 38%

Debt securities 36%

General accounts 18%

Other 8%

Total 100%

(h) Determination of long-term expected rate of return on plan assets

The long-term expected rate of return on plan assets is determined by considering the current and projected future allocation of plan

assets and present and future estimates for long-term investment returns calculated based on the diverse range of assets comprising

plan assets.

(i) Actuarial assumptions

Actuarial assumptions used at March 31, 2014 were as follows: 2014

Discount rate (funded contributory pension plan) Mainly 0.1%

Debt securities (lump-sum benefit plan) Mainly 1.0%

Long-term expected rate of return on plan assets Mainly 2.7%

(7) Defined contribution pension plans

Contributions to the defined contribution pension plans of the Companies totaled ¥3,322 million ($32,277 thousand).

61Teijin Limited

earnings reserve is included in retained earnings in the accompany-

ing 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.

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

At the Board of Directors’ meeting held on May 9, 2014, appropriations of retained earnings for year-end dividends applicable to the

year ended March 31, 2014 were duly approved as follows:


Cash dividends: ¥2.00 ($0.02) per share ¥1,966 $19,102

Note 11. Net assets

(8) Multiemployer pension plans

The Group’s contributions to multiemployer pension plans, for which contributions are negotiated, as well as contributions to defined

contribution plans, totaled ¥1,754 million ($17,042 thousand).

The funded status of the multiemployer contributory funded pension plans at December 31, 2013 (based on information available

as of March 31, 2014), for which contributions are recorded as net periodic retirement benefit costs by the Companies, is as follows:

Millions of yenThousands of U.S.

dollars

2014 2014

Fair value of plan assets ¥ 2,032,678 $ 19,750,078

Benefit obligation in the calculation of pension financing (1,939,897) (18,848,591)

Difference ¥ 92,781 $ 901,487

Companies’ contribution percentage for multiemployer contributory funded pension plans* 5.3%

* 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.

62 Teijin Limited

Certain consolidated subsidiaries accounted for impairment losses for the year ended March 31, 2013 as follows:

Impairment lossLocation Usage purpose Type of assets Millions of yen

Chiyoda-ku, Tokyo Advanced Fibers and Composites business Goodwill ¥17,344

California, U.S.A., etc. Healthcare business Goodwill, etc. 5,354

Nordrhein-Westfalen, GermanyAdvanced Fibers and Composites, High-performance fibers production facilities Machinery, etc. 3,112

Tennessee, U.S.A.Advanced Fibers and Composites, High-performance fibers production facilities Machinery, etc. 1,876

Others — — 1,731

Total ¥29,417

Certain consolidated subsidiaries accounted for impairment losses for the year ended March 31, 2014 as follows:

Impairment lossLocation Usage purpose Type of assets Millions of yen


Singapore Performance Polymer Products facilities Machinery, etc. ¥3,028 $29,422

Namegata City in Ibaraki Prefecture Performance Polymer Products facilities Buildings, Machinery, etc. 1,615 15,692

Zhejiang, PRC Performance Polymer Products facilities Machinery, etc. 1,272 12,359

Matsuyama City in Ehime Prefecture Polymerization facilities Machinery, etc. 1,031 10,017

Others — — 1,835 17,829

Total ¥8,781 $85,319

Note 12. Impairment loss

The Companies set up cash generating units by business unit

for 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 amount of ¥2,952

million ($28,682 thousand) as “Impairment loss.” Recoverable

amount was measured by value in use, which was calculated by

discounting future cash flows with discount rates of 6–19%.

The book values of idle assets with no utilization plan were

written down to the recoverable amount of ¥5,829 million ($56,637

thousand). Recoverable amount was measured by selling price,

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.

