TOKUYAMA CORPORATION · communities through recognizing “corporate social responsibilities” and...

T O K U Y A M A C O R P O R AT I O N

Annual Report 2008YEAR ENDED MARCH 31, 2008

Tokuyama traces its roots back to 1918, when it began producing soda ash(sodium carbonate), one of the basic materials used in various industries.

While adding various chemicals to our product lineup, we have grown toincorporate diverse businesses covering a wide range of products includingorganic and inorganic chemicals, plastics, cement/building materials, electronicmaterials, and materials used in the medical field. In this way, Tokuyama hascontinued to serve industry and a variety of markets for 90 years.

Tokuyama aims to be a thoroughly unique company, characterized bytechnology, rather than pursuing scale. At the same time, we strive to become ameaningful presence in society, full of originality, and to generate increasedcorporate value from a medium- to long-term perspective while also practicing astyle of management that is both future-oriented and in harmony with society.

1 C o n s o l i d a t e d F i n a n c i a l H i g h l i g h t s

2 A t a G l a n c e

4 M e s s a g e f r o m t h e P r e s i d e n t

8 F i n a n c i a l R e v i e w

1 6 C o n s o l i d a t e d B a l a n c e S h e e t s

1 8 C o n s o l i d a t e d S t a t e m e n t s o f I n c o m e

1 9 C o n s o l i d a t e d S t a t e m e n t s o f C h a n g e s i n N e t A s s e t s

2 0 C o n s o l i d a t e d S t a t e m e n t s o f C a s h F l o w s

2 1 N o t e s t o C o n s o l i d a t e d F i n a n c i a l S t a t e m e n t s

3 2 I n d e p e n d e n t A u d i t o r s ’ R e p o r t

3 3 D i r e c t o r y

3 4 M a j o r S u b s i d i a r i e s a n d A f f i l i a t e s

3 5 O v e r s e a s

3 5 M a i n P r o d u c t s

3 6 C o r p o r a t e D a t a

3 6 B o a r d o f D i r e c t o r s

CAUTIONARY NOTES: FORWARD-LOOKING STATEMENTSThis annual report contains information about forward-looking statements related to such matters as the Company’s plans, strategies and business results. These

forward-looking statements represent judgments made by the Company based on information available at present and are inherently subject to a variety of risks and

uncertainties. The Company’s actual activities and business results could differ significantly from the forward-looking statements due to changes including, but not limited

to, those in the economic environment, business environment, demand and exchange rates.

Contents

Profile

Tokuyama Corporation

1

Thousands ofMillions of yen Change (%) U.S. dollars

2008 2007 2008/2007 2008

Net sales ¥307,454 ¥292,764 5.0% $3,074,537

Operating income 35,325 34,737 1.7 353,254

Income before income taxes 30,915 29,796 3.8 309,154

Net income 18,889 18,460 2.3 188,889

Per share amounts (in yen, U.S. dollars)

Net income (basic) 68.85 67.24 — 0.689

Net income (diluted) — — — —

Cash dividends 9.00 6.00 — 0.090

Total assets 383,264 373,745 2.5 3,832,642

Net assets 206,135 197,812 4.2 2,061,352

Capital expenditures 37,434 23,058 62.3 374,336

Depreciation 21,380 18,071 18.3 213,796

R&D expenses 11,161 10,757 3.8 111,612

Number of employees 5,057 4,852 — —

Consolidated subsidiaries 47 44 — —

Note: U.S. dollar amounts above and elsewhere in this annual report are converted from Japanese yen, for convenience only, at the

rate of ¥100=US$1.

Consolidated Financial HighlightsTokuyama Corporation and Consolidated Subsidiaries Years ended March 31, 2008 and 2007


2

At a Glance

BUSINESS DIVISIONGROUP SEGMENT

Chemicals

(Billions of yen)

Sales

Operating income

Specialty Products

Sales

Operating income

(Billions of yen)

Cement,Building

Materials and Others

Sales

Operating income

(Billions of yen)

Chemicals

Si

Advanced Materials

Cement

2004

4.7

118

30.5

101

3.7

88

2008

2008

2008

2007

8.2

113

25.8

91

4.2

90

2007

2007

7.7

103

16.1

77

3.5

84

2006

2006

2006

8.6

96

9.2

67

3.3

75

2005

2005

2005

5.5

89

6.4

60

4.0

71

2004

2004


3

CEMENT

RECYCLING AND ENVIRONMENT

SODA ASH, CALCIUM CHLORIDE

CAUSTIC SODA, PROPYLENE OXIDE

VINYL CHLORIDE MONOMER

ISOPROPYL ALCOHOL (IPA)

MICROPOROUS FILM

ORDINARY PORTLAND CEMENT

OTHER CEMENT

RECYCLING WASTE AND

BY-PRODUCTS

ELECTRONIC MATERIALS

FUMED SILICA

PRECIPITATED SILICA

FUMED SILICA(Tokuyama Chemicals (Zhejiang)

Co., Ltd.)

PRECIPITATED SILICA(Tokuyama Siam Silica Co., Ltd.)

FINE CHEMICALS

SHAPAL

IC CHEMICALS

CLEANING SYSTEM

MEDICAL DIAGNOSIS SYSTEMS(A&T Corp.)

DEVELOPER(Hantok Chemicals Co., Ltd.)

DENTAL MATERIALS(Tokuyama Dental Corp.)

ION-EXCHANGE MEMBRANES(ASTOM Corp.)

POLYCRYSTALLINE SILICON

FUMED SILICA

PRECIPITATED SILICA

(WHITE CARBON)

PHARMACEUTICAL BULKS ANDINTERMEDIATES

OPTICAL LENS MATERIALS

ALUMINUM NITRIDE (SHAPAL®)

HIGH PURITY CHEMICALS FOR ELECTRONICSMANUFACTURING

CLEANING SOLVENTS AND SYSTEM

SODA ASH AND CALCIUM CHLORIDE

CHLOR-ALKALI

VINYL CHLORIDE

NEW ORGANIC CHEMICALS

NF

BUSINESS UNIT MAJOR DIRECT PRODUCTSMAJOR PRODUCTS OF AFFILIATE COMPANIES

POLYVINYL CHLORIDE(Shin Dai-ichi Vinyl Corp.)

POLYPROPYLENE FILM(Sun•Tox Co., Ltd.)

MICROPOROUS FILM(Shanghai Tokuyama Plastics

Co., Ltd.)

CEMENT & READY-MIXED CONCRETE(Tokuyama Tsusho Trading Co., Ltd.)

PLASTIC SASHES(Shanon Co., Ltd.)

OTHERS (Shunan System Sangyo Co., Ltd.)


4

Message from the President

SHIGEAKI NAKAHARAPRESIDENT


5

Review of the Previous Medium-term Management PlanThe Tokuyama Group is committed to the objectives in its basic management policies, which are: to make the

Group into a business grouping whose members are the enterprises of first choice by their customers, and which

is held in high esteem by all its stakeholders, including its shareholders, customers, employees, and the local

communities through recognizing “corporate social responsibilities” and practicing “management in harmony with

society,” together with achieving sustainable growth in corporate value based on enhancing corporate ethics and

ensuring strict compliance.

Based on these management policies, from April 2005 the Tokuyama Group began its previous three-year

management plan with the goal of enhancing its corporate value over the medium and long term. To do this, we

set numerical targets including net sales of more than ¥260 billion on a consolidated basis, an operating margin

(ratio of operating income to net sales) of higher than 10%, and ROA (ratio of net income to total assets) of higher

than 3.0% for the final fiscal year of the plan.

We endeavored to secure profits through product price revisions and cost reduction in response to continually

rising raw materials and fuel prices from the first fiscal year of the plan. On the other hand, the electronic materials

business saw favorable results, bolstered by robust demand. As a result of those, we succeeded in achieving all

our targets in the previous fiscal year, one year ahead of schedule. In this fiscal 2008 (year ended March 31,

2008), the final fiscal year of the plan, we successfully maintained all the target levels for the second straight year

by generating net sales of ¥307 billion, the operating margin of 11.5%, and ROA of 4.9%.

Our Centennial VisionThe Tokuyama Group celebrated the 90th anniversary of its establishment on February 16, 2008. We have

formulated our Centennial Vision, “a manufacturing company that creates a brighter future through vitality of

human resources and creativity of chemistry in harmony with society” as an ideal image for our centennial

anniversary, a decade from now. Through steadily promoting basic strategies (* See page 6), we will aim to

achieve our numerical targets for our centennial, concretely, net sales of more than ¥500 billion, the operating

margin of higher than 15%, and an overseas sales ratio of higher than 30%.

Outline of a New Three-year Management PlanIn April 2008, we have started a new three-year management plan as the first step based on a management

policy, “Venture spirit & Innovation,” in order to make our centennial vision a reality. Under this new three-year

management plan, we have set targets for the final fiscal year of the plan, fiscal 2011 (the year ending March

2011) of more than ¥370 billion in net sales, the operating margin of higher than 12%, and the overseas sales ratio

of higher than 22%.

Our specific initiatives are as follows.

1. Implementing Growth Strategies

1. Further Selection & Concentration for Attacking

The scope of the Tokuyama Group’s businesses encompasses a wide variety of products ranging from materials

to components in markets that differ from product to product, which can be called a multipolar structure. We

classify these businesses into four categories, namely Growing Materials Business, Growing Components

Business, Foundation Business, and Independent Components Business, from the two viewpoints of

“International competitiveness” and ”Life cycle.” Among these four businesses, we will expand our business


6

Net Sales More than ¥500 billion

Operating Margin Higher than 15%

Overseas Sales Ratio Higher than 30%

BASIC STRATEGIES FOR CENTENNIAL VISION

NEW THREE-YEAR MANAGEMENT PLAN

This category contains products used as materials in the globally growing industries. We must pursue scale expansion to win in the international competition. Businesses in this category are characterized as energy-consuming, and a large amount of advance investment is needed. e.g. Polycrystalline silicon, Fumed silica, Aluminum nitride powder, etc.

