Pages(3.2MB) - Toyobo

Ideas + Chemistry2013Annual ReportYear ended March 31, 2013

ProfileThe Toyobo Group aims to become “The category leader, continuing to create new value that contributesto society in the environment, life science, and high-function products fields.” With its coretechnologies of polymerization, modification, processing and biotechnology as its base, Toyobo isexpanding its specialty businesses globally, focusing on five markets (Environment, Life science,Automotive, Electronics & Information Display and Lifestyle & safety) as it works to offer new valueas a high-function products manufacturer.The Group’s Corporate Philosophy is “Jun-ri-soku-yu.” This phrase was the personal motto of Eiichishibusawa, who was the founder of Toyobo 130 years ago. It expresses the idea that “Adhering toReason Leads to Prosperity.” As we continue to follow this Corporate Philosophy handed down fromthe time of its establishment, we will pass the baton to the next generations.The Group has four main business segments:• Films and Functional Polymers• Industrial Materials• Life Science• TextilesContentsConsolidated Financial Highlights ...............................1To shareholders and Investors ..................................... 2New Products ...................................................................... 8Business segments and Fields ................................... 10Topics .................................................................................. 12sustainability ................................................................... 17Corporate Governance ................................................. 19Management ................................................................... 20Investor Information ..................................................... 21Corporate Data ................................................................ 21Research and Development ....................................... 15Caution Regarding Business Forecasts and Forward-Looking StatementsBusiness forecasts and other forward-looking statements regarding Toyobo Co., Ltd. found in this annual report reflect the management’sassessment based on data available to it at the time that such were compiled. Readers are cautioned that actual businessresults may differ materially from these statements due to market trends, economic conditions, and other factors.

Consolidated Financial HighlightsTOYOBO CO., LTD. AND CONsOLIDATED sUBsIDIARIEsYears ended March 31Millions of yenThousands of U.s.dollars (Note 1)2013 2012 2011 2010 2009 2008 2013Net sales ¥339,009 ¥349,505 ¥340,573 ¥318,773 ¥367,271 ¥431,417 $3,604,561Films and functional polymers 137,394 138,437 126,960 114,928 122,312 134,631 1,460,861Industrial materials 71,891 71,221 71,462 63,157 74,656 76,138 764,391Life science 24,839 26,580 31,386 32,377 33,123 33,961 264,104Textiles 79,211 87,999 86,832 88,373 111,736 142,471 842,222Real estate (Note 2) 3,741 3,793 3,602 4,564 4,649 4,267 39,777Other businesses (Note 2) 21,932 21,474 20,331 15,374 20,795 39,950 233,195Operating income 17,081 18,305 20,890 11,469 11,229 27,075 181,616Net income (loss) 7,639 4,587 4,155 2,094 (12,505) 4,698 81,223EBITDA 30,327 37,778 40,003 31,888 32,435 46,349 322,456Depreciation and amortization 13,246 19,473 19,113 20,419 21,206 19,274 140,840Capital expenditure 18,041 16,517 13,931 15,166 20,039 32,486 191,823R&D expenses 9,966 10,820 10,634 10,296 10,669 10,877 105,965Total assets 447,445 437,841 443,516 438,439 443,816 494,496 4,757,523shareholders’ equity (excluding minority interests) 138,024 130,572 125,770 107,095 98,253 129,671 1,467,560Interest-bearing debt 159,430 154,888 151,804 170,963 178,901 178,842 1,695,162Net cash flows provided by (used in)operating activities 30,354 14,192 33,714 29,024 (368) 23,282 322,743Net cash flows used in investing activities (11,294) (15,061) (11,579) (13,455) (15,803) (10,193) (120,085)Net cash flows used in financing activities (2,636) (11,531) (9,915) (15,832) 17,379 (17,948) (28,028)YenU.s. dollars(Note 1)Per stock data (yen):Basic net income (loss) per share ¥8.61 ¥5.17 ¥5.49 ¥2.88 (¥17.92) ¥6.73 $0.092Cash dividends 3.50 3.50 3.50 3.50 3.50 5.00 0.037Financial ratios:ROA (%) (Note 3) 3.8 4.2 4.7 2.6 2.5 5.5ROE (%) 5.7 3.6 3.6 2.0 (11.0) 3.6Equity ratio (%) 30.8 29.8 28.4 24.4 22.1 26.2D/E ratio (times) (Note 4) 1.16 1.19 1.21 1.60 1.82 1.38Notes: 1. The U.s. dollar amounts in this report represent translations of yen for convenience only at the rate of ¥94.05 to $1.00.2. The real estate leasing business was previously included as part of the Other Businesses segment, but since the value of the assets in this business has exceeded 10% of the total value ofassets in the segment, from the year ended March 31, 2009, the segment classification has been changed to include the Real Estate segment. segment information for the year ended March31, 2008 has been restated.3. ROA: Operating income basis.4. D/E ratio: Interest-bearing debt/net assets excluding minority interests.Financial Statements, Notes and Independent Auditors’ ReportTo view, download them online at www.toyobo-global.com/ir/TOYOBO 2013 Annual Report 1

To Shareholdersand InvestorsReview ofFiscal 2013The business environment for theToyobo Group through the end offiscal 2013, ended March 31, 2013,was characterized by moderaterecovery in the Japanese economyas reconstruction work progressedin the wake of the Great East JapanEarthquake and positive effectsemerged thanks to policies torevitalize consumer spending. In theworld economy, however, uncertainReview of Fiscal 2013conditions continued along with theslowing of economic growth inChina and the emerging countrieselsewhere in Asia, the prolongeddebt issues faced by some Europeangovernments, and other issues.Amid this operating environment,the Toyobo Group aims to become“the category leader, continuing tocreate new value that contributes tosociety in the environment, life science,and high-function productsfields.” Accordingly, Toyobo is proceedingwith activities targeted atfurther expanding its businesses bydeveloping specialty products andincreasing their sales in domesticand overseas markets.However, recovery was in progress inthe fourth quarter, even after factoringin the effects of lower shipmentsin the first quarter, but deteriorationof Japanese-Chinese relationsemerged from the beginning of thethird quarter.As a result, consolidated net salesfor the subject fiscal year decreased¥10.5 billion (3.0%) from the previousfiscal year, to ¥339.0 billion, withoperating income down ¥1.2 billion(6.7%), to ¥17.1 billion, and netincome rising to ¥7.6 billion.2 TOYOBO 2013 Annual Report