63Teijin Limited

Components of other comprehensive income for the years ended March 31, 2013 and 2014 consisted of the following:

Millions of yenThousands of U.S.

dollars

2013 2014 2014

Valuation difference on available-for-sale securities:

Increase (decrease) during the year ¥ 5,460 ¥ 4,231 $ 41,110

Reclassification adjustments 148 (8,468) (82,278)

Subtotal, before tax ¥ 5,608 ¥ (4,237) $ (41,168)

Tax (expenses) or benefit (1,969) 1,446 14,050

Subtotal, net of tax ¥ 3,639 ¥ (2,791) $ (27,118)

Deferred gains (losses) on hedges:

Increase (decrease) during the year ¥ 2,057 ¥ 3,351 $ 32,559

Reclassification adjustments (909) (3,617) (35,144)

Subtotal, before tax ¥ 1,148 ¥ (266) $ (2,585)

Tax (expenses) or benefit (385) 215 2,089

Subtotal, net of tax ¥ 763 ¥ (51) $ (496)

Foreign currency translation adjustments:

Subtotal, net of tax ¥ 8,786 ¥ 7,957 $ 77,313

Share of other comprehensive income of associates accounted for using the equity method:

Increase (decrease) during the year ¥ 596 ¥ 1,504 $ 14,613

Reclassification adjustments 0 1 10

Subtotal ¥ 596 ¥ 1,505 $ 14,623

Total other comprehensive income ¥ 13,784 ¥ 6,620 $ 64,322

Note 13. Consolidated statements of comprehensive income

The Company is subject to a number of taxes based on income,

which, in the aggregate, indicate a statutory rate in Japan of

approximately 37.8% for the year ended March 31, 2014. 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 year ended March 31, 2014.

Due to loss before income tax for the year ended March 31,

2013, reconciliation between the effective tax rate and the actual

income tax rate is omitted.

Note 14. Income taxes

64 Teijin Limited

2014

Effective tax rate 37.8%

Non-deductible expenses 3.2

Per capita inhabitants’ taxes 1.2

Difference in statutory tax rate between Japan and other countries 14.4

Equity in earnings of affiliates (11.1)

Amortization of goodwill 7.0

Changes in valuation allowance (0.7)

Refund of income taxes (3.7)

Decrease in statutory tax rate 2.4

Other 4.0

Actual income tax rate 54.5%

The Act on the Partial Amendment of the Income Tax Act, etc., was promulgated on March 31, 2014. Accordingly, Special Corporate

Tax for Reconstruction will no longer be imposed from the fiscal year commencing on or after April 1, 2014. Thus, the effective statutory tax

rate used to calculate the deferred tax assets and deferred tax liabilities for the current fiscal year was changed from 37.8% in the previous

fiscal year to 35.4% in connection with the temporary difference that is expected to be eliminated in the fiscal year commencing on April 1,

2014. Consequently, the amount of deferred tax assets (less the amount of deferred tax liabilities) declined by ¥352 million ($3,420 thousand),

income taxes–deferred posted in the current fiscal year increased by ¥356 million ($3,459 thousand) while deferred gains (losses) on hedges

increased by ¥4 million ($39 thousand).

Significant components of the Companies’ deferred tax assets and liabilities as of March 31, 2013 and 2014 are as follows:


2013 2014 2014

Deferred tax assets:

Excess bonuses accrued ¥ 3,245 ¥ 3,014 $ 29,285

Provision for loss on guarantees 246 292 2,837

Write-down of investment securities 2,638 2,653 25,777

Retirement benefits 4,456 4,647 45,152

Accumulated impairment loss 4,380 8,402 81,636

Net operating loss carry forwards 57,434 47,166 458,278

Other 17,257 16,720 162,457

Total ¥ 89,656 ¥ 82,894 $ 805,422

Valuation allowance (64,486) (60,327) (586,155)

Total deferred tax assets ¥ 25,170 ¥ 22,567 $ 219,267

Offset with deferred tax liabilities (11,862) (13,026) (126,564)

Net deferred tax assets ¥ 13,308 ¥ 9,541 $ 92,703

Deferred tax liabilities:

Adjustments to fixed assets based on Corporate Tax Law ¥ (5,520) ¥ (5,505) $ (53,488)

Accelerated depreciation of foreign subsidiaries’ fixed assets (2,269) (1,889) (18,354)

Tax effect of foreign subsidiaries’ undistributed earnings (1,398) (1,625) (15,789)

