TOKUYAMA CORPORATIONTOKUYAMACORPORATION
AnnualReport 2012
Year ended March 31, 2012

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 more than 90 years.
Tokuyama aims to be a thoroughly unique company, characterized by technology,
thereby achieving sustainable corporate growth. At the same time, we strive to
become a meaningful presence in society, full of originality, and to generateincreased corporate value from a medium- to long-term perspective while also
practicing a style of management that is both future-oriented and in harmony
with society.

PROFILECONTENTS

1

Consolidated Financial Highlights

20

Notes to Consolidated Financial Statements

2

At a Glance

35

Independent Auditor’s Report4

Message from the President

36

Directory

9

Financial Review

37

Major Subsidiaries and Affiliates

14

Consolidated Balance Sheets

38

Executive Team16

Consolidated Statements of Income

39

Main Products

17

Consolidated Statements of Comprehensive Income

39

Corporate Data

18

Consolidated Statements of Changes in Net Assets

19

Consolidated Statements of Cash Flows

CAUTIONARY NOTES: FORWARD-LOOKING STATEMENTS

This annual report contains information about forward-looking statements related to such matters as the Company’s plans, strategies andbusiness results. These forward-looking statements represent judgments made by the Company based on information available at present andare inherently subject to a variety of risks and uncertainties. The Company’s actual activities and business results could differ significantly from theforward-looking statements due to changes including, but not limited to, those in the economic environment, business environment, demandand exchange rates.

CONSOLIDATED FINANCIAL HIGHLIGHTS
Tokuyama Corporation and Consolidated Subsidiaries

Years ended March 31, 2012 and 2011

Millions of yen

2011

2012

Change (%)

Thousands of
U.S. dollars

2012/20112012¥282,382¥289,787(2.6)%$3,443,681

Operating income

13,721

20,145(31.9)

167,323

Income before income taxes

14,816

15,550(4.7)

180,679

Net income

9,351

9,766

(4.2)

114,038

26.87

28.06

(4.2)

0.328

—

—

—

—

6.00

6.00

—

0.073

Net sales

Per share amounts (in yen, U.S. dollars)
Net income
Basic
DilutedCash dividends
Total assets

501,181474,7085.6

6,111,967

Net assets

255,461

247,656

3.2

3,115,378

Capital expenditures

78,281

40,725

92.2

954,641

Depreciation

28,38031,257(9.2)

346,098

R&D expenses

11,705

11,4692.1

142,740

Number of employees

5,506

5,493

—

—

48

50

—

—

Consolidated subsidiaries

Note: U.S. dollar amounts above and elsewhere in this annual report are converted from Japanese yen, for convenience only, at the rate of ¥82=US$1.

TOKUYAMA CORPORATION

1AT A GLANCE
Group Segment

Business Unit

Major Direct Products

CHEMICALS

Soda ash and Calcium chloride

Soda ash, Calcium chloride

Chlor-alkali

Caustic soda, Propylene oxide, Chlorine derivatives

Vinyl chloride

Vinyl chloride monomer

New organic chemicals

Isopropyl alcohol (IPA)

Electronic materials

Polycrystalline silicon

SPECIALTY PRODUCTS

Fumed silica

Fumed silica

Precipitated silica

Precipitated silica (white carbon)

Fine chemicals

Active pharmaceutical ingredients (API)Plastic lens materials for glasses

ShapalAluminum nitride (AεN)

IC chemicals

High-purity chemicals for electronics manufacturing

Cleaning system

Metal-cleaning solvents

NF

Microporous film

CEMENT

Ordinary Portland cement
CementOther cement

Recycling and environment

ADVANCED COMPONENTS

Recycling of waste and by-products■ Polypropylene film【Sun•Tox 】■ Clinical analyzers / Laboratory information systems【A&T】■ Dental materials / equipment【Tokuyama Dental】

OTHERS■Others【Shunan System Sangyo etc.】

2

TOKUYAMA CORPORATIONMajor Products ofGroup Companies

Year ended March 31, 2012

Sales Composition■ Vinyl chloride resin【Shin Dai-ichi Vinyl】

12.7%

26.9%

13.8%
■ Fumed silica【Tokuyama Chemicals (Zhejiang) (China)】■ Precipitated silica【Tokuyama Siam Silica (Thailand)】■ Alminum nitride【Tokuyama-Dowa Power Materials】

21.6%

25.0%

■ Microporous film
【Shanghai Tokuyama Plastics (China)】■ Ready-mixed concrete【Ready-mixed concrete companies】■ Cement / Building materials【Tokuyama Tsusho Trading, etc.】

Chemicals
Specialty Products
CementAdvanced Components
OthersOperating Income Composition■ Ion exchange membranes / Systems【ASTOM】■ Gas sensors / detectors【Figaro Engineering】

10.8%

10.1%

9.3%
■ Plastic window sashes【Excel Shanon】

15.6%
54.2%

TOKUYAMA CORPORATION

3MESSAGE FROM THE PRESIDENT

Our Centennial Vision is
the Cornerstone ofa Revitalized Tokuyama Group

Kazuhisa Kogo
President

Please provide us with your review of the previous Three-Year Management Plan.
Our previous Three-Year Management Plan, which began in fiscal 2008 (the year ended March 31, 2009),
represented our first step toward achieving our Centennial Vision. In addition to launching the Malaysia Projectto lay a robust foundation for future growth and restructuring our cement business, we carried out some of ourappropriate measures as initially planned to attain a measure of progress and success.
Regrettably, however, we were unable to achieve the numerical targets established at the outset of the Plan.
This was largely attributable to dramatic deterioration in market conditions and our business environment
following the Lehman Brothers shock and intense polycrystalline silicon price competition.
In our chemicals and cement businesses geared toward addressing demand in Japan, rising energy costs
and appreciation in the value of the yen leave little or no hope of substantive growth. Against this backdrop, we

4

TOKUYAMA CORPORATION

are confronted by several issues that require immediate attention including the creation of new businesses, thenurturing of highly profitable businesses, and the establishment of a sales and marketing system that boasts
strong proposal capabilities.
With this in mind, fiscal 2011, ended March 2012, was positioned as a year in which the Tokuyama Groupwould take all preparatory steps to review its medium- to long-term growth strategies. In addition to reassessing
our business strategies, we adopted a selection and concentration approach toward development projects,
adhered strictly to a policy of rationalization in our production fields, and worked diligently to improve productivity.

What are the key points to achieving the targets of the new Three-Year Management Plan?
There are aspects of our Centennial Vision that perhaps place undue emphasis on our quest toward an ideal
image. We therefore took steps to go back to the starting point and assess exactly what is required to achieve
our targets. Drawing on our conclusions, we have put in place a new Three-Year Management Plan that focuseson three growth strategies. Moving forward, we will endeavor to establish a support structure that is capable of“strengthening strategically growing businesses,” “restructuring businesses in which we aim to improve
profitability,” and “bolstering international competitiveness.”Among these overarching growth strategies, steadily carrying out our Malaysia Project is a key priority instrengthening strategically growing businesses. We will look carefully to identifying the key construction,
operation and sales factors required for success as we work toward the start of the first phase of operation inJune 2013 and the second phase in April 2014. Through these means, energies will be channeled toward
producing polycrystalline silicon of high purity and at low cost for use in solar cells. By engaging in highly
competitive polycrystalline silicon activities, we are taking steps to position this business as a mainstay
earnings pillar.
In addition, to nurture second and third pillars that can support the polycrystalline silicon business andprovide complementary sources of profits is considered a pressing need. With this in mind, we will redouble ourefforts to bring promising new products to market. In creating new businesses, we will, for example, quickly
establish a mass production technology for single crystal sapphire wafers. Expectations are also high that theestablishment in fiscal 2013 of the liquid hydrogen business and new businesses in the recycling andenvironment field will help further boost earnings.
The Tokuyama Group recognizes that by undertaking to reform the structure of its management andenhancing its corporate culture, it will be better placed to implement its growth strategies in the new ThreeYear Plan. In pushing forward the aforementioned structural reform, we have separated and bolstered thesupervisorial and business execution functions with the aims of expediting our decision making and putting in

TOKUYAMA CORPORATION

5

Malaysia Project
1st Phase
LOCATION
ANNUAL PRODUCTION CAPACITY

2nd Phase

Samalaju Industrial Park in Sarawak, Malaysia
6,200 tonnes

13,800 tonnes
Siemens method

PRODUCTION METHOD

Solar cells

TARGET USAGE OF POLYCRYSTALLINE SILICONSCHEDULE (START OF OPERATIONS)

June 2013

April 2014

place a management structure that is capable of responding swiftly to changes in the Group’s operating
environment. At the same time, we will endeavor to develop a bright and vibrant workplace environment inwhich each and every employee can push the limits of his or her potential and skills. This is in fact the ultimate
in corporate culture reform.
Under the guidance of the Venture Spirit & Innovation Project, created in 2011 as a task force to help realize
the Group’s Centennial Vision, all Tokuyama Group employees are working in unison to bring about and implement
comprehensive corporate reform. Building on these endeavors, we are fostering an environment that will allow
employees to steadfastly stride forward beyond the scope of their allotted duties and tasks.
As I have mentioned, we will push forward efforts to strengthen our organizational functions and change ourcorporate culture by adopting both top-down and bottom-up approaches.

In carrying out these growth strategies that emphasize change, what is your ideal image of
the Company?
Our standing as a company that can win over the competition is in jeopardy if we are unable to expand ourbusiness portfolio and bring about corporate growth. Since the Lehman Brothers shock, the Company’s net sales
have remained flat at around ¥300 billion. Over the same period, the operating margin (the ratio of operating
income to net sales) has steadily declined. At the same time, our overseas net sales ratio is between 20 and 24%

6

TOKUYAMA CORPORATIONSupply-demand Forecast of Polycrystalline Silicon
Supply capacity / Demand (tonnes)*Tokuyama estimate

500,000
450,000
400,000
350,000
300,000
250,000
200,000
150,000
100,000
50,000
0

2012

2013
Demand forlower-purity polysilicon

2014

2015
Demand forhigh-purity polysilicon

2016

2017

Supply capacity oflower-purity polysilicon

Supply capacity ofhigh-purity polysiliconagainst a domestic chemical industry average of around 40%. Taking these factors into consideration, it isimperative that we break free from a product portfolio that is dependent on domestic demand and accelerate
efforts to ensure a structure and systems that are capable of excelling on the global stage.
I am convinced that genuine change, which includes globalization, will come about when the Company
boasts net sales in excess of ¥500 billion and the overseas net sales ratio over 50%. In this regard, our Centennial
Vision is indeed the cornerstone of a revitalized Tokuyama Group.