Ryuzo sakamotoPresident & Chief Operating OfficerTOYOBO 2013 Annual Report 3

for Fiscal 2014Forecast forFiscal 2014During the fiscal year ending March31, 2014, important developments inthe operating environment areexpected to include further economicgrowth in the emerging countries,including the ASEAN economies, andmoderately strong recovery in theJapanese economy owing to thedownward correction in the value ofthe yen, expansion in governmentpublic works investment, and otherdevelopments. However, the outlookis for continued uncertainty in thebusiness environment because of risingprices of raw materials, concernsabout financial instabilities inEurope, and other factors.In view of this outlook for the operatingenvironment, the Toyobo Groupwill continue to strengthen its earningsbase to cope successfully withMedium-Termchanges in the external environment.The Group works for furtherenhancing its profitability by focusingits management resources onbusinesses that are profitable andhave high growth potential, as itaggressively expands its businessactivities in Japan and overseas, andimproving its business portfolio,such as increasing the efficiency ofits capital, strengthening its financialposition, and other factors.Considering such factors, for fiscal2014, the Toyobo Group is forecastingconsolidated net sales of ¥350.0billion (up ¥11.0 billion year on year),with operating income of ¥22.0 billion(up ¥4.9 billion), and net incomeof ¥9.5 billion (up ¥1.9 billion).ManagementPlan(Fiscal 2011 to Fiscal 2014)At present, Toyobo is working tobecome a “strong company withgrowth potential and stable profitability.”To attain this objective,Toyobo is devoting its resources toimplement the following:These initiatives to address priorityissues remain unchanged from theFunctional cushion materials“BREATHAIR”: H1 FY 3/14Polyester shrinkable film: H1 FY 3/14Airbag fabrics: H1 FY 3/13Engineering plasticsIndustrial adhesivesVOC* emissions treatment equipmentFilters* VOC: Volatile Organic CompoundsSouth Korea/TaiwanReverse osmosis (RO) membranemodules for seawater desalinationH2 FY 3/15PET filmsIndustrial adhesivesDiagnosticsSoutheast AsiaIndustrial adhesives: H2 FY 3/14Engineering plasticsAirbag fabricsDiagnostics systems4 TOYOBO 2013 Annual Report

initial plan, but the operatingenvironment has become morechallenging than initially expected.rm Management PlanDevelopments causing this situationhave been increases in raw materialand fuel costs, the further appreciationof the yen, the decline in LCDsales prices, and other factors. Tocope effectively with these conditions,the Toyobo Group is furtheraccelerating its overseas businessdevelopment and its creation of newproducts through its R&D initiatives.However, in view of trends in theoperating environment, Toyobo hasrevised its quantitative targets forfiscal 2014, the final year of themedium-term management plan.The recently revised targets as ofMay 2012 are ¥350.0 billion inconsolidated net sales (comparedwith ¥360.0 billion previously) andoperating income of ¥22.0 billion(versus the previous target of¥27.0 billion).(a) Investments to ExpandCapacityThe Toyobo Group is implementinginvestments, alliances, and M&Adeals to increase its productioncapacity in its specialty businessesto capture emerging opportunities.During the fiscal year ended March31, 2013, investments completed inthe industrial and packaging filmsbusiness included multi-functionalpolyester film facilities. Also, in contractmanufacturing of pharmaceuticals,a new plant for production ofinjection agents was completed. TheCompany will also implement investmentsrelating to films, fine polymers,automotive airbag fabrics,bioproducts, and functional membranesat the appropriate time.(b) Acceleration of OverseasBusiness DevelopmentThe Toyobo Group will accelerate thedevelopment of its business activitiesin overseas markets that are continuingto grow, especially in China.Thus far, the Company’s principalbusiness has been exporting productsfrom Japan to overseas markets.Going forward, however, theEngineering plastics: H1 FY 3/14Airbag fabrics: H2 FY 3/13FiltersDiagnosticsManufacturing Marketing and sales OfficeOverseas Business DevelopmentTOYOBO 2013 Annual Report 5

Company is moving forward to structurea more-autonomous model foroverseas operations by establishingand upgrading its business basesthat can conduct integrated overseasoperations, from product developmentthrough to manufacturing andmarketing.In line with this policy, during fiscal2013, in the field of automotive airbagfabrics, the Group began theproduction of these fabrics in Chinaand the United states. In the watertreatment membranes business, theGroup’s reverse osmosis membraneelements for seawater desalinationwere adopted in the largest suchplant in saudi Arabia based on theGroup’s entry into the local marketthrough a joint venture. In addition,in the shrinkable film market inChina, where growth is expectedgoing forward, the Group made adecision to invest in a joint venturein China through an alliance witha film manufacturer based in southKorea.Going forward, through allianceswith companies based overseas, theGroup will accelerate the developmentof its overseas businessoperations.(c) Improvementof the Product PortfolioThe activities of the Toyobo Groupcomprise many specialty businesses.To build positions of strength in eachof these businesses, we believe it willbe important to continue developingnew products and increasingvalue added.In 2012, Toyobo launched threemajor new products: “Nerbridge,”a conduit for regeneration of peripheralnerves that have been severedor damaged, an industrial film forLCDs that has special optical properties,and a new polyester shrinkablefilm for labels that improves productivitywhile also being thinner andstronger. Going forward, we will takeinitiatives to improve our productportfolio by expanding sales of thesenewly introduced products andaccelerating work on productscurrently under development.(d) Improving Asset EfficiencyIn the textile business, we havemoved ahead without hesitationwith structural reforms that haveinvolved downsizing and scrappingof facilities.Also, among specialty businesses, wewill withdraw from the tire cord businessat the end of December 2013.Through this and other measures,we will continue to emphasize assetefficiency as a major indicator ofmanagement performance.Operating Income¥50billionTargets3020.918.317.122FY3/11 3/12 3/13 3/14 (estimate)3/17 3/216 TOYOBO 2013 Annual Report