Adjustment of carrying amount based on fair value (5,060) (5,103) (49,582)

Valuation difference on available-for-sale securities (6,534) (4,983) (48,416)

Other (3,752) (3,765) (36,582)

Total deferred tax liabilities ¥ (24,533) ¥ (22,870) $ (222,211)

Offset with deferred tax assets 11,862 13,027 126,574

Net deferred tax liabilities ¥ (12,671) ¥ (9,843) $ (95,637)

65Teijin Limited

(1) Finance leases as lessee

Finance lease transactions that commenced on or before March 31, 2008, and which do 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, 2013 and 2014 are as follows: Millions of yen

Year ended March 31, 2013 Original lease obligation Payments to date Payments remaining

Machinery, equipment and vehicles ¥1,803 ¥1,749 ¥54

Other fixed assets 493 467 26

Intangible assets 44 43 1

Total ¥2,340 ¥2,259 ¥81

Millions of yen


Machinery, equipment and vehicles ¥ 697 ¥ 697 ¥—

Other fixed assets 377 374 3

Intangible assets 8 8 —

Total ¥1,082 ¥1,079 ¥ 3



Machinery, equipment and vehicles $ 6,772 $ 6,772 $—

Other fixed assets 3,663 3,634 29

Intangible assets 78 78 —

Total $10,513 $10,484 $29

Future minimum lease payments for the remaining lease periods as of March 31, 2013 and 2014 including interest are as follows:


2013 2014 2014

Due within one year ¥78 ¥ 3 $29

Due over one year 3 — —

Total ¥81 ¥ 3 $29

Lease payments for finance leases that do not transfer ownership were ¥151 million and ¥78 million ($758 thousand) for the years

ended March 31, 2013 and 2014, respectively.

(2) Operating leases as lessee

Future minimum lease payments for the remaining lease periods as of March 31, 2013 and 2014 are as follows:


2013 2014 2014

Due within one year ¥ 345 ¥ 387 $ 3,760

Due over one year 2,485 2,733 26,555

Total ¥2,830 ¥3,120 $30,315

Note 15. Leases

66 Teijin Limited

Information on stock option plans at March 31, 2014 is as shown below.

Teijin LimitedThe account and the amount related to stock options in the years ended March 31, 2013 and 2014 are as follows:


Account 2013 2014 2014

Selling, general and administrative expenses ¥137 ¥141 $1,370

The following tables summarize the contents of stock options as of March 31, 2014.

Company name Teijin Limited

Position and number of grantees 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





























Note 16. Stock option plans

67Teijin Limited




Date of issue March 12, 2012



Period subscription rights are to be exercised From March 12, 2012 to March 11, 2032















The following tables summarize the numbers and movements of stock options as of March 31, 2014.

Non-exercisable stock optionsStocks


2006 2007 2008 2009 2010 2012 2013 2014

Stock options outstanding at April 1, 2013 — — — — — — — —

Stock options granted — — — — — — — 618,000

Forfeitures — — — — — — — —

Conversion to exercisable stock options — — — — — — — 618,000

Stock options outstanding at March 31, 2014 — — — — — — — —

Exercisable stock optionsStocks


2006 2007 2008 2009 2010 2012 2013 2014

Stock options outstanding at April 1, 2013 61,000 1,000 225,000 326,000 313,000 724,000 698,000 —

Conversion from non-exercisable stock options — — — — — — — 618,000

Stock options exercised 14,000 18,000 49,000 36,000 29,000 64,000 55,000 —

Forfeitures — — — — — — — —

Stock options outstanding at March 31, 2014 47,000 83,000 176,000 290,000 284,000 660,000 643,000 618,000

The following table summarizes value information of stock options as of March 31, 2014.