Please provide us with your views on fiscal 2012 (the year ending March 2013), the first year of the
new Three-Year Management Plan, and details of initiatives that you plan to implement.
In the Specialty Products segment, the U.S., China and Japan, three countries that are aggressively introducing
renewable energy, are expected to drive the solar cell market forward. Polycrystalline silicon for use in
semiconductors is also projected to benefit from robust trends in emerging countries particularly in the area ofsmart phones. This is in turn anticipated to offset the decline in personal computer and LCD markets.
Under these circumstances, we will work diligently to boost the presence and standing of our brand andreinforce profitability by steadily executing the Malaysia Project while increasing production capacity andimproving operational processes at the Tokuyama Factory.
In the Chemicals segment, we continue to confront difficult operating conditions. Due largely to the downturn

TOKUYAMA CORPORATION7

in the rate of economic growth in China from the second half of last year, vinyl chloride resin exports havedeclined. This has in turn led to a drop in operating rates at electrolysis facilities and, as a result, increasingly tightcaustic soda supply and demand in Japan. Vinyl chloride monomer activities are faring little better owing topersistent weak conditions. In this regard, orders from China and Southeast Asia remain subdued. Moving forward,
we are determined to review our logistics and sales structure in fiscal 2012, and to revise caustic soda prices.
In the Cement segment, there are signs of a recovery in demand particularly from the Kanto and Kansai
areas including redevelopment projects in Osaka. After a continuous period of decline that has extended formore than 15 years, there is sense that the market may have turned a corner.
Unfortunately, demand in western Japan, Tokuyama’s principal sales area, is expected to remain weak. As
a result, we will continue our policy of comprehensive rationalization, take steps to revise sales prices, and work
to further improve profits.
Our energies in the Advanced Components segment will be directed toward increasing revenues through thedevelopment of existing and new markets. From a profit perspective, we will endeavor to boost earnings byactively cutting costs. The Excel Shanon group will continue to promote repair and replacement work for
affected customers in an effort to address outstanding issues on a building by building basis and restore its
reputation and trust.

Can you provide us with your thoughts on returning profits to shareholders?
Tokuyama positions the return of profits to shareholders as a key management priority. The Company
maintains the basic policy of providing continuous, stable cash dividends while taking into consideration
the importance of a sound financial position and robust profit structure. In the fiscal year under review, we
paid an interim cash dividend of ¥3 per share and a period-end cash dividend of ¥3 per share for an annual
cash dividend of ¥6 per share.
Moving forward, and from the fiscal year ending March 31, 2013, we will implement our new Three-YearManagement Plan and work to improve earnings in an effort to ensure the payment of continuous, stable
cash dividends.
As we work toward achieving our established goals, we kindly request your continued supportand understanding.

Kazuhisa Kogo
President
June 2012
8TOKUYAMA CORPORATION

Financial Review

INCOME ANALYSIS
In the year ended March 31, 2012, the worsening debt
crisis in Europe acted as a hindrance to the economic
recovery in developed countries while the growth rates
of China and other emerging countries showed signs ofslowdown. Reflecting these factors, the global
economy exhibited a relatively weak trend.
The Japanese economy started out under a severe
economic environment at the beginning of the fiscal
year under review. For example, restrictions occurred incorporate production activities due to the serious

FINANCIAL SECTION

NET SALES(Billions of yen)

350
280

350

307

301

290

273

282

280

210

210

140

140

70

70

0

0

2008

2009

2010

2011

2012

impact of the Great East Japan Earthquake. Although
the Japanese economy showed signs of recovery in theBy business segment, Chemicals segment sales

second half of the fiscal year owing to theincreased 7.7% year on year to ¥85,274 million

reconstruction of supply chains and expectations of(US$1,040 million), sales in the Specialty Products

reconstruction demand, its future trend remains

segment fell 18.3% year on year to ¥79,080 million

uncertain due chiefly to the prolonged strong yen and(US$964 million), sales recorded by the Cement

instability of employment.

segment increased 6.1% year on year to ¥68,421

Under such circumstances, the Tokuyama Groupmillion (US$834 million), and sales in the Advanced

revised selling prices and undertook rationalization

Components segment increased 0.7% year on year toefforts. However, our efforts could not absorb price¥43,581 million (US$531 million).

increases in raw materials and fuels such as coal,

Despite a rise in prices of ethylene and propylene,

ethylene and propylene, and moreover the businessboth of which are main raw materials for theenvironment for polycrystalline silicon, which is ourCompany’s petrochemicals, cost of sales decreased

pillar of profit, deteriorated further. As a result, the

2.8% compared with the previous fiscal year, toTokuyama Group reported lower operating income on¥203,763 million (US$2,485 million), owing chiefly to

lower sales compared with the previous fiscal year.

decreased polycrystalline silicon sales volume and a

Consolidated net sales for fiscal 2012 amounted to¥282,382 million (US$3,444 million), a decrease of
2.6% compared with the previous fiscal year, chiefly

decrease in depreciation expenses of polycrystalline
silicon manufacturing facilities.
SG&A expenses increased 8.3% compared with thedue to damage to supply chains caused by the Great

previous fiscal year, to ¥64,898 million (US$791

East Japan Earthquake and decreased sales volume of

million), due mainly to an increase in depreciation

polycrystalline silicon arising mainly from the slumping

expenses arising from the start of operations at a newsolar cell and semiconductor markets caused by the

information line of business (LOB) system.

global recession.

TOKUYAMA CORPORATION

9Operating income decreased 31.9% year on year to

calculated in an appropriate way, we recorded net¥13,721 million (US$167 million), due mainly to lower

income of ¥9,351 million (US$114 million), a fall ofsales volume of polycrystalline silicon and increased¥414 million compared with net income of ¥9,766

depreciation expenses arising from the start ofmillion in the previous fiscal year. Net income per shareoperations at the new information LOB system. The

was ¥26.87 (US$0.328), down from net income per

operating margin (the ratio of operating income to net

share of ¥28.06 in the previous fiscal year. Dividends

sales) was 4.9%, a decrease of 2.1 percentage points

per share were ¥6.00 (US$0.073).

compared with the figure of 7.0% recorded in theprevious fiscal year.

NET INCOME (LOSS)(Billions of yen)

20

OPERATING INCOME

18.9

15

(Billions of yen)

40
32
22.7

24

40

10

35.3

20.1
16.5

16

13.7

5

32

0

24

–5

2008

2009

2010

2011

2012

2011

2012

16

2008

0

9.4

–5.6

–10

8

9.8
7.5

8
2009

2010

0

Return on equity (ROE) and return on assets (ROA)
were 3.8% and 1.9%, respectively, compared with 4.1%

In other income and expenses, the Company
reported net other income of ¥1,095 million (US$13
million), owing chiefly to a decrease in foreign exchange
losses.

and 2.1% in the previous fiscal year.
RETURN ON EQUITY
(%)

10

9.7

Income before income taxes was ¥14,816 million(US$181 million), a fall of ¥734 million compared withincome before income taxes of ¥15,550 million in the5

3.5

previous fiscal year. After deducting income taxes etc.

4.1

3.8

0

–2.9

–5
2008

10

TOKUYAMA CORPORATION

2009

2010

2011

2012

FINANCIAL SECTIONSEGMENT INFORMATIONThis segment’s net sales decreased 18.3% year on
year to ¥79,080 million (US$964 million) and operating

The Tokuyama Group is composed of the parent

income decreased 37.7% year on year to ¥10,216

company, Tokuyama Corporation (“the Company”), 52

million (US$125 million).

subsidiaries and 32 affiliated companies. The Group’s

Sales of polycrystalline silicon decreased due mainly

operations are divided into the five business segments

to damage to supply chains caused by the Great Eastof Chemicals, Specialty Products, Cement, Advanced

Japan Earthquake, a drop in solar cell prices, theComponents, and Others. For accounting purposes, 48

slumping semiconductor market and the strong yen. Onof the Company’s subsidiaries are consolidated, while

the profit front, despite the decrease in depreciationeight affiliates are accounted for using the equity

expenses of manufacturing facilities that commenced

method.

operations in the year ended March 2010, operating
income decreased due mainly to higher raw material

Chemicals
The Chemicals segment includes the operations of
three consolidated subsidiaries.
Segment net sales increased 7.7% year on year toand fuel prices as well as the aforementioned factors.
Fumed silica sales decreased due chiefly to thestrong yen and decreased sales volume of its
application to polishing material used for CMP for¥85,274 million (US$1,040 million), while operating

semiconductor wafers, which arose from the slumping

income declined 21.2% year on year to ¥1,901 million

semiconductor market.

(US$23 million).
Net sales in this segment increased, owing mainly toSales of the segment’s other products such asaluminum nitride and high-purity chemicals forthe revision of selling prices of petrochemicals such as

electronics manufacturing declined due mainly to thevinyl chloride resin and PO (propylene oxide) inslumping semiconductor and LCD markets and the

response to higher naphtha prices, and an increase instrong yen.

sales volume of caustic soda, vinyl chloride resin andother products resulting from the temporary

Cementsuspension of competitors’ operations caused by the

The Cement segment comprises the operations of 14

Great East Japan Earthquake. On the profit front,

consolidated subsidiaries and two equity-method

despite the above-mentioned positive factors,

affiliates.

operating income declined, reflecting a decline in vinyl

Segment net sales increased 6.1% year on year tochloride monomer export profitability arising from

¥68,421 million (US$834 million) and operatingsluggish demand for vinyl chloride resin in Asia due toincome increased 41.2% year on year to ¥2,938 million

the global recession and the strong yen; lower profit of(US$36 million).

soda ash arising from higher prices of raw materials
and fuels; and other factors.

In the cement business, sales were firm on the backof solid domestic private-sector demand and sales
volume of cement increased. In addition, we revised

Specialty Products

selling prices in response to the rising prices of raw

The Specialty Products segment includes thematerials and fuels. In the recycling and environment

operations of six consolidated subsidiaries and one

business, sales increased due to the revision of unit

equity-method affiliate.

prices for accepting wastes from outside the Company.

TOKUYAMA CORPORATION

11

On the profit front, the segment reported an

Gas sensor sales at Figaro Engineering Inc. declined

increase in operating income owing to thedue mainly to the strong yen, and Excel Shanon

aforementioned factors and the fundamental structural

Corporation reported soft sales due to repair andreform of its cement operations centered on thereplacement work arising from the plastic window sash

restructuring of our production structure and the(fireproof and fire-resistant grade) problem. Despite

rationalization of our logistics and sales structure,such negative factors, the segment reported anwhich were launched in the previous fiscal year.

increase in net sales owing chiefly to higher sales ofclinical analyzers and laboratory information systems

Advanced Components

at A&T Corporation and increased sales of ASTOM

The Advanced Components segment includes the

Corporation.

operations of 13 consolidated subsidiaries and twoequity-method affiliates.

On the profit front, the segment reported a decreasein operating income due mainly to lower profit at Sun-

Net sales in this segment increased 0.7% year on

Tox Co., Ltd. arising from higher raw material and fuelyear to ¥43,581 million (US$531 million) and operating

prices and increased distribution costs, as well as theincome decreased 13.7% year on year to ¥1,746

aforementioned negative impact of the sales decline ofmillion (US$21 million).

Figaro Engineering Inc.

