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Summary of Financial Result of 2009 and Outlook for 2010

May 15, 2009

Result of Fiscal Year 2009

During our Fiscal Year 2009, which ended on March 31, 2009, the Japanese economy experienced the one of the worst recession ever, especially in the latter half of the year. Under these harsh circumstances, Tomoegawa faced steep declines in demand beyond its control in major business fields. In the second quarter (July to September), the semiconductor-related business experienced symptoms of a shrinking market; while the flat panel display business had gone through a relatively positive second quarter. But, both suffered dramatic losses in the latter half of the year. This rapid decline in demand was faster than expected and our customers’ effort of inventory reduction accelerated this trend. As a result, we were forced to record drastically declined revenue of 40,999 million yen, 10.7% decrease compared to the previous year.

Recovery from the recurring losses incurred in the previous year has been the main target of our business activities. As a result, we were able to record a slightly positive Operating Income in the second quarter. These improvements were brought by reduction of labor costs through voluntary retirements, company-wide cost cutting efforts, and improved operating efficiencies.

During the latter half of the year, while the recession persisted, we continued to seek ways to improve profitability. One effort was the recording asset impairment loss on optical film processing facilities, by doing so, we reduced depreciation expenses. We also implemented further salary cuts for directors, officers, and managers. Still, we could not avoid the impact of the loss of revenue caused by the tough economic environment.

Although income recovered slightly compared to the previous year, we still had to report two consecutive years of recurring losses of 2,376 and 1,755 million yen, respectively. We were able to document a special gain from the sale of our headquarter building in Tokyo, but still ended with a net loss of 321 million yen. Due to these circumstances we regret to inform you that there will be no payment of dividends this year.

Outlook for FY2010

Our first priority is to recover as quickly as possible from the operating losses that were incurred these past two years. We will downsize our operating to equate with the estimated decline in sales volume. We will also pursue additional cost cutting measures with the agreement from our labor union. We anticipate 2.5 billion yen in cost reduction, which should boost us to record positive net result

While our expected sales volume is 39 billion yen, a 2 billion decline from the previous year, we anticipate positive figures that will show a profit. Our operating, recurring, and net income projections are 700, 500, and 300 million yen respectively.

In order to improve our financial stability, this past May, we issued shares of stock to four third parties who have strong relationships in various business fields of our company. The amount raised is 1.8 billion yen. We also entered into a strategic alliance agreement with Toppan Printing Co., to develop our activities in the optical film industry of LCD products. This will enable us to maintain our current competitiveness in this field, and increase future opportunities.

I appreciate your continuous support to TOMOEGAWA.

Yoshio Inoue,
President and CEO
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