(Note) This document has been translated from the Japanese original for reference purposes only. In the event ofany discrepancy between this translated document and the Japanese original, the original shall prevail.

September 28, 2016
Company name: Tokuyama Corporation
Representative: Hiroshi Yokota,
President and Representative Director(Code No. 4043, First Section TSE)
Contact: Taro Kobayashi, General Manager
Corporate Communications & Investor Relations Dept.
TEL: +81-3-5207-2552

Notice concerning Third-Party Allotment of the New Shares and Transfer of the Shares ofConsolidated Subsidiary
With a resolution at a meeting of Board of Directors held today, Tokuyama Corporation (hereinafter referred
to as the “Company,” “Tokuyama” or “we”) hereby announces that the Company’s consolidated subsidiary in
Malaysia, Tokuyama Malaysia Sdn. Bhd. (hereinafter referred to as “Tokuyama Malaysia”) will issue newshares to OCI Company Ltd. in Korea (hereinafter referred to as “OCI”) as a third-party allotment and theCompany will transfer all shares of Tokuyama Malaysia to OCI.
As a consequence of the above-mentioned transactions, Tokuyama Malaysia will be excluded from theconsolidation of the Company.

1. Reason for the Third-Party Allotment of New Shares and Transfer of Shares
Tokuyama Malaysia was established in August 2009 to expand the semiconductor-grade and solar-grade
polycrystalline silicon business. Due to the technological issues of manufacturing facilities and deteriorating
market condition of solar-grade polycrystalline silicon, two huge impairment losses in connection with plants
were posted. To continue Tokuyama Malaysia’s business, the efforts to improve the manufacturing facilities
and the productivity were taken, and certain level of productivity has been achieved. In addition, to further
strengthen Tokuyama Malaysia’s business structure, the Company has been evaluating every option including
Tokuyama Malaysia’s alliance with other company.
As a result, the Company has reached to the conclusion that transferring the business of Tokuyama Malaysia
to OCI, a global player of solar power business including the production of polycrystalline silicon, will be thebest choice for parties, and finally the Company reached an agreement with OCI about the third-party
allotment of new share and transfer of shares of Tokuyama Malaysia to OCI.

1

2. Outline of the consolidated subsidiary whose shares are to be transferred
(1)

Name

Tokuyama Malaysia Sdn. Bhd.

(2)

Location

Samalaju Industrial Park, Sarawak, Malaysia(3)

Name and Title ofHiroshi Nomura (President and Representative Director)

Representative(4)

Business

Production and sale of polycrystalline silicon(5)

Capital6,567 million yen(6)Date of Establishment

August 18, 2009

(7)

Major Shareholder andTokuyama Corporation

100%

Ratio of Shareholding(8)

Relationships between

Capital

Relevant company is Tokuyama’s consolidated

the Parties

Relationshipsubsidiary and Tokuyama’s ratio of shareholding is
100%.

Personnel

One executive officer and four employees ofRelationship

Tokuyama serve five board members of the relevant
company concurrently. No related parties or affiliatesof Tokuyama have any significant personnel
relationship with the relevant company.

Transaction

Tokuyama is lending the fund to the relevant company.

Relationship(9)

Results of Operations and Financial Conditions for Previous Three Fiscal Years(Expressed in millions of Japanese Yen unless otherwise specified)Fiscal Year Ended

March 2014

March 2015

March 2016

Net Assets

126,355

32,582(101,551)

Total Assets

208,965

148,936

22,298

-

4,387

8,849

Operating Loss

(952)

(4,344)(10,298)

Ordinary Loss

(2,099)(6,987)(11,449)

Net Loss(2,099)(93,772)(135,475)

Sales

3. Outline of the other party of the third-party allotment and the share transfer
(1)

Name

OCI Company Ltd.