FINANCIAL POSITION AND LIQUIDITY

decrease in marketable securities. Current liabilities
rose 5.8% to ¥102,773 million (US$1,253 million). This

As of March 31, 2012, total assets amounted tomainly reflected an increase in trade notes and¥501,181 million (US$6,112 million), an increase ofaccounts payable. As a result, the current ratio was¥26,473 million from the figure of ¥474,708 million at

down to 2.09 times, from 2.25 times at the previous

the previous fiscal year-end.

fiscal year-end.
Investments and other assets fell 22.9% over the

TOTAL ASSETS

previous fiscal year-end to ¥60,068 million (US$733(Billions of yen)

500
400

453
383

475

501

million). This was primarily due to a decrease in trust in
deposits.

404

500

Property,400
plant and equipment increased 27.0% incomparison with the previous fiscal year-end to

300

300

¥226,314 million (US$2,760 million). This was due
chiefly to an200
increase in construction in progress.

200

As of March 31, 2012, total liabilities amounted to

100

100
¥245,720 million(US$2,997 million), an increase of

8.2% compared with the previous fiscal year-end figure

0
2008

2009

2010

2011

2012

0

of ¥227,052 million. The main contributory factors
were the issue of corporate bonds and an increase in

Current assets decreased 1.8% compared with thelong-term debt. Interest-bearing debt increased 17.8%

previous fiscal year-end to ¥214,800 million

from ¥126,220 million at the previous fiscal year-end(US$2,620 million). This was due primarily to ato ¥148,668 million (US$1,813 million).

12

TOKUYAMA CORPORATION

FINANCIAL SECTION

Minority interests in consolidated subsidiaries
decreased 4.1% from ¥6,460 million as of the previous
fiscal year-end to ¥6,198 million (US$76 million). Net
assets increased 3.2% compared with the previous
fiscal year-end, from ¥247,656 million to ¥255,461
million (US$3,115 million). This was due chiefly to anincrease in retained earnings. The ratio ofshareholders’ equity to total assets was 49.7%, downfrom 50.8% at the previous fiscal year-end. The
amount of net assets per share was ¥716.39(US$8.736), up from ¥693.18 at the previous fiscal
year-end.

CAPITAL EXPENDITURESNET ASSETS(Billions of yen)

300
240
206
180

244

248

255

2010

2011

2012

190

120
60
0
2008

2009

previous fiscal year’s figure of ¥40,725 million.

Capital expenditures totaled ¥78,281 million (US$955
million), an increase of 92.2% compared with the

CASH FLOWSNet cash provided by financing activities equaled¥20,792 million (US$254 million). This was primarily

Net cash provided by operating activities totaled

attributed to proceeds from long-term debt of ¥17,466¥27,060 million (US$330 million). Principal items

million (US$213 million), up from ¥8,872 million in the

included depreciation expenses of ¥28,380 million

previous fiscal year, repayments of long-term debt of(US$346 million), down from ¥31,257 million in the¥8,238 million (US$100 million) (¥4,057 million in theprevious fiscal year.

previous fiscal year), and proceeds from the issue ofNet cash used in investing activities totaled ¥57,667
million (US$703 million). Major contributory factors
were payments for purchases of property, plant andcorporate bonds of ¥20,000 million (US$244 million)(¥20,000 million in the previous fiscal year).
As a result of the above, cash and cash equivalents

equipment, from ¥21,728 million in the previous fiscal

decreased by ¥10,147 million (US$124 million)

year to ¥44,237 million (US$539 million), andcompared with the previous fiscal year-end, to ¥58,477

payments for purchases of money held in trust of

million (US$713 million).

¥22,465 million (US$274 million) (¥69,896 million in
the previous fiscal year).

TOKUYAMA CORPORATION

13

Consolidated Balance Sheets
Tokuyama Corporation and Consolidated Subsidiaries

Years ended March 31, 2012 and 2011

Thousands of
U.S. dollars (Note 2)

Millions of yen

ASSETS

2012

2011

2012

Current assets:¥ 32,677¥ 28,324$ 398,495

Time deposits

986

984

12,024

Short-term investments

310

921

3,781

25,80040,300314,634

Trade notes and accounts

69,45574,891

847,015

Others

7,649

3,420

93,274

Less allowance for doubtful accounts

(240)

(248)

(2,927)76,86478,063

937,362

Cash in hand and deposits at bankMarketable securities (Note 5, Note 19)
Receivables:

Inventories (Note 6)

48,39336,305590,156

Trust in deposits

26,431

30,254322,335

Deferred tax assets (Note 8)

1,737

2,426

21,185

Other current assets

1,602

1,113

19,536

214,800

218,6902,619,508

Total current assets

Property, plant and equipment (Note 7):Land34,53735,026421,188

Buildings and structures

106,569

104,538

1,299,619

Machinery and equipment

478,945475,601

5,840,797

Construction in progress

81,09523,056

988,963

Others

1,331

1,123

16,228702,477

639,3448,566,795(476,163)(461,212)(5,806,868)

226,314

178,132

2,759,927

21,634

21,040263,829

Less accumulated depreciation

Investments and other assets
Investment securities (Note 5)
Investments in unconsolidated subsidiaries and affiliates

4,552

4,718

55,509Long-term receivables

3,907

3,997

47,640Prepaid pension cost

6,946

—

84,703

Less allowance for doubtful accounts

(432)

(270)

(5,272)Intangible assets

8,291

9,490

101,104

Trust in deposits

7,728

23,407

94,241

Deferred tax assets (Note 8)

41,282

3,385

5,617

Goodwill

216

—

2,629

Others

3,840

9,887

46,867

Total assets
See notes to consolidated financial statements

14

TOKUYAMA CORPORATION

60,06777,886

732,532¥ 501,181¥ 474,708$ 6,111,967

FINANCIAL SECTION

Thousands of
U.S. dollars (Note 2)

Millions of yen

LIABILITIES AND NET ASSETS

2012

2011

2012
$ 103,346

Current liabilities:
8,474¥ 10,194

Commercial papers

4,000

4,000

48,780Current portion of long-term debt (Note 6)

12,191

13,091

148,671

15

7

188

Trade notes and accounts

41,11935,196

501,446

Others

14,477

12,702

176,559
678,005

Short-term bank loans (Note 6)

Deferred tax liabilities (Note 7)¥

Notes and accounts payable:

55,59647,898

Accrued income taxes (Note 7)

1,112

3,143

13,567

Accrued expenses

5,843

6,082

71,257

Guarantee deposits received from dealers

5,061

5,174

61,722Other current liabilities

10,481

7,579

127,796

102,773

97,1681,253,332

123,113

98,156

1,501,384

1,051

1,041

12,818

256

277

3,120

2,444

13,22129,803

Total current liabilities
Long-term liabilities:
Long-term debt, less current portion (Note 6)
Accrued retirement and severance benefits (Note 8)
Deferred tax liabilities (Note 7)
Allowance for loss on compensation for building materials

16,083

17,189196,132

Total long-term liabilities

142,947

129,884

1,743,257

Total liabilities

245,720

227,052

2,996,589

Other long-term liabilities

Contingent liabilities (Note 19)
Shareholders’ equity (Note 14):
Common stock, ¥50 par value:
Authorized: 700,000,000 shares
53,45953,459651,939

Additional paid-in capital

57,67057,670703,295

Retained earnings

138,041

130,792

1,683,423

Issued: 349,671,876 shares

Less treasury stock, at cost
Total shareholders’ equity(1,417)(1,414)(17,275)

247,753

240,507

3,021,382

Valuation, translation adjustments and others (Note 3):
Unrealized holding gains on available-for-sale securities

3,965

3,647

48,356

Foreign currency translation adjustments(2,966)(2,958)(36,178)

511

—

6,227
18,405

Deferred hedge profit and loss

1,510

689

6,198

6,460

75,591

Total net assets

255,461

247,656

3,115,378

Total liabilities and net assets¥501,181¥474,708$ 6,111,967

Total valuation, translation adjustments and others
Minority interests in consolidated subsidiaries:

See notes to consolidated financial statements

TOKUYAMA CORPORATION

15

Consolidated Statements of Income
Tokuyama Corporation and Consolidated Subsidiaries

Years ended March 31, 2012, 2011 and 2010

Thousands of
U.S. dollars (Note 2)

Millions of yen

2012

2011

2010

2012

Net sales¥282,382¥289,787¥ 273,155$3,443,681

Cost of sales

203,764

209,714

196,4902,484,920

Gross profit

78,61880,07376,665

958,761

Selling, general and administrative expenses (Note 10)
Operating income

64,89759,92860,181

791,438

13,721

20,145

16,484

167,323

Other income (expenses):
Interest and dividend income
Interest expenses

588

606

605

7,170

(2,047)(1,817)(1,758)(24,958)

Loss from disposal of property, plant and equipment

(796)

(695)

(474)

(9,706)

Impairment loss on fixed assets

(160)

(223)

(341)

(1,949)

—

1,721

1,584

—

Gain on sale of marketable and investment securities
Loss on write-down of marketable and investment securities

(64)

(163)

(12)

(784)

Foreign exchange gain (loss)(478)(1,889)294(5,824)

Seconded employee labor cost

(317)

(309)

(314)

(3,863)

—

—

—

—

Costs of idle operations

(999)

(831)

(997)

(12,180)

Equity in earnings of unconsolidated subsidiaries and affiliates

287

631

826

3,504

Gain (loss) on changes in retirement benefit plans(Note 9)

0

(700)

(1,000)

0

5,081

(926)

(2,033)

61,946

1,095(4,595)(3,620)13,356

14,816

15,55012,864

180,679

2,003

5,054

3,789

24,431

Provision for loss on compensation for building materials
Other-net
Income (loss) before income taxes
Income taxes (Note 7):
Current

2,879

276

1,614

35,102

4,882

5,330

5,403

59,533

Minority interests

(583)

(454)

(3)

(7,108)Net income (loss)¥ 9,351

7,458$ 114,038

Deferred

¥

9,766

¥

U.S. dollars (Note 2)

Yen

2011

2012

2010

2012

Per share amounts:
Net income (loss)
Basic

¥

28.06

¥

23.52

$

0.328

—

—

—

—

Cash dividends

6.00

6.00

6.00

0.073

See notes to consolidated financial statements

16¥ 26.87

DilutedTOKUYAMA CORPORATION

Consolidated Statements of Comprehensive Income
Tokuyama Corporation and Consolidated Subsidiaries

Years ended March 31, 2012, 2011 and 2010

Thousands of
U.S. dollars (Note 2)

Millions of yen

Income before minority interests

2012

2011

2010

2012

¥ 9,934¥ 10,220—$ 121,145

Valuation difference of securities

324(2,792)—

3,945

Deferred gains or losses on hedges

511

—

—

6,227

Foreign currency translation adjustments

206

(948)

—

2,515

Share of other comprehensive income of companies
accounted for by the equity method

(21)

(139)

—

(245)