Yen


2006 2007 2008 2009 2010 2012 2013 2014

Paid-in value ¥ 1 ¥ 1 ¥ 1 ¥ 1 ¥ 1 ¥ 1 ¥ 1 ¥ 1

Average market price of the stock at the time of exercise ¥ 225 ¥ 225 ¥ 224 ¥ 224 ¥ 224 ¥ 225 ¥ 225 ¥ —

Fair value at the date of grant ¥ 663 ¥ 610 ¥ 307 ¥ 253 ¥ 261 ¥ 245 ¥ 196 ¥ 228

68 Teijin Limited

The method of estimation for the fair value of stock options granted in the year ended March 31, 2014 is as follows:

Method of valuation Black–Scholes Model

Volatility 32%

Expected remaining period 5.0 years

Expected dividend ¥4.0 per share

Interest rate without any risks 0.18%

Infocom CorporationThe account and the amount related to stock options in the year ended March 31, 2014 are as follows:


Account 2014 2014

Selling, general and administrative expenses ¥26 $253

The following table summarizes the contents of stock options as of March 31, 2014.

Company name Infocom Corporation



Date of issue May 31, 2013



Period subscription rights are to be exercised From June 1, 2013 to May 31, 2043

The following tables summarize the number and movement of stock options as of March 31 2014.

Non-exercisable stock optionsStocks


2014

Stock options outstanding at April 1, 2013 —

Stock options granted 36,200

Forfeitures —

Conversion to exercisable stock options 36,200

Stock options outstanding at March 31, 2014 —

Exercisable stock optionsStocks


2014

Stock options outstanding at April 1, 2013 —

Conversion from non-exercisable stock options 36,200

Stock options exercised —

Forfeitures —

Stock options outstanding at March 31, 2014 36,200

69Teijin Limited

The following table summarizes value information of stock options as of March 31, 2014.

Yen


2014

Paid-in value ¥ 1

Average market price of the stock at the time of exercise ¥ —

Fair value at the date of grant ¥ 143,839

The method of estimation for the fair value of stock options granted in the year ended March 31, 2014 is as follows:

Method of valuation Black–Scholes Model

Volatility 45.8%

Expected remaining period 8.0 years

Expected dividend 1.81%

Interest rate without any risks 0.76%

Note 17. Segment information

(1) Reportable operating segment information

The Company’s reportable operating segments are components 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 per-

formance. Up to and including the year ended March 31, 2014, the Company has divided its operations into business groups based on

the type of product, nature of business and services provided. The business groups formulate product and service strategies in a com-

prehensive manner in Japan and overseas. Accordingly, the Company divided its operations into four reportable operating segments

on the same basis as applied internally: Advanced Fibers and Composites; Electronics Materials and Performance Polymer Products;

Healthcare; and Trading and Retail.

The description of each segment is 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

(2) Accounting methods used to calculate segment sales, segment income, segment assets and other items for reportable operating

segments

Accounts for reportable operating segments are for the most part calculated in line with generally accepted standards for the prepara-

tion of consolidated financial statements. Segment income for reportable operating 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.

70 Teijin Limited

Millions of yen

2013


Electronics Materials and Performance

Polymer Products Healthcare

Trading and Retail Total Others

Consolidated total

Sales:

1) External customers ¥111,166 ¥175,538 ¥138,334 ¥237,160 ¥662,198 ¥ 83,515 ¥745,713

2) Intersegment net sales and transfer 23,790 5,688 0 3,158 32,636 40,013 72,649

Net sales 134,956 181,226 138,334 240,318 694,834 123,528 818,362

Segment income (loss) (4,697) (1,921) 24,809 4,713 22,904 4,231 27,135

Segment assets 201,985 167,485 104,509 119,725 593,704 94,676 688,380

Other items:

Depreciation 15,961 9,018 8,454 1,863 35,296 2,653 37,949

Amortization of goodwill 5,553 190 1,464 16 7,223 (67) 7,156

Investments in associates accounted for using the equity method 5,730 11,811 931 938 19,410 9,011 28,421

Increase in tangible and intangible fixed assets 13,253 4,019 11,680 2,239 31,191 3,751 34,942

Millions of yen

2014





Consolidated total

Sales:

1) External customers ¥123,551 ¥179,446 ¥138,415 ¥254,180 ¥695,592 ¥ 88,833 ¥784,425