Looking toFiscal 2021With the aim of being a “strong companywith growth potential and stableprofitability,” Toyobo is targetingnet sales of ¥500 billion in fiscalLooking to Fiscal 20212021, operating income of ¥50 billion(with an ROA of 10%), and adebt-to-equity ratio of 1.0. Our targetfor overseas sales in fiscal 2021 is¥150 billion, which is about twotimes the level in fiscal 2013. In theenvironment and life science businesses,we are aiming for sales of¥190 billion, or about 3.5 times thefiscal 2013 level. We believe that ournext medium-term managementplan will be extremely important aswe approach fiscal 2021, and we arescheduled to begin its formulation inthe latter half of the current fiscalyear.Return toShareholdersToyobo considers providing returnsto shareholders to be one of its highestpriorities. Our basic policy is tocontinually provide a stable dividend,determined in a comprehensiveconsideration of such factors asimproving the financial position,profit levels, and retention ofearnings for future investment.In accordance with this policy,Toyobo plans to pay a year-end dividendfor the subject fiscal year of¥3.50 per share. For fiscal 2014, weexpect to pay a dividend of ¥3.50per share, based on the forecastnet income of ¥9.5 billion.I would like to offer my sincerestappreciation to our shareholders andinvestors, and ask for your continuedsupport.August 2013Ryuzo sakamotoPresident & Chief Operating OfficerTOYOBO 2013 Annual Report 7

New ProductsFor companies to survive and grow, they must change with the business environment and introduce innovativeproducts that meet the needs and trends of the times. The key to this is new product development.In fiscal 2013, Toyobo was successful in developing products that are expected to grow in the environment,life science, and high-function fields.Examples in the high-function fields include new LCD and optical-use polyester films (super retarderfilms). In the environment field, Toyobo developed a new shrinkable film for labels, and in the life sciencefield, a conduit for regenerating damaged peripheral nerves.These new products are explained below.Development and Sales Launchof “Nerbridge” Peripheral NerveRegeneration ConduitsToyobo has developed a new medical device, “Nerbridge” (aconduit for peripheral nerve regeneration), that promotes theregeneration of nerves that have been damaged by diseaseor accidents.In general, when nerves are damaged by disease or accidents,patients undergo surgery for autografts or nerve suture.In the case of autografts, a healthy nerve is extracted from thepatient’s own body and transplanted to the area where nerveshave been injured, but this surgery leaves a scar on thehealthy portion the nerve is removed from, and afterward,patients may experience pain, numbness, or other side effects.On the other hand, in the case of nerve suture, the severednerves are sewn directly together, but when force is applied tothe affected area, there are cases where the nerves do not healand the patient may experience unusual or painful sensations.To solve the problems with existing treatments, Toyobo developedits “Nerbridge” medical device.“Nerbridge” conduits are inserted around the damaged portionof peripheral nerves (nerve gaps) that have been severedor otherwise damaged and then fastened. Their function is toinduce the portion of the nerve connected to the patient’s centralnervous system to regenerate and grow in the direction ofthe portion of the nerve connected to the patient’s peripheral1cmnerve endings. In addition, since “Nerbridge” conduits are composedof polygly colic acid, a new collagen, and other superiormaterials that de compose within the body, they dissolve andare absorbed by the patient’s body in about three months.Treatment using “Nerbridge” conduits is expected to be equallyeffective or more effective (as evidenced by the recovery ofsensation and other attributes) than the previous techniquesof autografts and nerve suture.For the time being, Toyobo is marketing these devices foruse limited to the regeneration of nerves in the hands, includingthe fingers. In addition, although Toyobo has receivedpermission from the Ministry of Health, Labour and Welfarefor the manufacturing and marketing of “Nerbridge” for theregeneration of peripheral nerves (excluding dura maternerves, such as those in the brain and spinal cord), Toyobo isscheduled to make cooperative arrangements with medicalinstitutions, and, when preparations have been completed,will begin step-by-step expansion beyond the treatment ofthe nerves of the hand, including the fingers.Toyobo is aiming for its sales of ¥5.0 billion annually by fiscal2016.Development of New Films for LEDand Optical Uses That Overturns theConventional Wisdom about PreviousMaterials—Development of Polyester Film That Usesthe Features of LED Light sources to EliminateInterference Fringes (“Rainbow mura”*)Toyobo has previously marketed “COsMOsHINE”, an opticalfilm made with polyester as a raw material, for use as a diffusionfilm for liquid crystal displays (LCDs), film for prism lenses,and film for indium tin oxide films in touch screens.8 TOYOBO 2013 Annual Report