Other comprehensive income

1,020(3,879)—12,442

Total comprehensive income

10,954

6,341—

133,587

5,959

—

382

—

Attributable to:Shareholders of Tokuyama Corporation

10,171

Minority interests

¥

783

¥

124,038$

9,549

See notes to consolidated financial statements

TOKUYAMA CORPORATION

17

Consolidated Statements of Changes in Net Assets
Tokuyama Corporation and Consolidated Subsidiaries

Years ended March 31, 2012, 2011 and 2010

Thousands of
U.S. dollars (Note 2)

Millions of yen

2012

2011

2010

2012

¥ 53,459¥ 53,459¥ 29,976$ 651,939

Common stock
Balance at beginning of year——

23,483—¥ 53,459¥ 53,459¥ 53,459$ 651,939$ 703,295

Issuance of common stock
Balance at end of year
Additional paid-in capital¥ 57,670¥ 57,670¥ 34,187

Issuance of common stock——

23,483—Gain on disposal of treasury stock

—

—

—

—

¥ 57,670¥ 57,670¥ 57,670$ 703,295¥ 130,792¥ 123,116¥ 117,584$ 1,595,020

Balance at beginning of year

Balance at end of year
Retained earnings
Balance at beginning of year
Net income

9,351

9,766

7,458

114,038

Cash dividends paid

(2,088)(2,088)(1,866)(25,460)

Disposal of treasury stock

(1)

(2)

(1)

(14)

Adjustment for changes in consolidated subsidiaries andaffiliates accounted for by the equity method

(13)

—

(59)

(161)

¥ 138,041¥ 130,792¥ 123,116$ 1,683,423¥ (1,414)¥ (1,402)¥ (1,382)$(17,242)

(3)

(12)

(20)

¥ (1,417)¥ (1,414)¥ (1,402)$(17,275)

¥

¥

¥

$

44,480

Balance at end of year
Less treasury stock, at cost
Balance at beginning of year
Net change
Balance at end of year

(33)

Unrealized holding gains on available-for-sale securities
Balance at beginning of year

6,434
(2,787)318

Net change
Balance at end of year

3,647

5,379
1,055

3,876

¥

3,965

¥

3,647

¥

6,434

$

48,356

¥

—

¥

—

¥

—

$

—

¥

511

¥

—

¥

—

$

6,227

$

(36,074)

Deferred gains or losses on hedges
Balance at beginning of year—511

Net change
Balance at end of year

—

6,227

Foreign currency translation adjustments
Balance at beginning of year

¥ (2,958)¥ (1,939)¥ (2,204)(8)(1,019)265¥ (2,966)¥ (2,958)¥ (1,939)$(36,176)

¥

¥

¥

$

78,782$75,591

Net change
Balance at end of year

(102)

Minority interest in consolidated subsidiaries
Balance at beginning of year
Balance at end of year
See notes to consolidated financial statements

18

TOKUYAMA CORPORATION

6,460

¥

6,198

6,268
192

(262)

Net change

¥

6,460

6,218
50

¥

6,268

(3,191)

Consolidated Statements of Cash Flows
Tokuyama Corporation and Consolidated Subsidiaries

Years ended March 31, 2012, 2011 and 2010

Thousands of
U.S. dollars (Note 2)

Millions of yen

2012

2011

2010

2012

¥ 14,816¥ 15,550¥ 12,864$ 180,679

28,380(10,778)
(289)
(588)
—
(40)
1,047
160
(287)
2,047
64
4,816
(12,616)
6,298
705
(273)
33,462
1,047(2,034)(5,415)27,06031,257(6,029)714(606)(1,721)
(434)
707
223
(631)
1,817
163
96
4,229
1,626
(4,036)(2,543)40,382918(1,793)(2,463)37,04437,484
(386)
3
(605)
(1,584)
(221)
619
341
(826)
1,758
12
(11,812)(3,422)
3,445(2,815)2,862
37,717862(1,758)(7,441)
29,380346,098(131,435)(3,521)(7,170)—(493)
12,763
1,949(3,504)
24,958784
58,733(153,856)
76,8108,601(3,320)408,076
12,771(24,800)(66,043)
330,004

Cash flows from investing activities:
Increase in time deposits
Decrease in time deposits
Payments for purchases of property, plant and equipment
Proceeds from sales of property, plant and equipment
Payments for purchases of intangible assets
Payments for purchases of investment securities
Proceeds from sales of investment securities
Increase in loans receivable
Decrease in loans receivable
Payments for purchases of money held in trust
Proceeds from cancellation of money held in trust
Other
Net cash used in investing activities

(115)
50
(44,237)
123(2,265)
(764)
2,084
(812)
340
(22,465)
10,780(386)(57,667)(324)
297(21,728)425(4,933)(1,244)
2,772
(33)
348
(69,896)
5,239
568(88,509)(790)
394(34,707)476(1,497)(1,489)
1,870
(281)
406
—
—
(850)
(36,468)(1,406)615(539,473)
1,498(27,627)(9,322)
25,411(9,905)
4,147(273,958)
131,470(4,704)(703,254)

Cash flows from financing activities:
Increase (decrease) in short-term loans
Increase in commercial paper
Proceeds of long-term debt
Repayments of long-term debt
Proceeds from issue of bonds
Redemption of bonds
Issuance of common stock
Cash dividends paid
Cash dividends paid to minority interest
Increase in treasury stock
Other
Net cash (used in) provided by financing activities
Effect of exchange rate changes on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of the year
Increase in cash and cash equivalents due to changes of scope of consolidation
Cash and cash equivalents at end of year(769)—
17,466(8,238)20,000(5,100)—(2,051)
(172)
(4)
(340)
20,792(250)(10,065)
68,624(82)¥ 58,477

1,855
—
8,872
(4,057)20,000——(2,088)
(190)
(14)
(383)
23,995
67(27,403)
95,94582¥ 68,624

(218)
1,600
8,742
(4,045)
10,000(15,000)
46,966(1,866)
(129)
(21)
962
46,991
273
40,17655,366403¥ 95,945(9,381)—
212,996(100,462)
243,902(62,195)—(25,017)(2,099)(48)(4,135)
253,561(3,060)(122,749)
836,879(1,000)$ 713,130

Cash flows from operating activities:
Income (loss) before income taxes
Adjustments to reconcile net cash provided by operating activities:
Depreciation
Increase in allowance for loss on compensation for building materials
Increase (decrease) in provisionInterest and dividend income
Gain on sale of marketable and investment securities
Foreign exchange gain
Loss on sale and disposal of property, plant and equipment
Impairment losses on fixed assets
Equity in earnings of unconsolidated subsidiaries and affiliates
Interest expenses
Write-down of marketable and investment securities(Increase) decrease in trade receivables(Increase) decrease in inventories
Increase (decrease) in trade payable
Increase in other long-term liabilities
Other
Sub totalInterest and dividend received
Interest paid
Income taxes paid
Net cash provided by operating activities

See notes to consolidated financial statements
TOKUYAMA CORPORATION

19

Notes to Consolidated Financial Statements
Tokuyama Corporation and Consolidated Subsidiaries

1. BASIS OF FINANCIAL STATEMENTS
The accompanying consolidated financial statements have been
prepared from accounts and records maintained by Tokuyama
Corporation (the “Company”) and its subsidiaries. The Company
and its consolidated domestic subsidiaries have maintained
their accounts and records in accordance with the provisions
set forth in the Companies Act (the “Act”) and the Financial
Instruments and Exchange Act and in conformity withaccounting principles and practices generally accepted in Japan,
which are different from the accounting and disclosure
requirements of International Financial Reporting Standards.
The accounts of consolidated overseas subsidiaries are

2. U.S. DOLLAR AMOUNTSThe U.S. dollar amounts included in the consolidated financial
statements and notes represent the arithmetic results oftranslating Japanese yen to U.S. dollars at the rate of¥82=US$1, the approximate exchange rate on March 31, 2011.

based on their accounting records maintained in conformity withgenerally accepted 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 of Finance in Japan have been reclassified for theconvenience of readers outside Japan. Such reclassifications
have no effect on net income or retained earnings.
The consolidated financial statements are not intended topresent the consolidated financial position, results ofoperations and cash flows in accordance with accounting
principles and practices generally accepted in countries andjurisdictions other than Japan.

The U.S. dollar amounts are included solely for the convenienceof readers outside Japan, and are not intended to imply that theassets and liabilities that originated in yen have been or could
be readily converted, realized, or settled in U.S. dollars at this orat any other rate.

3. SUMMARY OF SIGNIFICANT ACCOUNTINGPOLICIES

exchange gains or losses are credited or charged to income as
incurred.

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

The consolidated financial statements include the accounts of
the Company and its 48 significant subsidiaries (50 in 2011 and
49 in 2010). Significant intercompany transactions andaccounts have been eliminated in consolidation.
In total, 15 subsidiaries are consolidated on the basis of their
original fiscal years ended at December 31. Material differences
in intercompany transactions and accounts arising from the useof the different fiscal year-end are appropriately adjusted inconsolidation.
Investments in 8 unconsolidated subsidiaries and affiliates(9 in 2011 and 11 in 2010) are accounted for by the equity
method. Investments in unconsolidated subsidiaries andaffiliates 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
transaction dates. Monetary assets and liabilities denominatedin foreign currencies are translated into yen at the exchange
rate in effect at the balance sheet date and the resulting
20

TOKUYAMA CORPORATION

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 are translated at the average rates of exchange
prevailing during the year. The resulting translation adjustments
are shown as “Foreign currency 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
investments and marketable securities which are readily
convertible into cash and have no significant risk of change invalue.

MARKETABLE AND INVESTMENT SECURITIES:
Securities are classified into four groups: trading securities,
held-to-maturity debt securities, securities of subsidiaries andaffiliates, and other securities. Trading securities are stated atfair market value, held-to-maturity debt securities at amortized
cost, and securities of subsidiaries and affiliates are stated at

FINANCIAL SECTION

cost. Other securities with a quoted current price are stated atfair value, and those without a quoted current price are statedat cost, cost being determined by the moving-average method.
Net unrealized gains or losses of other securities are stated as“Unrealized holding gains on available-for-sale securities” inshareholders’ equity after applying tax effect accounting. The
Company and subsidiaries do not hold trading securities.

INVENTORIES:
Inventories held for sale in the ordinary course of business arestated at cost determined mainly by the moving-averagemethod. The balance sheet value of the inventories isdetermined by write-down based on their decreased profitability.

PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment are stated at cost. Depreciation
is mainly computed by the declining-balance method forstructures, machinery and equipment, and by the straight-line
method for buildings at rates based on the estimated useful
lives of assets prescribed by the Corporation Tax Act. The rangeof estimated useful lives is principally from 2 to 75 years forbuildings and structures, and from 2 to 20 years for machineryand 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. For the method of hedge accounting, in
general, the deferral hedge accounting is applied. Among
hedging instruments, Interest rate swaps that fulfill therequirement for preferential treatment are subjected to thepreferential treatment. The Company uses forward exchange
contracts and interest rate swaps in hedging instruments
subject to hedge accounting.
The Company utilizes financial derivative transactions only
for the purpose of hedging foreign exchange risk arising fromnormal operating activities and for managing interest rate risks.
The Company does not hold or issue derivatives for dealing or
speculative purposes. All derivative transactions are performed
and controlled by the financial section. Directors in charge
approve all derivative transactions entered into.
As the counterparties to these derivative transactions arelimited to major financial institutions with high credit standings,
the Company does not anticipate nonperformance by thecounterparties to these agreements, and no material losses are
expected.