Growing Materials Business

This category contains products used as components for growth products in the world markets. We need todifferentiate to win in the international competition. High-functional products created by high development capabilities are needed in this category's businesses.e.g. Fine chemicals, Figaro Engineering, Tokuyama Dental, etc.

Growing Components Business

This category contains products used as basic materials for domestic markets. In these businesses we need to secure stable profits and further reduce costs to compete against imported products. The strength of the Tokuyama Factory is the source of competitive advantages in these businesses.e.g. Cement, Chlor-alkali, Soda, Calcium chloride, etc.

Foundation Business

This category contains products used as components for products in domestic markets. We must pursue continuous growth to meet growth and needs in domestic markets. To win in the competition we need to make operations more efficient, including cooperation with upstream/downstream businesses, as well as differentiation of products.e.g. Sun•Tox, A&T, Shanon, etc.

Independent Components Business

Final Targets under the New Three-Year Management Plan (for Year ending March 2011)

Net Sales

More than ¥370 billion

Overseas Sales Ratio

Higher than 22%

Operating Margin

Higher than 12%

Operating Income before Depreciation/ Person

More than ¥14 million

Basis for the Plan: Exchange rate ¥110/$, Domestic naphtha price ¥66,000/kl

Human Resources-based ManagementPromotion of CSR

CentennialVision

Strengthening ofStrategically Growing

Businesses

Strengthening of International

Competitiveness


7

Shigeaki Nakahara

President

June 2008

through aggressively investing our management resources in Growing Materials Business and Growing

Components Business.

2. Creation of New Businesses with Global Competitiveness

In the creation of new businesses, while striving to make it realized that development projects that have already

reached commercial stages at this point will surely contribute to profits, we plan to cultivate new business themes

in the fields of electronic materials and components, as well as energy and environment, through closer

cooperation between our R&D and business planning sections.

3. Strengthening Competitiveness through Productivity Improvement

We aim to improve productivity by restructuring our manufacturing and information infrastructure. As for

manufacturing infrastructure, we will take the initiative in strengthening the Group’s international competitiveness

by building closer cooperation between the Tokuyama Factory, which is defined as the mother factory of

technologies and know-how, and the Kashima Factory, as well as the factories of group companies. At the same

time, for restructuring of information infrastructure, we have already started introducing enterprise resource

planning (ERP) systems. By enhancing the level of our managerial accounting, we will improve productivity in

office work as well as manufacturing departments.

2. Building Systems for Growth Strategies

1. Securing Management Resources and their Optimum Allocation

We will give top priority to human resources among all our management resources in order to achieve long-term

growth, and will realize their optimum allocation on a timely basis. At the same time, we will strive to create a

working environment in which each employee is highly motivated and can display his or her individual capabilities.

2. Globally Competitive HR Development

We will develop globally competitive human resources based on a medium- to long-term HR development

program.

3. Reinforcement of Corporate Governance

We will consider what governance system enables us to make important management decisions quickly in a time

of change.

4. Full Utilization of the Balanced Scorecard

We will enhance our functions for executing strategies through promoting “transparent approaches” in our

measures to achieve our objectives

The Tokuyama Group will steadily implement the above-mentioned medium- and long-term management

strategies and aim to enhance corporate value based on long years of relationships with our customers and our

consistent policy to stick to manufacturing only the best.

In closing, I would like to take this opportunity to ask all stakeholders for their continued support and

cooperation.


8

INCOME ANALYSIS

In fiscal 2008 (the year ended March 31, 2008), global economic growth remained steady on the whole,

as the emerging countries including China achieved steady economic growth, although the economy

showed signs of a slowdown due to such factors as growing concern over the financial system

triggered by the subprime loan problem in the second half of 2007 and steep rise in raw materials and

fuel prices. The Japanese economy recorded growth in exports, because the increased exports to the

emerging countries exceeded the decreased amount of exports to the U.S. On the other hand,

domestic demand was sluggish, and what is worse, decreased construction starts caused by the

revised Building Standards Act also had a negative impact on the Japanese economy from summer.

Under such circumstances, The Tokuyama Group further strove to reinforce cost-reduction measures

on a number of fronts while also implementing plans for prioritized investments aimed at realizing a

strategy to enhance corporate value through steady growth. On the sales front, Tokuyama continued to

make every effort to maintain or secure increases in sales prices to bolster profitability and also devoted

considerable resources to acquiring new customers.

Reflecting successful efforts to secure upward price adjustments and other efforts, consolidated net

sales in fiscal 2008 amounted to ¥307,454 million (US$3,075 million), an increase of 5.0% compared

with the previous year.

By business segment, the Chemicals segment sales rose 5.2% year-on-year to ¥118,336 million

(US$1,183 million), sales in the Specialty Products segment rose 11.9% year-on-year to ¥101,291

million (US$1,013 million), and sales recorded by the Cement, Building Materials and Others segment

decreased 2.1% year-on-year to ¥87,826 million (US$878 million).

FINANCIAL SECTION

Financial Review

NET SALES

219238

263

293307

(Billions of yen)

20082007200620052004

OPERATING INCOME

13.2

18.2

24.3

34.7 35.3

(Billions of yen)

20082007200620052004


9

Sharp increases in raw materials and fuel prices, higher depreciation and repairing cost, etc.

outweighed the effect of cost-reduction efforts, resulting in a 6.5% year-on-year increase in cost of

sales to ¥209,027 million (US$2,090 million).

Despite our efforts to lower costs, reflecting higher R&D expenses, personnel expenses, distribution

expenses and so on, SG&A expenses amounted to ¥63,102 million (US$631 million), an increase of

2.3% compared with the previous year.

The net aggregate effect of price adjustments and various efforts to lower costs more than offset the

impact of steep increases in raw materials and fuel prices. Operating income increased 1.7% year-on-

year to ¥35,325 million (US$353 million). The operating margin (Ratio of operating income to net sales)

was 11.5%, a decrease of 0.4 percentage points compared with the figure of 11.9% recorded in the

previous year.

In other income and expenses, Tokuyama reported neither impairment loss on fixed assets nor loss

on changes in retirement benefit plans in this fiscal year, both of which had been recorded in the

previous year. Reflecting these and other factors, net other expenses amounted to ¥4,410 million

(US$44 million), a decrease of 10.7% compared with the previous year.

Income before income taxes totaled ¥30,915 million (US$309 million), a gain of ¥1,119 million

compared with the previous year’s figure of ¥29,796 million. Income taxes were ¥11,522 million

(US$115 million) and minority interests totaled ¥504 million (US$5 million). As a result, net income rose

from ¥18,460 million to ¥18,889 million (US$189 million), a gain of ¥429 million compared with the

previous year. The return on sales (ROS) was 6.1%, compared with 6.3% in the previous year. Net

income per share was ¥68.85 (US$0.689), up from ¥67.24 in the previous year. Dividends per share

were increased to ¥9.00 (US$0.090), up ¥3.00 compared with the previous year. Commemorative

NET INCOME

6.0

11.0

14.0

18.5 18.9(Billions of yen)

20082007200620052004

RETURN ON EQUITY

(%)

20082007200620052004

8.58.9

10.09.7

5.1


10

dividends per share of ¥3.00 were included to celebrate the 90th anniversary of the Company’s

establishment on February 16, 2008.

Return on equity (ROE) and return on assets (ROA) were 9.7% and 4.9%, respectively, compared with

10.0% and 4.9% in the previous year.

SEGMENT INFORMATION

The Tokuyama Group comprises the parent company Tokuyama Corporation, 48 subsidiaries and 40

affiliated companies. The Group’s operations are divided into the three business segments of

Chemicals, Specialty Products, and Cement, Building Materials and Others. For accounting purposes,

47 of the Company’s major subsidiaries are consolidated, while 13 affiliates are accounted for using the

equity method.

CHEMICALS

The Chemicals segment is composed of the operations of 6 consolidated subsidiaries and 3 equity-

method affiliates.

Segment net sales increased 5.2% year-on-year to ¥118,337 million (US$1,183 million), while

operating income fell 42.4% year-on-year to ¥4,738 million (US$47 million). The segment accounted for

38.5% of total net sales (a rise of 0.1 percentage points compared with the previous year).

Sharp increases in raw materials and fuel prices exerted a substantial impact on overall businesses in

the Chemicals segment. Despite cost reduction and sales price revisions efforts, the performance in this

segment was sluggish.

SALES COMPOSITION

(%)

28.6

38.5

32.9

Chemicals SpecialtyProducts

Cement,Building Materialsand Others


11

Shin Dai-ichi Vinyl Corporation stopped special vinyl chloride resins production in its Takaoka factory.

In the film business, Sun•Tox Co., Ltd. registered unfavorable results despite continued efforts to

secure sales price increases and boost efficiency in response to further raw material price hikes.

We withdrew from BOPP films (Biaxial-oriented polypropylene films) business in Tianjin, China, which

had been in a slump.

SPECIALTY PRODUCTS

The Specialty Products segment consists of the operations of 20 consolidated subsidiaries and 5

equity-method affiliates.

Segment net sales increased 11.9% year-on-year to ¥101,291 million (US$1,013 million) and

operating income increased 18.2% year-on-year to ¥30,534 million (US$305 million). The segment

accounted for 32.9% of total net sales (a gain of 2.0 percentage points compared with the previous

year).

In the Si (silicon) business, demand for polycrystalline silicon remained strong for both

semiconductors and solar cells.

In functional powder operations, sales of fumed silica were brisk, especially for polishing of

semiconductor wafers (CMP application). In the second half of this fiscal year, Tokuyama Chemicals

(Zhejiang) Co., Ltd., which is a production base for fumed silica in China, commenced operations.

In the advanced materials business, we saw steadily increasing results for photoresist developer,

high-purity chemicals for use in production of semiconductors and liquid crystal displays, due to

improved production efficiency. In fine chemicals operations, plastic lens-related materials did not grow


12

as we had expected, because demand for them entered a phase of adjustment.