Conventional PET film (left),“COSMOSHINE” (SRF type) (right)In addition, since 2009, Toyobo has begun R&D and movedforward with the development of new films for LED and opticaluses. As the backlight source for LCDs has shifted to LEDs,Toyobo has been successful in developing super retarder film(sRF) that eliminates the rainbow mura* that formerly couldnot be eliminated from existing polyester films. This new filmdraws on the film production technology that Toyobo hasaccumulated in manufacturing “COsMOsHINE” and packagingfilms.“COsMOsHINE” (sRF type) is a new kind of film made possibleby a contrarian concept that overthrows existing commonknowledge that held that materials, other than polarizermaterials, used thus far in LCDs must be isotropic.Production of this new type of film is possible with themodification of a portion of equipment currently in use byToyobo for manufacturing optical films. New investments inmajor facilities will be unnecessary. Toyobo has already convertedone production line at its Inuyama Plant, one of itsmain film production facilities, and switched to mass production.Output of one production line is approximately 10 millionm 2 /month.It will be possible to further increase production capacityin line with market trends. Toyobo is aiming for its annual salesof ¥15.0 billion in 2015.Features (new functions) of “COSMOSHINE”(SRF type): Elimination of coloration (rainbow mura) due to birefringence Closer conversion of the polarized light given off from LCDsinto more natural light superior adhesive properties for combining with variousother materials; Principal Uses: As a protective film for PvA polarizers various base film materials for touch screens Improves the visibility of LCDs (usable with polarizingsunglasses)Expanding Sales of a New PolyesterShrinkable Film for LabelsToyobo has sold polyester film for use as shrinkage labels previously,but Toyobo has now developed a new polyester filmfor thermal shrinkage labels that responds to customer needs,such as improvement in perforation properties, thinness, andgreater strength. This new film succeeds in being thinner as italso improves productivity, and Toyobo has set a sales targetin the Japanese market of ¥5.0 billion a year by fiscal 2016.some of the brands employing this new film are placinggreater emphasis on eco-friendliness, and Toyobo hasresponded by mixing some resins recycled from PET bottles inthe film.To gain a foothold in the Chinese market for thermal shrinkablefilms, where growth is expected, Toyobo has decided toinvest in a Chinese joint venture film company in partnershipwith a south Korean-based film manufacturer. Toyobo and itsbusiness partners will promote the development of this new,more eco-friendly film as a replacement for polyvinyl chloride(PvC), which is currently used for shrinkable films in China.* “Rainbow mura” is a phenomenon in which color unevenness, similar to that of a rainbow,appears, because of the birefringence of the material.Installation of NewPolyester FilmManufacturingEquipmentToyobo’s film business is divided intoindustrial films and packaging films.Previously, these two types were producedby using dedicated equipmentfor each type. This time, however,Toyobo will install multi-function filmmanufacturing equipment for producingboth industrial and packagingpolyester films at its Tsuruga film plant(located in Tsuruga City, FukuiPrefecture). The amount of this investmentwill be approximately ¥10 billion,and one line of this new equipment willhave a production capacity of 22,000tons per year. Production will be startedup in October 2013.As a result of this investment, it will bepossible to increase the efficiency ofoverall film production. In the industrialfilm business, this new equipment willbe used for manufacturing films for theincreasingly broad range of new uses. Inaddition, in the packaging film business,Toyobo will create a more competitiveproduction system and plans to workto maintain its position as the No. 1supplier in the Japanese market.TOYOBO 2013 Annual Report 9

At a GlanceBusiness Segments and FieldsFilms & Functional PolymersPercentage ofNet Sales41%Sales(¥ billion)135122115Industrial MaterialsPercentage ofNet Sales21%127138137Operating Income(¥ billion)’08 ’09 ’10 ’11 ’12 ’13 ’08 ’09 ’10 ’11 ’12 ’13Sales(¥ billion)76756371717213.74.36.112.5Operating Income(¥ billion)’08 ’09 ’10 ’11 ’12 ’13 ’08 ’09 ’10 ’11 ’12 ’135.54.12.34.98.65.37.65.5Industrial films• PET films for (i) FPD use, (ii) photovoltaic backsheets, (iii) touchscreens, (iv) ceramic capacitor process sheets, and (v) otherindustrial uses• Synthetic paperPackaging films• PET, polyolefin, polyamide for food packaging, and shrinkablefilms for labelsFunctional polymers• Engineering plastics• For industrial adhesives, coatings: co-polyester, and modifiedpolyolefin• Acrylate polymersFunctional fibers• Airbag fabrics, polyester yarn for tire cordHigh-performance fibers• Ultra-high-strength polyethylene fiber• PBO fiber: extreme heat-resistant, high-tenacity fiberFunctional filters, non-woven fabrics• Filters for (i) automotive components, (ii) office equipment, and(iii) air purifiers• VOC emissions treatment equipment and systems with activatedcarbon filters• Non-woven fabrics for automotive parts and constructionmaterialsLife SciencePercentage ofNet Sales7%SalesOperating Income(¥ billion)(¥ billion)3433323127255.13.04.03.74.14.2’08 ’09 ’10 ’11 ’12 ’13 ’08 ’09 ’10 ’11 ’12 ’13Bioproducts• Enzymes for diagnostics, diagnostic systems and reagents,research reagents, and cosmetic ingredientsPharmaceuticals• Contract manufacturing (injections, raw pharmaceuticals, andantibody drugs)Medical membranes, equipment, and devices• Hollow fiber membranes for artificial kidneys, and anti-clottingmaterials• Medical treatment devicesWater treatment membranes• Reverse osmosis membranes for seawater desalination• Ultra-filtration membranes for drinking waterTextilesPercentage ofNet SalesSales(¥ billion)142Operating Income(¥ billion)3.8Textiles• Functional textiles23%112888788791.4Apparel products• “Munsingwear”: sportswearAcrylic fibers• “EXLAN”: acrylic fibers1.10.40.60.2’08 ’09 ’10 ’11 ’12 ’13 ’08 ’09 ’10 ’11 ’12 ’1310 TOYOBO 2013 Annual Report

AutomotiveElectronics&Information DisplaysEnvironment Life Science Lifestyle & SafetyEngineering plasticsPET films foroptical usesMaterials for photovoltaicsystemsPackaging filmsBiomass high-melting-point polyamidefor moldingCo-polyester adhesivesModified polyolefin adhesivesAcrylate polymersAirbag fabricsFunctional filtersNon-woven fabricsNew catalyst forpolyesterVOC emissionstreatment equipmentand systemsFunctional filtersHigh-performancefibersThree-dimensionalspring-structuredfibersWater treatmentmembranesMedical membranesEnzymes for diagnosticsDiagnostic systemsand reagentsCosmetics ingredientsMedical treatmentdevicesPharmaceuticals(contract manufacturing)Functional textilesTOYOBO 2013 Annual Report 11