2) Intersegment net sales and transfer 27,898 4,851 — 4,234 36,983 22,608 59,591

Net sales 151,449 184,297 138,415 258,414 732,575 111,441 844,016

Segment income (loss) 5,742 (7,218) 24,529 5,186 28,239 1,741 29,980

Segment assets 199,099 157,913 124,753 121,847 603,612 87,106 690,718

Other items:

Depreciation 16,314 9,985 9,789 1,795 37,883 3,046 40,929

Amortization of goodwill 1,435 190 1,116 16 2,757 (43) 2,714

Investments in associates accounted for using the equity method 7,546 16,658 879 698 25,781 9,786 35,567


(3) Segment sales, segment income, segment assets and other items for reportable operating segments

Segment information for the years ended March 31, 2013 and 2014 is as shown below.

71Teijin Limited


2014





Consolidated total

Sales:

1) External customers $1,200,457 $1,743,548 $1,344,880 $2,469,685 $6,758,570 $ 863,127 $7,621,697

2) Intersegment net sales and transfer 271,065 47,134 — 41,139 359,338 219,665 579,003

Net sales 1,471,522 1,790,682 1,344,880 2,510,824 7,117,908 1,082,792 8,200,700

Segment income (loss) 55,791 (70,132) 238,331 50,389 274,379 16,915 291,294

Segment assets 1,934,502 1,534,328 1,212,136 1,183,900 5,864,866 846,347 6,711,213

Other items:

Depreciation 158,512 97,017 95,113 17,441 368,083 29,596 397,679

Amortization of goodwill 13,944 1,846 10,843 155 26,788 (418) 26,370

Investments in associates accounted for using the equity method 73,319 161,854 8,541 6,782 250,496 95,083 345,579


(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, the Company recognizes certain of the home healthcare devices as fixed assets and depreciates them using the straight-line method. As a result

of this change, segment income for healthcare in the year ended March 31, 2014 was ¥1,740 million ($16,906 thousand) higher than would have been the case had the

previous method of depreciation been used.

Reconciliations of published figures and aggregates of reportable operating segments for the years ended March 31, 2013 and

2014 are as shown below:


Adjustment for net sales 2013 2014 2014

Reportable operating segments ¥694,834 ¥732,575 $7,117,908

Others segment 123,528 111,441 1,082,792

Elimination of intersegment transactions (72,649) (59,591) (579,003)

Net sales ¥745,713 ¥784,425 $7,621,697


Adjustment for operating income 2013 2014 2014

Reportable operating segments ¥22,904 ¥ 28,239 $ 274,379

Others segment 4,231 1,741 16,915

Elimination of intersegment transactions 226 288 2,798

Corporate expenses* (15,003) (12,190) (118,441)

Operating income ¥12,358 ¥ 18,078 $ 175,651

* Corporate expenses are expenses that cannot be allocated to individual reportable operating segments and are primarily related to basic research and head office

administration.

72 Teijin Limited

Reconciliations of published figures and aggregates of reportable operating segments as of March 31, 2013 and 2014 are as

shown below:


Adjustment for assets 2013 2014 2014

Reportable operating segments ¥593,704 ¥603,612 $5,864,866

Others segment 94,676 87,106 846,347

Elimination of intersegment transactions 118,089 112,388 1,091,994

Corporate assets† (44,070) (34,695) (337,107)

Total assets ¥762,399 ¥768,411 $7,466,100

† 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

2013

Other items Reportable operating segments Others Adjustment Total

Depreciation ¥35,296 ¥2,653 ¥1,772 ¥39,721

Amortization of goodwill 7,223 (67) — 7,156

Investments in associates accounted for using the equity method 19,410 9,011 — 28,421