LEASES:
Leased assets related to finance lease transactions that do nottransfer ownership are depreciated by the straight-line method
using the lease term as the useful life and until the residual
value becomes zero.
With respect to finance lease transactions that do nottransfer ownership whose starting date was on or before March
31, 2009, the accounting treatment similar to that applicable toordinary rental transactions continues to be applied.

ALLOWANCE FOR DOUBTFUL ACCOUNTS:
The allowance for doubtful accounts of the Company and its
consolidated subsidiaries is provided in amounts sufficient tocover possible losses on collection. In determining theallowance for doubtful accounts for normal receivables, regard
is taken of the historical default rate. With receivables where
there is an acknowledged credit risk, allowances for doubtful
accounts are provided for taking account of collectability on acase-by-case basis.

INCOME TAXES:
The tax effects of temporary differences between the carrying
amounts of assets and liabilities for tax and financial reportingis recognized as deferred income taxes. The provision forincome taxes is computed based on the pretax income includedin the consolidated statement of income. The asset and liability
approach is used to recognize deferred tax assets and liabilities
for the expected future tax consequences of temporary
differences between the carrying amounts of assets andliabilities for financial reporting purposes and the amounts used
for income tax purposes.

ACCRUED RETIREMENT BENEFITS:(i) Employees
Recognition of accrued retirement benefits for employees forthe fiscal year under review is based on actual valuation ofprojected benefit obligations 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 subsequentfiscal year when they are incurred.
(ii) Directors and corporate auditors
Certain consolidated subsidiaries record accrued retirement
benefits for directors and corporate auditors on the basis of theamounts required as of the end of the fiscal year under review
based on internal rules.

TOKUYAMA CORPORATION

21

ACCOUNTING FOR REVENUE AND COSTS OF
CONSTRUCTION CONTRACTS:

NET INCOME PER SHARE:(i) Construction contracts in which the outcome of theconstruction activity carried out by the end of the fiscal year
under review is deemed certain during the course of theactivity
Percentage-of-completion method (The percentage ofcompletion of construction activity is estimated based on thepercentage of the cost incurred to the estimated total cost)(ii) Construction contracts other than the above
Completed-contract method

Net income per share is computed by dividing net income
available to common stockholders by the weighted average
number of common shares outstanding during each fiscal year.
Diluted net income per share is calculated based on theassumption that all diluted convertible bonds were converted at
the beginning of the fiscal year. Diluted net income per share forthe fiscal years ended March 31, 2012, 2011 and 2010 was notpresented because there was no dilutive effect on any assumed
conversion of convertible bonds for the fiscal years ended
March 31, 2012, 2011 and 2010.

4. FAIR VALUE INFORMATION

Thousands of U.S. dollars

The fair values and net unrealized gains of quoted securities at
March 31, 2012 were as follows:
Millions of yen

Book value Fair value

DifferenceBook value Fair value

Held-to-maturity debt
securities:
Government securities
and municipal bonds
Bonds and others
Total

Held-to-maturity bonds:
Government securities
and municipal bonds

¥14

¥14

¥—

Bonds and others

—

—

—

Total

¥14

¥14

¥—

Difference

$167

$167

$—

—

—

—

$167

$167

$—

Thousands of U.S. dollars

Acquisition
UnrealizedBook value
cost
gain

The other securities:
Listed corporate shares

Millions of yen

Acquisition
cost

Book
value

Unrealized
gain¥13,619¥19,752¥6,133———¥13,619¥19,752¥6,133The other securities:
Listed corporate shares
Bonds and others
Total

Millions of yen

Book value

Non-quoted main securities:
Held-to-maturity bonds¥

Certificates of deposit

25,800The other securities
Total

22

TOKUYAMA CORPORATION

—
1,785

¥27,585

Bonds and others
Total$166,091 $240,880—$74,789——$166,091 $240,880$74,789

Thousands of U.S. dollars

Book value

Non-quoted main securities:
Held-to-maturity bonds
Certificates of deposit
The other securities
Total

$

—
314,634
21,774$336,408

FINANCIAL SECTION

5. INVENTORIESInventories at March 31, 2012 and 2011 were as follows:
Thousands of
U.S. dollars

Millions of yen

2012

2011

2012

Finished products and merchandise¥21,562¥17,112$262,948

Work in progress

13,502

8,306

164,663

Raw materials and supplies

13,32910,887

162,545¥48,393¥36,305$590,156

Total

6. SHORT-TERM BANK LOANS AND LONG-TERM DEBT
Short-term bank loans at March 31, 2011 represent loans, which principally bear interest at rates ranging from 0.00 % to 6.35 % perannum.
A summary of long-term debt at March 31, 2012 and 2011 was as follows:
Thousands of
U.S. dollars

Millions of yen

Loans principally from banks and insurance companies, due through2025 with interest rates ranging from 0.00 percent to 6.35 percent
1.36 percent unsecured bonds in yen due May 11, 20111.60 percent unsecured bonds in yen due March 30, 2012

2012

2011

2012

¥ 85,304¥ 76,147$ 1,040,299

—

5,000

—

—

100

—

0.54 percent unsecured bonds in yen due September 9, 2015

5,000

5,000

60,976

0.58 percent unsecured bonds in yen due September 8, 2016

10,000—121,951

1.76 percent unsecured bonds in yen due March 10, 2020

10,00010,000121,951

1.48 percent unsecured bonds in yen due September 9, 2020

15,00015,000182,927

1.37 percent unsecured bonds in yen due September 8, 2021
Less current maturities

10,000—121,951¥ 135,304¥111,247$ 1,650,055(12,191)(13,191)(148,671)¥ 123,113¥ 98,056$ 1,501,384

TOKUYAMA CORPORATION

23

The aggregate annual maturities of long-term debt at March
31, 2012 are summarized as follows:

The aggregate annual maturities of lease obligations at
March 31, 2012 are summarized as follows:

Millions of yen

Thousands of
U.S. dollars

2012¥ 12,191$ 148,671

2013

21,740265,124

2013

286

3,492

2014

6,547

79,837

2014

181

2,207

2015

13,530164,994

2015

69

847

2016

10,806

131,775

2016

36

438

70,491

859,654

Thereafter¥135,305$1,650,055

Years ending March 31

Millions of yen

Thousands of
U.S. dollars¥287$ 3,497

Years ending March 31

Thereafter

2012

30

357

¥889

$10,838

Assets pledged as collateral for certain loans and other liabilities at March 31, 2012 and 2011 are summarized as follows:
Thousands of
U.S. dollars

Millions of yen

2012

2011

2012

¥17,007¥19,833$207,401

Pledged Assets
Property, plant and equipment
Other

24

TOKUYAMA CORPORATION

356

385

4,344

¥17,363¥20,218$211,745

FINANCIAL SECTION

7. INCOME TAXESThe Company and its domestic consolidated subsidiaries are
subject to a number of income taxes that, in the aggregate,
indicate a statutory tax rate in Japan for the respective fiscal
years. Overseas subsidiaries are subject to income taxes ofcountries where they are domiciled.

The significant differences between the statutory tax rateand effective tax rate for consolidated financial statement
purposes for the fiscal years ended March 31 were summarized
as follows.

Statutory tax rate

2012

2011

40.4%

40.4%

Increase (decrease) in income taxes resulting from:
Change in valuation allowance allocated to income tax expenses(66.2)

12.1

Permanent difference

(2.2)

(1.2)

Effect of tax credits

(1.1)

(5.5)

Inter-company eliminations of dividends received

3.0

2.1

Inter-company eliminations of allowance for bad debts

27.2(23.7)

Inter-company eliminations of provision for loss on business of subsidiaries and affiliates

28.2

16.3

Utilization of loss carryforward

—

(3.6)

Lower tax rates of overseas consolidated subsidiaries

—

(2.4)

Equity in earnings of unconsolidated subsidiaries and affiliates

—

(1.6)

Other
Effective income tax rate

3.7

1.4

33.0%

34.3%

Significant components of deferred tax assets and liabilities at March 31, 2012 and 2011 were as follows:
Thousands of
U.S. dollars

Millions of yen

2011

2012

866

¥ 5,353$ 10,559

2012
Deferred tax assets:
Allowance for loss on compensation for building materials
Eliminated loss on business of subsidiaries and affiliates

¥

586

3,576

7,151

Eliminated allowance for bad debts

2,329

6,761

28,401

Allowance for repairs

1,793

1,888

21,868Fixed assets

1,408

1,384

17,171

Deficits

8,602

8,600

104,906

Others

2,131

3,863

25,979Subtotal

17,71531,425

216,035

Less valuation allowance(7,864)(18,229)(95,897)

Total deferred tax assets

9,851

13,196

120,138(2,201)(2,446)(26,846)

Deferred tax liabilities:
Unrealized holding gains on the other securities

—

(492)

—

Appropriations for advanced depreciation

Special depreciation reserve(1,574)(1,795)(19,198)

Others(1,225)(703)(14,934)

Gross deferred tax liabilities
Net deferred tax assets/(liabilities)(5,000)(5,436)(60,978)¥ 4,851¥ 7,760$ 59,160

TOKUYAMA CORPORATION

25

8. RETIREMENT AND SEVERANCE PLAN

The Company and its consolidated domestic subsidiaries
may pay, under certain circumstances, extra retirement
allowances when their employees leave the Companies.
The Company has a retirement benefit trust.

The Company and its consolidated domestic subsidiaries havelump-sum severance benefits plans and defined benefit
pension plans as vested benefits system (DB scheme). They
also have defined contribution pension plans as DC scheme.

Benefit obligations for the fiscal years ended March 31, 2012 and 2011 were as follows:
Thousands of
U.S. dollars

Millions of yen

2012

2011

2012

Project benefit obligation¥ (20,129)¥(19,465)$(245,470)

Fair value of plan assets

20,15819,860245,833

Funded status
Unrecognized actuarial loss

29

395

363

5,866

5,466

71,522

Net amount shown on balance sheets

5,895

5,861

71,885Prepaid pension expense

6,946

6,902

84,703¥ (1,051)¥ (1,041)$ (12,818)

Accrued retirement and severance benefits

Benefit costs for the fiscal years ended March 31, 2012 and 2011 were as follows:
Thousands of
U.S. dollars

Millions of yen

2012

2011

2012

Service cost

¥ 853

¥ 829

$ 10,404

Interest cost

461

482

5,616

Recognized actuarial loss
Benefit cost
Other
Total

524

394

6,398

1,838

1,705

22,418

468

550

5,703

¥ 2,306¥ 2,255$ 28,121

Assumptions used in the actuarial calculation were as follows:
Period allocation method for estimated retirement benefits
Discount rate
Expected return on plan assets

Straight-line method for the period
2.0%
0.0%

Period of amortization of prior service cost

Charge off all at once

Period of amortizing actuarial differences

16 years

Period of amortization of net transition asset

26

TOKUYAMA CORPORATIONThe Company is not arised.
Consolidated subsidiaries is amortizedfor 5 years.