(2)

Location

94, Sogong-ro, Jung-gu, Seoul, Korea(3)

Name and Title of

Lee Woo Hyun (President and Representative Director)

Representative(4)

Business

Production and sales of inorganic chemicals, petro and coal chemicals,
fine chemicals, and raw materials for solar panels(5)

Capital127,247 million Korean Won(6)

Date of Establishment

August 5, 1959
2

(7)Net Assets

3,242,206 million Korean Won(8)

Total Assets

7,298,775 million Korean Won(9)

Major Shareholders and

Lee Soo-Young 10.92 %, National Pension Service 10.33 %,Ratios of Shareholdings

Samsung Asset Management Company, Ltd. 6.44%,
Lee Hwa-Young 5.43%, Lee Bok-Young 5.40%(10)Relationships between

CapitalTokuyama and the relevant company have no

the Parties

Relationshipsignificant capital relationship.

Personnel

Tokuyama and the relevant company have no

Relationshipsignificant personnel relationship.

Transaction

Tokuyama and the relevant company have no

Relationshipsignificant transaction relationship.

Status as a

The relevant company does not belong to Tokuyama’s

Related Party

related parties.

4. The outline of third-party allotment(1)

Number of shares to be issued

First allotment

50,000,000 shares(Tokuyama’s shareholding after the first allotment:
Second allotment

83%)

210,000,000 shares(Tokuyama’s shareholding after the second allotment: 49%)
(2)

Amounts of procurement funds

USD 24 million (first allotment)
USD 78 million (second allotment)(3)

Allottee

OCI Company Ltd.

(4)

Payment date

First allotment

October 7, 2016 (planned)

Second allotment

March 31, 2017 (planned)* The third-party allotment and share transfer to OCI will be subject to the acquisition of permission of
notification or the like regarding business combination from competition authorities of the relevant
countries.
5. The number of shares to be transferred and the status of the shares before and after the transfer(1)

Number of shares before the transfer 252,356,839 shares (Tokuyama’s shareholding: 49%)

(2)

Number of shares to be transferred

252,356,839 shares(3)

Transfer price

USD 98 million(4)

Number of shares after the transfer

0 shares (Tokuyama’s shareholding: 0%)

6. Timetable(1)

Resolution of the Company’s Board of Directors relating to the

September 28, 2016transfer of shares(2)

Conclusion of share transfer agreement

September 29, 2016 (planned)(3)

OCI’s payment for third-party allotment (First allotment)

October 7, 2016 (planned)

3

(4)

OCI’s payment for third-party allotment (Second allotment)

March 31, 2017 (planned)(5)

Share transfer

March 31, 2017 (planned)

7. Extraordinary Loss and Future Prospect
As a consequence of the above-mentioned transactions, Tokuyama Malaysia will be excluded from theconsolidation of Tokuyama. With the transfer of Tokuyama Malaysia to OCI, it is expected that around 8
billion yen of loss on business transfer will be recorded as the extraordinary loss during the fourth quarter ofthe fiscal year ending March 31, 2017, however, the total amount of loss would be changed due to theperformance of Tokuyama Malaysia until the exclusion from the consolidation or other factor. The tax
expense for the fiscal year ending March 31, 2017 is expected to be reduced by around 8 billion yen as a resultof above transactions.
Any impact of the share transfer on Tokuyama’s consolidated financial results for the fiscal year ending
March 31, 2017, is currently being assessed. If and when a material impact is expected, Tokuyama will make atimely announcement as the impact is fixed.

4Transfer of Shares in Tokuyama Malaysia

September 28, 2016

CONTENTS
1 Transfer of Shares in Tokuyama Malaysia
2 Supplementary Data2

1 Transfer of Shares inTokuyama Malaysia
1. Overview
2. Background3. Impact on Results
for the Current Period
4. Impact on Medium-termManagement Plan
5. Summary3