TOPICSCapital InvestmentExpansion in InjectionProduction Facilities inContract Manufacturingof Pharmaceuticals1In its contract manufacturing ofpharmaceuticals, Toyobo producesnot only ethical drugs prescribed byhospitals but also drugs in the clinicaltesting stage that are underdevelopment. At present, the marketfor contract manufacturing isexpanding at between 5% and 10%annually, and the estimated marketsize in Japan alone in 2013 wasabout ¥600 billion. Toyobohas established a strong reputationin the pharmaceutical industryfor its capabilities in producingbiopharmaceuticals, and its technologyhas been evaluated highly. Forthese and other reasons, Toyoboreceives many contracts for the productionof biopharmaceuticals,which are more difficult to manufacturethan low-molecular drugs, fromthe development stage.In March 2013, Toyobo beganproduction at its new injection line.The new facility secures a highlybacteria-free production environmentby featuring (a) an enclosedsterilizable space called “RABs (Re-stricted Access Barrier system)” and(b) an intensive usage of single-useoperating procedures. Other capabilitiesof the new production lineinclude production of many itemsin small lots and the ability to meetthe Good Manufacturing Practices(GMP) of the three major markets:Japan, North America, and Europe.We will aim for full capacity operationduring 2013.Looking ahead, drawing on itssophisticated technological capabilities,Toyobo will continue to expandits high-value-added contract manufacturingof antibiotic drugs andother special pharmaceuticals and2new drugs that require advancedproduction technology.Entry into the AirbagBusiness in North AmericaThus far, Toyobo has manufacturedairbag fabrics in Japan, Thailand,and China, selling principally toJapanese-related automotivemanufacturers. In recent years, asJapanese automotive companieshave increased local productionoverseas, they have also proceededwith procurement of parts andmaterials in the local markets. Inaddition, with the growth of theBRICs and other emerging countrymarkets and the tightening of legalregulations in the United states, thedemand for airbags has expandedworldwide.Amid these developments,Toyobo has worked to expand itsairbag business and decided toestablish an airbag fabric sales companyin the United states. since theestablishment of this company inApril 2012, it has moved forward toobtain certifications from local automotiveparts manufacturers and isscheduled to begin full-scale salesactivities in summer 2013.The total expenditures on establishingthis sales infrastructure wereapproximately ¥1 billion. Toyobo’sairbag business, in addition to operationsin Japan and Thailand, wentinto full-scale manufacturing andwith sales operations in China inApril 2012. In addition to the NorthAmerican operations, Toyobo willaim to structure a global supplysystem.12 TOYOBO 2013 Annual Report

213Manufacturing and SalesCompany for “VYLON”Established in ThailandToyobo has manufactured “vYLON”co-polyester resin and continues todo so in Japan, selling it mainly tocustomers in the IT products andother electronics industries. Inrecent years, the number ofJapanese companies setting upoperations in China, the countries ofAsEAN, India, and elsewhere as wellas the number of European and U.s.companies shifting production tothese countries has grown, and localcompanies overseas have alsoentered the electronics markets.Moreover, these countries areexpected to show sustainablegrowth going forward.In view of these prospects, toexpand sales of “vYLON” into theelectronics-related markets, Toyobodecided to establish a joint venturefor the manufacturing and saleof “vYLON” in partnership withMitsubishi Corporation in Thailand,a country that offers favorable taxtreatment, highly convenient logistics,and other advantages. Toyobowill be in charge of productionmanagement and technical support,and Mitsubishi Corporation willdraw on its extensive business experiencein Thailand and cooperate inthe material procurement and productmarketing.The joint venture was establishedin July 2012. Production will beginin January 2014 and reach fullcapacity in 2016. The newly establishedcompany is scheduled to beToyobo’s base for business operationsin the Chinese, Indian, andAsEAN markets, and it will work toexpand sales.Overseas Expansion4Shipments Begin tothe World’s LargestSeawater DesalinationPlantToyobo’s “Hollosep” reverse osmosismembrane elements for seawaterdesalination have been selected foruse in the Ras Al Khair Plant in saudiArabia, which is the largestseawater desalinationfacility in the world.shipments beganin March 2013 inpreparation for the3 4commencement of operations in2014. This plant will use Toyobo’sreverse osmosis membrane elementsand will produce 345,000cubic meters of water per day.In addition, production hasbegun of “Hollosep” reverse osmosismembrane elements for seawaterdesalination at the ArabianJapanese Membrane Company, LLC(AJMC) in saudi Arabia, which is athree- company joint venture withACWA Holding of saudi Arabia andITOCHU Corporation.Toyobo is planning to makeAJMC a base for expansion of thisbusiness in Middle Eastern seawaterdesalination, where further growthis expected in the years ahead.Toyobo is planning to expand salesof reverse osmosis membraneelements for seawaterdesalinationbroadly,4 4TOYOBO 2013 Annual Report 13