FINANCIAL SECTION

9. LEASES(1) Lessee(i) Finance lease
Lease payments on finance lease contracts that do not transfer
ownership for the fiscal year ended March 31, 2012 amounted
to ¥ 124million (US$ 1,509 thousand). Lease payments
corresponding to depreciation expenses for the fiscal year

ended March 31, 2011, which were computed by the straightline method over a period up to the maturity of the relevant
lease contracts with no residual value, amounted to ¥ 55million(US$ 669thousand).
If the leases were capitalized, the acquisition cost of assets
and accumulated depreciation etc. at March 31, 2012 and2011 would be as follows:

Thousands of
U.S. dollars

Millions of yen

2011

2012
Machinery, equipment and vehicles

¥

¥ 104

140

2012
$ 1,263

Other

477

1,058

5,813

Less accumulated depreciation

(460)

(954)

(5,608)Less accumulated impairment
Total

(147)

(80)
¥

¥

41

97

(965)
$

503

The future lease payments on finance leases at March 31, 2012 and 2011 were as follows:
Thousands of
U.S. dollars

Millions of yen

Due within one year

2012

2011

2012

¥ 86

¥126

$1,049Due beyond one year

34

119

419

Total

¥120

¥245

$1,468(ii) Operating lease
The future lease payments on noncancellable operating lease transactions at March 31, 2012 and 2011 were as follows.
Thousands of
U.S. dollars

Millions of yen

2012

2011

2012

Due within one year

¥ 491

¥ 421

$ 5,988

Due beyond one year

1,672

2,163

20,385

Total¥2,163¥2,584$26,373TOKUYAMA CORPORATION

27

(2) Lessor(i) Operating lease
The future lease payments on noncancellable operating lease transactions at March 31, 2012 and 2011 were as follows.
Thousands of
U.S. dollars

Millions of yen

Due within one year

2012

2011

2012

¥ 10

¥ 10

$ 118

Due beyond one year

161

170

1,963

Total

¥171

¥180

$2,081

10. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses for the fiscal years ended March 31, 2012, 2011 and 2010 were as follows:
Thousands of
U.S. dollars

Millions of yen

2012

2011

2010

2012

Carriage and shipping¥25,512¥24,672¥24,048$311,117

Salaries and bonuses

9,537

9,266

9,587

116,303

Research and development expenses

10,437

10,22910,532

127,281

Rent

1,722

1,575

1,606

20,995

Traveling expenses and postage

2,018

1,828

1,763

24,613Welfare expense

1,695

1,637

1,600

20,676

Other

13,977

10,721

11,045

170,453¥64,898¥59,928¥60,181$791,438

Total

11. DEPRECIATION
Depreciation for the fiscal years ended March 31, 2012, 2011 and 2010 was as follows:
Thousands of
U.S. dollars

Millions of yen

Depreciation

2012

2011

2010

2012

¥28,380¥31,257¥37,484$346,098

12. RESEARCH AND DEVELOPMENT EXPENSES
Research and development expenses for the fiscal years ended March 31, 2012, 2011 and 2010 were as follows:
Thousands of
U.S. dollars

Millions of yen

Research and development expenses

28

TOKUYAMA CORPORATION

2012

2011

2010

2012

¥11,705¥11,469¥11,818$142,740

FINANCIAL SECTION

13. IMPAIRMENT LOSSThe Company’s Group groups its assets mainly according to thesmallest units independently generating cash flows based on

Use

Manufacturing facilities
for plastic window sashes

Millions of yen

Thousands of
U.S. dollars

2012

2012

Machinery and equipment

¥ 8

$ 92

Tools, furniture and fixtures

4

50

Location

Kuriyama-cho,Yubari County, Hokkaido
Prefecturebusiness categories. During the fiscal year ended March 31,
2012, the Group recorded impairment losses for the following
asset groups.

Asset category

OthersTotal

During the fiscal year ended March 31, 2012, because
profitability of the abovementioned assets owned by the Excel
Shanon Group decreased significantly, the book value of theseassets was written down to the recoverable value, and theamount of the write-downs was accounted for as impairment

57

703

¥69

$845

losses in the extraordinary loss.
The recoverable value of these assets was measured basedon their net selling value. The book value of the abovementioned
assets was written down to a memorandum value.

Millions of yen

Use

Manufacturing facilities
for high-purity chemicals
for electronic manufacturing

Location

Suzhou Industrial Park,
China

Asset category

Machinery and equipment
Tools, furniture and fixtures
Total

Thousands of
U.S. dollars

2012

2012

¥84

$1,0257

79¥91$1,104

During the fiscal year ended March 31, 2012, because thecontinuance of the operation of Tokuyama Electronic Materials(Suzhou) Co., Ltd. was made impossible, the book value of its
assets was written down to the recoverable value, and theamount of the write-downs was accounted for as an impairment
loss in the extraordinary loss.
The recoverable value of this asset group was measured
based on the net selling value.

14. SHAREHOLDERS’ EQUITY

On condition that the total amount of legal reserve andadditional paid-in capital remains being equal to or exceeding
25% of common stock, they are available for distributions andcertain other purposes by the resolution of the shareholders’meeting.
The legal reserve is included in the retained earnings and is
not allowed to show separately in the accompanying
consolidated financial statements.

The “Act” provides that an amount equal to at least 10% of cash
dividends and other cash appropriations shall be appropriatedand set aside as a legal reserve until the total amount of legal
reserve and additional paid-in capital equals 25% of common
stock.

15. ASSET RETIREMENT OBLIGATIONS
Since the amount of asset retirement obligations at the fiscal
year-end under review represented less than one-hundredth of

total liabilities and net assets at the same fiscal year-end, thepreparation of an asset retirement obligations schedule wasomitted.

TOKUYAMA CORPORATION

29

16. SEGMENT INFORMATION
BUSINESS SEGMENT INFORMATION(1) Summary of reportable segments
The reportable segments in the Company Group are defined as
individual units, where separate financial information isavailable and which are subject to regular review to evaluate
their results and decide the allocation of management
resources by the board of directors of the Company.
The Company has business divisions by product group, andthe Company Group conducts business operations through eachbusiness division devising its comprehensive product strategy
for domestic and overseas markets. The Company Group also
develops business in the field of advanced components througha group of subsidiaries that have comprehensive management
structure including R&D and are functionally independent. The
Company has the independent Business Management Div. thattakes control of business activities of these subsidiaries.
The Company Group is, therefore, composed of segments byproduct group based on business divisions and the independent
Business Management Div., and has four reportable segments.
“Chemicals,” “Specialty Products,” “Cement,” and “Advanced
Components.”
Main products etc. of each reportable segment are as
follows:
Chemicals: Caustic soda, soda ash, calcium chloride, layered
sodium disilicate, vinyl chloride monomer,
polyvinyl chloride resin, propylene oxide, isopropyl
alcohol, methylene chloride

Specialty Products: Polycrystalline silicon, fumed silica,
precipitated silica, aluminum nitride,
pharmaceutical ingredients andintermediates, plastic lens relatedmaterials for glasses, metal washingsolvent, high-purity chemicals forelectronics manufacturing, environmentrelated equipment, microporous film
Cement: Ordinary Portland cement, high early-strengthPortland cement, Portland blast-furnace slag
cement, ready-mixed concrete, cement-type
stabilizer, waste treatment
Advanced Components: Biaxial-oriented polypropylene film,
co- extrusion multi-layer film, castpolypropylene film, plastic window
sashes, clinical analyzes andsystems, dental materials andequipment, gas sensors, ion
exchange membranes(2) Calculation of sales, income/loss, assets and otherfinancial items by reportable segment
The accounting treatment methods applied to reportablesegments are identical to those stated in “3. SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES.”
Inter-segment sales or transfer are based on market prices.
Reportable segment’s income is based on operating income.

Millions of yen

2012

Chemicals

CementAdvanced
Components

1. SalesSales to customers
Inter-segment sales/transfer¥ 84,336 ¥ 67,732 ¥ 68,045
938
11,348376¥42,679902¥ 19,590
20,748¥ 282,382
34,312¥—(34,312)¥ 282,382—¥ 85,274 ¥ 79,080 ¥ 68,421

Total sales
Operating income
2. Assets
Assets30

Specialty
products

Others

Total

Corporate or
elimination

Consolidated¥43,581¥ 40,338¥ 316,694¥ (34,312)¥ 282,382

2,938

1,746

2,034

18,835(5,114)

13,721¥ 55,077 ¥167,107 ¥ 47,284

1,901

10,216¥33,097¥ 26,770¥ 329,335¥ 171,846¥ 501,181

Depreciation

4,226

10,773

3,115

1,438

1,056

20,608

7,772

28,380

Impairment loss on fixed assets
Capital expenditures

—
2,684

91
64,282

—
2,372

69
906

—
4,706

160
74,950

—
3,331

160
78,281TOKUYAMA CORPORATION

FINANCIAL SECTION

Thousands of U.S. dollars

2012

Chemicals

CementAdvanced
Components

1. SalesSales to customers
Inter-segment sales/transfer$ 1,028,491 $ 825,998 $829,817
11,434
138,386
4,589$520,474
11,006$238,901 $ 3,443,681 $— $ 3,443,681
253,029
418,444(418,444)—$ 1,039,925 $ 964,384 $834,406$531,480$491,930 $ 3,862,125 $ (418,444) $ 3,443,681

Total sales
Operating income
2. Assets
Assets23,185Specialty
products

124,582

35,834

21,295$ 671,666 $ 2,037,887 $576,636$403,628

Others24,805

Corporate or
elimination

Total

229,701

Consolidated(62,378)

167,323$326,460 $ 4,016,277 $ 2,095,690 $ 6,111,967

Depreciation

51,540131,373

37,982

17,535

12,882

251,312

94,786

346,098

Impairment loss on fixed assets
Capital expenditures—
32,726

1,104
783,929—
28,923845
11,046—
57,402

1,949
914,026—
40,615

1,949
954,641

Millions of yen

2012
Amortization of goodwill
Unamortized balance

Chemicals

Specialty
products

CementAdvanced
Components

Others

Total

Corporate or
elimination

Consolidated

¥—
—

¥—
—

¥ 44
285

¥5
4

¥—
—

¥ 49
288

¥—
—

¥ 49
288

Chemicals

Specialty
products

CementAdvanced
Components

Others

Total

Corporate or
elimination

Consolidated

$—
—

$—
—

$ 534
3,470

$62
46

$—
—

$ 596
3,516

$—
—

$ 596
3,516

Thousands of U.S. dollars

2012
Amortization of goodwill
Unamortized balance

OVERSEAS SALES INFORMATION
Overseas sales of the Company and its consolidated subsidiaries for the fiscal years ended March 31, 2012 and 2011 weresummarized as follows:
Thousands of
U.S. dollars

Millions of yen

Asia
Others
Total

2012

2011

2012

¥41,816¥45,086$509,957

13,544

16,813

165,169¥55,360¥61,899$675,126TOKUYAMA CORPORATION

31

17. DERIVATIVE FINANCIAL INSTRUMENTS(1) Management policy on financial instruments
The Company’s Group raises necessary funds (mainly with bankloans and by the issuance of corporate bonds) in line with its
business investment program to implement its growthstrategies, such as “Further select and concentrate foraggressive business expansion,” “Create new businesses for us
to win in the global markets,” and “Reinforce competitiveness byimproving productivity” based on two basic strategies,“Strengthen strategically growing businesses” and ”Bolster ourinternational competitiveness.”
The Group invests occasional spare cash in financial assets
with high safety, and raises short-term operating capital withbank loans and CP (commercial paper). We use derivatives only
to hedge against risks, and have a management policy of not
implementing derivative transactions for speculative purposes.