In aluminum nitride, although Tokuyama continued to focus on reducing costs and other measures,

results were sluggish. At the end of this fiscal year, the construction of manufacturing facilities of

Tokuyama-Dowa Power Material Co., Ltd., which is a joint venture with Dowa Metaltech Co., Ltd. to

manufacture and sell aluminum nitride substrates, was completed.

A&T Corporation reported solid results, due to cost reduction together with steady sales of laboratory

information systems, etc.

CEMENT, BUILDING MATERIALS AND OTHERS

The Cement, Building Materials and Others segment comprises the operations of 21 consolidated

subsidiaries and 5 equity-method affiliates.

Segment net sales decreased 2.1% year-on-year to ¥87,826 million (US$878 million) and operating

income fell 12.2% year-on-year to ¥3,691 million (US$37 million). The segment accounted for 28.6% of

total net sales (a decline of 2.0 percentage points compared with the previous year).

In cement operations, business conditions remained adverse due to a gradual downward trend of

public works and decreased private-sector demand caused by the delay in building confirmation as well

as harsh cost increases such as sharp price hikes of raw materials and fuel and higher fixed costs.

Tokuyama responded to these conditions by focusing on revising sales prices, lowering costs through

improving production efficiency. As a result of those, the performance of the cement business was

largely level with the previous fiscal year.

As a result of efforts to accept a larger amount of waste used as raw materials, the recycling and


13

environment business registered steady results.

In building materials and others operations, the Shanon Group, which is developing plastic window

sash business, registered unfavorable results, because its endeavor to revise product prices and lower

costs did not adequately absorb the steep rise of raw materials prices, and decreased demand caused

by the delay in building confirmation also had a negative impact.

FINANCIAL POSITION AND LIQUIDITY

As of March 31, 2008, total assets amounted to ¥383,264 million (US$3,833 million), an increase of

¥9,519 million from the figure of ¥373,745 million at the previous fiscal year-end.

Current assets increased 6.1% compared with the previous fiscal year-end to ¥164,650 million

(US$1,647 million). This was due primarily to an increase in securities. Current liabilities rose 9.7% to

¥115,068 million (US$1,151 million). This mainly reflected an increase in trade liabilities related to plant

and equipment. As a result, the current ratio was down to 1.43 times, from 1.48 times at the previous

fiscal year-end. Investments and long-term receivables declined 25.2% to ¥51,768 million (US$518

million). This was primarily owing to a drop in the market value of investment securities compared with

the previous fiscal year-end.

Property, plant and equipment totaled ¥164,025 million (US$1,640 million) as of the fiscal year-end.

Partial reconstruction and renovation of our own power generation facilities and an increase in

construction in progress as a result of additional polycrystalline silicon manufacturing facilities, etc.

were offset by a further increase in accumulated depreciation. The net increase compared with the

previous fiscal year-end was 11.9%.

TOTAL ASSETS

309 309

361 374 383

(Billions of yen)

20082007200620052004


14

Other assets decreased 0.4% to ¥2,821 million (US$28 million).

As of March 31, 2008, total liabilities amounted to ¥177,129 million (US$1,771 million), an increase of

0.7% compared with the previous fiscal year-end figure of ¥175,933 million. The main contributory

factors were increased trade liabilities related to plant and equipment, etc. Interest-bearing debt

declined 10.7% from ¥72,006 million at the previous fiscal year-end to ¥64,274 million (US$643 million).

Minority interests in consolidated subsidiaries increased 23.1% from ¥5,790 million as of the previous

fiscal year-end to ¥7,125 million (US$71 million). Net assets grew 4.2% compared with the previous

fiscal year-end, from ¥197,812 million to ¥206,135 million (US$2,061 million). This was due chiefly to an

increase in general reserve through appropriations of unappropriated retained earnings. The ratio of

shareholders’ equity to total assets was 51.9%, up from 51.4% at the previous fiscal year-end. Net

assets per share was ¥725.37 (US$7.254), compared with ¥699.69 at the previous fiscal year-end.

CAPITAL EXPENDITURES

Capital expenditures totaled ¥37,434 million (US$374 million), an increase of 62.3% compared with the

previous year’s figure of ¥23,058 million. One of the major items of capital spending was partial

reconstruction and renovation of our own power generation facilities.

CASH FLOWS

Net cash provided by operating activities totaled ¥47,699 million (US$477 million). Principal items

included income before income taxes, which increased from ¥29,796 million to ¥30,915 million (US$309

million). Depreciation totaled ¥21,380 million (US$214 million) from ¥18,071 million in the previous fiscal

127138

184198

206

(Billions of yen)

20082007200620052004

NET ASSETS


15

year. The cash inflow due to the decrease in trade receivables totaled ¥3,609 million (US$36 million)

compared with the cash outflow of ¥8,149 million in the previous year. Income taxes paid were ¥12,651

million (US$127 million) from ¥11,172 million in the previous year.

Net cash used in investing activities totaled ¥25,664 million (US$257 million). A major contributory

factor was the cash outflow due to payments for purchases of property, plant and equipment, from

¥21,042 million in the previous year to ¥27,593 million (US$276 million).

Net cash used in financing activities equaled ¥10,176 million (US$102 million). This was primarily

attributed to repayments of debt of ¥4,627 million (US$46 million) from ¥6,960 million in the previous

year and redemption of bonds of ¥5,000 million (US$50 million) from ¥4,800 million in the previous year.

As a result of the above, cash and cash equivalents increased by ¥11,835 million (US$118 million)

compared with the previous fiscal year-end, to ¥41,057 million (US$411 million).


16

Consolidated Balance SheetsTokuyama Corporation and Consolidated Subsidiaries Years ended March 31, 2008 and 2007

Thousands ofMillions of yen U.S. dollars (Note 2)

ASSETS 2 0 0 8 2 0 0 7 2 0 0 8

Current assets:

Cash in hand and deposits at bank ¥ 28,657 ¥ 29,222 $ 286,573

Time deposits 528 689 5,282

Short-term investments 679 1,995 6,790

Marketable securities (Note 5, Note 19) 12,400 1 124,001

Receivables:

Trade notes and accounts 81,751 85,688 817,512

Others 3,795 2,645 37,952

Less allowance for doubtful accounts (475) (560) (4,755)

85,071 87,773 850,709

Inventories (Note 6) 32,515 29,415 325,153

Deferred tax assets (Note 8) 3,482 4,508 34,825

Other current assets 1,318 1,538 13,163

Total current assets 164,650 155,141 1,646,496

Investments and long-term receivables:

Investment securities (Note 5) 32,487 47,445 324,875

Investments in unconsolidated subsidiaries and affiliates 6,913 11,078 69,125

Long-term receivables 4,631 4,612 46,309

Others 8,013 6,305 80,127

Less allowance for doubtful accounts (276) (192) (2,759)

51,768 69,248 517,677

Property, plant and equipment (Note 7):

Land 32,208 31,075 322,078

Buildings and structures 95,825 93,755 958,246

Machinery and equipment 419,276 401,423 4,192,759

Construction in progress 19,214 9,342 192,141

566,523 535,595 5,665,224

Less accumulated depreciation (402,498) (389,071) (4,024,976)

164,025 146,524 1,640,248

Other assets:

Intangible assets 1,770 1,724 17,716

Deferred tax assets (Note 8) 1,047 1,108 10,466

Excess of investment cost over equity in net assets acquired 4 — 39

2,821 2,832 28,221

Total assets ¥383,264 ¥373,745 $3,832,642

See notes to consolidated financial statements


17


LIABILITIES AND NET ASSETS 2 0 0 8 2 0 0 7 2 0 0 8

Current liabilities:

Short-term bank loans (Note 7) ¥ 8,565 ¥ 9,899 $ 85,655

Current portion of long-term debt (Note 7) 18,638 13,966 186,378

Notes and accounts payable:

Trade notes and accounts 43,064 44,311 430,644

Others 24,800 12,193 248,000

67,864 56,504 678,644

Accrued income taxes (Note 8) 2,963 7,436 29,635

Accrued expenses 9,266 8,501 92,664

Guarantee deposits received from dealers 5,183 4,985 51,832

Other current liabilities 2,589 3,606 25,871

Total current liabilities 115,068 104,897 1,150,679

Long-term liabilities:

Long-term debt, less current portion (Note 7) 37,071 48,140 370,711

Accrued retirement and severance benefits (Note 9) 1,387 9,599 13,867

Deferred tax liabilities (Note 8) 7,200 11,846 72,003

Other long-term liabilities 16,403 1,451 164,030

Total long-term liabilities 62,061 71,036 620,611

Contingent liabilities (Note 17)

Shareholders’ equity (Note 4, Note 14):

Common stock, ¥50 par value:

Authorized: 700,000,000 shares

Issued: 275,671,876 shares 29,976 29,976 299,758

Additional paid-in capital 34,195 34,193 341,955

Retained earnings 125,667 108,628 1,256,665

Less treasury stock, at cost (1,176) (1,011) (11,761)

Total shareholders’ equity 188,662 171,786 1,886,617

Valuation, translation adjustments and others (Note 4):

Unrealized holding gains on available-for-sale securities 10,193 20,366 101,933

Foreign currency translation adjustments 155 (130) 1,552

Total valuation, translation adjustments and others 10,348 20,236 103,485

Minority interests in consolidated subsidiaries (Note 4): 7,125 5,790 71,250

Total net assets 206,135 197,812 2,061,352

Total liabilities and net assets ¥383,264 ¥373,745 $3,832,642



18

Consolidated Statements of IncomeTokuyama Corporation and Consolidated Subsidiaries Years ended March 31, 2008, 2007 and 2006


2 0 0 8 2 0 0 7 2 0 0 6 2 0 0 8

Net sales ¥307,454 ¥292,764 ¥263,374 $3,074,537

Cost of sales (Note 4) 209,027 196,334 179,961 2,090,258

Gross profit 98,427 96,430 83,413 984,279

Selling, general and administrative expenses (Note 4, Note 11) 63,102 61,693 59,101 631,025