Increase in tangible and intangible fixed assets 31,191 3,751 1,319 36,261

Millions of yen

2014


Depreciation ¥37,883 ¥3,046 ¥2,021 ¥42,950





2014


Depreciation $368,083 $29,596 $19,635 $417,314




(4) Information by geographical segment

1. Net sales by region for the years ended March 31, 2013 and 2014 are as shown below:Millions of yen

2013

Japan China Asia Americas Europe and others Consolidated total

¥491,355 ¥97,807 ¥56,299 ¥51,398 ¥48,854 ¥745,713

Millions of yen

2014


¥494,741 ¥108,892 ¥68,802 ¥50,108 ¥61,882 ¥784,425

73Teijin Limited


2014


$4,807,044 $1,058,026 $668,500 $486,864 $601,263 $7,621,697

2. Tangible fixed assets by region as of March 31, 2013 and 2014 are as shown below:Millions of yen

2013

Japan Netherlands Asia Americas Europe Consolidated total

¥144,205 ¥47,744 ¥43,746 ¥3,373 ¥5,788 ¥244,856

Millions of yen

2014


¥140,096 ¥47,824 ¥40,019 ¥2,487 ¥6,435 ¥236,861


2014


$1,361,213 $464,672 $388,836 $24,164 $62,524 $2,301,409

(5) Information by major customer

Information for the year ended March 31, 2014 is omitted as no single customer accounts for more than 10% of consolidated net sales

as reported in the consolidated statements of operations.

(6) Loss on impairment and goodwill by reportable operating segment

Losses on impairment by reportable operating segment for the years ended March 31, 2013 and 2014 are as shown below:Millions of yen

2013



Polymer Products Healthcare Trading and Retail OthersElimination and

corporate Consolidated total

Loss on impairment ¥23,474 ¥140 ¥5,354 ¥338 ¥111 ¥— ¥29,417

Millions of yen

2014





Loss on impairment ¥1,149 ¥6,065 ¥511 ¥— ¥1,056 ¥— ¥8,781


2014





Loss on impairment $11,164 $58,929 $4,965 $— $10,261 $— $85,319

74 Teijin Limited

Goodwill by reportable operating segment as of March 31, 2013 and 2014 is as shown below:Millions of yen

2013





Amortization of goodwill ¥ 5,553 ¥ 190 ¥1,464 ¥16 ¥ (67) ¥— ¥ 7,156

Balance as of March 31, 2013 ¥11,045 ¥1,829 ¥5,307 ¥31 ¥(107) ¥— ¥18,105

Millions of yen

2014





Amortization of goodwill ¥1,435 ¥ 190 ¥1,116 ¥16 ¥(43) ¥— ¥ 2,714

Balance as of March 31, 2014 ¥9,517 ¥1,639 ¥4,676 ¥16 ¥(42) ¥— ¥15,806


2014





Amortization of goodwill $13,944 $ 1,846 $10,843 $155 $(418) $— $ 26,370

Balance as of March 31, 2014 $92,470 $15,925 $45,433 $155 $(407) $— $153,576

Note 18. Contingent liabilities

At March 31, 2013 and 2014, the Companies were contingently liable as follows:


2013 2014 2014

(a) As endorser of notes discounted or endorsed ¥ 103 ¥ 55 $ 534

(b) As guarantors of indebtedness of:

Unconsolidated subsidiaries and affiliates ¥ 2,334 ¥ 4,198 $ 40,789

Others 2,683 2,595 25,214

¥ 5,017 ¥ 6,793 $ 66,003

(c) As guarantor of accounts receivable negotiated to third parties ¥ 1,732 ¥ 1,650 $ 16,032

Note 19. Business combinations under common control

(1) Company split and mergers involving subsidiaries

In line with a resolution approved by directors at the Board of Directors’ meeting held on May 9, 2012, on October 1, 2012, a company

split was implemented between the Company and its core subsidiary, Teijin Fibers Limited, involving all businesses of Teijin Fibers

Limited, except for its polyester fibers for apparel business. On the same date, four mergers were implemented involving the Company

and four of its subsidiaries (consolidated subsidiaries Teijin Techno Products Limited, Teijin Films Limited and Teijin Creative Staff Co.,

Ltd. and nonconsolidated subsidiary Teijin Intellectual Property Center Limited). The details are as follows:

a) Purpose of company splitThe purpose of the realignment was to enhance market responsiveness and integrate fundamental technologies in a bid to evolve

toward an organization that is capable of continuously creating value for customers, a key objective of the Company’s medium- to

long-term management vision.