(2) Fair value of financial instruments
As of March 31, 2012, the book value of financial instruments, their fair value, and the differences between the two were as follows.
The financial instruments whose fair value is extremely difficult to estimate are not given in the table below.
Millions of yen

Cash in hand and deposits at bankBook value

Fair value

Difference¥ 33,663¥ 33,663¥

69,45569,455—25,80025,800—Trade notes and accounts—

Marketable securities and Investment securities
Marketable securities
Held-to-maturity bonds

14

14

—

19,751

19,751—

Money held in trust

34,15934,159—Long-term receivables

3,907

3,907

—

The other securities

Less allowance for doubtful accounts——¥186,749¥186,749

Trade notes and accounts

41,11941,119—

Short-term bank loans

8,474

8,474

—

Total

—
¥

—

Commercial papers

4,000

4,000

—

Bonds

50,00051,1801,180Long-term debt
Total

85,30585,881

576¥188,898¥190,654¥ 1,756

Derivatives
In which hedge accounting is not applied

80

80

—

In which hedge accounting is applied

821

337

(484)

417

¥ (484)Total

32

TOKUYAMA CORPORATION

¥

901

¥

FINANCIAL SECTION

Thousands of U.S. dollars

Book value

Fair value$ 410,520$ 410,520

847,015

847,015

Marketable securities

314,634

314,634—

Held-to-maturity bonds

167

167

—

Cash in hand and deposits at bank
Trade notes and accounts

Difference$——Marketable securities and Investment securities

The other securities

240,880

240,880—

Money held in trust

416,575

416,575—

Long-term receivables

47,64047,640————Less allowance for doubtful accounts
Total$2,277,431$2,277,431

Trade notes and accounts

501,446

501,446$——

Short-term bank loans

103,346

103,346—

Commercial papers

48,78048,780—

Bonds

609,756

624,140

14,384Long-term debt
Total

1,040,300

1,047,332

7,032$2,303,628$2,325,044$ 21,416

981

981

—

Derivatives
In which hedge accounting is not applied
In which hedge accounting is applied
Total

10,004$

10,985$

4,110(5,894)

5,091$ (5,894)

18. CONTINGENT LIABILITIESAt March 31, 2012 and 2011 the Company and its consolidated subsidiaries were contingently liable as follows:
Thousands of
U.S. dollars

Millions of yen

2012

2011

2012

Notes discounted or endorsed

¥221

¥ 260

$2,694Loans guaranteed

580

1,083

7,070

Commitments to guarantee

224

288

2,732

19. SUBSEQUENT EVENTSAt the annual shareholders’ meeting of the Company held on June 26, 2012, the appropriation of retained earnings for the fiscal year
ended March 31, 2012 was approved as follows:

Cash dividends (¥3.00 per share)

Millions of yen

Thousands of
U.S. dollars¥1,044$12,730TOKUYAMA CORPORATION

33

20. REVISIONS TO THE AMOUNTS OF
DEFERRED TAX ASSETS AND DEFERREDTAX LIABILITIES DUE TO CHANGES IN THE
CORPORATE INCOME TAX RATE
Effective from the fiscal year starting on or after April 1, 2012,
corporate income tax rates are lowered and a special
reconstruction corporate tax is imposed by the promulgation on
December 2, 2011 of two new laws: “The Act for Partial Revisionof the Income Tax Act, etc. for the Purpose of Constructing a
Taxation System Addressing Changes in the Socio-Economic
Structure” (Act No. 114 of 2011) and the “Act on Special
Measures for Securing Financial Resources Necessary to
Implement Measures for Reconstruction following the Great
East Japan Earthquake” (Act No. 117 of 2011).

21. ADOPTION OF THE ACCOUNTINGSTANDARD FOR ACCOUNTING CHANGESAND ERROR CORRECTIONS
Effective from the fiscal year under review, the Company and its
consolidated domestic subsidiaries have adopted an“Accounting Standard — ASBJ Statement No.24 Accounting

34

TOKUYAMA CORPORATION

In accordance with this change, the statutory tax rate used
for calculating deferred tax assets and deferred tax liabilities
will change to 37.8% for temporary differences expected to beresolved during April 1, 2012 to March 31, 2015 and to 35.4%
for temporary differences expected to be resolved on or after
April 1, 2015 from the 40.4% which was previously used.
As a result of this change in tax rates, the amount of deferred
tax assets (the amount after the deduction of deferred tax
liabilities) decreased by ¥18 million, while the amount of income
taxes-deferred, unrealized holding gains on available-for-salesecurities and deferred hedge profit (loss) increased by ¥341
million, ¥300 million and ¥21 million, respectively.

Standard for Accounting Changes and Error Corrections” (issued
on December 4, 2009) and its “Implementation Guidance —ASBJ Guidance No.24 Guidance on Accounting Standard for
Accounting Changes and Error Corrections” (issued on
December 4, 2009) to accounting changes and corrections ofprior period errors that are made on or after the beginning of the
fiscal year under review.

Independent Auditor’s Report
Tokuyama Corporation and Consolidated Subsidiaries

TO THE BOARD OF DIRECTORS OF TOKUYAMA CORPORATION
We have audited the accompanying consolidated balance sheet of Tokuyama Corporation and consolidated subsidiaries as ofMarch 31, 2012, and the related consolidated statements of income, comprehensive income, changes in net assets, andcash flows for the year then ended, and a summary of significant accounting policies and other explanatory information, allexpressed in Japanese yen.
Management’s Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial statements in conformity
with accounting principles generally accepted in Japan, and for such internal control as management determines is necessary
to enable the preparation of consolidated financial statements that are free from material misstatements, whether due tofraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our
audit in conformity with auditing standards generally accepted in Japan. Those standards require that we plan and performthe audit to obtain reasonable assurance about whether the consolidated financial statements are free from material
misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated
financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks ofmaterial misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk
assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of theconsolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not forthe purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating theappropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well
as evaluating the overall presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
OpinionIn our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated
financial position of Tokuyama Corporation and consolidated subsidiaries as of March 31, 2012, and the consolidated resultsof their operations and their cash flows for the year then ended in conformity with accounting principles generally accepted inJapan.
Convenience Translation
Our audit also comprehended the translation of Japanese yen amounts into U.S. dollar amounts and, in our opinion, suchtranslation has been made in conformity with the basis stated in Note 2. Such U.S. dollar amounts are presented solely forthe convenience of readers outside Japan.

YAMAGUCHI Audit Corporation
Shunan, Japan
June 13, 2012

TOKUYAMA CORPORATION

35

Directory

Head Office

Kasumigaseki Common Gate
West Tower
2-1, Kasumigaseki 3-chome,
Chiyoda-ku, Tokyo 100-8983, Japan
Tel: +81-3-6205-4832
Fax: +81-3-6205-4881
URL: http://www.tokuyama.co.jp/eng/

Domestic Offices:

Sendai, Nagoya, Osaka,
Hiroshima, Takamatsu, Fukuoka

Research Laboratories:
Tsukuba, Tokuyama

Factories:
Tokuyama Factory
1-1, Mikage-cho, Shunan-shi,
Yamaguchi 745-8648, Japan
Tel: +81-834-34-2000
Fax: +81-834-33-3790

Kashima Factory
26 Sunayama, Kamisu-shi,
Ibaraki 314-0255, Japan
Tel: +81-479-46-4700
Fax: +81-479-46-1933

Overseas:
Hantok Chemicals Co., Ltd.
19th Fl., KTB Network Bldg,
826-14, Yeoksam-Dong, Gangnam-Gu,
Seoul, Korea 135-769
Tel: +82-2-3453-8523
Fax: +82-2-3453-8300
Tianjin Figaro Electronic Co., Ltd.
No.19, Weishan Road,
Tianjin Economic-Technological
Development Area,
Tianjin China 300457
Tel: +86-22-6629-7458
Fax: +86-22-2532-5908
Shanghai Tokuyama Plastics Co., Ltd.
138 Xintao Road,
Qingpu Industrial Zone,
Shanghai China 201707
Tel: +86-21-5970-5669
Fax: +86-21-5970-3756

36

TOKUYAMA CORPORATION

Tokuyama Chemicals (Zhejiang)
Co., Ltd.
No.555, Yashan West Road, Zhapu,
Development Zone, Zhapu Port,
Jiaxing, Zhejiang China 314201
Tel: +86-573-8552-7887
Fax: +86-573-8552-3355
Taiwan Tokuyama Corporation
21 Shi Jian Road, Hsin Chu Industrial Park,
Hu Kou, Hsin Chu 303, Taiwan, R.O.C.
Tel: +886-3-597-9108
Fax: +886-3-597-9208
Tokuyama Electronic Chemicals Pte. Ltd.
21 Gul Road, Singapore 629355
Tel: +65-6862-1081
Fax: +65-6862-1267
Figaro USA, Inc.
121 South Wilke Road, Suite 300
Arlington Heights, IL 60005, U.S.A.
Tel: +1-847-832-1701
Fax: +1-847-832-1705
Email: figarousa@figarosensor.com
URL: http://www.figarosensor.com/
Eurodia Industrie S.A.
Zac Saint Martin, Impasse Saint Martin,
84120 PERTUIS, France
Tel: +33-4-9008-7500
Fax: +33-4-9008-7519
URL: http://www.eurodia.com/
Tokuyama Malaysia Sdn. Bhd.
Lot 600, 6th Floor, Wisma Bukit Mata
Kuching Jalan Tunku Abdul Rahman
93100 Kuching, Sarawak, Malaysia
Tel: +60-82-422-705
Fax: +60-82-427-708
Tokuyama America Inc.
121 South Wilke Road, Suite 300
Arlington Heights, IL 60005, U.S.A.
Tel: +1-847-385-2195
Fax: +1-847-832-1705
URL: http://www.tokuyama-a.com/