1Transfer of Shares in Tokuyama Malaysia

1. Overview
With a resolution at a meeting of Board of Directors held today, Sep 28, 2016, Tokuyama Corporation
decided to transfer its shares in Tokuyama Malaysia Sdn. Bhd, its consolidated subsidiary,
to OCI Company Ltd. (OCI), South Korea(1) Tokuyama Malaysia will undertake the issuance of new shares by way of a third-party
allotments to OCI
Number of shares to be issued:
First allotment: 50,000,000 shares (Tokuyama’s shareholding after the allotment: 83%)
Second allotment: 210,000,000 shares (Tokuyama’s shareholding after the allotment: 49%)
Amounts of procurement funds:
First allotment: US$ 24 million
Second allotment: US$ 78 million
Payment date:
First allotment: October 7, 2016 (planned)
Second allotment: March 31, 2017 (planned)(2) Tokuyama Corporation will transfer all of its shares in Tokuyama Malaysia to OCI
Number of shares to be transferred: 252,356,839 shares (Number of shares after the transfer: 0 shares)
Amounts of procurement funds: US$98 million
Date of share transfer: March 31, 2017

As a result of the aforementioned, Tokuyama Malaysia will be excluded from the Company’s scope of
consolidation from April 2017.
4

1

Transfer of Shares in Tokuyama Malaysia

1. Overview
Outline of the consolidated subsidiary whose shares are to be transferred
Name:
Location:
Representative:
Business:
Capital:Tokuyama Malaysia Sdn. Bhd.
Samalaju Industrial Park, Sarawak, Malaysia
Hiroshi Nomura, President and Representative Director
Production and sale of polycrystalline silicon
6.5 billion yen
Date of Establishment: August 18, 2009
Major Shareholder: Tokuyama Corporation (Ratio of shareholding: 100%)
Sales:
8.8 billion yen (Fiscal year ended March 2016)

Outline of the other party of the third-party allotment and the share transfer
Name:
Location:
Representative:
Business:

OCI Company Ltd.
94, Sogong-ro, Jung-gu, Seoul, Korea
Lee Woo Hyun, President and Representative Director
Production and sales of inorganic chemicals, petro and coal chemicals, fine chemicals,
and raw materials for solar panels
Capital:127.2 billion Korean Won
Date of Establishment: August 5, 1959
Total assets:
7,298.7 billion Korean Won (Fiscal year ended December 2015)
5

1

Transfer of Shares in Tokuyama Malaysia

2. Background
Tokuyama Malaysia was established with the aim of expanding the Group’s polycrystalline siliconbusiness in 2009. Despite the construction of the PS-1 and PS-2 plants, impairment losses for virtually theentire book values of both plants have been incurred due to engineering issues with regard to plantfacilities and the substantial deterioration in polycrystalline silicon market conditions.
While steps have been taken to secure productivity by promoting improvements in facilities and othermeasures in an effort to ensure the ongoing viability of Tokuyama Malaysia, evaluation of various options
including alliance with other companies was made aiming at further strengthening Tokuyama Malaysia’sbusiness structure.

After evaluating the merits of a business alliance with OCI, a company that is active across a broad rangeof fields in the solar cell market, the transfer of shares in Tokuyama Malaysia to OCI was considered thebest option for further developing the business.

6

1

Transfer of Shares in Tokuyama Malaysia

3. Impact on Results for the Current Period
Date of the first third-party allotment (October 7, 2016, the third quarter of the current accounting period)•There is no impact on results
Date of the second third-party allotment and transfer of equity interest(March 31, 2017, the fourth quarter of the current accounting period)•While an extraordinary loss of approximately ¥8.0 billion in connection with the business transfer ofTokuyama Malaysia is projected, the actual amount of the loss may change as a result of such factors as
the future performance of Tokuyama Malaysia.
•Decrease in income taxes of approximately ¥8.0 billion as a result of this undertaking is projectedin the current accounting period.

The Company is currently taking steps to review its consolidated financial results forecasts for the fiscal
year ending March 31, 2017. Details will be disclosed in a timely manner should any revision to financial
results forecasts arise.