TOPICSnot only in saudi Arabia, but also inthe other countries of the MiddleEast and North Africa.Operations in IndonesiaIn its sports apparel business,Toyobo makes use of high-value-added specialized materials.To differentiate itself from other5 6users. To respond to expanding56market needs, TKI and sTG areincreasing production capacity.Market Development for3D Fiber “BREATHAIR”in Europe“BREATHAIR” is a three-dimensionalspring-structured fiber created byuse of Toyobo’s “PELPRENE,” which iscompanies, Toyobo is producinga polyester elastomer. It is in widehigh-quality materials in Indonesia, use as a cushion material thatwhere operations are highly costreplaces urethane foam.competitive.Responding to the increasingAt present, Toyobo’s operationsmarket demand for this fiber inin Indonesia include two manufacturingsubsidiaries, P.T. TOYOBO(headquartered in Dusseldorf) willEurope, TOYOBO Europe GmbHKNITTING INDONEsIA (TKI), whichbegin the further development,is engaged in knitting and dyeingmanufacturing, and sales ofactivities, and P.T. sHINKO TOYOBO “BREATHAIR” in Europe. To do this,GIsTEX (sTG), which engages inToyobo is making about ¥700 millionin capital investments insewing operations.TKI uses materials that it procures Germany to construct a manufacturingfacility with an annual capacitylocally and produces fabrics, whichare developed and planned inof 1,100 tons, which is scheduled toJapan, to Japanese quality standards.sTG uses the fabric manufac-Looking ahead, Toyobo will furthergo into operation in August 2013.tured by TKI to make sports apparel. increase the sales of “BREATHAIR” inThe sports apparel produced byEurope for such applications as furnitureas it also develops new usesTKI and sTG is sold not only in Japanbut around the world. since thesesuch as mattresses for medical useproduction arrangements offerand seats for boats, automobiles,advantages to customers, enabling and trains.them to purchase products thatToyobo began mass production ofmeet Japanese quality standards“BREATHAIR” in 1996. It has earned aat low prices, the products havestrong reputation as a superiorearned a high appraisal amongcushion material and has beenadopted for use in the seats oftrains, especially the N700 series ofshinkansen trains, motorcycles, andother applications.Continued Evolutionin the Bio-Businesses7During the 1990s, Toyobo has beenreinforcing its commitment in sMBG(self-Monitoring of Blood Glucose)business, offering material enzymesused for glucose sensors. Thereafter,through a few renewals in theenzyme properties using generecombinant technologies, Toyobolaunched in 2009 “FAD-GDH,” thelatest version that enables evenmore-accurate glucose measurement.At present, Toyobo has the second-largestglobal market share inthe enzyme business for diagnosticuse.Making full advantage ofmicro-organism fermentation andpurification technologies it has beenaccumulating over the decades inenzyme business operations,Toyobo is expanding further intodiagnostic systems, materials forcosmetics, and other fields.714 TOYOBO 2013 Annual Report

Researchand DevelopmentToyobo began its operations in 1882 as a textile company,but from that time to the present, Toyobo has madetransitions into new businesses after taking account ofsocial conditions and requirements as well as the businessenvironment. Today, Toyobo positions films, functionalpolymers, industrial materials, and life science asits core businesses, or specialty businesses, and is aimingto grow and develop as “the category leader, continuingto create new value that contributes to societyin the environment, life science, and high-functionproducts fields.”Through making transitions into new businesses,Toyobo has introduced and acquired a wide range oftechnologies. Among these, Toyobo places polymerization,modification, processing, and biotechnology as itscore technologies. Through further in-depth research onand combining of these core technologies, Toyobo hasdeveloped high-function products in the environmentaland life science fields and proceeded with the nurturingof new businesses. Toyobo works to accelerate its R&Dactivities by partic ipating in Japan’s national projects, byadvancing aggressively into alliances with academiaand industry in Japan and overseas as well as by conductingjoint research with other companies inadvanced fields in the environmental and energy areas.At the same time, Toyobo is substantially expandingits business activities in overseas markets, and in its R&Dalso, to understand the needs of local markets, gatherinformation, and respond quickly to customer needs,Toyobo is strengthening its teamwork with its overseassubsidiaries and offices and establishing local technologycenters.TOYOBO 2013 Annual Report 15

Intellectual PropertyStrategyThe Toyobo Group works to secure patent protectionfor the vast accumulation of inventions that have beenmade over many years of research and development.At the same time, to sustain and further develop itsbusiness activities, Toyobo has established systemsfor responding quickly to the patent-related activitiesof other companies, including competitors.In recent years, as intellectual property functionshave received increased attention, Toyobo has workedto give these activities a strategic orientation. For example,Toyobo has created intellectual property databasesand used these for analytical studies, which are thenapplied to assist in the commercialization of Toyobo’sown products and for keeping track of industry trends.In addition, along with the globalization of businessactivities, Toyobo has formulated and implementedoverseas intellectual property strategies.Toyobo’s Intellectual Property Operating Office workswith the personnel responsible for intellectual propertyrelated liaison who have been appointed by the businessdivisions, R&D Division, and other divisions to convenepatent review meetings appropriate to the stageof development of various R&D projects as well as intellectualproperty strategy meetings. Through these intellectualproperty related activities, the office conductsresearch and analyses, applies for patents, and upholdsthe Company’s rights in close coordination with theToyobo Group’s corporate strategies and R&D strategies.“XENOMAX” High Heat-Resistant Polyimide FilmOne of the materials that Toyobo has conducted R&Don for many years is “XENOMAX,” a polyimide film thathas the same level of dimensional stability over a widethermal range as silicon used in semiconductors, highheat resistance, and excellent flame retardance.“XENOMAX” has the same low linear expansioncoefficient as silicon over a wide temperature range,from -50 to 450 degrees centigrade. Moreover, thisproduct has a decomposition temperature of over 500degrees centigrade, which is the highest of any organicpolymer film, and even in a 450-degree environment,it shows almost no change in shape. Also,because of its molecular structure, “XENOMAX” isresistant to combustion and has been certified as thethinnest polymer film that does not contain any halogencompound under the UL Certification System, aninternational indicator of resistance to combustion.In view of these properties, Toyobo is aiming toenter the market for next-generation electronic materials.In displays and high-performance electronicdevices, inorganic materials, such as ceramics andglass, are used as the substrates in semiconductordevices because they have properties close to silicon.However, since these inorganic materials tend to bethick, heavy, and easily broken, thinner and lighterpolymer films are taking their places, thus enablingmanufacturers to raise the specifications of portableelectronic devices, including making them more compactand lighter. At present, Toyobo is proceedingwith development jointly with a number of electronicdevice manufacturers, and its products are expectedto be adopted in the manufacturing of the compact,light electronic device materials and light, flexibledisplay substrate materials that are indispensablein tomorrow’s advanced information society.Researchand Development16 TOYOBO 2013 Annual Report