Tokuyama Europe GmbH
Oststrasse 10, 40211 Düsseldorf
Germany
Tel: +49-211-1754480
Fax: +49-211-357379
Email: tokuyama@tokuyama.de
Tokuyama Asia Pacific Pte. Ltd.
61 Robinson Road
#14-02 Robinson Centre
Singapore 068893
Tel: +65-6533-5258
Fax: +65-6533-5256
Email: takeuchi@tokuyama.com.sg
URL: http://www.tokuyama-asia.com/
Tokuyama Trading (Shanghai) Co., Ltd.
1203, Shanghai International Group
Mansion, 511 WeiHai Road,
Shanghai China 200041
Tel: +86-21-6218-1177
Fax: +86-21-5382-2894
Email: y-yokoi@tokuyama.com.cn
Tokuyama Korea Co., Ltd.
#415 Korea Air City Terminal Bldg.
159-6, Samseong-Dong
Gangnam-Gu, Seoul, 135-728, Korea
Tel: +82-2-517-3851
Fax: +82-2-517-3856
Email: k-tanaka@tokuyama.co.kr

Major Subsidiaries and Affiliates
As of March 31, 2012

Company

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

Chemicalsz Shin Dai-ichi Vinyl Corporationz Sun Arrow Kasei Co., Ltd.
z Tokuyama Siltech Co., Ltd.
(Category also includes another 4 affiliates)

Scope

2,000
98
200

71
100
100

Production and sale of polyvinyl chloride
Production and sale of polyvinyl chloride compounds
Production and sale of layered silicate

RMB351,200
250
S$11,000
NT$200,000

100
65
100
100

76,594Tokuyama Malaysia Sdn. Bhd.
RMB85,689
Shanghai Tokuyama Plastics Co., Ltd.
Won4,500,000* Hantok Chemicals Co., Ltd.
(Category also includes another 2 unconsolidated subsidiaries)

100
100
50

Production and sale of fumed silica
Production and sale of aluminum nitride
Production of solvent for semiconductor base materials
Production and sale of solvent for semiconductor basematerials
Production and sale of polycrystalline silicon
Production and sale of microporous film
Production of developers for photolithography

Specialty Products
Tokuyama Chemicals (Zhejiang) Co., Ltd.
z Tokuyama-Dowa Power Materials Co., Ltd.
z Tokuyama Electronic Chemicals Pte. Ltd.
z Taiwan Tokuyama Corporationzzz

CementTokyo Tokuyama Concrete Co., Ltd.

Production and sale of ready-mixed concrete andconcrete productsz Seibu Tokuyama Ready Mixed Concrete Co., Ltd.
100
100
Production and sale of ready-mixed concretez Kyushu Tokuyama Ready Mixed Concrete Co., Ltd.
50
100
Production and sale of ready-mixed concretez Chugoku Ready Mixed Concrete Co., Ltd.
80
52.36 Production and sale of ready-mixed concretez Tokuyama Tsusho Trading Co., Ltd.
95
100
Sale of cement and ready-mixed concretez Tokusho Co., Ltd.
40
100
Sale of cement and ready-mixed concretez Tokushin Co., Ltd.
40
100
Sale of cement and ready-mixed concretez Kansai Tokuyama Trading Co., Ltd.
80
100
Sale of cement and ready-mixed concretez Tokuyama Mtech Corporation
50
100
Processing and sale of building materials(Category also includes another 5 consolidated subsidiaries, 1 unconsolidated subsidiary, 2 equity method affiliates and 14 affiliates)z

Advanced Components
Sun•Tox Co., Ltd.
z A&T Corporation

80

92.04

1,600
577.6

100
40.21

100

60

Production and sale of plastic films
Production and sale of diagnostic reagents, analyzers
and systemsz Figaro Engineering Inc.
99
100
Production and sale of sensor devices
z Tianjin Figaro Electronic Co., Ltd.
RMB23,670
55.7
Production and sale of sensor devicesz Tokuyama Dental Corporation
100
100
Production and sale of dental and medical materials
z ASTOM Corporation
450
55
Production and sale of ion-exchange membranes
z Eurodia Industrie S.A.
EUR1,360
99.99 Sale of ion-exchange membranes and maintenance andleasing of related equipmentz Excel Shanon Corporation
495
100
Production, processing and sale of building materials,
including plastic window sashes and doorsz Tohoku Shanon Co., Ltd.
300
72
Production of plastic window sashes(Category also includes another 4 consolidated subsidiaries, 2 equity method affiliates and 2 affiliates)z

Othersz Tomitec Co., Ltd.

Production of plastic molding and moisture absorbing
agents, as well as components for gas sensors and officeequipmentsz Tokuyama Asia Pacific Pte.Ltd.
S$800
100
Sale of Tokuyama’s productsz Tokuyama Europe GmbH
€255
100
Sale of Tokuyama’s productsz Shunan System Sangyo Co., Ltd.
151
100
Real estate, civil engineering, construction
z Tokuyama Logistics Corporation
100
100
Transportation and warehousingz Tokuyama Information Serivce Corporation
20
100
Information processing services
z Shunan Bulk Terminal Co., Ltd.
150
65
Warehouse operations for bulk cargoes of coal etc.
50
50
Manufacture of metal parts and anti-rust surface coating* Nishinihon Resicoat Co., Ltd.
materials
500
50
Production and sale of polypropylene* Tokuyama Polypropylene Co., Ltd.
1,600
30
Production and sale of ceramics and electrochemical* Covalent Materials Tokuyama Corporation
products(Category also includes another 5 consolidated subsidiaries, 1 unconsolidated subsidiary and 4 affiliates)zConsolidated subsidiary *Affiliate accounted for by the equity method

TOKUYAMA CORPORATION

37

Executive TeamAs of June 26, 2012

DIRECTORS
Representative Director

Kazuhisa Kogo
Representative Director

Yoshikazu Mizuno

Supervision over Auditing Dept., Secretarial Dept.
Directors

Tatsuo Segawa

Supervision over Corporate Administration Div.,
Independent Business Management Div.,AUDITORS
Shigeki Yuasa

Supervision over Corporate Planning Div., General &Personnel Affairs Div., Research & Development Div.,and Management of Technology Div.

Toshiaki Tsuchiya

Isao Aso
Auditor

Masaki Akutagawa

Supervision over Chemicals Business Div., Cement

External Auditors

Business Div., and all branches

Ryuji Hori
Takeru Ishibashi

Tetsushi Yamada

Supervision over Tokuyama Factory, Manufacturing

and Corporate Social Responsibility Div.

Technology Div., and Kashima Factory

Yukio Muranaga

External Director

Supervision over Specialty Products Business Div.

Standing Auditor

Akio Fujiwara

EXECUTIVE OFFICERS
President and Executive Officer

Kazuhisa Kogo

Toyoki Fukuoka

General Manager of General & Personnel Affairs Div.

Yoshikazu Mizuno

Assistant to the President

Tatsuo Segawa

General Manager of Independent Business
Management Div.

Deputy General Manager of Malaysia Project
Promotion Div., General Manager of Polysilicon

General Manager of Malaysia Project Promotion Div.
Senior Managing Executive Officers

Shigetaka Misaka

Katsuyuki Masuno

Sales Dept.

General Manager of Research & Development Div.

Hidenori Okamoto

Takeshi Nakahara

General Manager of Corporate Strategic Planning

General Manager of Management of Technology Div.

Dept.

Hisashi Yasui

Takeo Suzuki

General Manager of Corporate Administration Div.

Deputy General Manager of Tokuyama Factory,
General Manager of Steam & Power Generation

Managing Executive Officers

Yukio Muranaga

Hideyoshi Koya

General Manager of Specialty Products Business
Executive Officers

Div.

Shigeki Yuasa

Kanji Sakata

Taishi Kutose

General Manager of Personnel Dept.

Osamu Nomura

General Manager of Manufacturing Technology Div.

President of Tokuyama Malaysia Sdn. Bhd.

Tetsushi Yamada

General Manager of Tokuyama Factory38

TOKUYAMA CORPORATION

Deputy General Manager of Cement Business Div.,
General Manager of Cement Manufacturing Dept.

Akihiro Hamada

Deputy General Manager of Corporate
Administration Div.,
General Manager of Management Support Center

General Manager of Chemicals Business Div.

Akira Sanuki

Hideki Adachi

General Manager of R&D Planning Dept.

General Manager of Corporate Planning Div.

Toshiaki Tsuchiya

Dept.

General Manager of Cement Business Div.

Masao Fukuoka

General Manager of Corporate Social Responsibility

Naoyuki Usagawa

General Manager of Osaka BranchDiv.

Main Products

Chemicals

Specialty Products

Advanced Components

Caustic soda

Polycrystalline silicon

Biaxial-oriented polypropylene film

Soda ash

Fumed silica

Multilayer co-extrusion films

Calcium chloride

Aluminium nitride

Cast polypropylene films

Vinyl chloride monomer

Pharmaceutical bulks and intermediates

Dental materials

Polyvinyl chloride

Plastic lens materials

Ion-exchange membranes

Propylene oxide

Methylene chloride for washing metal

Medical diagnosis systems

Isopropyl alcohol

Solvent for semiconductor base materials

Gas sensors and gas detection equipments

Methylene chloride

Microporous film

Plastic window sashes

CementOrdinary Portland cement
High early strength Portland cement
Blast furnace slag cement
Ready-mixed concrete
Cement type stabilizer

Corporate Data
As of March 31, 2012

Established:

Major Shareholders:February 16, 1918

Capital:Japan Trustee Services Bank, Ltd. (trust account)

Number of Shares
Held (Thousands)

Percentage ofTotal Shares

24,896

7.16

The Master Trust Bank of Japan, Ltd. (trust account)

17,483

5.02

Nippon Life Insurance Company

15,534

4.46

Japan Trustee Services Bank, Ltd. (trust account 9)

11,972

3.44

The Yamaguchi Bank, Ltd.

8,246

2.37

Meiji Yasuda Life Insurance Company

7,442

2.14

The Nomura Trust and Banking Co., Ltd.

7,429

2.14

The Bank of Tokyo-Mitsubishi UFJ, Ltd.

7,095

2.04

Sojitsu Corporation

6,484

1.86

Shares Issued:

Mitsubishi UFJ Trust and Banking Corporation

5,852

1.68

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

Percentage ofTotal Shares

Financial Institutions

152,672

43.7

Individuals/Other

94,96827.2

Non-Japanese Corporations/Foreign Residents

50,307

14.4

Other Domestic Corporations

42,814

12.2

Securities Companies

8,908

2.5

¥53,459 million

Employees (consolidated):
5,506

Shares Authorized:
700,000,000

349,671,876

34,258TOKUYAMA CORPORATION

39

Kasumigaseki Common Gate West Tower
2-1, Kasumigaseki 3-chome, Chiyoda-ku, Tokyo 100-8983, Japan

Corporate Communications & Investor Relations Department
TEL: +81-3-6205-4832 FAX: +81-3-6205-4881
URL: http://www.tokuyama.co.jp/eng/

AT12080700
Printed in Japan