75Teijin Limited

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

b. Legal form of the split

A simple absorption-type split in which the Company, as the successor company, absorbed all businesses of Teijin Fibers Limited,

the split company, except for its polyester fibers for apparel business

c. Allocation of shares

Because the two parties involved were the parent company and its wholly owned subsidiary, there was no issue or allocation of new

shares or other form of compensation as a result of this company split.

b) Outline of company splita. Agenda

Name Major business

Split company Teijin Fibers Limited Manufacturing and sales of polyester fibers

Successor company Teijin Limited Holding company

e. Split business

All businesses of Teijin Fibers Limited, except for its polyester fibers for apparel business

f. Outline of accounting treatment

This transaction was implemented as a business combination under common control, in accordance with accounting principles for

company splits.

c) Outline of mergersa. Agenda



Approval granted at the general shareholders’ meeting June 22, 2012

Effective date of merger October 1, 2012

For the Company, the mergers were simple absorption-type mergers as provided for in Article 796, Paragraph 3, of the Companies

Act of Japan, with the Company as the surviving company. For Teijin Techno Products Limited, Teijin Films Limited, Teijin Creative

Staff Co., Ltd. and Teijin Intellectual Property Center Limited, the mergers were short-form mergers as provided for in Article 784,

Paragraph 1, of the Companies Act of Japan, with these four consolidated subsidiaries as the absorbed companies. Accordingly,

there was no requirement that these contracts be submitted for approval at the general shareholders’ meeting.

b. Legal form of the mergers

A simple absorption-type merger in which the Company is the surviving company and Teijin Techno Products Limited, Teijin Films

Limited, Teijin Creative Staff Co., Ltd. and Teijin Intellectual Property Center Limited were the absorbed companies


Because Teijin Techno Products Limited, Teijin Films Limited, Teijin Creative Staff Co., Ltd. and Teijin Intellectual Property Center

Limited were wholly owned subsidiaries of the Company, there was no issue or allocation of new shares and no increase in capital

as a result of the mergers.

d. Names and major businesses of the parties

76 Teijin Limited


Name Major business

Absorbed companies Teijin Techno Products Limited Manufacturing and sales of high-performance fibers

Teijin Films Limited Coordination of joint venture films business

Teijin Creative Staff Co., Ltd. Contracting out of support service personnel for the Teijin Group

Teijin Intellectual Property Center Limited Intellectual property–related services for the Teijin Group

Surviving company Teijin Limited Holding company

e. Outline of accounting treatment

These transactions were implemented as business combinations under common control, in accordance with accounting principles

for business combinations.

(2) Transfer of intellectual property held by a subsidiary to the Company following a company split

At the Board of Directors’ meeting held on July 31, 2012, directors resolved to implement an absorption-type company split between

the Company and its consolidated subsidiary, Teijin Pharma Limited, whereby the Company would absorb the intellectual property, as

well as the agreements for licensing in technologies and pharmaceuticals and related rights and obligations, of all businesses of Teijin

Pharma Limited, the split company. The company split was implemented on October 1, 2012. The details are as follows:

a) Purpose of company splitThe purpose of the company split was to maximize the benefits of intellectual property by facilitating its unified management and

seamless deployment, with the aim of cultivating new healthcare businesses that integrate materials and healthcare technologies,

a key objective of the Company’s medium- to long-term management vision.

b) Outline of company splita. Agenda

Approval of the Board of Directors July 31, 2012

Date of contract August 1, 2012

Effective date of the company split October 1, 2012

b. Legal form of the split

A simple absorption-type split in which the Company, as the successor company, absorbed the intellectual property, as well as the

agreements for licensing in technologies and pharmaceuticals and related rights and obligations, of all businesses of Teijin Pharma

Limited



shares or other form of compensation as a result of the company split.


Name Major business

Split company Teijin Pharma LimitedR&D, production and sales of prescription and non-prescription pharmaceuticals; Sales and rentals of home healthcare equipment

Successor company Teijin Limited Holding company


This transaction was implemented as a business combination under common control in accordance with accounting principles for

company splits.