Operating income 35,325 34,737 24,312 353,254

Other income (expenses):

Interest and dividend income 951 585 477 9,512

Interest expenses (1,446) (1,534) (1,638) (14,455)

Loss from disposal of property, plant and equipment (358) (211) (461) (3,582)

Impairment loss on fixed assets (3) (1,903) — (35)

Gain on sale of marketable and investment securities 1,494 1,049 830 14,942

Loss on write-down of marketable and investment securities (661) (3) (6) (6,607)

Foreign exchange gain (loss) (1,271) — 380 (12,714)

Seconded employee labor cost (1,912) (1,940) (1,883) (19,120)

Gain (loss) on changes in retirement benefit plans (Note 9) 39 (1,004) — 393

Costs of idle operations (494) (372) (580) (4,939)

Equity in earnings of unconsolidated subsidiaries and affiliates 715 972 484 7,154

Other-net (1,464) (580) (3) (14,649)

(4,410) (4,941) (2,400) (44,100)

Income before income taxes 30,915 29,796 21,912 309,154

Income taxes (Note 8)

Current 8,163 11,060 8,748 81,632

Deferred 3,359 (314) (1,662) 33,589

11,522 10,746 7,086 115,221

Minority interests (504) (590) (862) (5,044)

Net income ¥ 18,889 ¥ 18,460 ¥ 13,964 $ 188,889

Yen U.S. dollars (Note 2)

2 0 0 8 2 0 0 7 2 0 0 6 2 0 0 8

Per share amounts:

Net income (basic) ¥ 68.85 ¥ 67.24 ¥ 52.61 $ 0.689

Net income (diluted) — — — —

Cash dividends 9.00 6.00 6.00 0.090



19

Consolidated Statements of Changes in Net AssetsTokuyama Corporation and Consolidated Subsidiaries Years ended March 31, 2008, 2007 and 2006


2 0 0 8 2 0 0 7 2 0 0 6 2 0 0 8

Common stock

Balance at beginning of year ¥ 29,976 ¥ 29,976 ¥ 19,274 $ 299,758

Issuance of common stock — — 10,702 —

Balance at end of year ¥ 29,976 ¥ 29,976 ¥ 29,976 $ 299,758

Additional paid-in capital


Issuance of common stock — — 10,692 —

Gain on disposal of treasury stock 2 1 3 26


Retained earnings

Balance at beginning of year ¥108,628 ¥ 91,889 ¥ 79,522 $1,086,277

Net income 18,889 18,460 13,964 188,889

Cash dividends paid (1,646) (1,648) (1,525) (16,464)

Bonuses to directors and statutory auditors — (66) (72) —

Adjustment for changes in consolidated subsidiaries and

affiliates accounted for by the equity method (204) (7) — (2,037)

Balance at end of year ¥125,667 ¥108,628 ¥ 91,889 $1,256,665

Less treasury stock, at cost

Balance at beginning of year ¥ (1,011) ¥ (676) ¥ (306) $ (10,114)

Net change (165) (335) (370) (1,647)

Balance at end of year ¥ (1,176) ¥ (1,011) ¥ (676) $ (11,761)

Unrealized holding gains on available-for-sale securities


Net change (10,173) (3,884) 10,598 (101,727)


Foreign currency translation adjustments

Balance at beginning of year ¥ (130) ¥ (606) ¥ (1,243) $ (1,301)

Net change 285 476 637 2,853

Balance at end of year ¥ 155 ¥ (130) ¥ (606) 1,552

Minority interests in consolidated subsidiaries


Net change 1,334 1,290 655 13,342




20

Consolidated Statements of Cash FlowsTokuyama Corporation and Consolidated Subsidiaries Years ended March 31, 2008, 2007 and 2006


2 0 0 8 2 0 0 7 2 0 0 6 2 0 0 8

Cash flows from operating activities:Income before income taxes ¥ 30,915 ¥ 29,796 ¥ 21,912 $ 309,154Adjustments to reconcile net cash provided by operating activities:

Depreciation 21,380 18,071 18,087 213,796Increase (decrease) in provision (4,327) 443 1,124 (43,272)Interest and dividend income (951) (585) (477) (9,512)Gain on sale of marketable and investment securities (1,558) (1,039) (826) (15,582)Foreign exchange gain 559 (283) (88) 5,590Loss on sale and disposal of property, plant and equipment 399 211 461 3,988Impairment loss on fixed assets 3 1,903 — 35Equity in earnings of affiliates (715) (972) (484) (7,154)Interest expenses 1,446 1,534 1,638 14,455Loss on write-down of marketable and investment securities — 3 6 —(Increase) decrease in trade receivables 3,609 (8,149) (11,496) 36,088Increase in inventories (3,042) (3,071) (3,166) (30,422)Increase (decrease) in trade payable (867) 6,222 2,497 (8,672)Increase in other long-term liabilities 11,785 — — 117,849Payment for bonuses to directors and statutory auditors — (66) (79) —Other 1,533 1,642 1,147 15,344

Sub total 60,169 45,660 30,256 601,685Interest and dividend received 1,666 1,280 767 16,663Interest paid (1,485) (1,542) (1,627) (14,851)Income taxes paid (12,651) (11,172) (3,648) (126,511)

Net cash provided by operating activities 47,699 34,226 25,748 476,986Cash flows from investing activities:

Increase in time deposits (135) (83) (399) (1,353)Decrease in time deposits 296 57 149 2,958Payments for purchases of marketable securities — — (50) —Proceeds from sales of marketable securities — 50 57 —Payments for purchases of property, plant and equipment (27,593) (21,042) (22,933) (275,934)Proceeds from sales of property, plant and equipment 573 681 771 5,729Payments for purchases of investment securities (3,012) (2,045) (626) (30,117)Proceeds from sales of investment securities 2,428 1,607 1,345 24,281Increase in loans receivable (309) (41) (93) (3,094)Decrease in loans receivable 351 544 572 3,509Other 1,737 (2,259) (1,551) 17,379

Net cash used in investing activities (25,664) (22,531) (22,758) (256,642)Cash flows from financing activities:

Decrease in short-term loans (212) (1,145) (1,193) (2,124)Increase (decrease) in commercial papers — — (3,000) —Proceeds from long-term debt 4,966 3,613 1,326 49,664Repayments of long-term debt (9,381) (9,428) (3,388) (93,812)Redemption of bonds (5,000) (4,800) — (50,000)Issuance of common stock — — 21,394 —Cash dividends paid (1,646) (1,648) (1,525) (16,464)Cash dividends paid to minority interest (79) (91) (92) (788)Increase in treasury stock (163) (338) (367) (1,633)Other 1,339 — — 13,395

Net cash used in (provided by) financing activities (10,176) (13,837) 13,155 (101,762)Effect of exchange rate changes on cash and cash equivalents (612) 200 53 (6,120)Net increase (decrease) in cash and cash equivalents 11,246 (1,942) 16,198 112,462Cash and cash equivalents at beginning of the year 29,222 30,999 14,801 292,224Increase in cash and cash equivalents due to changes of

scope of consolidation 589 165 — 5,887Cash and cash equivalents at end of year ¥ 41,057 ¥ 29,222 ¥ 30,999 $ 410,573



21

Notes to Consolidated Financial StatementsTokuyama Corporation and Consolidated Subsidiaries

1. BASIS OF FINANCIAL STATEMENTSThe accompanying consolidated financial statements have been prepared from accounts and records maintained by TokuyamaCorporation (the “Company”) and its subsidiaries. The Company and its consolidated domestic subsidiaries have maintained theiraccounts and records in accordance with the provisions set forth in the Company Law (the “Law”) and the Financial Instruments andExchange Law and in conformity with accounting principles and practices generally accepted in Japan, which are different from theaccounting and disclosure requirements of International Accounting Standards.

The accounts of consolidated overseas subsidiaries are based on their accounting records maintained in conformity with generallyaccepted accounting principles and practices prevailing in the respective countries of domicile.

Certain items presented in the consolidated financial statements filed with the appropriate Local Finance Bureau of the Ministry ofFinance (“MOF”) in Japan have been reclassified for the convenience of readers outside Japan. Such reclassifications have no effecton net income or retained earnings.

The consolidated financial statements are not intended to present the consolidated financial position, results of operations and cashflows in accordance with accounting principles and practices generally accepted in countries and jurisdictions other than Japan.

2. U.S. DOLLAR AMOUNTSThe U.S. dollar amounts included in the consolidated financial statements and notes represent the arithmetic results of translatingJapanese yen to U.S. dollars at the rate of ¥100=US$1, the approximate exchange rate on March 31, 2008. The U.S. dollar amountsare included solely for the convenience of readers outside Japan, and are not intended to imply that the assets and liabilities thatoriginated in yen have been or could be readily converted, realized, or settled in U.S. dollars at this or at any other rate.

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CONSOLIDATION:

The consolidated financial statements include the accounts of the Company and its 47 significant subsidiaries (44 in 2007 and 43 in2006). Significant intercompany transactions and accounts have been eliminated in consolidation.

In total, 16 subsidiaries are consolidated on the basis of their original fiscal years ended at December 31. Material differences inintercompany transactions and accounts arising from the use of the different fiscal year-end are appropriately adjusted inconsolidation.

Investments in 13 unconsolidated subsidiaries and affiliates (15 in 2007 and 16 in 2006) are accounted for by the equity method.Investments in unconsolidated subsidiaries and affiliates not accounted for by the equity method are carried at cost.

The excess of investment cost over equity in net assets acquired is amortized on a straight-line basis over five years.

FOREIGN CURRENCY TRANSACTIONS:

Revenue and expenses items denominated in foreign currencies are translated into Japanese yen at the rates of respective transactiondates. Monetary assets and liabilities denominated in foreign currencies are translated into yen at the exchange rate in effect at thebalance sheet date and the resulting exchange gains or losses are credited or charged to income as incurred.