Sustainability/Corporate GovernanceBecoming a “Strong Companywith Growth Potential andStable Profitability”As the Toyobo Group looks to the year 2020, it is aiming tobe “the category leader, continuing to create new valuethat contributes to society in the environment, life science,and high-function products fields.” The Group believes thatcorporate activities, business activities, and CsR activitiesshould all be integrated. What is important is to implementactivities to deal with changes in the operating environmentand among stakeholders.Recently, changes in the external environment havebeen very rapid. These have included fluctuations in theprices of petroleum-based materials, changes in foreignexchange rates, the rise in the inflow of products fromoverseas, and changes in consumer behavior. Corporationsmust have a strong driving power to expand their businessactivities to respond to these changes.To measure up to the challenge, the Toyobo Group wantsto become a “strong company with growth potential andstable profitability” as well as a company that contributesto societies around the world through its business activities,accelerates its expansion into overseas markets, andcontinues to develop new technologies and products.Contributing to a Sound andSustainable Society with theAwareness That CompaniesAre Members of SocietyTo implement CsR activities, Toyobo has established its CsRCommittee, which is chaired by the president. The missionof this committee is to fully comprehend and monitor overallactivities related to all stakeholders, including shareholdersand investors, suppliers, the community,employees, and the earth’s environment.The basis for these activities is Toyobo’s CsR Charter,which states the awareness of Toyobo that “companies aremembers of society” and clearly calls for the Toyobo Groupto actively fulfill its social responsibilities and contribute tothe creation of a sound and sustainable society.some of the CsR initiatives being implemented by theToyobo Group include the following. First, Toyobo has putin place a corporate governance system that enhanceschecking and monitoring functions and raises the transparencyof decision making and the execution of businessactivities. In addition, to create a compliance frameworkand raise awareness among employees of the necessity tomaintain high standards of compliance with laws and regulations,Toyobo has issued a Compliance Manual containingthe Toyobo Group Employee Guidelines for Action, whichserves as the code of conduct. Moreover, the Toyobo Groupconducts compliance training not only in Japan but also inGroup companies overseas.TOYOBO 2013 Annual Report 17

Regarding risk management, each of the committeesis developing systems that can effectively cope with risks.To deal with environmental issues, based on its “BasicEnvironmental Policy,” Toyobo is working to reduce theburden that its activities place on the natural environment,develop products that contribute to protecting the eco-ustainability/Nurturing Globalsphere, conduct environmental preservation activities inthe community, and respond affirmatively to biodiversity.Human ResourcesTo strengthen the capabilities of its personnel to work ininternational assignments in various countries and regions,the Toyobo Group is conducting education and trainingprograms for employees in Japan and the staff of its overseassubsidiaries.For personnel in Japan, Toyobo has created its “shorttermoverseas training program.” Under this program,Japanese employees are stationed for about a year atToyobo’s overseas subsidiaries, other Group companies, oron the properties of business partner companies wherethey are given a specific mission that is directly related toToyobo’s business.For staff employed by Toyobo’s overseas subsidiaries,arrangements are made for them to hold discussions withJapanese staff who are candidates for managerial positions.Through these opportunities for interchange andfriendly rivalry, Toyobo is working to raise their sense ofbelonging to the Toyobo organization and strengthen theirmotivation.Green ProcurementToyobo is taking initiatives to protect the natural environmentthrough its products and manufacturing activities.Toyobo places priority on procuring raw materials thathave a minimum impact on the environment and strives tocontribute to creating a sustainable society. As part ofthese activities, Toyobo pursues “green procurement” policies.Toyobo requests its business partners to supply informationon the chemical substance content of the rawmaterials they use to ensure: (1) that none of the substancesforbidden by Toyobo regulations are contained in theG Corporateproducts they supply and (2) that the amounts of harmfulsubstances specified by Toyobo are indicated.In addition, for other items in general, Toyobo promotesthe green procurement of products that bear the“Environment Label.”Initiatives to Reduce theBurden on the EnvironmentTo protect the air and water, the Toyobo Group promotesreduction in the volume of its emissions. To reduce theenvironmental burden of emissions into the atmosphere,Toyobo has made the transition from the use of heavy fueloil to LNG as the energy source in its boilers. In addition, tolower the environmental impact of effluent emissions intobodies of water, Toyobo has upgraded the capabilities of itswaste treatment facilities and promoted the treatment ofeffluence that may have a particularly significant adverseimpact on the environment as industrial waste.Trends in Incidence Ratios in the Toyobo Group(%)1.51.0Average for manufacturingin JapanToyobo Group0.50FY’08’09’10Toyobo(nonconsolidated)’11’12’13Note: Incidence ratios are the number ofcases where employees had to takeleave due to accidents per one millionhours worked. Employees includethose working for the Toyobo Groupand its subcontractors. The incidenceratio is computed each year on acalendar-year basis.18 TOYOBO 2013 Annual Report

Also, Toyobo has worked to reduce the volume of waterused for and wastewater emissions from chillers as well aseffluent emissions through the supervision of water usagein manufacturing processes and other measures.Labor Safety and HealthToyobo’s basic stance is that “ensuring safety is a majorprerequisite for the conduct of corporate activities” andhas, therefore, worked toward the goal of zero accidents.Toyobo’s safety management systems are based aroundits safety and security Promotion Committee. In addition,the Toyobo Group Environmental safety Committee isresponsible for implementing safety measures.Toyobo (on a nonconsolidated basis) achieved zero losttime due to injuries caused by human error during the fiscalyear under review. However, there were six incidents oflost time due to accidents among other Toyobo Groupcompanies. The Group as a whole is continuing to aim forzero lost time due to accidents.The Toyobo Group has newly prepared and is implementinga medium-term management plan for preventinglabor accidents that covers the period from FY2012through FY2016. In addition to attaining the objective ofzero lost time due to accidents, the Group has also set agoal of 20 or fewer accidents per year that do not result inlost time.overnanceCorporate GovernanceBoard of Directorsand Executive OfficersToyobo is a “Company with Auditors” as defined byJapan’s Companies Act and, under this governance system,has appointed one outside director and adoptedthe Executive Officer System. Under Toyobo’s governanceframework, a clear distinction is made betweenthe roles of the Board of Directors, who concentrate ondecision making as they perform management oversightfunctions, and the executives, who are in chargeof business execution. This corporate governancesystem increases the transparency and fairness ofmanagement and makes it possible to make promptdecisions as well as conduct business efficiently.The Board of Directors has nine members, one ofwhom is an outside director, whose role is to ensuretransparency and fairness in Toyobo’s management. Inaddition, in view of the diverse and specialized natureof Toyobo’s businesses, and to make decisions accuratelyand quickly, the eight members of the Board ofDirectors, after exclusion of the outside director, alsohold positions as Executive Officers.Regarding “business execution,” the President andChief Executive Officer call meetings of the Board ofCorporate Executive Officers and the Board ofCorporate Officers. These committees make decisionsregarding the items for business execution assigned tothem by the Board of Directors, make reports on companywideprojects, and perform certain other duties.Corporate Auditor SystemThe Board of Auditors has four members, two of whomare Outside Auditors. Their responsibilities includeattending meetings of the Board of Directors and otherimportant meetings, stating their opinions as necessary,and auditing the performance of duties by theBoard of Directors based on audits of operations in thevarious divisions. KPMG AZSA LLC has been appointedto conduct the independent audits required underJapan’s Corporation Law. The Board of Auditorsreceives plans for auditing and audit reports from theindependent auditor and meets with the independentauditor periodically to exchange information.For further details:To view, download them online at www.toyobo-global.com/company/governance/TOYOBO 2013 Annual Report 19