77Teijin Limited

(3) In line with a resolution approved by directors at the Board of Directors’ meeting held on May 9, 2012, a merger was implemented on

April 1, 2013 between the Company and its core subsidiary, Teijin Chemicals Limited, with the Company as the surviving company.

a) Purpose of mergerThe purpose of the realignment was to enhance market responsiveness and integrate fundamental technologies in a bid to evolve

toward an organization that is capable of continuously creating value for customers, a key objective of the Company’s medium- to

long-term management vision.

b) Outline of mergera. Agenda



Effective date of the merger April 1, 2013

For the Company, the merger was a simple absorption-type merger as provided for in Article 796, Paragraph 3, of the Companies

Act of Japan, with the Company as the surviving company. For Teijin Chemicals Limited, the merger was a short-form merger as

provided for in Article 784, Paragraph 1, of the Companies Act of Japan, with Teijin Chemicals Limited as the absorbed company.

Accordingly, there was no requirement that these contracts be submitted for approval at the general shareholders’ meeting.

b. Legal form of the merger

A simple absorption-type merger in which the Company is the surviving company and Teijin Chemicals Limited was the absorbed

company



shares and no increase in capital as a result of the merger.


Name Major business

Absorbed company Teijin Chemicals Limited Manufacturing and sales of films and plastics

Surviving company Teijin Limited Holding company


This transaction was implemented as a business combination under common control, in accordance with accounting principles for

business combinations.

Note 20. Subsequent events

At the Board of Directors’ meeting held on May 9, 2014, appropriations of retained earnings for year-end dividends applicable to the year

ended March 31, 2014 were duly approved as follows:


Cash dividends: ¥2.00 ($0.02) per share ¥1,966 $19,102

78 Teijin Limited

To the Shareholders and 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 as at March 31, 2013 and 2014, and the consolidated statements of operations, 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 policies and other explanatory information.

Management’s Responsibility for the Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with

accounting principles generally accepted in Japan, and for such internal control as management determines is necessary to enable the

preparation of consolidated financial statements that are free from material misstatements, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on these consolidated financial statements based on our 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 judgement, including the assessment of the risk 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.

Opinion

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of Teijin Limited and its

consolidated subsidiaries as at March 31, 2013 and 2014, and their financial performance and cash flows for the years then ended in

accordance with accounting principles generally accepted in Japan.

Emphasis of Matter

Without qualifying our opinion, we draw attention to Note 2 to the consolidated financial statements. As indicated in Note 2, Teijin Limited

and its consolidated subsidiaries previously recognized part of its leased home healthcare devices as expenses at the time of rental.

However, from the year ended March 31, 2014 Teijin Limited and its consolidated subsidiaries have recognized such devices as fixed assets

and has depreciated them using the straight-line method.

Convenience Translation

The U.S. dollar amounts in the accompanying consolidated financial statements with respect to the year ended March 31, 2014 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.

June 20, 2014

Tokyo, Japan

Independent Auditor’s Report

Building Value

© 2014 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.

Established June 17, 1918

Head Offices Osaka Head Office

6-7, Minami Hommachi 1-chome, Chuo-ku, Osaka 541-8587, Japan

Tel: +81-6-6268-2132

Tokyo Head Office

Kasumigaseki 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 115,132

Number of Teijin Group Companies Japan 55

Overseas 95

Total 150

Number of Teijin Group Employees

(Consolidated)

Japan 9,436

Overseas 6,320

Total 15,756

Stock Exchange Listing Tokyo

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.com

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, IR Section,

Finance & Investor Relations Department,

Kasumigaseki Common Gate West Tower,

2-1, Kasumigaseki 3-chome,

Chiyoda-ku, Tokyo 100-8585, Japan

Tel: +81-3-3506-4407 Fax: +81-3-5510-7977

E-mail: [email protected]

Corporate Data As of March 31, 2014

79Teijin Limited

http://www.teijin.com

Printed in Japan using waterless printing. Issued 2014.7

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