FOREIGN CURRENCY FINANCIAL STATEMENTS (ACCOUNTS OF OVERSEAS SUBSIDIARIES AND AFFILIATES):

All assets and liabilities are translated into yen at the exchange rate in effect at the balance sheet date except for shareholders’ equity,which is translated at the historical exchange rates. Revenue and expense accounts of the consolidated overseas subsidiaries aretranslated at the average rates of exchange prevailing during the year. The resulting translation adjustments are shown as “Foreigncurrency translation adjustments” in net assets.

CASH AND CASH EQUIVALENTS:

Cash and cash equivalents include all highly liquid time deposits with maturities of three months or less, and short-term investmentsand marketable securities which are readily convertible into cash and have no significant risk of change in value.

MARKETABLE AND INVESTMENT SECURITIES:

Securities are classified into four groups: trading securities, held-to-maturity debt securities, securities of subsidiaries and affiliates,and other securities. Trading securities are stated at fair market value, held-to-maturity debt securities at amortized cost, and securitiesof subsidiaries and affiliates are stated at cost. Other securities with a quoted current price are stated at fair value, and those without aquoted current price are stated at cost, cost being determined by the moving-average method. Net unrealized gains or losses of othersecurities are stated as “Unrealized holding gains on available-for-sale securities” in shareholders’ equity after applying tax effectaccounting. The Company and subsidiaries do not hold trading securities.


22

INVENTORIES:

Inventories are mainly stated at the lower of cost or market value, cost being determined by the moving-average method.

PROPERTY, PLANT AND EQUIPMENT:

Property, plant and equipment are stated at cost. Depreciation is mainly computed by the declining-balance method for structures,machinery and equipment, and by the straight-line method for buildings at rates based on the estimated useful lives of assetsprescribed by the Japanese Income Tax Law. The range of estimated useful lives is principally from 3 to 50 years for buildings andstructures, and from 2 to 17 years for machinery and equipment.

Significant renewals and betterments are capitalized. Maintenance expenses are charged to income as incurred.

RESEARCH AND DEVELOPMENT EXPENSES:

Research and development expenses are charged to income as incurred.

DERIVATIVES AND HEDGE ACCOUNTING:

All derivative financial instruments, except hedging instruments, are stated at fair value. The Company includes interest rate swaps inhedging instruments subject to hedge accounting.

The Company utilizes financial derivative transactions only for the purpose of hedging foreign exchange risk arising from normaloperating activities and for managing interest rate risks. The Company does not hold or issue derivatives for dealing or speculativepurposes. All derivative transactions are performed and controlled by the financial section. Directors in charge approve all derivativetransactions entered into.

As the counterparties to these derivative transactions are limited to major financial institutions with high credit standings, theCompany does not anticipate nonperformance by the counterparties to these agreements, and no material losses are expected.

LEASES:

Finance leases, other than those which are deemed to transfer ownership, are accounted for in the same manner as operating leases inaccordance with generally accepted accounting principles in Japan.

ALLOWANCE FOR DOUBTFUL ACCOUNTS:

The allowance for doubtful accounts of the Company and its consolidated subsidiaries is provided in amounts sufficient to coverpossible losses on collection. In determining the allowance for doubtful accounts for normal receivables, regard is taken of thehistorical default rate. With receivables where there is an acknowledged credit risk, allowances for doubtful accounts are provided fortaking account of collectability on a case-by-case basis.

INCOME TAXES:

The tax effects of temporary differences between the carrying amounts of assets and liabilities for tax and financial reporting isrecognized as deferred income taxes. The provision for income taxes is computed based on the pretax income included in theconsolidated statement of income. The asset and liability approach is used to recognize deferred tax assets and liabilities for theexpected future tax consequences of temporary differences between the carrying amounts of assets and liabilities for financialreporting purposes and the amounts used for income tax purposes.

ACCRUED RETIREMENT BENEFITS:

(i) EmployeesRecognition of accrued retirement benefits for employees for this fiscal year is based on actual valuation of projected benefitobligations and plan assets at the end of the fiscal year.

Prior service costs are charged to income as incurred.Actuarial differences are amortized by using the straight-line method over a period of time within the average remaining service

period of employees (16 years), from the subsequent fiscal year when they are incurred(ii) Directors and corporate auditorsCertain consolidated subsidiaries record accrued retirement benefits for directors and corporate auditors on the basis of the amountsrequired as of the end of this fiscal year based on internal rules.

Previously, the amounts required for retirement benefits for directors and corporate auditors at the balance sheet date were fullyaccrued by the Company based on internal rules.

At the Company’s 143rd general meeting of shareholders on June 26, 2007, a resolution was passed to abolish the retirementbenefits plan for directors and corporate auditors. On the same date, the Board of Directors of the Company resolved to make lump-sum payments of their retirement benefits for duties performed up to the date of abolition of the retirement plan at the time of theirretirement. As a result of that, the Company’s obligation for retirement benefits of ¥332 million payable for their duties performed up to


23

5. MARKET VALUE INFORMATIONThe market values and net unrealized gains of quoted securities at March 31, 2008 were as follows:

Millions of yen

Carrying amount Market value Difference

Held-to-maturity debt securities:

Government securities and municipal bonds — — —

Bonds and others — — —

Total — — —

the date of abolition of the retirement plan is presented in “Other long-term liabilities.”Retirement benefits for directors and corporate auditors of ¥25 million for the period from the previous fiscal year-end to the date of

abolition of the retirement plan were recorded as expense for accrued directors’ and corporate auditors’ retirement benefits.

NET INCOME PER SHARE:

Net income per share is computed by dividing net income available to common stockholders by the weighted average number ofcommon shares outstanding during each year. Diluted net income per share is calculated based on the assumption that all dilutedconvertible bonds were converted at the beginning of the year. Diluted net income per share for the Years ended March 31, 2008, 2007and 2006 was not presented because there was no dilutive effect on any assumed conversion of convertible bonds for the year endedMarch 31, 2008, 2007 and 2006.

4. CHANGE IN ACCOUNTING POLICIES(1) ADOPTION OF AN ACCOUNTING STANDARD FOR DIRECTORS’ BONUS

Effective April 1, 2006, the Company and its consolidated subsidiaries have adopted an “Accounting Standard - ASBJ Statement No. 4Accounting Standard for Directors’ Bonus” (issued on Nov. 29, 2005). Compared with the previous accounting standard, the effect ofthis change was to decrease operating income and income before income taxes by ¥65 million (US$646 thousand) respectively in thefiscal year ended March 31, 2007.

(2) ADOPTION OF AN ACCOUNTING STANDARD FOR PRESENTATION OF NET ASSETS IN THE BALANCE SHEET

Effective April 1, 2006, the Company and its consolidated subsidiaries have adopted an ”Accounting Standard - ASBJ Statement No. 5Accounting Standard for Presentation of Net Assets in the Balance Sheet” (issued on Dec. 9, 2005) and its “Implementation Guidance -ASBJ Guidance No. 8 Guidance on Accounting Standard for Presentation of Net Assets in the Balance Sheet” (issued on Dec. 9,2005). The corresponding figure to that of Total shareholders’ equity previously used was ¥192,022 million (US$1,920 million).

(3) CHANGE IN AN ACCOUNTING POLICY FOR DEPRECIATING IMPORTANT DEPRECIABLE ASSETS

In conformance with changes to the Corporate Income Tax Law, the method of depreciating tangible fixed assets (property, plant andequipment) for the Company and its domestic consolidated subsidiaries has been revised to confirm with the revised CorporateIncome Tax Law from the fiscal year under review for tangible fixed assets acquired on or after April 1, 2007.

Compared with the previous method, the effect of this change was to increase depreciation by ¥539 million (US$5,395 thousand),and decrease operating income and income before income taxes by ¥502 million (US$5,021 thousand) respectively during the fiscalyear under review.

Tangible fixed assets (property, plant and equipment) acquired by the Company and its domestic consolidated subsidiaries on orbefore March 31, 2007 are depreciated by the method applicable before the law’s revision. When the residual value of the assetsreaches 5% of the acquisition value, the remaining 5% is depreciated to a memorandum value over five years beginning in thesubsequent fiscal year by using the straight-line method, and is recorded as depreciation.

Compared with the previous method, the effect of this change was to increase depreciation by ¥1,880 million (US$18,799 thousand),and decrease operating income, ordinary income and income before income taxes by ¥1,765 million (US$17,651 thousand)respectively during the fiscal year under review.


24

Thousands of U.S. dollars


Held-to-maturity debt securities:

Government securities and municipal bonds — — —


Total — — —



Other securities:

Listed corporate shares $124,223 $294,984 $170,760


Total $124,223 $294,984 $170,760


Carrying amount

Non-quoted main securities:

Held-to-maturity debt securities $ —

Certificates of deposit 124,000

Other securities 27,309

Total $151,309

6. INVENTORIESInventories at March 31, 2008 and 2007 were as follows:

Thousands ofMillions of yen U.S. dollars

2 0 0 8 2 0 0 7 2 0 0 8

Finished products and merchandise ¥17,282 ¥15,449 $172,819

Work in progress 5,208 4,802 52,082

Raw materials and supplies 10,025 9,164 100,252

Total ¥32,515 ¥29,415 $325,153

Millions of yen

Acquisition cost Carrying amount Unrealized gain

Other securities:

Listed corporate shares ¥12,422 ¥29,498 ¥17,076


Total ¥12,422 ¥29,498 ¥17,076

Millions of yen

Carrying amount

Non-quoted main securities:

Held-to-maturity debt securities ¥ —

Certificates of deposit 12,400

Other securities 2,731

Total ¥15,131


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7. SHORT-TERM BANK LOANS AND LONG-TERM DEBTShort-term bank loans at March 31, 2008 represent loans, which principally bear interest at rates ranging from 0.94% to 6.72% perannum.