7

1

Transfer of Shares in Tokuyama Malaysia

4. Impact on Medium-term Management Plan
Items
Profit and loss

Numerical Targets (FY2020)(May 12, 2016)

Net sales¥335.0 billion

Operating income¥36.0 billion

ROA
Financial position

Cash flows

10%

Total asset turnover

1.0 times

CCC

55 daysD/E ratio

1 times

Free CF (5 years)

Approx ¥100.0 billion

While the share transfer will have a certain effect on the target indicators of the Medium-Term Management
Plan (decreased net sales of ¥18 bn and decreased operating income of ¥2 bn in FY2020), we will look tominimize any downside impact through the reallocation of management resources and work to secure
improvements in excess of targets.
In addition, free cash flow will be improved as a result of decreased tax expenses of Tokuyama Corp inconnection with the business transfer and other factors
8

1

Transfer of Shares in Tokuyama Malaysia

5. Summary
While a loss will be incurred as a result of the business transfer, this undertaking is expected to generate
the following benefits.
Enable the Company to definitively reduce the volatility of financial results and rebuild its financial
position
Enable the Company to direct management resources to core businesses that can better harness its
strengths including unique technologies
Enable the Company to improve its cash flows for certain period by taking advantage of the benefits
related to taxation and others

Tokuyama will accelerate efforts to rebuild its financial platform and expand earnings, priority measures
under its medium-term management plan.
As we work toward achieving these goals, we kindly request the continued support and understanding ofstakeholders.

92 Supplementary Data

1. Polysilicon Market
2. PV Market

112

Supplementary Data

1. Polysilicon Market
Supply-demand forecast of polysilicon
Supply capacity/Demand (tonnes)*Tokuyama estimate

700,000<Semiconductor-grade polysilicon demand>•Demand projected to increase on the back of higher functionality ofmobile devices<Solar-grade polysilicon demand>•A new framework regarding reductions on CO2 emissions in Paris
Agreement is expected to generate favorable conditions•Despite a substantial decline in installed PV capacity in Europe andcertain other areas, the projected annual increase in demand isaround 10% largely reflecting forecast growth due to aggressive
installation initiatives in such countries as China, the U.S. and India

600,000
500,000
400,000
300,000
200,000
100,000
02013 2014 2015 2016 2017 2018 201912

Forecasts

Demand (Solar cells)

Supply capacity of other producers

Demand (Semiconductors)

Supply capacity of major producers<Supply side>•Excess supply capacity expected to continue for the foreseeable
future; cost competitiveness recognized as the key to survivalSupplementary Data2

1. Polysilicon Market
Solar-cell grade Polysilicon Spot Price Trend(US$/KG)

30
28
26
24

100
90
80
70
60
50
40
30
20
10
2009/7 2010/7 2011/7 2012/7 2013/7 2014/7 2015/7 2016/7

22
20
18
16
14
12
10

2012/4/4

2012/8/4

2012/12/4

2013/4/4

2013/8/4

2013/12/4

2014/4/4

2014/8/4

2014/12/4

2015/4/4

2015/8/4

2015/12/4

2016/4/4

2016/8/4

Source：PV insights

13

2

Supplementary Data

2. PV Market

Conditions in each country

Forecasts of installed PV capacity by region
Unit:GW*Tokuyama estimate

80
70<China>Achieved a cumulative solar cell output total of 43.18GW as of the end of 2015;
secured the global top position surpassing Germany
Projected capacity installed in 2016 to be 18.1GW (20% increase yoy)
Identify renewable energy as one of eight major items in the energy field underthe 13th five-year plan; expectations of a further increase in solar cell demand overthe long term
<U.S.>
Investment tax credit (ITC) extension passed by the U.S. Congress; expectationsof an increase in the amount of solar power generation system installation by 2020

60
50

<Japan>Since the launch of the existing feed-in tariff system in July 2012, Japan has
witnessed a rapid surge in the amount of solar power generation introduction
Installed capacity in 2015 came to 9.8GW (8.6GW in 2014)
Stable installation can be expected though further market expansion is not
anticipated.

40
30
20
10
0
2013 2014 2015 2016 2017 2018 2019
EuropeAsia

N. America

ROW<India>The Modi government announced plans to target an installed capacity of 100GW
by 2022
Policy in place to authorize new clean energy targets (ratio of renewable energy
in 2030 of 40%: solar cells approx. 250GW)<Europe>
Expectations of moderate growth over the medium to long term despite theimpact of the successive shrinking and termination of policy support measures14