Message from the Management

TAIYO YUDEN continues to meet the challenges of transforming itself, aiming to become an excellent company that enjoys the trust and highest regard from our customers.

The TAIYO YUDEN Group continually strives to become a company trusted by all stakeholders, including shareholders, customers,employees and local communities. We aspire to be an excellent company as viewed by our shareholders through enhancing enterprise value, to be recognized as a strategic partner by our customers and to become a company in which employees take pride, and which earns public respect. The TAIYO YUDEN Group is constantly working to ensure that all companies under our worldwide enterprise remain steadfast and focused as a cohesive whole in realizing this aspiration.

Overview of the Year Ended March 2014

In the consolidated fiscal year ended March 2014, TAIYO YUDEN posted substantial increases in net sales of 7.9% year over year to ¥208.2 billion, operating income of 134.2% year over year to ¥11.3 billion, and net income of 274.3% year over year to ¥6.9 billion. The results reflect our diligent efforts to advance structural reform and success with our growth strategies focused on high value-added super high-end products with additional support from a weaker Japanese Yen. We are transforming TAIYO YUDEN into a company capable of consistently generating profits and believe we have established a sustainable growth path for the Company.

Nevertheless, we are still not fully satisfied with our performance. Insufficient lineup and mistimed product development for some of our core products along with lower level of production volume in the applications and models incorporating our products caused our sales and income results to fall short of our initial plan. I assure you that everyone at TAIYO YUDEN is aware that we did not live up to stakeholder expectations in the fi scal year ended in March 2014.

While addressing the causes of the shortcomings, we are stepping up measures to strengthen the Company's market, products, customer base, and financial bases to ensure we survive and thrive in the rapidly changing market conditions we face. We are also aiming to continually establish the Company's position as a trusted and stable supplier as seen by a wide range of customers in many different markets.


We expect to have increases in both sales and profit in the fiscal year ending in March 2015 as we steadily progress toward fulfilling our corporate vision by implementing growth strategies to strengthen our market, product, and customer bases with a fortified financial base.

We have also created a very clear corporate vision for the Company. Despite being an electronic components manufacturer in Japan, commanding 40% of the global market, and boasting a number of world-leading technologies, we are still viewed as having a market base that is dependent on business conditions, a product base that is prone to pricing competition, a customer base that makes us seen as a Tier 3 supplier out of range of the top two tier groups with a fragile financial base. We are confident and determined to turn this assessment around 180 degrees in right direction by persevering with our reform efforts and continuing to produce results.

We will continue the expansion of the sales composition ratios of our high value-added super high-end products to 50% and of our focus markets, including automobile electronics, industrial equipment, medical and healthcare, and environmental and energy, to 30%. By changing our main evaluation benchmark from operating income to net profit, implemented during the year ended in March 2014, we created a framework with established mini-companies in each of our business domains that are empowered to act independently and pursue positive results. This allows each group and the TAIYO YUDEN group as a whole to optimize sales and marketing decision making that drives an efficient utilization of our resources and facilities. Now that we have established our new structure we will focus on gaining a positive net cash flow and construct a solid financial base.

Developing Focus Markets

We have created a lineup of competitive products for the automotive and other industries and we are now supplying Tier 1 manufacturers (direct suppliers to original equipment manufacturers.)

TAIYO YUDEN is highly respected for its technological developments, product competitiveness, and proposal capabilities that we have cultivated in consumer markets, automobile electronics, industrial equipment, medical and healthcare, environmental and energy, and other markets. These fields continue to increase the use of electronics technology and we are positioned to take advantage of these new market demands. We have assembled a lineup of highly reliable products matched to the various needs of the automotive industry and are ready to begin supplying components to Tier 1 manufacturers. We see significant synergies with the new markets we are entering and our traditional consumer products markets. TAIYO YUDEN is capable of highly efficient development and manufacturing of products that have common basic designs and processes with consumer products. Moreover, we have highly competitive pricing advantages with such products.

We have been already selected as a component supplier of parts in automobile power trains, which conveys engine power that moves the vehicle and is considered to be the most difficult to produce. We are also progressing with commercialization of products for the industrial equipment, healthcare, environmental and energy markets, including energy regeneration systems for electric bicycles and other equipment, wireless sensor networks used to detect strain and vibrations in bridges and buildings, and power control systems that improve the efficiency of solar power generation systems.

We project the sales composition ratio of products for these focus markets to increase from 13% in the fiscal year ended in March 2013 to 20% in the fiscal year ending in March 2015.

Shareholder Return Policy

We are constructing a stable and sustainable earnings structure and we are constantly working to improve our fi nancial position. As we aim to realize these objectives, we are seeking to provide profi t return to shareholders at a total return ratio of 30%.

TAIYO YUDEN's goal is to become a company that is highly respected by all stakeholders, and we are focusing on the reform of the Company's financial base. This focus is in line with three priority bases— 1) market base, 2) product base, and 3) customer base. The Company's management team is working diligently to implement cash flow management policies that will yield a positive net cash flow in the fiscal year ending March 2016.

To realize this, we will fortify our production system and make our main focus super high end products while maintaining capital investment within the range of depreciation and amortization.

To properly succeed and assure our policies are implemented we are reestablishing a stable and sustainable earnings structure and we will continue to stress the importance of improving our financial position at this stage. Management has therefore determined to distribute total dividends of ¥10 per share from retained earnings, representing a dividend payout ratio of 16.8%, for the fiscal year ended in March 2014.

We are committed to returning profit to our shareholders as we move forward with our plans and related actions to increase sales and profits with positive net cash flow results in the fiscal year ending in March 2015.

Eiji Watanuki
Eiji Watanuki
President and Chief Executive Officer