A summary of long-term debt at March 31, 2008 and 2007 was as follows:


2 0 0 8 2 0 0 7 2 0 0 8

Loans principally from banks and insurance companies, due through 2022

with interest rates ranging from 1.00 percent to 7.05percent ¥ 30,709 ¥ 32,106 $ 307,089

2.9 percent unsecured bonds in yen due January 9, 2008 — 5,000 —

2.65 percent unsecured bonds in yen due September 2, 2009 5,000 5,000 50,000

2.35 percent unsecured bonds in yen due March 29, 2010 10,000 10,000 100,000

0.47 percent unsecured bonds in yen due June 19, 2008 5,000 5,000 50,000

1.36 percent unsecured bonds in yen due May 11, 2011 5,000 5,000 50,000

55,709 62,106 557,089

Less current portion (18,638) (13,966) (186,378)

¥ 37,071 ¥ 48,140 $ 370,711

The aggregate annual maturities of long-term debt at March 31, 2008 are summarized as follows:


Years ending March 31

2008 ¥18,638 $186,378

2009 17,816 178,159

2010 2,344 23,443

2011 9,777 97,765

2012 5,153 51,528

Thereafter 1,981 19,816

¥55,709 $557,089

Assets pledged as collateral for certain loans and other liabilities at March 31, 2008 and 2007 are summarized as follows:


2 0 0 8 2 0 0 7 2 0 0 8

Pledged Assets

Property, plant and equipment ¥28,983 ¥32,908 $289,825

Other 444 508 4,442

¥29,427 ¥33,416 $294,267


26

8. INCOME TAXESThe Company and its domestic consolidated subsidiaries are subject to a number of income taxes that, in the aggregate, indicate astatutory tax rate in Japan of approximately 40.4% for the year ended March 31, 2008. Overseas subsidiaries are subject to incometaxes of countries where they are domiciled.

The significant differences between the statutory tax rate and effective income tax rate for consolidated financial statementpurposes for the years ended March 31, 2008 and 2007 were summarized as follows:

2 0 0 8 2 0 0 7

Statutory tax rate 40.4% 40.4%

Increase (decrease) in income taxes resulting from:

Effect of tax credits (4.0) (3.1)

Change in valuation allowance allocated to income tax expenses — —

Permanent differences — —

Equity in earnings of unconsolidated subsidiaries and affiliates — (1.3)

Utilization of loss carryforward — —

Loss on write-down of investments — —

Loss carried forward without deferred tax assets — —

Other 0.9 0.1

Effective income tax rate 37.3% 36.1%

Significant components of deferred tax assets and liabilities at March 31, 2008 and 2007 were as follows:

Thousands of Millions of yen U.S. dollars

2 0 0 8 2 0 0 7 2 0 0 8

Deferred tax assets:

Allowance for repairs ¥ 1,763 ¥ 1,602 $ 17,628

Fixed assets 1,027 900 10,274

Accrued retirement and severance benefits 1,043 2,718 10,432

Investment securities 1,062 1,040 10,619

Deficits 950 — 9,504

Others 2,631 4,337 26,309

Subtotal 8,476 10,597 84,766

Less valuation allowance (1,104) (346) (11,042)

Total deferred tax assets 7,372 10,251 73,724

Deferred tax liabilities:

Unrealized holding gains on available-for-sale securities (6,899) (13,802) (68,994)

Special depreciation reserve (1,230) (714) (12,304)

Appropriations for advanced depreciation (1,851) (1,884) (18,507)

Others (63) (84) (631)

Total deferred tax liabilities (10,043) (16,484) (100,436)

Net deferred tax liabilities ¥ (2,671) ¥ (6,233) $ (26,712)


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9. RETIREMENT AND SEVERANCE PLANThe Company and consolidated domestic subsidiaries have lump-sum severance benefits plans and tax-qualified pensionplans as vested benefits system. Benefits under these plans are based on the current rate of pay, length of service andconditions under which terminations occur. The Company set up an employee retirement benefit trust, contributed certainmarketable securities to the trust.

The Company transferred to defined contribution pension plans in lump-sum severance benefits plans as of April 1, 2007.

A consolidated domestic subsidiary withdrew from the-same-industry-based Employees’ Pension Fund plans on the samedate, and transferred from qualified retirement pension plans to defined contribution pension plans in October 2007.

The Company and its consolidated subsidiaries adopted “Implementation Guidance of an Accounting Standard - ASBJGuidance No. 1 Guidance on Accounting Treatment for Transfer between Retirement Benefit Plans” in the accountingtreatments stated above.

Benefit obligations for the year ended March 31, 2008 were as follows:


2 0 0 8 2 0 0 8

Project benefit obligation ¥(23,641) $ (236,405)

Fair value of plan assets 22,951 229,515

Funded status (690) (6,890)

Unrecognized actuarial loss 4,238 42,372

Net amount shown on balance sheet 3,548 35,482

Prepaid pension expense 4,935 49,349

Accrued retirement and severance benefits ¥ (1,387) $ (13,867)

Benefit costs for the year ended March 31, 2008 were as follows:


2 0 0 8 2 0 0 8

Service cost ¥1,090 $10,898

Interest cost 584 5,844

Expected return on plan assets (541) (5,405)

Recognized actuarial loss 89 883

Benefit cost 1,222 12,220

Gain on transfer to defined contribution pension plans (39) (393)

Other 481 4,812

Total ¥1,664 $16,639

Assumptions used in the actuarial calculation were as follows:

Discount rate 2.5%

Expected rate of return on plan assets 2.5%


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10. LEASESLease payments on finance lease contracts that do not transfer ownership for the year ended March 31, 2008 amounted to¥538 million (US$5,385 thousand). Lease payments corresponding to depreciation expenses for the year ended March 31,2008, which were computed by the straight-line method over a period up to the maturity of the relevant lease contracts with noresidual value, amounted to ¥538 million (US$5,385 thousand).

If the leases were capitalized, the cost of assets and accumulated depreciation at March 31, 2008 and 2007 would be asfollows:


2 0 0 8 2 0 0 7 2 0 0 8

Machinery, equipment and vehicles ¥ 780 ¥ 625 $ 7,805

Other 2,004 1,804 20,045

Less accumulated depreciation (1,378) (1,286) (13,790)

Total ¥ 1,406 ¥ 1,143 $ 14,060

The future lease payments on finance leases at March 31, 2008 and 2007 were as follows:


2 0 0 8 2 0 0 7 2 0 0 8

Due within one year ¥ 523 ¥ 455 $ 5,234

Due beyond one year 883 688 8,826

Total ¥1,406 ¥1,143 $14,060

11. SELLING, GENERAL AND ADMINISTRATIVE EXPENSESSelling, general and administrative expenses for the Years ended March 31, 2008, 2007 and 2006 were as follows:


2 0 0 8 2 0 0 7 2 0 0 6 2 0 0 8

Carriage and shipping ¥27,814 ¥27,543 ¥27,022 $278,141

Salaries and bonuses 8,956 8,382 7,916 89,562

Research and development expenses 9,804 9,305 7,960 98,037

Rent 1,689 1,655 1,563 16,886

Traveling expenses and postage 1,922 1,841 1,837 19,216

Welfare expense 1,603 1,481 1,443 16,027

Other 11,314 11,486 11,360 113,156

Total ¥63,102 ¥61,693 ¥59,101 $631,025

12. DEPRECIATIONDepreciation for the Years ended March 31, 2008, 2007 and 2006 were as follows:


2 0 0 8 2 0 0 7 2 0 0 6 2 0 0 8

Depreciation ¥21,380 ¥18,071 ¥18,087 $213,796


29

13. RESEARCH AND DEVELOPMENT EXPENSESResearch and development expenses for the Years ended March 31, 2008, 2007 and 2006 were as follows:


2 0 0 8 2 0 0 7 2 0 0 6 2 0 0 8

Research and development expenses ¥11,161 ¥10,757 ¥9,397 $111,612

14. SHAREHOLDERS’ EQUITYThe “Law” provides that an amount equal to at least 10% of cash dividends and other cash appropriations shall beappropriated and set aside as a legal reserve until the total amount of legal reserve and additional paid-in capital equals 25% ofstated capital.

The legal reserve was not available for dividends but might be used to reduce a deficit with shareholder approval orcapitalized by resolution of the Board of Directors. On condition that the total amount of legal reserve and capital reserveremains being equal to or exceeding 25% of common stock, they are available for distributions and certain other purposes bythe resolution of shareholders’ meeting.

The legal reserve is included in the retained earnings and is not allowed to show separately in the accompanyingconsolidated financial statements.

15. SEGMENT INFORMATIONBUSINESS SEGMENT INFORMATION

The Company and its consolidated subsidiaries operate primarily in the following three business segments: “Chemicals”,“Specialty Products” and “Cement, Building Materials and Others”Chemicals: caustic soda, soda ash, vinyl chloride monomer, polyvinyl chloride, microporous film and others Specialty Products: Polycrystalline silicon, aluminum nitride, amorphous precipitated silica, solvent for semiconductor basematerials, medical diagnosis systems, dental materials, ion-exchange membranes and others Cement, Building Materials and Others: cement, ready-mixed concrete, plastic window sashes and others.