ManagementAs of June 27, 2013Board of DirectorsPresidentRyuzo SakamotoHiroshiTakahashiKazumasaKoyamaHiroshiTakabayashiSeijiNaraharaToshiyukiMatsuiKunioYanoShigekiSanoMichioOgimura** Outside DirectorBoard of Corporate AuditorsSetsuo ShimomichiMorito MoritaHiroshi Imanaka**Akio Ukai**** Outside Corporate AuditorCorporate Officers Chief Operating OfficerRyuzo Sakamoto Corporate Executive OfficersHiroshi TakahashiKazumasa KoyamaHiroshi TakabayashiShinichi Onizuka Corporate OfficersSeiji NaraharaToshiyuki MatsuiKunio YanoShigeki SanoHisao NishinakaToshitake SuzukiHiroyuki SatoJiro SuwaShinichi TeshimaYuji OitaMasakazu SaitoTeruo OhigashiHitoshi UenoShigeo Takenaka20 TOYOBO 2013 Annual Report

Investor InformationAs of March 31, 2013Stock ListingTokyoStock Code3101Transfer AgentSumitomo Mitsui Trust Bank, Ltd.1-4-1, Marunouchi, Chiyoda-ku,Tokyo 100-8233, JapanIndependent AuditorsKPMG AZSA LLC3-6-5, Kawara-machi, Chuo-ku,Osaka 541-0048, JapanCommon StockAuthorized: 2,000,000,000 sharesIssued: 890,487,922 sharesPaid-in Capital¥51,730 millionNumber of Stockholders104,131Major ShareholdersNumber of sharesheld (thousands)Percentage ofvoting rights (%)Japan Trustee Services Bank, Ltd. (Trust Account) 46,586 5.24The Master Trust Bank of Japan, Ltd. (Trust Account) 27,368 3.08Nippon Life Insurance Company 21,885 2.46Toyukai (Contractor Share Holding) 16,485 1.86Mizuho Corporate Bank, Ltd. 13,393 1.51Toyobo Employee Stockholders’ Association 13,260 1.49The Bank of Tokyo–Mitsubishi UFJ, Ltd. 13,214 1.49Sumitomo Mitsui Banking Corporation 13,034 1.47Meiji Yasuda Life Insurance Company 11,029 1.24Japan Trustee Services Bank, Ltd. (Account of RetirementBenefit Trust for Sumitomo Mitsui Trust Bank, Limited) 9,054 1.02Corporate DataAs of March 31, 2013Head Office2-8, Dojima Hama 2-chome,Kita-ku, Osaka 530-8230, JapanTelephone: +81-6-6348-3111EstablishedMay 1882Number of Employees3,217 (Nonconsolidated)10,566 (Consolidated)BranchesTokyo BranchHigashi-Gotanda Square Building,10-2, Higashi Gotanda 2-chome,Shinagawa-ku, Tokyo 141-8633, JapanNagoya Branch2-3, Sakae 3-chome, Naka-ku,Nagoya 460-0008, JapanResearch Center1-1, Katata 2-chome, Otsu,Shiga 520-0292, JapanOverseasTOYOBO (SHANGHAI) CO., LTD.Room 2301-A, Dawning Centre Tower B,No. 500 Hongbaoshi Road, Shanghai, ChinaTelephone: +86-21-6208-3030TOYOBO U.S.A., INC.1540 Broadway, 25th Floor,New York, NY 10036, U.S.A.Telephone: +1-212-398-0550TOYOBO Europe GmbHKlosterstrasse 18, 40211Dusseldorf, GermanyTelephone: +49-211-976229-10TOYOBO (THAILAND) CO., LTD.1Q House Lumpini Building, 28th Floor,Room 2801/1, South Sathorn Road,Thungmahamek,Bangkok 10120, ThailandTelephone: +66-(0) 2285-6318~6324http://www.toyobo-global.com/ir/TOYOBO DO BRASIL LTDA.Av Doutor Chucri Zaidan, 771, Vila Cordeiro.Sao Paulo, BrasilCEP 04583-913Telephone: +55-11-5509-7801 (Sao Paulo Office)TOYOBO 2013 Annual Report 21

TOYOBO CO., LTD.2-8, Dojima Hama 2-chome,Kita-ku, Osaka 530-8230, JapanTelephone: +81-6-6348-3111URL: http://www.toyobo-global.com/INVESTOR RELATIONSTelephone: +81-6-6348-3044E-mail: ir_g@toyobo.jpCover PhotosAn application ofpolyester elastomer “PELPRENE”Hollow fiber membranesFiltersFilmsNo. F1208K F1260KAugust 2013