Business segment information for the Years ended March 31, 2008, 2007 and 2006 was summarized as follows:

Millions of yen

CementSpecialty building Corporate or

2 0 0 8 Chemicals products materials and other Total elimination Consolidated

1. Sales

Sales to customers ¥118,337 ¥101,291 ¥ 87,826 ¥307,454 ¥ — ¥307,454

Inter-segment sales/transfer 1,714 52 12,877 14,643 (14,643) —

Total sales ¥120,051 ¥101,343 ¥100,703 ¥322,097 ¥(14,643) ¥307,454

Operating expenses 115,313 70,809 97,012 283,134 (11,005) 272,129

Operating income 4,738 30,534 3,691 38,963 (3,638) 35,325

2. Assets

Assets ¥103,064 ¥111,066 ¥ 85,488 ¥299,618 ¥ 83,646 ¥383,264

Depreciation 7,553 8,030 4,698 20,281 1,099 21,380

Impairment loss on fixed assets — — 3 3 — 3

Capital expenditures 7,987 18,343 5,443 31,773 5,661 37,434


30

Millions of yen



1. Sales

Sales to customers ¥112,537 ¥90,525 ¥ 89,702 ¥ 292,764 ¥ — ¥292,764

Inter-segment sales/transfer 1,855 62 11,430 13,347 (13,347) —

Total sales ¥114,392 ¥90,587 ¥101,132 ¥ 306,111 ¥ (13,347) ¥292,764



2. Assets

Assets ¥101,949 ¥96,935 ¥ 88,881 ¥ 287,765 ¥ 85,980 ¥373,745

Depreciation 6,004 6,879 4,224 17,107 964 18,071

Impairment loss on fixed assets 1,787 — — 1,787 116 1,903

Capital expenditures 10,355 7,207 4,644 22,206 852 23,058

Millions of yen



1. Sales

Sales to customers ¥102,647 ¥76,716 ¥84,011 ¥263,374 ¥ — ¥263,374

Inter—segment sales/transfer 1,681 56 8,958 10,695 (10,695) —

Total sales ¥104,328 ¥76,772 ¥92,969 ¥274,069 ¥ (10,695) ¥263,374



2. Assets

Assets ¥ 94,470 ¥88,078 ¥83,645 ¥266,193 ¥ 94,910 ¥361,103

Depreciation 6,191 6,867 4,283 17,341 746 18,087





1. Sales

Sales to customers $1,183,362 $1,012,915 $ 878,260 $3,074,537 $ — $3,074,537

Inter—segment sales/transfer 17,143 515 128,769 146,427 (146,427) —

Total sales $1,200,505 $1,013,430 $1,007,029 $3,220,964 $ (146,427) $3,074,537

Operating expenses 1,153,128 708,090 970,121 2,831,339 (110,056) 2,721,283


2. Assets

Assets $1,030,637 $1,110,663 $ 854,882 $2,996,182 $ 836,460 $3,832,642

Depreciation 75,534 80,294 46,980 202,808 10,988 213,796

Impairment loss on fixed assets — — 35 35 — 35



31

OVERSEAS SALES INFORMATION

Overseas sales of the Company and its consolidated subsidiaries for the Years ended March 31, 2008 and 2007 weresummarized as follows:


2 0 0 8 2 0 0 7 2 0 0 8

Asia ¥42,247 ¥38,163 $422,473

Others 17,099 13,755 170,989

Total ¥59,346 ¥51,918 $593,462

16. DERIVATIVE FINANCIAL INSTRUMENTSThe Company enters into foreign exchange forward contracts for certain foreign currency-denominated assets and liabilities to hedgeagainst future foreign currency fluctuations. The Company also enters into interest rate swap contracts to hedge against fluctuations ininterest rates on bonds and to reduce financing costs on debt instruments.

Information on the derivative financial instrument contracts utilized by the Company outstanding as of March 31, 2008 and 2007 isnot disclosed, as such contracts are accounted for as hedging instruments.

17. CONTINGENT LIABILITIESAt March 31, 2008 and 2007, the Company and its consolidated subsidiaries were contingently liable as follows:


2 0 0 8 2 0 0 7 2 0 0 8

Notes discounted or endorsed ¥ 497 ¥ 644 $ 4,971

Loans guaranteed 2,232 3,513 22,324

Commitments to guarantee 843 1,014 8,433

18. SUBSEQUENT EVENTSAt the annual shareholders’ meeting of the Company held on June 25, 2008, the appropriation of retained earnings for the yearended March 31, 2008, was approved as follows:


Cash dividends (¥6.00 per share) ¥1,646 $16,461

19. CHANGE IN THE METHOD OF PRESENTATIONEffective in the current fiscal year ended March 31, 2008, in accordance with the “Practice Guidelines on Accounting forFinancial Instruments” (JICPA Accounting Committee Report No. 14, revised on July 4, 2007) and “Questions and Answers onAccounting for Financial Instruments” (JICPA Accounting Committee, revised on November 6, 2007) in which certificates ofdeposit are defined to be treated as securities, certificates of deposit were categorized as “Marketable securities,” through theyhad been included in “Cash in hand and deposits at bank” for the previous fiscal year.

The amount of the certificates of deposit as of March 31, 2007 was ¥11,000 million ($110 million) and that as of March 31,2008 was ¥12,400 million ($124 million).


32

TO THE BOARD OF DIRECTORS OF TOKUYAMA CORPORATION

We have audited the accompanying consolidated balance sheets of Tokuyama Corporationand consolidated subsidiaries as of March 31, 2008, and 2007, and the related consolidatedstatements of income, changes in net assets and cash flows for each of the three years in theperiod ended March 31, 2008, all expressed in Japanese yen. These financial statements arethe responsibility of the Company’s management. Our responsibility is to express an opinion onthese financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in Japan.Those standards require that we plan and perform the audit to obtain reasonable assuranceabout whether the financial statements are free of material misstatement. An audit includesexamining, on a test basis, evidence supporting the amounts and disclosures in the financialstatements. An audit also includes assessing the accounting principles used and significantestimates made by management, as well as evaluating the overall financial statementpresentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in allmaterial respects, the consolidated financial position of Tokuyama Corporation andconsolidated subsidiaries as of March 31, 2008, and 2007, and the consolidated results of theiroperations and their cash flows for each of the three years in the period ended March 31, 2008,in conformity with accounting principles generally accepted in Japan.

The U.S. dollar amounts in the accompanying consolidated financial statements with respectto the year ended March 31, 2008, are presented solely for conveniences. Our audit alsoincluded the translation of Japanese yen amounts into U.S. dollar amounts and, in our opinion,such translation has been made on the basis described in Note 2 to the consolidated financialstatements.

YAMAGUCHI Audit Corporation

Shunan, JapanJune 10, 2008

Independent Auditors’ Report


33

Directory

Head OfficeShibuya Konno Bldg.3-1, Shibuya 3-chomeShibuya-ku, Tokyo 150-8383, JapanTel: +81-3-3499-8030Fax: +81-3-3499-8958URL: http://www.tokuyama.co.jp/

Domestic Offices:Sendai, Nagoya, OsakaHiroshima, Takamatsu, Fukuoka

Research Laboratories:Tsukuba, Tokuyama

Factories:

Tokuyama Factory1-1, Mikage-cho, Shunan-shiYamaguchi 745-8648, JapanTel: +81-834-34-2000Fax: +81-834-33-3790

Kashima Factory26 Sunayama, Kamisu-shi, Ibaraki 314-0255, JapanTel: +81-479-46-4700Fax: +81-479-46-1933

Overseas:

Hantok Chemicals Co., Ltd.23rd Fl., Samsung Life Bldg.,150, 2-Ga, Taepyung-Ro, Jung-GuSeoul 100-716, Korea Tel: +82-2-755-3952Fax: +82-2-755-3955

Tianjin Figaro Electronic Co., Ltd.Weishan Road, No. 19,Tianjin Economic-TechnologicalDevelopment AreaTianjin China 300457Tel: +86-22-2532-5831Fax: +86-22-2532-5908

Shanghai Tokuyama Plastics Co., Ltd.138 Xintao Road, Qingpu Industrial Zone, Shanghai China 201707Tel: +86-21-5970-5669Fax: +86-21-5970-3756

Tokuyama Chemicals (Zhejiang) Co., Ltd.No.555, Yashan West Road, Zhapu, Development ZoneJiaxing, Zhejiang China 314201Tel: +86-573-8552-7887Fax: +86-573-8552-3355Email: [email protected]

Taiwan Tokuyama CorporationNo. 21, Shin Chen RoadHu Kou CountryHsin Chu Industrial ParkHsin Chu CountyTaiwan, R.O.C.Tel: +886-3-597-9108Fax: +886-3-597-9208

Tokuyama Siam Silica Co., Ltd.38th Floor, Ocean Tower II Bldg., 75/106,Sukhumvit 19, Klongtoey Nua, Wattana,Bangkok 10110, ThailandTel: +66-2-665-2903Fax: +66-2-665-2912

Tokuyama Electronic Chemicals Pte. Ltd.21 Gul Road, Singapore 629355Tel: +65-6862-1081Fax: +65-6862-1267

Tokuyama Electronic Materials (Suzhou) Co., Ltd.86 Yinsheng Road, Shengpu TownSuzhou Industrial Park, China 215126Tel: +86-512-6281-1790Fax: +86-512-6281-1791

Figaro USA, Inc.121 South Wilke Road, Suite 300Arlington heights, IL 60005, U.S.A. Tel: +1-847-832-1701Fax: +1-847-832-1705Email: [email protected] URL: http://www.figarosensor.com/

Eurodia Industrie S.A.Batiment Tokyo, Parc deffairesSilic, 7 Rue du Jura, BP 30527Wissous, 94633 Rungis Cedex, FranceTel: +33-1-5630-1640Fax: +33-1-4675-3762URL: http://www.eurodia.com/

Tokuyama America Inc.121 South Wilke Road, Suite 300Arlington Heights, IL 60005, U.S.A. Tel: +1-847-385-2195 Fax: +1-847-832-1705

Tokuyama Europe GmbHOststrasse 10, 40211 DusseldorfGermanyTel: +49-211-1754480Fax: +49-211-357379

Tokuyama Asia Pacific Pte. Ltd.61 Robinson Road#14-02 Robinson CentreSingapore 068893Tel: +65-6533-5258Fax: +65-6533-5256URL: http://www.tokuyama-asia.com/

Tokuyama Trading (Shanghai) Co., Ltd.2106, Shui On Plaza,333 Huai Hai Zhong Road,Shanghai, China 200021Tel: +86-21-5306-4804Fax: +86-21-5382-2894

Tokuyama Korea Co., Ltd.#415 Korea Air City Terminal Bldg.159-6, Samseong-DongGangnam-Gu, Seoul, KoreaTel: +82-2-517-3851Fax: +82-2-517-3856


34

Major Subsidiaries and AffiliatesAs of March 31, 2008

Capital OwnershipCompany (millions of yen, local currency in thousands) (%) Scope

Chemicals• Shin Dai-ichi Vinyl Corporation 2,000 71 Production and sale of polyvinyl chloride• Sun Arrow Chemical Co., Ltd. 98 100 Production and sale of polyvinyl chloride compounds• Sun•Tox Co., Ltd. 1,600 100 Production and sale of plastic films• Tomitec Co., Ltd. 100 60 Production of plastic molding and moisture absorbing

agents, as well as components for gas sensors andoffice equipment

• Tokuyama Siltech Co., Ltd. 200 100 Production and sale of layered silicate• Shanghai Tokuyama Plastics Co., Ltd. RMB51,555 100 Production and sale of microporous film* Nishinihon Resicoat Co., Ltd. 50 50 Manufacture of metal parts and anti-rust surface coating

materials* Tokuyama Polypropylene Co., Ltd. 500 50 Production and sale of polypropylene(Category also 1 equity method affiliate and 4 affiliates)

Specialty Products• Tokuyama Dental Corporation 100 100 Production and sale of dental and medical materials• A&T Corporation 577.6 40.21 Production and sale of diagnostic reagents, analyzers

and systems• Figaro Engineering Inc. 99 100 Production and sale of sensor devices• Tokuyama Siam Silica Co., Ltd. Baht389,268 52 Production and sale of precipitated silica• Taiwan Tokuyama Corporation NT$200,000 100 Production and sale of solvent for semiconductor base

materials• Tokuyama Electronic Chemicals Co., Ltd. S$11,000 100 Production of solvent for semiconductor base materials• ASTOM Corporation 450 55 Production and sale of ion-exchange membranes• Eurodia Industrie S.A. EUR650 99.99 Sale of ion-exchange membranes and maintenance and

leasing of related equipment• Tokuyama Asia Pacific Pte.Ltd. S$800 100 Sale of Tokuyama’s products• Figaro USA, Inc. US$200 100 Sale of sensor devices• Tianjin Figaro Electronic Co., Ltd. RMB23,671 55.7 Production and sale of sensor devices**Tokuyama Korea Co., Ltd. Won500,000 100 Sale of Tokuyama’s products* Hantok Chemicals Co., Ltd. Won4,500,000 50 Production of developers for photolithography(Category also includes another 9 consolidated subsidiaries, 4 equity method affiliates and 3 affiliates)

Cement, Building Materials and Others• Tokuyama Ready Mixed Concrete Co., Ltd. 100 100 Production and sale of ready-mixed concrete• Seibu Tokuyama Ready Mixed Concrete Co., Ltd. 100 100 Production and sale of ready-mixed concrete• Kawasaki Tokuyama Ready Mixed Concrete Co., Ltd. 40 100 Production and sale of ready-mixed concrete• Tokuyama Tsusho Trading Co., Ltd. 95 100 Sale of cement and building materials• Tokusho Co., Ltd. 40 100 Sale of cement and steel frame materials• Shanon Co., Ltd. 495 100 Production, processing and sale of building materials,

including plastic window sashes and doors • Tohoku Shanon Co., Ltd. 300 72 Production of plastic window sashes• Hachimaru Sangyo Corporation 10 100 Production of plastic window sashes• Tokuyama Mtech Corporation 50 100 Processing and sale of building materials• Tokuyama Logistics Corporation 100 100 Transportation and warehousing• Shunan System Sangyo Co., Ltd. 151 100 Real estate, civil engineering, construction• Chugoku Ready Mixed Concrete Co., Ltd. 80 52.36 Production and sale of ready-mixed concrete* Sanyo Tokuyama Ready Mixed Concrete Co., Ltd. 50 50 Production and sale of ready-mixed concrete(Category also includes another 9 consolidated subsidiaries, 4 equity method affiliates and 20 affiliates)

• Consolidated subsidiary * Affiliate accounted for by the equity method ** Unconsolidated subsidiary


35

Overseas

Main Products

Chemicals

Caustic soda

Soda ash

Calcium chloride

Sodium silicate

Vinyl chloride monomer

Polyvinyl chloride

Propylene oxide

Isopropyl alcohol

Methylene chloride

Biaxial-oriented polypropylene film

Multilayer co-extrusion films

Cast polypropylene films

Microporous film

Specialty Products

Polycrystalline silicon

Amorphous precipitated silica

Fumed silica

Aluminum nitride

Dental materials

Pharmaceutical bulks and intermediates

Plastic lens materials

Ion-exchange membranes

Methylene chloride for washing metal

Solvent for semiconductor base materials

Medical diagnosis systems

Gas sensitive semiconductor

Cement, Building Materials and Others

Ordinary Portland cement

High early strength Portland cement

Blast furnace slag cement

Ready-mixed concrete

Plastic window sashes

Cement type stabilizer

Capital OwnershipCompany (thousands) (%) Scope

Tokuyama America Inc. US$300 100 Sale of Tokuyama’s products

Tokuyama Europe GmbH EUR255 100 Sale of Tokuyama’s products

Tokuyama Asia Pacific Pte. Ltd. S$800 100 Sale of Tokuyama’s products

Taiwan Tokuyama Corporation NT$200,000 100 Production and sale of solvent for semiconductor base

materials

Tokuyama Electronic Chemicals Pte. Ltd. S$11,000 100 Production of solvent for semiconductor base materials

Tokuyama Siam Silica Co., Ltd. Baht389,268 52 Production and sale of precipitated silica

Eurodia Industrie S.A. EUR650 99.99 Sale of ion-exchange membranes and maintenance

and leasing of related equipment

Figaro USA, Inc. US$200 100 Sale of sensor devices

Tokuyama Dental Italy S.r.l. EUR99 51 Production and sale of dental and medical materials

Hantok Chemicals Co., Ltd. Won4,500,000 50 Production of developers for photolithography

Southern Cross Cement Corporation PP342,000 50 Sale of cement

Tianjin Figaro Electronic Co., Ltd. RMB23,671 55.7 Production and sale of sensor devices

Shanghai Tokuyama Plastics Co., Ltd. RMB51,555 100 Production and sale of microporous film

Tokuyama Chemicals (Zhejiang) Co., Ltd. RMB177,500 100 Production and sale of fumed silica

Tokuyama Korea Co., Ltd. Won500,000 100 Sale of Tokuyama’s products


36

Corporate DataAs of March 31, 2008

Established:February 16, 1918

Capital:¥29,976 million

Employees (consolidated):5,057

Shares Authorized:700,000,000

Shares Issued:275,671,876

Shareholders:26,194

Board of DirectorsAs of June 26, 2008

President

Shigeaki Nakahara

Executive Managing Director

Yoshikazu MizunoAssistant to the President

Supervision of the Corporate Administration Div.

The Auditing Dept., the Secretarial Dept., all branches

and all subsidiaries and affiliates

Managing Directors

Masao KusunokiGeneral Manager of the Cement Business Div.

Etsuro MatsuiGeneral Manager of the Corporate Social Responsibility

Div., the ERP Promotion Div. and the Planning Dept.,

Corporate Social Responsibility Div.

Shouji IidaGeneral Manager of the General & Personnel Affairs Div.

Nobuyuki KuramotoGeneral Manager of the Research & Development Div.

Seiichi ShiragaGeneral Manager of Tokuyama Factory

Supervision of the Manufacturing Technology Div.

Hiroo MomoseGeneral Manager of the Si Business Div. and the GSE

Project Dept.

Directors

Tatsuo SegawaGeneral Manager of the Corporate Administration Div.

and the Management Support Center

Koji YasumotoGeneral Manager of the Personnel Dept.

Kazuhisa KogoGeneral Manager of the Advanced Materials Business

Div., Supervision of Kashima Factory

Yukio MuranagaDeputy General Manager of the Si Business Div.

General Manager of the Polysilicon Sales Dept.

and the SPS project Dept., the Si Business Div.

Shigeki YuasaGeneral Manager of the Corporate Planning Div.

and the Strategic Planning Dept.

Toshiaki TsuchiyaGeneral Manager of the Chemicals Business Div.

Standing Auditor

Kiyoshi Saigou

Auditor

Isao Aso

External Auditors

Ryuji HoriAkio Fujiwara

Major Shareholders:Number of Shares Percentage of Held (Thousands) Total Shares

State Street Trust and Banking Co., Ltd. 19,259 6.99

Nippon Life Insurance Company 17,518 6.35

The Master Trust Bank of Japan, Ltd. 13,409 4.86

The Chase Manhattan Bank 13,057 4.74

The Tokio Marine & Nichido Fire Insurance Co., Ltd. 9,202 3.34

The Yamaguchi Bank, Ltd. 8,246 2.99

Meiji Yasuda Life Insurance Company 8,082 2.93

The Bank of Tokyo-Mitsubishi UFJ, Ltd. 7,884 2.86

Mistubishi UFJ Trust and Banking Corporation 7,748 2.81

The Northern Trust Company AVFC 7,265 2.64

Composition of Shareholders:Number of Shares Percentage of Held (Thousands) Total Shares

Financial Institutions 104,122 37.8

Non-Japanese Corporations/Foreign Residents 80,058 29.0

Individuals/Other 51,176 18.5

Other Domestic Corporations 35,183 12.8

Securities Companies 5,132 1.9

Shibuya Konno Bldg.

3-1, Shibuya 3-chome, Shibuya-ku, Tokyo 150-8383, Japan

Corporate Communications & Investor Relations DepartmentTEL: +81-3-3499-8023 FAX: +81-3-5469-3374

URL: http://www.tokuyama.co.jp

Tokuyama Corp.

DJ08070700Printed in Japan

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